VIII, s. 62
125(1)There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the taxation year, a Canadian-controlled private corporation, an amount equal to the corporation’s small business deduction rate for the taxation year multiplied by the least of(a)the amount, if any, by which the total of(i)the total of all amounts each of which is the amount of income of the corporation for the year from an active business carried on in Canada, other than an amount that is(A)described in paragraph (a) of the description of A in the definitionspecified partnership incomein subsection (7) for the year,(B)described in subparagraph (a)(i) of the definitionspecified corporate incomein subsection (7) for the year, or(C)paid or payable to the corporation by another corporation with which it is associated, that is deemed by subsection 129(6) to be income for the year from an active business carried on by the corporation in circumstances where the associated corporation is not a Canadian-controlled private corporation or is a Canadian-controlled private corporation that has made an election under subsection 256(2) in respect of its taxation year in which the amount was paid or payable,(ii)the specified partnership income of the corporation for the year, and(ii.1)the specified corporate income of the corporation for the yearexceeds the total of(iii)the total of all amounts each of which is a loss of the corporation for the year from an active business carried on in Canada (other than a loss of the corporation for the year from a business carried on by it as a member of a partnership), and(iv)the specified partnership loss of the corporation for the year,(b)the amount, if any, by which the corporation’s taxable income for the year exceeds the total of(i)100/28 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4,(ii)the amount determined by multiplying the total of the amounts that would be deductible under subsection 126(2) from the tax for the year otherwise payable under this Part by it, if those amounts were determined without reference to section 123.4, by the relevant factor for the year, and(iii)the amount, if any, of the corporation’s taxable income for the year that is not, because of an Act of Parliament, subject to tax under this Part, and(c)the corporation’s business limit for the year.Marginal note:Small business deduction rate(1.1)For the purpose of subsection (1), a corporation’s small business deduction rate for a taxation year is the total of(a)that proportion of 17.5% that the number of days in the taxation year that are before 2018 is of the number of days in the taxation year,(b)that proportion of 18% that the number of days in the taxation year that are in 2018 is of the number of days in the taxation year, and(c)that proportion of 19% that the number of days in the taxation year that are after 2018 is of the number of days in the taxation year.(d) and (e)[Repealed, 2016, c. 7, s. 34]Marginal note:Business limit(2)For the purpose of this section, a corporation’s business limit for a taxation year is $500,000 unless the corporation is associated in the taxation year with one or more other Canadian-controlled private corporations, in which case, except as otherwise provided in this section, its business limit is nil.Marginal note:Associated corporations(3)Notwithstanding subsection (2), if all the Canadian-controlled private corporations that are associated with each other in a taxation year file with the Minister in prescribed form an agreement that assigns for the purpose of this section a percentage to one or more of them for the year, the business limit for the year of each of the corporations is(a)if the total of the percentages assigned in the agreement does not exceed 100%, $500,000 multiplied by the percentage assigned to that corporation in the agreement; and(b)in any other case, nil.Marginal note:Reduction — business limit(3.1)The business limit for the year of a corporation under subsection (2), (3) or (4) is reduced by the total of all amounts each of which is the portion, if any, of the business limit that the corporation assigns to another corporation under subsection (3.2).Marginal note:Assignment(3.2)For the purpose of this section, a Canadian-controlled private corporation (in this subsection referred to as thefirst corporation) may assign all or any portion of its business limit under subsection (2), (3) or (4) for a taxation year of the first corporation to another Canadian-controlled private corporation (in this subsection referred to as thesecond corporation) for a taxation year of the second corporation if(a)the second corporation has an amount of income, for its taxation year, referred to in subparagraph (a)(i) of the definitionspecified corporate incomein subsection (7) from the provision of services or property directly to the first corporation;(b)the first corporation’s taxation year ends in the second corporation’s taxation year;(c)the amount assigned does not exceed the amount determined by the formulaA − BwhereAis the amount of income referred to in paragraph (a), andBis the portion of the amount described in A that is deductible by the first corporation in respect of the amount of income referred to in clause (1)(a)(i)(A) or (B) for the year; and(d)a prescribed form is filed with the Minister by(i)the first corporation in its return of income for its taxation year, and(ii)the second corporation in its return of income for its taxation year.Marginal note:Failure to file agreement(4)If any of the Canadian-controlled private corporations that are associated with each other in a taxation year has failed to file with the Minister an agreement as contemplated by subsection (3) within 30 days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax under this Part, the Minister shall, for the purpose of this section, allocate an amount to one or more of them for the taxation year