However, it does not include
(a)a monetary contribution that a taxpayer who is an agent authorized under theCanada Elections Actto accept monetary contributions makes in that capacity; or
(b)a monetary contribution in respect of which a taxpayer has received or is entitled to receive a financial benefit of any kind (other than a prescribed financial benefit or a deduction under subsection (3)) from a government, municipality or other public authority, whether as a grant, subsidy, forgivable loan or deduction from tax or an allowance or otherwise.
(4.2)[Repealed, 2006, c. 9, s. 64]
Marginal note:Investment tax credit
(5)There may be deducted from the tax otherwise payable by a taxpayer under this Part for a taxation year an amount not exceeding the lesser of
(a)the total of
(i)the taxpayer’s investment tax credit at the end of the year in respect of property acquired before the end of the year, of the taxpayer’s apprenticeship expenditure for the year or a preceding taxation year, of the taxpayer’s flow-through mining expenditure for the year or a preceding taxation year, of the taxpayer’s flow-through critical mineral mining expenditure for the year or a preceding taxation year, of the taxpayer’s pre-production mining expenditure for the year or a preceding taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the year or at the end of a preceding taxation year, and
(ii)the lesser of
(A)the taxpayer’s investment tax credit at the end of the year in respect of property acquired in a subsequent taxation year, of the taxpayer’s apprenticeship expenditure for a subsequent taxation year, of the taxpayer’s flow-through mining expenditure for a subsequent taxation year, of the taxpayer’s flow-through critical mineral mining expenditure for a subsequent taxation year, of the taxpayer’s pre-production mining expenditure for a subsequent taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the subsequent taxation year to the extent that an investment tax credit was not deductible under this subsection for the subsequent taxation year, and
(B)the amount, if any, by which the taxpayer’s tax otherwise payable under this Part for the year exceeds the amount, if any, determined under subparagraph 127(5)(a)(i), and
(b)where Division E.1 applies to the taxpayer for the year, the amount, if any, by which
(i)the taxpayer’s tax otherwise payable under this Part for the year
exceeds
(ii)the taxpayer’s minimum amount for the year determined under section 127.51.
Marginal note:Investment tax credit of cooperative corporation
(6)Where at any particular time in a taxation year a taxpayer that is a cooperative corporation within the meaning assigned by subsection 136(2) has, as required by subsection 135(3), deducted or withheld an amount from a payment made by it to any person pursuant to an allocation in proportion to patronage, the taxpayer may deduct from the amount otherwise required by that subsection to be remitted to the Receiver General, an amount, not exceeding the amount, if any, by which
(a)its investment tax credit at the end of the immediately preceding taxation year in respect of property acquired and expenditures made before the end of that preceding taxation year
exceeds the total of
(b)the amount deducted under subsection 127(5) from its tax otherwise payable under this Part for the immediately preceding taxation year in respect of property acquired and expenditures made before the end of that preceding taxation year, and
(c)the total of all amounts each of which is the amount deducted by virtue of this subsection from any amount otherwise required to be remitted by subsection 135(3) in respect of payments made by it before the particular time and in the taxation year,
and the amount, if any, so deducted from the amount otherwise required to be remitted by subsection 135(3)
(d)shall be deducted in computing the taxpayer’s investment tax credit at the end of the taxation year, and
(e)shall be deemed to have been remitted by the taxpayer to the Receiver General on account of tax under this Part of the person to whom that payment was made.
Marginal note:Investment tax credit of certain trusts
(7)If, in a particular taxation year of a taxpayer who is a beneficiary under a trust that is a graduated rate estate or that is deemed to be in existence by section 143, an amount is determined in respect of the trust under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definitioninvestment tax creditin subsection (9) for its taxation year that ends in that particular taxation year, the trust may, in its return of income for its taxation year that ends in that particular taxation year, designate the portion of that amount that can, having regard to all the circumstances including the terms and conditions of the trust, reasonably be considered to be attributable to the taxpayer and was not designated by the trust in respect of any other beneficiary of the trust, and that portion is to be added in computing the investment tax credit of the taxpayer at the end of that particular taxation year and is to be deducted in computing the investment tax credit of the trust at the end of its taxation year that ends in that particular taxation year.
Marginal note:Investment tax credit of partnership
(8)Subject to subsection (28), where, in a particular taxation year of a taxpayer who is a member of a partnership, an amount would be determined in respect of the partnership, for its taxation year that ends in the particular taxation year, under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definitioninvestment tax creditin subsection (9), if
(a)except for the purpose of subsection 127(13), the partnership were a person and its fiscal period were its taxation year, and
(b)in the case of a taxpayer who is a specified member of the partnership in the taxation year of the partnership, that definition were read without reference to paragraph (a.1) thereof, and paragraph (e.1) of that definition were read without reference to subparagraphs (ii) to (iv) thereof,
the portion of that amount that can reasonably be considered to be the taxpayer’s share thereof shall be added in computing the investment tax credit of the taxpayer at the end of the particular year.
Marginal note:Investment tax credit of limited partner
(8.1)Notwithstanding subsection (8), if a taxpayer is a limited partner of a partnership at the end of a fiscal period of the partnership, the amount, if any, determined under subsection (8) to be added in computing the taxpayer’s investment tax credit at the end of the taxpayer’s taxation year in which that fiscal period ends shall not exceed the lesser of
(a)the portion of the amount that would, if this section were read without reference to this subsection, be determined under subsection (8) to be the amount to be added in computing the taxpayer’s investment tax credit at the end of the taxpayer’s taxation year in which that fiscal period ends as is considered to have arisen because of the expenditure by the partnership of an amount equal to the taxpayer’s expenditure base (as determined under subsection (8.2) in respect of the partnership) at the end of that fiscal period, and
(b)the taxpayer’s at-risk amount in respect of the partnership at the end of that fiscal period.
Marginal note:Expenditure base
(8.2)For the purposes of subsection 127(8.1), a taxpayer’s expenditure base in respect of a partnership at the end of a taxation year of the partnership is the lesser of
(a)the amount, if any, by which the total of
(i)the taxpayer’s at-risk amount in respect of the partnership at the time the taxpayer last became a limited partner of the partnership,
(ii)all amounts described in subparagraph 53(1)(e)(iv) contributed by the taxpayer after the time the taxpayer last became a limited partner of the partnership and before the end of the year that may reasonably be considered to have increased the taxpayer’s at-risk amount in respect of the partnership at the end of the taxation year in which the contribution was made, and
(iii)the amount, if any, by which
(A)the total of all amounts each of which is the taxpayer’s share of any income of the partnership as determined under paragraph 96(1)(f) for the year, or a preceding year ending after the time the taxpayer last became a limited partner of the partnership,
exceeds
(B)the total of all amounts each of which is the taxpayer’s share of any loss of the partnership as determined under paragraph 96(1)(g) for one of those years
exceeds the total of
(iv)all amounts received by the taxpayer after the time the taxpayer last became a limited partner of the partnership and before the end of the year as, on account or in lieu of payment of, or in satisfaction of, a distribution of the taxpayer’s share of partnership profits or partnership capital, and
(v)the total of all amounts each of which is the amount of an expenditure of the partnership referred to in paragraph 127(8.1)(a) in respect of the taxpayer for a preceding year, and
(b)that proportion of the lesser of
(i)the total of all amounts each of which is, if the partnership were a person and its fiscal period were its taxation year,
(A)an amount a specified percentage of which would be determined in respect of the partnership under paragraph (a), (b) or (e.1) of the definitioninvestment tax creditin subsection 127(9) for the year,
(A.1)an amount that would be the apprenticeship expenditure of the partnership if the reference to “$2,000” in paragraph (a) of the definitionapprenticeship expenditurein subsection (9) were read as a reference to “$20,000” and paragraph (b) of that definition were read without reference to “10% of”, or
(A.2)[Repealed, 2017, c. 20, s. 23]
(B)the amount that would be the SR&ED qualified expenditure pool of the partnership at the end of the year, and
(ii)the total of all amounts each of which is the amount determined under paragraph 127(8.2)(a) in respect of each of the limited partners of the partnership at the end of the year
that
(iii)the amount determined in respect of the taxpayer under paragraph 127(8.2)(a) for the year
is of
(iv)the amount determined under subparagraph 127(8.2)(b)(ii).
Marginal note:Investment tax credit — allocation of unallocated partnership ITCs
(8.3)For the purpose of subsection (8), and subject to subsection (8.4), if a taxpayer is a member of a partnership (other than a specified member) throughout a fiscal period of the partnership, there shall be added to the amount that can reasonably be considered to be that member’s share of the amount determined under subsection (8) the amount, if any, that is such portion of the amount determined under subsection (8.31) in respect of that fiscal period as is reasonable in the circumstances (having regard to the investment in the partnership, including debt obligations of the partnership, of each of those members of the partnership who was a member of the partnership throughout the fiscal period of the partnership and who was not a specified member of the partnership during the fiscal period of the partnership).
Marginal note:Amount of unallocated partnership ITC
(8.31)For the purpose of subsection (8.3), the amount determined under this subsection in respect of a fiscal period of a partnership is the amount, if any, by which
(a)the total of all amounts each of which is an amount that would, if the partnership were a person and its fiscal period were its taxation year, be determined in respect of the partnership under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definitioninvestment tax creditin subsection (9) for a taxation year that is the fiscal period,
exceeds
(b)the total of
(i)the total of all amounts each of which is the amount determined under subsection (8) in respect of the fiscal period to be the share of the total determined under paragraph (a) of a partner of the partnership (other than a member of the partnership who was at any time in the fiscal period of the partnership a specified member of the partnership), and
(ii)the total of all amounts each of which is the amount determined under subsection (8), with reference to subsection (8.1), in respect of the fiscal period to be the share of the total determined under paragraph (a) of a partner of the partnership who was at any time in the fiscal period of the partnership a specified member of the partnership.
(iii)[Repealed, 2007, c. 35, s. 43]
Marginal note:Idem
(8.4)Notwithstanding subsection 127(8), where, pursuant to subsections 127(8) and 127(8.3) an amount would, but for this subsection, be required to be added in computing the investment tax credit of a taxpayer for a taxation year, where the taxpayer so elects in prescribed form and manner in the taxpayer’s return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) under this Part for the year, such portion of the amount as is elected by the taxpayer shall, for the purposes of this section, be deemed not to have been required by subsection 127(8) to have been added in computing the taxpayer’s investment tax credit at the end of the year.
Marginal note:Definitions
(8.5)In subsections 127(8.1) to 127(8.4), the wordsat-risk amountof a taxpayer andlimited partnerof a partnership have the meanings assigned to those words by subsections 96(2.2) and 96(2.4), respectively.
Marginal note:Idem
(9)In this section,
annual investment tax credit limit[Repealed, 1994, c. 8, s. 15]
apprenticeship expenditureof a taxpayer for a taxation year in respect of an eligible apprentice is the lesser of
(a)$2,000, and
(b)10% of the eligible salary and wages payable by the taxpayer in the taxation year to the eligible apprentice in respect of the eligible apprentice’s employment, in the taxation year and on or after May 2, 2006, by the taxpayer in a business carried on in Canada by the taxpayer in the taxation year; (dépense d’apprentissage)
approved projectmeans a project with a total capital cost of depreciable property, determined without reference to subsection 13(7.1) or 13(7.4), of not less than $25,000 that has, on application in writing before July, 1988, been approved by such member of the Queen’s Privy Council for Canada as is designated by the Governor in Council for the purposes of this definition in relation to projects in the appropriate province or region of a province; (ouvrage approuvé)
approved project property[Repealed, 1996, c. 21, s. 30]
Cape Bretonmeans Cape Breton Island and that portion of the Province of Nova Scotia within the following described boundary:
beginning at a point on the southwesterly shore of Chedabucto Bay near Red Head, said point being S70 degrees E (Nova Scotia grid meridian) from Geodetic Station Sand, thence in a southwesterly direction to a point on the northwesterly boundary of highway 344, said point being southwesterly 240 [FEET] from the intersection of King Brook with said highway boundary, thence northwesterly to Crown post 6678, thence continuing northwesterly to Crown post 6679, thence continuing northwesterly to Crown post 6680, thence continuing northwesterly to Crown post 6681, thence continuing northwesterly to Crown post 6632, thence continuing northwesterly to Crown post 6602, thence northerly to Crown post 8575; thence northerly to Crown post 6599, thence continuing northerly to Crown post 6600, thence northwesterly to the southwest angle of the Town of Mulgrave, thence along the westerly boundary of the Town of Mulgrave and a prolongation thereof northerly to the Antigonish-Guysborough county line, thence along said county line northeasterly to the southwesterly shore of the Strait of Canso, thence following the southwesterly shore of the Strait of Canso and the northwesterly shore of Chedabucto Bay southeasterly to the place of beginning; (Cap-Breton)
certified propertyof a taxpayer means any property (other than an approved project property) described in paragraph (a) or (b) of the definitionqualified propertyin this subsection
(a)that was acquired by the taxpayer
(i)after October 28, 1980 and
(A)before 1987, or
(B)before 1988 where the property is
(I)a building under construction before 1987, or
(II)machinery and equipment ordered in writing by the taxpayer before 1987,
(ii)after 1986 and before 1989, other than a property included in subparagraph (i),
(iii)after 1988 and before 1995,
(iv)after 1994 and before 1996 where
(A)the property is acquired by the taxpayer for use in a project that was substantially advanced by or on behalf of the taxpayer, as evidenced in writing, before February 22, 1994, and
(B)construction of the project by or on behalf of the taxpayer begins before 1995, or
(v)after 1994 where the property
(A)is acquired by the taxpayer under a written agreement of purchase and sale entered into by the taxpayer before February 22, 1994,
(B)was under construction by or on behalf of the taxpayer on February 22, 1994, or
(C)is machinery or equipment that will be a fixed and integral part of property under construction by or on behalf of the taxpayer on February 22, 1994,
and that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer, and
(b)that is part of a facility as defined for the purposes of theRegional Development Incentives Act, chapter R-3 of the Revised Statutes of Canada, 1970, and was acquired primarily for use by the taxpayer in a prescribed area; (bien certifié)
child care space amount[Repealed, 2017, c. 20, s. 23]
contract paymentmeans
(a)an amount paid or payable to a taxpayer, by a taxable supplier in respect of the amount, for scientific research and experimental development to the extent that it is performed
(i)for or on behalf of a person or partnership entitled to a deduction in respect of the amount because of subparagraph 37(1)(a)(i.01) or (i.1), and
(ii)at a time when the taxpayer is dealing at arm’s length with the person or partnership, or
(b)an amount in respect of an expenditure of a current nature (within the meaning assigned by paragraph 37(8)(d)) of a taxpayer, other than a prescribed amount, payable by a Canadian government or municipality or other Canadian public authority or by a person exempt, because of section 149, from tax under this Part on all or part of the person’s taxable income for scientific research and experimental development to be performed for it or on its behalf; (paiement contractuel)
critical mineralmeans
(a)copper,
(b)nickel,
(c)lithium,
(d)cobalt,
(e)graphite,
(f)a rare earth element,
(g)scandium,
(h)titanium,
(i)gallium,
(j)vanadium,
(k)tellurium,
(l)magnesium,
(m)zinc,
(n)a platinum group metal, or
(o)uranium; (minéral critique)
eligible apprenticemeans an individual who is employed in Canada in a trade prescribed in respect of a province or in respect of Canada, during the first twenty-four months of the individual’s apprenticeship contract registered with the province or Canada, as the case may be, under an apprenticeship program designed to certify or license individuals in the trade; (apprenti admissible)
eligible child care space expenditure[Repealed, 2017, c. 20, s. 23]
eligible salary and wagespayable by a taxpayer to an eligible apprentice means the amount, if any, that is the salary and wages payable by the taxpayer to the eligible apprentice in respect of the first 24 months of the apprenticeship (other than a qualified expenditure incurred by the taxpayer in a taxation year, remuneration that is based on profits, bonuses, amounts described in section 6 or 7, and amounts deemed to be incurred by subsection 78(4)); (traitement et salaire admissibles)
eligible taxpayermeans
(a)a corporation other than a non-qualifying corporation,
(b)an individual other than a trust,
(c)a trust all the beneficiaries of which are eligible taxpayers, and
(d)a partnership all the members of which are eligible taxpayers,
and for the purpose of this definition, a beneficiary of a trust is a person or partnership that is beneficially interested in the trust; (contribuable admissible)
first term shared-use-equipment, of a taxpayer, means depreciable property of the taxpayer (other than prescribed depreciable property of a taxpayer) acquired before 2014 that is used by the taxpayer, during its operating time in the period (in this subsection and subsection (11.1) referred to as the “first period”) beginning at the time the property was acquired by the taxpayer and ending at the end of the taxpayer’s first taxation year ending at least 12 months after that time, primarily for the prosecution of scientific research and experimental development in Canada, but does not include general purpose office equipment or furniture; (matériel à vocations multiples de première période)
flow-through critical mineral mining expenditureof a taxpayer for a taxation year means an expense deemed by subsection 66(12.61) (or by subsection 66(18) as a consequence of the application of subsection 66(12.61) to the partnership, referred to in paragraph (c) of this definition, of which the taxpayer is a member) to be incurred by the taxpayer in the year
(a)that is a Canadian exploration expense incurred by a corporation after April 7, 2022 in conducting mining exploration activity from or above the surface of the earth primarily targeting critical minerals,
(b)that
(i)is an expense described in paragraph (f) of the definitionCanadian exploration expensein subsection 66.1(6), and
(ii)is not an expense in respect of
(A)trenching, if one of the purposes of the trenching is to carry out preliminary sampling (other than specified sampling),
(B)digging test pits (other than for the purpose of carrying out specified sampling), and
(C)preliminary sampling (other than specified sampling),
(c)that is an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after April 7, 2022 and on or before March 31, 2027,
(d)that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after April 7, 2022 and on or before March 31, 2027,
(e)that, in respect of an agreement described in paragraph (c), a qualified professional engineer or professional geoscientist certifies in prescribed form and manner that the expense is to be incurred in accordance with an exploration plan that primarily targets critical minerals if the qualified professional engineer or professional geoscientist
(i)completed the certification within the 12-month period immediately preceding the time when the agreement is made, and
(ii)acted reasonably, in their professional capacity, in completing the certification, and
(f)that is not an expense that the taxpayer has included under paragraph (a.2) of the definitioninvestment tax creditin the computation of its investment tax credit in respect of which the taxpayer has, at any time, sought a deduction under subsection (5); (dépense minière de minéral critique déterminée)
flow-through mining expenditureof a taxpayer for a taxation year means an expense deemed by subsection 66(12.61) (or by subsection 66(18) as a consequence of the application of subsection 66(12.61) to the partnership, referred to in paragraph (c) of this definition, of which the taxpayer is a member) to be incurred by the taxpayer in the year
(a)that is a Canadian exploration expense incurred by a corporation after March 2019 and before 2025 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2025) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definitionmineral resourcein subsection 248(1),
(b)that
(i)is an expense described in paragraph (f) of the definitionCanadian exploration expensein subsection 66.1(6), and
(ii)is not an expense in respect of
(A)trenching, if one of the purposes of the trenching is to carry out preliminary sampling (other than specified sampling),
(B)digging test pits (other than digging test pits for the purpose of carrying out specified sampling), and
(C)preliminary sampling (other than specified sampling),
(c)an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after March 2019 and before April 2024,
(d)that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after March 2019 and before April 2024, and
(e)that is not an expense that the taxpayer has included under paragraph (a.21) of the definitioninvestment tax creditin the computation of its investment tax credit in respect of which the taxpayer has, at any time, sought a deduction under subsection (5); (dépense minière déterminée)
Gaspé Peninsulameans that portion of the Gaspé region of the Province of Quebec that extends to the western border of Kamouraska County and includes the Magdalen Islands; (péninsule de Gaspé)
government assistancemeans assistance from a government, municipality or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance other than as a deduction under subsection 127(5) or 127(6); (aide gouvernementale)
investment tax creditof a taxpayer at the end of a taxation year means the amount, if any, by which the total of
(a)the total of all amounts each of which is the specified percentage of the capital cost to the taxpayer of qualified property or qualified resource property acquired by the taxpayer in the year,
(a.1)15% of the amount by which the taxpayer’s SR&ED qualified expenditure pool at the end of the year exceeds the total of all amounts each of which is the super-allowance benefit amount for the year in respect of the taxpayer in respect of a province,
(a.2)where the taxpayer is an individual (other than a trust), 15% of the taxpayer’s flow-through mining expenditures for the year,
(a.21)where the taxpayer is an individual (other than a trust), 30% of the taxpayer’s flow-through critical mineral mining expenditures for the year,
(a.3)if the taxpayer is a taxable Canadian corporation, the total of
(i)the specified percentage of the portion of the taxpayer’s pre-production mining expenditure described in subparagraph (a)(i) of the definitionpre-production mining expenditure, and
(ii)the specified percentage of the portion of the taxpayer’s pre-production mining expenditure described in subparagraph (a)(ii) of the definitionpre-production mining expenditure,
(a.4)the total of all amounts each of which is an apprenticeship expenditure of the taxpayer for the taxation year in respect of an eligible apprentice,
(a.5)[Repealed, 2017, c. 20, s. 23]
(b)the total of amounts required by subsection 127(7) or 127(8) to be added in computing the taxpayer’s investment tax credit at the end of the year,
(c)the total of all amounts each of which is an amount determined under any of paragraphs (a) to (b) in respect of the taxpayer for any of the 10 taxation years immediately preceding or the 3 taxation years immediately following the year,
(d)[Repealed, 2006, c. 4, s. 75]
(e)the total of all amounts each of which is an amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year or at the end of any of the 10 taxation years immediately preceding or the 3 taxation years immediately following the year,
(e.1)the total of all amounts each of which is the specified percentage of that part of a repayment made by the taxpayer in the year or in any of the 10 taxation years immediately preceding or the 3 taxation years immediately following the year that can reasonably be considered to be a repayment of government assistance, non-government assistance or a contract payment that reduced
(i)the capital cost to the taxpayer of a property under paragraph 127(11.1)(b),
(ii)the amount of a qualified expenditure incurred by the taxpayer under paragraph 127(11.1)(c) for taxation years that began before 1996,
(iii)the prescribed proxy amount of the taxpayer under paragraph 127(11.1)(f) for taxation years that began before 1996,
(iv)a qualified expenditure incurred by the taxpayer under any of subsections 127(18) to 127(20),
(v)the amount of a pre-production mining expenditure of the taxpayer under paragraph (11.1)(c.3), or
(vi)the amount of eligible salary and wages payable by the taxpayer to an eligible apprentice under paragraph (11.1)(c.4), to the extent that that reduction had the effect of reducing the amount of an apprenticeship expenditure of the taxpayer, and
(vii)[Repealed, 2017, c. 20, s. 23]
(e.2)the total of all amounts each of which is the specified percentage of 1/4 of that part of a repayment made by the taxpayer in the year or in any of the 10 taxation years immediately preceding or the 3 taxation years immediately following the year that can reasonably be considered to be a repayment of government assistance, non-government assistance or a contract payment that reduced
(i)the amount of a qualified expenditure incurred by the taxpayer under paragraph 127(11.1)(e) for taxation years that began before 1996, or
(ii)a qualified expenditure incurred by the taxpayer under any of subsections 127(18) to 127(20),
in respect of first term shared-use-equipment or second term shared-use-equipment, and, for that purpose, a repayment made by the taxpayer in any taxation year preceding the first taxation year that ends coincidentally with the first period or the second period in respect of first term shared-use-equipment or second term shared-use-equipment, respectively, is deemed to have been incurred by the taxpayer in that first taxation year,
exceeds the total of
(f)the total of all amounts each of which is an amount deducted under subsection 127(5) from the tax otherwise payable under this Part by the taxpayer for a preceding taxation year in respect of property acquired, or an expenditure incurred, in the year or in any of the 10 taxation years immediately preceding or the 2 taxation years immediately following the year, or in respect of the taxpayer’s SR&ED qualified expenditure pool at the end of such a year,
(g)the total of all amounts each of which is an amount required by subsection 127(6) to be deducted in computing the taxpayer’s investment tax credit
(i)at the end of the year, or
(ii)[Repealed, 1996, c. 21, s. 30]
(iii)at the end of any of the 9 taxation years immediately preceding or the 3 taxation years immediately following the year,
(h)the total of all amounts each of which is an amount required by subsection 127(7) to be deducted in computing the taxpayer’s investment tax credit
(i)at the end of the year, or
(ii)[Repealed, 1996, c. 21, s. 30]
(iii)at the end of any of the 10 taxation years immediately preceding or the 3 taxation years immediately following the year,
(i)the total of all amounts each of which is an amount claimed under subparagraph 192(2)(a)(ii) by the taxpayer for the year or a preceding taxation year in respect of property acquired, or an expenditure made, in the year or the 10 taxation years immediately preceding the year,
(j)if the taxpayer is subject to a loss restriction event at any time before the end of the year, the amount determined under subsection (9.1) in respect of the taxpayer, and
(k)if the taxpayer is subject to a loss restriction event at any time after the end of the year, the amount determined under subsection (9.2) in respect of the taxpayer,
except that no amount shall be included in the total determined under any of paragraphs (a) to (e.2) in respect of an outlay, expense or expenditure that would, if this Act were read without reference to subsections 127(26) and 78(4), be made or incurred by the taxpayer in the course of earning income in a particular taxation year, and no amount shall be added under paragraph (b) in computing the taxpayer’s investment tax credit at the end of a particular taxation year in respect of an outlay, expense or expenditure made or incurred by a trust or a partnership in the course of earning income, if
(l)any of the income is exempt income or is exempt from tax under this Part,
(m)the taxpayer does not file with the Minister a prescribed form containing prescribed information in respect of the amount on or before the day that is one year after the taxpayer’s filing-due date for the particular year; (crédit d’impôt à l’investissement)
non-government assistancemeans an amount that would be included in income under paragraph 12(1)(x) if that paragraph were read without reference to subparagraphs 12(1)(x)(v) to (vii); (aide non gouvernementale)
non-qualifying corporationat any time means
(a)a corporation that is, at that time, not a Canadian-controlled private corporation,
(b)a corporation that would be liable to pay tax under Part I.3 for the taxation year of the corporation that includes that time if that Part were read without reference to subsection 181.1(4) and if the amount determined under subsection 181.2(3) in respect of the corporation for the year were determined without reference to amounts described in any of paragraphs 181.2(3)(a), 181.2(3)(b), 181.2(3)(d) and 181.2(3)(f) to the extent that the amounts so described were used to acquire property that would be qualified small-business property if the corporation were not a non-qualifying corporation, or
(c)a corporation that at that time is related for the purposes of section 181.5 to a corporation described in paragraph (b); (société non admissible)
phase, of a project, means a discrete expansion in the extraction, processing or production capacity of the project of a taxpayer beyond a capacity level that was attained before March 29, 2012 and which expansion in capacity was the taxpayer’s demonstrated intention immediately before that date; (phase)
pre-production mining expenditure, of a taxable Canadian corporation for a taxation year, means the total of all amounts each of which is an expenditure incurred after 2002 by the taxable Canadian corporation in the taxation year that
(a)is a Canadian exploration expense and would be
(i)described in paragraph (f) of the definitionCanadian exploration expensein subsection 66.1(6) if the expressionmineral resourcein that paragraph were defined to mean a mineral deposit from which the principal mineral to be extracted is diamond, a base or precious metal deposit, or a mineral deposit from which the principal mineral to be extracted is an industrial mineral that, when refined, results in a base or precious metal, or
(ii)described in paragraph (g), (g.3) or (g.4) and not in paragraph (f), of the definitionCanadian exploration expensein subsection 66.1(6) if the expression “mineral resource” in paragraph (g) of that definition were defined to mean a mineral deposit from which the principal mineral to be extracted is diamond, a base or precious metal deposit, or a mineral deposit from which the principal mineral to be extracted is an industrial mineral that, when refined, results in a base or precious metal, and
(b)is not an expense that
(i)was renounced under subsection 66(12.6) to the taxable Canadian corporation except if the corporation is, on the effective date of the renunciation,
(A)a corporation that would be aprincipal business corporation, as defined in subsection 66(15), if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and
(B)the sole shareholder of the corporation that renounced the expenditure, or
(ii)is a member’s share of an expense incurred by a partnership unless the expense was deemed by subsection 66(18) to have been made or incurred at the end of the fiscal period of the partnership by the member and throughout the fiscal period of the partnership in which the expense was incurred
(A)each member of the partnership would (otherwise than because of being a member of the partnership) be a “principal-business corporation” as defined in subsection 66(15) of the Act, if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and
(B)the corporation is a member of the partnership at the time the expenditure is incurred and would not be a specified member of the partnership if the definitionspecified memberin subsection 248(1) were read without reference to its subparagraph (b)(ii), (dépense minière préparatoire)
qualified Canadian exploration expenditure[Repealed, 1996, c. 21, s. 30]
qualified construction equipment[Repealed, 1996, c. 21, s. 30]
qualified expenditureincurred by a taxpayer in a taxation year means
(a)an amount that is an expenditure incurred in the year by the taxpayer in respect of scientific research and experimental development and is
(i)an expenditure described in subparagraph 37(1)(a)(i), or
(ii)80% of an expenditure described in any of subparagraphs 37(1)(a)(i.01) to (iii), or
(iii) and (iv)[Repealed, 2012, c. 31, s. 27]
(b)a prescribed proxy amount of the taxpayer for the year,
but does not include
(c)a prescribed expenditure incurred in the year by the taxpayer,
(d)where the taxpayer is a corporation, an expenditure specified by the taxpayer for the year for the purpose of clause 194(2)(a)(ii)(A),
(e)[Repealed, 1998, c. 19, s. 33]
(f)an expenditure (other than an expenditure that is salary or wages of an employee of the taxpayer) incurred by the taxpayer in respect of scientific research and experimental development to the extent that it is performed by another person or partnership at a time when the taxpayer and the person or partnership to which the expenditure is paid or payable do not deal with each other at arm’s length,
(g)an expenditure described in paragraph 37(1)(a) that is paid or payable by the taxpayer to or for the benefit of a person or partnership that is not a taxable supplier in respect of the expenditure, other than an expenditure in respect of scientific research and experimental development directly undertaken by the taxpayer, and
(h)an amount that would otherwise be a qualified expenditure incurred by the taxpayer in the year to the extent of any reduction in respect of the amount that is required under any of subsections 127(18) to 127(20) to be applied; (dépense admissible)
qualified professional engineer or professional geoscientistmeans an individual who
(a)is an engineer or geoscientist with a university degree, or equivalent accreditation, in an area of geoscience, or engineering, relating to mineral exploration or mining,
(b)has at least five years of experience in mineral exploration, mine development or operation, or mineral project assessment, or any combination of those, that is relevant to their professional degree or area of practice,
(c)has experience relevant to the subject matter of the exploration plan and the certification described in paragraph (e) of the definitionflow-through critical mineral mining expenditure, and
(d)is registered and in good standing with a professional association that has the authority or recognition by law of a jurisdiction in Canada to regulate the profession of engineering or geoscience in
(i)the jurisdiction where the property that is the subject of the exploration plan is located, or
(ii)if there is no professional association in the jurisdiction described in subparagraph (i), a jurisdiction in Canada where a professional association regulates the profession of engineering or geoscience; (ingénieur ou géoscientifique professionnel qualifié)
qualified property, of a taxpayer, means property (other than a qualified resource property) that is
(a)a prescribed building to the extent that it is acquired by the taxpayer after June 23, 1975,
(b)prescribed machinery and equipment acquired by the taxpayer after June 23, 1975, or
(b.1)prescribed energy generation and conservation property acquired by the taxpayer after March 28, 2012,
that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer and that is
(c)to be used by the taxpayer in Canada primarily for the purpose of
(i)manufacturing or processing goods for sale or lease,
(ii)farming or fishing,
(iii)logging,
(iv)storing grain, or
(v)harvesting peat,
(vi) to (xiii)[Repealed, 2012, c. 31, s. 27]
(c.1)property (other than property described in paragraph (b.1)) to be used by the taxpayer in Canada primarily for the purpose of producing or processing electrical energy or steam in a prescribed area, if
(i)all or substantially all of the energy or steam
(A)is used by the taxpayer for the purpose of gaining or producing income from a business (other than the business of selling the product of the particular property), or
(B)is sold directly (or indirectly by way of sale to a provincially regulated power utility operating in the prescribed area) to a person related to the taxpayer, and
(ii)the energy or steam is used by the taxpayer or the person related to the taxpayer primarily for the purpose of manufacturing or processing goods in the prescribed area for sale or lease, or
(d)to be leased by the taxpayer to a lessee (other than a person exempt from tax under this Part because of section 149) who can reasonably be expected to use the property in Canada primarily for any of the purposes referred to in paragraph (c), but this paragraph does not apply to property that is prescribed for the purposes of paragraph (b) or (b.1) unless
(i)the property is leased in the ordinary course of carrying on a business in Canada by a corporation whose principal business is leasing property, lending money, purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services, or any combination thereof,
(ii)the property is manufactured and leased in the ordinary course of carrying on business in Canada by a corporation whose principal business is manufacturing property that it sells or leases,
(iii)the property is leased in the ordinary course of carrying on business in Canada by a corporation whose principal business is selling or servicing property of that type, or
(iv)the property is a fishing vessel, including the furniture, fittings and equipment attached to it, leased by an individual (other than a trust) to a corporation, controlled by the individual, that carries on a fishing business in connection with one or more commercial fishing licences issued by the Government of Canada to the individual, and, for the purpose of this definition,Canadaincludes the offshore region prescribed for the purpose of the definitionspecified percentage; (bien admissible)
qualified resource property, of a taxpayer, means property that is a prescribed building or prescribed machinery and equipment, that is acquired by the taxpayer after March 28, 2012, that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer and that is
(a)to be used by the taxpayer in Canada primarily for the purpose of
(i)operating an oil or gas well or extracting petroleum or natural gas from a natural accumulation of petroleum or natural gas,
(ii)extracting minerals from a mineral resource,
(iii)processing
(A)ore (other than iron ore or tar sands ore) from a mineral resource to any stage that is not beyond the prime metal stage or its equivalent,
(B)iron ore from a mineral resource to any stage that is not beyond the pellet stage or its equivalent, or
(C)tar sands ore from a mineral resource to any stage that is not beyond the crude oil stage or its equivalent,
(iv)producing industrial minerals,
(v)processing heavy crude oil recovered from a natural reservoir in Canada to a stage that is not beyond the crude oil stage or its equivalent,
(vi)Canadian field processing,
(vii)exploring or drilling for petroleum or natural gas, or
(viii)prospecting or exploring for or developing a mineral resource, or
(b)to be leased by the taxpayer to a lessee (other than a person exempt from tax under this Part because of section 149) who can reasonably be expected to use the property in Canada primarily for any of the purposes referred to in paragraph (a), but this paragraph does not apply to prescribed machinery and equipment unless
(i)the property is leased in the ordinary course of carrying on a business in Canada by a corporation whose principal business is any of, or a combination of, leasing property, lending money, purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services,
(ii)the property is manufactured and leased in the ordinary course of carrying on business in Canada by a corporation whose principal business is manufacturing property that it sells or leases, or
(iii)the property is leased in the ordinary course of carrying on business in Canada by a corporation the principal business of which is selling or servicing property of that type,
and, for the purpose of this definition, “Canada” includes the offshore region prescribed for the purpose of the definitionspecified percentage; (bien minier admissible)
qualified small-business property[Repealed, 1996, c. 21, s. 30]
qualified transportation equipment[Repealed, 1996, c. 21, s. 30]
second term shared-use-equipmentof a taxpayer means property of the taxpayer that was first term shared-use-equipment of the taxpayer and that is used by the taxpayer, during its operating time in the period (in this subsection and subsection 127(11.1) referred to as the “second period”) beginning at the time the property was acquired by the taxpayer and ending at the end of the taxpayer’s first taxation year ending at least 24 months after that time, primarily for the prosecution of scientific research and experimental development in Canada; (matériel à vocations multiples de deuxième période)
specified child care start-up expenditure[Repealed, 2017, c. 20, s. 23]
specified percentagemeans
(a)in respect of a qualified property
(i)acquired before April, 1977, 5%,
(ii)acquired after March 31, 1977 and before November 17, 1978 primarily for use in
(A)the Province of Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland or the Gaspé Peninsula, 10%,
(B)a prescribed designated region, 7 1/2%, and
(C)any other area in Canada, 5%,
(iii)acquired primarily for use in the Province of Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland or the Gaspé Peninsula,
(A)after November 16, 1978 and before 1989, 20%,
(B)after 1988 and before 1995, 15%,
(C)after 1994, 15% where the property
(I)is acquired by the taxpayer under a written agreement of purchase and sale entered into by the taxpayer before February 22, 1994,
(II)was under construction by or on behalf of the taxpayer on February 22, 1994, or
(III)is machinery or equipment that will be a fixed and integral part of property under construction by or on behalf of the taxpayer on February 22, 1994, and
(D)after 1994, 10% where the property is not property to which clause (C) applies,
(iv)acquired after November 16, 1978 and before February 26, 1986 primarily for use in a prescribed offshore region, 7%,
(v)acquired primarily for use in a prescribed offshore region and
(A)after February 25, 1986 and before 1989, 20%,
(B)after 1988 and before 1995, 15%,
(C)after 1994, 15% where the property
(I)is acquired by the taxpayer under a written agreement of purchase and sale entered into by the taxpayer before February 22, 1994,
(II)was under construction by or on behalf of the taxpayer on February 22, 1994, or
(III)is machinery or equipment that will be a fixed and integral part of property under construction by or on behalf of the taxpayer on February 22, 1994, and
(D)after 1994, 10% where the property is not property to which clause (C) applies,
(vi)acquired primarily for use in a prescribed designated region and
(A)after November 16, 1978 and before 1987, 10%,
(B)in 1987, 7%,
(C)in 1988, 3%, and
(D)after 1988, 0%, and
(vii)acquired primarily for use in Canada (other than a property described in subparagraph (iii), (iv), (v) or (vi)), and
(A)after November 16, 1978 and before 1987, 7%,
(B)in 1987, 5%,
(C)in 1988, 3%, and
(D)after 1988, 0%,
(a.1)in respect of a qualified resource property acquired by a taxpayer primarily for use in Nova Scotia, New Brunswick, Prince Edward Island, Newfoundland and Labrador, the Gaspé Peninsula or the prescribed offshore region, and that is acquired
(i)after March 28, 2012 and before 2014, 10%,
(ii)after 2013 and before 2017, 10% if the property
(A)is acquired by the taxpayer under a written agreement of purchase and sale entered into by the taxpayer before March 29, 2012, or
(B)is acquired as part of a phase of a project and
(I)the construction of the phase was started by, or on behalf of, the taxpayer before March 29, 2012 (and for this purpose construction does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), or
(II)the engineering and design work for the construction of the phase, as evidenced in writing, was started by, or on behalf of, the taxpayer before March 29, 2012 (and for this purpose engineering and design work does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), and
(iii)in any other case,
(A)in 2014 and 2015, 5%, and
(B)after 2015, 0%,
(b)in respect of qualified transportation equipment acquired
(i)before 1987, 7%,
(ii)in 1987, 5%, and
(iii)in 1988, 3%,
(c)in respect of qualified construction equipment acquired
(i)before 1987, 7%,
(ii)in 1987, 5%, and
(iii)in 1988, 3%,
(d)in respect of certified property
(i)included in subparagraph (a)(i) of the definitioncertified propertyin this subsection, 50%,
(ii)included in subparagraph (a)(ii) of that definition, 40%, and
(iii)in any other case, 30%,
(e)in respect of a qualified expenditure
(i)made after March 31, 1977 and before November 17, 1978 in respect of scientific research and experimental development to be carried out in
(A)the Province of Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland or the Gaspé Peninsula, 10%,
(B)a prescribed designated region, 7 1/2%, and
(C)any other area in Canada, 5%,
(ii)made by a taxpayer after November 16, 1978 and before the taxpayer’s taxation year that includes November 1, 1983 or made by the taxpayer in the taxpayer’s taxation year that includes November 1, 1983 or a subsequent taxation year if the taxpayer deducted an amount under section 37.1 in computing the taxpayer’s income for the year,
(A)where the expenditure was made by a Canadian-controlled private corporation in a taxation year of the corporation in which it is or would, if it had sufficient taxable income for the year, be entitled to a deduction under section 125 in computing its tax payable under this Part for the year, 25%, and
(B)where clause (A) is not applicable and the qualified expenditure was in respect of scientific research and experimental development to be carried out in
(I)the Province of Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland or the Gaspé Peninsula, 20%, and
(II)any other area in Canada, 10%,
(iii)made by a taxpayer in the taxpayer’s taxation year that ends after October 31, 1983 and before January 1, 1985, other than a qualified expenditure in respect of which subparagraph (ii) is applicable,
(A)where the expenditure was made by a Canadian-controlled private corporation in a taxation year of the corporation in which it is or would, if it had sufficient taxable income for the year, be entitled to a deduction under section 125 in computing its tax payable under this Part for the year, 35%, and
(B)where clause (A) is not applicable and the qualified expenditure was in respect of scientific research and experimental development to be carried out in
(I)the Province of Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland or the Gaspé Peninsula, 30%, and
(II)any other area in Canada, 20%,
(iv)made by a taxpayer
(A)after the taxpayer’s 1984 taxation year and before 1995, or
(B)after 1994 under a written agreement entered into by the taxpayer before February 22, 1994,
(other than a qualified expenditure in respect of which subparagraph (ii) applies) in respect of scientific research and experimental development to be carried out in
(C)the Province of Newfoundland, Prince Edward Island, Nova Scotia or New Brunswick or the Gaspé Peninsula, 30%, and
(D)in any other area in Canada, 20%, and
(v)made by a taxpayer after 1994, 20% where the amount is not an amount to which clause (B) applies,
(f)in respect of the repayment of government assistance, non-government assistance or a contract payment that reduced
(i)the capital cost to the taxpayer of a property under paragraph 127(11.1)(b),
(ii)the amount of a qualified expenditure incurred by the taxpayer under paragraph 127(11.1)(c) or 127(11.1)(e) for taxation years that began before 1996, or
(iii)the prescribed proxy amount of the taxpayer under paragraph 127(11.1)(f) for taxation years that began before 1996,
the specified percentage that applied in respect of the property, the expenditure or the prescribed proxy amount, as the case may be,
(f.1)in respect of the repayment of government assistance, non-government assistance or a contract payment that reduced
(i)a qualified expenditure of a taxpayer under any of subsections (18) to (20), for the qualified expenditure incurred
(A)before 2015, 20%, and
(B)after 2014, 15%,
(ii)the amount of eligible salary and wages payable (by the taxpayer) to an eligible apprentice under paragraph (11.1)(c.4), 10%,
(iii)[Repealed, 2017, c. 20, s. 23]
(g)in respect of an approved project property acquired
(i)before 1989, 60%, and
(ii)after 1988, 45%,
(h)in respect of the qualified Canadian exploration expenditure of a taxpayer for a taxation year, 25%,
(i)in respect of qualified small-business property, 10%,
(j)in respect of a pre-production mining expenditure of the taxpayer that is described in subparagraph (a)(i) of the definitionpre-production mining expenditureand that is incurred
(i)before 2013, 10%,
(ii)in 2013, 5%, and
(iii)after 2013, 0%, and
(k)in respect of a pre-production mining expenditure of the taxpayer that is described in subparagraph (a)(ii) of the definitionpre-production mining expenditureand that is incurred
(i)before 2014, 10%,
(ii)after 2013 and before 2016, 10% if the expenditure is incurred
(A)under a written agreement entered into by the taxpayer before March 29, 2012, or
(B)as part of the development of a new mine and
(I)the construction of the mine was started by, or on behalf of, the taxpayer before March 29, 2012 (and for this purpose construction does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), or
(II)the engineering and design work for the construction of the mine, as evidenced in writing, was started by, or on behalf of, the taxpayer before March 29, 2012 (and for this purpose engineering and design work does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), and
(iii)in any other case,
(A)in 2014, 7%,
(B)in 2015, 5% if the expense is described in paragraph (a)(ii) of the definitionpre-production mining expenditurebecause of paragraph (g.4) of the definitionCanadian exploration expensein subsection 66.1(6), and 4% otherwise, and
(C)after 2015, 0%; (pourcentage déterminé)
specified property[Repealed, 2017, c. 20, s. 23]
specified samplingmeans the collecting and testing of samples in respect of a mineral resource except that specified sampling does not include
(a)the collecting or testing of a sample that, at the time the sample is collected, weighs more than 15 tonnes, and
(b)the collecting or testing of a sample collected at any time in a calendar year in respect of any one mineral resource if the total weight of all such samples collected (by any person or partnership or any combination of persons and partnerships) in the period in the calendar year that is before that time (other than samples each of which weighs less than one tonne) exceeds 1,000 tonnes; (échantillonnage déterminé)
SR&ED qualified expenditure poolof a taxpayer at the end of a taxation year means the amount determined by the formula
A + B - C
where
super-allowance benefit amountfor a particular taxation year in respect of a corporation in respect of a province means the amount determined by the formula
(A - B) × C
where
(a)where the corporation’s expenditure limit for the particular year is nil, the maximum rate of the province’s income tax that applies for that year to active business income earned in the province by a corporation, and
(b)in any other case, the rate of the province’s income tax for that year that would apply to the corporation if
(i)it were not associated with any other corporation in the year,
(ii)its taxable income for the year were less than $200,000, and
(iii)its taxable income for the year were earned in the province in respect of an active business carried on in the province; (avantage relatif à la superdéduction)
taxable supplierin respect of an amount means
(a)a person resident in Canada or a Canadian partnership, or
(b)a non-resident person, or a partnership that is not a Canadian partnership,
(i)by which the amount was payable, or
(ii)by or for whom the amount was receivable
in the course of carrying on a business through a permanent establishment (as defined by regulation) in Canada. (fournisseur imposable)
Marginal note:Transitional application of investment tax credit definition
(9.01)For the purpose of applying each of paragraphs (c) to (f), (h) and (i) of the definitioninvestment tax creditin subsection (9) in respect of a taxpayer, the reference to “10” in that paragraph is to be read as a reference to the number that is the lesser of
(a)20, and
(b)the number that is the total of 10 and the number of taxation years by which the number of taxation years of the taxpayer that have ended after 1997 exceeds 11.
Marginal note:Transitional application of investment tax credit definition
(9.02)For the purpose of applying paragraph (g) of the definitioninvestment tax creditin subsection (9) in respect of a taxpayer, the reference to “9” in that paragraph is to be read as a reference to the number that is the lesser of
(a)19, and
(b)the number that is the total of 9 and the number of taxation years by which the number of taxation years of the taxpayer that have ended after 1997 exceeds 11.
Marginal note:Loss restriction event before end of year
(9.1)If a taxpayer is subject to a loss restriction event at any time (in this subsection referred to as “that time”) before the end of a taxation year of the taxpayer, the amount determined for the purposes of paragraph (j) of the definitioninvestment tax creditin subsection (9) with respect to the taxpayer is the amount, if any, by which
(a)the amount, if any, by which
(i)the total of all amounts added in computing its investment tax credit at the end of the year in respect of a property acquired, or an expenditure made, before that time
exceeds
(ii)the total of all amounts each of which is an amount
(A)deducted in computing its investment tax credit at the end of the year under paragraph (f) or (g) of the definitioninvestment tax creditin subsection 127(9), or
(B)deducted in computing its investment tax credit at the end of the taxation year immediately preceding the year under paragraph (i) of that definition,
to the extent that the amount may reasonably be considered to have been so deducted in respect of a property or expenditure in respect of which an amount is included in subparagraph 127(9.1)(a)(i)
exceeds the total of
(c)the amount, if any, by which its refundable Part VII tax on hand at the end of the year exceeds the total of all amounts each of which is an amount designated under subsection 192(4) in respect of a share issued by it
(i)in the period commencing one month before that time and ending at that time, or
(ii)after that time,
and before the end of the year, and
(d)that proportion of the amount that, but for subsections 127(3) and 127(5) and sections 126, 127.2 and 127.3, would be its tax payable under this Part for the year that,
(i)if throughout the year the taxpayer carried on a particular business in the course of which a property was acquired, or an expenditure was made, before that time in respect of which an amount is included in computing its investment tax credit at the end of the year, the amount, if any, by which the total of all amounts each of which is
(A)its income for the year from the particular business, or
(B)its income for the year from any other business substantially all the income of which was derived from the sale, leasing, rental or development of properties or the rendering of services similar to the properties sold, leased, rented or developed, or the services rendered, as the case may be, by the taxpayer in carrying on the particular business before that time
exceeds
(C)the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) for the year by the taxpayer in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of the particular business or the other business,
is of the greater of
(ii)the amount determined under subparagraph 127(9.1)(d)(i), and
(iii)its taxable income for the year.
Marginal note:Loss restriction event after end of year
(9.2)If a taxpayer is subject to a loss restriction event at any time (in this subsection referred to as “that time”) after the end of a taxation year of the taxpayer, the amount determined for the purposes of paragraph (k) of the definitioninvestment tax creditin subsection (9) is the amount, if any, by which
(a)the total of all amounts each of which is an amount included in computing its investment tax credit at the end of the year in respect of a property acquired, or an expenditure made, after that time
exceeds the total of
(c)its refundable Part VII tax on hand at the end of the year, and
(d)that proportion of the amount that, but for subsections 127(3) and 127(5) and sections 126, 127.2 and 127.3, would be its tax payable under this Part for the year that,
(i)if the taxpayer acquired a property or made an expenditure, in the course of carrying on a particular business throughout the portion of a taxation year that is after that time, in respect of which an amount is included in computing its investment tax credit at the end of the year, the amount, if any, by which the total of all amounts each of which is
(A)its income for the year from the particular business, or
(B)if the taxpayer carried on a particular business in the year, its income for the year from any other business substantially all the income of which was derived from the sale, leasing, rental or development of properties or the rendering of services similar to the properties sold, leased, rented or developed, or the services rendered, as the case may be, by the taxpayer in carrying on the particular business before that time
exceeds
(C)the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) for the year by the taxpayer in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of the particular business or the other business
is of the greater of
(ii)the amount determined under subparagraph 127(9.2)(d)(i), and
(iii)its taxable income for the year.
Marginal note:Ascertainment of certain property
(10)The Minister may
(a)obtain the advice of the appropriate minister for the purposes of theRegional Development Incentives Act, chapter R-3 of the Revised Statutes of Canada, 1970, as to whether any property is property as described in paragraph (b) of the definitioncertified propertyin subsection 127(9);
(b)obtain a certificate from the appropriate minister for the purposes of theRegional Development Incentives Actcertifying that any property specified therein is property as described in paragraph (b) of that definition; or
(c)provide advice to the member of the Queen’s Privy Council for Canada appointed to be the Minister for the purposes of theAtlantic Canada Opportunities Agency Actas to whether any property qualifies for certification under the definitionapproved project propertyin subsection 127(9).
Marginal note:Additions to investment tax credit
(10.1)For the purposes of paragraph (e) of the definitioninvestment tax creditin subsection (9), if a corporation was throughout a taxation year a Canadian-controlled private corporation, there shall be added in computing the corporation’s investment tax credit at the end of the year the amount that is 20% of the least of
(a)such amount as the corporation claims;
(b)the amount by which the corporation’s SR&ED qualified expenditure pool at the end of the year exceeds the total of all amounts each of which is the super-allowance benefit amount for the year in respect of the corporation in respect of a province; and
(c)the corporation’s expenditure limit for the year.
Marginal note:Expenditure limit
(10.2)For the purpose of subsection (10.1), a particular corporation’s expenditure limit for a particular taxation year is the amount determined by the formula
$3 million × ($40 million – A)/$40 million
where
(a)nil, if the following amount is less than or equal to $10 million:
(i)if the particular corporation is not associated with any other corporation in the particular taxation year, the amount that is its taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year, and
(ii)if the particular corporation is associated with one or more other corporations in the particular taxation year, the amount that is the total of all amounts, each of which is the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of the particular corporation for its, or of one of the other corporations for its, last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, and
(b)in any other case, the lesser of $40 million and the amount by which the amount determined under subparagraph (a)(i) or (ii), as the case may be, exceeds $10 million.
Marginal note:Expenditure limits — associated CCPCs
(10.21)Notwithstanding subsection (10.2), the expenditure limit for a taxation year of a corporation that is associated in the taxation year with one or more other Canadian-controlled private corporations is, except as otherwise provided in this section, nil.
Marginal note:Deemed non-association of corporations
(10.22)If a particular Canadian-controlled private corporation is associated with another corporation in circumstances where those corporations would not be associated if the Act were read without reference to paragraph 256(1.2)(a), the particular corporation has issued shares to one or more persons who have been issued shares by the other corporation and there is at least one shareholder of the particular corporation who is not a shareholder of the other corporation or one shareholder of the other corporation who is not a shareholder of the particular corporation, the particular corporation is deemed not to be associated with the other corporation for the purpose of determining the particular corporation’s expenditure limit under subsection (10.2).
Marginal note:Application of subsection (10.22)
(10.23)Subsection (10.22) applies to the particular corporation and the other corporation referred to in that subsection only if the Minister is satisfied that
(a)the particular corporation and the other corporation are not otherwise associated under this Act; and
(b)the existence of one or more shareholders of the particular corporation who is not a shareholder of the other corporation, or the existence of one or more shareholders of the other corporation who is not a shareholder of the particular corporation, is not for the purpose of satisfying the requirements of subsection (10.22) or 127.1(2.2).
Marginal note:Associated corporations
(10.3)If all of the Canadian-controlled private corporations that are associated with each other in a taxation year file with the Minister in prescribed form an agreement whereby, for the purpose of subsection 127(10.1), they allocate an amount to one or more of them for the year and the amount so allocated or the total of the amounts so allocated, as the case may be, does not exceed the amount determined for the year by the formula in subsection 127(10.2), the expenditure limit for the year of each of the corporations is the amount so allocated to it.
Marginal note:Failure to file agreement
(10.4)If any of the Canadian-controlled private corporations that are associated with each other in a taxation year fails to file with the Minister an agreement as contemplated by subsection 127(10.3) within 30 days after notice in writing by the Minister is forwarded to any of them that such an agreement is required for the purposes of this Part, the Minister shall, for the purpose of subsection 127(10.1), allocate an amount to one or more of them for the year, which amount or the total of which amounts, as the case may be, shall equal the amount determined for the year by the formula in subsection 127(10.2), and in any such case the expenditure limit for the year of each of the corporations is the amount so allocated to it.
Marginal note:Expenditure limit determination in certain cases
(10.6)Notwithstanding any other provision of this section,
(a)where a Canadian-controlled private corporation (in this paragraph referred to as the “first corporation”) has more than one taxation year ending in the same calendar year and it is associated in two or more of those taxation years with another Canadian-controlled private corporation that has a taxation year ending in that calendar year, the expenditure limit of the first corporation for each taxation year in which it is associated with the other corporation ending in that calendar year is, subject to the application of paragraph 127(10.6)(b), an amount equal to its expenditure limit for the first such taxation year determined without reference to paragraph 127(10.6)(b); and
(b)where a Canadian-controlled private corporation has a taxation year that is less than 51 weeks, its expenditure limit for the year is that proportion of its expenditure limit for the year determined without reference to this paragraph that the number of days in the year is of 365.
(c)[Repealed, 2019, c. 29, s. 24]
Marginal note:Further additions to investment tax credit
(10.7)Where a taxpayer has in a particular taxation year repaid an amount of government assistance, non-government assistance or a contract payment that was applied to reduce
(a)the amount of a qualified expenditure incurred by the taxpayer under paragraph 127(11.1)(c) for a preceding taxation year that began before 1996,
(b)the prescribed proxy amount of the taxpayer under paragraph 127(11.1)(f) for a preceding taxation year that began before 1996, or
(c)a qualified expenditure incurred by the taxpayer under any of subsections 127(18) to 127(20) for a preceding taxation year,
there shall be added to the amount otherwise determined under subsection 127(10.1) in respect of the taxpayer for the particular year the amount, if any, by which
(d)the amount that would have been determined under subsection 127(10.1) in respect of the taxpayer for that preceding year if subsections 127(11.1) and 127(18) to 127(20) had not applied in respect of the government assistance, non-government assistance or contract payment, as the case may be, to the extent of the amount so repaid,
exceeds
(e)the amount determined under subsection 127(10.1) in respect of the taxpayer for that preceding year.
Marginal note:Further additions to investment tax credit
(10.8)For the purposes of paragraph (e.1) of the definitioninvestment tax creditin subsection 127(9), subsection 127(10.7) and paragraph 37(1)(c), an amount of government assistance, non-government assistance or a contract payment that
(a)was applied to reduce
(i)the capital cost to a taxpayer of a property under paragraph 127(11.1)(b),
(ii)the amount of a qualified expenditure incurred by a taxpayer under paragraph 127(11.1)(c) for taxation years that began before 1996,
(iii)the prescribed proxy amount of a taxpayer under paragraph 127(11.1)(f) for taxation years that began before 1996, or
(iv)a qualified expenditure incurred by a taxpayer under any of subsections 127(18) to 127(20),
(b)was not received by the taxpayer, and
(c)ceased in a taxation year to be an amount that the taxpayer can reasonably be expected to receive,
is deemed to be the amount of a repayment by the taxpayer in the year of the government assistance, non-government assistance or contract payment, as the case may be.
Marginal note:Interpretation
(11)For the purposes of the definitionsqualified propertyandqualified resource propertyin subsection (9),
(a)manufacturing or processingdoes not include any of the activities
(i)referred to in any of paragraphs (a) to (e) and (g) to (i) of the definitionmanufacturing or processingin subsection 125.1(3),
(ii)that would be referred to in paragraph (f) of that definition if that paragraph were read without reference to the expression “located in Canada”,
(iii)that would be referred to in paragraph (j) of that definition if that paragraph were read without reference to the expression “in Canada”, or
(iv)that would be referred to in paragraph (k) of that definition if the definitionCanadian field processingin subsection 248(1) were read without reference to the expression “in Canada”; and
(b)for greater certainty, the purposes referred to in paragraph (c) of the definitionqualified propertyand paragraph (a) of the definitionqualified resource propertyin subsection (9) do not include
(i)storing (other than the storing of grain), shipping, selling or leasing finished goods,
(ii)purchasing raw materials,
(iii)administration, including clerical and personnel activities,
(iv)purchase and resale operations,
(v)data processing, or
(vi)providing facilities for employees, including cafeterias, clinics and recreational facilities.
Marginal note:Investment tax credit
(11.1)For the purposes of the definitioninvestment tax creditin subsection 127(9),
(a)the capital cost to a taxpayer of a property shall be computed as if no amount were added thereto by virtue of section 21;
(b)the capital cost to a taxpayer of a property shall be deemed to be the capital cost to the taxpayer of the property, determined without reference to subsections 13(7.1) and 13(7.4), less the amount of any government assistance or non-government assistance that can reasonably be considered to be in respect of, or for the acquisition of, the property and that, at the time of the filing of the taxpayer’s return of income under this Part for the taxation year in which the property was acquired, the taxpayer has received, is entitled to receive or can reasonably be expected to receive;
(c)[Repealed, 1996, c. 21, s. 30]
(c.1)the amount of a taxpayer’s qualified Canadian exploration expenditure for a taxation year shall be deemed to be the amount of the taxpayer’s qualified Canadian exploration expenditure for the year as otherwise determined less the amount of any government assistance, non-government assistance or contract payment (other than assistance under thePetroleum Incentives Program Act or the Petroleum Incentives Program Act, Chapter P-4.1 of the Statutes of Alberta, 1981) in respect of expenditures included in determining the taxpayer’s qualified Canadian exploration expenditure for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive;
(c.2)the amount of a taxpayer’s flow-through mining expenditure for a taxation year is deemed to be the amount of the taxpayer’s flow-through mining expenditure for the year as otherwise determined less the amount of any government assistance or non-government assistance in respect of expenses included in determining the taxpayer’s flow-through mining expenditure for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive;
(c.21)the amount of a taxpayer’s flow-through critical mineral mining expenditure for a taxation year is deemed to be the amount of the taxpayer’s flow-through critical mineral mining expenditure for the year as otherwise determined less the amount of any government assistance or non-government assistance in respect of expenses included in determining the taxpayer’s flow-through critical mineral mining expenditure for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive;
(c.3)the amount of a taxpayer’s pre-production mining expenditure for a taxation year is deemed to be the amount of the taxpayer’s pre-production mining expenditure for the year as otherwise determined less the amount of any government assistance or non-government assistance in respect of expenses included in determining the taxpayer’s pre-production mining expenditure for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive;
(c.4)the amount of a taxpayer’s eligible salary and wages for a taxation year is deemed to be the amount of the taxpayer’s eligible salary and wages for the year otherwise determined less the amount of any government assistance or non-government assistance in respect of the eligible salary and wages for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive; and
(c.5)[Repealed, 2017, c. 20, s. 23]
(d)where at a particular time a taxpayer who is a beneficiary of a trust or a member of a partnership has received, is entitled to receive or can reasonably be expected to receive government assistance, non-government assistance or a contract payment, the amount thereof that may reasonably be considered to be in respect of, or for the acquisition of, depreciable property of the trust or partnership or in respect of an expenditure by the trust or partnership shall be deemed to have been received at that time by the trust or partnership, as the case may be, as government assistance, non-government assistance or as a contract payment in respect of the property or the expenditure, as the case may be.
(e) and (f)[Repealed, 1996, c. 21, s. 30]
Marginal note:Time of acquisition
(11.2)In applying subsections (5), (7) and (8), paragraphs (a) and (a.1) of the definitioninvestment tax creditin subsection (9) and section 127.1, qualified property and qualified resource property are deemed not to have been acquired by a taxpayer before the property is considered to have become available for use by the taxpayer, determined without reference to paragraphs 13(27)(c) and (28)(d).
Marginal note:Decertification of approved project property
(11.3)For the purposes of the definitionapproved project propertyin subsection 127(9), a property that has been certified by the Minister of Regional Industrial Expansion, the Minister of Industry, Science and Technology or the member of the Queen’s Privy Council for Canada appointed to be the Minister for the purposes of theAtlantic Canada Opportunities Agency Actmay have its certification revoked by the latter Minister where
(a)an incorrect statement was made in the furnishing of information for the purpose of obtaining the certificate, or
(b)the taxpayer does not conform to the plan described in that definition,
and a certificate that has been so revoked shall be void from the time of its issue.
Marginal note:Special rule for eligible salary and wages — apprentices
(11.4)For the purpose of the definitioneligible salary and wagesin subsection (9), the eligible salary and wages payable by a taxpayer in a taxation year to an eligible apprentice in respect of the eligible apprentice’s employment in the taxation year is, if the eligible apprentice is employed by any other taxpayer who is related to the taxpayer (including a partnership that has a member that is related to the taxpayer) in the calendar year that includes the end of the taxpayer’s taxation year, deemed to be nil unless the taxpayer is designated in prescribed form by all of those related taxpayers to be the only employer of the eligible apprentice for the purpose of the taxpayer applying that definition to the salary and wages payable by the taxpayer to the eligible apprentice in that taxation year, in which case
(a)the eligible salary and wages payable by the taxpayer in the taxation year to the eligible apprentice in respect of the eligible apprentice’s employment in the taxation year shall be the amount determined without reference to this subsection; and
(b)the eligible salary and wages payable to the eligible apprentice by each of the other related taxpayers in their respective taxation years that end in the calendar year is deemed to be nil.
Marginal note:Adjustments to qualified expenditures
(11.5)For the purposes of the definitionqualified expenditurein subsection (9), the amount of an expenditure (other than a prescribed proxy amount) incurred by a taxpayer in a taxation year is deemed to be the amount of the expenditure determined under subsection (11.6).
Marginal note:Non-arm’s length costs
(11.6)For the purpose of subsection 127(11.5), where
(a)a taxpayer would, if this Act were read without reference to subsection 127(26), incur at any time an expenditure as consideration for a person or partnership (referred to in this subsection as the “supplier”) rendering a service (other than a service rendered by a person as an employee of the taxpayer) or providing a property to the taxpayer, and
(b)at that time the taxpayer does not deal at arm’s length with the supplier,
the amount of the expenditure incurred by the taxpayer for the service or property and the cost to the taxpayer of the property are deemed to be
(c)in the case of a service rendered to the taxpayer, the lesser of
(i)the amount of the expenditure otherwise incurred by the taxpayer for the service, and
(ii)the adjusted service cost to the supplier of rendering the service, and
(d)in the case of a property sold to the taxpayer, the lesser of
(i)the cost to the taxpayer of the property otherwise determined, and
(ii)the adjusted selling cost to the supplier of the property.
Marginal note:Definitions
(11.7)The definitions in this subsection apply in this subsection and subsection 127(11.6).
adjusted service costto a person or partnership (referred to in this definition as the “supplier”) of rendering a particular service is the amount determined by the formula:
A - B - C - D - E
where
(a)the cost to the supplier for a service (other than a service rendered by a person as an employee of the supplier) rendered by a person or partnership that does not deal at arm’s length with the supplier to the extent that the cost is incurred for the purpose of rendering the particular service
exceeds
(b)the adjusted service cost to the person or partnership referred to in paragraph (a) of rendering the service referred to in that paragraph to the supplier,
(a)the cost to the supplier of a property acquired by the supplier from a person or partnership that does not deal at arm’s length with the supplier
exceeds
(b)the adjusted selling cost to the person or partnership referred to in paragraph (a) of the property,
to the extent that the excess relates to the cost of rendering the particular service,
adjusted selling costto a person or partnership (referred to in this definition as the “supplier”) of a property is the amount determined by the formula
A - B
where
(a)where the property is purchased from another person or partnership with which the supplier does not deal at arm’s length, the lesser of
(i)the cost to the supplier of the property, and
(ii)the adjusted selling cost to the other person or partnership of the property, and
(b)in any other case, the cost to the supplier of the property,
and for the purpose of paragraph (b),
(c)where part of the cost to a supplier of a particular property is attributable to another property acquired by the supplier from a person or partnership with which the supplier does not deal at arm’s length, that part of the cost is deemed to be the lesser of
(i)the amount of that part of the cost otherwise determined, and
(ii)the adjusted selling cost to the person or the partnership of the other property,
(d)where part of the cost to a supplier of a property is attributable to a service (other than a service rendered by a person as an employee of the supplier) rendered to the supplier by a person or partnership with which the supplier does not deal at arm’s length, that part of the cost is deemed to be the lesser of
(i)the amount of that part of the cost otherwise determined, and
(ii)the adjusted service cost to the person or partnership of rendering the service, and
(e)no part of the cost to a supplier of a property that is attributable to remuneration based on profits or a bonus paid or payable to an employee of the supplier shall be included, and
Marginal note:Interpretation for non-arm’s length costs
(11.8)For the purposes of this subsection and subsections 127(11.6) and 127(11.7),
(a)the cost to a person or partnership (referred to in this paragraph as the “supplier”) of rendering a service or providing a property to another person or partnership (referred to in this paragraph as the “recipient”) with which the supplier does not deal at arm’s length does not include,
(i)where the cost to the recipient of the service rendered or property provided by the supplier would, but for this paragraph, be a cost to the recipient incurred in rendering a particular service or providing a particular property to a person or partnership with which the recipient does not deal at arm’s length, any expenditure of the supplier to the extent that it would, if it were incurred by the recipient in rendering the particular service or providing the particular property, be excluded from a cost to the recipient because of this paragraph, and
(ii)in any other case, any expenditure of the supplier to the extent that it would, if it were incurred by the recipient, not be a qualified expenditure of the recipient; and
(b)paragraph 69(1)(c) does not apply in determining the cost of a property.
(c)[Repealed, 2012, c. 31, s. 27]
Marginal note:Interpretation
(12)For the purposes of subsection 13(7.1), where, ursuant to a designation or an allocation from a trust or partnership, an amount is required by subsection 127(7) or 127(8) to be added in computing the investment tax credit of a taxpayer at the end of the taxpayer’s taxation year, the portion thereof that can reasonably be considered to relate to depreciable property shall be deemed to have been received by the partnership or trust, as the case may be, at the end of its fiscal period in respect of which the designation or allocation was made as assistance from a government for the acquisition of depreciable property.
Marginal note:Idem
(12.1)For the purposes of section 37, where, pursuant to a designation or an allocation from a trust or partnership, an amount is required by subsection 127(7) or 127(8) to be added in computing the investment tax credit of a taxpayer at the end of the taxpayer’s taxation year, the portion thereof that may reasonably be regarded as relating to expenditures of a current nature in respect of scientific research and experimental development that are qualified expenditures shall, at the end of the fiscal period of the trust or partnership, as the case may be, in respect of which the designation or allocation was made, reduce the total of such expenditures of a current nature as may be claimed by the trust or partnership in respect of scientific research and experimental development.
Marginal note:Idem
(12.2)For the purposes of paragraphs 53(2)(c), 53(2)(h) and 53(2)(k), where in a taxation year a taxpayer has deducted under subsection 127(5) an amount that may reasonably be regarded as attributable to amounts included in computing the investment tax credit of the taxpayer at the end of the year in respect of property acquired, or an expenditure made, in a subsequent taxation year, the taxpayer shall be deemed to have made the deduction under that subsection in that subsequent taxation year.
Marginal note:Idem
(12.3)For the purposes of the determination of J in the definitioncumulative Canadian exploration expensein subsection 66.1(6), where, pursuant to a designation by a trust, an amount is required by subsection 127(7) to be added in computing the investment tax credit of a taxpayer at the end of the taxpayer’s taxation year, the portion thereof that can reasonably be considered to relate to a qualified Canadian exploration expenditure of the trust for a taxation year shall be deemed to have been received by the trust at the end of its taxation year in respect of which the designation was made as assistance from a government in respect of that expenditure.
Marginal note:Agreement to transfer qualified expenditures
(13)Where a taxpayer (referred to in this subsection and subsections 127(15) and 127(16) as the “transferor”) and another taxpayer (referred to in this subsection and subsection 127(15) as the “transferee”) file with the Minister an agreement or an amended agreement in respect of a particular taxation year of the transferor, the least of
(a)the amount specified in the agreement for the purpose of this subsection,
(b)the amount that but for the agreement would be the transferor’s SR&ED qualified expenditure pool at the end of the particular year, and
(c)the total of all amounts each of which is an amount that, if the transferor were dealing at arm’s length with the transferee, would be a contract payment
(i)for the performance of scientific research and experimental development for, or on behalf of, the transferee,
(ii)that is paid by the transferee to the transferor on or before the day that is 180 days after the end of the particular year, and
(iii)that would be in respect of
(A)a qualified expenditure that
(I)would be incurred by the transferor in the particular year (if this Act were read without reference to subsections 127(26) and 78(4)) in respect of that portion of the scientific research and experimental development that was performed at a time when the transferor did not deal at arm’s length with the transferee, and
(II)is paid by the transferor on or before the day that is 180 days after the end of the particular year, or
(B)an amount added because of this subsection to the transferor’s SR&ED qualified expenditure pool at the end of the particular year where the amount is attributable to an expenditure in respect of the scientific research and experimental development
is deemed to be
(d)an amount determined in respect of the transferor for the particular year for the purpose of determining the value of C in the definitionSR&ED qualified expenditure poolin subsection 127(9), and
(e)an amount determined in respect of the transferee for the transferee’s first taxation year that ends at or after the end of the particular year for the purpose of determining the value of B in the definitionSR&ED qualified expenditure poolin subsection 127(9),
and where the total of all amounts each of which is an amount specified in an agreement filed with the Minister under this subsection in respect of a particular taxation year of a transferor exceeds the amount that would be the transferor’s SR&ED qualified expenditure pool at the end of the particular year if no agreement were filed with the Minister in respect of the particular year, the least of the amounts determined under paragraphs 127(13)(a) to 127(13)(c) in respect of each such agreement is deemed to be nil.
Marginal note:Identification of amounts transferred
(14)Where
(a)a transferor and a transferee have filed an agreement under subsection 127(13) in respect of a taxation year of the transferor,
(b)the agreement includes a statement identifying the amount specified in the agreement for the purpose of subsection 127(13), or a part of that amount, as being related to
(i)a particular qualified expenditure included in the value of A in the formula in the definitionSR&ED qualified expenditure poolin subsection 127(9) for the purpose of determining the transferor’s SR&ED qualified expenditure pool at the end of the year, or
(ii)a particular amount included in the value of B in the formula in that definition for the purpose of determining the transferor’s SR&ED qualified expenditure pool at the end of the year that is deemed by paragraph 127(14)(d) to be a qualified expenditure, and
(c)the total of all amounts so identified in agreements filed by the transferor under subsection 127(13) as being related to the particular expenditure or the particular amount does not exceed the particular expenditure or the particular amount, as the case may be,
for the purposes of this section (other than the description of A in the definitionSR&ED qualified expenditure poolin subsection 127(9)) and section 127.1,
(d)the amount so identified that is included in the value of B in the formula in that definition for the purpose of determining the transferee’s SR&ED qualified expenditure pool at the end of the taxation year of the transferee is deemed to be a qualified expenditure either of a current nature or of a capital nature, incurred by the transferee in that year, where the particular expenditure or the particular amount was an expenditure of a current nature or of a capital nature, as the case may be, and
(e)except for the purpose of paragraph 127(14)(b), the amount of the transferor’s qualified expenditures of a current nature incurred in the taxation year of the transferor in respect of which the agreement is made is deemed not to exceed the amount by which the amount of such expenditures otherwise determined exceeds the total of all amounts identified under paragraph 127(14)(b) by the transferor in agreements filed under subsection 127(13) in respect of the year as being related to expenditures of a current nature.
Marginal note:Invalid agreements
(15)An agreement or amended agreement referred to in subsection 127(13) between a transferor and a transferee is deemed not to have been filed with the Minister for the purpose of that subsection where
(a)it is not in prescribed form;
(b)it is not filed
(i)on or before the transferor’s filing-due date for the particular taxation year to which the agreement relates,
(ii)in the period within which the transferor may serve a notice of objection to an assessment of tax payable under this Part for the particular year, or
(iii)in the period within which the transferee may serve a notice of objection to an assessment of tax payable under this Part for its first taxation year that ends at or after the end of the transferor’s particular year;
(c)it is not accompanied by,
(i)where the transferor is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,
(ii)where the transferor is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made,
(iii)where the transferee is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and
(iv)where the transferee is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made; or
(d)an agreement amending the agreement has been filed in accordance with subsection 127(13) and this subsection, except where subsection 127(16) applies to the original agreement.
Marginal note:Non-arm’s length parties
(16)Where a taxpayer does not deal at arm’s length with another taxpayer as a result of a transaction, event or arrangement, or a series of transactions or events, the principal purpose of which can reasonably be considered to have been to enable the taxpayers to enter into an agreement referred to in subsection 127(13), for the purpose of paragraph 127(13)(e) the least of the amounts determined under paragraphs 127(13)(a) to 127(13)(c) in respect of the agreement is deemed to be nil.
Marginal note:Assessment
(17)Notwithstanding subsections 152(4) and 152(5), such assessment of the tax, interest and penalties payable by any taxpayer in respect of any taxation year that began before the day an agreement or amended agreement is filed under subsection 127(13) or 127(20) shall be made as is necessary to take into account the agreement or the amended agreement.
Marginal note:Reduction of qualified expenditures
(18)Where on or before the filing-due date for a taxation year of a person or partnership (referred to in this subsection as the “taxpayer”) the taxpayer has received, is entitled to receive or can reasonably be expected to receive a particular amount that is government assistance, non-government assistance or a contract payment that can reasonably be considered to be in respect of scientific research and experimental development, the amount by which the particular amount exceeds all amounts applied for preceding taxation years under this subsection or subsection 127(19) or 127(20) in respect of the particular amount shall be applied to reduce the taxpayer’s qualified expenditures otherwise incurred in the year that can reasonably be considered to be in respect of the scientific research and experimental development.
Marginal note:Reduction of qualified expenditures
(19)Where on or before the filing-due date for a taxation year of a person or partnership (referred to in this subsection as the “recipient”) the recipient has received, is entitled to receive or can reasonably be expected to receive a particular amount that is government assistance, non-government assistance or a contract payment that can reasonably be considered to be in respect of scientific research and experimental development and the particular amount exceeds the total of
(a)all amounts applied for preceding taxation years under this subsection or subsection 127(18) or 127(20) in respect of the particular amount,
(b)the total of all amounts each of which would be a qualified expenditure that is incurred in the year by the recipient and that can reasonably be considered to be in respect of the scientific research and experimental development if subsection 127(18) did not apply to the particular amount, and
(c)the total of all amounts each of which would, but for the application of this subsection to the particular amount, be a qualified expenditure
(i)that was incurred by a person or partnership in a taxation year of the person or partnership that ended in the recipient’s taxation year, and
(ii)that can reasonably be considered to be in respect of the scientific research and experimental development to the extent that it was performed by the person or partnership at a time when the person or partnership was not dealing at arm’s length with the recipient,
the particular amount shall be applied to reduce each qualified expenditure otherwise determined that is referred to in paragraph 127(19)(c).
Marginal note:Agreement to allocate
(20)Where
(a)on or before the filing-due date for a taxation year of a person or partnership (referred to in this subsection and subsection 127(22) as the “taxpayer”) the taxpayer has received, is entitled to receive or can reasonably be expected to receive a particular amount that is government assistance, non-government assistance or a contract payment that can reasonably be considered to be in respect of scientific research and experimental development,
(b)subsection 127(19) does not apply to the particular amount in respect of the year, and
(c)the taxpayer and a person or partnership (referred to in this subsection and subsection 127(22) as the “transferee”) with which the taxpayer does not deal at arm’s length file an agreement or amended agreement with the Minister,
the lesser of
(d)the amount specified in the agreement, and
(e)the total of all amounts each of which would, but for the agreement, be a qualified expenditure
(i)that was incurred by the transferee in a particular taxation year of the transferee that ended in the taxpayer’s taxation year, and
(ii)that can reasonably be considered to be in respect of the scientific research and experimental development to the extent that it was performed by the transferee at a time when the transferee was not dealing at arm’s length with the taxpayer
shall be applied to reduce the qualified expenditures otherwise determined that are described in paragraph 127(20)(e).
Marginal note:Failure to allocate
(21)Where on or before the filing-due date for a taxation year of a person or partnership (referred to in this subsection as the “recipient”) the recipient has received, is entitled to receive or can reasonably be expected to receive a particular amount that is government assistance, non-government assistance or a contract payment that can reasonably be considered to be in respect of scientific research and experimental development and subsection 127(19) does not apply to the particular amount in respect of the year, the lesser of
(a)the total of all amounts each of which is a qualified expenditure
(i)that was incurred by a particular person or partnership in a taxation year of the particular person or partnership that ended in the recipient’s taxation year, and
(ii)that can reasonably be considered to be in respect of the scientific research and experimental development to the extent that it was performed by the particular person or partnership at a time when the particular person or partnership was not dealing at arm’s length with the recipient, and
(b)the amount, if any, by which the particular amount exceeds the total of amounts applied for the year and preceding taxation years under subsection 127(18), 127(19) or 127(20) in respect of the particular amount
is deemed for the purposes of this section to be an amount of government assistance received at the end of the particular year by the particular person or partnership in respect of the scientific research and experimental development.
Marginal note:Invalid agreements
(22)An agreement or amended agreement referred to in subsection 127(20) between a taxpayer and a transferee is deemed not to have been filed with the Minister where
(a)it is not in prescribed form;
(b)it is not filed
(i)on or before the taxpayer’s filing-due date for the particular taxation year to which the agreement relates,
(ii)in the period within which the taxpayer may serve a notice of objection to an assessment of tax payable under this Part for the particular year, or
(iii)in the period within which the transferee may serve a notice of objection to an assessment of tax payable under this Part for its first taxation year that ends at or after the end of the taxpayer’s particular year;
(c)it is not accompanied by,
(i)where the taxpayer is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,
(ii)where the taxpayer is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made,
(iii)where the transferee is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and
(iv)where the transferee is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made; or
(d)an agreement amending the agreement has been filed in accordance with subsection 127(20) and this subsection.
Marginal note:Partnership’s taxation year
(23)For the purposes of subsections 127(18) to 127(22), the taxation year of a partnership is deemed to be its fiscal period and its filing-due date for a taxation year is deemed to be the day that would be its filing-due date for the year if it were a corporation.
Marginal note:Exclusion from qualified expenditure
(24)Where
(a)a person or partnership (referred to in this subsection as the “first person”) does not deal at arm’s length with another person or partnership (referred to in this subsection as the “second person”),
(b)there is an arrangement under which an amount is paid or payable by the first person to a person or partnership with which the first person deals at arm’s length and an amount is received or receivable by the second person from a person or partnership with which the second person deals at arm’s length, and
(c)one of the main purposes of the arrangement can reasonably be considered to be to cause the amount paid or payable by the first person to be a qualified expenditure,
the amount paid or payable by the first person is deemed not to be a qualified expenditure.
Marginal note:Deemed contract payment
(25)Where
(a)a person or partnership (referred to in this subsection as the “first person”) deals at arm’s length with another person or partnership (referred to in this subsection as the “second person”),
(b)there is an arrangement under which an amount is paid or payable by the first person to a person or partnership (other than the second person) and a particular amount is received or receivable in respect of scientific research and experimental development by the second person from a person or partnership that is not a taxable supplier in respect of the particular amount, and
(c)one of the main purposes of the arrangement can reasonably be considered to be to cause the amount received or receivable by the second person not to be a contract payment,
the amount received or receivable by the second person is deemed to be a contract payment in respect of scientific research and experimental development.
Marginal note:Unpaid amounts
(26)For the purposes of subsections 127(5) to 127(25) and section 127.1, a taxpayer’s expenditure described in paragraph 37(1)(a) that is unpaid on the day that is 180 days after the end of the taxation year in which the expenditure is otherwise incurred is deemed
(a)not to have been incurred in the year; and
(b)to be incurred at the time it is paid.
Marginal note:Recapture of investment tax credit
(27)Where
(a)a taxpayer acquired a particular property from a person or partnership in a taxation year of the taxpayer or in any of the 10 preceding taxation years,
(b)the cost, or a portion of the cost, of the particular property was a qualified expenditure, or would if this Act were read without reference to subsection (26) be a qualified expenditure, to the taxpayer,
(c)the cost, or the portion of the cost, of the particular property is included, or would if this Act were read without reference to subsection (26) be included, in an amount, a percentage of which can reasonably be considered to be included in computing the taxpayer’s investment tax credit at the end of the taxation year, and
(d)in the year and after February 23, 1998, the taxpayer converts to commercial use, or disposes of without having previously converted to commercial use, the particular property or another property that incorporates the particular property,
there shall be added to the taxpayer’s tax otherwise payable under this Part for the year the lesser of
(e)the amount that can reasonably be considered to be included in the taxpayer’s investment tax credit at the end of any taxation year, or that would be so included if this Act were read without reference to subsection (26), in respect of the particular property, and
(f)the amount that is the percentage — that is the sum of each percentage described in paragraph (c) that has been applied to compute the taxpayer’s investment tax credit in respect of the particular property — of
(i)in the case where the particular property or the other property is disposed of to a person who deals at arm’s length with the taxpayer,
(A)the proceeds of disposition of the property, if the property
(I)is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or
(II)is the other property,
(B)25% of the proceeds of disposition of the property, if the property is the particular property, is first term shared-use equipment and is not second term shared-use equipment, and
(C)50% of the proceeds of disposition of the property, if the property is the particular property and is second term shared-use equipment, and
(ii)in the case where the particular property or the other property is converted to commercial use or is disposed of to a person who does not deal at arm’s length with the taxpayer,
(A)the fair market value of the property, if the property
(I)is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or
(II)is the other property,
(B)25% of the fair market value of the property at the time of its conversion or disposition, if the particular property is first term shared-use equipment and is not second term shared-use equipment, and
(C)50% of the fair market value of the property at the time of its conversion or disposition, if the particular property is second term shared-use equipment.
(27.1) to (27.12)[Repealed, 2017, c. 20, s. 23]
Marginal note:Recapture of investment tax credit of partnership
(28)For the purpose of computing the amount determined under subsection (8) in respect of a partnership at the end of a particular fiscal period, where
(a)a particular property, the cost of which is a qualified expenditure, is acquired by the partnership from a person or partnership in the particular fiscal period or in any of the 10 preceding fiscal periods of the partnership,
(b)the cost of the particular property is included in an amount, a percentage of which can reasonably be considered to have been included in computing the amount determined under subsection (8) in respect of the partnership at the end of a fiscal period, and
(c)in the particular fiscal period and after February 23, 1998, the partnership converts to commercial use, or disposes of without having previously converted to commercial use, the particular property or another property that incorporates the particular property,
there shall be deducted in computing the amount determined under subsection (8) in respect of the partnership at the end of the particular fiscal period the lesser of
(d)the amount that can reasonably be considered to have been included in respect of the particular property in computing the amount determined under subsection (8) in respect of the partnership, and
(e)the percentage (described in paragraph (b)) of
(i)where the particular property or the other property is disposed of to a person who deals at arm’s length with the partnership, the proceeds of disposition of that property, and
(ii)in any other case, the fair market value of the particular property or the other property at the time of the conversion or disposition.
(28.1)[Repealed, 2017, c. 20, s. 23]
Marginal note:Recapture of investment tax credit of allocating taxpayer
(29)Where
(a)a taxpayer acquired a particular property from a person or partnership in a taxation year or in any of the 10 preceding taxation years,
(b)the cost of the particular property was a qualified expenditure to the taxpayer,
(c)all or part of the qualified expenditure can reasonably be considered to have been the subject of an agreement made under subsection (13) by the taxpayer and another taxpayer (in this subsection referred to as the “transferee”), and
(d)in the year and after February 23, 1998, the taxpayer converts to commercial use, or disposes of without having previously converted to commercial use, the particular property or another property that incorporates the particular property,
there shall be added to the taxpayer’s tax otherwise payable under this Part for the year the lesser of
(e)the amount that can reasonably be considered to have been included in computing the transferee’s investment tax credit in respect of the qualified expenditure that was the subject of the agreement, and
(f)the amount determined by the formula
A × B - C
where
(i)where the particular property or the other property is disposed of to a person who deals at arm’s length with the taxpayer, the proceeds of disposition of that property, and
(ii)in any other case, the fair market value of the particular property or the other property at the time of the conversion or disposition, and
Marginal note:Addition to tax
(30)Where a taxpayer is a member of a partnership at the end of a fiscal period of the partnership, there shall be added to the taxpayer’s tax otherwise payable under this Part for the taxpayer’s taxation year in which that fiscal period ends the amount that can reasonably be considered to be the taxpayer’s share of the amount, if any, by which
(a)the total of
(i)the total of all amounts each of which is the lesser of the amounts described in paragraphs (28)(d) and (e) in respect of the partnership in respect of the fiscal period, and
(ii)the total of all amounts each of which is the lesser of the amounts described in paragraphs (35)(c) and (d) in respect of the partnership in respect of the fiscal period,
(iii)[Repealed, 2017, c. 20, s. 23]
exceeds
(b)the amount that would be determined in respect of the partnership under subsection (8) if that subsection were read without reference to subsections (28) and (35).
Marginal note:Tiered partnership
(31)Where a taxpayer is a member of a particular partnership that is a member of another partnership and an amount would be added to the particular partnership’s tax payable under this Part for the year pursuant to subsection (30) if the particular partnership were a person and its fiscal period were its taxation year, that amount is deemed to be an amount that is the lesser of the amounts described in paragraphs (28)(d) and (e), in respect of a property of the particular partnership, that is required by subsection (28) to be deducted in computing the amount under subsection (8) in respect of the particular partnership at the end of the fiscal period.
Marginal note:Meaning of cost
(32)For the purposes of subsections (27), (28) and (29),cost of the particular propertyto a taxpayer shall not exceed the amount paid by the taxpayer to acquire the particular property from a transferor of the particular property and, for greater certainty, does not include amounts paid by the taxpayer to maintain, modify or transform the particular property.
Marginal note:Certain non-arm’s length transfers
(33)Subsections (27) to (29), (34) and (35) do not apply to a taxpayer or partnership (in this subsection referred to as the “transferor”) that disposes of a property to a person or partnership (in this subsection and subsections (34) and (35) referred to as the “purchaser”), that does not deal at arm’s length with the transferor, if the purchaser acquired the property in circumstances where the cost of the property to the purchaser would have been an expenditure of the purchaser described in subclause 37(8)(a)(ii)(A)(III) or (B)(III) (as those subclauses read on March 29, 2012) but for subparagraph 2902(b)(iii) of theIncome Tax Regulations.
Marginal note:Recapture of investment tax credit
(34)Where, at any particular time in a taxation year and after February 23, 1998, a purchaser (other than a partnership) converts to commercial use, or disposes of without having previously converted to commercial use, a property
(a)that was acquired by the purchaser in circumstances described in subsection (33) or that is another property that incorporates a property acquired in such circumstances; and
(b)that was first acquired, or that incorporates a property that was first acquired, by a person or partnership (in this subsection referred to as the “original user”) with which the purchaser did not deal at arm’s length at the time at which the purchaser acquired the property, in the original user’s taxation year or fiscal period that includes the particular time (on the assumption that the original user had such a taxation year or fiscal period) or in any of the original user’s 10 preceding taxation years or fiscal periods,
there shall be added to the purchaser’s tax otherwise payable under this Part for the year the lesser of
(c)the amount
(i)included, in respect of the property, in the investment tax credit of the original user, or
(ii)where the original user is a partnership, that can reasonably be considered to have been included in respect of the property in computing the amount determined under subsection (8) in respect of the original user, and
(d)the amount determined by applying the percentage that was applied by the original user in determining the amount referred to in paragraph (c) to
(i)if the property or the other property is disposed of to a person who deals at arm’s length with the purchaser, the proceeds of disposition of that property, and
(ii)in any other case, the fair market value of the property or the other property at the time of the conversion or disposition.
Marginal note:Recapture of investment tax credit
(35)Where, at any particular time in a fiscal period and after February 23, 1998, a purchaser is a partnership that converts to commercial use, or disposes of without having previously converted to commercial use, a property
(a)that was acquired by the purchaser in circumstances described in subsection (33) or that is another property that incorporates a property acquired in such circumstances, and
(b)that was first acquired, or that incorporates a property that was first acquired, by a person or partnership (in this subsection referred to as the “original user”) with which the purchaser did not deal at arm’s length at the time at which the purchaser acquired the property, in the original user’s taxation year or fiscal period that includes the particular time (on the assumption that the original user had such a taxation year or fiscal period) or in any of the original user’s 10 preceding taxation years or fiscal periods,
there shall be deducted in computing the amount determined under subsection (8) in respect of the purchaser at the end of the fiscal period the lesser of
(c)the amount
(i)included, in respect of the property, in the investment tax credit of the original user, or
(ii)where the original user is a partnership, that can reasonably be considered to have been included in respect of the property in computing the amount determined under subsection (8) in respect of the original user, and
(d)the amount determined by applying the percentage that was applied by the original user in determining the amount referred to in paragraph (c) to
(i)if the property or the other property is disposed of to a person who deals at arm’s length with the purchaser, the proceeds of disposition of that property, and
(ii)in any other case, the fair market value of the property or the other property at the time of the conversion or disposition.
Marginal note:Transitional application of investment tax credit recapture
(36)For the purpose of applying each of subsection (27) or (29) in respect of a taxpayer, subsection (28) in respect of a partnership or subsection (34) or (35) in respect of a purchaser and an original user, as the case may be, (which taxpayer, partnership or original user is, in this subsection, referred to as the “taxpayer”), the reference to “10” in that subsection is to be read as a reference to the number that is the lesser of
(a)20, and
(b)the number that is the total of 10 and the number of taxation years or fiscal periods, as the case may be, by which the number of taxation years or fiscal periods of the taxpayer that have ended after 1997 exceeds 11.
Marginal note:Refundable investment tax credit
127.1(1)Where a taxpayer (other than a person exempt from tax under section 149) files
(a)with the taxpayer’s return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(f) or subsection 150(4)) for a taxation year, or
(b)with a prescribed form amending a return referred to in paragraph 127.1(1)(a)
a prescribed form containing prescribed information, the taxpayer is deemed to have paid on the taxpayer’s balance-due day for the year an amount on account of the taxpayer’s tax payable under this Part for the year equal to the lesser of
(c)the taxpayer’s refundable investment tax credit for the year, and
(d)the amount designated by the taxpayer in the prescribed form.
Marginal note:Definitions
(2)In this section,
excluded corporationfor a taxation year means a corporation that is, at any time in the year,
(a)controlled directly or indirectly, in any manner whatever, by
(i)one or more persons exempt from tax under this Part by virtue of section 149,
(ii)Her Majesty in right of a province, a Canadian municipality or any other public authority, or
(iii)any combination of persons each of whom is a person referred to in subparagraph (i) or (ii), or
(b)related to any person referred to in paragraph (a); (société exclue)
qualifying corporation, for a particular taxation year that ends in a calendar year, means a particular corporation that is a Canadian-controlled private corporation in the particular taxation year the taxable income of which for its immediately preceding taxation year  —  together with, if the particular corporation is associated in the particular taxation year with one or more other corporations (in this subsection referred to as “associated corporations”), the taxable income of each associated corporation for its last taxation year that ended in the preceding calendar year (determined before taking into consideration the specified future tax consequences for that last year)  —  does not exceed the qualifying income limit, if any, of the particular corporation for the particular taxation year; (société admissible)
qualifying income limitof a corporation for a particular taxation year is the amount determined by the formula
$500,000 × [($40 million – A)/$40 million]
where
(a)nil, if $10 million is greater than or equal to the amount (in paragraph (b) referred to as the “taxable capital amount”) that is the total of the corporation’s taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year and the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of each associated corporation for the associated corporation’s last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, or
(b)in any other case, the lesser of $40 million and the amount by which the taxable capital amount exceeds $10 million; (plafond de revenu admissible)
refundable investment tax creditof a taxpayer for a taxation year means, in the case of a taxpayer who is
(a)a qualifying corporation for the year,
(b)an individual other than a trust, or
(c)a trust each beneficiary of which is a person referred to in paragraph (a) or (b),
an amount equal to 40% of the amount, if any, by which
(d)the total of all amounts included in computing the taxpayer’s investment tax credit at the end of the year
(i)in respect of property (other than qualified small-business property) acquired, or a qualified expenditure (other than an expenditure in respect of which an amount is included under paragraph (f) in computing the taxpayer’s refundable investment tax credit for the year) incurred, by the taxpayer in the year, or
(ii)because of paragraph (b) of the definitioninvestment tax creditin subsection 127(9) in respect of a property (other than qualified small-business property) acquired or a qualified expenditure (other than an expenditure in respect of which an amount is included under paragraph (f) in computing the taxpayer’s refundable investment tax credit for the year) incurred
exceeds
(e)the total of
(i)the portion of the total of all amounts deducted under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to be so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph (d), and
(ii)the portion of the total of all amounts required by subsection 127(6) or 127(7) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph (d),
plus where the taxpayer is a qualifying corporation (other than an excluded corporation) for the year, the amount, if any, by which
(f)the total of
(i)the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year that is in respect of qualified expenditures incurred by the taxpayer in the year, and
(ii)all amounts determined under paragraph (a.1) of the definitioninvestment tax creditin subsection 127(9) in respect of expenditures for which an amount is included in subparagraph (i)
exceeds
(g)the total of
(i)the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection 127.1(3) to be so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph (f), and
(ii)the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph (f). (crédit d’impôt à l’investissement remboursable)
Marginal note:Addition to refundable investment tax credit
(2.01)In the case of a taxpayer that is a Canadian-controlled private corporation other than a qualifying corporation or an excluded corporation, the refundable investment tax credit of the taxpayer for a taxation year is the amount, if any, by which
(a)the total of
(i)the portion of the amount required by subsection 127(10.1) to be added in computing the taxpayer’s investment tax credit at the end of the year that is in respect of qualified expenditures incurred by the taxpayer in the year, and
(ii)all amounts determined under paragraph (a.1) of the definitioninvestment tax creditin subsection 127(9) in respect of expenditures for which an amount is included in subparagraph (i)
exceeds
(b)the total of
(i)the portion of the total of all amounts deducted by the taxpayer under subsection 127(5) for the year or a preceding taxation year (other than an amount deemed by subsection (3) to have been so deducted for the year) that can reasonably be considered to be in respect of the total determined under paragraph (a), and
(ii)the portion of the total of all amounts required by subsection 127(6) to be deducted in computing the taxpayer’s investment tax credit at the end of the year that can reasonably be considered to be in respect of the total determined under paragraph (a).
Marginal note:Application of s. 127(9)
(2.1)The definitions in subsection 127(9) apply to this section.
Marginal note:Refundable investment tax credit — associated CCPCs
(2.2)If a particular Canadian-controlled private corporation is associated with another corporation in circumstances where those corporations would not be associated if the Act were read without reference to paragraph 256(1.2)(a), the particular corporation has issued shares to one or more persons who have been issued shares by the other corporation and there is at least one shareholder of the particular corporation who is not a shareholder of the other corporation or one shareholder of the other corporation who is not a shareholder of the particular corporation, the particular corporation is not associated with the other corporation for the purpose of calculating that portion of the particular corporation’s refundable investment tax credit that is in respect of qualified expenditures.
Marginal note:Application of subsection (2.2)
(2.3)Subsection (2.2) applies to the particular corporation and the other corporation referred to in that subsection only if the Minister is satisfied that
(a)the particular corporation and the other corporation are not otherwise associated under this Act; and
(b)the existence of one or more shareholders of the particular corporation who is not a shareholder of the other corporation, or the existence of one or more shareholders of the other corporation who is not a shareholder of the particular corporation, is not for the purpose of satisfying the requirements of subsection (2.2) or 127(10.22).
Marginal note:Deemed deduction
(3)For the purposes of this Act, the amount deemed under subsection 127.1(1) to have been paid by a taxpayer for a taxation year shall be deemed to have been deducted by the taxpayer under subsection 127(5) for the year.
Marginal note:Qualifying income limit determined in certain cases
(4)For the purpose of the definition ofqualifying corporationin subsection (2), where a Canadian-controlled private corporation has a taxation year that is less than 51 weeks, the taxable income of the corporation for the year shall be determined by multiplying that amount by the ratio that 365 is of the number of days in that year.
Marginal note:Share-purchase tax credit
127.2(1)There may be deducted from the tax otherwise payable under this Part by a taxpayer for a taxation year an amount not exceeding the total of
(a)the taxpayer’s share-purchase tax credit for the year, and
(b)the taxpayer’s unused share-purchase tax credit for the taxation year immediately following the year.
Marginal note:Persons exempt from tax
(2)Where a taxpayer who was throughout a taxation year a person described in any of paragraphs 149(1)(e) to (y) files with the taxpayer’s return of income under this Part for the year a prescribed form containing prescribed information, the taxpayer shall be deemed to have paid, on the day on which the return is filed, an amount, on account of the taxpayer’s tax under this Part for the year, equal to the taxpayer’s share-purchase tax credit for the year.
Marginal note:Trust
(3)Where, in a particular taxation year of a taxpayer who is a beneficiary under a trust, an amount is included in computing the share-purchase tax credit of the trust for its taxation year ending in that particular taxation year, the trust may, in its return of income for its taxation year ending in that particular taxation year, designate as attributable to the taxpayer such portion of that amount
(a)as may, having regard to all the circumstances (including the terms and conditions of the trust arrangement), reasonably be considered to be attributable to the taxpayer, and
(b)as was not designated by the trust in respect of any other beneficiary of that trust,
and, where the trust so designates such a portion, an amount equal to that portion shall be
(c)added in computing the share-purchase tax credit of the taxpayer for the particular taxation year, and
(d)deducted in computing the share-purchase tax credit of the trust for its taxation year ending in the particular taxation year.
Marginal note:Exclusion of certain trusts
(3.1)For the purposes of subsection 127.2(3), a trust does not include a trust that is
(a)governed by an employee benefit plan or a revoked deferred profit sharing plan; or
(b)exempt from tax under section 149.
Marginal note:Partnership
(4)Where, in a taxation year of a taxpayer who is a member of a partnership, an amount is included in computing the share-purchase tax credit of the partnership for its fiscal period ending in that year, such portion of that amount as may reasonably be considered to be the taxpayer’s share thereof shall be
(a)added in computing the share-purchase tax credit of the taxpayer for that year; and
(b)deducted in computing the share-purchase tax credit of the partnership for that fiscal period.
Marginal note:Cooperative corporation
(5)Where at any particular time in a taxation year a taxpayer that is a cooperative corporation (within the meaning assigned by subsection 136(2)) has, as required by subsection 135(3), deducted or withheld an amount from a payment made by it to any person pursuant to an allocation in proportion to patronage, the taxpayer may deduct from the amount otherwise required by subsection 135(3) to be remitted to the Receiver General, an amount not exceeding the amount, if any, by which
(a)the amount that would, but for this subsection, be its share-purchase tax credit for the taxation year in which it made the payment if that year had ended immediately before the particular time
exceeds
(b)the total of all amounts each of which is the amount deducted by virtue of this subsection from any amount otherwise required to be remitted by subsection 135(3) in respect of payments made by it before the particular time and in the taxation year,
and the amount, if any, so deducted from the amount otherwise required to be remitted by subsection 135(3) shall be
(c)deducted in computing the share-purchase tax credit of the taxpayer for the taxation year, and
(d)deemed to have been remitted by the taxpayer to the Receiver General on account of tax under this Part of the person to whom that payment was made.
Marginal note:Definitions
(6)In this section,
share-purchase tax creditof a taxpayer for a taxation year means the amount determined by the formula
(A + B) - C
where
unused share-purchase tax creditof a taxpayer for a taxation year means the amount determined by the formula
A - (B + C)
where
Marginal note:Definition oftax otherwise payable
(7)In this section,tax otherwise payableunder this Part by a taxpayer means the amount that would, but for this section and section 120.1, be the tax payable under this Part by the taxpayer.
Marginal note:Deemed cost of acquisition
(8)For the purposes of this Act, where, at any time in a taxation year, a taxpayer has acquired a share and is the first registered holder of the share, other than a broker or dealer in securities, and an amount is, at any time, designated by a corporation under subsection 192(4) in respect of the share, the following rules apply:
(a)the taxpayer shall be deemed to have acquired the share at a cost to the taxpayer equal to the amount by which
(i)its cost to the taxpayer as otherwise determined
exceeds
(ii)the amount so designated in respect of the share; and
(b)where the amount determined under subparagraph 127.2(8)(a)(ii) exceeds the amount determined under subparagraph 127.2(8)(a)(i), the excess shall
(i)where the share is a capital property to the taxpayer, be deemed to be a capital gain of the taxpayer for the year from the disposition of that property, and
(ii)in any other case, be included in computing the income of the taxpayer for the year,
and the cost to the taxpayer of the share shall be deemed to be nil.
Marginal note:Partnership
(9)For the purposes of this section and subsection 193(5), a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.
Marginal note:Election re first holder
(10)Where a share of a public corporation has been lawfully distributed to the public in accordance with a prospectus, registration statement or similar document filed with a public authority in Canada pursuant to and in accordance with the law of Canada or of any province, and, where required by law, accepted for filing by such a public authority, the corporation, if it has designated an amount under subsection 192(4) in respect of the share, may, in the prescribed form required to be filed under that subsection, elect that, for the purposes of this section, the first person, other than a broker or dealer in securities, to have acquired the share (and no other person) shall be considered to be the first person to be a registered holder of the share.
Marginal note:Calculation of consideration
(11)For greater certainty,
(a)for the purposes of this section and Part VII, the amount of consideration for which a share is acquired and issued includes the amount of any consideration for the designation under subsection 192(4) in respect of the share; and
(b)the amount received by a corporation as consideration for a designation under subsection 192(4) in respect of a share issued by it shall not be included in computing its income.
Marginal note:Scientific research and experimental development tax credit
127.3(1)There may be deducted from the tax otherwise payable under this Part by a taxpayer for a taxation year an amount not exceeding the total of the taxpayer’s
(a)scientific research and experimental development tax credit for the year, and
(b)unused scientific research and experimental development tax credit for the taxation year immediately following the year.
Marginal note:Definitions
(2)In this section,
scientific research and experimental development tax creditof a taxpayer for a taxation year means the amount determined by the formula
A - B
where
(a)where the taxpayer is a corporation, 50%, or
(b)where the taxpayer is an individual other than a trust, 34%
of an amount designated by a corporation under subsection 194(4) in respect of
(c)a share acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder thereof,
(d)a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation (in this section referred to as a “debt obligation”) acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of that debt obligation, or
(e)a right acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to have acquired that right, and
unused scientific research and experimental development tax creditof a taxpayer for a taxation year means the amount determined by the formula
A - (B + C)
where
Marginal note:Trust
(3)For the purposes of this section and section 53, where a taxpayer, other than a broker or dealer in securities, is a beneficiary under a trust and an amount is designated by a corporation under subsection 194(4) in respect of a share, debt obligation or right acquired by the trust in a taxation year of the trust where the trust is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be,
(a)the trust may, in its return of income for that year, specify such portion of that amount as may, having regard to all the circumstances (including the terms and conditions of the trust arrangement), reasonably be considered to be attributable to the taxpayer and as was not specified by the trust in respect of any other beneficiary under that trust; and
(b)the portion specified pursuant to paragraph 127.3(3)(a) shall be deemed to be an amount designated on the last day of that year by the corporation under subsection 194(4) in respect of a share, debt obligation or right, as the case may be, acquired by the taxpayer on that day where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be.
Marginal note:Exclusion of certain trusts
(3.1)For the purposes of subsection (3), a trust does not include a trust that is
(a)governed by an employee benefit plan or a revoked deferred profit sharing plan; or
(b)exempt from tax under section 149.
Marginal note:Partnership
(4)For the purposes of this section and section 53, where a taxpayer, other than a broker or dealer in securities, is a member of a partnership and an amount is designated by a corporation under subsection 194(4) in respect of a share, debt obligation or right acquired by the partnership in a taxation year of the partnership where the partnership is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be, such portion of that amount as may reasonably be considered to be the taxpayer’s share thereof shall be deemed to be an amount designated on the last day of that year by the corporation under subsection 194(4) in respect of a share, debt obligation or right, as the case may be, acquired by the taxpayer on that day where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of the share or debt obligation or to have acquired the right, as the case may be.
Marginal note:Cooperative corporation
(5)Where at any particular time in a taxation year a taxpayer that is a cooperative corporation (within the meaning assigned by subsection 136(2)) has, as required by subsection 135(3), deducted or withheld an amount from a payment made by it to any person pursuant to an allocation in proportion to patronage, the taxpayer may deduct from the amount otherwise required by subsection 135(3) to be remitted to the Receiver General, an amount not exceeding the amount, if any, by which
(a)the amount that would, but for this subsection, be its scientific research and experimental development tax credit for the taxation year in which it made the payment if that year had ended immediately before the particular time
exceeds
(b)the total of all amounts each of which is the amount deducted by virtue of this subsection from any amount otherwise required to be remitted by subsection 135(3) in respect of payments made by it before the particular time and in the taxation year,
and the amount, if any, so deducted from the amount otherwise required to be remitted by subsection 135(3) shall be
(c)deducted in computing the scientific research and experimental development tax credit of the taxpayer for the taxation year, and
(d)deemed to have been remitted by the taxpayer to the Receiver General on account of tax under this Part of the person to whom that payment was made.
Marginal note:Deduction from cost
(6)For the purposes of this Act, where at any time in a taxation year a taxpayer has acquired a share, debt obligation or right and is the first registered holder of the share or debt obligation or the first person to have acquired the right, as the case may be, other than a broker or dealer in securities, and an amount is, at any time, designated by a corporation under subsection 194(4), in respect of the share, debt obligation or right, the following rules apply:
(a)the taxpayer shall be deemed to have acquired the share, debt obligation or right at a cost to the taxpayer equal to the amount by which
(i)its cost to the taxpayer as otherwise determined
exceeds
(ii)50% of the amount so designated in respect thereof; and
(b)where the amount determined under subparagraph 127.3(6)(a)(ii) exceeds the amount determined under subparagraph (a)(i), the excess shall
(i)where the share, debt obligation or right, as the case may be, is a capital property to the taxpayer, be deemed to be a capital gain of the taxpayer for the year from the disposition of that property, and
(ii)in any other case, be included in computing the income of the taxpayer for the year,
and the cost to the taxpayer of the share, debt obligation or right, as the case may be, shall be deemed to be nil.
Marginal note:Partnership
(7)For the purposes of this section and Part VIII, a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.
Definition oftax otherwise payable
(8)In this section,tax otherwise payableunder this Part by a taxpayer means the amount that would, but for this section and section 120.1, be the tax payable under this Part by the taxpayer.
Marginal note:Election re first holder
(9)Where a share or debt obligation of a public corporation has been lawfully distributed to the public in accordance with a prospectus, registration statement or similar document filed with a public authority in Canada pursuant to and in accordance with the law of Canada or of any province, and, where required by law, accepted for filing by that public authority, the corporation, if it has designated an amount under subsection 194(4) in respect of the share or debt obligation, may, in the prescribed form required to be filed under that subsection, elect that, for the purposes of this section, the first person, other than a broker or dealer in securities, to have acquired the share or debt obligation, as the case may be, (and no other person) shall be considered to be the first person to be a registered holder thereof.
Marginal note:Calculation of consideration
(10)For greater certainty,
(a)for the purposes of this section and Part VIII, the amount of consideration for which a share, debt obligation or right was acquired and issued or granted includes the amount of any consideration for the designation under subsection 194(4) in respect of the share, debt obligation or right; and
(b)the amount received by a corporation as consideration for a designation under subsection 194(4) in respect of a share, debt obligation or right issued or granted by it shall not be included in computing its income.
Marginal note:Definitions
127.4(1)In this section,
approved sharemeans a share of the capital stock of a prescribed labour-sponsored venture capital corporation, but does not include
(a)a share issued by a registered labour-sponsored venture capital corporation the venture capital business of which was discontinued before the time of the issue, and
(b)a share issued by a prescribed labour-sponsored venture capital corporation that is not a registered labour-sponsored venture capital corporation if, at the time of the issue, no province under the laws (described in section 6701 of theIncome Tax Regulations) of which the corporation is registered or established provides assistance in respect of the acquisition of the share; (action approuvée)
labour-sponsored funds tax credit[Repealed, 1997, c. 25, s. 37]
net costto an individual of an approved share means the amount, if any, by which
(a)the amount of consideration paid by the individual to acquire or subscribe for the share
exceeds
(b)the amount of any assistance (other than an amount included in computing a tax credit of the individual in respect of that share) provided or to be provided by a government, municipality or any public authority in respect of, or for the acquisition of, the share; (coût net)
original acquisitionof a share means the first acquisition of the share, except that
(a)where the share is irrevocably subscribed and paid for before its first acquisition, subject to paragraphs (b) and (c), the original acquisition of the share is the first transaction whereby the share is irrevocably subscribed and paid for,
(b)a share is deemed never to have been acquired and never to have been irrevocably subscribed and paid for unless the first registered holder of the share is, subject to paragraph (c), the first person to either acquire or irrevocably subscribe and pay for the share, and
(c)for the purpose of this definition, a broker or dealer in securities acting in that capacity is deemed never to acquire or subscribe and pay for the share and never to be the registered holder of the share; (acquisition initiale)
qualifying trustfor an individual in respect of a share means
(a)a trust governed by a registered retirement savings plan, under which the individual is the annuitant, that is not a spousal or common-law partner plan (in this definition having the meaning assigned by subsection 146(1)) in relation to another individual,
(b)a trust governed by a registered retirement savings plan, under which the individual or the individual’s spouse or common-law partner is the annuitant, that is a spousal or common-law partner plan in relation to the individual or the individual’s spouse or common-law partner, if the individual and no other person claims a deduction under subsection (2) in respect of the share, or
(c)a trust governed by a TFSA of which the individual is the holder; (fiducie admissible)
tax otherwise payableby an individual means the amount that, but for this section, would be the individual’s tax payable under this Part. (impôt payable par ailleurs)
Marginal note:Amalgamations or mergers
(1.1)Subsections 204.8(2) and 204.85(3) apply for the purpose of this section.
Marginal note:Deduction of labour-sponsored funds tax credit
(2)There may be deducted from the tax otherwise payable by an individual (other than a trust) for a taxation year such amount as the individual claims not exceeding the individual’s labour-sponsored funds tax credit limit for the year.
(3) and (4)[Repealed, 1999, c. 22, s. 49]
Marginal note:Labour-sponsored funds tax credit limit
(5)For the purpose of subsection 127.4(2), an individual’s labour-sponsored funds tax credit limit for a taxation year is the lesser of
(a)$750, and
(b)the amount, if any, by which
(i)the total of all amounts each of which is the individual’s labour-sponsored funds tax credit in respect of an original acquisition in the year or in the first 60 days of the following taxation year of an approved share
exceeds
(ii)the portion of the total described in subparagraph 127.4(5)(b)(i) that was deducted under subsection 127.4(2) in computing the individual’s tax payable under this Part for the preceding taxation year.
Marginal note:Deemed original acquisition
(5.1)If the Minister so directs, an original acquisition of an approved share that occurs in an individual’s taxation year (other than in the first 60 days of the year) is deemed for the purpose of this section to have occurred at the beginning of the year and not at the time it actually occurred.
Marginal note:Labour-sponsored funds tax credit
(6)For the purpose of subsection (5), an individual’s labour-sponsored funds tax credit in respect of an original acquisition of an approved share is equal to the least of
(a)15% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if the share is a share of a prescribed labour-sponsored venture capital corporation (other than a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation),
(a.1)5% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if
(i)the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is 2016, and
(ii)the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,
(a.2)nil, if
(i)the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is after 2016, and
(ii)the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,
(b)nil, where the share was issued by a registered labour-sponsored venture capital corporation unless the information return described in paragraph 204.81(6)(c) is filed with the individual’s return of income for the taxation year for which a claim is made under subsection 127.4(2) in respect of the original acquisition of the share (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)),
(c)nil, where the individual dies after December 5, 1996 and before the original acquisition of the share,
(d)nil, where a payment in respect of the disposition of the share has been made under section 211.9, and
(e)nil, if the share is issued in exchange for another share of the corporation.
Marginal note:Part XII.4 tax credit
127.41(1)In this section, the Part XII.4 tax credit of a taxpayer for a particular taxation year means the total of
(a)all amounts each of which is an amount determined by the formula
A × B/C
where
(b)in respect of each partnership of which the taxpayer was a member, the total of all amounts each of which is the amount that can reasonably be considered to be the taxpayer’s share of the relevant credit in respect of the partnership and, for this purpose, the relevant credit in respect of a partnership is the amount that would, if a partnership were a person and its fiscal period were its taxation year, be the Part XII.4 tax credit of the partnership for its taxation year that ends in the particular year.
Marginal note:Reduction of Part I tax
(2)There may be deducted from a taxpayer’s tax otherwise payable under this Part for a taxation year such amount as the taxpayer claims not exceeding the taxpayer’s Part XII.4 tax credit for the year.
Marginal note:Deemed payment of Part I tax
(3)There is deemed to have been paid on account of the tax payable under this Part by a taxpayer (other than a taxpayer exempt from such tax) for a taxation year on the taxpayer’s balance-due day for the year, such amount as the taxpayer claims not exceeding the amount, if any, by which
(a)the taxpayer’s Part XII.4 tax credit for the year
exceeds
(b)the amount deducted under subsection 127.41(2) in computing the taxpayer’s tax payable under this Part for the year.
Marginal note:Definitions
127.42(1)The following definitions apply in this section.
designated provincemeans a province specified by the Minister of Finance for a calendar year. (province déterminée)
eligible farming expenses, of a taxpayer for a designated province for a taxation year, means the amount determined by the formula
A × B
where
(a)nil, if the total of all amounts deducted in the year by the taxpayer in computing income under this Part from farming activities, excluding any deductions arising from inventory adjustments under section 28 and from transactions with persons that do not deal at arm’s length with the taxpayer, is less than $25,000, and
(b)in any other case, the total of all amounts deducted in the year by the taxpayer in computing income under this Part from farming activities, excluding any deductions arising from inventory adjustments under section 28 and from transactions with persons that do not deal at arm’s length with the taxpayer; and
farming activitiesmeans a farming business, including or excluding activities prescribed by regulation. (activités agricoles)
payment rate, for a calendar year for a designated province, means the rate specified by the Minister of Finance for the calendar year for the designated province. (taux de paiement)
relevant proportion, of eligible farming expenses of a taxpayer for a designated province for a taxation year, means
(a)if the taxpayer is an individual, the proportion determined by the formula
A ÷ B
where
(b)if the taxpayer is a corporation, the proportion determined by the formula
C ÷ D
where
(c)if the taxpayer is a partnership, the proportion determined by the formula
E ÷ F
where
Marginal note:Deemed payment on account of tax
(2)A taxpayer (other than a partnership) that files a prescribed form containing prescribed information with their return of income for a taxation year is deemed, on their balance-due day for the year, to have paid on account of their tax payable under this Part for the year, the total of all amounts each of which is an amount, for each designated province and for each calendar year a portion of which falls within the taxation year, determined by the formula
(A × B) × (C ÷ D)
where
Marginal note:Deemed payment on account of tax — partnership
(3)If a taxpayer (other than a partnership) is a member of a partnership at the end of a fiscal period of the partnership that ends in a taxation year of the taxpayer — and the partnership files a prescribed form containing prescribed information for that fiscal period and the taxpayer files a prescribed form containing prescribed information with its return of income for the taxation year — the taxpayer is deemed, on the taxpayer’s balance-due day for the taxation year, to have paid on account of their tax payable under this Part for the year, the total of all amounts each of which is an amount, for each designated province and for each calendar year a portion of which falls within the partnership’s fiscal period, determined by the formula
(A × B) × (C ÷ D) × E
where
Marginal note:Partnerships
(4)For the purposes of this section,
(a)a taxpayer includes a partnership;
(b)the fiscal period of a partnership is deemed to be its taxation year; and
(c)if a taxpayer is a member of a particular partnership that is a member of another partnership, the taxpayer is deemed
(i)to be a member of the other partnership, and
(ii)to have a specified proportion in the other partnership for a fiscal period of the other partnership equal to its specified proportion of the particular partnership — for the last fiscal period of the particular partnership that ends in the fiscal period of the other partnership — multiplied by the particular partnership’s specified proportion of the other partnership for the fiscal period of the other partnership.
Marginal note:Authority to specify
(5)For the purposes of this section, the Minister of Finance may specify for a calendar year
(a)the designated provinces; and
(b)the payment rate for a designated province.
Marginal note:Payment rate not specified
(6)For the purposes of this section, if the Minister of Finance does not specify the payment rate for a designated province under paragraph (5)(b), the payment rate is deemed to be nil.
Marginal note:When assistance received
(7)For the purposes of this Act, and for greater certainty, an amount that a taxpayer is deemed under subsection (2) or (3) to have paid for a taxation year is assistance received by the taxpayer from a government immediately before the end of the year.
Marginal note:Relevant proportion — special rule
(8)For purposes of determining the relevant proportion of eligible farming expenses of a taxpayer for a designated province in a taxation year,
(a)if the income of an individual or partnership from farming activities for the year is nil, the income for the year from farming activities that is deemed to have been earned in the year in the designated province shall be computed in accordance with Part XXVI of theIncome Tax Regulationsas if the individual or partnership earned $1,000,000 of income from farming activities; and
(b)if the taxable income of a corporation is nil, the corporation’s taxable income that is deemed to have been earned in the year in the designated province shall be computed in accordance with Part IV of theIncome Tax Regulationsas if the corporation had taxable income for the year in the amount of $1,000,000.
Marginal note:Definitions
127.43(1)The following definitions apply in this section.
assistancemeans an amount, other than a prescribed amount or an amount deemed under subsection (2) to have been paid, that would be included under paragraph 12(1)(x) in computing an eligible entity’s income for any taxation year if that paragraph were read without reference to subparagraphs 12(1)(x)(v) to (vii). (montant d’aide)
eligible entity, for a taxation year, means
(a)a qualifying corporation for the taxation year;
(b)an individual other than a trust; or
(c)a partnership. (entité déterminée)
qualifying corporation, for a particular taxation year, means a particular corporation that meets the following conditions:
(a)it is a Canadian-controlled private corporation or would be a Canadian-controlled private corporation absent the application of subsection 136(1); and
(b)it is the case that
$15,000,000 > A + B
where
qualifying expendituremeans an outlay or expense prescribed by regulation that is made or incurred by an eligible entity during the qualifying period in the course of the eligible entity’s ordinary commercial activities. (dépense admissible)
qualifying location, of an eligible entity, means real or immovable property (other than property that is a self-contained domestic establishment, or part of such a self-contained domestic establishment, the land subjacent to the self-contained domestic establishment and such portion of any immediately contiguous land as can reasonably be regarded as contributing to the use and enjoyment of the self-contained domestic establishment as a residence) in Canada used by the eligible entity primarily in the course of its ordinary commercial activities. (emplacement admissible)
qualifying periodmeans the period that begins on September 1, 2021 and ends on December 31, 2022. (période d’admissibilité)
total per location expense, for a qualifying location of an eligible entity for a taxation year, means the lesser of
(a)the amount determined by the formula
A − B
where
(i)the eligible entity has received, is entitled to receive or can reasonably be expected to receive, in respect of amounts described in A, and
(ii)has not been repaid before the end of the taxation year pursuant to a legal obligation to do so; and
(b)the amount determined by the formula
$10,000 − C
where
(i)is a qualifying expenditure of the eligible entity, in respect of which an amount under subsection (2) or (3) is deemed to have been paid in a prior taxation year, or
(ii)is a qualifying expenditure of another eligible entity that is affiliated during the qualifying period with the eligible entity, in respect of which an amount under subsection (2) or (3) is deemed to have been paid in any taxation year. (dépense totale par emplacement)
total ventilation expense, of an eligible entity for a taxation year, means the lesser of
(a)the total of all amounts, each of which is a total per location expense for a qualifying location of the eligible entity for the taxation year; and
(b)the amount determined by the formula
$50,000 × X − Y
where
(i)100%, unless the eligible entity is affiliated at any time in the qualifying period with one or more other eligible entities that are deemed to have paid an amount under subsection (2) in respect of the qualifying period, or, in the case of a partnership, has a member that is deemed to have paid an amount under subsection (3) in respect of the partnership,
(ii)a percentage assigned to the eligible entity under an agreement, if
(A)the agreement is entered into by the eligible entity and each eligible entity that
(I)is affiliated with the eligible entity in the qualifying period, and
(II)is deemed to have paid an amount under subsection (2) in respect of the qualifying period, or, in the case of a partnership, has a member that is deemed to have paid an amount under subsection (3) in respect of the partnership,
(B)the agreement is filed in prescribed form and manner with the Minister by the eligible entity and each eligible entity referred to in clause (A),
(C)the agreement assigns, for the purposes of this definition, a percentage in respect of each eligible entity referred to in clause (A), and
(D)the total of all the percentages assigned under the agreement does not exceed 100%, and
(iii)in any other case, nil, and
Marginal note:Refundable tax credit
(2)An eligible entity (other than a partnership) that files a prescribed form containing prescribed information with its return of income for a taxation year that ends after 2021 is deemed to have, on its balance-due day for the year, paid on account of its tax payable under this Part for the year an amount equal to 25% of its total ventilation expense for the taxation year.
Marginal note:Refundable tax credit — partnership
(3)If an eligible entity (other than a partnership) is a member of a partnership at the end of a fiscal period of the partnership that ends after 2021 and that ends in a taxation year of the eligible entity — and the partnership files an information return in prescribed form containing prescribed information for that fiscal period and the eligible entity files a prescribed form containing prescribed information with its return of income for the taxation year — then the eligible entity is deemed to have paid, on the eligible entity’s balance-due day for the taxation year on account of the eligible entity’s tax payable under this Part for the taxation year, an amount determined by the formula
0.25 × A × B
where
Marginal note:Partnerships
(4)For the purposes of this section,
(a)the fiscal period of a partnership is deemed to be its taxation year; and
(b)if an eligible entity is a member of a particular partnership that is a member of another partnership, the eligible entity is deemed
(i)to be a member of the other partnership, and
(ii)to have a specified proportion in the other partnership for a fiscal period of the other partnership equal to its specified proportion of the particular partnership — for the last fiscal period of the particular partnership that ends in the fiscal period of the other partnership — multiplied by the particular partnership’s specified proportion of the other partnership for the fiscal period of the other partnership.
Marginal note:When assistance received
(5)For the purposes of this Act other than this section, and for greater certainty, an amount that an eligible entity is deemed under subsection (2) or (3) to have paid is assistance received by it from a government immediately before the end of the taxation year to which it relates.
Marginal note:Affiliated entities
(6)For the purposes of this section, if two eligible entities are affiliated with the same eligible entity, they are deemed to be affiliated with each other.
Marginal note:Obligation to pay minimum tax
127.5Notwithstanding any other provision of this Act but subject to subsection 120.4(3) and section 127.55, where the amount that, but for section 120, would be determined under Division E to be an individual’s tax payable for a taxation year is less than the amount determined under paragraph (a) in respect of the individual for the year, the individual’s tax payable under this Part for the year is the total of
(a)the amount, if any, by which
(i)the individual’s minimum amount for the year determined under section 127.51
exceeds
(ii)the individual’s special foreign tax credit determined under section 127.54 for the year, and
(b)the amount, if any, required by section 120 to be added to the individual’s tax otherwise payable under this Part for the year.
Marginal note:Minimum amount determined
127.51An individual’s minimum amount for a taxation year is the amount determined by the formula
A(B - C) - D
where
(a)$40,000, in the case of an individual (other than a trust) or a graduated rate estate; and
(b)nil, in any other case; and
Marginal note:Adjusted taxable income determined
127.52(1)Subject to subsection 127.52(2), an individual’s adjusted taxable income for a taxation year is the amount that would be the individual’s taxable income for the year or the individual’s taxable income earned in Canada for the year, as the case may be, if it were computed on the assumption that
(a)[Repealed, 1999, c. 22, s. 50(2)]
(b)the total of all amounts each of which is an amount deductible under paragraph 20(1)(a) or any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of a rental or leasing property (other than an amount included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)) were the lesser of the total of all amounts otherwise so deductible and the amount, if any, by which the total of
(i)the total of all amounts each of which is the individual’s income for the year from the renting or leasing of a rental or leasing property owned by the individual or by a partnership, computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f), and
(ii)the amount, if any, by which
(A)the total of all amounts each of which is the individual’s taxable capital gain for the year from the disposition of a rental or leasing property owned by the individual or by a partnership
exceeds
(B)the total of all amounts each of which is the individual’s allowable capital loss for the year from the disposition of a rental or leasing property owned by the individual or by a partnership
exceeds the total of all amounts each of which is the individual’s loss for the year from the renting or leasing of a rental or leasing property owned by the individual or by a partnership (other than an amount included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)), computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f);
(c)the total of all amounts each of which is an amount deductible under paragraph 20(1)(a) or any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of a film property referred to in paragraph 127.52(1)(w) of Class 10 of Schedule II to theIncome Tax Regulations(other than an amount included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)) were the lesser of the total of all amounts otherwise so deductible by the individual for the year and the amount, if any, by which the total of
(i)the total of all amounts each of which is the individual’s income for the year from the renting or leasing of a film property owned by the individual or by a partnership, computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f), and
(ii)the amount, if any, by which
(A)the total of all amounts each of which is the individual’s taxable capital gain for the year from the disposition of such a film property owned by the individual or by a partnership
exceeds
(B)the total of all amounts each of which is the individual’s allowable capital loss for the year from the disposition of such a film property owned by the individual or by a partnership
exceeds the total of all amounts each of which is the individual’s loss for the year from such a film property owned by the individual or by a partnership (other than amounts included in the individual’s share of a loss referred to in paragraph 127.52(1)(c.1)), computed without reference to paragraphs 20(1)(a) and 20(1)(c) to 20(1)(f);
(c.1)if, during a partnership’s fiscal period that ends in the year (other than a fiscal period that ends because of subsection 99(1)), the individual’s interest in the partnership is an interest for which an identification number is required to be, or has been, obtained under section 237.1,
(i)the individual’s share of allowable capital losses of the partnership for the fiscal period were the lesser of
(A)the total of all amounts each of which is the individual’s
(I)share of a taxable capital gain for the fiscal period from the disposition of property (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or
(II)taxable capital gain for the year from the disposition of the individual’s interest in the partnership if the individual, or a person who does not deal at arm’s length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year, and
(B)the individual’s share of allowable capital losses of the partnership for the fiscal period,
(ii)the individual’s share of each loss from a business of the partnership for the fiscal period were the lesser of
(A)the individual’s share of the loss, and
(B)the amount, if any, by which
(I)the total of all amounts each of which is the individual’s
1share of a taxable capital gain for the fiscal period from the disposition of property used by the partnership in the business (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or
2taxable capital gain for the year from the disposition of the individual’s interest in the partnership if the individual, or a person who does not deal at arm’s length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year
exceeds
(II)the total of all amounts each of which is the individual’s share of an allowable capital loss for the fiscal period, and
(iii)the individual’s share of losses from property of the partnership for the fiscal period were the lesser of
(A)the total of
(I)the individual’s share of incomes for the fiscal period from properties of the partnership, and
(II)the amount, if any, by which the total of all amounts each of which is the individual’s
1share of a taxable capital gain for the fiscal period from the disposition of property held by the partnership for the purpose of earning income from property (other than property acquired by the partnership in a transaction to which subsection 97(2) applied), or
2taxable capital gain for the year from the disposition of the individual’s interest in the partnership if the individual, or a person who does not deal at arm’s length with the individual, does not have an interest in the partnership (otherwise than because of the application of paragraph 98(1)(a) or 98.1(1)(a)) throughout the following taxation year,
exceeds the total of all amounts each of which is the individual’s share of an allowable capital loss for the fiscal period, and
(B)the individual’s share of losses from property of the partnership for the fiscal period;
(c.2)where, during a fiscal period of a partnership that ends in the year (other than a fiscal period that ends because of the application of subsection 99(1)),
(i)the individual is a limited partner of the partnership, or is a member of the partnership who was a specified member of the partnership at all times since becoming a member of the partnership, or
(ii)the partnership owns a rental or leasing property or a film property and the individual is a member of the partnership,
the total of all amounts each of which is an amount deductible under any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of the individual’s acquisition of the partnership interest were the lesser of
(iii)the total of all amounts otherwise so deductible, and
(iv)the total of all amounts each of which is the individual’s share of any income of the partnership for the fiscal period, determined in accordance with subsection 96(1);
(c.3)the total of all amounts each of which is an amount deductible in computing the individual’s income for the year in respect of a property for which an identification number is required to be, or has been, obtained under section 237.1 (other than an amount to which any of paragraphs 127.52(1)(b) to 127.52(1)(c.2) applies) were nil;
(d)except in respect of dispositions of property occurring before 1986 or to which section 79 applies,
(i)the references to the fraction applicable to the individual for the year in each of paragraphs 38(a), (b) and (c) and section 41 were read as a reference to “4/5”, other than in the case of a capital gain from a disposition that is the making of a gift of property to a qualified donee, and
(ii)each amount that is designated by a trust for a particular year of the trust in respect of the individual and deemed by subsection 104(21) to be a taxable capital gain for the year of the individual were equal to the amount obtained by the formula
4/5(A × 1/B)
where
(iii)[Repealed, 2013, c. 34, s. 271]
(e)the total of all amounts deductible under section 65, 66, 66.1, 66.2, 66.21 or 66.4 or under subsection 29(10) or (12) of theIncome Tax Application Rulesin computing the individual’s income for the year were the lesser of the amounts otherwise so deductible by the individual for the year and the total of
(i)the individual’s income for the year from royalties in respect of, and such part of the individual’s income, other than royalties, for the year as may reasonably be considered as attributable to, the production of petroleum, natural gas and minerals, determined before deducting those amounts,
(i.1)the individual’s income for the year from property, or from the business of selling the product of property, described in Class 43.1 or 43.2 in Schedule II to theIncome Tax Regulations, determined before deducting those amounts, and
(ii)all amounts included in computing the individual’s income for the year under section 59;
(e.1)the total of all amounts each of which is an amount deductible under any of paragraphs 20(1)(c) to 20(1)(f) in computing the individual’s income for the year in respect of a property that is a flow-through share (if the individual is the person to whom the share was issued under an agreement referred to in the definitionflow-through sharein subsection 66(15)), a Canadian resource property or a foreign resource property were the lesser of the total of the amounts otherwise so determined for the year and the amount, if any, by which
(i)the total of all amounts each of which is an amount described in subparagraph 127.52(1)(e)(i) or 127.52(1)(e)(ii), determined without reference to paragraphs 20(1)(c) to 20(1)(f),
exceeds
(ii)the total of all amounts each of which is an amount deductible under section 65, 66, 66.1, 66.2, 66.21 or 66.4 or under subsection 29(10) or (12) of theIncome Tax Application Rulesin computing the individual’s income for the year;
(f)subsection 82(1) were read without reference to paragraph 82(1)(b);
(g)the total of all amounts deductible under section 104 in computing the income of a trust for the year were equal to the total of
(i)the total of all amounts otherwise deductible under that section, and
(ii)the total of all amounts each of which is 3/5 of
(A)an amount designated by the trust under subsection 104(21) for the year, or
(B)that portion of a net taxable capital gain of the trust that may reasonably be considered to
(I)be part of an amount included, by virtue of subsection 104(13) or section 105, in computing the income for the year of a non-resident beneficiary of the trust, or
(II)have been paid in the year by a trust governed by an employee benefit plan to a beneficiary thereunder;
(h)the only amounts deductible under sections 110 to 110.7 in computing the individual’s taxable income for the year or taxable income earned in Canada for the year, as the case may be, were
(i)the amounts deducted under any of subsections 110(2), 110.6(2) and (2.1) and 110.7(1),
(ii)the amount deducted under paragraph 110(1)(d), not exceeding the total of
(A)the amount deducted under paragraph 110(1)(d.01), and
(B)2/5 of the amount, if any, by which
(I)the amount deducted under paragraph 110(1)(d)
exceeds
(II)the amount determined under clause (A),
(iii)the amount deducted under paragraph 110(1)(d.01),
(iv)2/5 of the amounts deducted under any of paragraphs 110(1)(d.1) to (d.3),
(v)the amount that would be deductible under paragraph 110(1)(f) if paragraph (d) were applicable in computing the individual’s income for the year, and
(vi)the amount deducted under paragraph 110(1)(g);
(h.1)the formula in paragraph 110.6(21)(a) were read as
A - B
(i)in computing the individual’s taxable income for the year or the individual’s taxable income earned in Canada for the year, as the case may be, the only amounts deductible under
(i)paragraphs 111(1)(a), 111(1)(c), 111(1)(d) and 111(1)(e) were the lesser of
(A)the amount deducted under those paragraphs for the year, and
(B)the total of all amounts that would be deductible under those paragraphs for the year if
(I)paragraphs (b), (c) and (e) of this subsection, as they read in respect of taxation years that began after 1985 and before 1995, applied in computing the individual’s non-capital loss, restricted farm loss, farm loss and limited partnership loss for any of those years,
(II)paragraphs (b) to (c.3), (e) and (e.1) of this subsection, as they read in respect of taxation years that began after 1994 and ended before 2012, applied in computing the individual’s non-capital loss, restricted farm loss, farm loss and limited partnership loss for any of those years, and
(III)paragraphs (b) to (c.3), (e) and (e.1) of this subsection applied in computing the individual’s non-capital loss, restricted farm loss, farm loss and limited partnership loss for any taxation year that ends after 2011, and
(ii)paragraph 111(1)(b) were the lesser of
(A)the total of all amounts each of which is an amount that can reasonably be considered to be the amount that the individual would have deducted under paragraph 111(1)(b) had paragraph (d) of this subsection been applicable in computing the amount deductible under paragraph 111(1)(b), and
(B)the total of all amounts that would be deductible under that paragraph for the year if
(I)paragraph (d) of this subsection applied in computing the individual’s net capital loss for any taxation year that began before 1995,
(II)paragraphs (c.1) and (d) of this subsection, as they read in respect of taxation years that began after 1994 and ended before 2012, applied in computing the individual’s net capital loss for any of those years, and
(III)paragraphs (c.1) and (d) of this subsection applied in computing the individual’s net capital loss for any taxation year that ends after 2011; and
(j)theIncome Tax Application Ruleswere read without reference to section 40 of that Act.
Marginal note:Partnerships
(2)For the purposes of subsection 127.52(1) and this subsection, any amount deductible under a provision of this Act in computing the income or loss of a partnership for a fiscal period is, to the extent of a member’s share of the partnership’s income or loss, deemed to be deductible by the member under that provision in computing the member’s income for the taxation year in which the fiscal period ends.
Marginal note:Specified member of a partnership
(2.1)Where it can reasonably be considered that one of the main reasons that a member of a partnership was not a specified member of the partnership at all times since becoming a member of the partnership is to avoid the application of this section to the member’s interest in the partnership, the member is deemed for the purpose of this section to have been a specified member of the partnership at all times since becoming a member of the partnership.
Marginal note:Definitions
(3)For the purposes of this section,
film propertymeans a property described in paragraph (n) of Class 12, or paragraph (w) of Class 10, of Schedule II to theIncome Tax Regulations; (production cinématographique)
limited partnerhas the meaning that would be assigned by subsection 96(2.4) if that subsection were read without reference to “if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection 127.52(2.5)) at that time and”; (commanditaire)
rental or leasing propertymeans a property that is a rental property or a leasing property for the purpose of section 1100 of theIncome Tax Regulations. (bien de location)
residential property[Repealed, 1998, c. 19, s. 150(8)]
127.53[Repealed, 2014, c. 39, s. 45]
Marginal note:Basic minimum tax credit determined
127.531An individual’s basic minimum tax credit for a taxation year is the total of all amounts each of which is
(a)an amount deducted under any of subsections 118(1), (2) and (10), sections 118.01 to 118.07, subsection 118.3(1), sections 118.5 to 118.7 and 119 and subsection 127(1) in computing the individual’s tax payable for the year under this Part; or
(b)the amount that was claimed under section 118.1 or 118.2 in computing the individual’s tax payable for the year under this Part, determined without reference to this Division, to the extent that the amount claimed does not exceed the maximum amount deductible under that section in computing the individual’s tax payable for the year under this Part, determined without reference to this Division.
Marginal note:Definitions
127.54(1)In this section,
foreign incomeof an individual for a taxation year means the total of
(a)the individual’s incomes for the year from businesses carried on by the individual in countries other than Canada, and
(b)the individual’s incomes for the year from sources in countries other than Canada in respect of which the individual has paid non-business-income taxes, within the meaning assigned by subsection 126(7), to governments of countries other than Canada; (impôts payés à l’étranger)
foreign taxesof an individual for a taxation year means the total of the business-income taxes, within the meaning assigned by subsection 126(7), paid by the individual for the year in respect of businesses carried on by the individual in countries other than Canada and 2/3 of the non-business-income taxes, within the meaning assigned by that subsection, paid by the individual for the year to the governments of countries other than Canada. (revenu de source étrangère)
Marginal note:Foreign tax credit
(2)For the purposes of section 127.5, an individual’s special foreign tax credit for a taxation year is the greater of
(a)the total of all amounts deductible under section 126 from the individual’s tax for the year, and
(b)the lesser of
(i)the individual’s foreign taxes for the year, and
(ii)the amount determined by the formula
A × B
where
Marginal note:Application of s. 127.5
127.55Section 127.5 does not apply in respect of
(a)a return of income of an individual filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4);
(b)[Repealed, 2001, c. 17, s. 121(1)]
(c)an individual for the taxation year in which the individual dies;
(d)an individual for the 1986 taxation year if the individual dies in 1987;
(e)a trust described in paragraph 104(4)(a) or (a.1) for its taxation year that includes the day determined in respect of the trust under that paragraph; and
(f)a taxation year of a trust throughout which the trust is
(i)a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)),
(ii)a mutual fund trust,
(iii)a trust prescribed to be a master trust, or
(iv)an employee life and health trust.
Marginal note:Where corporation bankrupt
128(1)Where a corporation has become a bankrupt, the following rules are applicable:
(a)the trustee in bankruptcy shall be deemed to be the agent of the bankrupt for all purposes of this Act;
(b)the estate of the bankrupt shall be deemed not to be a trust or an estate for the purposes of this Act;
(c)the income and the taxable income of the corporation for any taxation year of the corporation during which it was a bankrupt and for any subsequent year shall be calculated as if
(i)the property of the bankrupt did not pass to and vest in the trustee in bankruptcy on the bankruptcy order being made or the assignment filed but remained vested in the bankrupt, and
(ii)any dealing in the estate of the bankrupt or any act performed in the carrying on of the business of the bankrupt estate by the trustee was done as agent on behalf of the bankrupt and any income of the trustee from such dealing or carrying on is income of the bankrupt and not of the trustee;
(d)a taxation year of the corporation shall be deemed to have commenced on the day the corporation became a bankrupt and a taxation year of the corporation that would otherwise have ended after the corporation became a bankrupt shall be deemed to have ended on the day immediately before the day on which the corporation became a bankrupt;
(e)if, in the case of any taxation year of the corporation ending during the period the corporation is a bankrupt, the corporation fails to pay any tax payable by it under this Act for any such year, the corporation and the trustee in bankruptcy are jointly and severally, or solidarily, liable to pay the tax, except that
(i)the trustee is only liable to the extent of the property of the bankrupt in the trustee’s possession, and
(ii)payment by either of them discharges the liability to the extent of the amount paid;
(f)in the case of any taxation year of the corporation ending during the period the corporation is a bankrupt, the corporation shall be deemed not to be associated with any other corporation in the year; and
(g)where an absolute order of discharge is granted in respect of the corporation, for the purposes of section 111 any loss of the corporation for any taxation year preceding the year in which the order of discharge was granted is not deductible by the corporation in computing its taxable income for the taxation year of the corporation in which the order was granted or any subsequent year.
Marginal note:Where individual bankrupt
(2)Where an individual has become a bankrupt, the following rules are applicable:
(a)the trustee in bankruptcy shall be deemed to be the agent of the bankrupt for all purposes of this Act;
(b)the estate of the bankrupt shall be deemed not to be a trust or an estate for the purposes of this Act;
(c)the income and the taxable income of the individual for any taxation year during which the individual was a bankrupt and for any subsequent year shall be calculated as if
(i)the property of the bankrupt did not pass to and vest in the trustee in bankruptcy on the bankruptcy order being made or the assignment filed but remained vested in the bankrupt, and
(ii)any dealing in the estate of the bankrupt or any act performed in the carrying on of the business of the bankrupt estate by the trustee was done as agent on behalf of the bankrupt and any income of the trustee from such dealing or carrying on is income of the bankrupt and not of the trustee;
(d)except for the purposes of subsections 146(1), 146.01(4) and 146.02(4) and Part X.1,
(i)a taxation year of the individual is deemed to have begun at the beginning of the day on which the individual became a bankrupt, and
(ii)the individual’s last taxation year that began before that day is deemed to have ended immediately before that day;
(d.1)where, by reason of paragraph (d), a taxation year of the individual is not a calendar year,
(i)paragraph 146(5)(b) shall, for the purpose of the application of subsection 146(5) to the taxation year, be read as follows:
“(b)the amount, if any, by which
(i)the amount, if any, by which the taxpayer’s RRSP deduction limit for the particular calendar year in which the taxation year ends exceeds the total of all contributions made by an employer in the particular calendar year to a pooled registered pension plan in respect of the taxpayer
exceeds
(ii)the total of the amounts deducted under this subsection and subsection (5.1) in computing the taxpayer’s income for any preceding taxation year that ends in the particular calendar year.”,
and
(ii)paragraph 146(5.1)(b) shall, for the purpose of the application of subsection 146(5.1) to the taxation year, be read as follows:
“(b)the amount, if any, by which
(i)the amount, if any, by which the taxpayer’s RRSP deduction limit for the particular calendar year in which the taxation year ends exceeds the total of all contributions made by an employer in the particular calendar year to a pooled registered pension plan in respect of the taxpayer
exceeds
(ii)the total of the amount deducted under subsection (5) in computing the taxpayer’s income for the year and the amounts deducted under this subsection and subsection (5) in computing the taxpayer’s income for any preceding taxation year that ends in the particular calendar year.”;
(d.2)where, by reason of paragraph 128(2)(d), the individual has two taxation years ending in a calendar year, each amount deducted in computing the individual’s income for either of the taxation years shall be deemed, for the purposes of the definitionunused RRSP deduction roomin subsection 146(1) and Part X.1, to have been deducted in computing the individual’s income for the calendar year;
(e)where the individual was a bankrupt at any time in a calendar year the trustee shall, within 90 days from the end of the year, file a return with the Minister, in prescribed form, on behalf of the individual of the individual’s income for any taxation year occurring in the calendar year computed as if
(i)the only income of the individual for that taxation year was the income for the year, if any, arising from dealings in the estate of the bankrupt or acts performed in the carrying on of the business of the bankrupt by the trustee,
(ii)in computing the individual’s taxable income for that taxation year, no deduction were permitted by Division C, other than
(A)an amount under any of paragraphs 110(1)(d) to (d.3) and section 110.6 to the extent that the amount is in respect of an amount included in income under subparagraph (i) for that taxation year, and
(B)an amount under section 111 to the extent that the amount was in respect of a loss of the individual for any taxation year that ended before the individual was discharged absolutely from bankruptcy,
(iii)in computing the individual’s tax payable under this Part for that taxation year, no deduction were allowed
(A)under any of sections 118 to 118.07, 118.2, 118.3, 118.5, 118.8 and 118.9,
(B)under section 118.1 with respect to a gift made by the individual on or after the day the individual became bankrupt,
(B.1)under section 118.62 with respect to interest paid on or after the day on which the individual became bankrupt, and
(C)under subsection 127(5) with respect to an expenditure incurred or property acquired by the individual in any taxation year that ends after the individual was discharged absolutely from bankruptcy,
and the trustee is liable to pay any tax so determined for that taxation year;
(f)notwithstanding paragraph 128(2)(e), the individual shall file a separate return of the individual’s income for any taxation year during which the individual was a bankrupt, computed as if
(i)the income required to be reported in respect of the year by the trustee under paragraph 128(2)(e) was not the income of the individual,
(ii)in computing income, the individual was not entitled to deduct any loss sustained by the trustee in the year in dealing with the estate of the bankrupt or in carrying on the business of the bankrupt,
(iii)in computing the individual’s taxable income for the year, no amount were deductible under any of paragraphs 110(1)(d) to (d.3) and section 110.6 in respect of an amount included in income under subparagraph (e)(i), and no amount were deductible under section 111, and
(iv)in computing the individual’s tax payable under this Part for the year, no amount were deductible under
(A)section 118.1 in respect of a gift made before the day on which the individual became bankrupt,
(B)section 118.62 in respect of interest paid before the day on which the individual became bankrupt, or
(C)section 118.61 or 120.2 or subsection 127(5),
and the individual is liable to pay any tax so determined for that taxation year;
(g)notwithstanding subparagraphs 128(2)(e)(ii) and 128(2)(e)(iii) and 128(2)(f)(iii) and 128(2)(f)(iv), where at any time an individual was discharged absolutely from bankruptcy,
(i)in computing the individual’s taxable income for any taxation year that ends after that time, no amount shall be deducted under section 111 in respect of losses for taxation years that ended before that time,
(ii)in computing the individual’s tax payable under this Part for any taxation year that ends after that time,
(A)no amount shall be deducted under section 118.61 or 120.2 in respect of an amount for any taxation year that ended before that time,
(B)no amount shall be deducted under section 118.1 in respect of a gift made before the individual became bankrupt,
(B.1)no amount shall be deducted under section 118.62 in respect of interest paid before the day on which the individual became bankrupt, and
(C)no amount shall be deducted under subsection 127(5) in respect of an expenditure incurred or a property acquired by the individual in any taxation year that ended before that time, and
(iii)the individual’s unused tuition, textbook and education tax credits (as determined under subsection 118.61(1)) at the end of the last taxation year that ended before that time is deemed to be nil;
(h)where, in a taxation year commencing after an order of discharge has been granted in respect of the individual, the trustee deals in the estate of the individual who was a bankrupt or performs any act in the carrying on of the business of the individual, paragraphs 128(2)(e), 128(2)(f) and 128(2)(g) shall apply as if the individual were a bankrupt in the year; and
(i)the portion of the individual’s non-capital loss for a particular taxation year in which paragraph 128(2)(e) applied in respect of the individual and any preceding taxation year that does not exceed the lesser of
(i)the amount of the individual’s allowable business investment losses for the particular taxation year, and
(ii)any portion of the individual’s non-capital loss for that particular year that was not deducted in computing the individual’s taxable income for any taxation year in which paragraph 128(2)(e) applied in respect of the individual or any preceding taxation year,
shall, for the purpose of determining the individual’s cumulative gains limit under section 110.6 for taxation years following the taxation year in which paragraph 128(2)(e) was last applicable in respect of the individual, be deemed not to have been an allowable business investment loss.
(3)[Repealed, 1998, c. 19, s. 152]
Marginal note:Immigration
128.1(1)For the purposes of this Act, where at a particular time a taxpayer becomes resident in Canada,
Marginal note:Year-end, fiscal period
(a)where the taxpayer is a corporation or a trust,
(i)the taxpayer’s taxation year that would otherwise include the particular time shall be deemed to have ended immediately before the particular time and a new taxation year of the taxpayer shall be deemed to have begun at the particular time, and
(ii)for the purpose of determining the taxpayer’s fiscal period after the particular time, the taxpayer shall be deemed not to have established a fiscal period before the particular time;
Marginal note:Deemed disposition
(b)the taxpayer is deemed to have disposed, at the time (in this subsection referred to as the “time of disposition”) that is immediately before the time that is immediately before the particular time, of each property owned by the taxpayer, other than, if the taxpayer is an individual,
(i)property that is a taxable Canadian property,
(ii)property that is described in the inventory of a business carried on by the taxpayer in Canada at the time of disposition,
(iii)property included in Class 14.1 of Schedule II to theIncome Tax Regulations, in respect of a business carried on by the taxpayer in Canada at the time of disposition, and
(iv)an excluded right or interest of the taxpayer, other than an interest described in paragraph (k) of the definitionexcluded right or interestin subsection (10),
(v)[Repealed, 2001, c. 17, s. 123]
for proceeds equal to its fair market value at the time of disposition;
Marginal note:Deemed acquisition
(c)the taxpayer shall be deemed to have acquired at the particular time each property deemed by paragraph 128.1(1)(b) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property;
Marginal note:Deemed dividend to immigrating corporation
(c.1)if the taxpayer is a particular corporation that immediately before the time of disposition owned a share of the capital stock of another corporation resident in Canada, a dividend is deemed to have been paid by the other corporation, and received by the particular corporation, immediately before the time of disposition, equal to the amount, if any, by which the fair market value of the share immediately before the time of disposition exceeds the total of
(i)the paid-up capital in respect of the share immediately before the time of disposition, and
(ii)if the share immediately before the time of disposition was taxable Canadian property that is not treaty-protected property, the amount by which, at the time of disposition, the fair market value of the share exceeds its cost amount;
Marginal note:Deemed dividend to shareholder of immigrating corporation
(c.2)if the taxpayer is a corporation and an amount has been added to the paid-up capital in respect of a class of shares of the corporation’s capital stock because of paragraph (2)(b),
(i)the corporation is deemed to have paid, immediately before the time of disposition, a dividend on the issued shares of the class equal to the amount of the paid-up capital adjustment in respect of the class, and
(ii)a dividend is deemed to have been received, immediately before the time of disposition, by each person (other than a person in respect of whom the corporation is a foreign affiliate) who held any of the issued shares of the class equal to that proportion of the dividend so deemed to have been paid that the number of shares of the class held by the person immediately before the time of disposition is of the number of issued shares of the class outstanding immediately before the time of disposition;
Marginal note:Foreign affiliate dumping — immigrating corporation
(c.3)if the taxpayer is a corporation that was, immediately before the particular time, controlled by one non-resident person or, if no single non-resident person controlled the CRIC, a group of non-resident persons not dealing with each other at arm’s length (in this section, that one non-resident person, or each member of the group of non-resident persons, as the case may be, is referred to as a “parent”, and the group of non-resident persons, if any, is referred to as the “group of parents”) and the taxpayer owned, immediately before the particular time, one or more shares of one or more non-resident corporations (each of which is in this paragraph referred to as a “subject affiliate”) that, immediately after the particular time, were — or that became, as part of a transaction or event or series of transactions or events that includes the taxpayer having become resident in Canada — foreign affiliates of the taxpayer, then
(i)in computing the paid-up capital, at any time after the time that is immediately after the particular time, of any particular class of shares of the capital stock of the taxpayer there is to be deducted the amount determined by the formula
A × B/C
where
(A)the paid-up capital in respect of all of the shares of the capital stock of the taxpayer at the time that is immediately after the particular time, and
(B)the total of all amounts each of which is the fair market value at the particular time of
(I)a share of the capital stock of a subject affiliate owned by the taxpayer at the particular time, or
(II)an amount owing by the subject affiliate to the taxpayer at the particular time,
(ii)for the purposes of Part XIII, the taxpayer is deemed, immediately after the particular time, to have paid to each parent, and each parent is deemed, immediately after the particular time, to have received from the taxpayer, a dividend in an amount determined by the formula
(A – B) × C/D
where
Marginal note:Foreign affiliate
(d)where the taxpayer was, immediately before the particular time, a foreign affiliate of another taxpayer that is resident in Canada,
(i)the affiliate is deemed to have been a controlled foreign affiliate of the other taxpayer immediately before the particular time, and
(ii)the prescribed amount is to be included in the foreign accrual property income of the affiliate for its taxation year that ends immediately before the particular time.
Marginal note:Trusts subject to subsection 94(3)
(1.1)Paragraph (1)(b) does not apply, at a time in a trust’s particular taxation year, to the trust if the trust is resident in Canada for the particular taxation year for the purpose of computing its income.
Marginal note:Trusts and partnerships look-through rule
(1.2)For the purposes of this subsection and paragraph (1)(c.1), if at any time shares of the capital stock of a corporation resident in Canada are owned by a trust or a partnership (each referred to in this subsection as a “conduit”), each person or partnership with an interest as a beneficiary under the conduit or that is a member of the conduit (each referred to in this subsection as a “holder”), as the case may be, is deemed to own the shares of each class of the capital stock of the corporation that are owned by the conduit the number of which is determined by the formula
A × B/C
where
Marginal note:Paid-up capital adjustment
(2)If a corporation becomes resident in Canada at a particular time,
(a)for the purposes of subsection (1) and this subsection, thepaid-up capital adjustmentin respect of a particular class of shares of the corporation’s capital stock in respect of that acquisition of residence is the positive or negative amount determined by the formula
(A × B/C) - D
where
(i)the total of all amounts each of which is an amount deemed by paragraph (1)(c) to be the cost to the corporation of property deemed under that paragraph to have been acquired by the corporation at the particular time
exceeds
(ii)the total of all amounts each of which is the amount of a debt owing by the corporation, or any other obligation of the corporation to pay an amount, that is outstanding at the particular time,
(b)for the purposes of this Act, in computing the paid-up capital in respect of a class of shares of the corporation’s capital stock at any time after the particular time and before the time, if any, at which the corporation next becomes resident in Canada, there shall be
(i)added the amount of the paid-up capital adjustment in respect of the particular class, if that amount is positive and the corporation so elects for all such classes in respect of that acquisition of residence by notifying the Minister in writing within 90 days after the particular time, and
(ii)deducted, if the amount of the paid-up capital adjustment in respect of the particular class is negative, the absolute value of that amount.
Marginal note:Paid-up capital adjustment
(3)In computing the paid-up capital at any time in respect of a class of shares of the capital stock of a corporation
(a)there is to be deducted an amount equal to the lesser of A and B, and added an amount equal to the lesser of A and C, where
(i)the total of all amounts deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of the class paid before that time by the corporation, and
(ii)the total that would be determined under subparagraph (i) if this Act were read without reference to subsection (2),
(b)there is to be added an amount equal to the lesser of
(i)the amount, if any, by which
(A)the total of all amounts deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of the class paid after March 28, 2012 and before that time by the corporation
exceeds
(B)the total that would be determined under clause (A) if this Act were read without reference to subparagraph (c.3)(i), and
(ii)the total of all amounts required by subparagraph (c.3)(i) to be deducted in computing the paid-up capital in respect of the class before that time.
Marginal note:Emigration
(4)For the purposes of this Act, where at a particular time a taxpayer ceases to be resident in Canada,
Marginal note:Year-end, fiscal period
(a)where the taxpayer is a corporation or a trust,
(i)the taxpayer’s taxation year that would otherwise include the particular time shall be deemed to have ended immediately before the particular time and a new taxation year of the taxpayer shall be deemed to have begun at the particular time, and
(ii)for the purpose of determining the taxpayer’s fiscal period after the particular time, the taxpayer shall be deemed not to have established a fiscal period before the particular time;
Marginal note:Fiscal period
(a.1)if the taxpayer is an individual (other than a trust) and carries on a business at the particular time, otherwise than through a permanent establishment (as defined by regulation) in Canada,
(i)the fiscal period of the business is deemed to have ended immediately before the particular time and a new fiscal period of the business is deemed to have begun at the particular time, and
(ii)for the purpose of determining the fiscal period of the business after the particular time, the taxpayer is deemed not to have established a fiscal period of the business before the particular time;
Marginal note:Deemed disposition
(b)the taxpayer is deemed to have disposed, at the time (in this paragraph and paragraph (d) referred to as the “time of disposition”) that is immediately before the time that is immediately before the particular time, of each property owned by the taxpayer other than, if the taxpayer is an individual,
(i)real or immovable property situated in Canada, a Canadian resource property or a timber resource property,
(ii)capital property used in, property included in Class 14.1 of Schedule II to theIncome Tax Regulationsin respect of or property described in the inventory of, a business carried on by the taxpayer through apermanent establishment(as defined by regulation) in Canada at the particular time,
(iii)an excluded right or interest of the taxpayer,
(iv)if the taxpayer is not a trust and was not, during the 120-month period that ends at the particular time, resident in Canada for more than 60 months, property that was owned by the taxpayer at the time the taxpayer last became resident in Canada or that was acquired by the taxpayer by inheritance or bequest after the taxpayer last became resident in Canada, and
(v)any property in respect of which the taxpayer elects under paragraph (6)(a) for the taxation year that includes the first time, after the particular time, at which the taxpayer becomes resident in Canada,
for proceeds equal to its fair market value at the time of disposition, which proceeds are deemed to have become receivable and to have been received by the taxpayer at the time of disposition;
Marginal note:Employee life and health trust
(b.1)notwithstanding paragraph (b), if the taxpayer is or was at any time an employee life and health trust,
(i)the taxpayer is deemed
(A)to have disposed, at the time (in this paragraph referred to as the “time of disposition”) that is immediately before the time that is immediately before the particular time, of each property owned by the taxpayer for proceeds equal to its fair market value at the time of disposition, which proceeds are deemed to have become receivable and to have been received by the taxpayer at the time of disposition, and
(B)to have carried on a business at the time of disposition, and
(ii)each property of the taxpayer is deemed
(A)to have been described in the inventory of the business referred to in clause (i)(B), and
(B)to have a cost of nil at the time of disposition;
Marginal note:Reacquisition
(c)the taxpayer is deemed to have reacquired, at the particular time, each property deemed by paragraph (b) or (b.1) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property;
Marginal note:Individual — elective disposition
(d)notwithstanding paragraphs (b) to (c), if the taxpayer is an individual (other than a trust) and so elects in prescribed form and manner in respect of a property described in subparagraph (b)(i) or (ii),
(i)the taxpayer is deemed to have disposed of the property at the time of disposition for proceeds equal to its fair market value at that time and to have reacquired the property at the particular time at a cost equal to those proceeds,
(ii)the taxpayer’s income for the taxation year that includes the particular time is deemed to be the greater of
(A)that income determined without reference to this subparagraph, and
(B)the lesser of
(I)that income determined without reference to this subsection, and
(II)that income determined without reference to subparagraph (i), and
(iii)each of the taxpayer’s non-capital loss, net capital loss, restricted farm loss, farm loss and limited partnership loss for the taxation year that includes the particular time is deemed to be the lesser of
(A)that amount determined without reference to this subparagraph, and
(B)the greater of
(I)that amount determined without reference to this subsection, and
(II)that amount determined without reference to subparagraph (i); and
Marginal note:Employee CCPC stock option shares
(d.1)if the taxpayer is deemed by paragraph (b) to have disposed of a share that was acquired before February 28, 2000 under circumstances to which subsection 7(1.1) applied, there shall be deducted from the taxpayer’s proceeds of disposition the amount that would, if section 7 were read without reference to subsection 7(1.6), be added under paragraph 53(1)(j) in computing the adjusted cost base to the taxpayer of the share as a consequence of the deemed disposition.
(e) and (f)[Repealed, 2001, c. 17, s. 123]
Marginal note:Instalment interest
(5)If an individual is deemed by subsection (4) to have disposed of a property in a taxation year, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the individual’s total tax payable under this Part for the year is deemed to be the lesser of
(a)the individual’s total tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and
(b)the amount that would be determined under paragraph (a) if subsection (4) did not apply to the individual for the year.
Marginal note:Returning former resident
(6)If an individual (other than a trust) becomes resident in Canada at a particular time in a taxation year and the last time (in this subsection referred to as the “emigration time”), before the particular time, at which the individual ceased to be resident in Canada was after October 1, 1996,
(a)subject to paragraph (b), if the individual so elects in writing and files the election with the Minister on or before the individual’s filing-due date for the year, paragraphs (4)(b) and (c) do not apply to the individual’s cessation of residence at the emigration time in respect of all properties that were taxable Canadian properties of the individual throughout the period that began at the emigration time and that ends at the particular time;
(b)where, if a property in respect of which an election under paragraph (a) is made had been acquired by the individual at the emigration time at a cost equal to its fair market value at the emigration time and had been disposed of by the individual immediately before the particular time for proceeds of disposition equal to its fair market value immediately before the particular time, the application of subsection 40(3.7) would reduce the amount that would, but for that subsection and this subsection, be the individual’s loss from the disposition,
(i)the individual is deemed to have disposed of the property at the time of disposition (within the meaning assigned by paragraph (4)(b)) in respect of the emigration time for proceeds of disposition equal to the total of
(A)the adjusted cost base to the individual of the property immediately before the time of disposition, and
(B)the amount, if any, by which that reduction exceeds the lesser of
(I)the adjusted cost base to the individual of the property immediately before the time of disposition, and
(II)the amount, if any, that the individual specifies for the purposes of this paragraph in the election under paragraph (a) in respect of the property,
(ii)the individual is deemed to have reacquired the property at the emigration time at a cost equal to the amount, if any, by which the amount determined under clause (i)(A) exceeds the lesser of that reduction and the amount specified by the individual under subclause (i)(B)(II), and
(iii)for the purpose of section 119, the individual is deemed to have disposed of the property immediately before the particular time;
(c)if the individual so elects in writing and files the election with the Minister on or before the individual’s filing-due date for the year, in respect of each property that the individual owned throughout the period that began at the emigration time and that ends at the particular time and that is deemed by paragraph (1)(b) to have been disposed of because the individual became resident in Canada, notwithstanding paragraphs (1)(c) and (4)(b) the individual’s proceeds of disposition at the time of disposition (within the meaning assigned by paragraph (4)(b)), and the individual’s cost of acquiring the property at the particular time, are deemed to be those proceeds and that cost, determined without reference to this paragraph, minus the least of
(i)the amount that would, but for this paragraph, have been the individual’s gain from the disposition of the property deemed by paragraph (4)(b) to have occurred,
(ii)the fair market value of the property at the particular time, and
(iii)the amount that the individual specifies for the purposes of this paragraph in the election; and
(d)notwithstanding subsections 152(4) to (5), any assessment of tax that is payable under this Act by the individual for any taxation year that is before the year that includes the particular time and that is not before the year that includes the emigration time shall be made that is necessary to take an election under this subsection into account, except that no such assessment shall affect the computation of
(i)interest payable under this Act to or by a taxpayer in respect of any period that is before the day on which the taxpayer’s return of income for the taxation year that includes the particular time is filed, or
(ii)any penalty payable under this Act.
Marginal note:Deemed taxable Canadian property
(6.1)For the purposes of paragraph (6)(a), a property is deemed to be taxable Canadian property of the individual throughout the period that began at the emigration time and that ends at the particular time if
(a)the emigration time is before March 5, 2010; and
(b)the property was taxable Canadian property of the individual on March 4, 2010.
Marginal note:Returning trust beneficiary
(7)If an individual (other than a trust)
(a)becomes resident in Canada at a particular time in a taxation year,
(b)owns at the particular time a property that the individual last acquired on a trust distribution to which subsection 107(2) would, but for subsection 107(5), have applied and at a time (in this subsection referred to as the “distribution time”) that was after October 1, 1996 and before the particular time, and
(c)was a beneficiary of the trust at the last time, before the particular time, at which the individual ceased to be resident in Canada,
the following rules apply:
(d)subject to paragraphs (e) and (f), if the individual and the trust jointly so elect in writing and file the election with the Minister on or before the earlier of their filing-due dates for their taxation years that include the particular time, subsection 107(2.1) does not apply to the distribution in respect of all properties acquired by the individual on the distribution that were taxable Canadian properties of the individual throughout the period that began at the distribution time and that ends at the particular time,
(e)paragraph (f) applies in respect of the individual, the trust and a property in respect of which an election under paragraph (d) is made where, if the individual
(i)had been resident in Canada at the distribution time,
(ii)had acquired the property at the distribution time at a cost equal to its fair market value at that time,
(iii)had ceased to be resident in Canada immediately after the distribution time, and
(iv)had, immediately before the particular time, disposed of the property for proceeds of disposition equal to its fair market value immediately before the particular time,
the application of subsection 40(3.7) would reduce the amount that would, but for that subsection and this subsection, have been the individual’s loss from the disposition,
(f)where this paragraph applies in respect of an individual, a trust and a property,
(i)notwithstanding paragraph 107(2.1)(a), the trust is deemed to have disposed of the property at the distribution time for proceeds of disposition equal to the total of
(A)the cost amount to the trust of the property immediately before the distribution time, and
(B)the amount, if any, by which the reduction under subsection 40(3.7) described in paragraph (e) exceeds the lesser of
(I)the cost amount to the trust of the property immediately before the distribution time, and
(II)the amount, if any, which the individual and the trust jointly specify for the purposes of this paragraph in the election under paragraph (d) in respect of the property, and
(ii)notwithstanding paragraph 107(2.1)(b), the individual is deemed to have acquired the property at the distribution time at a cost equal to the amount, if any, by which the amount otherwise determined under paragraph 107(2)(b) exceeds the lesser of the reduction under subsection 40(3.7) described in paragraph (e) and the amount specified under subclause (i)(B)(II),
(g)if the individual and the trust jointly so elect in writing and file the election with the Minister on or before the later of their filing-due dates for their taxation years that include the particular time, in respect of each property that the individual owned throughout the period that began at the distribution time and that ends at the particular time and that is deemed by paragraph (1)(b) to have been disposed of because the individual became resident in Canada, notwithstanding paragraphs 107(2.1)(a) and (b), the trust’s proceeds of disposition under paragraph 107(2.1)(a) at the distribution time, and the individual’s cost of acquiring the property at the particular time, are deemed to be those proceeds and that cost determined without reference to this paragraph, minus the least of
(i)the amount that would, but for this paragraph, have been the trust’s gain from the disposition of the property deemed by paragraph 107(2.1)(a) to have occurred,
(ii)the fair market value of the property at the particular time, and
(iii)the amount that the individual and the trust jointly specify for the purposes of this paragraph in the election,
(h)if the trust ceases to exist before the individual’s filing-due date for the individual’s taxation year that includes the particular time,
(i)an election or specification described in this subsection may be made by the individual alone in writing if the election is filed with the Minister on or before that filing-due date, and
(ii)if the individual alone makes such an election or specification, the individual and the trust are jointly and severally, or solidarily, liable for any amount payable under this Act by the trust as a result of the election or specification, and
(i)notwithstanding subsections 152(4) to (5), such assessment of tax payable under the Act by the trust or the individual for any year that is before the year that includes the particular time and that is not before the year that includes the distribution time shall be made as is necessary to take an election under this subsection into account, except that no such assessment shall affect the computation of
(i)interest payable under this Act to or by the trust or the individual in respect of any period that is before the individual’s filing-due date for the taxation year that includes the particular time, or
(ii)any penalty payable under this Act.
Marginal note:Post-emigration loss
(8)If an individual (other than a trust)
(a)was deemed by paragraph (4)(b) to have disposed of a capital property at any particular time after October 1, 1996,
(b)has disposed of the property at a later time at which the property was a taxable Canadian property of the individual, and
(c)so elects in writing in the individual’s return of income for the taxation year that includes the later time,
there shall, except for the purpose of paragraph (4)(c), be deducted from the individual’s proceeds of disposition of the property at the particular time, and added to the individual’s proceeds of disposition of the property at the later time, an amount equal to the least of
(d)the amount specified in respect of the property in the election,
(e)the amount that would, but for the election, be the individual’s gain from the disposition of the property at the particular time, and
(f)the amount that would be the individual’s loss from the disposition of the property at the later time, if the loss were determined having reference to every other provision of this Act including, for greater certainty, subsection 40(3.7) and section 112, but without reference to the election.
Marginal note:Information reporting
(9)An individual who ceases at a particular time in a taxation year to be resident in Canada, and who owns immediately after the particular time one or more reportable properties the total fair market value of which at the particular time is greater than $25,000, shall file with the Minister in prescribed form, on or before the individual’s filing-due date for the year, a list of all the reportable properties that the individual owned immediately after the particular time.
Marginal note:Definitions
(10)The definitions in this subsection apply in this section.
excluded right or interestof a taxpayer who is an individual means
(a)a right of the individual under, or an interest of the individual in a trust governed by,
(i)a registered retirement savings plan or a plan referred to in subsection 146(12) as an “amended plan”,
(ii)a registered retirement income fund,
(iii)a registered education savings plan,
(iii.1)a registered disability savings plan,
(iii.2)a TFSA,
(iii.3)a FHSA,
(iv)a deferred profit sharing plan or a plan referred to in subsection 147(15) as a “revoked plan”,
(v)an employees profit sharing plan,
(vi)an employee benefit plan (other than a plan described in subparagraph (b)(i) or (ii)),
(vi.1)an employee life and health trust,
(vii)a plan or arrangement (other than an employee benefit plan) under which the individual has a right to receive in a year remuneration in respect of services rendered by the individual in the year or a prior year,
(viii)a superannuation or pension fund or plan (other than an employee benefit plan),
(ix)a retirement compensation arrangement,
(x)a foreign retirement arrangement, or
(xi)a registered supplementary unemployment benefit plan;
(b)a right of the individual to a benefit under an employee benefit plan that is
(i)a plan or arrangement described in paragraph (j) of the definitionsalary deferral arrangementin subsection 248(1) that would, but for paragraphs (j) and (k) of that definition, be a salary deferral arrangement, or
(ii)a plan or arrangement that would, but for paragraph 6801(c) of theIncome Tax Regulations, be a salary deferral arrangement,
to the extent that the benefit can reasonably be considered to be attributable to services rendered by the individual in Canada;
(c)a right of the individual under an agreement referred to in subsection 7(1);
(d)a right of the individual to a retiring allowance;
(e)a right of the individual under, or an interest of the individual in, a trust that is
(i)an employee trust,
(ii)an amateur athlete trust,
(iii)a cemetery care trust, or
(iv)a trust governed by an eligible funeral arrangement;
(f)a right of the individual to receive a payment under
(i)an annuity contract, or
(ii)an income-averaging annuity contract;
(g)a right of the individual to a benefit under
(i)theCanada Pension Planor a provincial plan described in section 3 of that Act,
(ii)theOld Age Security Act, or
(iii)[Repealed, 2011, c. 24, s. 43]
(iv)a plan or arrangement instituted by the social security legislation of a country other than Canada or of a state, province or other political subdivision of such a country;
(h)a right of the individual to a benefit described in any of subparagraphs 56(1)(a)(iii) to (vi);
(i)a right of the individual to a payment out of a NISA Fund No. 2;
(j)an interest of the individual in a personal trust resident in Canada if the interest was never acquired for consideration and did not arise as a consequence of a qualifying disposition by the individual (within the meaning that would be assigned by subsection 107.4(1) if that subsection were read without reference to paragraphs 107.4(1)(h) and (i));
(k)an interest of the individual in a non-resident testamentary trust that is an estate that arose on and as a consequence of a death if
(i)the interest was never acquired for consideration, and
(ii)the estate has been in existence for no more than 36 months; or
(l)an interest of the individual in a life insurance policy in Canada, except for that part of the policy in respect of which the individual is deemed by paragraph 138.1(1)(e) to have an interest in a related segregated fund trust. (droit, participation ou intérêt exclu)
reportable propertyof an individual at a particular time means any property other than
(a)money that is legal tender in Canada and deposits of such money;
(b)property that would be an excluded right or interest of the individual if the definitionexcluded right or interestin this subsection were read without reference to paragraphs (c), (j) and (l) of that definition;
(c)if the individual is not a trust and was not, during the 120-month period that ends at the particular time, resident in Canada for more than 60 months, property described in subparagraph (4)(b)(iv) that is not taxable Canadian property; and
(d)any item of personal-use property the fair market value of which, at the particular time, is less than $10,000. (bien à déclarer)
Marginal note:Cross-border mergers
128.2(1)Where a corporation formed at a particular time by the amalgamation or merger of, or by a plan of arrangement or other corporate reorganization in respect of, 2 or more corporations (each of which is referred to in this section as a “predecessor”) is at the particular time resident in Canada, a predecessor that was not immediately before the particular time resident in Canada shall be deemed to have become resident in Canada immediately before the particular time.
Marginal note:Idem
(2)Where a corporation formed at a particular time by the amalgamation or merger of, or by a plan of arrangement or other corporate reorganization in respect of, 2 or more corporations is at the particular time not resident in Canada, a predecessor that was immediately before the particular timeresident in Canada shall be deemed to have ceased to be resident in Canada immediately before the particular time.
Marginal note:Windings-up excluded
(3)For greater certainty, subsections 128.2(1) and (2) do not apply to reorganizations occurring solely because of the acquisition of property of one corporation by another corporation, pursuant to the purchase of the property by the other corporation or because of the distribution of the property to the other corporation on the winding-up of the corporation.
Marginal note:Former resident — replaced shares
128.3If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii), subsection 85.1(8) or section 86 or 87 applies, a person acquires a share (in this section referred to as the “new share”) in exchange for another share or equity in a SIFT wind-up entity (in this section referred to as the “old share”), for the purposes of section 119, subsections 126(2.21) to (2.23), subparagraph 128.1(4)(b)(iv) and subsections 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.
Marginal note:Dividend refund to private corporation
129(1)Where a return of a corporation’s income under this Part for a taxation year is made within 3 years after the end of the year, the Minister
(a)may, on sending the notice of assessment for the year, refund without application an amount (in this Act referred to as its “dividend refund” for the year) in respect of taxable dividends paid by the corporation on shares of its capital stock in the year, and at a time when it was a private corporation, equal to the total of
(i)in respect of eligible dividends, an amount equal to the lesser of
(A)38 1/3% of the total of all eligible dividends paid by it in the year, and
(B)its eligible refundable dividend tax on hand at the end of the year, and
(ii)in respect of taxable dividends (other than eligible dividends), an amount equal to the total of
(A)the lesser of
(I)38 1/3% of the total of all taxable dividends (other than eligible dividends) paid by it in the year, and
(II)its non-eligible refundable dividend tax on hand at the end of the year, and
(B)either
(I)if the amount determined under subclause (A)(I) exceeds the amount determined under subclause (A)(II), the lesser of
1the amount of the excess, and
2the amount by which the corporation’s eligible refundable dividend tax on hand at the end of the year exceeds the amount, if any, determined under subparagraph (i) for the year, and
(II)in any other case, nil; and
(b)shall, with all due dispatch, make the dividend refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable under this Part by the corporation for the year if that subsection were read without reference to paragraph 152(4)(a).
Marginal note:Dividends paid to bankrupt controlling corporation
(1.1)In determining the dividend refund for a taxation year ending after 1977 of a particular corporation, no amount may be included under clause (1)(a)(i)(A), subclause (1)(a)(ii)(A)(I) or sub-subclause (1)(a)(ii)(B)(I)1 in respect of a taxable dividend paid to a shareholder that
(a)was a corporation that controlled (within the meaning assigned by subsection 186(2)) the particular corporation at the time the dividend was paid; and
(b)was a bankrupt at any time during that taxation year of the particular corporation.
Marginal note:Dividends deemed not to be taxable dividends
(1.2)Where a dividend is paid on a share of the capital stock of a corporation and the share (or another share for which the share was substituted) was acquired by its holder in a transaction or as part of a series of transactions one of the main purposes of which was to enable the corporation to obtain a dividend refund, the dividend shall, for the purpose of subsection 129(1), be deemed not to be a taxable dividend.
Marginal note:Application to other liability
(2)Instead of making a refund that might otherwise be made under subsection 129(1), the Minister may, where the corporation is liable or about to become liable to make any payment under this Act, apply the amount that would otherwise be refundable to that other liability and notify the corporation of that action.
Marginal note:Interest on dividend refund
(2.1)Where a dividend refund for a taxation year is paid to, or applied to a liability of, a corporation, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is the later of
(a)the day that is 120 days after the end of the year, and
(b)the day that is 30 days after the day on which the corporation’s return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,
and ending on the day on which the refund is paid or applied.
Marginal note:Excess interest on dividend refund
(2.2)Where, at any particular time, interest has been paid to, or applied to a liability of, a corporation under subsection 129(2.1) in respect of a dividend refund and it is determined at a subsequent time that the dividend refund was less than that in respect of which interest was so paid or applied,
(a)the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the dividend refund shall be deemed to be an amount (in this subsection referred to as the “amount payable”) that became payable under this Part by the corporation at the particular time;
(b)the corporation shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and
(c)the Minister may at any time assess the corporation in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.
(3)[Repealed, 2018, c. 12, s. 22]
Marginal note:Application
(3.1)Where, in a taxation year that begins after November 12, 1981, a corporation that last became a private corporation on or before that date and that was throughout the year a private corporation, other than a Canadian-controlled private corporation, has included in its income for the year an amount in respect of property that the corporation
(a)disposed of before November 13, 1981,
(b)was obligated to dispose of under the terms of an agreement in writing entered into before November 13, 1981, or
(c)is deemed by subsection 44(2) to have disposed of at any time after November 12, 1981 because of an event referred to in paragraph (b), (c) or (d) of the definitionproceeds of dispositionin section 54 in respect of the disposition that occurred before November 13, 1981,
paragraph 3(a) shall apply as if the corporation were a Canadian-controlled private corporation throughout the year, except that the total of the amounts determined under that paragraph in respect of the corporation for the year shall not exceed the amount that would be so determined if the only income of the corporation for the year were the amount included in respect of the disposition of such property.
(3.2) to (3.5)[Repealed, 1996, c. 21, s. 32]
Marginal note:Definitions
(4)The definitions in this subsection apply in this section.
aggregate investment incomeof a corporation for a taxation year means the amount, if any, by which the total of all amounts, each of which is
(a)the amount, if any, by which
(i)the eligible portion of the corporation’s taxable capital gains for the year
exceeds the total of
(ii)the eligible portion of its allowable capital losses for the year, and
(iii)the amount, if any, deducted under paragraph 111(1)(b) in computing its taxable income for the year, or
(b)the corporation’s income for the year from a source that is a property, other than
(i)exempt income,
(ii)an amount included under subsection 12(10.2) in computing the corporation’s income for the year,
(iii)the portion of any dividend that was deductible in computing the corporation’s taxable income for the year, and
(iv)income that, but for paragraph 108(5)(a), would not be income from a property,
exceeds the total of all amounts, each of which is the corporation’s loss for the year from a source that is a property. (revenu de placement total)
Canadian investment income[Repealed, 1996, c. 21, s. 32]
eligible portionof a corporation’s taxable capital gains or allowable capital losses for a taxation year is the total of all amounts each of which is the portion of a taxable capital gain or an allowable capital loss, as the case may be, of the corporation for the year from a disposition of a property that, except where the property was a designated property (within the meaning assigned by subsection 89(1)), cannot reasonably be regarded as having accrued while the property, or a property for which it was substituted, was property of a corporation other than a Canadian-controlled private corporation, an investment corporation, a mortgage investment corporation or a mutual fund corporation. (fraction admissible)
eligible refundable dividend tax on hand, of a particular corporation at the end of a taxation year, means the amount, if any, by which the total of
(a)the total of the taxes payable under Part IV by the particular corporation for the year in respect of
(i)eligible dividends received by the particular corporation in the year from corporations other than corporations with which the particular corporation is connected (in this paragraph, within the meaning assigned by subsection 186(4) on the assumption that the other corporation is at that time a payer corporation within the meaning of that subsection), and
(ii)taxable dividends received by the particular corporation in the year from corporations that are connected with the particular corporation to the extent that such dividends caused a dividend refund to those corporations from their eligible refundable dividend tax on hand, and
(b)where the particular corporation was a private corporation at the end of its preceding taxation year, the particular corporation’s eligible refundable dividend tax on hand at the end of that preceding year
exceeds
(c)the total of all amounts each of which is the portion, if any, of the particular corporation’s dividend refund from its eligible refundable dividend tax on hand determined, for its preceding taxation year, under
(i)subparagraph (1)(a)(i), and
(ii)clause (1)(a)(ii)(B). (impôt en main remboursable au titre de dividendes déterminés)
foreign investment incomeof a corporation for a taxation year is the amount that would be its aggregate investment income for the year if
(a)every amount of its income, loss, capital gain or capital loss for the year that can reasonably be regarded as being from a source in Canada were nil,
(b)no amount were deducted under paragraph 111(1)(b) in computing its taxable income for the year, and
(c)this Act were read without reference to paragraph (a) of the definitionincomeorlossin this subsection. (revenu de placement étranger)
incomeorlossof a corporation for a taxation year from a source that is a property
(a)includes the income or loss from a specified investment business carried on by it in Canada other than income or loss from a source outside Canada, but
(b)does not include the income or loss from any property
(i)that is incident to or pertains to an active business carried on by it, or
(ii)that is used or held principally for the purpose of gaining or producing income from an active business carried on by it. (perteourevenu)
non-eligible refundable dividend tax on hand, of a corporation at the end of a taxation year, means the amount, if any, by which the total of
(a)if the corporation was a Canadian-controlled private corporation throughout the year, the least of
(i)the amount determined by the formula
A − B
where
(A)the amount deducted under subsection 126(1) from the tax for the year otherwise payable by it under this Part
exceeds
(B)8% of its foreign investment income for the year,
(ii)30 2/3% of the amount, if any, by which the corporation’s taxable income for the year exceeds the total of
(A)the least of the amounts determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the year,
(B)100/(38 2/3) of the total of amounts deducted under subsection 126(1) from its tax for the year otherwise payable under this Part, and
(C)the amount determined by multiplying the total of amounts deducted under subsection 126(2) from its tax for the year otherwise payable under this Part, by the relevant factor for the year, and
(iii)the corporation’s tax for the year payable under this Part,
(b)the total of the taxes payable under Part IV by the corporation for the year less the amount determined under paragraph (a) of the definitioneligible refundable dividend tax on handin respect of the corporation for the year, and
(c)if the corporation was a private corporation at the end of its preceding taxation year, the corporation’s non-eligible refundable dividend tax on hand at the end of that preceding year
exceeds
(d)the portion, if any, of the corporation’s dividend refund from its non-eligible refundable dividend tax on hand determined, for its preceding taxation year, under clause (1)(a)(ii)(A). (impôt en main remboursable au titre de dividendes non déterminés)
Marginal note:Conditions for subsection (4.2)
(4.1)Subsection (4.2) applies in respect of a particular taxation year of a particular corporation if the following conditions are met:
(a)the particular corporation has an amount of tax payable for the year under Part IV;
(b)the particular corporation has claimed amounts under paragraph 186(1)(c) or (d) in respect of the year; and
(c)the particular corporation would, in the absence of paragraphs 186(1)(c) and (d), have an amount determined, at the end of the year, under both paragraph (a) of the definitioneligible refundable dividend tax on handand paragraph (b) of the definitionnon-eligible refundable dividend tax on handin subsection (4).
Marginal note:Part IV tax — allocation of losses
(4.2)If this subsection applies in respect of a particular taxation year of a corporation, for the purpose of determining the amount under paragraph (a) of the definitioneligible refundable dividend tax on handin subsection (4), in respect of the corporation at the end of the year, the amount determined under subsection 186(1) in respect of the corporation for the year is deemed to be the amount determined by the formula
A + B − C
where
38 1/3% (D + E) − (F + G)
where
(4.3)[Repealed, 1996, c. 21, s. 32]
Marginal note:2019 transitional RDTOH
(5)The following rules apply to a corporation’s first taxation year in respect of which the definitioneligible refundable dividend tax on handin subsection (4) applies:
(a)if the corporation is a Canadian-controlled private corporation throughout the taxation year and its preceding taxation year and is not a corporation in respect of which an election under subsection 89(11) applies to the taxation year or the preceding taxation year,
(i)for the purpose of applying paragraph (b) of the definitioneligible refundable dividend tax on handin respect of the corporation at the end of the taxation year, the corporation’s eligible refundable dividend tax on hand at the end of its preceding taxation year is deemed to be the amount, if any, that is the lesser of
(A)the amount determined by the formula
A − B
where
(B)the amount determined by the formula
(C − D) × E
where
(I)the total of all amounts each of which is an eligible dividend paid by the corporation in its preceding taxation year
exceeds
(II)the total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year, and
(ii)for the purpose of applying paragraph (c) of the definitionnon-eligible refundable dividend tax on handin respect of the corporation at the end of the taxation year, the corporation’s non-eligible refundable dividend tax on hand at the end of its preceding taxation year is deemed to be the amount determined by the formula
A − B
where
(b)in any other case, for the purpose of applying paragraph (b) of the definitioneligible refundable dividend tax on handin respect of the corporation at the end of the taxation year, the corporation’s eligible refundable dividend tax on hand at the end of its preceding taxation year is deemed to be the amount that would be determined for clause (a)(i)(A) if paragraph (a) applied to the corporation in respect of the taxation year.
Marginal note:2019 transitional RDTOH — amalgamations
(5.1)Subsection (5) applies with such modifications as are necessary for the purpose of applying paragraph 87(2)(aa) in respect of a corporation if
(a)the corporation is a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation (within the meaning assigned by subsection 87(1));
(b)the corporation has an amount of refundable dividend tax on hand at the end of its taxation year that ends because of paragraph 87(2)(a); and
(c)the first taxation year of the new corporation (within the meaning assigned by subsection 87(1)) in respect of the amalgamation is one to which the definitioneligible refundable dividend tax on handin subsection (4) applies.
Marginal note:Investment income from associated corporation deemed to be active business income
(6)Where any particular amount paid or payable to a corporation (in this subsection referred to as the “recipient corporation”) by another corporation (in this subsection referred to as the “associated corporation”) with which the recipient corporation was associated in any particular taxation year commencing after 1972, would otherwise be included in computing the income of the recipient corporation for the particular year from a source in Canada that is a property, the following rules apply:
(a)for the purposes of subsection 129(4), in computing the recipient corporation’s income for the year from a source in Canada that is a property,
(i)there shall not be included any portion (in this subsection referred to as the “deductible portion”) of the particular amount that was or may be deductible in computing the income of the associated corporation for any taxation year from an active business carried on by it in Canada, and
(ii)no deduction shall be made in respect of any outlay or expense, to the extent that that outlay or expense may reasonably be regarded as having been made or incurred by the recipient corporation for the purpose of gaining or producing the deductible portion; and
(b)for the purposes of this subsection and section 125,
(i)the deductible portion shall be deemed to be income of the recipient corporation for the particular year from an active business carried on by it in Canada, and
(ii)any outlay or expense, to the extent described in subparagraph 129(6)(a)(ii), shall be deemed to have been made or incurred by the recipient corporation for the purpose of gaining or producing that income.
Marginal note:Meaning oftaxable dividend
(7)For the purposes of this section,taxable dividenddoes not include a capital gains dividend within the meaning assigned by subsection 131(1).
Marginal note:Application of s. 125
(8)Expressions used in this section and not otherwise defined for the purposes of this section have the same meanings as in section 125.
Marginal note:Deduction from tax
130(1)A corporation that was, throughout a taxation year, an investment corporation may deduct from the tax otherwise payable by it under this Part for the year an amount equal to 20% of the amount, if any, by which its taxable income for the year exceeds its taxed capital gains for the year.
Marginal note:Application of subsections 131(1) to (3.2), (4.1) and (6)
(2)Where a corporation was an investment corporation throughout a taxation year (other than a corporation that was a mutual fund corporation throughout the year), subsections 131(1) to (3.2), (4.1) and (6) apply in respect of the corporation for the year
(a)as if the corporation had been a mutual fund corporation throughout that and all previous taxation years ending after 1971 throughout which it was an investment corporation; and
(b)as if its capital gains redemptions for that and all previous taxation years ending after 1971, throughout which it would, but for the assumption made by paragraph 130(2)(a), not have been a mutual fund corporation, were nil.
Meaning of expressionsinvestment corporationandtaxed capital gains
(3)For the purposes of this section,
(a)a corporation is aninvestment corporationthroughout any taxation year in respect of which the expression is being applied if it complied with the following conditions:
(i)it was throughout the year a Canadian corporation that was a public corporation,
(ii)at least 80% of its property throughout the year consisted of shares, bonds, marketable securities or cash,
(iii)not less than 95% of its income (determined without reference to subsection 49(2)) for the year was derived from, or from dispositions of, investments described in subparagraph 130(3)(a)(ii),
(iv)not less than 85% of its gross revenue for the year was from sources in Canada,
(v)not more than 25% of its gross revenue for the year was from interest,
(vi)at no time in the year did more than 10% of its property consist of shares, bonds or securities of any one corporation or debtor other than Her Majesty in right of Canada or of a province or a Canadian municipality,
(vii)no person would have been a specified shareholder of the corporation in the year if
(A)the portion of the definitionspecified shareholderin subsection 248(1) before paragraph (a) were read as follows:
“specified shareholderof a corporation in a taxation year means a taxpayer who owns, directly or indirectly, at any time in the year, more than 25% of the issued shares of any class of the capital stock of the corporation and, for the purposes of this definition,”
(B)paragraph (a) of that definition were read as follows:
“(a)a taxpayer is deemed to own each share of the capital stock of a corporation owned at that time by a person related to the taxpayer,”
(B.1)[Repealed, 2013, c. 34, s. 371]
(C)that definition were read without reference to paragraph (d) of that definition,
(C.1)[Repealed, 2013, c. 34, s. 371]
and
(D)paragraph 251(2)(a) were read as follows:
“(a)an individual and
(i)the individual’s child (as defined in subsection 70(10)) who is under 19 years of age, or
(ii)the individual’s spouse or common-law partner;”
(viii)an amount not less than 85% of the total of
(A)2/3 of the amount, if any, by which its taxable income for the year exceeds its taxed capital gains for the year, and
(B)the amount, if any, by which all taxable dividends received by it in the year to the extent of the amount thereof deductible under section 112 or 113 from its income for the year exceeds the amount that the corporation’s non-capital loss for the year would be if the amount determined in respect of the corporation for the year under paragraph 3(b) was nil,
(less any dividends or interest received by it in the form of shares, bonds or other securities that had not been sold before the end of the year) was distributed, otherwise than by way of capital gains dividends, to its shareholders before the end of the year; and
(b)the amount of thetaxed capital gainsof a taxpayer for a taxation year is the amount, if any, by which
(i)its taxable capital gains for the year from dispositions of property
exceeds
(ii)the total of its allowable capital losses for the year from dispositions of property and the amount, if any, deducted under paragraph 111(1)(b) for the purpose of computing its taxable income for the year.
Marginal note:Wholly owned subsidiaries
(4)Where a corporation so elects in its return of income under this Part for a taxation year, each of the corporation’s properties that is a share or indebtedness of another Canadian corporation that is at any time in the year a subsidiary wholly owned corporation of the corporation shall, for the purposes of subparagraphs 130(3)(a)(ii) and (vi), be deemed not to be owned by the corporation at any such time in the year, and each property owned by the other corporation at that time shall, for the purposes of those subparagraphs, be deemed to be owned by the corporation at that time.
Marginal note:Deduction from tax
130.1(1)In computing the income for a taxation year of a corporation that was, throughout the year, a mortgage investment corporation,
(a)there may be deducted the total of
(i)all taxable dividends, other than capital gains dividends, paid by the corporation during the year or within 90 days after the end of the year to the extent that those dividends were not deductible by the corporation in computing its income for the preceding year, and
(ii)1/2 of all capital gains dividends paid by the corporation during the period commencing 91 days after the commencement of the year and ending 90 days after the end of the year; and
(b)no deduction may be made under section 112 in respect of taxable dividends received by it from other corporations.
Marginal note:Dividend equated to bond interest
(2)For the purposes of this Act, any amount received from a mortgage investment corporation by a shareholder of the corporation as or on account of a taxable dividend, other than a capital gains dividend, shall be deemed to have been received by the shareholder as interest payable on a bond issued by the corporation after 1971.
Marginal note:Application of s. (2)
(3)Subsection 130.1(2) applies where the taxable dividend (other than a capital gains dividend) described in that subsection was paid during a taxation year throughout which the paying corporation was a mortgage investment corporation or within 90 days thereafter.
Marginal note:Election re capital gains dividend
(4)Where at any particular time during the period that begins 91 days after the beginning of a taxation year of a corporation that was, throughout the year, a mortgage investment corporation and ends 90 days after the end of the year, a dividend is paid by the corporation to shareholders of the corporation, if the corporation so elects in respect of the full amount of the dividend in prescribed manner and at or before the earlier of the particular time and the first day on which any part of the dividend was paid,
(a)the dividend shall be deemed to be a capital gains dividend to the extent that it does not exceed the amount, if any, by which
(i)twice the taxed capital gains of the corporation for the year
exceeds
(ii)the total of all dividends, and parts of dividends, paid by the corporation during the period and before the particular time that are deemed by this paragraph to be capital gains dividends; and
(b)notwithstanding any other provision of this Act, if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount
(i)shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and
(ii)is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.
Marginal note:Application of ss. 131(1.1) to (1.4)
(4.1)Where at any particular time a mortgage investment corporation paid a dividend to its shareholders and subsection 130.1(4) would have applied to the dividend except that the corporation did not make an election under that subsection on or before the day on or before which it was required by that subsection to be made, subsections 131(1.1) to 131(1.4) apply with such modifications as the circumstances require.
(4.2) to (4.5)[Repealed, 2013, c. 34, s. 276]
Marginal note:Public corporation
(5)Notwithstanding any other provision of this Act, a mortgage investment corporation shall be deemed to be a public corporation.
Meaning ofmortgage investment corporation
(6)For the purposes of this section, a corporation is amortgage investment corporationthroughout a taxation year if, throughout the year,
(a)it was a Canadian corporation;
(b)its only undertaking was the investing of funds of the corporation and it did not manage or develop any real or immovable property;
(c)none of the property of the corporation consisted of
(i)debts owing to the corporation that were secured on real or immovable property situated outside Canada,
(ii)debts owing to the corporation by non-resident persons, except any such debts that were secured on real or immovable property situated in Canada,
(iii)shares of the capital stock of corporations not resident in Canada, or
(iv)real or immovable property situated outside Canada, or any leasehold interest in such property;
(d)there were 20 or more shareholders of the corporation and no person would have been a specified shareholder of the corporation at any time in the year if
(i)the portion of the definitionspecified shareholderin subsection 248(1) before paragraph (a) were read as follows:
“specified shareholderof a corporation at any time means a taxpayer who owns, directly or indirectly, at that time, more than 25% of the issued shares of any class of the capital stock of the corporation and, for the purposes of this definition,”
(ii)paragraph (a) of that definition were read as follows:
“(a)a taxpayer is deemed to own each share of the capital stock of a corporation owned at that time by a person related to the taxpayer,”
(iii)that definition were read without reference to paragraph (d) of that definition, and
(iv)paragraph 251(2)(a) were read as follows:
“(a)an individual and
(i)the individual’s child (as defined in subsection 70(10)) who is under 18 years of age, or
(ii)the individual’s spouse or common-law partner;”
(e)any holders of preferred shares of the corporation had a right, after payment to them of their preferred dividends, and payment of dividends in a like amount per share to the holders of the common shares of the corporation, to participatepari passuwith the holders of the common shares in any further payment of dividends;
(f)the cost amount to the corporation of such of its property as consisted of
(i)debts owing to the corporation that were secured, whether by mortgages, hypothecs or in any other manner, on houses (as defined in section 2 of theNational Housing Act) or on property included within a housing project (as defined in that section as it read on June 16, 1999), and
(ii)amounts of any deposits standing to the corporation’s credit in the records of
(A)a bank or other corporation any of whose deposits are insured by the Canada Deposit Insurance Corporation or the Régie de l’assurance-dépôts du Québec, or
(B)a credit union,
plus the amount of any money of the corporation was at least 50% of the cost amount to it of all its property;
(g)the cost amount to the corporation of all real or immovable property of the corporation, including leasehold interests in such property (except real or immovable property acquired by the corporation by foreclosure or otherwise after default made on a mortgage, hypothec or agreement of sale of real or immovable property) did not exceed 25% of the cost amount to it of all its property;
(h)its liabilities did not exceed 3 times the amount by which the cost amount to it of all its property exceeded its liabilities, where at any time in the year the cost amount to it of such of its property as consisted of property described in subparagraphs 130.1(6)(f)(i) and 130.1(6)(f)(ii) plus the amount of any money of the corporation was less than 2/3 of the cost amount to it of all of its property; and
(i)its liabilities did not exceed 5 times the amount by which the cost amount to it of all its property exceeded its liabilities, where paragraph 130.1(6)(h) is not applicable.
Marginal note:How shareholders counted
(7)In paragraph (6)(d), a trust governed by a registered pension plan or deferred profit sharing plan by which shares of the capital stock of a corporation are held shall be counted as four shareholders of the corporation for the purpose of determining the number of shareholders of the corporation, but as one shareholder for the purpose of determining whether any person is a specified shareholder (as defined for the purpose of that paragraph).
Marginal note:First taxation year
(8)For the purposes of subsection 130.1(6), a corporation that was incorporated after 1971 shall be deemed to have complied with paragraph 130.1(6)(d) throughout the first taxation year of the corporation in which it carried on business if it complied with that paragraph on the last day of that taxation year.
Marginal note:Definitions
(9)In this section,
liabilitiesof a corporation at any particular time means the total of all debts owing by the corporation, and all other obligations of the corporation to pay an amount, that were outstanding at that time; (passif)
non-qualifying real property[Repealed, 1995, c. 3, s. 40(2)]
non-qualifying taxed capital gains[Repealed, 1995, c. 3, s. 40(2)]
qualifying taxed capital gains[Repealed, 1995, c. 3, s. 40(2)]
taxed capital gainshas the meaning assigned by paragraph 130(3)(b). (gains en capital imposés)
Marginal note:Election re capital gains dividend
131(1)Where at any particular time a dividend became payable by a corporation, that was throughout the taxation year in which the dividend became payable a mutual fund corporation, to shareholders of any class of its capital stock, if the corporation so elects in respect of the full amount of the dividend in prescribed manner and at or before the earlier of the particular time and the first day on which any part of the dividend was paid,
(a)the dividend shall be deemed to be a capital gains dividend payable out of the corporation’s capital gains dividend account to the extent that it does not exceed the corporation’s capital gains dividend account atthe particular time; and
(b)notwithstanding any other provision of this Act (other than paragraph (5.1)(b)), if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount
(i)shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and
(ii)is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.
Marginal note:Deemed date of election
(1.1)Where at any particular time a dividend has become payable by a mutual fund corporation to shareholders of any class of shares of its capital stock and subsection 131(1) would have applied to the dividend except that the election referred to in that subsection was not made on or before the day on or before which the election was required by that subsection to be made, the election shall be deemed to have been made at the particular time or on the first day on which any part of the dividend was paid, whichever is the earlier, if
(a)the election is thereafter made in prescribed manner and prescribed form;
(b)an estimate of the penalty in respect of the election is paid by the corporation when the election is made; and
(c)the directors or other person or persons legally entitled to administer the affairs of the corporation have, before the time the election is made, authorized the election to be made.
Marginal note:Request to make election
(1.2)The Minister may at any time, by written request served personally or by registered mail, request that an election referred to in paragraph 131(1.1)(a) be made by a mutual fund corporation and where the mutual fund corporation on which such a request is served does not comply therewith within 90 days after service of the request, subsection 131(1.1) does not apply to such an election made thereafter by it.
Marginal note:Penalty
(1.3)For the purposes of this section, the penalty in respect of an election referred to in paragraph 131(1.1)(b) is an amount equal to the lesser of
(a)1% per annum of the amount of the dividend referred to in the election for each month or part of a month during the period commencing with the time that the dividend became payable, or the first day on which any part of the dividend was paid if that day is earlier, and ending with the day on which the election was made, and
(b)the product obtained when $500 is multiplied by the proportion that the number of months or parts of months during the period referred to in paragraph 131(1.3)(a) bears to 12.
Marginal note:Assessment and payment of penalty
(1.4)The Minister shall, with all due dispatch, examine each election referred to in paragraph 131(1.1)(a), assess the penalty payable and send a notice of assessment to the mutual fund corporation and the corporation shall pay forthwith to the Receiver General, the amount, if any, by which the penalty so assessed exceeds the total of all amounts previously paid on account of that penalty.
(1.5) to (1.9)[Repealed, 2013, c. 34, s. 277]
Marginal note:Capital gains refund to mutual fund corporation
(2)Where a corporation was, throughout a taxation year, a mutual fund corporation and a return of its income for the year has been made within 3 years from the end of the year, the Minister
(a)may, on sending the notice of assessment for the year, refund an amount (in this subsection referred to as its “capital gains refund” for the year) equal to the lesser of
(i)the total of
(A)14% of the total of
(I)all capital gains dividends paid by the corporation in the period commencing 60 days after the beginning of the year and ending 60 days after the end of the year, and
(II)its capital gains redemptions for the year, and
(B)the amount, if any, that the Minister determines to be reasonable in the circumstances, after giving consideration to the percentages applicable in determining the corporation’s capital gains refund for the year and preceding taxation years and the percentages applicable in determining the corporation’s refundable capital gains tax on hand at the end of the year, and
(ii)the corporation’s refundable capital gains tax on hand at the end of the year; and
(b)shall, with all due dispatch, make that capital gains refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable under this Part by the corporation for the year if that subsection were read without reference to paragraph 152(4)(a).
Marginal note:Application to other liability
(3)Instead of making a refund that might otherwise be made under subsection 131(2), the Minister may, where the corporation is liable or about to become liable to make any payment under this Act, apply the amount that would otherwise be refunded to that other liability and notify the corporation of that action.
Marginal note:Interest on capital gains refund
(3.1)Where a capital gains refund for a taxation year is paid to, or applied to a liability of, a corporation, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is the later of
(a)the day that is 120 days after the end of the year, and
(b)the day that is 30 days after the day on which the corporation’s return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,
and ending on the day the refund is paid or applied.
Marginal note:Excess interest on capital gains refund
(3.2)Where at any particular time interest has been paid to, or applied to a liability of, a corporation under subsection 131(3.1) in respect of a capital gains refund and it is determined at a subsequent time that the capital gains refund was less than that in respect of which interest was so paid or applied,
(a)the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the capital gains refund shall be deemed to be an amount (in this subsection referred to as the “amount payable”) that became payable under this Part by the corporation at the particular time;
(b)the corporation shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and
(c)the Minister may at any time assess the corporation in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.
Marginal note:Application of s. 84
(4)Section 84 does not apply to deem a dividend to have been paid by a corporation to any of its shareholders, or to deem any of the shareholders of a corporation to have received a dividend on any shares of the capital stock of the corporation, if at the time the dividend would, but for this subsection, be deemed by that section to have been so paid or received, as the case may be, the corporation was a mutual fund corporation.
Marginal note:Sections not applicable
(4.1)Sections 51, 85, 85.1, 86 and 87 do not apply to a taxpayer that holds a share (in this subsection referred to as theold share) of a class of shares, that is recognized under securities legislation as or as part of an investment fund, of a mutual fund corporation if the taxpayer exchanges or otherwise disposes of the old share for another share (in this subsection referred to as thenew share) of a mutual fund corporation, unless
(a)if the exchange or disposition occurs in the course of a transaction, event or series of transactions or events described in subsections 86(1) or 87(1),
(i)all shares of the class (determined without reference to subsection 248(6)) that includes the old share at the time of the exchange or disposition are exchanged for shares of the class that includes the new share,
(ii)the old share and the new share derive their value in the same proportion from the same property or group of properties, and
(iii)the transaction, event or series was undertaken solely forbona fidepurposes and not to cause this paragraph to apply; or
(b)if the old share and the new share are shares of the same class (determined without reference to subsection 248(6)) of shares of the same mutual fund corporation,
(i)the old share and the new share derive their value in the same proportion from the same property or group of properties held by the corporation that is allocated to that class, and
(ii)that class is recognized under securities legislation as or as part of a single investment fund.
Marginal note:Dividend refund to mutual fund corporation
(5)A corporation that was a mutual fund corporation throughout a taxation year
(a)is deemed for the purposes of paragraph 87(2)(aa) and section 129 to have been a private corporation throughout the year, except that itsnon-eligible refundable dividend tax on hand(as defined in subsection 129(4)) at the end of the year shall be determined without reference to paragraph (a) of that definition; and
(b)where it was not an investment corporation throughout the year, is deemed for the purposes of Part IV to have been a private corporation throughout the year except that, in applying subsection 186(1) to the corporation in respect of the year, that subsection shall be read without reference to paragraph 186(1)(b).
Marginal note:TCP gains distribution
(5.1)If a mutual fund corporation elects under subsection (1) to treat a dividend as a capital gains dividend, for the purposes of this Part and Part XIII,
(a)each shareholder to whom the dividend is paid is deemed to receive from the corporation, at the time the dividend is paid, a TCP gains distribution equal to the lesser of the amount of the dividend and the shareholder’s pro rata portion at that time of the mutual fund corporation’s TCP gains balance; and
(b)where the dividend is paid to a shareholder who is a non-resident person or a partnership that is not a Canadian partnership,
(i)subparagraph (1)(b)(ii) does not apply in respect of the dividend, to the extent of the TCP gains distribution, and
(ii)the TCP gains distribution is a taxable dividend that, except for the purpose of the definition ofcapital gains dividend accountin subsection (6), is not a capital gains dividend.
Marginal note:Application of subsection (5.1)
(5.2)Subsection (5.1) applies to a dividend paid by a mutual fund corporation in a taxation year only if more than 5% of the dividend is received by or on behalf of shareholders each of whom is a non-resident person or is a partnership that is not a Canadian partnership.
Marginal note:Definitions
(6)In this section,
capital gains dividend accountof a mutual fund corporation at any time means the amount, if any, by which
(a)the total of
(i)its capital gains, for all taxation years that began more than 60 days before that time, from dispositions of property after 1971 and before that time while it was a mutual fund corporation, and
(ii)all amounts each of which is an amount in respect of a distribution made by a trust to the corporation, at a time that is after its 2004 taxation year and at which it is a mutual fund corporation, in respect of capital gains of the trust equal to twice the amount determined by the following formula:
A – B
where
exceeds
(b)the total of
(i)its capital losses, for all taxation years that began more than 60 days before that time, from dispositions of property after 1971 and before that time while it was a mutual fund corporation,
(ii)all capital gains dividends that became payable by the corporation before that time and more than 60 days after the end of the last taxation year that ended more than 60 days before that time, and
(iii)an amount equal to 100/14 of its capital gains refund for any taxation year throughout which it was a mutual fund corporation where the year ended more than 60 days before that time; (compte de dividendes sur les gains en capital)
capital gains redemptionsof a mutual fund corporation for a taxation year means the amount determined by the formula
A/B × (C + D)
where
(a)the total of all amounts paid by the corporation in the year on the redemption of shares of its capital stock, and
(b)the total of all amounts each of which is an amount equal to the fair market value of the shares of the corporation’s capital stock that were exchanged in the year for other shares of the corporation’s capital stock if
(i)paragraph (4.1) applies to the exchange, and
(ii)the amount is not included in the amount determined for paragraph (a),
(K + L) - (M + N)
where
non-qualifying real property[Repealed, 1995, c. 3, s. 41]
non-qualifying real property capital gains dividend account[Repealed, 1995, c. 3, s. 41]
pro rata portion, of a shareholder at any time, of a mutual fund corporation’s TCP gains balance, in respect of a dividend paid by the mutual fund corporation on a class of shares of its capital stock, means the amount determined by the formula
A x B/C
where
refundable capital gains tax on handof a mutual fund corporation at the end of a taxation year means the amount determined by the formula
A - B
where
(a)28% of its taxable income for the year,
(b)28% of its taxed capital gains for the year, and
(c)the tax payable by it under this Part for the year determined without reference to section 123.2, and
TCP gains balance, of a mutual fund corporation at any time, means the amount, if any, by which
(a)the total of
(i)the mutual fund corporation’s capital gains from dispositions, after March 22, 2004 and at or before that time, of taxable Canadian properties, and
(ii)the TCP gains distributions (including those defined in section 132) received by the mutual fund corporation at or before that time
exceeds
(b)the total of
(i)the mutual fund corporation’s capital losses from dispositions, after March 22, 2004 and at or before that time, of taxable Canadian properties, and
(ii)the total of all amounts deemed, in respect of dividends paid by the mutual fund corporation before that time, to be TCP gains distributions received by shareholders from the mutual fund corporation; (solde des gains provenant de BCI)
TCP gains distributionmeans a TCP gains distribution described in subsection (5.1). (distribution de gains provenant de BCI)
Marginal note:Definition oftaxed capital gains
(7)In subsection 131(6),taxed capital gainsof a taxpayer for a taxation year has the meaning assigned by subsection 130(3).
Marginal note:Meaning ofmutual fund corporation
(8)Subject to subsection 131(8.1), a corporation is, for the purposes of this section, a mutual fund corporation at any time in a taxation year if, at that time, it was a prescribed labour-sponsored venture capital corporation or
(a)it was a Canadian corporation that was a public corporation;
(b)its only undertaking was
(i)the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),
(ii)the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real property) or of any immovable (or real right in immovables) that is capital property of the corporation, or
(iii)any combination of the activities described in subparagraphs 131(8)(b)(i) and 131(8)(b)(ii), and
(c)the issued shares of the capital stock of the corporation included shares
(i)having conditions attached thereto that included conditions requiring the corporation to accept, at the demand of the holder thereof and at prices determined and payable in accordance with the conditions, the surrender of the shares, or fractions or parts thereof, that are fully paid, or
(ii)qualified in accordance with prescribed conditions relating to the redemption of the shares,
and the fair market value of such of the issued shares of its capital stock as had conditions attached thereto that included such conditions or as were so qualified, as the case may be, was not less than 95% of the fair market value of all of the issued shares of the capital stock of the corporation (such fair market values being determined without regard to any voting rights attaching to shares of the capital stock of the corporation).
Marginal note:Election to be a mutual fund corporation
(8.01)A corporation is deemed to be a mutual fund corporation, from the date it was incorporated until the earlier of the date the corporation meets the conditions to qualify as a mutual fund corporation under subsection (8) and December 31, 2017, if the corporation
(a)was incorporated after 2014 and before March 22, 2016;
(b)would have been a mutual fund corporation on March 22, 2016 if it could have elected on or before that date to be a public corporation under paragraph (b) of the definitionpublic corporationin subsection 89(1), had the conditions prescribed in paragraph 4800(1)(b) of theIncome Tax Regulationsbeen satisfied;
(c)on March 22, 2016, had at least one class of shares that was recognized under securities legislation as an investment fund; and
(d)elects to have this subsection apply in the corporation’s return of income for the corporation’s first taxation year that ends after March 21, 2016.
Marginal note:Idem
(8.1)Where, at any time, it can reasonably be considered that a corporation, having regard to all the circumstances, including the terms and conditions of the shares of its capital stock, was established or is maintained primarily for the benefit of non-resident persons, the corporation shall be deemed not to be a mutual fund corporation after that time unless
(a)throughout the period that begins on the later of February 21, 1990 and the day of its incorporation and ends at that time, all or substantially all of its property consisted of property other than property that would be taxable Canadian property if the definitiontaxable Canadian propertyin subsection 248(1) were read without reference to paragraph (b) of that definition; or
(b)it has not issued a share (other than a share issued as a stock dividend) of its capital stock after February 20, 1990 and before that time to a person who, after reasonable inquiry, it had reason to believe was non-resident, except where the share was issued to that person under an agreement in writing entered into before February 21, 1990.
Marginal note:Reduction of refundable capital gains tax on hand
(9)Notwithstanding any other provision of this section, the amount determined for A in the definitionrefundable capital gains tax on handin subsection 131(6) in respect of the 1972 or 1973 taxation year of a corporation is,
(a)in respect of its 1972 taxation year, 91.25% of the amount so determined; and
(b)in respect of its 1973 taxation year, the total of
(i)91.25% of that proportion of the amount so determined that the number of days in that portion of the year that is before 1973 is of the number of days in the whole year, and
(ii)100% of that proportion of the amount so determined that the number of days in that portion of the year that is after 1972 is of the number of days in the whole year.
Marginal note:Restricted financial institution
(10)Notwithstanding any other provision of this Act, a mutual fund corporation or an investment corporation that at any time would, but for this subsection, be a restricted financial institution shall, if it has so elected in prescribed manner and prescribed form before that time, be deemed not to be a restricted financial institution at that time.
Marginal note:Rules respecting prescribed labour-sponsored venture capital corporations
(11)Notwithstanding any other provision of this Act, in applying this Act to a corporation that was at any time a prescribed labour-sponsored venture capital corporation,
(a)for the purposes of subparagraphs (a)(i) and (ii) of the definitionnon-eligible refundable dividend tax on handin subsection 129(4), the amount deducted under paragraph 111(1)(b) from the corporation’s income for each taxation year ending after that time shall be deemed to be nil;
(b)the definitionaggregate investment incomein subsection 129(4) shall be read without reference to paragraph (a) of that definition in its application to taxation years that end after that time;
(c)notwithstanding subsection 131(4), if it so elects in its return of income under this Part for a taxation year ending after that time, subsection 84(1) applies for that year and all subsequent taxation years;
(d)subsection 131(5) does not apply for taxation years ending after that time; and
(e)the amount of the corporation’s capital dividend account at any time after that time shall be deemed to be nil.
Marginal note:Capital gains refund to mutual fund trust
132(1)Where a trust was, throughout a taxation year, a mutual fund trust and a return of its income for the year has been made within 3 years from the end of the year, the Minister
(a)may, on sending the notice of assessment for the year, refund an amount (in this subsection referred to as its “capital gains refund” for the year) equal to the lesser of
(i)the total of
(A)16.5% of the total of the trust’s capital gains redemptions for the year, and
(B)the positive or negative amount, if any, that the Minister determines to be reasonable in the circumstances, after giving consideration to the percentages applicable in determining the trust’s capital gains refunds for the year or any previous taxation year and the percentages applicable in determining the trust’s refundable capital gains tax on hand at the end of the year, and
(ii)the trust’s refundable capital gains tax on hand at the end of the year; and
(b)shall, with all due dispatch, make that capital gains refund after sending the notice of assessment if an application for it has been made in writing by the trust within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable under this Part by the trust for the year if that subsection were read without reference to paragraph 152(4)(a).
Marginal note:Application to other liability
(2)Instead of making a refund that might otherwise be made under subsection 132(1) the Minister may, where the trust is liable or about to become liable to make any payment under this Act, apply the amount that would otherwise be refunded to that other liability and notify the trust of that action.
Marginal note:Interest on capital gains refund
(2.1)If a capital gains refund for a taxation year is paid to, or applied to a liability of, a mutual fund trust, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is 30 days after the later of
(a)the day that is 90 days after the end of the year, and
(b)the day on which the trust’s return of income under this Part for the year was filed under section 150
and ending on the day on which the refund is paid or applied.
Marginal note:Excess interest on capital gains refund
(2.2)Where at any particular time interest has been paid to, or applied to a liability of, a trust under subsection 132(2.1) in respect of a capital gains refund and it is determined at a subsequent time that the capital gains refund was less than that in respect of which interest was so paid or applied,
(a)the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the capital gains refund shall be deemed to be an amount (in this subsection referred to as the “amount payable”) that became payable under this Part by the trust at the particular time;
(b)the trust shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and
(c)the Minister may at any time assess the trust in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.
Marginal note:Application of s. 104(20)
(3)In its application in respect of a mutual fund trust, subsection 104(20) shall be read as if the reference therein to “a dividend (other than a taxable dividend)” were read as a reference to “a capital dividend”.
Marginal note:Definitions
(4)In this section,
capital gains redemptionsof a mutual fund trust for a taxation year means the amount determined by the formula
(A/B × (C + D)) - E
where
(K + L) - (M + N)
where
net asset valuehas the same meaning as inNational Instrument 81-102 Investment Funds, as amended from time to time, of the Canadian Securities Administrators; (valeur liquidative)
pro rata portion, of a beneficiary, of a mutual fund trust’s TCP gains balance for a taxation year, in respect of an amount designated under subsection 104(21) by the mutual fund trust for the taxation year, means the amount determined by the formula
A x B/C
where
refundable capital gains tax on handof a mutual fund trust at the end of a taxation year means the amount determined by the formula
(A - B)
where
(a)the highest individual percentage for the year multiplied by its taxable income for the year,
(b)the highest individual percentage for the year multiplied by its taxed capital gains for the year, and
(c)where the taxation year ended after May 6, 1974, the tax payable under this Part by it for the year, and
TCP gains balance, of a mutual fund trust for a particular taxation year, means the amount, if any, by which
(a)the total of
(i)the mutual fund trust’s capital gains from dispositions, after March 22, 2004 and at or before the end of the particular taxation year, of taxable Canadian properties, and
(ii)the TCP gains distributions (including those defined in section 131) received by the mutual fund trust at or before the end of the particular taxation year
exceeds
(b)the total of
(i)the mutual fund trust’s capital losses from dispositions, after March 22, 2004 and at or before the end of the particular taxation year, of taxable Canadian properties, and
(ii)the total of all amounts deemed, in respect of amounts designated by the mutual fund trust under subsection 104(21) for taxation years that preceded the particular taxation year, to be TCP gains distributions received by beneficiaries under the mutual fund trust; (solde des gains provenant de BCI)
TCP gains distributionmeans a TCP gains distribution described in subsection (5.1). (distribution de gains provenant de BCI)
Marginal note:Definition oftaxed capital gains
(5)In subsection 132(4),taxed capital gainsof a taxpayer for a taxation year has the meaning assigned by subsection 130(3).
Marginal note:TCP gains distribution
(5.1)If a mutual fund trust designates an amount under subsection 104(21) for a taxation year of the trust in respect of a beneficiary under the trust, for the purposes of this Part and Part XIII,
(a)the beneficiary is deemed to have received from the mutual fund trust a TCP gains distribution equal to the lesser of
(i)twice the amount designated, and
(ii)the beneficiary’s pro rata portion of the mutual fund trust’s TCP gains balance for the taxation year; and
(b)where the beneficiary is a non-resident person or a partnership that is not a Canadian partnership,
(i)the amount designated is deemed by subsection 104(21) to be a taxable capital gain of the beneficiary only to the extent that it exceeds one half of the TCP gains distribution, and
(ii)one half of the TCP gains distribution is to be added to the amount otherwise included under subsection 104(13) in computing the income of the beneficiary, and is deemed to be an amount to which paragraph 212(1)(c) applies.
Marginal note:Application of subsection (5.1)
(5.2)Subsection (5.1) applies to an amount designated under subsection 104(21) by a mutual fund trust for a taxation year only if more than 5% of the total of all amounts each of which is an amount designated under that subsection by the mutual fund trust for the taxation year was designated in respect of beneficiaries under the mutual fund trust each of whom is a non-resident person or is a partnership that is not a Canadian partnership.
Marginal note:Allocation to redeemers
(5.3)If a trust that is a mutual fund trust throughout a taxation year paid or made payable, at any time in the taxation year, to a beneficiary an amount on a redemption by that beneficiary of a unit of the trust (in this subsection and subsection (5.31) referred to as the “allocated amount”) and the beneficiary’s proceeds from the disposition of that unit do not include the allocated amount, in computing its income for the taxation year no deduction may be made by the trust in respect of
(a)the portion of the allocated amount that would be, without reference to subsection 104(6), an amount paid out of the income (other than taxable capital gains) of the trust; and
(b)the portion of the allocated amount determined by the formula
A − ½(B + C − D)
where
Marginal note:Allocations by ETFs
(5.31)If in a taxation year referred to in subsection (5.3)
(a)all of the units offered in the taxation year by a mutual fund trust are listed on a designated stock exchange in Canada and are in continuous distribution (in this subsection referred to as “ETF units”), then paragraph 132(5.3)(b) does not apply and, in computing its income for the taxation year, no deduction may be made by the trust in respect of the amount determined by the formula
A − (B ÷ (C + B) × D)
where
(i)the total amount paid for redemptions of the ETF units in the taxation year, and
(ii)the greater of
(A)the amount determined for C, and
(B)the net asset value of the trust at the end of the previous taxation year,
(b)units offered by a mutual fund trust include units that are not ETF units (in this paragraph referred to as “non-ETF units”) and units that are ETF units, then
(i)in respect of redemptions of ETF units, paragraph (5.3)(b) does not apply and paragraph (a) applies, except that
(A)the description of C is to be read as “is the portion of the net asset value of the trust at the end of the taxation year that is referable to the ETF units,”,
(B)clause (ii)(B) of the description of B shall be read as “the portion of the net asset value of the trust at the end of the previous taxation year that is referable to the ETF units,”, and
(C)the amount determined for D shall be the amount determined by the formula
E ÷ F × G
where
(ii)in respect of redemptions of non-ETF units, in addition to the limitation applicable under paragraph (5.3)(b), the total amount of the deductions that may be claimed by the trust for the taxation year for the portion of the allocated amounts described in the description of A in paragraph (5.3)(b) in respect of non-ETF units shall not exceed the amount determined by the formula
H ÷ I × J
where
Marginal note:Meaning ofmutual fund trust
(6)Subject to subsection 132(7), for the purposes of this section, a trust is a mutual fund trust at any time if at that time
(a)it was a unit trust resident in Canada,
(b)its only undertaking was
(i)the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),
(ii)the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real property) or of any immovable (or real right in immovables) that is capital property of the trust, or
(iii)any combination of the activities described in subparagraphs 132(6)(b)(i) and 132(6)(b)(ii), and
(c)it complied with prescribed conditions.
Marginal note:Election to be mutual fund
(6.1)Where a trust becomes a mutual fund trust at any particular time before the 91st day after the end of its first taxation year, and the trust so elects in its return of income for that year, the trust is deemed to have been a mutual fund trust from the beginning of that year until the particular time.
Marginal note:Retention of status as mutual fund trust
(6.2)A trust is deemed to be a mutual fund trust throughout a calendar year where
(a)at any time in the year, the trust would, if this section were read without reference to this subsection, have ceased to be a mutual fund trust
(i)because the condition described in paragraph 108(2)(a) ceased to be satisfied,
(ii)because of the application of paragraph (6)(c), or
(iii)because the trust ceased to exist;
(b)the trust was a mutual fund trust at the beginning of the year; and
(c)the trust would, throughout the portion of the year throughout which it was in existence, have been a mutual fund trust if
(i)in the case where the condition described in paragraph 108(2)(a) was satisfied at any time in the year, that condition were satisfied throughout the year,
(ii)subsection (6) were read without reference to paragraph (c) of that subsection, and
(iii)this section were read without reference to this subsection.
Marginal note:Idem
(7)Where, at any time, it can reasonably be considered that a trust, having regard to all the circumstances, including the terms and conditions of the units of the trust, was established or is maintained primarily for the benefit of non-resident persons, the trust shall be deemed not to be a mutual fund trust after that time unless
(a)at that time, all or substantially all of its property consisted of property other than property that would be taxable Canadian property if the definitiontaxable Canadian propertyin subsection 248(1) were read without reference to paragraph (b) of that definition; or
(b)it has not issued any unit (other than a unit issued to a person as a payment, or in satisfaction of the person’s right to enforce payment, of an amount out of the trust’s income determined before the application of subsection 104(6), or out of the trust’s capital gains) of the trust after February 20, 1990 and before that time to a person who, after reasonable inquiry, it had reason to believe was non-resident, except where the unit was issued to that person under an agreement in writing entered into before February 21, 1990.
Marginal note:Amounts designated by mutual fund trust
132.1(1)Where a trust in its return of income under this Part for a taxation year throughout which it was a mutual fund trust designates an amount in respect of a particular unit of the trust owned by a taxpayer at any time in the year equal to the total of
(a)such amount as the trust may determine in respect of the particular unit for the year not exceeding the amount, if any, by which
(i)the total of all amounts that were determined by the trust under subsection 104(16) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, for taxation years of the trust commencing before 1988
exceeds
(ii)the total of all amounts determined by the trust under this paragraph for the year or a preceding taxation year in respect of all units of the trust, other than amounts determined in respect of the particular unit for the year under this paragraph, and
(b)such amount as the trust may determine in respect of the particular unit for the year not exceeding the amount, if any, by which
(i)the total of all amounts described in subparagraph 53(2)(h)(i.1) that became payable by the trust after 1987 and before the year
exceeds
(ii)the total of all amounts determined by the trust under this paragraph for the year or a preceding taxation year in respect of all units of the trust, other than amounts determined in respect of the particular unit for the year under this paragraph,
the amount so designated shall
(c)subject to subsection 132.1(3), be deductible in computing the income of the trust for the year, and
(d)be included in computing the income of the taxpayer for the taxpayer’s taxation year in which the year of the trust ends, except that where the particular unit was owned by two or more taxpayers during the year, such part of the amount so designated as the trust may determine shall be included in computing the income of each such taxpayer for the taxpayer’s taxation year in which the year of the trust ends if the total of the parts so determined is equal to the amount so designated.
Marginal note:Adjusted cost base of unit where designation made
(2)In computing, at any time in a taxation year of a taxpayer, the adjusted cost base to the taxpayer of a unit in a mutual fund trust, there shall be added that part of the amount included under subsection 132.1(1) in computing the taxpayer’s income that is reasonably attributable to the amount determined under paragraph 132.1(1)(b) by the trust for its taxation year ending in the year in respect of the unit owned by the taxpayer.
Marginal note:Limitation on current year deduction
(3)The total of amounts deductible by reason of paragraph 132.1(1)(c) in computing the income of a trust for a taxation year shall not exceed the amount that would be the income of the trust for the year if no deductions were made under this section and subsection 104(6).
Marginal note:Carryover of excess
(4)The amount, if any, by which the total of all amounts each of which is an amount designated for the year under subsection 132.1(1) exceeds the amount deductible under this section in computing the income of the trust for the year, shall, for the purposes of paragraph 132.1(1)(c) and subsection 132.1(3), be deemed designated under subsection 132.1(1) by the trust for its immediately following taxation year.
Marginal note:Where designation has no effect
(5)Where it is reasonable to conclude that an amount determined by a mutual fund trust
(a)under paragraph 132.1(1)(a) or 132.1(1)(b) for a taxation year of the trust in respect of a unit owned at any time in the year by a taxpayer who was a person exempt from tax under this Part by reason of subsection 149(1), or
(b)under paragraph 132.1(1)(d) for the year in respect of the amount designated under subsection 132.1(1) for the year in respect of the unit
differs from the amount that would have been so determined for the year in respect of the taxpayer had the taxpayer not been a person exempt from tax under this Part by reason of subsection 149(1), the amount designated for the year in respect of the unit under subsection 132.1(1) shall have no effect for the purposes of paragraph 132.1(1)(c).
Marginal note:Taxation year of mutual fund trust
132.11(1)Notwithstanding any other provision of this Act, where a trust (other than a prescribed trust) that was a mutual fund trust on the 74th day after the end of a particular calendar year so elects in writing filed with the Minister with the trust’s return of income for the trust’s taxation year that includes December 15 of the particular year,
(a)the trust’s taxation year that began before December 16 of the particular year and, but for this paragraph, would end at the end of the particular year (or, where the first taxation year of the trust began after December 15 of the preceding calendar year and no return of income was filed for a taxation year of the trust that ended at the end of the preceding calendar year, at the end of the preceding calendar year) is deemed to end at the end of December 15 of the particular year;
(b)if the trust’s taxation year ends on December 15 because of paragraph (a), subject to subsection (1.1), each subsequent taxation year of the trust is deemed to be the period that begins at the beginning of December 16 of a calendar year and that ends at the end of December 15 of the following calendar year or at any earlier time that is determined under paragraph 128.1(4)(a), 132.2(3)(b), 142.6(1)(a) or 249(4)(a); and
(c)each fiscal period of the trust that begins in a taxation year of the trust that ends on December 15 because of paragraph (a) or that ends in a subsequent taxation year of the trust shall end no later than the end of the year or the subsequent year, as the case may be.
Marginal note:Revocation of election
(1.1)Where a particular taxation year of a trust ends on December 15 of a calendar year because of an election made under paragraph (1)(a), the trust applies to the Minister in writing before December 15 of that calendar year (or before a later time that is acceptable to the Minister) to have this subsection apply to the trust, with the concurrence of the Minister
(a)the trust’s taxation year following the particular taxation year is deemed to begin immediately after the end of the particular taxation year and end at the end of that calendar year; and
(b)each subsequent taxation year of the trust is deemed to be determined as if that election had not been made.
Marginal note:Electing trust’s share of partnership income and losses
(2)Where a trust is a member of a partnership a fiscal period of which ends in a calendar year after December 15 of the year and a particular taxation year of the trust ends on December 15 of the year because of subsection (1), each amount otherwise determined under paragraph 96(1)(f) or (g) to be the trust’s income or loss for a subsequent taxation year of the trust is deemed to be the trust’s income or loss determined under paragraph 96(1)(f) or (g) for the particular year and not for the subsequent year.
Marginal note:Electing trust’s income from other trusts
(3)Where a particular trust is a beneficiary under another trust a taxation year of which (in this subsection referred to as the “other year”) ends in a calendar year after December 15 of the year and a particular taxation year of the trust ends on December 15 of the year because of subsection (1), each amount determined or designated under subsection 104(13), (19), (21), (22) or (29) for the other year that would otherwise be included, or taken into account, in computing the income of the particular trust for a subsequent taxation year of the trust shall
(a)be included, or taken into account, in computing the particular trust’s income for the particular year; and
(b)not be included, or taken into account, in computing the particular trust’s income for the subsequent year.
Marginal note:Amounts paid or payable to beneficiaries
(4)Notwithstanding subsection 104(24), for the purposes of subsections (5) and (6) and 104(6) and (13) and paragraph (i) of the definitiondispositionin subsection 248(1) each amount that is paid, or that becomes payable, by a trust to a beneficiary after the end of a particular taxation year of the trust that ends on December 15 of a calendar year because of subsection (1) and before the end of that calendar year, is deemed to have been paid or to have become payable, as the case may be, to the beneficiary at the end of the particular year and not at any other time.
Marginal note:Special rules where change in status of beneficiary
(5)Where an amount is deemed by subsection (4) to have been paid or to have become payable at the end of December 15 of a calendar year by a trust to a beneficiary who was not a beneficiary under the trust at that time,
(a)notwithstanding any other provision of this Act, where the beneficiary did not exist at that time, except for the purpose of this paragraph, the first taxation year of the beneficiary is deemed to include the period that begins at that time and ends immediately before the beginning of the first taxation year of the beneficiary;
(b)the beneficiary is deemed to exist throughout the period described in paragraph (a); and
(c)where the beneficiary was not a beneficiary under the trust at that time, the beneficiary is deemed to have been a beneficiary under the trust at that time.
Marginal note:Additional income of electing trust
(6)Where a particular amount is designated under this subsection by a trust in its return of income for a particular taxation year that ends on December 15 because of subsection (1) or throughout which the trust was a mutual fund trust and the trust does not designate an amount under subsection 104(13.1) or (13.2) for the particular year,
(a)the particular amount shall be added in computing its income for the particular year; and
(b)for the purposes of subsections 104(6) and (13), each portion of the particular amount that is allocated under this paragraph to a beneficiary under the trust in the trust’s return of income for the particular year in respect of an amount paid or payable to the beneficiary in the particular year shall be considered to be additional income of the trust for the particular year (determined without reference to subsection 104(6)) that was paid or payable, as the case may be, to the beneficiary at the end of the particular year.
(c)[Repealed, 2001, c. 17, s. 130(4)]
Marginal note:Deduction
(7)Subject to subsection (8), the lesser of the amount designated under subsection (6) by a trust for a taxation year and the total of all amounts each of which is allocated by the trust under paragraph (6)(b) in respect of the year shall be deducted in computing the trust’s income for the following taxation year.
Marginal note:Anti-avoidance
(8)Subsection (7) does not apply in computing the income of a trust for a taxation year where it is reasonable to consider that the designation under subsection (6) for the preceding taxation year was part of a series of transactions or events that includes a change in the composition of beneficiaries under the trust.
Marginal note:Definitions re qualifying exchange of mutual funds
132.2(1)The following definitions apply in this section.
first post-exchange year, of a fund in respect of a qualifying exchange, means the taxation year of the fund that begins immediately after the acquisition time. (première année suivant l’échange)
qualifying exchangemeans a transfer at any time (in this section referred to as the “transfer time”) if
(a)the transfer is a transfer of all or substantially all of the property (including an exchange of a unit of a mutual fund trust for another unit of that trust) of
(i)a mutual fund corporation (other than a SIFT wind-up corporation) to one or more mutual fund trusts, or
(ii)a mutual fund trust to a mutual fund trust;
(b)all or substantially all of the shares issued by the mutual fund corporation referred to in subparagraph (a)(i) or the first mutual fund trust referred to in subparagraph (a)(ii) (in this section referred to as the “transferor”) and outstanding immediately before the transfer time are within 60 days after the transfer time disposed of to the transferor;
(c)no person disposing of shares of the transferor to the transferor within that 60-day period (otherwise than pursuant to the exercise of a statutory right of dissent) receives any consideration for the shares other than units of one or more mutual fund trusts referred to in subparagraph (a)(i) or the second mutual fund trust referred to in subparagraph (a)(ii) (in this section referred to as a “transferee” and, together with the transferor, as the “funds”);
(d)if property of the transferor has been transferred to more than one transferee,
(i)all shares of each class of shares, that is recognized under securities legislation as or as part of an investment fund, of the transferor are disposed of to the transferor within 60 days after the transfer time, and
(ii)the units received in consideration for a particular share of a class of shares, that is recognized under securities legislation as or as part of an investment fund, of the transferor are units of the transferee to which all or substantially all of the assets that were allocated to that investment fund immediately before the transfer time were transferred; and
(e)the funds jointly so elect, by filing a prescribed form with the Minister on or before the election’s due date. (échange admissible)
sharemeans a share of the capital stock of a mutual fund corporation and a unit of a mutual fund trust. (action)
Marginal note:Timing
(2)In respect of a qualifying exchange, a time referred to in the following list immediately follows the time that precedes it in the list
(a)the transfer time;
(b)the first intervening time;
(c)the acquisition time;
(d)the beginning of the funds’ first post-exchange years;
(e)the depreciables disposition time;
(f)the second intervening time; and
(g)the depreciables acquisition time.
Marginal note:General
(3)In respect of a qualifying exchange,
(a)each property of a fund, other than property disposed of by the transferor to a transferee at the transfer time and depreciable property, is deemed to have been disposed of, and to have been reacquired by the fund, at the first intervening time, for an amount equal to the lesser of
(i)the fair market value of the property at the transfer time, and
(ii)the greater of
(A)its cost amount, and
(B)the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;
(a.1)in respect of each property transferred by the transferor to a transferee, including an exchange of a unit of a transferee for another unit of that transferee, the transferor is deemed to have disposed of the property to the transferee, and to have received units of the transferee as consideration for the disposition of the property, at the transfer time;
(b)subject to paragraph (l), the last taxation years of the funds that began before the transfer time are deemed to have ended at the acquisition time, and their first post-exchange years are deemed to have begun immediately after those last taxation years ended;
(c)each depreciable property of a fund (other than property to which subsection (5) applies and property to which paragraph (d) would, if this Act were read without reference to this paragraph, apply) is deemed to have been disposed of, and to have been reacquired, by the fund at the second intervening time for an amount equal to the lesser of
(i)the fair market value of the property at the depreciables disposition time, and
(ii)the greater of
(A)the lesser of its capital cost and its cost amount to the disposing fund at the depreciables disposition time, and
(B)the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;
(d)if at the second intervening time the undepreciated capital cost to a fund of depreciable property of a prescribed class exceeds the fair market value of all the property of that class, the excess is to be deducted in computing the fund’s income for the taxation year that includes the transfer time and is deemed to have been allowed in respect of property of that class under regulations made for the purpose of paragraph 20(1)(a);
(e)except as provided in paragraph (m), the transferor’s cost of any particular property received by the transferor from a transferee as consideration for the disposition of the property is deemed to be
(i)nil, if the particular property is a unit of the transferee, and
(ii)the particular property’s fair market value at the transfer time, in any other case;
(f)the transferor’s proceeds of disposition of any units of a transferee that were disposed of by the transferor at any particular time that is within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be equal to the cost amount of the units to the transferor immediately before the particular time;
(g)if, at any particular time that is within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of a transferee
(i)the taxpayer’s proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the particular time,
(ii)for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,
(iii)where the qualifying exchange occurs after 2004, for the purposes of applying section 218.3 in respect of that exchange, the payment or crediting of the units to the taxpayer by the transferor is deemed not to be an assessable distribution,
(iv)where all of the taxpayer’s shares of the transferor have been so disposed of, for the purpose of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor,
(v)for the purpose of the definitiondesignated beneficiaryin section 210, the units are deemed not to have been held at any time by the transferor, and
(vi)if the taxpayer is at the particular time affiliated with the transferor or the transferee,
(A)those units are deemed not to be identical to any other units of the transferee,
(B)if the taxpayer is the transferee, and the units cease to exist when the taxpayer acquires them (or, for greater certainty, when the taxpayer would but for that cessation have acquired them), the taxpayer is deemed
(I)to have acquired those units at the particular time, and
(II)to have disposed of those units immediately after the particular time for proceeds of disposition equal to the cost amount to the taxpayer of those units at the particular time, and
(C)in any other case, for the purpose of computing any gain or loss of the taxpayer from the taxpayer’s first disposition, after the particular time, of each of those units,
(I)if that disposition is a renunciation or surrender of the unit by the taxpayer for no consideration, and is not in favour of any person other than the transferee, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to that unit’s cost amount to the taxpayer immediately before that disposition, and
(II)if subclause (I) does not apply, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to the greater of that unit’s fair market value and its cost amount to the taxpayer immediately before that disposition;
(h)where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be aqualified investment(within the meaning assigned by subsection 146(1), 146.1(1), 146.3(1) or 146.4(1), section 204 or subsection 207.01(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the day that includes the transfer time and the time at which it is disposed of in accordance with paragraph (g);
(i)there shall be added to the amount determined under the description of A in the definitionrefundable capital gains tax on handin subsection 132(4) in respect of a transferee for its taxation years that begin after the transfer time the amount determined by the formula
(A − B) × C/D
where
(j)no amount in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss of a fund for a taxation year that began before the transfer time is deductible in computing the taxable income of any of the funds for a taxation year that begins after the transfer time;
(k)if the transferor is a mutual fund trust, for the purposes of subsections 132.1(1) and (3) to (5), the transferee is deemed after the transfer time to be the same mutual fund trust as, and a continuation of, the transferor;
(l)if the transferor is a mutual fund corporation
(i)for the purpose of subsection 131(4) but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor is deemed in respect of any share disposed of in accordance with paragraph (g) to be a mutual fund corporation at the time of the disposition,
(ii)for the purpose of Part I.3 but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor’s taxation year that, if this Act were read without reference to this paragraph, would have included the transfer time is deemed to have ended immediately before the transfer time, and
(iii)for the purpose of subsection 131(1), a dividend that is made payable at a particular time after the acquisition time but within the 60-day period commencing immediately after the transfer time, and paid before the end of that period, by the transferor to taxpayers that held shares of a class of shares of the transferor, that was recognized under securities legislation as or as part of an investment fund, immediately before the transfer time is deemed to have become payable at the first intervening time if the transferor so elects in respect of the full amount of the dividend in prescribed manner on or before the day on which any part of the dividend was paid;
(m)for the purpose of determining the funds’ capital gains redemptions (as defined in subsection 131(6) or 132(4), as the case may be), for their taxation years that include the transfer time,
(i)the total of the cost amounts to the transferor of all its properties at the end of the year is deemed to be the total of all amounts each of which is
(A)the transferor’s proceeds of disposition of a property that was transferred to a transferee on the qualifying exchange, or
(B)the cost amount to the transferor at the end of the year of a property that was not transferred on the qualifying exchange,
(ii)a transferee is deemed not to have acquired any property that was transferred to it on the qualifying exchange, and
(iii)the amounts determined under the descriptions of A and B in the definitioncapital gains redemptionsshall be determined as if the year ended immediately before the transfer time;
(n)except as provided in subparagraph (l)(i), the transferor is, notwithstanding subsections 131(8) and (8.01) and 132(6), deemed to be neither a mutual fund corporation nor a mutual fund trust for taxation years that begin after the transfer time; and
(o)for the purpose of applying subsection 132(5.31) to a fund for a taxation year that includes the transfer time, the following amounts are to be determined as if the taxation year ended immediately before the transfer time:
(i)if paragraph 132(5.31)(a) applies, the amounts determined under the descriptions of B, C and D in that paragraph, and
(ii)if paragraph 132(5.31)(b) applies,
(A)the amounts determined for B and C in paragraph 132(5.31)(a), for the purpose of subparagraph 132(5.31)(b)(i),
(B)the amounts determined for D, E, F and G in clause 132(5.31)(b)(i)(C), and
(C)the amounts determined for H, I and J in subparagraph 132(5.31)(b)(ii).
Marginal note:Qualifying exchange — non-depreciable property
(4)If a transferor transfers a property, other than a depreciable property, to a transferee in a qualifying exchange,
(a)the transferee is deemed to have acquired the property at the acquisition time and not to have acquired the property at the transfer time;
(b)the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of
(i)the fair market value of the property at the transfer time, and
(ii)the greatest of
(A)the cost amount to the transferor of the property at the transfer time,
(B)the amount that the transferor and the transferee agree on in respect of the property in their election, and
(C)the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property; and
(c)if the property is a unit of the transferee and the unit ceases to exist when the transferee acquires it (or, for greater certainty, when the transferee would but for that cessation have acquired it), paragraphs (a) and (b) do not apply to the transferee.
Marginal note:Depreciable property
(5)If a transferor transfers a depreciable property to a transferee in a qualifying exchange,
(a)the transferor is deemed to have disposed of the property at the depreciables disposition time, and not to have disposed of the property at the transfer time;
(b)the transferee is deemed to have acquired the property at the depreciables acquisition time, and not to have acquired the property at the transfer time;
(c)the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of
(i)the fair market value of the property at the transfer time, and
(ii)the greatest of
(A)the lesser of its capital cost and its cost amount to the transferor immediately before the depreciables disposition time,
(B)the amount that the transferor and the transferee agree on in respect of the property in their election, and
(C)the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property;
(d)where the capital cost of the property to the transferor exceeds the transferor’s proceeds of disposition of the property under paragraph (c), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),
(i)the property’s capital cost to the transferee is deemed to be the amount that was its capital cost to the transferor, and
(ii)the excess is deemed to have been allowed to the transferee in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years ending before the transfer time; and
(e)where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, paragraph (c) applies as if each property so disposed of had been separately disposed of in the order designated by the transferor at the time of making the election in respect of the qualifying exchange or, if the transferor does not so designate any such order, in the order designated by the Minister.
Marginal note:Due date
(6)The due date of an election referred to in paragraph (c) of the definitionqualifying exchangein subsection (1) is
(a)the day that is six months after the day that includes the transfer time; and
(b)on joint application by the funds, any later day that the Minister accepts.
Marginal note:Amendment or revocation of election
(7)The Minister may, on joint application by the funds on or before the due date of an election referred to in paragraph (e) of the definitionqualifying exchangein subsection (1), grant permission to amend or revoke the election.
Marginal note:Computation of income
133(1)In computing the income of a non-resident-owned investment corporation for a taxation year,
(a)no deduction may be made in respect of interest on its bonds, debentures, securities or other indebtedness, and
(b)no deduction may be made under subsection 65(1),
and its income and taxable income shall be computed as if
(c)the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of taxable Canadian property,
(d)any taxable capital gain or allowable capital loss of the corporation were an amount equal to twice the amount thereof otherwise determined, and
(e)subsection 83(2) were read without reference to paragraph 83(2)(b).
Marginal note:Non-resident-owned investment corporations
(2)In computing the taxable income of a non-resident-owned investment corporation for a taxation year, no deduction may be made from its income for the year, except
(a)interest received in the year from other non-resident-owned investment corporations;
(b)taxes paid to the government of a country other than Canada in respect of any part of the income of the corporation for the year derived from sources therein; and
(c)net capital losses as provided for by section 111.
Marginal note:Special tax rate
(3)The tax payable under this Part by a corporation for a taxation year when it was a non-resident-owned investment corporation is an amount equal to 25% of its taxable income for the year.
Marginal note:No deduction for foreign taxes
(4)No deduction from the tax payable under this Part by a non-resident-owned investment corporation may be made under section 124 or in respect of taxes paid to the government of a country other than Canada.
Marginal note:Allowable refund to non-resident-owned investment corporations
(6)If the return of a non-resident-owned investment corporation’s income for a taxation year has been made within 3 years from the end of the year, the Minister
(a)may, on sending the notice of assessment for the year, refund without application its allowable refund for the year; and
(b)shall, with all due dispatch, make that allowable refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed under subsection 152(4) to assess tax payable by the corporation for the year if that subsection were read without reference to paragraph 152(4)(a).
Marginal note:Application to other liability
(7)Instead of making a refund that might otherwise be made under subsection 133(6), the Minister may, where the taxpayer is liable or about to become liable to make any payment under this Act, apply the amount that would otherwise be refunded to that other liability and notify the taxpayer of that action.
Marginal note:Interest on allowable refund
(7.01)Where an allowable refund for a taxation year is paid to, or applied to a liability of, a non-resident-owned investment corporation, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is the later of
(a)the day that is 120 days after the end of the year, and
(b)the day that is 30 days after the day on which the corporation’s return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,
and ending on the day the refund is paid or applied.
Marginal note:Excess interest on allowable refund
(7.02)Where at any particular time interest has been paid to, or applied to a liability of, a corporation under subsection 133(7.01) in respect of an allowable refund and it is determined at a subsequent time that the allowable refund was less than that in respect of which interest was so paid or applied,
(a)the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the allowable refund shall be deemed to be an amount (in this subsection referred to as the “amount payable”) that became payable under this Part by the corporation at the particular time;
(b)the corporation shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and
(c)the Minister may at any time assess the corporation in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.
Marginal note:Election re capital gains dividend
(7.1)Where at any particular time after 1971 a dividend has become payable by a non-resident-owned investment corporation to shareholders of any class of shares of its capital stock, if the corporation so elects in respect of the full amount of the dividend, in prescribed manner and prescribed form and at or before the particular time or the first day on which any part of the dividend was paid if that day is earlier than the particular time, the following rules apply:
(a)the dividend shall be deemed to be a capital gains dividend to the extent that it does not exceed the corporation’s capital gains dividend account immediately before the particular time; and
(b)any amount received by another non-resident-owned investment corporation in a taxation year as, on account or in lieu of payment of, or in satisfaction of the capital gains dividend shall not be included in computing its income for the year.
Marginal note:Simultaneous dividends
(7.2)Where a dividend becomes payable at the same time on more than one class of shares of the capital stock of a non-resident-owned investment corporation, for the purposes of subsection 133(7.1), the dividend on any such class of shares shall be deemed to become payable at a different time than the dividend on the other class or classes of shares and to become payable in the order designated
(a)by the corporation on or before the day on or before which the election described in subsection 133(7.1) is required to be filed; or
(b)in any other case, by the Minister.
Marginal note:Application of ss. 131(1.1) to (1.4)
(7.3)Where at any particular time a non-resident-owned investment corporation paid a dividend to its shareholders and subsection 133(7.1) would have applied to the dividend except that the corporation did not make an election under that subsection on or before the day on or before which it was required by that subsection to be made, subsections 131(1.1) to 131(1.4) apply with such modifications as the circumstances require.
Marginal note:Definitions
(8)In this section,
allowable refundof a non-resident-owned investment corporation for a taxation year means the total of amounts each of which is an amount in respect of a taxable dividend paid by the corporation in the year on a share of its capital stock, determined by the formula
A/B × C
where
Canadian propertymeans
(a)taxable Canadian property, and
(b)any other property not being foreign property within the meaning assigned by section 206; (biens canadiens)
capital gains dividend accountof a non-resident-owned investment corporation at any particular time means the amount determined by the formula
A - B
where
(a)the corporation’s capital gains for taxation years ending in the period from dispositions in the period of Canadian property or shares of another non-resident-owned investment corporation, and
(b)amounts received by the corporation in the period as, on account or in lieu of payment of, or in satisfaction of capital gains dividends from other non-resident-owned investment corporations, and
(a)the corporation’s capital losses for taxation years ending in the period from dispositions in the period of Canadian property or shares of another non-resident-owned investment corporation,
(b)all capital gains dividends that became payable by the corporation before the particular time, and
(c)the amount determined by the formula
0.25 × (M - N)
where
increase in capitalin respect of a corporation means a transaction (other than a transaction carried out pursuant to an agreement in writing made before February 28, 2000, referred to in this definition as a “specified transaction”) in the course of which the corporation issues additional shares of its capital stock or incurs indebtedness, if the transaction has the effect of increasing the total of
(a)the corporation’s liabilities, and
(b)the fair market value of all the shares of its capital stock
to an amount that is substantially greater than that total would have been on February 27, 2000 if all specified transactions had been carried out immediately before that day; (augmentation de capital)
non-resident-owned investment corporationmeans a corporation incorporated in Canada that, throughout the whole of the period commencing on the later of June 18, 1971 and the day on which it was incorporated and ending on the last day of the taxation year in respect of which the expression is being applied, complied with the following conditions:
(a)all of its issued shares and all of its bonds, debentures and other funded indebtedness were
(i)beneficially owned by non-resident persons (other than any foreign affiliate of a taxpayer resident in Canada),
(ii)owned by trustees for the benefit of non-resident persons or their unborn issue, or
(iii)owned by a non-resident-owned investment corporation, all of the issued shares of which and all of the bonds, debentures and other funded indebtedness of which were beneficially owned by non-resident persons or owned by trustees for the benefit of non-resident persons or their unborn issue, or by two or more such corporations,
(b)its income for each taxation year ending in the period was derived from
(i)ownership of, or trading or dealing in, bonds, shares, debentures, mortgages, hypothecary claims, bills, notes or other similar property or any interest, or for civil law any right, therein,
(ii)lending money with or without security,
(iii)rents, hire of chattels, charterparty fees or remunerations, annuities, royalties, interest or dividends,
(iv)estates or trusts, or
(v)disposition of capital property,
(c)not more than 10% of its gross revenue for each taxation year ending in the period was derived from rents, hire of chattels, charterparty fees or charterparty remunerations,
(d)its principal business in each taxation year ending in the period was not
(i)the making of loans, or
(ii)trading or dealing in bonds, shares, debentures, mortgages, hypothecary claims, bills, notes or other similar property or any interest therein,
(e)it has, on or before the earlier of February 27, 2000 and the day that is 90 days after the beginning of its first taxation year that begins after 1971, elected in prescribed manner to be taxed under this section, and
(f)it has not, before the end of the last taxation year in the period, revoked in prescribed manner its election,
except that
(g)a new corporation (within the meaning assigned by section 87) formed as a result of an amalgamation after June 18, 1971 of two or more predecessor corporations is not a non-resident-owned investment corporation unless each of the predecessor corporations was, immediately before the amalgamation, a non-resident-owned investment corporation,
(h)where a corporation is a new corporation described in paragraph (g), and each of the predecessor corporations elected in a timely manner under paragraph (e), paragraph (e) shall be read, in its application to the new corporation, without reference to the words “the earlier of February 27, 2000 and”, and
(i)subject to section 134.1, a corporation is not a non-resident-owned investment corporation in any taxation year that ends after the earlier of,
(i)the first time, if any, after February 27, 2000 at which the corporation effects an increase in capital, and
(ii)the corporation’s last taxation year that begins before 2003; (société de placement appartenant à des non-résidents)
taxable dividenddoes not include a capital gains dividend. (dividende imposable)
Marginal note:Definitions
(9)In the definitionallowable refundin subsection 133(8),
allowable refundable tax on handof a corporation at any particular time means the amount determined by the formula
(A + B + C) - (D + E + F)
where
0.25 × [L - (M + N)]
where
cumulative taxable incomeof a corporation at any particular time means the amount determined by the formula
(A + B) - (C + D + E)
where
L - (M + N)
where
P - (Q + R)
where
Marginal note:Non-resident-owned corporation not a Canadian corporation, etc.
134Notwithstanding any other provision of this Act, a non-resident-owned investment corporation that would, but for this section, be a Canadian corporation, taxable Canadian corporation or private corporation shall be deemed not to be a Canadian corporation, taxable Canadian corporation or private corporation, as the case may be, except for the purposes of section 87, subsection 88(2) and sections 212.1 and 219.
Marginal note:NRO — transition
134.1(1)This section applies to a corporation that
(a)was a non-resident-owned investment corporation in a taxation year;
(b)is not a non-resident-owned investment corporation in the following taxation year (in this section referred to as the corporation’s “first non-NRO year”); and
(c)elects in writing filed with the Minister on or before the corporation’s filing-due date for its first non-NRO year to have this section apply.
Marginal note:Application
(2)For the purposes of applying subsections 104(10) and (11) and 133(6) to (9) (other than the definitionnon-resident-owned investment corporationin subsection 133(8)), section 212 and any tax treaty, a corporation described in subsection (1) is deemed to be a non-resident-owned investment corporation in its first non-NRO year in respect of dividends paid in that year on shares of its capital stock to a non-resident person, to a trust for the benefit of non-resident persons or their unborn issue or to a non-resident-owned investment corporation.
Marginal note:Revocation
134.2(1)This section applies to a corporation that
(a)revokes at any time (in this section described as the “revocation time”) its election to be taxed under section 133;
(b)elects to have this section apply, by filing an election in writing with the Minister on or before the corporation’s filing-due date for the taxation year of the corporation (in this section referred to as the “revocation year”) that would have included the revocation time if the corporation had not so elected; and
(c)specifies in the election a time (in this section referred to as the “elected time”) that is in the revocation year and is not after the revocation time.
Marginal note:Consequences
(2)Where this section applies to a corporation,
(a)the corporation’s taxation year that would have included the elected time, if the corporation had not elected to have this section apply, is deemed to end immediately before the elected time;
(b)a new taxation year of the corporation is deemed to begin at the elected time; and
(c)notwithstanding paragraph (f) of the definitionnon-resident-owned investment corporationin subsection 133(8), the corporation is deemed to be a non-resident-owned investment corporation for the period that begins at the beginning of the revocation year and ends immediately before the elected time.
Marginal note:Deduction in computing income
135(1)Notwithstanding anything in this Part, other than subsections (1.1) to (2.1) and 135.1(3), there may be deducted, in computing the income of a taxpayer for a taxation year, the total of the payments made, pursuant to allocations in proportion to patronage, by the taxpayer
(a)within the year or within 12 months thereafter to the taxpayer’s customers of the year; and
(b)within the year or within 12 months thereafter to the taxpayer’s customers of a previous year, the deduction of which from income of a previous taxation year was not permitted.
Marginal note:Limitation where non-arm’s length customer
(1.1)Subsection (1) applies to a payment made by a taxpayer to a customer with whom the taxpayer does not deal at arm’s length only if
(a)the taxpayer is a cooperative corporation described in subsection 136(2) or a credit union; or
(b)the payment is prescribed.
Marginal note:Limitation where non-member customer
(2)If a taxpayer has not made allocations in proportion to patronage in respect of all of the taxpayer’s customers of the year, at the same rate, with appropriate differences for different types, classes, grades or qualities of goods, products or services, the amount that may be deducted by the taxpayer under subsection (1) is an amount equal to the lesser of
(a)the total of the payments mentioned in that subsection, and
(b)the total of
(i)the part of the income of the taxpayer for the year attributable to business done with members, and
(ii)the allocations in proportion to patronage made to non-member customers of the year.
Marginal note:Deduction carried over
(2.1)Where, in a taxation year ending after 1985, all or a portion of a payment made by a taxpayer pursuant to an allocation in proportion to patronage to the taxpayer’s customers who are members is not deductible in computing the taxpayer’s income for the year because of the application of subsection 135(2) (in this subsection referred to as the “undeducted amount”), there may be deducted in computing the taxpayer’s income for a subsequent taxation year, an amount equal to the lesser of
(a)the undeducted amount, except to the extent that that amount was deducted in computing the taxpayer’s income for any preceding taxation year, and
(b)the amount, if any, by which
(i)the taxpayer’s income for the subsequent taxation year (computed without reference to this subsection) attributable to business done with the taxpayer’s customers of that year who are members
exceeds
(ii)the amount deducted in computing the taxpayer’s income for the subsequent taxation year by virtue of subsection 135(1) in respect of payments made by the taxpayer pursuant to allocations in proportion to patronage to the taxpayer’s customers of that year who are members.
Marginal note:Amount to be deducted or withheld from payment to customer
(3)Subject to subsection 135.1(6), a taxpayer who makes at any particular time in a calendar year a payment pursuant to an allocation in proportion to patronage to a person who is resident in Canada and is not exempt from tax under section 149 shall, notwithstanding any agreement or any law to the contrary, deduct or withhold from the payment an amount equal to 15% of the lesser of the amount of the payment and the amount, if any, by which
(a)the total of the amount of the payment and the amounts of all other payments pursuant to allocations in proportion to patronage made by the taxpayer to that person in the calendar year and before the particular time
exceeds
(b)$100,
and forthwith remit that amount to the Receiver General on behalf of that person on account of that person’s tax under this Part.
Marginal note:Definitions
(4)For the purposes of this section and section 135.1,
allocation in proportion to patronagefor a taxation year means an amount credited by a taxpayer to a customer of that year on terms that the customer is entitled to or will receive payment thereof, computed at a rate in relation to the quantity, quality or value of the goods or products acquired, marketed, handled, dealt in or sold, or services rendered by the taxpayer from, on behalf of or to the customer, whether as principal or as agent of the customer or otherwise, with appropriate differences in the rate for different classes, grades or qualities thereof, if
(a)the amount was credited
(i)within the year or within 12 months thereafter, and
(ii)at the same rate in relation to quantity, quality or value aforesaid as the rate at which amounts were similarly credited to all other customers of that year who were members or to all other customers of that year, as the case may be, with appropriate differences aforesaid for different classes, grades or qualities, and
(b)the prospect that amounts would be so credited was held out by the taxpayer to the taxpayer’s customers of that year who were members or non-member customers of that year, as the case may be; (répartition proportionnelle à l’apport commercial)
consumer goods or servicesmeans goods or services the cost of which was not deductible by the taxpayer in computing the income from a business or property; (marchandises de consommation ou services)
customermeans a customer of a taxpayer and includes a person who sells or delivers goods or products to the taxpayer, or for whom the taxpayer renders services; (client)
income of the taxpayer attributable to business done with membersof any taxation year means that proportion of the income of the taxpayer for the year (before making any deduction under this section) that the value of the goods or products acquired, marketed, handled, dealt in or sold or services rendered by the taxpayer from, on behalf of, or for members, is of the total value of goods or products acquired, marketed, handled, dealt in or sold or services rendered by the taxpayer from, on behalf of, or for all customers during the year; (revenu du contribuable attribuable aux affaires faites avec ses membres)
membermeans a person who is entitled as a member or shareholder to full voting rights in the conduct of the affairs of the taxpayer (being a corporation) or of a corporation of which the taxpayer is a subsidiary wholly-owned corporation; (membre)
non-member customermeans a customer who is not a member; (client non membre)
paymentincludes
(a)the issue of a certificate of indebtedness or shares of the taxpayer or of a corporation of which the taxpayer is a subsidiary wholly-owned corporation if the taxpayer or that corporation has in the year or within 12 months thereafter disbursed an amount of money equal to the total face value of all certificates or shares so issued in the course of redeeming or purchasing certificates of indebtedness or shares of the taxpayer or that corporation previously issued,
(b)the application by the taxpayer of an amount to a member’s liability to the taxpayer (including, without restricting the generality of the foregoing, an amount applied in fulfilment of an obligation of the member to make a loan to the taxpayer and an amount applied on account of payment for shares issued to a member) pursuant to a by-law of the taxpayer, pursuant to statutory authority or at the request of the member, or
(c)the amount of a payment or transfer by the taxpayer that, under subsection 56(2), is required to be included in computing the income of a member. (paiement)
Marginal note:Holding out prospect of allocations
(5)For the purpose of this section a taxpayer shall be deemed to have held out the prospect that amounts would be credited to a customer of a taxation year by way of allocation in proportion to patronage, if
(a)throughout the year the statute under which the taxpayer was incorporated or registered, its charter, articles of association or by-laws or its contract with the customer held out the prospect that amounts would be so credited to customers who are members or non-member customers, as the case may be; or
(b)prior to the commencement of the year or prior to such other day as may be prescribed for the class of business in which the taxpayer is engaged, the taxpayer has published an advertisement in prescribed form in a newspaper or newspapers of general circulation throughout the greater part of the area in which the taxpayer carried on business holding out that prospect to customers who are members or non-member customers, as the case may be, and has filed copies of the newspapers with the Minister before the end of the 30th day of the taxation year or within 30 days from the prescribed day, as the case may be.
Marginal note:Amount of payment to customer
(6)For greater certainty, the amount of any payment pursuant to an allocation in proportion to patronage is the amount thereof determined before deducting any amount required by subsection 135(3) to be deducted or withheld from that payment.
Marginal note:Payment to customer to be included in income
(7)Where a payment pursuant to an allocation in proportion to patronage (other than an allocation in respect of consumer goods or services) has been received by a taxpayer, the amount of the payment shall, subject to subsection 135.1(2), be included in computing the recipient’s income for the taxation year in which the payment was received and, without restricting the generality of the foregoing, where a certificate of indebtedness or a share was issued to a person pursuant to an allocation in proportion to patronage, the amount of the payment by virtue of that issuance shall be included in computing the recipient’s income for the taxation year in which the certificate or share was received and not in computing the recipient’s income for the year in which the indebtedness was subsequently discharged or the share was redeemed.
Marginal note:Patronage dividends
(8)For the purposes of this section, where
(a)a person has sold or delivered a quantity of goods or products to a marketing board established by or pursuant to a law of Canada or a province,
(b)the marketing board has sold or delivered the same quantity of goods or products of the same class, grade or quality to a taxpayer of which the person is a member, and
(c)the taxpayer has credited that person with an amount based on the quantity of goods or products of that class, grade or quality sold or delivered to it by the marketing board,
the quantity of goods or products referred to in paragraph 135(8)(c) shall be deemed to have been sold or delivered by that person to the taxpayer and to have been acquired by the taxpayer from that person.
Marginal note:Definitions
135.1(1)The following definitions apply in this section and section 135.
agricultural businessmeans a business, carried on in Canada, that consists of one or any combination of
(a)farming (including, if the person carrying on the business is a corporation described in paragraph (a) of the definitionagricultural cooperative corporation, the production, processing, storing and wholesale marketing of the products of its members’ farming activities); or
(b)the provision of goods or services (other than financial services) that are required for farming. (entreprise d’agriculture)
agricultural cooperative corporationat any time means a corporation
(a)that was incorporated or continued by or under the provisions of a law, of Canada or of a province, that provide for the establishment of the corporation as a cooperative corporation or that provide for the establishment of cooperative corporations; and
(b)that has at that time
(i)as its principal business an agricultural business, or
(ii)members, making up at least 75% of all members of the corporation, each of whom
(A)is an agricultural cooperative corporation, or
(B)has as their principal business a farming business. (coopérative agricole)
allowable dispositionmeans a disposition by a taxpayer of a tax deferred cooperative share less than five years after the day on which the share was issued if
(a)before the disposition,
(i)the agricultural cooperative corporation is notified in writing that the taxpayer has after the share was issued become disabled and permanently unfit for work, or termi­nally ill, or
(ii)the taxpayer ceases to be a member of the agricultural cooperative corporation; or
(b)the agricultural cooperative corporation is notified in writing that the share is held by a person on whom the share has devolved as a consequence of the death of the taxpayer. (disposition admissible)
eligible memberof an agricultural cooperative corporation means a member who carries on an agricultural business and who is
(a)an individual resident in Canada;
(b)an agricultural cooperative corporation;
(c)a corporation resident in Canada that carries on the business of farming in Canada; or
(d)a partnership that carries on the business of farming in Canada, all of the members of which are described in any of paragraphs (a) to (c) or this paragraph. (membre admissible)
tax deferred cooperative shareat any time means a share
(a)issued, after 2005 and before 2026, by an agricultural cooperative corporation to a person or partnership that is at the time the share is issued an eligible member of the agricultural cooperative corporation, pursuant to an allocation in proportion to patronage;
(b)the holder of which is not entitled to receive on the redemption, cancellation or acquisition of the share by the agricultural cooperative corporation or by any person with whom the agricultural cooperative corporation does not deal at arm’s length an amount that is greater than the amount that would, if this Act were read without reference to this section, be included under subsection 135(7) in computing the eligible member’s income for their taxation year in which the share was issued;
(c)that has not before that time been deemed by subsection (4) to have been disposed of; and
(d)that is of a class
(i)the terms of which provide that the agricultural cooperative corporation shall not, otherwise than pursuant to an allowable disposition, redeem, acquire or cancel a share of the class before the day that is five years after the day on which the share was issued, and
(ii)that is identified by the agricultural cooperative corporation in prescribed form and manner as a class of tax deferred cooperative shares. (part à imposition différée)
tax paid balanceof a taxpayer at the end of a particular taxation year of the taxpayer means the amount, if any, by which
(a)the total of
(i)the taxpayer’s tax paid balance at the end of the immediately preceding taxation year, and
(ii)the amount, if any, that is included in computing the taxpayer’s income under this Part for the particular taxation year because of an election described in subparagraph (2)(a)(ii),
exceeds
(b)the total of all amounts each of which is the taxpayer’s proceeds of disposition of a tax deferred cooperative share that the taxpayer disposed of in the particular taxation year. (solde libéré d’impôt)
Marginal note:Income inclusion
(2)In computing the income of a taxpayer for a particular taxation year, there shall be included under subsection 135(7), in respect of the taxpayer’s receipt, as an eligible member, of tax deferred cooperative shares of an agricultural cooperative corporation in the particular taxation year, only the total of
(a)the lesser of
(i)the total of all amounts, in respect of the taxpayer’s receipt in the particular taxation year of tax deferred cooperative shares, that would, if this Act were read without reference to this section, be included under subsection 135(7) in computing the taxpayer’s income for the particular taxation year, and
(ii)the greater of nil and the amount, if any, specified by the taxpayer in an election in prescribed form that is filed with the taxpayer’s return of income for the particular taxation year, and
(b)the amount, if any, by which
(i)the total of all amounts each of which is the taxpayer’s proceeds of disposition of a tax deferred cooperative share disposed of by the taxpayer in the particular taxation year
exceeds
(ii)the total of
(A)the taxpayer’s tax paid balance at the end of the immediately preceding taxation year, and
(B)the amount, if any, that is included in computing the taxpayer’s income for the particular taxation year because of an election described in subparagraph (a)(ii).
Marginal note:Deductibility limit
(3)The amount that may be deducted under subsection 135(1) for a particular taxation year by an agricultural cooperative corporation in respect of payments, in the form of tax deferred cooperative shares, made pursuant to allocations in proportion to patronage shall not exceed 85% of the agricultural cooperative corporation’s income of the taxation year attributable to business done with members.
Marginal note:Deemed disposition
(4)A taxpayer who holds a tax deferred cooperative share is deemed to have disposed of the share, for proceeds of disposition equal to the amount that would, if this Act were read without reference to this section, have been included under subsection 135(7), in respect of the share, in computing the taxpayer’s income for the taxation year in which the share was issued, at the earliest time at which
(a)the paid-up capital of the share is reduced otherwise than by way of a redemption of the share; or
(b)the taxpayer pledges, or for civil law hypothecates, assigns or in any way alienates the share as security for indebtedness of any kind.
Marginal note:Reacquisition
(5)A taxpayer who is deemed by subsection (4) to have disposed at any time of a tax deferred cooperative share is deemed to have reacquired the share, immediately after that time, at a cost equal to the taxpayer’s proceeds of disposition from that disposition.
Marginal note:Exclusion from withholding obligation
(6)Subsection 135(3) does not apply to a payment pursuant to an allocation in proportion to patronage that is paid by an agricultural cooperative corporation through the issuance of a tax deferred cooperative share.
Marginal note:Withholding on redemption
(7)A person or partnership (in this subsection referred to as the “redeeming entity”) that redeems, acquires or cancels a shareholder’s share shall withhold and forthwith remit to the Receiver General, on account of the shareholder’s tax liability, 15% from the amount otherwise payable on the redemption, acquisition or cancellation, if
(a)the share was, at the time it was issued, a tax deferred cooperative share;
(b)the redeeming entity is the corporation that issued the share, or a person or partnership with whom the corporation does not deal at arm’s length; and
(c)the shareholder is not a trust whose taxable income is exempt from tax under this Part because of paragraph 149(1)(r) or (x).
Marginal note:Application of subsections 84(2) and (3)
(8)Subsections 84(2) and (3) do not apply to a tax deferred cooperative share.
Marginal note:Application of subsection (10)
(9)Subsection (10) applies in respect of the disposition, after September 28, 2009, by a taxpayer of a tax deferred cooperative share (in this subsection and subsection (10) referred to as the “old share”) of an agricultural cooperative corporation if
(a)the disposition results from the acquisition, cancellation or redemption of the old share in the course of a reorganization of the capital of the corporation;
(b)in exchange for the old share the corporation issues to the taxpayer a share (in this subsection and subsection (10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definitiontax deferred cooperative sharein subsection (1); and
(c)the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share.
Marginal note:Shares issued on corporate reorganizations
(10)If this subsection applies in respect of an exchange of a taxpayer’s old share for a new share, for the purposes of this section (other than subsection (9)),
(a)the new share issued in exchange for the old share is deemed to have been issued, pursuant to an allocation in proportion to patronage, at the time the old share was issued; and
(b)provided that no person or partnership receives at any time any consideration (other than the new share) in exchange for the old share, for the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.
Marginal note:Definitions
135.2(1)The following definitions apply in this section.
application for continuancemeans the application for continuance referred to in paragraph (a) of the definitionCanadian Wheat Board continuance. (demande de prorogation)
Canadian Wheat Boardmeans the corporation referred to in subsection 4(1) of theCanadian Wheat Board (Interim Operations) Act, as it read before its repeal, that is continued under theCanada Business Corporations Actpursuant to the application for continuance. (Commission canadienne du blé)
Canadian Wheat Board continuancemeans the series of transactions or events that includes
(a)the application for continuance under theCanada Business Corporations Actthat is
(i)made by the corporation referred to in subsection 4(1) of theCanadian Wheat Board (Interim Operations) Act, as it read before its repeal, and
(ii)approved by the Minister of Agriculture and Agri-Food under Part III of theMarketing Freedom for Grain Farmers Act;
(b)the issuance of a promissory note or other evidence of indebtedness by the Canadian Wheat Board to the eligible trust; and
(c)the disposition of the eligible debt by the eligible trust, in the same taxation year of the trust in which the eligible debt is issued to it, in exchange for consideration that includes the issuance of shares by the Canadian Wheat Board that have a total fair market value at the time of their issuance that is equal to the amount by which the principal amount of the eligible debt exceeds $10 million. (prorogation de la Commission canadienne du blé)
eligible debtmeans the promissory note or other evidence of indebtedness referred to in paragraph (b) of the definitionCanadian Wheat Board continuance. (dette admissible)
eligible sharemeans a common share of the capital stock of the Canadian Wheat Board that is issued in exchange for the eligible debt, as referred to in paragraph (c) of the definitionCanadian Wheat Board continuance. (action admissible)
eligible trust, at any time, means a trust that meets the following conditions:
(a)it was established in connection with the application for continuance;
(b)it is resident in Canada at that time;
(c)immediately before it acquired the eligible debt, it held only property of nominal value;
(d)it is not exempt because of subsection 149(1) from tax on its taxable income for any period in its taxation year that includes that time;
(e)all of the interests of beneficiaries under it at that time are described by reference to units that are eligible units in it;
(f)the only persons who have acquired an interest as a beneficiary under the trust from it before that time are persons who were participating farmers at the time they acquired the interest;
(g)all or substantially all of the fair market value of its property at that time is based on the value of property that is
(i)eligible debt,
(ii)shares of the capital stock of the Canadian Wheat Board, or
(iii)property described in paragraph (a) or (b) of the definitionqualified investmentif in section 204 or a deposit with a credit union;
(h)the property that it has paid or distributed at or before that time to a beneficiary under the trust in satisfaction of the beneficiary’s eligible unit in the trust is
(i)money denominated in Canadian dollars, or
(ii)shares distributed as an eligible wind-up distribution of the trust; and
(i)at no time in its taxation year that includes that time is any other trust an eligible trust. (fiducie admissible)
eligible unit, in a trust at any time, means a unit that describes all or part of an interest as a beneficiary under the trust, if
(a)the total of all amounts each of which is the value of a unit at the time it was issued by the trust to a participating farmer does not exceed the amount by which the principal amount of the eligible debt exceeds $10 million; and
(b)all of the interests as a beneficiary under the trust arefixed interestsif (as defined in subsection 251.2(1)) in the trust. (unité admissible)
eligible wind-up distribution, of a trust, means a distribution of property by the trust to a person if
(a)the distribution includes a share of the capital stock of the Canadian Wheat Board that is listed on a designated stock exchange;
(b)the only property (other than a share described in paragraph (a)) distributed by the trust on the distribution is money denominated in Canadian dollars;
(c)the distribution results in the disposition of all of the person’s interest as a beneficiary under the trust; and
(d)the trust ceases to exist immediately after the distribution or immediately after the last of a series of eligible wind-up distributions (determined without reference to this paragraph) of the trust that includes the distribution. (distribution admissible sur liquidation)
participating farmer, in respect of a trust at any time, means a person
(a)who is eligible to receive units of the trust pursuant to the plan under which the trust directs its trustees to grant units to persons who have delivered grain under a contract with the Canadian Wheat Board on or after August 1, 2013; and
(b)engaged in the production of grain or any person entitled, as landlord, vendor or mortgagee or hypothecary creditor, to grain produced by a person engaged in the production of grain or to any share of that grain. (agriculteur participant)
personincludes a partnership. (personne)
Marginal note:Trust acquires an eligible debt
(2)If, at any time, an eligible trust acquires eligible debt, the principal amount of the eligible debt is deemed not to be included in computing the income of the eligible trust for the taxation year of the eligible trust that includes that time.
Marginal note:Disposition of eligible debt
(3)If, at any time, an eligible trust disposes of eligible debt in exchange for consideration that includes the issuance of eligible shares
(a)for the purpose of computing the income of the eligible trust for its taxation year that includes that time
(i)an amount, in respect of the disposition of the eligible debt, equal to the fair market value of all property (other than eligible shares) received on the exchange by the trust is included,
(ii)no amount in respect of the disposition of the eligible debt is included (other than the amount described in subparagraph (i)), and
(iii)no amount in respect of the receipt of the eligible shares is included;
(b)the cost to the eligible trust of each eligible share is deemed to be nil;
(c)in computing the paid-up capital in respect of the class of the capital stock of the Canadian Wheat Board that includes the eligible shares, at any time after the shares are issued, there shall be deducted an amount equal to the amount of the paid-up capital in respect of that class at the time the shares are issued;
(d)subsection 75(2) does not apply to property
(i)that is held by the trust in a taxation year that ends at or after that time, and
(ii)that is
(A)received by the trust on the exchange, or
(B)a substitute for property described in subparagraph (i); and
(e)subsections 84(2) and (3) and section 85 do not apply at any time to eligible shares.
Marginal note:Eligible trust
(4)The following rules apply in respect of a trust that is an eligible trust at any time in a taxation year of the trust:
(a)in computing the trust’s income for the year
(i)no deduction may be made by the trust under subsection 104(6), except to the extent of the income of the trust (determined without reference to subsection 104(6)) for the year that is paid in the year, and
(ii)no deduction may be made by the trust under subsection 104(6), if the trust ceased to be an eligible trust at the beginning of the following taxation year;
(b)for the purposes of applying Part XII.2 in respect of the year
(i)the trust’s designated income for the year is deemed to be the trust’s income for the year determined without reference to subsections 104(6) and (30), and
(ii)the designated beneficiaries under the trust at any time in the year are deemed to include any beneficiary under the trust that is at that time
(A)non-resident,
(B)a partnership (other than a partnership that is, throughout its fiscal period that includes that time, a Canadian partnership), or
(C)exempt because of subsection 149(1) from tax under this Part on the person’s taxable income;
(c)each property held by the trust that is the eligible debt or an eligible share is deemed to have a cost amount to the trust of nil;
(d)if the trust disposes of a property,
(i)subject to subsection (14), the disposition is deemed to occur for proceeds equal to the fair market value of the property immediately before the disposition,
(ii)the gain, if any, of the trust from the disposition is
(A)deemed not to be a capital gain, and
(B)to be included in computing the trust’s income for the trust’s taxation year that includes the time of disposition, and
(iii)the loss, if any, of the trust from the disposition is
(A)deemed not to be a capital loss, and
(B)to be deducted in computing the trust’s income for the trust’s taxation year that includes the time of disposition;
(e)the trust is deemed not to be a
(i)personal trust,
(ii)unit trust,
(iii)trust prescribed for the purpose of subsection 107(2), or
(iv)trust any interest in which is an excluded right or interest in applying section 128.1;
(f)anysecurity(in this paragraph and paragraph (g), as defined in subsection 122.1(1)) of the trust that is held by a trust governed by a deferred profit sharing plan, RDSP, RESP, RRIF, RRSP or TFSA (referred to in this paragraph and paragraph (g) as theregistered plan trust) is deemed not to be a qualified investment for the registered plan trust;
(g)if a registered plan trust governed by a TFSA acquires at any time a security of the trust, Part XI.01 applies in respect of the security as though the acquisition is an advantage
(i)in relation to the TFSA that is extended at that time to the controlling individual of the TFSA, and
(ii)that is a benefit the fair market value of which is the fair market value of the security at that time; and
(h)paragraph (h) of the definitiondispositionin subsection 248(1) does not apply in respect of eligible units of the trust.
Marginal note:Participating farmer — acquisition of eligible unit
(5)If, at any time, a participating farmer acquires an eligible unit in an eligible trust from the trust,
(a)no amount in respect of the acquisition of the eligible unit is included in computing the income of the participating farmer; and
(b)the cost amount to the participating farmer of the eligible unit is deemed to be nil.
Marginal note:Eligible unit issued to estate
(6)If a participating farmer has, immediately before the participating farmer’s death, not received an eligible unit of an eligible trust for which the participating farmer was eligible — pursuant to the plan under which the eligible trust directs its trustees to grant units to persons who have delivered grain under a contract with the Canadian Wheat Board on or after August 1, 2013 — and the eligible trust issues the unit to the estate that arose on and as a consequence of the death,
(a)the participating farmer is deemed to have acquired the unit at the time that is immediately before the time that is immediately before the death, as a participating farmer from the eligible trust, and to own the unit at the time that is immediately before the death;
(b)for the purpose of paragraph (f) of the definitioneligible trustin subsection (1), the estate is deemed not to have acquired the unit from the trust; and
(c)for the purposes of paragraphs (8)(b) and (c), the estate is deemed to have acquired the eligible unit on and as a consequence of the death.
Marginal note:Eligible unit — gain (loss)
(7)If a person disposes of an eligible unit in a trust that is an eligible trust at the time of the disposition
(a)the gain, if any, of the person from the disposition is
(i)deemed not to be a capital gain, and
(ii)to be included in computing the person’s income for the person’s taxation year that includes that time; and
(b)the loss, if any, of the person from the disposition is
(i)deemed not to be a capital loss, and
(ii)to be deducted in computing the person’s income for the person’s taxation year that includes that time.
Marginal note:Death of a participating farmer
(8)If, immediately before an individual’s death, the individual owns an eligible unit that the individual acquired as a participating farmer from an eligible trust
(a)the individual is deemed to dispose (referred to in this subsection as theparticular disposition) of the eligible unit immediately before death;
(b)if paragraph (d) does not apply,
(i)the individual’s proceeds from the particular disposition are deemed to be equal to the unit’s fair market value immediately before the particular disposition,
(ii)the gain from the particular disposition is deemed to be included, under subsection 70(1) and not under any other provision, in the individual’s income for the individual’s taxation year in which the individual dies,
(iii)subsection 159(5) applies in respect of the individual who has died (determined as though a reference in that subsection to subsection 70(5.2) includes a reference to subsection 70(1) in the application of subsection 159(5) to the gain from the particular disposition) in respect of the particular disposition, and
(iv)the person who acquires the eligible unit as a consequence of the individual’s death is deemed to have acquired the eligible unit at the time of the death at a cost equal to the individual’s proceeds, described in subparagraph (i), from the particular disposition;
(c)paragraph (d) applies if
(i)the individual is resident in Canada immediately before the individual’s death,
(ii)the individual’s graduated rate estate acquires the eligible unit on and as a consequence of the death,
(iii)the individual’s legal representative elects in prescribed form in the course of administering the individual’s graduated rate estate that paragraph (b) not apply to the individual in respect of the particular disposition,
(iv)the election is filed with the individual’s return of income under this Part for the individual’s taxation year in which the death occurred,
(v)the estate distributes the eligible unit to the individual’s spouse or common-law partner at a time at which it is the individual’s graduated rate estate,
(vi)the individual’s spouse or common-law partner is resident in Canada at the time of the distribution, and
(vii)the estate does not dispose of the unit before the distribution; and
(d)if this paragraph applies,
(i)the individual’s gain from the disposition is deemed to be nil,
(ii)the cost amount to the estate of the eligible unit is deemed to be nil,
(iii)any amount that is included in the estate’s income (determined without reference to this subparagraph and subsections 104(6) and (12)) for a taxation year from a source that is the eligible unit is, notwithstanding subsection 104(24), deemed
(A)to have become payable in that taxation year by the estate to the spouse or common-law partner, and
(B)not be have become payable to any other beneficiary,
(iv)the distribution is deemed to be a disposition by the estate of the eligible unit for proceeds equal to the cost amount to the estate of the unit,
(v)the part of the spouse or common-law partner’s interest as a beneficiary under the estate that is disposed of as a result of the distribution is deemed to be disposed of for proceeds of disposition equal to the cost amount to the spouse or common-law partner of that part immediately before the disposition,
(vi)the cost amount to the spouse or common-law partner of the eligible unit is deemed to be nil, and
(vii)the spouse or common-law partner is, except for the purposes of paragraph (c), deemed to have acquired the eligible unit as a participating farmer from an eligible trust.
Marginal note:Participating farmer — disposition of eligible unit
(9)If, at any time, an eligible unit of an eligible trust that was acquired by a participating farmer from the eligible trust is disposed of by the participating farmer (other than a disposition described in paragraph (8)(a), (10)(d) or (11)(b)),
(a)the participating farmer’s proceeds from the disposition are deemed to be equal to the fair market value of the unit immediately before its disposition;
(b)if the disposition results from a distribution of money denominated in Canadian dollars by the trust to the participating farmer in a taxation year of the trust, the money is proceeds from the disposition in that taxation year by the trust of other property and, at the time of the disposition, the participating farmer is not a person described in any of clauses (4)(b)(ii)(A) to (C), the trust’s gain, if any, from the disposition of the other property is reduced to the extent that the proceeds so distributed would, in the absence of this paragraph, be included under subsection 104(13) in the participating farmer’s income for the taxation year of the participating farmer in which the taxation year of the trust ends; and
(c)if the participating farmer is a Canadian-controlled private corporation, for the purposes of section 125, the gain from the disposition is deemed to be income from an active business carried on by the corporation.
Marginal note:Eligible wind-up distribution
(10)If, at any time, an eligible trust distributes property as an eligible wind-up distribution of the trust to a person
(a)subsection 107(2.1) does not apply in respect of the distribution;
(b)the trust is deemed to have disposed of the property for proceeds equal to its fair market value at that time;
(c)the trust’s gain from the disposition of the property is, notwithstanding subsection 104(24), deemed
(i)to have become payable at that time by the trust to the person, and
(ii)not to have become payable to any other beneficiary;
(d)the person is deemed to acquire the property at a cost equal to the trust’s proceeds from the disposition;
(e)the person’s proceeds from the disposition of the eligible unit, or part of it, that results from the distribution are deemed to be equal to the cost amount of the unit to the person immediately before that time; and
(f)for greater certainty, no part of the trust’s gain from the disposition is to be included in the cost to the person of the property, other than as determined by paragraph (d).
Marginal note:Ceasing to be an eligible trust
(11)If a trust ceases to be an eligible trust at a particular time
(a)subsection 149(10) applies to the trust as if
(i)it ceased at that particular time to be exempt from tax under this Part on its taxable income, and
(ii)the list of provisions in paragraph 149(10)(c) included a reference to this section; and
(b)each person who holds at the particular time an eligible unit in the trust is deemed to have
(i)disposed of, at the time that is immediately before the time that is immediately before the particular time, each of the eligible units for proceeds equal to the cost amount of the unit to the person, and
(ii)reacquired the eligible unit at the time that is immediately before the particular time at a cost equal to the fair market value of the unit at the time that is immediately before the particular time.
Marginal note:Stock dividends — Canadian Wheat Board shares
(12)If, at any time, the eligible trust holds an eligible share (or another share of the Canadian Wheat Board acquired before that time as a stock dividend) and the Canadian Wheat Board issues, as a stock dividend paid in respect of such a share, a share of a class of its capital stock, the amount by which the paid-up capital is increased — in respect of the issuance of all shares paid by the Canadian Wheat Board to the eligible trust as the stock dividend or any other stock dividend paid to other shareholders in connection with that stock dividend — for all classes of shares of the Canadian Wheat Board is, for the purposes of this Act, deemed to be no more than $1.
Marginal note:Reorganization of capital — Canadian Wheat Board
(13)Subsection (14) applies in respect of the disposition by an eligible trust of all of the shares (in this subsection and subsection (14) referred to collectively as theold sharesand individually as anold share) of a class of the capital stock of the Canadian Wheat Board owned by the eligible trust if
(a)the disposition of the old shares results from the acquisition, cancellation or redemption in the course of a reorganization of the capital of the Canadian Wheat Board;
(b)the Canadian Wheat Board issues to the eligible trust, in exchange for the old shares, shares (in this subsection and subsection (14) referred to collectively as thenew sharesand individually as anew share) of a class of the capital stock of the Canadian Wheat Board the terms and conditions of which — including the entitlement to receive an amount on a redemption, acquisition or cancellation — are in all material respects the same as those of the old shares;
(c)the amount that is the total fair market value of all of the new shares acquired by the eligible trust on the exchange equals the total fair market value of all of the old shares disposed of by the eligible trust; and
(d)the amount that is the total paid-up capital in respect of all of the new shares acquired by the eligible trust on the exchange is equal to the amount that is the total paid-up capital in respect of all of the old shares disposed of on the exchange.
Marginal note:Rollover of shares on reorganization
(14)If this subsection applies in respect of an exchange of an eligible trust’s old share for a new share,
(a)the old share is deemed to be disposed of by the eligible trust for proceeds equal to its cost amount to the eligible trust;
(b)the new share acquired for the old share referred to in paragraph (a) is deemed to be acquired for a cost equal to the amount referred to in paragraph (a);
(c)if the old share was an eligible share, the new share is deemed to be an eligible share; and
(d)if new shares are deemed to be eligible shares because of paragraph (c) and those shares are included in a class of shares that also includes other shares that are not eligible shares, those eligible shares are deemed to have been issued in a separate series of the class and the other shares are deemed to have been issued in a separate series of the class.
Marginal note:Information filing requirement
(15)A trust shall file with the Minister a prescribed form in prescribed manner in respect of each taxation year of the trust in which it is an eligible trust on or before the trust’s filing-due date for the year.
Marginal note:Failure to file prescribed form
(16)If a trust fails to file the form required by subsection (15) on or before the day that is the trust’s filing-due date for a taxation year,
(a)in addition to any other penalty for which the trust may be liable under this Act in respect of the failure, the trust is liable to a penalty equal to the product obtained when $1,000 is multiplied by the number of days during which the failure continues; and
(b)if, within 30 days after the trust is served personally or by registered mail with a demand in writing from the Minister for the form to be filed, the trust has not filed the form with the Minister, the trust is deemed to cease to be an eligible trust at the end of the day on which the demand was served.
Marginal note:Cooperative not private corporation
136(1)Notwithstanding any other provision of this Act, a cooperative corporation that would, but for this section, be a private corporation is deemed not to be a private corporation except for the purposes of section 15.1, paragraphs 87(2)(vv) and (ww) (including, for greater certainty, in applying those paragraphs as provided under paragraph 88(1)(e.2)), the definitionsexcessive eligible dividend designation,general rate income poolandlow rate income poolin subsection 89(1), subsections 89(4) to (6) and (8) to (10), sections 123.4, 125, 125.1, 127 and 127.1, the definitionmark-to-market propertyin subsection 142.2(1), sections 152 and 157, subsection 185.2(3), the definitionsmall business corporationin subsection 248(1) (as it applies for the purposes of paragraph 39(1)(c)) and subsection 249(3.1).
Definition ofcooperative corporation
(2)In this section,cooperative corporationmeans a corporation that was incorporated or continued by or under the provisions of a law, of Canada or of a province, that provide for the establishment of the corporation as a cooperative corporation or that provide for the establishment of cooperative corporations, for the purpose of marketing (including processing incident to or connected to the marketing) natural products belonging to or acquired from its members or customers, of purchasing supplies, equipment or household necessaries for or to be sold to its members or customers or of performing services for its members or customers, if
(a)the statute by or under which it was incorporated, its charter, articles of association or by-laws or its contracts with its members or its members and customers held out the prospect that payments would be made to them in proportion to patronage;
(b)none of its members (except other cooperative corporations) have more than one vote in the conduct of the affairs of the corporation;
(c)at least 90% of its members are individuals, other cooperative corporations, or corporations or partnerships that carry on the business of farming; and
(d)at least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds, TFSAs or registered education savings plans, the annuitants, holders or subscribers under which are members described in that paragraph.
Marginal note:Payments pursuant to allocations in proportion to borrowing
137(2)Notwithstanding anything in this Part, there may be deducted, in computing the income for a taxation year of a credit union, the total of bonus interest payments and payments pursuant to allocations in proportion to borrowing made by the credit union within the year or within 12 months thereafter to members of the credit union, to the extent that those payments were not deductible under this subsection in computing the income of the credit union for the immediately preceding taxation year.
Marginal note:Additional deduction
(3)There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the year, a credit union, an amount equal to the amount determined by the formula
A × B × C
where
D – E
where
(a)the corporation’s taxable income for the year, and
(b)the amount, if any, by which 4/3 of the corporation’s maximum cumulative reserve at the end of the year exceeds the corporation’s preferred-rate amount at the end of the immediately preceding taxation year, and
(a)the proportion of 100% that the number of days in the year that are before March 21, 2013 is of the number of days in the year,
(b)the proportion of 80% that the number of days in the year that are after March 20, 2013 and before 2014 is of the number of days in the year,
(c)the proportion of 60% that the number of days in the year that are in 2014 is of the number of days in the year,
(d)the proportion of 40% that the number of days in the year in 2015 is of the number of days in the year,
(e)the proportion of 20% that the number of days in the year in 2016 is of the number of days in the year, and
(f)if one or more days in the year are after 2016, 0%.
Marginal note:Amount deemed deductible under s. 125
(4)For the purposes of this Act, any amount deductible or any deduction under subsection 137(3) from the tax otherwise payable by a credit union under this Part for a taxation year shall be deemed to be an amount deductible or a deduction, as the case may be, under section 125 from that tax.
Marginal note:Payments in respect of shares
(4.1)Notwithstanding any other provision of this Act, an amount paid or payable by a credit union to a person is deemed to be paid or payable, as the case may be, by the credit union as interest and to be received or receivable, as the case may be, by the person as interest, if
(a)the amount is in respect of a share held by the person of the capital stock of the credit union, other than an amount paid or payable as or on account of a reduction of the paid-up capital, redemption, acquisition or cancellation of the share by the credit union to the extent of the paid-up capital of the share;
(b)the share is not listed on a stock exchange; and
(c)the person is
(i)a member of the credit union, or
(ii)a member of another credit union if the share is issued by the credit union after March 28, 2012 and the other credit union is a member of the credit union.
Marginal note:Deemed interest not a dividend
(4.2)Notwithstanding any other provision of this Act, an amount that is deemed by subsection 137(4.1) to be interest shall be deemed not to be a dividend.
Marginal note:Determination of preferred-rate amount of a corporation
(4.3)For the purposes of subsection 137(3),
(a)the preferred-rate amount of a corporation at the end of a taxation year is determined by the formula
A + B/C
where
(b)where at any time a new corporation has been formed as a result of an amalgamation of two or more predecessor corporations, within the meaning of subsection 87(1), it shall be deemed to have had a taxation year ending immediately before that time and to have had, at the end of that year, a preferred-rate amount equal to the total of the preferred-rate amounts of each of the predecessor corporations at the end of their last taxation years; and
(c)where there has been a winding-up as described in subsection 88(1), the preferred-rate amount of the parent (referred to in that subsection) at the end of its taxation year immediately preceding its taxation year in which it received the assets of the subsidiary (referred to in that subsection) on the winding-up shall be deemed to be the total of the amount that would otherwise be its preferred-rate amount at the end of that year and the preferred-rate amount of the subsidiary at the end of its taxation year in which its assets were distributed to the parent on the winding-up.
Marginal note:Member’s income
(5)Where a payment has been received by a taxpayer from a credit union in a taxation year in respect of an allocation in proportion to borrowing, the amount thereof shall, if the money so borrowed was used by the taxpayer for the purpose of earning income from a business or property (otherwise than to acquire property the income from which would be exempt or to acquire a life insurance policy), be included in computing the taxpayer’s income for the year.
Marginal note:Allocations of taxable dividends and capital gains
(5.1)A credit union (referred to in this subsection and in subsection 137(5.2) as the “payer”) may, at any time within 120 days after the end of its taxation year, elect in prescribed form to allocate in respect of the year to a member that is a credit union such portion of each of the following amounts as may reasonably be regarded as attributable to the member:
(a)the total of all amounts each of which is the amount of a taxable dividend received by the payer from a taxable Canadian corporation in the year;
(b)the amount, if any, by which
(i)the total of all amounts each of which is the amount by which the payer’s capital gain from the disposition of a property in the year exceeds the payer’s taxable capital gain from the disposition
exceeds
(ii)the total of all amounts each of which is the amount by which the payer’s capital loss from the disposition of a property in the year exceeds the payer’s allowable capital loss from the disposition; and
(c)each amount deductible under paragraph 137(5.2)(c) in computing the payer’s taxable income for the year.
Marginal note:Idem
(5.2)Notwithstanding any other provision of this Act,
(a)there shall be deducted from the amount that would, but for this subsection, be deductible under section 112 in computing a payer’s taxable income for a taxation year such portion of the total referred to in paragraph 137(5.1)(a) as the payer allocated to its members under subsection 137(5.1) in respect of the year;
(b)there shall be included in computing the income of a payer for a taxation year an amount equal to that portion of the amounts referred to in paragraphs 137(5.1)(b) and 137(5.1)(c) that the payer allocated under subsection 137(5.1) in respect of the year to its members; and
(c)each amount allocated under subsection 137(5.1) to a member may be deducted by that member in computing the member’s taxable income for its taxation year that includes the last day of the payer’s taxation year in respect of which the amount was so allocated.
Marginal note:Definitions
(6)In this section,
allocation in proportion to borrowingfor a taxation year means an amount credited by a credit union to a person who was a member of the credit union in the year on terms that the member is entitled to or will receive payment thereof, computed at a rate in relation to
(a)the amount of interest payable by the member on money borrowed from the credit union, or
(b)the amount of money borrowed by the member from the credit union,
if the amount was credited at the same rate in relation to the amount of interest or money, as the case may be, as the rate at which amounts were similarly credited for the year to all other members of the credit union of the same class; (répartition proportionnelle à l’importance de l’emprunt)
bonus interest paymentfor a taxation year means an amount credited by a credit union to a person who was a member of the credit union in the year on terms that the member is entitled to or will receive payment thereof, computed at a rate in relation to
(a)the amount of interest payable in respect of the year by the credit union to the member on money standing to the member’s credit from time to time in the records or books of account of the credit union, or
(b)the amount of money standing to the member’s credit from time to time in the year in the records or books of account of the credit union,
if the amount was credited at the same rate in relation to the amount of interest or money, as the case may be, as the rate at which amounts were similarly credited in the year to all other members of the credit union of the same class; (paiement d’intérêts supplémentaires)
credit unionmeans a corporation, association or federation incorporated or organized as a credit union or cooperative credit society if
(a)it derived all or substantially all of its revenues from
(i)loans made to, or cashing cheques for, members,
(ii)debt obligations or securities of, or guaranteed by, the Government of Canada or a province, a Canadian municipality, or an agency thereof, or debt obligations or securities of a municipal or public body performing a function of government in Canada or an agency thereof,
(iii)debt obligations of or deposits with, or guaranteed by, a corporation, commission or association not less than 90% of the shares or capital of which was owned by the Government of Canada or a province or by a municipality in Canada,
(iv)debt obligations of or deposits with, or guaranteed by, a bank, or debt obligations of or deposits with a corporation licensed or otherwise authorized under a law of Canada or a province to carry on in Canada the business of offering to the public its services as trustee,
(v)charges, fees and dues levied against members or members of members,
(vi)loans made to or deposits with a credit union or cooperative credit society of which it is a member, or
(vii)a prescribed revenue source,
(b)all or substantially all the members thereof having full voting rights therein were corporations, associations or federations
(i)incorporated as credit unions or cooperative credit societies, all of which derived all or substantially all of their revenues from the sources described in paragraph (a), or all or substantially all of the members of which were credit unions, cooperatives or a combination thereof,
(ii)incorporated, organized or registered under, or governed by a law of Canada or a province with respect to cooperatives, or
(iii)incorporated or organized for charitable purposes,
or were corporations, associations or federations no part of the income of which was payable to, or otherwise available for the personal benefit of, any shareholder or member thereof, or
(c)the corporation, association or federation would be a credit union by virtue of paragraph (b) if all the members (other than individuals) having full voting rights in each member thereof that is a credit union were members having full voting rights in the corporation, association or federation; (caisse de crédit)
maximum cumulative reserveof a credit union at the end of any particular taxation year means an amount determined by the formula
0.05 × (A + B)
where
member, of a credit union, means
(a)a person who is recorded as a member on the records of the credit union and is entitled to participate in and use the services of the credit union, and
(b)a registered retirement savings plan, a registered retirement income fund, a TFSA or a registered education savings plan, the annuitant, holder or subscriber under which is a person described in paragraph (a). (membre)
Marginal note:Credit union not private corporation
(7)Notwithstanding any other provision of this Act, a credit union that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 123.1, 123.4, 125, 127, 127.1, 152 and 157 and the definitionsmall business corporationin subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).
Marginal note:Amounts included in income of deposit insurance corporation
137.1(1)For the purpose of computing the income for a taxation year of a taxpayer that is a deposit insurance corporation, the following rules apply:
(a)the corporation’s income shall, except as otherwise provided in this section, be computed in accordance with the rules applicable in computing income for the purposes of this Part; and
(b)there shall be included in computing the corporation’s income such of the following amounts as are applicable:
(i)the total of profits or gains made in the year by the corporation in respect of bonds, debentures, mortgages, hypothecary claims, notes or other similar obligations owned by it that were disposed of by it in the year, and
(ii)the total of each such portion of each amount, if any, by which the principal amount, at the time it was acquired by the corporation, of a bond, debenture, mortgage, hypothecary claim, note or other similar obligation owned by the corporation at the end of the year exceeds the cost to the corporation of acquiring it as was included by the corporation in computing its profit for the year.
Marginal note:Amounts not included in income
(2)The following amounts shall not be included in computing the income of a deposit insurance corporation for a taxation year:
(a)any premium or assessment received, or receivable, by the corporation in the year from a member institution; and
(b)any amount received by the corporation in the year from another deposit insurance corporation to the extent that that amount can reasonably be considered to have been paid out of amounts referred to in paragraph (a) received by that other deposit insurance corporation in any taxation year.
Marginal note:Amounts deductible in computing income of deposit insurance corporation
(3)There may be deducted in computing the income for a taxation year of a taxpayer that is a deposit insurance corporation such of the following amounts as are applicable:
(a)the total of losses sustained in the year by the corporation in respect of bonds, debentures, mortgages, hypothecary claims, notes or other similar obligations owned by it and issued by a person other than a member institution that were disposed of by it in the year;
(b)the total of each such portion of each amount, if any, by which the cost to the corporation of acquiring a bond, debenture, mortgage, hypothecary claim, note or other similar obligation owned by the corporation at the end of the year exceeds the principal amount of the bond, debenture, mortgage, hypothecary claim, note or other similar obligation, as the case may be, at the time it was so acquired as was deducted by the corporation in computing its profit for the year;
(d)the total of all expenses incurred by the taxpayer in collecting premiums or assessments from member institutions;
(e)the total of all expenses incurred by the taxpayer
(i)in the performance of its duties as curator of a bank, or as liquidator or receiver of a member institution when duly appointed as such a curator, liquidator or receiver,
(ii)in the course of making or causing to be made such inspections as may reasonably be considered to be appropriate for the purposes of assessing the solvency or financial stability of a member institution, and
(iii)in supervising or administering a member institution in financial difficulty; and
(f)the total of all amounts each of which is an amount that is not otherwise deductible by the taxpayer for the year or any other taxation year and that is
(i)an amount paid by the taxpayer in the year pursuant to a legal obligation to pay interest on borrowed money used
(A)to lend money to, or otherwise provide assistance to, a member institution in financial difficulty,
(B)to assist in the payment of any losses suffered by members or depositors of a member institution in financial difficulty,
(C)to lend money to a subsidiary wholly-owned corporation of the taxpayer where the subsidiary is deemed by subsection 137.1(5.1) to be a deposit insurance corporation,
(D)to acquire property from a member institution in financial difficulty, or
(E)to acquire shares of the capital stock of a member institution in financial difficulty, or
(ii)an amount paid by the taxpayer in the year pursuant to a legal obligation to pay interest on an amount that would be deductible under subparagraph 137.1(3)(f)(i) if it were paid in the year.
Marginal note:Limitation on deduction
(4)No deduction shall be made in computing the income for a taxation year of a taxpayer that is a deposit insurance corporation in respect of
(a)any grant, subsidy or other assistance to member institutions provided by it;
(b)an amount equal to the amount, if any, by which the amount paid or payable by it to acquire property exceeds the fair market value of the property at the time it was so acquired;
(c)any amounts paid to its member institutions as allocations in proportion to any amounts described in subsection 137.1(2);
(d)any amount paid by it to another deposit insurance corporation that is, because of paragraph (2)(b), not included in computing the income of that other deposit insurance corporation; or
(e)any amount that may otherwise be deductible under paragraph 20(1)(p) in respect of debts owing to it by any of its member institutions that has not been included in computing its income for the year or a preceding taxation year.
Marginal note:Definitions
(5)In this section,
deposit insurance corporationmeans
(a)a corporation that was incorporated by or under a law of Canada or a province respecting the establishment of a stabilization fund or board if
(i)it was incorporated primarily
(A)to provide or administer a stabilization, liquidity or mutual aid fund for credit unions, and
(B)to assist in the payment of any losses suffered by members of credit unions in liquidation, and
(ii)throughout any taxation year in respect of which the expression is being applied,
(A)it was a Canadian corporation, and
(B)the cost amount to the corporation of its investment property was at least 50% of the cost amount to it of all its property (other than a debt obligation of, or a share of the capital stock of, a member institution issued by the member institution at a time when it was in financial difficulty, or
(b)a corporation incorporated by theCanada Deposit Insurance Corporation Act; (compagnie d’assurance-dépôts)
investment propertymeans
(a)bonds, debentures, mortgages, hypothecary claims, notes or other similar obligations
(i)of or guaranteed by the Government of Canada,
(ii)of the government of a province or an agent thereof,
(iii)of a municipality in Canada or a municipal or public body performing a function of government in Canada,
(iv)of a corporation, commission or association not less than 90% of the shares or capital of which is owned by Her Majesty in right of a province or by a Canadian municipality, or of a subsidiary wholly-owned corporation that is subsidiary to such a corporation, commission or association, or
(v)of an educational institution or a hospital if repayment of the principal amount thereof and payment of the interest thereon is to be made, or is guaranteed, assured or otherwise specifically provided for or secured by the government of a province,
(b)any deposits, deposit certificates or guaranteed investment certificates with
(i)a bank,
(ii)a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, or
(iii)a credit union or central that is a member of the Canadian Payments Association or a credit union that is a shareholder or member of a central that is a member of the Canadian Payments Association,
(c)any money of the corporation, and
(d)in relation to a particular deposit insurance corporation, debt obligations of, and shares of the capital stock of, a subsidiary wholly-owned corporation of the particular corporation where the subsidiary is deemed by subsection 137.1(5.1) to be a deposit insurance corporation; (bien de placement)
member institution, in relation to a particular deposit insurance corporation, means
(a)a corporation whose liabilities in respect of deposits are insured by, or
(b)a credit union that is qualified for assistance from
that deposit insurance corporation. (institution membre)
Marginal note:Deeming provision
(5.1)For the purposes of this section, other than subsection 137.1(2), paragraph 137.1(3)(d), subparagraph 137.1(3)(e)(i), subsection 137.1(9) and paragraph 11(a), a subsidiary wholly-owned corporation of a particular corporation described in the definitiondeposit insurance corporationin subsection 137.1(5) shall be deemed to be a deposit insurance corporation, and any member institution of the particular corporation shall be deemed to be a member institution of the subsidiary, where all or substantially all of the property of the subsidiary has at all times since the subsidiary was incorporated consisted of
(a)investment property;
(b)shares of the capital stock of a member institution of the particular corporation obtained by the subsidiary at a time when the member institution was in financial difficulty;
(c)debt obligations issued by a member institution of the particular corporation at a time when the member institution was in financial difficulty;
(d)property acquired from a member institution of the particular corporation at a time when the member institution was in financial difficulty; or
(e)any combination of property described in paragraphs 137.1(5.1)(a) to 137.1(5.1)(d).
Marginal note:Deemed not to be a private corporation
(6)Notwithstanding any other provision of this Act, a deposit insurance corporation that would, but for this subsection, be a private corporation shall be deemed not to be a private corporation.
Marginal note:Deposit insurance corporation deemed not a credit union
(7)Notwithstanding any other provision of this Act, a deposit insurance corporation that would, but for this subsection, be a credit union shall be deemed not to be a credit union.
Marginal note:Deemed compliance
(8)For the purposes of subsection 137.1(5), a corporation shall be deemed to have complied with clause (a)(ii)(B) of the definitiondeposit insurance corporationin subsection 137.1(5) throughout the 1975 taxation year if it complied with that clause on the last day of that taxation year.
Marginal note:Special tax rate
(9)The tax payable under this Part by a corporation for a taxation year throughout which it was a deposit insurance corporation (other than a corporation incorporated under theCanada Deposit Insurance Corporation Act) is the amount determined by the formula:
(38% - A) × B
where
Marginal note:Amounts paid by a deposit insurance corporation
(10)Where in a taxation year a taxpayer is a member institution, there shall be included in computing its income for the year the total of all amounts each of which is
(a)an amount received by the taxpayer in the year from a deposit insurance corporation that is an amount described in any of paragraphs 137.1(4)(a) to 137.1(4)(c), to the extent that the taxpayer has not repaid the amount to the deposit insurance corporation in the year,
(b)an amount received from a deposit insurance corporation in the year by a depositor or member of the taxpayer as, on account of, in lieu of payment of, or in satisfaction of, deposits with, or share capital of, the taxpayer, to the extent that the taxpayer has not repaid the amount to the deposit insurance corporation in the year, or
(c)the amount by which
(i)the principal amount of any obligation of the taxpayer to pay an amount to a deposit insurance corporation that is settled or extinguished in the year without any payment by the taxpayer or by the payment by the taxpayer of an amount less than the principal amount
exceeds
(ii)the amount, if any, paid by the taxpayer on the settlement or extinguishment of the obligation
to the extent that the excess is not otherwise required to be included in computing the taxpayer’s income for the year or a preceding taxation year.
Marginal note:Principal amount of an obligation to pay interest
(10.1)For the purposes of paragraph 137.1(10)(c), an amount of interest payable by a member institution to a deposit insurance corporation on an obligation shall be deemed to have a principal amount equal to that amount.
Marginal note:Deduction by member institutions
(11)There may be deducted in computing the income for a taxation year of a taxpayer that is a member institution such of the following amounts as are applicable:
(a)any amount paid or payable by the taxpayer in the year that is described in subsection 137.1(2) to the extent that it was not deducted in computing the taxpayer’s income for a preceding taxation year; and
(b)any amount repaid by the taxpayer in the year to a deposit insurance corporation on account of an amount described in paragraph 137.1(10)(a) or 137.1(10)(b) that was received in a preceding taxation year to the extent that it was not, by reason of subsection 137.1(12), excluded from the taxpayer’s income for the preceding year.
Marginal note:Repayment excluded
(12)Where
(a)a member institution has in a taxation year repaid an amount to a deposit insurance corporation on account of an amount that was included by virtue of paragraph 137.1(10)(a) or 137.1(10)(b) in computing its income for a preceding taxation year,
(b)the member institution has filed its return of income required by section 150 for the preceding year, and
(c)on or before the day on or before which the member institution is required by section 150 to file a return of income for the taxation year, it has filed an amended return for the preceding year excluding from its income for that year the amount repaid,
the amount repaid shall be excluded from the amount otherwise included by virtue of paragraph 137.1(10)(a) or 137.1(10)(b) in computing the member institution’s income for the preceding year and the Minister shall make such reassessment of the tax, interest and penalties payable by the member institution for preceding taxation years as is necessary to give effect to the exclusion.
Marginal note:Computation of income for 1975 and subsequent years
137.2For the purpose of computing the income of a deposit insurance corporation for the 1975 and subsequent taxation years,
(a)property of the corporation that is a bond, debenture, mortgage, hypothecary claim, note or other similar obligation owned by it at the commencement of the corporation’s 1975 taxation year shall be valued at its cost to the corporation less the total of all amounts that, before that time, the corporation was entitled to receive as, on account or in lieu of payment of, or in satisfaction of, the principal amount of the bond, debenture, mortgage, hypothecary claim, note or other similar obligation,
(i)plus a reasonable amount in respect of the amortization of the amount by which the principal amount of the property at the time it was acquired by the corporation exceeded its actual cost to the corporation, or
(ii)minus a reasonable amount in respect of the amortization of the amount by which its actual cost to the corporation exceeded the principal amount of the property at the time it was acquired by the corporation;
(b)property of the corporation that is a debt owing to the corporation (other than property described in paragraph 137.2(a) or a debt that became a bad debt before its 1975 taxation year) acquired by it before the commencement of its 1975 taxation year shall be valued at any time at the amount thereof outstanding at that time;
(c)property of the corporation (other than property in respect of which any amount for the year has been included under paragraph (a)) that was acquired, by foreclosure or otherwise, after default made under a mortgage or hypothec shall be valued at its cost amount to the corporation; and
(d)any other property shall be valued at its cost amount to the corporation.
Marginal note:Insurance corporations
138(1)It is hereby declared that a corporation, whether or not it is a mutual corporation, that has, in a taxation year, been a party to insurance contracts or other arrangements or relationships of a particular class whereby it can reasonably be regarded as undertaking
(a)to insure other persons against loss, damage or expense of any kind, or
(b)to pay insurance moneys to other persons
(i)on the death of any person,
(ii)on the happening of an event or contingency dependent on human life,
(iii)for a term dependent on human life, or
(iv)at a fixed or determinable future time,
whether or not such persons are members or shareholders of the corporation, shall, regardless of the form or legal effect of those contracts, arrangements or relationships, be deemed, for the purposes of this Act, to have been carrying on an insurance business of that class in the year for profit, and in any such case, for the purpose of computing the income of the corporation, the following rules apply:
(c)every amount received by the corporation under, in consideration of, in respect of or on account of such a contract, arrangement or relationship shall be deemed to have been received by it in the course of that business,
(d)the income shall, except as otherwise provided in this section, be computed in accordance with the rules applicable in computing income for the purposes of this Part,
(e)all income from property vested in the corporation shall be deemed to be income of the corporation, and
(f)all taxable capital gains and allowable capital losses from dispositions of property vested in the corporation shall be deemed to be taxable capital gains or allowable capital losses, as the case may be, of the corporation.
Marginal note:Insurer’s income or loss
(2)Notwithstanding any other provision of this Act,
(a)if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, its income or loss for the year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada;
(b)if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, for greater certainty,
(i)in computing the insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the insurer, and
(ii)in computing the insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the insurer in the course of carrying on an insurance business,
(A)there is to be included each taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the insurer, and
(B)there is not to be included any taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the insurer;
(c)if a non-resident insurer carries on an insurance business in Canada in a taxation year, its income or loss for the taxation year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada; and
(d)if a non-resident insurer carries on an insurance business in Canada in a taxation year,
(i)in computing the non-resident insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the non-resident insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the non-resident insurer, and
(ii)in computing the non-resident insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the non-resident insurer in the course of carrying on an insurance business,
(A)there is to be included each taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the non-resident insurer, and
(B)there is not to be included any taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the non-resident insurer.
Marginal note:Income — designated foreign insurance business
(2.1)If a life insurer resident in Canada has a designated foreign insurance business in a taxation year,
(a)for the purposes of computing the life insurer’s income or loss from carrying on an insurance business in Canada for that taxation year, the life insurer’s insurance business carried on in Canada is deemed to include the insurance of the specified Canadian risks that are insured as part of the designated foreign insurance business;
(b)if, in the immediately preceding taxation year, the designated foreign insurance business was not a designated foreign insurance business, for the purposes of paragraph (4)(a), subsection (9), the definitiondesignated insurance propertyin subsection (12) and paragraphs 12(1)(d) to (e), the life insurer is deemed to have carried on the business in Canada in that immediately preceding year and to have claimed the maximum amounts to which it would have been entitled under subparagraph (3)(a)(i) and paragraphs 20(1)(l) and (l.1) and 20(7)(c) in respect of those specified Canadian risks if that designated foreign insurance business had been a designated foreign insurance business in that immediately preceding year; and
(c)for the purposes of subparagraph (3)(a)(ii.1) and subsection 20(22),
(i)the life insurer is deemed to have carried on the business in Canada in that immediately preceding year, and
(ii)the amounts, if any, that would have been prescribed in respect of the insurer for the purposes of paragraphs (4)(b) and 12(1)(e.1) for that immediately preceding year in respect of the insurance policies in respect of those specified Canadian risks are deemed to have been included in computing its income for that year.
Marginal note:Insurance swaps
(2.2)For the purposes of this section, one or more risks insured by a life insurer resident in Canada, as part of an insurance business carried on in a country other than Canada, that would not be specified Canadian risks if this Act were read without reference to this subsection, are deemed to be specified Canadian risks if those risks would be deemed to be specified Canadian risks because of paragraph 95(2)(a.21) if the life insurer were a foreign affiliate of a taxpayer.
Marginal note:Insurance swaps
(2.3)Subsection (2.4) applies in respect of one or more agreements or arrangements if
(a)subsection (2.2) applies to deem one or more risks insured by a particular life insurer resident in Canada to be specified Canadian risks; and
(b)those agreements or arrangements are in respect of risks described in paragraph (a) and have been entered into by any of the following (in subsection (2.4), referred to as an “agreeing party”):
(i)the particular life insurer,
(ii)another life insurer resident in Canada that does not deal at arm’s length with the particular life insurer,
(iii)a partnership of which a life insurer described in subparagraph (i) or (ii) is a member,
(iv)a foreign affiliate of either the particular life insurer or a person that does not deal at arm’s length with the particular life insurer, and
(v)a partnership of which a foreign affiliate described in subparagraph (iv) is a member.
Marginal note:Insurance swaps
(2.4)If this subsection applies in respect of one or more agreements or arrangements,
(a)to the extent that activities performed in connection with those agreements or arrangements can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph 95(2)(a.21)(ii) (with any modifications that the circumstances require), those activities are deemed to be,
(i)if the agreeing party is a life insurer resident in Canada, or a partnership of which such a life insurer is a member, part of the life insurer’s insurance business carried on in Canada, and
(ii)if the agreeing party is a foreign affiliate of a taxpayer, or a partnership of which such an affiliate is a member, a separate business, other than an active business, carried on by the affiliate; and
(b)any income from those activities (including income that pertains to or is incident to those activities) is deemed to be,
(i)if the agreeing party is a life insurer resident in Canada, income from the life insurer’s insurance business carried on in Canada, and
(ii)if the agreeing party is a foreign affiliate of a taxpayer, income from the business, other than an active business.
Marginal note:Ceding of Canadian risks
(2.5)Any income of a life insurer resident in Canada for a taxation year, from its insurance business carried on in a country other than Canada, in respect of the ceding of specified Canadian risks that would, if the life insurer were a foreign affiliate of a taxpayer, be included in computing the life insurer’s income from a business, other than an active business, for the taxation year because of subparagraph 95(2)(a.2)(iii), is to be included in computing the life insurer’s income or loss for that taxation year from its insurance business carried on in Canada, except to the extent it is already included because of subsection (2.1), (2.2) or (2.4).
Marginal note:Anti-avoidance
(2.6)For the purposes of this section,
(a)a risk is deemed to be a specified Canadian risk that is insured as part of an insurance business carried on in Canada by a particular life insurer resident in Canada if
(i)the particular life insurer insured the risk as part of a transaction or series of transactions,
(ii)the risk would not be a specified Canadian risk if this Act were read without reference to this subsection, and
(iii)it can reasonably be concluded that one of the purposes of the transaction or series of transactions was to avoid
(A)having a designated foreign insurance business, or
(B)the application of any of subsections (2.1) to (2.5) to the risk; and
(b)if one or more agreements or arrangements in respect of the risk have been entered into by any of the persons or partnerships described in subparagraphs (2.3)(b)(i) to (v) (in this paragraph, referred to as an “agreeing party”),
(i)any activities performed in connection with those agreements or arrangements are deemed to be
(A)if the agreeing party is a life insurer resident in Canada, or a partnership of which such a life insurer is a member, part of the life insurer’s insurance business carried on in Canada, and
(B)if the agreeing party is a foreign affiliate of a taxpayer, or a partnership of which such an affiliate is a member, a separate business, other than an active business, carried on by the affiliate, and
(ii)any income from those activities (including income that pertains to or is incident to those activities) is deemed to be,
(A)if the agreeing party is a life insurer resident in Canada, income from the life insurer’s insurance business carried on in Canada, and
(B)if the agreeing party is a foreign affiliate of a taxpayer, income from the business, other than an active business.
Marginal note:Deductions allowed in computing income
(3)In computing a life insurer’s income for a taxation year from carrying on its life insurance business in Canada, there may be deducted
(a)such of the following amounts as are applicable:
(i)any amount that the insurer claims as a policy reserve for the year in respect of its groups of life insurance contracts in Canada at the end of the year, not exceeding the total of amounts that the insurer is allowed by regulation to deduct in respect of those groups,
(ii)[Repealed, 2022, c. 19, s. 26]
(ii.1)the amount included under paragraph 138(4)(b) in computing the insurer’s income for the taxation year preceding the year,
(iii)the amount determined by the following formula:
A – B
where
(iv)[Repealed, 2013, c. 34, s. 286]
(v)each amount (other than an amount credited under a participating life insurance policy) that would be deductible under section 140 in computing the insurer’s income for the year if the reference in that section to “an insurance business other than a life insurance business” were read as a reference to “a life insurance business in Canada”;
(b)the total of amounts each of which is a policy loan made by the insurer in the year and after 1977; and
(c)the amount of tax under Part XII.3 payable by the insurer in respect of its taxable Canadian life investment income for the year.
(d)[Repealed, 1995, c. 21, s. 57(2)]
(e) to (g)[Repealed, 2013, c. 34, s. 286]
(3.1)[Repealed, 2013, c. 34, s. 286]
Marginal note:Amounts included in computing income
(4)In computing a life insurer’s income for a taxation year from carrying on its life insurance business in Canada, there shall be included
(a)each amount deducted under subparagraph (3)(a)(i) in computing the insurer’s income for the preceding taxation year;
(b)the amount prescribed in respect of the insurer for the year in respect of its groups of life insurance contracts in Canada at the end of the year; and
(c)the total of all amounts received by the insurer in the year in respect of the repayment of policy loans or in respect of interest on policy loans.
Marginal note:Life insurance policy
(4.01)For the purposes of subsections 138(3) and 138(4), a life insurance policy includes a benefit under a group life insurance policy or a group annuity contract.
(4.1) to (4.3)[Repealed, 2013, c. 34, s. 286]
Marginal note:Income inclusion
(4.4)If, for a period of time in a taxation year, a life insurer
(a)owned land (other than land referred to in paragraph (c) or (d)) or an interest, or for civil law a right, therein that was not held primarily for the purpose of gaining or producing income from the land for the period,
(b)had an interest, or for civil law a right, in a building that was being constructed, renovated or altered,
(c)owned land subjacent to the building referred to in paragraph (b) or an interest, or for civil law a right, therein, or
(d)owned land immediately contiguous to the land referred to in paragraph (c) or an interest, or for civil law a right, therein that was used or was intended to be used for a parking area, driveway, yard, garden or other use necessary for the use or intended use of the building referred to in paragraph (b),
there shall be included in computing the insurer’s income for the year, where the land, building, or interest or right, was designated insurance property of the insurer for the year, or property used or held by it in the year in the course of carrying on an insurance business in Canada, the total of all amounts each of which is the amount prescribed in respect of the insurer’s cost or capital cost, as the case may be, of the land, building, or interest or right, for the period, and the amount prescribed shall, at the end of the period, be included in computing
(e)where the land, or interest or right therein, is property described in paragraph (a), the cost to the insurer of the land, or of the interest or right therein, and
(f)where the land, building, or interest or right therein, is property described in paragraphs (b) to (d), the capital cost to the insurer of the interest or right in the building described in paragraph (b).
Marginal note:Application
(4.5)Where a life insurer transfers or lends property, directly or indirectly in any manner whatever, to a person or partnership (in this subsection referred to as the “transferee”) that is affiliated with the insurer or a person or partnership that does not deal at arm’s length with the insurer and
(a)that property,
(b)property substituted for that property, or
(c)property the acquisition of which was assisted by the transfer or loan of that property
was property described in paragraph (4.4)(a), (b), (c) or (d) of the transferee for a period of time in a taxation year of the insurer, the following rules apply:
(d)subsection 138(4.4) shall apply to include an amount in the insurer’s income for the year on the assumption that the property was owned by the insurer for the period, was property described in paragraph (4.4)(a), (b), (c) or (d) of the insurer and was used or held by it in the year in the course of carrying on an insurance business in Canada, and
(e)an amount included in the insurer’s income for the year under subsection 138(4.4) by reason of the application of this subsection shall
(i)where subparagraph 138(4.5)(e)(ii) does not apply, be added by the insurer in computing the cost to it of shares of the capital stock of or an interest in the transferee at the end of the year, or
(ii)where the insurer and the transferee have jointly elected in prescribed form on or before the day that is the earliest of the days on or before which any taxpayer making the election is required to file a return pursuant to section 150 for the taxation year that includes the period, be added in computing
(A)where the property is land or an interest, or for civil law a right, therein of the transferee described in paragraph (4.4)(a), the cost to the transferee of the land, or of the interest or right therein, and
(B)where the property is land or a building, or an interest therein or for civil law a right therein, described in paragraphs (4.4)(b) to (d), the capital cost to the transferee of the interest or of the right in the building described in paragraph (4.4)(b).
Marginal note:Completion
(4.6)For the purposes of subsection 138(4.4), the construction, renovation or alteration of a building is completed at the earlier of the day on which the construction, renovation or alteration is actually completed and the day on which all or substantially all of the building is used for the purpose for which it was constructed, renovated or altered.
Marginal note:Deductions not allowed
(5)Notwithstanding any other provision of this Act,
(a)in the case of an insurer, no deduction may be made under paragraph 20(1)(l) in computing its income for a taxation year from an insurance business in Canada in respect of a premium or other consideration for a life insurance policy in Canada or an interest therein; and
(b)in the case of a non-resident insurer or a life insurer resident in Canada that carries on any of its insurance business in a country other than Canada, no deduction may be made under paragraph 20(1)(c) or 20(1)(d) in computing its income for a taxation year from carrying on an insurance business in Canada, except in respect of
(i)interest on borrowed money used to acquire designated insurance property for the year, or to acquire property for which designated insurance property for the year was substituted property, for the period in the year during which the designated insurance property was held by the insurer in respect of the business,
(ii)interest on amounts payable for designated insurance property for the year in respect of the business, or
(iii)interest on deposits received or other amounts held by the insurer that arose in connection with life insurance policies in Canada or with policies insuring Canadian risks.
(iv)[Repealed, 2001, c. 17, s. 133(2)]
Marginal note:No deduction
(5.1)No deduction shall be made under subsection 20(12) in computing the income of a life insurer resident in Canada in respect of foreign taxes attributable to its insurance business.
(5.2)[Repealed, 1995, c. 21, s. 57(5)]
Marginal note:Deduction for dividends from taxable corporations
(6)In computing the taxable income of a life insurer for a taxation year, no deduction from the income of the insurer for the year may be made under section 112 but, except as otherwise provided by that section, there may be deducted from that income the total of taxable dividends (other than dividends on term preferred shares that are acquired in the ordinary course of the business carried on by the life insurer) included in computing the insurer’s income for the year and received by the insurer in the year from taxable Canadian corporations.
(7)[Repealed, 1997, c. 25, s. 39(8)]
Marginal note:No deduction for foreign tax
(8)No deduction shall be made under section 126 from the tax payable under this Part for a taxation year by a life insurer resident in Canada in respect of such part of an income or profits tax as can reasonably be attributable to income from its insurance business.
Marginal note:Computation of income
(9)Where in a taxation year an insurer (other than an insurer resident in Canada that does not carry on a life insurance business) carries on an insurance business in Canada and in a country other than Canada, there shall be included in computing its income for the year from carrying on its insurance businesses in Canada the total of
(a)its gross investment revenue for the year from its designated insurance property for the year, and
(b)the amount prescribed in respect of the insurer for the year.
Marginal note:Application of financial institution rules
(10)Notwithstanding sections 142.3, 142.4, 142.5 and 142.51, where in a taxation year an insurer (other than an insurer resident in Canada that does not carry on a life insurance business) carries on an insurance business in Canada and in a country other than Canada, in computing its income for the year from carrying on an insurance business in Canada,
(a)sections 142.3, 142.5 and 142.51 apply only in respect of property that is designated insurance property for the year in respect of the business; and
(b)section 142.4 applies only in respect of the disposition of property that, for the taxation year in which the insurer disposed of it, was designated insurance property in respect of the business.
(11)[Repealed, 1995, c. 21, s. 57(7)]
Marginal note:Identical properties
(11.1)For the purpose of section 47, any property of a life insurance corporation that would, but for this subsection, be identical to any other property of the corporation is deemed not to be identical to the other property unless both properties are
(a)designated insurance property of the insurer in respect of a life insurance business carried on in Canada; or
(b)designated insurance property of the insurer in respect of an insurance business in Canada other than a life insurance business.
Marginal note:Computation of capital gain on pre-1969 depreciable property
(11.2)For the purposes of computing the amount of a capital gain from the disposition of any depreciable property acquired by a life insurer before 1969, the capital cost of the property to the insurer shall be its capital cost determined without reference to paragraph 32(1)(a) ofAn Act to amend the Income Tax Act, chapter 44 of the Statutes of Canada, 1968-69, as it read in its application to the 1971 taxation year.
Marginal note:Deemed disposition
(11.3)Subject to subsection 138(11.31), where a property of a life insurer resident in Canada that carries on an insurance business in Canada and in a country other than Canada or of a non-resident insurer is
(a)designated insurance property of the insurer for a taxation year, was owned by the insurer at the end of the preceding taxation year and was not designated insurance property of the insurer for that preceding year, or
(b)not designated insurance property for a taxation year, was owned by the insurer at the end of the preceding taxation year and was designated insurance property of the insurer for that preceding year,
the following rules apply:
(c)the insurer is deemed to have disposed of the property at the beginning of the year for proceeds of disposition equal to its fair market value at that time and to have reacquired the property immediately after that time at a cost equal to that fair market value,
(d)where paragraph (a) applies, any gain or loss arising from the disposition is deemed not to be a gain or loss from designated insurance property of the insurer in the year, and
(e)where paragraph (b) applies, any gain or loss arising from the disposition is deemed to be a gain or loss from designated insurance property of the insurer in the year.
Marginal note:Exclusion from deemed disposition
(11.31)Subsection 138(11.3) does not apply
(a)to deem a disposition in a taxation year of a property of an insurer where subsection 142.5(2) deemed the insurer to have disposed of the property in its preceding taxation year; nor
(b)for the purposes of paragraph 20(1)(l), the description of A and paragraph (b) of the description of F in the definitionundepreciated capital costin subsection 13(21) and the definitiondesignated insurance propertyin subsection 138(12).
Marginal note:Deduction of loss
(11.4)Notwithstanding any other provision of this Act, where an insurer has a loss for a taxation year from the disposition, because of subsection 138(11.3), of a property other than a specified debt obligation (as defined in subsection 142.2(1)), and the loss would, but for this subsection, have been deductible in the year, the loss shall be deductible only in the taxation year in which the taxpayer disposes of the property otherwise than because of subsection 138(11.3).
(11.41)[Repealed, 1995, c. 21, s. 57(12)]
Marginal note:Transfer of insurance business by non-resident insurer
(11.5)Where
(a)a non-resident insurer (in this subsection referred to as the “transferor”) has, at any time in a taxation year, ceased to carry on all or substantially all of an insurance business carried on by it in Canada in that year,
(b)the transferor has, at that time or within 60 days after that time, transferred all or substantially all of the property (in this subsection referred to as the “transferred property) that is owned by it at that time and that was designated insurance property in respect of the business for the taxation year that, because of paragraph (h), ended immediately before that time
(i)to a corporation (in this subsection referred to as the “transferee”) that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that began immediately after that time to carry on that insurance business in Canada, and
(ii)for consideration that includes shares of the capital stock of the transferee,
(c)the transferee has, at that time or within 60 days thereafter, assumed or reinsured all or substantially all of the obligations of the transferor that arose in the course of carrying on that insurance business in Canada, and
(d)the transferor and the transferee have jointly elected in prescribed form and in accordance with subsection 138(11.6),
the following rules apply:
(e)subject to paragraph 138(11.5)(k.1), where the fair market value, at that time, of the consideration (other than shares of the capital stock of the transferee or a right to receive any such shares) received or receivable by the transferor for the transferred property does not exceed the total of the cost amounts to the transferor, at that time, of the transferred property, the proceeds of disposition of the transferor and the cost to the transferee of the transferred property shall be deemed to be the cost amount, at that time, to the transferor of the transferred property, and in any other case, the provisions of subsection 85(1) shall be applied in respect of the transfer,
(f)where the provisions of subsection 85(1) are not required to be applied in respect of the transfer, the cost to the transferor of any particular property (other than shares of the capital stock of the transferee or a right to receive any such shares) received or receivable by it as consideration for the transferred property shall be deemed to be the fair market value, at that time, of the particular property,
(g)where the provisions of subsection 85(1) are not required to be applied in respect of the transfer, the cost to the transferor of any shares of the capital stock of the transferee received or receivable by the transferor as consideration for the transferred property shall be deemed to be
(i)where the shares are preferred shares of any class of the capital stock of the transferee, the lesser of
(A)the fair market value of those shares immediately after the transfer of the transferred property, and
(B)the amount determined by the formula
A × B/C
where
(ii)where the shares are common shares of any class of the capital stock of the transferee, the amount determined by the formula
A × B/C
where
(h)for the purposes of this Act, the transferor and the transferee shall be deemed to have had taxation years ending immediately before that time and, for the purposes of determining the fiscal periods of the transferor and transferee after that time, they shall be deemed not to have established fiscal periods before that time,
(i)for the purpose of determining the amount of gross investment revenue required by subsection 138(9) to be included in computing the transferor’s income for the particular taxation year referred to in paragraph 138(11.5)(h) and its gains and losses from its designated insurance property for its subsequent taxation years, the transferor is deemed to have transferred the business referred to in paragraph 138(11.5)(a), the property referred to in paragraph 138(11.5)(b) and the obligations referred to in paragraph 138(11.5)(c) to the transferee on the last day of the particular year,
(j)for the purpose of determining the income of the transferor and the transferee for their taxation years following their taxation years referred to in paragraph (h), amounts deducted by the transferor as reserves under subparagraph (3)(a)(i) and paragraphs 20(1)(l) and (l.1) and 20(7)(c) of this Act and section 33 and paragraph 138(3)(c) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in its taxation year referred to in paragraph (h) in respect of the transferred property referred to in paragraph (b) or the obligations referred to in paragraph (c) are deemed to have been deducted by the transferee, and not the transferor, for its taxation year referred to in paragraph (h),
(j.1)for the purpose of determining the income of the transferor and the transferee for their taxation years following their taxation years referred to in paragraph 138(11.5)(h), amounts included under paragraphs 138(4)(b) and 12(1)(e.1) in computing the transferor’s income for its taxation year referred to in paragraph 138(11.5)(h) in respect of the insurance policies of the business referred to in paragraph 138(11.5)(a) are deemed to have been included in computing the income of the transferee, and not of the transferor, for their taxation years referred to in paragraph 138(11.5)(h),
(k)for the purposes of this section, sections 12, 12.4, 20, 138.1, 140 and 142, paragraphs 142.4(4)(c) and (d), section 148 and Part XII.3, the transferee is, in its taxation years following its taxation year referred to in paragraph (h), deemed to be the same person as, and a continuation of, the transferor in respect of the business referred to in paragraph (a), the transferred property referred to in paragraph (b) and the obligations referred to in paragraph (c),
(k.1)except for the purpose of this subsection, where the provisions of subsection 85(1) are not required to be applied in respect of the transfer,
(i)the transferor shall be deemed not to have disposed of a transferred property that is a specified debt obligation (other than a mark-to-market property), and
(ii)the transferee shall be deemed, in respect of a transferred property that is a specified debt obligation (other than a mark-to-market property), to be the same person as, and a continuation of, the transferor,
and for the purpose of this paragraph,mark-to-market propertyandspecified debt obligationhave the meanings assigned by subsection 142.2(1),
(k.2)for the purposes of subsections 112(5) to 112(5.2) and 112(5.4) and the definitionmark-to-market propertyin subsection 142.2(1), the transferee shall be deemed, in respect of the transferred property, to be the same person as, and a continuation of, the transferor,
(l)for the purposes of this subsection and subsections (11.7) and (11.9), the fair market value of consideration received by the transferor from the transferee in respect of the assumption or reinsurance of a particular obligation referred to in paragraph (c) is deemed to be the total of the amounts deducted by the transferor as a reserve under subparagraph (3)(a)(i) and paragraph 20(7)(c) in its taxation year referred to in paragraph (h) in respect of the particular obligation, and
(m)for the purpose of computing the income of the transferor or the transferee for their taxation years following their taxation years referred to in paragraph 138(11.5)(h),
(i)an amount in respect of a reinsurance premium paid or payable by the transferor to the transferee in respect of the obligations referred to in paragraph 138(11.5)(c), or
(ii)an amount in respect of a reinsurance commission paid or payable by the transferee to the transferor in respect of the amount referred to in subparagraph 138(11.5)(m)(i)
under a reinsurance arrangement undertaken to effect the transfer of the insurance business to which this subsection applied shall be included or deducted, as the case may be, only to the extent that may be reasonably regarded as necessary to determine the appropriate amount of income of both the transferor and the transferee.
Marginal note:Time of election
(11.6)Any election under subsection 138(11.5) shall be made on or before the day that is the earliest of the days on or before which any taxpayer making the election is required to file a return of income pursuant to section 150 for the taxation year in which the transactions to which the election relates occurred.
Marginal note:Computation of paid-up capital
(11.7)Where, after December 15, 1987, subsection 138(11.5) is applicable in respect of a transfer of property by a non-resident insurer to a qualified related corporation of the insurer and the provisions of subsection 85(1) were not required to be applied in respect of the transfer, the following rules apply:
(a)in computing the paid-up capital, at any time after the transfer, in respect of any particular class of shares of the capital stock of the qualified related corporation, there shall be deducted an amount determined by the formula
(A - B) × C/A
where
(b)in computing the paid-up capital, at any time after December 15, 1987, in respect of any particular class of shares of the capital stock of the qualified related corporation, there shall be added an amount equal to the lesser of
(i)the amount, if any, by which
(A)the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid after December 15, 1987 and before that time by the corporation
exceeds
(B)the total of such dividends that would have been determined under clause 138(11.7)(b)(i)(A) if this Act were read without reference to paragraph 138(11.7)(a), and
(ii)the total of all amounts each of which is an amount required by paragraph 138(11.7)(a) to be deducted in computing the paid-up capital in respect of that class of shares after December 15, 1987 and before that time.
Marginal note:Rules on transfers of depreciable property
(11.8)Where
(a)subsection 138(11.5) is applicable in respect of a transfer of depreciable property by a non-resident insurer to a qualified related corporation,
(b)the provisions of subsection 85(1) were not required to be applied in respect of the transfer, and
(c)the capital cost to the insurer of the depreciable property exceeds its proceeds of disposition therefor,
for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a), the following rules apply:
(d)the capital cost of the depreciable property to the corporation shall be deemed to be the amount that was the capital cost thereof to the insurer, and
(e)the excess shall be deemed to have been allowed to the corporation in respect of the property under regulations made under paragraph 20(1)(a) in computing its income for taxation years ending before the transfer.
Marginal note:Computation of contributed surplus
(11.9)Where, after December 15, 1987, subsection 138(11.5) or 85(1) is applicable in respect of a transfer of property by a person or partnership to an insurance corporation resident in Canada and
(a)the total of
(i)the fair market value, immediately after the transfer, of any consideration (other than shares of the capital stock of the corporation) received or receivable by the person or partnership from the corporation for the transferred property,
(ii)the increase, if any, in the paid-up capital of all the shares of the capital stock of the corporation (determined without reference to subsection 138(11.7) or 85(2.1) as it applies in respect of the transfer) arising on the transfer, and
(iii)the increase, if any, in the contributed surplus of the corporation (determined without reference to this subsection as it applies in respect of the transfer) arising on the transfer
exceeds
(b)the total of
(i)the total of all amounts each of which is an amount required to be deducted in computing the paid-up capital of a class of shares of the capital stock of the corporation under subsection 138(11.7) or 85(2.1), as the case may be, as it applies in respect of the transfer, and
(ii)the cost to the corporation of the transferred property,
for the purposes of paragraph 84(1)(c.1) and subsections 219(5.2) and 219(5.3), the contributed surplus of the corporation arising on the transfer shall be deemed to be the amount, if any, by which the amount of the contributed surplus otherwise determined exceeds the amount, if any, by which the total determined under paragraph 138(11.9)(a) exceeds the total determined under paragraph 138(11.9)(b).
Marginal note:Computation of income of non-resident insurer
(11.91)Where, at any time in a particular taxation year,
(a)a non-resident insurer carries on an insurance business in Canada, and
(b)immediately before that time, the insurer was not carrying on an insurance business in Canada or ceased to be exempt from tax under this Part on any income from such business by reason of any Act of Parliament or anything approved, made or declared to have the force of law thereunder,
for the purpose of computing the income of the insurer for the particular taxation year,
(c)the insurer shall be deemed to have had a taxation year ending immediately before the commencement of the particular taxation year,
(d)for the purposes of paragraph (4)(a), subsection (9), the definitiondesignated insurance propertyin subsection (12) and paragraphs 12(1)(d), (d.1) and (e), the insurer is deemed to have carried on the business in Canada in that preceding year and to have claimed the maximum amounts to which it would have been entitled under subparagraph (3)(a)(i) and paragraphs 20(1)(l) and (l.1) and 20(7)(c) for that year,
(d.1)for the purposes of subsection 20(22) and subparagraph 138(3)(a)(ii.1),
(i)the insurer is deemed to have carried on the business referred to in paragraph 138(11.91)(a) in Canada in the preceding taxation year referred to in paragraph 138(11.91)(c), and
(ii)the amounts, if any, that would have been prescribed in respect of the insurer for the purposes of paragraphs 138(4)(b) and 12(1)(e.1) for that preceding year in respect of the insurance policies of that business are deemed to have been included in computing its income for that year, and
(e)the insurer is deemed to have disposed, immediately before the beginning of the particular taxation year, of each property owned by it at that time that is designated insurance property in respect of the business referred to in paragraph (a) for the particular taxation year, for proceeds of disposition equal to the fair market value at that time and to have reacquired, at the beginning of the particular taxation year, the property at a cost equal to that fair market value.
(f)[Repealed, 2013, c. 34, s. 286]
Marginal note:Computation of income where insurance business is transferred
(11.92)Where, at any time in a taxation year, an insurer (in this subsection referred to as the “vendor”) has disposed of
(a)all or substantially all of an insurance business carried on by it in Canada, or
(b)all or substantially all of a line of business of an insurance business carried on by it in Canada
to a person (in this subsection referred to as the “purchaser”) and obligations in respect of the business or line of business, as the case may be, in respect of which a reserve may be claimed under subparagraph (3)(a)(i) or paragraph 20(7)(c) (in this subsection referred to as the “obligations”) were assumed by the purchaser, the following rules apply:
(c)for the purpose of determining the amount of the gross investment revenue required to be included in computing the income of the vendor and the purchaser under subsection 138(9) and the amount of the gains and losses of the vendor and the purchaser from designated insurance property for the year
(i)the vendor and the purchaser shall, in addition to their normal taxation years, be deemed to have had a taxation year ending immediately before that time, and
(ii)for the taxation years of the vendor and the purchaser following that time, the business or line of business, as the case may be, disposed of to, and the obligations assumed by, the purchaser shall be deemed to have been disposed of or assumed, as the case may be, on the last day of the taxation year referred to in subparagraph 138(11.92)(c)(i),
(d)for the purpose of computing the income of the vendor and the purchaser for taxation years ending after that time,
(i)an amount paid or payable by the vendor to the purchaser in respect of the obligations, or
(ii)an amount in respect of a commission paid or payable by the purchaser to the vendor in respect of the amount referred to in subparagraph 138(11.92)(d)(i)
shall be deemed to have been paid or payable or received or receivable, as the case may be, by the vendor or the purchaser, as the case may be, in the course of carrying on the business or line of business, as the case may be, and
(e)where the vendor has disposed of all or substantially all of an insurance business referred to in paragraph 138(11.92)(a), the vendor shall, for the purposes of section 219, be deemed to have ceased to carry on that business at that time.
Marginal note:Property acquired on default in payment
(11.93)Where, at any time in a taxation year of an insurer, the beneficial ownership of property is acquired or reacquired by the insurer in consequence of the failure to pay all or any part of an amount (in this subsection referred to as the “insurer’s claim”) owing to the insurer at that time in respect of a bond, debenture, mortgage, hypothecary claim, agreement of sale or any other form of indebtedness owned by the insurer, the following rules apply to the insurer:
(a)section 79.1 does not apply in respect of the acquisition or reacquisition;
(b)the insurer shall be deemed to have acquired or reacquired, as the case may be, the property at an amount equal to the fair market value of the property, immediately before that time;
(c)the insurer shall be deemed to have disposed at that time of the portion of the indebtedness represented by the insurer’s claim for proceeds of disposition equal to that fair market value and, immediately after that time, to have reacquired that portion of the indebtedness at a cost of nil;
(d)the acquisition or reacquisition shall be deemed to have no effect on the form of the indebtedness; and
(e)in computing the insurer’s income for the year or a subsequent taxation year, no amount is deductible under paragraph 20(1)(l) in respect of the insurer’s claim.
Marginal note:Transfer of insurance business by resident insurer
(11.94)Where
(a)an insurer resident in Canada (in this subsection referred to as the “transferor”) has, at any time in a taxation year, ceased to carry on all or substantially all of an insurance business carried on by it in Canada in that year,
(b)the transferor has, at that time or within 60 days after that time,
(i)in the case of a transferor that is a life insurer and that carries on an insurance business in Canada and in a country other than Canada in the year, transferred all or substantially all of the property (in subsection (11.5) referred to as the “transferred property”) that is owned by it at that time and that was designated insurance property in respect of the business for the taxation year that, because of paragraph (11.5)(h), ended immediately before that time, or
(ii)in any other case, transferred all or substantially all of the property owned by it at that time and used by it in the year in, or held by it in the year in the course of, carrying on that insurance business in Canada in that year (in subsection (11.5) referred to as the “transferred property”)
to a corporation resident in Canada (in this subsection referred to as the “transferee”) that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that, immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,
(c)the transferee has, at that time or within 60 days thereafter, assumed or reinsured all or substantially all of the obligations of the transferor that arose in the course of carrying on that insurance business in Canada, and
(d)the transferor and the transferee have jointly elected in prescribed form and in accordance with subsection 138(11.6),
paragraphs 138(11.5)(e) to 138(11.5)(m) and subsections 138(11.7) to 138(11.9) apply in respect of the transfer.
Marginal note:Definitions
(12)In this section,
accumulated 1968 deficit[Repealed, 1997, c. 25, s. 39(16)]
amount payable, in respect of a policy loan at a particular time, means the amount of the policy loan and the interest thereon that is outstanding at that time; (montant payable)
base yearof an insurer means the insurer’s taxation year that immediately precedes its transition year; (année de base)
Canada security[Repealed, 1995, c. 21, s. 57(15)]
contractual service marginfor a group of insurance contracts of an insurer, or a group of reinsurance contracts held by the insurer, at the end of a taxation year, means the greater of the positive or negative amount of the contractual service margin for the group
(a)that would be reported as at the end of the taxation year if the amount were determined without reference to amounts described in subparagraphs (a)(i) to (iii) of the definitionliability for remaining coveragein this subsection, and
(b)that would be determined at the end of the taxation year in respect of the group in accordance with International Financial Reporting Standards using reasonable assumptions in the circumstances if the amount were determined without reference to amounts described in subparagraphs (a)(i) to (iii) of the definitionliability for remaining coveragein this subsection; (marge sur services contractuels)
cost[Repealed, 1995, c. 21, s. 57(15)]
deposit accounting insurance policyin respect of an insurer’s taxation year means an insurance policy of the insurer that, according to International Financial Reporting Standards, is not an insurance contract for that taxation year; (police d’assurance à comptabilité de dépôt)
designated foreign insurance business, of a life insurer resident in Canada in a taxation year, means an insurance business that is carried on by the life insurer in a country other than Canada in the year unless more than 90% of the gross premium revenue from the business for the year from the insurance of risks (net of reinsurance ceded) is in respect of the insurance of risks (other than specified Canadian risks) of persons with whom the life insurer deals at arm’s length; (entreprise d’assurance étrangère désignée)
designated insurance propertyfor a taxation year of an insurer (other than an insurer resident in Canada that at no time in the year carried on a life insurance business) that, at any time in the year, carried on an insurance business in Canada and in a country other than Canada, means property determined in accordance with prescribed rules except that, in its application to any taxation year,designated insurance propertyfor the 1998 or a preceding taxation year means property that was, under this subsection as it read in its application to taxation years that ended in 1996, property used by it in the year in, or held by it in the year in the course of, carrying on an insurance business in Canada; (bien d’assurance désigné)
excluded policyin respect of an insurer’s base year means an insurance policy of the insurer that would be a deposit accounting insurance policy for the insurer’s base year if International Financial Reporting Standards applied for that base year; (police exclue)
gross investment revenueof an insurer for a taxation year means the amount determined by the formula
A + B + C + D + E + F - G
where
(a)taxable dividends, and
(b)amounts received or receivable as, on account of, in lieu of or in satisfaction of, interest, rentals or royalties, other than amounts in respect of debt obligations to which subsection 142.3(1) applies for the year,
(a)all amounts required by paragraph 142.3(1)(a) to be included in computing its income for the year, and
(b)all amounts required by subsection 12(3) or 20(14) to be included in computing its income for the year except to the extent that those amounts are included in the computation of A,
V - W
where
and
(a)an amount deemed by subparagraph 16(6)(a)(ii) to be paid by it in respect of the year as interest, or
(b)an amount deductible under paragraph 142.3(1)(b) in computing its income for the year; (revenus bruts de placements)
group of insurance contractsof an insurer means a group of insurance contracts of the insurer, determined according to International Financial Reporting Standards, that is a group for the purposes of determining an amount of the insurer that is reported as at the end of the insurer’s taxation year and, for greater certainty, includes a group of insurance contracts that include reinsurance contracts under which the insurer has assumed reinsurance risk; (groupe de contrats d’assurance)
group of life insurance contractsof an insurer means a group of life insurance contracts of the insurer, determined according to International Financial Reporting Standards, that is a group for the purposes of determining an amount of the insurer that is reported as at the end of the insurer’s taxation year and, for greater certainty, includes a group of life insurance contracts that include reinsurance contracts under which the insurer has assumed reinsurance risk; (groupe de contrats d’assurance-vie)
group of life insurance contracts in Canadaof an insurer means a group of life insurance contracts of the insurer that includes only life insurance contracts issued or effected by the insurer on the life of a person resident in Canada at the time the contract was issued or effected; (groupe de contrats d’assurance-vie au Canada)
group of reinsurance contractsheld by an insurer means a group of reinsurance insurance contracts held by the insurer, determined according to International Financial Reporting Standards, that is a group for the purposes of determining an amount of the insurer that is reported as at the end of the insurer’s taxation year; (groupe de contrats de réassurance)
group of segregated fund policiesof an insurer means a group of insurance contracts of the insurer that includes only segregated fund policies (within the meaning assigned by paragraph 138.1(1)(a)); (groupe de polices à fonds réservé)
insurance, of a risk, includes the reinsurance of the risk; (assurance)
interest, in relation to a policy loan, means the amount in respect of the policy loan that is required to be paid under the terms and conditions of the policy in order to maintain the policyholder’s interest in the policy; (intérêt)
liability for incurred claims, for a group of insurance contracts of an insurer at the end of a taxation year, means the lesser of the positive or negative amount of the liability for incurred claims for the group
(a)that would be reported as at the end of the taxation year if the amount were determined without reference to amounts described in subparagraphs (a)(i) to (iii) of the definitionliability for remaining coveragein this subsection, and
(b)that would be determined at the end of the taxation year in accordance with International Financial Reporting Standards using reasonable assumptions in the circumstances if the amount were determined without reference to amounts described in subparagraphs (a)(i) to (iii) of the definitionliability for remaining coveragein this subsection; (passif au titre des sinistres survenus)
liability for remaining coverage, for a group of insurance contracts of an insurer at the end of a taxation year, means the lesser of the positive or negative amount of the liability for remaining coverage for the group
(a)that would be reported as at the end of the taxation year if the amount were determined without reference to
(i)projected
(A)income and capital taxes (other than the tax payable under Part XII.3),
(B)taxes on premiums that are not deductible under Part I,
(C)amounts not deductible after the taxation year in computing income under Part I, and
(D)cash flows in respect of funds withheld arrangements,
(ii)amounts payable that are deductible for the taxation year, or a previous taxation year, in computing income under Part I, and
(iii)amounts receivable to the extent they have been included for the taxation year, or a previous taxation year, in computing income under Part I, and
(b)that would be determined at the end of the taxation year in accordance with International Financial Reporting Standards using reasonable assumptions in the circumstances if the amount were determined without reference to amounts described in subparagraphs (a)(i) to (iii); (passif au titre de la couverture restante)
life insurance policyincludes an annuity contract and a contract all or any part of the insurer’s reserves for which vary in amount depending on the fair market value of a specified group of assets; (police d’assurance-vie)
life insurance policy in Canadameans a life insurance policy issued or effected by an insurer on the life of a person resident in Canada at the time the policy was issued or effected; (police d’assurance-vie au Canada)
maximum tax actuarial reservefor a particular class of life insurance policy for a taxation year of a life insurer means, except as otherwise expressly prescribed, the maximum amount allowable under subparagraph 138(3)(a)(i) as a policy reserve for the year in respect of policies of that class; (provision actuarielle maximale aux fins d’impôt)
1975 branch accounting election deficiency[Repealed, 2013, c. 34, s. 286]
1975-76 excess additional group term reserve[Repealed, 2013, c. 34, s. 286]
1975-76 excess capital cost allowance[Repealed, 2013, c. 34, s. 286]
1975-76 excess investment reserve[Repealed, 2013, c. 34, s. 286]
1975-76 excess policy dividend deduction[Repealed, 2013, c. 34, s. 286]
1975-76 excess policy dividend reserve[Repealed, 2013, c. 34, s. 286]
1975-76 excess policy reserves[Repealed, 2013, c. 34, s. 286]
non-segregated propertyof an insurer means its property other than property included in a segregated fund; (biens non réservés)
participating life insurance policymeans a life insurance policy under which the policyholder is entitled to share (other than by way of an experience rating refund) in the profits of the insurer other than profits in respect of property in a segregated fund; (police d’assurance-vie avec participation)
policyholders’ liabilities, of an insurer as at the end of a taxation year, means the amount reported as policyholders’ liabilities as at the end of the year; (obligation envers les titulaires de polices)
policy loanmeans an amount advanced at a particular time by an insurer to a policyholder in accordance with the terms and conditions of a life insurance policy in Canada; (avance sur police)
property used by it in the year in, or held by it in the year in the course of[Repealed, 1997, c. 25, s. 39(16)]
qualified related corporationof a non-resident insurer has the meaning assigned by subsection 219(8); (société liée admissible)
reinsurance contract held amount, for a group of reinsurance contracts held by an insurer at the end of a taxation year, means the lesser of the positive or negative amount of the reinsurance contract held asset for the group
(a)that would be reported as at the end of the taxation year if the amount were determined without reference to amounts described in subparagraphs (a)(i) to (iii) of the definitionliability for remaining coveragein this subsection, and
(b)that would be determined at the end of the taxation year in accordance with International Financial Reporting Standards using reasonable assumptions in the circumstances if the amount were determined without reference to amounts described in subparagraphs (a)(i) to (iii) of the definitionliability for remaining coveragein this subsection; (montant au titre des contrats de réassurance détenus)
relevant authorityof an insurer means
(a)the Superintendent of Financial Institutions, if the insurer is required by law to report to the Superintendent of Financial Institutions, and
(b)in any other case, the Superintendent of Insurance or other similar officer or authority of the province under whose laws the insurer is incorporated; (autorité compétente)
reserve transition amountof an insurer, in respect of an insurance business carried on by it in its transition year, means the positive or negative amount determined by the formula
A + B − C − D − E − F + G + H
where
(a)the International Financial Reporting Standards that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and
(b)sections 1404 and 1406 of theIncome Tax Regulationswere read in respect of the insurer’s base year as they read in respect of its transition year,
(a)the International Financial Reporting Standards that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and
(b)sections 1400 and 1402 of theIncome Tax Regulationswere read in respect of the insurer’s base year as they read in respect of its transition year,
(a)the International Financial Reporting Standards that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and
(b)sections 1404 and 1406 of theIncome Tax Regulationswere read in respect of the insurer’s base year as they read in respect of its transition year,
(a)the International Financial Reporting Standards that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and
(b)sections 1400 and 1402 of theIncome Tax Regulationswere read in respect of the insurer’s base year as they read in respect of its transition year,
segregated fundhas the meaning given that expression in subsection 138.1(1); (fonds réservé)
specified Canadian riskhas the same meaning as in paragraph 95(2)(a.23); (risques canadiens déterminés)
surplus funds derived from operationsof an insurer as of the end of a particular taxation year means the amount determined by the formula
(A + B + C) – (D + E + F + G)
where
(a)all taxes payable under this Part by the insurer, and all income taxes payable by it under the laws of each province, for each taxation year in the period, except such portion thereof as would not have been payable by it if subsection 138(7) had not been enacted, and
(b)all taxes payable under Parts I.3 and VI by the insurer for each taxation year in the period, and
transition yearof an insurer means the insurer’s first taxation year that begins after 2022. (année transitoire)
Marginal note:Assets and liabilities
(12.1)For greater certainty, in determining the amount of
(a)the contractual service margin, liability for incurred claims and liability for remaining coverage for a group of insurance contracts of an insurer, the amount is
(i)a positive amount if the amount is reported as a liability, and
(ii)a negative amount if the amount is reported as an asset; and
(b)the contractual service margin and reinsurance contract held amount for a group of reinsurance contracts held by an insurer, the amount is
(i)a positive amount if the amount is reported as an asset, and
(ii)a negative amount if the amount is reported as a liability.
Marginal note:IFRS reference
(12.2)Except as otherwise provided, references to International Financial Reporting Standards in this section refer to the International Financial Reporting Standards adopted by the Accounting Standards Board and effective for years that begin on or after January 1, 2023.
Marginal note:Amount reported
(12.3)A reference in subsections (12) and 138.1(1) of this Act and Parts XIV, XXIV and LXXXVI of theIncome Tax Regulationsto an amount that is reported, or that would be reported, of an insurer as at the end of a taxation year means
(a)if the insurer is the Canada Mortgage and Housing Corporation or a foreign affiliate of a taxpayer resident in Canada, an amount that is reported, or that would be reported, in the insurer’s financial statements for the year if those statements were prepared in accordance with International Financial Reporting Standards;
(b)if paragraph (a) does not apply and reporting by the insurer to the insurer’s relevant authority is required at the end of the year, an amount that is reported, or that would be reported, in the insurer’s non-consolidated balance sheet for the year accepted by the insurer’s relevant authority;
(c)if paragraphs (a) and (b) do not apply and the insurer is, throughout the year, subject to the supervision of its relevant authority, an amount that is reported, or that would be reported, in a non-consolidated balance sheet for the year that is prepared in a manner consistent with the requirements that would have applied had reporting to the insurer’s relevant authority been required at the end of the year; and
(d)in any other case, nil.
Variation intax basisandamortized cost
(13)Where
(a)in a taxation year that ended after 1968 and before 1978 an insurer carried on a life insurance business in Canada and an insurance business in a country other than Canada,
(b)the insurer did not make an election in respect of the year under subsection 138(9) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it applied to that year, and
(c)the ratio of the value for the year of the insurer’s specified Canadian assets to its Canadian investment fund for the year exceeded one,
each of the amounts included or deducted as follows in respect of the year shall be multiplied by the ratio referred to in paragraph 138(13)(c):
(d)under paragraph (c), (d), (k) or (l) of the definitiontax basisin subsection 142.4(1) in determining the tax basis of a debt obligation to the insurer, or
(e)under paragraph (c), (d), (f) or (h) of the definitionamortized costin subsection 248(1) in determining the amortized cost of a debt obligation to the insurer.
Marginal note:Meaning of certain expressions
(14)For the purposes of subsection 138(13), the expressionsCanadian investment fund for a taxation year,specified Canadian assetsandvalue for the taxation yearhave the meanings prescribed therefor.
Marginal note:Definition not to apply
(15)In this section, in construing the meaning of the expressiongroup term insurance policy, the definitiongroup term life insurance policyin subsection 248(1) does not apply.
Marginal note:Transition year income inclusion
(16)There shall be included in computing an insurer’s income for its transition year from an insurance business carried on by it in the transition year the positive amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.
Marginal note:Transition year income deduction
(17)There shall be deducted in computing an insurer’s income for its transition year from an insurance business carried on by it in the transition year the absolute value of the negative amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.
Marginal note:IFRS transition — reversals
(17.1)In applying subsections (18) and (19) to an insurer for a taxation year of the insurer in respect of International Financial Reporting Standards,
(a)the reference to “policy reserve” in the description of C in the definitionreserve transition amountin subsection (12) is to be read as a reference to “policy reserve determined without reference to the insurer’s excluded policies”;
(b)the description of D in the definitionreserve transition amountin subsection (12) is to be read as follows:
D.1 − D.2
where
(c)the reference to “life insurance policies” in the description of G in the definitionreserve transition amountin subsection (12) is to be read as a reference to “life insurance policies other than excluded policies”; and
(d)the amount included in the description of H in the definitionreserve transition amountin subsection (12) is to be determined without reference to excluded policies.
Marginal note:Transition year income inclusion reversal
(18)If an amount has been included under subsection (16) in computing an insurer’s income for its transition year from an insurance business carried on by it, there shall be deducted in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula
A × B/1825
where
Marginal note:Transition year income deduction reversal
(19)If an amount has been deducted under subsection (17) in computing an insurer’s income for its transition year from an insurance business carried on by it, there shall be included in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula
A × B/1825
where
Marginal note:Winding-up
(20)If an insurer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent carries on an insurance business, in applying subsections (18) and (19) in computing the income of the insurer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the insurer were distributed to the parent on the winding-up,
(a)the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the insurer in respect of
(i)any amount included under subsection (16) or deducted under subsection (17) in computing the insurer’s income from an insurance business for its transition year,
(ii)any amount deducted under subsection (18) or included under subsection (19) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the start day, and
(iii)any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the start day or a subsequent day and on which the parent carries on an insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the insurer’s income from an insurance business; and
(b)the insurer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (18) and (19) without reference to the start day and days after the start day.
Marginal note:Amalgamations
(21)If there is an amalgamation (within the meaning assigned by subsection 87(1)) of an insurer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation carries on an insurance business, in applying subsections (18) and (19) in computing the income of the new corporation for particular taxation years of the new corporation that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the insurer in respect of
(a)any amount included under subsection (16) or deducted under subsection (17) in computing the insurer’s income from an insurance business for its transition year;
(b)any amount deducted under subsection (18) or included under subsection (19) in computing the insurer’s income from an insurance business for a taxation year that begins before the day on which the amalgamation occurred; and
(c)any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation carries on an insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the insurer’s income from an insurance business.
Marginal note:Application of subsection (23)
(22)Subsection (23) applies if, at any time, an insurer (referred to in this subsection and subsection (23) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (23) as the “transferee”) that is related to the transferor, property in respect of an insurance business carried on by the transferor (referred to in this subsection and subsection (23) as the “transferred business”) and
(a)subsection 138(11.5) or (11.94) applies to the transfer; or
(b)subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee carries on an insurance business.
Marginal note:Transfer of life insurance business
(23)If this subsection applies in respect of the transfer, at any time, of property
(a)the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of
(i)any amount included under subsection (16) or deducted under subsection (17) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,
(ii)any amount deducted under subsection (18) or included under subsection (19) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business, and
(iii)any amount that would — in the absence of this subsection and if the transferor existed and carried on an insurance business on each day that includes that time or is a subsequent day and on which the transferee carries on an insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the transferor’s income that can reasonably be attributed to the transferred business; and
(b)in determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (18) or (19) to be deducted or included in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.
Marginal note:Ceasing to carry on business
(24)If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections (20) to (22) apply,
(a)there shall be deducted, in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula
A − B
where
(b)there shall be included, in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula
C − D
where
Marginal note:Ceasing to exist
(25)If at any time an insurer that carried on an insurance business ceases to exist (otherwise than as a result of a winding-up or amalgamation described in subsection (20) or (21)), for the purposes of subsection (24), the insurer is deemed to have ceased to carry on the insurance business at the earlier of
(a)the time (determined without reference to this subsection) at which the insurer ceased to carry on the insurance business, and
(b)the time that is immediately before the end of the last taxation year of the insurer that ended at or before the time at which the insurer ceased to exist.
(26)[Repealed, 2022, c. 19, s. 26]
Marginal note:Rules relating to segregated funds
138.1(1)In respect of life insurance policies for which all or any part of an insurer’s reserves vary in amount depending on the fair market value of a specified group of properties that is reported to arelevant authority(as defined in subsection 138(12)) as a segregated fund (in this section referred to as a “segregated fund”), for the purposes of this Part, the following rules apply:
(a)a trust (in this section and section 138.2 referred to as the “related segregated fund trust”) is deemed to be created at the time that is the later of
(i)the day that the segregated fund is created, and
(ii)the day on which the insurer’s 1978 taxation year commences,
and to continue in existence throughout the period during which the fund determines any portion of the benefits under those policies that vary in amount depending on the fair market value of the property in the segregated fund (in this section referred to as “segregated fund policies”);
(b)property that has been allocated to and that remains a part of the segregated fund, and any income that has accrued on that property is deemed to be the property and income of the related segregated fund trust and not to be the property and income of the insurer;
(c)the insurer is deemed to be
(i)the trustee who has ownership or control of the related segregated fund trust property,
(ii)a resident of Canada in respect of the related segregated fund trust property used or held by it in the course of carrying on the insurer’s life insurance business in Canada, and
(iii)a non-resident of Canada in respect of the related segregated fund trust property not used or held by it in the course of carrying on the insurer’s life insurance business in Canada;
(d)where at a particular time there is property in the segregated fund that was not funded with premiums paid under a segregated fund policy,
(i)the insurer is deemed to have an interest in the related segregated fund trust that is not in respect of any particular property or source of income, and
(ii)the cost at any time of that interest to the insurer is deemed to be the total of
(A)for property of the trust at that time allocated by the insurer to the segregated fund prior to 1978, the amount that would be its adjusted cost base to the insurer if the interest had been a capital property at all relevant times prior to 1978 and if the rules in this section had been applicable for the taxation years after 1971 and before 1978, and
(B)for property of the trust at that time allocated by the insurer to the segregated fund after 1977, the fair market value of the property at the time it was last allocated to the segregated fund by the insurer;
(e)where at any particular time there is property in the segregated fund that was funded with a portion of the premiums paid before that time under a segregated fund policy,
(i)the respective segregated fund policyholder is deemed to have an interest in the related segregated fund trust that is not in respect of any particular property or source of income,
(ii)the cost of that interest is deemed to be the amount that is the total of
(A)the amount that would be its adjusted cost base to the insurer at December 31, 1977 if the interest had been a capital property at all relevant times prior to 1978 and if the rules in this section (if subsection 138.1(3) were read without reference to the expressions “or capital loss” and “or loss”) had been applicable for taxation years after 1971 and before 1978, and
(B)the total of amounts each of which is that portion of a premium paid before that time and after the day referred to in subparagraph 138.1(1)(a)(ii) under a segregated fund policy that was or is to be used by the insurer to fund property allocated to the segregated fund (other than the portion of the premium that is an acquisition fee), and
(iii)the portion of a premium included in a segregated fund is deemed not to be an amount paid in respect of a premium under the policy;
(f)the taxable income of the related segregated fund trust is deemed for the purposes of subsections 104(6), (13) and (24) to be an amount that has become payable in the year to the beneficiaries under the segregated fund trust and the amount therefor in respect of any particular beneficiary is equal to the amount determined by reference to the terms and conditions of the segregated fund policy;
(g)where at a particular time the fair market value of property transferred by the insurer to the segregated fund results in an increase at that time in the portion of the insurer’s reserves for a segregated fund policy held by a policyholder that vary with the fair market value of the segregated fund and a decrease in the portion of its reserves for the policy that do not so vary, the amount of that increase shall,
(i)for the purpose of the determination of H in the definitionadjusted cost basisin subsection 148(9), be deemed to be proceeds of disposition that the policyholder became entitled to receive at that time,
(ii)for the purpose of computing the adjusted cost base to the policyholder of the policyholder’s interest in the related segregated fund trust, be added at that time to the cost to the policyholder of that interest, and
(iii)for the purpose of computing the insurer’s income, be deemed to be a payment under the terms and conditions of the policy at that time;
(h)where at a particular time the fair market value of property transferred by the insurer from the segregated fund results in an increase at that time in the portion of the insurer’s reserves for a segregated fund policy that do not vary with the fair market value of the segregated fund and a decrease in the portion of its reserves for the policy that so vary, the amount of that increase shall, for the purpose of calculating the insurer’s income, be deemed to be a premium received by the insurer at that time;
(i)where at a particular time the policyholder of a segregated fund policy disposes of all or a portion of the policyholder’s interest in the related segregated fund trust, that proportion of the amount, if any, by which the acquisition fee with respect to the particular policy exceeds the total of amounts each of which is an amount determined under this paragraph with respect to the particular policy before that time, that
(i)the fair market value of the interest disposed of at that time
is of
(ii)the fair market value of the policyholder’s interest in the particular segregated fund trust immediately before that time,
is deemed to be a capital loss of the related segregated fund trust that reduces the policyholder’s benefits under the particular policy by that amount for the purposes of subsection 138.1(3);
(j)the obligations of an insurer in respect of a benefit that is payable under a segregated fund policy, the amount of which benefit varies with the fair market value of the segregated fund at the time the benefit becomes payable, are deemed to be obligations of the trustee under the related segregated fund trust and not of the insurer and any amount received by the policyholder or that the policyholder became entitled to receive at any particular time in a year in respect of those obligations is deemed to be proceeds from the disposition of an interest in the related segregated fund trust;
(k)a reference to “the terms and conditions of the trust arrangement” in section 104 or subsection 127.2(3) is deemed to include a reference to the terms and conditions of the related segregated fund policy and the trustee is deemed to have designated the amounts referred to in that section in accordance with those terms and conditions; and
(l)where at any time an insurer acquires a share as a first registered holder thereof and allocates the share to a related segregated fund trust, the trust shall be deemed to have acquired the share at that time as the first registered holder thereof for the purpose of computing its share-purchase tax credit and the insurer shall be deemed not to have acquired the share for the purpose of computing its share-purchase tax credit.
Marginal note:Rules relating to property in segregated funds at end of 1977 taxation year
(2)Where an insurer holds property at the end of its 1977 taxation year in connection with a segregated fund, the following rules apply:
(a)the property is deemed to have been acquired by the related segregated fund trust on the day determined under paragraph 138.1(1)(a) at a cost equal to the adjusted cost base of the property to the insurer on that day and that transaction is deemed to be a transaction between persons not dealing at arm’s length;
(b)the property is deemed to have been disposed of by the insurer on the day referred to in paragraph 138.1(2)(a) for proceeds equal to the adjusted cost base of the property to the insurer on that day; and
(c)for the purpose of computing the insurer’s income for its 1978 taxation year it shall be deemed to have made a payment to its policyholders in satisfaction of their rights under their segregated fund policies in that year equal to that portion of the amount deducted under subparagraph 138(3)(a)(i) in computing its income for its 1977 taxation year that is in respect of segregated fund policies.
Marginal note:Transition — pre-2018 non-capital losses
(2.1)For the purpose of determining the taxable income of a related segregated fund trust for a taxation year that begins after 2017, the non-capital losses of the related segregated fund trust that arise in a taxation year that begins before 2018 are deemed to be nil.
Marginal note:Capital gains and capital losses of related segregated fund trusts
(3)A capital gain or capital loss of a related segregated fund trust from the disposition of any property shall, to the extent that a policyholder’s benefits under a policy or the interest in the trust of any other beneficiary is affected by that gain or loss, be deemed to be a capital gain or capital loss, as the case may be, of the policyholder or other beneficiary and not that of the trust.
(3.1) and (3.2)[Repealed, 2013, c. 34, s. 287]
Marginal note:Election and allocation
(4)Where at any particular time after 1977, a policyholder withdraws all or part of the policyholder’s interest in a segregated fund policy, the trustee of a related segregated fund trust may elect in prescribed manner and prescribed form to treat any capital property of the trust as having been disposed of, whereupon the property shall be deemed to have been disposed of on any day designated by the trustee for proceeds of disposition equal to
(a)the fair market value of the property on that day,
(b)the adjusted cost base to the trust of the property on that day, or
(c)an amount that is neither greater than the greater of nor less than the lesser of the amounts determined under paragraphs 138.1(4)(a) and 138.1(4)(b),
whichever is designated by the trustee, and to have been reacquired by the trust immediately thereafter at a cost equal to those proceeds, and where the trustee of a related segregated fund trust has made such an election, the following rules apply:
(d)the amount of any capital gain or capital loss resulting from the deemed disposition shall be allocated by the trustee to any policyholder withdrawing all or part of the policyholder’s interest in the policyholder’s policy at that time to the extent that the amount of the policyholder’s benefits under the policy at that time is affected by the capital gain or capital loss in respect of property held by the related segregated fund trust at that time,
(e)the allocation referred to in paragraph 138.1(4)(d) is deemed to have been made immediately before the withdrawal,
(f)any capital gain not so allocated is deemed to be allocated in accordance with the terms and conditions of the policy, and
(g)any capital loss not so allocated is deemed to be a superficial loss of each policyholder to the extent that the policyholder’s benefits under the policy would be affected by the loss.
Marginal note:Adjusted cost base of property in related segregated fund trust
(5)At any particular time, the adjusted cost base of each capital property of a related segregated fund trust shall be deemed to be the amount, if any, by which
(a)the adjusted cost base of the property to the trust immediately before that time
exceeds
(b)the total of amounts each of which is an amount in respect of the disposition by a policyholder of all or part of the policyholder’s interest in the related segregated fund trust at that time equal to that proportion of the amount, if any, by which
(i)the adjusted cost base to the policyholder of that interest at that time
exceeds
(ii)the policyholder’s proceeds of the disposition of that interest in the trust
that
(iii)the fair market value of the capital property at that time
is of
(iv)the total of amounts each of which is the fair market value of a capital property of the related segregated fund trust at that time.
Definition ofacquisition fee
(6)In this section,acquisition feemeans the amount, if any, by which the total of amounts each of which is
(a)that portion of a premium charged by the insurer under a segregated fund policy that is not included in the related segregated fund or cannot reasonably be regarded as an amount required to fund a mortality or maturity benefit,
(b)a transfer from the segregated fund that cannot reasonably be regarded as an amount required to fund a mortality or maturity benefit other than an annual administration fee or charge, or
(c)any amount by which the proceeds payable to the policyholder under a particular segregated fund policy is reduced on the surrender or partial surrender of the policy that may reasonably be regarded as a surrender fee,
exceeds
(d)the total of amounts each of which is that portion of an amount described in paragraph 138.1(6)(a), 138.1(6)(b) or 138.1(6)(c) that may reasonably be considered to be in respect of an interest in the segregated fund that was disposed of before 1978.
Marginal note:Non-application of subsections (1) to (6)
(7)Subsections (1) to (6) do not apply to the holder of a segregated fund policy with respect to such a policy that is issued or effected as or under a FHSA, pooled registered pension plan, registered pension plan, registered retirement income fund, registered retirement savings plan or TFSA.
Marginal note:Qualifying transfer of funds
138.2(1)For the purposes of this section, a qualifying transfer occurs at a particular time (in this section referred to as the “transfer time”) if
(a)all of the property that, immediately before the transfer time, was property of a related segregated fund trust has become, at the transfer time, the property of another related segregated fund trust (in this section referred to as the “transferor” and “transferee”, respectively, and collectively as the “funds”);
(b)every person that had an interest in the transferor immediately before the transfer time (in this section referred to as a “beneficiary”) has ceased to be a beneficiary of the transferor at the transfer time and has received no consideration for the interest other than an interest in the transferee;
(c)the trustee of the funds is a resident of Canada; and
(d)the trustee of the funds so elects, by filing a prescribed form with the Minister on or before the election’s due date.
Marginal note:General
(2)If there has been a qualifying transfer,
(a)the last taxation years of the funds that began before the transfer time are deemed to have ended at the transfer time and the next taxation year of the transferee is deemed to have begun immediately after the transfer time;
(b)no amount in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss of a fund for a taxation year that began before the transfer time is deductible in computing the taxable income of the funds for a taxation year that begins after the transfer time;
(c)each beneficiary’s interest in the transferor is deemed to have been disposed of at the transfer time for proceeds of disposition, and each beneficiary’s interest in the transferee received in the qualifying transfer is deemed to have been acquired at a cost, equal to the cost amount to the beneficiary of the interest in the transferor immediately before the transfer time;
(d)any amount determined under subsection 138.1(6) in respect of a policyholder’s interest in the transferor is deemed
(i)to have been charged, transferred or paid in respect of the policyholder’s interest in the transferee that is acquired on the qualifying transfer, and
(ii)to not have been charged, transferred or paid in respect of the policyholder’s interest in the transferor; and
(e)subsections 138.1(4) and (5) do not apply in respect of any disposition of an interest in the transferor arising on the qualifying transfer.
Marginal note:Transferor – capital gains and losses
(3)In respect of a qualifying transfer, each property of the transferor held immediately before the transfer time is deemed to have been disposed of by the transferor immediately before the transfer time for proceeds of disposition, and to have been acquired by the transferee at the transfer time for a cost, equal to the lesser of
(a)the fair market value of the property immediately before the transfer time, and
(b)the greater of
(i)the cost amount of the property to the transferor immediately before the transfer time, and
(ii)the amount that is designated in respect of the property in the election in respect of the qualifying transfer.
Marginal note:Transferee – capital gains and losses
(4)In respect of a qualifying transfer, each property of the transferee held immediately before the transfer time is deemed to have been disposed of by the transferee immediately before the transfer time for proceeds of disposition, and to have been reacquired by the transferee at the transfer time for a cost, equal to the lesser of
(a)the fair market value of the property immediately before the transfer time, and
(b)the greater of
(i)the cost amount of the property to the transferee immediately before the transfer time, and
(ii)the amount that is designated in respect of the property in the election in respect of the qualifying transfer.
Marginal note:Loss limitation
(5)Subsection 138.1(3) does not apply to capital losses of a fund from the disposition of property on a qualifying transfer under subsection (3) or (4) to the extent that the amount of such capital losses exceeds the amount of capital gains of the fund from the disposition of property on the qualifying transfer under subsection (3) or (4), as the case may be.
Marginal note:Due date
(6)The due date of an election referred to in paragraph (1)(d) is the later of
(a)the day that is six months after the day that includes the transfer time, and
(b)a day that the Minister may specify.
Marginal note:Conversion of insurance corporations into mutual corporations
139Where an insurance corporation that is a Canadian corporation applies an amount in payment for shares of the corporation purchased or otherwise acquired by it under a mutualization proposal under Division III of Part VI of theInsurance Companies Actor under a law of the province under the laws of which the corporation is incorporated that provides for the conversion of the corporation into a mutual corporation by the purchase of its shares in accordance with that law,
(a)section 15 does not apply to require the inclusion, in computing the income of a shareholder of the corporation, of any part of that amount; and
(b)no part of that amount shall be deemed, for the purpose of subsection 138(7), to have been paid to shareholders or, for the purpose of section 84, to have been received as a dividend.
Marginal note:Definitions
139.1(1)The definitions in this subsection apply in this section and sections 139.2 and 147.4.
conversion benefitmeans a benefit received in connection with the demutualization of an insurance corporation because of an interest, before the demutualization, of any person in an insurance policy to which the insurance corporation has been a party. (avantage de transformation)
deadlinefor a payment in respect of a demutualization of an insurance corporation means the latest of
(a)the end of the day that is 13 months after the time of the demutualization,
(b)where the entire amount of the payment depends on the outcome of an initial public offering of shares of the corporation or a holding corporation in respect of the insurance corporation, the end of the day that is 60 days after the day on which the offering is completed,
(c)where the payment is made after the initial deadline for the payment and it is reasonable to conclude that the payment was postponed beyond that initial deadline because there was not sufficient information available 60 days before that initial deadline with regard to the location of a person, the end of the day that is six months after such information becomes available, and
(d)the end of any other day that is acceptable to the Minister. (échéance)
demutualizationmeans the conversion of an insurance corporation from a mutual company into a corporation that is not a mutual company. (démutualisation)
holding corporationmeans a corporation that
(a)in connection with the demutualization of an insurance corporation, has issued shares of its capital stock to stakeholders; and
(b)owns shares of the capital stock of the insurance corporation acquired in connection with the demutualization that entitle it to 90% or more of the votes that could be cast in respect of shares under all circumstances at an annual meeting of
(i)shareholders of the insurance corporation, or
(ii)shareholders of the insurance corporation and holders of insurance policies to which the insurance corporation is a party. (société de portefeuille)
initial deadlinefor a payment is the time that would, if the definitiondeadlinewere read without reference to paragraph (c) of that definition, be the deadline for the payment. (échéance initiale)
mutual holding corporation, in respect of an insurance corporation, means a mutual company established to hold shares of the capital stock of the insurance corporation, where the only persons entitled to vote at an annual meeting of the mutual company are policyholders of the insurance corporation. (société mutuelle de portefeuille)
ownership rightsmeans
(a)in a particular mutual holding corporation, the following rights and interests held by a person in respect of the particular corporation because of an interest or former interest of any person in an insurance policy to which an insurance corporation, in respect of which the particular corporation is the mutual holding corporation, has been a party:
(i)rights that are similar to rights attached to shares of the capital stock of a corporation, and
(ii)all other rights with respect to, and interests in, the particular corporation as a mutual company; and
(b)in a mutual insurance corporation, the following rights and interests held by a person in respect of the mutual insurance corporation because of an interest or former interest of any person in an insurance policy to which that corporation has been a party:
(i)rights that are similar to rights attached to shares of the capital stock of a corporation,
(ii)all other rights with respect to, and interests in, the mutual insurance corporation as a mutual company, and
(iii)any contingent or absolute right to receive a benefit in connection with the demutualization of the mutual insurance corporation. (droits de propriété)
personincludes a partnership. (personne)
shareof the capital stock of a corporation includes a right granted by the corporation to acquire a share of its capital stock. (action)
specified insurance benefitmeans a taxable conversion benefit that is
(a)an enhancement of benefits under an insurance policy;
(b)an issuance of an insurance policy;
(c)an undertaking by an insurance corporation of an obligation to pay a policy dividend; or
(d)a reduction in the amount of premiums that would otherwise be payable under an insurance policy. (avantage déterminé)
stakeholdermeans a person who is entitled to receive or who has received a conversion benefit but, in respect of the demutualization of an insurance corporation, does not include a holding corporation in connection with the demutualization or a mutual holding corporation in respect of the insurance corporation. (intéressé)
taxable conversion benefitmeans a conversion benefit received by a stakeholder in connection with the demutualization of an insurance corporation, other than a conversion benefit that is
(a)a share of a class of the capital stock of the corporation;
(b)a share of a class of the capital stock of a corporation that is or becomes a holding corporation in connection with the demutualization; or
(c)an ownership right in a mutual holding corporation in respect of the insurance corporation. (avantage de transformation imposable)
Marginal note:Rules of general application
(2)For the purpose of this section,
(a)subject to paragraphs (b) to (g), if in providing a benefit in respect of a demutualization, a corporation becomes obligated, either absolutely or contingently, to make or arrange a payment, the person to whom the undertaking to make or arrange the payment was given is considered to have received a benefit
(i)as a consequence of the undertaking of the obligation, and
(ii)not as a consequence of the making of the payment;
(b)where, in providing a benefit in respect of a demutualization, a corporation makes a payment (other than a payment, made pursuant to the terms of an insurance policy, that is not a policy dividend) at any time on or before the deadline for the payment,
(i)subject to paragraphs (f) and (g), the recipient of the payment is considered to have received a benefit as a consequence of the making of the payment, and
(ii)no benefit is considered to have been received as a consequence of the undertaking of an obligation, that is either contingent or absolute, to make or arrange the payment;
(c)no benefit is considered to have been received as a consequence of the undertaking of an absolute or contingent obligation of a corporation to make or arrange a payment (other than a payment, made pursuant to the terms of an insurance policy, that is not a policy dividend) unless it is reasonable to conclude that there is sufficient information with regard to the location of a person to make or arrange the payment;
(d)where a corporation’s obligation to make or arrange a payment in connection with a demutualization ceases on or before the initial deadline for the payment and without the payment being made in whole or in part, no benefit is considered to have been received as a consequence of the undertaking of the obligation unless the payment was to be a payment (other than a policy dividend) pursuant to the terms of an insurance policy;
(e)no benefit is considered to have been received as a consequence of the undertaking of an absolute or contingent obligation of a corporation to make or arrange a payment where
(i)paragraph (a) would, but for this paragraph, apply with respect to the obligation,
(ii)paragraph (d) would, if that paragraph were read without reference to the words “on or before the initial deadline for the payment”, apply in respect of the obligation,
(iii)it is reasonable to conclude that there was not, before the initial deadline for the payment, sufficient information with regard to the location of a person to make or arrange the payment, and
(iv)such information becomes available on a particular day after the initial deadline and the obligation ceases not more than six months after the particular day;
(f)no benefit is considered to have been received as a consequence of
(i)an undertaking of an absolute or contingent obligation of a corporation to make or arrange an annuity payment through the issuance of an annuity contract, or
(ii)a receipt of an annuity payment under the contract so issued
where it is reasonable to conclude that the purpose of the undertaking or the making of the annuity payment is to supplement benefits provided under either an annuity contract to which subsection 147.4(1) or paragraph 254(a) applied or a group annuity contract that had been issued under, or pursuant to, a registered pension plan that has wound up;
(g)no benefit is considered to have been received as a consequence of
(i)an amendment to which subsection 147.4(2) would, but for subparagraph 147.4(2)(a)(ii), apply, or
(ii)a substitution to which paragraph 147.4(3)(a) applies;
(h)the time at which a stakeholder is considered to receive a benefit in connection with the demutualization of an insurance corporation is
(i)where the benefit is a payment made at or before the time of the demutualization or is a payment to which paragraph (b) applies, the time at which the payment is made, and
(ii)in any other case, the latest of
(A)the time of the demutualization,
(B)where the extent of the benefit or the stakeholder’s entitlement to it depends on the outcome of an initial public offering of shares of the corporation or a holding corporation in respect of the insurance corporation and the offering is completed before the day that is 13 months after the time of the demutualization, the time at which the offering is completed,
(C)where the entire amount of the benefit depends on the outcome of an initial public offering of shares of the corporation or a holding corporation in respect of the insurance corporation, the time at which the offering is completed,
(D)where it is reasonable to conclude that the person conferring the benefit does not have sufficient information with regard to the location of the stakeholder before the later of the times determined under clauses (A) to (C), to advise the stakeholder of the benefit, the time at which sufficient information with regard to the location of the stakeholder to so advise the stakeholder was received by that person, and
(E)the end of any other day that is acceptable to the Minister;
(i)the time at which an insurance corporation is considered to demutualize is the time at which it first issues a share of its capital stock (other than shares of its capital stock issued by it when it was a mutual company if the corporation did not cease to be a mutual company because of the issuance of those shares); and
(j)subject to paragraph (3)(b), the value of a benefit received by a stakeholder is the fair market value of the benefit at the time the stakeholder receives the benefit.
Marginal note:Special cases
(3)For the purpose of this section,
(a)where benefits under an insurance policy are enhanced (otherwise than by way of an amendment to which subsection 147.4(2) would, but for subparagraph 147.4(2)(a)(ii), apply) in connection with a demutualization, the value of the enhancement is deemed to be a benefit received by the policyholder and not by any other person;
(b)where premiums payable under an insurance policy to an insurance corporation are reduced in connection with a demutualization, the policyholder is deemed, as a consequence of the undertaking to reduce the premiums, to have received a benefit equal to the present value at the time of the demutualization of the additional premiums that would have been payable if the premiums had not been reduced in connection with the demutualization;
(c)the payment of a policy dividend by an insurance corporation or an undertaking of an obligation by the corporation to pay a policy dividend is considered to be in connection with the demutualization of the corporation only to the extent that
(i)the policy dividend is referred to in the demutualization proposal sent by the corporation to stakeholders,
(ii)the obligation to make the payment is contingent on stakeholder approval for the demutualization, and
(iii)the payment or undertaking cannot reasonably be considered to have been made or given, as the case may be, to ensure that policy dividends are not adversely affected by the demutualization;
(d)except for the purposes of paragraphs (c), (e) and (f), where part of a policy dividend is a conversion benefit in respect of the demutualization of an insurance corporation and part of it is not, each part of the dividend is deemed to be a policy dividend that is separate from the other part;
(e)a policy dividend includes an amount that is in lieu of payment of, or in satisfaction of, a policy dividend;
(f)the payment of a policy dividend includes the application of the policy dividend to pay a premium under an insurance policy or to repay a policy loan;
(g)where the demutualization of an insurance corporation is effected by the merger of the corporation with one or more other corporations to form one corporate entity, that entity is deemed to be the same corporation as, and a continuation of, the insurance corporation;
(h)an insurance corporation shall be considered to have become a party to an insurance policy at the time that the insurance corporation becomes liable in respect of obligations of an insurer under the policy; and
(i)notwithstanding paragraph 248(7)(a), where a cheque or other means of payment sent to an address is returned to the sender without being received by the addressee, it is deemed not to have been sent.
Marginal note:Consequences of demutualization
(4)Where a particular insurance corporation demutualizes,
(a)each of the income, loss, capital gain and capital loss of a taxpayer, from the disposition, alteration or dilution of the taxpayer’s ownership rights in the particular corporation as a result of the demutualization, is deemed to be nil;
(b)no amount paid or payable to a stakeholder in connection with the disposition, alteration or dilution of the stakeholder’s ownership rights in the particular corporation may be included in Class 14.1 of Schedule II to theIncome Tax Regulations;
(c)no election may be made under subsection 85(1) or (2) in respect of ownership rights in the particular corporation;
(d)where the consideration given by a person for a share of the capital stock of the particular corporation or a holding corporation in connection with the demutualization (or for particular ownership rights in a mutual holding corporation in respect of the particular corporation) includes the transfer, surrender, alteration or dilution of ownership rights in the particular corporation, the cost of the share (or the particular ownership rights) to the person is deemed to be nil;
(e)where a holding corporation in connection with the demutualization acquires, in connection with the demutualization, a share of the capital stock of the particular corporation from the particular corporation and issues a share of its own capital stock to a stakeholder as consideration for the share of the capital stock of the particular corporation, the cost to the holding corporation of the share of the capital stock of the particular corporation is deemed to be nil;
(f)where at any time a stakeholder receives a taxable conversion benefit and subsection (14) does not apply to the benefit,
(i)the corporation that conferred the benefit is deemed to have paid a dividend at that time on shares of its capital stock equal to the value of the benefit, and
(ii)subject to subsection (16), the benefit received by the stakeholder is deemed to be a dividend received by the stakeholder at that time;
(g)for the purposes of this Part, where a dividend is deemed by paragraph (f) or by paragraph (16)(i) to have been paid by a non-resident corporation, that corporation is deemed in respect of the payment of the dividend to be a corporation resident in Canada that is a taxable Canadian corporation unless any amount is claimed under section 126 in respect of tax on the dividend;
(h)for the purposes of section 70, subsection 104(4) and section 128.1, the fair market value of rights to benefits that are to be received in connection with the demutualization is, before the time of the receipt, deemed to be nil; and
(i)where a person acquires an annuity contract in respect of which, because of the application of paragraph (2)(f), no benefit is considered to have been received for the purpose of this section,
(i)the cost of the annuity contract to the person is deemed to be nil, and
(ii)section 12.2 does not apply to the annuity contract.
Marginal note:Fair market value of ownership rights
(5)For the purposes of section 70, subsection 104(4) and section 128.1, where an insurance corporation makes, at any time, a public announcement that it intends to seek approval for its demutualization, the fair market value of ownership rights in the corporation is deemed to be nil throughout the period that
(a)begins at that time; and
(b)ends either at the time of the demutualization or, in the event that the corporation makes at any subsequent time a public announcement that it no longer intends to demutualize, at the subsequent time.
Marginal note:Paid-up capital — insurance corporation
(6)Where an insurance corporation resident in Canada has demutualized, in computing the paid-up capital at any particular time in respect of a class of shares of the capital stock of the corporation,
(a)there shall be deducted the total of all amounts each of which would, but for this subsection, have been deemed by subsection 84(1) to have been paid at or before the particular time by the corporation as a dividend on a share of that class because of an increase in paid-up capital (determined without reference to this subsection) in connection with the demutualization; and
(b)there shall be added the amount, if any, by which
(i)the total of all amounts each of which is deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of that class paid by the corporation before the particular time
exceeds
(ii)the total of all amounts each of which would be deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of that class paid by the corporation before the particular time, if this Act were read without reference to this subsection.
Marginal note:Paid-up capital — holding corporation
(7)Where a particular corporation resident in Canada was at any time a holding corporation in connection with the demutualization of an insurance corporation, in computing the paid-up capital at any particular time in respect of a class of shares of the capital stock of the particular corporation,
(a)there shall be deducted the total of all amounts each of which is an amount by which the paid-up capital would, but for this subsection, have increased at or before the particular time as a result of the acquisition of shares of a class of the capital stock of the insurance corporation from the corporation on its demutualization; and
(b)there shall be added the amount, if any, by which
(i)the total of all amounts each of which is deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of that class paid by the particular corporation before the particular time
exceeds
(ii)the total of all amounts each of which would be deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of that class paid by the particular corporation before the particular time, if this Act were read without reference to this subsection.
Marginal note:Policy dividends
(8)Where the payment of a policy dividend by an insurance corporation is a taxable conversion benefit,
(a)for the purposes of this Act other than this section, the policy dividend is deemed not to be a policy dividend; and
(b)no amount in respect of the policy dividend may be included, either explicitly or implicitly, in the calculation of an amount deductible by the insurer for any taxation year under paragraph 20(7)(c) or subsection 138(3).
Marginal note:Payment and receipt of premium
(9)Where, in connection with the demutualization of an insurance corporation, a person would, if subsection (2) were read without reference to paragraphs (f) and (g) and paragraph (3)(a) were read without reference to the application of subsection 147.4(2), receive a particular benefit that is a specified insurance benefit,
(a)the insurance corporation that is obligated to pay benefits under the policy to which the particular benefit relates is deemed to have received a premium at the time of the demutualization in respect of that policy equal to the value of the particular benefit;
(b)for the purpose of paragraph (a), to the extent that the obligations of a particular insurance corporation under the policy were assumed by another insurance corporation before the time of the demutualization, the particular corporation is deemed not to be obligated to pay benefits under the policy; and
(c)subject to paragraph (15)(e), where the person receives the particular benefit, the person is deemed to have paid, at the time of demutualization, a premium in respect of the policy to which the benefit relates equal to the value of the particular benefit.
Marginal note:Cost of taxable conversion benefit
(10)Where, in connection with the demutualization of an insurance corporation, a stakeholder receives a taxable conversion benefit (other than a specified insurance benefit), the stakeholder is deemed to have acquired the benefit at a cost equal to the value of the benefit.
Marginal note:No shareholder benefit
(11)Subsection 15(1) does not apply to a conversion benefit.
Marginal note:Exclusion of benefit from RRSP and other rules
(12)Subject to subsection (14), for the purposes of the provisions of this Act (other than paragraph (9)(c)) that relate to registered retirement savings plans, registered retirement income funds, retirement compensation arrangements, deferred profit sharing plans and superannuation or pension funds or plans, the receipt of a conversion benefit shall be considered to be neither a contribution to, nor a distribution from, such a plan, fund or arrangement.
Marginal note:RRSP registration rules, etc.
(13)For the purposes of this Act, paragraphs 146(2)(c.4) and 146.3(2)(g) and subsection 198(6) shall be applied without reference to any conversion benefit.
Marginal note:Retirement benefit
(14)A conversion benefit received because of an interest in a life insurance policy held by a trust governed by a registered retirement savings plan, registered retirement income fund, deferred profit sharing plan or superannuation or pension fund or plan is deemed to be received under the plan or fund, as the case may be, if it is received by any person (other than the trust).
Marginal note:Employee-paid insurance
(15)Where
(a)a stakeholder receives a conversion benefit because of the stakeholder’s interest in a group insurance policy under which individuals have been insured in the course of or because of their employment,
(b)at all times before the payment of a premium described in paragraph (c), the full cost of a particular insurance coverage under the policy was borne by the individuals who were insured under the particular coverage,
(c)the stakeholder pays a premium under the policy in respect of the particular coverage or under another group insurance policy in respect of coverage that has replaced the particular coverage, and
(d)either
(i)the premium is deemed by paragraph (9)(c) to have been paid, or
(ii)it is reasonable to conclude that the purpose of the premium is to apply, for the benefit of the individuals who are insured under the particular coverage or the replacement coverage, all or part of the value of the portion of the conversion benefit that can reasonably be considered to be in respect of the particular coverage,
the following rules apply:
(e)for the purposes of paragraph 6(1)(f) and regulations made for the purposes of subsection 6(4), the premium is deemed to be an amount paid by the individuals who are insured under the particular coverage or the replacement coverage, as the case may be, and not to be an amount paid by the stakeholder, and
(f)no amount may be deducted in respect of the premium in computing the stakeholder’s income.
Marginal note:Flow-through of conversion benefits to employees and others
(16)Where
(a)a stakeholder receives a conversion benefit (in this subsection referred to as the “relevant conversion benefit”) because of the interest of any person in an insurance policy,
(b)the stakeholder makes a payment of an amount (otherwise than by way of a transfer of a share that was received by the stakeholder as all or part of the relevant conversion benefit and that was not so received as a taxable conversion benefit) to a particular individual
(i)who has received benefits under the policy,
(ii)who has, or had at any time, an absolute or contingent right to receive benefits under the policy,
(iii)for whose benefit insurance coverage was provided under the policy, or
(iv)who received the amount because an individual satisfied the condition in subparagraph (i), (ii) or (iii),
(c)it is reasonable to conclude that the purpose of the payment is to distribute an amount in respect of the relevant conversion benefit to the particular individual,
(d)either
(i)the main purpose of the policy was to provide retirement benefits or insurance coverage to individuals in respect of their employment with an employer, or
(ii)all or part of the cost of insurance coverage under the policy had been borne by individuals (other than the stakeholder),
(e)subsection (14) does not apply to the relevant conversion benefit, and
(f)one of the following applies, namely,
(i)the particular individual is resident in Canada at the time of the payment, the stakeholder is a person the taxable income of which is exempt from tax under this Part and the payment would, if this section were read without reference to this subsection, be included in computing the income of the particular individual,
(ii)the payment is received before Decenber 7, 1999 and the stakeholder elects in writing filed with the Minister, on a day that is not more than six months after the end of the taxation year in which the stakeholder receives the relevant conversion benefit (or a later day acceptable to the Minister), that this subsection applies in respect of the payment,
(iii)the payment is received after December 6, 1999, the payment would, if this section were read without reference to this subsection, be included in computing the income of the particular individual and the stakeholder elects in writing filed with the Minister, on a day that is not more than six months after the end of the taxation year in which the stakeholder receives the relevant conversion benefit (or a later day acceptable to the Minister), that this subsection applies in respect of the payment, or
(iv)the payment is received after December 6, 1999 and the payment would, if this section were read without reference to this subsection, not be included in computing the income of the particular individual,
the following rules apply:
(g)subject to paragraph (l), no amount is, because of the making of the payment, deductible in computing the stakeholder’s income,
(h)except for the purpose of this subsection and without affecting the consequences to the particular individual of any transaction or event that occurs after the time that the payment was made, the payment is deemed not to have been received by, or made payable to, the particular individual,
(i)the corporation that conferred the relevant conversion benefit is deemed to have paid to the particular individual at the time the payment was made, and the particular individual is deemed to have received at that time, a dividend on shares of the capital stock of the corporation equal to the amount of the payment,
(j)all obligations that would, but for this subsection, be imposed by this Act or the regulations on the corporation because of the payment of the dividend apply to the stakeholder as if the stakeholder were the corporation, and do not apply to the corporation,
(k)where the relevant conversion benefit is a taxable conversion benefit, except for the purpose of this subsection and the purposes of determining the obligations imposed by this Act or the regulations on the corporation because of the conferral of the relevant conversion benefit, the stakeholder is deemed, to the extent of the fair market value of the payment, not to have received the relevant conversion benefit, and
(l)where the relevant conversion benefit was a share received by the stakeholder (otherwise than as a taxable conversion benefit),
(i)where the share is, at the time of the payment, capital property held by the stakeholder, the amount of the payment shall, after that time, be added in computing the adjusted cost base to the stakeholder of the share,
(ii)where subparagraph (i) does not apply and the share was capital property disposed of by the stakeholder before that time, the amount of the payment is deemed to be a capital loss of the stakeholder from the disposition of a property for the taxation year of the stakeholder in which the payment is made, and
(iii)in any other case, paragraph (g) shall not apply to the payment.
Marginal note:Flow-through of share benefits to employees and others
(17)Where
(a)because of the interest of any person in an insurance policy, a stakeholder receives a conversion benefit (other than a taxable conversion benefit) that consists of shares of the capital stock of a corporation,
(b)the stakeholder transfers some or all of the shares at any time to a particular individual
(i)who has received benefits under the policy,
(ii)who has, or had at any time, an absolute or contingent right to receive benefits under the policy,
(iii)for whose benefit insurance coverage was provided under the policy, or
(iv)who received the shares because an individual satisfied the condition in subparagraph (i), (ii) or (iii),
(c)it is reasonable to conclude that the purpose of the transfer is to distribute all or any portion of the conversion benefit to the particular individual,
(d)either
(i)the main purpose of the policy was to provide retirement benefits or insurance coverage to individuals in respect of their employment with an employer, or
(ii)all or part of the cost of insurance coverage under the policy had been borne by individuals (other than the stakeholder),
(e)subsection (14) does not apply to the conversion benefit, and
(f)one of the following applies, namely,
(i)the particular individual is resident in Canada at the time of the transfer, the stakeholder is a person the taxable income of which is exempt from tax under this Part and the amount of the transfer would, if this section were read without reference to this subsection, be included in computing the income of the particular individual,
(ii)the transfer is made before December 7, 1999 and the stakeholder elects in writing filed with the Minister, on a day that is not more than six months after the end of the taxation year in which the stakeholder receives the conversion benefit (or a later day acceptable to the Minister), that this subsection applies in respect of the transfer,
(iii)the transfer is made after December 6, 1999, the amount of the transfer would, if this section were read without reference to this subsection, be included in computing the income of the particular individual and the stakeholder elects in writing filed with the Minister, on a day that is not more than six months after the end of the taxation year in which the stakeholder receives the conversion benefit (or a later day acceptable to the Minister), that this subsection applies in respect of the transfer, or
(iv)the transfer is made after December 6, 1999 and the amount of the transfer would, if this section were read without reference to this subsection, not be included in computing the income of the particular individual,
the following rules apply:
(g)no amount is, because of the transfer, deductible in computing the stakeholder’s income,
(h)except for the purpose of this subsection and without affecting the consequences to the particular individual of any transaction or event that occurs after the time that the transfer was made, the transfer is deemed not to have been made to the particular individual nor to represent an amount payable to the particular individual, and
(i)the cost of the shares to the particular individual is deemed to be nil.
Marginal note:Acquisition of control
(18)For the purposes of subsections 10(10), 13(21.2) and (24) and 18(15), sections 18.1 and 37, subsection 40(3.4), the definitionsuperficial lossin section 54, section 55, subsections 66(11), (11.4) and (11.5), 66.5(3) and 66.7(10) and (11), section 80, paragraph 80.04(4)(h), subsections 85(1.2) and 88(1.1) and (1.2), sections 111 and 127 and subsections 249(4) and 256(7), control of an insurance corporation (and each corporation controlled by it) is deemed not to be acquired solely because of the acquisition of shares of the capital stock of the insurance corporation, in connection with the demutualization of the insurance corporation, by a particular corporation that at a particular time becomes a holding corporation in connection with the demutualization where, immediately after the particular time,
(a)the particular corporation is not controlled by any person or group of persons; and
(b)95% of the fair market value of all the assets of the particular corporation is less than the total of all amounts each of which is
(i)the amount of the particular corporation’s money,
(ii)the amount of a deposit, with a financial institution, of such money standing to the credit of the particular corporation,
(iii)the fair market value of a bond, debenture, note or similar obligation that is owned by the particular corporation that had, at the time of its acquisition, a maturity date of not more than 24 months after that time, or
(iv)the fair market value of a share of the capital stock of the insurance corporation held by the particular corporation.
Marginal note:Mutual holding corporations
139.2Where at any time a mutual holding corporation (as defined in subsection 139.1(1)) in respect of an insurance corporation distributes property to a policyholder of the insurance corporation, the mutual holding corporation is deemed to have paid, and the policyholder is deemed to have received from the mutual holding corporation, at that time a dividend on shares of the capital stock of the mutual holding corporation, equal to the fair market value of the property.
Marginal note:Deductions in computing income
140(1)In computing the income for a taxation year of an insurance corporation, whether a mutual corporation or a joint stock company, from carrying on an insurance business other than a life insurance business, there may be deducted every amount credited in respect of that business for the year or a preceding taxation year to a policyholder of the corporation by way of a policy dividend, refund of premiums or refund of premium deposits if the amount was, during the year or within 12 months thereafter,
(a)paid or unconditionally credited to the policyholder; or
(b)applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the corporation.
Marginal note:Inclusion in computing income
(2)There shall be included in computing the income of an insurance corporation, whether a mutual corporation or a joint stock company, from carrying on an insurance business for its first taxation year that commences after June 17, 1987 and ends after 1987 (in this subsection referred to as its “1988 taxation year”) the amount, if any, by which
(a)the total of all amounts each of which is an amount deducted by the corporation in computing its income for a taxation year ending before its 1988 taxation year pursuant to paragraph 140(c) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, or pursuant to that paragraph by reason of subparagraph 138(3)(a)(v) of that Act as it read in respect of those taxation years in respect of amounts credited to the account of the policyholder on terms that the policyholder is entitled to payment thereof on or before the expiration or termination of the policy
exceeds
(b)the total of all amounts each of which is an amount paid or unconditionally credited to a policyholder or applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the corporation before the corporation’s 1988 taxation year in respect of the amounts credited to the account of the policyholder referred to in paragraph 140(2)(a).
Marginal note:Definitions
141(1)In this section,demutualizationandholding corporationhave the same meaning as in subsection 139.1(1).
Marginal note:Life insurance corporation deemed to be public corporation
(2)Notwithstanding any other provision of this Act, a life insurance corporation that is resident in Canada is deemed to be a public corporation.
Marginal note:Holding corporation deemed to be public corporation
(3)A corporation resident in Canada that is a holding corporation because of its acquisition of shares in connection with the demutualization of a life insurance corporation resident in Canada is deemed to be a public corporation at each time in the specified period of the holding corporation at which the holding corporation would have satisfied conditions prescribed under subparagraph (b)(i) of the definitionpublic corporationin subsection 89(1) if the words “shareholders, the dispersal of ownership of its shares and the public trading of its shares” in that subparagraph were read as “shareholders and the dispersal of ownership of its shares”.
Marginal note:Specified period
(4)For the purpose of subsection (3), the specified period of a corporation
(a)begins at the time the corporation becomes a holding corporation; and
(b)ends at the first time the corporation is a public corporation because of any provision of this Act other than subsection (3).
Marginal note:Exclusion from taxable Canadian property
(5)For the purpose of paragraph (d) of the definitiontaxable Canadian propertyin subsection 248(1), a share of the capital stock of a corporation is deemed to be listed at any time on a designated stock exchange if
(a)the corporation is
(i)a life insurance corporation resident in Canada that has demutualized and that, at that time, would have satisfied conditions prescribed under subparagraph (b)(i) of the definitionpublic corporationin subsection 89(1) if the words “shareholders, the dispersal of ownership of its shares and the public trading of its shares” in that subparagraph were read as “shareholders and the dispersal of ownership of its shares”, or
(ii)a holding corporation that is deemed by subsection (3) to be a public corporation at that time;
(b)no share of the capital stock of the corporation is listed on any stock exchange at that time; and
(c)that time is not later than six months after the time of the demutualization of
(i)the corporation, where the corporation is a life insurance corporation, and
(ii)in any other case, the life insurance corporation in respect of which the corporation is a holding corporation.
Marginal note:Deemed not to be a private corporation
141.1Notwithstanding any other provision of this Act, an insurance corporation (other than a life insurance corporation) that would, but for this section, be a private corporation is deemed not to be a private corporation for the purposes of subsection 55(5), the definitioncapital dividend accountin subsection 89(1) and sections 123.3 and 129.
142[Repealed, 1997, c. 25, s. 40(1)]
142.1[Repealed, 1997, c. 25, s. 40(1)]
Marginal note:Definitions
142.2(1)In this section and sections 142.3 to 142.7,
excluded propertyof a taxpayer for a taxation year means property, held at any time in the taxation year by the taxpayer, that is
(a)a share of the capital stock of a corporation if, at any time in the taxation year, the taxpayer has a significant interest in the corporation,
(b)a property that is, at all times in the taxation year at which the taxpayer held the property, a prescribed payment card corporation share of the taxpayer,
(c)if the taxpayer is an investment dealer, a property that is, at all times in the taxation year at which the taxpayer held the property, a prescribed securities exchange investment of the taxpayer,
(d)a share of the capital stock of a corporation if
(i)control of the corporation is, at any time (referred to in this paragraph as the “acquisition of control time”) that is in the 24-month period that begins immediately after the end of the year, acquired by
(A)the taxpayer,
(B)one or more persons related to the taxpayer (otherwise than by reason of a right referred to in paragraph 251(5)(b)), or
(C)the taxpayer and one or more persons described in clause (B), and
(ii)the taxpayer elects in writing to have subparagraph (i) apply and files the election with the Minister on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the acquisition of control time, or
(e)a prescribed property; (bien exclu)
fair value propertyof a taxpayer for a taxation year means property, held at any time in the taxation year by the taxpayer, that is — or it is reasonable to expect would, if the taxpayer held the property at the end of the taxation year, be — valued (otherwise than solely because its fair value was less than its cost to the taxpayer or, if the property is a specified debt obligation, because of a default of the debtor) in accordance with generally accepted accounting principles, at its fair value (determined in accordance with those principles) in the taxpayer’s balance sheet as at the end of the taxation year; (bien évalué à sa juste valeur)
financial institutionat any time means
(a)a corporation that is, at that time,
(i)a corporation referred to in any of paragraphs (a) to (e.1) of the definitionrestricted financial institutionin subsection 248(1),
(ii)an investment dealer, or
(iii)a corporation controlled by one or more persons or partnerships each of which is a financial institution at that time, other than a corporation the control of which was acquired by reason of the default of a debtor where it is reasonable to consider that control is being retained solely for the purpose of minimizing any losses in respect of the debtor’s default, and
(b)a trust or partnership more than 50% of the fair market value of all interests in which are held at that time by one or more financial institutions,
but does not include
(c)a corporation that is, at that time,
(i)an investment corporation,
(ii)a mortgage investment corporation,
(iii)a mutual fund corporation, or
(iv)a deposit insurance corporation (as defined in subsection 137.1(5)),
(d)a trust that is a mutual fund trust at that time, nor
(e)a prescribed person or partnership; (institution financière)
investment dealerat any time means a corporation that is, at that time, a registered securities dealer; (courtier en valeurs mobilières)
mark-to-market propertyof a taxpayer for a taxation year means property (other than an excluded property) held at any time in the taxation year by the taxpayer that is
(a)a share,
(b)if the taxpayer is not an investment dealer, a specified debt obligation that is a fair value property of the taxpayer for the taxation year,
(c)if the taxpayer is an investment dealer, a specified debt obligation, or
(d)a tracking property of the taxpayer that is a fair value property of the taxpayer for the taxation year; (bien évalué à la valeur du marché)
specified debt obligationof a taxpayer means the interest held by the taxpayer in
(a)a loan, bond, debenture, mortgage, hypothecary claim, note, agreement of sale or any other similar indebtedness, or
(b)a debt obligation, where the taxpayer purchased the interest,
other than an interest in
(c)an income bond, an income debenture, a small business development bond, a small business bond or a prescribed property, or
(d)an instrument issued by or made with a person to whom the taxpayer is related or with whom the taxpayer does not otherwise deal at arm’s length, or in which the taxpayer has a significant interest. (titre de créance déterminé)
tracking propertyof a taxpayer means property of the taxpayer the fair market value of which is determined primarily by reference to one or more criteria in respect of property (referred to in this definition as “tracked property”) that, if owned by the taxpayer, would be mark-to-market property of the taxpayer, which criteria are
(a)the fair market value of the tracked property,
(b)the profits or gains from the disposition of the tracked property,
(c)the revenue, income or cash flow from the tracked property, or
(d)any other similar criteria in respect of the tracked property; (bien à évaluer)
Marginal note:Significant interest
(2)For the purposes of the definitionsexcluded propertyandspecified debt obligationin subsection (1) and subsection 142.6(1.6), a taxpayer has a significant interest in a corporation at any time if
(a)the taxpayer is related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the corporation at that time; or
(b)the taxpayer holds, at that time,
(i)shares of the corporation that give the taxpayer 10% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation, and
(ii)shares of the corporation having a fair market value of 10% or more of the fair market value of all the issued shares of the corporation.
Marginal note:Rules re significant interest
(3)For the purpose of determining under subsection 142.2(2) whether a taxpayer has a significant interest in a corporation at any time,
(a)the taxpayer shall be deemed to hold each share that is held at that time by a person or partnership to whom the taxpayer is related (otherwise than because of a right referred to in paragraph 251(5)(b));
(b)a share of the corporation acquired by the taxpayer by reason of the default of a debtor shall be disregarded where it is reasonable to consider that the share is being retained for the purpose of minimizing any losses in respect of the debtor’s default; and
(c)a share of the corporation that is prescribed in respect of the taxpayer shall be disregarded.
Extension of meaning ofrelated
(4)For the purposes of this subsection and subsections (2) and (3), in determining if, at a particular time, a person or partnership is related to another person or partnership, the rules in section 251 are to be applied as if,
(a)a partnership (other than a partnership in respect of which any amount of the income or capital of the partnership that any entity may receive directly from the partnership at any time as a member of the partnership depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power) were a corporation having capital stock of a single class divided into 100 issued shares and each member of the partnership owned, at the particular time, that proportion of the issued shares of that class that
(i)the fair market value of the member’s interest in the partnership at the particular time
is of
(ii)the fair market value of all interests in the partnership at the particular time; and
(b)a trust (other than a trust in respect of which any amount of the income or capital of the trust that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power) were a corporation having capital stock of a single class divided into 100 issued shares and each beneficiary under the trust owned, at the particular time, that proportion of the issued shares of that class that
(i)the fair market value of the beneficiary’s beneficial interest in the trust at the particular time
is of
(ii)the fair market value at that time of all beneficial interests in the trust.
(5)[Repealed, 2009, c. 2, s. 46]
Marginal note:Amounts to be included and deducted
142.3(1)Subject to subsections 142.3(3) and (4), where a taxpayer that is, in a taxation year, a financial institution holds a specified debt obligation at any time in the year,
(a)there shall be included in computing the income of the taxpayer for the year the amount, if any, prescribed in respect of the obligation;
(b)there shall be deducted in computing the income of the taxpayer for the year the amount, if any, prescribed in respect of the obligation; and
(c)except as provided by this section, paragraphs 12(1)(d) and (i) and 20(1)(l) and (p) and section 142.4, no amount shall be included or deducted in respect of payments under the obligation (other than fees and similar amounts) in computing the income of the taxpayer for the year.
Marginal note:Failure to report accrued amounts
(2)Subject to subsection 142.3(3), where
(a)a taxpayer holds a specified debt obligation at any time in a particular taxation year in which the taxpayer is a financial institution, and
(b)all or part of an amount required by paragraph 142.3(1)(a) or subsection 12(3) to be included in respect of the obligation in computing the taxpayer’s income for a preceding taxation year was not so included,
that part of the amount shall be included in computing the taxpayer’s income for the particular year, to the extent that it was not included in computing the taxpayer’s income for a preceding taxation year.
Marginal note:Exception for certain obligations
(3)Subsections 142.3(1) and (2) do not apply for a taxation year in respect of a taxpayer’s specified debt obligation that is
(a)a mark-to-market property for the year; or
(b)an indexed debt obligation, other than a prescribed obligation.
Marginal note:Impaired specified debt obligations
(4)Subsection 142.3(1) does not apply to a taxpayer in respect of a specified debt obligation for the part of a taxation year throughout which the obligation is impaired where an amount in respect of the obligation is deductible because of subparagraph 20(1)(l)(ii) in computing the taxpayer’s income for the year.
Marginal note:Definitions
142.4(1)In this section,
tax basisof a specified debt obligation at any time to a taxpayer means the amount, if any, by which the total of all amounts each of which is
(a)the cost of the obligation to the taxpayer,
(b)an amount included under subsection 12(3) or 16(2) or 16(3), paragraph 142.3(1)(a) or subsection 142.3(2) in respect of the obligation in computing the taxpayer’s income for a taxation year that began before that time,
(c)subject to subsection 138(13), where the taxpayer acquired the obligation in a taxation year ending before February 23, 1994, the part of the amount, if any, by which
(i)the principal amount of the obligation at the time it was acquired
exceeds
(ii)the cost to the taxpayer of the obligation
that was included in computing the taxpayer’s income for a taxation year ending before February 23, 1994,
(d)subject to subsection 138(13), where the taxpayer is a life insurer, an amount in respect of the obligation that was deemed by paragraph 142(3)(a) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read in its application to the 1977 taxation year, to be a gain for a taxation year ending before 1978,
(e)where the obligation is an indexed debt obligation, an amount determined under subparagraph 16(6)(a)(i) in respect of the obligation and included in computing the income of the taxpayer for a taxation year beginning before that time,
(f)an amount in respect of the obligation that was included in computing the taxpayer’s income for a taxation year ending at or before that time in respect of changes in the value of the obligation attributable to the fluctuation in the value of a currency of a country other than Canada relative to Canadian currency, other than an amount included under paragraph 142.3(1)(a),
(g)an amount in respect of the obligation that was included under paragraph 12(1)(i) in computing the taxpayer’s income for a taxation year beginning before that time, or
(h)where the obligation was a capital property of the taxpayer on February 22, 1994, an amount required by paragraph 53(1)(f) or 53(1)(f.1) to be added in computing the adjusted cost base of the obligation to the taxpayer on that day
exceeds the total of all amounts each of which is
(i)an amount deducted under paragraph 142.3(1)(b) in respect of the obligation in computing the taxpayer’s income for a taxation year beginning before that time,
(j)the amount of a payment received by the taxpayer under the obligation at or before that time, other than
(i)a fee or similar payment, and
(ii)proceeds of disposition of the obligation,
(k)subject to subsection 138(13), where the taxpayer acquired the obligation in a taxation year ending before February 23, 1994, the part of the amount, if any, by which
(i)the cost to the taxpayer of the obligation
exceeds
(ii)the principal amount of the obligation at the time it was acquired
that was deducted in computing the taxpayer’s income for a taxation year ending before February 23, 1994,
(l)subject to subsection 138(13), where the taxpayer is a life insurer, an amount in respect of the obligation that was deemed by paragraph 142(3)(b) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read in its application to the 1977 taxation year, to be a loss for a taxation year ending before 1978,
(m)an amount that was deducted under subsection 20(14) in respect of the obligation in computing the taxpayer’s income for a taxation year beginning before that time,
(n)where the obligation is an indexed debt obligation, an amount determined under subparagraph 16(6)(a)(ii) in respect of the obligation and deducted in computing the income of the taxpayer for a taxation year beginning before that time,
(o)an amount in respect of the obligation that was deducted in computing the taxpayer’s income for a taxation year ending at or before that time in respect of changes in the value of the obligation attributable to the fluctuation in the value of a currency of a country other than Canada relative to Canadian currency, other than an amount deducted under paragraph 142.3(1)(b),
(p)an amount in respect of the obligation that was deducted under paragraph 20(1)(p) in computing the taxpayer’s income for a taxation year ending at or before that time, or
(q)where the obligation was a capital property of the taxpayer on February 22, 1994, an amount required by paragraph 53(2)(b.2) or 53(2)(g) to be deducted in computing the adjusted cost base of the obligation to the taxpayer on that day; (montant de base)
transition amountof a taxpayer in respect of the disposition of a specified debt obligation has the meaning assigned by regulation. (montant de transition)
Marginal note:Scope of section
(2)This section applies to the disposition of a specified debt obligation by a taxpayer that is a financial institution, except that this section does not apply to the disposition of a specified debt obligation that is a mark-to-market property for the taxation year in which the disposition occurs.
Marginal note:Rules applicable to disposition
(3)Where a taxpayer has disposed of a specified debt obligation after February 22, 1994,
(a)except as provided by paragraph 79.1(7)(d) or this section, no amount shall be included or deducted in respect of the disposition in computing the taxpayer’s income; and
(b)except where the obligation is an indexed debt obligation (other than a prescribed obligation), paragraph 20(14)(a) shall not apply in respect of the disposition.
Marginal note:Inclusions and deductions re disposition
(4)Subject to subsection 142.4(5), where after 1994 a taxpayer disposes of a specified debt obligation in a taxation year,
(a)where the transition amount in respect of the disposition of the obligation is positive, it shall be included in computing the income of the taxpayer for the year;
(b)where the transition amount in respect of the disposition of the obligation is negative, the absolute value of the transition amount shall be deducted in computing the income of the taxpayer for the year;
(c)where the taxpayer has a gain from the disposition of the obligation,
(i)the current amount of the gain shall be included in computing the income of the taxpayer for the year, and
(ii)there shall be included in computing the taxpayer’s income for taxation years that end on or after the day of disposition the amount allocated, in accordance with prescribed rules, to the year in respect of the residual portion of the gain; and
(d)where the taxpayer has a loss from the disposition of the obligation,
(i)the current amount of the loss shall be deducted in computing the taxpayer’s income for the year, and
(ii)there shall be deducted in computing the taxpayer’s income for taxation years that end on or after the day of disposition the amount allocated, in accordance with prescribed rules, to the year in respect of the residual portion of the loss.
Marginal note:Gain or loss not amortized
(5)Where after February 22, 1994 a taxpayer disposes of a specified debt obligation in a taxation year, and
(a)the obligation is
(i)an indexed debt obligation (other than a prescribed obligation), or
(ii)a debt obligation prescribed in respect of the taxpayer,
(b)the disposition occurred
(i)before 1995,
(ii)after 1994 in connection with the transfer of all or part of a business of the taxpayer to a person or partnership, or
(iii)because of paragraph 142.6(1)(c), or
(c)in the case of a taxpayer other than a life insurance corporation,
(i)the disposition occurred before 1996, and
(ii)the taxpayer elects in writing, filed with the Minister before July 1997, to have this paragraph apply,
the following rules apply:
(d)subsection 142.4(4) does not apply to the disposition,
(e)there shall be included in computing the taxpayer’s income for the year the amount, if any, by which the taxpayer’s proceeds of disposition exceed the tax basis of the obligation to the taxpayer immediately before the disposition, and
(f)there shall be deducted in computing the taxpayer’s income for the year the amount, if any, by which the tax basis of the obligation to the taxpayer immediately before the disposition exceeds the taxpayer’s proceeds of disposition.
Marginal note:Gain or loss from disposition of obligation
(6)For the purposes of this section,
(a)where the amount determined under paragraph 142.4(6)(c) in respect of the disposition of a specified debt obligation by a taxpayer is positive, that amount is the taxpayer’s gain from the disposition of the obligation;
(b)where the amount determined under paragraph 142.4(6)(c) in respect of the disposition of a specified debt obligation by a taxpayer is negative, the absolute value of that amount is the taxpayer’s loss from the disposition of the obligation; and
(c)the amount determined under this paragraph in respect of the disposition of a specified debt obligation by a taxpayer is the positive or negative amount determined by the formula
A - (B + C)
where
Marginal note:Current amount
(7)For the purposes of subsections 142.4(4) and 142.4(8), the current amount of a taxpayer’s gain or loss from the disposition of a specified debt obligation is
(a)where the taxpayer has a gain from the disposition of the obligation, the part, if any, of the gain that is reasonably attributable to a material increase in the probability, or perceived probability, that the debtor will make all payments as required by the obligation; and
(b)where the taxpayer has a loss from the disposition of the obligation, the amount that the taxpayer claims not exceeding the part, if any, of the loss that is reasonably attributable to a default by the debtor or a material decrease in the probability, or perceived probability, that the debtor will make all payments as required by the obligation.
Marginal note:Residual portion of gain or loss
(8)For the purpose of subsection 142.4(4), the residual portion of a taxpayer’s gain or loss from the disposition of a specified debt obligation is the amount, if any, by which the gain or loss exceeds the current amount of the gain or loss.
Marginal note:Disposition of part of obligation
(9)Where a taxpayer disposes of part of a specified debt obligation, section 142.3 and this section apply as if the part disposed of and the part retained were separate specified debt obligations.
Marginal note:Penalties and bonuses
(10)Notwithstanding subsection 18(9.1), where a taxpayer that holds a specified debt obligation receives a penalty or bonus because of the repayment before maturity of all or part of the principal amount of the debt obligation, the payment is deemed to be received by the taxpayer as proceeds of disposition of the specified debt obligation.
Marginal note:Payments received on or after disposition
(11)For the purposes of this section, where at any time a taxpayer receives a payment (other than proceeds of disposition) under a specified debt obligation on or after the disposition of the obligation, the payment is deemed not to have been so received at that time but to have been so received immediately before the disposition.
Marginal note:Income treatment for profits and losses
142.5(1)Where, in a taxation year that begins after October 1994, a taxpayer that is a financial institution in the year disposes of a property that is a mark-to-market property for the year,
(a)there shall be included in computing the taxpayer’s income for the year the profit, if any, from the disposition; and
(b)there shall be deducted in computing the taxpayer’s income for the year the loss, if any, from the disposition.
Marginal note:Mark-to-market requirement
(2)Where a taxpayer that is a financial institution in a taxation year holds, at the end of the year, a mark-to-market property for the year, the taxpayer shall be deemed
(a)to have disposed of the property immediately before the end of the year for proceeds equal to its fair market value at the time of disposition, and
(b)to have reacquired the property at the end of the year at a cost equal to those proceeds.
Marginal note:Mark-to-market debt obligation
(3)Where a taxpayer is a financial institution in a particular taxation year that begins after October 1994, the following rules apply with respect to a specified debt obligation that is a mark-to-market property of the taxpayer for the particular year:
(a)paragraph 12(1)(c) and subsections 12(3) and 20(14) and (21) do not apply to the obligation in computing the taxpayer’s income for the particular year;
(b)there shall be included in computing the taxpayer’s income for the particular year an amount received by the taxpayer in the particular year as, on account of, in lieu of payment of, or in satisfaction of, interest on the obligation, to the extent that the interest was not included in computing the taxpayer’s income for a preceding taxation year; and
(c)for the purpose of paragraph 142.5(3)(b), where the taxpayer was deemed by subsection 142.5(2) or paragraph 142.6(1)(b) to have disposed of the obligation in a preceding taxation year, no part of an amount included in computing the income of the taxpayer for that preceding year because of the disposition shall be considered to be in respect of interest on the obligation.
Marginal note:Proceeds — mark-to-market property
(4)For greater certainty, if a taxpayer is a financial institution in a taxation year and disposes of a share that is mark-to-market property of the taxpayer for the year, the taxpayer’s proceeds from the disposition do not include any amount that would otherwise be proceeds from the disposition to the extent that the amount is deemed by subsection 84(2) or (3) to be a dividend received except to the extent the dividend is deemed by subparagraph 88(2)(b)(ii) not to be a dividend.
(5) to (7)[Repealed, 2013, c. 34, s. 288]
Marginal note:First deemed disposition of debt obligation
(8)Where
(a)in a particular taxation year that ends after October 30, 1994, a taxpayer disposed of a specified debt obligation that is a mark-to-market property of the taxpayer for the following taxation year, and
(b)either
(i)the disposition occurred because of subsection 142.5(2) and the particular year includes October 31, 1994, or
(ii)the disposition occurred because of paragraph 142.6(1)(b),
the following rules apply:
(c)subsection 20(21) does not apply to the disposition, and
(d)where
(i)an amount has been deducted under paragraph 20(1)(p) in respect of the obligation in computing the taxpayer’s income for the particular year or a preceding taxation year, and
(ii)section 12.4 does not apply to the disposition,
there shall be included in computing the taxpayer’s income for the particular year the amount, if any, by which
(iii)the total of all amounts referred to in subparagraph 142.5(8)(d)(i)
exceeds
(iv)the total of all amounts included under paragraph 12(1)(i) in respect of the obligation in computing the taxpayer’s income for the particular year or a preceding taxation year.
Marginal note:Application of subsection (8.2)
(8.1)Subsection (8.2) applies to a taxpayer for its transition year if
(a)subsection (2) deems the taxpayer to have disposed of a particular specified debt obligation immediately before the end of its transition year (in subsection (8.2) referred to as “the particular disposition”); and
(b)the particular specified debt obligation was owned by the taxpayer at the end of its base year and was not a mark-to-market property of the taxpayer for its base year.
Marginal note:Rules applicable to first deemed disposition of debt obligation
(8.2)If this subsection applies to a taxpayer for its transition year, the following rules apply to the taxpayer in respect of the particular disposition:
(a)subsection 20(21) does not apply to the taxpayer in respect of the particular disposition; and
(b)if section 12.4 does not apply to the taxpayer in respect of the particular disposition, there shall be included in computing the taxpayer’s income for its transition year the amount, if any, by which
(i)the total of all amounts each of which is
(A)an amount deducted under paragraph 20(1)(l) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its base year, or
(B)an amount deducted under paragraph 20(1)(p) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for a taxation year that preceded its transition year,
exceeds
(ii)the total of all amounts each of which is
(A)an amount included under paragraph 12(1)(d) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition year, or
(B)an amount included under paragraph 12(1)(i) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition year or a preceding taxation year.
Marginal note:Transition — property acquired on rollover
(9)Where
(a)a taxpayer acquired a property before October 31, 1994 at a cost less than the fair market value of the property at the time of acquisition,
(b)the property was transferred, directly or indirectly, to the taxpayer by a person that would never have been a financial institution before the transfer if the definitionfinancial institutionin subsection 142.2(1) had always applied,
(c)the cost is less than the fair market value because subsection 85(1) applied in respect of the disposition of the property by the person, and
(d)subsection 142.5(2) deemed the taxpayer to have disposed of the property in its particular taxation year that includes October 31, 1994,
the following rules apply:
(e)where the taxpayer would, but for this paragraph, have a taxable capital gain for the particular year from the disposition of the property, the part of the taxable capital gain that can reasonably be considered to have arisen while the property was held by a person described in paragraph 142.5(9)(b) shall be deemed to be a taxable capital gain of the taxpayer from the disposition of the property for the taxation year in which the taxpayer disposes of the property otherwise than because of subsection 142.5(2), and not to be a taxable capital gain for the particular year, and
(f)where the taxpayer has a profit (other than a capital gain) from the disposition of the property, the part of the profit that can reasonably be considered to have arisen while the property was held by a person described in paragraph 142.5(9)(b) shall be included in computing the taxpayer’s income for the taxation year in which the taxpayer disposes of the property otherwise than because of subsection 142.5(2), and shall not be included in computing the taxpayer’s income for the particular year.
Marginal note:Definitions
142.51(1)The following definitions apply for the purposes of this section and subsections 142.5(8.1) and (8.2).
base yearof a taxpayer means the taxpayer’s taxation year that immediately precedes its transition year. (année de base)
transition amountof a taxpayer for the taxpayer’s transition year is the positive or negative amount determined by the formula
A – B
where
transition propertyof a taxpayer means a property that
(a)was a specified debt obligation held by the taxpayer at the end of the taxpayer’s base year;
(b)was not a mark-to-market property of the taxpayer for the taxpayer’s base year, but would have been a mark-to-market property of the taxpayer for the taxpayer’s base year if the property had been carried at the property’s fair market value in the taxpayer’s balance sheet as at the end of each taxation year of the taxpayer that ends after the taxpayer last acquired the property (otherwise than by reason of a reacquisition under subsection 142.5(2)) and before the commencement of the taxpayer’s transition year; and
(c)was a mark-to-market property of the taxpayer for the transition year of the taxpayer. (bien transitoire)
transition yearof a taxpayer means the taxpayer’s first taxation year that begins after 2022. (année transitoire)
Marginal note:Transition year income inclusion
(2)If a taxpayer is an insurer in its transition year, there shall be included in computing the taxpayer’s income for its transition year the absolute value of the negative amount, if any, of the taxpayer’s transition amount.
Marginal note:Transition year income deduction
(3)If a taxpayer is an insurer in its transition year, there shall be deducted in computing the taxpayer’s income for its transition year the positive amount, if any, of the taxpayer’s transition amount.
Marginal note:Transition year income inclusion reversal
(4)If an amount has been included under subsection (2) in computing a taxpayer’s income for its transition year, there shall be deducted in computing the taxpayer’s income for each particular taxation year of the taxpayer that ends after the beginning of the transition year, and in which particular taxation year the taxpayer is an insurer, the amount determined by the formula
A × B/1825
where
Marginal note:Transition year income deduction reversal
(5)If an amount has been deducted under subsection (3) in computing a taxpayer’s income for its transition year, there shall be included in computing the taxpayer’s income, for each particular taxation year of the taxpayer ending after the beginning of the transition year, and in which particular taxation year the taxpayer is an insurer, the amount determined by the formula
A × B/1825
where
Marginal note:Winding-up
(6)If a taxpayer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent is an insurer, in applying subsections (4) and (5) in computing the income of the taxpayer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the taxpayer were distributed to the parent on the winding-up,
(a)the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the taxpayer in respect of
(i)any amount included under subsection (2) or deducted under subsection (3) by the taxpayer in computing the taxpayer’s income for its transition year,
(ii)any amount deducted under subsection (4) or included under subsection (5) in computing the taxpayer’s income for a taxation year of the taxpayer that begins before the start day, and
(iii)any amount that would — in the absence of this subsection and if the taxpayer existed and was an insurer on each day that is the start day or a subsequent day and on which the parent is an insurer — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income for its transition year; and
(b)the taxpayer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (4) and (5) without reference to the start day and days after the start day.
Marginal note:Amalgamations
(7)If there is an amalgamation (within the meaning assigned by subsection 87(1)) of a taxpayer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation is an insurer, in applying subsections (4) and (5) in computing the income of the new corporation for particular taxation years of the new corporation that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the taxpayer in respect of
(a)any amount included under subsection (2) or deducted under subsection (3) in computing the taxpayer’s income for its transition year of the taxpayer;
(b)any amount deducted under subsection (4) or included under subsection (5) in computing the taxpayer’s income for a taxation year of the taxpayer that begins before the day on which the amalgamation occurred; and
(c)any amount that would — in the absence of this subsection and if the taxpayer existed and was an insurer on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation is an insurer — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income.
Marginal note:Application of subsection (9)
(8)Subsection (9) applies if, at any time, a taxpayer (referred to in this subsection and subsection (9) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (9) as the “transferee”) that is related to the transferor, property in respect of a business carried on by the transferor in Canada (referred to in this subsection and subsection (9) as the “transferred business”) and
(a)subsection 138(11.5) or (11.94) applies to the transfer; or
(b)subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee is an insurer.
Marginal note:Transfer of a business
(9)If this subsection applies in respect of the transfer, at any time, of property
(a)the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of
(i)any amount included under subsection (2) or deducted under subsection (3) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,
(ii)any amount deducted under subsection (4) or included under subsection (5) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business, and
(iii)any amount that would — in the absence of this subsection and if the transferor existed and was an insurer on each day that includes that time or is a subsequent day and on which the transferee is an insurer — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the transferor’s income that can reasonably be attributed to the transferred business; and
(b)in determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (4) or (5) to be deducted or included in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.
(10)[Repealed, 2022, c. 19, s. 28]
Marginal note:Ceasing to carry on a business
(11)If at any time, a taxpayer ceases to be an insurer
(a)there shall be deducted, in computing the income of the taxpayer for the taxation year of the taxpayer that includes the time that is immediately before that time, the amount determined by the formula
A – B
where
(b)there shall be included, in computing the income of the taxpayer for the taxation year of the taxpayer that includes the time that is immediately before that time, the amount determined by the formula
C – D
where
Marginal note:Ceasing to exist
(12)If at any time a taxpayer ceases to exist (otherwise than as a result of a merger to which subsection 87(2) applies or a winding-up to which subsection 88(1) applies), for the purposes of subsection (11), the taxpayer is deemed to have ceased to be an insurer at the earlier of
(a)the time (determined without reference to this subsection) at which the taxpayer ceased to be an insurer, and
(b)the time that is immediately before the end of the last taxation year of the taxpayer that ended at or before the time at which the taxpayer ceased to exist.
Marginal note:Application of subsection (13.1)
(13)Subsection (13.1) applies to a taxpayer for a particular taxation year of the taxpayer if
(a)the taxpayer holds a transition property in the particular taxation year;
(b)the property was a mark-to-market property of the taxpayer for the taxation year preceding the particular taxation year; and
(c)the property is not a mark-to-market property of the taxpayer for the particular taxation year.
Marginal note:Ceasing to be mark-to-market property
(13.1)If this subsection applies to a taxpayer for a particular taxation year of the taxpayer, for purposes of this section
(a)the taxpayer is deemed to have ceased to be an insurer at the particular time that is the beginning of the particular taxation year; and
(b)the time immediately before the particular time shall be deemed to be the end of the taxation year that ends immediately before the particular taxation year.
Marginal note:Becoming or ceasing to be a financial institution
142.6(1)Where, at a particular time after February 22, 1994, a taxpayer becomes or ceases to be a financial institution,
(a)where a taxation year of the taxpayer would not, but for this paragraph, end immediately before the particular time,
(i)except for the purpose of subsection 132(6.1), the taxpayer’s taxation year that would otherwise have included the particular time is deemed to have ended immediately before that time and a new taxation year of the taxpayer is deemed to have begun at that time, and
(ii)for the purpose of determining the taxpayer’s fiscal period after the particular time, the taxpayer shall be deemed not to have established a fiscal period before that time;
(b)if the taxpayer becomes a financial institution, the taxpayer is deemed to have disposed, immediately before the end of its particular taxation year that ends immediately before the particular time, of each of the following properties held by the taxpayer for proceeds equal to the property’s fair market value at the time of that disposition:
(i)a specified debt obligation, or
(ii)a mark-to-market property of the taxpayer for the particular taxation year or for the taxpayer’s taxation year that includes the particular time;
(c)where the taxpayer ceases to be a financial institution, the taxpayer shall be deemed to have disposed, immediately before the end of its taxation year that ends immediately before the particular time, of each property held by the taxpayer that is a specified debt obligation (other than a mark-to-market property of the taxpayer for the year), for proceeds equal to its fair market value at the time of disposition; and
(d)the taxpayer is deemed to have reacquired, at the end of its taxation year that ends immediately before the particular time, each property deemed by paragraph (b) or (c) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property.
Marginal note:Ceasing to use property in Canadian business
(1.1)If at a particular time in a taxation year a taxpayer that is a non-resident financial institution (other than a life insurance corporation) ceases to use, in connection with a business or part of a business carried on by the taxpayer in Canada immediately before the particular time, a property that is a mark-to-market property of the taxpayer for the year or a specified debt obligation, but that is not a property that was disposed of by the taxpayer at the particular time,
(a)the taxpayer is deemed
(i)to have disposed of the property immediately before the time that was immediately before the particular time for proceeds equal to its fair market value at the time of disposition and to have received those proceeds at the time of disposition in the course of carrying on the business or the part of the business, as the case may be, and
(ii)to have reacquired the property at the particular time at a cost equal to those proceeds; and
(b)in determining the consequences of the disposition in subparagraph (a)(i), subsection 142.4(11) does not apply to any payment received by the taxpayer after the particular time.
Marginal note:Beginning to use property in a Canadian business
(1.2)If at a particular time a taxpayer that is a non-resident financial institution (other than a life insurance corporation) begins to use, in connection with a business or part of a business carried on by the taxpayer in Canada, a property that is a mark-to-market property of the taxpayer for the year that includes the particular time or a specified debt obligation, but that is not a property that was acquired by the taxpayer at the particular time, the taxpayer is deemed
(a)to have disposed of the property immediately before the time that was immediately before the particular time for proceeds equal to its fair market value at the time of disposition; and
(b)to have reacquired the property at the particular time at a cost equal to those proceeds.
Marginal note:Specified debt obligation marked to market
(1.3)In applying subsection (1.1) to a taxpayer in respect of a property in a taxation year,
(a)the definitionmark-to-market propertyin subsection 142.2(1) shall be applied as if the year ended immediately before the particular time referred to in subsection (1.1); and
(b)if the taxpayer does not have financial statements for the period ending immediately before the particular time referred to in subsection (1.1), references in the definition to financial statements for the year shall be read as references to the financial statements that it is reasonable to expect would have been prepared if the year had ended immediately before the particular time.
Marginal note:Change in status — prescribed payment card corporation share
(1.4)If, at any particular time in a taxation year of a taxpayer that is a financial institution for the taxation year, a property becomes a mark-to-market property of the taxpayer for the taxation year because it ceased, at the particular time, to be a prescribed payment card corporation share of the taxpayer,
(a)the taxpayer is deemed
(i)to have disposed of the property immediately before the particular time for proceeds of disposition equal to its fair market value immediately before the particular time, and
(ii)to have acquired the property, at the particular time, at a cost equal to those proceeds; and
(b)subsection 142.5(1) does not apply to the disposition under subparagraph (a)(i).
Marginal note:Change in status — prescribed securities exchange investment
(1.5)If, at any particular time in a taxation year of a taxpayer that is a financial institution for the taxation year, a property becomes a mark-to-market property of the taxpayer for the taxation year because it ceased, at the particular time, to be a prescribed securities exchange investment of the taxpayer,
(a)the taxpayer is deemed
(i)to have disposed of the property immediately before the particular time for proceeds of disposition equal to its fair market value immediately before the particular time, and
(ii)to have acquired the property, at the particular time, at a cost equal to those proceeds; and
(b)subsection 142.5(1) does not apply to the disposition under subparagraph (a)(i).
Marginal note:Change in status — significant interest
(1.6)If, at the end of a particular taxation year of a taxpayer that is a financial institution for the taxation year, the taxpayer holds a share of the capital stock of a corporation, the taxpayer has a significant interest in that corporation at any time in the particular taxation year and the share is mark-to-market property of the taxpayer for the immediately following taxation year, the taxpayer is deemed to have,
(a)disposed of the share immediately before the end of the particular taxation year for proceeds of disposition equal to the fair market value, at that time, of the share; and
(b)acquired the share at the end of the particular taxation year at a cost equal to those proceeds.
Marginal note:Deemed disposition not applicable
(2)For the purposes of this Act, the determination of when a taxpayer acquired a share shall be made without regard to a disposition or acquisition that occurred because of subsection 142.5(2) or subsection (1), (1.1), (1.2), (1.4), (1.5) or (1.6).
Marginal note:Property not inventory
(3)Where a taxpayer is a financial institution in a taxation year, inventory of the taxpayer in the year does not include property that is
(a)a specified debt obligation (other than a mark-to-market property for the year); or
(b)where the year begins after October 1994, a mark-to-market property for the year.
Marginal note:Property that ceases to be inventory
(4)Where a taxpayer that was a financial institution in its particular taxation year that includes February 23, 1994 held, on that day, a specified debt obligation (other than a mark-to-market property for the year) that was inventory of the taxpayer at the end of its preceding taxation year,
(a)the taxpayer shall be deemed to have disposed of the property at the beginning of the particular year for proceeds equal to
(i)where subparagraph 142.6(4)(a)(ii) does not apply, the amount at which the property was valued at the end of the preceding taxation year for the purpose of computing the taxpayer’s income for the year, and
(ii)where the taxpayer is a bank and the property is prescribed property for the particular year, the cost of the property to the taxpayer (determined without reference to paragraph 142.6(4)(b));
(b)for the purpose of determining the taxpayer’s profit or loss from the disposition, the cost of the property to the taxpayer shall be deemed to be the amount referred to in subparagraph 142.6(4)(a)(i); and
(c)the taxpayer shall be deemed to have reacquired the property, immediately after the beginning of the particular year, at a cost equal to the proceeds of disposition of the property.
Marginal note:Debt obligations acquired in rollover transactions
(5)Where,
(a)on February 23, 1994, a financial institution that is a corporation held a specified debt obligation (other than a mark-to-market property for the taxation year that includes that day) that was at any particular time before that day held by another corporation, and
(b)between the particular time and February 23, 1994, the only transactions affecting the ownership of the property were rollover transactions,
the financial institution shall be deemed, in respect of that obligation, to be the same corporation as, and a continuation of, the other corporation.
Definition ofrollover transaction
(6)For the purpose of subsection 142.6(5),rollover transactionmeans a transaction to which subsection 87(2), 88(1) or 138(11.5) or 138(11.94) applies, other than a transaction to which paragraph 138(11.5)(e) requires the provisions of subsection 85(1) to be applied.
Marginal note:Superficial loss rule not applicable
(7)Subsection 18(13) does not apply to the disposition of a property by a taxpayer after October 30, 1994 where
(a)the taxpayer is a financial institution when the disposition occurs and the property is a specified debt obligation or a mark-to-market property for the taxation year in which the disposition occurs; or
(b)the disposition occurs because of paragraph 142.6(1)(b).
Marginal note:Accrued capital gains and losses election
(8)Where a taxpayer that is a financial institution in its first taxation year that ends after February 22, 1994 so elects by notifying the Minister in writing before July 1998 or within 90 days after the day on which a notice of assessment of tax payable under this Part for the year, notification that no tax is payable under this Part for the year or notification that an election made by the taxpayer under this subsection is deemed by subsection 142.6(9) or 142.6(10) not to have been made is mailed to the taxpayer,
(a)each property of the taxpayer
(i)that was a capital property (other than a depreciable property) of the taxpayer at the end of the taxpayer’s last taxation year that ended before February 23, 1994,
(ii)that was a mark-to-market property for, or a specified debt obligation in, the taxpayer’s first taxation year that begins after that time,
(iii)that had a fair market value at that time greater than its adjusted cost base to the taxpayer at that time, and
(iv)that is designated by the taxpayer in the election
is deemed to have been disposed of by the taxpayer at that time for proceeds of disposition equal to, and to have been reacquired by the taxpayer immediately after that time at a cost equal to, the lesser of
(v)the fair market value of the property at that time, and
(vi)the greater of the adjusted cost base to the taxpayer of the property immediately before that time and the amount designated by the taxpayer in the election in respect of the property;
(b)each property of the taxpayer
(i)that was a capital property (other than a depreciable property) of the taxpayer at the end of the taxpayer’s last taxation year that ended before February 23, 1994,
(ii)that was not a mark-to-market property for, or a specified debt obligation in, the taxpayer’s first taxation year that begins after that time,
(iii)that had an adjusted cost base to the taxpayer at that time greater than its fair market value at that time, and
(iv)that is designated by the taxpayer in the election
is deemed to have been disposed of by the taxpayer at that time for proceeds of disposition equal to, and to have been reacquired by the taxpayer immediately after that time at a cost equal to, the greater of
(v)the fair market value of the property at that time, and
(vi)the lesser of the adjusted cost base to the taxpayer of the property immediately before that time and the amount designated by the taxpayer in the election in respect of the property; and
(c)notwithstanding subsections 152(4) to 152(5), such assessment of the taxpayer’s tax payable under this Act for the taxpayer’s last taxation year that ended before February 23, 1994 shall be made as is necessary to take the election into account.
Marginal note:Accrued capital gains election limit
(9)Where a taxpayer has made an election under subsection 142.6(8) in which a property was designated under subparagraph 142.6(8)(a)(iv), the election is deemed not to have been made where
(a)the amount that would be the taxpayer’s taxable capital gains from dispositions of property for the taxpayer’s last taxation year that ended before February 23, 1994 if this subsection and subsection 142.6(10) did not apply
exceeds the total of
(b)the amount that would be the taxpayer’s allowable capital losses for the year from dispositions of property if this subsection and subsection 142.6(10) did not apply,
(c)the maximum amount that would have been deductible in computing the taxpayer’s taxable income for the year in respect of the taxpayer’s net capital losses for preceding taxation years if there were sufficient taxable capital gains for the year from dispositions of property, and
(d)the amount, if any, by which
(i)the amount that would be the taxpayer’s taxable capital gains for the taxpayer’s last taxation year that ended before February 23, 1994 from dispositions of property if no election were made under subsection 142.6(8)
exceeds the total of
(ii)the amount that would be the taxpayer’s allowable capital losses for the year from dispositions of property if no election were made under subsection 142.6(8), and
(iii)the maximum amount that would have been deductible in computing the taxpayer’s taxable income for the year in respect of the taxpayer’s net capital losses for preceding taxation years if no election were made under subsection 142.6(8).
Marginal note:Accrued capital losses election limit
(10)Where a taxpayer has made an election under subsection 142.6(8) in which a property was designated under subparagraph 142.6(8)(b)(iv), the election is deemed not to have been made where
(a)the total of the amounts determined under paragraphs 142.6(9)(b) and 142.6(9)(c) in respect of the taxpayer exceeds the amount determined under paragraph 142.6(9)(a) in respect of the taxpayer; or
(b)the total of all amounts each of which would, if this subsection did not apply, be the taxpayer’s allowable capital loss for the taxpayer’s last taxation year that ended before February 23, 1994 from the disposition of a property deemed to have been disposed of under paragraph 142.6(8)(b) exceeds the total of all amounts each of which is the taxpayer’s taxable capital gain for the year from the disposition of a property deemed to have been disposed of under paragraph 142.6(8)(a).
Marginal note:Definitions
142.7(1)The definitions in this subsection apply in this section.
Canadian affiliateof an entrant bank at any particular time means a Canadian corporation that was, immediately before the particular time, affiliated with the entrant bank and that was, at all times during the period that began on February 11, 1999 and ended immediately before the particular time,
(a)affiliated with either
(i)the entrant bank, or
(ii)a foreign bank (within the meaning assigned by section 2 of theBank Act) that is affiliated with the entrant bank at the particular time; and
(b)either
(i)a bank,
(ii)a corporation authorized under theTrust and Loan Companies Actto carry on the business of offering to the public its services as trustee, or
(iii)a corporation of which the principal activity in Canada consists of any of the activities referred to in subparagraphs 518(3)(a)(i) to (v) of theBank Actand in which the entrant bank or a non-resident person affiliated with the entrant bank holds shares under the authority, directly or indirectly, of an order issued by the Minister of Finance or the Governor in Council under subsection 521(1) of that Act. (filiale canadienne)
eligible propertyof a Canadian affiliate at any time means a property described in any of paragraphs 85(1.1)(a) to (g.1) that is, immediately before that time, used or held by it in carrying on its business in Canada. (bien admissible)
entrant bankmeans a non-resident corporation that is, or has applied to the Superintendent of Financial Institutions to become, an authorized foreign bank. (banque entrante)
qualifying foreign mergermeans a merger or combination of two or more corporations that would be aforeign mergerwithin the meaning assigned by subsection 87(8.1) if that subsection were read without reference to the words “and otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation. (fusion étrangère déterminée)
Marginal note:Qualifying foreign merger
(2)Where an entrant bank was formed as the result of a qualifying foreign merger, after February 11, 1999, of two or more corporations (referred to in this subsection as “predecessors”), and at the time immediately before the merger, there were one or more Canadian corporations (referred to in this subsection as “predecessor affiliates”), each of which at that time would have been a Canadian affiliate of a predecessor if the predecessor were an entrant bank at that time,
(a)for the purpose of the definitionCanadian affiliatein subsection (1),
(i)each predecessor affiliate is deemed to have been affiliated with the entrant bank throughout the period that began on February 11, 1999 and ended at the time of the merger,
(ii)the expression “entrant bank” in subparagraph (b)(iii) of the definition is deemed to include a predecessor, and
(iii)if two or more of the predecessor affiliates are amalgamated or merged at any time after February 11, 1999 to form a new corporation, the new corporation is deemed to have been affiliated with the entrant bank throughout the period that began on February 11, 1999 and ended at the time of the amalgamation or merger of the predecessor affiliates; and
(b)if at least one of the predecessors complied with the terms of subsection (11)(a), the entrant bank is deemed to have complied with those terms.
Marginal note:Branch-establishment rollover
(3)If a Canadian affiliate of an entrant bank transfers an eligible property to the entrant bank, the entrant bank begins immediately after the transfer to use or hold the transferred property in its Canadian banking business and the Canadian affiliate and the entrant bank jointly elect, in accordance with subsection (11), to have this subsection apply in respect of the transfer, subsections 85(1) (other than paragraph (e.2)), (1.1), (1.4) and (5) apply, with any modifications that the circumstances require, in respect of the transfer, except that the portion of subsection 85(1) before paragraph (a) shall be read as follows:
“85(1)Where a taxpayer that is a Canadian affiliate of an entrant bank (within the meanings assigned by subsection 142.7(1)) has, in a taxation year, disposed of any of the taxpayer’s property to the entrant bank (referred to in this subsection as the “corporation”), if the taxpayer and the corporation have jointly elected under subsection 142.7(3), the following rules apply:”.
Marginal note:Deemed fair market value
(4)If a Canadian affiliate of an entrant bank and the entrant bank make an election under subsection (3) in respect of a transfer of property by the Canadian affiliate to the entrant bank, for the purposes of subsections 15(1), 52(2), 69(1), (4) and (5), 246(1) and 247(2) in respect of the transfer, the fair market value of the property is deemed to be the amount agreed by the Canadian affiliate and the entrant bank in their election.
Marginal note:Specified debt obligations
(5)If a Canadian affiliate of an entrant bank transfers a specified debt obligation to the entrant bank in a transaction in respect of which an election is made under subsection (3), the Canadian affiliate is a financial institution in its taxation year in which the transfer is made, and the amount that the Canadian affiliate and the entrant bank agree on in their election in respect of the obligation is equal to the tax basis of the obligation within the meaning assigned by subsection 142.4(1), the entrant bank is deemed, in respect of the obligation, for the purposes of sections 142.2 to 142.4 and 142.6, to be the same corporation as, and a continuation of, the Canadian affiliate.
Marginal note:Mark-to-market property
(6)If a Canadian affiliate of an entrant bank described in paragraph (11)(a) transfers at any time within the period described in paragraph (11)(c) to the entrant bank a property that is, for the Canadian affiliate’s taxation year in which the property is transferred, a mark-to-market property of the Canadian affiliate,
(a)for the purposes of subsections 112(5) to (5.21) and (5.4), the definitionmark-to-market propertyin subsection 142.2(1) and subsection 142.5(9), the entrant bank is deemed, in respect of the property, to be the same corporation as and a continuation of, the Canadian affiliate; and
(b)for the purpose of applying subsection 142.5(2) in respect of the property, the Canadian affiliate’s taxation year in which the property is transferred is deemed to have ended immediately before the time the property was transferred.
Marginal note:Reserves
(7)If
(a)at a particular time,
(i)a Canadian affiliate of an entrant bank transfers to the entrant bank property that is a loan or lending asset, or a right to receive an unpaid amount in respect of a disposition before the particular time of property by the affiliate, or
(ii)the entrant bank assumes an obligation of the Canadian affiliate that is an instrument or commitment described in paragraph 20(1)(l.1) or an obligation in respect of goods, services, land, or chattels or movable property, described in subparagraph 20(1)(m)(i), (ii) or (iii),
(b)the property is transferred or the obligation is assumed for an amount equal to its fair market value at the particular time,
(c)the entrant bank begins immediately after the particular time to use or hold the property or owe the obligation in its Canadian banking business, and
(d)the Canadian affiliate and the entrant bank jointly elect in accordance with subsection (11) to have this subsection apply in respect of the transfer or assumption,
then
(e)in applying paragraphs 20(1)(l), (l.1), (m), (n) and (p) in respect of the obligation or property, the taxation year of the affiliate that would, but for this paragraph, include the particular time is deemed to end immediately before the particular time, and
(f)in computing the income of the Canadian affiliate and the entrant bank for taxation years that end on or after the particular time,
(i)any amount deducted under paragraph 20(1)(l), (l.1), (m) or (n) by the Canadian affiliate in respect of the property or obligation in computing its income for its taxation year that ended immediately before the particular time, or under paragraph 20(1)(p) in computing its income for that year or for a preceding taxation year (to the extent that the amount has not been included in the affiliate’s income under paragraph 12(1)(i)), is deemed to have been so deducted by the entrant bank in computing its income for its last taxation year that ended before the particular time and not to have been deducted by the Canadian affiliate,
(ii)in applying paragraph 20(1)(m), an amount in respect of the goods, services, land, chattels or movable property, that was included under paragraph 12(1)(a) in computing the Canadian affiliate’s income from a business is deemed to have been so included in computing the entrant bank’s income from its Canadian banking business for a preceding taxation year,
(iii)in applying paragraph 20(1)(n) in respect of a property described in subparagraph (a)(i) and paragraphs (b), (c) and (d) sold by the Canadian affiliate in the course of a business, the property is deemed to have been disposed of by the entrant bank (and not by the Canadian affiliate) at the time it was disposed of by the Canadian affiliate, and the amount in respect of the sale that was included in computing the Canadian affiliate’s income from a business is deemed to have been included in computing the entrant bank’s income from its Canadian banking business for its taxation year that includes the time at which the property was so disposed of, and
(iv)in applying paragraph 40(1)(a) or 44(1)(e) in respect of a property described in subparagraph (a)(i) and paragraphs (b), (c) and (d) disposed of by the Canadian affiliate, the property is deemed to have been disposed of by the entrant bank (and not by the Canadian affiliate) at the time it was disposed of by the Canadian affiliate, the amount determined under subparagraph 40(1)(a)(i) or 44(1)(e)(i) in respect of the Canadian affiliate is deemed to be the amount determined under that subparagraph in respect of the entrant bank, and any amount claimed by the Canadian affiliate under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing its gain from the disposition of the property for its last taxation year that ended before the particular time is deemed to have been so claimed by the entrant bank for its last taxation year that ended before the particular time.
Marginal note:Assumption of debt obligation
(8)If a Canadian affiliate of an entrant bank described in paragraph (11)(a) transfers at any time within the period described in paragraph (11)(c) property to the entrant bank, and any part of the consideration for the transfer is the assumption by the entrant bank in respect of its Canadian banking business of a debt obligation of the Canadian affiliate,
(a)where the Canadian affiliate and the entrant bank jointly elect in accordance with subsection (11) to have this paragraph apply,
(i)both
(A)the value of that part of the consideration for the transfer of the property, and
(B)for the purpose of determining the consequences of the assumption of the obligation and any subsequent settlement or extinguishment of it, the value of the consideration given to the entrant bank for the assumption of the obligation,
are deemed to be an amount (in this paragraph referred to as the “assumption amount”) equal to the amount outstanding on account of the principal amount of the obligation at that time, and
(ii)the assumption amount shall not be considered a term of the transaction that differs from that which would have been made between persons dealing at arm’s length solely because it is not equal to the fair market value of the obligation at that time;
(a.1)[Repealed, 2013, c. 34, s. 290]
(b)where the obligation is denominated in a foreign currency, and the Canadian affiliate and the entrant bank jointly elect in accordance with subsection (11) to have this paragraph apply,
(i)the amount of any income, loss, capital gain or capital loss in respect of the obligation due to the fluctuation in the value of the foreign currency relative to Canadian currency realized by
(A)the Canadian affiliate on the assumption of the obligation is deemed to be nil, and
(B)the entrant bank on the settlement or extinguishment of the obligation shall be determined based on the amount of the obligation in Canadian currency at the time it became an obligation of the Canadian affiliate, and
(ii)for the purpose of an election made in respect of the obligation under paragraph (a), the amount outstanding on account of the principal amount of the obligation at that time is the total of all amounts each of which is an amount that was advanced to the Canadian affiliate on account of principal, that remains outstanding at that time, and that is determined using the exchange rate that applied between the foreign currency and Canadian currency at the time of the advance; and
(c)for the purpose of applying paragraphs 20(1)(e) and (f) in respect of the debt obligation, the obligation is deemed not to have been settled or extinguished by virtue of its assumption by the entrant bank and the entrant bank is deemed to be the same corporation as, and a continuation of, the Canadian affiliate.
Marginal note:Branch-establishment dividend
(9)Notwithstanding any other provision of this Act, the rules in subsection (10) apply if
(a)a dividend is paid by a Canadian affiliate of an entrant bank to the entrant bank or to a person that is affiliated with the Canadian affiliate and that is resident in the country in which the entrant bank is resident, or
(b)a dividend is deemed to be paid for the purposes of this Part or Part XIII (other than by paragraph 214(3)(a)) as a result of a transfer of property from the Canadian affiliate to such a person,
and the Canadian affiliate and the entrant bank jointly elect in accordance with subsection (11) to have subsection (10) apply in respect of the dividend.
Marginal note:Treatment of dividend
(10)If the conditions in subsection (9) are met,
(a)the dividend is deemed (except for the purposes of subsections 112(3) to (7)) not to be a taxable dividend; and
(b)there is added to the amount otherwise determined under paragraph 219(1)(g) in respect of the entrant bank for its first taxation year that ends after the time at which the dividend is paid, the amount of the dividend less, where the dividend is paid by means of, or arises as a result of, a transfer of eligible property in respect of which the Canadian affiliate and the entrant bank have jointly elected under subsection (3), the amount by which the fair market value of the property transferred exceeds the amount the Canadian affiliate and the entrant bank have agreed on in their election.
Marginal note:Elections
(11)An election under subsection (3) or (7), paragraph (8)(a) or (b) or subsection (10), (12) or (14) is valid only if
(a)the entrant bank by which the election is made has, on or before the day that is 6 months after the day on which theIncome Tax Amendments Act, 2000receives royal assent, complied with paragraphs 1.1(b) and (c) of the “Guide to Foreign Bank Branching” in respect of the establishment and commencement of business of a foreign bank branch in Canada issued by the Office of the Superintendent of Financial Institutions, as it read on December 31, 2000;
(b)the election is made in prescribed form on or before the earlier of the filing-due date of the Canadian affiliate and the filing-due date of the entrant bank, for the taxation year that includes the time at which
(i)in the case of an election under subsection (3) or (7), paragraph (8)(a) or (b) or subsection (10), the dividend, transfer or assumption to which the election relates is paid, made or effected, or
(ii)in the case of an election under subsection (12), the dissolution order was granted or the winding up commenced; and
(c)in the case of an election under subsection (3) or (7), paragraph (8)(a) or (b) or subsection (10), the dividend, transfer or assumption to which the election relates is paid, made or effected within the period that
(i)begins on the day on which the Superintendent makes an order in respect of the entrant bank under subsection 534(1) of theBank Act, and
(ii)ends on the later of
(A)the earlier of
(I)the day that is one year after the day referred to subparagraph (i), and
(II)the day that is three years after the day on which theIncome Tax Amendments Act, 2000receives royal assent, and
(B)the day that is one year after the day on which theIncome Tax Amendments Act, 2000receives royal assent.
Marginal note:Winding-up of Canadian affiliate: losses
(12)If
(a)within the period described in paragraph (11)(c) in respect of the entrant bank,
(i)the Minister of Finance has issued letters patent under section 342 of theBank Actor section 347 of theTrust and Loan Companies Actdissolving the Canadian affiliate or an order under section 345 of theBank Actor section 350 of theTrust and Loan Companies Actapproving the Canadian affiliate’s application for dissolution (such letters patent or order being referred to in this subsection as the “dissolution order”), or
(ii)the affiliate has been wound up under the terms of the corporate law that governs it,
(b)the entrant bank carries on all or part of the business in Canada that was formerly carried on by the Canadian affiliate, and
(c)the Canadian affiliate and the entrant bank jointly elect in accordance with subsection (11) to have this section apply
then in applying section 111 for the purpose of computing the taxable income earned in Canada of the entrant bank for any taxation year that begins after the date of the dissolution order or the commencement of the winding up, as the case may be,
(d)subject to paragraphs (e) and (h), the portion of a non-capital loss of the Canadian affiliate for a taxation year (in this paragraph referred to as the “Canadian affiliate’s loss year”) that can reasonably be regarded as being its loss from carrying on a business in Canada (in this paragraph referred to as the “loss business”) or being in respect of a claim made under section 110.5, to the extent that it
(i)was not deducted in computing the taxable income of the Canadian affiliate or any other entrant bank for any taxation year, and
(ii)would have been deductible in computing the taxable income of the Canadian affiliate for any taxation year that begins after the date of the dissolution order or the commencement of the winding up, as the case may be, on the assumption that it had such a taxation year and that it had sufficient income for that year,
is deemed, for the taxation year of the entrant bank in which the Canadian affiliate’s loss year ended, to be a non-capital loss of the entrant bank from carrying on the loss business (or, in respect of a claim made under section 110.5, to be a non-capital loss of the entrant bank in respect of a claim under subparagraph 115(1)(a)(vii)) that was not deductible by the entrant bank in computing its taxable income earned in Canada for any taxation year that began before the date of the dissolution order or the commencement of the winding up, as the case may be,
(e)if at any time control of the Canadian affiliate or entrant bank has been acquired by a person or group of persons, no amount in respect of the Canadian affiliate’s non-capital loss for a taxation year that ends before that time is deductible in computing the taxable income earned in Canada of the entrant bank for a particular taxation year that ends after that time, except that the portion of the loss that can reasonably be regarded as the Canadian affiliate’s loss from carrying on a business in Canada and, where a business was carried on by the Canadian affiliate in Canada in the earlier year, the portion of the loss that can reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)(k) in computing its taxable income for the year are deductible only
(i)if that business is carried on by the Canadian affiliate or the entrant bank for profit or with a reasonable expectation of profit throughout the particular year, and
(ii)to the extent of the total of the entrant bank’s income for the particular year from that business, and where properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, from any other business substantially all of the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services,
and for the purpose of this paragraph, where subsection 88(1.1) applied to the dissolution of another corporation in respect of which the Canadian affiliate was the parent and paragraph 88(1.1)(e) applied in respect of losses of that other corporation, the Canadian affiliate is deemed to be the same corporation as, and a continuation of, that other corporation with respect to those losses,
(f)subject to paragraphs (g) and (h), a net capital loss of the Canadian affiliate for a taxation year (in this paragraph referred to as the “Canadian affiliate’s loss year”) is deemed to be a net capital loss of the entrant bank for its taxation year in which the Canadian affiliate’s loss year ended to the extent that the loss
(i)was not deducted in computing the taxable income of the Canadian affiliate or any other entrant bank for any taxation year, and
(ii)would have been deductible in computing the taxable income of the Canadian affiliate for any taxation year beginning after the date of the dissolution order or the commencement of the winding-up, as the case may be, on the assumption that the Canadian affiliate had such a taxation year and that it had sufficient income and taxable capital gains for that year,
(g)if at any time control of the Canadian affiliate or the entrant bank has been acquired by a person or group of persons, no amount in respect of the Canadian affiliate’s net capital loss for a taxation year that ends before that time is deductible in computing the entrant bank’s taxable income earned in Canada for a taxation year that ends after that time, and
(h)any loss of the Canadian affiliate that would otherwise be deemed by paragraph (d) or (f) to be a loss of the entrant bank for a particular taxation year that begins after the date of the dissolution order or the commencement of the winding-up, as the case may be, is deemed, for the purpose of computing the entrant bank’s taxable income earned in Canada for taxation years that begin after that date, to be such a loss of the entrant bank for its immediately preceding taxation year and not for the particular year, if the entrant bank so elects in its return of income for the particular year.
Marginal note:Winding-up of Canadian affiliate: stop loss
(13)If a Canadian affiliate and its entrant bank have at any time made a joint election under either of subsection (3) or (12),
(a)in respect of any transfer of property, directly or indirectly, by the Canadian affiliate to the entrant bank or a person with whom the entrant bank does not deal at arm’s length,
(i)subparagraph 13(21.2)(e)(iii) shall be read without reference to clause (E) of that subparagraph,
(ii)[Repealed, 2016, c. 12, s. 51]
(iii)paragraph 18(15)(b) shall be read without reference to subparagraph (iv) of that paragraph, and
(iv)paragraph 40(3.4)(b) shall be read without reference to subparagraph (v) of that paragraph;
(b)in respect of any property of the Canadian affiliate appropriated to or for the benefit of the entrant bank or any person with whom the entrant bank does not deal at arm’s length, section 69(5) shall be read without reference to paragraph (d); and
(c)for the purposes of applying subsection 13(21.2), 18(15) and 40(3.4) to any property that was disposed of by the affiliate, after the dissolution or winding-up of the affiliate, the entrant bank is deemed to be the same corporation as, and a continuation of, the affiliate.
Marginal note:Winding-up of Canadian affiliate: SDOs
(14)If a Canadian affiliate of an entrant bank and the entrant bank meet the conditions set out in paragraphs (12)(a) and (b) and jointly elect in accordance with subsection (11) to have this subsection apply, and the Canadian affiliate has not made an election under this subsection with any other entrant bank, the entrant bank is deemed to be the same corporation as, and a continuation of, the Canadian affiliate for the purposes of paragraphs 142.4(4)(c) and (d) in respect of any specified debt obligation disposed of by the Canadian affiliate.
Marginal note:Communal organizations
143(1)Where a congregation, or one or more business agencies of the congregation, carries on one or more businesses for purposes that include supporting or sustaining the congregation’s members or the members of any other congregation, the following rules apply:
(a)a trust is deemed to be created on the day that is the later of
(i)December 31, 1976, and
(ii)the day the congregation came into existence;
(b)the trust is deemed to have been continuously in existence from the day determined under paragraph (a);
(c)the property of the congregation is deemed to be the property of the trust;
(d)the property of each business agency of the congregation in a calendar year is deemed to be property of the trust throughout the portion of the year throughout which the trust exists;
(e)where the congregation is a corporation, the corporation is deemed to be the trustee having control of the trust property;
(f)where the congregation is not a corporation, its council, committee of leaders, executive committee, administrative committee, officers or other group charged with its management are deemed to be the trustees having control of the trust property;
(g)the congregation is deemed to act and to have always acted as agent for the trust in all matters relating to its businesses and other activities;
(h)each business agency of the congregation in a calendar year is deemed to have acted as agent for the trust in all matters in the year relating to its businesses and other activities;
(i)the members of the congregation are deemed to be the beneficiaries under the trust;
(j)tax under this Part is payable by the trust on its taxable income for each taxation year;
(k)in computing the income of the trust for any taxation year,
(i)subject to paragraph (l), no deduction may be made in respect of salaries, wages or benefits of any kind provided to the members of the congregation, and
(ii)no deduction may be made under subsection 104(6), except to the extent that any portion of the trust’s income (determined without reference to that subsection) is allocated to the members of the congregation in accordance with subsection (2);
(l)for the purpose of applying section 20.01 to the trust,
(i)each member of the congregation is deemed to be a member of the trust’s household, and
(ii)section 20.01 shall be read without reference to paragraphs 20.01(2)(b) and (c) and subsection 20.01(3); and
(m)where the congregation or one of the business agencies is a corporation, section 15.1 shall, except for the purposes of paragraphs 15.1(2)(a) and (c) (other than subparagraphs 15.1(2)(c)(i) and (ii)), apply as if this subsection were read without reference to paragraphs (c), (d), (g) and (h).
Marginal note:Election in respect of income
(2)If the trust referred to in subsection (1) in respect of a congregation so elects in respect of a taxation year in writing filed with the Minister on or before the trust’s filing-due date for the year and all the congregation’s participating members are specified in the election in accordance with subsection (5), the following rules apply:
(a)for the purposes of subsections 104(6) and (13), the amount payable in the year to a particular participating member of the congregation out of the income of the trust (determined without reference to subsection 104(6)) is the amount determined by the formula
0.8 (A × B/C) + D + (0.2A - E)/F
where
(i)where the particular member is identified in the election as a person to whom this subparagraph applies (in this subsection referred to as a “designated member”), 1, and
(ii)in any other case, 0.5,
(i)the number of designated members of the congregation, and
(ii)1/2 of the number of other participating members of the congregation in respect of the year,
(b)the designated member of each family at the end of the year is deemed to have supported the other members of the family during the year and the other members of the family are deemed to have been wholly dependent on the designated member for support during the year;
(c)the taxable income for the year of each member of the congregation shall be computed without reference to subsection 110(2); and
(d)if the trust earns income from a business in the year, then the portion of the amount payable in the year to a particular participating member of the congregation out of the income of the trust under paragraph (a) that can reasonably be considered to relate to that income from a business is deemed to be income from a business carried on by the particular member.
Marginal note:Refusal to accept election
(3)An election under subsection (2) in respect of a congregation for a particular taxation year is not binding on the Minister unless all taxes, interest and penalties payable under this Part, as a consequence of the application of subsection (2) to the congregation for preceding taxation years, are paid at or before the end of the particular year.
Marginal note:Election in respect of gifts
(3.1)For the purposes of section 118.1, if the eligible amount of a gift made in a taxation year by a trust referred to in subsection (1) in respect of a congregation would, but for this subsection, be included in the total charitable gifts, total cultural gifts or total ecological gifts of the trust for the year and the trust so elects in its return of income under this Part for the year,
(a)the trust is deemed not to have made the gift; and
(b)each participating member of the congregation is deemed to have made, in the year, such a gift the eligible amount of which is the amount determined by the formula
A × B/C
where
Marginal note:Definitions
(4)For the purposes of this section,
adultmeans an individual who, before the time at which the term is applied, has attained the age of eighteen years or is married or in a common-law partnership; (adulte)
business agency, of a congregation at any time in a particular calendar year, means a corporation, trust or other person, where the congregation owned all the shares of the capital stock of the corporation (except directors’ qualifying shares) or every interest in the trust or other person, as the case may be, throughout the portion of the particular calendar year throughout which both the congregation and the corporation, trust or other person, as the case may be, were in existence; (agence commerciale)
congregationmeans a community, society or body of individuals, whether or not incorporated,
(a)the members of which live and work together,
(b)that adheres to the practices and beliefs of, and operates according to the principles of, the religious organization of which it is a constituent part,
(c)that does not permit any of its members to own any property in their own right, and
(d)that requires its members to devote their working lives to the activities of the congregation; (congrégation)
familymeans,
(a)in the case of an adult who is unmarried and who is not in a common-law partnership, that person and the person’s children who are not adults, not married and not in a common-law partnership, and
(b)in the case of an adult who is married or in a common-law partnership, that person and the person’s spouse or common-law partner and the children of either or both of them who are not adults, not married and not in a common-law partnership
but does not include an individual who is included in any other family or who is not a member of the congregation in which the family is included; (famille)
member of a congregationmeans
(a)an adult, living with the members of the congregation, who conforms to the practices of the religious organization of which the congregation is a constituent part whether or not that person has been formally accepted into the organization, and
(b)a child who is unmarried and not in a common-law partnership, other than an adult, of an adult referred to in paragraph (a), if the child lives with the members of the congregation; (membre d’une congrégation)
participating member, of a congregation in respect of a taxation year, means an individual who, at the end of the year, is an adult who is a member of the congregation; (membre participant)
religious organizationmeans an organization, other than a registered charity, of which a congregation is a constituent part, that adheres to beliefs, evidenced by the religious and philosophical tenets of the organization, that include a belief in the existence of a supreme being. (organisme religieux)
total charitable giftshas the meaning assigned by subsection 118.1(1); (total des dons de bienfaisance)
total Crown gifts[Repealed, 2014, c. 39, s. 48]
total cultural giftshas the meaning assigned by subsection 118.1(1); (total des dons de biens culturels)
total ecological giftshas the same meaning as in subsection 118.1(1). (total des dons de biens écosensibles)
Marginal note:Specification of family members
(5)For the purpose of applying subsection (2) to a particular election by the trust referred to in subsection (1) in respect of a congregation for a particular taxation year,
(a)subject to paragraph (b), a participating member of the congregation is considered to have been specified in the particular election in accordance with this subsection only if the member is identified in the particular election and
(i)where the member’s family includes only one adult at the end of the particular year, the member is identified in the particular election as a person to whom subparagraph (i) of the description of B in subsection (2) (in this subsection referred to as the “relevant subparagraph”) applies, and
(ii)in any other case, only one of the adults in the member’s family is identified in the particular election as a person to whom the relevant subparagraph applies; and
(b)an individual is considered not to have been specified in the particular election in accordance with this subsection if
(i)the individual is one of two individuals who were married to each other, or in a common-law partnership, at the end of a preceding taxation year of the trust and at the end of the particular year,
(ii)one of those individuals was
(A)where the preceding year ended before 1998, specified in an election under subsection (2) by the trust for the preceding year, and
(B)in any other case, identified in an election under subsection (2) by the trust for the preceding year as a person to whom the relevant subparagraph applied, and
(iii)the other individual is identified in the particular election as a person to whom the relevant subparagraph applies.
Marginal note:Definitions
143.1(1)The definitions in this subsection apply in this section.
amateur athleteat any time means an individual (other than a trust) who is, at that time,
(a)a member of a registered Canadian amateur athletic association;
(b)eligible to compete, in an international sporting event sanctioned by an international sports federation, as a Canadian national team member; and
(c)not a professional athlete. (athlète amateur)
professional athletemeans an individual who receives income that is compensation for, or is otherwise attributable to, the individual’s activities as a player or athlete in a professional sport. (athlète professionnel)
qualifying performance incomeof an individual means income that
(a)is received by the individual in a taxation year in which
(i)the individual was, at any time, an amateur athlete, and
(ii)the individual was not, at any time, a professional athlete;
(b)may reasonably be considered to be in connection with the individual’s participation as an amateur athlete in one or more international sporting events referred to in the definitionamateur athlete; and
(c)is endorsement income, prize money, or income from public appearances or speeches. (revenu de performance admissible)
third partyin respect of an arrangement described in paragraph (1.1)(b) means a person who deals at arm’s length with the amateur athlete in respect of the arrangement. (tiers)
Marginal note:Where subsection (1.2) applies
(1.1)Subsection (1.2) applies where, at any time,
(a)a national sport organization that is a registered Canadian amateur athletic association receives an amount for the benefit of an individual under an arrangement made under rules of an international sport federation that require amounts to be held, controlled and administered by the organization in order to preserve the eligibility of the individual to compete in a sporting event sanctioned by the federation; or
(b)an individual enters into an arrangement that
(i)is an account with an issuer described in paragraph (b) of the definitionqualifying arrangementin subsection 146.2(1), or that would be so described if that definition applied at that time,
(ii)provides that no amount may be deposited, credited or added to the account, other than an amount that is qualifying performance income of the individual or that is interest or other income in respect of the property deposited, credited or added to the account,
(iii)provides that a third party is a mandatory signatory on any payment from the account, and
(iv)is not a registered retirement savings plan or a TFSA.
Marginal note:Amateur athletes’ reserve funds
(1.2)If this subsection applies in respect of an arrangement referred to in subsection (1.1),
(a)a trust (in this section referred to as the “amateur athlete trust”) is deemed
(i)to be created on the day on which the first amount referred to in paragraph (1.1)(a) or (b) is received by the sport organization or by the issuer, as the case may be, in respect of the arrangement, and
(ii)to exist until subsection (3) or (4) applies in respect of the trust;
(b)all property held under the arrangement is deemed to be the property of the amateur athlete trust and not property of any other person;
(c)if, at any time, the sport organization or the issuer, as the case may be, receives an amount under the arrangement and the amount would, in the absence of this subsection, be included in computing the income of the individual in respect of the arrangement for the taxation year that includes that time, the amount is deemed to be income of the amateur athlete trust for that taxation year and not to be income of the individual;
(d)if, at any time, the sport organization or the issuer, as the case may be, pays or transfers an amount under the arrangement to or for the benefit of the individual, the amount is deemed to be an amount distributed at that time to the individual by the amateur athlete trust;
(e)the individual is deemed to be the beneficiary under the amateur athlete trust;
(f)the sport organization or the third party, as the case may be, in respect of the arrangement is deemed to be the trustee of the amateur athlete trust; and
(g)no tax is payable under this Part by the amateur athlete trust on its taxable income for any taxation year.
Marginal note:Amounts included in beneficiary’s income
(2)In computing the income for a taxation year of the beneficiary under an amateur athlete trust, there shall be included the total of all amounts distributed in the year to the beneficiary by the trust.
Marginal note:Termination of amateur athlete trust
(3)Where an amateur athlete trust holds property on behalf of a beneficiary who has not competed in an international sporting event as a Canadian national team member for a period of 8 years that ends in a particular taxation year and that begins in the year that is the later of
(a)where the beneficiary has competed in such an event, the year in which the beneficiary last so competed, and
(b)the year in which the trust was created,
the trust shall be deemed to have distributed, at the end of the particular taxation year to the beneficiary, an amount equal to
(c)if the trust is liable to pay tax under Part XII.2 in respect of the particular year, 60% of the fair market value of all property held by it at that time, and
(d)in any other case, the fair market value of all property held by it at that time.
Marginal note:Death of beneficiary
(4)Where an amateur athlete trust holds property on behalf of a beneficiary who dies in a year, the trust shall be deemed to have distributed, immediately before the death, to the beneficiary, an amount equal to
(a)if the trust is liable to pay tax under Part XII.2 in respect of the year, 60% of the fair market value of all property held by it at that time; and
(b)in any other case, the fair market value of all property held by it at that time.
Marginal note:Definitions
143.2(1)The definitions in this subsection apply in this section.
expendituremeans an outlay or expense or the cost or capital cost of a property. (dépense)
limited partnerhas the meaning that would be assigned by subsection 96(2.4) if that subsection were read without reference to “if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection 96(2.5)) at that time and”. (commanditaire)
limited-recourse amountmeans the unpaid principal amount of any indebtedness for which recourse is limited, either immediately or in the future and either absolutely or contingently. (montant à recours limité)
taxpayerincludes a partnership. (contribuable)
tax shelter investmentmeans
(a)a property that is a tax shelter for the purpose of subsection 237.1(1); or
(b)a taxpayer’s interest in a partnership where
(i)an interest in the taxpayer
(A)is a tax shelter investment, and
(B)the taxpayer’s partnership interest would be a tax shelter investment if
(I)this Act were read without reference to this paragraph and to the words “having regard to statements or representations made or proposed to be made in connection with the property” in the definitiontax shelterin subsection 237.1(1),
(II)the references in that definition torepresentedwere read as references to “that can reasonably be expected”, and
(III)the reference in that definition tois representedwere read as a reference to “can reasonably be expected”,
(ii)another interest in the partnership is a tax shelter investment, or
(iii)the taxpayer’s interest in the partnership entitles the taxpayer, directly or indirectly, to a share of the income or loss of a particular partnership where
(A)another taxpayer holding a partnership interest is entitled, directly or indirectly, to a share of the income or loss of the particular partnership, and
(B)that other taxpayer’s partnership interest is a tax shelter investment. (abri fiscal déterminé)
Marginal note:At-risk adjustment
(2)For the purpose of this section, an at-risk adjustment in respect of an expenditure of a particular taxpayer, other than the cost of a partnership interest to which subsection 96(2.2) applies, means any amount or benefit that the particular taxpayer, or another taxpayer not dealing at arm’s length with the particular taxpayer, is entitled, either immediately or in the future and either absolutely or contingently, to receive or to obtain, whether by way of reimbursement, compensation, revenue guarantee, proceeds of disposition, loan or any other form of indebtedness, or in any other form or manner whatever, granted or to be granted for the purpose of reducing the impact, in whole or in part, of any loss that the particular taxpayer may sustain in respect of the expenditure or, where the expenditure is the cost or capital cost of a property, any loss from the holding or disposition of the property.
Marginal note:Amount or benefit not included
(3)For the purpose of subsection 143.2(2), an at-risk adjustment in respect of a taxpayer’s expenditure does not include an amount or benefit
(a)to the extent that it is included in determining the value of J in the definitioncumulative Canadian exploration expensein subsection 66.1(6), of M in the definitioncumulative Canadian development expensein subsection 66.2(5) or of I in the definitioncumulative Canadian oil and gas property expensein subsection 66.4(5) in respect of the taxpayer; or
(b)the entitlement to which arises
(i)because of a contract of insurance with an insurance corporation dealing at arm’s length with the taxpayer (and, where the expenditure is the cost of an interest in a partnership, with each member of the partnership) under which the taxpayer is insured against any claim arising as a result of a liability incurred in the ordinary course of carrying on the business of the taxpayer or the partnership,
(ii)as a consequence of the death of the taxpayer,
(iii)in respect of an amount not included in the expenditure, determined without reference to subparagraph 143.2(6)(b)(ii), or
(iv)because of an excluded obligation (as defined in subsection 6202.1(5) of theIncome Tax Regulations) in relation to a share issued to the taxpayer or, where the expenditure is the cost of an interest in a partnership, to the partnership.
Marginal note:Amount or benefit
(4)For the purposes of subsections 143.2(2) and (3), where the amount or benefit to which a taxpayer is entitled at any time is provided by way of an agreement or other arrangement under which the taxpayer has a right, either immediately or in the future and either absolutely or contingently (otherwise than as a consequence of the death of the taxpayer), to acquire property, for greater certainty the amount or benefit to which the taxpayer is entitled under the agreement or arrangement is considered to be not less than the fair market value of the property at that time.
Marginal note:Amount or benefit
(5)For the purposes of subsections 143.2(2) and (3), where the amount or benefit to which a taxpayer is entitled at any time is provided by way of a guarantee, security or similar indemnity or covenant in respect of any loan or other obligation of the taxpayer, for greater certainty the amount or benefit to which the taxpayer is entitled under the guarantee or indemnity at any particular time is considered to be not less than the total of the unpaid amount of the loan or obligation at that time and all other amounts outstanding in respect of the loan or obligation at that time.
Marginal note:Amount of expenditure
(6)Notwithstanding any other provision of this Act, the amount of any expenditure that is, or is the cost or capital cost of, a taxpayer’s tax shelter investment, and the amount of any expenditure of a taxpayer an interest in which is a tax shelter investment, shall be reduced to the amount, if any, by which
(a)the amount of the taxpayer’s expenditure otherwise determined
exceeds
(b)the total of
(i)the limited-recourse amounts of
(A)the taxpayer, and
(B)all other taxpayers not dealing at arm’s length with the taxpayer
that can reasonably be considered to relate to the expenditure,
(ii)the taxpayer’s at-risk adjustment in respect of the expenditure, and
(iii)each limited-recourse amount and at-risk adjustment, determined under this section when this section is applied to each other taxpayer who deals at arm’s length with and holds, directly or indirectly, an interest in the taxpayer, that can reasonably be considered to relate to the expenditure.
Marginal note:Limited-re­course debt in respect of a gift or monetary contribution
(6.1)The limited-recourse debt in respect of a gift or monetary contribution of a taxpayer, at the time the gift or monetary contribution is made, is the total of
(a)each limited-recourse amount at that time, of the taxpayer and of all other taxpayers not dealing at arm’s length with the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution,
(b)each limited-recourse amount at that time, determined under this section when this section is applied to each other taxpayer who deals at arm’s length with and holds, directly or indirectly, an interest in the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution, and
(c)each amount that is the unpaid amount at that time of any other indebtedness, of any taxpayer referred to in paragraph (a) or (b), that can reasonably be considered to relate to the gift or monetary contribution if there is a guarantee, security or similar indemnity or covenant in respect of that or any other indebtedness.
Marginal note:Repayment of indebtedness
(7)For the purpose of this section, the unpaid principal of an indebtedness is deemed to be a limited-recourse amount unless
(a)bona fidearrangements, evidenced in writing, were made, at the time the indebtedness arose, for repayment by the debtor of the indebtedness and all interest on the indebtedness within a reasonable period not exceeding 10 years; and
(b)interest is payable at least annually, at a rate equal to or greater than the lesser of
(i)the prescribed rate of interest in effect at the time the indebtedness arose, and
(ii)the prescribed rate of interest applicable from time to time during the term of the indebtedness,
and is paid in respect of the indebtedness by the debtor no later than 60 days after the end of each taxation year of the debtor that ends in the period.
Marginal note:Limited-recourse amount
(8)For the purpose of this section, the unpaid principal of an indebtedness is deemed to be a limited-recourse amount of a taxpayer where the taxpayer is a partnership and recourse against any member of the partnership in respect of the indebtedness is limited, either immediately or in the future and either absolutely or contingently.
Marginal note:Timing
(9)Where at any time a taxpayer has paid an amount (in this subsection referred to as the “repaid amount”) on account of the principal amount of an indebtedness that was, before that time, the unpaid principal amount of a loan or any other form of indebtedness to which subsection 143.2(2) applies (in this subsection referred to as the “former amount or benefit”) relating to an expenditure of the taxpayer,
(a)the former amount or benefit is considered to have been an amount or benefit under subsection 143.2(2) in respect of the taxpayer at all times before that time; and
(b)the expenditure is, subject to subsection 143.2(6), deemed to have been made or incurred at that time to the extent of, and by the payment of, the repaid amount.
Marginal note:Timing
(10)Where at any time a taxpayer has paid an amount (in this subsection referred to as the “repaid amount”) on account of the principal amount of an indebtedness which was, before that time, an unpaid principal amount that was a limited-recourse amount (in this subsection referred to as the “former limited-recourse indebtedness”) relating to an expenditure of the taxpayer,
(a)the former limited-recourse indebtedness is considered to have been a limited-recourse amount at all times before that time; and
(b)the expenditure is, subject to subsection 143.2(6), deemed to have been made or incurred at that time to the extent of, and by the amount of, the repaid amount.
Marginal note:Short-term debt
(11)Where a taxpayer pays all of the principal of an indebtedness no later than 60 days after that indebtedness arose and the indebtedness would otherwise be considered to be a limited-recourse amount solely because of the application of subsection 143.2(7) or (8), that subsection does not apply to the indebtedness unless
(a)any portion of the repayment is made with a limited-recourse amount; or
(b)the repayment can reasonably be considered to be part of a series of loans or other indebtedness and repayments that ends more than 60 days after the indebtedness arose.
Marginal note:Series of loans or repayments
(12)For the purpose of paragraph 143.2(7)(a), a debtor is considered not to have made arrangements to repay an indebtedness within 10 years where the debtor’s arrangement to repay can reasonably be considered to be part of a series of loans or other indebtedness and repayments that ends more than 10 years after it begins.
Marginal note:Information located outside Canada
(13)For the purpose of this section, if it can reasonably be considered that information relating to indebtedness that relates to a taxpayer’s expenditure, gift or monetary contribution is available outside Canada and the Minister is not satisfied that the unpaid principal of the indebtedness is not a limited-recourse amount, the unpaid principal of the indebtedness relating to the taxpayer’s expenditure, gift or monetary contribution is deemed to be a limited-recourse amount relating to the expenditure, gift or monetary contribution unless
(a)the information is provided to the Minister; or
(b)the information is located in a country with which the Government of Canada has entered into a tax convention or agreement that has the force of law in Canada and includes a provision under which the Minister can obtain the information.
Marginal note:Information located outside Canada
(14)For the purpose of this section, where it can reasonably be considered that information relating to whether a taxpayer is not dealing at arm’s length with another taxpayer is available outside Canada and the Minister is not satisfied that the taxpayer is dealing at arm’s length with the other taxpayer, the taxpayer and the other taxpayer are deemed not to be dealing with each other at arm’s length unless
(a)the information is provided to the Minister; or
(b)the information is located in a country with which the Government of Canada has entered into a tax convention or agreement that has the force of law in Canada and includes a provision under which the Minister can obtain the information.
Marginal note:Assessments
(15)Notwithstanding subsections 152(4) to (5), such assessments, determinations and redeterminations may be made as are necessary to give effect to this section.
Marginal note:Definitions
143.3(1)The following definitions apply in this section.
expenditureof a taxpayer means an expense, expenditure or outlay made or incurred by the taxpayer, or a cost or capital cost of property acquired by the taxpayer. (dépense)
optionmeans
(a)a security that is issued or sold by a taxpayer under an agreement referred to in subsection 7(1); or
(b)an option, warrant or similar right, issued or granted by a taxpayer, giving the holder the right to acquire an interest in the taxpayer or in another taxpayer with whom the taxpayer does not, at the time the option, warrant or similar right is issued or granted, deal at arm’s length. (option)
taxpayerincludes a partnership. (contribuable)
Marginal note:Options — limitation
(2)In computing a taxpayer’s income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer’s tax payable, an expenditure of the taxpayer is deemed not to include any portion of the expenditure that would — if this Act were read without reference to this subsection — be included in determining the expenditure because of the taxpayer having granted or issued an option on or after November 17, 2005.
Marginal note:Corporate shares — limitation
(3)In computing a corporation’s income, taxable income or tax payable or an amount considered to have been paid on account of the corporation’s tax payable, an expenditure of the corporation that would — if this Act were read without reference to this subsection — include an amount because of the corporation having issued a share of its capital stock at any particular time on or after November 17, 2005 is reduced by
(a)if the issuance of the share is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds
(i)if the transaction under which the share is issued is a transaction to which section 85, 85.1 or 138 applies, the amount determined under that section to be the cost to the issuing corporation of the property acquired in consideration for issuing the share, or
(ii)in any other case, the amount of the consideration that is the fair market value of the property transferred or issued to, or the services provided to, the issuing corporation for issuing the share; and
(b)if the issuance of the share is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the issuing taxpayer for issuing the share.
Marginal note:Non-corporate interests — limitation
(4)In computing a taxpayer’s (other than a corporation’s) income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer’s tax payable, an expenditure of the taxpayer that would — if this Act were read without reference to this subsection — include an amount because of the taxpayer having issued an interest, or because of an interest being created, in itself at any particular time on or after November 17, 2005 is reduced by
(a)if the issuance or creation of the interest is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds
(i)if the transaction under which the interest is issued is a transaction to which paragraph 70(6)(b) or 73(1.01)(c), subsection 97(2) or section 107.4 or 132.2 applies, the amount determined under that provision to be the cost to the taxpayer of the property acquired for the interest, or
(ii)in any other case, the amount of the consideration that is the fair market value of the property transferred or issued to, or the services provided to, the taxpayer for the interest; and
(b)if the issuance or creation of the interest is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the taxpayer for the interest.
Marginal note:Clarification
(5)For greater certainty,
(a)subsection (2) does not apply to reduce an expenditure that is a commission, fee or other amount for services rendered by a person as a salesperson, agent or dealer in securities in the course of the issuance of an option;
(b)subsections (3) and (4) do not apply to reduce an expenditure of a taxpayer to the extent that the expenditure does not include an amount determined to be an excess under those subsections;
(c)this section does not apply to determine the cost or capital cost of property determined under subsection 70(6), section 73, 85 or 85.1, subsection 97(2) or section 107.4, 132.2 or 138;
(d)this section does not apply to determine the amount of a taxpayer’s expenditure if the amount of the expenditure as determined under section 69 is less than the amount that would, if this subsection were read without reference to this paragraph, be the amount of the expenditure as determined under this section; and
(e)this section does not apply to prohibit the deduction of an amount under paragraph 110(1)(e).
Marginal note:Definitions
143.4(1)The following definitions apply in this section.
contingent amount, of a taxpayer at any time (other than a time at which the taxpayer is a bankrupt), includes an amount to the extent that the taxpayer, or another taxpayer that does not deal at arm’s length with the taxpayer, has a right to reduce the amount at that time. (montant éventuel)
expenditure, of a taxpayer, means an expense, expenditure or outlay made or incurred by the taxpayer, or a cost or capital cost of property acquired by the taxpayer. (dépense)
right to reducemeans a right to reduce or eliminate an amount in respect of an expenditure at any time, including, for greater certainty, a right to reduce that is contingent upon the occurrence of an event, or in any other way contingent, if it is reasonable to conclude, having regard to all the circumstances, that the right will become exercisable. (droit de réduire)
taxpayerincludes a partnership. (contribuable)
Marginal note:Limitation of amount of expenditure
(2)For the purposes of this Act, if in a taxation year of a taxpayer an expenditure of the taxpayer occurs, the amount of the expenditure at any time is the lesser of
(a)the amount of the expenditure at the time calculated under this Act without reference to this section, and
(b)the least amount of the expenditure calculated by reducing the amount of the expenditure determined under paragraph (a) by the amount that is the amount, if any, by which
(i)the total of all amounts each of which is a contingent amount of the taxpayer in the year in respect of the expenditure
exceeds
(ii)the total of all amounts each of which is
(A)an amount paid by the taxpayer to obtain a right to reduce an amount in respect of the expenditure, or
(B)a limited-recourse amount for the purposes of paragraph 143.2(6)(b) that reduces the expenditure under subsection 143.2(6) to the extent that the amount is also a contingent amount described in subparagraph (i) in respect of the expenditure.
Marginal note:Payment of contingent amount
(3)For the purposes of this Act, if in a particular taxation year, a taxpayer pays all or a portion of a contingent amount referred to in paragraph (2)(b) that reduces the amount of the taxpayer’s expenditure referred to in paragraph (2)(a), the portion of the contingent amount paid by the taxpayer in the particular year for the purpose of earning income, and to that extent only, is deemed
(a)to have been incurred by the taxpayer in the particular year;
(b)to have been incurred for the same purpose and to have the same character as the expenditure so reduced; and
(c)to have become payable by the taxpayer in respect of the particular year.
Marginal note:Subsequent years
(4)Subject to subsection (6), if at any time in a taxation year that is after a taxation year in which an expenditure of the taxpayer occurred, the taxpayer, or another taxpayer not dealing at arm’s length with the taxpayer, has a right to reduce an amount in respect of the expenditure (in this subsection and subsection (5) referred to as the “prior expenditure”) that would, if the taxpayer or the other taxpayer had had the right to reduce in a particular taxation year that ended before the time, have resulted in subsection (2) applying in the particular taxation year to reduce or eliminate the amount of the prior expenditure, the taxpayer’s subsequent contingent amount in respect of the prior expenditure, as determined under subsection (5), is deemed, to the extent subsection (2) and this subsection have not previously applied in respect of the expenditure,
(a)to be an amount received by the taxpayer at the time in the course of earning income from a business or property from a person described in subparagraph 12(1)(x)(i); and
(b)to be an amount referred to in subparagraph 12(1)(x)(iv).
Marginal note:Subsequent contingent amount
(5)For the purposes of subsection (4), a taxpayer’s subsequent contingent amount in respect of a prior expenditure of the taxpayer is the amount, if any, by which
(a)the maximum amount by which the amount (in this subsection referred to as the “particular amount”) in respect of the prior expenditure may be reduced pursuant to a right to reduce the particular amount
exceeds
(b)the amount, if any, paid to obtain the right to reduce the particular amount.
Marginal note:Anti-avoidance
(6)If a taxpayer, or another taxpayer that does not deal at arm’s length with the taxpayer, has a right to reduce an amount in respect of an expenditure of the taxpayer in a taxation year that is after the taxation year in which the expenditure otherwise occurred, determined without reference to subsection (3), the taxpayer is deemed to have the right to reduce in the taxation year in which that expenditure otherwise occurred if it is reasonable to conclude having regard to all the circumstances that one of the purposes for having the right to reduce after the end of the year in which the expenditure otherwise occurred was to avoid the application of subsection (2) to the amount of the expenditure.
Marginal note:Assessments
(7)Notwithstanding subsections 152(4) to (5), such assessments, determinations and redeterminations may be made as are necessary to give effect to this section.
Marginal note:Definitions
144(1)The definitions in this subsection apply in this section.
employees profit sharing planat a particular time means an arrangement
(a)under which payments computed by reference to
(i)an employer’s profits from the employer’s business,
(ii)the profits from the business of a corporation with which the employer does not deal at arm’s length, or
(iii)any combination of the amounts described in subparagraphs 144(1) employees profit sharing plan (a)(i) and 144(1) employees profit sharing plan (a)(ii)
are required to be made by the employer to a trustee under the arrangement for the benefit of employees of the employer or of a corporation with which the employer does not deal at arm’s length; and
(b)in respect of which the trustee has, since the later of the beginning of the arrangement and the end of 1949, allocated, either contingently or absolutely, to those employees
(i)in each year that ended at or before the particular time, all amounts received in the year by the trustee from the employer or from a corporation with which the employer does not deal at arm’s length,
(ii)in each year that ended at or before the particular time, all profits for the year from the property of the trust (determined without regard to any capital gain made by the trust or capital loss sustained by it at any time after 1955),
(iii)in each year that ended after 1971 and at or before the particular time, all capital gains and capital losses of the trust for the year,
(iv)in each year that ended after 1971, before 1993 and at or before the particular time, 100/15 of the total of all amounts each of which is deemed by subsection 144(9) to be paid on account of tax under this Part in respect of an employee because the employee ceased to be a beneficiary under the plan in the year, and
(v)in each year that ended after 1991 and at or before the particular time, the total of all amounts each of which is an amount that may be deducted under subsection 144(9) in computing the employee’s income because the employee ceased to be a beneficiary under the plan in the year. (régime de participation des employés aux bénéfices)
unused portion of a beneficiary’s exempt capital gains balancein respect of a trust governed by an employees profit sharing plan, at any particular time in a taxation year of the beneficiary, means
(a)where the year ends before 2005, the amount, if any, by which the beneficiary’s exempt capital gains balance (in this paragraph having the same meaning as in subsection 39.1(1)) in respect of the trust for the year exceeds the total of all amounts each of which is an amount by which a capital gain is reduced under section 39.1 in the year because of the beneficiary’s exempt capital gains balance in respect of the trust; or
(b)where the year ends after 2004, the amount, if any, by which
(i)the amount, if any, that would, if the definitionexempt capital gains balancein subsection 39.1(1) were read without reference to “that ends before 2005”, be the beneficiary’s exempt capital gains balance in respect of the trust for the year
exceeds
(ii)where there has been a disposition of an interest or a part of an interest of the beneficiary in the trust after the beneficiary’s 2004 taxation year (other than a disposition that is a part of a transaction described in paragraph 144(7.1)(c) in which property is received in satisfaction of all or a portion of the beneficiary’s interests in the trust), the total of all amounts each of which is an amount by which the adjusted cost base of an interest or a part of an interest disposed of by the beneficiary (other than an interest or a part of an interest that is all or a portion of the beneficiary’s interests referred to in paragraph 144(7.1)(c)) was increased because of paragraph 53(1)(p), and
(iii)in any other case, nil. (fraction inutilisée du solde des gains en capital exonérés)
Marginal note:No tax while trust governed by plan
(2)No tax is payable under this Part by a trust on the taxable income of the trust for a taxation year throughout which the trust is governed by an employees profit sharing plan.
Marginal note:Allocation contingent or absolute taxable
(3)There shall be included in computing the income for a taxation year of an employee who is a beneficiary under an employees profit sharing plan each amount that is allocated to the employee contingently or absolutely by the trustee under the plan at any time in the year otherwise than in respect of
(a)a payment made by the employee to the trustee;
(b)a capital gain made by the trust before 1972;
(c)a capital gain of the trust for a taxation year ending after 1971;
(d)a gain made by the trust after 1971 from the disposition of a capital property except to the extent that the gain is a capital gain described in paragraph 144(3)(c); or
(e)a dividend received by the trust from a taxable Canadian corporation.
(f)[Repealed, 1994, c. 21, s. 68(2)]
Marginal note:Allocated capital gains and losses
(4)Each capital gain and capital loss of a trust governed by an employees profit sharing plan from the disposition of any property shall, to the extent that it is allocated by the trust to an employee who is a beneficiary under the plan, be deemed to be a capital gain or capital loss, as the case may be, of the employee from the disposition of that property for the taxation year of the employee in which the allocation was made and, for the purposes of section 110.6, the property shall be deemed to have been disposed of by the employee on the day on which it was disposed of by the trust.
Marginal note:Idem
(4.1)Notwithstanding subsection 26(6) of theIncome Tax Application Rules, where at any time before 1976 the trustee of a trust governed by an employees profit sharing plan so elects in prescribed manner, the trust shall be deemed
(a)to have, on December 31, 1971, disposed of each property owned by the trust on that day for proceeds of disposition equal to the fair market value of the property on that day, and
(b)to have, on January 1, 1972, reacquired each property described in paragraph 144(4.1)(a) for the amount referred to in that paragraph,
if the trustee under the plan has, before 1976, allocated the total of all capital gains and capital losses resulting from the deemed dispositions among the employees or other beneficiaries under the plan to the extent that the trustee under the plan has not previously so allocated them.
Marginal note:Idem
(4.2)Where a trust governed by an employees profit sharing plan
(a)was governed by an employees profit sharing plan on December 31, 1971, and the trustee of the trust has made an election under subsection 144(4.1), or
(b)was not governed by an employees profit sharing plan on December 31, 1971,
the trustee of the trust may, in any taxation year after 1973, elect in prescribed manner and prescribed form to treat any capital property of the trust as having been disposed of, in which event the property shall be deemed to have been disposed of on any day designated by the trustee for proceeds of disposition equal to
(c)the fair market value of the property on that day,
(d)the adjusted cost base to the trust of the property on that day, or
(e)an amount that is neither greater than the greater of the amounts determined under paragraphs 144(4.2)(c) and 144(4.2)(d) nor less than the lesser of the amounts determined under those paragraphs
whichever is designated by the trustee and to have been reacquired by the trust immediately thereafter at a cost equal to those proceeds.
Marginal note:Employer’s contribution to trust deductible
(5)An amount paid by an employer to a trustee under an employees profit sharing plan during a taxation year or within 120 days thereafter may be deducted in computing the employer’s income for the taxation year to the extent that it was not deductible in computing income for a previous taxation year.
Marginal note:Beneficiary’s receipts deductible
(6)An amount received in a taxation year by a beneficiary from a trustee under an employees profit sharing plan shall not be included in computing the beneficiary’s income for the year.
Marginal note:Beneficiary’s receipts that are not deductible
(7)Notwithstanding subsection 144(6), such portion of an amount received in a taxation year by a beneficiary from the trustee under an employees profit sharing plan as cannot be established to be attributable to
(a)payments made by the employee to the trustee,
(b)amounts required to be included in computing the income of the employee for that or a previous taxation year,
(c)a capital gain made by the trust before 1972,
(d)a capital gain made by the trust for a taxation year ending after 1971, to the extent allocated by the trust to the beneficiary,
(e)a gain made by the trust after 1971 from the disposition of a capital property, except to the extent that the gain is a capital gain made by the trust for a taxation year ending after 1971,
(f)the portion, if any, of the increase in the value of property transferred to the beneficiary by the trustee that would have been considered to be a capital gain made by the trust in 1971 if the trustee had sold the property on December 31, 1971 for its fair market value at that time, or
(g)a dividend received by the trust from a taxable Canadian corporation other than a dividend described in subsection 83(1), to the extent allocated by the trust to the beneficiary,
shall be included in computing the beneficiary’s income for the year in which the amount was received, except that in determining the amount of any payments or other things described in any paragraph of this subsection, the amount thereof otherwise determined shall be reduced by such portion of the total of all capital losses of the trust for taxation years ending after 1971 as has been allocated by the trust to the beneficiary and has not been applied to reduce the amount of any payments or other things described in any other paragraph of this subsection.
Marginal note:Where property other than money received by beneficiary
(7.1)Where, at any particular time in a taxation year of a trust governed by an employees profit sharing plan, an amount was received by a beneficiary from the trustee under the plan and the amount so received was property other than money, the following rules apply in respect of each such property so received by the beneficiary at the particular time:
(a)the amount that was the cost amount to the trust of the property immediately before the particular time shall be deemed to be the trust’s proceeds of disposition of the property;
(b)that proportion of
(i)such portion of the amount received by the beneficiary as can be established to be attributable to the payments or other things described in paragraphs 144(7)(a) to 144(7)(g) (on the assumption that the amount of any payments or other things described in any such paragraph is the amount thereof determined as provided in subsection 144(7))
that
(ii)the cost amount to the trust of the property immediately before the particular time
is of
(iii)the cost amounts to the trust of all properties, other than money, so received by the beneficiary at the particular time,
is subject to paragraph 144(7.1)(c), deemed to be
(iv)the cost to the beneficiary of the property, and
(v)for the purposes of subsection 144(7) but not for the purposes of this subsection, the amount so received by the beneficiary by virtue of the receipt by the beneficiary of the property; and
(c)where a particular property received is all or a portion of property received in satisfaction of all or a portion of the beneficiary’s interests in the trust and the beneficiary files with the Minister on or before the beneficiary’s filing-due date for the taxation year that includes the particular time an election in respect of the particular property in prescribed form, there shall be included in the cost to the beneficiary of the particular property determined under paragraph 144(7.1)(b) the least of
(i)the amount, if any, by which the unused portion of the beneficiary’s exempt capital gains balance in respect of the trust at the particular time exceeds the total of all amounts each of which is an amount included because of this paragraph in the cost to the beneficiary of another property received by the beneficiary at or before the particular time in the year,
(ii)the amount, if any, by which the fair market value of the particular property at the particular time exceeds the amount deemed by subparagraph 144(7.1)(b)(iv) to be the cost to the beneficiary of the particular property, and
(iii)the amount designated in the election in respect of the particular property.
Marginal note:Allocation of credit for dividends
(8)Where there has been included in computing the income of a trust for a taxation year during which the trust was governed by an employees profit sharing plan taxable dividends from taxable Canadian corporations and there has been allocated by the trustee under the plan for the purposes of this subsection an amount for the year to one or more of the employees who are beneficiaries under the plan, which amount or the total of which amounts does not exceed the amount of the taxable dividends so included, each of the employees who are beneficiaries under the plan shall be deemed to have received a taxable dividend from a taxable Canadian corporation equal to the lesser of
(a)the amount, if any, that would be included in computing the employee’s income for the year by virtue of this section, if this section were read without reference to paragraph 144(3)(e), and
(b)the amount, if any, so allocated for the purposes of this subsection to the employee.
Marginal note:Foreign tax deduction
(8.1)For the purpose of subsection 126(1), the following rules apply:
(a)such portion of the income for a taxation year of a trust governed by an employees profit sharing plan from sources (other than businesses carried on by it) in a foreign country as
(i)may reasonably be considered (having regard to all the circumstances including the terms and conditions of the plan) to be part of
(A)the income that, by virtue of subsection 144(3), was included in computing the income for a taxation year of a particular employee who was a beneficiary under the plan, or
(B)the amount, if any, by which
(I)the total of amounts each of which is a capital gain of the trust that, by virtue of subsection 144(4), was deemed to be a capital gain of the particular employee for a taxation year
exceeds
(II)the total of amounts each of which is a capital loss of the trust that, by virtue of subsection 144(4), was deemed to be a capital loss of the particular employee for the taxation year, and
(ii)was not designated by the trust in respect of any other employee who was a beneficiary under the plan,
shall if so designated by the trust in respect of the particular employee in its return of income for the year under this Part, be deemed to be income of the particular employee for the taxation year from sources in that country; and
(b)an employee who is a beneficiary under an employees profit sharing plan shall be deemed to have paid as non-business-income tax for a taxation year, on the income that the employee is deemed by paragraph 144(8.1)(a) to have for the year from sources in a foreign country, to the government of that country an amount equal to that proportion of the non-business-income tax paid by the trust governed by the plan for the year to the government of that country, or to the government of a state, province or other political subdivision of that country (except such portion of that tax as was deductible under subsection 20(11) in computing its income for the year) that
(i)the income that the employee is deemed by paragraph 144(8.1)(a) to have for the year from sources in that country
is of
(ii)the income of the trust for the year from sources (other than businesses carried on by it) in that country.
(8.2)[Repealed, 1994, c. 21, s. 68(3)]
Marginal note:Deduction for forfeited amounts
(9)Where a person ceases at any time in a taxation year to be a beneficiary under an employees profit sharing plan and does not become a beneficiary under the plan after that time and in the year, there may be deducted in computing the person’s income for the year the amount determined by the formula
A - B - C/4 - D
where
Marginal note:Payments out of profits
(10)Where the terms of an arrangement under which an employer makes payments to a trustee specifically provide that the payments shall be made “out of profits”, the arrangement shall, if the employer so elects in prescribed manner, be deemed, for the purpose of subsection 144(1), to be an arrangement under which payments computed by reference to the employer’s profits are required.
Marginal note:Taxation year of trust
(11)Where an employees profit sharing plan is accepted for registration by the Minister as a deferred profit sharing plan, the taxation year of the trust governed by the employees profit sharing plan shall be deemed to have ended immediately before the plan is deemed to have become registered as a deferred profit sharing plan pursuant to subsection 147(5).
Marginal note:Definitions
144.1(1)The following definitions apply in this section.
actuarymeans a Fellow of the Canadian Institute of Actuaries. (actuaire)
class of beneficiariesof a trust means a group of beneficiaries who have identical rights or interests under the trust.  (catégorie de bénéficiaires)
designated employee benefitmeans a benefit that is
(a)from a group sickness or accident insurance plan;
(b)from a group term life insurance policy;
(c)from a private health services plan;
(d)in respect of a counselling service described in subparagraph 6(1)(a)(iv); or
(e)not a death benefit, but that would be a death benefit if the amounts determined for paragraphs (a) and (b) of the definitiondeath benefitin subsection 248(1) were nil. (prestation désignée)
employeemeans a current or former employee of an employer and includes an individual in respect of whom the employer has assumed responsibility for the provision of designated employee benefits as a result of the acquisition by the employer of a business in which the individual was employed. (employé)
key employee, of an employer in respect of a taxation year, means an employee who
(a)was at any time in the taxation year or in a preceding taxation year, a specified employee of the employer; or
(b)was an employee whose employment income from the employer in any two of the five taxation years preceding the year exceeded five times the Year’s Maximum Pensionable Earnings (as determined under section 18 of theCanada Pension Plan) for the calendar year in which the employment income was earned. (employé clé)
Marginal note:Employee life and health trust
(2)A trust that is established for employees of one or more employers (each referred to in this subsection as a “participating employer”) is an employee life and health trust for a taxation year if, throughout the taxation year, under the terms that govern the trust,
(a)the only purpose of the trust is to provide benefits to, or for the benefit of, persons described in subparagraph (d)(i) or (ii) and all or substantially all of the total cost of the benefits is applicable to designated employee benefits;
(b)on wind-up or reorganization, the property of the trust may only be distributed to
(i)each remaining beneficiary of the trust who is described in subparagraph (d)(i) or (ii) (other than a key employee or an individual who is related to a key employee) on apro ratabasis,
(ii)another employee life and health trust, or
(iii)after the death of the last beneficiary described in subparagraph (d)(i) or (ii), Her Majesty in right of Canada or a province;
(c)the trust meets one of the following conditions:
(i)the trust is required to be resident in Canada, determined without reference to section 94, or
(ii)if the condition in subparagraph (i) is not met, it is the case that
(A)employee benefits are provided to employees who are resident in Canada and to employees who are not resident in Canada,
(B)one or more participating employers are employers that are resident in a country other than Canada, and
(C)the trust is required to be resident in a country in which a participating employer resides;
(d)the trust may not have any beneficiaries other than persons each of whom is
(i)an employee of a participating employer or former participating employer,
(ii)an individual who, in respect of an employee of a participating employer or former participating employer, is (or, if the employee is deceased, was, at the time of the employee’s death)
(A)the spouse or common-law partner of the employee, or
(B)related to the employee and either a member of the employee’s household or dependent on the employee for support,
(iii)another employee life and health trust, or
(iv)Her Majesty in right of Canada or a province;
(e)the trust meets one of the following conditions:
(i)it contains at least one class of beneficiaries where
(A)the members of the class represent at least 25% of all of the beneficiaries of the trust who are employees of the participating employers under the trust, and
(B)either of the following conditions is met:
(I)at least 75% of the members of the class are not key employees of any of the participating employers under the trust, or
(II)the contributions to the trust in respect of key employees who deal at arm’s length with their employer are determined in connection with a collective bargaining agreement, or
(ii)in respect of the private health services plan under the trust, the total cost of benefits provided to each key employee (and to persons described in subparagraph (2)(d)(ii) in respect of the key employee) in relation to the year does not exceed the amount determined by the formula
$2,500 × A(B/C)
where
(A)is a person to whom designated employee benefits are provided under the plan, and
(B)is the key employee or a person described in subparagraph (2)(d)(ii) in respect of the key employee,
(f)the rights under the trust of each key employee of a participating employer are not more advantageous than the rights of a class of beneficiaries described in paragraph (e);
(g)no participating employer, nor any person who does not deal at arm’s length with a participating employer, has any rights under the trust as a beneficiary or otherwise, except rights to
(i)designated employee benefits,
(ii)to enforce covenants, warranties or similar provisions regarding
(A)the maintenance of the trust as an employee life and health trust, or
(B)the operation of the trust in a manner that prevents subsection (3) from applying to prohibit the deduction of an amount by the trust under subsection 104(6), or
(iii)prescribed payments; and
(h)[Repealed, 2021, c. 23, s. 30]
(i)trustees who do not deal at arm’s length with one or more participating employers must not constitute the majority of the trustees of the trust.
Marginal note:Breach of terms, etc.
(3)No amount may be deducted in a taxation year by an employee life and health trust pursuant to subsection 104(6) if in the taxation year the trust
(a)is not operated in accordance with the terms required by subsection (2) to govern the trust, unless it is reasonable to conclude that its trustees neither knew nor ought to have known that designated employee benefits have been provided to, or contributions have been made in respect of, beneficiaries other than those described in subparagraph (2)(d)(i) or (ii); or
(b)provides any benefit for which, if the benefit had been paid directly to the employee and not out of the trust, the contributions or premiums would not be deductible in computing the income of an employer in respect of any taxation year.
Marginal note:Deductibility of employer contributions
(4)In computing the income of an employer,
(a)the employer may deduct for a taxation year the portion of its contributions to an employee life and health trust made in the year that may reasonably be regarded as having been contributed to enable the trust to
(i)pay premiums to an insurance corporation that is licensed to provide insurance under the laws of Canada or a province for insurance coverage for the year or a prior year in respect of designated employee benefits for beneficiaries described in subparagraph (2)(d)(i) or (ii), or
(ii)otherwise provide
(A)group term life insurance as described in clause 18(9)(a)(iii)(B), or
(B)any designated employee benefits payable in the year or a prior year to, or for the benefit of, beneficiaries described in subparagraph (2)(d)(i) or (ii); and
(b)the portion of any contribution made to an employee life and health trust that exceeds the amount deductible under paragraph (a) and that may reasonably be regarded as enabling the trust to provide or pay benefits described in subparagraphs (a)(i) or (ii) in a subsequent taxation year is deductible for that year.
Marginal note:Actuarial determination
(5)For the purposes of subsection (4), if, in respect of an employer’s obligations to fund an employee life and health trust, a report has been prepared by an independent actuary, using accepted actuarial principles and practices, before the time of a contribution by the employer, the portion of the contribution that the report specifies to be the amount that the employee life and health trust is reasonably expected to pay or incur in a taxation year in order to provide designated employee benefits to beneficiaries described in subparagraph (2)(d)(i) or (ii) for a taxation year is, in the absence of evidence to the contrary, presumed to have been contributed to enable the trust to provide those benefits for the year.
Marginal note:Deductibility — collectively bargained or similar agreement
(6)Despite subsection (4) and paragraph 18(9)(a), an employer may deduct in computing its income for a taxation year the amount that it is required to contribute for the year to an employee life and health trust if the following conditions are met at the time that the contribution is made:
(a)the employer contributes to the trust in accordance with a contribution formula that does not provide for any variation in contributions determined by reference to the financial experience of the trust and either of the following conditions is met:
(i)if there is a collective bargaining agreement, the trust provides benefits
(A)negotiated under the collective bargaining agreement, or
(B)under a participation agreement that are substantially the same as under the collective bargaining agreement, or
(ii)in any other case, the trust provides benefits in accordance with an arrangement that meets the following conditions:
(A)there is a legal requirement for each employer to participate in accordance with the terms and conditions that govern the trust,
(B)there are a minimum of 50 beneficiaries under the trust who are employees of the participating employers in respect of the trust, and
(C)each employee who is a beneficiary under the trust deals at arm’s length with each participating employer in respect of the trust; and
(b)contributions that are to be made by each employer are determined, in whole or in part, by reference to the number of hours worked by individual employees of the employer or some other measure that is specific to each employee with respect to whom contributions are made to the trust.
Marginal note:Maximum deductible
(7)The amount deducted in a taxation year by an employer in computing its income in respect of contributions made to an employee life and health trust shall not exceed the amount determined by the formula
A – B
where
Marginal note:Employer promissory note
(8)If an employer issues a promissory note or provides other evidence of its indebtedness to an employee life and health trust in respect of its obligation to the trust,
(a)the issuance of the note or the provision of the evidence of indebtedness to the trust is not a contribution to the trust; and
(b)a payment by the employer to the trust in full or partial satisfaction of its liability under the note or the evidence of indebtedness, whether stated to be of principal or interest or any other amount, is deemed to be an employer contribution to the trust that is subject to this section and not a payment of principal or interest on the note or indebtedness.
Marginal note:Trust status — subsequent times
(9)For the purposes of determining whether an amount is deductible by an employer under subsection (4), if a trust was an employee life and health trust at the time that a promissory note or other evidence of indebtedness referred to in subsection (8) was issued or provided, the trust is deemed to be an employee life and health trust at each time that an employer contribution is deemed to have been made under paragraph (8)(b) in respect of the note or other indebtedness.
Marginal note:Employee contributions
(10)For the purposes of paragraph 6(1)(f), subsection 6(4) and paragraph 118.2(2)(q), employee contributions to an employee life and health trust, to the extent that they are, and are identified by the trust at the time of contribution as, contributions in respect of a particular designated employee benefit, are deemed to be payments by the employee in respect of the particular designated employee benefit.
Marginal note:Income inclusion
(11)If a trust that is, or was, at any time, an employee life and health trust pays an amount as a distribution from the trust to any person in a taxation year, the amount of the distribution shall be included in computing the person’s income for the year, except to the extent that the amount is
(a)a payment of a designated employee benefit that is not included in the person’s income because of section 6; or
(b)a distribution to another employee life and health trust that is a beneficiary of the employee life and health trust.
Marginal note:Deemed separate trusts
(12)Where contributions have been received by an employee life and health trust from more than one employer, the trust is deemed to be a separate trust established in respect of the property held for the benefit of beneficiaries described in subparagraph (2)(d)(i) or (ii) in respect of a particular employer, if
(a)the trustee designates the property to be held in a separate trust for the benefit of those beneficiaries in an election made on or before the filing-due date of the first taxation year of the separate trust described in this subsection; and
(b)under the terms of the trust, contributions from the employer and the income derived from those contributions accrues solely for the benefit of those beneficiaries.
Marginal note:Non-capital losses
(13)No non-capital loss is deductible by an employee life and health trust in computing its taxable income for a taxation year, except as provided by subsections 111(7.3) to (7.5).
Marginal note:Conditions — deemed employee life and health trust
(14)Subsection (15) applies in respect of a trust if
(a)the trust was established before February 28, 2018;
(b)the contributions to the trust are determined in connection with a collective bargaining agreement;
(c)all or substantially all of the employee benefits provided by the trust are designated employee benefits; and
(d)the trust elects in prescribed form and manner that subsection (15) applies as of a particular date after 2018.
Marginal note:Deemed employee life and health trust
(15)If this subsection applies in respect of a trust,
(a)the trust is deemed for the purposes of the Act to be an employee life and health trust from the particular date referred to in paragraph (14)(d) until the earliest of
(i)the end of 2022,
(ii)the day that the trust satisfies the conditions in subsection (2), and
(iii)any day on which the condition in paragraph (14)(c) is not satisfied; and
(b)at any time that the trust is an employee life and health trust because of paragraph (a),
(i)subsection 111(7.5) applies to the trust as if the reference in paragraph (b) of that subsection to “subsection 144.1(3)” were read as a reference to “paragraph 144.1(3)(b)”, and
(ii)subsection (3) applies to the trust without reference to its paragraph (a).
Marginal note:Trust-to-trust transfer
(16)If a property is transferred from a trust that provides employee benefits substantially all of which are designated employee benefits (referred to in this subsection as the “transferor trust”) to an employee life and health trust (referred to in this subsection as the “receiving trust”), and if the Minister has been so notified in prescribed form, then
(a)the transferred property is deemed to have been disposed of by the transferor trust, and to have been acquired by the receiving trust, for an amount equal to the cost amount of the property to the transferor trust immediately before the disposition; and
(b)section 107.1 does not apply to the transfer.
Marginal note:Deductibility of transferred property
(17)If subsection (16) applies to a transfer of property to an employee life and health trust, the transfer shall not be considered to be a contribution to the employee life and health trust for the purposes of subsections (4) and (6).
Marginal note:Requirement to file
(18)A trust shall, on or before its first filing-due date after 2021, notify the Minister in prescribed form that it is an employee life and health trust if
(a)prior to February 27, 2018, it provided employee benefits substantially all of which are designated employee benefits;
(b)after February 26, 2018, it becomes an employee life and health trust because it satisfies the conditions in subsection (2); and
(c)subsections (15) and (16) do not apply to the trust.
Marginal note:Definitions
145(1)In this section,
registered supplementary unemployment benefit planmeans a supplementary unemployment benefit plan accepted by the Minister for registration for the purposes of this Act in respect of its constitution and operations for the taxation year under consideration; (régime enregistré de prestations supplémentaires de chômage)
supplementary unemployment benefit planmeans an arrangement, other than an arrangement in the nature of a superannuation or pension fund or plan or an employees profit sharing plan, under which payments are made by an employer to a trustee in trust exclusively for the payment of periodic amounts to employees or former employees of the employer who are or may be laid off for any temporary or indefinite period. (régime de prestations supplémentaires de chômage)
Marginal note:No tax while trust governed by plan
(2)No tax is payable under this Part by a trust on the taxable income of the trust for a period during which the trust was governed by a registered supplementary unemployment benefit plan.
Marginal note:Amounts received taxable
(3)There shall be included in computing the income of a taxpayer for a taxation year each amount received by the taxpayer under a supplementary unemployment benefit plan from the trustee under the plan at any time in the year.
Marginal note:Amounts received on amendment or winding-up of plan
(4)There shall be included in computing the income for a taxation year of a taxpayer who, as an employer, has made any payment to a trustee under a supplementary unemployment benefit plan, any amount received by the taxpayer in the year as a result of an amendment to or modification of the plan or as a result of the termination or winding-up of the plan.
Marginal note:Payments by employer deductible
(5)An amount paid by an employer to a trustee under a registered supplementary unemployment benefit plan during a taxation year or within 30 days thereafter may be deducted in computing the employer’s income for the taxation year to the extent that it was not deductible in computing income for a previous taxation year.
Marginal note:Definitions
146(1)In this section,
annuitantmeans
(a)until such time after maturity of the plan as an individual’s spouse or common-law partner becomes entitled, as a consequence of the individual’s death, to receive benefits to be paid out of or under the plan, the individual referred to in paragraph (a) or (b) of the definitionretirement savings planin this subsection for whom, under a retirement savings plan, a retirement income is to be provided, and
(b)thereafter, the spouse or common-law partner referred to in paragraph (a); (rentier)
benefitincludes any amount received out of or under a retirement savings plan other than
(a)the portion thereof received by a person other than the annuitant that can reasonably be regarded as part of the amount included in computing the income of an annuitant by virtue of subsections 146(8.8) and 146(8.9),
(b)an amount received by the person with whom the annuitant has the contract or arrangement described in the definitionretirement savings planin this subsection as a premium under the plan,
(b.1)an amount in respect of which the annuitant pays a tax under Part XI.01, unless the tax is waived, cancelled or refunded,
(c)an amount, or part thereof, received in respect of the income of the trust under the plan for a taxation year for which the trust was not exempt from tax by virtue of paragraph 146(4)(c), and
(c.1)a tax-paid amount described in paragraph (b) of the definitiontax-paid amountin this subsection that relates to interest or another amount included in computing income otherwise than because of this section
and without restricting the generality of the foregoing includes any amount paid to an annuitant under the plan
(d)in accordance with the terms of the plan,
(e)resulting from an amendment to or modification of the plan, or
(f)resulting from the termination of the plan; (prestation)
earned incomeof a taxpayer for a taxation year means the amount, if any, by which the total of all amounts each of which is
(a)the taxpayer’s income (other than an amount described in paragraph 12(1)(z)) for a period in the year throughout which the taxpayer was resident in Canada from
(i)an office or employment, determined without reference to paragraphs 8(1)(c), 8(1)(m) and 8(1)(m.2),
(ii)a business carried on by the taxpayer either alone or as a partner actively engaged in the business, or
(iii)property, where the income is derived from the rental of real or immovable property or from royalties in respect of a work or invention of which the taxpayer was the author or inventor,
(b)an amount included under paragraph 56(1)(b), (c.2), (g) or (o) or subparagraph 56(1)(r)(v) in computing the taxpayer’s income for a period in the year throughout which the taxpayer was resident in Canada,
(b.01)an amount included under paragraph 56(1)(n) in computing the taxpayer’s income for a period in the year throughout which the taxpayer was resident in Canada in connection with a program that consists primarily of research and does not lead to a diploma from a college or a collège d’enseignement général et professionnel, or a bachelor, masters, doctoral or equivalent degree,
(b.1)an amount received by the taxpayer in the year and at a time when the taxpayer is resident in Canada as, on account of, in lieu of payment of or in satisfaction of, a disability pension under theCanada Pension Planor a provincial pension plan as defined in section 3 of that Act,
(b.2)the taxpayer’s qualifying performance income (as defined in subsection 143.1(1)) that is deemed by paragraph 143.1(1.2)(c) to be income of an amateur athlete trust for the year,
(c)the taxpayer’s income (other than an amount described in paragraph 12(1)(z)) for a period in the year throughout which the taxpayer was not resident in Canada from
(i)the duties of an office or employment performed by the taxpayer in Canada, determined without reference to paragraphs 8(1)(c), 8(1)(m) and 8(1)(m.2), or
(ii)a business carried on by the taxpayer in Canada, either alone or as a partner actively engaged in the business
except to the extent that the income is exempt from income tax in Canada by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada, or
(d)in the case of a taxpayer described in subsection 115(2), the total that would be determined under paragraph 115(2)(e) in respect of the taxpayer for the year if
(i)that paragraph were read without reference to subparagraph 115(2)(e)(iv), and
(ii)subparagraph 115(2)(e)(ii) were read without any reference therein to paragraph 56(1)(n),
except any part thereof included in the total determined under this definition by reason of paragraph (c) or exempt from income tax in Canada by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada,
exceeds the total of all amounts each of which is
(e)the taxpayer’s loss for a period in the year throughout which the taxpayer was resident in Canada from
(i)a business carried on by the taxpayer, either alone or as a partner actively engaged in the business, or
(ii)property, where the loss is sustained from the rental of real or immovable property,
(f)an amount deductible under paragraph 60(b), or deducted under paragraph 60(c.2), in computing the taxpayer’s income for the year, or
(g)the taxpayer’s loss for a period in the year throughout which the taxpayer was not resident in Canada from a business carried on by the taxpayer in Canada, either alone or as a partner actively engaged in the business,
(h)[Repealed, 2016, c. 12, s. 52]
and, for the purposes of this definition, the income or loss of a taxpayer for any period in a taxation year is the taxpayer’s income or loss computed as though that period were the whole taxation year; (revenu gagné)
issuermeans the person referred to in the definitionretirement savings planin this subsection with whom an annuitant has a contract or arrangement that is a retirement savings plan; (émetteur)
maturitymeans the date fixed under a retirement savings plan for the commencement of any retirement income the payment of which is provided for by the plan; (échéance)
net past service pension adjustmentof a taxpayer for a taxation year means the positive or negative amount determined by the formula
P + Q - G
where
non-qualified investmenthas the same meaning as in subsection 207.01(1); (placement non admissible)
premiummeans any periodic or other amount paid or payable under a retirement savings plan
(a)as consideration for any contract referred to in paragraph (a) of the definitionretirement savings planto pay a retirement income, or
(b)as a contribution or deposit referred to in paragraph (b) of that definition for the purpose stated in that paragraph
but except for the purposes of paragraph (b) of the definitionbenefitin this subsection, paragraph (2)(b.3), subsection (22) and the definitionexcluded premiumin subsection 146.02(1), does not include a repayment to which paragraph (b) or (d) of the definitionexcluded withdrawalin subsection 146.01(1), or paragraph (b) of the definitionexcluded withdrawalin subsection 146.02(1), applies or an amount that is designated under subsection 146.01(3) or 146.02(3); (prime)
qualified investmentfor a trust governed by a registered retirement savings plan means
(a)an investment that would be described by any of paragraphs (a) to (d), (f) and (g) of the definitionqualified investmentin section 204 if the reference in that definition to “a trust governed by a deferred profit sharing plan or revoked plan” were read as a reference to “a trust governed by a registered retirement savings plan” and if that definition were read without reference to the words “with the exception of excluded property in relation to the trust”,
(b)[Repealed, 2007, c. 29, s. 17]
(c)an annuity described in the definitionretirement incomein respect of the annuitant under the plan, if purchased from a licensed annuities provider,
(c.1)a contract for an annuity issued by a licensed annuities provider where
(i)the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract, and
(ii)the holder of the contract has a right to surrender the contract at any time for an amount that would, if reasonable sales and administration charges were ignored, approximate the value of funds that could otherwise be applied to fund future periodic payments under the contract,
(c.2)a contract for an annuity issued by a licensed annuities provider where
(i)annual or more frequent periodic payments are or may be made under the contract to the holder of the contract,
(ii)the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract,
(iii)neither the time nor the amount of any payment under the contract may vary because of the length of any life, other than the life of the annuitant under the plan (in this definition referred to as the “RRSP annuitant”),
(iv)the day on which the periodic payments began or are to begin (in this paragraph referred to as the “start date”) is not later than the end of the year in which the RRSP annuitant attains 72 years of age,
(v)either
(A)the periodic payments are payable for the life of the RRSP annuitant and either there is no guaranteed period under the contract or there is a guaranteed period that begins at the start date and does not exceed a term equal to 90 years minus the lesser of
(I)the age in whole years at the start date of the RRSP annuitant (determined on the assumption that the RRSP annuitant is alive at the start date), and
(II)the age in whole years at the start date of a spouse or common-law partner of the RRSP annuitant (determined on the assumption that a spouse or common-law partner of the RRSP annuitant at the time the contract was acquired is a spouse or common-law partner of the RRSP annuitant at the start date), or
(B)the periodic payments are payable for a term equal to
(I)90 years minus the age described in subclause (I), or
(II)90 years minus the age described in subclause (II), and
(vi)the periodic payments
(A)are equal, or
(B)are not equal solely because of one or more adjustments that would, if the contract were an annuity under a retirement savings plan, be in accordance with subparagraphs 146(3)(b)(iii) to 146(3)(b)(v) or that arise because of a uniform reduction in the entitlement to the periodic payments as a consequence of a partial surrender of rights to the periodic payments, and
(d)such other investments as may be prescribed by regulations of the Governor in Council made on the recommendation of the Minister of Finance; (placement admissible)
RRSP deduction limitof a taxpayer for a taxation year means the amount determined by the formula
A + B + R - C
where
(a)the lesser of the RRSP dollar limit for the year and 18% of the taxpayer’s earned income for the preceding taxation year
exceeds the total of all amounts each of which is
(b)the taxpayer’s pension adjustment for the preceding taxation year in respect of an employer, or
(c)a prescribed amount in respect of the taxpayer for the year,
RRSP dollar limitfor a calendar year means
(a)for years other than 1996 and 2003, the money purchase limit for the preceding year,
(b)for 1996, $13,500, and
(c)for 2003, $14,500; (plafond REER)
refund of premiumsmeans any amount paid out of or under a registered retirement savings plan (other than a tax-paid amount in respect of the plan) as a consequence of the death of the annuitant under the plan,
(a)to an individual who was, immediately before the death, a spouse or common-law partner of the annuitant, where the annuitant died before the maturity of the plan, or
(b)to a child or grandchild of the annuitant who was, immediately before the death, financially dependent on the annuitant for support; (remboursement de primes)
registered retirement savings planmeans a retirement savings plan accepted by the Minister for registration for the purposes of this Act as complying with the requirements of this section; (régime enregistré d’épargne-retraite)
retirement incomemeans
(a)an annuity commencing at maturity, and with or without a guaranteed term commencing at maturity, not exceeding the term referred to in paragraph (b), or, in the case of a plan entered into before March 14, 1957, not exceeding 20 years, payable to
(i)the annuitant for the annuitant’s life, or
(ii)the annuitant for the lives, jointly, of the annuitant and the annuitant’s spouse and to the survivor of them for the survivor’s life, or
(b)an annuity commencing at maturity, payable to the annuitant, or to the annuitant for the annuitant’s life and to the spouse after the annuitant’s death, for a term of years equal to 90 minus either
(i)the age in whole years of the annuitant at the maturity of the plan, or
(ii)where the annuitant’s spouse is younger than the annuitant and the annuitant so elects, the age in whole years of the spouse at the maturity of the plan,
issued by a person described in the definitionretirement savings planin this subsection with whom an individual may have a contract or arrangement that is a retirement savings plan,
or any combination thereof; (revenu de retraite)
retirement savings planmeans
(a)a contract between an individual and a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business, under which, in consideration of payment by the individual or the individual’s spouse or common-law partner of any periodic or other amount as consideration under the contract, a retirement income commencing at maturity is to be provided for the individual, or
(b)an arrangement under which payment is made by an individual or the individual’s spouse or common-law partner
(i)in trust to a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, of any periodic or other amount as a contribution under the trust,
(ii)to a corporation approved by the Governor in Council for the purposes of this section that is licensed or otherwise authorized under the laws of Canada or a province to issue investment contracts providing for the payment to or to the credit of the holder thereof of a fixed or determinable amount at maturity, of any periodic or other amount as a contribution under such a contract between the individual and that corporation, or
(iii)as a deposit with a branch or office, in Canada, of
(A)a person who is, or is eligible to become, a member of the Canadian Payments Association, or
(B)a credit union that is a shareholder or member of a body corporate referred to as a “central” for the purposes of theCanadian Payments Act,
(in this section referred to as a “depositary”)
to be used, invested or otherwise applied by that corporation or that depositary, as the case may be, for the purpose of providing for the individual, commencing at maturity, a retirement income; (régime d’épargne-retraite)
spousal or common-law partner plan, in relation to a taxpayer, means
(a)a registered retirement savings plan
(i)to which the taxpayer has, at a time when the taxpayer’s spouse or common-law partner was the annuitant under the plan, paid a premium, or
(ii)that has received a payment out of or a transfer from a registered retirement savings plan or a registered retirement income fund that was a spousal or common-law partner plan in relation to the taxpayer, or
(b)a registered retirement income fund that has received a payment out of or a transfer from a spousal or common-law partner plan in relation to the taxpayer; (régime au profit de l’époux ou du conjoint de fait)
spousal plan[Repealed, 2001, c. 17, s. 246]
tax-paid amountpaid to a person in respect of a registered retirement saving plan means
(a)an amount paid to the person in respect of the amount that would, if this Act were read without reference to subsection 104(6), be income of a trust governed by the plan for a taxation year for which the trust was subject to tax because of paragraph 146(4)(c), or
(b)where
(i)the plan is a deposit with a depositary referred to in clause (b)(iii)(B) of the definitionretirement savings planin this subsection, and
(ii)an amount is received at any time out of or under the plan by the person,
the portion of the amount that can reasonably be considered to relate to interest or another amount in respect of the deposit that was required to be included in computing the income of any person (other than the annuitant) otherwise than because of this section; (montant libéré d’impôt)
unused RRSP deduction roomof a taxpayer at the end of a taxation year means,
(a)for taxation years ending before 1991, nil, and
(b)for taxation years that end after 1990, the amount, which can be positive or negative, determined by the formula
A + B + R - (C + D)
where
(i)the lesser of the RRSP dollar limit for the year and 18% of the taxpayer’s earned income for the preceding taxation year
exceeds the total of all amounts each of which is
(ii)the taxpayer’s pension adjustment for the preceding taxation year in respect of an employer, or
(iii)a prescribed amount in respect of the taxpayer for the year,
(i)an amount deducted by the taxpayer under any of subsections (5) to (5.2), in computing the taxpayer’s income for the year,
(ii)an amount deducted by the taxpayer under paragraph 10 of Article XVIII of theCanada-United States Tax Conventionsigned at Washington on September 26, 1980 or a similar provision in another tax treaty, in computing the taxpayer’s taxable income for the year,
(iii)a contribution made by an employer in the year to a pooled registered pension plan in respect of the taxpayer, or
(iv)the amount, if any, by which the taxpayer’s exempt-income contribution amount (as defined in subsection 147.5(1)) for the year exceeds the taxpayer’s unused non-deductible PRPP room (as defined in subsection 147.5(1)) at the end of the preceding taxation year, and
Marginal note:Restriction — financially dependent
(1.1)For the purposes of paragraph (b) of the definitionrefund of premiumsin subsection (1), clause 60(l)(v)(B.01), the definitioneligible individualin subsection 60.02(1), subparagraph 104(27)(e)(i) and section 147.5, it is assumed, unless the contrary is established, that an individual’s child or grandchild was not financially dependent on the individual for support immediately before the individual’s death if the income of the child or grandchild for the taxation year preceding the taxation year in which the individual died exceeded the amount determined by the formula
A + B
where
Marginal note:Acceptance of plan for registration
(2)The Minister shall not accept for registration for the purposes of this Act any retirement savings plan unless, in the Minister’s opinion, it complies with the following conditions:
(a)the plan does not provide for the payment of any benefit before maturity except
(i)a refund of premiums, and
(ii)a payment to the annuitant;
(b)the plan does not provide for the payment of any benefit after maturity except
(i)by way of retirement income to the annuitant,
(ii)to the annuitant in full or partial commutation of retirement income under the plan, and
(iii)in respect of a commutation referred to in paragraph 146(2)(c.2);
(b.1)the plan does not provide for a payment to the annuitant of a retirement income except by way of equal annual or more frequent periodic payments until such time as there is a payment in full or partial commutation of the retirement income and, where that commutation is partial, equal annual or more frequent periodic payments thereafter;
(b.2)the plan does not provide for periodic payments in a year under an annuity after the death of the first annuitant, the total of which exceeds the total of the payments under the annuity in a year before that death;
(b.3)the plan does not provide for the payment of any premium after maturity;
(b.4)the plan does not provide for maturity after the end of the year in which the annuitant attains 71 years of age;
(c)the plan provides that retirement income under the plan may not be assigned in whole or in part;
(c.1)notwithstanding paragraph 146(2)(a), the plan permits the payment of an amount to a taxpayer where the amount is paid to reduce the amount of tax otherwise payable under Part X.1 by the taxpayer;
(c.2)the plan requires the commutation of each annuity payable thereunder that would otherwise become payable to a person other than an annuitant under the plan;
(c.3)the plan, where it involves a depositary, includes provisions stipulating that
(i)the depositary has no right of offset as regards the property held under the plan in connection with any debt or obligation owing to the depositary, and
(ii)the property held under the plan cannot be pledged, assigned or in any way alienated as security for a loan or for any purpose other than that of providing for the annuitant, commencing at maturity, a retirement income; and
(c.4)[Repealed, 2011, c. 24, s. 45]
(d)the plan in all other respects complies with regulations of the Governor in Council made on the recommendation of the Minister of Finance.
Marginal note:Idem
(3)The Minister may accept for registration for the purposes of this Act any retirement savings plan notwithstanding that the plan
(a)provides for the payment of a benefit after maturity by way of dividend;
(b)provides for any annual or more frequent periodic amount payable
(i)to the annuitant referred to in subparagraph (a)(ii) of the definitionretirement incomein subsection 146(1) by way of an annuity described in paragraph (a) of that definition to be reduced, in the event of the death of the annuitant’s spouse or common-law partner during the lifetime of the annuitant, in such manner as to provide for the payment of equal annual or more frequent periodic amounts throughout the lifetime of the annuitant thereafter,
(ii)to any person by way of an annuity, to be reduced if a pension becomes payable to that person under theOld Age Security Act, by an annual or other periodic amount not exceeding the amount payable to that person in that period under that Act,
(iii)to any person by way of an annuity, to be increased or reduced depending on the increase or reduction in the value of a specified group of assets constituting the assets of a separate and distinct account or fund maintained in respect of a variable annuities business by a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada that business,
(iii.1)to any person by way of an annuity under a contract that provides for the increase or reduction of the annuity in accordance only with a change in the interest rate on which the annuity is based, if the interest rate, as increased or reduced, equals or approximates a generally available Canadian market interest rate,
(iv)that may be adjusted annually to reflect
(A)in whole or in part increases in the Consumer Price Index, as published by Statistics Canada under the authority of theStatistics Act, or
(B)increases at a rate specified in the annuity contract, not exceeding 4% per annum, or
(v)to the annuitant by way of an annuity to be increased annually to the extent the amount or rate of return that would have been earned on a pool of investment assets (available for purchase by the public and specified in the annuity contract) exceeds an amount or rate specified in the plan and provides that no other increase may be made in the amount payable;
(d)provides for the payment of any amount after the death of an annuitant thereunder;
(e)is adjoined to a contract or other arrangement that is not a retirement savings plan; or
(f)contains such other terms and provisions, not inconsistent with this section, as are authorized or permitted by regulations of the Governor in Council made on the recommendation of the Minister of Finance.
Marginal note:No tax while trust governed by plan
(4)Except as provided in subsection 146(10.1), no tax is payable under this Part by a trust on the taxable income of the trust for a taxation year if, throughout the period in the year during which the trust was in existence, the trust was governed by a registered retirement savings plan, except that
(a)if the trust has borrowed money (other than money used in carrying on a business) in the year or has, after June 18, 1971, borrowed money (other than money used in carrying on a business) that it has not repaid before the commencement of the year, tax is payable under this Part by the trust on its taxable income for the year;
(b)in any case not described in paragraph 146(4)(a), if the trust has carried on any business or businesses in the year, tax is payable under this Part by the trust on the amount, if any, by which
(i)the amount that its taxable income for the year would be if it had no incomes or losses from sources other than from that business or those businesses, as the case may be,
exceeds
(ii)such portion of the amount determined under subparagraph 146(4)(b)(i) in respect of the trust for the year as can reasonably be considered to be income from, or from the disposition of, qualified investments for the trust; and
(c)if the last annuitant under the plan has died, tax is payable under this Part by the trust on its taxable income for each year after the year following the year in which the last annuitant died.
Marginal note:Amount of RRSP premiums deductible
(5)There may be deducted in computing a taxpayer’s income for a taxation year such amount as the taxpayer claims not exceeding the lesser of
(a)the amount, if any, by which the total of all amounts each of which is a premium paid by the taxpayer after 1990 and on or before the day that is 60 days after the end of the year under a registered retirement savings plan under which the taxpayer was the annuitant at the time the premium was paid, other than the portion, if any, of the premium
(i)that was deducted in computing the taxpayer’s income for a preceding taxation year,
(ii)that was designated for any taxation year for the purposes of paragraph 60(j), 60(j.1) or 60(l),
(iii)in respect of which the taxpayer received a payment that was deducted under subsection 146(8.2) in computing the taxpayer’s income for a preceding taxation year,
(iii.1)that was an exempt-income contribution amount (as defined in subsection 147.5(1)) for any taxation year,
(iv)that was deductible under subsection 146(6.1) in computing the taxpayer’s income for any taxation year or
(iv.1)that would be considered to be withdrawn by the taxpayer as an eligible amount (as defined in subsection 146.01(1) or 146.02(1)) less than 90 days after it was paid, if earnings in respect of a registered retirement savings plan were considered to be withdrawn before premiums paid under that plan and premiums were considered to be withdrawn in the order in which they were paid
exceeds
(v)the amount, if any, by which
(A)the total of all amounts deducted under subsection 147.3(13.1) in computing the taxpayer’s income for the year or a preceding taxation year
exceeds
(B)the total of all amounts, in respect of transfers occurring before 1991 from registered pension plans, deemed by paragraph 147.3(10)(b) or 147.3(10)(c) to be a premium paid by the taxpayer to a registered retirement savings plan, and
(b)the amount, if any, by which the taxpayer’s RRSP deduction limit for the year exceeds the total of all contributions made by an employer in the year to a pooled registered pension plan in respect of the taxpayer.
Marginal note:Amount of spousal RRSP premiums deductible
(5.1)There may be deducted in computing a taxpayer’s income for a taxation year such amount as the taxpayer claims not exceeding the lesser of
(a)the total of all amounts each of which is a premium paid by the taxpayer after 1990 and on or before the day that is 60 days after the end of the year under a registered retirement savings plan under which the taxpayer’s spouse or common-law partner (or, where the taxpayer died in the year or within 60 days after the end of the year, an individual who was the taxpayer’s spouse or common-law partner immediately before the death) was the annuitant at the time the premium was paid, other than the portion, if any, of the premium
(i)that was deducted in computing the taxpayer’s income for a preceding taxation year,
(ii)that was designated for any taxation year for the purposes of paragraph 60(j.2),
(iii)in respect of which the taxpayer or the taxpayer’s spouse or common-law partner has received a payment that has been deducted under subsection 146(8.2) in computing the taxpayer’s income for a preceding taxation year, or
(iv)that would be considered to be withdrawn by the taxpayer’s spouse or common-law partner as an eligible amount (as defined in subsection 146.01(1) or 146.02(1)) less than 90 days after it was paid, if earnings in respect of a registered retirement savings plan were considered to be withdrawn before premiums paid under that plan and premiums were considered to be withdrawn in the order in which they were paid, and
(b)the amount, if any, by which the taxpayer’s RRSP deduction limit for the year exceeds the total of all amounts each of which is
(i)the amount deducted under subsection (5) in computing the taxpayer’s income for the year, or
(ii)a contribution made by an employer in the year to a pooled registered pension plan in respect of the taxpayer.
Marginal note:RRSP premium
(5.2)If a taxpayer’s entitlement to benefits under a defined benefit provision of a registered pension plan is transferred in accordance with subsection 147.3(4) after February 2009 and before 2011, there may be deducted in computing the taxpayer’s income for a taxation year that ends on or after the day on which the transfer was made, the amount claimed by the taxpayer in respect of premiums paid by the taxpayer in the year to a registered retirement savings plan under which the taxpayer is the annuitant, not exceeding the amount, if any, determined by the formula
A – B – C
where
(a)the prescribed amount that would have been determined for the purpose of paragraph 147.3(4)(c) if subsection 8517(3.01) of the Regulations had applied in respect of the transfer, and
(b)the amount of the taxpayer’s entitlement to benefits under the provision commuted in connection with the transfer;
Marginal note:Transitional rule
(5.201)For the purpose of subsection (5.2), a premium paid by a taxpayer before 2013 is deemed to have been paid in the taxation year in which the transfer referred to in that subsection was made and not in the year in which it was actually paid, if the taxpayer so elects in prescribed form.
Marginal note:Anti-avoidance
(5.21)Notwithstanding any other provision of this section, where
(a)a registered pension plan is amended or administered in such a manner as to terminate, suspend or delay
(i)the membership of an individual in the plan for the individual’s 1990 taxation year,
(ii)contributions under the plan by or for the benefit of the individual in respect of the year, or
(iii)the accrual of retirement benefits under the plan for the individual in respect of the year, or
(b)a deferred profit sharing plan is amended or administered in such a manner as to terminate, suspend or delay contributions under the plan for the year in respect of an individual,
and one of the main reasons for the termination, suspension or delay may reasonably be considered to be to reduce the pension adjustment of the individual for the year in respect of an employer, the only amount that may be deducted in computing the income for the year of the individual, in respect of premiums paid to registered retirement savings plans, is the amount that would have been deductible had that termination, suspension or delay not occurred.
(6)[Repealed, 2011, c. 24, s. 45]
Marginal note:Recontribution of certain withdrawals
(6.1)There may be deducted in computing a taxpayer’s income for a particular taxation year the total of all amounts each of which is such portion of a prescribed premium for the particular year as was not designated for any taxation year for the purposes of paragraph 60(j), 60(j.1) or 60(l).
Marginal note:Recovery of property used as security
(7)Where in a taxation year a loan, for which a trust governed by a registered retirement savings plan has used or permitted to be used trust property as security, ceases to be extant, and the fair market value of the property so used was included by virtue of subsection 146(10) in computing the income of the taxpayer who is the annuitant under the plan, there may be deducted, in computing the income of the taxpayer for the taxation year, an amount equal to the amount, if any, remaining when
(a)the net loss (exclusive of payments by the trust as or on account of interest) sustained by the trust in consequence of its using the property, or permitting it to be used, as security for the loan and not as a result of a change in the fair market value of the property
is deducted from
(b)the amount so included in computing the income of the taxpayer in consequence of the trust’s using the property, or permitting it to be used, as security for the loan.
Marginal note:Benefits taxable
(8)There shall be included in computing a taxpayer’s income for a taxation year the total of all amounts received by the taxpayer in the year as benefits out of or under registered retirement savings plans, other than excluded withdrawals (as defined in subsection 146.01(1) or 146.02(1)) of the taxpayer and amounts that are included under paragraph (12)(b) in computing the taxpayer’s income.
Marginal note:Subsequent re-calculation
(8.01)If a designated withdrawal (as defined in subsection 146.01(1)) or an amount referred to in paragraph (a) of the definitioneligible amountin subsection 146.02(1) is received by a taxpayer in a taxation year and, at any time after that year, it is determined that the amount is not an excluded withdrawal (as defined in subsection 146.01(1) or 146.02(1)), notwithstanding subsections 152(4) to (5), such assessments of tax, interest and penalties shall be made as are necessary to give effect to the determination.
Marginal note:Deemed receipt of refund of premiums
(8.1)If a payment out of or under a registered retirement savings plan of a deceased annuitant to the annuitant’s legal representative would have been a refund of premiums if it had been paid under the plan to an individual who is a beneficiary (as defined in subsection 108(1)) under the deceased’s estate, the payment is, to the extent it is so designated jointly by the legal representative and the individual in prescribed form filed with the Minister, deemed to be received by the individual (and not by the legal representative) at the time it was so paid as a benefit that is a refund of premiums.
Marginal note:Amount deductible
(8.2)Where
(a)all or any portion of the premiums paid in a taxation year by a taxpayer to one or more registered retirement savings plans under which the taxpayer or the taxpayer’s spouse or common-law partner was the annuitant was not deducted in computing the taxpayer’s income for any taxation year,
(b)the taxpayer or the taxpayer’s spouse or common-law partner can reasonably be regarded as having received a payment from a registered retirement savings plan or a registered retirement income fund in respect of such portion of the undeducted premiums as
(i)was not paid by way of a transfer of an amount from a registered pension plan to a registered retirement savings plan,
(ii)was not paid by way of a transfer of an amount from a deferred profit sharing plan to a registered retirement savings plan in accordance with subsection 147(19), and
(iii)was not paid by way of a transfer of an amount to a registered retirement savings plan from
(A)a pooled registered pension plan in circumstances to which subsection 147.5(21) applied, or
(B)a specified pension plan in circumstances to which subsection (21) applied,
(c)the payment is received by the taxpayer or the taxpayer’s spouse or common-law partner in a particular taxation year that is
(i)the year in which the premiums were paid by the taxpayer,
(ii)the year in which a notice of assessment for the taxation year referred to in subparagraph 146(8.2)(c)(i) was sent to the taxpayer, or
(iii)the year immediately following the year referred to in subparagraph 146(8.2)(c)(i) or 146(8.2)(c)(ii), and
(d)the payment is included in computing the taxpayer’s income for the particular year,
the payment (except to the extent that it is a prescribed withdrawal) may be deducted in computing the taxpayer’s income for the particular year unless it is reasonable to consider that
(e)the taxpayer did not reasonably expect that the full amount of the premiums would be deductible in the taxation year in which the premiums were paid or in the immediately preceding taxation year, and
(f)the taxpayer paid all or any portion of the premiums with the intent of receiving a payment that, but for this paragraph and paragraph 146(8.2)(e), would be deductible under this subsection.
Marginal note:Premium deemed not paid
(8.21)Where a taxpayer or the taxpayer’s spouse or common-law partner has, at any time in a taxation year, received a payment from a registered retirement savings plan or a registered retirement income fund in respect of all or any portion of a premium paid by the taxpayer to a registered retirement savings plan and the payment has been deducted under subsection 146(8.2) in computing the taxpayer’s income for the year, the premium or portion thereof, as the case may be, shall,
(a)for the purposes of determining, after that time, the amount that may be deducted under subsection 146(5) or 146(5.1) in computing the taxpayer’s income for the year or a preceding taxation year, and
(b)for the purposes of subsections 146(8.3) and 146.3(5.1) after that time, in the case of a payment received by the taxpayer,
be deemed not to have been a premium paid by the taxpayer to a registered retirement savings plan.
Marginal note:Spousal or common-law partner payments
(8.3)Where at any time in a taxation year a particular amount in respect of a registered retirement savings plan that is a spousal or common-law partner plan in relation to a taxpayer is required by reason of subsection (8) or paragraph (12)(b) to be included in computing the income of the taxpayer’s spouse or common-law partner before the plan matures or as a payment in full or partial commutation of a retirement income under the plan and the taxpayer is not living separate and apart from the taxpayer’s spouse or common-law partner at that time by reason of the breakdown of their marriage or common-law partnership, there shall be included at that time in computing the taxpayer’s income for the year an amount equal to the lesser of
(a)the total of all amounts each of which is a premium paid by the taxpayer in the year or in one of the two immediately preceding taxation years to a registered retirement savings plan under which the taxpayer’s spouse or common-law partner was the annuitant at the time the premium was paid, and
(b)the particular amount.
Marginal note:Ordering
(8.5)Where a taxpayer has paid more than one premium described in subsection 146(8.3), such a premium or part thereof paid by the taxpayer at any time shall be deemed to have been included in computing the taxpayer’s income by virtue of that subsection before premiums or parts thereof paid by the taxpayer after that time.
Marginal note:Spouse’s income
(8.6)Where, in respect of an amount required at any time in a taxation year to be included in computing the income of a taxpayer’s spouse or common-law partner, all or part of a premium has by reason of subsection 146(8.3) been included in computing the taxpayer’s income for the year, the following rules apply:
(a)the premium or part thereof, as the case may be, shall, for the purposes of subsections 146(8.3) and 146.3(5.1) after that time, be deemed not to have been a premium paid to a registered retirement savings plan under which the taxpayer’s spouse or common-law partner was the annuitant; and
(b)an amount equal to the premium or part thereof, as the case may be, may be deducted in computing the income of the spouse or common-law partner for the year.
Marginal note:Where s. (8.3) does not apply
(8.7)Subsection 146(8.3) does not apply
(a)in respect of a taxpayer at any time during the year in which the taxpayer died;
(b)in respect of a taxpayer where either the taxpayer or the taxpayer’s spouse or common-law partner is a non-resident at the particular time referred to in that subsection;
(c)in respect of amounts paid out of or under a plan referred to in subsection 146(12) as an “amended plan” to which paragraph 146(12)(a) applied before May 26, 1976;
(d)to any payment that is received in full or partial commutation of a registered retirement income fund or a registered retirement savings plan and in respect of which a deduction was made under paragraph 60(l) if, where the deduction was in respect of the acquisition of an annuity, the terms of the annuity provide that it cannot be commuted, and it is not commuted, in whole or in part within 3 years after the acquisition; or
(e)in respect of an amount that is deemed by subsection 146(8.8) to have been received by an annuitant under a registered retirement savings plan immediately before the annuitant’s death.
Marginal note:Effect of death where person other than spouse becomes entitled
(8.8)Where the annuitant under a registered retirement savings plan (other than a plan that had matured before June 30, 1978) dies after June 29, 1978, the annuitant shall be deemed to have received, immediately before the annuitant’s death, an amount as a benefit out of or under a registered retirement savings plan equal to the amount, if any, by which
(a)the fair market value of all the property of the plan at the time of death
exceeds
(b)where the annuitant died after the maturity of the plan, the fair market value at the time of the death of the portion of the property described in paragraph 146(8.8)(a) that, as a consequence of the death, becomes receivable by a person who was the annuitant’s spouse or common-law partner immediately before the death, or would become so receivable should that person survive throughout all guaranteed terms contained in the plan.
Marginal note:Idem
(8.9)There may be deducted from the amount deemed by subsection 146(8.8) to have been received by an annuitant as a benefit out of or under a registered retirement savings plan an amount not exceeding the amount determined by the formula
A × [1 - ((B + C - D) / (B + C))]
where
(a)all refunds of premiums in respect of the plan,
(b)all tax-paid amounts in respect of the plan paid to individuals who, otherwise than because of subsection 146(8.1), received refunds of premiums in respect of the plan, and
(c)all amounts each of which is a tax-paid amount in respect of the plan paid to the legal representative of the annuitant under the plan, to the extent that the legal representative would have been entitled to designate that tax-paid amount under subsection 146(8.1) if tax-paid amounts were not excluded in determining refunds of premiums;
(a)the end of the first calendar year that begins after the death of the annuitant, and
(b)the time immediately after the last time that any refund of premiums in respect of the plan is paid out of or under the plan;
(a)the fair market value of the property of the plan at the time of the annuitant’s death, and
(b)the sum of the values of B and C in respect of the plan.
Marginal note:Amounts deemed receivable by spouse or common-law partner
(8.91)Where, as a consequence of the death of an annuitant after the maturity of the annuitant’s registered retirement savings plan, the annuitant’s legal representative has become entitled to receive amounts out of or under the plan for the benefit of the spouse or common-law partner of the deceased and the legal representative and the spouse or common-law partner file with the Minister a joint election in prescribed form,
(a)the spouse or common-law partner shall be deemed to have become the annuitant under the plan as a consequence of the annuitant’s death; and
(b)those amounts shall be deemed to be receivable by the spouse or common-law partner and, when paid, to be received by the spouse or common-law partner as a benefit under the plan, and not to be received by any other person.
Marginal note:Deduction for post-death reduction in value
(8.92)If the annuitant under a registered retirement savings plan dies before the maturity of the plan, there may be deducted in computing the annuitant’s income for the taxation year in which the annuitant dies an amount not exceeding the amount determined, after all amounts payable out of or under the plan have been paid, by the formula
A – B
where
(a)the amount deemed by subsection (8.8) to have been received by the annuitant as a benefit out of or under the plan,
(b)an amount (other than an amount described in paragraph (c)) received, after the death of the annuitant, by a taxpayer as a benefit out of or under the plan and included, because of subsection (8), in computing the taxpayer’s income, or
(c)a tax-paid amount in respect of the plan; and
Marginal note:Subsection (8.92) not applicable
(8.93)Except where the Minister has waived in writing the application of this subsection with respect to all or any portion of the amount determined in subsection (8.92) in respect of a registered retirement savings plan, that subsection does not apply if
(a)at any time after the death of the annuitant, a trust governed by the plan held a non-qualified investment; or
(b)the last payment out of or under the plan was made after the end of the year following the year in which the annuitant died.
Marginal note:Where disposition of property by trust
(9)Where in a taxation year a trust governed by a registered retirement savings plan
(a)disposes of property for a consideration less than the fair market value of the property at the time of the disposition, or for no consideration, or
(b)acquires property for a consideration greater than the fair market value of the property at the time of the acquisition,
the difference between the fair market value and the consideration, if any, shall be included in computing the income for the taxation year of the annuitant under the plan.
Marginal note:Property used as security for loan
(10)If at any time in a taxation year a trust governed by a registered retirement savings plan uses or permits to be used any property of the trust as security for a loan, the fair market value of the property at the time it commenced to be so used shall be included in computing the income for the year of the taxpayer who is the annuitant under the plan at that time.
Marginal note:Where tax payable
(10.1)Where in a taxation year a trust governed by a registered retirement savings plan holds a property that is a non-qualified investment,
(a)tax is payable under this Part by the trust on the amount that its taxable income for the year would be if it had no incomes or losses from sources other than non-qualified investments and no capital gains or losses other than from dispositions of non-qualified investments; and
(b)for the purposes of paragraph 146(10.1)(a),
(i)incomeincludes dividends described in section 83, and
(ii)paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.
(11) and (11.1)[Repealed, 2011, c. 24, s. 45]
Marginal note:Change in plan after registration
(12)Where, on any day after a retirement savings plan has been accepted by the Minister for registration for the purposes of this Act, the plan is revised or amended or a new plan is substituted for it, and the plan as revised or amended or the new plan, as the case may be (in this subsection referred to as the “amended plan”), does not comply with the requirements of this section for its acceptance by the Minister for registration for the purposes of this Act, subject to subsection 146(13.1), the following rules apply:
(a)the amended plan shall be deemed, for the purposes of this Act, not to be a registered retirement savings plan; and
(b)the taxpayer who was the annuitant under the plan before it became an amended plan shall, in computing the taxpayer’s income for the taxation year that includes that day, include as income received at that time an amount equal to the fair market value of all the property of the plan immediately before that time.
Marginal note:Idem
(13)For the purposes of subsection 146(12), an arrangement under which a right or obligation under a retirement savings plan is released or extinguished either wholly or in part and either in exchange or substitution for any right or obligation, or otherwise (other than an arrangement the sole object and legal effect of which is to revise or amend the plan) or under which payment of any amount by way of loan or otherwise is made on the security of a right under a retirement savings plan, shall be deemed to be a new plan substituted for that retirement savings plan.
(13.1)[Repealed, 2011, c. 24, s. 45]
(13.2) and (13.3)[Repealed, 2007, c. 29, s. 17]
Marginal note:Premiums paid in taxation year
(14)Where any amount has been paid in a taxation year as a premium under a retirement savings plan that was, at the end of that taxation year, a registered retirement savings plan, the amount so paid shall be deemed, for the purposes of this Act, to have been paid in that year as a premium under a registered retirement savings plan.
Marginal note:Plan not registered at end of year entered into
(15)Notwithstanding anything in this section, where an amount is received in a taxation year as a benefit under a registered retirement savings plan that was not, at the end of the year in which the plan was entered into, a registered retirement savings plan, such part, if any, of the amount so received as may be prescribed shall be deemed, for the purposes of this Act, to have been received in the taxation year otherwise than as a benefit or other payment under a registered retirement savings plan.
Marginal note:Transfer of funds
(16)Notwithstanding any other provision in this section, a registered retirement savings plan may at any time be revised or amended to provide for the payment or transfer before the maturity of the plan, on behalf of the annuitant under the plan (in this subsection referred to as the “transferor”), of any property thereunder by the issuer thereof
(a)to a registered pension plan for the benefit of the transferor or to a registered retirement savings plan or registered retirement income fund under which the transferor is the annuitant,
(a.1)to a licensed annuities provider to acquire an advanced life deferred annuity for the benefit of the transferor,
(a.2)to a FHSA for the benefit of the transferor, if subsection (8.3) would not apply to an amount in respect of the property in the case that the property was instead received by the transferor as a benefit out of or under the registered retirement savings plan, or
(b)to a registered retirement savings plan or registered retirement income fund under which the spouse or common-law partner or former spouse or common-law partner of the transferor is the annuitant, where the transferor and the transferor’s spouse or common-law partner or former spouse or common-law partner are living separate and apart and the payment or transfer is made under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the transferor and the transferor’s spouse or common-law partner or former spouse or common-law partner in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership,
and, where there has been such a payment or transfer of such property on behalf of the transferor before the maturity of the plan,
(c)the amount of the payment or transfer shall not, solely because of the payment or transfer, be included in computing the income of the transferor or the transferor’s spouse or common-law partner or former spouse or common-law partner,
(d)no deduction may be made under subsection (5), (5.1) or (8.2) or section 8, 60 or 146.6 in respect of the payment or transfer in computing the income of any taxpayer, and
(e)where the payment or transfer was made to a registered retirement savings plan, for the purposes of subsection 146(8.2), the amount of the payment or transfer shall be deemed not to be a premium paid to that plan by the taxpayer.
Marginal note:Credited or added amount deemed not received
(20)Where
(a)an amount is credited or added to a deposit with a depositary referred to in subparagraph (b)(iii) of the definitionretirement savings planin subsection 146(1) as interest or income in respect of the deposit,
(b)the deposit is a registered retirement savings plan at the time the amount is credited or added to the deposit, and
(c)during the calendar year in which the amount is credited or added or during the preceding calendar year, the annuitant under the plan was alive,
the amount shall be deemed not to be received by the annuitant or any other person solely because of the crediting or adding.
Marginal note:Specified pension plan
(21)Where
(a)an amount (other than an amount that is part of a series of periodic payments) is transferred directly from an individual’s account under a specified pension plan
(i)to a registered retirement savings plan or registered retirement income fund under which the individual, or a spouse or common-law partner or former spouse or common-law partner of the individual, is the annuitant,
(ii)to acquire from a licensed annuities provider an annuity that would be described in subparagraph 60(l)(ii) if the individual, or a spouse or common-law partner or former spouse or common-law partner of the individual, were the taxpayer referred to in that subparagraph and if that subparagraph were read without reference to clause 60(l)(ii)(B), or
(iii)to an account under the plan of a spouse or common-law partner or former spouse or common-law partner of the individual, and
(b)if the transfer is in respect of a spouse or common-law partner or former spouse or common-law partner of the individual,
(i)the individual and the spouse or common-law partner or former spouse or common-law partner are living separate and apart and the transfer is made under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership, or
(ii)the amount is transferred as a consequence of the individual’s death,
the following rules apply:
(c)the amount shall not, solely because of the transfer, be included because of subparagraph 56(1)(a)(i) in computing the income of a taxpayer, and
(d)no deduction may be made under any provision of this Act in respect of the transfer in computing the income of a taxpayer.
Marginal note:Specified pension plan — contribution
(21.1)For the purposes of this section, paragraphs 18(11)(b), 60(j), (j.1) and (l), 74.5(12)(a), 146.01(3)(a) and 146.02(3)(a) and Parts X.1 and X.5, and for the purposes of section 214.1 of theIncome Tax Regulations, a contribution made by an individual to an account of the individual, or of the individual’s spouse or common-law partner, under a specified pension plan is deemed to be a premium paid by the individual to a registered retirement savings plan under which the individual, or the individual’s spouse or common-law partner, as the case may be, is the annuitant.
Marginal note:Specified pension plan — account
(21.2)For the purposes of paragraph (8.2)(b), subsection (8.21), paragraphs (16)(a) and (b) and 18(1)(u), subparagraph (a)(i) of the definitionexcluded right or interestin subsection 128.1(10), paragraph (b) of the definitionexcluded premiumin subsection 146.01(1), paragraph (c) of the definitionexcluded premiumin subsection 146.02(1), subsections 146.3(14) and 147(19), section 147.3 and paragraphs 147.5(21)(c) and 212(1)(j.1) and (m) and for the purposes of any regulations made under subsection 147.1(18), an individual’s account under a specified pension plan is deemed to be a registered retirement savings plan under which the individual is the annuitant.
Marginal note:Specified pension plan — payment
(21.3)For the purposes of subsections (8.3) to (8.7), a payment received by an individual from a specified pension plan is deemed to be a payment received by the individual from a registered retirement savings plan.
Marginal note:Deemed payment of RRSP premiums
(22)If the Minister so directs,
(a)except for the purposes of subparagraphs (5)(a)(iv.1) and (5.1)(a)(iv), an amount paid by an individual in a taxation year (other than an amount paid in the first 60 days of the year) as a premium is deemed to have been paid at the beginning of the year and not at the time it was actually paid;
(b)all or part of the amount may be designated in writing by the individual for the purpose of paragraph 60(j), (j.1) or (l) or subsection 146.01(3) or 146.02(3); and
(c)the designation is deemed to have been made in the individual’s return of income for the preceding taxation year or in a prescribed form filed with that return, as the case may be.
Marginal note:Definitions
146.01(1)In this section,
annuitanthas the meaning assigned by subsection 146(1); (rentier)
benefithas the meaning assigned by subsection 146(1); (prestation)
completion date, in respect of an amount received by an individual, is
(a)where the amount was received before March 2, 1993, October 1, 1993,
(b)where the amount was received after March 1, 1993 and before March 2, 1994, October 1, 1994, and
(c)in any other case, October 1 of the calendar year following the calendar year in which the amount was received; (date de clôture)
designated withdrawalof an individual is an amount received by the individual, as a benefit out of or under a registered retirement savings plan, pursuant to the individual’s written request in the prescribed form referred to in paragraph (a) of the definitioneligible amount(as that definition read in its application to amounts received before 1999), paragraph (a) of the definitionregular eligible amountor paragraph (a) of the definitionsupplemental eligible amount; (retrait déterminé)
eligible amountof an individual is a regular eligible amount or supplemental eligible amount of the individual; (montant admissible)
excluded premiumin respect of an individual means a premium under a registered retirement savings plan where the premium
(a)was designated by the individual for the purposes of paragraph 60(j), 60(j.1), 60(j.2) or 60(l),
(b)was an amount transferred directly from a registered retirement savings plan, registered pension plan, registered retirement income fund or deferred profit sharing plan,
(c)was deductible under subsection 146(6.1) in computing the individual’s income for any taxation year, or
(d)was deducted in computing the individual’s income for the 1991 taxation year; (prime exclue)
excluded withdrawalof an individual means
(a)an eligible amount received by the individual,
(b)a particular amount (other than an eligible amount) received while the individual was resident in Canada and in a calendar year if
(i)the particular amount would be an eligible amount of the individual if the definitionregular eligible amountwere read without reference to paragraphs (c) and (g) of that definition and the definitionsupplemental eligible amountwere read without reference to paragraphs (d) and (f) of that definition,
(ii)a payment (other than an excluded premium) equal to the particular amount is made by the individual under a retirement saving plan that is, at the end of the taxation year of the payment, a registered retirement savings plan under which the individual is the annuitant,
(iii)the payment is made before the particular time that is
(A)if the individual was not resident in Canada at the time the individual filed a return of income for the taxation year in which the particular amount was received, the earlier of
(I)the end of the following calendar year, and
(II)the time at which the individual filed the return,
(B)where clause (A) does not apply and the particular amount would, but for subclause (2)(c)(ii)(A)(II), be an eligible amount, the end of the second following calendar year, and
(C)in any other case, the end of the following calendar year, and
(iv)either
(A)if the particular time is before 2000, the payment is made, as a repayment of the particular amount, to the issuer of the registered retirement savings plan from which the particular amount was received, no other payment is made as a repayment of the particular amount and that issuer is notified of the payment in prescribed form submitted to the issuer at the time the payment is made, or
(B)the payment is made after 1999 and before the particular time and the payment (and no other payment) is designated under this clause as a repayment of the particular amount in prescribed form filed with the Minister on or before the particular time (or before such later time as is acceptable to the Minister),
(c)an amount (other than an eligible amount) that is received in a calendar year before 1999 and that would be an eligible amount of the individual if the definitioneligible amount, as it applied to amounts received before 1999, were read without reference to paragraphs (c) and (e) of that definition, where the individual
(i)died before the end of the following calendar year, and
(ii)was resident in Canada throughout the period that began immediately after the amount was received and ended at the time of the death, or
(d)a particular amount (other than an eligible amount) received while the individual was resident in Canada and in a calendar year if
(i)the particular amount would be a regular eligible amount if subsection (2.1) were read without reference to its subparagraph (a)(iii),
(ii)a payment (other than an excluded premium) equal to the particular amount is made by the individual under a retirement saving plan that is, at the end of the taxation year of the payment, a registered retirement savings plan under which the individual is the annuitant, and
(iii)the payment is made before the end of the second calendar year after the calendar year that includes the particular time referred to in subsection (2.1); (retrait exclu)
HBP balanceof an individual at any time means the amount, if any, by which the total of all eligible amounts received by the individual at or before that time exceeds the total of
(a)all amounts designated under subsection (3) by the individual for taxation years that ended before that time, and
(b)all amounts each of which is included under subsection (4) or (5) in computing the individual’s income for a taxation year that ended before that time; (solde RAP)
issuerhas the meaning assigned by subsection 146(1); (émetteur)
participation periodof an individual means each period
(a)that begins at the beginning of a calendar year in which the individual receives an eligible amount, and
(b)that ends immediately before the beginning of the first subsequent calendar year at the beginning of which the individual’s HBP balance is nil; (période de participation)
premiumhas the meaning assigned by subsection 146(1); (prime)
qualifying homemeans
(a)a housing unit located in Canada, or
(b)a share of the capital stock of a cooperative housing corporation, the holder of which is entitled to possession of a housing unit located in Canada,
except that, where the context so requires, a reference to a qualifying home that is a share described in paragraph (b) means the housing unit to which the share described in that paragraph relates; (habitation admissible)
quarter[Repealed, 2013, c. 34, s. 297]
regular eligible amountof an individual means an amount received at a particular time by the individual as a benefit out of or under a registered retirement savings plan if
(a)the amount is received pursuant to the individual’s written request in a prescribed form in which the individual sets out the location of a qualifying home that the individual has begun, or intends not later than one year after its acquisition by the individual to begin, using as a principal place of residence,
(b)the individual entered into an agreement in writing before the particular time for the acquisition of it or with respect to its construction,
(c)the individual
(i)acquires the qualifying home (or a replacement property for the qualifying home) before the completion date in respect of the amount, or
(ii)dies before the end of the calendar year that includes the completion date in respect of the amount,
(d)neither the individual nor the individual’s spouse or common-law partner acquired the qualifying home more than 30 days before the particular time,
(e)the individual did not have an owner-occupied home in the period
(i)that began at the beginning of the fourth preceding calendar year that ended before the particular time, and
(ii)that ended on the 31st day before the particular time,
(f)the individual’s spouse or common-law partner did not, in the period referred to in paragraph (e), have an owner-occupied home
(i)that was inhabited by the individual during the spouse’s or common-law partner’s marriage or common-law partnership to the individual, or
(ii)that was a share of the capital stock of a cooperative housing corporation that relates to a housing unit inhabited by the individual during the spouse’s or common-law partner’s marriage or common-law partnership to the individual,
(g)the individual
(i)acquired the qualifying home before the particular time and is resident in Canada at the particular time, or
(ii)is resident in Canada throughout the period that begins at the particular time and ends at the earlier of the time of the individual’s death and the earliest time at which the individual acquires the qualifying home or a replacement property for it,
(h)the total of the amount and all other eligible amounts received by the individual in the calendar year that includes the particular time does not exceed $35,000, and
(i)the individual’s HBP balance at the beginning of the calendar year that includes the particular time is nil; (montant admissible principal)
replacement propertyfor a particular qualifying home in respect of an individual, or of a specified disabled person in respect of the individual, means another qualifying home that
(a)the individual or the specified disabled person agrees to acquire, or begins the construction of, at a particular time that is after the latest time that the individual made a request described in the definitiondesignated withdrawalin respect of the particular qualifying home,
(b)at the particular time, the individual intends to be used by the individual or the specified disabled person as a principal place of residence not later than one year after its acquisition, and
(c)none of the individual, the individual’s spouse or common-law partner, the specified disabled person or that person’s spouse or common-law partner had acquired before the particular time; (bien de remplacement)
specified disabled person, in respect of an individual at any time, means a person who
(a)is the individual or is related at that time to the individual, and
(b)would be entitled to a deduction under subsection 118.3(1) in computing tax payable under this Part for the person’s taxation year that includes that time if that subsection were read without reference to paragraph (c) of that subsection; (personne handicapée déterminée)
supplemental eligible amountof an individual means an amount received at a particular time by the individual as a benefit out of or under a registered retirement savings plan if
(a)the amount is received pursuant to the individual’s written request in a prescribed form identifying a specified disabled person in respect of the individual and setting out the location of a qualifying home
(i)that has begun to be used by that person as a principal place of residence, or
(ii)that the individual intends to be used by that person as a principal place of residence not later than one year after its first acquisition after the particular time,
(b)the purpose of receiving the amount is to enable the specified disabled person to live
(i)in a dwelling that is more accessible by that person or in which that person is more mobile or functional, or
(ii)in an environment better suited to the personal needs and care of that person,
(c)the individual or the specified disabled person entered into an agreement in writing before the particular time for the acquisition of the qualifying home or with respect to its construction,
(d)either
(i)the individual or the specified disabled person acquires the qualifying home (or a replacement property for it) after 1998 and before the completion date in respect of the amount, or
(ii)the individual dies before the end of the calendar year that includes the completion date in respect of the amount,
(e)none of the individual, the spouse or common-law partner of the individual, the specified disabled person or the spouse or common-law partner of that person acquired the qualifying home more than 30 days before the particular time,
(f)either
(i)the individual or the specified disabled person acquired the qualifying home before the particular time and the individual is resident in Canada at the particular time, or
(ii)the individual is resident in Canada throughout the period that begins at the particular time and ends at the earlier of the time of the individual’s death and the earliest time at which
(A)the individual acquires the qualifying home or a replacement property for it, or
(B)the specified disabled person acquires the qualifying home or a replacement property for it,
(g)the total of the amount and all other eligible amounts received by the individual in the calendar year that includes the particular time does not exceed $35,000, and
(h)the individual’s HBP balance at the beginning of the calendar year that includes the particular time is nil. (montant admissible supplémentaire)
Marginal note:Special Rules
(2)For the purposes of this section,
(a)an individual shall be considered to have acquired a qualifying home if the individual acquired it jointly with one or more other persons;
(a.1)an individual shall be considered to have an owner-occupied home at any time where, at that time, the individual owns, whether jointly with another person or otherwise, a housing unit or a share of the capital stock of a cooperative housing corporation and
(i)the housing unit is inhabited by the individual as the individual’s principal place of residence at that time, or
(ii)the share was acquired for the purpose of acquiring a right to possess a housing unit owned by the corporation and that unit is inhabited by the individual as the individual’s principal place of residence at that time;
(b)where an individual agrees to acquire a condominium unit, the individual shall be deemed to have acquired it on the day the individual is entitled to immediate vacant possession of it;
(c)except for the purposes of subparagraph (g)(ii) of the definitionregular eligible amountand subparagraph (f)(ii) of the definitionsupplemental eligible amount, an individual or a specified disabled person in respect of the individual is deemed to have acquired, before the completion date in respect of a designated withdrawal received by the individual, the qualifying home in respect of which the designated withdrawal was received if
(i)neither the qualifying home nor a replacement property for it was acquired by the individual or the specified disabled person before that completion date, and
(ii)either
(A)the individual or the specified disabled person
(I)is obliged under the terms of a written agreement in effect on that completion date to acquire the qualifying home (or a replacement property for it) on or after that date, and
(II)acquires the qualifying home or a replacement property for it before the day that is one year after that completion date, or
(B)the individual or the specified disabled person made payments, the total of which equalled or exceeded the total of all designated withdrawals that were received by the individual in respect of the qualifying home,
(I)to persons with whom the individual was dealing at arm’s length,
(II)in respect of the construction of the qualifying home or a replacement property for it, and
(III)in the period that begins at the time the individual first received a designated withdrawal in respect of the qualifying home and that ends before that completion date; and
(d)an amount received by an individual in a particular calendar year is deemed to have been received by the individual at the end of the preceding calendar year and not at any other time if
(i)the amount is received in January of the particular year (or at such later time as is acceptable to the Minister),
(ii)the amount would not be an eligible amount if this section were read without reference to this paragraph, and
(iii)the amount would be an eligible amount if the definitionregular eligible amountin subsection (1) were read without reference to paragraph (i) of that definition and the definitionsupplemental eligible amountwere read without reference to paragraph (h) of that definition.
(e) and (f)[Repealed, 1999, c. 22, s. 60(5)]
Marginal note:Marriage or common-law partnership
(2.1)Notwithstanding paragraph (2)(a.1), for the purposes of the definitionregular eligible amount,
(a)an individual, and a spouse or common-law partner of the individual, are deemed not to have an owner-occupied home in a period ending before a particular time referred to in that definition if
(i)at the particular time, the individual
(A)is living separate and apart from the individual’s spouse or common-law partner because of a breakdown of their marriage or common-law partnership,
(B)has been living separate and apart from the individual’s spouse or common-law partner for a period of at least 90 days, and
(C)began living separate and apart from the individual’s spouse or common-law partner in the calendar year that includes the particular time or any time in the four preceding calendar years,
(ii)in the absence of this subsection, the individual would not be precluded from having a regular eligible amount because of the application of paragraph (f) of that definition in respect of a spouse or common-law partner (other than the spouse or common-law partner referred to in clauses (i)(A) to (C)), and
(iii)where the individual has an owner-occupied home at the particular time,
(A)the home is not the qualifying home referred to in that definition and the individual disposes of the home no later than the end of the second calendar year after the calendar year that includes the particular time, or
(B)the individual acquires the interest, or for civil law the right, of the spouse or common-law partner in the home; and
(b)if an individual to whom paragraph (a) applies has an owner-occupied home at the particular time referred to in that paragraph and the individual acquires the interest, or for civil law the right, of a spouse or common-law partner in the home, the individual is deemed for the purposes of paragraphs (c) and (d) of that definition to have acquired a qualifying home on the date that the individual acquired the interest or the right.
Marginal note:Repayment of eligible amount
(3)An individual may designate a single amount for a taxation year in a prescribed form filed with the individual’s return of income for the year if the amount does not exceed the lesser of
(a)the total of all amounts (other than excluded premiums, repayments to which paragraph (b) or (d) of the definitionexcluded withdrawalin subsection (1) applies and amounts paid by the individual in the first 60 days of the year that can reasonably be considered to have been deducted in computing the individual’s income, or designated under this subsection, for the preceding taxation year) paid by the individual in the year or within 60 days after the end of the year under a retirement savings plan that is at the end of the year or the following taxation year a registered retirement savings plan under which the individual is the annuitant, and
(b)the amount, if any, by which
(i)the total of all eligible amounts received by the individual before the end of the year
exceeds the total of
(ii)all amounts designated by the individual under this subsection for preceding taxation years, and
(iii)all amounts each of which is an amount included in computing the income of the individual under subsection 146.01(4) or 146.01(5) for a preceding taxation year.
Marginal note:Portion of eligible amount not repaid
(4)There shall be included in computing an individual’s income for a particular taxation year included in a particular participation period of the individual the amount determined by the formula
[(A - B - C) / (15 - D)] - E
where
(a)where
(i)the individual died or ceased to be resident in Canada in the particular year, or
(ii)the completion date in respect of an eligible amount received by the individual was in the particular year
nil and
(b)in any other case, the total of all eligible amounts received by the individual in preceding taxation years included in the particular period,
(a)nil, if the completion date in respect of an eligible amount received by the individual was in the preceding taxation year, and
(b)in any other case, the total of all amounts each of which is designated under subsection (3) by the individual for a preceding taxation year included in the particular period;
(a)where the completion date in respect of an eligible amount received by the individual was before 1995, January 1, 1995, and
(b)in any other case, January 1 of the first calendar year beginning after the completion date in respect of an eligible amount received by the individual
and ending at the beginning of the particular year, and
(a)if the completion date in respect of an eligible amount received by the individual was in the preceding taxation year, the total of all amounts each of which is designated under subsection (3) by the individual for the particular year or any preceding taxation year included in the particular period, and
(b)in any other case, the amount designated under subsection (3) by the individual for the particular year.
Marginal note:Where individual becomes a non-resident
(5)Where at any time in a taxation year an individual ceases to be resident in Canada, there shall be included in computing the income of the individual for the period in the year during which the individual was resident in Canada the amount, if any, by which
(a)the total of all amounts each of which is an eligible amount received by the individual in the year or a preceding taxation year
exceeds the total of
(b)all amounts designated under subsection 146.01(3) by the individual in respect of amounts paid not later than 60 days after that time and before the individual files a return of income for the year, and
(c)all amounts included under subsection (4) or this subsection in computing the individual’s income for preceding taxation years.
Marginal note:Death of individual
(6)If an individual dies at any time in a taxation year, there shall be included in computing the individual’s income for the year the amount, if any, by which
(a)the individual’s HBP balance immediately before that time
exceeds
(b)the amount designated under subsection (3) by the individual for the year.
Marginal note:Exception
(7)If a spouse or common-law partner of an individual was resident in Canada immediately before the individual’s death at a particular time in a taxation year and the spouse or common-law partner and the individual’s legal representatives jointly so elect in writing in the individual’s return of income for the year,
(a)subsection (6) does not apply to the individual;
(b)the spouse or common-law partner is deemed to have received a particular eligible amount at the particular time equal to the amount that, but for this subsection, would be determined under subsection (6) in respect of the individual;
(c)for the purposes of subsection (4) and paragraph (d), the completion date in respect of the particular amount is deemed to be
(i)if the spouse or common-law partner received an eligible amount before the death (other than an eligible amount received in a participation period of the spouse or common-law partner that ended before the beginning of the year), the completion date in respect of that amount, and
(ii)in any other case, the completion date in respect of the last eligible amount received by the individual; and
(d)for the purpose of subsection (4), the completion date in respect of each eligible amount received by the spouse or common-law partner, after the death and before the end of the spouse’s or common-law partner’s participation period that includes the time of the death, is deemed to be the completion date in respect of the particular amount.
(8)[Repealed, 2013, c. 34, s. 297]
(9) to (13)[Repealed, 1995, c. 3, s. 44(13)]
Marginal note:Definitions
146.02(1)The definitions in this subsection apply in this section.
annuitanthas the meaning assigned by subsection 146(1). (rentier)
benefithas the meaning assigned by subsection 146(1). (prestation)
eligible amountof an individual means a particular amount received at a particular time in a calendar year by the individual as a benefit out of or under a registered retirement savings plan if
(a)the particular amount is received after 1998 pursuant to the individual’s written request in a prescribed form;
(b)in respect of the particular amount, the individual designates in the form a person (in this definition referred to as the “designated person”) who is the individual or the individual’s spouse or common-law partner;
(c)the total of the particular amount and all other eligible amounts received by the individual at or before the particular time and in the year does not exceed $10,000;
(d)the total of the particular amount and all other eligible amounts received by the individual at or before the particular time (other than amounts received in participation periods of the individual that ended before the year) does not exceed $20,000;
(e)the individual did not receive an eligible amount at or before the particular time in respect of which someone other than the designated person was designated (other than an amount received in a participation period of the individual that ended before the year);
(f)the designated person
(i)is enrolled at the particular time as a full-time student in a qualifying educational program, or
(ii)has received written notification before the particular time that the designated person is absolutely or contingently entitled to enrol before March of the following year as a full-time student in a qualifying educational program;
(g)the individual is resident in Canada throughout the period that begins at the particular time and ends immediately before the earlier of
(i)the beginning of the following year, and
(ii)the time of the individual’s death;
(h)except where the individual dies after the particular time and before April of the following year, the designated person is enrolled as a full-time student in a qualifying educational program after the particular time and before March of the following year and
(i)the designated person completes the program before April of the following year,
(ii)the designated person does not withdraw from the program before April of the following year, or
(iii)less than 75% of the tuition paid, after the beginning of the year and before April of the following year, in respect of the designated person and the program is refundable; and
(i)if an eligible amount was received by the individual before the year, the particular time is neither
(i)in the individual’s repayment period for the individual’s participation period that includes the particular time, nor
(ii)after January (or a later month where the Minister so permits) of the fifth calendar year of that participation period. (montant admissible)
excluded premiumof an individual means a premium that
(a)was designated by the individual for the purpose of paragraph 60(j), (j.1) or (l) or subsection 146.01(3);
(b)was a repayment to which paragraph (b) or (d) of the definitionexcluded withdrawalin subsection 146.01(1) applies;
(c)was an amount transferred directly from a registered retirement savings plan, registered pension plan, registered retirement income fund or deferred profit sharing plan; or
(d)was deductible under subsection 146(6.1) in computing the individual’s income for any taxation year. (prime exclue)
excluded withdrawalof an individual means
(a)an eligible amount received by the individual; or
(b)a particular amount (other than an eligible amount) received while the individual was resident in Canada and in a calendar year if
(i)the particular amount would be an eligible amount of the individual if the definitioneligible amountwere read without reference to paragraphs (g) and (h) of that definition,
(ii)a payment (other than an excluded premium) equal to the particular amount is paid by the individual under a retirement savings plan that is, at the end of the taxation year of payment, a registered retirement savings plan under which the individual is the annuitant,
(iii)the payment is made before the particular time that is,
(A)if the individual was not resident in Canada at the time the individual filed a return of income for the taxation year in which the particular amount was received, the earlier of
(I)the end of the following calendar year, and
(II)the time at which the individual filed the return, and
(B)in any other case, the end of the following calendar year, and
(iv)the payment (and no other payment) is designated under this subparagraph as a repayment of the particular amount in prescribed form filed with the Minister on or before the particular time (or before such later time as is acceptable to the Minister). (retrait exclu)
full-time studentin a taxation year includes an individual to whom subsection 118.6(3) applies for the purpose of computing tax payable under this Part for the year or the following taxation year. (étudiant à temps plein)
LLP balanceof an individual at any time means the amount, if any, by which the total of all eligible amounts received by the individual at or before that time exceeds the total of
(a)all amounts designated under subsection (3) by the individual for taxation years that ended before that time, and
(b)all amounts each of which is included under subsection (4) or (5) in computing the individual’s income for a taxation year that ended before that time. (solde REP)
participation periodof an individual means each period
(a)that begins at the beginning of a calendar year
(i)in which the individual receives an eligible amount, and
(ii)at the beginning of which the individual’s LLP balance is nil; and
(b)that ends immediately before the beginning of the first subsequent calendar year at the beginning of which the individual’s LLP balance is nil. (période de participation)
premiumhas the meaning assigned by subsection 146(1). (prime)
qualifying educational programmeans a program at a designated educational institution, as defined in subsection 118.6(1), of not less than three consecutive months duration that requires that each student taking the program spend not less than ten hours per week on courses or work in the program and that is
(a)of a technical or vocational nature designed to furnish a person with skills for, or improve a person’s skills in, an occupation, if the program is at an institution described in subparagraph (a)(ii) of that definition; and
(b)at a post-secondary school level, in any other case. (programme de formation admissible)
repayment periodof an individual for a participation period of the individual in respect of a person designated under paragraph (b) of the definitioneligible amountmeans the period, if any, within the participation period
(a)that begins
(i)at the beginning of the third calendar year within the participation period if, in each of the second and third calendar years within the participation period,
(A)for calendar years before 2017, the person would not be entitled to claim an amount under subsection 118.6(2) (as it read in the year) in respect of at least three months in the year, if that subsection were read without reference to paragraph (b) of the description of B in that subsection, and
(B)for calendar years after 2016, the person would not be aqualifying student(as defined in subsection 118.6(1)) in respect of at least three months in the year, if that definition were read without reference to its subparagraph (a)(ii),
(ii)at the beginning of the fourth calendar year within the participation period if, in each of the third and fourth calendar years within the participation period,
(A)for calendar years before 2017, the person would not be entitled to claim an amount under subsection 118.6(2) (as it read in the year) in respect of at least three months in the year, if that subsection were read without reference to paragraph (b) of the description of B in that subsection, and
(B)for calendar years after 2016, the person would not be aqualifying student(as defined in subsection 118.6(1)) in respect of at least three months in the year, if that definition were read without reference to its subparagraph (a)(ii),
(iii)at the beginning of the fifth calendar year within the participation period if, in each of the fourth and fifth calendar years within the participation period,
(A)for calendar years before 2017, the person would not be entitled to claim an amount under subsection 118.6(2) (as it read in the year) in respect of at least three months in the year, if that subsection were read without reference to paragraph (b) of the description of B in that subsection, and
(B)for calendar years after 2016, the person would not be aqualifying student(as defined in subsection 118.6(1)) in respect of at least three months in the year, if that definition were read without reference to its subparagraph (a)(ii), and
(iv)in any other case, at the beginning of the sixth calendar year within the participation period; and
(b)that ends at the end of the participation period. (période de remboursement)
Marginal note:Rule of application
(2)For the purpose of the definitioneligible amountin subsection (1), a particular person is deemed to be the only person in respect of whom a particular amount was designated under paragraph (b) of that definition if
(a)an individual received the particular amount;
(b)the individual files a prescribed form with the Minister in which the particular person is specified in connection with the receipt of the particular amount;
(c)the particular amount would be an eligible amount of the individual if
(i)that definition were read without reference to paragraphs (b) and (e) of that definition, and
(ii)each reference in the portion of that definition after paragraph (d) to “designated person” were read as “individual” or “individual’s spouse or common-law partner”; and
(d)the Minister so permits.
Marginal note:Repayment of eligible amount
(3)An individual may designate a single amount for a taxation year in prescribed form filed with the individual’s return of income for the year if the amount does not exceed the lesser of
(a)the total of all amounts (other than excluded premiums, repayments to which paragraph (b) of the definitionexcluded withdrawalin subsection (1) applies and amounts paid by the individual in the first 60 days of the year that can reasonably be considered to have been deducted in computing the individual’s income, or designated under this subsection, for the preceding taxation year) paid by the individual in the year or within 60 days after the end of the year under a retirement savings plan that is at the end of the year or the following taxation year a registered retirement savings plan under which the individual is the annuitant, and
(b)the individual’s LLP balance at the end of the year.
Marginal note:If portion of eligible amount not repaid
(4)There shall be included in computing an individual’s income for a particular taxation year that begins after 2000 the amount determined by the formula
[(A - B - C)/(10 - D)] - E
where
(a)nil, if
(i)the individual died or ceased to be resident in Canada in the particular year, or
(ii)the beginning of the particular year is not included in a repayment period of the individual, and
(b)in any other case, the total of all eligible amounts received by the individual in preceding taxation years (other than taxation years in participation periods of the individual that ended before the particular year);
(a)nil, if the particular year is the first taxation year in a repayment period of the individual, and
(b)in any other case, the total of all amounts designated under subsection (3) by the individual for preceding taxation years (other than taxation years in participation periods of the individual that ended before the particular year);
(a)begins at the beginning of the individual’s last repayment period that began at or before the beginning of the particular year, and
(b)ends at the beginning of the particular year; and
(a)if the particular year is the first taxation year within a repayment period of the individual, the total of the amount designated under subsection (3) by the individual for the particular year and all amounts so designated for preceding taxation years (other than taxation years in participation periods of the individual that ended before the particular year), and
(b)in any other case, the amount designated under subsection (3) by the individual for the particular year.
Marginal note:Ceasing residence in Canada
(5)If at any time in a taxation year an individual ceases to be resident in Canada, there shall be included in computing the individual’s income for the period in the year during which the individual was resident in Canada the amount, if any, by which
(a)the total of all amounts each of which is an eligible amount received by the individual in the year or a preceding taxation year
exceeds the total of
(b)all amounts designated under subsection (3) by the individual in respect of amounts paid not later than 60 days after that time and before the individual files a return of income for the year, and
(c)all amounts included under subsection (4) or this subsection in computing the individual’s income for preceding taxation years.
Marginal note:Death of individual
(6)If an individual dies at any time in a taxation year, there shall be included in computing the individual’s income for the year the amount, if any, by which
(a)the individual’s LLP balance immediately before that time
exceeds
(b)the amount designated under subsection (3) by the individual for the year.
Marginal note:Exception
(7)If a spouse or common-law partner of an individual was resident in Canada immediately before the individual’s death at a particular time in a taxation year and the spouse or common-law partner and the individual’s legal representatives jointly so elect in writing in the individual’s return of income for the year,
(a)subsection (6) does not apply to the individual;
(b)the spouse or common-law partner is deemed to have received a particular eligible amount at the particular time equal to the amount that, but for this subsection, would be determined under subsection (6) in respect of the individual;
(c)subject to paragraph (d), for the purpose of applying this section after the particular time, the spouse or common-law partner is deemed to be the person designated under paragraph (b) of the definitioneligible amountin subsection (1) in respect of the particular amount; and
(d)where the spouse or common-law partner received an eligible amount before the particular time in the spouse’s or common-law partner’s participation period that included the particular time and the particular individual designated under paragraph (b) of the definitioneligible amountin subsection (1) in respect of that eligible amount was not the spouse or common-law partner, for the purpose of applying this section after the particular time the particular individual is deemed to be the person designated under that paragraph in respect of the particular amount.
Marginal note:Definitions
146.1(1)In this section,
accumulated income paymentunder an education savings plan means any amount paid out of the plan, other than a payment described in any of paragraphs (a) and (c) to (e) of the definitiontrust, to the extent that the amount so paid exceeds the fair market value of any consideration given to the plan for the payment of the amount; (paiement de revenu accumulé)
beneficiary, in respect of an education savings plan, means a person, designated by a subscriber, to whom or on whose behalf an educational assistance payment under the plan is agreed to be paid if the person qualifies under the plan; (bénéficiaire)
contributionto an education savings plan does not include an amount paid into the plan under or because of
(a)theCanada Education Savings Actor a designated provincial program, or
(b)any other program that has a similar purpose to a designated provincial program and that is funded, directly or indirectly, by a province (other than an amount paid into the plan by a public primary caregiver in its capacity as subscriber under the plan); (cotisation)
designated provincial programmeans
(a)a program administered pursuant to an agreement entered into under section 12 of theCanada Education Savings Act, or
(b)a program established under the laws of a province to encourage the financing of children’s post-secondary education through savings in registered education savings plans; (programme provincial désigné)
educational assistance paymentmeans any amount, other than a refund of payments, paid out of an education savings plan to or for an individual to assist the individual to further the individual’s education at a post-secondary school level; (paiement d’aide aux études)
education savings planmeans an arrangement entered into between
(a)any of the following, namely,
(i)an individual (other than a trust),
(ii)an individual (other than a trust) and the spouse or common-law partner of the individual, and
(iii)a public primary caregiver of a beneficiary, and
(b)a person (in this definition referred to as the “promoter”)
under which the promoter agrees to pay or to cause to be paid educational assistance payments to or for one or more beneficiaries; (régime d’épargne-études)
post-secondary educational institutionmeans
(a)an educational institution in Canada that is described in paragraph (a) of the definitiondesignated educational institutionin subsection 118.6(1), or
(b)an educational institution outside Canada that provides courses at a post-secondary school level and that is
(i)a university, college or other educational institution at which a beneficiary was enrolled in a course of not less than 13 consecutive weeks, or
(ii)a university at which a beneficiary was enrolled on a full-time basis in a course of not less than three consecutive weeks; (établissement d’enseignement postsecondaire)
post-secondary school levelincludes a program of courses, at an institution described in subparagraph (a)(ii) of the definitiondesignated educational institutionin subsection 118.6(1), of a technical or vocational nature designed to furnish a person with skills for, or improve a person’s skills in, an occupation; (niveau postsecondaire)
pre-1972 income[Repealed, 1998, c. 19, s. 38(1)]
promoter, of an arrangement, means the person described as the promoter in the definitioneducation savings plan; (promoteur)
public primary caregiver, of a beneficiary under an education savings plan in respect of whom a special allowance is payable under theChildren’s Special Allowances Act, means the department, agency or institution that maintains the beneficiary or the public trustee or public curator of the province in which the beneficiary resides; (responsable public)
qualified investmentfor a trust governed by a registered education savings plan means
(a)an investment that would be described by any of paragraphs (a) to (d), (f) and (g) of the definitionqualified investmentin section 204 if the reference in that definition to “a trust governed by a deferred profit sharing plan or revoked plan” were read as a reference to “a trust governed by a registered education savings plan” and if that definition were read without reference to the words “with the exception of excluded property in relation to the trust”,
(b)[Repealed, 2007, c. 29, s. 18]
(c)a contract for an annuity issued by a licensed annuities provider where
(i)the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract, and
(ii)the holder of the contract has a right to surrender the contract at any time for an amount that would, if reasonable sales and administration charges were ignored, approximate the value of funds that could otherwise be applied to fund future periodic payments under the contract,
(d)an investment that was acquired by the trust before October 28, 1998, and
(e)a prescribed investment; (placement admissible)
qualifying educational programmeans a program at a post-secondary school level of not less than three consecutive weeks duration that requires that each student taking the program spend not less than ten hours per week on courses or work in the program; (programme de formation admissible)
refund of paymentsat any time under a particular registered education savings plan means
(a)a refund at that time of a contribution that had been made at a previous time, if the contribution was made
(i)otherwise than by way of a transfer from another registered education savings plan, and
(ii)into the particular plan by or on behalf of a subscriber under the particular plan, or
(b)a refund at that time of an amount that was paid at a previous time into the particular plan by way of a transfer from another registered education savings plan, where the amount would have been a refund of payments under the other plan if it had been paid at the previous time directly to a subscriber under the other plan; (remboursement de paiements)
registered education savings planorRESPmeans
(a)an education savings plan registered for the purposes of this Act, or
(b)a registered education savings plan as it is amended from time to time
but, except for the purposes of subsections 146.1(7) and 146.1(7.1) and Part X.4, a plan ceases to be a registered education savings plan immediately after the day as of which its registration is revoked under subsection 146.1(13); (régime enregistré d’épargne-études)
RESP annual limit[Repealed, 2007, c. 29, s. 18]
specified educational programmeans a program at a post-secondary school level of not less than three consecutive weeks duration that requires each student taking the program to spend not less than 12 hours per month on courses in the program; (programme de formation déterminé)
specified planmeans an education savings plan
(a)that does not allow more than one beneficiary under the plan at any one time,
(b)under which the beneficiary is an individual in respect of whom paragraphs 118.3(1)(a) to (b) apply for the beneficiary’s taxation year that ends in the 31st year following the year in which the plan was entered into, and
(c)that provides that, at all times after the end of the 35th year following the year in which the plan was entered into, no other individual may be designated as a beneficiary under the plan; (régime déterminé)
subscriberunder an education savings plan at any time means
(a)each individual or the public primary caregiver with whom the promoter of the plan enters into the plan,
(a.1)another individual or another public primary caregiver who has before that time, under a written agreement, acquired a public primary caregiver’s rights as a subscriber under the plan,
(b)an individual who has before that time acquired a subscriber’s rights under the plan pursuant to a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the individual and a subscriber under the plan in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership, or
(c)after the death of an individual described in any of paragraphs (a) to (b), any other person (including the estate of the deceased individual) who acquires the individual’s rights as a subscriber under the plan or who makes contributions into the plan in respect of a beneficiary
but does not include an individual or a public primary caregiver whose rights as a subscriber under the plan had, before that time, been acquired by an individual or public primary caregiver in the circumstances described in paragraph (a.1) or (b); (souscripteur)
tax-paid income[Repealed, 1998, c. 19, s. 38(1)]
trust, except in this definition and the definitioneducation savings plan, means any person who irrevocably holds property under an education savings plan for any of, or any combination of, the following purposes:
(a)the payment of educational assistance payments,
(b)the payment after 1997 of accumulated income payments,
(c)the refund of payments,
(c.1)the repayment of amounts (and the payment of amounts related to that repayment) under theCanada Education Savings Actor under a designated provincial program,
(d)the payment to, or to a trust in favour of, designated educational institutions in Canada referred to in subparagraph (a)(i) of the definition of that expression in subsection 118.6(1), or
(e)the payment to a trust that irrevocably holds property pursuant to a registered education savings plan for any of the purposes set out in paragraphs (a) to (d). (fiducie)
Marginal note:Election
(1.1)A subscriber under an RESP that allows accumulated income payments and a holder of an RDSP may jointly elect in prescribed form to have subsection (1.2) apply in respect of a beneficiary under the RESP if, at the time the election is made, the beneficiary is also the beneficiary under the RDSP and
(a)the beneficiary has a severe and prolonged mental impairment that prevents, or can reasonably be expected to prevent, the beneficiary from enrolling in a qualifying educational program at a post-secondary educational institution; or
(b)the RESP meets the conditions described in clause (2)(d.1)(iii)(A) or (B) to make an accumulated income payment.
Marginal note:Effect of election
(1.2)If an election is made under subsection (1.1) and is filed by the promoter of the RESP with the Minister without delay, then notwithstanding paragraph (2)(d.1) and any terms of the RESP required by that paragraph, an accumulated income payment under the RESP may be made to the RDSP.
Marginal note:Conditions for registration
(2)The Minister shall not accept for registration for the purposes of this Act any education savings plan of a promoter unless, in the Minister’s opinion, the following conditions are complied with:
(a)the plan provides that the property of any trust governed by the plan (after the payment of trustee and administration charges) is irrevocably held for any of the purposes described in the definitiontrustin subsection 146.1(1) by a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as a trustee;
(b)at the time of the application by the promoter for registration of the plan, there are not fewer than 150 plans entered into with the promoter each of which complied, at the time it was entered into, with all the other conditions set out in this subsection, as it read at that time;
(b.1)application for registration of the plan is made by the promoter in prescribed form containing prescribed information;
(c)the promoter and all trusts governed by the plan are resident in Canada;
(d)the plan does not allow for any payment before 1998 to a subscriber, other than a refund of payments, unless the subscriber is also the beneficiary under the plan;
(d.1)subject to subsection (2.2), if the plan allows accumulated income payments, the plan provides that an accumulated income payment is permitted to be made only if
(i)the payment is made to, or on behalf of, a subscriber under the plan who is resident in Canada when the payment is made,
(ii)the payment is not made jointly to, or on behalf of, more than one subscriber, and
(iii)any of
(A)the payment is made after the 9th year that follows the year in which the plan was entered into and each individ­ual (other than a deceased individual) who is or was a beneficiary under the plan has attained 21 years of age before the payment is made and is not, when the payment is made, eligible under the plan to receive an educational assistance payment,
(B)the payment is made in the year in which the plan is required to be terminated in accordance with paragraph (i), or
(C)each individual who was a beneficiary under the plan is deceased when the payment is made;
(e)the plan is substantially similar to the type of plan described in or annexed to a prospectus filed by the promoter with a securities commission in Canada or a body performing a similar function in a province;
(f)in the event that a trust governed by the plan is terminated, the property held by the trust is required to be used for any of the purposes described in the definitiontrustin subsection 146.1(1);
(g)the plan does not allow for the payment of educational assistance payments before 1997 to an individual unless the individual is, at the time the payment is made, a student in full-time attendance at a post-secondary educational institution and enrolled in a qualifying educational program at the institution;
(g.1)the plan does not allow for the payment of an educational assistance payment to or for an individual at any time after 1996 unless
(i)either
(A)the individual is, at that time, enrolled as a student in a qualifying educational program at a post-secondary educational institution, or
(B)the individual has, before that time, attained the age of 16 years and is, at that time, enrolled as a student in a specified educational program at a post-secondary educational institution, and
(ii)either
(A)the individual satisfies, at that time, the condition set out in clause (i)(A), and
(I)has satisfied that condition throughout at least 13 consecutive weeks in the 12-month period that ends at that time, or
(II)the total of the payment and all other educational assistance payments made under a registered education savings plan of the promoter to or for the individual in the 12-month period that ends at that time does not exceed $5,000 or any greater amount that the Minister designated for the purpose of theCanada Education Savings Actapproves in writing with respect to the individual, or
(B)the individual satisfies, at that time, the condition set out in clause (i)(B) and the total of the payment and all other educational assistance payments made under a registered education savings plan of the promoter to or for the individual in the 13-week period that ends at that time does not exceed $2,500 or any greater amount that the Minister designated for the purpose of theCanada Education Savings Actapproves in writing with respect to the individual;
(g.2)the plan does not allow for any contribution into the plan, other than a contribution made by or on behalf of a subscriber under the plan in respect of a beneficiary under the plan or a contribution made by way of transfer from another registered education savings plan;
(g.3)the plan provides that an individual is permitted to be designated as a beneficiary under the plan, and that a contribution to the plan in respect of an individual who is a beneficiary under the plan is permitted to be made, only if
(i)in the case of a designation, the individual’s Social Insurance Number is provided to the promoter before the designation is made and either
(A)the individual is resident in Canada when the designation is made, or
(B)the designation is made in conjunction with a transfer of property into the plan from another registered education savings plan under which the individual was a beneficiary immediately before the transfer, and
(ii)in the case of a contribution, either
(A)the individual’s Social Insurance Number is provided to the promoter before the contribution is made and the individual is resident in Canada when the contribution is made, or
(B)the contribution is made by way of transfer from another registered education savings plan under which the individual was a beneficiary immediately before the transfer;
(h)the plan provides that no contribution (other than a contribution made by way of a transfer from another registered education savings plan) may be made into the plan after
(i)in the case of a specified plan, the 35th year following the year in which the plan was entered into, and
(ii)in any other case, the 31st year following the year in which the plan was entered into;
(i)the plan provides that it must be terminated on or before the last day of
(i)in the case of a specified plan, the 40th year following the year in which the plan was entered into, and
(ii)in any other case, the 35th year following the year in which the plan was entered into;
(i.1)if the plan allows accumulated income payments, the plan provides that it must be terminated before March of the year following the year in which the first such payment is made out of the plan;
(i.2)the plan does not allow for the receipt of property by way of direct transfer from another registered education savings plan after the other plan has made any accumulated income payment;
(j)if the plan allows more than one beneficiary under the plan at any one time, the plan provides
(i)that each of the beneficiaries under the plan is required to be connected to each living subscriber under the plan, or to have been connected to a deceased original subscriber under the plan, by blood relationship or adoption,
(ii)that a contribution into the plan in respect of a beneficiary is permitted to be made only if
(A)the beneficiary had not attained 31 years of age before the time of the contribution, or
(B)the contribution is made by way of transfer from another registered education savings plan that allows more than one beneficiary at any one time, and
(iii)that an individual is permitted to become a beneficiary under the plan at any particular time only if
(A)the individual had not attained 21 years of age before the particular time, or
(B)the individual was, immediately before the particular time, a beneficiary under another registered education savings plan that allows more than one beneficiary at any one time;
(k)[Repealed, 2007, c. 29, s. 18]
(l)the plan provides that the promoter shall, within 90 days after an individual becomes a beneficiary under the plan, notify the individ­ual (or, where the individual is under 19 years of age at that time and either ordinarily resides with a parent of the individual or is maintained by a public primary caregiver of the individual, that parent or public primary caregiver) in writing of the existence of the plan and the name and address of the subscriber in respect of the plan;
(m)the Minister has no reasonable basis to believe that the promoter will not take all reasonable measures to ensure that the plan will continue to comply with the conditions set out in paragraphs 146.1(2)(a), 146.1(2)(c) to 146.1(2)(d.1) and 146.1(2)(f) to 146.1(2)(l) for its registration for the purposes of this Act; and
(n)the Minister has no reasonable basis to believe that the plan will become revocable.
Marginal note:RESP is revocable
(2.1)For the purposes of paragraphs (2)(n) and (12.1)(d), a registered education savings plan is revocable at any time after October 27, 1998 at which
(a) and (b)[Repealed, 2017, c. 33, s. 57]
(c)a trust governed by the plan begins carrying on a business; or
(d)a trustee that holds property in connection with the plan borrows money for the purposes of the plan, except where
(i)the money is borrowed for a term not exceeding 90 days,
(ii)the money is not borrowed as part of a series of loans or other transactions and repayments, and
(iii)none of the property of the trust is used as security for the borrowed money.
Marginal note:Waiver of conditions for accumulated income payments
(2.2)The Minister may, on written application of the promoter of a registered education savings plan, waive the application of the conditions in clause (2)(d.1)(iii)(A) in respect of the plan where a beneficiary under the plan suffers from a severe and prolonged mental impairment that prevents, or can reasonably be expected to prevent, the beneficiary from enrolling in a qualifying educational program at a post-secondary educational institution.
Marginal note:Extension for making educational assistance payments
(2.21)Notwithstanding paragraph (2)(g.1), an education savings plan may allow for the payment of an educational assistance payment to or for an individual at any time in the six-month period immediately following the particular time at which the individual ceases to be enrolled as a student in a qualifying educational program or a specified educational program, as the case may be, if the payment would have complied with the requirements of paragraph (2)(g.1) had the payment been made immediately before the particular time.
Marginal note:Timing of payment
(2.22)An educational assistance payment that is made at any time in accordance with subsection (2.21) but not in accordance with paragraph (2)(g.1) is deemed, for the purposes of applying that paragraph at and after that time, to have been made immediately before the particular time referred to in subsection (2.21).
Marginal note:Social Insurance Number not required
(2.3)Notwithstanding paragraph (2)(g.3), an education savings plan may provide that an individual’s Social Insurance Number need not be provided in respect of
(a)a contribution to the plan, if the plan was entered into before 1999; and
(b)a designation of a non-resident individual as a beneficiary under the plan, if the individual was not assigned a Social Insurance Number before the designation is made.
Marginal note:Deemed registration
(3)Where in any year an education savings plan cannot be accepted for registration solely because the condition set out in paragraph 146.1(2)(b) has not been complied with, if the plan is subsequently registered, it shall be deemed to have been registered on the first day of January of
(a)the year in which all of the conditions set out in subsection 146.1(2) (except in paragraph 146.1(2)(b)) were complied with, or
(b)the year preceding the year in which the plan was subsequently registered,
whichever is the later.
Marginal note:Registration of plans without prospectus
(4)Notwithstanding paragraph 146.1(2)(e), where a promoter has not filed a prospectus in respect of an education savings plan referred to in that paragraph, the Minister may register the plan if the promoter is not otherwise required by the laws of Canada or a province to file such a prospectus with a securities commission in Canada or a body performing a similar function in a province and the plan complies with the other conditions set out in subsection 146.1(2).
Marginal note:Obligation to file amendment
(4.1)When a registered education savings plan is amended, the promoter shall file the text of the amendment with the Minister not later than 60 days after the day on which the plan is amended.
Marginal note:Trust not taxable
(5)No tax is payable under this Part by a trust that is governed by a RESP on its taxable income for a taxation year, except that, if at any time in the taxation year, it holds one or more properties that are not qualified investments for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no income or losses from sources other than those properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,
(a)income includes dividends described in section 83;
(b)the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition; and
(c)the trust’s income shall be computed without reference to subsection 104(6).
Marginal note:Subscriber not taxable
(6)No tax is payable by a subscriber on the income of a trust for a taxation year after 1971 throughout which the trust was governed by a registered education savings plan.
Marginal note:Transfers between plans
(6.1)Where property irrevocably held by a trust governed by a registered education savings plan (in this subsection referred to as the “transferor plan”) is transferred to a trust governed by another registered education savings plan (in this subsection referred to as the “transferee plan”),
(a)[Repealed, 1998, c. 19, s. 38(13)]
(b)for the purposes of this paragraph, the definitionspecified planin subsection (1) and paragraphs (2)(d.1), (h) and (i), the transferee plan is deemed to have been entered into on the day that is the earlier of
(i)the day on which the transferee plan was entered into, and
(ii)the day on which the transferor plan was entered into; and
(c)notwithstanding subsections 146.1(7) and 146.1(7.1), no amount shall be included in computing the income of any person because of the transfer.
Marginal note:Educational assistance payments
(7)There shall be included in computing an individual’s income for a taxation year the total of all educational assistance payments paid out of registered education savings plans to or for the individual in the year that exceeds the total of all excluded amounts in respect of those plans and the individual for the year.
Marginal note:Other income inclusions
(7.1)There shall be included in computing a taxpayer’s income for a taxation year
(a)each accumulated income payment (other than an accumulated income payment made under subsection (1.2)) received in the year by the taxpayer under a registered education savings plan that exceeds the total of all excluded amounts in respect of those plans and the individual for the year; and
(b)each amount received in the year by the taxpayer in full or partial satisfaction of a subscriber’s interest under a registered education savings plan (other than any excluded amount in respect of the plan).
Marginal note:Excluded amount
(7.2)An excluded amount in respect of a registered education savings plan is,
(a)for the purposes of subsection (7) and paragraph (7.1)(a), an amount in respect of which a subscriber pays a tax under section 207.05 in respect of the plan, or another plan for which the plan was substituted by the subscriber, that
(i)has not been waived, cancelled or refunded, and
(ii)has not reduced any other amount that would otherwise be included under subsections (7) or (7.1) in computing an individual’s income for the year or a preceding year; and
(b)for the purposes of paragraph (7.1)(b),
(i)any amount received under the plan,
(ii)any amount received in satisfaction of a right to a refund of payments under the plan, or
(iii)any amount received by a taxpayer under a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the taxpayer and the taxpayer’s spouse or common-law partner or former spouse or common-law partner in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.
(8) to (10)[Repealed, 1998, c. 19, s. 38(15)]
(11)[Repealed, 2014, c. 39, s. 51]
Marginal note:Deemed date of registration
(12)Subject to subsection 146.1(3), an education savings plan that is registered
(a)before 1976 shall be deemed to have been registered since the later of
(i)January 1, 1972, and
(ii)the first day of January of the year in which the plan was created; and
(b)after 1975 shall be deemed to have been registered on the first day of January in the year of registration.
Marginal note:Notice of intent to revoke registration
(12.1)When a particular day is
(a)a day on which a registered education savings plan ceases to comply with the conditions of subsection 146.1(2) for the plan’s registration,
(b)a day on which a registered education savings plan ceases to comply with any provision of the plan,
(c)the last day of a month in respect of which tax is payable under Part X.4 by an individual because of contributions made, or deemed for the purpose of Part X.4 to have been made, by or on behalf of the individual into a registered education savings plan,
(d)a day on which a registered education savings plan is revocable, or
(e)a day on which a person fails to comply with a condition or an obligation, imposed under theCanada Education Savings Actor under a program administered pursuant to an agreement entered into under section 12 of that Act, that applies with respect to a registered education savings plan,
the Minister may send written notice (referred to in this subsection and subsection 146.1(12.2) as a “notice of intent”) to the promoter of the plan that the Minister proposes to revoke the registration of the plan as of the day specified in the notice of intent, which day shall not be earlier than the particular day.
Marginal note:Notice of revocation
(12.2)When the Minister sends a notice of intent to revoke the registration of a registered education savings plan to the promoter of the plan, the Minister may, after 30 days after the receipt by the promoter of the notice, send written notice (referred to in this subsection and subsection 146.1(13) as a “notice of revocation”) to the promoter that the registration of the plan is revoked as of the day specified in the notice of revocation, which day shall not be earlier than the day specified in the notice of intent.
Marginal note:Revocation of registration
(13)When the Minister sends a notice of revocation of the registration of a registered education savings plan under subsection 146.1(12.2) to the promoter of the plan, the registration of the plan is revoked as of the day specified in the notice of revocation, unless the Federal Court of Appeal or a judge thereof, on application made at any time before the determination of an appeal under subsection 172(3), orders otherwise.
Marginal note:RESP information
(13.1)Every trustee under a registered education savings plan shall, in prescribed form and manner, file with the Minister information returns in respect of the plan.
Marginal note:Former Act
(14)A reference
(a)in this section, in paragraph 60(x) or in subparagraph 241(4)(d)(vii.1) to theCanada Education Savings Act, to an amount paid, to the payment of an amount or to the repayment of an amount, or to a condition or an obligation imposed, under that Act includes a reference to Part III.1 of theDepartment of Human Resources Development Act, or to an amount paid, to the payment of an amount or to the repayment of an amount, or to a condition or an obligation imposed, as the case may be, under that Part as it read at the time the reference is relevant; and
(b)in clause (2)(g.1)(ii)(B) to an amount that the Minister designated for the purpose of theCanada Education Savings Actapproves in writing with respect to an individual includes a reference to an amount that the Minister of Human Resources Development or the Minister of State to be styled Minister of Human Resources and Skills Development has approved in writing, before the day on which a Minister is designated for the purposes of that Act, with respect to the individual.
Marginal note:Regulations
(15)The Governor in Council may make regulations requiring promoters of education savings plans to file information returns in respect of the plans.
Marginal note:Definitions
146.2(1)The following definitions apply in this section and in Part XI.01.
distributionunder an arrangement of which an individual is the holder means a payment out of or under the arrangement in satisfaction of all or part of the holder’s interest in the arrangement. (distribution)
holderof an arrangement means
(a)until the death of the individual who entered into the arrangement with the issuer, the individual;
(b)at and after the death of the individual, the individual’s survivor, if the survivor acquires
(i)all of the individual’s rights as the holder of the arrangement, and
(ii)to the extent it is not included in the rights described in subparagraph (i), the unconditional right to revoke any beneficiary designation made, or similar direction imposed, by the individual under the arrangement or relating to property held in connection with the arrangement; and
(c)at and after the death of a holder described in paragraph (b) or in this paragraph, the holder’s survivor, if the survivor acquires
(i)all of the holder’s rights as the holder of the arrangement, and
(ii)to the extent it is not included in the rights described in subparagraph (i), the unconditional right to revoke any beneficiary designation made, or similar direction imposed, by the holder under the arrangement or relating to property held in connection with the arrangement. (titulaire)
issuerof an arrangement means the person described as the issuer in the definitionqualifying arrangement. (émetteur)
qualifying arrangement, at a particular time, means an arrangement
(a)that is entered into after 2008 between a person (in this definition referred to as the “issuer”) and an individual (other than a trust) who is at least 18 years of age;
(b)that is
(i)an arrangement in trust with an issuer that is a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee,
(ii)an annuity contract with an issuer that is a licensed annuities provider, or
(iii)a deposit with an issuer that is
(A)a person who is, or is eligible to become, a member of the Canadian Payments Association, or
(B)a credit union that is a shareholder or member of a body corporate referred to as a “central” for the purposes of theCanadian Payments Act;
(c)that provides for contributions to be made under the arrangement to the issuer in consideration of, or to be used, invested or otherwise applied for the purpose of, the issuer making distributions under the arrangement to the holder;
(d)under which the issuer and the individual agree, at the time the arrangement is entered into, that the issuer will file with the Minister an election to register the arrangement as a TFSA; and
(e)that, at all times throughout the period that begins at the time the arrangement is entered into and that ends at the particular time, complies with the conditions in subsection (2). (arrangement admissible)
survivorof an individual means another individual who is, immediately before the individual’s death, a spouse or common-law partner of the individual. (survivant)
Marginal note:Qualifying arrangement conditions
(2)The conditions referred to in paragraph (e) of the definitionqualifying arrangementin subsection (1) are as follows:
(a)the arrangement requires that it be maintained for the exclusive benefit of the holder (determined without regard to any right of a person to receive a payment out of or under the arrangement only on or after the death of the holder);
(b)the arrangement prohibits, while there is a holder of the arrangement, anyone that is neither the holder nor the issuer of the arrangement from having rights under the arrangement relating to the amount and timing of distributions and the investing of funds;
(c)the arrangement prohibits anyone other than the holder from making contributions under the arrangement;
(d)the arrangement permits distributions to be made to reduce the amount of tax otherwise payable by the holder under section 207.02 or 207.03;
(e)the arrangement provides that, at the direction of the holder, the issuer shall transfer all or any part of the property held in connection with the arrangement (or an amount equal to its value) to another TFSA of the holder;
(f)if the arrangement is an arrangement in trust, it prohibits the trust from borrowing money or other property for the purposes of the arrangement; and
(g)the arrangement complies with prescribed conditions.
Marginal note:Paragraphs (2)(a), (b) and (e) not applicable
(3)The conditions in paragraphs (2)(a), (b) and (e) do not apply to the extent that they are inconsistent with subsection (4).
Marginal note:Using TFSA interest as security for a loan
(4)A holder of a TFSA may use the holder’s interest or, for civil law, right in the TFSA as security for a loan or other indebtedness if
(a)the terms and conditions of the indebtedness are terms and conditions that persons dealing at arm’s length with each other would have entered into; and
(b)it can reasonably be concluded that none of the main purposes for that use is to enable a person (other than the holder) or a partnership to benefit from the exemption from tax under this Part of any amount in respect of the TFSA.
Marginal note:TFSA
(5)If the issuer of an arrangement that is, at the time it is entered into, a qualifying arrangement files with the Minister, before March of the calendar year following the calendar year in which the arrangement was entered into, an election in prescribed form and manner to register the arrangement as a TFSA under the Social Insurance Number of the individual with whom the arrangement was entered into, the arrangement becomes a TFSA at the time the arrangement was entered into and ceases to be a TFSA at the earliest of the following times:
(a)the time at which the last holder of the arrangement dies;
(b)the time at which the arrangement ceases to be a qualifying arrangement; or
(c)the earliest time at which the arrangement is not administered in accordance with the conditions in subsection (2).
Marginal note:Trust not taxable
(6)No tax is payable under this Part by a trust that is governed by a TFSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments (as defined in subsection 207.01(1)) for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,
(a)“income” includes dividends described in section 83;
(b)the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition; and
(c)the trust’s income shall be computed without reference to subsection 104(6).
Marginal note:Carrying on a business
(6.1)If tax is payable under this Part for a taxation year because of subsection (6) by a trust that is governed by a TFSA that carries on one or more businesses at any time in the taxation year,
(a)the holder of the TFSA is jointly and severally, or solidarily, liable with the trust to pay each amount payable under this Act by the trust that is attributable to that business or those businesses; and
(b)the issuer’s liability at any time for amounts payable under this Act in respect of that business or those businesses shall not exceed the total of
(i)the amount of property of the trust that the issuer is in possession or control of at that time in its capacity as legal representative of the trust, and
(ii)the total amount of all distributions of property from the trust on or after the date that the notice of assessment was sent in respect of the taxation year and before that time.
Marginal note:Amount credited to a deposit
(7)An amount that is credited or added to a deposit that is a TFSA as interest or other income in respect of the TFSA is deemed not to be received by the holder of the TFSA solely because of that crediting or adding.
Marginal note:Trust ceasing to be a TFSA
(8)If an arrangement that governs a trust ceases, at a particular time, to be a TFSA,
(a)the trust is deemed
(i)to have disposed, immediately before the particular time, of each property held by the trust for proceeds equal to the property’s fair market value immediately before the particular time, and
(ii)to have acquired, at the particular time, each such property at a cost equal to that fair market value;
(b)the trust’s last taxation year that began before the particular time is deemed to have ended immediately before the particular time; and
(c)a taxation year of the trust is deemed to begin at the particular time.
Marginal note:Trust ceasing to be a TFSA on death of holder
(9)If an arrangement that governs a trust ceases to be a TFSA because of the death of the holder of the TFSA,
(a)the arrangement is deemed, for the purposes of subsections (6) and (8), any regulations made under subsection (13), the definitiontrustin subsection 108(1), paragraph 149(1)(u.2) and the definitionsqualified investmentandnon-qualified investmentin subsection 207.01(1), to continue to be a TFSA until, and to cease to be a TFSA immediately after, the exemption-end time, being in this subsection the earlier of
(i)the time at which the trust ceases to exist, and
(ii)the end of the first calendar year that begins after the holder dies;
(b)there shall be included in computing a taxpayer’s income for a taxation year the total of all amounts each of which is an amount determined by the formula
A – B
where
(i)the amount of the payment, and
(ii)the amount by which the fair market value of all of the property held by the trust immediately before the holder’s death exceeds the total of all amounts each of which is the value of B in respect of any other payment made out of or under the trust; and
(c)there shall be included in computing the trust’s income for its first taxation year, if any, that begins after the exemption-end time the amount determined by the formula
A – B
where
Marginal note:Annuity contract ceasing to be a TFSA
(10)If an annuity contract ceases, at a particular time, to be a TFSA,
(a)the holder of the TFSA is deemed to have disposed of the contract immediately before the particular time for proceeds equal to its fair market value immediately before the particular time;
(b)the contract is deemed to be a separate annuity contract issued and effected at the particular time otherwise than pursuant to or as a TFSA; and
(c)each person who has an interest or, for civil law, a right in the separate annuity contract at the particular time is deemed to acquire the interest at the particular time at a cost equal to its fair market value at the particular time.
Marginal note:Deposit ceasing to be a TFSA
(11)If a deposit ceases, at a particular time, to be a TFSA,
(a)the holder of the TFSA is deemed to have disposed of the deposit immediately before the particular time for proceeds equal to its fair market value immediately before the particular time; and
(b)each person who has an interest or, for civil law, a right in the deposit at the particular time is deemed to acquire the interest at the particular time at a cost equal to its fair market value at the particular time.
Marginal note:Arrangement is TFSA only
(12)An arrangement that is a qualifying arrangement at the time it is entered into is deemed not to be a retirement savings plan, an education savings plan, a retirement income fund or a disability savings plan.
Marginal note:Regulations
(13)The Governor in Council may make regulations requiring issuers of TFSAs to file information returns in respect of TFSAs.
Marginal note:Definitions
146.3(1)In this section,
annuitantunder a retirement income fund at any time means
(a)the first individual to whom the carrier has undertaken to make payments described in the definitionretirement income fundout of or under the fund, where the first individual is alive at that time,
(b)after the death of the first individual, a spouse or common-law partner (in this definition referred to as the “survivor”) of the first individual to whom the carrier has undertaken to make payments described in the definitionretirement income fundout of or under the fund after the death of the first individual, if the survivor is alive at that time and the undertaking was made
(i)pursuant to an election that is described in that definition and that was made by the first individual, or
(ii)with the consent of the legal representative of the first individual, and
(c)after the death of the survivor, another spouse or common-law partner of the survivor to whom the carrier has undertaken, with the consent of the legal representative of the survivor, to make payments described in the definitionretirement income fundout of or under the fund after the death of the survivor, where that other spouse or common-law partner is alive at that time; (rentier)
carrierof a retirement income fund means
(a)a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business,
(b)a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee,
(c)a corporation approved by the Governor in Council for the purposes of section 146 that is licensed or otherwise authorized under the laws of Canada or a province to issue investment contracts, or
(d)a person referred to as a depositary in section 146,
that has agreed to make payments under a retirement incomefund to the individual who is the annuitant under the fund; (émetteur)
designated benefitof an individual in respect of a registered retirement income fund means the total of
(a)such amounts paid out of or under the fund after the death of the last annuitant thereunder to the legal representative of that annuitant
(i)as would, had they been paid under the fund to the individual, have been refunds of premiums (in this paragraph having the meaning assigned by subsection 146(1)) if the fund were a registered retirement savings plan that had not matured before the death, and
(ii)as are designated jointly by the legal representative and the individual in prescribed form filed with the Minister, and
(b)amounts paid out of or under the fund after the death of the last annuitant thereunder to the individual that would be refunds of premiums had the fund been a registered retirement savings plan that had not matured before the death; (prestation désignée)
minimum amountunder a retirement income fund for a year means, for the year in which the fund was entered into, a nil amount, and, for any other year, the amount determined by the formula
(A × B) + C
where
(a)where the first annuitant under the fund elected in respect of the fund under paragraph (b) of the definitionminimum amountin this subsection, as it read before 1992, or under subparagraph 146.3(1)(f)(i) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, to use the age of another individual, the prescribed factor for the year in respect of the other individual,
(b)where paragraph (a) does not apply and the first annuitant under the fund so elects before any payment has been made under the fund by the carrier, the prescribed factor for the year in respect of an individual who was the spouse or common-law partner of the first annuitant at the time of the election, and
(c)in any other case, the prescribed factor for the year in respect of the first annuitant under the fund, and
(a)a periodic payment under an annuity contract held by the trust at the beginning of the year (other than an annuity contract described at the beginning of the year in paragraph (b.1) of the definitionqualified investment) that is paid to the trust in the year, or
(b)if the periodic payment under such an annuity contract is not made to the trust because the trust disposed of the right to that payment in the year, a reasonable estimate of that payment on the assumption that the annuity contract had been held throughout the year and no rights under the contract were disposed of in the year; (minimum)
property heldin connection with a retirement income fund means property held by the carrier of the fund, whether held by the carrier as trustee or beneficial owner thereof, the value of which, or the income or loss from which, is relevant in determining the amount for a year payable to the annuitant under the fund; (biens détenus)
qualified investmentfor a trust governed by a registered retirement income fund means
(a)an investment that would be described by any of paragraphs (a) to (d), (f) and (g) of the definitionqualified investmentin section 204 if the reference in that definition to “a trust governed by a deferred profit sharing plan or revoked plan” were read as a reference to “a trust governed by a registered retirement income fund” and if that definition were read without reference to the words “with the exception of excluded property in relation to the trust”,
(b)[Repealed, 2007, c. 29, s. 19]
(b.1)a contract for an annuity issued by a licensed annuities provider where
(i)the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract, and
(ii)the holder of the contract has a right to surrender the contract at any time for an amount that would, if reasonable sales and administration charges were ignored, approximate the value of funds that could otherwise be applied to fund future periodic payments under the contract,
(b.2)a contract for an annuity issued by a licensed annuities provider where
(i)annual or more frequent periodic payments are or may be made under the contract to the holder of the contract,
(ii)the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract,
(iii)neither the time nor the amount of any payment under the contract may vary because of the length of any life, other than
(A)if the annuitant under the fund (in this paragraph referred to as the “RRIF annuitant”) has made the election referred to in the definitionretirement income fundin respect of the fund and a spouse or common-law partner, the life of the RRIF annuitant or the life of the spouse or common-law partner, and
(B)in any other case, the life of the RRIF annuitant,
(iv)the day on which the periodic payments began or are to begin (in this paragraph referred to as the “start date”) is not later than the end of the year following the year in which the contract was acquired by the trust,
(v)either
(A)the periodic payments are payable for the life of the RRIF annuitant or the joint lives of the RRIF annuitant and the RRIF annuitant’s spouse or common-law partner and either there is no guaranteed period under the contract or there is a guaranteed period that begins at the start date and does not exceed a term equal to 90 years minus the lesser of
(I)the age in whole years at the start date of the RRIF annuitant (determined on the assumption that the RRIF annuitant is alive at the start date), and
(II)the age in whole years at the start date of a spouse or common-law partner of the RRIF annuitant (determined on the assumption that a spouse or common-law partner of the RRIF annuitant at the time the contract was acquired is a spouse or common-law partner of the RRIF annuitant at the start date), or
(B)the periodic payments are payable for a term equal to
(I)90 years minus the age described in subclause (I), or
(II)90 years minus the age described in subclause (II), and
(vi)the periodic payments
(A)are equal, or
(B)are not equal solely because of one or more adjustments that would, if the contract were an annuity under a retirement savings plan, be in accordance with subparagraphs 146(3)(b)(iii) to 146(3)(b)(v) or that arise because of a uniform reduction in the entitlement to the periodic payments as a consequence of a partial surrender of rights to the periodic payments, and
(c)such other investments as may be prescribed by regulations of the Governor in Council made on the recommendation of the Minister of Finance; (placement admissible)
registered retirement income fundmeans a retirement income fund accepted by the Minister for registration for the purposes of this Act and registered under the Social Insurance Number of the first annuitant under the fund; (fonds enregistré de revenu de retraite)
retirement income fundmeans an arrangement between a carrier and an annuitant under which, in consideration for the transfer to the carrier of property, the carrier undertakes to pay amounts to the annuitant (and, where the annuitant so elects, to the annuitant’s spouse or common-law partner after the annuitant’s death), the total of which is, in each year in which the minimum amount under the arrangement for the year is greater than nil, not less than the minimum amount under the arrangement for that year, but the amount of any such payment does not exceed the value of the property held in connection with the arrangement immediately before the time of the payment. (fonds de revenu de retraite)
Marginal note:Adjusted minimum amount for 2008
(1.1)The minimum amount under a retirement income fund for 2008 is 75 per cent of the amount that would, in the absence of this subsection, be the minimum amount under the fund for the year.
Marginal note:Exceptions
(1.2)Subsection (1.1) does not apply to a retirement income fund
(a)for the purposes of subsections (5.1) and 153(1) and the definitionperiodic pension paymentin section 5 of theIncome Tax Conventions Interpretation Act; nor
(b)if the individual who was the annuitant under the fund on January 1, 2008 attained 70 years of age in 2007.
Marginal note:Exceptions
(1.3)For the purposes of subsections (5.1) and 153(1) and the definitionperiodic pension paymentin section 5 of theIncome Tax Conventions Interpretation Act, the minimum amount under a retirement income fund for 2015 is the amount that would be the minimum amount under the fund for the year if it were determined using the prescribed factors under subsection 7308(3) or (4), as the case may be, of theIncome Tax Regulationsas they read on December 31, 2014.
Marginal note:Adjusted minimum amount for 2020
(1.4)The minimum amount under a retirement income fund for 2020 is 75% of the amount that would, in the absence of this subsection, be the minimum amount under the fund for the year.
Marginal note:Exceptions
(1.5)Subsection (1.4) does not apply to a retirement income fund for the purposes of subsections (5.1) and 153(1) and the definitionperiodic pension paymentin section 5 of theIncome Tax Conventions Interpretation Act.
Marginal note:Acceptance of fund for registration
(2)The Minister shall not accept for registration for the purposes of this Act any retirement income fund of an individual unless, in the Minister’s opinion, the following conditions are complied with:
(a)the fund provides that the carrier shall make only those payments described in any of paragraphs (d) and (e), the definitionretirement income fundin subsection (1), and subsections (14) and (14.1);
(b)the fund provides that payments thereunder may not be assigned in whole or in part;
(c)if the carrier is a person referred to as a depositary in section 146, the fund provides that
(i)the carrier has no right of offset as regards the property held in connection with the fund in respect of any debt or obligation owing to the carrier, and
(ii)the property held in connection with the fund cannot be pledged, assigned or in any way alienated as security for a loan or for any purpose other than that of the making by the carrier to the annuitant those payments described in paragraph 146.3(2)(a);
(d)the fund provides that, except where the annuitant’s spouse or common-law partner becomes the annuitant under the fund, the carrier shall, as a consequence of the death of the annuitant, distribute the property held in connection with the fund at the time of the annuitant’s death or an amount equal to the value of such property at that time;
(e)the fund provides that, at the direction of the annuitant, the carrier shall transfer all or part of the property held in connection with the fund, or an amount equal to its value at the time of the direction (other than property required to be retained in accordance with the provision described in paragraph 146.3(2)(e.1) or 146.3(2)(e.2)), together with all information necessary for the continuance of the fund, to a person who has agreed to be a carrier of another registered retirement income fund of the annuitant;
(e.1)where the fund does not govern a trust or the fund governs a trust created before 1998 that does not hold an annuity contract as a qualified investment for the trust, the fund provides that if an annuitant, at any time, directs that the carrier transfer all or part of the property held in connection with the fund, or an amount equal to its value at that time, to a person who has agreed to be a carrier of another registered retirement income fund of the annuitant or to a registered pension plan in accordance with subsection (14.1), the transferor shall retain an amount equal to the lesser of
(i)the fair market value of such portion of the property as would, if the fair market value thereof does not decline after the transfer, be sufficient to ensure that the minimum amount under the fund for the year in which the transfer is made may be paid to the annuitant in the year, and
(ii)the fair market value of all the property;
(e.2)where paragraph (e.1) does not apply, the fund provides that if an annuitant, at any time, directs that the carrier transfer all or part of the property held in connection with the fund, or an amount equal to its value at that time, to a person who has agreed to be a carrier of another registered retirement income fund of the annuitant or to a registered pension plan in accordance with subsection (14.1), the transferor shall retain property in the fund sufficient to ensure that the total of
(i)all amounts each of which is the fair market value, immediately after the transfer, of a property held in connection with the fund that is
(A)property other than an annuity contract, or
(B)an annuity contract described, immediately after the transfer, in paragraph (b.1) of the definitionqualified investmentin subsection 146.3(1), and
(ii)all amounts each of which is a reasonable estimate, as of the time of the transfer, of the amount of an annual or more frequent periodic payment under an annuity contract (other than an annuity contract described in clause 146.3(2)(e.2)(i)(B)) that the trust may receive after the transfer and in the year of the transfer
is not less than the amount, if any, by which the minimum amount under the fund for that year exceeds the total of all amounts received out of or under the fund before the transfer that are included in computing the income of the annuitant under the fund for that year;
(f)the fund provides that the carrier shall not accept property as consideration thereunder other than property transferred from
(i)a registered retirement savings plan under which the individual is the annuitant,
(ii)another registered retirement income fund under which the individual is the annuitant,
(iii)the individual to the extent only that the amount of the consideration was an amount described in subparagraph 60(l)(v),
(iv)a registered retirement income fund or registered retirement savings plan of the individual’s spouse or common-law partner or former spouse or common-law partner under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the individual and the individual’s spouse or common-law partner or former spouse or common-law partner in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership,
(iv.1)a deferred profit sharing plan in accordance with subsection 147(19);
(v)a registered pension plan of which the individual is a member (within the meaning assigned by subsection 147.1(1)),
(vi)a registered pension plan in accordance with subsection 147.3(5) or (7),
(vii)a specified pension plan in circumstances to which subsection 146(21) applies,
(viii)a pooled registered pension plan in accordance with subsection 147.5(21),
(ix)an advanced life deferred annuity under which the individual is the annuitant, if the transfer is a refund described under paragraph (g) of the definitionadvanced life deferred annuityin subsection 146.5(1), or
(x)a FHSA in accordance with subsection 146.6(7);
(g)[Repealed, 2011, c. 24, s. 49]
(h)the fund in all other respects complies with regulations of the Governor in Council made on the recommendation of the Minister of Finance.
Marginal note:No tax while trust governed by fund
(3)Except as provided in subsection 146.3(9), no tax is payable under this Part by a trust on the taxable income of the trust for a taxation year if, throughout the period in the year during which the trust was in existence, the trust was governed by a registered retirement income fund of an individual, except that if the trust has
(a)borrowed money in the year or has borrowed money that it has not repaid before the commencement of the year,
(b)received a gift of property (other than a transfer from a registered retirement savings plan under which the individual is the annuitant (within the meaning of subsection 146(1)) or a transfer from a registered retirement income fund under which the individual is the annuitant)
(i)in the year, or
(ii)in a preceding year and has not divested itself of the property or any property substituted therefor before the commencement of the year, or
(c)carried on any business or businesses in the year,
tax is payable under this Part by the trust,
(d)where paragraph 146.3(3)(a) or 146.3(3)(b) applies, on its taxable income for the year, and
(e)where neither paragraph 146.3(3)(a) nor (b) applies and where paragraph 146.3(3)(c) applies, on the amount, if any, by which
(i)the amount that its taxable income for the year would be if it had no incomes or losses from sources other than from the business or businesses, as the case may be,
exceeds
(ii)such portion of the amount determined under subparagraph 146.3(3)(e)(i) in respect of the trust for the year as can reasonably be considered to be income from, or from the disposition of, qualified investments for the trust.
Marginal note:Exception
(3.1)Notwithstanding subsection 146.3(3), if the last annuitant under a registered retirement income fund has died, tax is payable under this Part by the trust governed by the fund on its taxable income for each year after the year following the year in which the last annuitant under the fund died.
Marginal note:Disposition or acquisition of property by trust
(4)Where at any time in a taxation year a trust governed by a registered retirement income fund
(a)disposes of property for a consideration less than the fair market value of the property at the time of the disposition, or for no consideration, or
(b)acquires property for a consideration greater than the fair market value of the property at the time of the acquisition,
2 times the difference between that fair market value and the consideration, if any, shall be included in computing the income for the taxation year of the taxpayer who is the annuitant under the fund at that time.
Marginal note:Benefits taxable
(5)There shall be included in computing the income of a taxpayer for a taxation year all amounts received by the taxpayer in the year out of or under a registered retirement income fund other than the portion thereof that can reasonably be regarded as
(a)part of the amount included in computing the income of another taxpayer by virtue of subsections 146.3(6) and 146.3(6.2);
(b)an amount received in respect of the income of the trust under the fund for a taxation year for which the trust was not exempt from tax by virtue of subsection 146.3(3.1);
(c)an amount that relates to interest, or to another amount included in computing income otherwise than because of this section, and that would, if the fund were a registered retirement savings plan, be a tax-paid amount (within the meaning assigned by paragraph (b) of the definitiontax-paid amountin subsection 146(1)); or
(d)an amount in respect of which the annuitant pays a tax under Part XI.01, unless the tax is waived, cancelled or refunded.
Marginal note:Amount included in income
(5.1)If at any time in a taxation year a particular amount in respect of a registered retirement income fund that is a spousal or common-law partner plan (within the meaning assigned by subsection 146(1)) in relation to a taxpayer is required to be included in the income of the taxpayer’s spouse or common-law partner and the taxpayer is not living separate and apart from the taxpayer’s spouse or common-law partner at that time by reason of the breakdown of their marriage or common-law partnership, there shall be included at that time in computing the taxpayer’s income for the year an amount equal to the least of
(a)the total of all amounts each of which is a premium (within the meaning assigned by subsection 146(1)) paid by the taxpayer in the year or in one of the two immediately preceding taxation years to a registered retirement savings plan under which the taxpayer’s spouse or common-law partner was the annuitant (within the meaning assigned by subsection 146(1)) at the time the premium was paid,
(b)the particular amount, and
(c)the amount, if any, by which
(i)the total of all amounts each of which is an amount in respect of the fund that is required, in the year and at or before that time, to be included in the income of the taxpayer’s spouse or common-law partner
exceeds
(ii)the minimum amount under the fund for the year.
Marginal note:Ordering
(5.3)Where a taxpayer has paid more than one premium described in subsection 146.3(5.1), such a premium or part thereof paid by the taxpayer at any time shall be deemed to have been included in computing the taxpayer’s income by virtue of that subsection before premiums or parts thereof paid by the taxpayer after that time.
Marginal note:Spouse’s income
(5.4)Where, in respect of an amount required at any time in a taxation year to be included in computing the income of a taxpayer’s spouse, all or part of a premium has, by reason of subsection 146.3(5.1), been included in computing the taxpayer’s income for the year, the following rules apply:
(a)the premium or part thereof, as the case may be, shall, for the purposes of subsections 146.3(5.1) and 146(8.3) after that time, be deemed not to have been a premium paid to a registered retirement savings plan under which the taxpayer’s spouse was the annuitant (within the meaning assigned by subsection 146(1)); and
(b)an amount equal to the premium or part thereof, as the case may be, may be deducted in computing the income of the spouse for the year.
Marginal note:Where s. (5.1) does not apply
(5.5)Subsection 146.3(5.1) does not apply
(a)in respect of a taxpayer at any time during the year in which the taxpayer dies;
(b)in respect of a taxpayer where either the taxpayer or the annuitant is a non-resident at the particular time referred to in that subsection;
(c)to any payment that is received in full or partial commutation of a registered retirement savings plan or a registered retirement income fund and in respect of which a deduction was made under paragraph 60(l) if, where the deduction was in respect of the acquisition of an annuity, the terms of the annuity provide that it cannot be commuted, and it is not commuted, in whole or in part within 3 years after the acquisition; or
(d)in respect of an amount that is deemed by subsection 146.3(6) to have been received by an annuitant under a registered retirement income fund immediately before the annuitant’s death.
Marginal note:Where last annuitant dies
(6)Where the last annuitant under a registered retirement income fund dies, that annuitant shall be deemed to have received, immediately before death, an amount out of or under a registered retirement income fund equal to the fair market value of the property of the fund at the time of the death.
Marginal note:Designated benefit deemed received
(6.1)A designated benefit of an individual in respect of a registered retirement income fund that is received by the legal representative of the last annuitant under the fund shall be deemed
(a)to be received by the individual out of or under the fund at the time it is received by the legal representative; and
(b)except for the purpose of the definitiondesignated benefitin subsection 146.3(1), not to be received out of or under the fund by any other person.
Marginal note:Transfer of designated benefit
(6.11)For the purpose of subparagraph 60(l)(v), the eligible amount of a particular individual for a taxation year in respect of a registered retirement income fund is nil unless the particular individual was
(a)a spouse or common-law partner of the last annuitant under the fund, or
(b)a child or grandchild of that annuitant who was dependent because of physical or mental infirmity on that annuitant,
in which case the eligible amount shall be determined by the formula
A × [1 - ((B - C) / D)]
where
(a)the total amounts included because of subsection 146.3(5) in computing the income of an annuitant under the fund for the year in respect of amounts received by the annuitant out of or under the fund, and
(b)the minimum amount under the fund for the year, and
Marginal note:Amount deductible
(6.2)There may be deducted from the amount deemed by subsection 146.3(6) to be received by an annuitant out of or under a registered retirement income fund an amount not exceeding the amount determined by the formula
A × [1 - ((B + C - D) / (B + C))]
where
(a)all designated benefits of individuals in respect of the fund,
(b)all amounts that would, if the fund were a registered retirement savings plan, be tax-paid amounts (in this subsection having the meaning assigned by subsection 146(1)) in respect of the fund received by individuals who received, otherwise than because of subsection 146.3(6.1), designated benefits in respect of the fund, and
(c)all amounts each of which is an amount that would, if the fund were a registered retirement savings plan, be a tax-paid amount in respect of the fund received by the legal representative of the last annuitant under the fund, to the extent that the legal representative would have been entitled to designate that tax-paid amount under paragraph (a) of the definitiondesignated benefitin subsection 146.3(1) if tax-paid amounts were not excluded in determining refunds of premiums (as defined in subsection 146(1));
(a)the end of the first calendar year that begins after the death of the annuitant, and
(b)the time immediately after the last time that any designated benefit in respect of the fund is received by an individual;
(a)the fair market value of the property of the fund at the time of the death of the last annuitant thereunder, and
(b)the sum of the values of B and C in respect of the fund.
Marginal note:Deduction for post-death reduction in value
(6.3)If the last annuitant under a registered retirement income fund dies, there may be deducted in computing the annuitant’s income for the taxation year in which the annuitant dies an amount not exceeding the amount determined, after all amounts payable out of or under the fund have been paid, by the formula
A – B
where
(a)the amount deemed by subsection (6) to have been received by the annuitant out of or under the fund,
(b)an amount (other than an amount described in paragraph (c)) received, after the death of the annuitant, by a taxpayer out of or under the fund and included, because of subsection (5), in computing the taxpayer’s income, or
(c)an amount that would, if the fund were a registered retirement savings plan, be a tax-paid amount (within the meaning assigned by subsection 146(1)) in respect of the fund; and
Marginal note:Subsection (6.3) not applicable
(6.4)Except where the Minister has waived in writing the application of this subsection with respect to all or any portion of the amount determined in subsection (6.3) in respect of a registered retirement income fund, that subsection does not apply if
(a)at any time after the death of the annuitant, a trust governed by the fund held an investment that is not a qualified investment; or
(b)the last payment out of or under the fund was made after the end of the year following the year in which the annuitant died.
Marginal note:Property used as security for loan
(7)If at any time in a taxation year a trust governed by a registered retirement income fund uses or permits to be used any property of the trust as security for a loan, the fair market value of the property at the time it commenced to be so used shall be included in computing the income for the year of the taxpayer who is the annuitant under the fund at that time.
(8)[Repealed, 2011, c. 24, s. 49]
Marginal note:Tax payable on income from non-qualified investment
(9)If a trust that is governed by a registered retirement income fund holds, at any time in a taxation year, a property that is not a qualified investment,
(a)tax is payable under this Part by the trust on the amount that its taxable income for the year would be if it had no incomes or losses from sources other than the property that is not a qualified investment or no capital gains or capital losses other than from the disposition of that property, as the case may be; and
(b)for the purposes of paragraph 146.3(9)(a),
(i)incomeincludes dividends described in section 83, and
(ii)paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.
Marginal note:Recovery of property used as security
(10)Where at any time in a taxation year a loan for which a trust governed by a registered retirement income fund has used or permitted to be used trust property as security ceases to be extant, and the fair market value of the property so used was included by virtue of subsection 146.3(7) in computing the income of a taxpayer who was the annuitant under the fund, there may be deducted in computing the income for a taxation year of the taxpayer who is at that time the annuitant, an amount equal to the amount, if any, remaining when
(a)the net loss (exclusive of payments by the trust as or on account of interest) sustained by the trust in consequence of its using or permitting to be used the property as security for the loan and not as a result of a change in the fair market value of the property
is deducted from
(b)the amount so included in computing the income of a taxpayer in consequence of the trust’s using or permitting to be used the property as security for the loan.
Marginal note:Change in fund after registration
(11)Where, on any day after a retirement income fund has been accepted by the Minister for registration for the purposes of this Act, the fund is revised or amended or a new fund is substituted therefor, and the fund as revised or amended or the new fund substituted therefor, as the case may be, (in this subsection referred to as the “amended fund”) does not comply with the requirements of this section for its acceptance by the Minister for registration for the purposes of this Act, the following rules apply:
(a)the amended fund shall be deemed, for the purposes of this Act, not to be a registered retirement income fund; and
(b)the taxpayer who was the annuitant under the fund before it became an amended fund shall, in computing the taxpayer’s income for the taxation year that includes that day, include as income received out of the fund at that time an amount equal to the fair market value of all the property held in connection with the fund immediately before that time.
Marginal note:Idem
(12)For the purposes of subsection 146.3(11), an arrangement under which a right or obligation under a retirement income fund is released or extinguished either wholly or in part and either in exchange or substitution for any right or obligation, or otherwise (other than an arrangement the sole object and legal effect of which is to revise or amend the fund) or under which payment of any amount by way of loan or otherwise is made on the security of a right under a retirement income fund, shall be deemed to be a new fund substituted for the retirement income fund.
(13)[Repealed, 2011, c. 24, s. 49]
Marginal note:Transfer on breakdown of marriage or common-law partnership
(14)An amount is transferred from a registered retirement income fund of an annuitant in accordance with this subsection if the amount
(a)is transferred on behalf of an individual who is a spouse or common-law partner or former spouse or common-law partner of the annuitant and who is entitled to the amount under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between the annuitant and the individual in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership; and
(b)is transferred directly to
(i)a registered retirement income fund under which the individual is the annuitant, or
(ii)a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1)).
Marginal note:Transfer to PRPP or RPP
(14.1)An amount is transferred from a registered retirement income fund of an annuitant in accordance with this subsection if the amount
(a)is transferred at the direction of the annuitant directly to an account of the annuitant under a pooled registered pension plan;
(b)is transferred at the direction of the annuitant directly to a registered pension plan of which, at any time before the transfer, the annuitant was a member (within the meaning assigned by subsection 147.1(1)) or to a prescribed registered pension plan and is allocated to the annuitant under a money purchase provision (within the meaning assigned by subsection 147.1(1)) of the plan; or
(c)is transferred at the direction of the annuitant directly to a licensed annuities provider to acquire an advanced life deferred annuity for the benefit of the annuitant.
Marginal note:Taxation of amount transferred
(14.2)An amount transferred on behalf of an individual in accordance with paragraph (2)(e) or subsection (14) or (14.1)
(a)is not, solely because of that transfer, to be included in computing the income of any taxpayer; and
(b)is not to be deducted in computing the income of any taxpayer.
Marginal note:Credited or added amount deemed not received
(15)Where
(a)an amount is credited or added to a deposit with a depositary referred to in paragraph (d) of the definitioncarrierin subsection 146.3(1) as interest or income in respect of the deposit,
(b)the deposit is a registered retirement income fund at the time the amount is credited or added to the deposit, and
(c)during the calendar year in which the amount is credited or added or during the preceding calendar year, the annuitant under the fund was alive,
the amount shall be deemed not to be received by the annuitant or any other person solely because of the crediting or adding.
Marginal note:Definitions
146.4(1)The following definitions apply in this section.
assistance holdback amount, in relation to a disability savings plan, has the meaning assigned under theCanada Disability Savings Act. (montant de retenue)
contributionto a disability savings plan does not include (other than for the purpose of paragraph (b) of the definitiondisability savings plan)
(a)an amount paid into the plan under or because of theCanada Disability Savings Actor a designated provincial program;
(b)an amount paid into the plan under or because of any other program that has a similar purpose to a designated provincial program and that is funded, directly or indirectly, by a province (other than an amount paid into the plan by an entity described in subparagraph (a)(iii) of the definitionqualifying personin its capacity as holder of the plan);
(c)an amount transferred to the plan in accordance with subsection (8); or
(d)other than for the purposes of paragraphs (4)(f) to (h) and (n),
(i)a specified RDSP payment as defined in subsection 60.02(1), or
(ii)an accumulated income payment made to the plan under subsection 146.1(1.2). (cotisation)
designated provincial programmeans a program that is established under the laws of a province and that supports savings in registered disability savings plans. (programme provincial désigné)
disability assistance payment, in relation to a disability savings plan of a beneficiary, means any payment made from the plan to the beneficiary or to the beneficiary’s estate. (paiement d’aide à l’invalidité)
disability savings planof a beneficiary means an arrangement
(a)between
(i)a corporation (in this definition referred to as the “issuer”)
(A)that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee, and
(B)with which the specified Minister has entered into an agreement that applies to the arrangement for the purposes of theCanada Disability Savings Act, and
(ii)one or more of the following:
(A)the beneficiary,
(B)an entity that, at the time the arrangement is entered into, is a qualifying person described in paragraph (a) or (b) of the definitionqualifying personin relation to the beneficiary,
(B.1)if the arrangement is entered into before 2024, a qualifying family member in relation to the beneficiary who, at the time the arrangement is entered into, is a qualifying person in relation to the beneficiary,
(B.2)a qualifying family member in relation to the beneficiary who, at the time the arrangement is entered into, is not a qualifying person in relation to the beneficiary but is a holder of another arrangement that is a registered disability savings plan of the beneficiary, and
(C)a legal parent of the beneficiary who, at the time the arrangement is entered into, is not a qualifying person in relation to the beneficiary but is a holder of another arrangement that is a registered disability savings plan of the beneficiary;
(b)under which one or more contributions are to be made in trust to the issuer to be invested, used or otherwise applied by the issuer for the purpose of making payments from the arrangement to the beneficiary; and
(c)that is entered into in a taxation year in respect of which
(i)the beneficiary is a DTC-eligible individual, or
(ii)the beneficiary is not a DTC-eligible individual and an amount is to be transferred from a registered disability savings plan of the beneficiary to the arrangement in accordance with subsection (8). (régime d’épargne-invalidité)
DTC-eligible individual, in respect of a taxation year, means an individual in respect of whom an amount is deductible, or would if this Act were read without reference to paragraph 118.3(1)(c) be deductible, under section 118.3 in computing a taxpayer’s tax payable under this Part for the taxation year. (particulier admissible au CIPH)
holderof a disability savings plan at any time means each of the following:
(a)an entity that has, at that time, rights as an entity with whom the issuer entered into the plan;
(b)an entity that has, at that time, rights as a successor or assignee of an entity described in paragraph (a) or in this paragraph; and
(c)the beneficiary if, at that time, the beneficiary is not an entity described in paragraph (a) or (b) and has rights under the plan to make decisions (either alone or with other holders of the plan) concerning the plan, except where the only such right is a right to direct that disability assistance payments be made as provided for in subparagraph (4)(n)(ii). (titulaire)
issuer, of an arrangement, means the person described as the “issuer” in the definitiondisability savings plan. (émetteur)
lifetime disability assistance paymentsunder a disability savings plan of a beneficiary means disability assistance payments that are identified under the terms of the plan as lifetime disability assistance payments and that, after they begin to be paid, are payable at least annually until the earlier of the day on which the beneficiary dies and the day on which the plan is terminated. (paiements viagers pour invalidité)
plan trust, in relation to a disability savings plan, means the trust governed by the plan. (fiducie de régime)
qualified investment, for a trust governed by a RDSP, means
(a)an investment that would be described by any of paragraphs (a) to (d), (f) and (g) of the definitionqualified investmentin section 204 if the reference in that definition to “a trust governed by a deferred profit sharing plan or revoked plan” were read as a reference to “a trust governed by a RDSP” and if that definition were read without reference to the words “with the exception of excluded property in relation to the trust”;
(b)a contract for an annuity issued by a licensed annuities provider where
(i)the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract, and
(ii)the holder of the contract has a right to surrender the contract at any time for an amount that would, if reasonable sales and administration charges were ignored, approximate the value of funds that could otherwise be applied to fund future periodic payments under the contract;
(c)a contract for an annuity issued by a licensed annuities provider where
(i)annual or more frequent periodic payments are or may be made under the contract to the holder of the contract,
(ii)the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract,
(iii)neither the time nor the amount of any payment under the contract may vary because of the length of any life, other than the life of the beneficiary under the plan,
(iv)the day on which the periodic payments began or are to begin is not later than the end of the later of
(A)the year in which the beneficiary under the plan attains the age of 60 years, and
(B)the year following the year in which the contract was acquired by the trust,
(v)the periodic payments are payable for the life of the beneficiary under the plan and either there is no guaranteed period under the contract or there is a guaranteed period that does not exceed 15 years,
(vi)the periodic payments
(A)are equal, or
(B)are not equal solely because of one or more adjustments that would, if the contract were an annuity under a retirement savings plan, be in accordance with subparagraphs 146(3)(b)(iii) to (v) or that arise because of a uniform reduction in the entitlement to the periodic payments as a consequence of a partial surrender of rights to the periodic payments, and
(vii)the contract requires that, in the event the plan must be terminated in accordance with paragraph (4)(p), any amounts that would otherwise be payable after the termination be commuted into a single payment; and
(d)a prescribed investment. (placement admissible)
qualifying family member, in relation to a beneficiary of a disability savings plan, at any time, means an individual who, at that time, is
(a)a legal parent of the beneficiary; or
(b)a spouse or common-law partner of the beneficiary who is not living separate and apart from the beneficiary by reason of a breakdown of their marriage or common-law partnership. (membre de la famille admissible)
qualifying person, in relation to a beneficiary of a disability savings plan, at any time, means
(a)if the beneficiary has not, at or before that time, attained the age of majority, an entity that is, at that time,
(i)a legal parent of the beneficiary,
(ii)a guardian, tutor, curator or other individual who is legally authorized to act on behalf of the beneficiary, or
(iii)a public department, agency or institution that is legally authorized to act on behalf of the beneficiary;
(b)if the beneficiary has, at or before that time, attained the age of majority and is not, at that time, contractually competent to enter into a disability savings plan, an entity that is, at that time, an entity described in subparagraph (a)(ii) or (iii); and
(c)other than for the purposes of subparagraph (4)(b)(iv), an individual who is a qualifying family member in relation to the beneficiary if
(i)at or before that time, the beneficiary has attained the age of majority and is not a beneficiary under a disability savings plan,
(ii)at that time, no entity described in subparagraph (a)(ii) or (iii) is legally authorized to act on behalf of the beneficiary, and
(iii)in the issuer’s opinion after reasonable inquiry, the beneficiary’s contractual competence to enter into a disability savings plan at that time is in doubt. (responsable)
registered disability savings planorRDSPmeans a disability savings plan that satisfies the conditions in subsection (2), but does not include a plan to which subsection (3) or (10) applies. (régime enregistré d’épargne-invaliditéouREEI)
specified maximum amount, for a calendar year in respect of a disability savings plan, means the amount that is the greater of
(a)the amount determined by the formula set out in paragraph (4)(l) in respect of the plan for the calendar year, and
(b)the amount determined by the formula
A + B
where
(i)a periodic payment under an annuity contract held by the plan trust at the beginning of the calendar year (other than an annuity contract described at the beginning of the calendar year in paragraph (b) of the definitionqualified investment) that is paid to the plan trust in the calendar year, or
(ii)if the periodic payment under such an annuity contract is not made to the plan trust because the plan trust disposed of the right to that payment in the calendar year, a reasonable estimate of that payment on the assumption that the annuity contract had been held throughout the calendar year and no rights under the contract were disposed of in the calendar year. (plafond)
specified Ministermeans the minister designated under section 4 of theCanada Disability Savings Act. (ministre responsable)
specified year, for a disability savings plan of a beneficiary means the particular calendar year in which a medical doctor or a nurse practitioner licensed to practise under the laws of a province (or of the place where the beneficiary resides) certifies in writing that the beneficiary’s state of health is such that, in the professional opinion of the medical doctor or the nurse practitioner, the beneficiary is not likely to survive more than five years and
(a)if the plan is a specified disability savings plan, each subsequent calendar year, but does not include any calendar year prior to the calendar year in which the certification is provided to the issuer of the plan; or
(b)in any other case, each of the five calendar years following the particular calendar year, but does not include any calendar year prior to the calendar year in which the certification is provided to the issuer of the plan. (année déterminée)
Marginal note:Specified disability savings plan
(1.1)If, in respect of a beneficiary under a registered disability savings plan, a medical doctor or a nurse practitioner licensed to practise under the laws of a province (or of the place where the beneficiary resides) certifies in writing that the beneficiary’s state of health is such that, in the professional opinion of the medical doctor or the nurse practitioner, the beneficiary is not likely to survive more than five years, the holder of the plan elects in prescribed form and provides the election and the medical certification in respect of the beneficiary to the issuer of the plan, and the issuer notifies the specified Minister of the election in a manner and format acceptable to the specified Minister, then the plan becomes a specified disability savings plan at the time the notification is received by the specified Minister.
Marginal note:Ceasing to be a specified disability savings plan
(1.2)A plan ceases to be a specified disability savings plan at the earliest of the following times:
(a)the time that the specified Minister receives a notification, in a manner and format acceptable to the specified Minister, from the issuer of the plan that the holder elects that the plan is to cease to be a specified disability savings plan;
(b)the time that is immediately before the earliest time in a calendar year when the total disability assistance payments, other than non-taxable portions, made from the plan in the year and while it was a specified disability savings plan exceeds $10,000 (or such greater amount as is required to satisfy the condition in subparagraph (d)(i));
(c)the time that is immediately before the time that
(i)a contribution is made to the plan,
(ii)an amount described in any of paragraphs (a) and (b) and subparagraph (d)(ii) of the definitioncontributionin subsection (1) is paid into the plan,
(iii)the plan is terminated,
(iv)the plan ceases to be a registered disability savings plan as a result of the application of paragraph (10)(a), or
(v)is the beginning of the first calendar year throughout which the beneficiary under the plan has no severe and prolonged impairments with the effects described in paragraph 118.3(1)(a.1); and
(d)the time immediately following the end of a calendar year if
(i)in the year the total amount of disability assistance payments made from the plan to the beneficiary is less than the amount determined by the formula set out in paragraph (4)(l) in respect of the plan for the year (or such lesser amount as is supported by the property of the plan), and
(ii)the year is not the calendar year in which the plan became a specified disability savings plan.
(e) and (f)[Repealed, 2012, c. 31, s. 35]
Marginal note:Waiting period
(1.3)If at any time, a plan has ceased to be a specified disability savings plan because of subsection (1.2), then the holder of the plan may not make an election under subsection (1.1) until 24 months after that time.
Marginal note:Waiver
(1.4)The Minister may waive the application of subsections (1.2) or (1.3) if it is just and equitable to do so.
Marginal note:Beneficiary replacing holder
(1.5)Any holder of a disability savings plan who was a qualifying person in relation to the beneficiary under the plan at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definitionqualifying personin subsection (1) ceases to be a holder of the plan and the beneficiary becomes the holder of the plan if
(a)the beneficiary is determined to be contractually competent by a competent tribunal or other authority under the laws of a province or, in the issuer’s opinion after reasonable inquiry, the beneficiary’s contractual competence to enter into a disability savings plan is no longer in doubt; and
(b)the beneficiary notifies the issuer that the beneficiary chooses to become the holder of the plan.
Marginal note:Entity replacing holder
(1.6)If an entity described in subparagraph (a)(ii) or (iii) of the definitionqualifying personin subsection (1) is appointed in respect of a beneficiary of a disability savings plan and a holder of the plan was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of that definition,
(a)the entity shall notify the issuer without delay of the entity’s appointment;
(b)the holder of the plan ceases to be a holder of the plan; and
(c)the entity becomes the holder of the plan.
Marginal note:Rules applicable in case of dispute
(1.7)If a dispute arises as a result of an issuer’s acceptance of a qualifying family member who was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definitionqualifying personin subsection (1) as a holder of a disability savings plan, from the time the dispute arises until the time that the dispute is resolved or an entity becomes the holder of the plan under subsection (1.5) or (1.6), the holder of the plan shall use their best efforts to avoid any reduction in the fair market value of the property held by the plan trust, having regard to the reasonable needs of the beneficiary under the plan.
Marginal note:Registered status
(2)The conditions that must be satisfied for a disability savings plan of a beneficiary to be a registered disability savings plan are as follows:
(a)before the plan is entered into, the issuer of the plan has received written notification from the Minister that, in the Minister’s opinion, a plan whose terms are identical to the plan would, if entered into by entities eligible to enter into a disability savings plan, comply with the conditions in subsection (4);
(b)at or before the time the plan is entered into, the issuer of the plan has been provided with the Social Insurance Number of the beneficiary and the Social Insurance Number or business number, as the case may be, of each entity with which the issuer has entered into the plan; and
(c)at the time the plan is entered into, the beneficiary is resident in Canada, except that this condition does not apply if, at that time, the beneficiary is the beneficiary under another registered disability savings plan.
Marginal note:Registered status nullified
(3)A disability savings plan is deemed never to have been a registered disability savings plan unless
(a)the issuer of the plan provides without delay notification of the plan’s establishment in prescribed form containing prescribed information to the specified Minister; and
(b)if the beneficiary is the beneficiary under another registered disability savings plan at the time the plan is established, that other plan is terminated without delay.
Marginal note:Plan conditions
(4)The conditions referred to in paragraph (2)(a) are as follows:
(a)the plan stipulates
(i)that it is to be operated exclusively for the benefit of the beneficiary under the plan,
(ii)that the designation of the beneficiary under the plan is irrevocable, and
(iii)that no right of the beneficiary to receive payments from the plan is capable, either in whole or in part, of surrender or assignment;
(b)the plan allows an entity to acquire rights as a successor or assignee of a holder of the plan only if the entity is
(i)the beneficiary,
(ii)the beneficiary’s estate,
(iii)a holder of the plan at the time the rights are acquired,
(iv)a qualifying person in relation to the beneficiary at the time the rights are acquired, or
(v)an individual who is a legal parent of the beneficiary and was previously a holder of the plan;
(c)the plan provides that, where an entity (other than a qualifying family member in relation to the beneficiary) that is a holder of the plan ceases to be a qualifying person in relation to the beneficiary at any time, the entity ceases at that time to be a holder of the plan;
(d)the plan provides for there to be at least one holder of the plan at all times that the plan is in existence and may provide for the beneficiary (or the beneficiary’s estate, as the case may be) to automatically acquire rights as a successor or assignee of a holder in order to ensure compliance with this requirement;
(e)the plan provides that, where an entity becomes a holder of the plan after the plan is entered into, the entity is prohibited (except to the extent otherwise permitted by the Minister or the specified Minister) from exercising their rights as a holder of the plan until the issuer has been advised of the entity having become a holder of the plan and been provided with the entity’s Social Insurance Number or business number, as the case may be;
(f)the plan prohibits contributions from being made to the plan at any time if
(i)the beneficiary is not a DTC-eligible individual in respect of the taxation year that includes that time, unless the contribution is a specified RDSP payment in respect of the beneficiary, or
(ii)the beneficiary died before that time;
(g)the plan prohibits a contribution from being made to the plan at any time if
(i)the beneficiary attained the age of 59 years before the calendar year that includes that time,
(ii)the beneficiary is not resident in Canada at that time, or
(iii)the total of the contribution and all other contributions made at or before that time to the plan or to any other registered disability savings plan of the beneficiary would exceed $200,000;
(h)the plan prohibits contributions to the plan by any entity that is not a holder of the plan, except with the written consent of a holder of the plan;
(i)the plan provides that no payments may be made from the plan other than
(i)disability assistance payments,
(ii)a transfer in accordance with subsection (8), and
(iii)repayments under theCanada Disability Savings Actor a designated provincial program;
(j)the plan prohibits a disability assistance payment from being made if it would result in the fair market value of the property held by the plan trust immediately after the payment being less than the assistance holdback amount in relation to the plan;
(k)the plan provides for lifetime disability assistance payments to begin to be paid no later than the end of the particular calendar year in which the beneficiary attains the age of 60 years or, if the plan is established in or after the particular year, in the calendar year following the calendar year in which the plan is established;
(l)the plan provides that the total amount of lifetime disability assistance payments made in any calendar year (other than a specified year for the plan) shall not exceed the amount determined by the formula
A/(B + 3 - C) + D
where
(i)a periodic payment under an annuity contract held by the plan trust at the beginning of the calendar year (other than an annuity contract described at the beginning of the calendar year in paragraph (b) of the definitionqualified investmentin subsection (1)) that is paid to the plan trust in the calendar year, or
(ii)if the periodic payment under such an annuity contract is not made to the plan trust because the plan trust disposed of the right to that payment in the calendar year, a reasonable estimate of that payment on the assumption that the annuity contract had been held throughout the calendar year and no rights under the contract were disposed of in the calendar year;
(m)the plan stipulates whether or not disability assistance payments that are not lifetime disability assistance payments are to be permitted under the plan;
(n)the plan provides that when the total of all amounts paid under theCanada Disability Savings Actbefore the beginning of a calendar year to any registered disability savings plan of the beneficiary exceeds the total of all contributions made before the beginning of the calendar year to any registered disability savings plan of the beneficiary,
(i)if the calendar year is not a specified year for the plan and the conditions in clauses (p)(ii)(A) and (B) are not met in the calendar year, the total amount of disability assistance payments made from the plan to the beneficiary in the calendar year shall not exceed the specified maximum amount for the calendar year, except that, in calculating that total amount, any payment made following a transfer in the calendar year from another plan in accordance with subsection (8) is to be disregarded if it is made
(A)to satisfy an undertaking described in paragraph (8)(d), or
(B)in lieu of a payment that would otherwise have been permitted to be made from the other plan in the calendar year had the transfer not occurred, and
(ii)if the beneficiary attained the age of 27 years, but not the age of 59 years, before the calendar year, the beneficiary has the right to direct that, within the constraints imposed by subparagraph (i) and paragraph (j), one or more disability assistance payments be made from the plan to the beneficiary in the calendar year;
(iii)[Repealed, 2012, c. 31, s. 35]
(n.1)the plan provides that, if the beneficiary attained the age of 59 years before a calendar year, the total amount of disability assistance payments made from the plan to the beneficiary in the calendar year shall not be less than the amount determined by the formula set out in paragraph (l) in respect of the plan for the calendar year (or such lesser amount as is supported by the property of the plan trust);
(o)the plan provides that, at the direction of the holders of the plan, the issuer shall transfer all of the property held by the plan trust (or an amount equal to its value) to another registered disability savings plan of the beneficiary, together with all information in its possession (other than information provided to the issuer of the other plan by the specified Minister) that may reasonably be considered necessary for compliance, in respect of the other plan, with the requirements of this Act and with any conditions and obligations imposed under theCanada Disability Savings Act; and
(p)the plan provides for any amounts remaining in the plan (after taking into consideration any repayments under theCanada Disability Savings Actor a designated provincial program) to be paid to the beneficiary or the beneficiary’s estate, as the case may be, and for the plan to be terminated, by the end of the calendar year following the earlier of
(i)the calendar year in which the beneficiary dies, and
(ii)the first calendar year in which the following conditions are met:
(A)the holder of the plan has requested that the issuer terminate the plan, and
(B)throughout the year, the beneficiary has no severe and prolonged impairments with the effects described in paragraph 118.3(1)(a.1).
Marginal note:Transitional rule
(4.01)If, after March 18, 2019 and before 2021, a registered disability savings plan would otherwise be required to be terminated because of subparagraph (4)(p)(ii) or any terms of the plan provided because of that subparagraph, then notwithstanding that subparagraph or those terms, the plan is not required to be terminated before 2021 in either of the following circumstances:
(a)the beneficiary of the plan has no severe and prolonged impairments with the effects described in paragraph 118.3(1)(a.1), or
(b)an election was made under subsection (4.1), as it read immediately before 2021, and the election ceases to be valid after March 18, 2019 and before 2021 because of paragraph (4.2)(b), as it read immediately before 2021.
(4.1)[Repealed, 2021, c. 23, s. 33]
(4.2)[Repealed, 2021, c. 23, s. 33]
(4.3)[Repealed, 2021, c. 23, s. 33]
Marginal note:Trust not taxable
(5)No tax is payable under this Part by a trust on the taxable income of the trust for a taxation year if, throughout the period in the year during which the trust was in existence, the trust was governed by a registered disability savings plan, except that
(a)tax is payable under this Part by the trust on its taxable income for the year if the trust has borrowed money
(i)in the year, or
(ii)in a preceding taxation year and has not repaid it before the beginning of the year; and
(b)if the trust is not otherwise taxable under paragraph (a) on its taxable income for the year and, at any time in the year, it carries on one or more businesses or holds one or more properties that are not qualified investments for the trust, tax is payable under this Part by the trust on the amount that its taxable income for the year would be if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or losses other than from dispositions of those properties, and for this purpose,
(i)“income” includes dividends described in section 83, and
(ii)paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.
Marginal note:Taxation of disability assistance payments
(6)Where a disability assistance payment is made from a registered disability savings plan of a beneficiary, the amount, if any, by which the amount of the payment exceeds the non-taxable portion of the payment shall be included,
(a)if the beneficiary is alive at the time the payment is made, in computing the beneficiary’s income for the beneficiary’s taxation year in which the payment is made; and
(b)in any other case, in computing the income of the beneficiary’s estate for the estate’s taxation year in which the payment is made.
Marginal note:Non-taxable portion of disability assistance payment
(7)The non-taxable portion of a disability assistance payment made at a particular time from a registered disability savings plan of a beneficiary is the lesser of the amount of the disability assistance payment and the amount determined by the formula
A × B/C + D
where
(a)the total of all amounts each of which is the amount of a contribution made before the particular time to any registered disability savings plan of the beneficiary
exceeds
(b)the total of all amounts each of which is the amount that would be the non-taxable portion of a disability assistance payment made before the particular time from any registered disability savings plan of the beneficiary, if the formula in this subsection were read without reference to the description of D;
(a)has not been waived, cancelled or refunded; and
(b)has not otherwise been used in the year or a preceding year in computing the non-taxable portion of a disability assistance payment made from the plan or another plan for which the plan was substituted.
Marginal note:Transfer of funds
(8)An amount is transferred from a registered disability savings plan (in this subsection referred to as the “prior plan”) of a beneficiary in accordance with this subsection if
(a)the amount is transferred directly to another registered disability savings plan (in this subsection referred to as the “new plan”) of the beneficiary;
(b)the prior plan is terminated immediately after the transfer;
(c)the issuer of the prior plan provides the issuer of the new plan with all information in its possession concerning the prior plan (other than information provided to the issuer of the new plan by the specified Minister) as may reasonably be considered necessary for compliance, in respect of the new plan, with the requirements of this Act and with any conditions and obligations imposed under theCanada Disability Savings Act; and
(d)where the beneficiary attained the age of 59 years before the calendar year in which the transfer occurs, the issuer of the new plan undertakes to make (in addition to any other disability assistance payments that would otherwise have been made from the new plan in the year) one or more disability assistance payments from the plan in the year, the total of which is equal to the amount, if any, by which
(i)the total amount of disability assistance payments that would have been required to be made from the prior plan in the year if the transfer had not occurred
exceeds
(ii)the total amount of disability assistance payments made from the prior plan in the year.
Marginal note:No income inclusion on transfer
(9)An amount transferred in accordance with subsection (8) is not, solely because of that transfer, to be included in computing the income of any taxpayer.
Marginal note:Non-compliance — cessation of registered status
(10)Where, at any particular time, a registered disability savings plan is non-compliant as described in subsection (11),
(a)the plan ceases, as of the particular time, to be a registered disability savings plan (other than for the purposes of applying, as of the particular time, this subsection and subsection (11));
(b)a disability assistance payment is deemed to have been made from the plan at the time (in this subsection referred to as the “relevant time”) immediately before the particular time to the beneficiary under the plan (or, if the beneficiary is deceased at the relevant time, to the beneficiary’s estate), the amount of which payment is equal to the amount, if any, by which
(i)the fair market value of the property held by the plan trust at the relevant time
exceeds
(ii)the assistance holdback amount in relation to the plan; and
(c)if the plan is non-compliant because of a payment that is not in accordance with paragraph (4)(j), a disability assistance payment is deemed to have been made from the plan at the relevant time (in addition to the payment deemed by paragraph (b) to have been made) to the beneficiary under the plan (or, if the beneficiary is deceased at the relevant time, to the beneficiary’s estate)
(i)the amount of which payment is equal to the amount by which the lesser of
(A)the assistance holdback amount in relation to the plan, and
(B)the fair market value of the property held by the plan trust at the relevant time
exceeds
(C)the fair market value of the property held by the plan trust immediately after the particular time, and
(ii)the non-taxable portion of which is deemed to be nil.
Marginal note:Non-compliance
(11)A registered disability savings plan is non-compliant
(a)at any time that the plan fails to comply with a condition in subsection (4);
(b)at any time that there is a failure to administer the plan in accordance with its terms (other than those terms which the plan is required by subparagraph (4)(a)(i) to stipulate); and
(c)at any time that a person fails to comply with a condition or an obligation imposed, with respect to the plan, under theCanada Disability Savings Act, and the specified Minister has notified the Minister that, in the specified Minister’s opinion, it is appropriate that the plan be considered to be non-compliant because of the failure.
Marginal note:Non-application of subsection (11)
(12)Where a registered disability savings plan would otherwise be non-compliant at a particular time because of a failure described in paragraph (11)(a) or (b),
(a)the Minister may waive the application of the relevant paragraph with respect to the failure, if it is just and equitable to do so;
(b)the Minister may deem the failure to have occurred at a later time;
(c)if the failure consists of the making of a contribution that is prohibited under any of paragraphs (4)(f) to (h), an amount equal to the amount of the contribution has been withdrawn from the plan within such period as is specified by the Minister and the Minister has approved the application of this paragraph with respect to the failure,
(i)the contribution is deemed never to have been made, and
(ii)the withdrawal is deemed not to be a disability assistance payment and not to be in contravention of the condition in paragraph (4)(i); or
(d)if the failure consists of the plan not being terminated by the time set out in paragraph (4)(p) and the failure was due to the issuer being unaware of, or there being some uncertainty as to, the existence of circumstances requiring that the plan be terminated,
(i)the Minister may specify a later time by which the plan is to be terminated (but no later than is reasonably necessary for the plan to be terminated in an orderly manner), and
(ii)paragraph (4)(p) and the plan terms are, for the purposes of paragraphs (11)(a) and (b), to be read as though they required the plan to be terminated by the time so specified.
Marginal note:Obligations of issuer
(13)The issuer of a registered disability savings plan shall,
(a)where an entity becomes a holder of the plan after the plan is entered into, so notify the specified Minister in prescribed form containing prescribed information on or before the day that is 60 days after the later of
(i)the day on which the issuer is advised of the entity having become a holder of the plan, and
(ii)the day on which the issuer is provided with the new holder’s Social Insurance Number or business number, as the case may be;
(b)not amend the plan before having received notification from the Minister that, in the Minister’s opinion, a plan whose terms are identical to the amended plan would, if entered into by entities eligible to enter into a disability savings plan, comply with the conditions in subsection (4);
(c)where the issuer becomes aware that the plan is, or is likely to become, non-compliant (determined without reference to paragraph (11)(c) and subsection (12)), notify the Minister and the specified Minister of this fact on or before the day that is 30 days after the day on which the issuer becomes so aware; and
(d)[Repealed, 2017, c. 33, s. 58]
(e)if the issuer enters into the plan with a qualifying family member who was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definitionqualifying personin subsection (1),
(i)so notify the beneficiary under the plan without delay in writing and include in the notification information setting out the circumstances in which the holder of the plan may be replaced under subsection (1.5) or (1.6), and
(ii)collect and use any information provided by the holder of the plan that is relevant to the administration and operation of the plan.
Marginal note:Issuer’s liability
(14)If, after reasonable inquiry, an issuer of a disability savings plan is of the opinion that an individual’s contractual competence to enter into a disability savings plan is in doubt, no action lies against the issuer for entering into a plan, under which the individual is the beneficiary, with a qualifying family member who was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definitionqualifying personin subsection (1).
Marginal note:Definitions
146.5(1)The following definitions apply in this section.
advanced life deferred annuitymeans a contract for an annuity that meets the following conditions:
(a)it is issued by a licensed annuities provider;
(b)it specifies that it is intended to qualify as an advanced life deferred annuity under this Act;
(c)periodic annuity payments under the contract
(i)commence to be paid no later than the end of the calendar year in which the annuitant attains 85 years of age, and
(ii)are payable for the life of the annuitant or for the lives, jointly, of the annuitant and the annuitant’s spouse or common-law partner;
(d)periodic annuity payments under the contract are payable
(i)in equal amounts, or
(ii)in amounts that are not equal only because the payments
(A)are adjusted in whole or in part to reflect
(I)increases in the Consumer Price Index, as published by Statistics Canada under the authority of theStatistics Act, or
(II)increases at a rate specified in the contract, not exceeding 2% per annum, or
(B)are reduced on the death of the annuitant or the annuitant’s spouse or common-law partner;
(e)if an annuity is payable for the lives, jointly, of the annuitant and the annuitant’s spouse or common-law partner and the annuitant dies before payments commence to be paid, then the payments to the annuitant’s spouse or common-law partner shall
(i)commence no later than the date that they would have commenced if the annuitant were alive, and
(ii)be adjusted in accordance with generally accepted actuarial principles if the payments commence before the date they would have commenced if the annuitant were alive;
(f)the amount to be paid, if any, to one or more beneficiaries under the contract after the death of the annuitant — or, in the case of a joint-lives annuity, after the last death of the annuitant and the annuitant’s spouse or common-law partner — shall
(i)be paid as soon as practicable after the death of the annuitant or the last death of the annuitant and the annuitant’s spouse or common-law partner, as the case may be, and
(ii)not exceed the amount, if any, by which the total amount transferred to acquire the annuity exceeds the total amount of annuity payments made under the contract;
(g)it provides that all or part of the amount transferred to acquire the annuity may be refunded, if
(i)the refund is paid to reduce the amount of tax that would otherwise be payable by the annuitant under Part XI, and
(ii)the refund is
(A)paid to the annuitant, or
(B)transferred directly to
(I)the issuer of a registered retirement savings plan of the annuitant,
(II)the carrier of a registered retirement income fund of the annuitant,
(III)the administrator of a pooled registered pension plan under which the annuitant is a member, or
(IV)the administrator of a money purchase provision of a registered pension plan under which the annuitant is a member;
(h)if it provides that the spouse or common-law partner may request a payment in a single amount in full or partial satisfaction of the spouse’s or common-law partner’s entitlement to payments described in subparagraph (c)(ii) as a consequence of the death of the annuitant, then the single amount cannot exceed the present value (at the time the single amount is paid) of the other payments that, as a consequence of the payment of the single amount, cease to be provided;
(i)no right under the contract is capable of being assigned, charged, anticipated, given as security or surrendered; and
(j)it does not provide for any payment under the contract except as specified in this definition. (rente viagère différée à un âge avancé)
annuitantmeans an individual who has acquired a contract for an annuity from a licensed annuities provider. (rentier)
beneficiary, under a contract for an annuity, means an individual who has a right under the contract to receive a payment after the death of the annuitant or the annuitant’s spouse or common-law partner. (bénéficiaire)
Marginal note:Taxable amount — annuity payments
(2)Amounts (excluding amounts described in paragraph (f) or (g) of the definitionadvanced life deferred annuityin subsection (1) and including amounts deemed to have been received under paragraph (7)(a)) received by a taxpayer in a taxation year under an advanced life deferred annuity shall be included in computing the income of the taxpayer for the taxation year.
Marginal note:Taxable amount — death benefits
(3)Amounts described in paragraph (f) of the definitionadvanced life deferred annuityin subsection (1) received by a taxpayer in a taxation year under an advanced life deferred annuity as a result of the death of an individual shall be included in computing the income of
(a)the taxpayer for the taxation year, if the taxpayer is
(i)the spouse or common-law partner of the individual, or
(ii)a child or grandchild of the individual who was, immediately before the death of the individual, financially dependent on the individual for support; and
(b)the individual for the taxation year in which the individual died, in any other case.
Marginal note:Taxation of refunds
(4)The amount of a refund described in clause (g)(ii)(A) of the definitionadvanced life deferred annuityin subsection (1) that is paid to an annuitant shall be included in the income of the annuitant.
Marginal note:Treatment of amount transferred
(5)If an amount is paid in circumstances described in clause (g)(ii)(B) of the definitionadvanced life deferred annuityin subsection (1),
(a)the amount shall not, by reason only of that payment, be included by reason of paragraph 56(1)(z.5) in computing the income of any taxpayer;
(b)no deduction may be made under any provision of this Act in respect of the amount in computing the income of any taxpayer;
(c)in the case of an amount paid to a registered pension plan, the amount is deemed not to be a contribution for the purpose of applying Parts LXXXIII and LXXXV of theIncome Tax Regulations; and
(d)in the case of an amount paid to a registered retirement savings plan or a pooled registered pension plan, the amount shall not be included in determining the amount of the individual’s undeducted RRSP premiums under subsection 204.2(1.2).
Marginal note:Deemed payment to beneficiary
(6)An amount is deemed to have been received at a particular time by abeneficiary(as defined in subsection 108(1)) of a deceased annuitant’s estate, and not by the legal representative of the deceased annuitant, if
(a)the amount is described in paragraph (f) of the definitionadvanced life deferred annuityin subsection (1);
(b)the amount was paid to the legal representative;
(c)the beneficiary is described in paragraph (3)(a);
(d)the beneficiary is entitled to the amount in full or partial satisfaction of their rights as a beneficiary under the deceased annuitant’s estate; and
(e)the amount is designated jointly by the legal representative and the beneficiary in prescribed form filed with the Minister.
Marginal note:Amended contract
(7)If an amendment made at any time to a contract results in it no longer meeting the conditions in the definitionadvanced life deferred annuityin subsection (1), the following rules apply:
(a)the annuitant under the contract immediately before that time is deemed to have received under the contract at that time an amount equal to the fair market value of their interest in the contract at that time; and
(b)the annuitant is deemed to have acquired their interest in the contract at that time at a cost equal to the fair market value of the interest at that time.
Marginal note:Definitions
146.6(1)The following definitions apply in this section.
annual FHSA limitof a taxpayer for a taxation year is the least of
(a)the amount determined by the formula
A + B − C
where
(i)if the taxpayer’s maximum participation period has not begun in a preceding taxation year, nil, and
(ii)in any other case, the amount by which the amount determined under this paragraph for the preceding taxation year exceeds the annual FHSA limit for that taxation year, and
(b)the amount determined by the formula
$8,000 + D − (E − F − G)
where
(i)if the taxpayer had not started their maximum participation period in the preceding taxation year, nil, or
(ii)in any other case, the lesser of
(A)the amount determined by the formula
H − I
where
(B)$8,000 plus the amount of the FHSA carryforward for the preceding taxation year, and
(c)nil, if the taxation year is after the year in which
(i)the taxpayer’s maximum participation period has ended, or
(ii)the taxpayer has died. (plafond annuel au titre du CELIAPP)
beneficiaryunder a FHSA means an individual (including an estate) or a qualified donee that has a right to receive a distribution from the FHSA after the death of the holder of the FHSA. (bénéficiaire)
first home savings accountorFHSAmeans an arrangement registered with the Minister that has not ceased to be a FHSA under subsection 146.6(16). (compte d’épargne libre d’impôt pour l’achat d’une première propriétéouCELIAPP)
FHSA carryforwardof a taxpayer for a taxation year is the least of
(a)$8,000,
(b)the amount determined by the formula
A − B
where
(c)nil, if the taxpayer had not started their maximum participation period prior to the taxation year. (montant des cotisations reporté)
holderof an arrangement means
(a)until the death of the individual who entered into the arrangement, the individual; and
(b)after the death of the individual, the individual’s survivor, if the survivor is designated under the arrangement to become a successor of the holder and is a qualifying individual. (titulaire)
issuerof an arrangement means the person described as the issuer in the definitionqualifying arrangement. (émetteur)
maximum participation periodof an individual means the period that
(a)begins when an individual first enters into a qualifying arrangement; and
(b)ends at the end of the year following the year in which the earliest of the following events occur:
(i)the 14th anniversary of the date the individual first enters into a qualifying arrangement,
(ii)the individual attains 70 years of age, and
(iii)the individual first makes a qualifying withdrawal from a FHSA. (période de participation maximale)
non-qualified investmenthas the same meaning as in subsection 207.01(1). (placement non admissible)
qualified investmenthas the same meaning as in subsection 207.01(1). (placement admissible)
qualifying arrangement, at a particular time, means an arrangement
(a)that is entered into after March 2023 between a person (in this definition referred to as the “issuer”) and a qualifying individual;
(b)that is
(i)an arrangement in trust with an issuer that is a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee,
(ii)an annuity contract with an issuer that is a licensed annuities provider, or
(iii)a deposit with an issuer that is
(A)a person that is, or is eligible to become, a member of the Canadian Payments Association, or
(B)a credit union that is a shareholder or member of a body corporate referred to as a “central” for the purposes of theCanadian Payments Act;
(c)that provides for contributions to be made under the arrangement to the issuer in consideration of, or to be used, invested or otherwise applied for the purpose of, the issuer making distributions under the arrangement to the holder;
(d)under which the issuer and the qualifying individual agree, at the time the arrangement is entered into, that the issuer will file with the Minister an election to register the arrangement as a FHSA, in the prescribed form and manner under the Social Insurance Number of the qualifying individual with whom the arrangement was entered into; and
(e)that, at all times throughout the period that begins at the time the arrangement is entered into and that ends at the particular time, complies with the conditions in subsection (2). (arrangement admissible)
qualifying homemeans
(a)a housing unit located in Canada; or
(b)a share of the capital stock of a cooperative housing corporation, the holder of which is entitled to possession of a housing unit located in Canada, except that, where the context so requires, a reference to a share with a right to possession of a housing unit described means the housing unit to which the share relates. (habitation admissible)
qualifying individual, at a particular time, means an individual who
(a)is a resident of Canada;
(b)is at least 18 years of age; and
(c)did not, at any prior time in the calendar year or in the preceding four calendar years, inhabit as a principal place of residence a qualifying home (or what would be a qualifying home if it were located in Canada) that was owned, whether jointly with another person or otherwise, by
(i)the individual, or
(ii)a person who is the spouse or common-law partner of the individual at the particular time. (particulier déterminé)
qualifying withdrawalof an individual means an amount received at a particular time by the individual as a benefit out of or under a FHSA if
(a)the amount is received as a result of the individual’s written request in prescribed form in which the individual sets out the location of a qualifying home that the individual has begun, or intends not later than one year after its acquisition by the individual to begin, using as a principal place of residence;
(b)the individual
(i)is a resident of Canada throughout the period that begins at the particular time and ends at the earlier of the time of the individual’s death and the time at which the individual acquires the qualifying home, and
(ii)does not have an owner-occupied home within the meaning of paragraph 146.01(2)(a.1) in the period
(A)that begins at the beginning of the fourth preceding calendar year that ended before the particular time, and
(B)that ends on the 31st day before the particular time;
(c)the individual entered into an agreement in writing before the particular time for the acquisition or construction of the qualifying home before October 1 of the calendar year following the year in which the amount was received; and
(d)the individual did not acquire the qualifying home more than 30 days before the particular time. (retrait admissible)
survivorof a qualifying individual means another individual who is, immediately before the qualifying individual’s death, a spouse or common-law partner of the qualifying individual. (survivant)
Marginal note:Qualifying arrangement conditions
(2)For the purposes of paragraph (e) of the definitionqualifying arrangementin subsection (1), the conditions are as follows:
(a)the arrangement requires that it be maintained for the exclusive benefit of the holder (determined without regard to any right of a person to receive a payment out of or under the arrangement only on or after the death of the holder);
(b)the arrangement prohibits, while there is a holder of the arrangement, anyone that is neither the holder nor the issuer of the arrangement from having rights under the arrangement relating to the amount and timing of distributions and the investing of funds;
(c)the arrangement prohibits anyone other than the holder from making contributions under the arrangement;
(d)the arrangement permits distributions to be made to reduce the amount of tax otherwise payable by the holder under section 207.021;
(e)the arrangement provides that, at the direction of the holder, the issuer shall transfer all or any part of the property held in connection with the arrangement (or an amount equal to its value) to another FHSA of the holder or to an RRSP or a RRIF under which the holder is the annuitant;
(f)if the arrangement is an arrangement in trust, it prohibits the trust from borrowing money or other property for the purposes of the arrangement;
(g)the arrangement provides that it ceases to be a FHSA after the end of the holder’s maximum participation period;
(h)the arrangement, if it involves an issuer described in subparagraph (b)(iii) of the definitionqualifying arrangementin subsection (1), includes provisions stipulating that the issuer has no right of offset with respect to the property held under the arrangement in connection with any debt or obligation owing to the issuer; and
(i)the arrangement meets prescribed conditions.
Marginal note:Trust not taxable
(3)No tax is payable under this Part by a trust that is governed by a FHSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,
(a)income includes dividends described in section 83;
(b)the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition; and
(c)the trust’s income shall be computed without reference to subsection 104(6).
Marginal note:Carrying on a business
(4)If tax is payable under this Part for a taxation year by application of subsection (3) by a trust that is governed by a FHSA that carries on one or more businesses at any time in the taxation year,
(a)the holder of the FHSA is jointly and severally, or solidarily, liable with the trust to pay each amount payable under this Act by the trust that is attributable to that business or those businesses; and
(b)the issuer’s liability at any time for amounts payable under this Act in respect of that business or those businesses may not exceed the total of
(i)the amount of property of the trust that the issuer is in possession or control of at that time in its capacity as legal representative of the trust, and
(ii)the total amount of all distributions of property from the trust on or after the date that the notice of assessment was sent in respect of the taxation year and before that time.
Marginal note:FHSA deduction
(5)There may be deducted in computing a taxpayer’s income for a taxation year an amount not exceeding the lesser of
(a)the amount determined by the formula
A − B
where
(b)the amount by which $40,000 exceeds the total of
(i)the amount determined for B in paragraph (a), and
(ii)all amounts transferred in the year or a preceding taxation year under paragraph 146(16)(a.2) to a FHSA under which the taxpayer is the holder.
Marginal note:Withdrawals included in income
(6)There shall be included in computing the income of a taxpayer for a taxation year the total of all amounts received by the taxpayer in the year out of or under a FHSA of which the taxpayer is the holder, other than an amount that is
(a)a qualifying withdrawal;
(b)adesignated amountas defined in subsection 207.01(1); or
(c)otherwise included in computing the income of the taxpayer.
Marginal note:Transfer of amounts
(7)Subsection (8) applies to an amount transferred at a particular time from a FHSA (in this subsection referred to as the “transferor FHSA”) if the following conditions are met:
(a)the amount is transferred on behalf of an individual who is
(i)the holder of the transferor FHSA,
(ii)a spouse or common-law partner or former spouse or common-law partner of the holder of the transferor FHSA and who is entitled to the amount under a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the holder and the individual, in settlement of rights arising out of, or on a breakdown of, their marriage or common-law partnership, or
(iii)entitled to the amount as a consequence of the death of the holder of the transferor FHSA and was a spouse or common-law partner of the holder immediately before the death;
(b)the amount is transferred directly to
(i)another FHSA of the individual, or
(ii)an RRSP or a RRIF under which the individual is the annuitant; and
(c)if the transfer is not made to another FHSA of the holder of the transferor FHSA, the amount does not exceed the amount determined by the formula
A − B
where
Marginal note:Tax-free transfer
(8)If this subsection applies to an amount transferred from a FHSA,
(a)the amount shall not, by reason only of the transfer, be included in computing the income of any taxpayer; and
(b)no deduction may be made under this Part in respect of the amount in computing the income of any taxpayer.
Marginal note:Taxable transfer
(9)If an amount is transferred from a FHSA to a plan or fund (in this subsection referred to as the “transferee plan”) that is a FHSA, RRSP or RRIF and subsection (8) does not apply to the amount transferred,
(a)the amount is deemed to have been received from the FHSA by the holder of the FHSA;
(b)the holder or annuitant of the transferee plan is deemed to have paid the amount as a contribution or premium to the transferee plan; and
(c)in the case that the transferee plan is a RRIF, for the purposes of subsection 146(5) and Part X.1, the annuitant of the transferee plan is deemed to have paid the amount at the time of the transfer as a premium under a RRSP under which the annuitant is theannuitant(as defined in subsection 146(1)).
Marginal note:Apportionment of transferred amount
(10)If an amount is transferred from a FHSA to another FHSA, or to a RRSP or RRIF, and a portion but not all of the amount is transferred in accordance with subsection (7),
(a)subsection (8) applies to the portion of the amount transferred in accordance with subsection (7), and
(b)subsection (9) applies with respect to the remainder of the amount.
Marginal note:Security for loan
(11)If at any time in a taxation year a trust governed by a FHSA uses or permits to be used any property of the trust as security for a loan, the fair market value of the property at the time it commenced to be so used shall be included in computing the income for the year of the holder of the FHSA at that time.
Marginal note:Recovery of property used as security
(12)If in a taxation year a property described in subsection (11) ceases to be used as security for a loan, there may be deducted, in computing the income of the holder of the relevant FHSA for the taxation year, an amount equal to the amount determined by the formula
A − B
where
Marginal note:Successor holder
(13)If the holder of a FHSA dies and the holder’s survivor is designated as the successor holder of the FHSA, the survivor is, immediately after the time of death, deemed to have entered into a new qualifying arrangement in respect of the FHSA unless
(a)the survivor is a qualifying individual and the balance of the FHSA is transferred to a RRSP or a RRIF of the survivor, or distributed to the survivor in accordance with subsection (14), by the end of the year following the year of death; or
(b)the survivor is not a qualifying individual, in which case the balance of the FHSA is to be transferred to a RRSP or a RRIF of the survivor, or distributed to the survivor in accordance with subsection (14), by the end of the year following the year of death.
Marginal note:Distribution on death
(14)If, as a consequence of the death of the holder of a FHSA, an amount is distributed in a taxation year from the FHSA to, or on behalf of, a beneficiary, the amount shall be included in computing the beneficiary’s income for the year.
Marginal note:Deemed transfer or distribution
(15)If an amount is distributed at any time from the FHSA of a deceased holder to the holder’s legal representative and a survivor of the holder is entitled to all or a portion of the amount in full or partial satisfaction of the survivor’s rights as a person beneficially interested under the deceased’s estate, the following rules apply:
(a)if a payment is made from the estate to a FHSA, RRSP or RRIF of the survivor, the payment is deemed to be a transfer from the FHSA to the extent that
(i)it is so designated jointly by the legal representative and the survivor in prescribed form filed with the Minister, and
(ii)it meets the conditions to be a transferred amount under subsections (7) to (10);
(b)if a payment is made from the estate to the survivor, the payment is deemed for the purposes of subsection (14) to be a distribution to the survivor as a beneficiary to the extent that it is so designated jointly by the legal representative and the survivor in prescribed form filed with the Minister; and
(c)for the purposes of subsection (14), the amount distributed to the legal representative from the FHSA is deemed to be reduced by the amounts designated in paragraphs (a) and (b).
Marginal note:Arrangement ceasing to be a FHSA
(16)An arrangement that was filed with the Minister as a FHSA ceases to be a FHSA at
(a)subject to paragraph (b), the earliest of the following times:
(i)the end of the maximum participation period of the last holder,
(ii)the end of the year following the year of the death of the last holder,
(iii)the time at which the arrangement ceases to be a qualifying arrangement, or
(iv)the time at which the arrangement is not administered in accordance with the conditions in subsection (2); or
(b)a later time specified by the Minister in writing.
Marginal note:Rules applicable on FHSA cessation
(17)If an arrangement ceases at a particular time to be a FHSA,
(a)subsection (3) does not apply to exempt the trust governed by the arrangement from tax under this Part on the taxable income of the trust earned after the particular time;
(b)if the taxpayer who was the holder under the arrangement is not deceased at the particular time, an amount equal to the fair market value of all property of the arrangement immediately before the particular time is to be included in the taxpayer’s income for the taxation year that includes the particular time; and
(c)if the last holder is deceased at the particular time, each beneficiary of the FHSA shall include in their income, for the taxation year that includes the particular time, the proportion of the fair market value of all property of the arrangement immediately before the particular time that the beneficiary is entitled to.
Marginal note:Regulations
(18)The Governor in Council may make regulations requiring issuers of FHSAs to file information returns in respect of FHSAs.
Marginal note:Definitions
147(1)In this section,
deferred profit sharing planmeans a profit sharing plan accepted by the Minister for registration for the purposes of this Act, on application therefor in prescribed manner by a trustee under the plan and an employer of employees who are beneficiaries under the plan, as complying with the requirements of this section; (régime de participation différée aux bénéfices)
forfeited amount, under a deferred profit sharing plan or a plan the registration of which has been revoked pursuant to subsection 147(14) or 147(14.1), means an amount to which a beneficiary under the plan has ceased to have any rights, other than the portion thereof, if any, that is payable as a consequence of the death of the beneficiary to a person who is entitled thereto by virtue of the participation of the beneficiary in the plan; (montant perdu)
licensed annuities providermeans a person licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada an annuities business; (fournisseur de rentes autorisé)
profit sharing planmeans an arrangement under which payments computed by reference to an employer’s profits from the employer’s business, or by reference to those profits and the profits, if any, from the business of a corporation with which the employer does not deal at arm’s length, are or have been made by the employer to a trustee in trust for the benefit of employees or former employees of that employer. (régime de participation aux bénéfices)
Marginal note:Participating employer
(1.1)An employer is considered to participate in a profit sharing plan where the employer makes or has made payments under the plan to a trustee in trust for the benefit of employees or former employees of the employer.
Marginal note:Acceptance of plan for registration
(2)The Minister shall not accept for registration for the purposes of this Act any profit sharing plan unless, in the Minister’s opinion, it complies with the following conditions:
(a)the plan provides that each payment made under the plan to a trustee in trust for the benefit of beneficiaries thereunder is the total of amounts each of which is required to be allocated by the trustee in the year in which it is received by the trustee, to the individual beneficiary in respect of whom the amount was so paid;
(a.1)the plan includes a stipulation that no contribution may be made to the plan other than
(i)a contribution made in accordance with the terms of the plan by an employer for the benefit of the employer’s employees who are beneficiaries under the plan, or
(ii)an amount transferred to the plan in accordance with subsection 147(19);
(b)the plan does not provide for the payment of any amount to an employee or other beneficiary thereunder by way of loan;
(c)the plan provides that no part of the funds of the trust governed by the plan may be invested in notes, bonds, debentures, bankers’ acceptances or similar obligations of
(i)an employer by whom payments are made in trust to a trustee under the plan for the benefit of beneficiaries thereunder, or
(ii)a corporation with which that employer does not deal at arm’s length;
(d)the plan provides that no part of the funds of the trust governed by the plan may be invested in shares of a corporation at least 50% of the property of which consists of notes, bonds, debentures, bankers’ acceptances or similar obligations of an employer or a corporation described in paragraph 147(2)(c);
(e)the plan includes a provision stipulating that no right of a person under the plan is capable of any surrender or assignment other than
(i)an assignment under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between an individual and the individual’s spouse or common-law partner, or former spouse or common-law partner, in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership,
(ii)an assignment by a deceased individual’s legal representative on the distribution of the individual’s estate, and
(iii)a surrender of benefits to avoid revocation of the plan’s registration;
(f)the plan includes a provision stipulating that each of the trustees under the plan shall be resident in Canada;
(g)the plan provides that, if a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee is not a trustee under the plan, there shall be at least 3 trustees under the plan who shall be individuals;
(h)the plan provides that all income received, capital gains made and capital losses sustained by the trust governed by the plan must be allocated to beneficiaries under the plan on or before a day 90 days after the end of the year in which they were received, made or sustained, as the case may be, to the extent that they have not been allocated in years preceding that year;
(i)the plan provides that each amount allocated or reallocated by a trustee under the plan to a beneficiary under the plan vests irrevocably in that beneficiary,
(i)in the case of an amount allocated or reallocated before 1991, at a time that is not later than 5 years after the end of the year in which it was allocated or reallocated, unless the beneficiary becomes, before that time, an individual who is not an employee of any employer who participates in the plan, and
(ii)in the case of any other amount, not later than the later of the time of allocation or reallocation and the day on which the beneficiary completes a period of 24 consecutive months as a beneficiary under the plan or under any other deferred profit sharing plan for which the plan can reasonably be considered to have been substituted;
(i.1)the plan requires that each forfeited amount under the plan and all earnings of the plan reasonably attributable thereto be paid to employers who participate in the plan, or be reallocated to beneficiaries under the plan, on or before the later of December 31, 1991 and December 31 of the year immediately following the calendar year in which the amount is forfeited, or such later time as is permitted in writing by the Minister under subsection 147(2.2);
(j)the plan provides that a trustee under the plan inform, in writing, all new beneficiaries under the plan of their rights under the plan;
(k)the plan provides that, in respect of each beneficiary under the plan who has been employed by an employer who participates in the plan, all amounts vested under the plan in the beneficiary become payable
(i)to the beneficiary, or
(ii)in the event of the beneficiary’s death, to another person designated by the beneficiary or to the beneficiary’s estate,
not later than the earlier of
(iii)the end of the year in which the beneficiary attains 71 years of age, and
(iv)90 days after the earliest of
(A)the death of the beneficiary,
(B)the day on which the beneficiary ceases to be employed by an employer who participates in the plan where, at the time of ceasing to be so employed, the beneficiary is not employed by another employer who participates in the plan, and
(C)the termination or winding-up of the plan,
except that the plan may provide that, on election by the beneficiary, all or any part of the amounts payable to the beneficiary may be paid
(v)in equal instalments payable not less frequently than annually over a period not exceeding 10 years from the day on which the amount became payable, or
(vi)by a trustee under the plan to a licensed annuities provider to purchase for the beneficiary an annuity (other than an advanced life deferred annuity), if
(A)payment of the annuity is to begin not later than the end of the year in which the beneficiary attains 71 years of age, and
(B)the guaranteed term, if any, of the annuity does not exceed 15 years;
(k.1)the plan requires that no benefit or loan, other than
(i)a benefit the amount of which is required to be included in computing the beneficiary’s income,
(ii)an amount referred to in paragraph 147(10)(b),
(ii.1)an amount paid pursuant to or under the plan by a trustee under the plan to a licensed annuities provider to purchase for a beneficiary under the plan an annuity to which subparagraph (k)(vi) or (19)(d)(v) applies,
(iii)a benefit derived from an allocation or reallocation referred to in subsection 147(2), or
(iv)the benefit derived from the provision of administrative or investment services in respect of the plan,
that is conditional in any way on the existence of the plan may be extended to a beneficiary thereunder or to a person with whom the beneficiary was not dealing at arm’s length;
(k.2)the plan provides that no individual who is
(i)a person related to the employer,
(ii)a person who is, or is related to, a specified shareholder of the employer or of a corporation related to the employer,
(iii)where the employer is a partnership, a person related to a member of the partnership, or
(iv)where the employer is a trust, a person who is, or is related to, a beneficiary under the trust
may become a beneficiary under the plan; and
(l)the plan, in all other respects, complies with regulations of the Governor in Council made on the recommendation of the Minister of Finance.
Marginal note:Terms limiting contributions
(2.1)The Minister shall not accept for registration for the purposes of this Act a profit sharing plan unless it includes terms that are adequate to ensure that the requirements of subsection 147(5.1) in respect of the plan will be satisfied for each calendar year.
Marginal note:Reallocation of forfeitures
(2.2)The Minister may, on written application, extend the time for satisfying the requirements of paragraph 147(2)(i.1) where
(a)the total of the forfeited amounts arising in a calendar year is greater than normal because of unusual circumstances; and
(b)the forfeited amounts are to be reallocated on a reasonable basis to a majority of beneficiaries under the plan.
Marginal note:Acceptance of employees profit sharing plan for registration
(3)The Minister shall not accept for registration for the purposes of this Act any employees profit sharing plan unless all the capital gains of or made by the trust governed by the plan before the date of application for registration of the plan and all the capital losses of or sustained by the trust before that date have been allocated by the trustee under the plan to employees and other beneficiaries thereunder.
Marginal note:Capital gains determined
(4)For the purposes of subsections 147(3) and 147(11), such amount as may be determined by the Minister, on request in prescribed manner by the trustee of a trust governed by an employees profit sharing plan, shall be deemed to be the amount of
(a)the capital gains of or made by the trust governed by the plan before the date of application for registration of the plan, or
(b)the capital losses of or sustained by the trust before that date,
as the case may be.
Marginal note:Registration date
(5)Where a profit sharing plan is accepted by the Minister for registration as a deferred profit sharing plan, the plan shall be deemed to have become registered as a deferred profit sharing plan
(a)on the date the application for registration of the plan was made; or
(b)where in the application for registration a later date is specified as the date on which the plan is to commence as a deferred profit sharing plan, on that date.
Marginal note:Contribution limits
(5.1)For the purposes of subsections 147(2.1) and 147(9) and paragraph 147(14)(c.4), the requirements of this subsection in respect of a deferred profit sharing plan are satisfied for a calendar year if, in the case of each beneficiary under the plan and each employer in respect of whom the beneficiary’s pension credit (as prescribed by regulation) for the year under the plan is greater than nil,
(a)the total of all amounts each of which is the beneficiary’s pension credit (as prescribed by regulation) for the year in respect of the employer under a deferred profit sharing plan does not exceed the lesser of
(i)1/2 of the money purchase limit for the year, and
(ii)18% of the amount that would be the beneficiary’s compensation (within the meaning assigned by subsection 147.1(1)) from the employer for the year if the definitioncompensationin subsection 147.1(1) were read without reference to paragraph (b) of that definition;
(b)the total of all amounts each of which is the beneficiary’s pension credit (as prescribed by regulation) for the year under a deferred profit sharing plan in respect of
(i)the employer, or
(ii)any other employer who, at any time in the year, does not deal at arm’s length with the employer
does not exceed 1/2 of the money purchase limit for the year; and
(c)the total of
(i)the beneficiary’s pension adjustment for the year in respect of the employer, and
(ii)the total of all amounts each of which is the beneficiary’s pension adjustment for the year in respect of any other employer who, at any time in the year, does not deal at arm’s length with the employer
does not exceed the lesser of
(iii)the money purchase limit for the year, and
(iv)18% of the total of all amounts each of which is the beneficiary’s compensation (within the meaning assigned by subsection 147.1(1)) for the year from the employer or any other employer referred to in subparagraph 147(5.1)(c)(ii).
(5.11)[Repealed, 2013, c. 34, s. 301]
Marginal note:Deferred plan not employees profit sharing plan
(6)For a period during which a plan is a deferred profit sharing plan, the plan shall be deemed, for the purposes of this Act, not to be an employees profit sharing plan.
Marginal note:No tax while trust governed by plan
(7)No tax is payable under this Part by a trust on the taxable income of the trust for a period during which the trust was governed by a deferred profit sharing plan.
Marginal note:Amount of employer’s contribution deductible
(8)Subject to subsection 147(9), there may be deducted in computing the income of an employer for a taxation year the total of all amounts each of which is an amount paid by the employer in the year or within 120 days after the end of the year to a trustee under a deferred profit sharing plan for the benefit of the employer’s employees who are beneficiaries under the plan, to the extent that the amount was paid in accordance with the terms of the plan and was not deducted in computing the employer’s income for a preceding taxation year.
Marginal note:Limitation on deduction
(9)Where the requirements of subsection 147(5.1) in respect of a deferred profit sharing plan are not satisfied for a calendar year by reason that the pension credits of a beneficiary under the plan in respect of a particular employer do not comply with paragraph 147(5.1)(a) or the beneficiary’s pension credits or pension adjustments in respect of a particular employer and other employers who do not deal at arm’s length with the particular employer do not comply with paragraph 147(5.1)(b) or 147(5.1)(c), the particular employer is not entitled to a deduction under subsection 147(8) in computing the particular employer’s income for any taxation year in respect of an amount paid to a trustee under the plan in the calendar year except to the extent expressly permitted in writing by the Minister, and, for the purposes of this subsection, an amount paid to a trustee of a deferred profit sharing plan in the first two months of a calendar year shall be deemed to have been paid in the immediately preceding year and not to have been paid in the year to the extent that the amount can reasonably be considered to be in respect of the immediately preceding year.
Marginal note:No deduction
(9.1)Notwithstanding subsection 147(8), no deduction shall be made in computing the income of an employer for a taxation year in respect of an amount paid by the employer for the year to a trustee under a deferred profit sharing plan in respect of a beneficiary who is described in paragraph 147(2)(k.2) in respect of the plan.
Marginal note:Amounts received taxable
(10)There shall be included in computing the income of a beneficiary under a deferred profit sharing plan for a taxation year the amount, if any, by which
(a)the total of all amounts received by the beneficiary in the year from a trustee under the plan (other than as a result of acquiring an annuity described in subparagraph 147(2)(k)(vi) under which the beneficiary is the annuitant)
exceeds
(b)the total of all amounts each of which is an amount determined for the year under subsection 147(10.1), 147(11) or 147(12) in relation to the plan and in respect of the beneficiary.
Marginal note:Single payment on retirement, etc.
(10.1)For the purposes of subsections 147(10) and 147(10.2), where a beneficiary under a deferred profit sharing plan has received, in a taxation year and when the beneficiary was resident in Canada, from a trustee under the plan a single payment that included shares of the capital stock of a corporation that was an employer who contributed to the plan or of a corporation with which the employer did not deal at arm’s length on the beneficiary’s withdrawal from the plan or retirement from employment or on the death of an employee or former employee and has made an election in respect thereof in prescribed manner and prescribed form, the amount determined for the year under this subsection in relation to the plan and in respect of the beneficiary is the amount, if any, by which the fair market value of those shares, immediately before the single payment was made, exceeds the cost amount to the plan of those shares at that time.
Marginal note:Idem
(10.2)Where a trustee under a deferred profit sharing plan has at any time in a taxation year made under the plan a single payment that included shares referred to in subsection 147(10.1) to a beneficiary who was resident in Canada at the time and the beneficiary has made an election under that subsection in respect of that payment,
(a)the trustee shall be deemed to have disposed of those shares for proceeds of disposition equal to the cost amount to the trust of those shares immediately before the single payment was made;
(b)the cost to the beneficiary of those shares shall be deemed to be their cost amount to the trust immediately before the single payment was made;
(c)the cost to the beneficiary of each of those shares shall be deemed to be the amount determined by the formula
A × B/C
where
(d)for the purposes of paragraph 60(j), the cost to the beneficiary of those shares is an eligible amount in respect of the beneficiary for the year.
Marginal note:Amount contributed to or forfeited under a plan
(10.3)There shall be included in computing the income for a taxation year of a beneficiary described in paragraph 147(2)(k.2) the total of amounts allocated or reallocated to the beneficiary in the year in respect of
(a)any amount contributed after December 1, 1982 by an employer to, or
(b)any forfeited amount under
a deferred profit sharing plan or a plan the registration of which has been revoked pursuant to subsection 147(14) or 147(14.1).
Marginal note:Income on disposal of shares
(10.4)Where a taxpayer has a share in respect of which the taxpayer has made an election under subsection 147(10.1), there shall be included in computing the taxpayer’s income for the taxation year in which the taxpayer disposed of or exchanged the share or ceased to be a resident of Canada, whichever is the earlier, the amount, if any, by which the fair market value of the share at the time the taxpayer acquired it exceeds the cost to the taxpayer, determined under paragraph (10.2)(c), of the share at the time the taxpayer acquired it.
Marginal note:Amended contract
(10.5)Where an amendment is made to an annuity contract to which subparagraph (2)(k)(vi) applies, the sole effect of which is to defer annuity commencement to no later than the end of the calendar year in which the individual in respect of whom the contract was purchased attains 71 years of age, the annuity contract is deemed not to have been disposed of by the individual.
(10.6)[Repealed, 2007, c. 29, s. 20]
Marginal note:Portion of receipts deductible
(11)For the purposes of subsections 147(10), 147(10.1) and 147(12), where an amount was received in a taxation year from a trustee under a deferred profit sharing plan by an employee or other beneficiary thereunder, and the employee was a beneficiary under the plan at a time when the plan was an employees profit sharing plan, the amount determined for the year under this subsection in relation to the plan and in respect of the beneficiary is such portion of the total of the amounts so received in the year as does not exceed
(a)the total of
(i)each amount included in respect of the plan in computing the income of the employee for the year or for a previous taxation year by virtue of section 144,
(ii)each amount paid by the employee to a trustee under the plan at a time when it was an employees profit sharing plan, and
(iii)each amount that was allocated to the employee or other beneficiary by a trustee under the plan, at a time when it was an employees profit sharing plan, in respect of a capital gain made by the trust before 1972,
minus
(b)the total of
(i)each amount received by the employee or other beneficiary in a previous taxation year from a trustee under the plan at a time when it was an employees profit sharing plan,
(ii)each amount received by the employee or other beneficiary in a previous taxation year from a trustee under the plan at a time when it was a deferred profit sharing plan, and
(iii)each amount allocated to the employee or other beneficiary by a trustee under the plan, at a time when it was an employees profit sharing plan, in respect of a capital loss sustained by the trust before 1972.
Marginal note:Idem
(12)For the purposes of subsections 147(10) and 147(10.1), where an amount was received in a taxation year from a trustee under a deferred profit sharing plan by an employee or other beneficiary thereunder, and the employee has made a payment in the year or a previous year to a trustee under the plan at a time when the plan was a deferred profit sharing plan, the amount determined for the year under this subsection in relation to the plan and in respect of the beneficiary is such portion of the total of the amounts so received in the year (minus any amount determined for the year under subsection 147(11) in relation to the plan and in respect of the beneficiary) as does not exceed
(a)the total of all amounts each of which was so paid by the employee in the year or a previous year to the extent that the payment was not deductible in computing the employee’s income,
minus
(b)the total of all amounts each of which was received by the employee or other beneficiary from a trustee under the plan, at a time when it was a deferred profit sharing plan, to the extent that it was included in the computation of an amount determined for a previous year under this subsection in relation to the plan and in respect of the employee or other beneficiary.
Marginal note:Appropriation of trust property by employer
(13)Where funds or property of a trust governed by a deferred profit sharing plan have been appropriated in any manner whatever to or for the benefit of a taxpayer who is
(a)an employer by whom payments are made in trust to a trustee under the plan, or
(b)a corporation with which that employer does not deal at arm’s length,
otherwise than in payment of or on account of shares of the capital stock of the taxpayer purchased by the trust, the amount or value of the funds or property so appropriated shall be included in computing the income of the taxpayer for the taxation year of the taxpayer in which the funds or property were so appropriated, unless the funds or property or an amount in lieu thereof equal to the amount or value of the funds or property was repaid to the trust within one year from the end of the taxation year, and it is established by subsequent events or otherwise that the repayment was not made as part of a series of appropriations and repayments.
Marginal note:Revocation of registration
(14)Where, at any time after a profit sharing plan has been accepted by the Minister for registration for the purposes of this Act,
(a)the plan has been revised or amended or a new plan has been substituted therefor, and the plan as revised or amended or the new plan substituted therefor, as the case may be, ceased to comply with the requirements of this section for its acceptance by the Minister for registration for the purposes of this Act,
(b)any provision of the plan has not been complied with,
(c)the plan is a plan that did not, as of January 1, 1968,
(i)comply with the requirements of paragraphs 147(2)(a), 147(2)(b) to 147(2)(h), 147(2)(j) and 147(2)(k), and paragraph 147(2)(i) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on January 1, 1972, and
(ii)provide that the amounts held by the trust for the benefit of beneficiaries thereunder that remained unallocated on December 31, 1967 must be allocated or reallocated, as the case may be, before 1969,
(c.1)the plan becomes a revocable plan pursuant to subsection 147(21),
(c.2)the plan does not comply with the requirements of paragraphs 147(2)(a) to 147(2)(k) and 147(2)(l),
(c.3)in the case of a plan that became registered after March, 1983, the plan does not comply with the requirements of paragraphs 147(2)(k.1) and 147(2)(k.2),
(c.4)the requirements of subsection 147(5.1) in respect of the plan are not satisfied for a calendar year, or
(c.5)an employer who participates in the plan fails to file an information return reporting a pension adjustment of a beneficiary under the plan as and when required by regulation,
the Minister may revoke the registration of the plan,
(d)where paragraph 147(14)(a) applies, as of the date that the plan ceased so to comply, or any subsequent date,
(e)where paragraph 147(14)(b) applies, as of the date that any provision of the plan was not so complied with, or any subsequent date,
(f)where paragraph 147(14)(c) applies, as of any date following January 1, 1968,
(g)where paragraph 147(14)(c.1) applies, as of the date on which the plan became a revocable plan, or any subsequent date,
(h)where paragraph 147(14)(c.2) or 147(14)(c.3) applies, as of the date on which the plan did not so comply, or any subsequent date, but not before January 1, 1991,
(i)where paragraph 147(14)(c.4) applies, as of the end of the year for which the requirements of subsection 147(5.1) in respect of the plan are not satisfied, or any subsequent date, and
(j)where paragraph 147(14)(c.5) applies, as of any date after the date by which the information return was required to be filed,
and the Minister shall thereafter give notice of the revocation by registered mail to a trustee under the plan and to an employer of employees who are beneficiaries under the plan.
Marginal note:Idem
(14.1)Where on any day after June 30, 1982 a benefit or loan is extended or continues to be extended as a consequence of the existence of a deferred profit sharing plan and that benefit or loan would be prohibited if the plan met the requirement for registration contained in paragraph 147(2)(k.1), the Minister may revoke the registration of the plan as of that or any subsequent day that is specified by the Minister in a notice given by registered mail to a trustee under the plan and to an employer of employees who are beneficiaries under the plan.
Marginal note:Rules applicable to revoked plan
(15)Where the Minister revokes the registration of a deferred profit sharing plan, the plan (in this section referred to as the “revoked plan”) shall be deemed, for the purposes of this Act, not to be a deferred profit sharing plan, and notwithstanding any other provision of this Act, the following rules shall apply:
(a)the revoked plan shall not be accepted for registration for the purposes of this Act or be deemed to have become registered as a deferred profit sharing plan at any time within a period of one year commencing on the date the plan became a revoked plan;
(b)subsection 147(7) does not apply to exempt the trust governed by the plan from tax under this Part on the taxable income of the trust for a taxation year in which, at any time therein, the trust was governed by the revoked plan;
(c)no deduction shall be made by an employer in computing the employer’s income for a taxation year in respect of an amount paid by the employer to a trustee under the plan at a time when it was a revoked plan;
(d)there shall be included in computing the income of a taxpayer for a taxation year
(i)all amounts received by the taxpayer in the year from a trustee under the revoked plan that, by virtue of subsection 147(10), would have been so included if the revoked plan had been a deferred profit sharing plan at the time the taxpayer received those amounts, and
(ii)the amount or value of any funds or property appropriated to or for the benefit of the taxpayer in the year that, by virtue of subsection 147(13), would have been so included if the revoked plan had been a deferred profit sharing plan at the time of the appropriation of the funds or property; and
(e)the revoked plan shall be deemed, for the purposes of this Act, not to be an employees profit sharing plan or a retirement compensation arrangement.
Marginal note:Payments out of profits
(16)Where the terms of an arrangement under which an employer makes payments to a trustee specifically provide that the payments shall be made “out of profits”, the arrangement shall be deemed, for the purpose of subsection 147(1), to be an arrangement for payments “computed by reference to an employer’s profits from the employer’s business”.
Interpretation ofother beneficiary
(17)Where the expression “employee or other beneficiary” under a profit sharing plan occurs in this section, the wordsother beneficiaryshall be construed as meaning any person, other than the employee, to whom any amount is or may become payable by a trustee under the plan as a result of payments made to the trustee under the plan in trust for the benefit of employees, including the employee.
Marginal note:Inadequate consideration on purchase from or sale to trust
(18)Where a trust governed by a deferred profit sharing plan or revoked plan
(a)disposes of property to a taxpayer for a consideration less than the fair market value of the property at the time of the transaction, or for no consideration, or
(b)acquires property from a taxpayer for a consideration greater than the fair market value of the property at the time of the transaction,
the difference between that fair market value and the consideration, if any,
(c)shall, for the purposes of subsections 147(10) and 147(15), be deemed to be an amount received by the taxpayer at the time of the disposal or acquisition, as the case may be, from a trustee under the plan as if the taxpayer were a beneficiary under the plan, and
(d)is an amount taxable under section 201 for the calendar year in which the trust disposes of or acquires the property, as the case may be.
Marginal note:Transfer to RPP, RRSP or DPSP
(19)An amount is transferred from a deferred profit sharing plan in accordance with this subsection if the amount
(a)is not part of a series of periodic payments;
(b)is transferred on behalf of an individual
(i)who is an employee or former employee of an employer who participated in the plan on the employee’s behalf, or
(ii)who is a spouse or common-law partner, or former spouse or common-law partner, of an employee or former employee referred to in subparagraph (i) and who is entitled to the amount
(A)as a consequence of the death of the employee or former employee, or
(B)under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between the employee or former employee and the individual in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership;
in full or partial satisfaction of the individual’s entitlement to benefits under the plan;
(c)would, if it were paid directly to the individual, be included under subsection 147(10) in computing the individual’s income for a taxation year; and
(d)is transferred for the benefit of the individual directly to
(i)a registered pension plan,
(ii)a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1)),
(iii)a deferred profit sharing plan that can reasonably be expected to have at least 5 beneficiaries at all times throughout the calendar year in which the transfer is made,
(iv)a registered retirement income fund under which the individual is the annuitant (within the meaning assigned by subsection 146.3(1)), or
(v)a licensed annuities provider to acquire an advanced life deferred annuity, if the individual is an employee or former employee of an employer who participated in the plan on the employee’s behalf.
Marginal note:Taxation of amount transferred
(20)Where an amount is transferred on behalf of an individual in accordance with subsection 147(19),
(a)the amount shall not, by reason only of that transfer, be included by virtue of this section in computing the income of any taxpayer; and
(b)no deduction may be made under any provision of this Act in respect of the amount in computing the income of any taxpayer.
Marginal note:Restriction re transfers
(21)A deferred profit sharing plan becomes a revocable plan at any time that an amount is transferred from the plan to a registered pension plan, a registered retirement savings plan or another deferred profit sharing plan unless
(a)the transfer is in accordance with subsection 147(19); or
(b)the amount is deductible under paragraph 60(j) or 60(j.2) of this Act or paragraph 60(k) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, by the individual on whose behalf the transfer is made.
Marginal note:Excess transfer
(22)Where
(a)the transfer of an amount from a deferred profit sharing plan in a calendar year on behalf of a beneficiary under the plan would, but for this subsection, be in accordance with subsection 147(19), and
(b)the requirements of subsection 147(5.1) in respect of the plan are not satisfied for the year by reason that the beneficiary’s pension credits or pension adjustments do not comply with any of paragraphs 147(5.1)(a) to 147(5.1)(c),
such portion of the amount transferred as may reasonably be considered to derive from amounts allocated or reallocated to the beneficiary in the year or from earnings reasonably attributable to those amounts shall, except to the extent otherwise expressly provided in writing by the Minister, be deemed to be an amount that was not transferred in accordance with subsection 147(19).
Marginal note:Definitions
147.1(1)In this section and sections 147.2 and 147.3,
actuarymeans a Fellow of the Canadian Institute of Actuaries; (actuaire)
administratorof a pension plan means the person or body of persons that has ultimate responsibility for the administration of the plan; (administrateur)
average wagefor a calendar year means the amount that is obtained by dividing by 12 the total of all amounts each of which is the wage measure for a month in the 12 month period ending on June 30 of the immediately preceding calendar year; (salaire moyen)
compensationof an individual from an employer for a calendar year means the total of all amounts each of which is
(a)an amount in respect of
(i)the individual’s employment with the employer, or
(ii)an office in respect of which the individual is remunerated by the employer
that is required (or that would be required but for paragraph 81(1)(a) as it applies with respect to theIndian Actor theForeign Missions and International Organizations Act) by section 5 or 6 to be included in computing the individual’s income for the year, except such portion of the amount as
(iii)may reasonably be considered to relate to a period throughout which the individual was not resident in Canada, and
(iv)is not attributable to the performance of the duties of the office or employment in Canada or is exempt from income tax in Canada by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada,
(b)a prescribed amount, or
(c)an amount acceptable to the Minister in respect of remuneration received by the individual from any employer for a period in the year throughout which the individual was not resident in Canada, to the extent that the amount is not otherwise included in the total; (rétribution)
defined benefit provisionof a pension plan means terms of the plan under which benefits in respect of each member are determined in any way other than that described in the definitionmoney purchase provisionin this subsection; (disposition à prestations déterminées)
former limitfor each calendar year after 2005 and before 2010 means the greater of
(a)the product (rounded to the nearest multiple of $10, or, if that product is equidistant from two such consecutive multiples, to the higher multiple) of
(i)$18,000, and
(ii)the quotient obtained when the average wage for the year is divided by the average wage for 2005, and
(b )for 2006, $18,000, and for any other of those calendar years, the former limit for the preceding calendar year; (ancien plafond)
memberof a pension plan means an individual who has a right, either immediate or in the future and either absolute or contingent, to receive benefits under the plan, other than an individual who has such a right only by reason of the participation of another individual in the plan; (participant)
money purchase limitfor a calendar year means
(a)for years before 1990, nil,
(b)for 1990, $11,500,
(c)for 1991 and 1992, $12,500,
(d)for 1993, $13,500,
(e)for 1994, $14,500,
(f)for 1995, $15,500,
(g)for years after 1995 and before 2003, $13,500,
(h)for 2003, $15,500,
(i)for 2004, $16,500,
(j)for 2005, $18,000,
(k)for 2006, the greater of $19,000 and the former limit for the year,
(l)for 2007, the greater of $20,000 and the former limit for the year,
(m)for 2008, the greater of $21,000 and the former limit for the year,
(n)for 2009, the greater of $22,000 and the former limit for the year, and
(o)for each year after 2009, the greater of
(i)the product (rounded to the nearest multiple of $10, or, if that product is equidistant from two such consecutive multiples, to the higher multiple) of
(A)the money purchase limit for 2009, and
(B)the quotient obtained when the average wage for the year is divided by the average wage for 2009, and
(ii)the money purchase limit for the preceding year; (plafond des cotisations déterminées)
money purchase provisionof a pension plan means terms of the plan
(a)which provide for a separate account to be maintained in respect of each member, to which are credited contributions made to the plan by, or in respect of, the member and any other amounts allocated to the member, and to which are charged payments made in respect of the member, and
(b)under which the only benefits in respect of a member are benefits determined solely with reference to, and provided by, the amount in the member’s account; (disposition à cotisations déterminées)
multi-employer planin a calendar year has the meaning assigned by regulation; (régime interentreprises)
participating employer, in relation to a pension plan, means an employer who has made, or is required to make, contributions to the plan in respect of the employer’s employees or former employees, or payments under the plan to the employer’s employees or former employees, and includes a prescribed employer; (employeur participant)
past service eventhas the meaning assigned by regulation; (fait lié aux services passés)
single amountmeans an amount that is not part of a series of periodic payments; (montant unique)
specified multi-employer planin a calendar year has the meaning assigned by regulation; (régime interentreprises déterminé)
spouse[Repealed, 1994, c. 7, Sch