If the persons cannot agree as to what portion of the refund each can so claim, the Minister may fix the portions.
Marginal note:Liability for tax
(6)Each person who is a holder of a RDSP or a subscriber of a RESP at the time that a tax is imposed under subsection (1) in connection with the plan is jointly and severally, or solidarily, liable to pay the tax.
(7)[Repealed, 2010, c. 25, s. 58]
Marginal note:Tax payable in respect of advantage
207.05(1)A tax is payable under this Part for a calendar year if, in the year, an advantage in relation to a registered plan is extended to, or is received or receivable by, the controlling individual of the registered plan, a trust governed by the registered plan, or any other person who does not deal at arm’s length with the controlling individual.
Marginal note:Amount of tax payable
(2)The amount of tax payable in respect of an advantage described in subsection (1) is
(a)in the case of a benefit, the fair market value of the benefit;
(b)in the case of a loan or an indebtedness, the amount of the loan or indebtedness; and
(c)in the case of a registered plan strip, the amount of the registered plan strip.
Marginal note:Liability for tax
(3)Each controlling individual of a registered plan in connection with which a tax is imposed under subsection (1) is jointly and severally, or solidarily, liable to pay the tax except that, if the advantage is extended by the issuer, carrier or promoter of the registered plan or by a person with whom the issuer, carrier or promoter is not dealing at arm’s length, the issuer, carrier or promoter, and not the controlling individual, is liable to pay the tax.
Marginal note:Transitional rule
(4)If an individual so elects before March 2, 2013 in prescribed form, subsection (1) does not apply in respect of any advantage that is an amount included in the calculation of the transitional prohibited investment benefit of the individual for a taxation year provided that the transitional prohibited investment benefit
(a)is paid to the individual, from a RRIF or RRSP of the individual, on or before the later of April 2, 2013 and the day that is 90 days after the end of the taxation year; and
(b)is not paid by way of transfer to another RRIF or RRSP of the individual.
Marginal note:Waiver of tax payable
207.06(1)If an individual would otherwise be liable to pay a tax under this Part because of section 207.02 or 207.03, the Minister may waive or cancel all or part of the liability if
(a)the individual establishes to the satisfaction of the Minister that the liability arose as a consequence of a reasonable error; and
(b)one or more distributions are made without delay under a TFSA of which the individual is the holder, the total amount of which is not less than the total of
(i)the amount in respect of which the individual would otherwise be liable to pay the tax, and
(ii)income (including a capital gain) that is reasonably attributable, directly or indirectly, to the amount described in subparagraph (i).
Marginal note:Waiver of tax payable
(2)If a person would otherwise be liable to pay a tax under this Part because of subsection 207.04(1) or section 207.05, the Minister may waive or cancel all or part of the liability where the Minister considers it just and equitable to do so having regard to all the circumstances, including
(a)whether the tax arose as a consequence of reasonable error;
(b)the extent to which the transaction or series of transactions that gave rise to the tax also gave rise to another tax under this Act; and
(c)the extent to which payments have been made from the person’s registered plan.
Marginal note:Waiver of tax payable
(3)If an individual would otherwise be liable to pay a tax under section 207.021, the Minister may waive or cancel all or part of the liability if
(a)the individual establishes to the satisfaction of the Minister that the liability arose as a consequence of a reasonable error; and
(b)one or more distributions are made without delay under a FHSA of which the individual is the holder, the total amount of which is not less than the total of
(i)the amount in respect of which the individual would otherwise be liable to pay tax, and
(ii)the income (including any capital gain) that is reasonably attributable, directly or indirectly, to the amount described in subparagraph (i).
Marginal note:Other powers of Minister
(4)The Minister may notify the controlling individual of a registered plan that the controlling individual must cause a payment to be made from the registered plan to the controlling individual within 90 days of receipt of the notice, the amount of which is not less than the amount of specified non-qualified investment income in respect of the registered plan.
Marginal note:Income inclusion
207.061A holder of a TFSA shall include in computing the holder’s income for a taxation year under Part I any portion of a distribution made in the year that is described in subparagraph (a)(ii) of the definitionspecified distributionin subsection 207.01(1) or subparagraph 207.06(1)(b)(ii) or that is specified by the Minister as part of an agreement to waive or cancel a liability for tax under this Part.
Marginal note:Special limit on tax payable
207.062If an individual is liable to pay an amount of tax under section 207.05 and under sections 207.02 or 207.03 in respect of the same contribution for the same calendar year, the tax payable under section 207.05 for the year shall be reduced by the amount of the tax payable under section 207.02 or 207.03, as the case may be, for the year.
Marginal note:Return and payment of tax
207.07(1)A person who is liable to pay tax under this Part for all or any part of a calendar year shall before July of the following calendar year
(a)file with the Minister a return for the year under this subsection in prescribed form and containing prescribed information including
(i)an estimate of the amount of tax payable under this Part by the person in respect of the year, and
(ii)an estimate of the amount of the person’s allowable refund, if any, for the year; and
(b)pay to the Receiver General the amount, if any, by which the amount of the person’s tax payable under this Part in respect of the year exceeds the person’s allowable refund, if any, for the year.
Marginal note:Multiple holders or subscribers
(1.1)If two or more holders of a RDSP, or two or more subscribers of a RESP, are jointly and severally, or solidarily, liable with each other to pay a tax under this Part for a calendar year in connection with the plan,
(a)a payment by any of the holders, or any of the subscribers, on account of that tax liability shall to the extent of the payment discharge the joint liability; and
(b)a return filed by one of the holders, or one of the subscribers, as required by this Part for the year is deemed to have been filed by each other holder, or each other subscriber, in respect of the joint liability to which the return relates.
Marginal note:Refund
(2)If a person has filed a return under this Part for a calendar year within three years after the end of the year, the Minister
(a)may, on sending the notice of assessment for the year, refund without application any allowable refund of the person for the year, to the extent that it was not applied against the person’s tax payable under paragraph (1)(b); and
(b)shall, with all due dispatch, make the refund referred to in paragraph (a) after sending the notice of assessment if an application for it has been made in writing by the person within three years after the sending of an original notice of assessment for the year.
Marginal note:Provisions applicable to Part
(3)Subsections 150(2) and (3), sections 152 and 158 to 167 and Division J of Part I apply to this Part with any modifications that the circumstances require.
207.1(1)[Repealed, 2011, c. 24, s. 68]
Marginal note:Tax payable by trust under deferred profit sharing plan
(2)Where, at the end of any month, a trust governed by a deferred profit sharing plan holds property that is neither a qualified investment (within the meaning assigned by section 204) nor a life insurance policy (referred to in paragraphs 198(6)(c) to 198(6)(e) or subsection 198(6.1)), the trust shall, in respect of that month, pay a tax under this Part equal to 1% of the fair market value of the property at the time it was acquired by the trust of all such property held by it at the end of the month, other than
(a)property in respect of the acquisition of which the trust has paid or is liable to pay a tax under subsection 198(1); and
(b)property acquired by the trust before August 25, 1972.
(3)[Repealed, 2017, c. 33, s. 72]
(4)[Repealed, 2011, c. 24, s. 68]
Marginal note:Tax payable in respect of agreement to acquire shares
(5)Where at any time a taxpayer whose taxable income is exempt from tax under Part I makes an agreement (otherwise than as a consequence of the acquisition or writing by it of an option listed on a designated stock exchange) to acquire a share of the capital stock of a corporation (otherwise than from the corporation) at a price that may differ from the fair market value of the share at the time the share may be acquired, the taxpayer shall, in respect of each month during which the taxpayer is a party to the agreement, pay a tax under this Part equal to the total of all amounts each of which is the amount, if any, by which the amount of a dividend paid on the share at a time in the month at which the taxpayer is a party to the agreement exceeds the amount, if any, of the dividend that is received by the taxpayer.
Marginal note:Return and payment of tax
207.2(1)Within 90 days after the end of each year, a taxpayer to whom this Part applies shall
(a)file with the Minister a return for the year under this Part in prescribed form and containing prescribed information, without notice or demand therefor;
(b)estimate in the return the amount of tax, if any, payable by it under this Part in respect of each month in the year; and
(c)pay to the Receiver General the amount of tax, if any, payable by it under this Part in respect of each month in the year.
Marginal note:Liability of trustee
(2)Where the trustee of a trust that is liable to pay tax under this Part does not remit to the Receiver General the amount of the tax within the time specified in subsection 207.2(1), the trustee is personally liable to pay on behalf of the trust the full amount of the tax and is entitled to recover from the trust any amount paid by the trustee as tax under this section.
Marginal note:Provisions applicable to Part
(3)Subsections 150(2) and 150(3), sections 152 and 158, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
Marginal note:Tax Payable by institution or public authority
207.3Every institution or public authority that, at any time in a year, disposes of an object within 10 years after the object became an object described in subparagraph 39(1)(a)(i.1) shall pay a tax under this Part, in respect of the year, equal to 30% of the object’s fair market value at that time, unless the disposition was made to another institution or public authority that was, at that time, designated under subsection 32(2) of theCultural Property Export and Import Acteither generally or for a specified purpose related to that object.
Marginal note:Ecological gift — tax payable
207.31(1)A charity, municipality in Canada or municipal or public body performing a function of government in Canada (each of which is referred to in this section as the “recipient”) shall, in respect of a property, pay a tax under this Part in respect of a taxation year if
(a)at any time in the year, the recipient
(i)disposes of the property, or
(ii)in the opinion of the Minister of the Environment, or a person designated by that Minister, changes the use of the property;
(b)the property is described in paragraph 110.1(1)(d) or in the definitiontotal ecological giftsin subsection 118.1(1); and
(c)the disposition or change is made without the authorization of the Minister of the Environment or a person designated by that Minister.
Marginal note:Ecological gift — amount of tax
(2)The amount of tax to be paid under subsection (1) is equal to 50% of the amount that would be determined for the purposes of section 110.1 or 118.1, if this Act were read without reference to subsections 110.1(3) and 118.1(6), to be the fair market value of the property referred to in subsection (1) if the property were given to the recipient immediately before the disposition or change referred to in paragraph (1)(a).
Marginal note:Return and payment of tax
207.4(1)Any institution, public authority, charity or municipality that is liable to pay a tax under subsection 207.3 or 207.31 in respect of a year shall, within 90 days after the end of the year,
(a)file with the Minister a return for the year under this Part in prescribed form and containing prescribed information without notice or demand therefor;
(b)estimate in the return the amount of tax payable by it under this Part in respect of the year; and
(c)pay to the Receiver General the amount of tax payable by it under this Part in respect of the year.
Marginal note:Provisions applicable to Part
(2)Subsections 150(2) and 150(3), sections 152 and 158, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
Marginal note:Definitions
207.5(1)In this Part,
advantage, in relation to a retirement compensation arrangement, means
(a)any benefit, loan or indebtedness that is conditional in any way on the existence of the arrangement, other than
(i)a benefit derived from the provision of administrative or investment services in respect of the arrangement,
(ii)a loan or an indebtedness the terms and conditions of which are terms and conditions that persons dealing at arm’s length with each other would have entered into, and
(iii)a payment out of or under the arrangement that is included in computing a taxpayer’s income under Part I, and
(b)a benefit that is an increase in the total fair market value of the subject property of the arrangement if it is reasonable to consider, having regard to all the circumstances, that the increase is attributable, directly or indirectly, to a transaction or event or a series of transactions or events one of the main purposes of which was to enable a person or a partnership to benefit from a provision of this Part, or from the exemption from tax under paragraph 149(1)(q.1), if the transaction, event or series
(i)would not have occurred in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly, or
(ii)included a payment received as, on account or in lieu of, or in satisfaction of, a payment
(A)for services provided by a person who is, or does not deal at arm’s length with, a specified beneficiary of the arrangement, or
(B)of interest, of a dividend, of rent, of a royalty or of any other return on investment, or of proceeds of disposition, in respect of property (other than subject property of the arrangement) held by a person who is, or does not deal at arm’s length with, a specified beneficiary of the arrangement,
(c)a benefit that is income or a capital gain that is reasonably attributable, directly or indirectly, to
(i)a prohibited investment in respect of the arrangement,
(ii)an amount received by a specified beneficiary of the arrangement, or by a person who does not deal at arm’s length with the specified beneficiary, if it is reasonable to consider, having regard to all the circumstances, that the amount was paid in relation to, or would not have been paid but for, subject property of the arrangement and the amount was paid as, on account or in lieu of, or in satisfaction of, a payment
(A)for services provided by a person who is, or who does not deal at arm’s length with, the specified beneficiary, or
(B)of interest, of a dividend, of rent, of a royalty or of any other return on investment, or of proceeds of disposition,
(d)an RCA strip in respect of the arrangement, and
(e)a prescribed benefit; (avantage)
prohibited investment, for a retirement compensation arrangement at any time, means property (other than prescribed excluded property) that is at that time
(a)a debt of a specified beneficiary of the arrangement,
(b)a share of the capital stock of, an interest in, or a debt of
(i)a corporation, partnership or trust in which the specified beneficiary has a significant interest, or
(ii)a person or partnership that does not deal at arm’s length with, or is affiliated with, the specified beneficiary,
(c)an interest (or, for civil law, a right) in, or a right to acquire, a share, interest or debt described in paragraph (a) or (b), or
(d)prescribed property; (placement interdit)
RCA strip, in respect of a retirement compensation arrangement, means the amount of a reduction in the fair market value of subject property of the arrangement, if the value is reduced as part of a transaction or event or a series of transactions or events one of the main purposes of which is to enable a specified beneficiary of the arrangement, or a person or a partnership who does not deal at arm’s length with the specified beneficiary, to benefit from a provision of this Part or to obtain a benefit in respect of subject property of the arrangement or as a result of the reduction, but does not include an amount that is included in computing the income of the specified beneficiary or of an employer or former employer of the specified beneficiary; (somme découlant d’un dépouillement de CR)
RCA trustunder a retirement compensation arrangement means
(a)any trust deemed by subsection 207.6(1) to be created in respect of subject property of the arrangement, and
(b)any trust governed by the arrangement; (fiducie de convention de retraite)
refundable taxof a retirement compensation arrangement at the end of a taxation year of an RCA trust under the arrangement means the amount, if any, by which the total of
(a)50% of all contributions made under the arrangement while it was a retirement compensation arrangement and before the end of the year, and
(b)50% of the amount, if any, by which
(i)the total of all amounts each of which is the income (determined as if this Act were read without reference to paragraph 82(1)(b)) of an RCA trust under the arrangement from a business or property for the year or a preceding taxation year or a capital gain of the trust for the year or a preceding taxation year,
exceeds
(ii)the total of all amounts each of which is a loss of an RCA trust under the arrangement from a business or property for the year or a preceding taxation year or a capital loss of the trust for the year or a preceding taxation year,
exceeds
(c)50% of all amounts paid as distributions to one or more persons (including amounts that are required by paragraph 12(1)(n.3) to be included in computing the recipient’s income) under the arrangement while it was a retirement compensation arrangement and before the end of the year, other than a distribution paid where it is established, by subsequent events or otherwise, that the distribution was paid as part of a series of payments and refunds of contributions under the arrangement; (impôt remboursable)
significant interesthas the same meaning as in subsection 207.01(4); (participation notable)
specified beneficiary, of a retirement compensation arrangement, means an individual who has an interest or a right in respect of the arrangement and who has or had a significant interest in an employer or former employer in respect of the arrangement; (bénéficiaire déterminé)
subject property of a retirement compensation arrangementmeans property that is held in connection with the arrangement. (bien déterminé d’une convention de retraite)
Marginal note:Election
(2)Notwithstanding the definitionrefundable taxin subsection 207.5(1), where the custodian of a retirement compensation arrangement so elects in the return under this Part for a taxation year of an RCA trust under the arrangement and all the subject property, if any, of the arrangement (other than a right to claim a refund under subsection 164(1) or 207.7(2)) at the end of the year consists only of cash, debt obligations, shares listed on a designated stock exchange, or any combination thereof, an amount equal to the total of
(a)the amount of that cash at the end of the year,
(b)the total of all amounts each of which is the greater of the principal amount of such a debt obligation outstanding at the end of the year and the fair market value of the obligation at the end of the year, and
(c)the fair market value of those shares at the end of the year
shall be deemed for the purposes of this Part to be the refundable tax of the arrangement at the end of the year.
Marginal note:Limitation on election
(3)Subsection (2) does not apply in respect of an RCA trust if any part of a decline in the fair market value of subject property of the retirement compensation arrangement is reasonably attributable to a prohibited investment for, or an advantage in relation to, the RCA trust unless the Minister is satisfied that it is just and equitable to allow the election to be made, having regard to all the circumstances, in which case, the Minister may adjust the amount deemed by subsection (2) to be the refundable tax of the arrangement to take into account all or part of the decline in the fair market value of the subject property.
Marginal note:Creation of trust
207.6(1)In respect of the subject property of a retirement compensation arrangement, other than subject property of the arrangement held by a trust governed by a retirement compensation arrangement, for the purposes of this Part and Part I, the following rules apply:
(a)a trust is deemed to be created on the day that the arrangement is established;
(b)the subject property of the arrangement is deemed to be property of the trust and not to be property of any other person; and
(c)the custodian of the arrangement is deemed to be the trustee having ownership or control of the trust property.
Marginal note:Life insurance policies
(2)For the purposes of this Part and Part I, where by virtue of a plan or arrangement an employer is obliged to provide benefits that are to be received or enjoyed by any person on, after or in contemplation of any substantial change in the services rendered by a taxpayer, the retirement of a taxpayer or the loss of an office or employment of a taxpayer, and where the employer, former employer or a person or partnership with whom or which the employer or former employer does not deal at arm’s length acquires an interest in a life insurance policy that may reasonably be considered to be acquired to fund, in whole or in part, those benefits, the following rules apply in respect of the plan or arrangement if it is not otherwise a retirement compensation arrangement and is not excluded from the definitionretirement compensation arrangement, in subsection 248(1), by any of paragraphs (a) to (l) and (n) thereof:
(a)the person or partnership that acquired the interest is deemed to be the custodian of a retirement compensation arrangement;
(b)the interest is deemed to be subject property of the retirement compensation arrangement;
(c)an amount equal to twice the amount of any premium paid in respect of the interest or any repayment of a policy loan thereunder is deemed to be a contribution under the retirement compensation arrangement; and
(d)any payment received in respect of the interest, including a policy loan, and any amount received as a refund of refundable tax is deemed to be an amount received out of or under the retirement compensation arrangement by the recipient and not to be a payment of any other amount.
Marginal note:Incorporated employee
(3)For the purpose of the provisions of this Act relating to retirement compensation arrangements, where
(a)a corporation that at any time carried on a personal services business, or an employee of the corporation, enters into a plan or arrangement with a person or partnership (referred to in this subsection as the “employer”) to whom or which the corporation renders services, and
(b)the plan or arrangement provides for benefits to be received or enjoyed by any person on, after or in contemplation of the cessation of, or any substantial change in, the services rendered by the corporation, or an employee of the corporation, to the employer,
the following rules apply:
(c)the employer and the corporation are deemed to be an employer and employee, respectively, in relation to each other, and
(d)any benefits to be received or enjoyed by any person under the plan or arrangement are deemed to be benefits to be received or enjoyed by the person on, after or in contemplation of a substantial change in the services rendered by the corporation.
Marginal note:Deemed contribution
(4)Where at any time an employee benefit plan becomes a retirement compensation arrangement as a consequence of a change of the custodian of the plan or as a consequence of the custodian ceasing either to carry on business through a fixed place of business in Canada or to be 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,
(a)for the purposes of this Part and Part I, the custodian of the plan is deemed to have made a contribution to the arrangement immediately after that time, in an amount equal to the fair market value at that time of all the properties of the plan; and
(b)for the purposes of section 32.1, that amount is deemed to be a payment made at that time out of or under the plan to or for the benefit of employees or former employees of the employers who contributed to the plan.
Marginal note:Residents’ arrangement
(5)For the purposes of this Act, where a resident’s contribution has been made under a plan or arrangement (in this subsection referred to as the “plan”),
(a)the plan is deemed, in respect of its application to all resident’s contributions made under the plan and all property that can reasonably be considered to be derived from those contributions, to be a separate arrangement (in this subsection referred to as the “residents’ arrangement”) independent of the plan in respect of its application to all other contributions and property that can reasonably be considered to derive from those other contributions;
(b)the residents’ arrangement is deemed to be a retirement compensation arrangement; and
(c)each person and partnership to whom a contribution is made under the residents’ arrangement is deemed to be a custodian of the residents’ arrangement.
Marginal note:Resident’s contribution
(5.1)For the purpose of subsection 207.6(5),resident’s contributionmeans such part of a contribution made under a plan or arrangement (in this subsection referred to as the “plan”) at a time when the plan would, but for paragraph (l) of the definitionretirement compensation arrangementin subsection 248(1), be a retirement compensation arrangement as
(a)is not a prescribed contribution; and
(b)can reasonably be considered to have been made in respect of services rendered by an individual to an employer in a period
(i)throughout which the individual was resident in Canada and rendered services to the employer that were primarily services rendered in Canada or services rendered in connection with a business carried on by the employer in Canada (or a combination of such services), and
(ii)at the beginning of which the individual had been resident in Canada throughout at least 60 of the 72 preceding calendar months, where the individual was non-resident at any time before the period and became a member of the plan before the end of the month after the month in which the individual became resident in Canada,
and, for the purpose of this paragraph, where benefits provided to an individual under a particular plan or arrangement are replaced by benefits under another plan or arrangement, the other plan or arrangement shall be deemed, in respect of the individual, to be the same plan or arrangement as the particular plan or arrangement.
Marginal note:Prescribed plan or arrangement
(6)For the purposes of the provisions of this Act relating to retirement compensation arrangements, the following rules apply in respect of a prescribed plan or arrangement:
(a)the plan or arrangement shall be deemed to be a retirement compensation arrangement;
(b)an amount credited at any time to the account established in the accounts of Canada or a province in connection with the plan or arrangement shall be, except to the extent that it is in respect of a refund determined under subsection 207.7(2), deemed to be a contribution under the plan or arrangement at that time;
(c)the custodian of the plan or arrangement shall be deemed to be
(i)where the account is established in the accounts of Canada, Her Majesty in right of Canada, and
(ii)where the account is established in the accounts of a province, Her Majesty in right of that province; and
(d)the subject property of the plan or arrangement, at any time, shall be deemed to include an amount of cash equal to the balance at that time in the account.
Marginal note:Transfers
(7)Where an amount (other than an amount that is part of a series of periodic payments) is transferred directly to a retirement compensation arrangement (other than an arrangement the custodian of which is non-resident or which is deemed by subsection 207.6(5) to be a retirement compensation arrangement) from another retirement compensation arrangement,
(a)the amount shall not, solely because of the transfer, be included in computing a taxpayer’s income under Part I;
(b)no deduction may be made in respect of the amount in computing a taxpayer’s income under Part I; and
(c)the amount is considered, for the purpose of the definitionrefundable taxin subsection 207.5(1), to be paid as a distribution to one or more persons under the arrangement from which the amount is transferred and to be a contribution made under the arrangement to which the amount is transferred.
Marginal note:Tax payable on prohibited investment
207.61(1)A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, at any time in the year,
(a)the arrangement acquires property that is a prohibited investment for the arrangement; or
(b)subject property of the arrangement becomes a prohibited investment for the arrangement after March 29, 2012.
Marginal note:Amount of tax payable
(2)The amount of tax payable in respect of each property described in subsection (1) is 50% of the fair market value of the property at the time referred to in that subsection.
Marginal note:Refund
(3)If in a calendar year an RCA trust disposes of a property in respect of which a tax is imposed under subsection (1) on the custodian of the retirement compensation arrangement, the custodian is entitled to a refund for the year of an amount equal to
(a)the amount of the tax so imposed, unless paragraph (b) applies; or
(b)nil,
(i)if it is reasonable to consider that the custodian, or a specified beneficiary of the arrangement, knew, or ought to have known, at the time the property was acquired by the arrangement, that it was, or would become, a property described in subsection (1), or
(ii)if the property is not disposed of by the arrangement before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances.
Marginal note:Deemed disposition and reacquisition
(4)If, at any time, a property held by an RCA trust ceases to be, or becomes, a prohibited investment for the RCA trust, the RCA trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.
Marginal note:Tax payable in respect of advantage
207.62(1)A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, in the year, an advantage in relation to the arrangement is extended to, or is received or receivable by, an RCA trust under the arrangement, a specified beneficiary of the arrangement or any person who does not deal at arm’s length with the specified beneficiary.
Marginal note:Amount of tax payable
(2)The amount of tax payable in respect of an advantage described in subsection (1) is
(a)in the case of a benefit, the fair market value of the benefit;
(b)in the case of a loan or an indebtedness, the amount of the loan or indebtedness; and
(c)in the case of an RCA strip, the amount of the RCA strip.
Marginal note:Joint liability
207.63If a custodian of a retirement compensation arrangement is liable to pay a tax under section 207.61 or 207.62, a specified beneficiary of the arrangement is jointly and severally, or solidarily, liable for that tax to the extent that the specified beneficiary participated in, assented to or acquiesced in the making of, the transaction or event or series of transactions or events that resulted in the liability.
Marginal note:Waiver of tax payable
207.64If a person would otherwise be liable to pay a tax under this Part because of any of sections 207.61 to 207.63, the Minister may waive or cancel all or part of the liability if the Minister considers it just and equitable to do so having regard to all the circumstances, including
(a)whether the tax arose as a consequence of reasonable error; and
(b)the extent to which the transaction or event or series of transactions or events that gave rise to the tax also gave rise to another tax under this Act.
Marginal note:Deemed distribution
207.65For the purposes of the definitionrefundable taxin subsection 207.5(1), tax paid under section 207.61 or 207.62 by a custodian of a retirement compensation arrangement out of property held in connection with the arrangement is deemed to be a distribution under the arrangement for the taxation year in which the tax is paid to the extent that the tax has not been refunded, waived or cancelled.
Marginal note:Tax payable
207.7(1)Every custodian of a retirement compensation arrangement shall pay a tax under this Part for each taxation year of an RCA trust under the arrangement equal to the amount, if any, by which the refundable tax of the arrangement at the end of the year exceeds the refundable tax of the arrangement at the end of the immediately preceding taxation year, if any.
Marginal note:Refund
(2)Where the custodian of a retirement compensation arrangement has filed a return under this Part for a taxation year within three years after the end of the year, the Minister
(a)may, on sending the notice of assessment for the year or a notification that no tax is payable for the year, refund without application an amount equal to the amount, if any, by which the refundable tax of the arrangement at the end of the immediately preceding year exceeds the refundable tax of the arrangement at the end of the year; and
(b)shall, with all due dispatch, make such a refund after sending the notice of assessment if application for it has been made in writing by the custodian within three years after the day of sending of a notice of an original assessment for the year or of a notification that no tax is payable for the year.
Marginal note:Payment of tax
(3)Every custodian of a retirement compensation arrangement shall, within 90 days after the end of each taxation year of an RCA trust under the arrangement,
(a)file with the Minister a return for the year under this Part in prescribed form and containing prescribed information, without notice or demand therefor;
(b)estimate in the return the amount of tax, if any, payable by the custodian under this Part for the year; and
(c)pay to the Receiver General the amount of tax, if any, payable by the custodian under this Part for the year.
Marginal note:Provisions applicable to Part
(4)Subsections 150(2) and 150(3), sections 152 and 158, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
Marginal note:Excess EPSP amount
207.8(1)In this Part,excess EPSP amount, of a specified employee for a taxation year in respect of an employer, means the amount determined by the formula
A – (20% × B)
where
Marginal note:Tax payable
(2)If a specified employee has an excess EPSP amount for a taxation year, the specified employee shall pay a tax for the year equal to the amount determined by the formula
(A + B) × C
where
(a)if the specified employee is resident in Quebec at the end of the year, 0%,
(b)if the specified employee is resident in a province other than Quebec at the end of the year, the highest percentage rate of tax, including surtaxes but not taxes that are limited to a maximum amount, imposed by the province for the year on the income of an individual who is a resident of the province, or
(c)in any other case, 14%; and
Marginal note:Waiver or cancellation
(3)If a specified employee would otherwise be liable to pay a tax under subsection (2), the Minister may waive or cancel all or part of the liability if the Minister considers it just and equitable to do so having regard to all the circumstances.
Marginal note:Return and payment of tax
(4)Every person who is liable to pay tax under this Part for a taxation year shall
(a)on or before the person’s filing-due date for the year, file with the Minister a return for the year under this Part in prescribed form and containing prescribed information; and
(b)on or before the person’s balance-due day for the year, pay to the Receiver General the amount of tax payable under this Part by the person for the year.
Marginal note:Provisions applicable to this Part
(5)Subsections 150(2) and (3), sections 152, 155 to 156.1, 158 to 160.1, 161 and 161.2 to 167 and Division J of Part I apply to this Part with any modifications that the circumstances require.
Marginal note:Definitions
207.9(1)The following definitions apply in this Part.
participating employerof an employee life and health trust means an employer that provides designated employee benefits for its employees through a trust that meets the conditions described in subsection 144.1(2). (employeur participant)
prohibited investment, at any time for an employee life and health trust, means property that is at that time
(a)a share of the capital stock of, an interest in or a debt of
(i)a participating employer of the employee life and health trust, or
(ii)a person or partnership that does not deal at arm’s length with a participating employer of the employee life and health trust; or
(b)an interest (or, for civil law, a right) in, or a right to acquire, a share, interest or debt described in paragraph (a). (placement interdit)
Marginal note:Tax payable on prohibited investment
(2)A trust shall pay a tax under this Part for a calendar year if, at any time in the year while the trust is an employee life and health trust,
(a)the trust acquires property that is a prohibited investment for the trust; or
(b)income is received or becomes receivable by the trust from, or the trust has a taxable capital gain from the disposition of, a prohibited investment for the trust.
Marginal note:Amount of tax payable
(3)The amount of tax payable under subsection (2) is
(a)if paragraph (2)(a) applies, 50% of the fair market value of the property at the time it is acquired; and
(b)if paragraph (2)(b) applies, 50% of the income or the taxable capital gain.
Marginal note:Refund
(4)If in a calendar year a trust disposes of a property in respect of which a tax is imposed on the trust under subsection (2), the trust is entitled to a refund for the year of an amount equal to
(a)the amount of the tax so imposed, unless paragraph (b) applies; or
(b)nil, if
(i)it is reasonable to consider that the trustees knew, or ought to have known, at the time the property was acquired that it was, or would become, a property described in subsection (2), or
(ii)the property is not disposed of by the trust before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances.
Marginal note:Deemed disposition and reacquisition
(5)If, at any time, a property held by an employee life and health trust ceases to be, or becomes, a prohibited investment for the employee life and health trust, the employee life and health trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.
208[Repealed, 2003, c. 28, s. 15(1)]
Marginal note:Definitions
209(1)For the purposes of this Part,
carved-out incomeof a person for a taxation year from a carved-out property means the amount, if any, by which
(a)the person’s income for the year attributable to the property computed under Part I on the assumption that in computing income no deduction was allowed under section 20, Subdivision E of Division B of Part I or section 104,
exceeds the total of
(b)the amount deducted under subsection 66.4(2) in computing the person’s income for the year to the extent that it may reasonably be considered to be attributable to the property, and
(c)to the extent that the property is an interest in a bituminous sands deposit or oil shale deposit, the amount deducted under subsection 66.2(2) in computing the person’s income for the year to the extent that it can reasonably be considered to be attributable to the cost of that interest; (revenus miniers et pétroliers)
carved-out propertyof a person means
(a)a Canadian resource property where
(i)all or substantially all of the amount that the person is or may become entitled to receive in respect of the property may reasonably be considered to be limited to a maximum amount or to an amount determinable by reference to a stated quantity of production from a mineral resource or an accumulation of petroleum, natural gas or related hydrocarbons,
(ii)the period of time during which the person’s interest in the income attributable to the property may reasonably be expected to continue is
(A)where the property is a head lease or may reasonably be considered to derive from a head lease, less than the lesser of 10 years and the remainder of the term of the head lease, and
(B)in any other case, less than 10 years,
(iii)the person’s interest in the income attributable to the property, expressed as a percentage of production for any period, may reasonably be expected to be reduced substantially,
(A)where the property is a head lease or may reasonably be considered to derive from a head lease, at any time before
(I)the expiration of a period of 10 years commencing when the property was acquired, or
(II)the expiration of the term of the head lease,
whichever occurs first, and
(B)in any other case, at any time before the expiration of a period of 10 years commencing when the property was acquired, or
(iv)another person has a right under an arrangement to acquire, at any time, the property or a portion thereof or a similar property from the person and it is reasonable to consider that one of the main reasons for the arrangement, or any series of transactions or events that includes the arrangement, was to reduce or postpone tax that would, but for this subparagraph, be payable under this Part, or
(b)an interest in a partnership or trust that holds a Canadian resource property where it is reasonable to consider that one of the main reasons for the existence of the interest is to reduce or postpone the tax that would, but for this paragraph, be payable under this Part,
but does not include
(c)an interest, or for civil law a right, in respect of a property that was acquired by the person solely in consideration of the person’s undertaking under an agreement to incur Canadian exploration expense or Canadian development expense in respect of the property and, where the agreement so provides, to acquire gas or oil well equipment (as defined in subsection 1104(2) of theIncome Tax Regulations) in respect of the property,
(c.1)an interest, or for civil law a right, in respect of a property that was retained by the person under an agreement under which another person obtained an absolute or conditional right to acquire another interest, or for civil law another right, in respect of the property, if the other interest or right is not carved-out property of the other person because of paragraph (c),
(d)a particular property acquired by the person under an arrangement solely as consideration for the sale of a Canadian resource property (other than a property that, immediately before the sale was a carved-out property of the person) that relates to the particular property except where it is reasonable to consider that one of the main reasons for the arrangement, or any series of transactions or events that includes the arrangement, was to reduce or postpone tax that would, but for this paragraph, be payable under this Act,
(e)a property retained or reserved by the person out of a Canadian resource property (other than a property that, immediately before the transaction by which the retention or reservation is made, was a carved-out property of the person) that was disposed of by the person except where it is reasonable to consider that one of the main reasons for the retention or reservation, or any series of transactions or events in which the property or interest was retained or reserved, was to reduce or postpone tax that would, but for this paragraph, be payable under this Act,
(f)a property acquired by the person from a taxpayer with whom the person did not deal at arm’s length at the time of the acquisition and the property was acquired by the taxpayer or a person with whom the taxpayer did not deal at arm’s length
(i)pursuant to an agreement in writing to do so entered into before July 20, 1985, or
(ii)under the circumstances described in this paragraph or paragraph (d) or (e),
except where it is reasonable to consider that one of the main reasons for the acquisition of the property, or any series of transactions or events in which the property was acquired, was to reduce or postpone tax that would, but for this paragraph, be payable under this Act,
(f.1)where the taxable income of the person is exempt from tax under Part I, a property of the person that
(i)does not relate to property of a person whose taxable income is not exempt from tax under Part I, and
(ii)is not, and does not relate to, property that was at any time a carved-out property of any other person, or
(g)a prescribed property; (bien restreint)
head leasemeans a contract under which
(a)Her Majesty in right of Canada or a province grants, or
(b)an owner in fee simple, other than Her Majesty in right of Canada or a province, grants for a period of not less than 10 years
any right, licence or privilege to explore for, drill for or take petroleum, natural gas or related hydrocarbons in Canada or to prospect, explore, drill or mine for minerals in a mineral resource in Canada; (bail initial)
termof a head lease includes all renewal periods in respect of the head lease. (durée)
Marginal note:Tax
(2)Every person shall pay a tax under this Part for each taxation year equal to 45% of the total of the person’s carved-out incomes for the year from carved-out properties.
Marginal note:Return
(3)Every person liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which the person is or would be, if the person were liable to pay tax under Part I for the year, required under section 150 to file a return of the person’s income for the year under Part I, a return for the year under this Part in prescribed form containing an estimate of the amount of tax payable by the person under this Part for the year.
Marginal note:Payment of tax
(4)Where a person is liable to pay tax for a taxation year under this Part, the person shall pay in respect of the year, to the Receiver General
(a)on or before the last day of each month in the year, an amount equal to 1/12 of the amount of tax payable by the person under this Part for the year; and
(b)the remainder, if any, of the tax payable by the person under this Part for the year, on or before the person’s balance-due day for the year.
Marginal note:Provisions applicable to Part
(5)Subsections 150(2) and 150(3) and sections 152, 158 and 159, subsections 161(1), 161(2) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
Marginal note:Partnerships
(6)For the purposes of subsection 209(1), a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.
Marginal note:Definitions
210(1)The following definitions apply in this Part.
designated beneficiary, under a particular trust at any time, means a beneficiary, under the particular trust, who is at that time
(a)a non-resident person;
(b)[Repealed, 2014, c. 39, s. 63]
(c)a person who is, because of subsection 149(1), exempt from tax under Part I on all or part of their taxable income and who acquired an interest as a beneficiary under the particular trust after October 1, 1987 directly or indirectly from a beneficiary under the particular trust except if
(i)the interest was, at all times after the later of October 1, 1987 and the day on which the interest was created, held by persons who were exempt from tax under Part I on all of their taxable income because of subsection 149(1), or
(ii)the person is a trust, governed by a registered retirement savings plan or a registered retirement income fund, who acquired the interest, directly or indirectly, from an individual or the spouse or common-law partner, or former spouse or common-law partner, of the individual who was, immediately after the interest was acquired, a beneficiary under the trust governed by the fund or plan;
(d)another trust (in this paragraph referred to as the “other trust”) that is not a graduated rate estate, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time
(i)a non-resident person,
(ii)[Repealed, 2014, c. 39, s. 63]
(iii)a trust that is not
(A)a graduated rate estate,
(B)a mutual fund trust,
(C)a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, or
(D)a trust
(I)whose interest, at that time, in the other trust was held, at all times after the day on which the interest was created, either by it or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and
(II)none of the beneficiaries under which is, at that time, a designated beneficiary under it, or
(iv)a person or partnership that
(A)is a designated beneficiary under the other trust because of paragraph (c) or (e), or
(B)would be a designated beneficiary under the particular trust because of paragraph (c) or (e) if, instead of being a beneficiary under the other trust, the person or partnership were at that time a beneficiary, under the particular trust, whose interest as a beneficiary under the particular trust were
(I)identical to its interest (referred to in this clause as the “particular interest”) as a beneficiary under the other trust,
(II)acquired from each person or partnership from whom it acquired the particular interest, and
(III)held, at all times after the later of October 1, 1987 and the day on which the particular interest was created, by the same persons or partnerships that held the particular interest at those times; or
(e)a particular partnership any of the members of which is at that time
(i)another partnership, except if
(A)each such other partnership is a Canadian partnership,
(B)the interest of each such other partnership in the particular partnership is held, at all times after the day on which the interest was created, by the other partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,
(C)the interest of each member, of each such other partnership, that is a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income was held, at all times after the day on which the interest was created, by that member or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and
(D)the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,
(ii)a non-resident person,
(iii)[Repealed, 2014, c. 39, s. 63]
(iv)another trust that is, under paragraph (d), a designated beneficiary of the particular trust or that would, under paragraph (d), be a designated beneficiary of the particular trust if the other trust were at that time a beneficiary under the particular trust whose interest as a beneficiary under the particular trust were
(A)acquired from each person or partnership from whom the particular partnership acquired its interest as a beneficiary under the particular trust, and
(B)held, at all times after the later of October 1, 1987 and the day on which the particular partnership’s interest as a beneficiary under the particular trust was created, by the same persons or partnerships that held that interest of the particular partnership at those times, or
(v)a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income except if the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income. (bénéficiaire étranger ou assimilé)
designated income, of a trust for a taxation year, means the amount that would be the income of the trust for the year determined under section 3 if
(a)this Act were read without reference to subsections 104(6), (12) and (30);
(b)the trust had no income other than taxable capital gains from dispositions described in paragraph (c) and incomes from
(i)real or immovable properties in Canada (other than Canadian resource properties),
(ii)timber resource properties,
(iii)Canadian resource properties (other than properties acquired by the trust before 1972), and
(iv)businesses carried on in Canada;
(c)the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from
(i)dispositions of taxable Canadian property, and
(ii)dispositions of particular property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)), or property for which the particular property is substituted, that was transferred at any particular time to a particular trust in circumstances in which subsection 73(1) or 107.4(3) applied, if
(A)it is reasonable to conclude that the property was so transferred in anticipation that a person beneficially interested at the particular time in the particular trust would subsequently cease to reside in Canada, and a person beneficially interested at the particular time in the particular trust did subsequently cease to reside in Canada, or
(B)when the property was so transferred, the terms of the particular trust satisfied the conditions in subparagraph 73(1.01)(c)(i) or (iii), and it is reasonable to conclude that the transfer was made in connection with the cessation of residence, on or before the transfer, of a person who was, at the time of the transfer, beneficially interested in the particular trust and a spouse or common-law partner, as the case may be, of the transferor of the property to the particular trust; and
(d)the only losses referred to in paragraph 3(d) were losses from sources described in any of subparagraphs (b)(i) to (iv). (revenu de distribution)
Marginal note:Tax not payable
(2)No tax is payable under this Part for a taxation year by a trust that was throughout the year
(a)a graduated rate estate;
(b)a mutual fund trust;
(c)exempt from tax under Part I because of subsection 149(1);
(d)a trust to which paragraph (a), (a.1) or (c) of the definitiontrustin subsection 108(1) applies; or
(e)non-resident.
210.1[Repealed, 2013, c. 34, s. 341]
Marginal note:Tax on income of trust
210.2(1)Subject to section 210.3, if a trust deducts an amount under paragraph 104(6)(b) in computing its income under Part I for a taxation year, the trust shall pay a tax under this Part in respect of the year equal to 40% of the least of
(a)the designated income of the trust for the year,
(b)the amount that, but for subsections 104(6) and 104(30), would be the income of the trust for the year, and
(c)100/60 of the amount deducted.
(1.1)[Repealed, 2013, c. 34, s. 342]
Marginal note:Amateur athlete trusts
(2)Notwithstanding subsection 210(2), a trust shall pay a tax under this Part in respect of a particular taxation year of the trust equal to 2/3 of the amount that is required by subsection 143.1(2) to be included in computing the income under Part I for a taxation year of a beneficiary under the trust, if
(a)the beneficiary is at any time in the particular taxation year a designated beneficiary under the trust; and
(b)the particular taxation year ends in that taxation year of the beneficiary.
Marginal note:Tax deemed paid by beneficiary
(3)Where an amount (in this subsection and subsection 210.3(2) referred to as the “income amount”) in respect of the income of a trust for a taxation year is, by reason of subsection 104(13) or 105(2), included in computing
(a)the income under Part I of a person who was not at any time in the year a designated beneficiary under the trust, or
(b)the income of a non-resident person (other than a person who, at any time in the year, would be a designated beneficiary under the trust if section 210 were read without reference to paragraph (a) of the definitiondesignated beneficiaryin that section) that is subject to tax under Part I by reason of subsection 2(3) and is not exempt from tax under Part I by reason of a provision contained in a tax treaty,
an amount determined by the formula
A × B/C
where
shall, if designated by the trust in respect of the person in its return for the year under this Part, be deemed to be an amount paid on account of the person’s tax payable under Part I for the person’s taxation year in which the taxation year of the trust ends, on the day that is 90 days after the end of the taxation year of the trust.
Marginal note:Designations in respect of partnerships
(4)Where a taxpayer is a member of a partnership in respect of which an amount is designated by a trust for a taxation year of the trust (in this subsection referred to as the “particular year”) under subsection 210.2(3),
(a)no amount shall be deemed to be paid on account of the partnership’s tax payable under Part I by reason of subsection 210.2(3) except in the application of that subsection for the purposes of subsection 104(31), and
(b)an amount determined by the formula
A × B/C
where
shall be deemed to be an amount paid on account of the taxpayer’s tax payable under Part I for the person’s taxation year in which the partnership’s period ends, on the last day of that year.
Marginal note:Returns
(5)A trust shall, within 90 days after the end of each taxation year,
(a)file with the Minister a return for the year under this Part in prescribed form and containing prescribed information, without notice or demand therefor;
(b)estimate in the return the amount of tax, if any, payable by it under this Part for the year; and
(c)pay to the Receiver General the tax, if any, payable by it under this Part for the year.
Marginal note:Liability of trustee
(6)A trustee of a trust is personally liable to pay to the Receiver General on behalf of the trust the full amount of any tax payable by the trust under this Part to the extent that the amount is not paid to the Receiver General within the time specified in subsection 210.2(5), and the trustee is entitled to recover from the trust any such amount paid by the trustee.
Marginal note:Provisions applicable to Part
(7)Subsections 150(2) and 150(3), sections 152 and 158, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
Marginal note:Where no designated beneficiaries
210.3(1)No tax is payable under this Part by a trust for a taxation year in respect of which the trustee has certified in the trust’s return under this Part for the year that no beneficiary under the trust was a designated beneficiary in the year.
Marginal note:Where beneficiary deemed not designated
(2)Where a trust would, if the trust paid tax under this Part for a taxation year, be entitled to designate an amount under subsection 210.2(3) in respect of a non-resident beneficiary and the income amount in respect of the beneficiary is included in computing the income of the beneficiary which is subject to tax under Part I by reason of subsection 2(3) and is not exempt from tax under Part I by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada, for the purposes of subsection 210.3(1), the beneficiary shall be deemed not to be a designated beneficiary of the trust at any time in the year.
Marginal note:Definitions
211(1)For the purposes of this Part,
existing guaranteed life insurance policy, at any time, means a non-participating life insurance policy in Canada in respect of which
(a)the amount of every premium that became payable before that time and after December 31, 1989,
(b)the number of premium payments under the policy, and
(c)the amount of each benefit under the policy at that time
were fixed and determined on or before December 31, 1989; (police d’assurance-vie garantie existante)
life insurance policyincludes a benefit under
(a)a group life insurance policy, and
(b)a group annuity contract
but does not include
(c)that part of a policy in respect of which the policyholder is deemed by paragraph 138.1(1)(e) to have an interest in a related segregated fund trust, or
(d)a reinsurance arrangement; (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)
net interest rate, in respect of a liability, benefit, risk or guarantee under a life insurance policy of an insurer for a taxation year, is the positive amount, if any, determined by the formula
(A - B) × C
where
(a)in the case of a guaranteed benefit provided under the terms and conditions of the policy as they existed on March 2, 1988, other than a policy where, at any time after March 2, 1988, its terms and conditions relating to premiums and benefits were changed (otherwise than to give effect to the terms and conditions that were determined before March 3, 1988), the greater of
(i)the rate of interest (expressed as a percentage per year) used by the insurer in determining the amount of the guaranteed benefit, and
(ii)4%, and
(b)in any other case, nil, and
(a)in the case of a guaranteed benefit to which paragraph (a) of the description of B applies, 65%, and
(b)in any other case, 55%; (taux d’intérêt net)
non-participating life insurance policymeans a life insurance policy that is not a participating life insurance policy; (police d’assurance-vie sans participation)
participating life insurance policyhas the meaning assigned by subsection 138(12); (police d’assurance-vie avec participation)
policy loanhas the meaning assigned by subsection 138(12); (avance sur police)
registered life insurance policymeans a life insurance policy issued or effected as or under a pooled registered pension plan, a registered retirement savings plan, a deferred profit sharing plan or a registered pension plan; (police d’assurance-vie agréée)
reinsurance arrangementdoes not include an arrangement under which an insurer has assumed the obligations of the issuer of a life insurance policy to the policyholder; (mécanisme de réassurance)
segregated fundhas the meaning given that expression in subsection 138.1(1); (fonds réservé)
specified transaction or event, in respect of a life insurance policy, means
(a)a change in underwriting class,
(b)a change in premium because of a change in frequency of premium payments within a year that does not alter the present value, at the beginning of the year, of the total premiums to be paid under the policy in the year,
(c)an addition under the terms of the policy as they existed on
(i)in the case of an existing guaranteed life insurance policy, December 31, 1989,
(ii)in any other case, March 2, 1988,
of accidental death, dismemberment, disability or guaranteed purchase option benefits,
(d)the deletion of a rider,
(e)redating lapsed policies within the reinstatement period referred to in paragraph (g) of the definitiondispositionin subsection 148(9) or redating for policy loan indebtedness,
(f)a change in premium because of a correction of erroneous information,
(g)the payment of a premium after its due date, or no more than 30 days before its due date, as established on or before
(i)in the case of an existing guaranteed life insurance policy, December 31, 1989, and
(ii)in any other case, March 2, 1988, and
(h)the payment of an amount described in paragraph (a) of the definitionpremiumin subsection 148(9); (opération ou événement déterminé)
taxable life insurance policyof an insurer at any time means a life insurance policy in Canada issued by the insurer (or in respect of which the insurer has assumed the obligations of the issuer of the policy to the policyholder), other than a policy that is at that time
(a)an existing guaranteed life insurance policy,
(b)an annuity contract (including a settlement annuity),
(c)a registered life insurance policy,
(d)a registered pension plan, or
(e)a retirement compensation arrangement. (police d’assurance-vie imposable)
Marginal note:Riders and changes in terms
(2)For the purposes of this Part,
(a)any rider added at any time after March 2, 1988 to a life insurance policy shall be deemed to be a separate life insurance policy issued and effected at that time; and
(b)a change in the terms or conditions of a life insurance policy resulting from a specified transaction or event shall be deemed not to have occurred and not to be a change.
Marginal note:Tax payable
211.1(1)Every life insurer shall pay a tax under this Part for each taxation year equal to 15% of its taxable Canadian life investment income for the year.
Marginal note:Taxable Canadian life investment income
(2)For the purposes of this Part, the taxable Canadian life investment income of a life insurer for a taxation year is the amount, if any, by which its Canadian life investment income for the year exceeds the total of its Canadian life investment losses for the 20 taxation years immediately preceding the year, to the extent that those losses were not deducted in computing its taxable Canadian life investment income for any preceding taxation year.
Marginal note:Canadian life investment income
(3)For the purposes of this Part, the Canadian life investment income or loss of a life insurer for a taxation year is the positive or negative amount determined by the formula
A + B - C
where
(a)the maximum amount that would be determined under paragraph 1401(1)(a), (c) or (d) of theIncome Tax Regulations(other than an amount that would be determined under subparagraph 1401(1)(d)(ii) of those Regulations in respect of a disabled life) in respect of the insurer for the year in respect of the liability, benefit, risk or guarantee if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and
(b)the maximum amount that would be determined under paragraph 1401(1)(a), (c) or (d) of theIncome Tax Regulations(other than an amount that would be determined under subparagraph 1401(1)(d)(ii) of those Regulations in respect of a disabled life) in respect of the insurer for the preceding taxation year in respect of the liability, benefit, risk or guarantee if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement;
D - E
where
(a)the maximum amount that would be determined under paragraph 1401(1)(c.1) of theIncome Tax Regulationsin respect of the insurer for the year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and
(b)the maximum amount that would be determined under paragraph 1401(1)(c.1) of theIncome Tax Regulationsin respect of the insurer for the preceding taxation year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement, and
(a)the total of all amounts determined in respect of the insurer under the description of in respect of the policy for the year and any preceding taxation years ending after 1989
exceeds the total of
(b)all amounts determined in respect of the insurer under the description of E in respect of the policy for taxation years ending before the year, and
(c)the amount, if any, by which
(i)the maximum amount that would be determined under paragraph 1401(1)(c.1) of theIncome Tax Regulationsin respect of the insurer for the year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement
exceeds
(ii)the maximum amount that would be determined under paragraph 1401(1)(c.1) of theIncome Tax Regulationsin respect of the insurer for its last 1989 taxation year in respect of the policy if subsection 1401(1) of those Regulations applied to all life insurance policies and if that amount were determined without reference to any policy loan or reinsurance arrangement; and
(a)where paragraph (a) of the description of B in the definitionnet interest ratein subsection 211(1) applies for any taxation year in respect of a guaranteed benefit under the policy,
(b)where the policy was at any time after 1989 an existing guaranteed life insurance policy,
Marginal note:Short taxation year
(4)Where a taxation year of a life insurer is less than 51 weeks, the values of A and D in subsection 211.1(3) for the year are that proportion of those values otherwise so determined that the number of days in the year (other than February 29) is of 365.
Marginal note:Return
211.2Every life insurer shall file with the Minister, not later than the day on or before which it is required by section 150 to file its return of income for a taxation year under Part I, a return of taxable Canadian life investment income for that year in prescribed form containing an estimate of the tax payable by it under this Part for the year.
Marginal note:Instalments
211.3(1)Every life insurer shall, in respect of each of its taxation years, pay to the Receiver General on or before the last day of each month in the year, an amount equal to 1/12 of the lesser of
(a)the amount estimated by the insurer to be the annualized tax payable under this Part by it for the year, and
(b)the annualized tax payable under this Part by the insurer for the immediately preceding taxation year.
Marginal note:Annualized tax payable
(2)For the purposes of subsections 211.3(1) and 211.5(2), the annualized tax payable under this Part by a life insurer for a taxation year is the amount determined by the formula
(365/A) × B
where
(a)if the year is less than 357 days, the number of days in the year (other than February 29), and
(b)otherwise, 365; and
Marginal note:Payment of remainder of tax
211.4Every life insurer shall pay, on or before its balance-due day for a taxation year, the remainder, if any, of the tax payable under this Part by the insurer for the year.
Marginal note:Provisions applicable to Part
211.5(1)Section 152, subsection 157(2.1), sections 158 and 159, subsections 161(1), 161(2), 161(2.1), 161(2.2) and 161(11), sections 162 to 167 and Division J of Part I apply to this Part, with such modifications as the circumstances require.
Marginal note:Interest on instalments
(2)For the purposes of subsection 161(2) and section 163.1 as they apply to this Part, a life insurer is, in respect of a taxation year, deemed to have been liable to pay, on or before the last day of each month in the year, an instalment equal to 1/12 of the lesser of
(a)the annualized tax payable under this Part by the insurer for the year, and
(b)the annualized tax payable under this Part by the insurer for the immediately preceding taxation year.
Marginal note:Definitions
211.6(1)The definitions in this section apply for the purposes of this Part.
excluded trust, at any time, means a trust that
(a)relates at that time to the reclamation of a well;
(b)is not maintained at that time to secure the reclamation obligations of one or more persons or partnerships that are beneficiaries under the trust;
(c)borrows money at that time;
(d)if the trust is not a trust to which paragraph (e) applies, acquires at that time any property that is not described by any of paragraphs (a), (b) and (f) of the definitionqualified investmentin section 204;
(e)if the trust is created after 2011 (or if the trust was created before 2012, it elects in writing filed with the Minister on or before its filing-due date for a particular taxation year to have subparagraphs (i) and (ii) apply to it for the particular taxation year and all subsequent taxation years, and that election is made jointly with Her Majesty in right of Canada or a particular province, depending upon the qualifying law or qualifying contract in respect of the trust),
(i)acquires at that time any property that is not described by any of paragraphs (a), (b), (c), (c.1), (d) and (f) of the definitionqualified investmentin section 204, or
(ii)holds at that time a prohibited investment;
(f)elected in writing filed with the Minister, before 1998 or before April of the year following the year in which the first contribution to the trust was made, never to have been a qualifying environmental trust; or
(g)was at any previous time during its existence not a qualifying environmental trust (as determined under the definitionqualifying environmental trustin subsection 248(1) as it applied at that previous time). (fiducie exclue)
prohibited investment, of a trust at any time, means a property that
(a)at the time it was acquired by the trust, was described by any of paragraphs (c), (c.1) or (d) of the definitionqualified investmentin section 204; and
(b)was issued by
(i)a person or partnership that has contributed property to, or that is a beneficiary under, the trust,
(ii)a person that is related to, or a partnership that is affiliated with, a person or partnership that has contributed property to, or that is a beneficiary under, the trust, or
(iii)a particular person or partnership if
(A)another person or partnership holds a significant interest (within the meaning assigned by subsection 207.01(4) with any modifications that the circumstances require) in the particular person or partnership, and
(B)the holder of that significant interest has contributed property to, or is a beneficiary under, the trust. (placement interdit)
QET income tax rate, for a trust’s taxation year, means the amount, expressed as a decimal fraction, by which
(a)the percentage rate of tax provided under paragraph 123(1)(a) for the taxation year
exceeds
(b)the total of
(i)the percentage that would, if the trust were a corporation, be its general rate reduction percentage, within the meaning assigned by subsection 123.4(1), for the taxation year, and
(ii)the percentage deduction from tax provided under subsection 124(1) for the taxation year. (taux d’impôt sur le revenu des FEA)
qualifying contract, in respect of a trust, means a contract entered into with Her Majesty in right of Canada or a province on or before the later of January 1, 1996 and the day that is one year after the day on which the trust was created. (contrat admissible)
qualifying environmental trustmeans a trust
(a)each trustee of which is
(i)Her Majesty in right of Canada or a province, or
(ii)a corporation resident in Canada 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;
(b)that is maintained for the sole purpose of funding the reclamation of a qualifying site;
(c)that is, or may become, required to be maintained under
(i)the terms of a qualifying contract, or
(ii)a qualifying law; and
(d)that is not an excluded trust. (fiducie pour l’environnement admissible)
qualifying law, in respect of a trust, means
(a)a law of Canada or a province that was enacted on or before the later of January 1, 1996 and the day that is one year after the day on which the trust was created; and
(b)if the trust was created after 2011, an order made
(i)by a tribunal constituted under a law described by paragraph (a), and
(ii)on or before the day that is one year after the day on which the trust was created. (loi admissible)
qualifying site, in respect of a trust, means a site in Canada that is or has been used primarily for, or for any combination of,
(a)the operation of a mine,
(b)the extraction of clay, peat, sand, shale or aggregates (including dimension stone and gravel),
(c)the deposit of waste, or
(d)if the trust was created after 2011, the operation of a pipeline. (site admissible)
Marginal note:Charging provision
(2)Every trust that is a qualifying environmental trust at the end of a taxation year (other than a trust that is at that time described by paragraph 149(1)(z.1) or (z.2)) shall pay a tax under this Part for the year equal to the amount determined by the formula
A × B
where
Marginal note:Return
(3)Every trust that is a qualifying environmental trust at the end of a taxation year shall file with the Minister on or before its filing-due date for the year a return for the year under this Part in prescribed form containing an estimate of the amount of its tax payable under this Part for the year.
Marginal note:Payment of tax
(4)Every trust shall pay to the Receiver General its tax payable under this Part for each taxation year on or before its balance-due day for the year.
Marginal note:Provisions applicable to Part
(5)Subsections 150(2) and 150(3), sections 152, 158 and 159, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I apply to this Part, with such modifications as the circumstances require.
Marginal note:Definitions
211.7(1)The definitions in this section apply for the purposes of this Part.
approved sharehas the meaning assigned by subsection 127.4(1). (action approuvée)
labour-sponsored funds tax creditin respect of a share is
(a)where the original acquisition of the share occurred before 1996, 20% of the net cost of the share on that acquisition;
(b)in any other case, the amount that would be determined under subsection 127.4(6) in respect of the share if this Act were read without reference to its paragraphs (b) and (d). (crédit d’impôt relatif à un fonds de travailleurs)
(c)[Repealed, 2016, c. 7, s. 44]
net costhas the meaning assigned by subsection 127.4(1). (coût net)
original acquisitionhas the meaning assigned by subsection 127.4(1). (acquisition initiale)
qualifying exchangemeans an exchange by a taxpayer of an approved share, that is part of a series of Class A shares of the capital stock of a corporation, for another approved share, that is part of another series of Class A shares of the capital stock of the corporation, if
(a)the only consideration received by the taxpayer on the exchange is the other share; and
(b)the rights in respect of the series are identical except for the portion of the reserve (within the meaning assigned by subsection 204.8(1)) of the corporation that is attributable to each series. (échange admissible)
qualifying trusthas the meaning assigned by subsection 127.4(1). (fiducie admissible)
revoked corporationmeans a corporation the registration of which has been revoked under subsection 204.81(6). (société radiée)
Marginal note:Amalgamations and mergers
(2)For the purposes of this Part, where two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) amalgamate or merge to form a corporate entity deemed by paragraph 204.85(3)(d) to have been registered under Part X.3, the shares of each predecessor corporation are deemed not to be redeemed, acquired or cancelled by the predecessor corporation on the amalgamation or merger.
Marginal note:Exchangeable shares
(3)For the purposes of this Part and Part X.3, if an approved share of the capital stock of a corporation (referred to in this subsection as the “new share”) has been issued in exchange for another approved share (referred to in this subsection as the “original share”) in a qualifying exchange, the new share is deemed not to have been issued on the exchange and is deemed to have been issued at the time the corporation issued the original share.
Marginal note:Disposition of approved share
211.8(1)If an approved share of the capital stock of a registered labour-sponsored venture capital corporation or a revoked corporation is, before the first discontinuation of its venture capital business, redeemed, acquired or cancelled by the corporation less than eight years after the day on which the share was issued (other than in circumstances described in subclause 204.81(1)(c)(v)(A)(I) or (III) or clause 204.81(1)(c)(v)(B) or (D) or other than if the share is a Class A share of the capital stock of the corporation that is exchanged for another Class A share of the capital stock of the corporation as part of a qualifying exchange) or any other share that was issued by any other labour-sponsored venture capital corporation is disposed of, the person who was the shareholder immediately before the redemption, acquisition, cancellation or disposition shall pay a tax under this Part equal to the lesser of
(a)the amount determined by the formula
A × B
where
(i)where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the labour-sponsored funds tax credit in respect of the share, and
(ii)where the share was issued by any other labour-sponsored venture capital corporation and was at any time an approved share, the amount, if any, required to be remitted to the government of a province as a consequence of the redemption, acquisition, cancellation or disposition (otherwise than as a consequence of an increase in the corporation’s liability for a penalty under a law of the province), and
(i)nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was before March 6, 1996 and the redemption, acquisition, cancellation or disposition is
(A)more than 2 years after the day on which it was issued, where the redemption, acquisition, cancellation or disposition is permitted under the articles of the corporation because an individual attains 65 years of age, retires from the workforce or ceases to be resident in Canada,
(B)more than five years after its issuance, or
(C)if the day that is five years after its issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day,
(i.1)nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was after March 5, 1996 and the redemption, acquisition or cancellation is in February or on March 1st of a calendar year but is not more than 31 days before the day that is eight years after the day on which the share was issued,
(ii)one, in any other case where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, and
(iii)in any other case, the quotient obtained when the labour-sponsored fund tax credit in respect of the share is divided by the tax credit provided under a law of a province in respect of any previous acquisition of the share, and
(b)the amount that would, but for subsection 211.8(2), be payable to the shareholder because of the redemption, acquisition, cancellation or disposition (determined after taking into account the amount determined under subparagraph (ii) of the description of A in paragraph 211.8(1)(a)).
Marginal note:Rules of application
(1.1)Subsections 204.8(2) and (3) and 204.85(3) apply for the purpose of subsection (1).
Marginal note:Withholding and remittance of tax
(2)Where a person or partnership (in this section referred to as the “transferee”) redeems, acquires or cancels a share and, as a consequence, tax is payable under this Part by the person who was the shareholder immediately before the redemption, acquisition or cancellation, the transferee shall
(a)withhold from the amount otherwise payable on the redemption, acquisition or cancellation to the shareholder the amount of the tax;
(b)within 30 days after the redemption, acquisition or cancellation, remit the amount of the tax to the Receiver General on behalf of the shareholder; and
(c)submit with the remitted amount a statement in prescribed form.
Marginal note:Liability for tax
(3)Where a transferee has failed to withhold any amount as required by subsection 211.8(2) from an amount paid or credited to a shareholder, the transferee is liable to pay as tax under this Part on behalf of the shareholder the amount the transferee failed to withhold, and is entitled to recover that amount from the shareholder.
Marginal note:Tax for failure to reacquire certain shares
211.81If a particular amount is payable under a prescribed provision of a provincial law for a taxation year of an individual as determined for the purposes of that provincial law (referred to in this section as the “relevant provincial year”), and an amount has been included in the computation of the labour-sponsored funds tax credit of the individual under subsection 127.4(6) in respect of an approved share that has been disposed of by a qualifying trust in respect of the individual, the individual shall pay a tax for the taxation year in which the relevant provincial year ends equal to the amount deducted by the individual under subsection 127.4(2) in respect of the share.
Marginal note:Return
211.82(1)Every person that is liable to pay tax under this Part for a taxation year shall, not later than the day on or before which the person is required by section 150 to file a return of income for the year under Part I, file with the Minister a return for the year under this Part in prescribed form containing an estimate of the tax payable by the person for the year.
Marginal note:Provisions applicable to this Part
(2)Subsections 150(2) and (3), sections 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I apply to this Part, with any modifications that the circumstances require.
211.9[Repealed, 2013, c. 34, s. 346]
Marginal note:Tax imposed
211.91(1)Every corporation shall pay a tax under this Part in respect of each month (other than January) in a calendar year equal to the amount determined by the formula
(A + B/2 - C - D/2) × (E/12 + F/10)
where
(a)made or incurred by the end of the month by the corporation, and
(b)in respect of the purported renunciations in respect of which an amount is included in the value of A;
(a)made or incurred by the end of the month by the corporation, and
(b)in respect of the purported renunciations in respect of which an amount is included in the value of B;
(a)one, where the month is December, and
(b)nil, in any other case.
Marginal note:Return and payment of tax
(2)A corporation liable to tax under this Part in respect of one or more months in a calendar year shall, before March of the following calendar year,
(a)file with the Minister a return for the year under this Part in prescribed form containing an estimate of the tax payable under this Part by it in respect of each month in the year; and
(b)pay to the Receiver General the amount of tax payable under this Part by it in respect of each month in the year.
Marginal note:COVID-19 – expenses deemed incurred earlier
(2.1)If an agreement referred to in subsection 66(12.66) was made in 2019 or 2020,
(a)the reference in subsection (2) to “the following calendar year” is to be read as a reference to “the second following calendar year”; and
(b)for the purposes of this section and, where subparagraph (iii) applies, paragraph 66(12.66)(a), Canadian exploration expenses incurred by a corporation in respect of the agreement in a particular month in a calendar year are deemed to have been incurred
(i)in January 2020, if the expenses were incurred in 2020 and the agreement was entered into in 2019,
(ii)in January 2021, if the expenses were incurred in 2021 and the agreement was entered into in 2020, and
(iii)12 months earlier, in any other case.
Marginal note:Provisions applicable to Part
(3)Subsections 150(2) and 150(3), sections 152, 158 and 159, subsections 161(1) and 161(11), sections 162 to 167 and Division J of Part I apply to this Part, with any modifications that the circumstances require.
Marginal note:Tax
212(1)Every non-resident person shall pay an income tax of 25% on every amount that a person resident in Canada pays or credits, or is deemed by Part I to pay or credit, to the non-resident person as, on account or in lieu of payment of, or in satisfaction of,
Marginal note:Management fee
(a)a management or administration fee or charge;
Marginal note:Interest
(b)interest that
(i)is not fully exempt interest and is paid or payable
(A)to a person with whom the payer is not dealing at arm’s length, or
(B)in respect of a debt or other obligation to pay an amount to a person with whom the payer is not dealing at arm’s length, or
(ii)is participating debt interest;
Marginal note:Estate or trust income
(c)income of or from an estate or a trust to the extent that the amount
(i)is included in computing the income of the non-resident person under subsection 104(13), except to the extent that the amount is deemed by subsection 104(21) to be a taxable capital gain of the non-resident person, or
(ii)can reasonably be considered (having regard to all the circumstances including the terms and conditions of the estate or trust arrangement) to be a distribution of, or derived from, an amount received by the estate or trust as, on account of, in lieu of payment of or in satisfaction of, a dividend on a share of the capital stock of a corporation resident in Canada, other than a taxable dividend;
Marginal note:Rents, royalties, etc.
(d)rent, royalty or similar payment, including, but not so as to restrict the generality of the foregoing, any payment
(i)for the use of or for the right to use in Canada any property, invention, trade-name, patent, trademark, design or model, plan, secret formula, process or other thing whatever,
(ii)for information concerning industrial, commercial or scientific experience where the total amount payable as consideration for that information is dependent in whole or in part on
(A)the use to be made of, or the benefit to be derived from, that information,
(B)production or sales of goods or services, or
(C)profits,
(iii)for services of an industrial, commercial or scientific character performed by a non-resident person where the total amount payable as consideration for those services is dependent in whole or in part on
(A)the use to be made of, or the benefit to be derived from, those services,
(B)production or sales of goods or services, or
(C)profits,
but not including a payment made for services performed in connection with the sale of property or the negotiation of a contract,
(iv)unless paragraph (i) applies to the amount, made pursuant to an agreement between a person resident in Canada and a non-resident person under which the non-resident person agrees not to use or not to permit any other person to use any thing referred to in subparagraph (i) or any information referred to in subparagraph (ii), or
(v)that was dependent on the use of or production from property in Canada whether or not it was an instalment on the sale price of the property, but not including an instalment on the sale price of agricultural land,
but not including
(vi)a royalty or similar payment on or in respect of a copyright in respect of the production or reproduction of any literary, dramatic, musical or artistic work,
(vii)a payment in respect of the use by a railway company or by a person whose principal business is that of a common carrier of property that is railway rolling stock as defined in the definitionrolling stockin section 2 of theRailway Act
(A)if the payment is made for the use of that property for a period or periods not expected to exceed in the aggregate 90 days in any 12 month period, or
(B)in any other case, if the payment is made pursuant to an agreement in writing entered into before November 19, 1974;
(viii)a payment made under abona fidecost-sharing arrangement under which the person making the payment shares on a reasonable basis with one or more non-resident persons research and development expenses in exchange for an interest, or for civil law a right, in any or all property or other things of value that may result therefrom,
(ix)a rental payment for the use of or the right to use outside Canada any tangible, or for civil law corporeal, property,
(x)any payment made to a person with whom the payer is dealing at arm’s length, to the extent that the amount thereof is deductible in computing the income of the payer under Part I from a business carried on by the payer in a country other than Canada,
(xi)a payment made to a person with whom the payer is dealing at arm’s length for the use of or the right to use property that is
(A)an aircraft,
(B)furniture, fittings or equipment attached to an aircraft,
(C)a spare part for property described in clause 212(1)(d)(xi)(A) or 212(1)(d)(xi)(B),
(D)air navigation equipment utilized in the provision of services under theCivil Air Navigation Services Commercialization Actor computer software the use of which is necessary for the operation of that equipment that is used by the payer for no other purpose; or
(xii)an amount to which subsection (5) would apply if that subsection were read without reference to “to the extent that the amount relates to that use or reproduction”;
Marginal note:Timber royalties
(e)a timber royalty in respect of a timber resource property or a timber limit in Canada (which, for the purposes of this Part, includes any consideration for a right under or pursuant to which a right to cut or take timber from a timber resource property or a timber limit in Canada is obtained or derived, to the extent that the consideration is dependent on, or computed by reference to, the amount of timber cut or taken);
(f)[Repealed, 1997, c. 25, s. 63]
Marginal note:Patronage dividend
(g)a patronage dividend, that is, a payment made pursuant to an allocation in proportion to patronage as defined by section 135 or an amount that would, under subsection 135(7), be included in computing the non-resident person’s income if that person were resident in Canada;
Marginal note:Pension benefits
(h)a payment of a superannuation or pension benefit, other than
(i)[Repealed, 1996, c. 21, s. 55]
(ii)an amount distributed from a pooled registered pension plan that has been designated by the administrator of the plan in accordance with subsection 147.5(18),
(iii)an amount or payment referred to in subsection 81(1) to the extent that that amount or payment would not, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made, be included in computing that person’s income,
(iii.1)the portion of the payment that is transferred by the payer on behalf of the non-resident person, pursuant to an authorization in prescribed form, to a pooled registered pension plan, registered pension plan, registered retirement savings plan, registered retirement income fund or specified pension plan and that
(A)because of any of subsections 146(21), 147.3(9) and 147.5(22) would not, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made, be included in computing the non-resident person’s income, or
(B)by reason of paragraph 60(j) or 60(j.2) would, if the non-resident person had been resident in Canada throughout the year, be deductible in computing the non-resident person’s income for the year,
(iii.2)an amount referred to in paragraph 110(1)(f) to the extent that the amount would, if the non-resident person had been resident in Canada throughout the taxation year in which the amount was paid, be deductible in computing that person’s taxable income or that of the spouse or common-law partner of that person,
(iv)in the case of a payment described in section 57, that portion of the payment that would, by virtue of that section, not be included in the recipient’s income for the taxation year in which it was received, if the recipient were resident in Canada throughout that year, or
(iv.1)the portion of the payment that is transferred by the payer on behalf of the non-resident person, pursuant to an authorization in prescribed form, to acquire an annuity contract in circumstances to which subsection 146(21) applies,
except such portion, if any, of the payment as may reasonably be regarded as attributable to services rendered by the person, to or in respect of whom the payment is made, in taxation years
(v)during which the person at no time was resident in Canada, and
(vi)throughout which the person was not employed, or was only occasionally employed, in Canada;
Marginal note:Restrictive covenant amount
(i)an amount that would, if the non-resident person had been resident in Canada throughout the taxation year in which the amount was received or receivable, be required by paragraph 56(1)(m) or subsection 56.4(2) to be included in computing the non-resident person’s income for the taxation year;
Marginal note:Benefits
(j)any benefit described in any of subparagraphs 56(1)(a)(iii) to 56(1)(a)(vi), any amount described in paragraph 56(1)(x) or 56(1)(z) (other than an amount transferred under circumstances in which subsection 207.6(7) applies) or the purchase price of an interest in a retirement compensation arrangement;
Marginal note:Retiring allowances
(j.1)a payment of any allowance described in subparagraph 56(1)(a)(ii), except
(i)such portion, if any, of the payment as may reasonably be regarded as attributable to services rendered by the person, to or in respect of whom the payment is made, in taxation years
(A)during which the person at no time was resident in Canada, and
(B)throughout which the person was not employed, or was only occasionally employed, in Canada, and
(ii)the portion of the payment transferred by the payer on behalf of the non-resident person pursuant to an authorization in prescribed form to a registered pension plan or to a registered retirement savings plan under which the non-resident person is the annuitant (within the meaning assigned by subsection 146(1)) that would, if the non-resident person had been resident in Canada throughout the year, be deductible in computing the income of the non-resident person by virtue of paragraph 60(j.1);
Marginal note:Supplementary unemployment benefit plan payments
(k)a payment by a trustee under a registered supplementary unemployment benefit plan;
Marginal note:Registered retirement savings plan payments
(l)a payment out of or under a registered retirement savings plan or a plan referred to in subsection 146(12) as an “amended plan” that would, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made, be required by section 146 to be included in computing the income of the non-resident person for the year, other than the portion thereof that
(i)has been transferred by the payer on behalf of the non-resident person pursuant to an authorization in prescribed form
(A)to a registered retirement savings plan under which the non-resident person is the annuitant (within the meaning assigned by subsection 146(1)),
(B)to acquire an annuity described in subparagraph 60(l)(ii) under which the non-resident person is the annuitant, or
(C)to a carrier (within the meaning assigned by subsection 146.3(1)) as consideration for a registered retirement income fund under which the non-resident person is the annuitant (within the meaning assigned by subsection 146.3(1)), and
(ii)would, if the non-resident person had been resident in Canada throughout the year, be deductible in computing the income of the non-resident person for the year by virtue of paragraph 60(l);
Marginal note:Advanced life deferred annuity payment
(l.1)a payment of an amount described in paragraph 56(1)(z.5);
Marginal note:Deferred profit sharing plan payments
(m)a payment under a deferred profit sharing plan or a plan referred to in subsection 147(15) as a “revoked plan” that would, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made, be required by section 147, if it were read without reference to subsections 147(10.1) and 147(20), to be included in computing the non-resident person’s income for the year, other than the portion thereof that is transferred by the payer on behalf of the non-resident person, pursuant to an authorization in prescribed form, to a registered pension plan or registered retirement savings plan and that
(i)by reason of subsection 147(20) would not, if the non-resident person had been resident in Canada throughout the year, be included in computing the non-resident person’s income, or
(ii)by reason of paragraph 60(j.2) would, if the non-resident person had been resident in Canada throughout the year, be deductible in computing the non-resident person’s income for the year;
Marginal note:Income-averaging annuity contract payments
(n)a payment under an income-averaging annuity contract, any proceeds of the surrender, cancellation, redemption, sale or other disposition of an income-averaging annuity contract, or any amount deemed by subsection 61.1(1) to have been received by the non-resident person as proceeds of the disposition of an income-averaging annuity contract;
Marginal note:Other annuity payments
(o)a payment under an annuity contract (other than a payment in respect of an annuity issued in the course of carrying on a life insurance business in a country other than Canada) to the extent of the amount in respect of the interest of the non-resident person in the contract that, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made,
(i)would be required to be included in computing the income of the non-resident person for the year, and
(ii)would not be deductible in computing that income;
Marginal note:Former TFSA
(p)an amount that would, if the non-resident person had been resident in Canada at the time at which the amount was paid, be required by paragraph 12(1)(z.5) to be included in computing the non-resident person’s income for the taxation year that includes that time;
Marginal note:Registered retirement income fund payments
(q)a payment out of or under a registered retirement income fund that would, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made, be required by section 146.3 to be included in computing the non-resident person’s income for the year, other than the portion thereof that
(i)has been transferred by the payer on behalf of the non-resident person pursuant to an authorization in prescribed form
(A)to a registered retirement savings plan under which the non-resident person is the annuitant (within the meaning assigned by subsection 146(1)),
(B)to acquire an annuity described in subparagraph 60(l)(ii) under which the non-resident person is the annuitant, or
(C)to a carrier (within the meaning assigned by subsection 146.3(1)) as consideration for a registered retirement income fund under which the non-resident person is the annuitant (within the meaning assigned by subsection 146.3(1)), and
(ii)would, if the non-resident person had been resident in Canada throughout the year, be deductible in computing the non-resident person’s income for the year by reason of paragraph 60(l);
Marginal note:Registered education savings plan
(r)a payment that is
(i)required by paragraph 56(1)(q) to be included in computing the non-resident person’s income under Part I for a taxation year, and
(ii)not required to be included in computing the non-resident person’s taxable income or taxable income earned in Canada for the year;
Marginal note:Registered disability savings plan
(r.1)an amount that would, if the non-resident person had been resident in Canada throughout the taxation year in which the amount was paid, be required by paragraph 56(1)(q.1) to be included in computing the non-resident person’s income for the taxation year;
Marginal note:Home insulation or energy conversion grants
(s)a grant under a prescribed program of the Government of Canada relating to home insulation or energy conversion;
Marginal note:NISA Fund No. 2 payments
(t)a payment out of a NISA Fund No. 2 to the extent that that amount would, if Part I applied, be required by subsection 12(10.2) to be included in computing the person’s income for a taxation year;
Marginal note:Amateur athlete trust payments
(u)a payment in respect of an amateur athlete trust that would, if Part I applied, be required by section 143.1 to be included in computing the person’s income for a taxation year;
Marginal note:Payments under an eligible funeral arrangement
(v)a payment made by a custodian (within the meaning assigned by subsection 148.1(1)) of an arrangement that was, at the time it was established, an eligible funeral arrangement, to the extent that such amount would, if the non-resident person were resident in Canada, be included because of subsection 148.1(3) in computing the person’s income;
(w)a payment out of a trust that is, or was, at any time, an employee life and health trust, except to the extent that it is a payment of a designated employee benefit (as defined by subsection 144.1(1));
Marginal note:Tax informant program
(x)a payment of an amount described in paragraph 56(1)(z.4); or
Marginal note:First home savings account
(y)a payment out of a FHSA, other than any portion of the payment that is transferred in accordance with subsection 146.6(7).
Marginal note:Tax on dividends
(2)Every non-resident person shall pay an income tax of 25% on every amount that a corporation resident in Canada pays or credits, or is deemed by Part I or Part XIV to pay or credit, to the non-resident person as, on account or in lieu of payment of, or in satisfaction of,
(a)a taxable dividend (other than a capital gains dividend within the meaning assigned by subsection 130.1(4), 131(1) or 133(7.1)); or
(b)a capital dividend.
Marginal note:Exempt dividends
(2.1)Subsection (2) does not apply to an amount paid or credited, by a borrower, under a securities lending arrangement or a specified securities lending arrangement if
(a)the amount is deemed by subparagraph 260(8)(a)(ii) to be a dividend;
(b)either
(i)the arrangement is a fully collateralized arrangement, or
(ii)the borrower and the lender are dealing at arm’s length; and
(c)the security that is transferred or lent to the borrower under the securities lending arrangement is a share of a class of the capital stock of a non-resident corporation.
Marginal note:Interest — definitions
(3)The following definitions apply for the purpose of paragraph (1)(b).
fully exempt interestmeans
(a)interest that is paid or payable on a bond, debenture, note, mortgage, hypothecary claim or similar debt obligation
(i)of, or guaranteed (otherwise than by being insured by the Canada Deposit Insurance Corporation) by, the Government of Canada,
(ii)of the government of a province,
(iii)of an agent of a province,
(iv)of a municipality in Canada or a municipal or public body performing a function of government in Canada,
(v)of a corporation, commission or association to which any of paragraphs 149(1)(d) to (d.6) applies, or
(vi)of an educational institution or a hospital if repayment of the principal amount of the obligation and payment of the interest is to be made, or is guaranteed, assured or otherwise specifically provided for or secured by the government of a province;
(b)interest that is paid or payable on a mortgage, hypothecary claim or similar debt obligation secured by, or on an agreement for sale or similar obligation with respect to, real property situated outside Canada or an interest in any such real property, or to immovables situated outside Canada or a real right in any such immovable, except to the extent that the interest payable on the obligation is deductible in computing the income of the payer under Part I from a business carried on by the payer in Canada or from property other than real or immovable property situated outside Canada;
(c)interest that is paid or payable to a prescribed international organization or agency; or
(d)an amount paid or payable or credited under a securities lending arrangement, or a specified securities lending arrangement, that is deemed by subparagraph 260(8)(a)(i) to be a payment made by a borrower to a lender of interest, if the arrangement is a fully collateralized arrangement, and
(i)the following conditions are met:
(A)the arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and
(B)the security that is transferred or lent to the borrower under the arrangement is described in paragraph (b) of the definitionqualified securityin subsection 260(1) and issued by a non-resident issuer,
(ii)the security that is transferred or lent to the borrower under the arrangement is described in paragraph (c) of the definitionqualified securityin subsection 260(1), or
(iii)the security that is transferred or lent to the borrower under the arrangement is described in paragraph (a) or (b). (intérêts entièrement exonérés)
participating debt interestmeans interest (other than interest described in any of paragraphs (b) to (d) of the definitionfully exempt interest) that is paid or payable on an obligation, other than a prescribed obligation, all or any portion of which interest is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation. (intérêts sur des créances participatives)
Marginal note:Back-to-back loan arrangement
(3.1)Subsection (3.2) applies at any time in respect of a taxpayer if
(a)the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, interest (determined without reference to paragraph 18(6.1)(b) and subsection 214(16)) in respect of a particular debt or other obligation to pay an amount to a person or partnership (in this subsection and subsection (3.2) referred to as theimmediate funder);
(b)the immediate funder is not
(i)a person resident in Canada that does not deal at arm’s length with the taxpayer, or
(ii)a partnership each member of which is a person described in subparagraph (i);
(c)at any time in the period during which the interest accrued (in this subsection and subsections (3.2) and (3.3) referred to as therelevant period), a relevant funder, in respect of a particular relevant funding arrangement,
(i)has an amount outstanding as or on account of a debt or other obligation to pay an amount to a person or partnership that meets any of the following conditions:
(A)recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to a relevant funding arrangement, or
(B)it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because
(I)all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or
(II)the relevant funder anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or
(ii)has a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership and
(A)the existence of the specified right is required under the terms and conditions of the particular relevant funding arrangement, or
(B)it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because
(I)the specified right was granted, or
(II)the relevant funder anticipated that the specified right would be granted;
(d)the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to any ultimate funder rather than the immediate funder, is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.2)) in respect of the particular amount; and
(e)at any time during the relevant period, the total of all amounts — each of which is an amount outstanding as or on account of a debt or other obligation owed by the immediate funder that is a relevant funding arrangement or the fair market value of a particular property in respect of which the immediate funder is granted a specified right that is a relevant funding arrangement — is equal to at least 25% of the total of
(i)the amount outstanding as or on account of the particular debt or other obligation, and
(ii)the total of all amounts each of which is an amount (other than the amount described in subparagraph (i)) that the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the immediate funder under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into where
(A)the immediate funder is granted asecurity interest(as defined in subsection 18(5)) in respect of a property that is the debt or other obligation owed by the immediate funder or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other obligation, and
(B)each security interest that secures the payment of a debt or other obligation referred to in clause (A) secures the payment of every debt or other obligation referred to in that clause.
Marginal note:Back-to-back loan arrangement
(3.2)If this subsection applies at any time in respect of a taxpayer, then for the purposes of paragraph (1)(b), the taxpayer is deemed, at that time, to pay interest to each ultimate funder, the amount of which is determined for each particular ultimate funder by the formula
(A – B) × C/D × (E – F)/E
where
G – H
where
(a)the amount of the particular debt or other obligation referred to in paragraph (3.1)(a) outstanding at the particular time, and
(b)the total of all amounts each of which is at that particular time
(i)an amount outstanding as or on account of a debt or other obligation that is owed to the particular ultimate funder under a relevant funding arrangement,
(ii)the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular ultimate funder has granted a specified right under a relevant funding arrangement, or
(iii)if neither subparagraph (i) nor (ii) applies at that particular time, nil, and
(a)an amount outstanding as or on account of a debt or other obligation that is owed by the particular ultimate funder under a relevant funding arrangement,
(b)the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular ultimate funder has a specified right under a relevant funding arrangement, or
(c)if neither paragraph (a) nor (b) applies at that particular time, nil;
Marginal note:Back-to-back arrangement — election
(3.21)Subsection (3.22) applies in respect of a taxpayer and two or more ultimate funders (referred to in this subsection and subsection (3.22) as theelecting ultimate funders) at any time if
(a)at that time, subsection (3.2) applies in respect of the taxpayer;
(b)prior to that time, the taxpayer and the electing ultimate funders have jointly filed an election under this subsection;
(c)the election designates one of the electing ultimate funders to be the recipient of interest payments that are deemed to be made by the taxpayer under subsection (3.22);
(d)at that time, the tax that would be payable under this Part in respect of an interest payment by the taxpayer to the designated ultimate funder is not less than the tax that would be payable under this Part if the interest payment were made by the taxpayer to any of the other electing ultimate funders; and
(e)the election has not been revoked prior to that time.
Marginal note:Back-to-back arrangement — election
(3.22)If this subsection applies at any time in respect of a taxpayer and two or more electing ultimate funders, then each interest payment that would, in the absence of this subsection, have been deemed under subsection (3.2) to have been made at that time by the taxpayer to an electing ultimate funder, and received by the electing ultimate funder from the taxpayer, is deemed to have instead been
(a)made by the taxpayer to the designated ultimate funder; and
(b)received by the designated ultimate funder from the taxpayer.
Marginal note:Excess funding
(3.3)Subsection (3.4) applies in respect of a particular relevant funder if the amount determined by the following formula is greater than nil:
A – B
where
Marginal note:Excess funding — deemed funding allocation
(3.4)If this subsection applies in respect of a particular relevant funder, for the purposes of subsections (3.2) to (3.4) (other than for the purpose of applying subsections (3.3) and (3.4) in respect of the particular relevant funder), each amount that is owed by the particular relevant funder, or that is the fair market value of a property in respect of which the particular relevant funder has been granted a specified right, under a relevant funding arrangement, is deemed to be the amount determined by the formula
C/D x E
where
Marginal note:Multiple funding arrangements
(3.5)If an amount owing by a relevant funder or a specified right held by the relevant funder is a relevant funding arrangement in respect of more than one particular debt or other obligation referred to in paragraph (3.1)(a), for the purposes of applying subsections (3.2) to (3.4) in respect of each of the particular debts or other obligations, the amount owing, or the fair market value of the property in respect of which the specified right was granted, as the case may be, is deemed, in respect of each particular debt or other obligation, to be the amount determined by the formula
A/B × C
where
Marginal note:Back-to-back loan arrangement — character substitution
(3.6)Subsection (3.7) applies in respect of
(a)shares (other than specified shares) of the capital stock of a particular relevant funder, in respect of a particular relevant funding arrangement, if — at any time at or after the time when the particular debt or other obligation referred to in paragraph (3.1)(a) was entered into — the particular relevant funder has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, a dividend on the shares, either immediately or in the future and either absolutely or contingently, to a person or partnership, and any of the following conditions is met:
(i)the amount of the dividend is determined, in whole or in part, by reference to an amount of interest paid or credited, or an obligation to pay or credit interest, under a relevant funding arrangement, or
(ii)it can reasonably be concluded that the particular relevant funding arrangement was entered into or was permitted to remain in effect, because
(A)the shares were issued or were permitted to remain issued and outstanding, or
(B)it was anticipated that the shares would be issued or would be permitted to remain issued and outstanding; or
(b)a specified royalty arrangement, if — at any time at or after the time when the particular debt or other obligation referred to in paragraph (3.1)(a) was entered into — a particular relevant funder, in respect of a particular relevant funding arrangement, is a specified licensee that has an obligation to pay or credit an amount under the specified royalty arrangement, either immediately or in the future and either absolutely or contingently, to a person or partnership, and any of the following conditions is met:
(i)the amount is determined, in whole or in part, by reference to an amount of interest paid or credited, or an obligation to pay or credit interest, under a relevant funding arrangement, or
(ii)it can reasonably be concluded that the particular relevant funding arrangement was entered into or was permitted to remain in effect, because
(A)the specified royalty arrangement was entered into or was permitted to remain in effect, or
(B)it was anticipated that the specified royalty arrangement would be entered into or remain in effect.
Marginal note:Back-to-back loan arrangement — character substitution
(3.7)If this subsection applies in respect of a specified royalty arrangement (under which a particular relevant funder is a specified licensee) or shares of the capital stock of a particular relevant funder, then, for the purposes of subsections (3.1) to (3.8),
(a)the specified royalty arrangement or the holding of the shares, as the case may be, is deemed to be a relevant funding arrangement;
(b)the specified licensor or shareholder, as the case may be, in respect of the relevant funding arrangement, is deemed to be a relevant funder, in respect of the relevant funding arrangement;
(c)the conditions in paragraph (3.1)(c) are deemed to be met in respect of the relevant funding arrangement; and
(d)the relevant funder is deemed to be owed, under the relevant funding arrangement and by the particular relevant funder, an amount as or on account of a debt, the outstanding amount of which is determined by the formula
(A – B) × C/D
where
(i)an amount outstanding as or on account of a debt or other obligation that is owed to the particular relevant funder under a relevant funding arrangement,
(ii)the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular relevant funder has granted a specified right under a relevant funding arrangement, or
(iii)if neither subparagraph (i) nor (ii) applies at that particular time, nil,
(i)an amount outstanding as or on account of a debt or other obligation that is owed by the particular relevant funder under the relevant funding arrangement,
(ii)the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular relevant funder has been granted a specified right under a relevant funding arrangement, or
(iii)if neither subparagraph (i) nor (ii) applies at that particular time, nil,
(i)if the relevant funding arrangement is described in paragraph (3.6)(a), the shares, or
(ii)if the relevant funding arrangement is described in paragraph (3.6)(b), the specified royalty arrangement, and
Marginal note:Back-to-back loan arrangement — definitions
(3.8)The following definitions apply in this subsection and subsections (3.1) to (3.7) and (3.81).
relevant funder, in respect of a relevant funding arrangement, means
(a)if the relevant funding arrangement is described in paragraph (a) of the definitionrelevant funding arrangement, the immediate funder referred to in paragraph (3.1)(a);
(b)if the relevant funding arrangement is described in paragraph (b) of the definitionrelevant funding arrangement, the creditor in respect of the debt or other obligation or the grantor of the specified right, as the case may be; or
(c)a person or partnership that does not deal at arm’s length with a person or partnership that is referred to in paragraph (a) or (b) and that deals at arm’s length with the taxpayer. (bailleur de fonds considéré)
relevant funding arrangementmeans
(a)the particular debt or other obligation referred to in paragraph (3.1)(a); and
(b)each debt or other obligation or specified right, owing by or granted to a relevant funder, in respect of a particular relevant funding arrangement, if the debt or other obligation or specified right meets the conditions in subparagraph (3.1)(c)(i) or (ii) in respect of a relevant funding arrangement. (mécanisme de financement considéré)
specified licenseemeans
(a)a lessee, licensee or grantee of a right similar to a right granted under a lease or licence, under a specified royalty arrangement;
(b)an assignee under a specified royalty arrangement; or
(c)a purchaser under a specified royalty arrangement. (porteur de licence déterminé)
specified licensormeans
(a)a lessor, licensor or grantor of a right similar to a right granted under a lease or licence, under a specified royalty arrangement;
(b)an assignor under a specified royalty arrangement; or
(c)a seller under a specified royalty arrangement. (cédant de licence déterminé)
specified righthas the same meaning as in subsection 18(5). (droit déterminé)
specified royalty arrangementhas the same meaning as in subsection (3.94). (mécanisme de redevance déterminé)
specified sharemeans a share of the capital stock of a corporation if, under the terms or conditions of the share, or any agreement or arrangement relating to the share,
(a)the holder of the share may cause the share to be redeemed, acquired or cancelled;
(b)the issuing corporation is, or may be, required to redeem, acquire or cancel the share at a specific time; or
(c)the share is convertible or exchangeable into a share that meets the conditions in paragraph (a) or (b). (action déterminée)
ultimate fundermeans a relevant funder, in respect of a relevant funding arrangement (other than the immediate funder) that either
(a)is not a debtor, or a holder of a specified right, under a relevant funding arrangement; or
(b)is a debtor, or a holder of a specified right, under a relevant funding arrangement, if the amount that would — if the relevant funder were an ultimate funder — be determined for C in the formula in subsection (3.2) is greater than nil. (bailleur de fonds ultime)
Marginal note:Specified shares
(3.81)For the purposes of subsections (3.1) to (3.8),
(a)specified shares of a relevant funder, in respect of a relevant funding arrangement, held at any time by a person or partnership are deemed to be a debt of the relevant funder owing to the person or partnership; and
(b)the amount outstanding at that time as or on account of the debt is deemed to be equal to the fair market value of the specified shares at that time.
Marginal note:Back-to-back arrangement — rents, royalties, similar payments
(3.9)Subsection (3.91) applies at any time in respect of a taxpayer if
(a)the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, rent, royalty or similar payment, in respect of a particular lease, licence or similar agreement, to a non-resident person or a partnership any member of which is a non-resident person (in this subsection and subsections (3.91) to (3.94) referred to as theimmediate licensor);
(b)at any time at or after the time when the particular lease, licence or similar agreement was entered into,
(i)a relevant licensor in respect of a particular relevant royalty arrangement has an obligation to pay or credit an amount, either immediately or in the future and either absolutely or contingently, to a person or partnership, in respect of a specified royalty arrangement, and either of the following additional conditions is met:
(A)the amount is determined, in whole or in part, by reference to
(I)an amount paid or credited, or an obligation to pay or credit an amount, in respect of a relevant royalty arrangement, or
(II)one or more of the fair market value of, any revenue, profits, income, or cash flow from, or any other similar criteria in respect of, a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B)it can reasonably be concluded that the particular relevant royalty arrangement was entered into, or was permitted to remain in effect, because
(I)the specified royalty arrangement was entered into or was permitted to remain in effect, or
(II)it was anticipated that the specified royalty arrangement would be entered into or remain in effect, and
(ii)either the person or partnership
(A)does not deal at arm’s length with the taxpayer, or
(B)deals at arm’s length with the taxpayer, if it can reasonably be concluded that one of the main purposes of the specified royalty arrangement was
(I)to reduce or avoid the tax payable under this Part in respect of the particular amount, or
(II)to avoid the application of subsection (3.91); and
(c)the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to an ultimate licensor rather than the immediate licensor, is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.91)) in respect of the particular amount.
Marginal note:Back-to-back arrangement — rents, royalties, similar payments
(3.91)If this subsection applies at any time in respect of a taxpayer, then, for the purposes of paragraph (1)(d), the taxpayer is deemed, at that time, to pay to each ultimate licensor an amount — of the same character as the particular amount referred to in paragraph (3.9)(a) — determined for each particular ultimate licensor by the formula
(A × B/C) × (D – E)/D
where
(a)the portion of the amount referred to in paragraph (3.9)(a) that is demonstrated, to the satisfaction of the Minister, to be reasonably allocable to the particular ultimate licensor, and
(b)if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, one;
(a)the total of all amounts, each of which is the portion of the amount referred to in paragraph (3.9)(a) that is demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each ultimate licensor, and
(b)if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, the number of ultimate licensors;
(a)if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, the highest rate of tax that would be imposed under this Part on the particular amount referred to in paragraph (3.9)(a) if the particular amount were paid by the taxpayer to any of the ultimate licensors at that time, and
(b)in any other case, the rate of tax that would be imposed under this Part on the particular amount referred to in paragraph (3.9)(a) if the particular amount were paid by the taxpayer to the particular ultimate licensor at that time; and
Marginal note:Back-to-back arrangement — character substitution
(3.92)Subsection (3.93) applies in respect of
(a)shares of the capital stock of a particular relevant licensor, in respect of a particular relevant royalty arrangement, if — at any time at or after the time when a particular lease, license or similar agreement referred to in paragraph (3.9)(a) was entered into — the particular relevant licensor has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, a dividend on the shares, either immediately or in the future and either absolutely or contingently, to a person or partnership, and
(i)either of the following conditions is met:
(A)the amount of the dividend is determined, in whole or in part, by reference to
(I)an amount of rent, royalty or similar payment paid or credited, or an obligation to pay or credit rent, royalty or similar payment, under a relevant royalty arrangement, or
(II)one or more of the fair market value of, any revenue profits, income or cash flow from, or any other similar criteria in respect of a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B)it can reasonably be concluded that the particular relevant royalty arrangement was entered into or was permitted to remain in effect, because
(I)the shares were issued or were permitted to remain issued and outstanding, or
(II)it was anticipated that the shares would be issued or would be permitted to remain issued and outstanding, and
(ii)either the person or partnership
(A)does not deal at arm’s length with the taxpayer referred to in paragraph (3.9)(a), or
(B)deals at arm’s length with that taxpayer, if it can reasonably be concluded that one of the main purposes of the issuance of the shares was
(I)to reduce or avoid the tax payable under this Part in respect of the particular amount referred to in paragraph (3.9)(a), or
(II)to avoid the application of subsection (3.91); and
(b)an amount outstanding as or on account of a debt or other obligation to pay an amount, if — at any time at or after the time when a particular lease, license or similar agreement referred to in paragraph (3.9)(a) was entered into — a particular relevant licensor, in respect of a particular relevant royalty arrangement, has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, interest under the debt or other obligation, either immediately or in the future and either absolutely or contingently, to a person or partnership, and
(i)either of the following conditions is met:
(A)the amount of the interest is determined, in whole or in part, by reference to
(I)an amount of rent, royalty or similar payment paid or credited, or an obligation to pay or credit rent, royalty or similar payment, under a relevant royalty arrangement, or
(II)one or more of the fair market value of, any revenue profits, income or cash flow from, or any other similar criteria in respect of a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B)it can reasonably be concluded that the particular relevant royalty arrangement was entered into or was permitted to remain in effect, because
(I)the debt or other obligation was entered into or was permitted to remain in effect, or
(II)it was anticipated that the debt or other obligation would be entered into or remain in effect, and
(ii)either the person or partnership
(A)does not deal at arm’s length with the taxpayer referred to in paragraph (3.9)(a), or
(B)deals at arm’s length with that taxpayer, if it can reasonably be concluded that one of the main purposes of entering into the debt or other obligation was
(I)to reduce or avoid the tax payable under this Part in respect of the particular amount referred to in paragraph (3.9)(a), or
(II)to avoid the application of subsection (3.91).
Marginal note:Back-to-back arrangement — character substitution
(3.93)If this subsection applies in respect of a debt or other obligation to pay an amount (under which a particular relevant licensor is a borrower) or shares of the capital stock of a particular relevant licensor, then, for the purposes of subsections (3.9) to (3.94),
(a)the debt or other obligation or the holding of the shares, as the case may be, is deemed to be a relevant royalty arrangement;
(b)the creditor or shareholder, as the case may be, in respect of the relevant royalty arrangement, is deemed to be a relevant licensor, in respect of the relevant royalty arrangement; and
(c)the relevant royalty arrangement is deemed to be a specified royalty arrangement in respect of which the conditions in paragraph (3.9)(b) are met.
Marginal note:Back-to-back arrangement — definitions
(3.94)The following definitions apply in this subsection and subsections (3.9) to (3.93).
lease, licence or similar agreementmeans an agreement under which a rent, royalty or similar payment is or could be made. (convention de bail, licence ou autre convention semblable)
relevant licensor, in respect of a relevant royalty arrangement, means
(a)if the relevant royalty arrangement is described in paragraph (a) of the definitionrelevant royalty arrangement, the immediate licensor referred to in paragraph (3.9)(a);
(b)if the relevant royalty arrangement is described in paragraph (b) of the definitionrelevant royalty arrangement, a person or partnership that is the lessor, the licensor or the grantor of a right similar to a right granted under a lease or licence, the assignor or the seller, as the case may be; or
(c)a person or partnership that does not deal at arm’s length with a relevant licensor referred to in paragraph (a) or (b). (cédant de licence considéré)
relevant royalty arrangementmeans
(a)the particular lease, licence or similar agreement referred to in paragraph (3.9)(a); and
(b)each specified royalty arrangement that
(i)meets, in respect of a relevant royalty arrangement, the conditions in clause (3.9)(b)(i)(A) or (B), and
(ii)is an arrangement in respect of which the person or partnership referred to in subparagraph (3.9)(b)(ii) meets the conditions in clause (3.9)(b)(ii)(A) or (B). (mécanisme de redevance considéré)
rent, royalty or similar paymentmeans a rent, royalty or similar payment described in paragraph (1)(d) and, for greater certainty, includes any payment described in subparagraphs (1)(d)(i) to (v) but does not include any payment described in subparagraphs (1)(d)(vi) to (xii). (loyer, redevance ou paiement semblable)
specified royalty arrangementmeans a lease, license or similar agreement, an assignment or an instalment sale. (mécanisme de redevance déterminé)
ultimate licensormeans a relevant licensor (other than the immediate licensor), in respect of a relevant royalty arrangement, that is not, under a relevant royalty arrangement,
(a)a lessee, a licensee or a grantee of a right similar to a right granted under a lease or licence;
(b)an assignee; or
(c)a purchaser. (cédant de licence ultime)
Interpretation ofmanagement or administration fee or charge
(4)For the purpose of paragraph 212(1)(a),management or administration fee or chargedoes not include any amount paid or credited or deemed by Part I to have been paid or credited to a non-resident person as, on account or in lieu of payment of, or in satisfaction of,
(a)a service performed by the non-resident person if, at the time the non-resident person performed the service
(i)the service was performed in the ordinary course of a business carried on by the non-resident person that included the performance of such a service for a fee, and
(ii)the non-resident person and the payer were dealing with each other at arm’s length, or
(b)a specific expense incurred by the non-resident person for the performance of a service that was for the benefit of the payer,
to the extent that the amount so paid or credited was reasonable in the circumstances.
Marginal note:Motion picture films
(5)Every non-resident person shall pay an income tax of 25% on every amount that a person resident in Canada pays or credits, or is deemed by Part I to pay or credit, to the non-resident person as, on account or in lieu of payment of, or in satisfaction of, payment for a right in or to the use of
(a)a motion picture film, or
(b)a film, video tape or other means of reproduction for use in connection with television (other than solely in connection with and as part of a news program produced in Canada),
that has been, or is to be, used or reproduced in Canada to the extent that the amount relates to that use or reproduction.
Marginal note:Acting services
(5.1)Notwithstanding any regulation made under paragraph 214(13)(c), every person who is either a non-resident individual who is an actor or that is a corporation related to such an individual shall pay an income tax of 23% on every amount paid or credited, or provided as a benefit, to or on behalf of the person for the provision in Canada of the acting services of the actor in a film or video production.
Marginal note:Relief from double taxation
(5.2)Where a corporation is liable to tax under subsection (5.1) in respect of an amount for acting services of an actor (in this subsection referred to as the “corporation payment”) and the corporation pays, credits or provides as a benefit to the actor an amount for those acting services (in this subsection referred to as the “actor payment”), no tax is payable under subsection (5.1) with respect to the actor payment except to the extent that it exceeds the corporation payment.
Marginal note:Reduction of withholding
(5.3)If the Minister is satisfied that the deduction or withholding otherwise required by section 215 from an amount described in subsection (5.1), would cause undue hardship, the Minister may determine a lesser amount to be deducted or withheld and that lesser amount is deemed to be the amount so required to be deducted or withheld.
Marginal note:Interest on provincial bonds from wholly-owned subsidiaries
(6)Where an amount described by subsection 212(1) relates to interest on bonds or other obligations of or guaranteed by Her Majesty in right of a province or interest on bonds or other obligations provision for the payment of which was made by a statute of a provincial legislature, the tax payable under subsection 212(1) is 5% of that amount.
Marginal note:Where s. (6) does not apply
(7)Subsection 212(6) does not apply to interest on any bond or other obligation described therein that was issued after December 20, 1960, except any such bond or other obligation for the issue of which arrangements were made on or before that day with a dealer in securities, if the existence of the arrangements for the issue of the bond or other obligation can be established by evidence in writing given or made on or before that day.
Marginal note:Bonds issued after December 20, 1960 in exchange for earlier bonds
(8)For the purposes of this Part, where any bond, except a bond to which clause 212(1)(b)(ii)(C) applies, was issued after December 20, 1960 in exchange for a bond issued on or before that day, it shall, if the terms on which the bond for which it was exchanged was issued conferred on the holder thereof the right to make the exchange, be deemed to have been issued on or before December 20, 1960.
Marginal note:Exemptions
(9)Where
(a)a dividend or interest is received by a trust from a non-resident-owned investment corporation,
(b)an amount (in this subsection referred to as the “royalty payment”) is received by a trust as, on account of, in lieu of payment of or in satisfaction of, a royalty on or in respect of a copyright in respect of the production or reproduction of any literary, dramatic, musical or artistic work,
(c)interest is received by a mutual fund trust maintained primarily for the benefit of non-resident persons, or
(d)a dividend or interest is received by a trust that is created under a reinsurance trust agreement
(i)to which a regulatory authority — being the Superintendent of Financial Institutions or a provincial regulatory authority having powers similar to those of the Superintendent — is a party, and
(ii)that accords with guidelines issued by the regulatory authority relating to reinsurance arrangements with unregistered insurers
and a particular amount is paid or credited to a non-resident person as income of or from the trust and can reasonably be regarded as having been derived from the dividend, interest or royalty payment, as the case may be, no tax is payable because of paragraph 212(1)(c) as a consequence of the payment or crediting of the particular amount if no tax would have been payable under this Part in respect of the dividend, interest or royalty payment, as the case may be, if it had been paid directly to the non-resident person instead of to the trust.
Marginal note:Trust beneficiaries residing outside of Canada
(10)Where all the beneficiaries of a trust established before 1949 reside, during a taxation year, in one country other than Canada and all amounts included in computing the income of the trust for the taxation year were received from persons resident in that country, no tax is payable under paragraph 212(1)(c) on an amount paid or credited in the taxation year to a beneficiary as income of or from the trust.
Marginal note:Payment to beneficiary as income of trust
(11)An amount paid or credited by a trust or an estate to a beneficiary or other person beneficially interested therein shall be deemed, for the purpose of paragraph 212(1)(c) and without limiting the generality thereof, to have been paid or credited as income of the trust or estate, regardless of the source from which the trust or estate derived it.
Marginal note:Deemed payments to spouse, etc.
(12)Where by reason of subsection 56(4) or 56(4.1) or any of sections 74.1 to 75 of this Act or section 74 of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, there is included in computing a taxpayer’s income under Part I for a taxation year an amount paid or credited to a non-resident person in the year, no tax is payable under this section on that amount.
Marginal note:Rent and other payments
(13)For the purposes of this section, where a non-resident person pays or credits an amount as, on account or in lieu of payment of, or in satisfaction of,
(a)rent for the use in Canada of property (other than property that is rolling stock as defined in section 2 of theRailway Act),
(b)a timber royalty in respect of a timber resource property or a timber limit in Canada,
(c)a payment of a superannuation or pension benefit under a registered pension plan or of a distribution to one or more persons out of or under a retirement compensation arrangement,
(d)a payment of a retiring allowance or a death benefit to the extent that the payment is deductible in computing the payer’s taxable income earned in Canada,
(e)a payment described in any of paragraphs 212(1)(k) to 212(1)(n), 212(1)(q) and 212(1)(v),
(f)interest on any mortgage, hypothecary claim or other indebtedness entered into or issued or modified after March 31, 1977 and secured by real property situated in Canada or an interest therein, or by immovables situated in Canada or real rights therein, to the extent that the amount so paid or credited is deductible in computing the non-resident person’s taxable income earned in Canada or the amount on which the non-resident person is liable to pay tax under Part I, or
(g)an amount to which paragraph (1)(i) would apply if the amount paid or credited were paid or credited by a person resident in Canada, and that amount affects, or is intended to affect, in any way whatever,
(i)the acquisition or provision of property or services in Canada,
(ii)the acquisition or provision of property or services outside Canada by a person resident in Canada, or
(iii)the acquisition or provision outside Canada of a taxable Canadian property,
the non-resident person shall be deemed in respect of that payment to be a person resident in Canada.
Marginal note:Application of Part XIII tax where payer or payee is a partnership
(13.1)For the purposes of this Part, other than section 216,
(a)where a partnership pays or credits an amount to a non-resident person, the partnership shall, in respect of the portion of that amount that is deductible, or that would but for section 21 be deductible in computing the amount of the income or loss, as the case may be, referred to in paragraph 96(1)(f) or 96(1)(g) if the references therein to “a particular place” and “that particular place” were read as references to “Canada”, be deemed to be a person resident in Canada;
(a.1)where a partnership pays, credits or provides to a non-resident person an amount described in subsection (5.1), the partnership is deemed in respect of the amount to be a person; and
(b)where a person resident in Canada pays or credits an amount to a partnership (other than a Canadian partnership within the meaning assigned by section 102), the partnership shall be deemed, in respect of that payment, to be a non-resident person.
Marginal note:Application of Part XIII tax — non-resident operates in Canada
(13.2)For the purposes of this Part, a particular non-resident person, who in a taxation year pays or credits to another non-resident person an amount other than an amount to which subsection (13) applies, is deemed to be a person resident in Canada in respect of the portion of the amount that is deductible in computing the particular non-resident person’s taxable income earned in Canada for any taxation year from a source that is neither a treaty-protected business nor a treaty-protected property.
Marginal note:Application of Part XIII to authorized foreign bank
(13.3)An authorized foreign bank is deemed to be resident in Canada for the purposes of
(a)this Part, in respect of any amount paid or credited to or by the bank in respect of its Canadian banking business; and
(b)the application in paragraph (13.1)(b) of the definitionCanadian partnershipin respect of a partnership interest held by the bank in the course of its Canadian banking business.
(14)[Repealed, 2007, c. 35, s. 59]
Marginal note:Certain obligations
(15)For the purposes of subparagraph (1)(b)(ii), after November 18, 1974 interest on a bond, debenture, note, mortgage, hypothecary claim or similar obligation that is insured by the Canada Deposit Insurance Corporation is deemed not to be interest with respect to an obligation guaranteed by the Government of Canada.
Marginal note:Payments for temporary use of rolling stock
(16)Clause 212(1)(d)(vii)(A) does not apply to a payment in a year for the temporary use of railway rolling stock by a railway company to a person resident in a country other than Canada unless that country grants substantially similar relief for the year to the company in respect of payments received by it for the temporary use by a person resident in that country of railway rolling stock.
Marginal note:Exception
(17)This section is not applicable to payments out of or under an employee benefit plan or employee trust.
Marginal note:Payments to the International Olympic Committee and the International Paralympic Committee
(17.1)Notwithstanding subsections (1) and (2),
(a)the International Olympic Committee is not taxable under this Part on any amount paid or credited to it, after 2005 and before 2011, in respect of the 2010 Olympic Winter Games, and
(b)the International Paralympic Committee is not taxable under this Part on any amount paid or credited to it, after 2005 and before 2011, in respect of the 2010 Paralympic Winter Games.
Marginal note:Undertaking
(18)Every person who in a taxation year is a prescribed financial institution or a person resident in Canada who is a registered securities dealer shall on demand from the Minister, served personally or by registered letter, file within such reasonable time as may be stipulated in the demand, an undertaking in prescribed form relating to the avoidance of payment of tax under this Part.
Marginal note:Tax on registered securities dealers
(19)Every taxpayer who is a registered securities dealer resident in Canada shall pay a tax under this Part equal to the amount determined by the formula
1/365 × .25 × (A - B) × C
where
(a)all amounts each of which is the amount of money provided before the end of the day by or on behalf of the taxpayer (and not returned or repaid before the end of the day) to a non-resident person as collateral or as consideration for a security that is described in paragraph (a) of the definitionfully exempt interestin subsection (3), or that is an obligation of the government of any country, province, state, municipality or other political subdivision, and that was lent or transferred under a securities lending arrangement, and
(b)the greater of
(i)10 times the greatest amount determined, under the laws of the province or provinces in which the taxpayer is a registered securities dealer, to be the capital employed by the taxpayer at the end of the day, and
(ii)20 times the greatest amount of capital required, under the laws of the province or provinces in which the taxpayer is a registered securities dealer, to be maintained by the taxpayer as a margin in respect of securities described in paragraph (a) of the definitionfully exempt interestin subsection (3), or that is an obligation of the government of any country, province, state, municipality or other political subdivision, at the end of the day, and
and shall remit that amount to the Receiver General on or before the 15th day of the month after the month in which the day occurs.
Marginal note:Designated SLA
(20)For the purpose of subsection (19), a designated securities lending arrangement is a securities lending arrangement
(a)under which
(i)the lender is a prescribed financial institution or a registered securities dealer resident in Canada,
(ii)the particular security lent or transferred is an obligation described in paragraph (a) of the definitionfully exempt interestin subsection (3) or an obligation of the government of any country, prov- ince, state, municipality or other political subdivision,
(iii)the amount of money provided to the lender at any time during the term of the arrangement either as collateral or as consideration for the particular security does not exceed 110% of the fair market value at that time of the particular security; and
(b)that was neither intended, nor made as a part of a series of securities lending arrangements, loans or other transactions that was intended, to be in effect for more than 270 days.
Marginal note:Interest coupon stripping arrangement — conditions
(21)Subsection (22) applies at any time in respect of a taxpayer if
(a)the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, interest to a person or partnership (in this subsection and subsection (22) referred to as the “interest coupon holder”) in respect of a debt or other obligation, other than a specified publicly offered debt obligation, owed to another person or partnership (in this subsection and subsection (22) referred to as the “non-arm’s length creditor”) that is
(i)a non-resident person with whom the taxpayer is not dealing at arm’s length, or
(ii)a partnership other than a Canadian partnership; and
(b)the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to the non-arm’s length creditor rather than the interest coupon holder, is greater than the tax payable under this Part (determined without reference to subsection (22)) in respect of the particular amount.
Marginal note:Interest coupon stripping arrangement — application
(22)If this subsection applies at any time in respect of a taxpayer, then for the purpose of paragraph (1)(b), the taxpayer is deemed, at that time, to pay interest to the non-arm’s length creditor, the amount of which is determined by the formula
A × (B − C) ÷ B
where
Marginal note:Definition ofspecified publicly offered debt obligation
(23)For the purposes of subsection (21),specified publicly offered debt obligationmeans a debt or other obligation that meets the following conditions:
(a)it was issued by the taxpayer as part of an offering that is lawfully distributed to the public in accordance with a prospectus, registration statement or similar document filed with and, where required by law, accepted for filing by a public authority; and
(b)it can reasonably be considered that none of the main purposes of a transaction or event, or series of transactions or events, as a part of which the taxpayer pays or credits an amount as, on account or in lieu of payment of, or in satisfaction of, interest to a person or partnership in respect of the debt or other obligation is to avoid or reduce tax that would otherwise be payable under this Part by a non-resident person or partnership to whom the debt or other obligation is owed.
Marginal note:Non-arm’s length sales of shares by non-residents
212.1(1)Subsection (1.1) applies if a non-resident person disposes of shares (in this section referred to as the “subject shares”) of any class of the capital stock of a corporation resident in Canada (in this section referred to as the “subject corporation”) to another corporation resident in Canada (in this section referred to as the “purchaser corporation”) with which the non-resident person does not (otherwise than because of a right referred to in paragraph 251(5)(b)) deal at arm’s length and, immediately after the disposition, the subject corporation is connected (within the meaning that would be assigned by subsection 186(4) if the references in that subsection to “payer corporation” and “particular corporation” were read as “subject corporation” and “purchaser corporation”, respectively, and if section 186 were read without reference to its subsection (6)) with the purchaser corporation.
Marginal note:Non-arm’s length sales of shares by non-residents
(1.1)If this subsection applies,
(a)the amount, if any, by which the fair market value of any consideration (other than any share of the capital stock of the purchaser corporation) received by the non-resident person referred to in subsection (1) from the purchaser corporation for the subject shares exceeds the paid-up capital in respect of the subject shares immediately before the disposition shall, for the purposes of this Act, be deemed to be a dividend
(i)in the case that, immediately before the disposition, the purchaser corporation controlled the non-resident person,
(A)paid at the time of the disposition by the subject corporation to the non-resident person, and
(B)received at that time by the non-resident person from the subject corporation, and
(ii)in any other case,
(A)paid at the time of the disposition by the purchaser corporation to the non-resident person, and
(B)received at that time by the non-resident person from the purchaser corporation; and
(b)in computing the paid-up capital at any particular time after March 31, 1977 of any particular class of shares of the capital stock of the purchaser corporation, there shall be deducted that proportion of the amount, if any, by which the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of all of the shares of the capital stock of the purchaser corporation exceeds the amount, if any, by which
(i)the paid-up capital in respect of the subject shares immediately before the disposition
exceeds
(ii)the fair market value of the consideration described in paragraph (a),
that the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of the particular class of shares is of the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of all of the issued shares of the capital stock of the purchaser corporation.
Marginal note:Deemed consideration
(1.2)For the purposes of subsections (1) and (1.1), if, in the absence of this subsection, no consideration would be received by the non-resident person referred to in subsection (1) from the purchaser corporation for the subject shares, the non-resident person is deemed to receive consideration other than shares of the capital stock of the purchaser corporation from the purchaser corporation for the subject shares, the fair market value of which is equal to the amount, if any, by which the fair market value of the subject shares disposed of by the non-resident person exceeds the amount of any increase because of the disposition in the fair market value of the shares of the capital stock of the purchaser corporation.
Marginal note:Idem
(2)In computing the paid-up capital at any particular time after March 31, 1977 of any particular class of shares of the capital stock of a corporation, there shall be added an amount equal to the lesser of
(a)the amount, if any, by which
(i)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 the particular class paid after March 31, 1977 and before the particular time by the corporation and received by a non-resident-owned investment corporation or by a person who is not a corporation resident in Canada
exceeds
(ii)the total that would be determined under subparagraph (i) if this Act were read without reference to paragraph (1.1)(b), and
(b)the total of all amounts each of which is an amount required by paragraph (1.1)(b) to be deducted in computing the paid-up capital in respect of the particular class of shares after March 31, 1977 and before the particular time.
Marginal note:Idem
(3)For the purposes of this section,
(a)a non-resident person shall, for greater certainty, be deemed not to deal at arm’s length with a purchaser corporation at the time of a disposition described in subsection (1) if the non-resident person was,
(i)immediately before the disposition, one of a group of less than 6 persons that controlled the subject corporation, and
(ii)immediately after the disposition, one of a group of less than 6 persons that controlled the purchaser corporation, each member of which was a member of the group referred to in subparagraph (i);
(b)for the purposes of determining whether or not a non-resident person referred to in paragraph (a) was a member of a group of less than six persons that controlled a corporation at any time, any shares of the capital stock of that corporation owned at that time by any of the following persons shall be deemed to be owned at that time by the non-resident person and not by the person who actually owned the shares at that time:
(i)the non-resident person’schild(within the meaning assigned by subsection 70(10)), who is under 18 years of age, or the non-resident person’s spouse or common-law partner,
(ii)a trust of which the non-resident person, a person described in subparagraph (i) or a corporation described in subparagraph (iii) is a beneficiary,
(iii)a corporation controlled by the non-resident person, a person described in subparagraph (i), a trust described in subparagraph (ii) or any combination thereof, and
(iv)a partnership of which the non-resident person or a person described in one of subparagraphs (i) to (iii) is a majority-interest partner or a member of amajority-interest group of partners(as defined in subsection 251.1(3));
(c)a trust and a beneficiary of the trust or a person related to a beneficiary of the trust shall be deemed not to deal with each other at arm’s length;
(d)for the purpose of paragraph (a),
(i)a group of persons in respect of a corporation means any 2 or more persons each of whom owns shares of the capital stock of the corporation,
(ii)a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation shall be considered to be controlled by that group of persons, and
(iii)a corporation may be controlled by a person or a particular group of persons notwithstanding that the corporation is also controlled or deemed to be controlled by another person or group of persons; and
(e)[Repealed, 2018, c. 27, s. 21]
(f)in this subsection, a person includes a partnership.
Marginal note:Where section does not apply
(4)Notwithstanding subsection (1), subsection (1.1) does not apply in respect of a disposition by a non-resident corporation of shares of a subject corporation to a purchaser corporation if
(a)immediately before the disposition, the purchaser corporation controlled the non-resident corporation; and
(b)it is not the case that, at the time of the disposition, or as part of a transaction or event or series of transactions or events that includes the disposition, a non-resident person
(i)holds, directly or indirectly, shares of the capital stock of the purchaser corporation, and
(ii)does not deal at arm’s length with the purchaser corporation.
Marginal note:Tiered trusts and partnerships
(5)For the purposes of this section and paragraph (k) of the definitionproceeds of dispositionin section 54, a person or partnership that is, at any time, a beneficiary under a trust (other than a trust that is the non-resident person referred to in subsection (1)), or a member of a partnership (such trust or partnership referred to in this subsection as the “particular conduit”), that is a beneficiary under a trust or member of a partnership (such trust or partnership referred to in this subsection as the “other conduit”) is deemed
(a)to be a beneficiary under or member of, as the case may be, the other conduit; and
(b)to hold the interest in the other conduit that is held by the particular conduit in the proportion expressed by the formula
A/B
where
Marginal note:Trusts and partnerships look-through rule
(6)The following rules apply for the following purposes:
(a)for the purposes of this subsection and subsections (1) and (1.1), if at any time an interest (in this paragraph referred to as the “pertinent interest”) in a trust or a partnership (each referred to in this subsection as a “conduit”) is disposed of by a 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, to a purchaser and any portion of the fair market value of the pertinent interest is attributable to shares of the capital stock of a corporation resident in Canada held, directly or indirectly (unless all of the shares are held indirectly through one or more non-resident corporations), by the conduit (in this paragraph referred to as the “shares held by the conduit”), then
(i)the holder is deemed, on a class-by-class basis, to have disposed, at that time, of the shares held by the conduit to the purchaser, and the purchaser is deemed to have acquired the shares, in the proportion expressed by the formula
A/B
where
(ii)the holder is deemed to have received from the purchaser and the purchaser is deemed to have paid to the holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula
A × B/C
where
(b)for the purposes of subsections (1) and (1.1) and paragraph (c), if at any time a conduit (other than a non-resident trust) disposes of shares of the capital stock of a corporation resident in Canada to a purchaser, then
(i)each holder of an interest in the conduit is deemed, on a class-by-class basis, to have disposed, at that time, of the shares to the purchaser in the proportion expressed by the formula
A/B
where
(ii)each holder of an interest in the conduit is deemed to have received from the purchaser and the purchaser is deemed to have paid to each such holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula
A × B/C
where
(c)for the purposes of subsections (1) and (1.1), if at any time a conduit acquires shares of the capital stock of a corporation resident in Canada from a vendor, then
(i)each holder of an interest in the conduit is deemed to have acquired, at that time, the shares from the vendor, on a class-by-class basis, in the proportion expressed by the formula
A/B
where
(ii)each holder of an interest in the conduit is deemed to have paid to the vendor and the vendor is deemed to have received from each such holder, as consideration for the shares deemed to have been acquired in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula
A × B/C
where
(d)for the purpose of determining whether the subject corporation is connected with the purchaser corporation for the purposes of subsection (1) at any time, if at that time a conduit owns shares of the capital stock of the subject corporation, each holder of an interest in the conduit is deemed to own, at that time, the shares of each class of the capital stock of the subject corporation that are owned by the conduit the number of which is determined by the formula
A × B/C
where
Marginal note:Avoidance of subsections (5) and (6)
(7)The amounts determined for A and B in paragraph (5)(b), for A and B in subparagraph (6)(c)(i) and for B and C in paragraph (6)(d) are, in respect of an interest as a beneficiary under a trust held by a person or partnership, deemed to be equal to one if
(a)the person or partnership’s share of the accumulating income or capital of the trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power; and
(b)it can reasonably be considered that one of the reasons for the discretionary power is to avoid or limit the application of subsection (1.1).
Marginal note:Application
212.2(1)This section applies where
(a)a taxpayer disposes at a particular time of a share of the capital stock of a corporation resident in Canada (or any property more than 10% of the fair market value of which can be attributed to shares of the capital stock of corporations resident in Canada) to
(i)a person resident in Canada,
(ii)a partnership in which any person resident in Canada has, directly or indirectly, an interest, or
(iii)a person or partnership that acquires the share or the property in the course of carrying on a business through a permanent establishment in Canada, as defined in theIncome Tax Regulations;
(b)subsection 212.1(1.1) does not apply in respect of the disposition;
(c)the taxpayer is non-resident at the particular time;
(d)it is reasonable to conclude that the disposition is part of an expected series of transactions or events that includes the issue after December 15, 1998 of a particular share of the capital stock of a particular insurance corporation resident in Canada on the demutualization (within the meaning assigned by subsection 139.1(1)) of the particular corporation and
(i)after the particular time, the redemption, acquisition or cancellation of the particular share, or a share substituted for the particular share, by the particular corporation or the issuer of the substituted share, as the case may be,
(ii)after the particular time, an increase in the level of dividends declared or paid on the particular share or a share substituted for the particular share, or
(iii)the acquisition, at or after the particular time, of the particular share or a share substituted for the particular share by
(A)a person not dealing at arm’s length with the particular corporation or with the issuer of the substituted share, as the case may be, or
(B)a partnership any direct or indirect interest in which is held by a person not dealing at arm’s length with the particular corporation or with the issuer of the substituted share, as the case may be; and
(e)at the particular time, the person described in subparagraph (a)(i) or (iii) or any person who has, directly or indirectly, an interest in the partnership described in subparagraph (a)(ii) or (iii) knew, or ought reasonably to have known, of the expected series of transactions or events described in paragraph (d).
Marginal note:Deemed dividend
(2)For the purposes of this Part, where property is disposed of at any time by a taxpayer to a person or partnership in circumstances in which this section applies,
(a)a taxable dividend is deemed to be paid at that time by the person or partnership to the taxpayer and received at the time by the taxpayer;
(b)the amount of the dividend is deemed to be equal to the amount determined by the formula
A - ((A/B) × C)
where
(c)in respect of the dividend, the person or partnership is deemed to be a corporation resident in Canada.
Marginal note:Foreign affiliate dumping — conditions for application
212.3(1)Subsection (2) applies to an investment in a non-resident corporation (in this section referred to as the “subject corporation”) made at any time (in this section referred to as the “investment time”) by a corporation resident in Canada (in this section referred to as the “CRIC”) if
(a)the subject corporation is immediately after the investment time, or becomes as part of a transaction or event or series of transactions or events that includes the making of the investment, a foreign affiliate of
(i)the CRIC, or
(ii)a corporation that does not deal at arm’s length with the CRIC (if the condition in this paragraph is satisfied because of this subparagraph and not because of subparagraph (i), such a corporation is referred to in paragraph (b) as an “other Canadian corporation”);
(b)the CRIC or an other Canadian corporation is immediately after the investment time, or becomes after the investment time and as part of a transaction or event or series of transactions or events that includes the making of the investment, controlled by one non-resident person or, if no single non-resident person controls the CRIC, by 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 any of the following conditions is satisfied:
(i)if, at the investment time, a parent owned all shares of the capital stock of the CRIC and the other Canadian corporation, if applicable, that are owned — determined without reference to paragraph (25)(b) in the case of partnerships referred to in this subparagraph and as if all rights referred to in paragraph 251(5)(b), of the parent, each person that does not deal at arm’s length with the parent and all of those partnerships, were immediate and absolute and the parent and each of the other persons and partnerships had exercised those rights at the investment time — by the parent, persons that are not dealing at arm’s length with the parent and partnerships of which the parent or a person that is not dealing at arm’s length with the parent is a member (other than a limited partner within the meaning assigned by subsection 96(2.4)), the parent would own shares of the capital stock of the CRIC or the other Canadian corporation that
(A)give the holders of those shares 25% or more of all of the votes that could be cast at any annual meeting of the shareholders in respect of all shares of the capital stock of the CRIC or the other Canadian corporation, as the case may be, or
(B)have a fair market value of 25% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the CRIC or the other Canadian corporation, as the case may be,
(ii)the investment is an acquisition of shares of the capital stock of a subject corporation by a CRIC to which this subparagraph applies because of subsection (19), or
(iii)under an arrangement entered into in connection with the investment, a person or partnership, other than the CRIC or a person related to the CRIC, has in any material respect the risk of loss or opportunity for gain or profit in respect of a property that can reasonably be considered to relate to the investment; and
(c)neither subsection (16) nor (18) applies in respect of the investment.
Marginal note:Foreign affiliate dumping — consequences
(2)If this subsection applies to an investment in a subject corporation made by a CRIC,
(a)for the purposes of this Part and subject to subsections (3) and (7), the CRIC is deemed to have paid to each parent, and each parent is deemed to have received from the CRIC, at the dividend time, a dividend in an amount determined by the formula
A × B/C
where
(i)if there is one parent, one, and
(ii)if there is a group of parents, the fair market value at the dividend time of the shares of the capital stock of the CRIC that are held, directly or indirectly, by the parent, and
(i)if there is one parent, one, and
(ii)if there is a group of parents, the total of all amounts each of which is the fair market value at the dividend time of the shares of the capital stock of the CRIC that are held, directly or indirectly, by a parent; and
(b)in computing the paid-up capital in respect of any class of shares of the capital stock of the CRIC at any time that is at or after the investment time, there is to be deducted the amount of any increase in the paid-up capital in respect of the class, determined without reference to this section, that can reasonably be considered to relate to the investment.
Marginal note:Dividend substitution election
(3)If a CRIC (or a CRIC and a corporation that is a qualifying substitute corporation in respect of the CRIC at the dividend time) and a parent (or a parent and another non-resident person that at the dividend time is related to the parent) jointly elect in writing under this subsection in respect of an investment, and the election is filed with the Minister on or before the filing-due date of the CRIC for its taxation year that includes the dividend time, then the dividend that would, in the absence of this subsection, be deemed under paragraph (2)(a) to have been paid by the CRIC to the parent and received by the parent from the CRIC is deemed to have instead been
(a)paid by the CRIC or the qualifying substitute corporation, as agreed on in the election; and
(b)paid to, and received by, the parent or the other non-resident person, as agreed on in the election.
Marginal note:Definitions
(4)The following definitions apply in this section.
cross-border class, in respect of an investment, means a class of shares of the capital stock of a CRIC or qualifying substitute corporation if, immediately after the dividend time in respect of the investment,
(a)a parent, or a non-resident person that does not deal at arm’s length with a parent, owns at least one share of the class; and
(b)no more than 30% of the issued and outstanding shares of the class are owned by one or more persons resident in Canada that do not deal at arm’s length with a parent. (catégorie transfrontalière)
dividend time, in respect of an investment, means
(a)if the CRIC is controlled by a parent or group of parents at the investment time, the investment time; and
(b)in any other case, the earlier of
(i)the first time, after the investment time, at which the CRIC is controlled by a parent or group of parents, as the case may be, and
(ii)the day that is one year after the day that includes the investment time. (moment du dividende)
qualifying substitute corporation, at any time in respect of a CRIC, means a corporation resident in Canada
(a)that is, at that time, controlled by
(i)a parent,
(ii)a group of parents, or
(iii)a non-resident person that does not deal at arm’s length with a parent;
(b)that has, at that time, anequity percentage(as defined in subsection 95(4)) in the CRIC; and
(c)shares of the capital stock of which are, at that time, owned by a parent or another non-resident person with which the parent does not, at that time, deal at arm’s length. (société de substitution admissible)
Marginal note:Modification of terms — paragraph (10)(e)
(5)In the case of an investment described in paragraph (10)(e), the CRIC is deemed for the purposes of paragraph (2)(a) to transfer to the subject corporation property that relates to the investment, the fair market value of which property is
(a)if the investment is described in subparagraph (10)(e)(i), the amount owing in respect of the debt obligation referred to in that subparagraph immediately after the investment time, or
(b)if the investment is described in subparagraph (10)(e)(ii), the fair market value of the shares referred to in that subparagraph immediately after the investment time.
Marginal note:Sequential investments — paragraph (10)(f)
(5.1)In the case of an investment (in this subsection referred to as the “second investment”) in a subject corporation by a CRIC described in paragraph (10)(f), the amount determined for A in paragraph (2)(a) in respect of the second investment is to be reduced by the amount determined for A in paragraph (2)(a) in respect of a prior investment (in this subsection referred to as the “first investment”) in the subject corporation by another corporation resident in Canada if
(a)the first investment is an investment that is described in paragraph (10)(a) or (b) and to which paragraph (2)(a) applies;
(b)immediately after the investment time in respect of the first investment, the other corporation is not controlled by
(i)if there is one parent in respect of the CRIC, the parent, and
(ii)if there is a group of parents in respect of the CRIC, the group of parents; and
(c)the other corporation becomes, after the time that is immediately after the investment time in respect of the first investment and as part of a transaction or event or series of transactions or events that includes the making of the first investment, controlled by the parent or group of parents, as the case may be, because of the second investment.
Marginal note:Anti-avoidance rule — cross-border class
(6)A particular class of shares of the capital stock of a CRIC or a qualifying substitute corporation that, in the absence of this subsection, would be a cross-border class in respect of an investment is deemed not to be a cross-border class in respect of the investment if
(a)a particular corporation resident in Canada that does not deal at arm’s length with a parent
(i)acquires shares of the particular class (or shares that are substituted for those shares) as part of a transaction or event or series of transactions or events that includes the investment, or
(ii)owns shares of the particular class (or shares that are substituted for those shares) and, as part of a transaction or event or series of transactions or events that includes the investment,
(A)the paid-up capital in respect of the particular class is increased otherwise than as a result of an acquisition described in subparagraph (i), and
(B)the increase in paid-up capital in respect of the particular class can reasonably be considered to be connected to funding provided to the particular corporation or another corporation resident in Canada (other than the corporation that issued the particular class) by a parent or a non-resident person that does not deal at arm’s length with a parent, unless
(I)the funding results in an increase, equal to the amount funded, in the paid-up capital of shares of a class of the capital stock of the particular corporation, or the other corporation, that is a cross-border class in respect of the investment, and
(II)the increase referred to in subclause (I) occurred at or before the time of the increase to the paid-up capital in respect of the particular class; and
(b)it can reasonably be considered that one of the main reasons for the acquisition or for the funding, as the case may be, was to increase the amount of a deduction required under paragraph (7)(b) or (c) in computing the paid-up capital in respect of shares of the particular class held by the particular corporation.
Marginal note:Reduction of deemed dividend
(7)If paragraph (2)(a) applies to an investment in a subject corporation made by a CRIC,
(a)where the CRIC demonstrates — in respect of one or more classes of shares of the capital stock of the CRIC, or of a qualifying substitute corporation, all the issued and outstanding shares of which are owned, immediately after the dividend time in respect of the investment, by persons that deal at arm’s length with the CRIC — that an amount of paid-up capital in respect of each of the classes arose as a consequence of one or more transfers of property, directly or indirectly, to the CRIC and that all of the property transferred was used by the CRIC to make, in whole or in part, the investment (or, in the case of an investment described in paragraph (10)(f), the direct acquisition referred to in that paragraph), then
(i)the amount determined, without reference to this subsection, for A in paragraph (2)(a), is reduced by the lesser of
(A)that amount, and
(B)the total of all amounts of paid-up capital so demonstrated by the CRIC, and
(ii)in computing the paid-up capital in respect of each class described in this paragraph, at any time after the dividend time, there is to be deducted an amount equal to the portion of the amount determined under subparagraph (i) that can reasonably be considered to relate to that class;
(b)where the amount determined, without reference to this paragraph, for A in paragraph (2)(a) is equal to or greater than the total of all amounts each of which is an amount of paid-up capital immediately after the dividend time, determined without reference to this paragraph, of a cross-border class in respect of the investment, then
(i)the amount determined, without reference to this paragraph, for A in paragraph (2)(a) is reduced by the total referred to in this paragraph, and
(ii)in computing, at any time after the dividend time, the paid-up capital in respect of each cross-border class in respect of the investment, there is to be deducted an amount equal to the paid-up capital in respect of that class immediately after the dividend time, determined without reference to this paragraph;
(c)where paragraph (b) does not apply and there is at least one cross-border class in respect of the investment,
(i)the amount determined, without reference to this paragraph, for A in paragraph (2)(a) is reduced to nil,
(ii)in computing, at any time after the dividend time, the paid-up capital in respect of a particular cross-border class in respect of the investment, there is to be deducted the amount, if any, that when added to the total of all amounts that are deducted under this paragraph in computing the paid-up capital of other cross-border classes, results in the greatest total reduction because of this paragraph, immediately after the dividend time, of the paid-up capital in respect of shares of cross-border classes that are owned by a parent or another non-resident person with which a parent does not, at the dividend time, deal at arm’s length,
(iii)if the proportion of the shares of a particular class owned, in aggregate, by parents and non-resident persons that do not deal at arm’s length with parents is equal to the proportion so owned of one or more other cross-border classes (in this subparagraph all those classes, together with the particular class, referred to as the “relevant classes”), then the proportion that the reduction under subparagraph (ii) to the paid-up capital in respect of the particular class is of the paid-up capital, determined immediately after the dividend time and without reference to this paragraph, in respect of that class is to be equal to the proportion that the total reduction under subparagraph (ii) to the paid-up capital in respect of all the relevant classes is of the total paid-up capital, determined immediately after the dividend time and without reference to this paragraph, of all the relevant classes, and
(iv)the total of all amounts each of which is an amount to be deducted under subparagraph (ii) in computing the paid-up capital of a cross-border class is to be equal to the amount by which the amount determined for A in paragraph (2)(a) is reduced under subparagraph (i); and
(d)if the amount determined for A in paragraph (2)(a) is reduced because of any of subparagraphs (a)(i), (b)(i) and (c)(i),
(i)the CRIC shall file with the Minister in prescribed manner a form containing prescribed information and the amounts of the paid-up capital, determined immediately after the dividend time and without reference to this subsection, of each class of shares that is described in paragraph (a) or that is a cross-border class in respect of the investment, the paid-up capital of the shares of each of those classes that are owned by a parent or another non-resident person that does not, at the dividend time, deal at arm’s length with a parent, and the reduction under any of subparagraphs (a)(ii), (b)(ii) and (c)(ii) in respect of each of those classes, and
(ii)if the form is not filed on or before the CRIC’s filing-due date for its taxation year that includes the dividend time, the CRIC is deemed to have paid to each parent, and each parent is deemed to have received from the CRIC, on the filing-due date, a dividend equal to the total of all amounts each of which is the amount of a reduction because of any of subparagraphs (a)(i), (b)(i) and (c)(i) in the amount the CRIC is deemed under paragraph (2)(a) to have paid to the parent.
Marginal note:Election to not reduce deemed dividend
(7.1)Subsection (7) does not apply in respect of an investment made by a CRIC if
(a)the investment was made after March 28, 2012 and before August 16, 2013;
(b)at the investment time, each share of the capital stock of the CRIC, and each qualifying substitute corporation in respect of the CRIC, that was not owned by the parent was owned by persons or partnerships with which the parent did not deal at arm’s length; and
(c)the CRIC files an election with the Minister before 2017 to have this subsection apply in respect of the investment.
Marginal note:Paid-up capital adjustment
(8)In computing the paid-up capital at any time after March 28, 2012 in respect of a class of shares of the capital stock of a corporation, there is to be added an amount equal to the lesser of
(a)the amount, if any, by which
(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 after March 28, 2012 and before that time by the corporation
exceeds
(ii)the total that would be determined under subparagraph (i) if this Act were read without reference to paragraph (2)(b) and subsections (7) and (9), and
(b)the amount, if any, by which
(i)the total of all amounts required by paragraph (2)(b) or subsection (7) to be deducted in computing the paid-up capital in respect of the class before that time
exceeds
(ii)the total of all amounts required by subsection (9) to be added in computing the paid-up capital in respect of the class before that time.
Marginal note:Paid-up capital reinstatement
(9)If, in respect of an investment in a subject corporation made by a CRIC that is described in any of paragraphs (10)(a) to (f), an amount is deducted under paragraph (2)(b) or subsection (7) in computing the paid-up capital in respect of a class of shares of the capital stock of a particular corporation and, at a time subsequent to the investment time, there is a reduction of paid-up capital referred to in subparagraph (b)(i) or a receipt of property referred to in the description of A in subparagraph (b)(ii), then the paid-up capital in respect of the class is to be increased, immediately before the subsequent time, by the lesser of
(a)the amount, if any, by which
(i)the total of all amounts deducted, before the subsequent time, under paragraph (2)(b) or subsection (7), in respect of the investment, in computing the paid-up capital in respect of the class
exceeds
(ii)the total of all amounts added under this subsection, in respect of the investment, to the paid-up capital in respect of the class before the time that is immediately before the subsequent time, and
(b)an amount that
(i)if the investment is described in paragraph (10)(a), (b) or (f), the paid-up capital in respect of the class is reduced at the subsequent time as part of or because of a distribution of property by the particular corporation and the property (in this paragraph referred to as the “distributed shares”) is shares of the capital stock of the subject corporation or shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for shares of the capital stock of the subject corporation, is equal to the amount determined by the formula
A/B
where
(A)if the investment is described in paragraph (10)(b), the portion of the fair market value, immediately before the subsequent time, of the distributed shares that can reasonably be considered to relate to the contribution of capital that is the investment, and
(B)if the investment is described in paragraph (10)(a) or (f), the lesser of
(I)the portion of the fair market value, immediately before the subsequent time, of the distributed shares that can reasonably be considered to relate to the shares (in this paragraph referred to as the “acquired shares”) of the capital stock of the subject corporation that were acquired on the investment (other than any portion described in clause (A)), and
(II)the proportion of the amount determined under subparagraph (a)(i) that the amount determined under subclause (I) is of the fair market value, immediately before the subsequent time, of the acquired shares, or the portion of the fair market value of shares that were substituted for the acquired shares that can reasonably be considered to relate to the acquired shares, and
(A)if the particular corporation is, immediately after the dividend time, a qualifying substitute corporation in respect of the CRIC, the particular corporation’s equity percentage (as defined in subsection 95(4)) in the CRIC immediately after the dividend time, and
(B)in any other case, 100%, and
(ii)in any other case, is equal to the amount determined by the formula
A × B/C
where
(A)as proceeds from the disposition of the acquired shares, or other shares to the extent that the proceeds from the disposition of those other shares can reasonably be considered to relate to the acquired shares or to shares of the capital stock of the subject corporation in respect of which an investment described in paragraph (10)(b) was made, other than
(I)the fair market value of shares of the capital stock of another foreign affiliate of the taxpayer acquired by the recipient corporation as consideration for the disposition and as an investment to which subsection (16) or (18) applies, and
(II)proceeds from a disposition of shares to a corporation resident in Canada for which the acquisition of the shares is an investment to which subsection (16) or (18) applies,
(B)as a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of the subject corporation or the portion, of a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for shares of the capital stock of the subject corporation, that can reasonably be considered to relate to the subject shares, or
(C)if the investment is described in paragraph (10)(c) or (d) or subparagraph (10)(e)(i),
(I)as a repayment of or as proceeds from the disposition of the debt obligation or amount owing, other than
1if the debt obligation or amount owing was acquired by another foreign affiliate of the taxpayer, the portion of the fair market value of property received by the particular corporation as a result of an investment by the particular corporation that is described in paragraphs (10)(a) to (f) to which subsection (16) or (18) applies, or
2as proceeds from a disposition to a corporation resident in Canada and that is affiliated with the particular corporation, and where subsection (16) or (18) applies to the other corporation in respect of its acquisition, or
(II)as interest on the debt obligation or amount owing,
Marginal note:Exchange of debt obligation for shares
(9.1)For the purposes of subsection (9), if at any time a debt obligation that relates to a particular investment described in paragraph (10)(c) or (d) or subparagraph (10)(e)(i) is exchanged for shares of a subject corporation and as part of the exchange there is an acquisition of shares described in subparagraph (18)(b)(i) or paragraph 18(d), then all amounts, in respect of the particular investment, deducted under paragraph (2)(b) or subsection (7) from, or added under subsection (9) to, the paid-up capital in respect of a class of shares before that time are deemed to have been deducted or added, as the case may be, in respect of the acquisition of the shares and not the particular investment.
Marginal note:Continuity for paid-up capital reinstatement
(9.2)If at any particular time shares (in this subsection referred to as the “new shares”) of a class of the capital stock of a corporation resident in Canada are acquired, in a transaction to which any of sections 51, 85, 85.1, 86 and 87 apply, in exchange for a share (in this subsection referred to as the “old share”) of a class of the capital stock of a particular corporation that is either the corporation or another corporation resident in Canada, then for the purposes of subsections (8) and (9),
(a)if the corporation that issues the new shares is not the particular corporation, it is deemed to be the same corporation as, and a continuation of, the particular corporation;
(b)the new shares are deemed to be the same share, and of the same class of the capital stock of the particular corporation, as the old share; and
(c)if the old share remains outstanding after the exchange, it is deemed to be a share of a different class of the capital stock of the particular corporation.
Marginal note:Investment in subject corporation
(10)In this section,investment, in a subject corporation made by a CRIC, means any of
(a)an acquisition of shares of the capital stock of the subject corporation by the CRIC;
(b)a contribution of capital to the subject corporation by the CRIC, which is deemed to include any transaction or event under which a benefit is conferred on the subject corporation by the CRIC;
(c)a transaction under which an amount becomes owing by the subject corporation to the CRIC, other than an amount owing
(i)that arises in the ordinary course of the business of the CRIC and that is repaid, other than as part of a series of loans or other transactions and repayments, within 180 days after the day on which the amount becomes owing,
(ii)that is a pertinent loan or indebtedness immediately after the time of the transaction, or
(iii)because a dividend has been declared, but not yet paid, by the subject corporation;
(d)an acquisition of a debt obligation of the subject corporation by the CRIC from a person, other than
(i)if the acquisition is made in the ordinary course of the business of the CRIC, a debt obligation acquired from a person with which the CRIC deals at arm’s length at the time of the acquisition, or
(ii)a debt obligation that is a pertinent loan or indebtedness immediately after the time of the acquisition;
(e)an extension of
(i)the maturity date of a debt obligation (other than a debt obligation that is a pertinent loan or indebtedness immediately after the time of the extension) owing by the subject corporation to the CRIC, or
(ii)the redemption, acquisition or cancellation date of shares of the capital stock of the subject corporation owned by the CRIC;
(f)an indirect acquisition by the CRIC of shares of the capital stock of the subject corporation that results from a direct acquisition by the CRIC of shares of the capital stock of another corporation resident in Canada, of which the subject corporation is a foreign affiliate, if the total fair market value of all the shares that are held directly or indirectly by the other corporation and are shares of foreign affiliates of the other corporation exceeds 75% of the total fair market value (determined without reference to debt obligations of any corporation resident in Canada in which the other corporation has a direct or indirect interest) of all of the properties owned by the other corporation; and
(g)an acquisition by the CRIC of an option in respect of, or an interest in, or for civil law a right in, shares of the capital stock of, an amount owing by (other than an amount owing described in subparagraph (c)(i) or (ii)), or a debt obligation of (other than a debt obligation described in subparagraph (d)(i) or (ii)), the subject corporation.
Marginal note:Pertinent loan or indebtedness
(11)For the purposes of subsection (10) and subject to subsection 17.1(3),pertinent loan or indebtedness, at any time, means an amount owing at that time by the subject corporation to the CRIC in respect of which all of the following apply:
(a)either
(i)the amount became owing after March 28, 2012, or
(ii)the amount became owing before March 29, 2012 and is a debt obligation for which the maturity date was extended after March 28, 2012 and at or before that time;
(b)the amount owing is not an amount owing described in subparagraph (10)(c)(i) or a debt obligation described in subparagraph (10)(d)(i); and
(c)the CRIC and each parent jointly elect in writing under this paragraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC
(i)in the case of an amount owing described in subparagraph (a)(i), for the year in which the amount became owing, or
(ii)in the case of an amount owing described in subparagraph (a)(ii), for the year in which the extension was made.
Marginal note:Late-filed elections
(12)Where an election referred to in subsection (3) or paragraph (11)(c) was not made on or before the day on or before which the election was required by that paragraph to be made, the election is deemed to have been made on that day if the election is made on or before the day that is three years after that day and the penalty in respect of the election is paid by the CRIC when the election is made.
Marginal note:Penalty for late-filed election
(13)For the purposes of subsection (12), the penalty in respect of an election referred to in that subsection is the amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period commencing with the day on or before which the election is required by subsection (3) or paragraph (11)(c), as the case may be, to be made and ending on the day on which the election is made.
Marginal note:Rules for paragraph (10)(f)
(14)For the purposes of paragraph (10)(f),
(a)the condition in that paragraph is deemed to be satisfied at the time of the acquisition if
(i)any property (other than shares of foreign affiliates of the other corporation that is referred to in that paragraph) held directly or indirectly by that other corporation is disposed of, after the time of the acquisition, directly or indirectly by that corporation as part of a series of transactions or events that includes the acquisition, and
(ii)at any time that is subsequent to the time of the acquisition and that is in the period during which the series occurs, the condition in that paragraph would have been satisfied had the acquisition occurred at the subsequent time; and
(b)the fair market value of properties held directly or indirectly by the other corporation is not to be taken into account more than once in determining whether the condition in that paragraph is satisfied.
Marginal note:Control
(15)For the purposes of this section and paragraph 128.1(1)(c.3),
(a)a CRIC or a taxpayer to which paragraph 128.1(1)(c.3) applies (in this subsection referred to as the “specific corporation”), that would, in the absence of this subsection, be controlled at any time
(i)by more than one non-resident person, is deemed not to be controlled at that time by any such person that controls at that time another non-resident person that controls at that time the specific corporation, unless the application of this paragraph would otherwise result in no non-resident person controlling the specific corporation, and
(ii)by a particular non-resident corporation is deemed not to be controlled at that time by the particular non-resident corporation if the particular non-resident corporation is controlled at that time by another corporation that is at that time
(A)resident in Canada, and
(B)not controlled by any non-resident person or group of non-resident persons not dealing with each other at arm’s length; and
(b)a non-resident person is deemed not to be a member of a particular group of non-resident persons not dealing with each other at arm’s length that controls the specific corporation if
(i)the non-resident person would, absent the application of this paragraph, be a member of the particular group, and
(ii)the non-resident person is a member of the particular group solely because it controls, or is a member of a group that controls, another member of the particular group.
Marginal note:Exception — more closely connected business activities
(16)Subject to subsection (19), subsection (2) does not apply to an investment in a subject corporation made by a CRIC if the CRIC demonstrates that all of the following conditions are met:
(a)the business activities carried on by the subject corporation and all other corporations (those other corporations in this subsection and subsection (17) referred to as the “subject subsidiary corporations”) in which the subject corporation has, at the investment time, anequity percentage(as defined in subsection 95(4)) are at the investment time, and are expected to remain, on a collective basis, more closely connected to the business activities carried on in Canada by the CRIC, or by any corporation resident in Canada with which the CRIC does not, at the investment time, deal at arm’s length, than to the business activities carried on by any non-resident person with which the CRIC, at the investment time, does not deal at arm’s length, other than
(i)the subject corporation,
(ii)the subject subsidiary corporations, and
(iii)any corporation that is, immediately before the investment time, a controlled foreign affiliate of the CRIC for the purposes of section 17,
(b)officers of the CRIC, or of a corporation resident in Canada that did not, at the investment time, deal at arm’s length with the CRIC, had and exercised the principal decision-making authority in respect of the making of the investment and a majority of those officers were, at the investment time, persons each of whom was resident, and working principally,
(i)in Canada, or
(ii)in a country in which a particular corporation is resident if the particular corporation (in this subsection and subsection (17) referred to as a “connected affiliate”) is a controlled foreign affiliate of the CRIC for the purposes of section 17 and carries on business activities that are, at the investment time, and are expected to remain, at least as closely connected to those of the subject corporation and the subject subsidiary corporations, on a collective basis, as the business activities carried on in Canada by the CRIC, or any corporation resident in Canada with which the CRIC does not, at the investment time, deal at arm’s length, as the case may be, are to those of the subject corporation and the subject subsidiary corporations, on a collective basis; and
(c)at the investment time, it is reasonably expected that
(i)officers of the CRIC, or of a corporation resident in Canada that does not deal at arm’s length with the CRIC, will have and exercise the ongoing principal decision-making authority in respect of the investment,
(ii)a majority of those officers will be persons each of whom will be resident, and working principally, in Canada or in a country in which a connected affiliate is resident, and
(iii)the performance evaluation and compensation of the officers of the CRIC, or of the corporation resident in Canada that does not deal at arm’s length with the CRIC, who are resident, and work principally, in Canada, or in a country in which a connected affiliate is resident, will be based on the results of operations of the subject corporation to a greater extent than will be the performance evaluation and compensation of any officer of a non-resident corporation (other than the subject corporation, a corporation controlled by the subject corporation or a connected affiliate) that does not deal at arm’s length with the CRIC.
Marginal note:Dual officers
(17)For the purposes of paragraphs (16)(b) and (c), any person who is an officer of the CRIC, or of a corporation resident in Canada that does not deal at arm’s length with the CRIC, and of a non-resident corporation that does not, at the investment time, deal at arm’s length with the CRIC (other than the subject corporation, a subject subsidiary corporation or a connected affiliate) is deemed to not be resident, and to not work principally, in a country in which a connected affiliate is resident.
Marginal note:Exception — corporate reorganizations
(18)Subject to subsections (18.1) to (20), subsection (2) does not apply to an investment in a subject corporation made by a CRIC if
(a)the investment is described in paragraph (10)(a) or (d) and is an acquisition of shares of the capital stock, or a debt obligation, of the subject corporation
(i)from a corporation resident in Canada (in this paragraph referred to as the “disposing corporation”) to which the CRIC is, immediately before the investment time, related (determined without reference to paragraph 251(5)(b)), and
(A)each shareholder of the disposing corporation immediately before the investment time is
(I)if there is only one parent in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that is, immediately before the investment time, related to the parent, and
2at no time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, and
(II)if there is a group of parents in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that is, immediately before the investment time, controlled by the group of parents, and
2at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents, or
(B)the disposing corporation is
(I)if there is only one parent in respect of the CRIC, at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, and
(II)if there is a group of parents in respect of the CRIC, at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents, or
(ii)on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a “predecessor corporation”) to form the CRIC if all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)) and
(A)either
(I)if there is only one parent in respect of the CRIC, none of the predecessor corporations are, at any time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or
(II)if there is a group of parents in respect of the CRIC, all of the predecessor corporations are, at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents, or
(B)if the condition in clause (A) is not satisfied in respect of a predecessor corporation, each shareholder of that predecessor immediately before the investment time is
(I)if there is only one parent in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that is, immediately before the investment time, related to the parent, and
2at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, and
(II)if there is a group of parents in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that is, immediately before the investment time, controlled by the group of parents, and
2at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents;
(b)the investment is described in paragraph (10)(a) and is an acquisition of shares of the capital stock of the subject corporation in which the shares are acquired by the CRIC
(i)in an exchange to which subsection 51(1) applies,
(ii)as consideration for a disposition of shares to which subsection 85.1(3) applies (determined without reference to subsection 85.1(4)),
(iii)in the course of a reorganization of the capital of the subject corporation to which subsection 86(1) applies,
(iv)as a result of a foreign merger (as defined in subsection 87(8.1)) under which the subject corporation was formed,
(v)on a liquidation and dissolution to which subsection 88(3) applies,
(vi)on a redemption of shares of another non-resident corporation that is, immediately before the investment time, a foreign affiliate of the CRIC,
(vii)as a dividend or a qualifying return of capital, within the meaning assigned by subsection 90(3), in respect of the shares of another non-resident corporation that is, immediately before the investment time, a foreign affiliate of the CRIC, or
(viii)as a result of a disposition of the shares by the CRIC to a partnership and to which subsection 97(2) applies;
(c)the investment is an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada
(i)from a corporation (in this paragraph referred to as the “disposing corporation”) to which the CRIC is, immediately before the investment time, related (determined without reference to paragraph 251(5)(b)) and
(A)each shareholder of the disposing corporation immediately before the investment time is
(I)if there is only one parent in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that, immediately before the investment time, is related to the parent, and
2at no time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, and
(II)if there is a group of parents in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that is, immediately before the investment time, controlled by the group of parents, and
2at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents, or
(B)the disposing corporation is
(I)if there is only one parent in respect of the CRIC, at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, and
(II)if there is a group of parents in respect of the CRIC, at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents, or
(ii)on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a “predecessor corporation”) to form the CRIC, or a corporation of which the CRIC is a shareholder, if all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)) and
(A)either
(I)if there is only one parent in respect of the CRIC, none of the predecessor corporations are, at any time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or
(II)if there is a group of parents in respect of the CRIC, all of the predecessor corporations are, at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents, or
(B)if the condition in clause (A) is not satisfied in respect of a predecessor corporation, each shareholder of that predecessor immediately before the investment time is
(I)if there is only one parent in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that is, immediately before the investment time, related to the parent, and
2at no time that is in the period and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident person that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, and
(II)if there is a group of parents in respect of the CRIC,
1either the CRIC or a corporation resident in Canada that is, immediately before the investment time, controlled by the group of parents, and
2at all times that are in the period during which the series of transactions or events that includes the making of the investment occurs and that are before the investment time, controlled by the group of parents,
(iii)in an exchange to which subsection 51(1) applies,
(iv)in the course of a reorganization of the capital of the other corporation to which subsection 86(1) applies,
(v)to the extent that an investment (other than one described in paragraph (10)(f)) is made in the subject corporation by the other corporation, or by a particular corporation resident in Canada to which the CRIC and the other corporation are related at the investment time, using property transferred, directly or indirectly, by the CRIC to the other corporation or the particular corporation, as the case may be, if the two investments
(A)occur within 90 days of each other, and
(B)are part of the same series of transactions or events, or
(vi)as a result of a disposition of the shares by the CRIC to a partnership and to which subsection 97(2) applies; or
(d)the investment is an acquisition of shares of the capital stock of the subject corporation that is described in paragraph (10)(a), or an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada, if
(i)the shares are acquired by the CRIC in exchange for a bond, debenture or note, and
(ii)subsection 51(1) would apply to the exchange if the terms of the bond, debenture or note conferred on the holder the right to make the exchange.
Marginal note:Exchange — pertinent loan or indebtedness
(18.1)Subsection (18) does not apply to an investment that is an acquisition of property if the property can reasonably be considered to have been received by the CRIC as repayment in whole or in part, or in settlement, of a pertinent loan or indebtedness.
Marginal note:Preferred shares
(19)Subparagraph (1)(b)(ii) applies, and subsection (16) and paragraphs (18)(b) and (d) do not apply, to an acquisition of shares of the capital stock of a subject corporation by a CRIC if, having regard to all the terms and conditions of the shares and any agreement in respect of the shares, the shares cannot reasonably be considered to fully participate in the profits of the subject corporation and any appreciation in the value of the subject corporation, unless the subject corporation would be a subsidiary wholly-owned corporation of the CRIC throughout the period during which the series of transactions or events that includes the acquisition occurs if the CRIC owned all of the shares of the capital stock of the subject corporation that are owned by any of
(a)the CRIC;
(b)a corporation resident in Canada that is a subsidiary wholly-owned corporation of the CRIC; and
(c)a corporation resident in Canada of which the CRIC is a subsidiary wholly-owned corporation.
Marginal note:Assumption of debt on liquidation or distribution
(20)Subsection (2) applies to an investment in a subject corporation made by a CRIC that is an acquisition of shares of the capital stock of the subject corporation described in any of subparagraphs (18)(b)(v) to (vii) to the extent of the lesser of
(a)the total of all amounts each of which is the amount of a debt obligation assumed by the CRIC in respect of the liquidation and dissolution, redemption, dividend or qualifying return of capital, as the case may be, and
(b)the fair market value of the shares at the investment time.
Marginal note:Persons deemed not to be related
(21)If it can reasonably be considered that one of the main purposes of one or more transactions or events is to cause two or more persons to be related to each other, or a person or group of persons to control another person, so that, in the absence of this subsection, subsection (2) would not apply because of subsection (18) to an investment in a subject corporation made by a CRIC, those persons are deemed not to be related to each other, or that person or group of persons is deemed not to control that other person, as the case may be, for the purposes of subsection (18).
Marginal note:Mergers
(22)For the purposes of this section and subsections 219.1(3) and (4),
(a)if there has been an amalgamation to which subsection 87(11) applies,
(i)the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, the parent and each subsidiary referred to in that subsection,
(ii)the new corporation is deemed not to acquire any property of the parent, or of any subsidiary, as a result of the amalgamation, and
(iii)each shareholder of the new corporation is deemed not to acquire indirectly any shares as a result of the amalgamation; and
(b)if there has been a winding-up to which subsection 88(1) applies,
(i)the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection, and
(ii)the parent is deemed not to acquire any property of the subsidiary as a result of the winding-up.
Marginal note:Indirect investment
(23)Subsection (2) applies to an investment in a subject corporation made by a CRIC to which, in the absence of this subsection, subsection (2) would not apply because of subsection (16) or (24), to the extent that one or more properties received by the subject corporation from the CRIC as a result of the investment, or property substituted for any such property, may reasonably be considered to have been used by the subject corporation, directly or indirectly as part of a series of transactions or events that includes the making of the investment, in a transaction or event to which subsection (2) would have applied if the CRIC had entered into the transaction, or participated in the event, as the case may be, instead of the subject corporation.
Marginal note:Indirect funding
(24)Subsection (2) does not apply to an investment in a subject corporation made by a CRIC to which, in the absence of this subsection, subsection (2) would apply, if the CRIC demonstrates that
(a)all the properties received by the subject corporation from the CRIC as a result of the investment were used, at a particular time that is within 30 days after the investment time and at all times after the particular time, by the subject corporation
(i)to derive income from activities that can reasonably be considered to be directly related to active business activities carried on by a particular corporation and all of the income is income from an active business because of subparagraph 95(2)(a)(i), or
(ii)to make a loan or acquire a property, all or substantially all of the income from which is, or would be, if there were income from the loan or property, derived from amounts paid or payable, directly or indirectly, to the subject corporation by a particular corporation and is, or would be, income from an active business because of subparagraph 95(2)(a)(ii);
(b)the particular corporation was, at the particular time, a controlled foreign affiliate of the CRIC for the purposes of section 17; and
(c)the particular corporation is, throughout the period that begins at the investment time and during which the series of transactions or events that includes the activities of, or the making of the loan or acquisition of property by, the subject corporation occurs, a corporation in which an investment made by the CRIC would not be subject to subsection (2) because of subsection (16).
Marginal note:Partnerships
(25)For the purposes of this section, subsection 17.1(1) (as it applies in respect of a pertinent loan or indebtedness as defined in subsection (11)), paragraph 128.1(1)(c.3) and subsection 219.1(2),
(a)any transaction entered into, or event participated in, by a partnership is deemed to have been entered into, or participated in, as the case may be, by each member of the partnership in the proportion that the fair market value, at the time of the transaction or event, of the member’s interest — held directly or indirectly through one or more other partnerships — in the partnership is of the fair market value, at that time, of all direct interests in the partnership;
(b)if at any time, based on the assumptions contained in paragraph 96(1)(c), property would be owned by a partnership, that property is deemed to be owned at that time by each member of the partnership in the proportion that the fair market value, at that time, of the member’s interest — held directly or indirectly through one or more other partnerships — in the partnership is of the fair market value, at that time, of all direct interests in the partnership;
(c)if at any time there is an increase (including, for greater certainty, as a result of a particular acquisition of an interest in a partnership in which, immediately prior to the particular acquisition, the member did not have an interest) in the portion of a property that is deemed under paragraph (b) to be owned by a member of a partnership, the member is deemed at that time
(i)to acquire the additional portion of the property, and
(ii)to transfer property that relates to the acquisition of the additional portion and that has a fair market value equal to the fair market value at that time of the additional portion;
(d)if at any time, based on the assumptions contained in paragraph 96(1)(c), an amount would be owing by a partnership, that amount is deemed to be owed by each member of the partnership in the proportion that the fair market value, at that time, of the member’s interest — held directly or indirectly through one or more other partnerships — in the partnership is of the fair market value, at that time, of all direct interests in the partnership;
(e)if a member of a partnership enters into a transaction, or participates in an event, with the partnership, paragraph (a) does not apply to the transaction or event to the extent that the transaction or event would, in the absence of this paragraph, be deemed by paragraph (a) to have been entered into, or participated in, as the case may be, by the member; and
(f)a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership.
Marginal note:Trusts
(26)For the purposes of this section, subsection 17.1(1) (as it applies in respect of apertinent loan or indebtednessas defined in subsection (11)), paragraph 128.1(1)(c.3) and subsection 219.1(2), and for the purpose of paragraph 251(1)(a) as it applies for the purposes of those provisions,
(a)in determining, at any time, whether two persons are related to each other or whether any person is controlled by any other person or group of persons, it shall be assumed that
(i)each trust is a corporation having a capital stock of a single class of voting shares divided into 100 issued shares, and
(ii)each beneficiary under a trust owned at that time the number of issued shares of that class determined by the formula
A/B × 100
where
(b)in determining, at any time, the extent to which any person owns shares of the capital stock of a corporation, if at that time a trust resident in Canada owns (determined without reference to this paragraph) shares of the capital stock of the corporation, each beneficiary of the trust is deemed to own, and the trust is deemed not to own, at that time, the shares of each class of the capital stock of the corporation that are owned (determined without reference to this paragraph) by the trust, the number of which is determined by the formula
A × B/C
where
(c)if a beneficiary’s share of the income or capital of a trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, then the amounts determined for A and B in paragraph (a), and for B and C in paragraph (b), in respect of the beneficiary are deemed to be equal to one, unless
(i)the trust is resident in Canada, and
(ii)it cannot reasonably be considered that one of the main reasons for the discretionary power is to avoid or limit the application of paragraph 128.1(1)(c.3) or subsection 212.3(2) or 219.1(2).
Marginal note:Tax non-payable by non-resident person
213(1)Tax is not payable by a non-resident person under subsection 212(2) on a dividend in respect of a share of the capital stock of a foreign business corporation if not less than 90% of the total of the received or receivable by it that are required to be included in computing its income for the taxation year in which the dividend was paid was received or receivable in respect of the operation by it of public utilities or from mining, transporting and processing of ore in a country in which
(a)if the non-resident person is an individual, the non-resident person resides; or
(b)if the non-resident person is a corporation, individuals who own more than 50% of its share capital (having full voting rights under all circumstances) reside.
Marginal note:Idem
(2)For the purposes of this section, if 90% of the total of the received or receivable by a corporation that are required to be included in computing its income for a taxation year was received or receivable in respect of the operation by it of public utilities or from the mining, transporting and processing of ore, an amount received or receivable in that year from that corporation by another corporation shall, if it is required to be included in computing the receiving corporation’s income for the year, be deemed to have been received by the receiving corporation in respect of the operation by it of public utilities or from the mining, transporting and processing of ore by it in the country in which the public utilities were operated or the mining, transporting and processing of ore was carried out by the payer corporation.
Marginal note:Corporation deemed to be foreign business corporation
(3)For the purposes of this section, a corporation shall be deemed to be a foreign business corporation at a particular time if it would have been a foreign business corporation within the meaning of section 71 of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952 (as that section read in its application to the 1971 taxation year), for the taxation year of the corporation in which the particular time occurred, if that section had been applicable to that taxation year.
Marginal note:No deductions
214(1)The tax payable under section 212 is payable on the amounts described therein without any deduction from those whatever.
Marginal note:Income and capital combined
(2)Where paragraph 16(1)(b) would, if Part I were applicable, result in a part of an amount being included in computing the income of a non-resident person, that part of the amount shall, for the purposes of this Part, be deemed to have been paid or credited to the non-resident person in respect of property, services or otherwise, depending on the nature of that part of the amount.
Marginal note:Deemed payments
(3)For the purposes of this Part,
(a)where section 15 or subsection 56(2) would, if Part I were applicable, require an amount to be included in computing a taxpayer’s income, that amount shall be deemed to have been paid to the taxpayer as a dividend from a corporation resident in Canada;
(b)where paragraph 56(1)(f) would, if Part I were applicable, require an amount to be included in computing an individual’s income, that amount shall be deemed to have been paid to the individual under an income-averaging annuity contract;
(b.1)where paragraph 56(1)(y) would, if Part I were applicable, require an amount to be included in computing a taxpayer’s income, that amount shall be deemed to have been paid to the taxpayer to acquire an interest in a retirement compensation arrangement;
(c)where, because of subsection 146(8.1), 146(8.8), 146(8.91), 146(9), 146(10) or 146(12), an amount would, if Part I applied, be required to be included in computing a taxpayer’s income, that amount shall be deemed to have been paid to the taxpayer as a payment under a registered retirement savings plan or an amended plan (within the meaning assigned by subsection 146(12)), as the case may be;
(d)where, by virtue of subsection 147(10), 147(13) or 147(15), an amount would, if Part I were applicable, be required to be included in computing a taxpayer’s income, that amount shall be deemed to have been paid to the taxpayer as a payment under a deferred profit sharing plan or a plan referred to in subsection 147(15) as a “revoked plan”, as the case may be;
(e)where subsection 130.1(2) would, if Part I were applicable, deem an amount received by a shareholder of a mortgage investment corporation to have been received by the shareholder as interest, that amount shall be deemed to have been paid to the shareholder as interest on a bond issued after 1971;
(f)where subsection 104(13) would, if Part I were applicable, require any part of an amount payable by a trust in its taxation year to a beneficiary to be included in computing the income of the non-resident person who is a beneficiary of the trust, that part is deemed to be an amount paid or credited to that person as income of or from the trust
(i)on, or at, the earliest of
(A)the day on which the amount was paid or credited,
(B)the day that is 90 days after the end of the taxation year, and
(C)if the taxation year is deemed by subparagraph 128.1(4)(a)(i) to end after July 25, 2012, the time that is immediately before the end of the taxation year, and
(ii)not at any later time;
(f.1)where paragraph 132.1(1)(d) would, if Part I were applicable, require an amount to be included in computing a taxpayer’s income for a taxation year by reason of a designation by a mutual fund trust under subsection 132.1(1), that amount shall be deemed to be an amount paid or credited to that person as income of or from the trust on the day of the designation;
(g)where an individual who is a beneficiary under a fund, plan or trust that was a registered home ownership savings plan (within the meanings assigned by subparagraphs 146.2(1)(a) and (h) of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as they read in their application to the 1985 taxation year) on December 31, 1985 dies, an amount equal to the fair market value of the property in the fund, plan or trust at the time of death shall be deemed, for the purposes of section 212, to have been paid to the individual at the time of death as a payment out of or under a fund, plan or trust that was at the end of 1985 a registered home ownership savings plan;
(i)where, because of subsection 146.3(4), 146.3(6), 146.3(6.1), 146.3(7) or 146.3(11), an amount would, if Part I applied, be required to be included in computing a taxpayer’s income, that amount shall be deemed to have been paid to the taxpayer as a payment under a registered retirement income fund;
(j)[Repealed, 1998, c. 19, s. 63(1)]
(k)where, because of subsection 143.1(2), an amount distributed at any time by an amateur athlete trust would, if Part I were applicable, be required to be included in computing an individual’s income, that amount shall be deemed to have been paid at that time to the individual as a payment in respect of an amateur athlete trust; and
(l)where, because of subsection 12(10.2), an amount would at any particular time, if Part I were applicable, be required to be included in computing a taxpayer’s income, that amount shall be deemed to have been paid by Her Majesty in right of Canada at that time to the taxpayer out of the taxpayer’s NISA Fund No. 2.
Marginal note:Time of deemed payment
(3.1)Except as otherwise expressly provided, each amount deemed by subsection 214(3) to have been paid shall be deemed to have been paid at the time of the event or transaction as a consequence of which the amount would, if Part I were applicable, be required to be included in computing a taxpayer’s income.
Marginal note:Securities
(4)Where, if section 76 were applicable in computing a non-resident person’s income, that section would require an amount to be included in computing the income, that amount shall, for the purpose of this Part, be deemed to have been, at the time the non-resident person received the security, right, certificate or other evidence of indebtedness, paid to the non-resident person on account of the debt in respect of which the non-resident person received it.
Marginal note:Interpretation
(5)Subsection 214(4) is enacted for greater certainty and shall not be construed as limiting the generality of the other provisions of this Part defining on which tax is payable.
Marginal note:Deemed interest
(6)Where, in respect of interest stipulated to be payable, on a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation that has been assigned or otherwise transferred by a non-resident person to a person resident in Canada, subsection 20(14) would, if Part I were applicable, require an amount to be included in computing the transferor’s income, that amount is, for the purposes of this Part, deemed to be a payment of interest on that obligation made by the transferee to the transferor at the time of the assignment or other transfer of the obligation, if
(a)the obligation was issued by a person resident in Canada;
(b)the obligation was not an obligation described in paragraph 214(8)(a) or 214(8)(b); and
(c)the assignment or other transfer is not an assignment or other transfer referred to in paragraph 214(7.1)(b).
Marginal note:Sale of obligation
(7)Where
(a)a non-resident person has at any time assigned or otherwise transferred to a person resident in Canada a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued by a person resident in Canada,
(b)the obligation was not an excluded obligation, and
(c)the assignment or other transfer is not an assignment or other transfer referred to in paragraph 214(7.1)(b),
the amount, if any, by which
(d)the price for which the obligation was assigned or otherwise transferred at that time,
exceeds
(e)the price for which the obligation was issued,
shall, for the purposes of this Part, be deemed to be a payment of interest on that obligation made by the person resident in Canada to the non-resident person at that time.
Marginal note:Idem
(7.1)Where
(a)a person resident in Canada has at a particular time assigned or otherwise transferred an obligation to a non-resident person,
(b)the non-resident person has at a subsequent time assigned or otherwise transferred the obligation back to the person resident in Canada, and
(c)subsection 214(6) or 214(7) would apply with respect to the assignment or other transfer referred to in paragraph 214(7.1)(b), if those subsections were read without reference to paragraphs 214(6)(c) and 214(7)(c),
the amount, if any, by which
(d)the price for which the obligation was assigned or otherwise transferred at the subsequent time,
exceeds
(e)the price for which the obligation was assigned or otherwise transferred at the particular time,
shall, for the purposes of this Part, be deemed to be a payment of interest on that obligation made by the person resident in Canada to the non-resident person at the subsequent time.
Meaning ofexcluded obligation
(8)For the purposes of subsection (7),excluded obligationmeans any bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation
(a)that is described in paragraph (a) of the definitionfully exempt interestin subsection 212(3), or on which the interest would have been exempt under subparagraph 212(1)(b)(iii) or (vii) as they applied to the 2007 taxation year;
(b)that is prescribed to be a public issue security; or
(c)that is not an indexed debt obligation and that was issued for an amount not less than 97% of the principal amount thereof, and the yield from which, expressed in terms of an annual rate on the amount for which the obligation was issued (which annual rate shall, if the terms of the obligation or any agreement relating thereto conferred on the holder thereof a right to demand payment of the principal amount of the obligation or the amount outstanding as or on account of the principal amount thereof, as the case may be, before the maturity of the obligation, be calculated on the basis of the yield that produces the highest annual rate obtainable either on the maturity of the obligation or conditional on the exercise of any such right) does not exceed 4/3 of the interest stipulated to be payable on the obligation, expressed in terms of an annual rate on
(i)the principal amount thereof, if no amount is payable on account of the principal amount before the maturity of the obligation, and
(ii)the amount outstanding from time to time as or on account of the principal amount thereof, in any other case.
Marginal note:Deemed resident
(9)Where
(a)the assignment or other transfer of an obligation to a non-resident person carrying on business in Canada would be described in subsection 214(6) or 214(7) if those subsections were read without reference to paragraphs 214(6)(c) and 214(7)(c) and if that non-resident person were a person resident in Canada, and
(b)that non-resident person
(i)may deduct, under subsection 20(14), in computing the non-resident person’s taxable income earned in Canada for a taxation year an amount in respect of interest on the obligation, or
(ii)may deduct, under Part I, in computing the non-resident person’s taxable income earned in Canada for a taxation year an amount in respect of any amount paid on account of the principal amount of the obligation,
the non-resident person shall, with respect to the assignment or other transfer of the obligation, be deemed, for thepurposes of this Part, to be a person resident in Canada.
Marginal note:Reduction of tax
(10)Where a non-resident person has assigned or otherwise transferred to a person resident in Canada an obligation
(a)on which an amount of interest was deemed by subsection 214(6) or 214(7) to have been paid, and
(b)that the non-resident person had previously acquired from a person resident in Canada,
the amount of the tax under this Part that the non-resident person is liable to pay in respect thereof shall be deemed, for the purpose of subsection 227(6), to be that proportion of the tax the non-resident person would otherwise have been liable to pay in respect thereof that
(c)the number of days in the period commencing with the day the obligation was last acquired by the non-resident person from a person resident in Canada and ending with the day the obligation was last assigned or otherwise transferred by the non-resident person to a person resident in Canada
is of
(d)the number of days in the period commencing with the day the obligation was issued and ending with the day the obligation was last assigned or otherwise transferred by the non-resident person to a person resident in Canada.
(11)[Repealed, 2007, c. 35, s. 60]
Marginal note:Where s. (2) does not apply
(12)Subsection 214(2) does not apply in respect of a payment to a non-resident person under any obligation in respect of which that person is liable to pay tax under this Part by reason of subsection 214(7) or 214(7.1).
Marginal note:Regulations respecting residents
(13)The Governor in Council may make general or special regulations, for the purposes of this Part, prescribing
(a)who is or has been at any time resident in Canada;
(b)where a person was resident in Canada as well as in some other place, what amounts are taxable under this Part; and
(c)where a non-resident person carried on business in Canada, what are taxable under this Part or what portion of the tax under this Part is payable by that person.
Marginal note:Assignment of obligation
(14)For the purposes of this section, any transaction or event by which an obligation held by a non-resident person is redeemed in whole or in part or is cancelled shall be deemed to be an assignment of the obligation by the non-resident person.
Marginal note:Standby charges and guarantee fees
(15)For the purposes of this Part,
(a)where a non-resident person has entered into an agreement under the terms of which the non-resident person agrees to guarantee the repayment, in whole or in part, of the principal amount of a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation of a person resident in Canada, any amount paid or credited as consideration for the guarantee is deemed to be a payment of interest on that obligation; and
(b)where a non-resident person has entered into an agreement under the terms of which the non-resident person agrees to lend money, or to make money available, to a person resident in Canada, any amount paid or credited as consideration for so agreeing to lend money or to make money available shall, if the non-resident person would be liable to tax under this Part in respect of interest payable on any obligation issued under the terms of the agreement on the date it was entered into, be deemed to be a payment of interest.
Marginal note:Deemed dividends
(16)For the purposes of this Part,
(a)an amount paid or credited as interest by a corporation resident in Canada, or by a partnership, in a taxation year of the corporation to a non-resident person is deemed to have been paid by the corporation as a dividend, and not to have been paid or credited by the corporation or the partnership as interest, to the extent that an amount in respect of the interest
(i)is not deductible in computing the income of the corporation for the year because of subsection 18(4), or
(ii)is included in computing the income of the corporation for the year under paragraph 12(1)(l.1); and
(b)to the extent that amounts paid or credited to a non-resident person in the year are deemed by paragraph (a) to have been paid by a corporation as dividends, the corporation may designate in its return of income under Part I for the year which amounts paid or credited as interest to the non-resident person in the year are deemed to have been paid as dividends and not as interest.
Marginal note:Deemed interest payments
(17)For the purposes of subsection (16),
(a)interest payable (other than interest payable pursuant to a legal obligation to pay interest on an amount of interest) by a corporation resident in Canada, or by a partnership, in respect of a taxation year of the corporation, but that has not been paid or credited in the year, is deemed to have been paid immediately before the end of the year and not to have been paid or credited at any other time; and
(b)if subsection (6) or (7) deems a payment of interest to have been made to a non-resident person in respect of a debt or other obligation of a corporation, interest that, at the time of the transfer or assignment, is payable by the corporation in respect of the debt or other obligation and has not been paid or credited is deemed to have been paid by the corporation immediately before that time to the non-resident person.
Marginal note:Withholding and remittance of tax
215(1)When a person pays, credits or provides, or is deemed to have paid, credited or provided, an amount on which an income tax is payable under this Part, or would be so payable if this Act were read without reference to subparagraph 94(3)(a)(viii) and to subsection 216.1(1), the person shall, notwithstanding any agreement or law to the contrary, deduct or withhold from it the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the non-resident person on account of the tax and shall submit with the remittance a statement in prescribed form.
Marginal note:Exception - corporate immigration
(1.1)Subsection (1) does not apply in respect of a dividend deemed to be paid under paragraph 128.1(1)(c.1) by a corporation to a non-resident corporation with which the corporation was dealing at arm’s length.
Marginal note:Idem
(2)Where an amount on which an income tax is payable under this Part is paid or credited by an agent or other person on behalf of the debtor either by way of redemption of bearer coupons or warrants or otherwise, the agent or other person by whom the amount was paid or credited shall, notwithstanding any agreement or law to the contrary, deduct or withhold and remit the amount of the tax and shall submit therewith a statement in prescribed form as required by subsection 215(1) and shall thereupon, for purposes of accounting to or obtaining reimbursement from the debtor, be deemed to have paid or credited the full amount to the person otherwise entitled to payment.
Marginal note:Idem
(3)Where an amount on which an income tax is payable under this Part was paid or credited to an agent or other person for or on behalf of the person entitled to payment without the tax having been deducted or withheld under subsection 215(1), the agent or other person shall, notwithstanding any agreement or law to the contrary, deduct or withhold therefrom the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the person entitled to payment in payment of the tax and shall submit therewith a statement in prescribed form, and the agent or other person shall thereupon, for purposes of accounting to the person entitled to payment, be deemed to have paid or credited that amount to that person.
Marginal note:Regulations creating exceptions
(4)The Governor in Council may make regulations with reference to any non-resident person or class of non-resident persons who carries or carry on business in Canada, providing that subsections 215(1) to 215(3) are not applicable to amounts paid to or credited to that person or those persons and requiring the person or persons to file an annual return on a prescribed form and to pay the tax imposed by this Part within a time limited in the regulations.
Marginal note:Regulations reducing deduction or withholding
(5)The Governor in Council may make regulations in respect of any non-resident person or class of non-resident persons to whom any amount is paid or credited as, on account of, in lieu of payment of or in satisfaction of, any amount described in any of paragraphs 212(1)(h), (j) to (m) and (q) reducing the amount otherwise required by any of subsections (1) to (3) to be deducted or withheld from the amount so paid or credited.
Marginal note:Liability for tax
(6)Where a person has failed to deduct or withhold any amount as required by this section from an amount paid or credited or deemed to have been paid or credited to a non-resident person, that person is liable to pay as tax under this Part on behalf of the non-resident person the whole of the amount that should have been deducted or withheld, and is entitled to deduct or withhold from any amount paid or credited by that person to the non-resident person or otherwise recover from the non-resident person any amount paid by that person as tax under this Part on behalf thereof.
Marginal note:Alternatives re rents and timber royalties
216(1)If an amount has been paid during a taxation year to a non-resident person or to a partnership of which that person was a member as, on account of, in lieu of payment of or in satisfaction of, rent on real or immovable property in Canada or a timber royalty, that person may, within two years (or, if that person has filed an undertaking described in subsection (4) in respect of the year, within six months) after the end of the year, file a return of income under Part I for that year in prescribed form