VIII, s. 114(1)]
Marginal note:Definitions
191(1)In this Part,
excluded dividendmeans a dividend
(a)paid by a corporation to a shareholder that had a substantial interest in the corporation at the time the dividend was paid,
(b)paid by a corporation that was a financial intermediary corporation or a private holding corporation at the time the dividend was paid,
(c)paid by a particular corporation that would, but for paragraphs (h) and (i) of the definitionfinancial intermediary corporationin this subsection, have been a financial intermediary corporation at the time the dividend was paid, except where the dividend was paid to a controlling corporation in respect of the particular corporation or to a specified person (within the meaning assigned by paragraph (h) of the definitiontaxable preferred sharein subsection 248(1)) in relation to such a controlling corporation,
(d)paid by a mortgage investment corporation, or
(e)that is a capital gains dividend within the meaning assigned by subsection 131(1); (dividende exclu)
financial intermediary corporationmeans a corporation that is
(a)a corporation described in subparagraph (b)(ii) of the definitionretirement savings planin subsection 146(1),
(b)an investment corporation,
(c)a mortgage investment corporation,
(d)a mutual fund corporation,
(e)a prescribed venture capital corporation, or
(f)a prescribed labour-sponsored venture capital corporation,
but does not include
(g)a prescribed corporation,
(h)a corporation that is controlled by or for the benefit of one or more corporations (each of which is referred to in this subsection as a “controlling corporation”) other than financial intermediary corporations or private holding corporations unless the controlling corporations and specified persons (within the meaning assigned by paragraph (h) of the definitiontaxable preferred sharein subsection 248(1)) in relation to the controlling corporations do not own in the aggregate shares of the capital stock of the corporation having a fair market value of more than 10% of the fair market value of all of the issued and outstanding shares of the capital stock of the corporation (those fair market values being determined without regard to any voting rights attaching to those shares), or
(i)any particular corporation in which another corporation (other than a financial intermediary corporation or a private holding corporation) has a substantial interest unless the other corporation and specified persons (within the meaning assigned by paragraph (h) of the definitiontaxable preferred sharein subsection 248(1)) in relation to the other corporation do not own in the aggregate shares of the capital stock of the particular corporation having a fair market value of more than 10% of the fair market value of all of the issued and outstanding shares of the capital stock of the particular corporation (those fair market values being determined without regard to any voting rights attaching to those shares); (intermédiaire financier constitué en société)
private holding corporationmeans a private corporation the only undertaking of which is the investing of its funds, but does not include
(a)a specified financial institution,
(b)any particular corporation that owns shares of another corporation in which it has a substantial interest, except where the other corporation would, but for that substantial interest, be a financial intermediary corporation or a private holding corporation, or
(c)any particular corporation in which another corporation owns shares and has a substantial interest, except where the other corporation would, but for that substantial interest, be a private holding corporation. (société de portefeuille privée)
Marginal note:Substantial interest
(2)For the purposes of this Part, a shareholder has a substantial interest in a corporation at any time if the corporation is a taxable Canadian corporation and
(a)the shareholder is related (otherwise than by reason of a right referred to in paragraph 251(5)(b)) to the corporation at that time; or
(b)the shareholder owned, at that time,
(i)shares of the capital stock of the corporation that would give the shareholder 25% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation,
(ii)shares of the capital stock of the corporation having a fair market value of 25% or more of the fair market value of all the issued shares of the capital stock of the corporation,
and either
(iii)shares (other than shares that would be taxable preferred shares if the definitiontaxable preferred sharein subsection 248(1) were read without reference to subparagraph (b)(iv) thereof and if they were issued after June 18, 1987 and were not grandfathered shares) of the capital stock of the corporation having a fair market value of 25% or more of the fair market value of all those shares of the capital stock of the corporation, or
(iv)in respect of each class of shares of the capital stock of the corporation, shares of that class having a fair market value of 25% or more of the fair market value of all the issued shares of that class,
and for the purposes of this paragraph, a shareholder shall be deemed to own at any time each share of the capital stock of a corporation that is owned, otherwise than by reason of this paragraph, at that time by a person to whom the shareholder is related (otherwise than by reason of a right referred to in paragraph 251(5)(b)).
Marginal note:Idem
(3)Notwithstanding subsection 191(2),
(a)where it can reasonably be considered that the principal purpose for a person acquiring an interest that would, but for this subsection, be a substantial interest in a corporation is to avoid or limit the application of Part I or IV.1 or this Part, the person shall be deemed not to have a substantial interest in the corporation;
(b)where it can reasonably be considered that the principal purpose for an acquisition of a share of the capital stock of a corporation (in this paragraph referred to as the “issuer”) by any person (in this paragraph referred to as the “acquirer”) who had, immediately after the time of the acquisition, a substantial interest in the issuer from another person who did not, immediately before that time, have a substantial interest in the issuer, was to avoid or limit the application of Part I or IV.1 or this Part with respect to a dividend on the share, the acquirer and specified persons (within the meaning assigned by paragraph (h) of the definitiontaxable preferred sharein subsection 248(1)) in relation to the acquirer shall be deemed not to have a substantial interest in the issuer with respect to any dividend paid on the share;
(c)a corporation described in paragraphs (a) to (f) of the definitionfinancial intermediary corporationin subsection 191(1) shall be deemed not to have a substantial interest in another corporation unless it is related (otherwise than by reason of a right referred to in paragraph 251(5)(b)) to the other corporation;
(d)any partnership or trust, other than
(i)a partnership all the members of which are related to each other otherwise than by reason of a right referred to in paragraph 251(5)(b),
(ii)a trust in which each person who is beneficially interested is
(A)related (otherwise than because of a right referred to in paragraph 251(5)(b)) to each other person who is beneficially interested in the trust and who is not a registered charity, or
(B)a registered charity
and for the purpose of this subparagraph, where a particular person who is beneficially interested in the trust is an aunt, uncle, niece or nephew of another person, the particular person and any person who is a child or descendant of the particular person shall be deemed to be related to the other person and to any person who is the child or descendant of the other person, or
(iii)a trust in which only one person (other than a registered charity) is beneficially interested,
shall be deemed not to have a substantial interest in a corporation; and
(e)where at any time a shareholder holds a share of the capital stock of a corporation to which paragraph (g) of the definitiontaxable preferred sharein subsection 248(1) or paragraph (e) of the definitiontaxable RFI sharein that subsection applies to deem the share to be a taxable preferred share or a taxable RFI share, the shareholder shall be deemed not to have a substantial interest in the corporation at that time.
Marginal note:Deemed dividends
(4)Where at any particular time
(a)a share of the capital stock of a corporation is issued,
(b)the terms or conditions of a share of the capital stock of a corporation are changed, or
(c)an agreement in respect of a share of the capital stock of a corporation is changed or entered into,
and the terms or conditions of the share or the agreement in respect of the share specify an amount in respect of the share, including an amount for which the share is to be redeemed, acquired or cancelled (together with, where so provided, any accrued and unpaid dividends thereon) and where paragraph 191(4)(a) applies, the specified amount does not exceed the fair market value of the consideration for which the share was issued, and where paragraph 191(4)(b) or 191(4)(c) applies, the specified amount does not exceed the fair market value of the share immediately before the particular time, the amount of any dividend deemed to have been paid on a redemption, acquisition or cancellation of the share to which subsection 84(2) or 84(3) applies shall
(d)for the purposes of this Part and section 187.2, be deemed to be an excluded dividend and an excepted dividend, respectively, unless
(i)where paragraph 191(4)(a) applies, the share was issued for consideration that included a taxable preferred share, or
(ii)where paragraph 191(4)(b) or 191(4)(c) applies, the share was, immediately before the particular time, a taxable preferred share, and
(e)be deemed not to be a dividend to which subsection 112(2.1) or 138(6) applies to deny a deduction with respect to the dividend in computing the taxable income of a corporation under subsection 112(1) or 112(2) or 138(6), unless
(i)where paragraph 191(4)(a) applies, the share was issued for consideration that included a term preferred share or for the purpose of raising capital or as part of a series of transactions or events the purpose of which was to raise capital, and
(ii)where paragraph 191(4)(b) or 191(4)(c) applies, the share was, immediately before the particular time, a term preferred share, or the terms or conditions of the share were changed, or the agreement in respect of the share was changed or entered into for the purpose of raising capital or as part of a series of transactions or events the purpose of which was to raise capital.
Marginal note:Where s. (4) does not apply
(5)Subsection (4) does not apply to the extent that the total of
(a)the amount paid on the redemption, acquisition or cancellation of the share, and
(b)all amounts each of which is an amount (other than an amount deemed by subsection 84(4) to be a dividend) paid, after the particular time and before the redemption, acquisition or cancellation of the share, on a reduction of the paid-up capital of the corporation in respect of the share
exceeds the specified amount referred to in subsection (4).
Marginal note:Excluded dividend — partner
(6)If at any time a corporation pays a dividend to a partnership, the corporation is, for the purposes of this subsection and paragraph (a) of the definitionexcluded dividendin subsection (1), deemed to have paid at that time to each member of the partnership a dividend equal to the amount determined by the formula
A × B
where
Marginal note:Tax on taxable dividends
191.1(1)Every taxable Canadian corporation shall pay a tax under this Part for each taxation year equal to the amount, if any, by which
(a)the total of
(i)the amount determined by multiplying the amount by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on short-term preferred shares exceeds the corporation’s dividend allowance for the year, by
(A)50% for dividends paid in a taxation year that ends before 2010,
(B)45% for dividends paid in a taxation year that ends after 2009 and before 2012,
(C)40% for dividends paid in a taxation year that ends after 2011,
(ii)40% of the amount, if any, by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on taxable preferred shares (other than short-term preferred shares) of all classes in respect of which an election under subsection 191.2(1) has been made exceeds the amount, if any, by which the corporation’s dividend allowance for the year exceeds the total of the dividends referred to in subparagraph 191.1(1)(a)(i),
(iii)25% of the amount, if any, by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on taxable preferred shares (other than short-term preferred shares) of all classes in respect of which an election under subsection 191.2(1) has not been made exceeds the amount, if any, by which the corporation’s dividend allowance for the year exceeds the total of the dividends referred to in subparagraphs 191.1(1)(a)(i) and 191.1(1)(a)(ii), and
(iv)the total of all amounts each of which is an amount determined for the year in respect of the corporation under paragraph 191.3(1)(d)
exceeds
(b)the total of all amounts each of which is an amount determined for the year in respect of the corporation under paragraph 191.3(1)(c).
Marginal note:Dividend allowance
(2)For the purposes of this section, a taxable Canadian corporation’sdividend allowancefor a taxation year is the amount, if any, by which
(a)$500,000
exceeds
(b)the amount, if any, by which the total of taxable dividends (other than excluded dividends) paid by it on taxable preferred shares, or shares that would be taxable preferred shares if they were issued after June 18, 1987 and were not grandfathered shares, in the calendar year immediately preceding the calendar year in which the taxation year ended exceeds $1,000,000,
unless the corporation is associated in the taxation year with one or more other taxable Canadian corporations, in which case, except as otherwise provided in this section, its dividend allowance for the year is nil.
Marginal note:Associated corporations
(3)If all of the taxable Canadian corporations that are associated with each other in a taxation year and that have paid taxable dividends (other than excluded dividends) on taxable preferred shares in the year have filed with the Minister in prescribed form an agreement whereby, for the purposes of this section, they allocate an amount to one or more of them for the taxation year, and the amount so allocated or the total of the amounts so allocated, as the case may be, is equal to the total dividend allowance for the year of those corporations and all other taxable Canadian corporations with which each such corporation is associated in the year, the dividend allowance for the year for each of the corporations is the amount so allocated to it.
Marginal note:Total dividend allowance
(4)For the purposes of this section, thetotal dividend allowanceof a group of taxable Canadian corporations that are associated with each other in a taxation year is the amount, if any, by which
(a)$500,000
exceeds
(b)the amount, if any, by which the total of taxable dividends (other than excluded dividends) paid by those corporations on taxable preferred shares, or shares that would be taxable preferred shares if they were issued after June 18, 1987 and were not grandfathered shares, in the calendar year immediately preceding the calendar year in which the taxation year ended exceeds $1,000,000.
Marginal note:Failure to file agreement
(5)If any of the taxable Canadian corporations that are associated with each other in a taxation year and that have paid taxable dividends (other than excluded dividends) on taxable preferred shares in the year has failed to file with the Minister an agreement as contemplated by subsection 191.1(3) within 30 days after notice in writing by the Minister has been forwarded to any of them that such an agreement is required for the purpose of any assessment of tax under this Part, the Minister shall, for the purpose of this section, allocate an amount to one or more of them for the taxation year, which amount or the total of which amounts, as the case may be, shall equal the total dividend allowance for the year for those corporations and all other taxable Canadian corporations with which each such corporation is associated in the year, and the dividend allowance for the year of each of the corporations is the amount so allocated to it.
Marginal note:Dividend allowance in short years
(6)Notwithstanding any other provision of this section,
(a)where a corporation has a taxation year that is less than 51 weeks, its dividend allowance for the year is that proportion of its dividend allowance for the year determined without reference to this paragraph that the number of days in the year is of 365; and
(b)where a taxable Canadian corporation (in this paragraph referred to as the “first corporation”) has more than one taxation year ending in a calendar year and is associated in two or more of those taxation years with another taxable Canadian corporation that has a taxation year ending in that calendar year, the dividend allowance of the first corporation for each taxation year in which it is associated with the other corporation ending in that calendar year is, subject to the application of paragraph 191.1(6)(a), an amount equal to the amount that would be its dividend allowance for the first such taxation year if the allowance were determined without reference to paragraph 191.1(6)(a).
Marginal note:Election
191.2(1)For the purposes of determining the tax payable by reason of subparagraphs 191.1(1)(a)(ii) and 191.1(1)(a)(iii), a taxable Canadian corporation (other than a financial intermediary corporation or a private holding corporation) may make an election with respect to a class of its taxable preferred shares the terms and conditions of which require an election to be made under this subsection by filing a prescribed form with the Minister
(a)not later than the day on or before which its return of income under Part I is required by section 150 to be filed for the taxation year in which shares of that class are first issued or first become taxable preferred shares; or
(b)within the 6 month period commencing on any of the following days, namely,
(i)the day of sending of any notice of assessment of tax payable under this Part or Part I by the corporation for that year,
(ii)where the corporation has served a notice of objection to an assessment described in subparagraph (i), the day of sending of a notice that the Minister has confirmed or varied the assessment,
(iii)where the corporation has instituted an appeal in respect of an assessment described in subparagraph 191.2(1)(b)(i) to the Tax Court of Canada, the day of mailing of a copy of the decision of the Court to the taxpayer, and
(iv)where the corporation has instituted an appeal in respect of an assessment described in subparagraph 191.2(1)(b)(i) to the Federal Court of Appeal or the Supreme Court of Canada, the day on which the judgment of the Court is pronounced or delivered or the day on which the corporation discontinues the appeal.
Marginal note:Time of election
(2)An election with respect to a class of taxable preferred shares filed in accordance with subsection 191.2(1) shall be deemed to have been filed before any dividend on a share of that class is paid.
Marginal note:Assessment
(3)Where an election has been filed under subsection 191.2(1), the Minister shall, notwithstanding subsections 152(4) and 152(5), assess or reassess the tax, interest or penalties payable under this Act by any corporation for any relevant taxation year in order to take into account the election.
Marginal note:Agreement respecting liability for tax
191.3(1)Where a corporation (in this section referred to as the “transferor corporation”) and a taxable Canadian corporation (in this section referred to as the “transferee corporation”) that was related (otherwise than because of a right referred to in paragraph 251(5)(b) or because of the control of any corporation by Her Majesty in right of Canada or a province) to the transferor corporation
(a)throughout a particular taxation year of the transferor corporation (or, where the transferee corporation came into existence in that year, throughout the part of that year in which the transferee corporation was in existence), and
(b)throughout the last taxation year of the transferee corporation ending at or before the end of the particular taxation year (or, where the transferor corporation came into existence in that last taxation year of the transferee corporation, throughout that part of that last year in which the transferor corporation was in existence)
file as provided in subsection 191.3(2) an agreement or amended agreement with the Minister under which the transferee corporation agrees to pay all or any portion, as is specified in the agreement, of the tax for that taxation year of the transferor corporation that would, but for the agreement, be payable under this Part by the transferor corporation (other than any tax payable by the transferor corporation by reason of another agreement made under this section), the following rules apply, namely,
(c)the amount of tax specified in the agreement is an amount determined for that taxation year of the transferor corporation in respect of the transferor corporation for the purpose of paragraph 191.1(1)(b),
(d)the amount of tax specified in the agreement is an amount determined in respect of the transferee corporation for its last taxation year ending at or before the end of that taxation year of the transferor corporation for the purpose of subparagraph 191.1(1)(a)(iv), and
(e)the transferor corporation and the transferee corporation are jointly and severally, or solidarily, liable to pay the amount of tax specified in the agreement and any interest or penalty in respect thereof.
Marginal note:Consideration for agreement
(1.1)For the purposes of Part I of this Act, where property is acquired at any time by a transferee corporation as consideration for entering into an agreement with a transferor corporation that is filed under this section,
(a)where the property was owned by the transferor corporation immediately before that time,
(i)the transferor corporation shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and
(ii)the transferor corporation shall not be entitled to deduct any amount in computing its income as a consequence of the transfer of the property, except any amount arising as a consequence of subparagraph 191.3(1.1)(a)(i);
(b)the cost at which the property was acquired by the transferee corporation at that time shall be deemed to be equal to the fair market value of the property at that time;
(c)the transferee corporation shall not be required to add an amount in computing its income solely because of the acquisition at that time of the property; and
(d)no benefit shall be deemed to have been conferred on the transferor corporation as a consequence of the transferor corporation entering into an agreement filed under this section.
Marginal note:Manner of filing agreement
(2)An agreement or amended agreement referred to in subsection 191.3(1) between a transferor corporation and a transferee corporation shall be deemed not to have been filed with the Minister unless
(a)it is in prescribed form;
(b)it is filed on or before the day on or before which the transferor corporation’s return for the year in respect of which the agreement is filed is required to be filed under this Part or within the 90-day period beginning on the day of sending of a notice of assessment of tax payable under this Part or Part I by the transferor corporation for the year or by the transferee corporation for its taxation year ending in the calendar year in which the taxation year of the transferor corporation ends or the sending of a notification that no tax is payable under this Part or Part I for that taxation year;
(c)it is accompanied by,
(i)where the directors of the transferor corporation are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,
(ii)where the directors of the transferor corporation are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer the corporation’s affairs authorized the agreement to be made,
(iii)where the directors of the transferee corporation are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and
(iv)where the directors of the transferee corporation are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer the corporation’s affairs authorized the agreement to be made; and
(d)where the agreement is not an agreement to which subsection 191.3(4) applies, an agreement amending the agreement has not been filed in accordance with this section.
(e)[Repealed, 1994, c. 7, Sch