Federal-Provincial Fiscal Arrangements Act

Marginal note:Incentive to eliminate capital taxes

• 10 (1) As an incentive for a province to eliminate capital taxes imposed by the province, the province is eligible to receive a payment under this Part if

  • (a) before January 2, 2011, it eliminates a capital tax that is imposed under a law of the province that was in force on March 18, 2007; and

  • (b) any legislation that is required to give effect to the elimination is enacted after March 18, 2007 and before January 2, 2011.

• Marginal note:Meaning of elimination

  (2) For the purposes of this Part, a capital tax is considered to be eliminated if

  • (a) under the law of the province, the tax ceases before January 2, 2011 to be imposed on all corporations, except that the tax may continue to be imposed on any corporation that is exempt from tax under any of paragraphs 149(1)(d) to (d.4) of the Income Tax Act on all of its taxable income; or

  • (b) in the case where the tax is imposed only on financial institutions, the law under which the tax is imposed is amended, before January 2, 2011, to replace the tax with a new capital tax imposed only on financial institutions that meets the following criteria:

    • (i) no financial institution becomes subject to the new capital tax that was not subject to the replaced tax,

    • (ii) every financial institution on which the new capital tax is imposed must be permitted to reduce the amount of the new capital tax payable by it for a taxation year by the amount of income tax payable by it to the province for the year and, if the amount of income tax so payable exceeds the amount of the new capital tax so payable, the financial institution must be permitted to apply the amount of the excess to reduce capital tax payable by it in other taxation years in a manner satisfactory to the Minister, and

    • (iii) the Minister is satisfied that the total amount of revenue that would be raised by the new capital tax from financial institutions if there were no reduction for income tax payable is intended to be broadly commensurate with the total amount of revenue raised from those financial institutions by the province’s income tax.

• Marginal note:Separate capital tax

  (3) If a province imposes a capital tax that applies to financial institutions as well as corporations that are not financial institutions, the capital tax is deemed to be two separate capital taxes for the purposes of this Part.