Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Manufacturing and processing profits deductions

• 125.1 (1) There may be deducted from the tax otherwise payable under this Part by a corporation for a taxation year an amount equal to the corporation’s general rate reduction percentage for the taxation year (within the meaning assigned by subsection 123.4(1)) multiplied by the lesser of

  • (a) the amount, if any, by which the corporation’s Canadian manufacturing and processing profits for the year exceed, where the corporation was a Canadian-controlled private corporation throughout the year, the least of the amounts determined under paragraphs 125(1)(a) to 125(1)(c) in respect of the corporation for the year, and

  • (b) the amount, if any, by which the corporation’s taxable income for the year exceeds the total of

    • (i) where the corporation was a Canadian-controlled private corporation throughout the year, the least of the amounts determined under paragraphs 125(1)(a) to 125(1)(c) in respect of the corporation for the year,

    • (ii) the amount determined by multiplying the total of the amounts that would be deductible under subsection 126(2) from the tax for the year otherwise payable under this Part by it, if those amounts were determined without reference to section 123.4, by the relevant factor for the year, and

    • (iii) where the corporation was a Canadian-controlled private corporation throughout the year, its aggregate investment income for the year (within the meaning assigned by subsection 129(4)).

• Marginal note:Electrical energy and steam

  (2) A corporation that generates electrical energy for sale, or produces steam for sale, in a taxation year may deduct from its tax otherwise payable under this Part for the year an amount equal to the corporation’s general rate reduction percentage for the taxation year (within the meaning assigned by subsection 123.4(1)) multiplied by the amount determined by the formula

  A - B

  where

  A

  is the amount, if any, that would, if the definition manufacturing or processing in subsection (3), and in subsection 1104(9) of the Income Tax Regulations, were read without reference to paragraph (h) of those definitions (other than for the purpose of applying section 5201 of those Regulations and if subsection (5) applied for the purpose of subsection (1), be the lesser of

  • (a) the amount determined under paragraph (1)(a) in respect of the corporation for the year, and

  • (b) the amount determined under paragraph (1)(b) in respect of the corporation for the year; and

  B

  is the amount, if any, that is the lesser of

  • (a) the amount determined under paragraph (1)(a) in respect of the corporation for the year, and

  • (b) the amount determined under paragraph (1)(b) in respect of the corporation for the year.

• Marginal note:Definitions

  (3) In this section,

  Canadian manufacturing and processing profits

  Canadian manufacturing and processing profits of a corporation for a taxation year means such portion of the total of all amounts each of which is the income of the corporation for the year from an active business carried on in Canada as is determined under rules prescribed for that purpose by regulation made on the recommendation of the Minister of Finance to be applicable to the manufacturing or processing in Canada of goods for sale or lease; (bénéfices de fabrication et de transformation au Canada)

  manufacturing or processing

  manufacturing or processing does not include

  • (a) farming or fishing,

  • (b) logging,

  • (c) construction,

  • (d) operating an oil or gas well or extracting petroleum or natural gas from a natural accumulation of petroleum or natural gas,

  • (e) extracting minerals from a mineral resource,

  • (f) processing

    • (i) ore (other than iron ore or tar sands ore) from a mineral resource located in Canada to any stage that is not beyond the prime metal stage or its equivalent,

    • (ii) iron ore from a mineral resource located in Canada to any stage that is not beyond the pellet stage or its equivalent, or

    • (iii) tar sands ore from a mineral resource located in Canada to any stage that is not beyond the crude oil stage or its equivalent,

  • (g) producing industrial minerals,

  • (h) producing or processing electrical energy or steam, for sale,

  • (i) processing natural gas as part of the business of selling or distributing gas in the course of operating a public utility,

  • (j) processing heavy crude oil recovered from a natural reservoir in Canada to a stage that is not beyond the crude oil stage or its equivalent,

  • (k) Canadian field processing, or

  • (l) any manufacturing or processing of goods for sale or lease, if, for any taxation year of a corporation in respect of which the expression is being applied, less than 10% of its gross revenue from all active businesses carried on in Canada was from

    • (i) the selling or leasing of goods manufactured or processed in Canada by it, and

    • (ii) the manufacturing or processing in Canada of goods for sale or lease, other than goods for sale or lease by it. (fabrication ou transformation)

• Marginal note:Determination of gross revenue

  (4) For the purposes of paragraph (l) of the definition manufacturing or processing in subsection 125.1(3), where a corporation was a member of a partnership at any time in a taxation year,

  • (a) there shall be included in the gross revenue of the corporation for the year from all active businesses carried on in Canada, that proportion of the gross revenue from each such business carried on in Canada by means of the partnership, for the fiscal period of the partnership coinciding with or ending in that year, that the corporation’s share of the income of the partnership from that business for that fiscal period is of the income of the partnership from that business for that fiscal period; and

  • (b) there shall be included in the gross revenue of the corporation for the year from all activities described in subparagraphs (l)(i) and (ii) of the definition manufacturing or processing in subsection 125.1(3), that proportion of the gross revenue from each such activity engaged in in the course of a business carried on by means of the partnership, for the fiscal period of the partnership coinciding with or ending in that year, that the corporation’s share of the income of the partnership from that business for that fiscal period is of the income of the partnership from that business for that fiscal period.

• Marginal note:Interpretation

  (5) For the purpose of the description of A in subsection (2) and for the purpose of applying the Income Tax Regulations (other than section 5201 of those Regulations) to that subsection other than the description of B,

  • (a) electrical energy and steam are deemed to be goods; and

  • (b) the generation of electrical energy for sale, and the production of steam for sale, are deemed to be, subject to paragraph (l) of the definition manufacturing or processing in subsection (3), manufacturing or processing.

125.11 [Repealed, 2003, c. 28, s. 13(2)]

Marginal note:Definitions

• 125.2 (1) The following definitions apply in this section.

  adjusted business income

  adjusted business income, of a corporation for a taxation year, has the same meaning as in Part LII of the Income Tax Regulations. (revenu rajusté tiré d’une entreprise)

  cost of capital

  cost of capital, of a corporation for a taxation year, has the same meaning as in Part LII of the Income Tax Regulations. (coût en capital)

  cost of labour

  cost of labour, of a corporation for a taxation year, has the same meaning as in Part LII of the Income Tax Regulations. (coût en main-d’oeuvre)

  zero-emission technology manufacturing profits

  zero-emission technology manufacturing profits, of a corporation for a taxation year, means the amount determined by the formula

  A × B × C

  where

  A

  is the corporation’s adjusted business income for the taxation year;

  B

  is the fraction determined by the formula

  D ÷ E

  where

  D

  is the total of the corporation’s ZETM cost of capital and ZETM cost of labour for the taxation year, and

  E

  is the total of the corporation’s cost of capital and cost of labour for the taxation year; and

  C

  is

  • (a) if the fraction determined for B is at least 0.9, the fraction determined by the formula

    F ÷ G

    where

    F

    is the amount determined for E, and

    G

    is the amount determined for D; and

  • (b) 1, in any other case. (bénéfices de fabrication de technologies à zéro émission)

  ZETM cost of capital

  ZETM cost of capital, of a corporation for a taxation year, has the same meaning as in Part LII of the Income Tax Regulations. (coût en capital de FTZE)

  ZETM cost of labour

  ZETM cost of labour, of a corporation for a taxation year, has the same meaning as in Part LII of the Income Tax Regulations. (coût en main-d’œuvre de FTZE)

• Marginal note:Zero-emission technology manufacturing

  (2) There may be deducted from the tax otherwise payable under this Part by a corporation for a taxation year the amount determined by the formula

  (A × B) + (C × D)

  where

  A

  is

  • (a) 0.075, if the taxation year begins after 2021 and before 2032,

  • (b) 0.05625, if the taxation year begins after 2031 and before 2033,

  • (c) 0.0375, if the taxation year begins after 2032 and before 2034,

  • (d) 0.01875, if the taxation year begins after 2033 and before 2035, and

  • (e) nil, in any other case;

  B

  is the least of

  • (a) the corporation’s zero-emission technology manufacturing profits for the taxation year,

  • (b) the amount of the corporation’s adjusted business income for the taxation year (determined without reference to section 5203 of the Income Tax Regulations) less

    • (i) if the corporation was a Canadian-controlled private corporation throughout the taxation year, the least of the amounts, if any, determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the taxation year, and

    • (ii) in any other case, nil, and

  • (c) the amount, if any, by which the corporation’s taxable income for the taxation year exceeds the total of

    • (i) if the corporation was a Canadian-controlled private corporation throughout the taxation year, the least of the amounts, if any, determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the taxation year,

    • (ii) the corporation’s aggregate investment income (as defined in subsection 129(4)) for the taxation year, and

    • (iii) the amount determined by multiplying the total of the amounts deducted under subsection 126(2) from its tax for the taxation year otherwise payable under this Part, by the relevant factor for the taxation year;

  C

  is

  • (a) 0.045, if the taxation year begins after 2021 and before 2032,

  • (b) 0.03375, if the taxation year begins after 2031 and before 2033,

  • (c) 0.0225, if the taxation year begins after 2032 and before 2034,

  • (d) 0.01125, if the taxation year begins after 2033 and before 2035, and

  • (e) nil, in any other case; and

  D

  is

  • (a) if the corporation was a Canadian-controlled private corporation throughout the taxation year, the lesser of

    • (i) the least of the amounts, if any, determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the taxation year, and

    • (ii) the amount determined by the formula

      E − F

      where

      E

      is the corporation’s zero-emission technology manufacturing profits for the taxation year, and

      F

      is the amount determined for B, and

  • (b) nil, in any other case.

Marginal note:Part XIII tax  — eligible bank affiliate

125.21 There may be deducted in computing the tax payable under this Part for a taxation year by a particular corporation that is throughout the year an eligible Canadian bank (as defined in subsection 95(2.43)) the total of all amounts, each of which is the amount, if any, by which

• (a) an amount paid under paragraph 212(1)(b) in respect of interest paid or credited in the year by the particular corporation in respect of an upstream deposit (as defined in subsection 95(2.43)) owing to a non-resident corporation that is, throughout the year, an eligible bank affiliate (as defined in subsection 95(2.43)) of the particular corporation

exceeds

• (b) the total of all amounts each of which is a portion of the amount described in paragraph (a) that is available to the non-resident corporation or any other person or partnership at any time as a credit or reduction of, or deduction from, any amount otherwise payable to the government of a country other than Canada, or a political subdivision of that country, having regard to all available provisions of the laws of that country, or political subdivision, as the case may be, any tax treaty with that country and any other agreements entered into by that country or political subdivision.