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

Full Document:  

Act current to 2022-09-22 and last amended on 2022-09-01. Previous Versions

PART VI.1Tax on Corporations Paying Dividends on Taxable Preferred Shares (continued)

Marginal note:Election

  •  (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.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 191.2
  • 2002, c. 8, s. 184
  • 2010, c. 25, s. 53

Marginal note:Agreement respecting liability for tax

  •  (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. II, s. 163(1)]

  • Marginal note:Assessment

    (3) Where an agreement or amended agreement between a transferor corporation and a transferee corporation has been filed under this section with the Minister, the Minister shall, notwithstanding subsections 152(4) and 152(5), assess or reassess the tax, interest and penalties payable under this Act by the transferor corporation and the transferee corporation for any relevant taxation year in order to take into account the agreement or amended agreement.

  • Marginal note:Related corporations

    (4) Where, at any time, a corporation has become related to another corporation and it may reasonably be considered, having regard to all the circumstances, that the main purpose of the corporation becoming related to the other corporation was to transfer, by filing an agreement or an amended agreement under this section, the benefit of a deduction under paragraph 110(1)(k) to a transferee corporation, the amount of the tax specified in the agreement shall, for the purposes of paragraph 191.3(1)(c), be deemed to be nil.

  • Marginal note:Assessment of transferor corporation

    (5) The Minister may at any time assess a transferor corporation in respect of any amount for which it is jointly and severally, or solidarily, liable by reason of paragraph (1)(e) and the provisions of Division I of Part I are applicable in respect of the assessment as though it had been made under section 152.

  • Marginal note:Payment by transferor corporation

    (6) If a transferor corporation and a transferee corporation are by reason of paragraph (1)(e) jointly and severally, or solidarily, liable in respect of tax payable by the transferee corporation under subparagraph 191.1(1)(a)(iv) and any interest or penalty in respect thereof, the following rules apply:

    • (a) a payment by the transferor corporation on account of the liability shall, to the extent thereof, discharge their liability; and

    • (b) a payment by the transferee corporation on account of its liability discharges the transferor corporation’s liability only to the extent that the payment operates to reduce the transferee corporation’s liability under this Act to an amount less than the amount in respect of which the transferor corporation was, by paragraph (1)(e), made jointly and severally, or solidarily, liable.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 191.3
  • 1994, c. 7, Sch. II, s. 163
  • 1995, c. 21, s. 41
  • 1998, c. 19, s. 207
  • 2010, c. 25, s. 54
  • 2013, c. 34, s. 153

Marginal note:Information return

  •  (1) Every corporation that is or would, but for section 191.3, be liable to pay tax under this Part for a taxation year shall, not later than the day on or before which it is required by section 150 to file its 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 it under this Part for the year.

  • Marginal note:Provisions applicable to Part

    (2) Sections 152, 158 and 159, subsection 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:Provisions applicable -- Crown corporations

    (3) Section 27 applies to this Part with any modifications that the circumstances require.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • R.S., 1985, c. 1 (5th Supp.), s. 191.4
  • 1994, c. 7, Sch. VIII, s. 116
  • 1998, c. 19, s. 208

PART VIIRefundable Tax on Corporations Issuing Qualifying Shares

Marginal note:Corporation to pay tax

  •  (1) Every corporation shall pay a tax under this Part for a taxation year equal to the total of all amounts each of which is an amount designated under subsection 192(4) in respect of a share issued by it in the year.

  • Definition of Part VII refund

    (2) In this Part, the Part VII refund of a corporation for a taxation year means an amount equal to the lesser of

    • (a) the total of

      • (i) the amount, if any, by which the share-purchase tax credit of the corporation for the year exceeds the amount, if any, deducted in respect thereof by it for the year under subsection 127.2(1) from its tax otherwise payable under Part I for the year or the amount deemed by subsection 127.2(2) to have been paid on account of its tax payable under Part I for the year, as the case may be, and

      • (ii) such amount as the corporation may claim, not exceeding the amount that would, if paragraph (i) of the definition investment tax credit in subsection 127(9) were read without reference to the words “the year or”, be its investment tax credit at the end of the year in respect of property acquired, or an expenditure made, after April 19, 1983 and on or before the last day of the year, and

    • (b) the refundable Part VII tax on hand of the corporation at the end of the year.

  • Definition of refundable Part VII tax on hand

    (3) In this Part, refundable Part VII tax on hand of a corporation at the end of a taxation year means the amount, if any, by which

    • (a) the total of the taxes payable by it under this Part for the year and all preceding taxation years

    exceeds the total of

    • (b) the total of its Part VII refunds for all preceding taxation years, and

    • (c) the total of all amounts each of which is an amount of tax included in the total described in paragraph 192(3)(a) in respect of a share that was issued by the corporation and that, at the time it was issued, was not a qualifying share.

  • Marginal note:Corporation may designate amount

    (4) Every taxable Canadian corporation may, by filing a prescribed form with the Minister at any time on or before the last day of the month immediately following the month in which it issued a qualifying share of its capital stock (other than a share issued before July, 1983 or after 1986, or a share in respect of which the corporation has, on or before that day, designated an amount under subsection 194(4)), designate, for the purposes of this Part and Part I, an amount in respect of that share not exceeding 25% of the amount by which

    • (a) the amount of the consideration for which the share was issued

    exceeds

    • (b) the amount of any assistance (other than an amount included in computing the share-purchase tax credit of a taxpayer in respect of that share) provided or to be provided by a government, municipality or any other public authority in respect of, or for the acquisition of, the share.

  • Marginal note:Computing paid-up capital after designation

    (4.1) Where a corporation has designated an amount under subsection 192(4) in respect of shares issued at any time after May 23, 1985, in computing, at any particular time after that time, the paid-up capital in respect of the class of shares of the capital stock of the corporation that includes those shares

    • (a) there shall be deducted the amount, if any, by which

      • (i) the increase as a result of the issue of those shares in the paid-up capital in respect of all shares of that class, determined without reference to this subsection as it applies to those shares,

      exceeds

      • (ii) the amount, if any, by which the total amount of consideration for which those shares were issued exceeds the total amount designated by the corporation under subsection 192(4) in respect of those shares; and

    • (b) there shall be added an amount equal to the lesser of

      • (i) the amount, if any, by which

        • (A) the total of all amounts each of which is an amount deemed by subsection 84(3), 84(4) or 84(4.1) to be a dividend on shares of that class paid by the corporation after May 23, 1985 and before the particular time

        exceeds

        • (B) the total that would be determined under clause 192(4.1)(b)(i)(A) if this Act were read without reference to paragraph 192(4.1)(a), and

      • (ii) the total of all amounts each of which is an amount required by paragraph 192(4.1)(a) to be deducted in computing the paid-up capital in respect of that class of shares after May 23, 1985 and before the particular time.

  • Marginal note:Presumption

    (5) For the purposes of this Act, the Part VII refund of a corporation for a taxation year shall be deemed to be an amount paid on account of its tax under this Part for the year on the last day of the second month following the end of the year.

  • Definition of qualifying share

    (6) In this Part, qualifying share, at any time, means a prescribed share of the capital stock of a taxable Canadian corporation issued after May 22, 1985 and before 1987.

  • Marginal note:Effect of obligation to acquire shares

    (7) When determining under section 251 whether a corporation and any other person do not deal with each other at arm’s length for the purposes of any regulations made for the purposes of subsection 192(6), a person who has an obligation in equity, under a contract or otherwise, either immediately or in the future and either absolutely or contingently, to acquire shares in a corporation, shall be deemed to be in the same position in relation to the control of the corporation as if that person owned the shares.

  • Marginal note:Late designation

    (8) Where a taxable Canadian corporation that issued a share does not designate an amount under subsection 192(4) in respect of the share on or before the day on or before which the designation was required by that subsection, the corporation shall be deemed to have made the designation on that day if

    • (a) the corporation has filed with the Minister a prescribed information return relating to the share-purchase tax credit in respect of the share within the time that it would have been so required to file the return had the designation been made on that day, and

    • (b) within 3 years after that day, the corporation has

      • (i) designated an amount in respect of the share by filing a prescribed form with the Minister, and

      • (ii) paid to the Receiver General, at the time the prescribed form referred to in subparagraph 192(8)(b)(i) is filed, an amount that is a reasonable estimate of the penalty payable by the corporation for the late designation in respect of the share,

    except that, where the Minister has mailed a notice to the corporation that a designation has not been made in respect of the share under subsection 192(4), the designation and payment described in paragraph 192(8)(b) must be made by the corporation on or before the day that is 90 days after the day of the mailing.

  • Marginal note:Penalty for late designation

    (9) Where, pursuant to subsection 192(8), a corporation made a late designation in respect of a share issued in a month, the corporation shall pay, for each month or part of a month that elapsed during the period beginning on the last day on or before which an amount could have been designated by the corporation under subsection 192(4) in respect of the share and ending on the day that the late designation is made, a penalty for the late designation in respect of the share in an amount equal to 1% of the amount designated in respect of the share, except that the maximum penalty payable under this subsection by the corporation for a month shall not exceed $500.

  • Marginal note:Deemed deduction

    (10) For the purposes of this Act, other than the definition investment tax credit in subsection 127(9), the amount, if any, claimed under subparagraph 192(2)(a)(ii) by a taxpayer for a taxation year shall be deemed to have been deducted by the taxpayer under subsection 127(5) for the year.

  • Marginal note:Restriction

    (11) Where at any time a corporation has designated an amount under subsection 192(4) in respect of a share, no amount may be designated by the corporation at any subsequent time in respect of that share.

  • [NOTE: Application provisions are not included in the consolidated text
  • see relevant amending Acts and regulations.]
  • 1970-71-72, c. 63, s. 1 “192”
  • 1973-74, c. 14, s. 62(F)
  • 1974-75-76, c. 26, s. 111
  • 1976-77, c. 4, s. 66
  • 1977-78, c. 1, s. 88
  • 1984, c. 1, s. 95, c. 45, s. 80
  • 1985, c. 45, s. 103
  • 1986, c. 6, s. 101
 
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