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

Calculation of Capital Tax

Marginal note:Tax payable

• 190.1 (1) Every corporation that is a financial institution at any time during a taxation year shall pay a tax under this Part for the year equal to 1.25% of the amount, if any, by which its taxable capital employed in Canada for the year exceeds its capital deduction for the year.

• (1.1) and (1.2) [Repealed, 2007, c. 2, s. 40]

• Marginal note:Short taxation years

  (2) Where a taxation year of a corporation is less than 51 weeks, the amount determined under subsection 190.1(1) for the year in respect of the corporation shall be reduced to that proportion of that amount that the number of days in the year is of 365.

• Marginal note:Deduction

  (3) There may be deducted in computing a corporation’s tax payable under this Part for a taxation year an amount equal to the total of

  • (a) the corporation’s tax payable under Parts I and VI.2 (determined in accordance with subsection 191.5(9)) for the year; and

  • (b) such part as the corporation claims of its unused Part I tax credits and unused surtax credits for its 7 taxation years immediately before and its 3 taxation years immediately after the year.

  • (c) and (d) [Repealed, 2007, c. 2, s. 40]

• Marginal note:Idem

  (4) For the purposes of this subsection and subsections 190.1(3), 190.1(5) and 190.1(6),

  • (a) an amount may not be claimed under subsection 190.1(3) in computing a corporation’s tax payable under this Part for a particular taxation year

    • (i) in respect of its unused Part I tax credit for another taxation year, until its unused Part I tax credits for taxation years preceding the other year that may be claimed under this Part for the particular year have been claimed, and

    • (ii) in respect of its unused surtax credit for another taxation year, until its unused surtax credits for taxation years preceding the other year that may be claimed under Part I.3 or this Part for the particular year have been claimed;

  • (b) an amount may be claimed under subsection 190.1(3) in computing a corporation’s tax payable under this Part for a particular taxation year

    • (i) in respect of its unused Part I tax credit for another taxation year, only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of that unused Part I tax credit in computing its tax payable under this Part for a taxation year preceding the particular year, and

    • (ii) in respect of its unused surtax credit for another taxation year, only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of the unused surtax credit

      • (A) in computing its tax payable under this Part for a taxation year preceding the particular year, or

      • (B) in computing its tax payable under Part I.3 for the particular year or a taxation year preceding the particular year; and

  • (c) an amount may be claimed under paragraph (3)(b) in computing a corporation’s tax payable under this Part for a taxation year that ends before July 1, 2006 in respect of its unused Part I tax credit for a taxation year that ends after July 1, 2006 (referred to in this paragraph as the “credit taxation year”) only to the extent that the unused Part I tax credit exceeds the amount, if any, by which

    • (i) the amount that would, if this Part were read as it applied to the 2005 taxation year, be the corporation’s tax payable under this Part for the credit taxation year

    exceeds

    • (ii) the corporation’s tax payable under this Part for the credit taxation year.

• Marginal note:Definitions

  (5) For the purposes of subsections 190.1(3), 190.1(4) and 190.1(6),

  unused Part I tax credit

  unused Part I tax credit, of a corporation for a taxation year, means the amount, if any, by which

  • (a) the corporation’s tax payable under Part I for the year

  exceeds

  • (b) the amount that would, but for subsection (3), be its tax payable under this Part for the year; (crédit d’impôt de la partie I inutilisé)

  unused surtax credit

  unused surtax credit of a corporation for a taxation year has the meaning assigned by subsection 181.1(6). (crédit de surtaxe inutilisé)

• Marginal note:Acquisition of control

  (6) Where at any time control of a corporation was acquired by a person or group of persons, no amount in respect of its unused Part I tax credit or unused surtax credit for a taxation year ending before that time is deductible by the corporation for a taxation year ending after the time and no amount in respect of its unused Part I tax credit or unused surtax credit for a taxation year ending after that time is deductible by the corporation for a taxation year ending before that time, except that

  • (a) the corporation’s unused Part I tax credit and unused surtax credit for a particular taxation year that ended before that time is deductible by the corporation for a taxation year that ends after that time (in this paragraph referred to as the “subsequent year”) to the extent of that proportion of the corporation’s tax payable under Part I for the particular year that

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

      • (A) the total of all amounts each of which is

        • (I) its income under Part I for the particular year from a business that was carried on by the corporation for profit or with a reasonable expectation of profit throughout the subsequent year, or

        • (II) where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business all or substantially all of the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services

      exceeds

      • (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or 111(1)(d) in computing its taxable income for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of any business referred to in clause 190.1(6)(a)(i)(A)

    is of the greater of

    • (ii) the amount determined under subparagraph 190.1(6)(a)(i), and

    • (iii) the corporation’s taxable income for the particular year; and

  • (b) the corporation’s unused Part I tax credit and unused surtax credit for a particular taxation year that ends after that time is deductible by the corporation for a taxation year (in this paragraph referred to as the“preceding year”) that ended before that time to the extent of that proportion of the corporation’s tax payable under Part I for the particular year that

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

      • (A) the total of all amounts each of which is

        • (I) its income under Part I for the particular year from a business that was carried on by the corporation in the preceding year and throughout the particular year for profit or with a reasonable expectation of profit, or

        • (II) where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business all or substantially all of the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services

      exceeds

      • (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or 111(1)(d) in computing its taxable income for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of any business referred to in clause 190.1(6)(b)(i)(A)

    is of the greater of

    • (ii) the amount determined under subparagraph 190.1(6)(b)(i), and

    • (iii) the corporation’s taxable income for the particular year.

Marginal note:Taxable capital employed in Canada

190.11 For the purposes of this Part, the taxable capital employed in Canada of a financial institution for a taxation year is,

• (a) in the case of a financial institution other than a life insurance corporation, that proportion of its taxable capital for the year that its Canadian assets at the end of the year is of its total assets at the end of the year;

• (b) in the case of a life insurance corporation that was resident in Canada at any time in the year, the total of

  • (i) that proportion of the amount, if any, by which the total of

    • (A) its taxable capital for the year, and

    • (B) the amount prescribed for the year in respect of the corporation

    exceeds

    • (C) the amount prescribed for the year in respect of the corporation

    that its Canadian reserve liabilities as at the end of the year is of the total of

    • (D) its total reserve liabilities as at the end of the year, and

    • (E) the amount prescribed for the year in respect of the corporation; and

  • (ii) [Repealed, 2009, c. 2, s. 63]

• (c) in the case of a life insurance corporation that was non-resident throughout the year, its taxable capital for the year.

Marginal note:Taxable capital

190.12 For the purposes of this Part, the taxable capital of a corporation for a taxation year is the amount, if any, by which its capital for the year exceeds the total determined under section 190.14 in respect of its investments for the year in financial institutions related to it.

Marginal note:Capital

190.13 For the purposes of this Part, the capital of a financial institution for a taxation year is,

• (a) in the case of a financial institution, other than an authorized foreign bank or a life insurance corporation, the amount, if any, by which the total at the end of the year of

  • (i) the amount of its long-term debt,

  • (ii) the amount of its capital stock (or, in the case of an institution incorporated without share capital, the amount of its members’ contributions), retained earnings, contributed surplus and any other surpluses, and

  • (iii) the amount of its reserves, except to the extent that they were deducted in computing its income under Part I for the year,

  exceeds the total at the end of the year of

  • (iv) the amount of its deferred tax debit balance, and

  • (v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares);

• (b) in the case of a life insurance corporation that was resident in Canada at any time in the year, the amount determined by the formula

  A + B + (0.9 × C) − (0.9 × D) − E

  where

  A

  is the amount of the corporation’s long-term debt at the end of the year,

  B

  is the total amount, at the end of the year, of the corporation’s

  • (i) capital stock (or, in the case of an insurance corporation incorporated without share capital, the amount of its members’ contributions),

  • (ii) retained earnings,

  • (iii) accumulated other comprehensive income,

  • (iv) policyholders’ liabilities,

  • (v) contributed surplus, and

  • (vi) any other surpluses,

  C

  is the total of all amounts each of which is the contractual service margin for a group of insurance contracts of the corporation at the end of the year other than a group of segregated fund policies,

  D

  is the total of all amounts each of which is the amount, in respect of a group of reinsurance contracts held by the corporation at the end of the year, that is

  • (i) if no portion of the contractual service margin for the group is in respect of a risk under a segregated fund policy, the contractual service margin for the group, and

  • (ii) in any other case, the amount that would be the contractual service margin for the group if the contractual service margin were determined excluding any portion that is in respect of the reinsurance of risk under a segregated fund policy, and

  E

  is the amount of any deficit deducted in computing the shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year;

• (c) in the case of a life insurance corporation that was non-resident throughout the year, the total at the end of the year of

  • (i) the amount that is the greater of

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

      • (I) its surplus funds derived from operations (as defined in subsection 138(12)) as of the end of the year, computed as if no tax were payable under Part I.3 or this Part for the year

      exceeds the total of all amounts each of which is

      • (II) an amount on which it was required to pay, or would but for subsection 219(5.2) have been required to pay, tax under Part XIV for a preceding taxation year, except the portion, if any, of the amount on which tax was payable, or would have been payable, because of subparagraph 219(4)(a)(i.1), and

      • (III) an amount on which it was required to pay, or would but for subsection 219(5.2) have been required to pay, tax under subsection 219(5.1) for the year because of the transfer of an insurance business to which subsection 138(11.5) or 138(11.92) has applied, and

    • (B) its attributed surplus for the year,

  • (ii) any other surpluses relating to its insurance businesses carried on in Canada,

  • (iii) the amount of its long-term debt that can reasonably be regarded as relating to its insurance businesses carried on in Canada; and

  • (iv) [Repealed, 2009, c. 2, s. 64]

• (d) in the case of an authorized foreign bank, the total of

  • (i) 10% of the total of all amounts, each of which is the risk-weighted amount at the end of the year of an on-balance sheet asset or an off-balance sheet exposure of the bank in respect of its Canadian banking business that the bank would be required to report under the OSFI risk-weighting guidelines if those guidelines applied and required a report at that time, and

  • (ii) the total of all amounts, each of which is an amount at the end of the year in respect of the bank’s Canadian banking business that

    • (A) if the bank were a bank listed in Schedule II to the Bank Act, would be required under the risk-based capital adequacy guidelines issued by the Superintendent of Financial Institutions and applicable at that time to be deducted from the bank’s capital in determining the amount of capital available to satisfy the Superintendent’s requirement that capital equal a particular proportion of risk-weighted assets and exposures, and

    • (B) is not an amount in respect of a loss protection facility required to be deducted from capital under the Superintendent’s guidelines respecting asset securitization applicable at that time.