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

Marginal note:Definitions

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

  eligible employer

  eligible employer means an employer that paid an amount, or that has a predecessor employer (as defined in subsection 8500(1) of the Income Tax Regulations) that paid an amount, before March 28, 2023, under a specified arrangement that is an excluded contribution. (employeur admissible)

  specified refundable tax

  specified refundable tax of a specified arrangement at the end of a taxation year means the amount, if any, determined by the formula

  A − B

  where

  A

  is the amount elected under paragraph (2)(c); and

  B

  is the total of all amounts, if any, each of which is a refund as determined under subsection (3), in respect of a preceding taxation year. (impôt remboursable déterminé)

• Marginal note:Election

  (2) Subsection (3) applies to a specified arrangement if

  • (a) an eligible employer, or the custodian of the arrangement, paid a refundable tax under this Part with respect to an excluded contribution made under the arrangement before March 28, 2023;

  • (b) the eligible employer files an election with the Minister in prescribed form and manner; and

  • (c) the election includes an elected amount that does not exceed the total amount of refundable tax paid with respect to excluded contributions made under the arrangement before March 28, 2023.

• Marginal note:Amount of refund

  (3) If this subsection applies to a specified arrangement, the Minister may refund to the eligible employer, or to the custodian of the arrangement, an amount claimed on the return for a taxation year described in subsection 207.7(3), not exceeding the lesser of

  • (a) 50% of all retirement benefits paid in the taxation year directly by the eligible employer for the benefit of beneficiaries whose retirement benefits were secured under the specified arrangement with a letter of credit or surety bond issued by a financial institution, and

  • (b) the specified refundable tax of the specified arrangement at the end of the taxation year.

• Marginal note:Refundable tax definition

  (4) If an eligible employer claims a refund under subsection (3) for a taxation year, paragraph (c) of the definition refundable tax in subsection 207.5(1) is to be read as follows:

  • (c) the total of

    • (i) 50% of all amounts paid as distributions to one or more persons (including amounts that are required by paragraph 12(1)(n.3) to be included in computing the recipient’s income) under the arrangement while it was a retirement compensation arrangement and before the end of the year, other than a distribution paid where it is established, by subsequent events or otherwise, that the distribution was paid as part of a series of payments and refunds of contributions under the arrangement, and

    • (ii) all amounts determined under subsection 207.71(3) in respect of the specified arrangement for the year and a preceding year;

PART XI.4Tax on Excess EPSP Amounts

Marginal note:Excess EPSP amount

• 207.8 (1) In this Part, excess EPSP amount, of a specified employee for a taxation year in respect of an employer, means the amount determined by the formula

  A – (20% × B)

  where

  A

  is the portion of the total of all amounts paid by the employer of the specified employee (or by a corporation with which the employer does not deal at arm’s length) to a trust governed by an employees profit sharing plan that is allocated for the year to the specified employee; and

  B

  is the specified employee’s total income for the year from an office or employment with the employer computed without reference to paragraph 6(1)(d) and sections 7 and 8.

• Marginal note:Tax payable

  (2) If a specified employee has an excess EPSP amount for a taxation year, the specified employee shall pay a tax for the year equal to the amount determined by the formula

  (A + B) × C

  where

  A

  is the highest individual percentage for the year;

  B

  is

  • (a) if the specified employee is resident in Quebec at the end of the year, 0%,

  • (b) if the specified employee is resident in a province other than Quebec at the end of the year, the highest percentage rate of tax, including surtaxes but not taxes that are limited to a maximum amount, imposed by the province for the year on the income of an individual who is a resident of the province, or

  • (c) in any other case, the percentage (rounded to the nearest half percentage, or where it is equidistant from two such consecutive half percentages, to the higher of the two) determined by the formula

    E × F

    where

    E

    is the highest individual percentage for the year, and

    F

    is the percentage referred to in subsection 120(1); and

  C

  is the total of all excess EPSP amounts of the specified employee for the year.

• Marginal note:Waiver or cancellation

  (3) If a specified employee would otherwise be liable to pay a tax under subsection (2), the Minister may waive or cancel all or part of the liability if the Minister considers it just and equitable to do so having regard to all the circumstances.

• Marginal note:Return and payment of tax

  (4) Every person who is liable to pay tax under this Part for a taxation year shall

  • (a) on or before the person’s filing-due date for the year, file with the Minister a return for the year under this Part in prescribed form and containing prescribed information; and

  • (b) on or before the person’s balance-due day for the year, pay to the Receiver General the amount of tax payable under this Part by the person for the year.

• Marginal note:Provisions applicable to this Part

  (5) Subsections 150(2) and (3), sections 152, 155 to 156.1, 158 to 160.1, 161 and 161.2 to 167 and Division J of Part I apply to this Part with any modifications that the circumstances require.

PART XI.5Tax in Respect of Employee Life and Health Trust

Marginal note:Definitions

• 207.9 (1) The following definitions apply in this Part.

  participating employer

  participating employer of an employee life and health trust means an employer that provides designated employee benefits for its employees through a trust that meets the conditions described in subsection 144.1(2). (employeur participant)

  prohibited investment

  prohibited investment, at any time for an employee life and health trust, means property that is at that time

  • (a) a share of the capital stock of, an interest in or a debt of

    • (i) a participating employer of the employee life and health trust, or

    • (ii) a person or partnership that does not deal at arm’s length with a participating employer of the employee life and health trust; or

  • (b) an interest (or, for civil law, a right) in, or a right to acquire, a share, interest or debt described in paragraph (a). (placement interdit)

• Marginal note:Tax payable on prohibited investment

  (2) A trust shall pay a tax under this Part for a calendar year if, at any time in the year while the trust is an employee life and health trust,

  • (a) the trust acquires property that is a prohibited investment for the trust; or

  • (b) income is received or becomes receivable by the trust from, or the trust has a taxable capital gain from the disposition of, a prohibited investment for the trust.

• Marginal note:Amount of tax payable

  (3) The amount of tax payable under subsection (2) is

  • (a) if paragraph (2)(a) applies, 50% of the fair market value of the property at the time it is acquired; and

  • (b) if paragraph (2)(b) applies, 50% of the income or the taxable capital gain.

• Marginal note:Refund

  (4) If in a calendar year a trust disposes of a property in respect of which a tax is imposed on the trust under subsection (2), the trust is entitled to a refund for the year of an amount equal to

  • (a) the amount of the tax so imposed, unless paragraph (b) applies; or

  • (b) nil, if

    • (i) it is reasonable to consider that the trustees knew, or ought to have known, at the time the property was acquired that it was, or would become, a property described in subsection (2), or

    • (ii) the property is not disposed of by the trust before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances.

• Marginal note:Deemed disposition and reacquisition

  (5) If, at any time, a property held by an employee life and health trust ceases to be, or becomes, a prohibited investment for the employee life and health trust, the employee life and health trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.

PART XIITax in Respect of Certain Royalties, Taxes, Lease Rentals, Etc., Paid to a Government by a Tax Exempt Person

208 [Repealed, 2003, c. 28, s. 15(1)]

PART XII.1Tax on Carved-out Income

Marginal note:Definitions

• 209 (1) For the purposes of this Part,

  carved-out income

  carved-out income of a person for a taxation year from a carved-out property means the amount, if any, by which

  • (a) the person’s income for the year attributable to the property computed under Part I on the assumption that in computing income no deduction was allowed under section 20, Subdivision E of Division B of Part I or section 104,

  exceeds the total of

  • (b) the amount deducted under subsection 66.4(2) in computing the person’s income for the year to the extent that it may reasonably be considered to be attributable to the property, and

  • (c) to the extent that the property is an interest in a bituminous sands deposit or oil shale deposit, the amount deducted under subsection 66.2(2) in computing the person’s income for the year to the extent that it can reasonably be considered to be attributable to the cost of that interest; (revenus miniers et pétroliers)

  carved-out property

  carved-out property of a person means

  • (a) a Canadian resource property where

    • (i) all or substantially all of the amount that the person is or may become entitled to receive in respect of the property may reasonably be considered to be limited to a maximum amount or to an amount determinable by reference to a stated quantity of production from a mineral resource or an accumulation of petroleum, natural gas or related hydrocarbons,

    • (ii) the period of time during which the person’s interest in the income attributable to the property may reasonably be expected to continue is

      • (A) where the property is a head lease or may reasonably be considered to derive from a head lease, less than the lesser of 10 years and the remainder of the term of the head lease, and

      • (B) in any other case, less than 10 years,

    • (iii) the person’s interest in the income attributable to the property, expressed as a percentage of production for any period, may reasonably be expected to be reduced substantially,

      • (A) where the property is a head lease or may reasonably be considered to derive from a head lease, at any time before

        • (I) the expiration of a period of 10 years commencing when the property was acquired, or

        • (II) the expiration of the term of the head lease,

      whichever occurs first, and

      • (B) in any other case, at any time before the expiration of a period of 10 years commencing when the property was acquired, or

    • (iv) another person has a right under an arrangement to acquire, at any time, the property or a portion thereof or a similar property from the person and it is reasonable to consider that one of the main reasons for the arrangement, or any series of transactions or events that includes the arrangement, was to reduce or postpone tax that would, but for this subparagraph, be payable under this Part, or

  • (b) an interest in a partnership or trust that holds a Canadian resource property where it is reasonable to consider that one of the main reasons for the existence of the interest is to reduce or postpone the tax that would, but for this paragraph, be payable under this Part,

  but does not include

  • (c) an interest, or for civil law a right, in respect of a property that was acquired by the person solely in consideration of the person’s undertaking under an agreement to incur Canadian exploration expense or Canadian development expense in respect of the property and, where the agreement so provides, to acquire gas or oil well equipment (as defined in subsection 1104(2) of the Income Tax Regulations) in respect of the property,

  • (c.1) an interest, or for civil law a right, in respect of a property that was retained by the person under an agreement under which another person obtained an absolute or conditional right to acquire another interest, or for civil law another right, in respect of the property, if the other interest or right is not carved-out property of the other person because of paragraph (c),

  • (d) a particular property acquired by the person under an arrangement solely as consideration for the sale of a Canadian resource property (other than a property that, immediately before the sale was a carved-out property of the person) that relates to the particular property except where it is reasonable to consider that one of the main reasons for the arrangement, or any series of transactions or events that includes the arrangement, was to reduce or postpone tax that would, but for this paragraph, be payable under this Act,

  • (e) a property retained or reserved by the person out of a Canadian resource property (other than a property that, immediately before the transaction by which the retention or reservation is made, was a carved-out property of the person) that was disposed of by the person except where it is reasonable to consider that one of the main reasons for the retention or reservation, or any series of transactions or events in which the property or interest was retained or reserved, was to reduce or postpone tax that would, but for this paragraph, be payable under this Act,

  • (f) a property acquired by the person from a taxpayer with whom the person did not deal at arm’s length at the time of the acquisition and the property was acquired by the taxpayer or a person with whom the taxpayer did not deal at arm’s length

    • (i) pursuant to an agreement in writing to do so entered into before July 20, 1985, or

    • (ii) under the circumstances described in this paragraph or paragraph (d) or (e),

    except where it is reasonable to consider that one of the main reasons for the acquisition of the property, or any series of transactions or events in which the property was acquired, was to reduce or postpone tax that would, but for this paragraph, be payable under this Act,

  • (f.1) where the taxable income of the person is exempt from tax under Part I, a property of the person that

    • (i) does not relate to property of a person whose taxable income is not exempt from tax under Part I, and

    • (ii) is not, and does not relate to, property that was at any time a carved-out property of any other person, or

  • (g) a prescribed property; (bien restreint)

  head lease

  head lease means a contract under which

  • (a) Her Majesty in right of Canada or a province grants, or

  • (b) an owner in fee simple, other than Her Majesty in right of Canada or a province, grants for a period of not less than 10 years

  any right, licence or privilege to explore for, drill for or take petroleum, natural gas or related hydrocarbons in Canada or to prospect, explore, drill or mine for minerals in a mineral resource in Canada; (bail initial)

  term

  term of a head lease includes all renewal periods in respect of the head lease. (durée)

• Marginal note:Tax

  (2) Every person shall pay a tax under this Part for each taxation year equal to 45% of the total of the person’s carved-out incomes for the year from carved-out properties.

• Marginal note:Return

  (3) Every person liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which the person is or would be, if the person were liable to pay tax under Part I for the year, required under section 150 to file a return of the person’s income for the year under Part I, a return for the year under this Part in prescribed form containing an estimate of the amount of tax payable by the person under this Part for the year.

• Marginal note:Payment of tax

  (4) Where a person is liable to pay tax for a taxation year under this Part, the person shall pay in respect of the year, to the Receiver General

  • (a) on or before the last day of each month in the year, an amount equal to 1/12 of the amount of tax payable by the person under this Part for the year; and

  • (b) the remainder, if any, of the tax payable by the person under this Part for the year, on or before the person’s balance-due day for the year.

• Marginal note:Provisions applicable to Part

  (5) Subsections 150(2) and 150(3) and sections 152, 158 and 159, subsections 161(1), 161(2) and 161(11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.

• Marginal note:Partnerships

  (6) For the purposes of subsection 209(1), a partnership shall be deemed to be a person and its taxation year shall be deemed to be its fiscal period.