Income Tax Act

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.