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

PART IXTax on Deduction Under Section 66.5

Marginal note:Tax in respect of cumulative offset account

• 196 (1) Every corporation shall pay a tax under this Part for each taxation year equal to 30% of the amount deducted under subsection 66.5(1) in computing its income for the year.

• Marginal note:Return

  (2) Every corporation that is 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 it is required under section 150 to file a return of its 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 it under this Part for the year.

• Marginal note:Instalments

  (3) Where a corporation is liable to pay tax for a taxation year under this Part, the corporation 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 it under this Part for the year; and

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

• Marginal note:Provisions applicable to Part

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

PART IX.1Tax on Sift Partnerships

Marginal note:Definitions

• 197 (1) The following definitions apply in this Part and in section 96.

  non-portfolio earnings

  non-portfolio earnings, of a SIFT partnership for a taxation year, means the total of

  • (a) the amount, if any, by which

    • (i) the total of all amounts each of which is the SIFT partnership’s income for the taxation year from a business carried on by it in Canada or from a non-portfolio property, other than income that is a taxable dividend received by the SIFT partnership,

    exceeds

    • (ii) the total of all amounts each of which is the SIFT partnership’s loss for the taxation year from a business carried on by it in Canada or from a non-portfolio property, and

  • (b) the amount, if any, by which all taxable capital gains of the SIFT partnership from dispositions of non-portfolio properties during the taxation year exceeds the total of the allowable capital losses of the SIFT partnership for the taxation year from dispositions of non-portfolio properties during the taxation year. (gains hors portefeuille)

  SIFT partnership

  SIFT partnership, being a specified investment flow-through partnership, for any taxation year, means a partnership other than an excluded subsidiary entity (as defined in subsection 122.1(1)) for the taxation year that meets the following conditions at any time during the taxation year:

  • (a) the partnership is a Canadian resident partnership;

  • (b) investments (as defined in subsection 122.1(1)) in the partnership are listed or traded on a stock exchange or other public market; and

  • (c) the partnership holds one or more non-portfolio properties. (société de personnes intermédiaire de placement déterminée)

  taxable non-portfolio earnings

  taxable non-portfolio earnings of a SIFT partnership, for a taxation year, means the lesser of

  • (a) the amount that would, if the SIFT partnership were a taxpayer for the purposes of Part I and if subsection 96(1) were read without reference to its paragraph (d), be its income for the taxation year as determined under section 3; and

  • (b) its non-portfolio earnings for the taxation year. (gains hors portefeuille imposables)

• Marginal note:Tax on partnership income

  (2) Every partnership that is a SIFT partnership for a taxation year is liable to a tax under this Part equal to the amount determined by the formula

  A × (B + C)

  where

  A

  is the taxable non-portfolio earnings of the SIFT partnership for the taxation year;

  B

  is the net corporate income tax rate in respect of the SIFT partnership for the taxation year; and

  C

  is the provincial SIFT tax rate of the SIFT partnership for the taxation year.

• Marginal note:Ordering

  (3) This Part and section 122.1 are to be applied as if this Act were read without reference to subsection 96(1.11).

• Marginal note:Partnership to file return

  (4) Every member of a partnership that is liable to pay tax under this Part for a taxation year shall — on or before the day on or before which the partnership return is required to be filed for the year under section 229 of the Income Tax Regulations — file with the Minister a return for the taxation year under this Part in prescribed form containing an estimate of the tax payable by the partnership under this Part for the taxation year.

• Marginal note:Authority to file return

  (5) For the purposes of subsection (4), if, in respect of a taxation year of a partnership, a particular member of the partnership has authority to act for the partnership,

  • (a) if the particular member has filed a return as required by this Part for a taxation year, each other person who was a member of the partnership during the taxation year is deemed to have filed the return; and

  • (b) a return that has been filed by any other member of the partnership for the taxation year is not valid and is deemed not to have been filed by any member of the partnership.

• Marginal note:Provisions applicable to Part

  (6) Subsection 150(2), section 152, subsections 157(1), (2.1) and (4), sections 158, 159 and 161 to 167 and Division J of Part I apply to this Part, with any modifications that the circumstances require, and for greater certainty,

  • (a) a notice of assessment referred to in subsection 152(2) in respect of tax payable under this Part is valid notwithstanding that a partnership is not a person; and

  • (b) notwithstanding subsection 152(4), the Minister may at any time make an assessment or reassessment of tax payable under this Part or Part I to give effect to a determination made by the Minister under subsection 152(1.4), including the assessment or reassessment of Part I tax payable in respect of the disposition of an interest in a SIFT partnership by a member of the partnership.

• Marginal note:Payment

  (7) Every SIFT partnership shall pay to the Receiver General, on or before its SIFT partnership balance-due day for each taxation year, its tax payable under this Part for the taxation year.

• Application of definition SIFT partnership

  (8) The definition SIFT partnership applies to a partnership for a taxation year of the partnership that ends after 2006, except that if the partnership would have been a SIFT partnership on October 31, 2006 had that definition been in force and applied to the partnership as of that date, that definition does not apply to the partnership for a taxation year of the partnership that ends before the earlier of

  • (a) 2011, and

  • (b) the first day after December 15, 2006 on which the partnership exceeds normal growth as determined by reference to the normal growth guidelines issued by the Department of Finance on December 15, 2006, as amended from time to time, unless that excess arose as a result of a prescribed transaction.

PART XTaxes on Deferred Profit Sharing Plans and Revoked Plans

Marginal note:Tax on non-qualified investments and use of assets as security

• 198 (1) Every trust governed by a deferred profit sharing plan or revoked plan that

  • (a) acquires a non-qualified investment, or

  • (b) uses or permits to be used any property of the trust as security for a loan,

  shall pay a tax equal to the fair market value of

  • (c) the non-qualified investment at the time it was acquired by the trust, or

  • (d) the property used as security at the time it commenced to be so used.

• Marginal note:Payment of tax

  (2) A trustee of a trust liable to pay tax under subsection 198(1) shall remit the amount of the tax to the Receiver General within 10 days of the day on which the non-qualified investment is acquired or the property is used as security for a loan, as the case may be.

• Marginal note:Trustee liable for tax

  (3) Where a trustee of a trust liable to pay tax under subsection 198(1) does not remit to the Receiver General the amount of the tax within the time specified in subsection 198(2), the trustee is personally liable to pay on behalf of the trust the full amount of the tax and is entitled to recover from the trust any amount paid by the trustee as tax under this section.

• Marginal note:Refund of tax on disposition of non-qualified investment

  (4) Where a trust disposes of a property that, when acquired, was a non-qualified investment, the trust is, on application in accordance with section 202, entitled to a refund of an amount equal to the lesser of

  • (a) the amount of the tax imposed under this section as a result of the acquisition of the property, and

  • (b) the proceeds of disposition of the property.

• Marginal note:Refund of tax on recovery of property given as security

  (5) Where a loan, for which a trust has used or permitted to be used trust property as security, ceases to be extant, the trust is, on application in accordance with section 202, entitled to a refund of an amount equal to the amount remaining, if any, when

  • (a) the net loss (exclusive of payments by the trust as or on account of interest) sustained by the trust in consequence of its using or permitting to be used the property as security for the loan and not as a result of a change in the fair market value of the property

  is deducted from

  • (b) the tax imposed under this section in consequence of the trust’s using or permitting to be used the property as security for the loan.

• Marginal note:Special rules relating to life insurance policies

  (6) For the purposes of this section,

  • (a) the acquisition of an interest in or the payment of an amount under a life insurance policy shall be deemed not to be the acquisition of a non-qualified investment, and

  • (b) the disposition of an interest in a life insurance policy shall be deemed not to be the disposition of a non-qualified investment,

  except that where a trust governed by a deferred profit sharing plan or revoked plan makes a payment under or to acquire an interest in a life insurance policy, other than a life insurance policy under which

  • (c) the trust is, or by virtue of the payment about to become, the only person entitled to any rights or benefits under the policy (other than the rights or benefits of the insurer),

  • (d) the cash surrender value of the policy (exclusive of accumulated dividends) is or will be, at or before the end of the year in which the insured person attains 71 years of age, if all premiums under the policy are paid, not less than the maximum total amount (exclusive of accumulated dividends) payable by the insurer under the policy, and

  • (e) the total of the premiums payable in any year under the policy is not greater than the total of the amounts that, if the annual premiums had been payable in monthly instalments, would have been payable as such instalments in the 12 months commencing with the date the policy was issued,

  the making of the payment shall be deemed to be the acquisition of a non-qualified investment at a cost equal to the amount of the payment.

• Marginal note:Idem

  (6.1) A life insurance policy giving an option to the policyholder to receive annuity payments that otherwise complies with paragraph 198(6)(d) shall be deemed,

  • (a) where the option has not been exercised, to comply with that paragraph; and

  • (b) where at a particular time the option is exercised, to have been disposed of at that time for an amount equal to the cash surrender value of the policy immediately before that time, and an annuity contract shall be deemed to have been acquired at that time at a cost equal to that amount.

• Marginal note:Idem

  (7) Notwithstanding subsection 198(6), where the total of all payments made in a year by a trust governed by a deferred profit sharing plan or revoked plan under or to acquire interests in life insurance policies in respect of which the trust is the only person entitled to any rights or benefits (other than the rights or benefits of the insurer) does not exceed an amount equal to 25% of the total of all amounts paid by employers to the trust in the year under the plan for the benefit of beneficiaries thereunder, the making of the payments under or to acquire interests in such policies shall be deemed, for the purposes of this section, not to be the acquisition of non-qualified investments.

• Marginal note:Idem

  (8) Where a trust surrenders, cancels, assigns or otherwise disposes of its interest in a life insurance policy,

  • (a) the trust shall be deemed, for the purposes of subsection 198(4), to have disposed of each non-qualified investment that, by virtue of payments under the policy, it was deemed by subsection 198(6) to have acquired; and

  • (b) the proceeds of the disposition shall be deemed to be the amount, if any, by which

    • (i) the amount received by the trust in consequence of the surrender, cancellation, assignment or other disposition of its interest in the policy

    exceeds the total of

    • (ii) each amount paid by the trust under or to acquire an interest in the policy, the payment of which is deemed by this section not to be the acquisition of a non-qualified investment, and

    • (iii) the cash surrender value on December 21, 1966 of the interest of the trust in the policy on that date.

Marginal note:Tax on initial non-qualified investments not disposed of

• 199 (1) Every trust governed by a deferred profit sharing plan or revoked plan shall pay a tax

  • (a) for 1967, equal to the amount, if any, by which 20% of the initial base of the trust exceeds the proceeds of disposition of its initial non-qualified investments disposed of after December 21, 1966 and before 1968;

  • (b) for 1968, equal to the amount, if any, by which 40% of the initial base of the trust exceeds the total of

    • (i) the proceeds of disposition of its initial non-qualified investments disposed of after December 21, 1966 and before 1969, and

    • (ii) the tax payable by the trust determined under paragraph 199(1)(a);

  • (c) for 1969, equal to the amount, if any, by which 60% of the initial base of the trust exceeds the total of

    • (i) the proceeds of disposition of its initial non-qualified investments disposed of after December 21, 1966 and before 1970, and

    • (ii) the tax payable by the trust determined under paragraphs 199(1)(a) and 199(1)(b); and

  • (d) for 1970, equal to the amount, if any, by which 100% of the initial base of the trust exceeds the total of

    • (i) the proceeds of disposition of its initial non-qualified investments disposed of after December 21, 1966 and before 1971, and

    • (ii) the tax payable by the trust determined under paragraphs 199(1)(a), 199(1)(b) and 199(1)(c).

• Marginal note:Refund

  (2) Where at the end of a year,

  • (a) the total of all taxes paid by a trust under subsection 199(1)

  exceeds

  • (b) the total of

    • (i) all refunds made to the trust under this subsection, and

    • (ii) the amount, if any, by which the initial base of the trust exceeds the proceeds of disposition of its initial non-qualified investments disposed of after December 21, 1966 and before the end of the year,

  the trust is, on application in accordance with section 202, entitled to a refund equal to the amount by which the total described in paragraph 199(2)(a) exceeds the total described in paragraph 199(2)(b).