Income Tax Regulations (C.R.C., c. 945)

• 413. (1) In this Part, if a corporation is not resident in Canada, “salaries and wages paid in the year” by the corporation does not include salaries and wages paid to employees of a permanent establishment outside Canada.

• (2) For the purposes of paragraph 402(3)(a), where a corporation is not resident in Canada, “total gross revenue for the year” of the corporation does not include gross revenue reasonably attributable to a permanent establishment outside Canada.

• (3) For the purpose of paragraph 404(1)(b), in the case of an authorized foreign bank, “all loans and deposits of the bank for the year” is to be read as a reference to “all loans and deposits of the bank for the year in respect of its Canadian banking business”.

413.1 Despite any other provision in this Part, a corporation’s taxable income earned in a taxation year in a particular province is equal to the total of

• (a) the corporation’s taxable income earned in the taxation year in the particular province (determined without reference to this section), and

• (b) the positive or negative amount determined by the formula

  A – B

  where

  A 

  is the total of all amounts that are, because of the application of section 33.1 of the Act to a business carried on in a branch or office situated in the particular province, not allowed to be deducted in computing the corporation’s income for the taxation year, and

  B 

  is the total of all amounts that are, because of the application of section 33.1 of the Act to a business carried on in a branch or office situated in the particular province, not required to be added in computing the corporation’s income for the taxation year.

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

  “general corporate income tax rate”

  “general corporate income tax rate”, in a province for a taxation year, means

  • (a) for Quebec, 0%;

  • (b) for the Newfoundland offshore area, the highest percentage rate of tax imposed under the laws of Newfoundland and Labrador on the taxable income of a public corporation earned in the taxation year in Newfoundland and Labrador;

  • (c) for the Nova Scotia offshore area, the highest percentage rate of tax imposed under the laws of Nova Scotia on the taxable income of a public corporation earned in the taxation year in Nova Scotia; and

  • (d) for each other province, the highest percentage rate of tax imposed under the laws of the province on the taxable income of a public corporation earned in the taxation year in the province. (taux général d’imposition du revenu des sociétés)

  “province”

  “province” includes the Newfoundland offshore area and the Nova Scotia offshore area. (province)

  “taxable SIFT distributions”

  “taxable SIFT distributions”, for a taxation year, means

  • (a) in the case of a SIFT trust, its non-deductible distributions amount for the taxation year; and

  • (b) in the case of a SIFT partnership, its taxable non-portfolio earnings for the taxation year. (montant des distributions imposables)

• (2) In determining the amount of a SIFT trust’s or SIFT partnership’s taxable SIFT distributions for a taxation year earned in a province

  • (a) except as provided in paragraph (b), this Part applies in respect of the SIFT trust or SIFT partnership as though

    • (i) each reference to “corporation” (other than in the expression “subsidiary controlled corporation”) were read as a reference to “SIFT trust” or “SIFT partnership”, as the case may be,

    • (ii) each reference to “taxable income” were read as a reference to “taxable SIFT distributions”,

    • (iii) each reference to “its incorporating documents or bylaws” were read as a reference to “the agreement governing the SIFT trust” or “the agreement governing the SIFT partnership”, as the case may be, and

    • (iv) “subsidiary controlled corporation” in respect of a SIFT trust or a SIFT partnership meant a corporation more than 50% of the issued share capital of which (having full voting rights under all circumstances) belongs to the SIFT trust or SIFT partnership, as the case may be; and

  • (b) subsection 400(1), section 401, subsections 402(1) and (2) and sections 403 to 413 do not apply.

• (3) Subject to subsection (4), in applying the definition “provincial SIFT tax rate” in subsection 248(1) of the Act in respect of a SIFT trust or SIFT partnership for a taxation year, the prescribed amount determined in respect of the SIFT trust or SIFT partnership for the taxation year is

  • (a) if the SIFT trust or SIFT partnership has no permanent establishment in a province in the taxation year, 0.10;

  • (b) if the SIFT trust or SIFT partnership has a permanent establishment in a province in the taxation year and has no permanent establishment outside that province in the taxation year, the decimal fraction equivalent of the general corporate income tax rate in the province for the taxation year; and

  • (c) if the SIFT trust or SIFT partnership has a permanent establishment in the taxation year in a province, and has a permanent establishment outside that province in the taxation year, the amount, expressed as a decimal fraction, determined by the formula

    A + B

    where

    A 

    is the total of all amounts, if any, each of which is in respect of a province in which the SIFT trust or SIFT partnership has a permanent establishment in the taxation year and is determined by the formula

    C/D × E

    where

    C 

    is its taxable SIFT distributions for the taxation year earned in the province,

    D 

    is its total taxable SIFT distributions for the taxation year, and

    E 

    is the decimal fraction equivalent of the general corporate income tax rate in the province for the taxation year, and

    B 

    is the amount determined by the formula

    (1 – F/D) × 0.1

    where

    F 

    is the total of all amounts each of which is an amount determined under the description of C in the description of A in respect of a province in which the SIFT trust or SIFT partnership has a permanent establishment in the taxation year.

• (4) If a SIFT trust or a SIFT partnership has a permanent establishment in Quebec in a taxation year, paragraph (a) of the definition “general corporate income tax rate” in subsection (1) does not apply in determining the prescribed amount under subsection (3) in respect of the SIFT trust or the SIFT partnership for the taxation year for the purposes of applying the definition “provincial SIFT tax rate” in determining:

  • (a) in the case of the SIFT partnership, the amount of a dividend deemed by paragraph 96(1.11)(b) of the Act to have been received by it in the taxation year; and

  • (b) in the case of the SIFT trust, the amount of its taxable SIFT trust distributions for the taxation year.