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

PART I.3Tax on Large Corporations

Marginal note:Definitions

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

  financial institution

  financial institution, in respect of a taxation year, means a corporation that at any time in the year is

  • (a) a bank or credit union,

  • (b) an insurance corporation that carries on business in Canada,

  • (c) authorized under the laws of Canada or a province to carry on the business of offering its services as a trustee to the public,

  • (d) authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables,

  • (e) a registered securities dealer,

  • (f) a mortgage investment corporation, or

  • (g) a corporation

    • (i) listed in the schedule, or

    • (ii) all or substantially all of the assets of which are shares or indebtedness of financial institutions to which the corporation is related; (institution financière)

  long-term debt

  long-term debt means

  • (a) in the case of a bank, its subordinated indebtedness (within the meaning assigned by section 2 of the Bank Act) evidenced by obligations issued for a term of not less than 5 years,

  • (b) in the case of an insurance corporation, its subordinated indebtedness (within the meaning assigned by section 2 of the Insurance Companies Act) evidenced by obligations issued for a term of not less than 5 years, and

  • (c) in the case of any other corporation, its subordinated indebtedness (within the meaning that would be assigned by section 2 of the Bank Act if the definition of that expression in that section were applied with such modifications as the circumstances require) evidenced by obligations issued for a term of not less than 5 years,

  but does not include, where the corporation is a prescribed federal Crown corporation for the purpose of section 27, any indebtedness evidenced by obligations issued to and held by Her Majesty in right of Canada; (passif à long terme)

  reserves

  reserves, in respect of a corporation for a taxation year, means the amount at the end of the year of all of the corporation’s reserves, provisions and allowances (other than allowances in respect of depreciation or depletion) and, for greater certainty, includes any provision in respect of deferred taxes. (réserves)

• Marginal note:Prescribed expressions

  (2) For the purposes of this Part, the expressions attributed surplus, Canadian assets, Canadian premiums, Canadian reserve liabilities, contractual service margin, group of insurance contracts, group of reinsurance contracts, permanent establishment, policyholders’ liabilities, reinsurance contract held amount, total assets, total premiums and total reserve liabilities have such meanings as may be prescribed.

• Marginal note:Determining values and amounts

  (3) For the purposes of determining the carrying value of a corporation’s assets or any other amount under this Part in respect of a corporation’s capital, investment allowance, taxable capital or taxable capital employed in Canada for a taxation year or in respect of a partnership in which a corporation has an interest,

  • (a) the equity and consolidation methods of accounting shall not be used; and

  • (b) subject to paragraph 181(3)(a) and except as otherwise provided in this Part, the amounts reflected in the balance sheet

    • (i) presented to the shareholders of the corporation (in the case of a corporation that is neither an insurance corporation to which subparagraph 181(3)(b)(ii) applies nor a bank) or the members of the partnership, as the case may be, or, where such a balance sheet was not prepared in accordance with generally accepted accounting principles or no such balance sheet was prepared, the amounts that would be reflected if such a balance sheet had been prepared in accordance with generally accepted accounting principles, or

    • (ii) accepted by the Superintendent of Financial Institutions, in the case of a bank or an insurance corporation that is required by law to report to the Superintendent, or the superintendent of insurance or other similar officer or authority of the province under whose laws the corporation is incorporated, in the case of an insurance corporation that is required by law to report to that officer or authority,

    shall be used.

• Marginal note:Limitations respecting inclusions and deductions

  (4) Unless a contrary intention is evident, no provision of this Part shall be read or construed to require the inclusion or to permit the deduction, in computing the amount of a corporation’s capital, investment allowance, taxable capital or taxable capital employed in Canada for a taxation year, of any amount to the extent that that amount has been included or deducted, as the case may be, in computing the first-mentioned amount under, in accordance with or by reason of any other provision of this Part.

Marginal note:Tax payable

• 181.1 (1) Every corporation shall pay a tax under this Part for each taxation year equal to the amount obtained by multiplying the corporation’s specified percentage for the taxation year by the amount, if any, by which

  • (a) its taxable capital employed in Canada for the year

  exceeds

  • (b) its capital deduction for the year.

• Marginal note:Specified percentage

  (1.1) For the purpose of subsection (1), the specified percentage of a corporation for a taxation year that ends after 2003 is the total of

  • (a) that proportion of 0.225% that the number of days in the taxation year that are before 2004 is of the number of days in the taxation year,

  • (b) that proportion of 0.200% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year, and

  • (c) that proportion of 0.175% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year.

  • (d) and (e) [Repealed, 2006, c. 4, s. 82]

• Marginal note:Exceptions

  (1.2) Notwithstanding subsection (1.1), for the purposes of applying subsection 125(5.1) and the definitions unused surtax credit in subsections (6) and 190.1(5), the amount of tax in respect of a corporation under subsection (1) for a taxation year is to be determined as if the specified percentage of the corporation for the taxation year were 0.225%.

• Marginal note:Short taxation years

  (2) Where a taxation year of a corporation is less than 51 weeks, the amount determined under subsection 181.1(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:Where tax not payable

  (3) No tax is payable under this Part for a taxation year by a corporation

  • (a) that was a non-resident-owned investment corporation throughout the year;

  • (b) that was a bankrupt at the end of the year;

  • (c) that was throughout the year exempt from tax under section 149 on all of its taxable income;

  • (d) that neither was resident in Canada nor carried on business through a permanent establishment in Canada at any time in the year;

  • (e) that was throughout the year a deposit insurance corporation (within the meaning assigned by subsection 137.1(5)) or a corporation deemed by subsection 137.1(5.1) to be a deposit insurance corporation; or

  • (f) that was throughout the year a corporation described in subsection 136(2) the principal business of which was marketing (including processing incidental to or connected therewith) natural products belonging to or acquired from its members or customers.

• Marginal note:Deduction

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

  • (a) its Canadian surtax payable for the year, and

  • (b) such part as the corporation claims of its unused surtax credits for its 7 immediately preceding and 3 immediately following taxation years,

  to the extent that that total does not exceed the amount by which

  • (c) the amount that would, but for this subsection, be its tax payable under this Part for the year

  exceeds

  • (d) the total of all amounts each of which is the amount deducted under subsection 125.3(1) in computing the corporation’s tax payable under Part I for a taxation year ending before 1992 in respect of its unused Part I.3 tax credit (within the meaning assigned by section 125.3) for the year.

• Marginal note:Idem

  (5) For the purposes of this subsection and subsections 181.1(4), 181.1(6) and 181.1(7),

  • (a) an amount may not be claimed under subsection 181.1(4) in computing a corporation’s tax payable under this Part for a particular taxation year in respect of its unused surtax credit for another taxation year until its unused surtax credits, if any, for taxation years preceding the other year that may be claimed under this Part for the particular year have been claimed; and

  • (b) an amount in respect of a corporation’s unused surtax credit for a taxation year may be claimed under subsection 181.1(4) in computing its tax payable under this Part for another taxation year only to the extent that it exceeds the total of all amounts each of which is an amount claimed in respect of that unused surtax credit in computing its tax payable under this Part or Part VI for a taxation year preceding that other year.

• Marginal note:Definitions

  (6) For the purposes of this subsection and subsections 181.1(4), 181.1(5) and 181.1(7),

  Canadian surtax payable

  Canadian surtax payable of a corporation for a taxation year has the meaning assigned by subsection 125.3(4); (surtaxe canadienne payable)

  unused surtax credit

  unused surtax credit for a taxation year ending after 1991

  • (a) of a corporation (other than a corporation that was throughout the year a financial institution, within the meaning assigned by section 190) means the amount, if any, by which

    • (i) its Canadian surtax payable for the year

    exceeds the total of

    • (ii) the amount that would, but for subsection 181.1(4), be its tax payable under this Part for the year, and

    • (iii) the amount, if any, deducted under section 125.3 in computing the corporation’s tax payable under Part I for the year, and

  • (b) of a corporation that was throughout the year a financial institution (within the meaning assigned by section 190) means the lesser of

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

      • (A) its Canadian surtax payable for the year

      exceeds the total of

      • (B) the amount that would, but for subsection 181.1(4), be its tax payable under this Part for the year, and

      • (C) the amount, if any, deducted under section 125.3 in computing the corporation’s tax payable under Part I for the year, and

    • (ii) the amount, if any, by which its tax payable under Part I for the year exceeds the amount that would, but for subsection 181.1(4) and subsection 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year. (crédit de surtaxe inutilisé)

• Marginal note:Acquisition of control

  (7) Where at any time control of a corporation has been acquired by a person or group of persons, no amount in respect of its unused surtax credit for a taxation year ending before that time is deductible by the corporation for a taxation year ending after that time and no amount in respect of its 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 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 Canadian surtax payable 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 throughout the subsequent 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 taxation year in respect of any business referred to in clause 181.1(7)(a)(i)(A)

    is of the greater of

    • (ii) the amount determined under subparagraph 181.1(7)(a)(i), and

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

  • (b) the corporation’s unused surtax credit for a particular taxation year that ends after that time is deductible by the corporation for a taxation year that ended before that time (in this paragraph referred to as the “preceding year”) to the extent of that proportion of the corporation’s Canadian surtax payable 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, the corporation’s 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 the corporation’s 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 181.1(7)(b)(i)(A)

    is of the greater of

    • (ii) the amount determined under subparagraph 181.1(7)(b)(i), and

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