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Corporations Tax Act

R.S.O. 1990, CHAPTER C.40

Consolidation Period: From May 14, 2008 to the e-Laws currency date.

Last amendment: 2008, c. 7, Sched. E.

Caution: Many provisions of this Act have special application rules. The reader should consult the Statutes of Ontario, 1992, chapter 3, the Statutes of Ontario, 1994, chapter 14, the Statutes of Ontario, 1996, chapter 1, Schedule B, the Statutes of Ontario, 1996, chapter 29, the Statutes of Ontario, 1997, chapter 43, Schedule A, the Statutes of Ontario, 1998, chapter 5, subsection 12 (2), the Statutes of Ontario, 1998, chapter 34, Part III, the Statutes of Ontario, 1999, chapter 9, Part VI and the Statutes of Ontario, 2004, chapter 31, Schedule 9, subsection 7 (2).

SKIP TABLE OF CONTENTS

CONTENTS

PART I
GENERAL

Interpretation

Interpretation

1.  (1)  In this Act and in the application of the provisions of the Income Tax Act (Canada) that are by this Act made applicable for the purposes of this Act,

(a) each of the provisions contained in Part XVII of the Income Tax Act (Canada) applies for the purposes of this Act unless otherwise provided in this Act;

(b) Repealed: 1996, c. 29, s. 36 (1).

(c) subsection 248 (7) of the Income Tax Act (Canada) does not apply for the purposes of this Act;

(d) the interpretations contained in the said Part XVII of the expressions “farming”, “foreign resource property”, “Minister”, “paid-up capital”, “regulation”, “taxable income”, “taxable income earned in Canada” and “tax payable” do not apply and in lieu thereof the following interpretations are applicable:

“farming” includes tillage of the soil, livestock raising or exhibiting, maintaining of horses for racing, raising of poultry, fur farming, dairy farming, fruit growing, and the keeping of bees, but does not include an office or employment under a person engaged in the business of farming and, for the purposes of subsection 71 (1) only, does not include the maintaining of horses for racing, (“agriculture”)

“foreign resource property” has the meaning given to that expression by section 14, (“avoir minier étranger”)

“Minister” means, unless otherwise provided in this Act, the Minister of Finance, but the reference to “Minister” in subsection 249.1 (7) of the Income Tax Act (Canada) means the Minister of National Revenue for the purposes of this Act, (“ministre”)

“paid-up capital” has the meaning given to that expression by subsection 89 (1) of the Income Tax Act (Canada), but such meaning does not apply for the purposes of Part III of this Act, (“capital versé”)

“regulations” means regulations made under this Act, (“règlements”)

“tax payable”, by a corporation or other person under any Part of this Act by or under which provision is made for the assessment of tax, means the tax payable by the corporation or other person as fixed by assessment or reassessment, subject to variation on objection or appeal, if any, in accordance with sections 84 to 92, (“impôt payable”)

“taxable income” has the meaning given to that expression by section 7, (“revenu imposable”)

“taxable income earned in Canada” has the meaning given to that expression by section 8. (“revenu imposable gagné au Canada”) R.S.O. 1990, c. C.40, s. 1 (1); 1994, c. 14, s. 1 (1); 1996, c. 1, Sched. B, s. 1 (1); 1996, c. 29, s. 36 (1, 2); 1997, c. 43, Sched. A, s. 1 (1, 2); 1999, c. 9, s. 72; 2001, c. 23, s. 20; 2004, c. 16, s. 2 (2); 2008, c. 7, Sched. E, s. 1.

Definitions

(2)  In this Act and in the application of the provisions of the Income Tax Act (Canada) that are by this Act made applicable for the purposes of this Act,

“bank” means a bank to which the Bank Act (Canada) applies; (“banque”)

“family farm corporation” means a corporation that is throughout the taxation year a corporation,

(a) all shares of the capital stock of which that confer on the holder thereof the right to vote were owned by,

(i) an individual ordinarily resident in Canada or by that individual and a member or members of that individual’s family ordinarily resident in Canada or by another family farm corporation, or

(ii) another corporation, all shares of the capital stock of which that confer on the holder thereof the right to vote were owned directly or indirectly by a person or persons referred to in subclause (i),

(b) 75 per cent of the assets of which were farming assets, and

(c) which carried on the business of farming in Ontario through the employment of a shareholder or a member of his or her family actually engaged in the operation of the farm or, where subclause (a) (ii) applies, through the employment of the person or persons referred to in subclause (a) (i); (“société agricole familiale”)

“family fishing corporation” means a corporation that is throughout the taxation year a corporation,

(a) all shares of the capital stock of which that confer on the holder thereof the right to vote were owned by,

(i) an individual ordinarily resident in Canada or by that individual and a member or members of that individual’s family ordinarily resident in Canada or by another family fishing corporation, or

(ii) another corporation, all shares of the capital stock of which that confer on the holder thereof the right to vote were owned directly or indirectly by a person or persons referred to in subclause (i),

(b) 75 per cent of the assets of which were fishing assets, and

(c) which carried on the business of fishing in Ontario through the employment of a shareholder or a member of his or her family actually engaged in the operation of the business or, where subclause (a) (ii) applies, through the employment of the person or persons referred to in subclause (a) (i); (“société de pêche familiale”)

“farming assets” of a family farm corporation means,

(a) cash, trade accounts receivable, supplies and inventory of commodities or things produced, raised or grown through farming,

(b) land, buildings, equipment, machinery, and livestock that are used chiefly in the operation of the farm by the corporation,

(c) any right or licence granted or issued under any Act of the Legislature that permits or regulates the production or sale of any commodity or thing produced, raised or grown through farming,

(d) the building in which a shareholder or member or members of his or her family reside who are engaged in the operation of the farm if that building is on land that is used or is contiguous to land used by that shareholder or member or members of his or her family in the operation of the farm,

(e) shares in another family farm corporation,

(f) a mortgage taken by the family farm corporation as security for the balance of the sale price on its sale of farming assets referred to in clause (b), provided that the amount of the aggregate of its remaining farming assets referred to in clauses (a) to (e) exceeds 50 per cent of its assets; (“actif agricole”)

“federal assessment action” means any of the following actions taken by the Minister of National Revenue under the Income Tax Act (Canada),

(a) an assessment, reassessment or additional assessment of tax, interest or penalties,

(b) a determination or redetermination of a loss or an amount or a written notice of a change in a loss or an amount,

(c) a written notice that no tax is payable, or

(d) a confirmation of an assessment, reassessment or additional assessment of tax, interest or penalties or of a determination or redetermination of a loss or an amount; (“mesure fiscale fédérale”)

“fishing assets” of a family fishing corporation means,

(a) cash, trade accounts receivable, supplies and inventory used in the fishing business,

(b) land, buildings, boats, ships, equipment, machinery and nets that are used chiefly in the operation of the fishing business by the corporation,

(c) any right or licence granted or issued under any Act of the Legislature that permits or regulates the catching or sale of fish, and

(d) shares in another family fishing corporation; (“actif de pêche”)

“jurisdiction” means a province or territory of Canada or a state outside Canada having sovereign power; (“autorité législative”)

“member of his or her family” means, with respect to an individual referred to in the definition of “family farm corporation” or “family fishing corporation” or in subclause 61 (5) (c) (i),

(a) his or her spouse or common-law partner,

(b) his or her child,

(c) his or her father, mother, grandfather or grandmother,

(d) his or her brother or sister or any lawful descendant of his or her brother or sister,

(e) the brother or sister of his or her father or mother or any lawful descendant of that uncle or aunt,

(f) the father or mother of his or her spouse or common-law partner,

(g) a brother or sister of his or her spouse or common-law partner or any lawful descendant of that brother or sister,

(h) the spouse or common-law partner of his or her child, or

(i) a person adopted by him or her under the Child and Family Services Act or a predecessor of that Act or the spouse, common-law partner or any lawful descendant of that person; (“membre de sa famille”)

“permanent establishment” has the meaning given to that expression by section 4; (“établissement stable”)

“province” means a province as defined in subsection 35 (1) of the Interpretation Act (Canada); (“province”)

“return” means a tax return of a corporation or other person for a taxation year that meets the requirements of section 75 respecting the form and medium, the contents, the accompanying documents and the manner of delivery; (“déclaration”)

“taxation year”, of a person, means,

(a) a calendar year, if the person is an administrator of a benefit plan under section 74.2 and is not a corporation,

(b) a taxation year of the person for the purposes of the Income Tax Act (Canada), if the person is an insurance broker within the meaning of section 74.3 and is not a corporation, and

(c) a fiscal period for which the person’s statement of the condition of affairs is prepared for the purposes of reporting to the Superintendent of Insurance, if the person is an insurance exchange within the meaning of section 74.4; (“année d’imposition”)

“timber royalty” includes any consideration for a right under or pursuant to which a right to cut or take timber from a timber limit in Canada is obtained or derived, to the extent that such consideration is dependent upon, and computed by reference to, the amount of timber cut or taken. (“redevance forestière”) R.S.O. 1990, c. C.40, s. 1 (2); 1994, c. 14, s. 1 (2, 3); 1997, c. 43, Sched. A, s. 1 (3-5); 2000, c. 42, s. 10; 2004, c. 16, s. 2 (2); 2005, c. 31, Sched. 5, s. 1.

Interpretation

(3)  In the application of the sections of the Income Tax Act (Canada) that by this Act are made applicable for the purposes of this Act,

(a) “capital cost” means the cost of property as determined for the purposes of this Act;

(b) “undepreciated capital cost” means the undepreciated capital cost of depreciable property as determined for the purposes of this Act;

(c) the references therein to,

(i) returns required to be filed under section 150 of that Act shall be deemed to be references to the returns required to be filed under section 75 of this Act, and

(ii) assessments to be made under section 152 of that Act shall be deemed to be references to assessments to be made under section 80 of this Act;

(d) Repealed: 2005, c. 28, Sched. D, s. 1 (2).

R.S.O. 1990, c. C.40, s. 1 (3); 1996, c. 29, s. 36 (3); 2004, c. 16, s. 2 (2); 2005, c. 28, Sched. D, s. 1 (1, 2).

Application of federal provisions referred to in federal provisions

(3.1)  The following rules apply if a provision of the Income Tax Act (Canada) is made applicable for the purposes of this Act and the provision refers to another provision of the Income Tax Act (Canada) (in this subsection called the “other provision”):

1. Subject to paragraph 3, if the other provision does not otherwise apply for the purposes of this Act, it shall apply for the purposes of the application of the following provisions of the Income Tax Act (Canada) for the purposes of this Act:

i. Section 12.

ii. Section 12.2.

iii. Subsection 13 (7), paragraph 13 (7.1) (e) and the definition of “I” in the definition of “undepreciated capital cost” in subsection 13 (21).

iv. Subsection 14 (3).

v. Section 20.

vi. Paragraphs 37 (1) (d) and (e).

vii. Clauses 53 (1) (e) (i) (B) and 53 (2) (c) (i) (B) and subparagraphs 53 (2) (c) (vi), (vii) and (viii) and 53 (2) (h) (ii), (iii) and (iv).

viii. Section 56.

ix. Section 60.

x. The definition of “L” in the definition of “cumulative Canadian exploration expense” in subsection 66.1 (6).

xi. Section 66.8.

xii. Paragraph 67.1 (2) (d).

xiii. Paragraph 84 (1) (c.3).

xiv. Section 88.

xv. The definition of “relevant tax factor” in subsection 95 (1).

xvi. Subsection 96 (2.1).

xvii. Paragraph 110 (1) (k).

xviii. Paragraph 111 (1) (e).

xix. Paragraph 127.2 (6) (a) and subsection 127.2 (8).

xx. Subsection 127.3 (6).

xxi. Subsection 128.1 (2).

xxii. The definition of “Canadian property” in subsection 133 (8).

xxiii. Subsection 137 (4.3).

xxiv. Section 138.

xxv. Paragraph 138.1 (1) (k).

xxvi. Section 248.

xxvii. Subsection 258 (5).

2. If the other provision is subsection 192 (4.1) or 194 (4.1), it shall apply for the purposes of the application of subparagraph (b) (iii) of the definition of “paid-up capital” in section 89 of the Income Tax Act (Canada) for the purposes of this Act.

3. If the other provision does not apply for the purposes of this Act because a provision of this Act is enacted to apply instead, the reference to the other provision in the provision of the Income Tax Act (Canada) that applies for the purposes of this Act shall be deemed to be a reference to the provision of this Act that applies instead.

4. If the application of the other provision for the purposes of this Act differs from the application of the other provision for the purposes of the Income Tax Act (Canada), the reference to the other provision in the provision of that Act shall be deemed to be a reference to the other provision as it applies for the purposes of this Act.

5. Despite paragraph 3, if the other provision is referred to in clause 53 (1) (e) (i) (B) or 53 (2) (c) (i) (B) of the Income Tax Act (Canada) or in the definition of “gross revenue” in subsection 248 (1) of that Act, the other provision shall apply for the purposes of the application of that clause or definition for the purposes of this Act.

6. Except as otherwise provided in paragraphs 1 to 5, if the other provision does not apply for the purposes of this Act, it shall not apply for the purposes of the application of any provision of the Income Tax Act (Canada) for the purposes of this Act. 2005, c. 28, Sched. D, s. 1 (3).

Application of regulations under Income Tax Act (Canada)

(4)  Despite subsections (1) and (2), any regulation made pursuant to any provision of the Income Tax Act (Canada) that is by this Act made applicable for the purposes of this Act shall apply with necessary modifications for the purposes of this Act unless otherwise provided by this Act or by the regulations. R.S.O. 1990, c. C.40, s. 1 (4); 2004, c. 16, s. 2 (2).

Elections

(5)  Any election or designation by a corporation which has been properly made for the purposes of the Income Tax Act (Canada), pursuant to any provision of that Act that is by this Act made applicable for the purposes of this Act, shall be deemed to have been properly made for the purposes of this Act, provided that,

(a) except as otherwise required by section 29.1 or 31.1 or subsection 34 (10), where an amount elected or designated would be different from the amount determined in accordance with this Act, the amount determined in accordance with this Act applies; and

(b) the provisions in that Act imposing penalties for late filing of such elections are not applicable for the purposes of this Act. R.S.O. 1990, c. C.40, s. 1 (5); 1997, c. 43, Sched. A, s. 1 (6); 2004, c. 16, s. 2 (2).

Late and amended elections

(5.1)  Where, under subsection 220 (3.2) of the Income Tax Act (Canada), the Minister of National Revenue has extended the time for making an election under that Act or has granted permission to amend an election made under that Act, the election or amended election, as the case may be, shall be deemed to have been properly made for the purposes of this Act and shall apply as described in subsection (5) of this section and in paragraph 220 (3.3) (a) of the Income Tax Act (Canada). 1994, c. 14, s. 1 (4); 2004, c. 16, s. 2 (2).

Revoked elections

(5.2)  Where, under subsection 220 (3.2) of the Income Tax Act (Canada), the Minister of National Revenue has granted permission to revoke an election made under that Act, the election shall be deemed never to have been made for the purposes of this Act. 1994, c. 14, s. 1 (4); 2004, c. 16, s. 2 (2).

Registered pension funds

(6)  Any registered pension fund or plan that has been accepted for registration by the Minister of National Revenue for Canada shall be deemed to have been accepted for registration by the Minister of Finance. R.S.O. 1990, c. C.40, s. 1 (6); O.C. 355/93; 1997, c. 19, s. 4 (1); 2004, c. 16, s. 2 (2).

Income Tax Act (Canada) applies as amended from time to time

(7)  The provisions of the Income Tax Act (Canada) by this Act made applicable for the purposes of this Act shall, unless otherwise provided in this Act, be deemed to be applicable as amended or re-enacted from time to time, and such amendments or re-enactments shall apply for the purposes of this Act in the same manner as they apply for the purposes of the Income Tax Act (Canada). R.S.O. 1990, c. C.40, s. 1 (7); 2004, c. 16, s. 2 (2).

Income Tax Regulations (Canada)

(7.1)  The reference in subsection (7) to the provisions of the Income Tax Act (Canada) includes a reference to the provisions of the Income Tax Regulations (Canada) as made, amended and remade from time to time. 1998, c. 34, s. 26; 2004, c. 16, s. 2 (2).

Tax Treaty

(8)  Where,

(a) a corporation is subject to tax under this Act and under the Income Tax Act (Canada); and

(b) the corporation’s liability for tax under the Income Tax Act (Canada) is subject to and modified by the application of the provisions of a Tax Treaty, Agreement or Convention between Canada and another country,

the provisions of this Act may be modified and applied in the manner prescribed by the regulations for the purpose of giving effect to a provision of such a Treaty, Agreement or Convention for the purposes of this Act, and regulations related to this subsection may have retroactive application if they so state. R.S.O. 1990, c. C.40, s. 1 (8); 2004, c. 16, s. 2 (2).

Deemed delivery by registered mail

(9)  Where a receipt is obtained from the addressee on the delivery of anything required or permitted by this Act to be delivered by registered mail, the delivery shall be deemed to have been made by registered mail for the purposes of this Act, and a “registered letter” includes any letter deemed by this subsection to have been delivered by registered mail. R.S.O. 1990, c. C.40, s. 1 (9); 2004, c. 16, s. 2 (2).

Deemed deduction of investment tax credit

(10)  Any amount deemed to have been deducted under subsection 127 (5) of the Income Tax Act (Canada) by operation of subsection 127.1 (3) or 192 (10) of that Act shall be deemed to have been deducted under subsection 127 (5) of that Act for the purposes of this Act. 1992, c. 3, s. 1; 2004, c. 16, s. 2 (2).

Interpretation, corporation

(11)  For the purposes of Parts V and VI, a reference to “corporation” shall be deemed to include a reference to an administrator of a benefit plan within the meaning of section 74.2, an insurance broker within the meaning of section 74.3 and an insurance exchange within the meaning of section 74.4. 1996, c. 1, Sched. B, s. 1 (2); 1997, c. 43, Sched. A, s. 1 (8); 2004, c. 16, s. 2 (2).

(12)  Repealed: 2005, c. 28, Sched. D, s. 1 (4).

Liability for Taxes

Taxes payable

Taxes payable, resident corporation

2.  (1)  Subject to subsection (5), every corporation resident in Canada that has a permanent establishment in Ontario at any time in a taxation year shall pay to Her Majesty in right of Ontario the taxes for the taxation year imposed by this Act at the time and in the manner required by this Act. 2005, c. 28, Sched. D, s. 2 (1); 2007, c. 11, Sched. B, s. 2 (1).

Taxes payable, non-resident corporation

(2)  Subject to subsection (5), every non-resident corporation shall pay to Her Majesty in right of Ontario the taxes for a taxation year imposed by this Act at the time and in the manner required by this Act if, at any time in the taxation year or in a previous taxation year,

(a) the corporation had a permanent establishment in Ontario within the meaning of section 4;

(b) the corporation owned real property, timber resource property or a timber limit in Ontario and the corporation’s income from the property or timber limit,

(i) arose from the sale or rental of the property or timber limit, or

(ii) is a royalty or timber royalty; or

(c) the corporation disposed of property,

(i) that would be taxable Canadian property as defined in subsection 248 (1) of the Income Tax Act (Canada) if the reference in that definition to section 2 of that Act were read as a reference to this section, and

(ii) that is deemed under the regulations to be situated in Ontario. 2005, c. 28, Sched. D, s. 2 (1); 2007, c. 11, Sched. B, s. 2 (2).

Tax in respect of a benefit plan

(2.1)  Every person who is a member or planholder of a benefit plan within the meaning of section 74.2 is liable to a tax in the amount determined under section 74.2, payable at the time and in the manner provided in that section to Her Majesty in right of Ontario. 1996, c. 1, Sched. B, s. 2; 2004, c. 16, s. 2 (2).

Tax in respect of insurance contract with unlicensed insurer

(2.2)  Every insured person within the meaning of section 74.3 who enters into an insurance contract, as defined in that section, with an insurer that is not licensed under the Insurance Act is liable to a tax in the amount determined under that section, payable at the time and in the manner provided in that section to Her Majesty in right of Ontario. 1997, c. 43, Sched. A, s. 2; 2004, c. 16, s. 2 (2).

Tax on insurance exchange

(2.3)  Every insurance exchange within the meaning of section 74.4 is liable to a tax in the amount determined under that section, payable at the time and in the manner provided in that section to Her Majesty in right of Ontario. 1997, c. 43, Sched. A, s. 2; 2004, c. 16, s. 2 (2).

Interpretation

(3)  For the purposes of subsection (2), a corporation “owned real property, timber resource property or a timber limit” if it had a legal, equitable or beneficial interest in the real property, timber resource property or timber limit. R.S.O. 1990, c. C.40, s. 2 (3); 2004, c. 16, s. 2 (2).

Application of subss. (1) and (2)

(4)  Subsections (1) and (2) apply to corporations for taxation years ending after May 11, 2005 and subsections (1) and (2) as they read before that day continue to apply to corporations for taxation years ending on or before that day. 2005, c. 28, Sched. D, s. 2 (2).

Taxation years ending after 2008

(5)  No corporation is liable for taxes under this Act for a taxation year ending after December 31, 2008 other than the taxes imposed by section 74 and subsections (2.1), (2.2) and (2.3). 2007, c. 11, Sched. B, s. 2 (3).

How tax to be determined

3.  (1)  Unless otherwise provided in this Act, any tax imposed by this Act shall be determined on the amount of the paid-up capital or other subject in respect of which the amount of the tax is to be ascertained as such paid-up capital or other subject stood at the close of the taxation year of the corporation for which the tax is imposed. R.S.O. 1990, c. C.40, s. 3 (1); 2004, c. 16, s. 2 (2).

Idem

(2)  Any tax imposed by this Act that is to be calculated in respect of,

(a) the taxable income of a corporation; or

(b) the gross premiums that become payable to insurance corporations,

shall be calculated with reference to the taxable income earned or the gross premiums that become payable, as the case may be, during the taxation year of the corporation for which the respective tax is imposed. R.S.O. 1990, c. C.40, s. 3 (2); 2004, c. 16, s. 2 (2).

Same

(3)  The tax imposed by subsection 2 (2.1) shall be calculated by reference to administration fees paid in respect of the plan and,

(a) to contributions made to the benefit plan if the plan is a funded benefit plan under section 74.2; or

(b) to benefits paid under the plan if the plan is an unfunded benefit plan under that section. 1996, c. 1, Sched. B, s. 3 (1); 2004, c. 16, s. 2 (2).

Same

(4)  The tax imposed by subsection 2 (2.2) shall be calculated by reference to the amount of premiums paid on insurance contracts, as defined in section 74.3, with insurers who do not hold licences under the Insurance Act. 1997, c. 43, Sched. A, s. 3; 2004, c. 16, s. 2 (2).

Same

(5)  The tax imposed by subsection 2 (2.3) shall be calculated by reference to premiums and deposits collected by an insurance exchange, as defined in section 74.4. 1997, c. 43, Sched. A, s. 3; 2004, c. 16, s. 2 (2).

Permanent establishment

4.  (1)  In this Act,

“permanent establishment” includes branches, mines, oil wells, farms, timberlands, factories, workshops, warehouses, offices, agencies and other fixed places of business. R.S.O. 1990, c. C.40, s. 4 (1); 2004, c. 16, s. 2 (2).

Idem

(2)  Where a corporation carries on business through an employee or agent who has general authority to contract for the corporation or who has a stock of merchandise owned by the corporation from which the employee or agent regularly fills orders which the employee or agent receives, such employee or agent shall be deemed to operate a permanent establishment of the corporation. R.S.O. 1990, c. C.40, s. 4 (2); 2004, c. 16, s. 2 (2).

Idem

(3)  The fact that a corporation has business dealings through a commission agent, broker or other independent agent shall not of itself be deemed to mean that the corporation has a permanent establishment. R.S.O. 1990, c. C.40, s. 4 (3); 2004, c. 16, s. 2 (2).

Idem

(4)  The fact that a corporation has a subsidiary controlled corporation in a place or a subsidiary controlled corporation engaged in a trade or business in a place shall not of itself be deemed to mean that the first-mentioned corporation is operating a permanent establishment in that place. R.S.O. 1990, c. C.40, s. 4 (4); 2004, c. 16, s. 2 (2).

Idem

(5)  An insurance corporation is deemed to have a permanent establishment in each jurisdiction in which the corporation is registered or licensed to do business. R.S.O. 1990, c. C.40, s. 4 (5); 2004, c. 16, s. 2 (2).

Idem

(6)  The fact that a corporation maintains an office solely for the purchase of merchandise shall not of itself be deemed to mean that the corporation has a permanent establishment in that office. R.S.O. 1990, c. C.40, s. 4 (6); 2004, c. 16, s. 2 (2).

Idem

(7)  Where a corporation, otherwise having a permanent establishment in Canada, owns land in a province or territory of Canada, such land is a permanent establishment. R.S.O. 1990, c. C.40, s. 4 (7); 2004, c. 16, s. 2 (2).

Idem

(8)  The fact that a non-resident corporation in a taxation year produced, grew, mined, created, manufactured, fabricated, improved, packed, preserved or constructed in whole or in part anything in Canada, whether or not the corporation exported that thing without selling it prior to exportation, shall of itself, for the purposes of this Act, be deemed to mean that the corporation maintained a permanent establishment at any place where the corporation did any of those things in the taxation year. R.S.O. 1990, c. C.40, s. 4 (8); 2004, c. 16, s. 2 (2).

Idem

(9)  The use of substantial machinery or equipment in a particular place at any time in a taxation year of a corporation constitutes a permanent establishment of such corporation in that place for the taxation year. R.S.O. 1990, c. C.40, s. 4 (9); 2004, c. 16, s. 2 (2).

Idem

(10)  Where a corporation has no fixed place of business, it has a permanent establishment in the principal place in which the corporation’s business is conducted. R.S.O. 1990, c. C.40, s. 4 (10); 2004, c. 16, s. 2 (2).

Idem

(11)  Where a corporation does not otherwise have a permanent establishment in Canada, it has a permanent establishment in the place designated in its charter or by-laws as being its head office or registered office. R.S.O. 1990, c. C.40, s. 4 (11); 2004, c. 16, s. 2 (2).

Same, where tax liability affected by a tax treaty, etc.

(12)  If the liability of a corporation for tax under the Income Tax Act (Canada) is determined with reference to a tax treaty, convention or agreement with another country, the corporation does not have a permanent establishment in Ontario for the purposes of this Act if it does not have such an establishment for the purposes of the tax treaty, convention or agreement. 2002, c. 22, s. 37; 2004, c. 16, s. 2 (2).

Same

(13)  Subsection (12) applies with respect to taxation years ending after June 17, 2002. 2002, c. 22, s. 37; 2004, c. 16, s. 2 (2).

Avoidance transactions

Definitions

5.  (1)  In this section and in subsection 80 (3),

“avoidance transaction” means any transaction,

(a) that, but for this section, would result directly or indirectly in a tax benefit, unless the transaction may reasonably be considered to have been undertaken or arranged in good faith primarily for purposes other than to obtain the tax benefit, or

(b) that is part of a series of transactions which would result directly or indirectly in a tax benefit but for this section, unless the transaction may reasonably be considered to have been undertaken or arranged in good faith primarily for purposes other than to obtain the tax benefit; (“opération d’évitement”)

“tax benefit” means a reduction, avoidance or deferral of tax or other amount payable by a corporation under this Act or under the Income Tax Act (Canada) or an increase in a refund of tax or other amount under this Act or under the Income Tax Act (Canada) and includes,

(a) a reduction, avoidance or deferral of tax or other amount that would be payable under the Act or the Income Tax Act (Canada) but for a Tax Treaty, Agreement or Convention between Canada and another country, and

(b) an increase in a refund of tax or other amount under the Act or the Income Tax Act (Canada) as a result of a Tax Treaty, Agreement or Convention between Canada and another country; (“avantage fiscal”)

“tax consequences”, to a corporation, means the amount of,

(a) the corporation’s income, taxable income, taxable income earned in a jurisdiction other than Ontario, taxable income earned in Canada or taxable income earned in Canada in a jurisdiction other than Ontario,

(a.1) the corporation’s net income, net loss, adjusted net income, adjusted net loss, pre-1994 loss or eligible losses for a taxation year, for the purposes of Part II.1,

(b) the corporation’s paid-up capital, taxable paid-up capital, taxable paid-up capital that is deemed to be used by the corporation in a jurisdiction outside Ontario, paid-up capital employed in Canada, taxable paid-up capital employed in Canada or taxable paid-up capital employed in Canada that is deemed to be used by the corporation in a jurisdiction outside Ontario,

(c) any gross premium referred to in Part IV that is payable to the corporation or its agent or agents,

(c.1) any contribution made to a funded benefit plan within the meaning of section 74.2, any benefit paid to or for the benefit of a member of an unfunded benefit plan within the meaning of section 74.2 and any administration fee paid by a person in respect of a benefit plan,

(d) any amount, other than an amount referred to in clause (a), (a.1), (b), (c) or (c.1), payable by or refundable to the corporation under this Act or that is relevant for the purposes of determining any other amount referred to in this subsection; (“attribut fiscal”)

“transaction” includes an arrangement or event. (“opération”) R.S.O. 1990, c. C.40, s. 5 (1); 1994, c. 14, s. 2 (1); 1996, c. 1, Sched. B, s. 4 (1); 2004, c. 16, s. 2 (2); 2005, c. 31, Sched. 5, s. 2 (1).

Application

(1.1)  This section applies to,

(a) transactions entered into after September 12, 1988 in respect of which the tax consequences to a person have been determined through a notice of assessment, reassessment, additional assessment or determination under subsection 152 (1.11) of the Income Tax Act (Canada) that involves the application of section 245 of that Act; and

(b) transactions entered into on or after December 20, 1990. 2005, c. 31, Sched. 5, s. 2 (2).

Determination of tax consequences

(2)  If a transaction is an avoidance transaction, the tax consequences to a corporation shall be determined in a manner that is reasonable in the circumstances in order to deny the tax benefit under this Act that would otherwise result directly or indirectly from the transaction, or from a series of transactions that includes the transaction. R.S.O. 1990, c. C.40, s. 5 (2); 2004, c. 16, s. 2 (2).

Application of subs. (2)

(3)  Subsection (2) applies to a transaction if it is reasonable to consider that,

(a) the transaction would, if this Act were read without reference to this section, result directly or indirectly in a misuse of the provisions of one or more of,

(i) this Act,

(ii) the regulations made under this Act,

(iii) a Tax Treaty, Agreement or Convention between Canada and another country, or

(iv) any Act or regulation of any jurisdiction that is relevant in computing tax or any amount payable by or refundable to a corporation under this Act or in determining any amount relevant for the purposes of that computation; or

(b) the transaction would result directly or indirectly in an abuse having regard to the provisions described in clause (a), other than this section, read as a whole. 2005, c. 31, Sched. 5, s. 2 (3).

Nature of determination

(4)  Without restricting the generality of subsection (2) and despite any other Act or regulation of any jurisdiction, in any determination under subsection (2) of the tax consequences to a corporation of a transaction,

(a) any deduction, exemption or exclusion in computing an amount referred to in clause (a), (a.1), (b), (c), (c.1) or (d) of the definition of “tax consequences” in subsection (1) may be allowed or disallowed in whole or in part;

(b) any deduction, exemption or exclusion referred to in clause (a) and any income, loss or other amount used in the determination of any amount payable or refundable under this Act may be allocated to any person;

(c) the nature of any payment or other amount may be recharacterized; and

(d) the tax effects that would otherwise result from the application of other provisions of this Act may be ignored. R.S.O. 1990, c. C.40, s. 5 (4); 1994, c. 14, s. 2 (2); 1996, c. 1, Sched. B, s. 4 (2); 2004, c. 16, s. 2 (2); 2005, c. 31, Sched. 5, s. 2 (4-6).

Application of subs. (4)

(4.1)  Subsection (4) applies to any benefit provided under a Tax Treaty, Agreement or Convention between Canada and another country that applies for the purposes of this Act despite the following:

1. A provision of the Tax Treaty, Agreement or Convention.

2. A provision of any Act of Canada that gives the force of law to the Tax Treaty, Agreement or Convention and relates to the application of the Tax Treaty, Agreement or Convention. 2005, c. 31, Sched. 5, s. 2 (7).

Consequential adjustments

(5)  If a notice of assessment, reassessment or additional assessment involving the application of subsection (2) with respect to a transaction has been sent to a corporation, or a notice of determination under subsection 80 (3) has been sent to the corporation, any other corporation is entitled, within 180 days after the day of mailing of the notice, to request in writing that the Minister make an assessment, reassessment or additional assessment applying subsection (2), or make a determination under subsection 80 (3), with respect to the transaction. R.S.O. 1990, c. C.40, s. 5 (5); 2004, c. 16, s. 2 (2).

Duty of the Minister

(6)  On receipt of a request by a corporation under subsection (5), the Minister shall consider the request and make an assessment or a determination under subsection 80 (3) with respect to the corporation, despite the expiry of any time limit under subsection 80 (11), except that an assessment or determination may be made under this subsection only to the extent that it may be reasonably regarded as relating to a transaction referred to in subsection (5). R.S.O. 1990, c. C.40, s. 5 (6); 2004, c. 16, s. 2 (2).

Notice of assessment, etc.

(7)  The tax consequences to any corporation after the application of this section shall be determined only through a notice of assessment, reassessment or additional assessment, or through a notice of determination under subsection 80 (3), involving the application of this section. R.S.O. 1990, c. C.40, s. 5 (7); 2004, c. 16, s. 2 (2).

Interpretation, corporation

(8)  In the application of this section,

(a) a reference to “corporation” in this section shall be deemed to include a reference to a person subject to tax under subsection 2 (2.1) and to an administrator of a benefit plan referred to in section 74.2; and

(b) the amount of tax payable under this Act by an administrator of a benefit plan referred to in section 74.2 shall be deemed to include the amount of tax required to be collected and paid over to the Minister by the administrator under section 74.2. 1996, c. 1, Sched. B, s. 4 (3); 2004, c. 16, s. 2 (2).

Inter-provincial tax avoidance

Definitions

5.1  (1)  In this section,

“taxpayer” means a corporation or a partnership whose members include one or more corporations; (“contribuable”)

“transferee” means, in respect of a taxation year,

(a) a corporation that has a permanent establishment in one or more provinces other than Ontario, or

(b) a partnership, one or more of whose members is a corporation described in clause (a); (“bénéficiaire du transfert”)

“transferor” means, in respect of a taxation year,

(a) a corporation that has a permanent establishment in one or more provinces other than Ontario,

(b) an individual who is ordinarily resident in a province other than Ontario on the last day of the taxation year, including a trust that is deemed under subsection 104 (2) of the Income Tax Act (Canada) to be an individual in respect of the trust property, or

(c) a partnership, one or more of whose members is a corporation described in clause (a) or an individual described in clause (b). (“auteur du transfert”) 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Inter-provincial anti-avoidance, disposition of property

(2)  Despite any other provision of this Act except subsections (4) and (8), if a taxpayer disposes of property to a transferee, and clauses (3) (a) to (d) apply in respect of the disposition, the amount of the taxpayer’s deemed proceeds of disposition of the property for the purposes of this Act is the total of,

(a) the amount that is deemed to be the taxpayer’s proceeds of disposition of the property as determined under this Act without reference to this section; and

(b) the total of all amounts, each of which is in respect of a province in which the transferee has a permanent establishment, determined by multiplying,

(i) the amount by which the cost amount of the property to the transferee under the laws of a province other than Ontario exceeds the amount referred to in clause (a),

by,

(ii) the percentage of the transferee’s taxable income, for the taxation year in which the transferee disposed of the property,

(A) if the transferee is a corporation, that is deemed to be earned in that other province under regulations made under the Income Tax Act (Canada), or that would be deemed to be earned in that other province if the transferee had had taxable income for that year, or

(B) if the transferee is a partnership, that the partnership would be deemed to have earned in that other province under regulations made under the Income Tax Act (Canada) if the partnership were a corporation, its taxation year were its fiscal period, it had had income for the fiscal period and its taxable income for the year were its income for that fiscal period. 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Application of subs. (2)

(3)  Subsection (2) applies in respect of a disposition of property if,

(a) the transferee does not deal at arm’s length with the taxpayer at or immediately after the time of the disposition;

(b) the amount of the taxpayer’s proceeds of disposition of the property, as determined under this Act without reference to this section, would be deemed to be an amount that is less than the transferee’s cost amount of the property immediately after the disposition, as determined under the laws of a province other than Ontario in which the transferee or, if the transferee is a partnership, one or more of its members, has a permanent establishment;

(c) the property, or other property the fair market value of which is derived primarily from the property or other property acquired by any person other than the taxpayer in substitution for the property, is subsequently disposed of to another person or partnership; and

(d) it is reasonable to believe that a purpose of the disposition of the property to the transferee prior to the subsequent disposition of the property by the transferee to another person was to reduce the total amount of income tax payable to one or more provinces in respect of the two dispositions to an amount that would be less than the amount of provincial income tax that would have been payable if the taxpayer’s proceeds of disposition of the property had equalled the transferee’s proceeds of disposition of the property on the subsequent disposition. 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Exceptions

(4)  Subsection (2) does not apply in respect of a disposition if,

(a) the cost amount of the property to the transferee is greater than the taxpayer’s proceeds of disposition of the property, as otherwise determined, by reason only of the operation of paragraph 88 (1) (c) or 98 (3) (b) of the Income Tax Act (Canada) or a comparable provision of the laws of another province in which the transferee, or if the transferee is a partnership, one or more of its members, has a permanent establishment;

(b) in the case where the taxpayer is a corporation, the percentage of the taxpayer’s taxable income, for the taxation year in which the taxpayer disposes of the property, that is not deemed, or would not be deemed if the taxpayer had had taxable income for that year, to be earned outside Ontario for the purposes of section 39, is less than or equal to,

(i) if the transferee is a corporation, the percentage of the transferee’s taxable income for the taxation year in which the transferee disposed of the property, that is not deemed, or would not be deemed if the transferee had had taxable income for that year, to be earned outside Ontario for the purposes of section 39, or

(ii) if the transferee is a partnership, the percentage of the transferee’s income, for the fiscal period in which the transferee disposed of the property, that would not be deemed to be earned outside Ontario for the purposes of section 39, if the partnership were a corporation, the fiscal period were its taxation year and it had had income for the fiscal period; or

(c) in the case where the taxpayer is a partnership, the percentage of the taxpayer’s income, for the fiscal period in which the taxpayer disposed of the property, that would not be deemed to be earned outside Ontario for the purposes of section 39, if the partnership were a corporation, the fiscal period were its taxation year and it had had income for the fiscal period, is less than or equal to the percentage of the transferee’s taxable income, for the taxation year in which the transferee disposed of the property, that is not deemed, or would not be deemed if the transferee had had taxable income for that year, to be earned outside Ontario for the purposes of section 39. 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Inter-provincial anti-avoidance, acquisition of property

(5)  Despite any other provision of this Act except subsections (7) and (8), if a taxpayer acquires property from a transferor and clauses (6) (a) to (d) apply, the taxpayer’s cost amount of the property for the purposes of this Act shall be the amount by which,

(a) the taxpayer’s cost amount of the property as otherwise determined under this Act without reference to this section,

exceeds,

(b) the total of all amounts, each of which is in respect of a province in which the transferor has a permanent establishment, determined by multiplying,

(i) the amount by which the amount determined under clause (a) exceeds the proceeds of disposition of the property to the transferor as determined under the laws of a province other than Ontario,

by,

(ii) the percentage of the transferor’s taxable income for the taxation year in which the disposition occurred that is deemed to be earned in that other province under regulations made under the Income Tax Act (Canada), or that would be deemed to be earned in that other province if the transferor had had taxable income for that year. 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Application of subs. (5)

(6)  Subsection (5) applies in respect of an acquisition of property if,

(a) the transferor does not deal at arm’s length with the taxpayer at or immediately after the time of the acquisition;

(b) the cost amount of the property to the taxpayer, as otherwise determined under this Act, is greater than the amount of the transferor’s deemed proceeds of disposition of the property as determined under the laws of a province other than Ontario in which the transferor or, if the transferor is a partnership, one or more of its members, has a permanent establishment;

(c) the property, or other property the fair market value of which is derived primarily from the property or other property acquired by any person other than the taxpayer in substitution for the property, is subsequently disposed of to another person or partnership; and

(d) it is reasonable to believe that a purpose of the disposition of the property to the taxpayer prior to the disposition of the property by the taxpayer to another person was to reduce the total amount of income tax payable to one or more provinces in respect of the two dispositions to an amount that would be less than the amount of provincial income tax that would have been payable if the taxpayer’s cost amount of the property for the purposes of this Act had equalled the greater of,

(i) the transferor’s cost amount of the property under the Income Tax Act (Canada) immediately before the disposition to the taxpayer, and

(ii) the transferor’s cost amount of the property under the laws of another province immediately before the disposition to the taxpayer. 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Exceptions

(7)  Subsection (5) does not apply in respect of an acquisition of a property if,

(a) the cost amount of the property to the taxpayer is greater than the transferor’s proceeds of disposition of the property, as otherwise determined, by reason only of the operation of paragraph 88 (1) (c) or 98 (3) (b) of the Income Tax Act (Canada), as applicable for the purposes of this Act;

(b) in the case where the taxpayer is a corporation, the percentage of the taxpayer’s taxable income, for the taxation year in which the taxpayer acquires the property, that is not deemed, or would not be deemed if the taxpayer had had taxable income for that year, to be earned outside Ontario for the purposes of section 39, is less than or equal to,

(i) if the transferor is a corporation, the percentage of the transferor’s taxable income, for the taxation year in which the transferor disposed of the property, that is not deemed, or would not be deemed if the transferor had had income for that year, to be earned outside Ontario for the purposes of section 39, or

(ii) if the transferor is a partnership, the percentage of the transferor’s income, for the fiscal period in which the transferor disposed of the property, that would not be deemed to be earned outside Ontario under the rules prescribed for the purposes of section 39, if the partnership were a corporation, the fiscal period were its taxation year and it had had income for the fiscal period; or

(c) in the case where the taxpayer is a partnership, the percentage of the taxpayer’s income, for the fiscal period in which the taxpayer acquired the property, that would not be deemed to be earned outside Ontario under the rules prescribed for the purposes of section 39 if the partnership were a corporation, the fiscal period were its taxation year and it had had income for the fiscal period, is less than or equal to the percentage of the transferor’s taxable income, for the taxation year in which the transferor disposed of the property, that is not deemed, or would not be deemed if the transferor had had taxable income for that year, to be earned outside Ontario for the purposes of section 39 or, if the transferor is an individual, is deemed, or would be deemed if the transferor had had taxable income for that year, to be earned in Ontario under rules prescribed in the regulations made under the Income Tax Act (Canada). 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Section not applicable

(8)  This section does not apply to a disposition or an acquisition of property if,

(a) the property is,

(i) depreciable property that was included in Class 3 of Schedule II to the regulations made under the Income Tax Act (Canada) and was acquired after November 12, 1981 and before October 25, 1985 by the transferor,

(ii) depreciable property referred to in subclause (i) that was acquired from a related corporation, and the difference between the cost amount of the property for the purposes of this Act and the cost amount of the property for the purposes of the Income Tax Act (Canada) can be primarily attributed to the fact that subsection 1100 (2) of the regulations made under that Act that applied for the purposes of that Act after November 12, 1981 did not apply for the purposes of this Act before October 25, 1985, or

(iii) a foreign resource property;

(b) the rules or conditions prescribed by the regulations have been satisfied; or

(c) an election is made under subsection 29.1 (4) or 31.1 (4) in respect of the disposition, or could have been made if those subsections had been enacted and in force. 1997, c. 43, Sched. A, s. 4 (1); 2004, c. 16, s. 2 (2).

Anti-avoidance of provincial tax

5.2  (1)  Except as otherwise provided in this section, if a corporation deducts or claims an amount under a provision of this Act, or of the Income Tax Act (Canada) as it applies for the purposes of this Act, that is less than the maximum amount the corporation may deduct or claim in determining its income or taxable income for the taxation year, or fails to deduct or claim any amount under the provision for the taxation year, the corporation shall be deemed to deduct or claim an amount under the provision in determining its income or taxable income, as the case may be, for the taxation year, in addition to the amount, if any, that it has deducted or claimed under the provision, equal to the amount, if any, by which the lesser of “A” and “B” exceeds “C”,

where,

“A” is the greatest amount that may be deducted or claimed by the corporation under the provision in determining its income or taxable income under this Act for the taxation year,

“B” is the greatest of the amounts deducted or claimed by the corporation under the corresponding provisions of the laws of other provinces in computing its income or taxable income for the taxation year under the laws of the other provinces, and

“C” is the amount, if any, that the corporation deducted or claimed under the provision for the taxation year before the application of this subsection. 1998, c. 34, s. 27 (1); 1999, c. 9, s. 73 (1); 2004, c. 16, s. 2 (2).

Exception

(1.1)  Subsection (1) does not apply if the corporation deducted or claimed the amount, or failed to deduct or claim the amount, primarily for purposes other than a reduction in the total amount of income tax payable to one or more provinces over the course of one or more taxation years. 1999, c. 9, s. 73 (2); 2004, c. 16, s. 2 (2).

Same

(2)  Subsection (1) does not apply to a corporation for a taxation year unless the following conditions are satisfied:

1. The corporation’s Ontario allocation factor for a subsequent taxation year, within the meaning of subsection 12 (1), is at least 20 per cent greater than the corporation’s Ontario allocation factor for the taxation year.

2. The amount that would be the corporation’s income or taxable income for the taxation year, determined under this Act before the deduction of any amount deemed by subsection (1) to be deducted or claimed under the provision referred to in that subsection, is greater than the corporation’s income or taxable income, as the case may be, for the taxation year determined under the law of a province other than Ontario because the corporation deducted or claimed a greater amount in determining its income or taxable income under the corresponding provision of the law of the other province.

3. The total amount of al