I-3 - Taxation Act

Section 1175.28.0.2 Disposition versions

2017-12-07

1175.28.0.2. Where a corporation has deducted an amount under section 737.18.40 in computing its taxable income for a taxation year (in this paragraph referred to as a “preceding year”) in relation to a qualified patented part of the corporation that is incorporated into a qualified property of the corporation and if in a subsequent taxation year (in this section referred to as the “tax liability year”) any of the circumstances described in the second paragraph applies in respect of the qualified patented part, the corporation shall pay for the tax liability year a tax equal to the aggregate of all amounts each of which is the amount by which the tax (in the second and third paragraphs referred to as the “notional tax”) that the corporation would have had to pay under Part I for a preceding year if no amount had been deducted by the corporation in computing its taxable income for that preceding year in relation to the qualified patented part exceeds the tax determined by the Minister (in the second paragraph referred to as the “real tax”) that is payable by the corporation under that Part for that preceding year.

The circumstances to which the first paragraph refers, in respect of an invention that is a qualified patented part of a corporation, are the following:

(a)  the patent issued in respect of the invention is invalidated in accordance with an Act referred to in subparagraph i of paragraph c of the definition of “qualified patented part” in the first paragraph of section 737.18.36;

(b)  the application for a patent, in respect of the invention that is, under the second paragraph of section 737.18.36, the qualified patented part of the corporation, has not resulted in the issue of a patent by a competent authority within five years after the day on which the application was made;

(c)  a redetermination by the Minister reduces to zero the aggregate of all amounts each of which is an amount that a corporation is deemed to have paid to the Minister for a taxation year under any of Divisions II to II.3.0.1 of Chapter III.1 of Title III of Book IX of Part I in respect of the scientific research and experimental development work from which the invention derives; and

(d)  a redetermination by the Minister reduces to less than $500,000 the total described in the first paragraph of section 737.18.39 that was taken into account for the purpose of determining whether the corporation has made sustained innovation efforts in relation to the invention.

Where an amount (in this paragraph and in the fourth paragraph referred to as the “increased amount”), in respect of which the corporation could claim a deduction under a particular provision of this Act in computing its taxable income or tax payable under Part I for a preceding taxation year referred to in the first paragraph (in this paragraph and in the fourth paragraph referred to as the “computation year”) for the purpose of determining its notional tax for the computation year, is greater than the amount (in this paragraph and in the fourth paragraph referred to as the “deducted amount”) that the corporation deducted under the particular provision for the purpose of determining its real tax for the computation year, the increased amount rather than the deducted amount may be taken into account, for the purpose of determining the corporation’s notional tax for the computation year, if

(a)  the corporation so requests in writing to the Minister; and

(b)  it may reasonably be considered that the amount by which the increased amount exceeds the deducted amount has not been deducted under the particular provision or another provision of this Act for the purpose of determining the corporation’s tax payable under Part I for any other taxation year, nor for the purpose of determining a tax of the corporation for any taxation year that is similar in nature to the corporation’s notional tax and is provided for in another part of this Act.

If the third paragraph applies, the amount by which the increased amount exceeds the deducted amount is deemed, for the purpose of determining the corporation’s notional tax for any taxation year subsequent to the computation year and for the application of Part I to the tax liability year and to any subsequent taxation year, to have been deducted under the particular provision in computing the corporation’s taxable income or tax payable, as the case may be, under Part I for the computation year.

2017, c. 29, s. 222.