I-3 - Taxation Act

Section 772.2 Disposition versions

2022-06-08

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 to 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year, or

ii.  (subparagraph repealed);

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period;

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year; or

(d)  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 to 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  (subparagraph repealed);

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period,

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or 737.28 in computing the taxpayer’s taxable income for the year, or

ix.  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 772.13.2, 776 to 776.1.41, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraphs d.2 to d.4 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74; 2011, c. 34, s. 39; 2012, c. 8, s. 136; 2015, c. 21, s. 316; 2015, c. 36, s. 50; 2017, c. 1, s. 216; 2021, c. 18, s. 65; 2022, c. 23, s. 66.

2021-06-04

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 to 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period;

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year; or

(d)  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 to 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period,

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year, or

ix.  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 772.13.2, 776 to 776.1.41, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraphs d.2 to d.4 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74; 2011, c. 34, s. 39; 2012, c. 8, s. 136; 2015, c. 21, s. 316; 2015, c. 36, s. 50; 2017, c. 1, s. 216; 2021, c. 18, s. 65.

2017-02-08

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 to 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period;

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year; or

(d)  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 to 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period,

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year, or

ix.  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 772.13.2, 776 to 776.1.35, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraphs d.2 to d.4 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74; 2011, c. 34, s. 39; 2012, c. 8, s. 136; 2015, c. 21, s. 316; 2015, c. 36, s. 50; 2017, c. 1, s. 216.

2015-12-04

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period;

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year; or

(d)  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period,

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year, or

ix.  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 772.13.2, 776 to 776.1.26, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraphs d.2 and d.3 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74; 2011, c. 34, s. 39; 2012, c. 8, s. 136; 2015, c. 21, s. 316; 2015, c. 36, s. 50.

2015-10-21

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period;

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year; or

(d)  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period,

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year, or

ix.  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 772.13.2, 776 to 776.1.18, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraphs d.2 and d.3 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74; 2011, c. 34, s. 39; 2012, c. 8, s. 136; 2015, c. 21, s. 316.

2012-05-09

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period;

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year; or

(d)  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period,

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year, or

ix.  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 772.13.2, 776 to 776.1.18, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraph d.2 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74; 2011, c. 34, s. 39; 2012, c. 8, s. 136.

2012-01-01

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period;

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year; or

(d)  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period,

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year, or

ix.  that may reasonably be regarded as relating to the amount determined for B in the formula in the first paragraph of section 752.0.10.0.3 in respect of the taxpayer for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 776 to 776.1.18, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraph d.2 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74; 2011, c. 34, s. 39.

2010-04-20

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period; or

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period, or

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 776 to 776.1.18, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771, subparagraphs i and iii of paragraph j of that subsection 1 and subparagraphs i and ii of paragraph j.1 of that subsection 1, and, in paragraph d.2 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321; 2010, c. 5, s. 74.

2009-05-15

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period; or

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period, or

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 776 to 776.1.18, 776.17, 1183 and 1184, subparagraphs i and ii.1 of paragraph h of subsection 1 of section 771 and subparagraphs i and iii of paragraph j of that subsection 1, and, in paragraph d.2 of that subsection 1, the deduction provided for in respect of a Canadian-controlled private corporation;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89; 2009, c. 5, s. 321.

2007-11-07

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period; or

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period, or

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 776 to 776.1.18, 776.17, 1183 and 1184, subparagraphs i and ii of paragraph d.2 of subsection 1 of section 771, subparagraphs i to ii.1 of paragraph h of that subsection 1 and subparagraphs i to iii of paragraph j of that subsection 1;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179; 2007, c. 12, s. 89.

2006-03-01

772.2. In this chapter,

“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a particular foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to the government of a foreign country as may reasonably be regarded as tax in respect of the taxpayer’s income from any business carried on by the taxpayer in the particular foreign country and that is attributable to an establishment situated in that country, but does not include a tax

(a)  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government;

(b)  that may reasonably be attributed, as the case may be,

i.  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

ii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

iii.  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres (chapter C-8.3), in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period; or

(c)  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 in computing the taxpayer’s taxable income for the year;

“commercial obligation” in respect of a taxpayer’s foreign oil and gas business in a country means an obligation of the taxpayer to a particular person, where

(a)  the obligation was undertaken in the course of carrying on the business or in contemplation of the business; and

(b)  the law of the country would have allowed the taxpayer to undertake an obligation, on substantially the same terms, to a person other than the particular person;

“economic profit” of a taxpayer in respect of a property for a period means the part of the taxpayer’s profit, from the business in which the property is used, that is attributable to the property in respect of the period or to related transactions, determined as if the only amounts deducted in computing that part of the profit were

(a)  interest and financing expenses incurred by the taxpayer and attributable to the acquisition or holding of the property in respect of the period or to a related transaction;

(b)  income or profits taxes payable by the taxpayer for any year to the government of a foreign country, in respect of the property for the period or in respect of a related transaction; or

(c)  other outlays and expenses that are directly attributable to the acquisition, holding or disposition of the property in respect of the period or to a related transaction;

“foreign oil and gas business” of a taxpayer means a business, carried on by the taxpayer in a taxing country, the principal activity of which is the extraction from natural accumulations, or from oil or gas wells, of petroleum, natural gas or related hydrocarbons;

“non-business-income tax” paid by a taxpayer for a taxation year to the government of a foreign country means, subject to sections 772.5.1 and 772.5.2, such portion of any income or profits tax paid by the taxpayer for the year to that government as

(a)  was not included in computing the business-income tax paid by the taxpayer for the year in respect of any business carried on by the taxpayer in any foreign country;

(b)  was not deductible by virtue of section 146 in computing the taxpayer’s income for the year;

(c)  was not deducted by virtue of section 146.1 in computing the taxpayer’s income for the year; and

(d)  is not a tax

i.  that would not have been payable by the taxpayer had the taxpayer not been a citizen of that country and that cannot reasonably be regarded as attributable to income from a source situated in a foreign country,

ii.  that is in respect of an amount deducted because of section 671.3 in computing the business-income tax paid by the taxpayer,

iii.  that may reasonably be regarded as relating to an amount that any other person or partnership has received or is entitled to receive from that government,

iv.  that may reasonably be regarded as the proportion of the tax paid by the taxpayer to that government in respect of income from employment abroad that the amount deducted by the taxpayer under section 737.25 in respect of that income in computing the taxpayer’s taxable income for the year is of the taxpayer’s income from employment abroad for the year as determined under Chapters I and II of Title II of Book III,

v.  that may reasonably be regarded as relating to the amount by which the amount deducted under subsection 12 of section 20 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in computing the taxpayer’s income for the year under that Act exceeds any amount deducted in the computation of the taxpayer’s income for the year under section 146.1,

vi.  that may reasonably be attributed to all or part of the taxable capital gain in respect of which the taxpayer or the taxpayer’s spouse claimed a deduction under any of sections 726.7 to 726.9 and 726.20.2,

vii.  that may reasonably be attributed, as the case may be,

(1)  to an amount included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of the individual’s exemption period, within the meaning of section 737.18.6, in relation to an employment that is included in the year,

(2)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, within the meaning of section 737.18.29, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined under subparagraph a of the second paragraph of section 737.18.34 in respect of that period, or

(3)  to the portion of an amount, included in the part of the individual’s income for the year that may reasonably be considered to be earned in the part of a specified period of the individual, established under the fourth paragraph of section 65 of the Act respecting international financial centres, in relation to an employment that is included in the year, that is equal to the product obtained by multiplying that amount by the percentage determined in subparagraph 1 of the second paragraph of that section 65 in respect of that period, or

viii.  that may reasonably be regarded as relating to an amount deductible under paragraph a of section 725 or section 737.14 or 737.28 in computing the taxpayer’s taxable income for the year;

“production tax amount” of a taxpayer for a foreign oil and gas business carried on by the taxpayer in a taxing country for a taxation year means the total of all amounts each of which

(a)  became receivable in the year by the government of the country because of an obligation, other than a commercial obligation, of the taxpayer, in respect of the business, to the government or a mandatary or instrumentality of the government;

(b)  is computed by reference to the amount by which the amount or value of petroleum, natural gas or related hydrocarbons produced or extracted by the taxpayer in the course of carrying on the business in the year exceeds an amount that

i.  is deductible, under the agreement or law that creates the obligation described in paragraph a, in computing the amount receivable by the government of the taxing country, and

ii.  is intended to take into account the taxpayer’s operating and capital costs of that production or extraction, and can reasonably be considered to have that effect;

(c)  would not, but for section 772.5.6, be an income or profits tax; and

(d)  is not identified as a royalty under the agreement that creates the obligation described in paragraph a or under any law of the taxing country;

“related transactions”, in respect of a taxpayer’s ownership of a property for a period, means transactions entered into by the taxpayer as part of the arrangement under which property was owned;

“tax-exempt income” means income of a taxpayer from a source in a country in respect of which

(a)  the taxpayer is, because of a tax agreement with that country, entitled to an exemption from all income or profits taxes, imposed in that country, to which the agreement applies; and

(b)  no income or profits tax to which the tax agreement does not apply is imposed in any country other than Canada;

“taxing country” means a foreign country the government of which regularly imposes, in respect of income from business carried on in the country, a levy or charge of general application that would, but for section 772.5.6, be an income or profits tax;

“tax otherwise payable” under this Part by a taxpayer for a taxation year means the tax payable by the taxpayer for the year under this Part, computed without reference to this chapter, sections 766.2 to 766.3, 767, 776 to 776.1.6, 776.17, 1183 and 1184, subparagraphs i and ii of paragraph d.2 of subsection 1 of section 771, subparagraphs i to ii.1 of paragraph h of that subsection 1 and subparagraphs i to iii of paragraph j of that subsection 1;

“unused portion of the foreign tax credit” of a taxpayer for a taxation year means

(a)  in respect of a country, where the taxpayer is an individual,

i.  the amount determined as such for the year in respect of the individual in respect of that country in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991, or

ii.  in other cases, the amount by which

(1)  45% of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country exceeds

(2)  where the year is a taxation year that is before the taxation year 1998, the total of the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year and the portion, that may reasonably be regarded as deductible under section 1086.3 in computing the individual’s tax payable under Part I.1 for the year, of the business-income tax paid by the individual for the year in respect of businesses carried on by the individual in that country, or, where the year is a taxation year that is after the taxation year 1997, the amount deductible under section 772.8 in respect of that country in computing the individual’s tax payable under this Part for the year; and

(b)  where the taxpayer is a corporation,

i.  the amount determined as such for the year in respect of the corporation in accordance with the regulations made under section 772, as they read for that year, where the year is a taxation year previous to the taxation year 1991,

ii.  an amount that is nil where the year is the taxation year 1991 or 1992 and the corporation decided to include an amount under section 726.5, as it read for those years, in computing its taxable income for the year, and

iii.  in other cases, the amount by which

(1)  the aggregate of the amounts, each of which corresponds to the maximum deduction that would be granted in accordance with this chapter, otherwise than under section 772.12, to the corporation in respect of a foreign country if it had sufficient tax otherwise payable, exceeds

(2)  the amount deductible under this chapter, otherwise than under section 772.12, in computing the corporation’s tax payable for the year under this Part.

1995, c. 63, s. 82; 1996, c. 39, s. 209; 1997, c. 3, s. 71; 1997, c. 14, s. 129; 1997, c. 85, s. 166; 1999, c. 86, s. 83; 2000, c. 39, s. 92; 2001, c. 53, s. 132; 2003, c. 2, s. 228; 2003, c. 9, s. 102; 2004, c. 21, s. 207; 2005, c. 1, s. 182; 2005, c. 38, s. 179.