I-3 - Taxation Act

Section 746 Disposition versions

2015-10-21

746. A corporation resident in Canada which receives in a taxation year a dividend on a share that it owns of the capital stock of a foreign affiliate, may deduct from its income for the year in respect of that dividend:

(a)  such portion of the dividend as is prescribed to be paid out of the exempt surplus of the affiliate;

(a.1)  an amount equal to the total of

i.  one-half of the portion of the dividend that is prescribed to have been paid out of the hybrid surplus of the affiliate, and

ii.  the lesser of the amount determined under subparagraph i and the total of

(1)  the product obtained when the foreign tax prescribed to be applicable to the portion of the dividend referred to in subparagraph i is multiplied by the amount by which the corporation’s tax factor for the year exceeds one-half, and

(2)  the product obtained when the non-business-income tax, within the meaning of section 772.2, paid by the corporation and applicable to the portion of the dividend referred to in subparagraph i is multiplied by the corporation’s tax factor for the year;

(b)  the product obtained when the amount by which the corporation’s tax factor for the year exceeds one is multiplied by the foreign tax prescribed to be applicable to the portion of the dividend prescribed to have been paid out of the taxable surplus of the affiliate, without exceeding that portion of the dividend;

(c)  the lesser of the product obtained when the corporation’s tax factor for the year is multiplied by the non-business-income tax, within the meaning of section 772.2, paid by the corporation and applicable to the portion of the dividend prescribed to have been paid out of the taxable surplus of the affiliate, and the amount by which that portion of the dividend exceeds the amount deductible in respect of the dividend under subparagraph b;

(d)  such part of the dividend as is prescribed to be paid out of the pre-acquisition surplus of the affiliate.

In addition, for the purposes of this section and sections 571 to 598, the corporation may make such elections as may be prescribed.

1972, c. 23, s. 562; 1972, c. 26, s. 58; 1975, c. 22, s. 207; 1984, c. 15, s. 174; 1995, c. 63, s. 55; 1997, c. 3, s. 71; 2015, c. 21, s. 266.

2006-03-01

746. A corporation resident in Canada which receives in a taxation year a dividend on a share that it owns of the capital stock of a foreign affiliate, may deduct from its income for the year in respect of that dividend:

(a)  such portion of the dividend as is prescribed to be paid out of the exempt surplus of the affiliate;

(b)  the product obtained when the amount by which the tax factor exceeds one is multiplied by the foreign tax prescribed to be applicable to the portion of the dividend prescribed to be paid out of the taxable surplus of the affiliate, without exceeding that portion of the dividend;

(c)  the lesser of the product obtained when the tax factor is multiplied by the non-business-income tax, within the meaning of section 772.2, paid by the corporation and applicable to such portion of the dividend as is prescribed to have been paid out of the taxable surplus of the affiliate, and the amount by which that portion of the dividend exceeds the amount deductible in respect thereof under subparagraph b; and

(d)  such part of the dividend as is prescribed to be paid out of the pre-acquisition surplus of the affiliate.

In addition, for the purposes of this section and sections 571 to 598, the corporation may make such elections as may be prescribed.

1972, c. 23, s. 562; 1972, c. 26, s. 58; 1975, c. 22, s. 207; 1984, c. 15, s. 174; 1995, c. 63, s. 55; 1997, c. 3, s. 71.