Tax wiki
s. 125.3
PART I — Income Tax · DIVISION E — Computation of Tax · SUBDIVISION B — Rules Applicable to Corporations · Additional Tax on Banks and Life Insurers
Deduction of Part I.3 tax
Not yet annotated · Text current to 2026-06-21 · section last amended 2013-06-26
Current text
There may be deducted in computing the tax payable under this Part for a taxation year by a corporation (other than a corporation that was throughout the year a financial institution, within the meaning assigned by section 190) an amount equal to such part as the corporation claims of its unused Part I.3 tax credits for any of its 7 immediately preceding taxation years ending before 1992, to the extent that that amount does not exceed the amount, if any, by which
its Canadian surtax payable for the year
exceeds
the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year.
Idem
(1.1)There may be deducted in computing the tax payable under this Part for a taxation year by a corporation that was a financial institution (within the meaning assigned by section 190) throughout the year an amount equal to such part as the corporation claims of its unused Part I.3 tax credits for any of its 7 immediately preceding taxation years ending before 1992, to the extent that that amount does not exceed the lesser of
the amount, if any, by which its Canadian surtax payable for the year exceeds the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year, and
the amount, if any, by which its tax payable under this Part (determined without reference to this section) for the year exceeds the amount that would, but for subsections 181.1(4) and 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year.
Special rules
(2)For the purposes of this section,
no amount may be claimed under subsection 125.3(1) in computing a corporation’s tax payable under this Part for a particular taxation year in respect of its unused Part I.3 tax credit for another taxation year until its unused Part I.3 tax credits for taxation years preceding the other year that may be claimed for the particular year have been claimed; and
an amount in respect of a corporation’s unused Part I.3 tax credit for a taxation year may be claimed under subsection 125.3(1) in computing its tax payable under this Part for another taxation year only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of that unused Part I.3 tax credit in computing its tax payable under this Part for a taxation year preceding that other year.
Acquisition of control
(3)Where, at any time, control of a corporation has been acquired by a person or group of persons, no amount in respect of its unused Part I.3 tax credit for a taxation year ending before that time is deductible by the corporation for a taxation year ending after that time and no amount in respect of its unused Part I.3 tax credit for a taxation year ending after that time is deductible by the corporation for a taxation year ending before that time, except that
where a business was carried on by the corporation in a taxation year ending before that time, its unused Part I.3 tax credit for that year is deductible by the corporation for a particular taxation year ending after that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit throughout the particular year and only to the extent of that proportion of the corporation’s Canadian surtax payable for the particular year that
the amount, if any, by which
the total of its income for the particular year from that business and, where properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, its income for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services
exceeds
the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) for the particular year by the corporation in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business,
is of the greater of
the amount determined under subparagraph 125.3(3)(a)(i), and
the corporation’s taxable income for the particular year; and
where a business was carried on by the corporation throughout a taxation year ending after that time, its unused Part I.3 tax credit for that year is deductible by the corporation for a particular taxation year ending before that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit in the particular year and only to the extent of that proportion of the corporation’s Canadian surtax payable for the particular year that
the amount, if any, by which
the total of its income for the particular year from that business and, where properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, its income for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services
exceeds
the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) for the particular year by the corporation in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business,
is of the greater of
the amount determined under subparagraph 125.3(3)(b)(i), and
the corporation’s taxable income for the particular year.
Definitions
(4)For the purposes of this section,
Canadian surtax payable of a corporation for a taxation year means
in the case of a corporation that is non-resident throughout the year, the lesser of
the amount determined under section 123.2 in respect of the corporation for the year, and
its tax payable under this Part for the year, and
in any other case, the lesser of
the prescribed proportion of the amount determined under section 123.2 in respect of the corporation for the year, and
its tax payable under this Part for the year; (surtaxe canadienne payable)
unused Part I.3 tax credit of a corporation for a taxation year means
where the year ended before 1992, the amount, if any, by which its tax payable under Part I.3 for the year exceeds the amount deductible under subsection 125.3(1) in computing its tax payable under this Part for the year, and
where the year ends after 1991, the amount, if any, by which the corporation’s tax payable under Part I.3 for the year (determined without reference to subsection 181.1(4)) exceeds its Canadian surtax payable under this Part for the year. (crédit d’impôt de la partie I.3 inutilisé)
Source: Justice Laws Website. Not an official version.
Historic text
Immediately preceding version, in force from 2004-08-31 to 2013-06-25:
Show the text in force 2004-08-31 to 2013-06-25
Deduction of Part I.3 tax
125.3 (1) There may be deducted in computing the tax payable under this Part for a taxation year by a corporation (other than a corporation that was throughout the year a financial institution, within the meaning assigned by section 190) an amount equal to such part as the corporation claims of its unused Part I.3 tax credits for any of its 7 immediately preceding taxation years ending before 1992, to the extent that that amount does not exceed the amount, if any, by which
(a) its Canadian surtax payable for the year
exceeds
(b) the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year.
Idem
(1.1) There may be deducted in computing the tax payable under this Part for a taxation year by a corporation that was a financial institution (within the meaning assigned by section 190) throughout the year an amount equal to such part as the corporation claims of its unused Part I.3 tax credits for any of its 7 immediately preceding taxation years ending before 1992, to the extent that that amount does not exceed the lesser of
(a) the amount, if any, by which its Canadian surtax payable for the year exceeds the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year, and
(b) the amount, if any, by which its tax payable under this Part (determined without reference to this section and section 125.2) for the year exceeds the amount that would, but for subsections 181.1(4) and 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year.
Special rules
(2) For the purposes of this section,
(a) no amount may be claimed under subsection 125.3(1) in computing a corporation’s tax payable under this Part for a particular taxation year in respect of its unused Part I.3 tax credit for another taxation year until its unused Part I.3 tax credits for taxation years preceding the other year that may be claimed for the particular year have been claimed; and
(b) an amount in respect of a corporation’s unused Part I.3 tax credit for a taxation year may be claimed under subsection 125.3(1) in computing its tax payable under this Part for another taxation year only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of that unused Part I.3 tax credit in computing its tax payable under this Part for a taxation year preceding that other year.
Acquisition of control
(3) Where, at any time, control of a corporation has been acquired by a person or group of persons, no amount in respect of its unused Part I.3 tax credit for a taxation year ending before that time is deductible by the corporation for a taxation year ending after that time and no amount in respect of its unused Part I.3 tax credit for a taxation year ending after that time is deductible by the corporation for a taxation year ending before that time, except that
(a) where a business was carried on by the corporation in a taxation year ending before that time, its unused Part I.3 tax credit for that year is deductible by the corporation for a particular taxation year ending after that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit throughout the particular year and only to the extent of that proportion of the corporation’s Canadian surtax payable for the particular year that
(i) the amount, if any, by which
(A) the total of its income for the particular year from that business and, where properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, its income for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services
exceeds
(B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) for the particular year by the corporation in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business,
is of the greater of
(ii) the amount determined under subparagraph 125.3(3)(a)(i), and
(iii) the corporation’s taxable income for the particular year; and
(b) where a business was carried on by the corporation throughout a taxation year ending after that time, its unused Part I.3 tax credit for that year is deductible by the corporation for a particular taxation year ending before that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit in the particular year and only to the extent of that proportion of the corporation’s Canadian surtax payable for the particular year that
(i) the amount, if any, by which
(A) the total of its income for the particular year from that business and, where properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, its income for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services
exceeds
(B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) for the particular year by the corporation in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business,
is of the greater of
(ii) the amount determined under subparagraph 125.3(3)(b)(i), and
(iii) the corporation’s taxable income for the particular year.
Definitions
(4) For the purposes of this section,
Canadian surtax payable
surtaxe canadienne payable
Canadian surtax payable of a corporation for a taxation year means
(a) in the case of a corporation that is non-resident throughout the year, the lesser of
(i) the amount determined under section 123.2 in respect of the corporation for the year, and
(ii) its tax payable under this Part for the year, and
(b) in any other case, the lesser of
(i) the prescribed proportion of the amount determined under section 123.2 in respect of the corporation for the year, and
(ii) its tax payable under this Part for the year; (surtaxe canadienne payable)
unused Part I.3 tax credit
crédit d’impôt de la partie I.3 inutilisé
unused Part I.3 tax credit of a corporation for a taxation year means
(a) where the year ended before 1992, the amount, if any, by which its tax payable under Part I.3 for the year exceeds the amount deductible under subsection 125.3(1) in computing its tax payable under this Part for the year, and
(b) where the year ends after 1991, the amount, if any, by which the corporation’s tax payable under Part I.3 for the year (determined without reference to subsection 181.1(4)) exceeds its Canadian surtax payable under this Part for the year. (crédit d’impôt de la partie I.3 inutilisé)
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 125.3
- 1994, c. 7, Sch. VIII, s. 66, c. 21, s. 59
Earlier versions: Justice Laws point-in-time versions of the Act (from 31 August 2004), and CanLII (under “Versions”). On Justice Laws, each version of section 125.3 links to the one before it.
Enacting and amending legislation
- R.S., 1985, c. 1 (5th Supp.), s. 125.3; 1994, c. 7, Sch. VIII, s. 66, c. 21, s. 59; 2013, c. 34, s. 266
Text before 2004 is found in the annual Statutes of Canada cited above. Application and coming-into-force provisions are not part of the consolidation; see the amending Acts.
Cross-references
Citation
Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 125.3.