Capital deduction



Capital deduction

• 190.15 (1) For the purposes of this Part, the capital deduction of a corporation for a taxation year during which it was at any time a financial institution is the total of $200,000,000 and the lesser of

  • (a) $20,000,000, and

  • (b) 1/5 of the amount, if any, by which its taxable capital employed in Canada for the year exceeds $200,000,000,

  unless the corporation was related to another financial institution at the end of the year, in which case, subject to subsection 190.15(4), its capital deduction for the year is nil.

• Related financial institution

  (2) A corporation that is a financial institution at any time during a taxation year and that was related to another financial institution at the end of the year may file with the Minister an agreement in prescribed form on behalf of the related group of which the corporation is a member under which an amount that does not exceed the total of $200,000,000 and the lesser of

  • (a) $20,000,000, and

  • (b) 1/5 of the amount, if any, by which the total of all amounts, each of which is the taxable capital employed in Canada of a financial institution for the year that is a member of the related group, exceeds $200,000,000

  is allocated among the members of the related group for the taxation year.

• Idem

  (3) The Minister may request a corporation that is a financial institution at any time during a taxation year and that was related to any other financial institution at the end of the year to file with the Minister an agreement referred to in subsection 190.15(2) and, if the corporation does not file such an agreement within 30 days after receiving the request, the Minister may allocate an amount among the members of the related group of which the corporation is a member for the year not exceeding the total of $200,000,000 and the lesser of

  • (a) $20,000,000, and

  • (b) 1/5 of the amount, if any, by which the total of all amounts, each of which is the taxable capital employed in Canada of a financial institution for the year that is a member of the related group, exceeds $200,000,000.

• Idem

  (4) For the purposes of this Part, the least amount allocated for a taxation year to each member of a related group under an agreement described in subsection 190.15(2) or by the Minister pursuant to subsection 190.15(3) is the capital deduction for the taxation year of that member, but, if no such allocation is made, the capital deduction of each member of the related group for that year is nil.

• Idem

  (5) Where a corporation (in this subsection referred to as the “first corporation”) has more than one taxation year ending in the same calendar year and is related in 2 or more of those taxation years to another corporation that has a taxation year ending in that calendar year, the capital deduction of the first corporation for each such taxation year at the end of which it is related to the other corporation is, for the purposes of this Part, an amount equal to its capital deduction for the first such taxation year.

• Idem

  (6) Two corporations that would, but for this subsection, be related to each other solely because of

  • (a) the control of any corporation by Her Majesty in right of Canada or a province, or

  • (b) a right referred to in paragraph 251(5)(b),

  are, for the purposes of this section and section 190.14, deemed not to be related to each other except that, where at any time a taxpayer has a right referred to in paragraph 251(5)(b) with respect to shares and it can reasonably be considered that one of the main purposes for the acquisition of the right was to avoid any limitation on the amount of a corporation’s capital deduction for a taxation year, for the purpose of determining whether a corporation is related to any other corporation, the corporations are, for the purpose of this section, deemed to be in the same position in relation to each other as if the right were immediate and absolute and as if the taxpayer had exercised the right at that time.