PART XIII.1 — Additional Tax on Authorized Foreign Banks

Branch interest tax

Not yet annotated · Text current to 2026-06-21 · section last amended 2004-08-31

Current text

Every authorized foreign bank shall pay a tax under this Part for each taxation year equal to 25% of its taxable interest expense for the year.

Taxable interest expense

(2)

The taxable interest expense of an authorized foreign bank for a taxation year is 15% of the amount, if any, by which

(a)

the total of all amounts on account of interest that are deducted under section 20.2 in computing the bank’s income for the year from its Canadian banking business

exceeds

(b)

the total of all amounts that are included in paragraph (a) and that are in respect of a liability of the bank to another person or partnership.

Where tax not payable

(3)

No tax is payable under this Part for a taxation year by an authorized foreign bank if

(a)

the bank is resident in a country with which Canada has a tax treaty at the end of the year; and

(b)

no tax similar to the tax under this Part would be payable in that country for the year by a bank resident in Canada carrying on business in that country during the year.

Rate limitation

(4)

Notwithstanding any other provision of this Act, the reference in subsection (1) to 25% shall, in respect of a taxation year of an authorized foreign bank that is resident in a country with which Canada has a tax treaty on the last day of the year, be read as a reference to,

(a)

if the treaty specifies the maximum rate of tax that Canada may impose under this Part for the year on residents of that country, that rate;

(b)

if the treaty does not specify a maximum rate as described in paragraph (a) but does specify the maximum rate of tax that Canada may impose on a payment of interest in the year by a person resident in Canada to a related person resident in that country, that rate; and

(c)

in any other case, 25%.

Provisions applicable to Part

(5)

Sections 150 to 152, 158, 159, 160.1 and 161 to 167 and Division J of Part I apply to this Part with any modifications that the circumstances require.

Source: Justice Laws Website. Not an official version.

Historic text

This section has not been amended since the start of the point-in-time record on 31 August 2004.

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 218.2 links to the one before it.

Enacting and amending legislation

2001, c. 17, s. 176

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

This section refers to

s. 20.2

References are generated from the statutory text and list other sections of the Act only.

Citation

Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 218.2.