Timing of recceipt of benefit of tax credit
¶ 17. Federal and provincial tax credits and deductions from tax which are in the nature of inducements, or which are received as assistance for the cost of property or an expense, are included in income under paragraph 12(1)(x) in the year received unless one of the exceptions discussed in ¶ 8 applies. The federal small business deduction is an example of a deduction from tax that is neither an inducement nor assistance for the cost of a property or expense and thus, is not included in income under paragraph 12(1)(x). A tax credit or deduction from tax is considered to be received (and therefore included in income if it is an inducement or assistance in respect of the cost of property or an expense) at the earliest of when it is applied:
- to reduce a taxpayer's tax instalment payable, and
- to create or increase a tax refund or to reduce tax liability for a taxation year.
Note that although subsections 125.4(5) and 125.5(5) deem the tax credits in respect of film or video productions to be assistance for the purpose of paragraph 12(1)(x), these provisions were enacted to establish the timing of the receipt of the assistance for all purposes of the Income Tax Act. In contrast to the general timing rule described above, by virtue of subsections 125.4(5) and 125.5(5), tax credits received under sections 125.4 and 125.5 are always considered to be received before the end of the taxation year to which the credits pertain. The lack of such a deeming provision in respect of other tax credits or deductions from tax does not mean that such amounts are not considered to be government assistance.
