Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Overview
New Part 1.3 of the Act, as passed by the House of Commons on December 20, 1989, proposes to levy a 0.175% annual tax on a corporation's capital employed in Canada in excess of $ 10 million.
Generally speaking, this tax will be payable for taxation years ending after June, 1989 and will be required to be paid in monthly instalments commencing in 1990. The new tax will be creditable against the 3% corporate surtax imposed under section 123.2 of the Act to the extent that it is levied on income earned in Canada.
Relevant Sections
Subsection 181.1(1) of the Act sets the annual rate of the Part 1.3 tax at 0.175% of a corporation's taxable capital employed in Canada in excess of its capital deduction for the year.
Subsection 181.2(1) of the Act provides that the taxable capital employed in Canada of a corporation (other than a financial institution or a corporation that was throughout the year not resident in Canada) is to be determined under the Regulations. On February 1, 1990, Finance released draft Regulation 8600 for this purpose.
Subsection 181.2(2) of the Act defines the taxable capital of a corporation (other than a financial institution) for a taxation year as the amount, if any, by which its capital for the year (defined in subsection 181.2(3) of the Act) exceeds its investment allowance for the year (defined in subsection 181.2(4) of the Act).
Section 181.5 of the Act provides that the capital deduction of a corporation for a taxation year is $ 1O million. It also provides for a sharing of the 5 1O million amount between related corporations.
Meeting with Finance
In response to numerous queries received from Revenue Canada concerning the proposed Part 1.3 tax, Finance agreed to attend a meeting with us to discuss their intent and policy considerations inherent in the drafting of the Part 1.3 legislation.
On March 20, 1990, Doug McFadyen, Brian Ernewein and Dan McIntosh all of the Department of Finance met with numerous officials of the Rulings Directorate of Revenue Canada from the Bilingual Services Sections, Financial Institution Section, basing and Financing Section and the Resource Industries Section.
To assist us in replying to a query recently received from the Calgary District Office (our file #7-4766), A Nelson of the Resource Industries Section posed the following queries relating to the Oil and Gas Industry:
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© Sa Majesté la Reine du Chef du Canada, 1990
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