Partnerships that are subject to Specified Investment Flow Through (SIFT) tax

Partnerships have to pay income tax in monthly instalments when the total of Part IX.1 tax payable for either the previous year or the current year is more than $3,000.

A SIFT partnership is liable to pay tax under Part IX.1, section 197, of the Income Tax Act (ITA). For this purpose, the partnership information return is considered as the Part IX.1 tax return which is required to be filed by a SIFT partnership. Part IX.1 tax applies on a SIFT partnership's income from non-portfolio property and on income from carrying on a business in Canada.

The Part IX.1 tax payable by a SIFT partnership reduces the amount of income that will be subject to tax in the hands of the members of the partnership under Part I of the ITA. The difference between the taxable non-portfolio earnings and the Part IX.1 tax payable is deemed to be a dividend received by the partnership from a taxable Canadian corporation. In addition, if a SIFT partnership has Quebec SIFT tax payable, such tax should also be deducted from the taxable non-portfolio earnings when determining the deemed dividend.

The result is that members of the partnership who are residents of Canada are deemed to have received an "eligible dividend". For individuals, this "eligible dividend" qualifies for the enhanced dividend tax credit and in the case of corporations, it qualifies for inclusion in the General Rate Income Pool. A partner that is a corporation resident in Canada may also be eligible for a dividend deduction under section 112 of the ITA.

SIFT partnerships have to file Form T5013-1, Part IX.1 tax calculation – SIFT Partnerships, with their partnership information return. This form includes charts to calculate the amount of Part IX.1 tax payable and the allocation to the applicable jurisdictions, the balance due or the overpayment, and the deemed dividend.

For more information about SIFT partnerships, contact our Business Enquiries service at 1-800-959-5525.

Forms and Publications

• T5013 Partnership Information Return guide T4068 and forms
• T5013-1 Part lX.l income tax calculation – SIFT Partnerships

Date modified:

2016-03-03