ontario regulation 624/05

made under the

corporations tax act

Made: December 7, 2005
Filed: December 8, 2005
Published on e-Laws: December 9, 2005
Printed in The Ontario Gazette: December 24, 2005


Amending Reg. 183 of R.R.O. 1990

(General)

1. Section 506 of Regulation 183 of the Revised Regulations of Ontario, 1990 is amended by adding the following heading and subsection:

Instalment Base

(0.1) This section applies only in respect of taxation years commencing before January 1, 2006.

2. The Regulation is amended by adding the following section:

507. (1) For the purposes of subsection 78 (8) of the Act,

“first instalment base” means, in respect of a corporation for a particular taxation year commencing after December 31, 2005, the amount determined under this section;

“second instalment base” means, in respect of a corporation for a particular taxation year commencing after December 31, 2005, the amount determined under this section.

(2) For the purposes of the definition of “first instalment base” in subsection (1) and except as otherwise provided in this section, the amount of a corporation’s first instalment base for a taxation year is the product obtained when the amount of tax payable by the corporation under the Act for its immediately preceding taxation year is multiplied by the ratio of 365 to the number of days in its immediately preceding taxation year.

(3) For the purposes of the definition of “second instalment base” in subsection (1) and except as otherwise provided in this section, the amount of a corporation’s second instalment base for a taxation year is the amount of its first instalment base for its immediately preceding taxation year.

(4) If the number of days in the taxation year immediately preceding the particular taxation year of a corporation is less than 183, the amount of the corporation’s first instalment base for the particular taxation year is the greater of,

(a) the amount that would be its first instalment base as otherwise determined under this section; and

(b) the amount determined by multiplying the amount of tax payable by the corporation under the Act for its last prior taxation year that had more than 182 days by the ratio of 365 to the number of days in that prior taxation year.

(5) If the corporation is a new corporation formed as a result of an amalgamation within the meaning of section 87 of the Income Tax Act (Canada),

(a) the amount of its first instalment base for its first taxation year is the sum of all amounts, each of which is the product of the tax payable under the Act by a predecessor corporation, within the meaning of section 87 of the Income Tax Act

(Canada), for the predecessor corporation’s last taxation year multiplied by the ratio of 365 to the number of days in the predecessor corporation’s last taxation year;

(b) the amount of its second instalment base for its first taxation year is the sum of all amounts each of which is the first instalment base of a predecessor corporation for its last taxation year;

(c) the amount of its first instalment base for its second taxation year is,

(i) the amount that would be determined under this section, without regard to this subsection, to be its first instalment base for that taxation year if the number of days in its first taxation year exceeds 182, or

(ii) the amount that would be determined under this section, without regard to this subsection, to be its first instalment base for the taxation year or the amount of its first instalment base for its first taxation year as determined under clause (a), whichever is greater, if the number of days in its first taxation year is less than 183; and

(d) the amount of its second instalment base for its second taxation year is the amount of its first instalment base for its first taxation year as determined under clause (a).

(6) Despite clause (5) (a), if there are fewer than 183 days in the last taxation year of a predecessor corporation, the amount included under that clause in respect of the predecessor corporation in determining the amount of the new corporation’s first instalment base for its first taxation year shall be the greater of,

(a) the amount that would otherwise be determined in respect of the predecessor corporation for the purposes of clause (5) (a); and

(b) the amount of the predecessor corporation’s first instalment base for its last taxation year.

(7) Subject to subsection (8), the following rules apply if a subsidiary, within the meaning of subsection 88 (1) of the Income Tax Act (Canada), is winding up and, at a particular time in the course of the winding up, all or substantially all of the property of the subsidiary has been distributed to the corporation that is its parent, within the meaning of that subsection:

1. The amount of the parent’s first instalment base, as otherwise determined under this section, for its taxation year that includes the particular time shall be increased by the amount of the subsidiary’s first instalment base for its taxation year that includes the particular time.

2. The amount of the parent’s second instalment base, as otherwise determined under this section, for its taxation year that includes the particular time shall be increased by the amount of the subsidiary’s second instalment base for its taxation year that includes the particular time.

3. The amount of the parent’s first instalment base, as otherwise determined under this section, for its first taxation year after the taxation year that includes the particular time shall be increased by the amount determined by multiplying the subsidiary’s first instalment base for its taxation year that includes the particular time by the number of complete months in the parent’s taxation year that includes the particular time that ended at or before the particular time and dividing the product by 12;

4. The amount of the parent’s second instalment base, as otherwise determined under this section, for its first taxation year after the taxation year that includes the particular time shall be increased by the amount of the subsidiary’s first instalment base for its taxation year that includes the particular time.

(8) Subsection (7) does not apply at any time before the particular time referred to in that subsection in determining the amount of the parent’s first instalment base or second instalment base for the purposes of section 78 of the Act.

(9) Subject to subsection (10), the following rules apply if, at a particular time, a corporation, referred to in this subsection as the “transferor”, has disposed of all or substantially all of its property to another corporation, referred to in this subsection as the “transferee”, with whom the transferor was not dealing at arm’s length and subsection 85 (1) or (2) of the Income Tax Act (Canada) applies in respect of the disposition of any of the property:

1. The amount of the transferee’s first instalment base, as otherwise determined under this section, for its taxation year that includes the particular time shall be increased by the amount of the transferor’s first instalment base for its taxation year that includes the particular time.

2. The amount of the transferee’s second instalment base, as otherwise determined under this section, for its taxation year that includes the particular time shall be increased by the amount of the transferor’s second instalment base for its taxation year that includes the particular time.

3. The amount of the transferee’s first instalment base, as otherwise determined under this section, for its first taxation year after the taxation year that includes the particular time shall be increased by the amount determined by multiplying the transferor’s first instalment base for its taxation year that includes the particular time by the number of complete months in the taxation year of the transferee that includes the particular time that ended at or before the particular time and dividing the product by 12.

4. The amount of the transferee’s second instalment base, as otherwise determined under this section, for its first taxation year after the taxation year that includes the particular time shall be increased by the amount of the transferor’s first instalment base for its taxation year that includes the particular time.

(10) Subsection (9) does not apply at any time before the particular time referred to in that subsection in determining the amount of the transferee’s first instalment base or second instalment base for the purposes of section 78 of the Act.

(11) The following rules apply if a particular taxation year of a corporation is the first or second taxation year in which section 83.1 of the Act applies to the corporation:

1. The amount of the corporation’s first instalment base, as otherwise determined under this section, for the first taxation year in which section 83.1 of the Act applies to it shall be increased by the sum of all amounts, if any, each of which is the product of an amount payable to the Financial Corporation under subsection 90 (1) or 93 (2) of the Electricity Act, 1998 by the corporation or by a predecessor corporation, within the meaning of section 83.1 of the Act, for the immediately preceding taxation year multiplied by the ratio of 365 to the number of days in the immediately preceding taxation year.

2. The amount of the corporation’s second instalment base, as otherwise determined under this section, for the first taxation year in which section 83.1 of the Act applies to it shall be increased by the amount, if any, by which the corporation’s first instalment base for its immediately preceding taxation year would have been increased under paragraph 1 if its immediately preceding taxation year had been the first taxation year in which section 83.1 of the Act applied to the corporation;

3. The amount of the corporation’s second instalment base, as otherwise determined under this section, for the taxation year immediately after the first taxation year in which section 83.1 of the Act applies to it is the amount of the corporation’s first instalment base for the first taxation year in which section 83.1 of the Act applies to it.

4. If the taxation year of the corporation or of a predecessor corporation that immediately precedes the first taxation year of the corporation in which section 83.1 of the Act applies to the corporation is less than 183 days, the corporation’s first instalment base for its first taxation year in which section 83.1 of the Act applies shall be increased by the greater of,

i. the amount by which its first instalment base would otherwise be increased under paragraph 1 for that taxation year, and

ii. the amount that would be determined under paragraph 1 if the reference to the immediately preceding taxation year were read as a reference to the last prior taxation year of the corporation or predecessor corporation that had more than 182 days.

(12) In this section, a reference to the amount of tax payable under the Act by a corporation for a taxation year is a reference to the amount of tax that would have been payable under the Act if no amount in respect of any loss for a later taxation year were deductible in determining the corporation’s taxable income for the taxation year.

3. This Regulation comes into force on January 1, 2006.