Financial Institutions Capital Tax Regulations
made under Section 71 of the
Income Tax Act
R.S.N.S. 1989, c. 217
O.I.C. 2021-248 (effective November 1, 2021), N.S. Reg. 135/2021
Table of Contents
Please note: this table of contents is provided for convenience of reference and does not form part of the regulations.
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Citation
Definitions
Basic capital deduction
Capital deduction
Allocation of basic capital deduction
Investment in related financial institution
Citation
1 These regulations may be cited as the Financial Institutions Capital Tax Regulations.
Definitions
2 In these regulations,
“basic capital deduction” means the basic capital deduction determined under
Section 3;
“registered office” of a loan or trust company means its registered office as
determined under the Trust and Loan Companies Act.
Basic capital deduction
3 A financial institution’s basic capital deduction for a taxation year is as follows:
(a) $5 million, if the total amount of the capital of the financial institution and
its related financial institutions is $10 million or less;
(b) $30 million, for a financial institution that is a trust company or a loan
company with its registered office in the Province;
(c) nil, in all circumstances other than in clauses (a) and (b).
Capital deduction
4 A financial institution’s capital deduction for a taxation year is the amount determined by
the following formula:
BCD + IRF
in which
BCD = the financial institution’s basic capital deduction for the taxation year,
allocated among related financial institutions in accordance with
Section 5;
IRF = the amount of the financial institution’s investment in related financial
institutions for the taxation year, as determined under Section 6.
Allocation of basic capital deduction
5 (1) A financial institution that is related to one or more other financial institutions at
the end of a taxation year may file with the Minister of Finance an agreement for
the allocation of the basic capital deduction as set out in the prescribed form on
behalf of the related group of which the financial institution is a member under
which an amount that does not exceed the basic capital deduction at the end of the
taxation year is allocated among the members of the related group for the taxation
year.
(2) The Minister of Finance may request a financial institution that was related to
another financial institution at the end of the year to file an agreement referred to in
subsection (1) and, if the financial institution does not file such an agreement
within 30 days after receiving the request, the Minister of Finance may allocate an
amount among the members of the related group of which the financial institution
is a member for the taxation year not exceeding the basic capital deduction.
(3) For the purposes of these regulations, the least amount allocated for a taxation year
to each member of a related group under an agreement described in subsection (1)
or by the Minister of Finance under subsection (2) is the basic capital deduction for
the taxation year of that member, but if no such allocation is made, the basic
capital deduction of each member of the related group for that year is nil.
(4) Subsections 190.15(5) and (6) of the Federal Act apply for the purposes of
calculating the basic capital deduction for each member of a related group under
these regulations with the necessary changes in detail, including the following:
(a) “capital deduction” in the Federal Act must be read as “basic capital
deduction”;
(b) “corporation” in the Federal Act must be read as “financial institution”.
Investment in related financial institution
6 (1) A financial institution’s investment for a taxation year in another financial
institution related to it is the following:
(a) for a financial institution that was resident in Canada at any time in the
taxation year, the total of all amounts, each of which is 1 of the following:
(i) the carrying value at the end of the taxation year of an eligible
investment of the financial institution in the other financial
institution,
(ii) for contributed surplus, the amount at the end of the taxation year of
an eligible investment of the financial institution in the other
financial institution;
(b) for a financial institution that is an authorized foreign bank, the total of all
amounts, each of which is 1 of the following:
(i) the amount at the end of the taxation year, before the application of
risk-weights, that would be required to be reported under the
guidelines if those guidelines applied and required a report at that
time, of an eligible investment of the financial institution in the other
financial institution that was used or held by the financial institution
in the taxation year in the course of carrying on its Canadian banking
business,
(ii) for an eligible investment that, at the end of the taxation year, is
contributed surplus of the other financial institution, the amount of
the surplus contributed by the financial institution in the course of
carrying on that business.
(2) For the purpose of subsection (1),
(a) an eligible investment of a financial institution in another financial
institution that is related to it must be 1 of the following:
(i) a share of the capital stock of the other financial institution,
(ii) long-term debt of the other financial institution,
(iii) a surplus of the other financial institution contributed by the financial
institution, other than an amount otherwise included as a share or
debt,
(b) at the end of the taxation year, the other financial institution referred to in
clause (a) must meet all of the following criteria:
(i) it is related to the financial institution,
(ii) it is resident in Canada or can reasonably be regarded as using the
surplus or the proceeds of the share or debt in a business carried on
by the other financial institution through a permanent establishment
in Canada,
(iii) it has a permanent establishment in the Province at any time during
the taxation year.
The following regulations are not yet in force and
are not included in the current consolidation: