Income Tax Act — I-3.3 245
Preamble 245 (0.1) This section of the Act contains the general anti-avoidance rule, which (a) applies to deny the tax benefit of avoidance transactions that result directly or indirectly either in a misuse of provisions of the Act (or any of the enactments listed in subparagraphs (4)(a)(ii) to (v)) or an abuse having regard to those provisions read as a whole, while not preventing taxpayers from obtaining tax benefits contemplated by Parliament; and (b) strikes a balance between (i) the Government of Canada’s responsibility to protect the tax base and the fairness of the tax system, and (ii) taxpayers’ need for certainty in planning their affairs. Definitions (1) In this section, tax benefit means (a) a reduction, avoidance or deferral of tax or other amount payable under this Act, and includes a reduction, avoidance or deferral of tax or other amount that would be payable under this Act but for a tax treaty, (b) an increase in a refund of tax or other amount under this Act, and includes an increase in a refund of tax or other amount under this Act as a result of a tax treaty, or (c) a reduction, increase or preservation of an amount that could at a subsequent time (i) be relevant for the purpose of computing an amount referred to in paragraph (a) or (b), and (ii) result in any of the effects described in paragraph (a) or (b); ( avantage fiscal ) tax consequences , to a person, means (a) the amount of income, taxable income or taxable income earned in Canada of the person under this Act, (b) the tax or other amount payable by, or refundable to, the person under this Act, or (c) any other amount that is, or could at a subsequent time be, relevant for the purpose of computing an amount referred to in paragraph (a) or (b); ( attribut fiscal ) transaction includes an arrangement or event. ( opération ) General anti-avoidance provision (2) Where a transaction is an avoidance transaction, the tax consequences to a person shall be determined as is reasonable in the circumstances in order to deny a tax benefit that, but for this section, would result, directly or indirectly, from that transaction or from a series of transactions that includes that transaction. Avoidance transaction (3) Unless it may reasonably be considered that obtaining the tax benefit is not one of the main purposes for undertaking or arranging a transaction, the transaction is an avoidance transaction if the transaction (a) but for this section, would result, directly or indirectly, in a tax benefit; or (b) is part of a series of transactions, which series, but for this section, would result, directly or indirectly, in a tax benefit. Application of subsection (2) (4) Subsection (2) applies to a transaction only if it may reasonably be considered that the transaction (a) would, if this Act were read without reference to this section, result directly or indirectly in a misuse of the provisions of any one or more of (i) this Act, (ii) the Income Tax Regulations , (iii) the Income Tax Application Rules , (iv) a tax treaty, or (v) any other enactment that is relevant in computing tax or any other amount payable by or refundable to a person under this Act or in determining any amount that is relevant for the purposes of that computation; or (b) would result directly or indirectly in an abuse having regard to those provisions, other than this section, read as a whole. Economic substance — effect (4.1) If an avoidance transaction — or a series of transactions that includes the avoidance transaction — is significantly lacking in economic substance, this is an important consideration that tends to indicate that the transaction results in a misuse under paragraph (4)(a) or an abuse under paragraph (4)(b). Economic substance — meaning (4.2) Factors that establish that a transaction or series of transactions is significantly lacking in economic substance may include, but are not limited to, any of the following: (a) all or substantially all of the opportunity for gain or prof