Income Tax Act — I-3.3 (a)
qualifying rent expense , in respect of a qualifying property for an eligible entity for a qualifying period, means the amount determined by the formula A − B where A is the lesser of $75,000 and the total of all amounts paid — under a written agreement entered into before October 9, 2020, or pursuant to the renewal (on substantially similar terms) or assignment of a written agreement entered into before October 9, 2020 — in respect of the qualifying period by the eligible entity to a party with which the eligible entity deals at arm’s length, each of which is (a) rent for the use of, or right to use, the qualifying property, (i) including (A) gross rent, (B) rent based on a percentage of sales, profit or a similar criterion, (C) amounts required to be paid under a net lease by the eligible entity either to the lessor or a third party, as (I) base rent, (II) regular instalments of operating expenses, such as insurance, utilities and common area maintenance expenses, customarily charged to the lessee under a net lease, (III) property and similar taxes, including school and municipal taxes, and (IV) regular instalments of other amounts payable to the lessor for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties, and (D) amounts received by the lessor under the Canada Emergency Commercial Rent Assistance program that were applied against rent payable in respect of the qualifying period, if those amounts would otherwise be required to be refunded to the eligible entity, and (ii) excluding (A) sales taxes, (B) amounts paid as, on account of, in lieu of payment of or in satisfaction of, damages, (C) amounts paid under a guarantee, security or similar indemnity or covenant, (D) payments arising due to default under the agreement by the eligible entity, (E) interest and penalties on unpaid amounts, (F) fees payable for discrete items or special services, and (G) reconciliation adjustment payments, and (b) in the case of qualifying property owned by the eligible entity that is not used by the eligible entity primarily to earn rental income or, where the qualifying property is used primarily by the eligible entity to earn rental income directly or indirectly from a person or partnership not dealing at arm’s length with the eligible entity, that is not used by that person or partnership primarily to earn rental income, (i) if there is a debt obligation secured by a mortgage or hypothec on the qualifying property, interest on the debt obligation to the extent that the amount of the debt obligation does not exceed the lesser of (A) the lowest total principal amount secured by one or more mortgages or hypothecs (provided the mortgage or hypothec has an amortization period) on the qualifying property at any time after it was acquired by the eligible entity (excluding any temporary period in the course of a refinancing transaction between the time when an existing mortgage is discharged and a new mortgage is registered), and (B) the cost amount of the qualifying property, (ii) amounts paid for insurance on the qualifying property, and (iii) property and similar taxes on the qualifying property, including school and municipal taxes; and B is the total of all amounts, each of which is received or receivable by the eligible entity in respect of the qualifying period, either directly or indirectly, from a party with which the entity deals at arm’s length and is described in paragraph (a) of the description of A. ( dépenses de loyer admissibles )