Income Tax Act — I-3.3 126
elate to amounts that are included in computing the bank’s taxable income earned in Canada from its Canadian banking business; and (f) the definition tax-exempt income in subsection (7) shall be read as follows: “ tax-exempt income means income of a taxpayer from a source in a particular country in respect of which (a) the taxpayer is, because of a comprehensive agreement or convention for the elimination of double taxation on income, which has the force of law in the particular country and to which a country in which the taxpayer is resident is a party, entitled to an exemption from all income or profits taxes, imposed in the particular country, to which the agreement or convention applies, and (b) no income or profits tax to which the agreement or convention does not apply is imposed in the particular country;”. Idem (2) Where a taxpayer who was resident in Canada at any time in a taxation year carried on business in the year in a country other than Canada, the taxpayer may deduct from the tax for the year otherwise payable under this Part by the taxpayer an amount not exceeding the least of (a) such part of the total of the business-income tax paid by the taxpayer for the year in respect of businesses carried on by the taxpayer in that country and the taxpayer’s unused foreign tax credits in respect of that country for the 10 taxation years immediately preceding and the 3 taxation years immediately following the year as the taxpayer may claim, (b) the amount determined under subsection 126(2.1) for the year in respect of businesses carried on by the taxpayer in that country, and (c) the amount by which (i) the tax for the year otherwise payable under this Part by the taxpayer exceeds (ii) the amount or the total of amounts, as the case may be, deducted under subsection 126(1) by the taxpayer from the tax for the year otherwise payable under this Part. Amount determined for purposes of para. (2)(b) (2.1) For the purposes of paragraph 126(2)(b), the amount determined under this subsection for a year in respect of businesses carried on by a taxpayer in a country other than Canada is the total of (a) that proportion of the tax for the year otherwise payable under this Part by the taxpayer that (i) the amount, if any, by which the total of the taxpayer’s qualifying incomes exceeds the total of the taxpayer’s qualifying losses (A) for the year, if the taxpayer is resident in Canada throughout the year, and (B) for the part of the year throughout which the taxpayer is resident in Canada, if the taxpayer is non-resident at any time in the year, from businesses carried on by the taxpayer in that country is of (ii) the total of (A) the amount, if any, by which (I) if the taxpayer is resident in Canada throughout the year, the taxpayer’s income for the year computed without reference to paragraph 20(1)(ww), and (II) if the taxpayer is non-resident at any time in the year, the amount determined under paragraph 114(a) in respect of the taxpayer for the year exceeds (III) the total of all amounts each of which is an amount deducted under section 110.6, 110.61 or 110.62 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (g) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and (B) the amount, if any, added under section 110.5 in computing the taxpayer’s taxable income for the year, and (b) that proportion of the amount, if any, added under subsection 120(1) to the tax for the year otherwise payable under this Part by the taxpayer that (i) the amount determined under subparagraph (a)(i) in respect of the country is of (ii) the amount, if any, by which, (A) where section 114 does not apply to the taxpayer in respect of the year, the taxpayer’s income for the year, and (B) where section 114 applies to the taxpayer in respect of the year, the total of the taxpayer’s income for the period or periods referred to in paragraph 114(a) and the amount that would be determined under paragraph 1