u No. 64 2nd Session, 15th Legislature, Alberta 13 Elizabeth II BILL 64 A Bill to amend The Alberta Income Tax Act HON. MR. AALBORG Printed by L. S. WALL, Printer to the Queen's Most Exce1lent Majesty, Edmonton, Alberta, 1965

Explanatory Note I. This Bill amends

chapter 1 of the Statutes of Alberta, 1961 (2nd Sess.)

Section 4, subsection (3), clause (

d) presently reads:

(3) For the purposes of this

section the percentage of the tax pay­ able under the federal Act to be used for computing the tax payaible under this

section is as foHows: (

d) nineteen per cent in respect of the 1965 taxation year.

Section 41 of the federal Act provides for a foreign tax credit for taxes paid to a foreign country. A distinction is made between business income and investment income from foreign sources. The federal foreign tax credit relating to foreign business income is calculated with reference to the tax before the provincial abate­ ment. The tax credit for investment income is calculated after the provincial abatement. Foreign business income is not subject to provincial tax, and therefore the federal foreign tax credit acts to absorb the maximum foreign tax which may be allowed in Canada.

Foreign investment income is subject to provincial tax and the federal foreign tax credit acts to absorb only that part of foreign tax which relates to the federal share of the tax in Canada. In many cases, the federal foreign tax credit will absorb all the foreign tax and no balance will remain to apply against provincial tax otherwise payable. In other cases, an amount will remain unabsorbed by federal tax credits, and it is the intention of this legislation to establish the rules by which this excess may be applied against provincial income tax otherwise payable.

The limiting factor in determining the provincial foreign tax credit is: the lesser of (

a) the foreign tax credit which has not been absorbed by the federal tax, or (b) 9% of the foreign investment income which is attributable to the province.

BILL No. 64 of 1965

An Act to amend The Alberta Income Tax Act (Assented to , 1965) HER MAJE.ST~, by and with the advice and consent of the LegIslative Assembly of the Province of Alberta, enacts as follows: 1. The Alberta Income Tax Act is hereby amended. 2. 8ection 4, subsection (3) is amended by striking out clause (

d) and by substituting the following: (

d) twenty-one per cent in respect of the 1965 taxation year; (

e) twenty-four per cent in respect of the 1966 taxa­ tion year.

Section 5 is amended by adding the following sub­ sections:

(4) Where there has been included in computing the in­ come for a taxation year of a corporation that maintained a permanent establishment in Alberta at any time in the taxa­ tion year amounts received by the corporation in the year as dividends, interest, rents or royalties that were derived from sources in a country other than Canada (in this sec­ tion referred to as "foreign investment income") and where the corporation is entitled to a deduction under sec­ tion 41 of the federal Act in respect of the foreign invest­ ment income, the corporation may deduct from the tax for the year otherw,ise payable under this Act an amount equal to the lesser of, (

a) nine per cent of the product of (

i) the foreign investment income of the corpora­ tion for the year minus amounts that are de­ ductible under paragraph (

d) of subsection (1) of

section 28 of the federal Act that were included in its foreign investment income for that year, and (ii) that proportion of the taxable income earned in the year by the corporation that is deter­ mined to have been earned in the year in Al­ berta in accordance with regulations made under subsection (2) of

section 10 of the federal Act, or

4. Commencement of Act. 2

(

b) that pr'OP'Orti'On 'Of the am'Ount of the deducti'On fr.om the. tax f'Or the year 'Otherwise payable by the 'c.orp'OratIOn under

Part I 'Of the federal Act that W'Ould l?e permitted under subsecti'On (1) .or (1a) 'Of sectI'On 41 'Of that Act if subparagraph (ii) 'Of paragraph (b) 'Of subsecti'On (la) and subsecti'On (5) 'Of that

section did n'Ot c'Ontain a reference to secti'On 40 .of that Act minus the am'Ount of such deducti'On permitted by either subsecti'On (1) 'Or (1a) .of secti'On 41 'Of the said Act that (

i) the taxable inc'Ome earned in the year in Al­ berta by the c.orp'Orati'On as determined in a,cc'Ordance with regulati'Ons made under sub­ section (2) 'Of secti'On 40 'Of the federal Act is of (ii) the aggregate 'Of the taxable income earned in the year in each pr.ovince by the c'Orp'Orati'On as determined in acc.ordance with regulati.ons made under subsecti'On (2) ,'Of

section 40 'Of the federal Act.

(5) Where the inc'Ome 'Of a c'Orp'Orati'On for a taxation year includes inc'Ome from s'Ources in more than one country other than Canada, subsection (4) shaH be read as pr.oviding f'Or separate deducti'Ons in respect of each of the c'Ountries other than Canada. 4. ~his Act comes into force on the day upon which it is assented to and UP.on so c'Oming into force shall be dee~ed to have been in force at all times .on and after the fIrst day ,of J,anuary, 1965. 2

1'10. 04 SECOND SESSION FIFTEENTH LEGISLATURE 13 ELIZABET'H II 1965 BILL

An Act to amend The Alberta Income Tax Act Received and read the First time ......................................... . Second time ....................................... . Third time ......................................... . HON. MR. AALBORG Title: 1965 (15th, 2nd) Bill 64,

An Act to amend The Alberta Income Tax Act