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Statutes of Newfoundland 1996


CHAPTER 3

CHAPTER 3

AN ACT TO AMEND THE INCOME TAX ACT

(Assented to June 18, 1996)

Analysis

1. S.4.1 Added Surtax

2. S.6.2 Added Research and development tax credit

Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:


RSN1990 cI-1

1. The Income Tax Act is amended by adding immediately after section 4 the following:

Surtax

4.1 In addition to the income tax payable by an individual for the taxation year computed in accordance with section 4, every individual shall pay a personal income surtax in respect of the 1996 and subsequent taxation years equal to 10% of the amount by which the tax computed under section 4 for the taxation year exceeds $7,900, before deductions authorized under sections 8, 10 and 10.1.

2. The Act is amended by adding the following immediately after section 6.1:

Research and development tax credit

6.2 (1) In this section

(a) "eligible expenditure" means an expenditure made after 1995, by a taxpayer with a permanent establishment in the province in respect of scientific research to be carried out in the province that is a qualified expenditure under subsection 127(9) of the Federal Act, without reference to paragraph (b);

(b) "research and development tax credit" of a taxpayer at the end of a taxation year for expenditures made in the taxation year means the amount, if any, by which the aggregate of

(i) an amount equal to 15% of the aggregate of all amounts each of which is an eligible expenditure made by it in the year, computed without reference to subsection 13(7.1) of the Federal Act, and

(ii) an amount equal to the aggregate of all amounts each of which is an amount required by subsection (5) or (6) to be included in computing its research and development tax credit at the end of the year,

exceeds the aggregate of all amounts each of which is that portion of the amount deducted under subsection (2) from the tax otherwise payable under this Act by the taxpayer for a preceding taxation year.

(2) A taxpayer may deduct from the tax otherwise payable under this Act for a taxation year an amount not exceeding the lesser of

(a) its research and development tax credit at the end of the year; and

(b) its tax otherwise payable by it under this Act for the year.

(3) The amount by which the deduction referred to in paragraph (1)(b) to which a taxpayer is entitled exceeds the taxpayer's tax payable under this Act for the taxation year calculated without reference to this section may be applied by the Minister of Finance to pay any

(a) tax, interest or penalty owing by the taxpayer for that or any prior taxation year under this Act, the income statute of any agreeing province or the Federal Act;

(b) contribution, penalty or interest owing by the taxpayer for that or any prior taxation year as a result of payments required from the taxpayer under the Canada Pension Plan Act (Canada); and

(c) premium, interest or penalty owing by the taxpayer for that or any prior taxation year under the Unemployment Insurance Act (Canada),

and the part of the amount not so applied shall be paid to the taxpayer.

(4) A taxpayer referred to in subsection (3) does not include a taxpayer that is exempt from tax under section 149 of the Federal Act.

(5) Where in a particular taxation year of a taxpayer which is a beneficiary under a trust, an amount would, if the trust were a taxpayer, be, by virtue of subparagraph (1)(b)(ii), included in computing the research and development tax credit of the trust for its taxation year ending in that particular taxation year, the portion of that amount that may, having regard to all the circumstances including the terms and conditions of the trust, reasonably be considered to be the taxpayer's share shall be included in computing the research and development tax credit of the taxpayer at the end of that particular taxation year.

(6) Where in a particular taxation year of a taxpayer which is a member of a partnership, an amount would, if the partnership were a taxpayer, be, by virtue of subparagraph (1)(b)(ii), included in computing the research and development tax credit of the partnership for its taxation year ending in that particular taxation year, the portion of that amount that may reasonably be considered to be the taxpayer's share shall be included in computing the research and development tax credit of the taxpayer at the end of that particular taxation year.

(7) Where, after 1995, 2 or more taxpayers amalgamate within the meaning of subsection 87(1) of the Federal Act and one or more of the taxpayers had a research and development tax credit for any taxation year any portion of which was not deducted by it in computing its tax otherwise payable under this Act for any taxation year, for the purpose of determining the research and development tax credit of the new taxpayer for a taxation year preceding any taxation year of the new taxpayer, the new taxpayer shall be considered to be the same taxpayer as, and a continuation of, each such predecessor taxpayer.

(8) Where after 1995 a subsidiary is wound up within the meaning of subsection 88(1) of the Federal Act and the subsidiary had a research and development tax credit for any taxation year any portion of which was not deducted by it in computing its tax otherwise payable under this Act for any taxation year, for the purpose of determining the research and development tax credit of the parent for any taxation year preceding any taxation year of the parent, the parent shall be considered to be the same taxpayer as and a continuation of the subsidiary.

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