CO-771.R.3, Breakdown Of Business Carried On In Québec And ...

A corporation that has an establishment in Québec at any time in a taxation year must pay, for that year,

• income tax on its taxable income,
• tax on its paid-up capital, and  
• compensation tax on its paid-up capital, in the case of a bank, loan corporation, trust corporation or corporation trading in securities that is both subject to Part IV of the Taxation Act and a financial institution.

However, if such a corporation also has an establishment outside Québec,

• the income that takes into account the foreign tax credit is equal to its income determined on line 36 of form CO-771,
• the Québec income tax payable is equal to its income tax determined on line 420d of form CO-17,
• the tax on capital payable is equal to its tax on capital determined on line 427a of form CO-17,
• the compensation tax is equal to its compensation tax calculated on line 16 of form CO-1159.2,

multiplied by the proportion of business carried on Québec, in relation to the total business (i.e., the business carried on in Québec, other jurisdictions in Canada, and elsewhere).

This proportion corresponds to half of the aggregate of

1. the ratio between the corporation’s gross revenue for the year reasonably attributable to any establishment(s) in the province or territory or outside Canada and the corporation’s total gross revenue for the year;
2. the ratio between the salaries and wages paid by the corporation during the year to employees of any establishment(s) in the province or territory or outside Canada and the total salaries and wages paid by the corporation during the year.

22, 27, 771 para. 2, 1131, 1133 and 771R3*