Guide - How to Complete the Statement of Adjusted International Business Income - Option A & B (FIN 575 and FIN 576)

This guide is to help you complete certain sections of the form that require additional detailed instructions. 

Functional Currency

Where a corporation has elected to file in a qualifying currency (functional currency) other than Canadian currency under section 261 of the Income Tax Act (Canada) (federal Act), the Statement of Adjusted IB Income - Option A (FIN 575) or Option B (FIN 576) should be filed in the same functional currency as reported in sections 10 to 12 of the applicable IBA Return.  Please see main guide for further information.

Option A (FIN 575) or Option B (FIN 576)

Complete Option A (FIN 575) for the international business carried on by the corporation:

  • where the corporation was registered for all or part of the tax year, but not all of the corporation’s income is from the international business, or
  • where the corporation was only registered for part of the tax year, and all (100%) of the corporation’s income is from the international business. 

Complete Option B (FIN 576) only if all (100%) of the corporation’s income is from the international business and the corporation was registered for the entire tax year.

Adjusted IB Income

Adjusted IB income = IB income – (foreign dividends + inducements)

IB income means:

  • for an international financial business, section 19 of the Act
  • for an international business other than an international financial business or international patent business, section 19.01(2) of the Act
  • for an international patent business, section 19.02 of the Act

Foreign dividends and inducements are defined below under either Option A (section 4) or Option B (section 3).

IB Income

IB income of an international business is defined as if the business’s income for the tax year was only from international financial activities or qualifying transactions, as applicable, for that part of the tax year that the corporation was registered under the IBA program.

For a corporation that is not a securities corporation, IB income includes the income or loss from certain foreign currency hedging transactions. The hedging transaction must have been made to reduce the risk of currency fluctuations related to an international financial activity or a qualifying transaction, as applicable, of the international business. 

A securities corporation is a savings institution or a corporation registered under the Securities Act as a dealer or underwriter.

Option A (FIN 575) Statement of Adjusted IB Income

Option A calculates the IB income by reporting the revenue (section 2) and expenses (section 3) on the same basis as for income tax purposes. Adjusted IB income is determined in section 4.

Section 2. IB Revenue as reported for income tax purposes

Box A - enter the subtotal of all of the revenues in Box A. 

List each of the IB revenues and the amount in the spaces provided. Attach a separate sheet if required. 

If the corporation is not a securities corporation, include any IB income or loss incurred by the international business due to a fluctuation in a foreign currency as noted above.

Section 3. IB expenses deducted for income tax purposes

Box B - enter the subtotal of all of the expenses in Box B. 

List each of the IB expenses and the amount in the spaces provided. 

Include all amounts that relate to the international business that have been deducted in determining the corporation’s business income or loss for income tax purposes for the tax year. In determining IB expenses, any allocation method chosen should be reasonable in the circumstances and should substantiate the amount claimed.

For example:

  • The corporation conducts two businesses, only one of which is an international business.
  • 30% of the undepreciated capital cost (UCC) balance relates to the international business and it is reasonable to allocate CCA on this basis. 
  • CCA claimed on the T2: $100. 
  • Amount of CCA to include as an IB expense: $30. 

Where the corporation has registered an IB specialist as an executive specialist, or an administrative support services or back-up office services specialist, all amounts paid or payable to the IB specialist(s) as salary, wages or other remuneration or benefits for that part of the year that the IB specialist was registered must be deducted in determining IB income, whether or not the amounts relate to the international business.

Section 4. Calculation of adjusted IB income 

Box D - dividends from foreign affiliates are amounts included under section 12(1)(k) of the federal Act in computing IB income (loss) of the international business for the tax year, if the corporation makes a deduction under section 113 of the federal Act.

Box E - inducements (including government assistance) are amounts included under section 12(1)(x) of the federal Act in computing the IB income (loss) of the international business for the tax year. Do not include any amounts elected under section 12(2.2) of the federal Act.

Box G (adjusted IB Income) - subtract Box F from Box C and enter the calculated amount in Box G. Enter this amount in Box 12D of either FIN 546 or FIN 578, whichever is applicable, and attach a copy of this form.

Option B (FIN 576), Statement of Adjusted IB Income

Option B reconciles net income for income tax purposes, as reported on the T2, to IB income for the international business. Itemize each applicable addition or deduction in the spaces provided (section 2). Adjusted IB income is determined in section 3.

Section 2. Net Income per section 3 of the Income Tax Act (Canada) (Line 300 of T2)

Box B - subtotal of all amounts that were deducted in determining the corporation’s net income for tax purposes that are not part of IB income. Amounts to be added back include but are not limited to:

  • Rental losses from property claimed in determining net income for tax purposes.
  • Other losses from property claimed in determining net income for tax purposes. 
  • Any other losses or expenses that are included in determining the corporation's net income for tax purposes but are not permitted in determining IB income. 

Box C - subtotal of all amounts that were included in determining the corporation’s net income for tax purposes that are not part of IB income. Amounts to be deducted include but are not limited to:

  • taxable capital gains included in determining net income for tax purposes,
  • rental income from property included in determining net income for tax purposes,
  • other income from property included in determining net income for tax purposes,
  • dividends included in determining net income for tax purposes (other than from foreign affiliates), and
  • any other income or gains that are included in determining the corporation's net income for tax purposes but are not permitted in determining IB income.

Section 3. Calculation of adjusted of IB Income 

Box E - dividends from foreign affiliates are amounts included under section 12(1)(k) of the federal Act in computing IB income (loss) of the international business for the tax year, if the corporation makes a deduction under section 113 of the federal Act.

Box F - inducements (including government assistance) are amounts included under section 12(1)(x) of the federal Act in computing the IB income (loss) of the international business for the tax year. Do not include any amounts elected under section 12(2.2) of the federal Act.

Box H (adjusted IB Income) - subtract Box G from Box D and enter the calculated amount in Box H. Enter this amount in Box 12D of either FIN 546 or FIN 578, whichever is applicable, and attach a copy of this form.

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