Income Tax Amendments Act, 2000 (S.C. 2001, c. 17)
Full Document:
Assented to 2001-06-14
88. (1) Subsection 112(2.2) of the Act is replaced by the following:
Marginal note:Guaranteed shares
(2.2) No deduction may be made under subsection (1), (2) or 138(6) in computing the taxable income of a particular corporation in respect of a dividend received on a share of the capital stock of a corporation that was issued after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 where
(a) a person or partnership (in this subsection and subsection (2.21) referred to as the “guarantor”) that is a specified financial institution or a specified person in relation to any such institution, but that is not the issuer of the share or an individual other than a trust, is, at or immediately before the time the dividend is paid, obligated, either absolutely or contingently and either immediately or in the future, to effect any undertaking (in this subsection and subsections (2.21) and (2.22) referred to as a “guarantee agreement”), including any guarantee, covenant or agreement to purchase or repurchase the share and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the particular corporation or any specified person in relation to the particular corporation given to ensure that
(i) any loss that the particular corporation or a specified person in relation to the particular corporation may sustain by reason of the ownership, holding or disposition of the share or any other property is limited in any respect, or
(ii) the particular corporation or a specified person in relation to the particular corporation will derive earnings by reason of the ownership, holding or disposition of the share or any other property; and
(b) the guarantee agreement was given as part of a transaction or event or a series of transactions or events that included the issuance of the share.
Marginal note:Exceptions
(2.21) Subsection (2.2) does not apply to a dividend received by a particular corporation on
(a) a share that is at the time the dividend is received a share described in paragraph (e) of the definition “term preferred share” in subsection 248(1);
(b) a grandfathered share, a taxable preferred share issued before December 16, 1987 or a prescribed share;
(c) a taxable preferred share issued after December 15, 1987 and of a class of the capital stock of a corporation that is listed on a prescribed stock exchange where all guarantee agreements in respect of the share were given by one or more of the issuer of the share and persons that are related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the issuer unless, at the time the dividend is paid to the particular corporation, dividends in respect of more than 10 per cent of the issued and outstanding shares to which the guarantee agreement applies are paid to the particular corporation or the particular corporation and specified persons in relation to the particular corporation; or
(d) a share
(i) that was not acquired by the particular corporation in the ordinary course of its business,
(ii) in respect of which the guarantee agreement was not given in the ordinary course of the guarantor’s business, and
(iii) the issuer of which is, at the time the dividend is paid, related (otherwise than because of a right referred to in paragraph 251(5)(b)) to both the particular corporation and the guarantor.
Marginal note:Interpretation
(2.22) For the purposes of subsections (2.2) and (2.21),
(a) where a guarantee agreement in respect of a share is given at any particular time after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987, otherwise than under a written arrangement to do so entered into before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987, the share is deemed to have been issued at the particular time and the guarantee agreement is deemed to have been given as part of a series of transactions that included the issuance of the share; and
(b) “specified person” has the meaning assigned by paragraph (h) of the definition “taxable preferred share” in subsection 248(1).
(2) Subparagraphs 112(3.2)(a)(iii) and (3.3)(a)(iii) of the Act are amended by replacing the reference to the fraction “1/4” with a reference to the fraction “1/2”.
(3) Subsection (1) applies in respect of dividends received after 1998.
(4) Subsection (2) applies to dispositions that occur after February 27, 2000 except that, for dispositions that occurred before October 18, 2000, the reference to the fraction “1/2” in subparagraphs 112(3.2)(a)(iii) and (3.3)(a)(iii) of the Act, as enacted by subsection (2), shall be read as a reference to the fraction “1/3”.
89. (1) Sections 114 and 114.1 of the Act are replaced by the following:
Marginal note:Individual resident in Canada for only part of year
114. Notwithstanding subsection 2(2), the taxable income for a taxation year of an individual who is resident in Canada throughout part of the year and non-resident throughout another part of the year is the amount, if any, by which
(a) the amount that would be the individual’s income for the year if the individual had no income or losses, for the part of the year throughout which the individual was non-resident, other than
(i) income or losses described in paragraphs 115(1)(a) to (c), and
(ii) income that would have been included in the individual’s taxable income earned in Canada for the year under subparagraph 115(1)(a)(v) if the part of the year throughout which the individual was non-resident were the whole taxation year,
exceeds the total of
(b) the deductions permitted by subsection 111(1) and, to the extent that they relate to amounts included in computing the amount determined under paragraph (a), the deductions permitted by any of paragraphs 110(1)(d) to (d.2) and (f), and
(c) any other deduction permitted for the purpose of computing taxable income to the extent that
(i) it can reasonably be considered to be applicable to the part of the year throughout which the individual was resident in Canada, or
(ii) if all or substantially all of the individual’s income for the part of the year throughout which the individual was non-resident is included in the amount determined under paragraph (a), it can reasonably be considered to be applicable to that part of the year.
(2) Subsection (1) applies to the 1998 and subsequent taxation years.
90. (1) Subparagraph 115(1)(a)(i) of the Act is replaced by the following:
(i) incomes from the duties of offices and employments performed by the non-resident person in Canada and, if the person was resident in Canada at the time the person performed the duties, outside Canada,
(2) Subparagraph 115(1)(a)(ii) of the Act is replaced by the following:
(ii) incomes from businesses carried on by the non-resident person in Canada which, in the case of the Canadian banking business of an authorized foreign bank, is, subject to this Part, the profit from that business computed using the bank’s branch financial statements (within the meaning assigned by subsection 20.2(1),
(3) Paragraph 115(1)(a) of the Act is amended by striking out the word “and” at the end of subparagraph (v), by adding the word “and” at the end of subparagraph (vi) and by adding the following after subparagraph (vi):
(vii) in the case of an authorized foreign bank, the amount claimed by the bank to the extent that the inclusion of the amount in income
(A) increases any amount deductible by the bank under subsection 126(1) for the year, and
(B) does not increase an amount deductible by the bank under section 127 for the year,
(4) Paragraphs 115(1)(b) and (b.1) of the Act are replaced by the following:
(b) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were taxable capital gains and allowable capital losses from dispositions of taxable Canadian properties (other than treaty-protected properties), and
(5) Paragraph 115(1)(d) of the Act is replaced by the following:
(d) the deductions permitted by subsection 111(1) and, to the extent that they relate to amounts included in computing the amount determined under any of paragraphs (a) to (c), the deductions permitted by any of paragraphs 110(1)(d) to (d.2) and (f) and subsection 110.1(1),
(6) Subsection 115(1) of the Act is amended by striking out the word “and” at the end of paragraph (e) and by adding the following after paragraph (e):
(e.1) the deduction permitted by subsection (4.1), and
(7) Paragraphs 115(2)(b) and (b.1) of the Act are replaced by the following:
(b) a student attending, or a teacher teaching at, an educational institution outside Canada that is a university, college or other educational institution providing courses at a post-secondary school level, who in any preceding taxation year ceased to be resident in Canada in the course of or subsequent to moving to attend or to teach at the institution,
(b.1) an individual who in any preceding taxation year ceased to be resident in Canada in the course of or subsequent to moving to carry on research or any similar work under a grant received by the individual to enable the individual to carry on the research or work,
(8) Section 115 of the Act is amended by adding the following after subsection (2):
Marginal note:Non-resident actors
(2.1) Notwithstanding subsection (1), where a non-resident person is liable to tax under subsection 212(5.1), or would if this Act were read without reference to subsection 212(5.2) be so liable, in respect of an amount paid, credited or provided in a particular taxation year, the amount shall not be included in computing the non-resident person’s taxable income earned in Canada for any taxation year unless a valid election is made under subsection 216.1(1) in respect of the non-resident person for the particular year.
Marginal note:Deferred payment by actor’s corporation
(2.2) Where a corporation is liable to tax under subsection 212(5.1) in respect of a corporation payment (within the meaning assigned by subsection 212(5.2)) made in a taxation year in respect of an actor and, in a subsequent year, the corporation makes an actor payment (within the meaning assigned by subsection 212(5.2)) to or for the benefit of the actor, the amount of the actor payment is not deductible in computing the income of the corporation for any taxation year and is not included in computing the taxable income earned in Canada of the actor for any taxation year.
(9) Subsection 115(3) of the Act is repealed.
(10) Section 115 of the Act is amended by adding the following after subsection (4):
Marginal note:Foreign resource pool expenses
(4.1) Where a taxpayer ceases at any time after February 27, 2000 to be resident in Canada, a particular taxation year of the taxpayer ends after that time and the taxpayer was non-resident throughout the period (in this subsection referred to as the “non-resident period”) that begins at that time and ends at the end of the particular year,
(a) in computing the taxpayer’s taxable income earned in Canada for the particular year, there may be deducted each amount that would be permitted to be deducted in computing the taxpayer’s income for the particular year under subsection 66(4) or 66.21(4) if
(i) subsection 66(4) were read without reference to the words “who is resident throughout a taxation year in Canada” and as if the amount determined under subparagraph 66(4)(b)(ii) were nil, and
(ii) subsection 66.21(4) were read without reference to the words “throughout which the taxpayer is resident in Canada” and as if the amounts determined under subparagraph 66.21(4)(a)(ii) and paragraph 66.21(4)(b) were nil; and
(b) an amount deducted under this subsection in computing the taxpayer’s taxable income earned in Canada for the particular year is deemed, for the purpose of applying subsection 66(4) or 66.21(4), as the case may be, to a subsequent taxation year, to have been deducted in computing the taxpayer’s income for the particular year.
(11) Subsections (1) and (7) apply to the 1998 and subsequent taxation years except that, if an individual who ceased at any time after 1992 and before October 2, 1996 to be resident in Canada elects under subsection 124(1) in respect of that cessation of residence, subparagraph 115(1)(a)(i) of the Act, as enacted by subsection (1), applies to income received by the individual after that cessation of residence.
(12) Subsections (2) and (3) apply after June 27, 1999.
(13) Subsections (4) and (9) apply after October 1, 1996 except that, in its application to dispositions that occurred before the 1998 taxation year, paragraph 115(1)(b) of the Act, as enacted by subsection (4), shall be read as follows:
(b) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were taxable capital gains and allowable capital losses from dispositions of taxable Canadian properties, and
(14) Subsection (5) applies to the 2000 and subsequent taxation years.
(15) Subsections (6) and (10) apply to taxation years that begin after February 27, 2000.
(16) Subsection (8) applies in respect of amounts paid, credited or provided after 2000.
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