Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)
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Assented to 2013-06-26
Technical Tax Amendments Act, 2012
S.C. 2013, c. 34
Assented to 2013-06-26
An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation
SUMMARY
Part 1 of this enactment implements, in accordance with proposals announced in the March 4, 2010 Budget and released for comment on August 27, 2010, amendments to the provisions of the Income Tax Act governing the taxation of non-resident trusts and their beneficiaries and of Canadian taxpayers who hold interests in offshore investment fund property.
Parts 2 and 3 implement various technical amendments in respect of the Income Tax Act and the Income Tax Regulations relating to the taxation of Canadian multinational corporations with foreign affiliates. The amendments in Part 2 are based on draft proposals released on December 18, 2009. Among other things, Part 2 includes the amendments to the foreign affiliate surplus rules in the Income Tax Regulations that are consequential to the foreign affiliate changes to the Income Tax Act announced in the March 19, 2007 Budget. The amendments in Part 3 are based on draft proposals released on August 19, 2011. Among other things, Part 3 includes revisions to the measures proposed in a package of draft legislation released on February 27, 2004 dealing primarily with reorganizations of, and distributions from, foreign affiliates.
Part 4 deals with provisions of the Income Tax Act that are not amended in Parts 1, 2, 3 or 5 in which the following private law concepts are used: right and interest, real and personal property, life estate and remainder interest, tangible and intangible property and joint and several liability. It enacts amendments, released for comments on July 16, 2010, to ensure that those provisions are bijural, in other words, that they reflect both the common law and the civil law in both linguistic versions. Similar amendments are made in Parts 1, 2, 3 and 5 to ensure that any provision of the Act enacted or amended by those Parts are also bijural.
Part 5 implements a number of income tax measures proposed in the March 4, 2010 Budget and released for comment on May 7, 2010 and August 27, 2010. Most notably, it enacts amendments
(a) relating to specified leasing property;
(b) to provide that conversions of specified investment flow-through (SIFT) trusts and partnerships into corporations are subject to the same loss utilization restrictions as are transactions between corporations;
(c) to prevent foreign tax credit generators; and
(d) implementing a regime for information reporting of tax avoidance transactions.
Part 5 also implements certain income tax measures that were previously announced. Most notably, it enacts amendments announced
(a) on January 27, 2009, relating to the Apprenticeship Completion Grant;
(b) on May 3, 2010, to clarify that computers continue to be eligible for the Atlantic investment tax credit;
(c) on July 16, 2010, relating to technical changes to the Income Tax Act which include amendments relating to the income tax treatment of restrictive covenants;
(d) on August 27, 2010, relating to the introduction of the Fairness for the Self-Employed Act;
(e) on November 5, 2010 and October 31, 2011, relating to technical changes to the Income Tax Act;
(f) on December 16, 2010, relating to changes to the income tax rules concerning real estate investment trusts; and
(g) on March 16, 2011, relating to the deductibility of contingent amounts, withholding tax applicable to certain interest payments made to non-residents, and certain life insurance corporation reserves.
Finally, Part 5 implements certain further technical income tax measures. Most notably, it enacts amendments relating to
(a) labour-sponsored venture capital corporations;
(b) the allocation of income of airline corporations; and
(c) the tax treatment of shares owned by short-term residents.
Part 6 amends the Excise Tax Act to implement technical and housekeeping amendments that include relieving the goods and services tax and the harmonized sales tax on the administrative service of collecting and distributing the levy on blank media imposed under the Copyright Act announced on October 31, 2011.
Part 7 amends the Federal-Provincial Fiscal Arrangements Act to clarify, for greater certainty, the authority of the Minister of Finance and of the Minister of National Revenue to amend administration agreements if the change in question is explicitly contemplated by the language of the agreement and to confirm any amendments that may have been made to those agreements. Part 7 also amends the Federal-Provincial Fiscal Arrangements Act and the First Nations Goods and Services Tax Act to enable the First Nations goods and services tax, imposed under a tax administration agreement between the federal government and an Aboriginal government, to be administered through a provincial administration system, if the province also administers the federal goods and services tax.
Part 8 contains coordinating amendments in respect of those provisions of the Income Tax Act that are amended by this Act and also by the Jobs and Growth Act, 2012 or that need coordination with the Pooled Registered Pension Plans Act.
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
SHORT TITLE
Marginal note:Short title
1. This Act may be cited as the Technical Tax Amendments Act, 2012.
PART 1AMENDMENTS IN RESPECT OF OFFSHORE INVESTMENT FUND PROPERTY AND NON-RESIDENT TRUSTS
R.S., c. 1 (5th Supp.)Income Tax Act
2. (1) Paragraph 12(1)(k) of the Income Tax Act is replaced by the following:
Marginal note:Foreign corporations, trusts and investment entities
(k) any amount required by subdivision i to be included in computing the taxpayer’s income for the year;
(2) Subsection (1) applies to taxation years that end after 2006.
3. (1) Paragraph 51(1)(a) of the French version of the Act is replaced by the following:
a) sauf pour l’application des paragraphes 20(21) et 44.1(6) et (7) et de l’alinéa 94(2)m), l’échange est réputé ne pas constituer une disposition du bien convertible;
(2) Paragraph 51(1)(c) of the English version of the Act is replaced by the following:
(c) except for the purposes of subsections 20(21) and 44.1(6) and (7) and paragraph 94(2)(m), the exchange is deemed not to be a disposition of the convertible property,
(3) Subsections (1) and (2) apply to taxation years of a taxpayer that begin after 1999, except that, for any taxation year of the taxpayer that ends before 2007 in respect of which subsection 94(1) of the Act, as enacted by section 7, does not apply to the taxpayer,
(a) paragraph 51(1)(a) of the French version of the Act, as enacted by subsection (1), is to be read without reference to “et de l’alinéa 94(2)m)”; and
(b) paragraph 51(1)(c) of the English version of the Act, as enacted by subsection (2), is to be read without reference to “and paragraph 94(2)(m)”.
4. (1) Paragraph 53(1)(d.1) of the Act is replaced by the following:
(d.1) if the property is a capital interest in a trust, any amount included under subsection 91(1) or (3) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been required to have been included under those subsections but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest;
(2) Paragraph 53(2)(b.1) of the Act is replaced by the following:
(b.1) if the property is a capital interest in a trust, any amount deducted by the taxpayer by reason of subsection 91(2) or (4) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been so deductible by the taxpayer but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest;
(3) Subsections (1) and (2) apply to taxation years that end after 2006. Subsections (1) and (2) also apply in computing the adjusted cost base to a taxpayer of a capital interest in a trust for an earlier taxation year if subsection 94(1) of the Act, as enacted by section 7, applies to the trust for a taxation year that ends in that earlier taxation year of the taxpayer.
(4) In computing the adjusted cost base of a capital interest in a trust disposed of on or before August 27, 2010, paragraph 53(1)(d.1) of the Act, as enacted by subsection (1), is to be read as follows:
(d.1) if the property is a capital interest in a trust, any amount required to be included under subsection 91(1) or (3) in computing the taxpayer’s income for a taxation year that ends before that time (or that would have been required to have been included under those subsections but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952) in respect of that interest;
5. (1) Subsection 75(3) of the Act is amended by striking out “or” at the end of paragraph (c.1) and by adding the following after paragraph (c.1):
(c.2) by a trust if the person from whom the trust acquired the property is, in respect of the trust, an electing contributor as defined in subsection 94(1);
(c.3) by a trust that is non-resident, but would be resident in Canada for the purpose of computing its income for the year if the definition “resident contributor” in subsection 94(1) were read without reference to its paragraph (a); or
(2) Paragraph 75(3)(c.2) of the Act, as enacted by subsection (1), applies to taxation years that end after March 4, 2010.
(3) Paragraph 75(3)(c.3) of the Act, as enacted by subsection (1), applies to taxation years that begin after 2000 except that, for taxation years that end before 2007, it is to be read as follows:
(c.3) by a trust that is non-resident, but would be resident in Canada for the purpose of computing its income for the year if section 94, as it reads in its application to the 2007 taxation year, had applied to the trust for the year and the definition “resident contributor” in that section were read without reference to its paragraph (a); or
6. (1) Subsection 87(2) of the Act is amended by adding the following after paragraph (j.94):
Marginal note:Non-resident entities
(j.95) for the purposes of sections 94 to 94.2, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(2) Subsection (1) applies to taxation years that end after 2000.
7. (1) Section 94 of the Act is replaced by the following:
Marginal note:Definitions
94. (1) The following definitions apply in this section and section 94.2.
“arm’s length transfer”
« transfert sans lien de dépendance »
“arm’s length transfer”, at any time by a person or partnership (referred to in this definition as the “transferor”) means a transfer or loan (which transfer or loan is referred to in this definition as the “transfer”) of property (other than restricted property) that is made at that time (referred to in this definition as the “transfer time”) by the transferor to a particular person or partnership (referred to in this definition as the “recipient”) if
(a) it is reasonable to conclude that none of the reasons (determined by reference to all the circumstances including the terms of a trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the transfer is the acquisition at any time by any person or partnership of an interest as a beneficiary under a non-resident trust; and
(b) the transfer is
(i) a payment of interest, of a dividend, of rent, of a royalty or of any other return on investment, or any substitute for such a return on investment, in respect of a particular property held by the recipient, if the amount of the payment is not more than the amount that the transferor would have paid if the transferor dealt at arm’s length with the recipient,
(ii) a payment made by a corporation on a reduction of the paid-up capital in respect of shares of a class of its capital stock held by the recipient, if the amount of the payment is not more than the lesser of the amount of the reduction in the paid-up capital and the consideration for which the shares were issued,
(iii) a transfer in exchange for which the recipient transfers or loans property to the transferor, or becomes obligated to transfer or loan property to the transferor, and for which it is reasonable to conclude
(A) having regard only to the transfer and the exchange, that the transferor would have been willing to make the transfer if the transferor dealt at arm’s length with the recipient, and
(B) that the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient,
(iv) a transfer made in satisfaction of an obligation referred to in subparagraph (iii) and for which it is reasonable to conclude
(A) having regard only to the transfer and the obligation, that the transferor would have been willing to make the transfer if the transferor dealt at arm’s length with the recipient, and
(B) that the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient,
(v) a payment of an amount owing by the transferor under a written agreement the terms and conditions of which, when entered into, were terms and conditions that, having regard only to the amount owing and the agreement, would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient of the payment,
(vi) a payment made before 2002 to a trust, to a corporation controlled by a trust or to a partnership of which a trust is a majority interest partner in repayment of or otherwise in respect of a loan made by a trust, corporation or partnership to the transferor, or
(vii) a payment made after 2001 to a trust, to a corporation controlled by the trust or to a partnership of which the trust is a majority interest partner, in repayment of or otherwise in respect of a particular loan made by the trust, corporation or partnership to the transferor and either
(A) the payment is made before 2011 and they would have been willing to enter into the particular loan if they dealt at arm’s length with each other, or
(B) the payment is made before 2005 in accordance with fixed repayment terms agreed to before June 23, 2000.
“beneficiary”
« bénéficiaire »
“beneficiary” under a trust includes
(a) a person or partnership that is beneficially interested in the trust; and
(b) a person or partnership that would be beneficially interested in the trust if the reference in subparagraph 248(25)(b)(ii) to
(i) “any arrangement in respect of the particular trust” were read as a reference to “any arrangement (including, for greater certainty, the terms or conditions of a share, or any arrangement in respect of a share, of the capital stock of a corporation that is beneficially interested in the particular trust) in respect of the particular trust”, and
(ii) “the particular person or partnership might” were read as a reference to “the particular person or partnership becomes (or could become on the exercise of any discretion by any person or partnership), directly or indirectly, entitled to any amount derived, directly or indirectly, from the income or capital of the particular trust or might”.
“closely held corporation”
« société à peu d’actionnaires »
“closely held corporation” at any time means a corporation, other than a corporation in respect of which
(a) there is at least one class of shares of its capital stock that includes shares prescribed for the purpose of paragraph 110(1)(d);
(b) it is reasonable to conclude that at that time, in respect of each class of shares described in paragraph (a), shares of the class are held by at least 150 shareholders each of whom holds shares of the class that have a total fair market value of at least $500; and
(c) it is reasonable to conclude that at that time in no case does a particular shareholder (or particular shareholder together with any other shareholder with whom the particular shareholder does not deal at arm’s length) hold shares of the corporation
(i) that would give the particular shareholder (or the particular shareholder together with those other shareholders referred to in this paragraph) 10% or more of the votes that could be cast under any circumstance at an annual meeting of shareholders of the corporation if the meeting were held at that time, or
(ii) that have a fair market value of 10% or more of the fair market value of all of the issued and outstanding shares of the corporation.
“connected contributor”
« contribuant rattaché »
“connected contributor” to a trust at a particular time means a contributor to the trust at the particular time, other than
(a) an individual (other than a trust) who was, at or before the particular time, resident in Canada for a period of, or periods the total of which is, not more than 60 months (but not including an individual who, before the particular time, was never non-resident); or
(b) a person all of whose contributions to the trust made at or before the particular time were made at a non-resident time of the person.
“contribution”
« apport »
“contribution” to a trust by a particular person or partnership means
(a) a transfer or loan (other than an arm’s length transfer) of property to the trust by the particular person or partnership;
(b) if a particular transfer or loan (other than an arm’s length transfer) of property is made by the particular person or partnership as part of a series of transactions that includes another transfer or loan (other than an arm’s length transfer) of property to the trust by another person or partnership, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the particular transfer or loan; and
(c) if the particular person or partnership becomes obligated to make a particular transfer or loan (other than a transfer or loan that would, if it were made, be an arm’s length transfer) of property as part of a series of transactions that includes another transfer or loan (other than an arm’s length transfer) of property to the trust by another person or partnership, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the obligation.
“contributor”
« contribuant »
“contributor” to a trust at any time means a person (other than an exempt person but including a person that has ceased to exist) that, at or before that time, has made a contribution to the trust.
“electing contributor”
« contribuant déterminé »
“electing contributor” at any time in respect of a trust means a resident contributor, to the trust, who has elected to have subsection (16) apply in respect of the contributor and the trust for a taxation year of the contributor that includes that time or that ends before that time and for all subsequent taxation years, if
(a) the election was in writing filed with the Minister on or before the contributor’s filing-due date for the first taxation year of the contributor for which the election was to take effect (referred to in this definition as the “initial year”); and
(b) the election included both the trust’s account number as assigned by the Minister and evidence that the contributor notified, no later than 30 days after the end of the trust’s taxation year that ends in the initial year, the trust that the election would be made.
“electing trust”
« fiducie déterminée »
“electing trust” in respect of a trust’s particular taxation year means the trust, if the trust
(a) holds at any time in the particular taxation year, or in a prior taxation year of the trust throughout which it was deemed by subsection (3) to be resident in Canada for the purpose of computing its income, property that is at that time part of its non-resident portion;
(b) elects to have paragraph (3)(f) apply to it for
(i) its first taxation year
(A) throughout which it is deemed by subsection (3) to be resident in Canada for the purpose of computing its income, and
(B) in which it holds property that is at a time in the year part of its non-resident portion, and
(ii) all of its taxation years that end after its taxation year described in subparagraph (i); and
(c) files the election described in paragraph (b) in writing filed with the Minister with the trust’s return of income for its taxation year described in subparagraph (b)(i).
“exempt amount”
« somme exclue »
“exempt amount” in respect of a trust’s particular taxation year means an amount that is
(a) paid or credited (in this definition within the meaning assigned by Part XIII) by the trust before 2004;
(b) paid or credited by the trust and referred to in paragraph 104(7.01)(b) in respect of the trust for the particular taxation year; or
(c) paid in the particular taxation year (or within 60 days after the end of the particular taxation year) by the trust directly to a beneficiary (determined without reference to subsection 248(25)) under the trust if
(i) the beneficiary is a natural person none of whose interests as a beneficiary under the trust was ever acquired for consideration,
(ii) the amount is described in subparagraph 212(1)(c)(i) and is not included in computing an exempt amount in respect of any other taxation year of the trust,
(iii) the trust was created before October 30, 2003, and
(iv) no contribution has been made to the trust on or after July 18, 2005.
“exempt foreign trust”
« fiducie étrangère exempte »
“exempt foreign trust” at a particular time means
(a) a non-resident trust if
(i) each beneficiary under the trust at the particular time is
(A) an individual who, at the time that the trust was created, was, because of mental or physical infirmity, dependent on an individual who is a contributor to the trust or on an individual related to such a contributor (which beneficiary is referred to in this paragraph as an “infirm beneficiary”), or
(B) a person who is entitled, only after the particular time, to receive or otherwise obtain the use of any of the trust’s income or capital,
(ii) at the particular time there is at least one infirm beneficiary who suffers from a mental or physical infirmity that causes the beneficiary to be dependent on a person,
(iii) each infirm beneficiary is, at all times that the infirm beneficiary is a beneficiary under the trust during the trust’s taxation year that includes the particular time, non-resident, and
(iv) each contribution to the trust made at or before the particular time can reasonably be considered to have been, at the time that the contribution was made, made to provide for the maintenance of an infirm beneficiary during the expected period of the beneficiary’s infirmity;
(b) a non-resident trust if
(i) the trust was created as a consequence of the breakdown of a marriage or common-law partnership of two particular individuals to provide for the maintenance of a beneficiary under the trust who was, during that marriage or common-law partnership,
(A) a child of both of those particular individuals (which beneficiary is referred to in this paragraph as a “child beneficiary”), or
(B) one of those particular individuals (which beneficiary is referred to in this paragraph as the “adult beneficiary”),
(ii) each beneficiary under the trust at the particular time is
(A) a child beneficiary under 21 years of age,
(B) a child beneficiary under 31 years of age who is enrolled at any time in the trust’s taxation year that includes the particular time at an educational institution that is described in subclause (iv)(B)(I) or (II),
(C) the adult beneficiary, or
(D) a person who is entitled, only after the particular time, to receive or otherwise obtain the use of any of the trust’s income or capital,
(iii) each beneficiary described in any of clauses (ii)(A) to (C) is, at all times that the beneficiary is a beneficiary under the trust during the trust’s taxation year that includes the particular time, non-resident, and
(iv) each contribution to the trust, at the time that the contribution was made, was
(A) an amount paid by the particular individual other than the adult beneficiary that would be a support amount as defined in subsection 56.1(4) if it had been paid by that particular individual directly to the adult beneficiary, or
(B) made by one of those particular individuals or a person related to one of those particular individuals to provide for the maintenance of a child beneficiary while the child was either under 21 years of age or was under 31 years of age and enrolled at an educational institution located outside Canada that is
(I) a university, college or other educational institution that provides courses at a post-secondary school level, or
(II) an educational institution that provides courses designed to furnish a person with skills for, or improve a person’s skills in, an occupation;
(c) a non-resident trust if
(i) at the particular time the trust is an agency of the United Nations,
(ii) at the particular time the trust owns and administers a university described in subparagraph (a)(iv) of the definition “qualified donee” in subsection 149.1(1),
(iii) at any time in the trust’s taxation year that includes the particular time or at any time in the preceding calendar year Her Majesty in right of Canada has made a gift to the trust, or
(iv) the trust is established under the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992, or any protocol to it that has been ratified by the Government of Canada;
(d) a non-resident trust
(i) that throughout the particular period that began at the time it was created and ends at the particular time would be non-resident if this Act were read without reference to subsection (1) as that subsection read in its application to taxation years that include December 31, 2000,
(ii) that was created exclusively for charitable purposes and has been operated throughout the particular period exclusively for charitable purposes,
(iii) if the particular time is more than 24 months after the day on which the trust was created, in respect of which, there are at the particular time at least 20 persons (other than trusts) each of whom at the particular time
(A) is a contributor to the trust,
(B) exists, and
(C) deals at arm’s length with at least 19 other contributors to the trust,
(iv) the income of which (determined in accordance with the laws described in subparagraph (v)) for each of its taxation years that ends at or before the particular time would, if the income were not distributed and the laws described in subparagraph (v) did not apply, be subject to an income or profits tax in the country in which it was resident in each of those taxation years, and
(v) that was, for each of its taxation years that ends at or before the particular time, exempt under the laws of the country in which it was resident from the payment of income or profits tax to the government of that country in recognition of the charitable purposes for which the trust is operated;
(e) a non-resident trust that throughout the trust’s taxation year that includes the particular time is a trust governed by an employees profit sharing plan, a retirement compensation arrangement or a foreign retirement arrangement;
(f) a non-resident trust if
(i) throughout the particular period that began when it was created and ends at the particular time it has been operated exclusively for the purpose of administering or providing employee benefits in respect of employees or former employees, and
(ii) throughout the trust’s taxation year that includes the particular time
(A) the trust is a trust governed by an employee benefit plan or is a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1),
(B) the trust is maintained for the benefit of natural persons the majority of whom are non-resident, and
(C) no benefits are provided under the trust other than benefits in respect of qualifying services;
(g) a non-resident trust (other than a prescribed trust or a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1)) that throughout the particular period that began when it was created and ends at the particular time
(i) has been resident in a particular country (other than Canada) the laws of which have, throughout the particular period,
(A) imposed an income or profits tax, and
(B) exempted the trust from the payment of all income tax, and all profits tax, to the government of that particular country in recognition of the purposes for which the trust is operated, and
(ii) has been operated exclusively for the purpose of administering or providing superannuation or pension benefits that are primarily in respect of services rendered in the particular country by natural persons who were non-resident at the time those services were rendered;
(h) a non-resident trust (other than a trust that elects, in writing filed with the Minister on or before the trust’s filing-due date for the trust’s taxation year that includes the particular time, not to be an exempt foreign trust under this paragraph for the taxation year in which the election is made and for each subsequent taxation year), if at the particular time
(i) the only beneficiaries who may for any reason receive, at or after the particular time and directly from the trust, any of the income or capital of the trust are beneficiaries that hold fixed interests in the trust, and
(ii) any of the following applies:
(A) there are at least 150 beneficiaries described in subparagraph (i) under the trust each of whose fixed interests in the trust have at the particular time a total fair market value of at least $500,
(B) all fixed interests in the trust are listed on a designated stock exchange and in the 30 days immediately preceding the particular time fixed interests in the trust were traded on a designated stock exchange on at least 10 days,
(C) each outstanding fixed interest in the trust
(I) was issued by the trust in exchange for consideration that was not less than 90% of the interest’s proportionate share of the net asset value of the trust’s property at the time of its issuance, or
(II) was acquired in exchange for consideration equal to the fair market value of the interest at the time of its acquisition, or
(D) the trust is governed by
(I) a Roth IRA, within the meaning of section 408A of the Internal Revenue Code of the United States, or
(II) a plan or arrangement that was created after September 21, 2007, that is subject to that Code and that the Minister agrees is substantially similar to a Roth IRA; or
(i) a trust that is at the particular time a prescribed trust.
“exempt person”
« personne exemptée »
“exempt person” at any time means
(a) Her Majesty in right of Canada or a province;
(b) a person whose taxable income for the taxation year that includes that time is exempt from tax under this Part because of subsection 149(1);
(c) a trust resident in Canada or a Canadian corporation
(i) that was established by or arises under an Act of Parliament or of the legislature of a province, and
(ii) the principal activities of which at that time are to administer, manage or invest the monies of one or more pension funds or plans established under an Act of Parliament or of the legislature of a province;
(d) a trust or corporation established by or arising by reason of an Act of Parliament or the legislature of a province in connection with a scheme or program for the compensation of workers injured in an accident arising out of or in the course of their employment;
(e) a trust resident in Canada all the beneficiaries under which are at that time exempt persons;
(f) a Canadian corporation all the shares, or rights to shares, of which are held at that time by exempt persons;
(g) a Canadian corporation without share capital all the property of which is held at that time exclusively for the benefit of exempt persons;
(h) a partnership all the members of which are at that time exempt persons; and
(i) a trust or corporation that is at that time a mutual fund.
“exempt service”
« service exempté »
“exempt service” means a service rendered at any time by a person or partnership (referred to in this definition as the “service provider”) to, for or on behalf of, another person or partnership (referred to in this definition as the “recipient”) if
(a) the recipient is a trust and the service relates to the administration of the trust; or
(b) the following conditions apply in respect of the service, namely,
(i) the service is rendered in the service provider’s capacity at that time as an employee or agent of the recipient,
(ii) in exchange for the service, the recipient transfers or loans property or becomes obligated to transfer or loan property, and
(iii) it is reasonable to conclude
(A) having regard only to the service and the exchange, that the service provider would be willing to carry out the service if the service provider were dealing at arm’s length with the recipient, and
(B) that the terms, conditions and circumstances under which the service is provided would be acceptable to the service provider if the service provider were dealing at arm’s length with the recipient.
“fixed interest”
« participation fixe »
“fixed interest” at any time of a person or partnership in a trust means an interest of the person or partnership as a beneficiary (in this definition, determined without reference to subsection 248(25)) under the trust provided that no amount of the income or capital of the trust to be distributed at any time in respect of any interest in the trust depends on the exercise by any person or partnership of, or the failure by any person or partnership to exercise, any discretionary power, other than a power in respect of which it is reasonable to conclude that
(a) the power is consistent with normal commercial practice;
(b) the power is consistent with terms that would be acceptable to the beneficiaries under the trust if the beneficiaries were dealing with each other at arm’s length; and
(c) the exercise of, or failure to exercise, the power will not materially affect the value of an interest as a beneficiary under the trust relative to the value of other such interests under the trust.
“joint contributor”
« contribuant conjoint »
“joint contributor” at any time in respect of a contribution to a trust means, if more than one contributor has made the contribution, each of those contributors that is at that time a resident contributor to the trust.
“mutual fund”
« fonds commun de placement »
“mutual fund” at a particular time means a mutual fund trust or mutual fund corporation (referred to in this definition as the “fund”), but does not include a fund in respect of which statements or representations have been made at or before the particular time — by the fund, or by a promoter or other representative of the fund, in respect of the acquisition or offering of an interest in the fund — that the taxes, if any, under this Part on the income, profit or gains for any particular year — in respect of property that is held by the fund and that is, or derives its value from, an interest in a trust — are less than, or are expected to be less than, the tax that would have been applicable under this Part if the income, profits or gains from the property had been earned directly by a person who acquires an interest in the fund.
“non-resident portion”
« partie non-résidente »
“non-resident portion” of a trust at any time means all property held by the trust to the extent that it is not at that time part of the resident portion of the trust.
“non-resident time”
« moment de non-résidence »
“non-resident time” of a person in respect of a contribution to a trust and a particular time means a time (referred to in this definition as the “contribution time”) at which the person made a contribution to a trust that is before the particular time and at which the person was non-resident (or, if the person is not in existence at the contribution time, the person was non-resident throughout the 18 months before ceasing to exist), if the person was non-resident or not in existence throughout the period that began 60 months before the contribution time (or, if the person is an individual and the trust arose on and as a consequence of the death of the individual, 18 months before the contribution time) and ends at the earlier of
(a) the time that is 60 months after the contribution time, and
(b) the particular time.
“promoter”
« promoteur »
“promoter” of a trust or corporation at any time means
(a) a person or partnership that at or before that time establishes, organizes or substantially reorganizes the undertakings of the trust or corporation, as the case may be; and
(b) for the purposes of the definition “mutual fund” in this subsection, a person or partnership described by paragraph (a) and a person or partnership who in the course of a business
(i) sells or issues, or promotes the sale, issuance or acquisition of, an interest in a mutual fund corporation or mutual fund trust,
(ii) acts as an agent or advisor in respect of the sale or issuance, or the promotion of the sale, issuance or acquisition of, an interest in a mutual fund corporation or mutual fund trust, or
(iii) accepts, whether as a principal or agent, consideration in respect of an interest in a mutual fund corporation or mutual fund trust.
“qualifying services”
« services admissibles »
“qualifying services” means services that are
(a) rendered to an employer by an employee of the employer, which employee was non-resident throughout the period during which the services were rendered;
(b) rendered to an employer by an employee of the employer, other than services that were
(i) rendered primarily in Canada,
(ii) rendered primarily in connection with a business carried on by the employer in Canada, or
(iii) a combination of services described in subparagraphs (i) and (ii);
(c) rendered in a particular calendar month to an employer by an employee of the employer, which employee
(i) was resident in Canada throughout no more than 60 months during the 72-month period that ends at the end of the particular month, and
(ii) became a member of, or a beneficiary under, the plan or trust under which benefits in respect of the services may be provided (or a similar plan or trust for which the plan or the trust was substituted) before the end of the calendar month following the month in which the employee became resident in Canada; or
(d) any combination of services that are qualifying services determined without reference to this paragraph.
“resident beneficiary”
« bénéficiaire résident »
“resident beneficiary” under a trust at any time means a person (other than a person that is at that time a successor beneficiary under the trust or an exempt person) that is, at that time, a beneficiary under the trust if, at that time,
(a) the person is resident in Canada; and
(b) there is a connected contributor to the trust.
“resident contributor”
« contribuant résident »
“resident contributor” to a trust at any time means a person that is, at that time, resident in Canada and a contributor to the trust, but does not include
(a) an individual (other than a trust) who has not, at that time, been resident in Canada for a period of, or periods the total of which is, more than 60 months (other than an individual who, before that time, was never non-resident); or
(b) an individual (other than a trust) if
(i) the trust is an inter vivos trust that was created before 1960 by a person who was non-resident when the trust was created, and
(ii) the individual has not, after 1959, made a contribution to the trust.
“resident portion”
« partie résidente »
“resident portion” of a trust at a particular time means all of the trust’s property that is
(a) property in respect of which a contribution has been made at or before the particular time to the trust by a contributor that is at the particular time a resident contributor, or if there is at the particular time a resident beneficiary under the trust a connected contributor, to the trust and, for the purposes of this paragraph,
(i) if a property is held by a contributor in common or in partnership immediately before the property is contributed to the trust, it is contributed by the contributor only to the extent that the contributor so held the property, and
(ii) if the contribution is a transfer described by any of paragraphs (2)(a), (c), (d) or (f), the property in respect of which the contribution has been made is deemed to be
(A) in respect of a transfer under paragraph (2)(a), property
(I) if clause (2)(a)(ii)(A) applies, the fair market value of which has increased because of a transfer or loan described by subparagraph (2)(a)(i), or
(II) if clause (2)(a)(ii)(B) applies, that would not otherwise be included in the resident portion of the trust, that is selected by the trust (or, failing which, is selected by the Minister) and that has a fair market value at least equal to the absolute value of a decrease in a liability or potential liability of the trust that arose because of a transfer or loan described by subparagraph (2)(a)(i),
(B) in respect of a transfer under paragraph (2)(c), property described by subparagraph (2)(c)(ii),
(C) in respect of a transfer under paragraph (2)(d), property acquired as a result of any undertaking including a guarantee, covenant or agreement given by a person or partnership other than the trust to ensure the repayment, in whole or in part, of a loan or other indebtedness incurred by the trust as described by paragraph (2)(d), and
(D) in respect of a transfer under paragraph (2)(f), property selected by the trust (or, failing which, is selected by the Minister) that has a fair market value at least equal to the fair market value of property deemed to be transferred to the trust as described by paragraph (2)(f);
(b) property that is acquired, at or before the particular time, by way of indebtedness incurred by the trust (referred to in this paragraph as the “subject property”), if
(i) all or part of the indebtedness is secured on property (other than the subject property) that is held in the trust’s resident portion,
(ii) it was reasonable to conclude, at the time that the indebtedness was incurred, that the indebtedness would be repaid with recourse to any property (other than the subject property) held at any time in the trust’s resident portion, or
(iii) a person resident in Canada or partnership of which a person resident in Canada is a member has become obligated, either absolutely or contingently, to effect any undertaking including a guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of the indebtedness, or provided any other financial assistance in respect of the indebtedness;
(c) property to the extent that it is derived, directly or indirectly, in any manner whatever, from property described by any of paragraphs (a), (b) and (d), and, without limiting the generality of the foregoing, including property derived from the income (computed without reference to paragraph (16)(f) and subsections 104(6) and (12)) of the trust for a taxation year of the trust that ends at or before the particular time and property in respect of which an amount would be described at the particular time in respect of the trust by the definition “capital dividend account” in subsection 89(1) if the trust were at the particular time a corporation; and
(d) property to the extent that it is at the particular time substituted for a property described by any of paragraphs (a) to (c).
“restricted property”
« bien d’exception »
“restricted property” of a person or partnership means property that the person or partnership holds and that is
(a) a share (or a right to acquire a share) of the capital stock of a closely held corporation if the share or right, or a property for which the share or right was substituted, was at any time acquired by the person or partnership as part of a transaction or series of transactions under which
(i) a specified share of the capital stock of a closely held corporation was acquired by any person or partnership in exchange for, as consideration for or upon the conversion of any property and the cost of the specified share to the person who acquired it was less than the fair market value of the specified share at the time of the acquisition, or
(ii) a share (other than a specified share) of the capital stock of a closely held corporation becomes a specified share of the capital stock of the corporation;
(b) an indebtedness or other obligation, or a right to acquire an indebtedness or other obligation, of a closely held corporation if
(i) the indebtedness, obligation or right, or property for which the indebtedness, obligation or right was substituted, became property of the person or partnership as part of a transaction or series of transactions under which
(A) a specified share of the capital stock of a closely held corporation was acquired by any person or partnership in exchange for, as consideration for or upon the conversion of any property and the cost of the specified share to the person who acquired it was less than the fair market value of the specified share at the time of the acquisition, or
(B) a share (other than a specified share) of a closely held corporation becomes a specified share of the capital stock of the corporation, and
(ii) the amount of any payment under the indebtedness, obligation or right (whether the right to the amount is immediate or future, absolute or contingent or conditional on or subject to the exercise of any discretion by any person or partnership) is, directly or indirectly, determined primarily by one or more of the following criteria:
(A) the fair market value of, production from or use of any of the property of the closely held corporation,
(B) gains or profits from the disposition of any of the property of the closely held corporation,
(C) income, profits, revenue or cash flow of the closely held corporation, or
(D) any other criterion similar to a criterion referred to in any of clauses (A) to (C); and
(c) property
(i) that the person or partnership acquired as part of a series of transactions described in paragraph (a) or (b) in respect of another property, and
(ii) the fair market value of which is derived in whole or in part, directly or indirectly, from that other property.
“specified party”
« tiers déterminé »
“specified party” in respect of a particular person at any time means
(a) the particular person’s spouse or common-law partner at that time;
(b) a corporation that at that time
(i) is a controlled foreign affiliate of the particular person or their spouse or common-law partner, or
(ii) would be a controlled foreign affiliate of a partnership, of which the particular person is a majority interest partner, if the partnership were a person resident in Canada at that time;
(c) a person, or a partnership of which the particular person is a majority interest partner, for which it is reasonable to conclude that the benefit referred to in subparagraph (8)(a)(iv) was conferred
(i) in contemplation of the person becoming after that time a corporation described by paragraph (b), or
(ii) to avoid or minimize a liability that arose, or that would otherwise have arisen, under this Part with respect to the particular person; or
(d) a corporation in which the particular person, or partnership of which the particular person is a majority interest partner, is a shareholder if
(i) the corporation is at or before that time a beneficiary under a trust, and
(ii) the particular person or the partnership is a beneficiary under the trust solely because of the application of paragraph (b) of the definition “beneficiary” in this subsection to the particular person or the partnership in respect of the corporation.
“specified share”
« action déterminée »
“specified share” means a share of the capital stock of a corporation other than a share that is a prescribed share for the purpose of paragraph 110(1)(d).
“specified time”
« moment déterminé »
“specified time” in respect of a trust for a taxation year of the trust means
(a) if the trust exists at the end of the taxation year, the time that is the end of that taxation year; and
(b) in any other case, the time in that taxation year that is immediately before the time at which the trust ceases to exist.
“successor beneficiary”
« bénéficiaire remplaçant »
“successor beneficiary” at any time under a trust means a person that is a beneficiary under the trust solely because of a right of the person to receive any of the trust’s income or capital, if under that right the person may so receive that income or capital only on or after the death after that time of an individual who, at that time, is alive and
(a) is a contributor to the trust;
(b) is related to (in this definition including an uncle, aunt, niece or nephew of) a contributor to the trust; or
(c) would have been related to a contributor to the trust if every individual who was alive before that time were alive at that time.
“transaction”
« opération »
“transaction” includes an arrangement or event.
“trust”
« fiducie »
“trust” includes, for greater certainty, an estate.
Marginal note:Rules of application
(2) In this section and section 94.2,
(a) a person or partnership is deemed to have transferred, at any time, a property to a trust if
(i) at that time the person or partnership transfers or loans property (other than by way of an arm’s length transfer) to another person or partnership, and
(ii) because of that transfer or loan
(A) the fair market value of one or more properties held by the trust increases at that time, or
(B) a liability or potential liability of the trust decreases at that time;
(b) the fair market value, at any time, of a property deemed by paragraph (a) to be transferred at that time by a person or partnership is deemed to be the amount of the absolute value of the increase or decrease, as the case may be, referred to in subparagraph (a)(ii) in respect of the property, and if that time is after August 27, 2010, and the property that the person or partnership transfers or loans at that time is restricted property of the person or partnership, the property deemed by paragraph (a) to be transferred at that time to a trust is deemed to be restricted property transferred at that time to the trust;
(c) a person or partnership is deemed to have transferred, at any time, property to a trust if
(i) at that time the person or partnership transfers restricted property, or loans property other than by way of an arm’s length transfer, to another person (referred to in this paragraph and paragraph (c.1) as the “intermediary”),
(ii) at or after that time, the trust holds property (other than property described by paragraph (14)(b)) the fair market value of which is derived in whole or in part, directly or indirectly, from property held by the intermediary, and
(iii) it is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize a liability under this Part;
(c.1) the fair market value, at any time, of a property deemed by paragraph (c) to be transferred at that time by a person or partnership is deemed to be the fair market value of the property referred to in subparagraph (c)(i), and if that time is after October 24, 2012 and the property that the person or partnership transfers or loans to the intermediary is restricted property of the intermediary, the property deemed by paragraph (c) to be transferred at that time by the person or partnership to a trust is deemed to be restricted property transferred at that time to the trust throughout the period in which the intermediary holds the restricted property;
(d) if, at any time, a particular person or partnership becomes obligated, either absolutely or contingently, to effect any undertaking including a guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of a loan or other indebtedness incurred by another person or partnership, or has provided any other financial assistance to another person or partnership,
(i) the particular person or partnership is deemed to have transferred, at that time, property to that other person or partnership, and
(ii) the property, if any, transferred to the particular person or partnership from the other person or partnership in exchange for the guarantee or other financial assistance is deemed to have been transferred to the particular person or partnership in exchange for the property deemed by subparagraph (i) to have been transferred;
(e) the fair market value at any time of a property deemed by subparagraph (d)(i) to have been transferred at that time to another person or partnership is deemed to be the amount at that time of the loan or indebtedness incurred by the other person or partnership to which the property relates;
(f) if, at any time after June 22, 2000, a particular person or partnership renders any service (other than an exempt service) to, for or on behalf of another person or partnership,
(i) the particular person or partnership is deemed to have transferred, at that time, property to that other person or partnership, and
(ii) the property, if any, transferred to the particular person or partnership from the other person or partnership in exchange for the service is deemed to have been transferred to the particular person or partnership in exchange for the property deemed by subparagraph (i) to have been transferred;
(g) each of the following acquisitions of property by a particular person or partnership is deemed to be a transfer of the property, at the time of the acquisition of the property, to the particular person or partnership from the person or partnership from which the property was acquired, namely, the acquisition by the particular person or partnership of
(i) a share of a corporation from the corporation,
(ii) an interest as a beneficiary under a trust (otherwise than from a beneficiary under the trust),
(iii) an interest in a partnership (otherwise than from a member of the partnership),
(iv) a debt owing by a person or partnership from the person or partnership, and
(v) a right (granted after June 22, 2000, by the person or partnership from which the right was acquired) to acquire or to be loaned property;
(h) the fair market value at any time of a property deemed by subparagraph (f)(i) to have been transferred at that time is deemed to be the fair market value at that time of the service to which the property relates;
(i) a person or partnership that at any time becomes obligated to do an act that would, if done, constitute the transfer or loan of a property to another person or partnership is deemed to have become obligated at that time to transfer or loan, as the case may be, property to that other person or partnership;
(j) in applying at any time the definition “non-resident time” in subsection (1), if a trust acquires property of an individual as a consequence of the death of the individual and the individual was immediately before death resident in Canada, the individual is deemed to have transferred the property to the trust immediately before the individual’s death;
(k) a transfer or loan of property at any time is deemed to be made at that time jointly by a particular person or partnership and a second person or partnership (referred to in this paragraph as the “specified person”) if
(i) the particular person or partnership transfers or loans property at that time to another person or partnership,
(ii) the transfer or loan is made at the direction, or with the acquiescence, of the specified person, and
(iii) it is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize the liability, of any person or partnership, under this Part that arose, or that would otherwise have arisen, because of the application of this section;
(k.1) a transfer or loan of property made at any time on or after November 9, 2006, is deemed to be made at that time jointly by a particular person or partnership and a second person or partnership (referred to in this paragraph as the “specified person”) if
(i) the particular person or partnership transfers or loans property at that time to another person or partnership, and
(ii) a purpose or effect of the transfer or loan may reasonably be considered to be to provide benefits in respect of services rendered by a person as an employee of the specified person (whether the provision of the benefits is because of a right that is immediate or future, absolute or contingent, or conditional on or subject to the exercise of any discretion by any person or partnership);
(l) a transfer or loan of property at any time is deemed to be made at that time jointly by a corporation and a person or partnership (referred to in this paragraph as the “specified person”) if
(i) the corporation transfers or loans property at that time to another person or partnership,
(ii) the transfer or loan is made at the direction, or with the acquiescence, of the specified person,
(iii) that time is not, or would not be if the transfer or loan were a contribution of the specified person,
(A) a non-resident time of the specified person, or
(B) if the specified person is a partnership, a non-resident time of one or more members of the partnership, and
(iv) either
(A) the corporation is, at that time, a controlled foreign affiliate of the specified person, or would at that time be a controlled foreign affiliate of the specified person if the specified person were at that time resident in Canada, or
(B) it is reasonable to conclude that the transfer or loan was made in contemplation of the corporation becoming after that time a corporation described in clause (A);
(m) a particular person or partnership is deemed to have transferred, at a particular time, a particular property or particular part of it, as the case may be, to a corporation described in subparagraph (i) or a second person or partnership described in subparagraph (ii) if
(i) the particular property is a share of the capital stock of a corporation held at the particular time by the particular person or partnership, and as consideration for the disposition at or before the particular time of the share, the particular person or partnership received at the particular time (or became entitled at the particular time to receive) from the corporation a share of the capital stock of the corporation, or
(ii) the particular property (or property for which the particular property is substituted) was acquired, before the particular time, from the second person or partnership by any person or partnership, in circumstances that are described by any of subparagraphs (g)(i) to (v) (or would be so described if it applied at the time of that acquisition) and at the particular time,
(A) the terms or conditions of the particular property change,
(B) the second person or partnership redeems, acquires or cancels the particular property or the particular part of it,
(C) if the particular property is a debt owing by the second person or partnership, the debt or the particular part of it is settled or cancelled, or
(D) if the particular property is a right to acquire or to be loaned property, the particular person or partnership exercises the right;
(n) a contribution made at any time by a particular trust to another trust is deemed to have been made at that time jointly by the particular trust and by each person or partnership that is at that time a contributor to the particular trust;
(o) a contribution made at any time by a particular partnership to a trust is deemed to have been made at that time jointly by the particular partnership and by each person or partnership that is at that time a member of the particular partnership;
(p) subject to paragraph (q) and subsection (9), the amount of a contribution to a trust at the time it was made is deemed to be the fair market value, at that time, of the property that was the subject of the contribution;
(q) a person or partnership that at any time acquires a fixed interest in a trust (or a right, issued by the trust, to acquire a fixed interest in the trust) from another person or partnership (other than from the trust that issued the interest or the right) is deemed to have made at that time a contribution to the trust and the amount of the contribution is deemed to be equal to the fair market value at that time of the interest or right, as the case may be;
(r) a particular person or partnership that has acquired a fixed interest in a trust as a consequence of making a contribution to the trust — or that has made a contribution to the trust as a consequence of having acquired a fixed interest in the trust or a right described in paragraph (q) — is, for the purpose of applying this section at any time after the time that the particular person or partnership transfers the fixed interest or the right, as the case may be, to another person or partnership (which transfer is referred to in this paragraph as the “sale”), deemed not to have made the contribution in respect of the fixed interest, or right, that is the subject of the sale if
(i) in exchange for the sale, the other person or partnership transfers or loans, or becomes obligated to transfer or loan, property (which property is referred to in subparagraph (ii) as the “consideration”) to the particular person or partnership, and
(ii) it is reasonable to conclude
(A) having regard only to the sale and the consideration that the particular person or partnership would be willing to make the sale if the particular person or partnership were dealing at arm’s length with the other person or partnership, and
(B) that the terms and conditions made or imposed in respect of the exchange would be acceptable to the particular person or partnership if the particular person or partnership were dealing at arm’s length with the other person or partnership;
(s) a transfer to a trust by a particular person or partnership is deemed not to be, at a particular time, a contribution to the trust if
(i) the particular person or partnership has transferred, at or before the particular time and in the ordinary course of business of the particular person or partnership, property to the trust,
(ii) the transfer is not an arm’s length transfer, but would be an arm’s length transfer if the definition “arm’s length transfer” in subsection (1) were read without reference to paragraph (a) and subparagraphs (b)(i), (ii) and (iv) to (vii) of that definition,
(iii) it is reasonable to conclude that the particular person or partnership was the only person or partnership that acquired, in respect of the transfer, an interest as a beneficiary under the trust,
(iv) the particular person or partnership was required, under the securities law of a country or of a political subdivision of the country in respect of the issuance by the trust of interests as a beneficiary under the trust, to acquire an interest because of the particular person or partnership’s status at the time of the transfer as a manager or promoter of the trust,
(v) at the particular time the trust is not an exempt foreign trust, but would be at that time an exempt foreign trust if it had not made an election under paragraph (h) of the definition “exempt foreign trust” in subsection (1), and
(vi) the particular time is before the earliest of
(A) the first time at which the trust becomes an exempt foreign trust,
(B) the first time at which the particular person or partnership ceases to be a manager or promoter of the trust, and
(C) the time that is 24 months after the first time at which the total fair market value of consideration received by the trust in exchange for interests as a beneficiary (other than the particular person or partnership’s interest referred to in subparagraph (iii)) under the trust is greater than $500,000;
(t) a transfer, by a Canadian corporation of particular property, that is at a particular time a contribution by the Canadian corporation to a trust, is deemed not to be, after the particular time, a contribution by the Canadian corporation to the trust if
(i) the trust acquired the property before the particular time from the Canadian corporation in circumstances described in subparagraph (g)(i) or (iv),
(ii) as a result of a transfer (which transfer is referred to in this paragraph as the “sale”) at the particular time by any person or partnership (referred to in this paragraph as the “seller”) to another person or partnership (referred to in this paragraph as the “buyer”) the trust
(A) no longer holds any property that is shares of the capital stock of, or debt issued by, the Canadian corporation, and
(B) no longer holds any property that is property the fair market value of which is derived in whole or in part, directly or indirectly, from shares of the capital stock of, or debt issued by, the Canadian corporation,
(iii) the buyer deals at arm’s length immediately before the particular time with the Canadian corporation, the trust and the seller,
(iv) in exchange for the sale, the buyer transfers or becomes obligated to transfer property (which property is referred to in this paragraph as the “consideration”) to the seller, and
(v) it is reasonable to conclude
(A) having regard only to the sale and the consideration that the seller would be willing to make the sale if the seller were dealing at arm’s length with the buyer,
(B) that the terms and conditions made or imposed in respect of the exchange would be acceptable to the seller if the seller were dealing at arm’s length with the buyer, and
(C) that the value of the consideration is not, at or after the particular time, determined in whole or in part, directly or indirectly, by reference to shares of the capital stock of, or debt issued by, the Canadian corporation;
(u) a transfer, before October 11, 2002, to a personal trust by an individual (other than a trust) of particular property is deemed not to be a contribution of the particular property by the individual to the trust if
(i) the individual identifies the trust in prescribed form filed with the Minister on or before the individual’s filing-due date for the individual’s 2003 taxation year (or a later date that is acceptable to the Minister), and
(ii) the Minister is satisfied that
(A) the individual (and any person or partnership not dealing at any time at arm’s length with the individual) has never loaned or transferred, directly or indirectly, restricted property to the trust,
(B) in respect of each contribution (determined without reference to this paragraph) made before October 11, 2002, by the individual to the trust, none of the reasons (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the contribution was to permit or facilitate, directly or indirectly, the conferral at any time of a benefit (for greater certainty, including an interest as a beneficiary under the trust) on
(I) the individual,
(II) a descendant of the individual, or
(III) any person or partnership with whom the individual or descendant does not, at any time, deal at arm’s length, and
(C) the total of all amounts each of which is the amount of a contribution (determined without reference to this paragraph) made before October 11, 2002, by the individual to the trust does not exceed the greater of
(I) 1% of the total of all amounts each of which is the amount of a contribution (determined without reference to this paragraph) made to the trust before October 11, 2002, and
(II) $500; and
(v) a loan made by a particular specified financial institution to a trust is deemed not to be a contribution to the trust if
(i) the loan is made on terms and conditions that would have been agreed to by persons dealing at arm’s length, and
(ii) the loan is made by the specified financial institution in the ordinary course of the business carried on by it.
Marginal note:Liabilities of non-resident trusts and others
(3) If at a specified time in a trust’s particular taxation year (other than a trust that is, at that time, an exempt foreign trust) the trust is non-resident (determined without reference to this subsection) and, at that time, there is a resident contributor to the trust or a resident beneficiary under the trust,
(a) the trust is deemed to be resident in Canada throughout the particular taxation year for the purposes of
(i) section 2,
(ii) computing the trust’s income for the particular taxation year,
(iii) applying subsections 104(13.1) to (28) and 107(2.1), in respect of the trust and a beneficiary under the trust,
(iv) applying clause 53(2)(h)(i.1)(B), the definition “non-resident entity” in subsection 94.1(2), subsection 107(2.002) and section 115, in respect of a beneficiary under the trust,
(v) paragraph (c) and subsection 111(9),
(vi) determining an obligation of the trust to file a return under section 233.3 or 233.4,
(vii) determining the rights and obligations of the trust under Divisions I and J,
(viii) determining the liability of the trust for tax under Part I, and under Part XIII on amounts paid or credited (in this paragraph having the meaning assigned by Part XIII) to the trust,
(ix) applying Part XIII in respect of an amount (other than an exempt amount) paid or credited by the trust to any person, and
(x) determining whether a foreign affiliate of a taxpayer (other than the trust) is a controlled foreign affiliate of the taxpayer;
(b) no deduction shall be made under subsection 20(11) by the trust in computing its income for the particular taxation year, and for the purposes of applying subsection 20(12) and section 126 to the trust for the particular taxation year
(i) in determining the non-business-income tax (in this paragraph as defined by subsection 126(7)) paid by the trust for the particular taxation year, paragraph (b) of the definition “non-business-income tax” does not apply, and
(ii) if, at that specified time, the trust is resident in a country other than Canada,
(A) the trust’s income for the particular taxation year is deemed to be from sources in that country and not to be from any other source, and
(B) the business-income tax (in this paragraph as defined by subsection 126(7)), and the non-business-income tax, paid by the trust for the particular taxation year are deemed to have been paid by the trust to the government of that country and not to any other government;
(c) if the trust was non-resident throughout its taxation year (referred to in this paragraph as the “preceding year”) immediately preceding the particular taxation year, the trust is deemed to have
(i) immediately before the end of the preceding year, disposed of each property (other than property described in any of subparagraphs 128.1(1)(b)(i) to (iv)) held by the trust at that time for proceeds of disposition equal to its fair market value at that time, and
(ii) at the beginning of the particular taxation year, acquired each of those properties so disposed of at a cost equal to its proceeds of disposition;
(d) each person that at any time in the particular taxation year is a resident contributor to the trust (other than an electing contributor in respect of the trust at the specified time) or a resident beneficiary under the trust
(i) has jointly and severally, or solidarily, with the trust and with each other such person, the rights and obligations of the trust in respect of the particular taxation year under Divisions I and J, and
(ii) is subject to Part XV in respect of those rights and obligations;
(e) each person that at any time in the particular taxation year is a beneficiary under the trust and was a person from whom an amount would be recoverable at the end of the trust’s 2006 taxation year under subsection (2) (as it read in its application to taxation years that end before 2007) in respect of the trust if the person had received before the trust’s 2007 taxation year amounts described under paragraph (2)(a) or (b) in respect of the trust (as those paragraphs read in their application to taxation years that end before 2007)
(i) has, to the extent of the person’s recovery limit for the year, jointly and severally, or solidarily, with the trust and with each other such person, the rights and obligations of the trust in respect of the taxation years, of the trust, that end before 2007 under Divisions I and J, and
(ii) is, to the extent of the person’s recovery limit for the year, subject to Part XV in respect of those rights and obligations;
(f) if the trust (referred to in this paragraph as the “particular trust”) is an electing trust in respect of the particular taxation year,
(i) an inter vivos trust (in this paragraph referred to as the “non-resident portion trust”) is deemed for the purposes of this Act (other than for the purposes of subsection 104(2))
(A) to be created at the first time at which the particular trust exists in its first taxation year in respect of which the particular trust is an electing trust, and
(B) to continue in existence until the earliest of
(I) the time at which the particular trust ceases to be resident in Canada because of subsection (5) or (5.1),
(II) the time at which the particular trust ceases to exist, and
(III) the time at which the particular trust becomes resident in Canada otherwise than because of this subsection,
(ii) all of the particular trust’s property that is part of the particular trust’s non-resident portion is deemed to be the property of the non-resident portion trust and not to be, except for the purposes of this paragraph and the definition “electing trust” in subsection (1), the particular trust’s property,
(iii) the terms and conditions of, and rights and obligations of beneficiaries under, the particular trust (determined by reference to all the circumstances including the terms of a trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) are deemed to be the terms and conditions of, and rights and obligations of beneficiaries under, the non-resident portion trust,
(iv) for greater certainty
(A) the trustees of the particular trust are deemed to be the trustees of the non-resident portion trust,
(B) the beneficiaries under the particular trust are deemed to be the beneficiaries under the non-resident portion trust, and
(C) the non-resident portion trust is deemed not to have a resident contributor or connected contributor to it,
(v) the non-resident portion trust is deemed to be, without affecting the liability of its trustees for their own income tax, in respect of its property an individual,
(vi) if all or part of a property becomes at a particular time part of the particular trust’s non-resident portion and immediately before that time the property or that part, as the case may be, was part of its resident portion, the particular trust is deemed to have transferred at the particular time the property or that part, as the case may be, to the non-resident portion trust,
(vii) if all or part of a property becomes at a particular time part of the particular trust’s resident portion and immediately before that time the property or that part, as the case may be, was part of its non-resident portion, the non-resident portion trust is deemed to have transferred at the particular time the property or that part, as the case may be, to the particular trust,
(viii) the particular trust and the non-resident portion trust are deemed at all times to be affiliated with each other and to not deal with each other at arm’s length,
(ix) the particular trust
(A) has jointly and severally, or solidarily, with the non-resident portion trust, the rights and obligations of the non-resident portion trust in respect of any taxation year under Divisions I and J, and
(B) is subject to Part XV in respect of those rights and obligations, and
(x) if the non-resident portion trust ceases to exist at a particular time (for greater certainty, as determined by clause (i)(B))
(A) the non-resident portion trust is deemed, at the time (referred to in this subparagraph as the “disposition time”) that is immediately before the time that is immediately before the particular time, to have
(I) in the case of each property of the non-resident portion trust that is property described in any of subparagraphs 128.1(1)(b)(i) to (iv), disposed of the property for proceeds of disposition equal to the cost amount to it of the property at the disposition time, and
(II) in the case of each other property of the non-resident portion trust, disposed of the property for proceeds of disposition equal to its fair market value of the property at the disposition time,
(B) the particular trust is deemed to have acquired, at the time that is immediately before the particular time, each property described in subclause (A)(I) or (II) at a cost equal to the proceeds determined under that subclause in respect of the property, and
(C) each person or partnership that is at the time immediately before the particular time a beneficiary under the non-resident portion trust is deemed
(I) at the disposition time to have disposed of the beneficiary’s interest as a beneficiary under the non-resident portion trust for proceeds equal to the beneficiary’s cost amount in the interest at the disposition time, and
(II) at the disposition time, to have ceased to be, other than for purposes of this clause, a beneficiary under the non-resident portion trust; and
(g) if a person deducts or withholds any amount (referred to in this paragraph as the “withholding amount”) as required by section 215 from a particular amount paid or credited or deemed to have been paid or credited to the trust, and the particular amount has been included in the trust’s income for the particular taxation year, the withholding amount is deemed to have been paid on account of the trust’s tax under this Part for the particular taxation year.
Marginal note:Excluded provisions
(4) For greater certainty, paragraph (3)(a) does not deem a trust to be resident in Canada for the purposes of
(a) the definitions “arm’s length transfer” and “exempt foreign trust” in subsection (1);
(b) paragraph (14)(a), subsections 70(6) and 73(1), the definition “Canadian partnership” in subsection 102(1), paragraph 107.4(1)(c) and paragraph (a) of the definition “mutual fund trust” in subsection 132(6);
(c) determining the liability of a person (other than the trust) that would arise under section 215;
(d) determining whether, in applying subsection 128.1(1), the trust becomes resident in Canada at a particular time;
(e) determining whether, in applying subsection 128.1(4), the trust ceases to be resident in Canada at a particular time;
(f) subparagraph (f)(i) of the definition “disposition” in subsection 248(1);
(g) determining whether subsection 107(5) applies to a distribution on or after July 18, 2005, of property to the trust; and
(h) determining whether subsection 75(2) applies to deem an amount to be an income, loss, taxable capital gain or allowable capital loss of the trust.
Marginal note:Deemed cessation of residence — loss of resident contributor or resident beneficiary
(5) A trust is deemed to cease to be resident in Canada at the earliest time at which there is neither a resident contributor to the trust nor a resident beneficiary under the trust in a taxation year (determined without reference to subsection 128.1(4)) of the trust
(a) that immediately follows a taxation year of the trust throughout which it was deemed by subsection (3) to be resident in Canada for the purpose of computing its income; and
(b) at a specified time in which the trust
(i) is non-resident,
(ii) is not an exempt foreign trust, and
(iii) has no resident contributor to it or resident beneficiary under it.
Marginal note:Deemed cessation of residence — becoming an exempt foreign trust
(5.1) A trust is deemed to cease to be resident in Canada at the earliest time at which the trust becomes an exempt foreign trust in a taxation year (determined without reference to subsection 128.1(4)) of the trust
(a) that immediately follows a taxation year of the trust throughout which it was deemed by subsection (3) to be resident in Canada for the purpose of computing its income; and
(b) at a specified time in which
(i) there is a resident contributor to the trust or a resident beneficiary under the trust, and
(ii) the trust is an exempt foreign trust.
Marginal note:Administrative relief — changes in status
(5.2) If a trust is deemed by subsection (5) or (5.1) to cease to be resident in Canada at a particular time, the following rules apply to the trust in respect of the particular taxation year that is, as a result of that cessation of residence, deemed by subparagraph 128.1(4)(a)(i) to end immediately before the particular time:
(a) the trust’s return of income for the particular taxation year is deemed to be filed with the Minister on a timely basis if it is filed with the Minister within 90 days from the end of the trust’s taxation year that is deemed by subparagraph 128.1(4)(a)(i) to start at the particular time; and
(b) an amount that is included in the trust’s income (determined without reference to subsections 104(6) and (12)) for the particular taxation year but that became payable (determined without regard to this paragraph) by the trust in the period after the particular taxation year and before the end of the trust’s taxation year that is deemed by subparagraph 128.1(4)(a)(i) to start at the particular time, is deemed to have become payable by the trust immediately before the end of the particular taxation year and not at any other time.
Marginal note:Ceasing to be an exempt foreign trust
(6) If at a specified time in a trust’s taxation year it is an exempt foreign trust, at a particular time in the immediately following taxation year (determined without reference to this subsection) the trust ceases to be an exempt foreign trust (otherwise than because of becoming resident in Canada), and at the particular time there is a resident contributor to, or resident beneficiary under, the trust,
(a) the trust’s taxation year (determined without reference to this subsection) that includes the particular time is deemed to have ended immediately before the particular time and a new taxation year of the trust is deemed to begin at the particular time; and
(b) for the purpose of determining the trust’s fiscal period after the particular time, the trust is deemed not to have established a fiscal period before the particular time.
Marginal note:Limit to amount recoverable
(7) The maximum amount recoverable under the provisions referred to in paragraph (3)(d) at any particular time from a person in respect of a trust (other than a person that is deemed, under subsection (12) or (13), to be a contributor or a resident contributor to the trust) and a particular taxation year of the trust is the person’s recovery limit at the particular time in respect of the trust and the particular year if
(a) either
(i) the person is liable under a provision referred to in paragraph (3)(d) in respect of the trust and the particular year solely because the person was a resident beneficiary under the trust at a specified time in respect of the trust in the particular year, or
(ii) at a specified time in respect of the trust in the particular year, the total of all amounts each of which is the amount, at the time it was made, of a contribution to the trust made before the specified time by the person or by another person or partnership not dealing at arm’s length with the person, is not more than the greater of
(A) $10,000, and
(B) 10% of the total of all amounts each of which was the amount, at the time it was made, of a contribution made to the trust before the specified time;
(b) except if the total determined in subparagraph (a)(ii) in respect of the person and all persons or partnerships not dealing at arm’s length with the person is $10,000 or less, the person has filed on a timely basis under section 233.2 all information returns required to be filed by the person before the particular time in respect of the trust (or on any later day that is acceptable to the Minister); and
(c) it is reasonable to conclude that for each transaction that occurred before the end of the particular year at the direction of, or with the acquiescence of, the person
(i) none of the purposes of the transaction was to enable the person to avoid or minimize any liability under a provision referred to in paragraph (3)(d) in respect of the trust, and
(ii) the transaction was not part of a series of transactions any of the purposes of which was to enable the person to avoid or minimize any liability under a provision referred to in paragraph (3)(d) in respect of the trust.
Marginal note:Recovery limit
(8) The recovery limit referred to in paragraph (3)(e) and subsection (7) at a particular time of a particular person in respect of a trust and a particular taxation year of the trust is the amount, if any, by which the greater of
(a) the total of all amounts each of which is
(i) an amount received or receivable after 2000 and before the particular time
(A) by the particular person on the disposition of all or part of the person’s interest as a beneficiary under the trust, or
(B) by a person or partnership (that was, when the amount became receivable, a specified party in respect of the particular person) on the disposition of all or part of the specified party’s interest as a beneficiary under the trust,
(ii) an amount (other than an amount described in subparagraph (i)) made payable by the trust after 2000 and before the particular time to
(A) the particular person because of the interest of the particular person as a beneficiary under the trust, or
(B) a person or partnership (that was, when the amount became payable, a specified party in respect of the particular person) because of the interest of the specified party as a beneficiary under the trust,
(iii) an amount received after August 27, 2010, by the particular person, or a person or partnership (that was, when the amount was received, a specified party in respect of the particular person), as a loan from the trust to the extent that the amount has not been repaid,
(iv) an amount (other than an amount described in any of subparagraphs (i) to (iii)) that is the fair market value of a benefit received or enjoyed, after 2000 and before the particular time, from or under the trust by
(A) the particular person, or
(B) a person or partnership that was, when the benefit was received or enjoyed, a specified party in respect of the particular person, or
(v) the maximum amount that would be recoverable from the particular person at the end of the trust’s 2006 taxation year under subsection (2) (as it read in its application to taxation years that end before 2007) if the trust had tax payable under this Part at the end of the trust’s 2006 taxation year and that tax payable exceeded the total of the amounts described in respect of the particular person under paragraphs (2)(a) and (b) (as they read in their application to taxation years that end before 2007), except to the extent that the amount so recoverable is in respect of an amount that is included in the particular person’s recovery limit because of subparagraph (i) or (ii), and
(b) the total of all amounts each of which is the amount, when made, of a contribution to the trust before the particular time by the particular person,
exceeds the total of all amounts each of which is
(c) an amount recovered before the particular time from the particular person in connection with a liability of the particular person (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of subsection (3) (or the application of this section as it read in its application to taxation years that end before 2007),
(d) an amount (other than an amount in respect of which this paragraph has applied in respect of any other person) recovered before the particular time from a specified party in respect of the particular person in connection with a liability of the particular person (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of subsection (3) (or the application of this section as it read in its application to taxation years that end before 2007), or
(e) the amount, if any, by which the particular person’s tax payable under this Part for any taxation year in which an amount described in any of subparagraphs (a)(i) to (iv) was paid, became payable, was received, became receivable or was enjoyed by the particular person exceeds the amount that would have been the particular person’s tax payable under this Part for that taxation year if no such amount were paid, became payable, were received, became receivable or were enjoyed by the particular person in that taxation year.
Marginal note:Determination of contribution amount — restricted property
(9) If a person or partnership contributes at any time restricted property to a trust, the amount of the contribution at that time is deemed, for the purposes of this section, to be the greater of
(a) the amount, determined without reference to this subsection, of the contribution at that time, and
(b) the amount that is the greatest fair market value of the restricted property, or property substituted for it, in the period that begins immediately after that time and ends at the end of the third calendar year that ends after that time.
Marginal note:Contributor — resident in Canada within 60 months after contribution
(10) In applying this section at each specified time, in respect of a trust’s taxation year, that is before the particular time at which a contributor to the trust becomes resident in Canada within 60 months after making a contribution to the trust, the contribution is deemed to have been made at a time other than a non-resident time of the contributor if
(a) in applying the definition “non-resident time” in subsection (1) at each of those specified times, the contribution was made at a non-resident time of the contributor; and
(b) in applying the definition “non-resident time” in subsection (1) immediately after the particular time, the contribution is made at a time other than a non-resident time of the contributor.
Marginal note:Application of subsections (12) and (13)
(11) Subsections (12) and (13) apply to a trust or a person in respect of a trust if
(a) at any time property of a trust (referred to in this subsection and subsections (12) and (13) as the “original trust”) is transferred or loaned, directly or indirectly, in any manner, to another trust (referred to in this subsection and subsections (12) and (13) as the “transferee trust”);
(b) the original trust
(i) is deemed to be resident in Canada immediately before that time because of paragraph (3)(a),
(ii) would be deemed to be resident in Canada immediately before that time because of paragraph (3)(a) if this section were read without reference to paragraph (a) of the definition “connected contributor” in subsection (1) and paragraph (a) of the definition “resident contributor” in that subsection,
(iii) was deemed to be resident in Canada immediately before that time because of subsection (1) as it read in its application to taxation years that end before 2007, or
(iv) would have been deemed to be resident in Canada immediately before that time because of subsection (1) as it read in its application to taxation years that end before 2007 if that subsection were read in that application without reference to subclause (b)(i)(A)(III) of that subsection; and
(c) it is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize a liability under this Part that arose, or that would otherwise have arisen, because of the application of this section (or the application of this section as it read in its application to taxation years that end before 2007).
Marginal note:Deemed resident contributor
(12) The original trust described in subsection (11) (including a trust that has ceased to exist) is deemed to be, at and after the time of the transfer or loan referred to in that subsection, a resident contributor to the transferee trust for the purpose of applying this section in respect of the transferee trust.
Marginal note:Deemed contributor
(13) A person (including any person that has ceased to exist) that is, at the time of the transfer or loan referred to in subsection (11), a contributor to the original trust, is deemed to be at and after that time
(a) a contributor to the transferee trust; and
(b) a connected contributor to the transferee trust, if at that time the person is a connected contributor to the original trust.
Marginal note:Restricted property — exception
(14) A particular property that is, or will be, at any time held, loaned or transferred, as the case may be, by a particular person or partnership is not restricted property held, loaned or transferred, as the case may be, at that time by the particular person or partnership if
(a) the following conditions are met:
(i) the particular property (and property, if any, for which it is, or is to be, substituted) was not, and will not be, at any time acquired, held, loaned or transferred by the particular person or partnership (or any person or partnership with whom the particular person or partnership does not at any time deal at arm’s length) in whole or in part for the purpose of permitting any change in the value of the property of a corporation (that is, at any time, a closely held corporation) to accrue directly or indirectly in any manner whatever to the value of property held by a non-resident trust,
(ii) the Minister is satisfied that the particular property (and property, if any, for which it is, or is to be, substituted) is described by subparagraph (i), and
(iii) the particular property is identified in prescribed form, containing prescribed information, filed, by or on behalf of the particular person or partnership, with the Minister on or before
(A) in the case of a person, the particular person’s filing-due date for the particular person’s taxation year that includes that time,
(B) in the case of a partnership, the day on or before which a return is required by section 229 of the Income Tax Regulations to be filed in respect of the fiscal period of the particular partnership or would be required to be so filed if that section applied to the partnership, or
(C) another date that is acceptable to the Minister; or
(b) at that time
(i) the particular property is
(A) a share of the capital stock of a corporation,
(B) a fixed interest in a trust, or
(C) an interest, as a member of a partnership, under which, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited,
(ii) there are at least 150 persons each of whom holds at that time property that at that time
(A) is identical to the particular property, and
(B) has a total fair market value of at least $500,
(iii) the total of all amounts each of which is the fair market value, at that time, of the particular property (or of identical property that is held, at that time, by the particular person or partnership or a person or partnership with whom the particular person or partnership does not deal at arm’s length) does not exceed 10% of the total of all amounts each of which is the fair market value, at that time, of the particular property or of identical property held by any person or partnership,
(iv) property that is identical to the particular property can normally be acquired by and sold by members of the public in the open market, and
(v) the particular property, or identical property, is listed on a designated stock exchange.
Marginal note:Anti-avoidance
(15) In applying this section,
(a) if it can reasonably be considered that one of the main reasons that a person or partnership
(i) is at any time a shareholder of a corporation is to cause the condition in paragraph (b) of the definition “closely held corporation” in subsection (1) to be satisfied in respect of the corporation, the condition is deemed not to have been satisfied at that time in respect of the corporation,
(ii) holds at any time an interest in a trust is to cause the condition in clause (h)(ii)(A) of the definition “exempt foreign trust” in subsection (1) to be satisfied in respect of the trust, the condition is deemed not to have been satisfied at that time in respect of the trust, and
(iii) holds at any time a property is to cause the condition described in subparagraph (14)(b)(ii) to be satisfied in respect of the property or an identical property held by any person, the condition is deemed not to have been satisfied at that time in respect of the property or the identical property;
(b) if at any time at or before a specified time in a trust’s taxation year, a resident contributor to the trust contributes to the trust property that is restricted property of the trust, or property for which restricted property of the trust is substituted, and the trust is at that specified time an exempt foreign trust by reason of paragraph (f) of the definition “exempt foreign trust” in subsection (1), the amount of the trust’s income for the taxation year from the restricted property, and the amount of any taxable capital gain from the disposition in the taxation year by the trust of the restricted property, shall be included in computing the income of the resident contributor for its taxation year in which that taxation year of the trust ends and not in computing the income of the trust for that taxation year of the trust; and
(c) if at a specified time in a trust’s taxation year it is an exempt foreign trust by reason of paragraph (h) of the definition “exempt foreign trust” in subsection (1), at a time immediately before a particular time in the immediately following taxation year (determined without reference to subsection (6)) there is a resident contributor to, or resident beneficiary under, the trust, at the time that is immediately before the particular time a beneficiary holds a fixed interest in the trust, and at the particular time the interest ceases to be a fixed interest in the trust,
(i) the trust is deemed, other than for purposes of subsection (6), not to be an exempt foreign trust at any time in the trust’s taxation year (referred to in this paragraph as its “assessment year”) that ends (for greater certainty as determined under paragraph (6)(a)) at the time that is immediately before the particular time,
(ii) the trust shall include in computing its income for its assessment year an amount equal to the amount determined by the formula
A – B – C
where
- A
- is the amount by which the total of all amounts each of which is the fair market value of a property held by the trust at the end of its assessment year exceeds the total of all amounts each of which is the principal amount outstanding at the end of its assessment year of a liability of the trust,
- B
- is the amount by which the total of all amounts each of which is the fair market value of a property held by the trust at the earliest time at which there is a resident contributor to, or resident beneficiary under, the trust and at which the trust is an exempt foreign trust (referred to in this paragraph as the “initial time”) exceeds the total of all amounts each of which is the principal amount outstanding at the initial time of a liability of the trust, and
- C
- is the total of all amounts each of which is the amount of a contribution made to the trust in the period that begins at the initial time and ends at the end of its assessment year (in this paragraph referred to as the “interest gross-up period”), and
(iii) if the trust is liable for tax for its assessment year, then throughout the period that begins at the trust’s balance-due day for each taxation year that ends in the interest gross-up period and ends at the balance-due day for its assessment year, the trust is (in addition to any excess otherwise determined in respect of the trust under that subsection) deemed to have an excess for the purposes of subsection 161(1) equal to the amount determined by the formula
A/B × 42.92%
where
- A
- is the amount determined under subparagraph (ii) in respect of the trust for the particular taxation year, and
- B
- is the number of the trust’s taxation years that end in the interest gross-up period.
Marginal note:Attribution to electing contributors
(16) If at a specified time in respect of a trust for a taxation year of the trust (referred to in this subsection as the “trust’s year”), there is an electing contributor in respect of the trust, the following rules apply:
(a) the electing contributor is required to include in computing their income for their taxation year (referred to in this subsection as the “contributor’s year”) in which the trust’s year ends, the amount determined by the formula
A/B × (C – D)
where
- A
- is the total of all amounts each of which is
(i) if at or before the specified time the electing contributor has made a contribution to the trust and is not a joint contributor in respect of the trust and the contribution, the amount of the contribution, or
(ii) if at or before the specified time the electing contributor has made a contribution to the trust and is a joint contributor in respect of the trust and the contribution, the amount obtained when the amount of the contribution is divided by the number of joint contributors in respect of the contribution,
- B
- is the total of all amounts each of which is the amount that would be determined under A for each resident contributor, or connected contributor, to the trust at the specified time if all of those contributors were electing contributors in respect of the trust,
- C
- is the trust’s income, computed without reference to paragraph (f), for the trust’s year, and
- D
- is the amount deducted by the trust under section 111 in computing its taxable income for the trust’s year;
(b) subject to paragraph (c), the amount, if any, required by paragraph (a) to be included in the electing contributor’s income for the contributor’s year is deemed to be income from property from a source in Canada;
(c) for the purposes of this paragraph, paragraph (d) and section 126, an amount in respect of the trust’s income for the trust’s year from a source in a country other than Canada is deemed to be income of the electing contributor for the contributor’s year from that source if
(i) the amount is designated by the trust, in respect of the electing contributor, in the trust’s return of income under this Part for the trust’s year,
(ii) the amount may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that because of paragraph (a) was included in computing the income of the electing contributor for the contributor’s year, and
(iii) the total of all amounts designated by the trust, under this paragraph or subsection 104(22) in respect of that source, in the trust’s return of income under this Part for the trust’s year is not greater than the trust’s income for the trust’s year from that source;
(d) for the purposes of this paragraph and section 126, the electing contributor is deemed to have paid as business-income tax (in this subsection as defined by subsection 126(7)) or non-business-income tax (in this subsection as defined by subsection 126(7)), as the case may be, for the contributor’s year in respect of a source the amount determined by the formula
A × B/C
where
- A
- is the amount that, in the absence of subparagraph (e)(i), would be the business-income tax or non-business-income tax, as the case may be, paid by the trust in respect of that source for the trust’s year,
- B
- is the total of all amounts each of which is an amount designated under paragraph (c) in respect of that source by the trust in respect of the electing contributor in the trust’s return of income under this Part for the trust’s year, and
- C
- is the trust’s income for the trust’s year from that source;
(e) in applying subsection 20(12) and section 126 in respect of the trust’s year there shall be deducted
(i) in computing the trust’s income from a source for the trust’s year the total of all amounts each of which is an amount deemed by paragraph (c) to be income from that source of the electing contributor for the contributor’s year, and
(ii) in computing the business-income tax or non-business-income tax paid by the trust for the trust’s year in respect of a source the total of all amounts in respect of that source each of which is an amount deemed by paragraph (d) to be paid by the electing contributor as business-income tax or non-business-income tax, as the case may be, in respect of that source;
(f) in computing the trust’s income for the trust’s year there may be deducted the amount that does not exceed the amount included by reason of paragraph (a) in the electing contributor’s income for the contributor’s year; and
(g) if before the specified time the electing contributor made a contribution to the trust as part of a series of transactions in which another person made the same contribution, in applying paragraphs (a) to (f) in respect of the electing contributor and the other person, the other person is deemed not to be a joint contributor in respect of the contribution if it can reasonably be considered that one of the main purposes of the series was to obtain the benefit of any deduction in computing income, taxable income or tax payable under this Act or any balance of undeducted outlays, expenses or other amounts available to the other person or any exemption available to the other person from tax payable under this Act.
Marginal note:Liability for joint contribution
(17) If, at or before a specified time in a trust’s taxation year (referred to in this subsection as the “trust’s year”), there is an electing contributor in respect of the trust who is a joint contributor in respect of a contribution to the trust,
(a) each person who is a joint contributor in respect of the contribution
(i) has, in respect of the contribution, jointly and severally, or solidarily, the rights and obligations under Divisions I and J of each other person (referred to in this subsection as the “specified person”) who is, at or before the specified time, a joint contributor in respect of that contribution, for the specified person’s taxation year in which the trust’s year ends, and
(ii) is subject to Part XV in respect of those rights and obligations; and
(b) the maximum amount recoverable under the provisions referred to in paragraph (a) at a particular time from the person in respect of the contribution and a taxation year, of another person who is the specified person, in which the trust’s year ends is the amount determined by the formula
A – B – C
where
- A
- is the total of the amounts payable by the specified person under this Part for the specified person’s taxation year in which the trust’s year ends,
- B
- is the amount that would be determined for A if the total of the amounts payable by the specified person under this Part for the particular specified person’s taxation year in which the trust’s year ends were computed without reference to the contribution, and
- C
- is the amount recovered before the particular time from the specified person, and any other joint contributor in respect of the trust and the contribution, in connection with the liability of the specified person in respect of the contribution.
(2) Subsection (1) applies to taxation years that end after 2006, except that
(a) subsections 94(1) to (15) of the Act, as enacted by subsection (1), also apply to the particular taxation year of a trust that ends after 2000 and before 2007, and to each subsequent taxation year of the trust that ends before 2007, and to each taxation year of the beneficiaries under, and contributors to, the trust in which such a trust taxation year ends, if the trust elects to have section 94 of the Act, as enacted by subsection (1), apply to the particular taxation year by filing the election in writing with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year in which this Act receives royal assent;
(b) subsections 94(16) and (17) of the Act, as enacted by subsection (1), apply only to taxation years that end after March 4, 2010;
(c) if
(i) an election or form referred to in section 94 of the Act, as enacted by subsection (1), would otherwise be required to be filed before 120 days after the day on which this Act receives royal assent, it is deemed to have been filed with the Minister of National Revenue on a timely basis if it is filed with the Minister of National Revenue within 365 days after the day on which this Act receives royal assent, and
(ii) a trust’s return of income for a taxation year throughout which it was deemed by subsection 94(3) of the Act, as enacted by subsection (1), to be resident in Canada for the purpose of computing its income (or was deemed by paragraph 94(3)(f) of the Act, as enacted by subsection (1), to exist) would otherwise be required to be filed before 120 days after the day on which this Act receives royal assent, it is deemed to have been filed, for the purposes of section 162 of the Act, with the Minister of National Revenue on a timely basis if it is filed with the Minister of National Revenue within 365 days after the day on which this Act receives royal assent (however, this subparagraph does not apply in respect of a return of income for a taxation year that ends before the day on which this Act receives royal assent and for which the trust was deemed resident in Canada by section 94 of the Act as it read without reference to this Act);
(d) if a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act receives royal assent, that this paragraph applies, in applying section 94 of the Act, as enacted by subsection (1), in respect of the trust, the definition “arm’s length transfer” in subsection 94(1) of the Act, as enacted by subsection (1), does not include a loan or other transfer of property that is identified in the election and that is made in a taxation year that begins before 2003;
(e) clause (f)(ii)(C) of the definition “exempt foreign trust” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of a trust for its taxation years that end before 2009, to be read as follows:
(C) no benefits are provided under the trust, other than benefits in respect of
(I) qualifying services,
(II) particular services rendered before November 9, 2006, to an employer by an employee of the employer if the employee had on November 8, 2006, a right (whether immediate or future or whether absolute or contingent) to receive the benefits in respect of the particular services under an agreement in writing
1. that was entered into before November 9, 2006, and
2. if the employee was resident in Canada on November 9, 2006, a copy of which was filed with a prescribed form with the Minister by or on behalf of the employer no later than April 30 of the first calendar year that begins after November 9, 2006, or
(III) any combination of services that are described in subclause (I) or (II);
(f) the expression “if the person is an individual and the trust arose on and as a consequence of the death of the individual, 18 months before the contribution time” in the definition “non-resident time” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of contributions made before June 23, 2000, to be read as the expression “if the contribution time is before June 23, 2000, 18 months before the end of the trust’s taxation year that includes the contribution time”;
(g) subparagraph 94(3)(a)(x) of the Act, as enacted by subsection (1), does not apply in determining, on or before July 18, 2005, whether a foreign affiliate is a controlled foreign affiliate of a taxpayer;
(h) the reference to “(28)” in subparagraph 94(3)(a)(iii) of the Act, as enacted by subsection (1), is, for taxation years that begin before 2007, to be read as a reference to “(29)”;
(i) paragraph 94(4)(b) of the Act, as enacted by subsection (1), is
(i) subject to subparagraph (ii), for taxation years that begin on or before July 18, 2005, to be read without reference to “the definition “Canadian partnership” in subsection 102(1),”, and
(ii) to be read as follows in its application to a transfer, by a trust, that occurred before February 28, 2004:
(b) subsections 70(6) and 73(1), paragraph 107.4(1)(c) other than subparagraph (i) of that paragraph and paragraph (a) of the definition “mutual fund trust” in subsection 132(6);
(j) paragraph 94(4)(f) of the Act, as enacted by subsection (1), is, in its application to a transfer by a trust that occurred before February 28, 2004, to be read as follows:
(f) determining the residency of the transferee in applying subparagraph (f)(ii) of the definition “disposition” in subsection 248(1);
(k) paragraph 94(2)(o) of the Act, as enacted by subsection (1), is, in its application to a transfer that occurred before August 27, 2010, to be read as follows:
(o) a contribution made at any time by a particular partnership to a trust is deemed to have been made at that time jointly by the particular partnership and by each person or partnership that is at that time a member of the particular partnership (other than a member of the particular partnership if the liability of the member as a member of the particular partnership is limited by operation of any law governing the partnership arrangement);
(l) if a trust was, for its last taxation year that ends before 2007, deemed by paragraph 94(1)(c) of the Act (as it read in its application to that taxation year) to be resident in Canada, paragraphs 94(4)(d) and (e) of the Act, as enacted by subsection (1), do not apply to the trust for the period that starts immediately before the end of that last taxation year and that ends immediately after the beginning of its first taxation year that ends after 2006, unless during that period a change in the trustees of the trust occurred;
(m) the reference to “designated stock exchange” in subparagraph 94(14)(b)(v) of the Act, as enacted by subsection (1), is, before December 14, 2007, to be read as a reference to “prescribed stock exchange”;
(n) subparagraph (c)(ii) of the definition “exempt foreign trust” in subsection 94(1) of the Act, as enacted by subsection (1), is, before January 1, 2012, to be read as follows:
(ii) at the particular time the trust owns and administers a university described in paragraph (f) of the definition “total charitable gifts” in subsection 118.1(1),
(o) if a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act receives royal assent, that this paragraph applies, subsections 94(5) to (6) of the Act, as enacted by subsection (1), are, for the trust’s taxation years that end on or before October 24, 2012, to be read as follows:
(5) A trust is deemed to cease to be resident in Canada at the earliest time at which there is neither a resident contributor to the trust nor a resident beneficiary under the trust in a period that would, if this Act were read without reference to subsection 128.1(4), be a taxation year of the trust
(a) that immediately follows a taxation year of the trust throughout which it was resident in Canada;
(b) at the beginning of which there was a resident contributor to the trust or a resident beneficiary under the trust; and
(c) at the end of which the trust is non-resident.
(6) If at any time a trust becomes or ceases to be an exempt foreign trust (otherwise than because of becoming resident in Canada),
(a) its taxation year that would otherwise include that time is deemed to have ended immediately before that time and a new taxation year of the trust is deemed to begin at that time; and
(b) for the purpose of determining the trust’s fiscal period after that time, the trust is deemed not to have established a fiscal period before that time.
(3) Notwithstanding subsection 152(4) of the Act, the Minister of National Revenue may reassess a trust for its particular taxation year in respect of which it elects under subsection (2) and in respect of each of its subsequent taxation years that ends before 2007, tax, interest or penalties payable under Part I of the Act by the trust if
(a) the trust is deemed by subsection 94(3) of the Act, as enacted by subsection (1), to be resident in Canada for the purpose of computing its income for the particular taxation year; and
(b) on or before the day that is 365 days after the day on which this Act receives royal assent, the trust files with the Minister of National Revenue a prescribed form amending, as necessary, each of its returns for taxation years to which that election applies.
8. (1) The portion of subsection 94.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Offshore investment fund property
94.1 (1) If in a taxation year a taxpayer holds or has an interest in property (referred to in this section as an “offshore investment fund property”)
(2) Subparagraph 94.1(1)(f)(ii) of the Act is replaced by the following:
(ii) 1/12 of the total of
(A) the prescribed rate of interest for the period that includes that month, and
(B) two per cent
(3) The definition “non-resident entity” in subsection 94.1(2) of the Act is replaced by the following:
“non-resident entity”
« entité non-résidente »
“non-resident entity” at any time means
(a) a corporation that is at that time non-resident,
(b) a partnership, organization, fund or entity that is at that time non-resident or is not at that time situated in Canada, or
(c) an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition “exempt foreign trust” in subsection 94(1)).
(4) Subsections (1) to (3) apply to taxation years that end after March 4, 2010. Subsections (1) and (3) also apply to each taxation year of a beneficiary under a trust that ends before March 5, 2010 if subsection 94(1) of the Act, as enacted by section 7, applies to the trust for a taxation year of the trust that ends in that earlier taxation year of the beneficiary.
(5) Subsection (6) applies to a taxpayer for each taxation year that ends in the period that begins on January 1, 2001 and ends on March 4, 2010 (referred to in this subsection and subsections (7), (8) and (10) as the “relevant period”), if
(a) in the return of income for the year the taxpayer has, in respect of one or more participating interests held by the taxpayer during the relevant period, in this subsection and subsections (6) to (10) having the meaning of “participating interest” as set out in the provisions of sections 94.1 to 94.4 of the Act contained in section 18 of Bill C-10 of the second session of the 39th Parliament as passed by the House of Commons on October 29, 2007, included or deducted an amount (referred to in this subsection and subsections (6) to (8) and (10) as the “reported inclusion” or “reported deduction” as the case may be) under those provisions in computing income for the year; and
(b) the taxpayer files a prescribed form on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act receives royal assent
(i) identifying each participating interest of the taxpayer for which a reported inclusion or reported deduction described in paragraph (a) has been included, or deducted, in computing the taxpayer’s income for a taxation year ending in the relevant period, and
(ii) providing sufficient detail of each of those participating interests, including any reported inclusions, reported deductions, and any taxable capital gains or allowable capital losses realized on the participating interests described in subparagraph (i).
(6) If this subsection applies to a taxpayer for a taxation year,
(a) the taxpayer’s reported inclusion and any taxable capital gains for the year in respect of a participating interest is deemed to be the amount required to be included under the Act in computing the taxpayer’s income for that year in respect of that participating interest; and
(b) the taxpayer’s reported deduction and any allowable capital loss for the year in respect of a participating interest is deemed to be the amount deductible under the Act in computing the taxpayer’s income, or the allowable capital loss, respectively, for that year in respect of that participating interest.
(7) If subsection (6) applies to a taxpayer for one or more taxation years, in computing the taxpayer’s income for the first taxation year that ends after the relevant period, there may be deducted the amount that does not exceed the amount, if any, determined by the formula
(A – B) – (C – D)
where
- A
- is the total of all amounts each of which is a reported inclusion for a year in respect of a participating interest, or a taxable capital gain for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a);
- B
- is the total of all amounts each of which is a reported deduction for a year in respect of a participating interest, or an allowable capital loss for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a);
- C
- is the total of all amounts each of which is
(a) an amount that would be required to be included under the provisions of the Act, read without reference to this Act, in the taxpayer’s income for a taxation year that ends in the relevant period in respect of a property that is a participating interest of the taxpayer described in paragraph (5)(a), or
(b) a taxable capital gain computed without reference to this Act for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a); and
- D
- is the total of all amounts each of which is an allowable capital loss computed without reference to this Act for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a).
(8) Subsection (9) applies to a taxpayer in respect of a participating interest described in paragraph (5)(a) for the first taxation year that ends after the relevant period if
(a) at the start of the year the taxpayer holds the participating interest;
(b) the total of all amounts each of which is a reported deduction for a year in respect of the participating interest exceeds the total of all amounts each of which is a reported inclusion for a year in respect of the participating interest; and
(c) the amount determined for B in applying the formula in subsection (7) in computing the taxpayer’s income for that year exceeds the amount, if any, that is the amount determined for A in so applying that formula.
(9) If this subsection applies to a taxpayer in respect of a participating interest for a taxation year, in computing the adjusted cost base to the taxpayer of the participating interest at any time after the start of the taxation year, there is to be deducted an amount equal to the excess determined in respect of the participating interest under paragraph (8)(b).
(10) Notwithstanding subsection 152(4) of the Act, the Minister of National Revenue may reassess tax, interest or penalties payable under Part I of the Act by the taxpayer, in respect of each of the taxpayer’s participating interests for each of the taxpayer’s taxation years that ends in the relevant period to give effect to the application of the Act as read in respect of each of those years without regard to this Part if
(a) subsection (6) does not apply to the taxpayer;
(b) the taxpayer has a reported inclusion or a reported deduction in respect of those participating interests for one or more of those years; and
(c) at any time that is on or before the day that is 365 days after the day on which this Act receives royal assent, the taxpayer files with the Minister of National Revenue a prescribed form amending, as necessary, each of the returns for those taxation years.
9. (1) The Act is amended by adding the following after section 94.1:
Marginal note:Investments in non-resident commercial trusts
94.2 (1) Subsection (2) applies to a beneficiary under a trust, and to any particular person (other than an individual described in paragraph (a) of the definition “connected contributor” in subsection 94(1)) of which any such beneficiary is a controlled foreign affiliate, at any time if
(a) the trust is at that time an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition “exempt foreign trust” in subsection 94(1));
(b) either
(i) the total fair market value at that time of all fixed interests of a particular class in the trust held by the beneficiary, persons or partnerships not dealing at arm’s length with the beneficiary, or persons or partnerships that acquired their interests in the trust in exchange for consideration given to the trust by the beneficiary, is at least 10% of the total fair market value at that time of all fixed interests of the particular class, or
(ii) the beneficiary or the particular person has at or before that time contributed restricted property to the trust; and
(c) the beneficiary is at that time a
(i) resident beneficiary,
(ii) mutual fund,
(iii) controlled foreign affiliate of the particular person, or
(iv) partnership of which a person described in any of subparagraphs (i) to (iii) is a member.
Marginal note:Deemed corporation
(2) If this subsection applies at any time to a beneficiary under, or a particular person in respect of, a trust, then for the purposes of applying this section, subsections 91(1) to (4), paragraph 94.1(1)(a) and sections 95 and 233.4 to the beneficiary under, and, if applicable, to the particular person in respect of, the trust
(a) the trust is deemed to be at that time a non-resident corporation
(i) controlled by each of the beneficiary and the particular person, and
(ii) having, for each particular class of fixed interests in the trust, a separate class of capital stock of 100 issued shares that have the same attributes as the interests of the particular class; and
(b) each beneficiary under the trust is deemed to hold at that time the number of shares of each separate class described in subparagraph (a)(ii) equal to the proportion of 100 that the fair market value at that time of that beneficiary’s fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class.
Marginal note:Relief from double tax
(3) For the purposes of applying subsection 91(1) to the beneficiary, and, if applicable, to the particular person, to whom subsection (2) applies
(a) there may be deducted in computing the foreign accrual property income of the trust referred to in paragraph (2)(a) (in this subsection referred to as the “entity”) for a particular taxation year of the entity the amount that would, in the absence of this paragraph, be the portion of the entity’s foreign accrual property income that would reasonably be considered to have been if this Part were applicable to all beneficiaries of the entity, included under subsection 104(13) in computing the income of any beneficiary of the entity for the taxation year in which the particular taxation year of the entity ends; and
(b) subsection 5904(2) of the Income Tax Regulations is to be read without reference to its paragraph (a) in determining the distribution entitlement of all the shares of a class of the capital stock of the entity at the end of the particular taxation year.
Marginal note:Request for information
(4) If the Minister sends a written request, served personally or by registered mail, to a taxpayer requesting additional information for the purpose of enabling the Minister to determine the fair market value of interests in a trust for the purpose of determining the application of subsections (1) to (3) for a taxation year to the taxpayer, and information that may reasonably be considered to be sufficient to make the determination is not received by the Minister within 120 days (or within any longer period that is acceptable to the Minister) after the Minister sends the request, then in applying this section for the taxation year to the taxpayer the fair market value of those interests is deemed to be the fair market value as reasonably determined by the Minister based on the information received by the Minister within 120 days (or within any longer period that is acceptable to the Minister) after the Minister sends the request and any other information the Minister considers reasonable.
(2) Subsection (1) applies to taxation years that end after March 4, 2010, except that
(a) for taxation years that end before October 24, 2012, paragraph 94.2(1)(c) of the Act, as enacted by subsection (1), is to be read as follows:
(c) the beneficiary is at that time a resident beneficiary or a mutual fund.
(b) if subsection 94(1) of the Act, as enacted by section 7, applies to a trust for a taxation year that ends before March 5, 2010, then section 94.2 of the Act, as enacted by subsection (1), applies to each beneficiary under the trust, and to each person of which a beneficiary under the trust is a controlled foreign affiliate, for a taxation year of the beneficiary or person in which the earlier taxation year of the trust ends and, for those earlier taxation years, that section is to be read as follows:
94.2 Where,
(a) at any time in a taxation year of a trust that is an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition “exempt foreign trust” in subsection 94(1)), a person beneficially interested in the trust (referred to in this section as a “beneficiary”) was
(i) a person resident in Canada,
(ii) a corporation or trust with which a person resident in Canada was not dealing at arm’s length, or
(iii) a controlled foreign affiliate of a person resident in Canada, and
(b) at any time in or before the trust’s taxation year,
(i) the trust, or a non-resident corporation that would, if the trust were resident in Canada, be a controlled foreign affiliate of the trust, has, other than by virtue of the repayment of a loan, acquired property, directly or indirectly in any manner whatever, from
(A) a particular person who
(I) was the beneficiary referred to in paragraph (a), was related to that beneficiary or was the uncle, aunt, nephew or niece of that beneficiary,
(II) was resident in Canada at any time in the 18-month period before the end of that year or, in the case of a person who has ceased to exist, was resident in Canada at any time in the 18-month period before the person ceased to exist, and
(III) in the case of an individual, had before the end of that year been resident in Canada for a period of, or periods the total of which is, more than 60 months, or
(B) a trust or corporation that acquired the property, directly or indirectly in any manner whatever, from a particular person described in clause (A) with whom it was not dealing at arm’s length
and the trust was not
(C) an inter vivos trust created at any time before 1960 by a person who at that time was a non-resident person,
(D) a testamentary trust that arose as a consequence of the death of an individual before 1976, or
(E) governed by a foreign retirement arrangement, or
(ii) all or any part of the interest of the beneficiary in the trust was acquired directly or indirectly by the beneficiary by way of
(A) purchase,
(B) gift, bequest or inheritance from a person referred to in clause (i)(A) or (B), or
(C) the exercise of a power of appointment by a person referred to in clause (i)(A) or (B),
the following rules apply for that taxation year of the trust:
(c) for the purposes of subsections 91(1) to (4) and sections 95 and 233.4,
(i) the trust shall, with respect to any beneficiary under the trust whose beneficial interest in the trust has a fair market value that is not less than 10% of the aggregate fair market value of all beneficial interests in the trust, be deemed to be a non-resident corporation that is controlled by the beneficiary,
(ii) the trust shall be deemed to be a non-resident corporation having a capital stock of a single class divided into 100 issued shares, and
(iii) each beneficiary under the trust shall be deemed to own at any time the number of the issued shares that is equal to the proportion of 100 that
(A) the fair market value at that time of the beneficiary’s beneficial interest in the trust
is of
(B) the fair market value at that time of all beneficial interests in the trust, and
(d) in computing the foreign accrual property income of the trust for that taxation year, there may be deducted such portion of the amount that would, but for this paragraph, be the foreign accrual property income of the trust as may reasonably be considered as having been included in computing a beneficiary’s income under subsection 104(13) for a taxation year in which that taxation year of the trust ends.
10. (1) The portion of subsection 104(6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Deduction in computing income of trust
(6) Subject to subsections (7) to (7.1), for the purposes of this Part, there may be deducted in computing the income of a trust for a taxation year
(2) Section 104 of the Act is amended by adding the following after subsection (7):
Marginal note:Trusts deemed to be resident in Canada
(7.01) If a trust is deemed by subsection 94(3) to be resident in Canada for a taxation year for the purpose of computing the trust’s income for the year, the maximum amount deductible under subsection (6) in computing its income for the year is the amount, if any, by which
(a) the maximum amount that, if this Act were read without reference to this subsection, would be deductible under subsection (6) in computing its income for the year,
exceeds
(b) the total of
(i) the portion of the trust’s designated income for the year (within the meaning assigned by section 210) that became payable in the year to a non-resident beneficiary under the trust in respect of an interest of the non-resident as a beneficiary under the trust, and
(ii) all amounts each of which is determined by the formula
A × B
where
- A
- is an amount (other than an amount described in subparagraph (i)) that
(A) is paid or credited (having the meaning assigned by Part XIII) in the year to the trust,
(B) would, if this Act were read without reference to subparagraph 94(3)(a)(viii), paragraph 212(2)(b) and sections 216 and 217, be an amount as a consequence of the payment or crediting of which the trust would have been liable to tax under Part XIII, and
(C) becomes payable in the year by the trust to a non-resident beneficiary under the trust in respect of an interest of the non-resident as a beneficiary under the trust, and
- B
- is
(A) 0.35, if the trust can establish to the satisfaction of the Minister that the non-resident beneficiary to whom the amount described in the description of A is payable is resident in a country with which Canada has a tax treaty under which the income tax that Canada may impose on the beneficiary in respect of the amount is limited, and
(B) 0.6, in any other case.
(3) Subsection 104(24) of the Act is replaced by the following:
Marginal note:Amount payable
(24) For the purposes of subsections (6), (7), (7.01), (13), (16) and (20), subparagraph 53(2)(h)(i.1) and subsections 94(5.2) and (8), an amount is deemed not to have become payable to a beneficiary in a taxation year unless it was paid in the year to the beneficiary or the beneficiary was entitled in the year to enforce payment of it.
(4) Subsections (1) to (3) apply to taxation years that end after 2006. Those subsections also apply to each earlier taxation year of a trust to which subsection 94(1) of the Act, as enacted by section 7, applies and each taxation year of a beneficiary under the trust in which one of those earlier taxation years of the trust ends, except that subsection 104(24) of the Act, as enacted by subsection (3), is to be read as follows in its application before October 31, 2006:
(24) For the purposes of subsections (6), (7), (7.01), (13) and (20), subparagraph 53(2)(h)(i.1) and subsections 94(5.2) and (8), an amount is deemed not to have become payable to a beneficiary in a taxation year unless it was paid in the year to the beneficiary or the beneficiary was entitled in the year to enforce payment of it.
11. (1) The portion of paragraph 107(4.1)(b) of the Act before subparagraph (i) is replaced by the following:
(b) subsection 75(2) was applicable, or would have been applicable if subsection 75(3) were read without reference to its paragraph (c.2), at a particular time in respect of any property of
(2) Subsection (1) applies to distributions made after August 27, 2010.
12. (1) The portion of subsection 108(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Income of a trust in certain provisions
(3) For the purposes of the definitions “income interest” in subsection (1), “lifetime benefit trust” in subsection 60.011(1) and “exempt foreign trust” in subsection 94(1), the income of a trust is its income computed without reference to the provisions of this Act and, for the purposes of the definition “pre-1972 spousal trust” in subsection (1) and paragraphs 70(6)(b) and (6.1)(b), 73(1.01)(c) and 104(4)(a), the income of a trust is its income computed without reference to the provisions of this Act, minus any dividends included in that income
(2) The portion of subsection 108(7) of the Act before paragraph (a) is replaced by the following:
Marginal note:Interests acquired for consideration
(7) For the purposes of paragraph 53(2)(h), subparagraph (c)(i) of the definition “exempt amount” in subsection 94(1), subsection 107(1), paragraph (j) of the definition “excluded right or interest” in subsection 128.1(10) and paragraph (b) of the definition “personal trust” in subsection 248(1),
(3) Subsection (1) applies to trust taxation years that begin after 2000.
(4) Subsection (2) applies to taxation years that end after 2006. That subsection also applies to each earlier taxation year of a trust to which subsection 94(1) of the Act, as enacted by section 7, applies and each taxation year of a beneficiary under the trust in which one of those earlier taxation years of the trust ends.
13. (1) Subsection 122(2) of the Act is amended by adding the following after paragraph (d):
(d.1) was not a trust to which a contribution (as defined by section 94 as it reads for taxation years that end after 2006) was made after June 22, 2000;
(2) Subsection (1) applies to trust taxation years that begin after 2002.
14. (1) Section 128.1 of the Act is amended by adding the following after subsection (1):
Marginal note:Trusts subject to subsection 94(3)
(1.1) Paragraph (1)(b) does not apply, at a time in a trust’s particular taxation year, to the trust if the trust is resident in Canada for the particular taxation year for the purpose of computing its income.
(2) Subsection (1) applies to trust taxation years that end after 2006. Subsection (1) also applies to each earlier taxation year of a trust to which subsection 94(1) of the Act, as enacted by section 7, applies.
15. (1) Paragraph 152(4)(b) of the Act is amended by striking out “or” at the end of subparagraph (v), by adding “or” at the end of subparagraph (vi) and by adding the following after subparagraph (vi):
(vii) is made to give effect to the application of any of sections 94, 94.1 and 94.2;
(2) Subsection (1) applies to taxation years that end after March 4, 2010.
16. (1) Section 160 of the Act is amended by adding the following after subsection (2):
Marginal note:Assessment
(2.1) The Minister may at any time assess a taxpayer in respect of any amount payable because of paragraph 94(3)(d) or (e) or subsection 94(17) and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.
(2) The portion of subsection 160(3) of the Act before paragraph (b) is replaced by the following:
Marginal note:Discharge of liability
(3) If a particular taxpayer has become jointly and severally liable with another taxpayer under this section or because of paragraph 94(3)(d) or (e) or subsection 94(17) in respect of part or all of a liability under this Act of the other taxpayer,
(a) a payment by the particular taxpayer on account of that taxpayer’s liability shall to the extent of the payment discharge their liability; but
(3) Subsections (1) and (2) apply to assessments made after 2006, except that
(a) subsection 160(2.1) of the Act, as enacted by subsection (1), and the portion of subsection 160(3) of the Act before its paragraph (a), as enacted by subsection (2), are to be read without reference to “or subsection 94(17)” in their application to taxation years that end before March 5, 2010; and
(b) if subsection 94(1) of the Act, as enacted by section 7, applies to a taxation year of a taxpayer that ends before 2007, subsection (1) applies to assessments made on or after the first day of the first such taxation year of the taxpayer to which that subsection 94(1) applies.
17. (1) Paragraph (c) of the description of A in subsection 162(10.1) of the French version of the Act is replaced by the following:
c) si la déclaration est à produire en application de l’article 233.2 à l’égard d’une fiducie, 5% du total des montants représentant chacun la juste valeur marchande, au moment où il a été fait, d’un apport que la personne ou la société de personnes a fait à la fiducie avant la fin de la dernière année d’imposition de celle-ci pour laquelle la déclaration doit être produite,
(2) Paragraph (d) of the description of A in subsection 162(10.1) of the English version of the Act is replaced by the following:
(d) if the return is required to be filed under section 233.2 in respect of a trust, 5% of the total of all amounts each of which is the fair market value, at the time it was made, of a contribution of the person or partnership made to the trust before the end of the last taxation year of the trust in respect of which the return is required,
(3) Section 162 of the Act is amended by adding the following after subsection (10.1):
Marginal note:Application to trust contributions
(10.11) In paragraph (d) of the description of A in subsection (10.1), subsections 94(1), (2) and (9) apply.
(4) Subsections (1) to (3) apply to returns in respect of taxation years that end after 2006. Those subsections also apply to returns in respect of an earlier taxation year of a taxpayer if subsection 94(1) of the Act, as enacted by section 7, applies to that earlier taxation year of the taxpayer.
18. (1) Paragraph 163(2.4)(b) of the Act is replaced by the following:
(b) if the return is required to be filed under section 233.2 in respect of a trust, the greater of
(i) $24,000, and
(ii) 5% of the total of all amounts each of which is the fair market value, at the time it was made, of a contribution of the person or partnership made to the trust before the end of the last taxation year of the trust in respect of which the return is required;
(2) Section 163 of the Act is amended by adding the following after subsection (2.4):
Marginal note:Application to trust contributions
(2.41) In subparagraph (2.4)(b)(ii), subsections 94(1), (2) and (9) apply.
(3) Subsections (1) and (2) apply to taxation years that end after 2006. Those subsections also apply to returns in respect of an earlier taxation year of a taxpayer if subsection 94(1) of the Act, as enacted by section 7, applies to that earlier taxation year of the taxpayer.
19. (1) Subsection 215(1) of the Act is replaced by the following:
Marginal note:Withholding and remittance of tax
215. (1) When a person pays, credits or provides, or is deemed to have paid, credited or provided, an amount on which an income tax is payable under this Part, or would be so payable if this Act were read without reference to subparagraph 94(3)(a)(viii) and to subsection 216.1(1), the person shall, notwithstanding any agreement or law to the contrary, deduct or withhold from it the amount of the tax and forthwith remit that amount to the Receiver General on behalf of the non-resident person on account of the tax and shall submit with the remittance a statement in prescribed form.
(2) Subsection (1) applies to trust taxation years that end after 2006. Subsection (1) also applies to each earlier taxation year of a trust to which subsection 94(1) of the Act, as enacted by section 7, applies.
20. (1) Section 216 of the Act is amended by adding the following after subsection (4):
Marginal note:Optional method of payment
(4.1) If a trust is deemed by subsection 94(3) to be resident in Canada for a taxation year for the purpose of computing the trust’s income for the year, a person who is otherwise required by subsection 215(3) to remit in the year, in respect of the trust, an amount to the Receiver General in payment of tax on rent on real or immovable property or on a timber royalty may elect in prescribed form filed with the Minister under this subsection not to remit under subsection 215(3) in respect of amounts received after the election is made, and if that election is made, the elector shall,
(a) when any amount is available out of the rent or royalty received for remittance to the trust, deduct 25% of the amount available and remit the amount deducted to the Receiver General on behalf of the trust on account of the trust’s tax under Part I; and
(b) if the trust does not file a return for the year as required by section 150, or does not pay the tax that the trust is liable to pay under Part I for the year within the time required by that Part, on the expiration of the time for filing or payment, as the case may be, pay to the Receiver General, on account of the trust’s tax under Part I, the amount by which the full amount that the elector would otherwise have been required to remit in the year in respect of the rent or royalty exceeds the amounts that the elector has remitted in the year under paragraph (a) in respect of the rent or royalty.
(2) Subsection (1) applies to trust taxation years that end after 2006, except that
(a) it also applies to each earlier taxation year of a trust to which subsection 94(1) of the Act, as enacted by section 7, applies; and
(b) an election referred to in subsection 216(4.1) of the Act, as enacted by subsection (1), is deemed to have been filed with the Minister of National Revenue on a timely basis if it is filed with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year that includes the day on which this Act receives royal assent.
21. (1) The definitions “specified beneficiary” and “specified foreign trust” in subsection 233.2(1) of the Act are repealed.
(2) Subsections 233.2(2) and (3) of the Act are replaced by the following:
Marginal note:Rule of application
(2) In this section and paragraph 233.5(c.1), subsections 94(1), (2) and (10) to (13) apply, except that the reference to the expression “(other than restricted property)” in the definition “arm’s length transfer” in subsection 94(1) is to be read as a reference to the expression “(other than property to which paragraph 94(2)(g) applies but not including a unit of a mutual fund trust or of a trust that would be a mutual fund trust if section 4801 of the Income Tax Regulations were read without reference to paragraph 4801(b), a share of the capital stock of a mutual fund corporation, or a particular share of the capital stock of a corporation (other than a closely held corporation) which particular share is identical to a share that is, at the transfer time, of a class that is listed on a designated stock exchange)”.
(3) Subsection 233.2(4) of the Act is replaced by the following:
Marginal note:Filing information on foreign trusts
(4) A person shall file an information return in prescribed form, in respect of a taxation year of a particular trust (other than an exempt trust or a trust described in any of paragraphs (c) to (h) of the definition “exempt foreign trust” in subsection 94(1)) with the Minister on or before the person’s filing-due date for the person’s taxation year in which the particular trust’s taxation year ends if
(a) the particular trust is non-resident at a specified time in that taxation year of the particular trust;
(b) the person is a contributor, a connected contributor or a resident contributor to the particular trust; and
(c) the person
(i) is resident in Canada at that specified time, and
(ii) is not, at that specified time,
(A) a mutual fund corporation,
(B) an exempt person,
(C) a mutual fund trust,
(D) a trust described in any of paragraphs (a) to (e.1) of the definition “trust” in subsection 108(1),
(E) a registered investment,
(F) a trust in which all persons beneficially interested are persons described in clauses (A) to (E), or
(G) a contributor to the particular trust by reason only of being a contributor to another trust that is resident in Canada and is described in any of clauses (B) to (F).
Marginal note:Similar arrangements
(4.1) In this section and sections 162, 163 and 233.5, a person’s obligations under subsection (4) (except to the extent that they are waived in writing by the Minister) are to be determined as if a contributor described in paragraph (4)(b) were any person who had transferred or loaned property, an arrangement or entity were a non-resident trust throughout the calendar year that includes the time referred to in paragraph (a) and that calendar year were a taxation year of the arrangement or entity, if
(a) the person at any time, directly or indirectly, transferred or loaned the property to be held
(i) under the arrangement and the arrangement is governed by the laws of a country or a political subdivision of a country other than Canada or exists, was formed or organized, or was last continued under the laws of a country or a political subdivision of a country other than Canada, or
(ii) by the entity and the entity is a non-resident entity (as defined by subsection 94.1(2));
(b) the transfer or loan is not an arm’s length transfer;
(c) the transfer or loan is not solely in exchange for property that would be described in paragraphs (a) to (i) of the definition “specified foreign property” in subsection 233.3(1) if that definition were read without reference to paragraphs (j) to (q);
(d) the arrangement or entity is not a trust in respect of which the person would, if this Act were read without reference to this subsection, be required to file an information return for a taxation year that includes that time; and
(e) the arrangement or entity is, for a taxation year or fiscal period of the arrangement or entity that includes that time, not
(i) an exempt foreign trust (as defined in subsection 94(1)),
(ii) a foreign affiliate in respect of which the person is a reporting entity (within the meaning assigned by subsection 233.4(1)), or
(iii) an exempt trust.
(4) Subsections (1) to (3) apply to returns in respect of trust taxation years that end after 2006. Those subsections also apply to returns in respect of an earlier taxation year of a trust if subsection 94(1) of the Act, as enacted by section 7, applies to the trust for that earlier taxation year. However, the reference to “designated stock exchange” in subsection 233.2(2) of the Act, as enacted by subsection (2), is in its application to a time that is before December 14, 2007 to be read as a reference to “prescribed stock exchange”.
(5) A return required to be filed by a person because of subsection 233.2(4) of the Act, as enacted by subsection (3), is deemed to have been filed with the Minister of National Revenue on a timely basis if it is filed with the Minister of National Revenue on or before the person’s filing-due date for the person’s taxation year that includes the day on which this Act receives royal assent.
22. (1) Subparagraph (a)(iv) of the definition bien étranger déterminé in subsection 233.3(1) of the French version of the Act is replaced by the following:
(iv) la participation dans une fiducie non-résidente,
(2) Paragraph (d) of the definition “specified foreign property” in subsection 233.3(1) of the English version of the Act is replaced by the following:
(d) an interest in a non-resident trust,
(3) Subsections (1) and (2) apply to returns in respect of trust taxation years that end after 2006. Those subsections also apply to returns in respect of an earlier taxation year of a trust if subsection 94(1) of the Act, as enacted by section 7, applies to the trust for that earlier taxation year.
23. (1) Paragraph 233.5(c) of the Act is replaced by the following:
(c) if the return is required to be filed under section 233.2 in respect of a trust, at the time of each transaction, if any, entered into by the person or partnership after March 5, 1996 and before June 23, 2000 that gave rise to the requirement to file a return for a taxation year of the trust that ended before 2007 or that affects the information to be reported in the return, it was reasonable to expect that sufficient information would be available to the person or partnership to comply with section 233.2 in respect of each taxation year of the trust that ended before 2007;
(c.1) if the return is required to be filed under section 233.2, at the time of each contribution (determined with reference to subsection 233.2(2)) made by the person or partnership after June 22, 2000 that gives rise to the requirement to file the return or that affects the information to be reported in the return, it was reasonable to expect that sufficient information would be available to the person or partnership to comply with section 233.2;
(c.2) if the return is required to be filed under section 233.4 by a person or partnership in respect of a corporation that is a controlled foreign affiliate for the purpose of that section of the person or partnership, at the time of each transaction, if any, entered into by the person or partnership after March 5, 1996 that gives rise to the requirement to file the return or that affects the information to be reported in the return, it was reasonable to expect that sufficient information would be available to the person or partnership to comply with section 233.4; and
(2) Subsection (1) applies to returns in respect of trust taxation years that end after 2006. Subsection (1) also applies to returns in respect of an earlier taxation year of a trust if subsection 94(1) of the Act, as enacted by section 7, applies to that earlier taxation year of the trust.
2001, c. 17Income Tax Amendments Act, 2000
24. (1) Paragraph 53(2)(a) of the Income Tax Amendments Act, 2000 is replaced by the following:
(a) in respect of transfers that occur after 1999 and before 2007, for the purpose of subsection 73(1) of the Act, as enacted by subsection (1), the residence of a transferee trust shall be determined without reference to section 94 of the Act, as it reads in its application to taxation years that end before 2007;
(2) Subsection (1) is deemed to have come into force on June 14, 2001.
25. (1) Subsection 80(19) of the Act is replaced by the following:
(19) Subsections (1) to (4) apply to the 2000 and subsequent taxation years except that, in respect of transfers after 1999 and before 2007, for the purposes of subsection 107(1) of the Act, as amended by this section, the residence of a transferee trust shall be determined without reference to section 94 of the Act, as it read in its application to taxation years that end before 2007.
(2) Subsection (1) is deemed to have come into force on June 14, 2001.
R.S., c. I-4Income Tax Conventions Interpretation Act
26. (1) The Income Tax Conventions Interpretation Act is amended by adding the following after section 4.2:
Marginal note:Application of section 94 of the Income Tax Act
4.3 Notwithstanding the provisions of a convention or the Act giving the convention the force of law in Canada, if a trust is deemed by subsection 94(3) of the Income Tax Act to be resident in Canada for a taxation year for the purposes of computing its income, the trust is deemed to be a resident of Canada, and not a resident of the other contracting state, for the purposes of applying the convention
(a) in respect of the trust for that taxation year; and
(b) in respect of any other person for any period that includes all or part of that taxation year.
(2) Subsection (1) is deemed to have come into force on March 5, 2010.
C.R.C., c. 945Income Tax Regulations
27. (1) Section 202 of the Income Tax Regulations is amended by adding the following after subsection (6):
(6.1) A trust that is deemed by subsection 94(3) of the Act to be resident in Canada for a taxation year for the purposes of computing its income, is deemed, in respect of amounts (other than an exempt amount as defined in subsection 94(1) of the Act) paid or credited by it, to be a person resident in Canada for the taxation year for the purposes of subsections (1) and (2).
(2) Subsection (1) applies to amounts paid or credited after August 27, 2010.
28. (1) Section 5909 of the Regulations and the heading before it are repealed.
(2) Subsection (1) applies to trust taxation years that end after 2006.
PART 2AMENDMENTS IN RESPECT OF FOREIGN AFFILIATES: SURPLUS RULES AND OTHER TECHNICAL AMENDMENTS
R.S., c. 1 (5th Supp.)Income Tax Act
29. (1) Paragraph 53(1)(d) of the Income Tax Act is replaced by the following:
(d) if the property is a share of the capital stock of a foreign affiliate of the taxpayer, any amount required by section 92 to be added in computing the adjusted cost base to the taxpayer of the share;
(2) Subsection (1) is deemed to have come into force on December 21, 2002.
30. (1) Subparagraph 88(1)(d)(ii) of the Act is replaced by the following:
(ii) in no case shall the amount so designated in respect of any such capital property exceed the amount, if any, by which the fair market value of the property at the time the parent last acquired control of the subsidiary exceeds the total of
(A) the cost amount to the subsidiary of the property immediately before the winding-up, and
(B) the prescribed amount, and
(2) Subparagraph 88(1)(d)(iii) of the French version of the Act is replaced by the following:
(iii) le total des sommes ainsi désignées, relativement à toute immobilisation semblable, ne peut en aucun cas dépasser l’excédent du total déterminé selon le sous-alinéa b)(ii) sur le total des sommes déterminées selon les sous-alinéas (i) et (i.1);
(3) Section 88 of the Act is amended by adding the following after subsection (1.7):
Marginal note:Application of subsection (1.9)
(1.8) Subsection (1.9) applies if
(a) a corporation has made a designation (referred to in this subsection and subsection (1.9) as the “initial designation”) under paragraph (1)(d) in respect of a share of the capital stock of a foreign affiliate of the corporation, or an interest in a partnership that, based on the assumptions contained in paragraph 96(1)(c), owns a share of the capital stock of a foreign affiliate of the corporation, on or before the filing-due date for its return of income under this Part for the taxation year in which a disposition of the share or the partnership interest, as the case may be, occurred in the course of a winding-up referred to in subsection (1) or an amalgamation referred to in subsection 87(11);
(b) the corporation made reasonable efforts to determine the foreign affiliate’s tax-free surplus balance (within the meaning assigned by subsection 5905(5.5) of the Income Tax Regulations), in respect of the corporation, that was relevant in the computation of the maximum amount available under subparagraph (1)(d)(ii) to be designated in respect of that disposition; and
(c) the corporation amends the initial designation on or before the day that is 10 years after the filing-due date referred to in paragraph (a).
Marginal note:Amended designation
(1.9) If this subsection applies and, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the initial designation to be amended, the amended designation under paragraph (1.8)(c) is deemed to have been made on the day on which the initial designation was made and the initial designation is deemed not to have been made.
(4) Subsections (1) and (2) apply in respect of windings-up that begin, and amalgamations that occur, after February 27, 2004.
(5) Subsection (3) is deemed to have come into force on December 19, 2009.
31. (1) Section 92 of the Act is amended by adding the following after subsection (1):
Marginal note:Adjustment for prescribed amount
(1.1) The prescribed amount shall be added in computing the adjusted cost base of a share of the capital stock of a foreign affiliate of a corporation resident in Canada to
(a) another foreign affiliate of the corporation; or
(b) a partnership of which another foreign affiliate of the corporation is a member.
(2) Subsection (1) is deemed to have come into force on December 19, 2009.
32. (1) Paragraph 93(1)(b) of the Act is replaced by the following:
(b) if subsection 40(3) applies to the disposing corporation or disposing affiliate, as the case may be, in respect of the share, the amount deemed by that subsection to be the gain of the disposing corporation or disposing affiliate, as the case may be, from the disposition of the share is, except for the purposes of paragraph 53(1)(a), deemed to be equal to the amount, if any, by which
(i) the amount deemed by that subsection to be the gain from the disposition of the share determined without reference to this paragraph
exceeds
(ii) the elected amount.
(2) Subparagraph 93(1.2)(a)(ii) of the Act is replaced by the following:
(ii) if subsection (1.3) applies, the prescribed amount
(3) Subsection 93(3) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) the prescribed amount is deemed to be an amount that is received, at the adjustment time referred to in subsection 5905(7.7) of the Income Tax Regulations, by a particular foreign affiliate of a corporation resident in Canada from another foreign affiliate of the corporation and that is in respect of an exempt dividend on a share of the capital stock of the other affiliate.
(4) Section 93 of the Act is amended by adding the following after subsection (5.1):
Marginal note:Amended election
(5.2) An election (referred to in this subsection as the “amended election”) by a taxpayer under subsection (1) in respect of a disposition of shares of the capital stock of a foreign affiliate of the taxpayer is deemed to have been made on the day on or before which the election was required to be made and any previous election (referred to in this subsection as the “old election”) under subsection (1) in respect of that disposition is deemed not to have been made if
(a) the taxpayer has not elected under section 51 of the Technical Tax Amendments Act, 2012;
(b) the taxpayer made the old election on or before December 18, 2009;
(c) in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the old election to be amended; and
(d) the amended election is made in prescribed form on or before December 31, 2013.
(5) Subsection (1) applies in respect of elections made in respect of dispositions that occur after December 18, 2009.
(6) Subsection (2) applies in respect of elections made under subsection 93(1.2) of the Act in respect of dispositions that occur after November 1999.
(7) Subsections (3) and (4) are deemed to have come into force on December 19, 2009.
33. (1) The description of F in the definition “foreign accrual property income” in subsection 95(1) of the Act is replaced by the following:
- F
- is the prescribed amount for the year,
(2) Clause (a)(i)(A) of the definition “investment business” in subsection 95(1) of the Act is replaced by the following:
(A) of each country in which the business is carried on through a permanent establishment in that country and of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued,
(3) Subsection 95(1) of the Act is amended by adding the following in alphabetical order:
“permanent establishment”
« établissement stable »
“permanent establishment” has the meaning assigned by regulation;
(4) Clause 95(2)(l)(iii)(A) of the Act is replaced by the following:
(A) of each country in which the business is carried on through a permanent establishment in that country and of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued,
(5) Clause 95(2.3)(b)(ii)(A) of the Act is replaced by the following:
(A) under the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment in that country,
(6) Subparagraph 95(2.4)(a)(i) of the Act is replaced by the following:
(i) of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued and of each country in which the business is carried on through a permanent establishment in that country,
(7) Subclause (c)(ii)(B)(I) of the definition “indebtedness” in subsection 95(2.5) of the Act is replaced by the following:
(I) under the laws of the country under whose laws the non-resident corporation is governed and any of exists, was (unless the non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued and under the laws of each country in which the business is carried on through a permanent establishment in that country,
(8) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that begin after November 1999.
(9) Subsections (2) to (7) apply to taxation years of a foreign affiliate of a taxpayer that begin after 1999.
34. (1) Subparagraph 152(4)(b)(i) of the Act is replaced by the following:
(i) is required under subsection (6) or (6.1), or would be so required if the taxpayer had claimed an amount by filing the prescribed form referred to in the subsection on or before the day referred to in the subsection,
(2) Subsection 152(6.1) of the Act is replaced by the following:
Marginal note:Reassessment if amount under subsection 91(1) is reduced
(6.1) If
(a) a taxpayer has filed for a particular taxation year the return of income required by section 150,
(b) the amount included in computing the taxpayer’s income for the particular year under subsection 91(1) is subsequently reduced because of a reduction in the foreign accrual property income of a foreign affiliate of the taxpayer for a taxation year (referred to in this paragraph as the “claim year”) of the affiliate that ends in the particular year, if the reduction in that foreign accrual property income is
(i) attributable to a foreign accrual property loss (within the meaning assigned by subsection 5903(3) of the Income Tax Regulations) of the affiliate for a taxation year of the affiliate that ends in a subsequent taxation year of the taxpayer, and
(ii) included in the description of F in the definition “foreign accrual property income” in subsection 95(1) in respect of the affiliate for the claim year, and
(c) the taxpayer has filed with the Minister, on or before the filing-due date for that subsequent taxation year, a prescribed form amending the return,
the Minister shall reassess the taxpayer’s tax for any relevant taxation year (other than a taxation year preceding the particular year) in order to take into account the reduction in the amount included under subsection 91(1) in computing the income of the taxpayer for the particular year.
(3) Subsections (1) and (2) apply to taxation years that begin after November 1999.
35. (1) The portion of paragraph 161(7)(a) of the Act before subparagraph (i) is replaced by the following:
(a) the tax payable under this Part and Parts I.3, VI and VI.1 by the taxpayer for the year is deemed to be the amount that it would be if the consequences of the deduction, reduction or exclusion of the following amounts were not taken into consideration:
(2) Paragraph 161(7)(a) of the Act is amended by striking out “and” at the end of subparagraph (x) and by adding the following after subparagraph (xi):
(xii) any amount by which the amount included under subsection 91(1) for the year is reduced because of a reduction referred to in paragraph 152(6.1)(b) in the foreign accrual property income of a foreign affiliate of the taxpayer for a taxation year of the affiliate that ends in the year; and
(3) Subparagraph 161(7)(b)(iii) of the Act is replaced by the following:
(iii) if an amended return of the taxpayer’s income for the year or a prescribed form amending the taxpayer’s return of income for the year was filed under subsection 49(4) or 152(6) or (6.1) or paragraph 164(6)(e), the day on which the amended return or prescribed form was filed, and
(4) Subsections (1) to (3) apply to taxation years that begin after December 18, 2009.
36. (1) Subsection 164(5) of the Act is amended by striking out “or” at the end of paragraph (h.2), by adding “or” at the end of paragraph (h.3), and by adding the following after paragraph (h.3):
(h.4) the reduction of the amount included under subsection 91(1) for the year because of a reduction referred to in paragraph 152(6.1)(b) in the foreign accrual property income of a foreign affiliate of the taxpayer for a taxation year of the affiliate that ends in the year,
(2) Paragraph 164(5)(k) of the Act is replaced by the following:
(k) if an amended return of a taxpayer’s income for the year or a prescribed form amending the taxpayer’s return of income for the year was filed under paragraph (6)(e) or subsection 49(4) or 152(6) or (6.1), the day on which the amended return or prescribed form was filed, and
(3) Subsections (1) and (2) apply to taxation years that begin after December 18, 2009.
37. (1) The portion of subsection 256(7) of the Act before paragraph (a) is replaced by the following:
Marginal note:Acquiring control
(7) For the purposes of this subsection, of subsections 10(10), 13(21.2) and (24), 14(12) and 18(15), sections 18.1 and 37, subsection 40(3.4), the definition “superficial loss” in section 54, section 55, subsections 66(11), (11.4) and (11.5), 66.5(3) and 66.7(10) and (11), section 80, paragraph 80.04(4)(h), subsections 85(1.2), 88(1.1) and (1.2) and 110.1(1.2), sections 111 and 127 and subsection 249(4) and of subsection 5905(5.2) of the Income Tax Regulations,
(2) Subsection (1) is deemed to have come into force on December 19, 2009.
38. (1) The portion of subparagraph 261(5)(h)(i) of the Act before clause (A) is replaced by the following:
(i) the references in section 95 (other than paragraph 95(2)(f.15)) and the references in regulations made for the purposes of section 95 or 113 to
(2) The portion of subsection 261(15) of the Act before paragraph (a) is replaced by the following:
Marginal note:Amounts carried back
(15) For the purposes of determining the amount that may be deducted, in respect of a particular amount that arises in a taxation year (referred to in this subsection as the “later year”) of a taxpayer, under section 111 or subsection 126(2), 127(5), 181.1(4) or 190.1(3) in computing the taxpayer’s Canadian tax results for a taxation year (referred to in this subsection as the “current year”) that ended before the later year, and for the purposes of determining the amount by which the amount included under subsection 91(1) for the current year is reduced because of a reduction referred to in paragraph 152(6.1)(b) in respect of the later year,
(3) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that begin after December 18, 2009.
(4) Subsection (2) is deemed to have come into force on December 14, 2007.
2007, c. 35Budget and Economic Statement Implementation Act, 2007
39. (1) The read-as text in paragraph 26(27)(b) of the Budget and Economic Statement Implementation Act, 2007 is replaced by the following:
- “controlled foreign affiliate”
“controlled foreign affiliate”, at any time of a taxpayer resident in Canada, means a foreign affiliate of the taxpayer that
(a) is, at that time, controlled
(i) by the taxpayer,
(ii) by the taxpayer and not more than four other persons resident in Canada, or
(iii) by not more than four persons resident in Canada, other than the taxpayer, or
(b) would, at that time, be controlled by the taxpayer if the taxpayer owned
(i) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any of not more than four other persons resident in Canada,
(ii) each share of the capital stock of a corporation that is owned at that time by any of not more than four persons resident in Canada (other than the taxpayer), or
(iii) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any person with whom the taxpayer does not deal at arm’s length;
(2) The portion of paragraph 26(35)(b) of the Act before subparagraph (i) is replaced by the following:
(b) if a taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the day that is 18 months after the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2007,
(3) The portion of subsection 26(37) of the English version of the Act before the read-as text is replaced by the following:
(37) Subject to subsection (46), paragraphs 95(2)(g) to (g.03) of the Act, as enacted by subsection (13), apply to taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002, except that, for taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002 and before 2009, paragraph 95(2)(g.03) of the Act, as enacted by subsection (13), is to be read as if the references in that paragraph to “qualified foreign affiliate” were references to “qualified foreign corporation” and paragraph 95(2)(g) of the Act, as enacted by subsection (13), is to be read as follows:
(4) Subsection 26(38) of the Act is replaced by the following:
(38) Subject to subsection (46), paragraphs 95(2)(n), (p), (r) to (t), (v) and (y) of the Act, as enacted by subsection (16), apply to taxation years, of a foreign affiliate of a taxpayer, that end after 1999. However, if a taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the day that is 18 months after the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2007, paragraph 95(2)(n) of the Act, as enacted by subsection (16), applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994.
(5) Subsection 26(40) of the Act is replaced by the following:
(40) Paragraph 95(2)(u) of the Act, as enacted by subsection (16), applies to taxation years, of foreign affiliates of a taxpayer, that end after 1999. However, if a taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the day that is 18 months after the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2007, paragraph 95(2)(u) of the Act, as enacted by subsection (16), applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994.
(6) The portion of paragraph 26(42)(b) of the Act before the read-as text is replaced by the following:
(b) if a taxpayer elects in writing and files the election with the Minister of National Revenue on or before the day that is 18 months after the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2007, subsection 95(2.2) of the Act, as enacted by subsection (19), also applies to taxation years, of all its foreign affiliates, that begin after 1994 and end before 2000, as though subsection 95(2.2) of the Act, as enacted by subsection (19), read as follows:
(7) Subsections 26(44) and (45) of the Act are replaced by the following:
(44) Subject to subsection (46), subsection (24) applies to the 2001 and subsequent taxation years of a foreign affiliate of a taxpayer. However, if a taxpayer elects in writing and files the election with the Minister of National Revenue on or before the day that is 18 months after the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2007, subsection (24) applies to taxation years, of all its foreign affiliates, that begin after 1994.
(45) Subsection (25) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002. However, if a taxpayer elects in writing and files the election with the Minister of National Revenue on or before the day that is 18 months after the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2007, subsections (11) and (25) apply to taxation years, of all its foreign affiliates, that begin after 1994.
(8) The portion of subsection 26(46) of the Act before paragraph (a) is replaced by the following:
(46) If a taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the day that is 18 months after the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2007,
(9) Subsection 26(47) of the Act is replaced by the following:
(47) If a taxpayer has made what would, but for this subsection, be a valid election under any of paragraph (35)(b), subsections (38) and (40), paragraph (42)(b) and subsections (44) to (46) and the taxpayer has, on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes December 14, 2010, filed with the Minister of National Revenue a notice in writing to revoke the election, the election is deemed, otherwise than for the purpose of this subsection, never to have been made.
(10) Subsection 26(48) of the Act is replaced by the following:
(48) Any assessment of a taxpayer’s tax, interest and penalties payable under the Act for any taxation year that ends before December 14, 2007 and would, in the absence of this subsection, be precluded because of subsections 152(4) to (5) of the Act shall be made to the extent necessary to take into account any of the following:
(a) an election made by the taxpayer under any of subsections (35), (38), (40), (42) and (44) to (46), a revocation referred to in subsection (47) or any provision of this section in respect of which an election is made under any of those subsections by the taxpayer; or
(b) subsection 10(3) or any provision of this section (other than any provision referred to in paragraph (a) in respect of which the taxpayer has made an election referred to in paragraph (a)), if the taxpayer
(i) elects in writing in respect of all of its foreign affiliates that this subsection apply in respect of that provision, and
(ii) files that election with the Minister of National Revenue on or before the day that is six months after the day on which the Technical Tax Amendments Act, 2012 receives royal assent.
(11) Subsections (1) to (10) are deemed to have come into force on December 14, 2007.
C.R.C., c. 945Income Tax Regulations
40. (1) Subsection 5900(3) of the Income Tax Regulations is replaced by the following:
(3) For the purposes of subsection 91(5) of the Act, if a person resident in Canada (other than a corporation) receives a dividend on a share of any class of the capital stock of a foreign affiliate of the person, the dividend is prescribed to have been paid out of the affiliate’s taxable surplus.
(2) Subsection (1) applies in respect of dividends received after November 1999.
41. (1) Subsections 5902(1) to (3) of the Regulations are replaced by the following:
5902. (1) If at any time a dividend (such time and each such dividend, respectively, referred to in this subsection and subsection (2) as the “dividend time” and an “elected dividend”) is, by virtue of an election made under subsection 93(1) of the Act by a corporation in respect of a disposition, deemed to have been received on a share (each such share referred to in this subsection as an “elected share”) of a class of the capital stock of a particular foreign affiliate of the corporation, the following rules apply:
(a) for the purposes of subsection 5900(1), in applying the provisions of subsection 5901(1),
(i) the particular affiliate’s exempt surplus or exempt deficit, taxable surplus or taxable deficit, underlying foreign tax and net surplus, in respect of the corporation at the dividend time, are deemed to be those amounts that would otherwise be determined immediately before the dividend time if
(A) each other foreign affiliate of the corporation in which the affiliate had an equity percentage (within the meaning assigned by subsection 95(4) of the Act) at the dividend time had, immediately before the time that is immediately before the dividend time, paid a dividend equal to its net surplus in respect of the corporation, determined immediately before the time the dividend was paid, and
(B) any dividend referred to in clause (A) that any other foreign affiliate would have received had been received by it immediately before any such dividend that it would have paid, and
(ii) the particular affiliate is deemed to have paid a whole dividend at the dividend time on the shares of that class of its capital stock in an amount determined by the formula
A × B
where
- A
- is the total of all amounts each of which is the amount of an elected dividend, and
- B
- is the greater of
(A) one, and
(B) the quotient determined by the formula
C/D
where
- C
- is the amount of the particular affiliate’s net surplus determined under subparagraph (a)(i), and
- D
- is the greater of
(I) one unit of the currency in which the amount determined for C is expressed, and
(II) the amount that would have been received on the elected shares if the particular affiliate had at the dividend time paid dividends, on all shares of its capital stock, the total of which was equal to the amount of its net surplus referred to in subparagraph (a)(i); and
(b) subject to paragraph 5905(5)(c), there is to be included, at the dividend time,
(i) under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1) in computing the particular affiliate’s exempt surplus or exempt deficit, as the case may be, in respect of the corporation an amount equal to the product obtained when the specified adjustment factor in respect of the disposition is multiplied by the total of all amounts each of which is the portion of any elected dividend that is prescribed by paragraph 5900(1)(a) to have been paid out of the exempt surplus of the particular affiliate,
(ii) under subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1) in computing the particular affiliate’s taxable surplus or taxable deficit, as the case may be, in respect of the corporation an amount equal to the product obtained when the specified adjustment factor in respect of the disposition is multiplied by the total of all amounts each of which is the portion of any elected dividend that is prescribed by paragraph 5900(1)(b) to have been paid out of the taxable surplus of the particular affiliate, and
(iii) under subparagraph (iii) of the description of B in the definition “underlying foreign tax” in subsection 5907(1) in computing the particular affiliate’s underlying foreign tax in respect of the corporation an amount equal to the product obtained when the specified adjustment factor in respect of the disposition is multiplied by the total of all amounts each of which is the amount prescribed by paragraph 5900(1)(d) to be the foreign tax applicable to such portion of any elected dividend as is prescribed by paragraph 5900(1)(b) to have been paid out of the taxable surplus of the particular affiliate.
(2) In this section,
(a) for the purpose of paragraph (1)(a),
(i) in determining the exempt surplus or exempt deficit, the taxable surplus or taxable deficit, the underlying foreign tax and the net surplus of a particular foreign affiliate of a taxpayer resident in Canada in which any other foreign affiliate of the taxpayer has an equity percentage (within the meaning assigned by subsection 95(4) of the Act), no amount shall be included in respect of any distribution that would be received by the particular affiliate from that other affiliate, and
(ii) if any foreign affiliate of a corporation resident in Canada has issued shares of more than one class of its capital stock, the amount that would be paid as a dividend on the shares of any class is the portion of its exempt surplus or exempt deficit and its taxable surplus (including underlying foreign tax applicable) or taxable deficit (and thus net surplus) that, in the circumstances, would reasonably be expected to have been paid on all the shares of that class; and
(b) the specified adjustment factor in respect of a disposition is the percentage determined by the formula
A/B
where
- A
- is
(i) if the elected dividend is received by the corporation, 100 per cent, and
(ii) if the elected dividend is received by another foreign affiliate of the corporation, the surplus entitlement percentage of the corporation in respect of the other affiliate immediately before the dividend time, and
- B
- is the surplus entitlement percentage of the corporation in respect of the particular affiliate immediately before the dividend time.
(2) Paragraph 5902(6)(b) of the Regulations is replaced by the following:
(b) the amount that would reasonably be expected to have been received in respect of the share if the particular affiliate had at that time paid dividends, on all shares of its capital stock, the total of which was equal to the amount determined under subparagraph (1)(a)(i) to be its net surplus in respect of the corporation for the purposes of the election.
(3) Subsections (1) and (2) apply in respect of elections made in respect of dispositions that occur after December 18, 2009. However, in applying subsection 5905(5.6) of the Regulations, as enacted by subsection 44(6), the portion of subsection 5902(1) of the Regulations before its subparagraph (a)(ii), as enacted by subsection (1), applies after December 18, 2009.
42. (1) Section 5903 of the Regulations is replaced by the following:
5903. (1) For the purposes of the description of F in the definition “foreign accrual property income” in subsection 95(1) of the Act, subject to subsection (2), the prescribed amount for the year (referred to in this subsection and subsection (2) as the “particular year”) is the total of all amounts each of which is a portion designated for the particular year by the taxpayer of the foreign accrual property loss of the affiliate for a taxation year of the affiliate that is
(a) one of the 20 taxation years of the affiliate that immediately precede the particular year; or
(b) one of the three taxation years of the affiliate that immediately follow the particular year.
(2) For the purposes of this subsection and subsection (1),
(a) a portion of a foreign accrual property loss of the affiliate for any taxation year of the affiliate may be designated for the particular year only to the extent that the foreign accrual property loss exceeds the total of all amounts each of which is a portion, of the foreign accrual property loss, designated by the taxpayer for a taxation year of the affiliate that precedes the particular year;
(b) no portion of the affiliate’s foreign accrual property loss for a taxation year of the affiliate is to be designated for the particular year until the affiliate’s foreign accrual property losses for the preceding taxation years referred to in paragraph (1)(a) have been fully designated; and
(c) if any person or partnership that was, at the end of a taxation year (referred to in this paragraph as the “relevant loss year”) of the affiliate, a relevant person or partnership in respect of the taxpayer designates for a taxation year (referred to in this paragraph as the “relevant claim year”) of the affiliate a particular portion of the affiliate’s foreign accrual property loss for the relevant loss year, there is deemed to have been designated for the relevant claim year by the taxpayer the portion of that loss that is the greater of
(i) the particular portion, and
(ii) the greatest of the portions of that loss that are so designated by any other relevant persons or partnerships in respect of the taxpayer.
(3) For the purposes of this section, and subject to subsection (4), “foreign accrual property loss” of the affiliate for a taxation year of the affiliate means
(a) if, at the end of the year, the affiliate is a controlled foreign affiliate of a person or partnership that is, at the end of the year, a relevant person or partnership in respect of the taxpayer, the amount, if any, by which
(i) the total of the amounts determined for D, E, G and H in the formula in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the affiliate for the year
exceeds
(ii) the total of the amounts determined for A to C in that formula in that definition in respect of the affiliate for the year; and
(b) in any other case, nil.
(4) In computing under subsection (3) the affiliate’s foreign accrual property loss for a taxation year, if the affiliate or another corporation receives a payment described in subsection 5907(1.3) from a non-resident corporation that is, at the time of the payment, a foreign affiliate of a relevant person or partnership in respect of the taxpayer and any portion of the payment can reasonably be considered to relate to a loss or portion of a loss of the affiliate for the year described in the description of D or E in the definition “foreign accrual property income” in subsection 95(1) of the Act, the amount of the loss or portion of the loss is deemed to be nil.
(5) For the purpose of this section,
(a) if there is a foreign merger (within the meaning assigned by subsection 87(8.1) of the Act) of two or more foreign affiliates of a taxpayer resident in Canada in respect of each of which the taxpayer’s surplus entitlement percentage immediately before the merger is not less than 90 per cent to form one corporate entity in respect of which the taxpayer’s surplus entitlement percentage immediately after the merger is not less than 90 per cent, the corporate entity is deemed to be the same corporation as, and a continuation of, each of those predecessor affiliates; and
(b) if there is a liquidation and dissolution of a foreign affiliate of a taxpayer resident in Canada in respect of which the taxpayer’s surplus entitlement percentage immediately before the liquidation and dissolution is not less than 90 per cent into another foreign affiliate of the taxpayer in respect of which the taxpayer’s surplus entitlement percentage immediately before and immediately after the liquidation and dissolution is not less than 90 per cent, the other affiliate is deemed to be the same corporation as, and a continuation of, that predecessor affiliate.
(6) In this section, a “relevant person or partnership” in respect of the taxpayer, at any time, means the taxpayer or a person (other than a designated acquired corporation of the taxpayer), or a partnership, that is at that time
(a) a person (other than a partnership) that is resident in Canada and does not, at that time, deal at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act) with the taxpayer;
(b) an antecedent corporation of a relevant person or partnership in respect of the taxpayer;
(c) a partnership a member of which is at that time a relevant person or partnership in respect of the taxpayer under this subsection; or
(d) where paragraph (1)(b) is being applied, a corporation of which the taxpayer is an antecedent corporation.
(7) For the purposes of paragraphs (6)(a) to (d),
(a) if a person or partnership (referred to in this paragraph as the “relevant person”) is not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act) with another person or partnership (referred to in this paragraph as the “particular person”) at a particular time, the relevant person is deemed to have existed and not to have dealt at arm’s length with the particular person, nor with each antecedent corporation (other than a designated acquired corporation of the particular person) of the particular person, throughout the period that began when the particular person or the antecedent corporation, as the case may be, came into existence and that ends at the particular time; and
(b) where paragraph (1)(b) is being applied, if a corporation of which a particular person (other than a designated acquired corporation of the corporation) is an antecedent corporation is not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act) with another person or partnership at any time, the particular person is deemed to exist and not to be dealing at arm’s length with the other person or the partnership, as the case may be, at that time.
(2) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that begin after November 1999, except that
(a) the reference to “20 taxation years” in paragraph 5903(1)(a) of the Regulations, as enacted by subsection (1), is, in respect of foreign accrual property losses for the foreign affiliate’s taxation years that end in taxation years of the taxpayer that end
(i) before March 23, 2004, to be read as “seven taxation years”, and
(ii) after March 22, 2004 and before 2006, to be read as “10 taxation years”;
(b) subsection 5903(2) of the Regulations, as enacted by subsection (1), is, in its application to taxation years that begin before 2001, to be read without reference to its paragraph (b);
(c) paragraph 5903(3)(a) of the Regulations, as enacted by subsection (1), is, in its application to taxation years of the foreign affiliate that begin on or before December 18, 2009, to be read as follows:
(a) where, at the end of the year, the affiliate is a controlled foreign affiliate of a person or partnership that is, at the end of the year, a relevant person or partnership in respect of the taxpayer, the amount, if any, by which
(i) the total of the amounts determined for D and E in the formula in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the affiliate for the year
exceeds
(ii) the total of the amounts determined for A, B and C in that formula in that definition in respect of the affiliate for the year; and
(d) subsection 5903(4) of the Regulations, as enacted by subsection (1), is, in its application to taxation years of the foreign affiliate that begin on or before December 18, 2009, to be read as follows:
(4) In computing under subsection (3) the affiliate’s foreign accrual property loss for a taxation year, if the affiliate or another corporation has received a payment described in subsection 5907(1.3) from another foreign affiliate of the taxpayer and any portion of the payment can reasonably be considered to relate to a loss or portion of a loss of the affiliate for the year described in the description of D or E in the definition “foreign accrual property income” in subsection 95(1) of the Act, the amount of the loss or portion of the loss is deemed to be nil.
(e) subsection 5903(6) of the Regulations, as enacted by subsection (1), is, in its application to taxation years of the foreign affiliate that begin on or before December 18, 2009, to be read as follows:
(6) In this section, a “relevant person or partnership”, in respect of a taxpayer, at any time means
(a) the taxpayer;
(b) any person with whom the taxpayer was not dealing at arm’s length;
(c) any person with whom the taxpayer would not have been dealing at arm’s length if the person had been in existence after the taxpayer came into existence;
(d) any predecessor corporation (within the meaning assigned by subsection 87(1) of the Act) of a person described in any of paragraphs (a) to (c); or
(e) any predecessor corporation (within the meaning assigned by paragraph 87(2)(l.2) of the Act) of a person described in any of paragraphs (a) to (c).
(f) section 5903 of the Regulations, as enacted by subsection (1), is, in its application to taxation years that begin on or before December 18, 2009, to be read without reference to its subsection (7).
43. (1) Paragraph 5904(3)(a) of the Regulations is replaced by the following:
(a) the net surplus of a foreign affiliate of a person resident in Canada is, in respect of that person, to be computed as if that person were a corporation resident in Canada;
(2) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that begin after November 1999.
44. (1) Subsection 5905(1) of the Regulations is replaced by the following:
5905. (1) If, at any time, there is an acquisition or a disposition of shares of the capital stock of a particular foreign affiliate of a corporation resident in Canada and the surplus entitlement percentage of the corporation in respect of the particular foreign affiliate or any other foreign affiliate (the particular affiliate and those other affiliates being referred to individually in this subsection as a “relevant affiliate”) of the corporation in which the particular affiliate has an equity percentage (within the meaning assigned by subsection 95(4) of the Act) changes, for the purposes of the definitions “exempt surplus”, “taxable surplus” and “underlying foreign tax” in subsection 5907(1), each of the opening exempt surplus or opening exempt deficit, opening taxable surplus or opening taxable deficit, and opening underlying foreign tax, as the case may be, of the relevant affiliate in respect of the corporation is, except where the acquisition or disposition occurs in a transaction to which paragraph (3)(a) or subsection (5) or (5.1) applies, the amount determined at that time by the formula
A × B/C
where
- A
- is the amount of that surplus, deficit or tax, as the case may be, as otherwise determined at that time;
- B
- is the corporation’s surplus entitlement percentage immediately before that time in respect of the relevant affiliate; and
- C
- is the corporation’s surplus entitlement percentage immediately after that time in respect of the relevant affiliate.
(2) Subsection 5905(2) of the Regulations is repealed.
(3) Subsections 5905(3) and (4) of the Regulations are replaced by the following:
(3) If at any time (referred to in this subsection as the “merger time”) a foreign affiliate (referred to in this subsection as the “merged affiliate”) of a corporation resident in Canada has been formed as a result of a foreign merger (within the meaning assigned by subsection 87(8.1) of the Act) of two or more corporations (referred to individually in this subsection as a “predecessor corporation”), the following rules apply:
(a) for the purposes of the definitions “exempt surplus”, “taxable surplus” and “underlying foreign tax” in subsection 5907(1), as they apply in respect of the merged affiliate,
(i) the merged affiliate’s opening exempt surplus, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the exempt surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the exempt deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time,
(ii) the merged affiliate’s opening exempt deficit, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the exempt deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the exempt surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time,
(iii) the merged affiliate’s opening taxable surplus, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the taxable surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the taxable deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time,
(iv) the merged affiliate’s opening taxable deficit, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the taxable deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the taxable surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time, and
(v) the merged affiliate’s opening underlying foreign tax in respect of the corporation shall be the total of all amounts each of which is the underlying foreign tax of a predecessor corporation, in respect of the corporation, immediately before the merger time;
(b) for the purposes of paragraph (a),
(i) each of the exempt surplus or exempt deficit, taxable surplus or taxable deficit and underlying foreign tax, in respect of the corporation, of each predecessor corporation immediately before the merger time is deemed to be the amount determined by the formula
A × B/C
where
- A
- is the amount of that surplus, deficit or tax, as the case may be, as otherwise determined,
- B
- is the surplus entitlement percentage of the corporation immediately before the merger time in respect of the predecessor corporation, and
- C
- is the percentage that would be the surplus entitlement percentage of the corporation immediately after the merger time in respect of the merged affiliate if the merged affiliate’s net surplus were the total of all amounts each of which is the net surplus of a predecessor corporation immediately before the merger time, but
(ii) the values for A, B and C in the formula in subparagraph (i) shall take into account the application of paragraph 5902(1)(b) and subsection 5907(8) in respect of the merger; and
(c) in respect of any foreign affiliate (other than a predecessor corporation) of the corporation in which a predecessor corporation had an equity percentage (within the meaning assigned by subsection 95(4) of the Act) immediately before the merger time, for the purposes of subsection (1), there is deemed to be an acquisition or a disposition of shares of the capital stock of that affiliate at the merger time.
(4) Subsection 5905(5) of the Regulations is replaced by the following:
(5) If there is, at any time, a disposition by a corporation (referred to in this subsection as the “disposing corporation”) resident in Canada of any of the shares (referred to in this subsection as the “disposed shares”) of the capital stock of a particular foreign affiliate of the disposing corporation to a taxable Canadian corporation (referred to in this subsection as the “acquiring corporation”) with which the disposing corporation is not dealing at arm’s length,
(a) each of the opening exempt surplus or opening exempt deficit, opening taxable surplus or opening taxable deficit, and opening underlying foreign tax, in respect of the acquiring corporation, of the particular affiliate and of each foreign affiliate of the disposing corporation in which the particular affiliate has, immediately before that time, an equity percentage (within the meaning assigned by subsection 95(4) of the Act) is deemed to be the amount, if any,
(i) in the case of its opening exempt surplus, by which the total of its exempt surplus in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time, exceeds the total of its exempt deficit in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time,
(ii) in the case of its opening exempt deficit, by which the total of its exempt deficit in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time, exceeds the total of its exempt surplus in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time,
(iii) in the case of its opening taxable surplus, by which the total of its taxable surplus in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time, exceeds the total of its taxable deficit in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time,
(iv) in the case of its opening taxable deficit, by which the total of its taxable deficit in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time, exceeds the total of its taxable surplus in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time, and
(v) in the case of its opening underlying foreign tax, that is the total of its underlying foreign tax in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time;
(b) for the purpose of paragraph (a), each of the exempt surplus or exempt deficit, taxable surplus or taxable deficit, and underlying foreign tax of an affiliate in respect of the disposing corporation and the acquiring corporation, determined immediately before that time, is deemed to be the amount determined by the formula
A × B/C
where
- A
- is the amount of that surplus, deficit or tax, as the case may be, as determined without reference to this subsection but taking into account the application of subparagraph (c)(i), if applicable,
- B
- is the surplus entitlement percentage immediately before that time of the disposing corporation or the acquiring corporation, as the case may be, in respect of the affiliate, determined as if the disposed shares were the only shares owned by the disposing corporation immediately before that time, and
- C
- is the surplus entitlement percentage immediately after that time of the acquiring corporation in respect of the affiliate;
(c) if the disposing corporation makes an election under subsection 93(1) of the Act in respect of the disposed shares,
(i) for the purposes of paragraph (b), the exempt surplus or exempt deficit, taxable surplus or taxable deficit, and underlying foreign tax of an affiliate in respect of the disposing corporation, as determined without reference to this subsection, immediately before that time, shall be adjusted in accordance with paragraph 5902(1)(b) as if the disposing corporation’s surplus entitlement percentage that is referred to in the description of B in paragraph 5902(2)(b) were determined as if the disposed shares were the only shares owned by the disposing corporation immediately before that time, and
(ii) no adjustment shall be made to the amount of the exempt surplus or exempt deficit, taxable surplus or taxable deficit, or underlying foreign tax of an affiliate in respect of the disposing corporation under paragraph 5902(1)(b) other than for the purpose of paragraph (b); and
(d) for greater certainty, no adjustment shall be made under subsection (1) to the exempt surplus or exempt deficit, taxable surplus or taxable deficit, or underlying foreign tax of an affiliate in respect of the disposing corporation.
(5.1) If there is, at any time, an amalgamation within the meaning of subsection 87(1) of the Act and, as a result of the amalgamation, shares of the capital stock of a particular foreign affiliate of a predecessor corporation become property of the new corporation,
(a) each of the opening exempt surplus or opening exempt deficit, opening taxable surplus or opening taxable deficit, and opening underlying foreign tax, in respect of the new corporation, of the particular affiliate and of each foreign affiliate of the predecessor corporation in which the particular affiliate has, immediately before that time, an equity percentage (within the meaning assigned by subsection 95(4) of the Act) is deemed to be the amount, if any,
(i) in the case of its opening exempt surplus, by which the total of its exempt surplus in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its exempt deficit in respect of each predecessor corporation, determined immediately before that time,
(ii) in the case of its opening exempt deficit, by which the total of its exempt deficit in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its exempt surplus in respect of each predecessor corporation, determined immediately before that time,
(iii) in the case of its opening taxable surplus, by which the total of its taxable surplus in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its taxable deficit in respect of each predecessor corporation, determined immediately before that time,
(iv) in the case of its opening taxable deficit, by which the total of its taxable deficit in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its taxable surplus in respect of each predecessor corporation, determined immediately before that time, and
(v) in the case of its opening underlying foreign tax, that is the total of its underlying foreign tax in respect of each predecessor corporation, determined immediately before that time; and
(b) for the purpose of paragraph (a), each of the exempt surplus or exempt deficit, taxable surplus or taxable deficit, and underlying foreign tax of an affiliate in respect of a predecessor corporation, determined immediately before that time, is deemed to be the amount determined by the formula
A × B/C
where
- A
- is the amount of that surplus, deficit or tax, as the case may be, as determined without reference to this subsection,
- B
- is the predecessor corporation’s surplus entitlement percentage immediately before that time in respect of the affiliate, and
- C
- is the new corporation’s surplus entitlement percentage immediately after that time in respect of the affiliate.
(5.11) Subsection (5.12) applies if
(a) in the case of a winding-up, an amount has been designated, under paragraph 88(1)(d) of the Act by the corporation (referred to in this subsection and subsection (5.12) as the “parent corporation”) described in subsection 88(1) of the Act as the parent, in respect of
(i) shares of the capital stock of a corporation (referred to in this subsection and subsection (5.12) as the “particular affiliate”) that is, immediately before the winding-up, a foreign affiliate of the corporation (referred to in this subsection and subsection (5.12) as the “subsidiary corporation”) resident in Canada that is described in that subsection 88(1) as the subsidiary, or
(ii) an interest in a partnership that holds shares described in subparagraph (i); or
(b) in the case of an amalgamation, an amount has been designated, under paragraph 88(1)(d) of the Act by the corporation (referred to in this subsection and subsection (5.12) as the “parent corporation”) described in subsection 87(11) of the Act as the parent, in respect of
(i) shares of the capital stock of a corporation (referred to in this subsection and subsection (5.12) as the “particular affiliate”) that is, immediately before the amalgamation, a foreign affiliate of the corporation (referred to in this subsection and subsection (5.12) as the “subsidiary corporation”) resident in Canada that is described in that subsection 87(11) as the subsidiary, or
(ii) an interest in a partnership that holds shares described in subparagraph (i).
(5.12) If this subsection applies, the following rules apply for the purposes of subsections (5) and (5.1):
(a) each amount of the exempt surplus or exempt deficit, taxable surplus or taxable deficit, and underlying foreign tax, in respect of the subsidiary corporation, of the particular affiliate and of all foreign affiliates of the subsidiary corporation in which the particular affiliate has, immediately before the winding-up or the amalgamation, an equity percentage (within the meaning assigned by subsection 95(4) of the Act) is deemed to be, immediately before the winding-up or the amalgamation, nil; and
(b) each amount (referred to individually in this paragraph as a “relevant balance”) of the exempt surplus or exempt deficit, taxable surplus or taxable deficit, and underlying foreign tax, in respect of the parent corporation, of the particular affiliate and of all foreign affiliates (referred to individually in this paragraph as a “lower-tier affiliate”) of the parent corporation in which the particular affiliate has, immediately before the winding-up or the amalgamation, an equity percentage (within the meaning assigned by subsection 95(4) of the Act) is deemed to be, immediately before the winding-up or the amalgamation, the amount that would be determined to be the relevant balance if
(i) in addition to shares or partnership interests, if any, held by the parent corporation that are relevant in computing any relevant balance of the particular affiliate or of any lower-tier affiliate of the parent corporation, in respect of the parent corporation, any shares of the particular affiliate’s capital stock, and any interests in partnerships that hold such shares, that were held by the subsidiary corporation at any time in the period (referred to in this paragraph as the “control period”) that begins at the first time referred to in subparagraph 88(1)(d)(ii) of the Act and ends immediately before the winding-up or the amalgamation, that are relevant in computing any relevant balance of the particular affiliate or any lower-tier affiliate of the subsidiary corporation, in respect of the subsidiary corporation, were held by the parent corporation at the same time in the control period that they were held by the subsidiary corporation,
(ii) the parent corporation had acquired, at that first time, all the shares and partnership interests held, at that first time, by the subsidiary corporation that are relevant in computing any relevant balance of the particular affiliate or any lower-tier affiliate of the subsidiary corporation, in respect of the subsidiary corporation, and
(iii) where the subsidiary corporation acquired or disposed of any shares or partnership interests in the control period that are relevant in computing any relevant balance of the particular affiliate or of any lower-tier affiliate of the subsidiary corporation, in respect of the subsidiary corporation, the parent corporation is deemed to have acquired or disposed of, as the case may be, the shares or partnership interests at the same time they were acquired or disposed of by the subsidiary corporation.
(5.13) For the purposes of clause (B) of subparagraph 88(1)(d)(ii) of the Act, the prescribed amount is
(a) if the property described in that subparagraph is a share of the capital stock of a foreign affiliate of the subsidiary or if that property is an interest in a partnership that holds one or more such shares, the amount determined by the formula
A × B/C
where
- A
- is the total of all amounts each of which is the amount, if any, by which
(i) the amount of a dividend received, after the particular time at which the parent last acquired control of the subsidiary, on any share of the capital stock of the foreign affiliate (or any share of the capital stock of the foreign affiliate for which that share was substituted) held by the subsidiary or the partnership, as the case may be, immediately before the winding-up, that was deductible under paragraph 113(1)(a) or (b) of the Act in computing the taxable income of the subsidiary or of a corporation with which the subsidiary was not dealing at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act in respect of the foreign affiliate)
exceeds
(ii) the portion of that dividend that may reasonably be considered to have reduced the foreign affiliate’s exempt surplus or taxable surplus in respect of the subsidiary that arose after the particular time (determined as if a dividend were paid out of the foreign affiliate’s exempt surplus or taxable surplus, as the case may be, in respect of the subsidiary, in the reverse order to that in which that surplus of the foreign affiliate in respect of the subsidiary arose),
- B
- is the fair market value of the property immediately before the winding-up, and
- C
- is
(i) if the property is a share, the fair market value, immediately before the winding-up, of all of the shares of the capital stock of the foreign affiliate held by the subsidiary immediately before the winding-up, and
(ii) if the property is an interest in a partnership, the fair market value of the interest in the partnership immediately before the winding-up; and
(b) in any other case, nil.
(5) Subsections 5905(5.11) to (5.13) of the Regulations, as enacted by subsection (4), are repealed.
(6) Section 5905 of the Regulations is amended by adding the following in numerical order:
(5.2) If, at a particular time, control of a corporation resident in Canada has been acquired by a person or a group of persons and, at the particular time, the corporation owns shares of the capital stock of a foreign affiliate of the corporation, there shall be included — under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1) in computing the affiliate’s exempt surplus or exempt deficit, as the case may be, in respect of the corporation at the time that is immediately before the particular time — the amount, if any, determined by the formula
(A + B – C)/D
where
- A
- is the amount determined by the formula
E × F
where
- E
- is the affiliate’s tax-free surplus balance in respect of the corporation, determined at the time (referred to in this subsection as the “relevant time”) that is immediately before the time that is immediately before the particular time, and
- F
- is the corporation’s surplus entitlement percentage in respect of the affiliate determined at the relevant time;
- B
- is the total of all amounts each of which is the corporation’s cost amount, determined at the particular time, of a share of the capital stock of the affiliate that is owned by the corporation at the particular time;
- C
- is the total of
(a) the fair market value, determined at the particular time, of all of the shares of the capital stock of the affiliate that are owned by the corporation at the particular time, and
(b) the amount, if any, determined under paragraph 5908(6)(b); and
- D
- is the corporation’s surplus entitlement percentage in respect of the affiliate determined at the relevant time.
(5.3) The cost amount of a share that is referred to in the description of B in subsection (5.2) shall be determined after taking into account the application of subsection 111(4) of the Act.
(5.4) For the purposes of clause (B) of subparagraph 88(1)(d)(ii) of the Act, the prescribed amount is
(a) if the property described in that subparagraph is a share of the capital stock of a foreign affiliate of the subsidiary, the amount determined by the formula
A × B
where
- A
- is the affiliate’s tax-free surplus balance, in respect of the subsidiary, determined at the time at which the parent last acquired control of the subsidiary, and
- B
- is the percentage that would be the subsidiary’s surplus entitlement percentage, determined at that time, in respect of the affiliate if at that time the subsidiary had owned no shares of the affiliate’s capital stock other than the share;
(b) if the property described in that subparagraph is an interest in a partnership, the amount determined by subsection 5908(7); and
(c) in any other case, nil.
(5.5) For the purposes of subsections (5.2), (5.4), (7.2) and (7.3), the “tax-free surplus balance” of a foreign affiliate of a corporation resident in Canada, in respect of the corporation, at any time, is the total of
(a) the amount, if any, by which the affiliate’s exempt surplus in respect of the corporation at that time exceeds the affiliate’s taxable deficit in respect of the corporation at that time; and
(b) the lesser of
(i) the amount, if any, determined by the formula
A × B
where
- A
- is the affiliate’s underlying foreign tax in respect of the corporation at that time, and
- B
- is the amount by which the corporation’s relevant tax factor (within the meaning assigned by subsection 95(1) of the Act), for the corporation’s taxation year that includes that time, exceeds one, and
(ii) the amount, if any, by which the affiliate’s taxable surplus in respect of the corporation at that time exceeds the affiliate’s exempt deficit in respect of the corporation at that time.
(5.6) For the purposes of subsection (5.5), the amounts of exempt surplus or exempt deficit, taxable surplus or taxable deficit, and underlying foreign tax of a foreign affiliate of a corporation resident in Canada, in respect of the corporation, at a particular time are those amounts that would be determined, at the particular time, under subparagraph 5902(1)(a)(i) if that subparagraph were applicable at the particular time and the references in that subparagraph to “the dividend time” were references to the particular time.
(7) Subsection 5905(6) of the Regulations is repealed.
(8) Section 5905 of the Regulations is amended by adding the following after subsection (7):
(7.1) Subsection (7.2) applies if
(a) a foreign affiliate (referred to in this subsection and subsections (7.2) to (7.6) as the “deficit affiliate”) of a corporation resident in Canada has an exempt deficit, in respect of the corporation, at a particular time; and
(b) at the time (referred to in this paragraph and subsections (7.2) to (7.6) as the “acquisition time”) that is immediately after the particular time, shares of the capital stock of a foreign affiliate (referred to in this subsection and subsections (7.2) to (7.6) as an “acquired affiliate”) of the corporation in which the deficit affiliate has, at the particular time, an equity percentage (within the meaning assigned by subsection 95(4) of the Act) are acquired by, or otherwise become property of,
(i) the corporation, or
(ii) another foreign affiliate of the corporation, in the case where the percentage that would, if the deficit affiliate were resident in Canada, be the deficit affiliate’s surplus entitlement percentage in respect of the acquired affiliate immediately after the acquisition time is less than the percentage that would, if the deficit affiliate were so resident, be its surplus entitlement percentage in respect of the acquired affiliate at the particular time.
(7.2) If this subsection applies, there is to be included,
(a) at the time (referred to in this subsection and subsections (7.6) and (7.7) and 5908(11) and (12) as the “adjustment time”) that is immediately before the time that is immediately before the time that is immediately before the acquisition time, under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1) in computing an acquired affiliate’s exempt surplus or exempt deficit in respect of the corporation, the amount, if any, equal to the lesser of
(i) the amount determined by the formula
A/B
where
- A
- is the deficit affiliate’s exempt deficit in respect of the corporation immediately before the acquisition time, and
- B
- is the percentage that would, if the deficit affiliate were resident in Canada, be the deficit affiliate’s surplus entitlement percentage in respect of the acquired affiliate immediately before the acquisition time, and
(ii) the lesser of
(A) the acquired affiliate’s tax-free surplus balance in respect of the corporation immediately before the adjustment time, and
(B) either
(I) if there is more than one acquired affiliate, the amount designated by the corporation, in its return of income for the taxation year in which the taxation year of the acquired affiliate that includes the acquisition time ends, in respect of the acquired affiliate, or
(II) in any other case, the amount determined under clause (A);
(b) at the time that is immediately after the acquisition time, under subparagraph (vi.1) of the description of A in the definition “exempt surplus” in subsection 5907(1) in computing the deficit affiliate’s exempt deficit in respect of the corporation, the total of all amounts each of which is the amount determined in respect of an acquired affiliate by the formula
C × D
where
- C
- is the amount determined under paragraph (a) in respect of the acquired affiliate, and
- D
- is the percentage that would, if the deficit affiliate were resident in Canada, be the deficit affiliate’s surplus entitlement percentage immediately before the acquisition time in respect of the acquired affiliate; and
(c) at the time that is immediately after the acquisition time, under subparagraph (vi.1) of the description of A in the definition “exempt surplus” in subsection 5907(1) in computing the exempt surplus or exempt deficit of any other foreign affiliate (referred to in this paragraph and paragraph (7.6)(b) as a “subordinate affiliate”) of the corporation, in respect of the corporation, that has immediately before the acquisition time a direct equity percentage (within the meaning assigned by subsection 95(4) of the Act) in the acquired affiliate and in which, immediately before the acquisition time, the deficit affiliate does not have an equity percentage (within the meaning assigned by subsection 95(4) of the Act), the amount determined by the formula
E × F
where
- E
- is the amount determined under paragraph (a) in respect of the acquired affiliate, and
- F
- is the percentage that would, if the subordinate affiliate were resident in Canada, be the subordinate affiliate’s surplus entitlement percentage immediately before the acquisition time in respect of the acquired affiliate if the subordinate affiliate owned no shares of the capital stock of any corporation other than its shares of the capital stock of the acquired affiliate.
(7.3) Subsection (7.4) applies if
(a) the lesser of
(i) the deficit affiliate’s exempt deficit in respect of the corporation immediately before the acquisition time, and
(ii) the total of all amounts each of which is the amount, if any, that is the product obtained by multiplying
(A) the tax-free surplus balance immediately before the acquisition time in respect of the corporation of an acquired affiliate, and
(B) the surplus entitlement percentage of the corporation in respect of that acquired affiliate immediately before the acquisition time
exceeds
(b) the total of all amounts each of which is the amount, if any, that is the product obtained by multiplying
(i) the amount, if any, actually designated under subclause (7.2)(a)(ii)(B)(I) in respect of an acquired affiliate, and
(ii) the surplus entitlement percentage of the corporation in respect of that acquired affiliate immediately before the acquisition time.
(7.4) If this subsection applies, the amount designated by the corporation in respect of a particular acquired affiliate is deemed, for the purposes of subclause (7.2)(a)(ii)(B)(I),
(a) to be the amount determined by the Minister in respect of the particular acquired affiliate; and
(b) not to be the amount, if any, actually designated under subclause (7.2)(a)(ii)(B)(I).
(7.5) Subsection (7.6) applies if
(a) subsection (7.2) applies;
(b) the deficit affiliate, or any other foreign affiliate of the corporation in which the deficit affiliate has, immediately before the acquisition time, an equity percentage (which percentage has, for the purposes of this subsection, the meaning assigned by subsection 95(4) of the Act and which deficit affiliate or other affiliate is referred to in subsection (7.6) as the “direct holder”), has, immediately before the acquisition time, a direct equity percentage (within the meaning assigned by that subsection 95(4)) in any other foreign affiliate (referred to in paragraph (c) and subsection (7.6) as the “subject affiliate”) of the corporation; and
(c) the subject affiliate is the acquired affiliate or has, immediately before the acquisition time, an equity percentage in the acquired affiliate.
(7.6) Subject to paragraph 5908(11)(c), for the purposes of paragraph 92(1.1)(a) of the Act, if this subsection applies, there shall be added, in computing on and after the adjustment time
(a) the direct holder’s adjusted cost base of a share of the capital stock of the subject affiliate, the amount determined by the formula
A × B
where
- A
- is the amount determined under paragraph (7.2)(a) in respect of the acquired affiliate, and
- B
- is the percentage that would, if the direct holder were resident in Canada, be the direct holder’s surplus entitlement percentage in respect of the acquired affiliate immediately before the acquisition time if the direct holder owned only the share; and
(b) the subordinate affiliate’s adjusted cost base of a share of the capital stock of the acquired affiliate, the amount determined by the formula
C × D
where
- C
- is the amount determined under paragraph (7.2)(a) in respect of the acquired affiliate, and
- D
- is the percentage that would, if the subordinate affiliate were resident in Canada, be the subordinate affiliate’s surplus entitlement percentage in respect of the acquired affiliate immediately before the acquisition time if the subordinate affiliate owned only the share.
(7.7) For the purposes of paragraph 93(3)(c) of the Act, if an amount (referred to in this subsection and subsection 5908(12) as the “adjustment amount”) is required by subsection 92(1.1) of the Act to be added in computing, on or after the adjustment time, the adjusted cost base of a share of the capital stock of a foreign affiliate of a corporation resident in Canada,
(a) where paragraph 92(1.1)(a) of the Act applies, the prescribed amount is the adjustment amount; and
(b) where paragraph 92(1.1)(b) of the Act applies, the prescribed amount is the amount determined under subsection 5908(12).
(9) Subsection 5905(8) of the Regulations is repealed.
(10) Subsection 5905(9) of the Regulations is repealed.
(11) Subsection (1) applies in respect of acquisitions and dispositions that occur after December 18, 2009.
(12) Subsection (2) applies in respect of redemptions, acquisitions and cancellations that occur after December 18, 2009.
(13) Subsection (3) applies in respect of mergers or combinations that occur after December 18, 2009.
(14) Subsections 5905(5) and (5.1) of the Regulations, as enacted by subsection (4), and subsection (7) apply in respect of dispositions and amalgamations that occur, and windings-up that begin, after December 18, 2009.
(15) Subsections 5905(5.11) and (5.12) of the Regulations, as enacted by subsection (4), apply in respect of an amalgamation that occurs, or a winding-up that begins, after February 27, 2004, except that, if subsection 5905(6) of the Regulations applies in respect of the amalgamation or winding-up, then the portion of subsection 5905(5.12) of the Regulations, as so enacted, before its paragraph (a) is to be read as follows:
(5.12) If this subsection applies, the following rules apply for the purposes of subsections (5) and (6):
(16) Subsection 5905(5.13) of the Regulations, as enacted by subsection (4), applies in respect of windings-up that begin, and amalgamations that occur, after February 27, 2004.
(17) Subsection (5) applies in respect of acquisitions of control that occur after December 18, 2009, except if the acquisition of control results from an acquisition of shares made under an agreement in writing entered into before December 18, 2009.
(18) Subsections 5905(5.2) to (5.4) of the Regulations, as enacted by subsection (6), apply in respect of acquisitions of control that occur after December 18, 2009, except if the acquisition of control results from an acquisition of shares made under an agreement in writing entered into before December 18, 2009.
(19) Subsections 5905(5.5) and (5.6) of the Regulations, as enacted by subsection (6), are deemed to have come into force on December 19, 2009.
(20) Subsection (8) applies where a share of the capital stock of a foreign affiliate of a corporation is acquired by, or otherwise becomes property of, a person after December 18, 2009.
(21) Subsection (9) applies in respect of dispositions that occur after December 18, 2009.
(22) Subsection (10) applies in respect of issuances that occur after December 18, 2009.
45. (1) Subsection 5906(2) of the Regulations is replaced by the following:
(2) The expression “permanent establishment” means
(a) for the purposes of paragraph (1)(a) and the definition “earnings” in subsection 5907(1) (which paragraph or definition is referred to in this paragraph as a “provision”),
(i) if the expression is given a particular meaning in a tax treaty with a country, a permanent establishment within the meaning assigned by that tax treaty with respect to the business carried on in that country by the foreign affiliate referred to in the provision, and
(ii) in any other case, a fixed place of business of the affiliate, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse, or if the affiliate does not have any fixed place of business, the principal place at which the affiliate’s business is conducted; and
(b) for the purposes of subdivision i of Division B of Part I of the Act,
(i) if the expression is given a particular meaning in a tax treaty with a country, a permanent establishment within the meaning assigned by that tax treaty if the person or partnership referred to in the relevant portion of that subdivision (which person or partnership is referred to in this paragraph and subsection (3) as the “person”) is a resident of that country for the purpose of that tax treaty, and
(ii) in any other case, a fixed place of business of the person, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse, or if the person does not have any fixed place of business, the principal place at which the person’s business is conducted.
(3) For the purposes of subparagraphs (2)(a)(ii) and (b)(ii),
(a) if the affiliate or the person, as the case may be, carries on business through an employee or agent, established in a particular place, who has general authority to contract for the affiliate or the person or who has a stock of merchandise owned by the affiliate or the person from which the employee or agent regularly fills orders, the affiliate or the person is deemed to have a fixed place of business at that place;
(b) if the affiliate or the person, as the case may be, is an insurance corporation, the affiliate or the person is deemed to have a fixed place of business in each country in which the affiliate or the person is registered or licensed to do business;
(c) if the affiliate or the person, as the case may be, uses substantial machinery or equipment at a particular place at any time in a taxation year, the affiliate or the person is deemed to have a fixed place of business at that place;
(d) the fact that the affiliate or the person, as the case may be, has business dealings through a commission agent, broker or other independent agent or maintains an office solely for the purchase of merchandise at a particular place does not of itself mean that the affiliate or the person has a fixed place of business at that place; and
(e) the fact that the affiliate or the person, as the case may be, has a subsidiary controlled corporation at a place or a subsidiary controlled corporation engaged in trade or business at a place does not of itself mean that the affiliate or person has a fixed place of business at that place.
(2) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999 except that, for taxation years of the affiliate that end on or before December 18, 2009, the portion of paragraph 5906(2)(b) of the Regulations, as enacted by subsection (1), before its subparagraph (i) is to be read as follows:
(b) for the purposes of subdivision i of Division B of Part I (other than the definitions “excluded income” and “excluded revenue” in subsection 95(2.5)) of the Act,
46. (1) The definition “loss” in subsection 5907(1) of the Regulations is replaced by the following:
- “loss”
“loss”, of a foreign affiliate of a taxpayer resident in Canada for a taxation year of the affiliate from an active business, means
(a) in the case of an active business carried on by it in a country, the amount of its loss for the year from the active business carried on in the country computed by applying the provisions of paragraph (a) of the definition “earnings” respecting the computation of earnings from that active business carried on in that country, with any modifications that the circumstances require, and
(b) in any other case, the total of all amounts each of which is an amount of a loss that is required under paragraph 95(2)(a) of the Act to be included in computing the affiliate’s income or loss from an active business for the year; (perte)
(2) Paragraph (b) of the definition “earnings” in subsection 5907(1) of the Regulations is replaced by the following:
(b) in any other case, the total of all amounts each of which is an amount of income that is required under paragraph 95(2)(a) of the Act to be included in computing the affiliate’s income or loss from an active business for the year; (gains)
(3) Subparagraph (a)(ii) of the definition “exempt earnings” in subsection 5907(1) of the Regulations is replaced by the following:
(ii) the amount of the taxable capital gains for the year referred to in subparagraphs (c)(i), (d)(iii), (e)(i) and (f)(iv) of the definition “net earnings”, and
(4) The definition “exempt earnings” in subsection 5907(1) of the Regulations is amended by adding the following after paragraph (a):
(a.1) the amount determined by the formula
A – B
where
- A
- is the total of all amounts each of which is a particular amount that would be included, in respect of a particular business of the particular affiliate, by paragraph (c), (c.1) or (c.2) of the definition “capital dividend account” in subsection 89(1) of the Act in determining the particular affiliate’s capital dividend account at the end of the year if
(i) the particular affiliate were the corporation referred to in that definition,
(ii) the references in paragraphs (c.1) and (c.2) of that definition, and in paragraph (c) of that definition as that paragraph (c) read in its application to taxation years that ended before February 28, 2000, to “a business” were read as references to a business that
(A) is not an active business (as defined in subsection 95(1) of the Act), or
(B) is an active business (as defined in that subsection 95(1)) the particular affiliate’s earnings from which for the year are determined under subparagraph (a)(iii) of the definition “earnings”, and
(iii) the particular amount did not include any amount that can reasonably be considered to have accrued while no person or partnership that carried on the particular business was a specified person or partnership (within the meaning of section 95 of the Act) in respect of the particular corporation, and
- B
- is the amount determined for A at the end of the particular affiliate’s taxation year that immediately precedes the year,
(5) Paragraph (d) of the definition “exempt earnings” in subsection 5907(1) of the Regulations is replaced by the following:
(d) where the year is the 1976 or any subsequent taxation year of the particular affiliate and the particular affiliate is, throughout the year, resident in a designated treaty country,
(i) the particular affiliate’s net earnings for the year from an active business carried on by it in Canada or a designated treaty country, or
(ii) the particular affiliate’s earnings for the year from an active business to the extent that they derive from
(A) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(i) of the Act and that would
(I) if earned by the other foreign affiliate referred to in subclause 95(2)(a)(i)(A)(I) of the Act, be included in computing the exempt earnings or exempt loss of the other foreign affiliate for a taxation year, or
(II) if earned by the life insurance corporation referred to in subclause 95(2)(a)(i)(A)(II) of the Act and based on the assumptions contained in subclause 95(2)(a)(i)(B)(II) of the Act, be included in computing the exempt earnings or exempt loss of the life insurance corporation for a taxation year,
(B) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(A) of the Act where the income is derived from amounts that are paid or payable by the life insurance corporation referred to in that clause and are for expenditures that would, if that life insurance corporation were a foreign affiliate of the particular corporation, be deductible in computing its exempt earnings or exempt loss for a taxation year,
(C) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(B) of the Act to the extent that the amounts paid or payable referred to in that clause are for expenditures that are deductible in computing the exempt earnings or exempt loss, for a taxation year, of the other foreign affiliate referred to in that clause,
(D) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(C) of the Act to the extent that the amounts paid or payable referred to in that clause are for expenditures that are deductible in computing its exempt earnings or exempt loss for a taxation year,
(E) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(D) of the Act if
(I) the country referred to in subclause 95(2)(a)(ii)(D)(IV) of the Act is a designated treaty country, and
(II) that income would be required to be so included if
1. paragraph (a) of the definition “excluded property” in subsection 95(1) of the Act were read as follows:
(a) used or held by the foreign affiliate principally for the purpose of gaining or producing income from an active business carried on by it in a designated treaty country (within the meaning assigned by subsection 5907(11) of the Income Tax Regulations),
2. paragraph (c) of that definition “excluded property” were read as follows:
(c) property all or substantially all of the income from which is, or would be, if there were income from the property, income from an active business (which, for this purpose, includes income that would be deemed to be income from an active business by paragraph (2)(a) if that paragraph were read without reference to subparagraph (v)) that is included in computing the foreign affiliate’s exempt earnings, or exempt loss, as defined in subsection 5907(1) of the Income Tax Regulations, for a taxation year,
(F) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(iii) of the Act to the extent that the trade accounts receivable referred to in that subparagraph arose in the course of an active business carried on by the other foreign affiliate referred to in that subparagraph the income or loss from which is included in computing its exempt earnings or exempt loss for a taxation year,
(G) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(iv) of the Act to the extent that the loans or lending assets referred to in that subparagraph arose in the course of an active business carried on by the other foreign affiliate referred to in that subparagraph the income or loss from which is included in computing its exempt earnings or exempt loss for a taxation year,
(H) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(v) of the Act, where all or substantially all of its income, from the property described in that subparagraph, is, or would be if there were income from the property, income from an active business (which, for this purpose, includes income that would be deemed to be income from an active business by paragraph 95(2)(a) of the Act if that paragraph were read without reference to its subparagraph (v) and, for greater certainty, excludes income arising as a result of the disposition of the property) that is included in computing its exempt earnings or exempt loss for a taxation year, or
(I) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(vi) of the Act, where the agreement for the purchase, sale or exchange of currency referred to in that subparagraph can reasonably be considered to have been made by the particular affiliate to reduce its risk with respect to an amount of income or loss that is included in computing its exempt earnings or exempt loss for a taxation year, or
(6) Subparagraph (a)(ii) of the definition “exempt loss” in subsection 5907(1) of the Regulations is replaced by the following:
(ii) the amount of the allowable capital losses for the year referred to in subparagraphs (c)(i), (d)(iii), (e)(i) and (f)(iv) of the definition “net loss”, and
(7) The definition “exempt loss” in subsection 5907(1) of the Regulations is amended by adding the following after paragraph (a):
(a.1) the total of all amounts each of which is the portion of an eligible capital expenditure of the affiliate, in respect of a business of the affiliate, that was not included at any time in the affiliate’s cumulative eligible capital in respect of the business, if
(i) the business
(A) is not an active business (as defined in subsection 95(1) of the Act), or
(B) is an active business (as defined in subsection 95(1) of the Act) the affiliate’s earnings from which for the year are determined under subparagraph (a)(iii) of the definition “earnings”, and
(ii) in computing its income for the year, the affiliate has deducted an amount described in paragraph 24(1)(a) of the Act for the year in respect of the business,
(8) Paragraph (c) of the definition “exempt loss” in subsection 5907(1) of the Regulations is replaced by the following:
(c) where the year is the 1976 or any subsequent taxation year of the affiliate and the affiliate is, throughout the year, resident in a designated treaty country,
(i) the affiliate’s net loss for the year from an active business carried on by it in Canada or a designated treaty country, or
(ii) the amount by which
(A) the affiliate’s loss for the year from an active business to the extent determined under subparagraph (d)(ii) of the definition “exempt earnings” in respect of the year with any modifications that the circumstances require
exceeds
(B) the portion of any income or profits tax refunded by the government of a country for the year to the affiliate that can reasonably be regarded as tax that was refunded in respect of the amount determined under clause (A), or
(9) Paragraphs (b) and (c) of the definition “exempt surplus” in subsection 5907(1) of the Regulations are replaced by the following:
(b) the last time for which the opening exempt surplus of the subject affiliate in respect of the corporation was required to be determined under section 5905, and
(c) the last time for which the opening exempt deficit of the subject affiliate in respect of the corporation was required to be determined under section 5905
(10) Subparagraph (i) of the description of A in the definition “exempt surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(i) the opening exempt surplus, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (b),
(11) The description of A in the definition “exempt surplus” in subsection 5907(1) of the Regulations is amended by striking out “or” at the end of subparagraph (vi) and by adding the following after that subparagraph:
(vi.1) each amount that is required, under section 5905, to be included under this subparagraph in the period and before the particular time, or
(12) Subparagraph (i) of the description of B in the definition “exempt surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(i) the opening exempt deficit, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (c),
(13) Subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(v) each amount that is required under section 5902 or 5905 to be included under this subparagraph, or subparagraph (1)(d)(xii) as it applies to taxation years that end before February 22, 1994, in the period and before the particular time, or
(14) The definition “net earnings” in subsection 5907(1) of the Regulations is amended by striking out “and” at the end of paragraph (c) and by adding the following after paragraph (d):
(e) from the disposition of a property that is an excluded property of the affiliate that is described in paragraph (c) of the definition “excluded property” in subsection 95(1) of the Act but that would not be an excluded property of the affiliate if that paragraph were read in the manner described in sub-subclause (d)(ii)(E)(II)2 of the definition “exempt earnings” is the amount, if any, by which
(i) the portion of the affiliate’s taxable capital gain for the year from the disposition of the property that accrued after its 1975 taxation year
exceeds
(ii) the portion of any income or profits tax paid to the government of a country for the year by the affiliate that can reasonably be regarded as tax that was paid in respect of the amount determined under subparagraph (i), and
(f) from a particular disposition of a property, that is an excluded property of the affiliate because of paragraph (c.1) of the definition “excluded property” in subsection 95(1) of the Act, that related to
(i) an amount that was receivable under an agreement that relates to the sale of a particular property the taxable capital gain or allowable capital loss from the sale of which is included under any of paragraphs (c) to (e) of this definition or of the definition “net loss”, as the case may be,
(ii) an amount that was receivable and was a property that was described in paragraph (c) of that definition “excluded property” but that would not have been an excluded property of the affiliate if that paragraph were read in the manner described in sub-subclause (d)(ii)(E)(II)2 of the definition “exempt earnings”, or
(iii) an amount payable, or an amount of indebtedness, described in clause (c.1)(ii)(B) of that definition “excluded property” arising in respect of the acquisition of an excluded property of the affiliate any taxable capital gain or allowable capital loss from the disposition of which would, if that excluded property were disposed of, be included under any of paragraphs (c) to (e) of this definition or of the definition “net loss”, as the case may be,
is the amount, if any, by which
(iv) the portion of the affiliate’s taxable capital gain for the year from the particular disposition that accrued after its 1975 taxation year
exceeds
(v) the portion of any income or profits tax paid to the government of a country for the year by the affiliate that can reasonably be regarded as tax that was paid for the year in respect of the amount determined under subparagraph (iv); (gains nets)
(15) The definition “net loss” in subsection 5907(1) of the Regulations is amended by striking out “and” at the end of paragraph (c) and by adding the following after paragraph (d):
(e) from the disposition of a property, that is an excluded property of the affiliate that is described in paragraph (c) of the definition “excluded property” in subsection 95(1) of the Act but that would not be an excluded property of the affiliate if that paragraph were read in the manner described in sub-subclause (d)(ii)(E)(II)2 of the definition “exempt earnings” is the amount, if any, by which
(i) the portion of the affiliate’s allowable capital loss for the year from the disposition of the property that accrued after its 1975 taxation year
exceeds
(ii) the portion of any income or profits tax refunded by the government of a country for the year to the affiliate that can reasonably be regarded as tax that was refunded in respect of the amount determined under subparagraph (i), and
(f) from a particular disposition of a property, that is an excluded property of the affiliate because of paragraph (c.1) of the definition “excluded property” in subsection 95(1) of the Act, that related to
(i) an amount that was receivable under an agreement that relates to the sale of a particular property the taxable capital gain or allowable capital loss from the sale of which is included under any of paragraphs (c) to (e) of this definition or of the definition “net earnings”, as the case may be,
(ii) an amount that was receivable and was a property that was described in paragraph (c) of that definition “excluded property” but that would not have been an excluded property of the affiliate if that paragraph were read in the manner described in sub-subclause (d)(ii)(E)(II)2 of the definition “exempt earnings”, or
(iii) an amount payable, or an amount of indebtedness, described in clause (c.1)(ii)(B) of that definition “excluded property” arising in respect of the acquisition of an excluded property of the affiliate any taxable capital gain or allowable capital loss from the disposition of which would, if that excluded property were disposed of, be included under any of paragraphs (c) to (e) of this definition or of the definition “net earnings”, as the case may be,
is the amount, if any, by which
(iv) the portion of the affiliate’s allowable capital loss for the year from the particular disposition that accrued after its 1975 taxation year
exceeds
(v) the portion of any income or profits tax refunded by the government of a country for the year to the affiliate that can reasonably be regarded as tax that was refunded in respect of the amount determined under subparagraph (iv); (perte nette)
(16) Subparagraphs (b)(iii) to (v) of the definition “taxable earnings” in subsection 5907(1) of the Regulations are replaced by the following:
(iii) the affiliate’s earnings for the year as determined under paragraph (b) of the definition “earnings” minus the portion of any income or profits tax paid to the government of a country for a year by the affiliate that can reasonably be regarded as tax in respect of those earnings, or
(iv) to the extent not included under subparagraph (ii), the affiliate’s net earnings for the year determined under paragraphs (c) to (f) of the definition “net earnings”,
(17) Subparagraphs (b)(iii) and (iv) of the definition “taxable loss” in subsection 5907(1) of the Regulations are replaced by the following:
(iii) the affiliate’s loss for the year as determined under paragraph (b) of the definition “loss” minus the portion of any income or profits tax refunded by the government of a country for a year to the affiliate that can reasonably be regarded as tax refunded in respect of that loss, or
(iv) to the extent not included under subparagraph (ii), the affiliate’s net loss for the year determined under paragraphs (c) to (f) of the definition “net loss”,
(18) Paragraphs (b) and (c) of the definition “taxable surplus” in subsection 5907(1) of the Regulations are replaced by the following:
(b) the last time for which the opening taxable surplus of the subject affiliate in respect of the corporation was required to be determined under section 5905, and
(c) the last time for which the opening taxable deficit of the subject affiliate in respect of the corporation was required to be determined under section 5905
(19) Subparagraph (i) of the description of A in the definition “taxable surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(i) the opening taxable surplus, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (b),
(20) The description of A in the definition “taxable surplus” in subsection 5907(1) of the Regulations is amended by adding the following after subparagraph (iv):
(iv.1) each amount that is required under section 5905 to be included under this subparagraph in the period and before the particular time, or
(21) Subparagraph (i) of the description of B in the definition “taxable surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(i) the opening taxable deficit, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (c),
(22) Subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(v) each amount that is required under section 5902 or 5905 to be included under this subparagraph, or subparagraph (1)(k)(xi) as it applies to taxation years that end before February 22, 1994, in the period and before the particular time, or
(23) The definition “underlying foreign tax” in subsection 5907(1) of the Regulations is amended by adding “and” at the end of paragraph (a) and by replacing paragraphs (b) and (c) with the following:
(b) the last time for which the opening underlying foreign tax of the subject affiliate in respect of the corporation was required to be determined under section 5905
(24) Subparagraph (i) of the description of A in the definition “underlying foreign tax” in subsection 5907(1) of the Regulations is replaced by the following:
(i) the opening underlying foreign tax, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (b),
(25) Subparagraph (iii) of the description of B in the definition “underlying foreign tax” in subsection 5907(1) of the Regulations is replaced by the following:
(iii) each amount that is required under section 5902 or 5905 to be included under this subparagraph, or subparagraph (1)(l)(x) as it applies to taxation years that end before February 22, 1994, in the period and before the particular time, or
(26) Paragraph (b) of the definition “underlying foreign tax applicable” in subsection 5907(1) of the Regulations is replaced by the following:
(b) any additional amount in respect of the whole dividend that the corporation claims in its return of income under Part I of the Act in respect of the whole dividend, not exceeding the amount that is the lesser of
(i) the amount by which the portion of the whole dividend deemed to have been paid out of the affiliate’s taxable surplus in respect of the corporation exceeds the amount determined under paragraph (a), and
(ii) the amount by which the affiliate’s underlying foreign tax in respect of the corporation immediately before the whole dividend was paid exceeds the amount determined under paragraph (a); (montant intrinsèque d’impôt étranger applicable)
(27) Paragraph (b) of the definition “whole dividend” in subsection 5907(1) of the Regulations is replaced by the following:
(b) where a whole dividend is deemed by subparagraph 5902(1)(a)(ii) to have been paid at the same time on shares of more than one class of an affiliate’s capital stock, for the purpose only of that subparagraph, the whole dividend deemed to have been paid at that time on the shares of a class of the affiliate’s capital stock is deemed to be the total of all amounts each of which is a whole dividend deemed to have been paid at that time on the shares of a class of the affiliate’s capital stock, and
(28) The portion of the definition gains exonérés in subsection 5907(1) of the French version of the Regulations before paragraph (a) is replaced by the following:
gains exonérés En ce qui concerne une société étrangère affiliée d’une société donnée pour une année d’imposition de la société affiliée, le total des sommes représentant chacune l’une des sommes ci-après, moins la partie de l’impôt sur le revenu ou sur les bénéfices payé par la société affiliée pour l’année au gouvernement d’un pays qu’il est raisonnable de considérer comme un impôt sur les gains visés à l’alinéa c) ou au sous-alinéa d)(ii) :
(29) The portion of paragraph (a) of the definition gains exonérés in subsection 5907(1) of the French version of the Regulations after subparagraph (iii) is replaced by the following:
pour l’application du présent alinéa, lorsque la société affiliée a disposé d’immobilisations qui étaient des actions du capital-actions d’une autre société étrangère affiliée de la société donnée en faveur d’une autre société qui était, immédiatement après la disposition, une société étrangère affiliée de la société donnée, est exclue des gains en capital de la société affiliée pour l’année la partie de ces gains qui correspond au total des sommes représentant chacune l’excédent de la juste valeur marchande, à la fin de l’année d’imposition 1975 de la société affiliée, de l’une des actions dont il a été disposé sur son prix de base rajusté;
(30) Subsection 5907(1.02) of the Regulations is repealed.
(31) Section 5907 of the Regulations is amended by adding the following after subsection (1.01):
(1.02) For the purposes of paragraph (d) of the definition “exempt earnings” and paragraph (c) of the definition “exempt loss” in subsection (1), if a foreign affiliate of a corporation becomes a foreign affiliate of the corporation in a taxation year of the affiliate, otherwise than as a result of a transaction between persons that do not deal with each other at arm’s length, and the affiliate is resident in a designated treaty country at the end of the year, the affiliate is deemed to be so resident throughout the year.
(32) Subparagraph 5907(1.1)(b)(ii) of the Regulations is replaced by the following:
(ii) an amount is paid by the primary affiliate to a secondary affiliate in respect of a reduction or refund, because of a loss or a tax credit of the secondary affiliate for a taxation year, of the income or profits tax that would otherwise have been payable by the primary affiliate for the year on behalf of the consolidated group
(A) in respect of the primary affiliate,
(I) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the exempt surplus or included in the exempt deficit, as the case may be, of the secondary affiliate shall, at the end of the year to which the loss or the tax credit relates, be deducted from the exempt surplus or added to the exempt deficit, as the case may be, of the primary affiliate, and
(II) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the taxable surplus or included in the taxable deficit, as the case may be, of the secondary affiliate shall, at the end of the year to which the loss or the tax credit relates, be deducted from the taxable surplus or added to the taxable deficit, as the case may be, of the primary affiliate and be added to the underlying foreign tax of the primary affiliate, and
(B) in respect of the secondary affiliate, the amount is deemed to be a refund to the secondary affiliate, for the year to which the loss or the tax credit relates, of income or profits tax in respect of the loss or the tax credit,
(33) The portion of subsection 5907(1.3) of the Regulations before paragraph (a) is replaced by the following:
(1.3) For the purpose of paragraph (b) of the definition “foreign accrual tax” in subsection 95(1) of the Act and subject to subsection (1.4),
(34) Section 5907 of the Regulations is amended by adding the following after subsection (1.3):
(1.4) If the amount prescribed under paragraph (1.3)(a) or (b), or any portion of the amount, can reasonably be considered to be in respect of a loss of another corporation for a taxation year of the other corporation, then the amount so prescribed is to be reduced to the extent that it can reasonably be considered to be in respect of the portion of that loss that would, if section 5903 were read without reference to its subsection (4), not be a foreign accrual property loss (within the meaning assigned by subsection 5903(3)) of a controlled foreign affiliate of a person or partnership that is, at the end of that taxation year, a relevant person or partnership (within the meaning assigned by subsection 5903(6)) in respect of the taxpayer.
(1.5) If subsection (1.4) applied to reduce an amount that would, in the absence of subsection (1.4), be prescribed by paragraph (1.3)(a) to be foreign accrual tax applicable to an amount (referred to in this subsection as the “FAPI amount”) included in the taxpayer’s income under subsection 91(1) of the Act for a taxation year (referred to in subsection (1.6) as the “FAPI year”) of the taxpayer, an amount equal to that reduction is, for the purpose of paragraph (b) of the definition “foreign accrual tax” in subsection 95(1) of the Act, prescribed to be foreign accrual tax applicable to the FAPI amount in the taxpayer’s taxation year that includes the last day of the designated taxation year, if any, of the particular affiliate referred to in paragraph (1.3)(a).
(1.6) For the purposes of subsection (1.5), the designated taxation year of the particular affiliate is a particular taxation year of the particular affiliate if
(a) in the particular year, or in the particular affiliate’s taxation year (referred to in this paragraph as the “PATY”) ending in the FAPI year and one or more taxation years of the particular affiliate each of which follows the PATY and the latest of which is the particular year, all losses of the particular affiliate and the other corporations referred to in paragraph (1.3)(a) for their taxation years ending in the FAPI year would, on the assumption that the particular affiliate and each of those other corporations had no foreign accrual property income for any taxation year, reasonably be considered to have been fully deducted (under the tax law referred to in paragraph (1.3)(a)) against income (as determined under that tax law) of the particular affiliate or those other corporations;
(b) the taxpayer demonstrates that no other losses of the particular affiliate or those other corporations for any taxation year were, or could reasonably have been, deducted under that tax law against that income; and
(c) the last day of the particular year occurs in one of the five taxation years of the taxpayer that immediately follow the FAPI year.
(35) Subsections 5907(2.7) and (2.8) of the Regulations are replaced by the following:
(2.7) Notwithstanding any other provision of this Part, if an amount (referred to in this subsection as the “inclusion amount”) is included in computing the income or loss from an active business of a foreign affiliate of a taxpayer for a taxation year under subparagraph 95(2)(a)(i) or (ii) of the Act and the inclusion amount is in respect of a particular amount paid or payable,
(a) if clause 95(2)(a)(ii)(D) of the Act is applicable, by the second affiliate referred to in that clause,
(i) the particular amount is to be deducted in computing the second affiliate’s income or loss from an active business carried on by it in the country in which it is resident for its earliest taxation year in which that amount was paid or payable,
(ii) the second affiliate is deemed to have carried on an active business in that country for that earliest taxation year, and
(iii) in computing the second affiliate’s income or loss for a taxation year from any source, no amount is to be deducted in respect of the particular amount except as required under subparagraph (i); and
(b) in any other case, by the other foreign affiliate referred to in subparagraph 95(2)(a)(i) or (ii) of the Act, as the case may be, or by a partnership of which the other foreign affiliate is a member, the particular amount is, except where it has been deducted under paragraph (2)(j) in computing the other foreign affiliate’s earnings or loss from an active business,
(i) to be deducted in computing the earnings or loss of the other foreign affiliate or the partnership, as the case may be, from the active business for its earliest taxation year in which the particular amount was paid or payable, and
(ii) not to be deducted in computing its earnings or loss from the active business for any other taxation year.
(36) Subsection 5907(5) of the Regulations is replaced by the following:
(5) For the purposes of this section, each capital gain, capital loss, taxable capital gain or allowable capital loss of a foreign affiliate of a taxpayer from the disposition of property shall be computed in accordance with the rules set out in subsection 95(2) of the Act and, for the purposes of subsection (6), if any such gain or loss is required to be computed in Canadian currency, the amount of such gain or loss shall be converted from Canadian currency into the currency referred to in subsection (6) at the rate of exchange prevailing on the date of disposition of the property.
(37) Subsection 5907(6) of the Regulations is replaced by the following:
(6) All amounts referred to in subsections (1) and (2) shall be maintained on a consistent basis from year to year in the currency of the country in which the foreign affiliate of the corporation resident in Canada is resident or any currency that the corporation resident in Canada demonstrates to be reasonable in the circumstances.
(38) Subsection 5907(12) of the Regulations is repealed.
(39) Subject to section 50, subsections (1) and (2) apply to taxation years of a foreign affiliate of a taxpayer that end after 1999.
(40) Subsections (3), (6) and (14) to (16) apply in respect of dispositions of property that occur after December 18, 2009.
(41) Subject to section 50, subsection (4) applies to taxation years of a foreign affiliate of a taxpayer that begin after December 20, 2002, except that the description of A in paragraph (a.1) of the definition “exempt earnings” in subsection 5907(1) of the Regulations, as enacted by subsection (4), is, in its application to taxation years of the foreign affiliate that begin on or before December 18, 2009, to be read without reference to its subparagraph (iii).
(42) Subject to section 50, subsection (5) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999, except that
(a) the portion of paragraph (d) of the definition “exempt earnings” in subsection 5907(1) of the Regulations before its subparagraph (i), as enacted by subsection (5), is, in its application to taxation years of the foreign affiliate that begin on or before December 18, 2009, to be read as follows:
(d) where the year is the 1976 or any subsequent taxation year of the particular affiliate and the particular affiliate is resident in a designated treaty country,
(b) subclause (d)(ii)(E)(II) of the definition “exempt earnings” in subsection 5907(1) of the Regulations, as enacted by subsection (5), is, in its application to taxation years of the foreign affiliate that begin after 2008 and on or before June 18, 2010, to be read as follows:
(II) that income would be required to be so included if paragraph (c) of the definition “excluded property” in subsection 95(1) of the Act were read as follows:
(c) property all or substantially all of the income from which is deemed, or would be deemed, if there were income from the property, to be income from an active business by paragraph (2)(a) (which, for this purpose, includes income that would be deemed to be income from an active business by paragraph (2)(a) if that paragraph were read without reference to its subparagraph (v)) that is derived from amounts payable by payers who are, or would be, if they were foreign affiliates of the taxpayer, entitled to deduct the amounts in computing their exempt earnings or exempt loss, as defined in subsection 5907(1) of the Income Tax Regulations, for a taxation year,
(c) subject to paragraph (d), subparagraph (d)(ii) of the definition “exempt earnings” in subsection 5907(1) of the Regulations, as enacted by subsection (5), is, in its application to taxation years of the foreign affiliate that end after 1999 and begin before 2009, to be read as follows:
(ii) the particular affiliate’s earnings for the year from an active business to the extent that they derive from
(A) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(i) of the Act and that would,
(I) if earned by the non-resident corporation referred to in sub-subclause 95(2)(a)(i)(A)(I)1 of the Act and based on the assumptions contained in subclause 95(2)(a)(i)(B)(I) of the Act, be included in computing the exempt earnings or exempt loss of the non-resident corporation for a taxation year,
(II) if earned by the foreign affiliate referred to in sub-subclause 95(2)(a)(i)(A)(I)2 of the Act, be included in computing the exempt earnings or exempt loss of that foreign affiliate for a taxation year, or
(III) if earned by the life insurance corporation referred to in subclause 95(2)(a)(i)(A)(II) of the Act and based on the assumptions contained in subclause 95(2)(a)(i)(B)(I) of the Act, be included in computing the exempt earnings or exempt loss of the life insurance corporation for a taxation year,
(B) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(A) of the Act to the extent that the amounts paid or payable referred to in that clause are for expenditures that would be deductible in computing the exempt earnings or exempt loss for a taxation year of the non-resident corporation or the partnership, as the case may be, referred to in that clause if it were a foreign affiliate of the particular corporation,
(C) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(B) of the Act to the extent that the amounts paid or payable referred to in that clause are for expenditures that
(I) are deductible in computing the exempt earnings or exempt loss, for a taxation year, of the other foreign affiliate referred to in that clause, or
(II) would be deductible in computing the exempt earnings or exempt loss, for a taxation year, of the partnership referred to in that clause if the partnership were a foreign affiliate of the particular corporation,
(D) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(C) of the Act to the extent that the amounts paid or payable referred to in that clause are for expenditures that would be deductible in computing the exempt earnings or exempt loss, for a taxation year, of the partnership referred to in that clause if the partnership were a foreign affiliate of the particular corporation,
(E) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(D) of the Act if
(I) the country referred to in subclause 95(2)(a)(ii)(D)(IV) of the Act is a designated treaty country, and
(II) that income would be required to be so included if paragraph (c) of the definition “excluded property” in subsection 95(1) of the Act were read as follows:
(c) property all or substantially all of the income from which is deemed, or would be deemed if there were income from the property, to be income from an active business by paragraph (2)(a) (which, for this purpose, includes income that would be deemed to be income from an active business by paragraph (2)(a) if that paragraph were read without reference to its subparagraph (v)) that is derived from amounts payable by payers who are, or would be, if they were foreign affiliates of the taxpayer, entitled to deduct the amounts in computing their exempt earnings or exempt loss, as defined in subsection 5907(1) of the Income Tax Regulations, for a taxation year,
(F) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under clause 95(2)(a)(ii)(E) of the Act where the income is derived from amounts that are paid or payable by the life insurance corporation referred to in that clause and are for expenditures that would, if that life insurance corporation were a foreign affiliate of the particular corporation, be deductible in computing its exempt earnings or exempt loss for a taxation year,
(G) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(iii) of the Act to the extent that the trade accounts receivable referred to in that subparagraph arose in the course of an active business carried on by the non-resident corporation referred to in that subparagraph the income or loss from which would be included in computing its exempt earnings or exempt loss for a taxation year if it were a foreign affiliate of the particular corporation,
(H) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(iv) of the Act to the extent that the loans or lending assets referred to in that subparagraph arose in the course of an active business carried on by the non-resident corporation referred to in that subparagraph the income or loss from which would be included in computing its exempt earnings or exempt loss for a taxation year if it were a foreign affiliate of the particular corporation,
(I) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(v) of the Act, where all or substantially all of its income, from the property described in that subparagraph, is, or would be if there were income from the property, income from an active business (which, for this purpose, includes income that would be deemed to be income from an active business by paragraph 95(2)(a) of the Act if that paragraph were read without reference to its subparagraph (v) and, for greater certainty, excludes income arising as a result of the disposition of the property) that is included in computing its exempt earnings or exempt loss for a taxation year, or
(J) income that is required to be included in computing the particular affiliate’s income or loss from an active business for the year under subparagraph 95(2)(a)(vi) of the Act, where the agreement for the purchase, sale or exchange of currency referred to in that subparagraph can reasonably be considered to have been made by the particular affiliate to reduce its risk with respect to an amount of income or loss that is included in computing its exempt earnings or exempt loss for a taxation year, or
(d) subclause (d)(ii)(E)(II) of the definition “exempt earnings” in subsection 5907(1) of the Regulations, as set out in the read-as text contained in paragraph (c), is, in its application to taxation years of the foreign affiliate that end after 1999 and begin before December 21, 2002, to be read as follows:
(II) that income would be required to be so included if paragraph (c) of the definition “excluded property” in subsection 95(1) of the Act were read without reference to amounts receivable referred to in that paragraph (c), where the interest on the amounts is not, or would not be if interest were payable on the amounts, deductible in computing the debtor’s exempt earnings or exempt loss for a taxation year,
(43) Subsections (7), (31), (36) and (37) apply to taxation years of a foreign affiliate of a taxpayer that begin after December 18, 2009.
(44) Subject to section 50, subsection (8) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999, except that the portion of paragraph (c) of the definition “exempt loss” in subsection 5907(1) of the Regulations before subparagraph (i), as enacted by subsection (8), is, in its application to taxation years of the foreign affiliate that begin on or before December 18, 2009, to be read as follows:
(c) where the year is the 1976 or any subsequent taxation year of the affiliate and the affiliate is resident in a designated treaty country,
(45) Subsections (9), (10), (12), (13), (18), (19) and (21) to (25) are deemed to have come into force on December 1, 1999.
(46) Subsections (11) and (20) apply where a share of the capital stock of a foreign affiliate of a corporation is acquired by, otherwise becomes property of, or is disposed of by, a person after December 20, 2002.
(47) Subject to section 50, subsection (17) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999, except that, in respect of dispositions of property that occur before December 18, 2009, subparagraph (b)(iv) of the definition “taxable loss” in subsection 5907(1) of the Regulations, as enacted by subsection (17), is to be read as follows:
(iv) to the extent not included under subparagraph (ii), the affiliate’s net loss for the year determined under paragraphs (c) and (d) of the definition “net loss”,
(48) Subsection (26) applies in respect of whole dividends paid on the shares of a class of the capital stock of a foreign affiliate of a corporation after December 18, 2009.
(49) Subsection (27) applies to elections made in respect of dispositions that occur after December 18, 2009.
(50) Subsections (28) and (29) apply to taxation years of a foreign affiliate of a taxpayer that begin after December 20, 2002.
(51) Subsections (30) and (35) apply to taxation years of a foreign affiliate of a taxpayer that begin after 2008.
(52) Subsection (32) applies in respect of payments made after December 20, 2002.
(53) Subsections (33) and (34) apply to taxation years of a foreign affiliate of a taxpayer that begin after November 1999.
(54) Subsection (38) is deemed to have come into force on December 19, 2009.
47. (1) The Regulations are amended by adding the following after section 5907:
5908. (1) For the purposes of this subsection, subsections (2) to (7), paragraph 5902(2)(b) and section 5905, if at any time shares of a class of the capital stock of a foreign affiliate of a corporation resident in Canada are, based on the assumptions contained in paragraph 96(1)(c) of the Act, owned by a partnership, or are deemed under this subsection to be owned by a partnership, each member of the partnership is deemed to own at that time the number of shares of that class that is determined by the formula
A × B/C
where
- A
- is the number of shares of that class that are so owned or so deemed owned by the partnership;
- B
- is the fair market value of the member’s interest in the partnership at that time; and
- C
- is the fair market value of all members’ interests in the partnership at that time.
(2) For the purposes of subsections (4) and 5905(1), (5) and (7.1), if a person is deemed by subsection (1) to own at a particular time a different number of shares of a class of the capital stock of a foreign affiliate of a corporation resident in Canada (which shares so deemed owned are referred to in this subsection as “affiliate shares”) than the person was deemed by that subsection to have owned immediately before the particular time, the number of affiliate shares equal to that difference is deemed to be
(a) disposed of, at the particular time, by the person, when that person is deemed to own fewer affiliate shares at the particular time than immediately before it; and
(b) acquired by, at the particular time, the person, when that person is deemed to own more affiliate shares at the particular time than immediately before it.
(3) For the purposes of subsection (2),
(a) if a partnership of which a person is a member at any time does not own, and (but for this subsection) is not deemed by subsection (1) to own, any shares of a class of the capital stock of the foreign affiliate at that time, subsection (1) is deemed to have applied in respect of the person and to have deemed the person to own, because of subsection (1) in respect of the partnership, no shares of that class at that time; and
(b) if a corporation resident in Canada or a foreign affiliate of such a corporation disposes of or acquires its entire interest in a partnership that, based on the assumptions contained in paragraph 96(1)(c) of the Act, owns shares of a class of the capital stock of a non-resident corporation, the corporation resident in Canada or the foreign affiliate, as the case may be, is deemed at the time that is immediately after the disposition or immediately before the acquisition, as the case may be, to own, because of subsection (1) in respect of the partnership, no shares of that class.
(4) For the purposes of subsection 5905(5), if at any time a corporation resident in Canada (referred to in this subsection as the “disposing corporation”) disposes of shares of a class of the capital stock of a foreign affiliate of the disposing corporation and, as a consequence of the same transaction or event (other than one to which neither paragraph (2)(a) nor paragraph (2)(b) applies) that caused the disposition, a taxable Canadian corporation with which the disposing corporation is not, at that time, dealing at arm’s length acquires shares of that class, the disposing corporation is, at that time, deemed to have disposed of, to the taxable Canadian corporation, the number of the shares of that class that is determined by the formula
A × B
where
- A
- is the number of shares of that class disposed of by the disposing corporation; and
- B
- is
(a) if the taxable Canadian corporation acquires, because of paragraph (2)(b), shares of that class, the fraction determined by the formula
C/D
where
- C
- is the number of shares of that class that is deemed by that paragraph to be acquired by the taxable Canadian corporation as a result of the transaction or event, and
- D
- is the total of all amounts each of which is the number of shares of that class that is deemed by that paragraph to be acquired by a person as a result of the transaction or event, and
(b) in any other case, one.
(5) For the purposes of subsection 5905(5.1), if a predecessor corporation described in that subsection is, at the time that is immediately before the amalgamation described in that subsection, a member of a particular partnership that, based on the assumptions contained in paragraph 96(1)(c) of the Act, owns, at that time, shares of the capital stock of a foreign affiliate of the predecessor corporation and the predecessor corporation’s interest in the particular partnership, or in another partnership that is a member of the particular partnership, becomes, upon the amalgamation, property of the new corporation described in that subsection, the shares of the capital stock of the affiliate that are deemed under subsection (1) to be owned by the predecessor corporation at that time are deemed to become property of the new corporation upon the amalgamation.
(6) In applying subsection 5905(5.2), if the corporation is a member of a partnership that, based on the assumptions contained in paragraph 96(1)(c) of the Act, owns shares (referred to individually in paragraph (a) as a “relevant share”) of the affiliate’s capital stock at the particular time,
(a) for the purposes of the description of B in subsection 5905(5.2), the corporation’s cost amount of each relevant share at the particular time is to be determined by the formula
P × Q/R
where
- P
- is the partnership’s cost amount of that relevant share at the particular time,
- Q
- is the number of shares of the capital stock of the affiliate that are deemed by subsection (1), in respect of the partnership, to be owned by the corporation at the particular time, and
- R
- is the total number of relevant shares at the particular time; and
(b) for the purposes of paragraph (b) of the description of C in subsection 5905(5.2), the amount determined under this paragraph is the total of all amounts each of which is the amount that would be the corporation’s portion of a gain that would be deemed under subsection 92(5) of the Act to be a gain of the member of the partnership from the disposition of a share of the capital stock of the affiliate by the partnership if that share were disposed of immediately before the particular time.
(7) For the purposes of paragraph 5905(5.4)(b), the amount determined by this subsection is the amount determined by the following formula for shares of the capital stock of a foreign affiliate of the subsidiary that were deemed by subsection (1), in respect of the partnership, to be owned by the subsidiary at the time at which the parent last acquired control of the subsidiary:
A × B
where
- A
- is the tax-free surplus balance of the affiliate, in respect of the subsidiary, at that time; and
- B
- is the percentage that would be the subsidiary’s surplus entitlement percentage in respect of the affiliate at that time if the only shares of that capital stock that were owned at that time by the subsidiary were the shares of that capital stock that were deemed by subsection (1), in respect of the partnership, to be owned by the subsidiary at the time at which the parent last acquired control of the subsidiary.
(8) If a particular corporation resident in Canada or a particular foreign affiliate of a particular corporation resident in Canada is a member of a particular partnership, the particular partnership owns (based on the assumptions contained in paragraph 96(1)(c) of the Act) shares of a class of the capital stock of a foreign affiliate of the particular corporation and the particular partnership disposes of any of those shares,
(a) any reference in this Part (other than subsections 5902(5) and (6)) to subsection 93(1) of the Act is deemed to include a reference to subsection 93(1.2) of the Act;
(b) an election under subsection 93(1.2) of the Act by the particular corporation is to be made by filing the prescribed form with the Minister on or before
(i) where the particular corporation is the disposing corporation referred to in that subsection, the particular corporation’s filing-due date for its taxation year that includes the last day of the particular partnership’s fiscal period in which the disposition was made, and
(ii) where the particular affiliate is the disposing corporation referred to in that subsection, the particular corporation’s filing-due date for its taxation year that includes the last day of the particular affiliate’s taxation year that includes the last day of the disposing partnership’s fiscal period in which the disposition was made; and
(c) the prescribed amount for the purposes of subparagraph 93(1.2)(a)(ii) of the Act is the lesser of
(i) the taxable capital gain, if any, of the particular affiliate otherwise determined in respect of the disposition, and
(ii) the amount determined by the formula
A × B × C/D
where
- A
- is the fraction referred to in paragraph 38(a) of the Act that applies to the particular affiliate’s taxation year that includes the last day of the particular partnership’s fiscal period that includes the time of the disposition,
- B
- is the amount that could reasonably be expected to have been received in respect of all the shares of that class if the second foreign affiliate referred to in subsection 93(1.2) of the Act had, immediately before that time, paid dividends, on all shares of its capital stock, the total of which was equal to the amount determined under subparagraph 5902(1)(a)(i) to be its net surplus in respect of the particular corporation,
- C
- is the number of shares of that class that is determined under subsection 93(1.3) of the Act, and
- D
- is the total number of issued shares of that class immediately before that time.
(9) For the purposes of this Part, except to the extent that the context otherwise requires, if a person or partnership is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership, the person or partnership is deemed to be a member of the other partnership.
(10) For the purposes of paragraph 95(2)(j) of the Act, the adjusted cost base to a foreign affiliate of a taxpayer of an interest in a partnership at any time is prescribed to be the cost to the affiliate of the interest as otherwise determined at that time, and for those purposes
(a) there shall be added to that cost such of the following amounts as are applicable:
(i) any amount included in the affiliate’s earnings for a taxation year ending after 1971 and before that time that may reasonably be considered to relate to profits of the partnership,
(ii) the affiliate’s incomes as described by the description of A in the definition “foreign accrual property income” in subsection 95(1) of the Act for a taxation year ending after 1971 and before that time that can reasonably be considered to relate to profits of the partnership,
(iii) any amount included in computing the exempt earnings or taxable earnings, as the case may be, of the affiliate for a taxation year ending after 1971 and before that time that may reasonably be considered to relate to a capital gain of the partnership,
(iv) where the affiliate has, at any time before that time and in a taxation year ending after 1971, made a contribution of capital to the partnership otherwise than by way of a loan, such part of the amount of the contribution as cannot reasonably be regarded as a gift made to or for the benefit of any other member of the partnership who was related to the affiliate,
(v) such portion of any income or profits tax refunded before that time by the government of a country to the partnership as may reasonably be regarded as tax refunded in respect of an amount described in any of subparagraphs (b)(i) to (iii), and
(vi) the amount, if any, determined under paragraph (11)(b);
(b) there shall be deducted from that cost such of the following amounts as are applicable:
(i) any amount included in the affiliate’s loss for a taxation year ending after 1971 that may reasonably be considered to relate to a loss of the partnership,
(ii) the affiliate’s losses as described by the description of D in the definition “foreign accrual property income” in subsection 95(1) of the Act for a taxation year ending after 1971 and before that time that can reasonably be considered to relate to the losses of the partnership,
(iii) any amount included in computing the exempt loss or taxable loss, as the case may be, of the affiliate for a taxation year ending after 1971 and before that time that may reasonably be considered to relate to a capital loss of the partnership,
(iv) any amount received by the affiliate before that time and in a taxation year ending after 1971 as, on account or in lieu of payment of, or in satisfaction of, a distribution of the affiliate’s share of the partnership profits or partnership capital, and
(v) such portion of any income or profits tax paid before that time to the government of a country by the partnership as may reasonably be regarded as tax paid in respect of an amount described in any of subparagraphs (a)(i) to (iii); and
(c) for greater certainty, where any interest of a foreign affiliate in a partnership was reacquired by the affiliate after having been previously disposed of, no adjustment that was required to be made under this subsection before such reacquisition shall be made under this subsection to the cost to the affiliate of the interest as reacquired property of the affiliate.
(11) If at any time a partnership owns, based on the assumptions contained in paragraph 96(1)(c) of the Act, a share of the capital stock of a particular foreign affiliate of a corporation resident in Canada and one or more members of the partnership is at that time a direct holder referred to in paragraph 5905(7.6)(a) or a subordinate affiliate referred to in paragraph 5905(7.6)(b), the following rules apply:
(a) for the purposes of paragraph 92(1.1)(b) of the Act, there is to be added, in computing at or after that time the partnership’s adjusted cost base of the share, the total of all amounts each of which is the amount determined, in respect of an acquired affiliate referred to in subsection 5905(7.6), by the formula
A × B
where
- A
- is the amount, if any, determined under paragraph 5905(7.2)(a) in respect of the acquired affiliate, and
- B
- is the percentage that would, if the partnership were a corporation resident in Canada, be the partnership’s surplus entitlement percentage in respect of the acquired affiliate, at the adjustment time, if the partnership owned only the share;
(b) for the purposes of subparagraph (10)(a)(vi), the amount determined under this paragraph, in respect of the interest in the partnership of the direct holder or the subordinate affiliate, is the amount determined by the formula
A × B/C
where
- A
- is the total of all amounts each of which is the amount, if any, determined under paragraph (a) in respect of a share of the capital stock of the particular affiliate,
- B
- is the fair market value, at the adjustment time, of the interest in the partnership of the direct holder or the subordinate affiliate, as the case may be, and
- C
- is the fair market value, at the adjustment time, of all members’ interests in the partnership; and
(c) no amount is to be added under subsection 5905(7.6) to the direct holder’s or the subordinate affiliate’s adjusted cost base of the share.
(12) For the purposes of paragraph 5905(7.7)(b), the amount determined under this subsection is the amount determined by the formula
A × B/C
where
- A
- is the adjustment amount;
- B
- is the fair market value, at the adjustment time, of the interest in the partnership that is referred to in paragraph 92(1.1)(b) of the Act of the particular foreign affiliate that is referred to in paragraph 93(3)(c) of the Act; and
- C
- is the fair market value, at the adjustment time, of all members’ interests in the partnership.
(2) Subsections 5908(1) and (2) of the Regulations, as enacted by subsection (1), apply to taxation years of a foreign affiliate of a taxpayer that begin after November 1999, except that those subsections, as so enacted, are, in their application to acquisitions, dispositions, redemptions, cancellations, foreign mergers, amalgamations and issuances that occur, and windings-up that begin, on or before December 18, 2009, to be read as follows:
5908. (1) In determining,
(a) for the purposes of this Part (other than section 5904), the equity percentage at any time of a person in a corporation,
(b) for the purposes of this section and section 5905, the surplus entitlement at any time of a share owned by a corporation resident in Canada of the capital stock of a foreign affiliate of the corporation in respect of a particular foreign affiliate of the corporation, and
(c) for the purposes of this Part and the definition “surplus entitlement percentage” in subsection 95(1) of the Act, the surplus entitlement percentage at any time of a corporation resident in Canada in respect of a particular foreign affiliate of the corporation,
if at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, those shares are deemed to be owned at that time by each member of the partnership in a proportion equal to the proportion of all such shares that
(d) the fair market value of the member’s interest in the partnership at that time
is of
(e) the fair market value of all members’ interests in the partnership at that time.
(2) For the purposes of this section and section 5905, if the number of shares of a class of the capital stock of a foreign affiliate of a corporation resident in Canada deemed by subsection 93.1(1) of the Act to be owned by a person at a particular time is different from the number so deemed immediately before the particular time,
(a) where the number of shares of that class deemed to be owned by the person has decreased, the person is deemed to have disposed of, at the particular time, the number of shares of that class equal to the amount of the decrease;
(b) where the number of shares of that class deemed to be owned by the person has increased, the person is deemed to have acquired, at the particular time, the number of shares of that class equal to the amount of the increase;
(c) a person (referred to in this paragraph as the “seller”) that is deemed by paragraph (a) to have disposed of, at a particular time, shares of a class of the foreign affiliate’s capital stock is deemed to have disposed of those shares to the persons (referred to in this paragraph as the “acquirers”) deemed in paragraph (b) to have acquired shares of that class at that time and the number of shares of that class deemed to have been acquired at that time by a particular acquirer from the seller shall be determined by the formula
A × B/C
where
- A
- is the number of shares of that class acquired by the particular acquirer at that time,
- B
- is the number of shares of that class disposed of by the seller at that time, and
- C
- is the number of shares of that class acquired by all acquirers at that time; and
(d) persons (referred to in this paragraph as the “acquirers”) that are deemed by paragraph (b) to have acquired, at a particular time, shares of a class of the foreign affiliate’s capital stock are deemed to have acquired those shares from a person (referred to in this paragraph as the “seller”) deemed in paragraph (a) to have disposed of shares of that class at that time and the number of shares of that class deemed to have been disposed of by the seller to a particular acquirer at that time shall be determined by the formula
A × B/C
where
- A
- is the number of shares of that class disposed of by the seller,
- B
- is the number of shares of that class acquired by the particular acquirer at that time, and
- C
- is the number of shares of that class disposed of by all sellers at that time.
(3) Subsections 5908(3) to (5) of the Regulations, as enacted by subsection (1), apply to taxation years of a foreign affiliate of a taxpayer that begin after December 18, 2009.
(4) Subsections 5908(6) and (7) of the Regulations, as enacted by subsection (1), apply in respect of acquisitions of control that occur after December 18, 2009, except if the acquisition of control results from an acquisition of shares made under an agreement in writing entered into before December 18, 2009.
(5) Subsection 5908(8) of the Regulations, as enacted by subsection (1), applies to elections made under subsection 93(1.2) of the Income Tax Act in respect of dispositions that occur after November 1999.
(6) Subsection 5908(9) of the Regulations, as enacted by subsection (1), applies for taxation years of a foreign affiliate of a taxpayer that begin after November 1999 except that, for the foreign affiliate’s taxation years that end on or before August 27, 2010, that subsection 5908(9) is to be read as follows:
(9) For the purposes of this section and paragraph 5907(2.7)(b), if any corporation is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership, the corporation is deemed to be a member of the other partnership.
(7) Subsection 5908(10) of the Regulations, as enacted by subsection (1), is deemed to have come into force on December 19, 2009.
(8) Subsections 5908(11) and (12) of the Regulations, as enacted by subsection (1), apply where a share of the capital stock of a foreign affiliate of a corporation is acquired by, or otherwise becomes property of, a person after December 18, 2009.
48. (1) The Regulations are amended by adding the following in numerical order:
5910. (1) If a foreign affiliate of a corporation resident in Canada carries on in a particular taxation year an active business that is a foreign oil and gas business in a taxing country, the affiliate is deemed for the purposes of this Part to have paid for the particular year, as an income or profits tax to the government of the taxing country in respect of its earnings from the business for the particular year, an amount equal to the lesser of
(a) the amount, if any, determined by the formula
(A × B) – C
where
- A
- is the percentage determined under subsection (2) for the particular year,
- B
- is the amount determined under subsection (3) in respect of the business for the particular year, and
- C
- is the total of all amounts each of which is an amount that would, but for this subsection, be an income or profits tax paid to the government of the taxing country by the affiliate for the particular year in respect of its earnings from the business for the particular year; and
(b) the affiliate’s production tax amount for the business in the taxing country for the particular year.
(2) The percentage determined under this subsection for the particular year is the percentage determined by the formula
P – Q
where
- P
- is the percentage set out in paragraph 123(1)(a) of the Act for the corporation’s taxation year that includes the last day of the particular year; and
- Q
- is the corporation’s general rate reduction percentage (within the meaning assigned by subsection 123.4(1) of the Act) for that taxation year of the corporation.
(3) The amount determined under this subsection in respect of the business for the particular year is
(a) if the affiliate’s earnings from the business for the particular year are required to be determined under subparagraph (a)(iii) of the definition “earnings” in subsection 5907(1), the amount that would be determined to be the affiliate’s earnings for the particular year from the business if the affiliate
(i) had, in computing its income from the business for each taxation year (referred to in this subparagraph as an “earnings year”) that is the particular year or is any preceding taxation year that begins after December 18, 2009,
(A) claimed all deductions that it could have claimed under the Act, up to the maximum amount deductible in computing the income from the business for that earnings year, and
(B) made all claims and elections and taken all steps under applicable provisions of the Act, or of enactments implementing amendments to the Act or its regulations, to maximize the amount of any deduction referred to clause (A), and
(ii) had, in computing its income from the business for any preceding taxation year that began before December 19, 2009, claimed all deductions, if any, that it actually claimed under the Act, up to the maximum amount deductible, and made all claims and elections, if any, and taken all steps, if any, under applicable provisions of the Act, or of enactments implementing amendments to the Act or its regulations, that it actually made; and
(b) in any other case, the affiliate’s earnings from the business for the particular year.
(4) In this section, “foreign oil and gas business”, “production tax amount” and “taxing country” have the meanings assigned by subsection 126(7) of the Act.
(2) Subsection (1) applies in respect of production tax amounts that become receivable by the government of a taxing country in taxation years of a taxpayer’s foreign affiliate that begin after the date (referred to in this subsection as the “application date”) that is the earlier of December 31, 2002 and the designated date. The designated date is the later of
(a) December 31, 1994; and
(b) any date that the taxpayer designates in writing for the purpose of this subsection, if the designation is filed with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent.
However, in their application to taxation years of the foreign affiliate that begin after the application date and on or before December 18, 2009, subsections 5910(2) and (3) of the Regulations, as enacted by subsection (1), are to be read as follows:
(2) The percentage determined under this subsection for the particular year is 40 per cent.
(3) The amount determined under this subsection in respect of the business for the particular year is the amount that would, if the definition “earnings” in subsection 5907(1) were read without reference to its subparagraphs (a)(i) and (ii), be the foreign affiliate’s earnings from the business in the taxing country for the particular year.
49. (1) The portion of section 8201 of the Regulations before paragraph (a) is replaced by the following:
8201. For the purposes of subsection 16.1(1), the definition “outstanding debts to specified non-residents” in subsection 18(5), subsection 112(2), the definition “qualified Canadian transit organization” in subsection 118.02(1), subsections 125.4(1) and 125.5(1), the definition “taxable supplier” in subsection 127(9), subparagraph 128.1(4)(b)(ii), paragraphs 181.3(5)(a) and 190.14(2)(b), the definition “Canadian banking business” in subsection 248(1) and paragraph 260(5)(a) of the Act, a “permanent establishment” of a person or partnership (either of whom is referred to in this section as the “person”) means a fixed place of business of the person, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse if the person has a fixed place of business and, where the person does not have any fixed place of business, the principal place at which the person’s business is conducted, and
(2) Subsection (1) applies to taxation years that end after 2008, except that, for taxation years that end before December 19, 2009, the portion of section 8201 of the Regulations before paragraph (a), as enacted by subsection (1), is to be read as follows:
8201. For the purposes of subsection 16.1(1), the definition “outstanding debts to specified non-residents” in subsection 18(5), the definitions “excluded income” and “excluded revenue” in subsection 95(2.5), subsection 112(2), the definition “qualified Canadian transit organization” in subsection 118.02(1), subsections 125.4(1) and 125.5(1), the definition “taxable supplier” in subsection 127(9), subparagraph 128.1(4)(b)(ii), paragraphs 181.3(5)(a) and 190.14(2)(b), the definition “Canadian banking business” in subsection 248(1) and paragraph 260(5)(a) of the Act, a “permanent establishment” of a person or partnership (either of whom referred to in this section as the “person”) means a fixed place of business of the person, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse if the person has a fixed place of business and, where the person does not have any fixed place of business, the principal place at which the person’s business is conducted, and
50. (1) If a taxpayer has elected under subsection 26(46) of the Budget and Economic Statement Implementation Act, 2007,
(a) subsections 46(1), (2) and (8) (with the portion of paragraph (c) of the definition “exempt loss” in subsection 5907(1) of the Regulations before subparagraph (i) being read in the manner described in subsection 46(44)) also apply to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000;
(b) subsection 46(4) (with paragraph (a.1) of the definition “exempt earnings” in subsection 5907(1) of the Regulations being read in the manner described in subsection 46(41)) also applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and on or before December 20, 2002;
(c) subparagraph (d)(ii) of the definition “exempt earnings” in subsection 5907(1) of the Regulations, as enacted by subsection 46(5) and being read in the manner described in paragraph 46(42)(c), but without reference to paragraph 46(42)(d), also applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000, except that, for those taxation years,
(i) clause (A) of that subparagraph (d)(ii), as so read, is to be read without reference to its subclause (II),
(ii) if the taxpayer has not elected under paragraph 26(35)(b) of that Act, clause (E) of that subparagraph (d)(ii), as so read, is to be read as if it also contained a subclause (I.1) that read as follows:
(I.1) the shares of a foreign affiliate (referred to in this subclause as the “non-qualifying affiliate”) that is not resident and subject to income taxation in a designated treaty country are not considered relevant for the purpose of determining whether shares of the third affiliate that is referred to in clause 95(2)(a)(ii)(D) of the Act are excluded property unless the shares of the third affiliate would not have been excluded property if the shares of all such non-qualifying affiliates were not excluded property, and
(iii) each reference to “income or loss” in clauses (H) and (I) of that subparagraph (d)(ii), as so read, is to be replaced by a reference to “income”; and
(d) subsection 46(17) (with subparagraph (b)(iv) of the definition “taxable loss” in subsection 5907(1) of the Regulations being read in the manner described in subsection 46(47)) also applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000.
(2) If a taxpayer has not elected under subsection 26(46) of the Budget and Economic Statement Implementation Act, 2007 but has elected under paragraph 26(35)(b) of that Act, subparagraph (d)(ii) of the definition “exempt earnings” in subsection 5907(1) of the Regulations, as enacted by subsection 46(5) and being read in the manner described in paragraphs 46(42)(c) and (d), also applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000.
51. Subject to section 52, if a corporation resident in Canada elects in writing under this section in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the corporation’s filing-due date for the corporation’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, the following rules apply:
(a) if there is an election (referred to in this section as a “designated section 93 election”) made by the corporation under subsection 93(1) or (1.2) of the Income Tax Act in respect of a disposition of shares (referred to in this section as the “designated shares”) of the capital stock of a foreign affiliate of the corporation that occurs after December 20, 2002 and before December 19, 2009, other than a disposition that is required to be made under an agreement in writing made by the vendor before December 21, 2002,
(i) section 92 of that Act is, in respect of the designated shares, to be read as if it also contained the following subsections:
(1.2) Subsection (1.4) applies to a holder of a share (referred to in this subsection and subsections (1.3) and (1.4) as the “relevant share”) of a foreign affiliate (referred to in subsection (1.3) as the “relevant foreign affiliate”) of a particular corporation resident in Canada in computing at any time (referred to in this subsection and subsection (1.3) as the “computation time”) the adjusted cost base to the holder of the relevant share, if, at the computation time, there is a specified section 93 election related to the relevant share.
(1.3) An election made by the particular corporation resident in Canada under subsection 93(1) or (1.2), as the case may be, in respect of a share of a particular foreign affiliate of the particular corporation that is disposed of at a time (referred to in this subsection and subsection (1.4) as the “election time”) before the computation time is, at the computation time, a specified section 93 election related to the relevant share if
(a) the particular foreign affiliate has, at the election time, an equity percentage in the relevant foreign affiliate;
(b) the relevant foreign affiliate was, at the election time, a foreign affiliate of the particular corporation;
(c) throughout the period that begins at the election time and ends at the computation time,
(i) the holder held the relevant share, and
(ii) the holder was
(A) a foreign affiliate of the particular corporation,
(B) a foreign affiliate of a corporation resident in Canada that was related to the particular corporation,
(C) a partnership of which a foreign affiliate of the particular corporation was a member, or
(D) a partnership of which a foreign affiliate, of a corporation resident in Canada that was related to the particular corporation, was a member;
(d) the relevant share was, at the election time, excluded property of the holder (or would have been, at the election time, excluded property of the holder if the holder had been a foreign affiliate of the particular corporation); and
(e) the relevant share is, at the computation time, excluded property of the holder (or would have been, at the computation time, excluded property of the holder if the holder had been a foreign affiliate of the particular corporation or of a corporation resident in Canada that is related to the particular corporation).
(1.4) If this subsection applies, for the purposes of computing, at any time after the election time, the exempt surplus or deficit, the taxable surplus or deficit, and the underlying foreign tax, of the holder, in respect of the particular corporation resident in Canada or in respect of any other person that would, at the time after the election time, be a designated person in respect of the particular corporation, the following rules apply in determining the adjusted cost base to the holder of the relevant share:
(a) there shall be added, to the adjusted cost base to the holder of the relevant share, the amount prescribed in respect of the relevant share in respect of the specified section 93 election, and
(b) there shall be deducted, from the adjusted cost base to the holder of the relevant share, the amount prescribed in respect of the relevant share in respect of the specified section 93 election.
(1.5) For the purposes of subsection (1.4), a designated person, in respect of a particular corporation, at any time means
(a) any person with whom the particular corporation was not dealing at arm’s length;
(b) any person with whom the particular corporation would not have been dealing at arm’s length if the person had been in existence after the particular corporation came into existence;
(c) any predecessor corporation (within the meaning assigned by subsection 87(1)) of a person described in paragraph (a) or (b); or
(d) any predecessor corporation (within the meaning assigned by paragraph 87(2)(l.2)) of a person described in paragraph (a) or (b).
(ii) subsection 5902(1) of the Regulations is, in respect of the designated section 93 election, to be read as follows:
5902. (1) If, at a particular time, one or more shares (each of which is referred to in this subsection as a “disposed share”) of a class (referred to in this subsection as the “specified class”) of the capital stock of a particular foreign affiliate of a corporation resident in Canada are disposed of by a particular shareholder of the particular foreign affiliate and, because of an election made under subsection 93(1) of the Act in respect of that disposition, a dividend is deemed under subsection 93(1) of the Act to have been received on a disposed share at the time (referred to in this subsection and section 5905 as the “dividend time”) that is immediately before the particular time, the following rules apply:
(a) the amount of the particular foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, (in this subsection referred to as the “consolidated exempt surplus” in respect of the corporation resident in Canada) at the time (in this section and in section 5905 referred to as the “calculation time”) that is immediately before the dividend time, is deemed to be the amount that would be its exempt surplus, in respect of the corporation resident in Canada, at the calculation time if
(i) the particular foreign affiliate and each other foreign affiliate of the corporation resident in Canada in which the particular foreign affiliate had, at the calculation time, an equity percentage (each of which other foreign affiliates is referred to in this section as a “subsidiary affiliate”) had (except for the purpose of determining consolidated net surplus in respect of the corporation resident in Canada in subparagraph (iii)), at the calculation time, no amount of exempt deficit, taxable surplus or taxable deficit, in respect of the corporation resident in Canada,
(ii) the amount of the exempt surplus, in respect of the corporation resident in Canada, of the particular foreign affiliate were, immediately before the calculation time, increased by the total of all amounts each of which is an amount equal to the particular foreign affiliate’s proportionate share of the amount that would be the exempt surplus, in respect of the corporation resident in Canada, of a subsidiary affiliate in which it has, immediately before the calculation time, a direct equity percentage if that exempt surplus were, immediately before the calculation time, determined in the following manner:
(A) the exempt surplus, in respect of the corporation resident in Canada, of the subsidiary affiliate, were increased by the subsidiary affiliate’s proportionate share of the exempt surplus of a foreign affiliate of the corporation resident in Canada in which the subsidiary affiliate has, immediately before the time that is immediately before the calculation time, a direct equity percentage, and
(B) the exempt surplus, in respect of the corporation resident in Canada, of a subsidiary affiliate in which another subsidiary affiliate has a direct equity percentage, were increased because of this subparagraph before the increase in that other subsidiary affiliate’s exempt surplus in respect of the corporation resident in Canada,
(iii) for the purpose of subparagraph (ii), the proportionate share, at any time, of a foreign affiliate (referred to in this subparagraph as the “calculating foreign affiliate”) of the corporation resident in Canada, of the exempt surplus, in respect of the corporation resident in Canada, of another foreign affiliate (referred to in this subparagraph as the “providing foreign affiliate”) of the corporation resident in Canada in which the calculating foreign affiliate has a direct equity percentage were equal to the proportion determined by the following formula:
A/B
where
- A
- is the amount of dividends that would be received, at that time, by the calculating foreign affiliate from the providing foreign affiliate if, at that time, the providing foreign affiliate had paid dividends on all of its shares and the total of those dividends were equal to its consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such a consolidated net surplus, in respect of the corporation resident in Canada, its consolidated exempt surplus (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
- B
- is the amount of the providing foreign affiliate’s consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such consolidated net surplus, its consolidated exempt surplus (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
(iv) in determining, under this paragraph, the particular foreign affiliate’s consolidated exempt surplus, in respect of the corporation resident in Canada,
(A) no amount were included, directly or indirectly, in respect of the exempt surplus, in respect of the corporation resident in Canada, of the particular shareholder, of the particular foreign affiliate, that disposed of the disposed share, and
(B) no amount were included, directly or indirectly, in respect of the exempt surplus, in respect of the corporation resident in Canada, of the particular foreign affiliate or any subsidiary affiliate more than once;
(b) the amount of the particular foreign affiliate’s exempt deficit, in respect of the corporation resident in Canada, (in this subsection referred to as the “consolidated exempt deficit” in respect of the corporation resident in Canada) at the calculation time, is deemed to be the amount that would be its exempt deficit, in respect of the corporation resident in Canada, at that time, if
(i) the particular foreign affiliate and each subsidiary affiliate had (except for the purpose of determining consolidated net surplus, in respect of the corporation resident in Canada, in subparagraph (iii)), at the calculation time, no amount of exempt surplus, taxable surplus or taxable deficit, in respect of the corporation resident in Canada,
(ii) the amount of the exempt deficit, in respect of the corporation resident in Canada, of the particular foreign affiliate, were, immediately before the calculation time, increased by the total of all amounts each of which is an amount equal to the particular foreign affiliate’s proportionate share of the exempt deficit, in respect of the corporation resident in Canada, of a subsidiary affiliate in which the particular foreign affiliate has, immediately before the calculation time, a direct equity percentage if that exempt deficit were, immediately before the calculation time, determined in the following manner:
(A) the exempt deficit, in respect of the corporation resident in Canada, of the subsidiary affiliate, were increased by the subsidiary affiliate’s proportionate share of the exempt deficit of a foreign affiliate of the corporation resident in Canada in which the subsidiary affiliate has, immediately before the time that is immediately before the calculation time, a direct equity percentage, and
(B) the exempt deficit, in respect of the corporation resident in Canada, of a subsidiary affiliate in which another subsidiary affiliate has a direct equity percentage, were increased because of this subparagraph before the increase in that other subsidiary affiliate’s exempt deficit in respect of the corporation resident in Canada,
(iii) for the purpose of subparagraph (ii), the proportionate share, at any time, of a foreign affiliate (referred to in this subparagraph as the “calculating foreign affiliate”) of the corporation resident in Canada, of the exempt deficit, in respect of the corporation resident in Canada, of another foreign affiliate (referred to in this subparagraph as the “providing foreign affiliate”) of the corporation resident in Canada in which the calculating foreign affiliate has a direct equity percentage were equal to the proportion determined by the following formula:
A/B
where
- A
- is the amount of dividends that would be received by the calculating foreign affiliate from the providing foreign affiliate if, at that time, the providing foreign affiliate had paid dividends on all of its shares and the total of those dividends were equal to its consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such consolidated net surplus, its exempt deficit (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
- B
- is the amount of the providing foreign affiliate’s consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such consolidated net surplus, its consolidated exempt deficit (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
(iv) in determining, under this paragraph, the particular foreign affiliate’s consolidated exempt deficit, in respect of the corporation resident in Canada,
(A) no amount were included, directly or indirectly, in respect of the exempt deficit, in respect of the corporation resident in Canada, of the particular shareholder, of the particular foreign affiliate, that disposed of the disposed share, and
(B) no amount were included, directly or indirectly, in respect of the exempt deficit, in respect of the corporation resident in Canada, of the particular foreign affiliate or any subsidiary affiliate more than once;
(c) the amount of the particular foreign affiliate’s taxable surplus and underlying foreign tax, in respect of the corporation resident in Canada, (referred to, respectively, in this subsection as the “consolidated taxable surplus”, and “consolidated underlying foreign tax”, in respect of the corporation resident in Canada) at the calculation time, is deemed to be the amount that would be its taxable surplus, and underlying foreign tax, in respect of the corporation resident in Canada, at that time, if
(i) the particular foreign affiliate and each subsidiary affiliate had (except for the purpose of determining consolidated net surplus, in respect of the corporation resident in Canada, in subparagraph (iii)), at the calculation time, no amount of exempt surplus, exempt deficit or taxable deficit, in respect of the corporation resident in Canada,
(ii) the amount of the taxable surplus, and underlying foreign tax, in respect of the corporation resident in Canada, of the particular foreign affiliate, were, immediately before the calculation time, increased by an amount equal to the total of all amounts each of which is the particular foreign affiliate’s proportionate share of the taxable surplus, or underlying foreign tax, as the case may be, in respect of the corporation resident in Canada, of a subsidiary affiliate in which the particular foreign affiliate has, immediately before the calculation time, a direct equity percentage if that taxable surplus and underlying foreign tax were, immediately before the calculation time, determined in the following manner:
(A) the taxable surplus, and underlying foreign tax, in respect of the corporation resident in Canada, of the subsidiary affiliate, were increased by the subsidiary affiliate’s proportionate share of the taxable surplus, or underlying foreign tax, respectively, of a foreign affiliate of the corporation resident in Canada in which the subsidiary affiliate had, immediately before the time that is immediately before the calculation time, a direct equity percentage, and
(B) the taxable surplus, and underlying foreign tax, in respect of the corporation resident in Canada, of a subsidiary affiliate in which another subsidiary affiliate has a direct equity percentage, were increased because of this subparagraph before the increase in that other subsidiary affiliate’s taxable surplus, and underlying foreign tax, respectively, in respect of the corporation resident in Canada,
(iii) for the purpose of subparagraph (ii), the proportionate share, at any time, of a foreign affiliate (referred to in this subparagraph as the “calculating foreign affiliate”) of the corporation resident in Canada, of the taxable surplus, or underlying foreign tax, as the case may be, in respect of the corporation resident in Canada, of another foreign affiliate (referred to in this subparagraph as the “providing foreign affiliate”) of the corporation resident in Canada in which the particular foreign affiliate has a direct equity percentage were equal to the proportion determined by the following formula:
A/B
where
- A
- is the amount of dividends that would be received, at that time, by the calculating foreign affiliate from the providing foreign affiliate if, at that time, the providing foreign affiliate had paid dividends on all of its shares and the total of those dividends were equal to its consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such consolidated net surplus, its consolidated taxable surplus (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
- B
- is the amount of the providing foreign affiliate’s consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such consolidated net surplus, its consolidated taxable surplus (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
(iv) in determining, under this paragraph, the particular foreign affiliate’s consolidated taxable surplus, and consolidated underlying foreign tax, in respect of the corporation resident in Canada,
(A) no amount were included, directly or indirectly, in respect of the taxable surplus, and underlying foreign tax, in respect of the corporation resident in Canada, of the particular shareholder, of the particular foreign affiliate, that disposed of the disposed share, and
(B) no amount were included, directly or indirectly, in respect of the taxable surplus, and underlying foreign tax, in respect of the corporation resident in Canada, of the particular foreign affiliate or any subsidiary affiliate more than once;
(d) the amount of the particular foreign affiliate’s taxable deficit, in respect of the corporation resident in Canada, (in this subsection referred to as the “consolidated taxable deficit” in respect of the corporation resident in Canada) at the calculation time is deemed to be the amount that would be its taxable deficit, in respect of the corporation resident in Canada, at that time if
(i) the particular foreign affiliate and each subsidiary affiliate had (except for the purpose of determining consolidated net surplus, in respect of the corporation resident in Canada, in subparagraph (iii)), at the calculation time, no amount of exempt surplus, exempt deficit or taxable surplus, in respect of the corporation resident in Canada,
(ii) the amount of the taxable deficit, in respect of the corporation resident in Canada, of the particular foreign affiliate, were, immediately before the calculation time, increased by the total of all amounts each of which is an amount equal to the particular foreign affiliate’s proportionate share of the taxable deficit, in respect of the corporation resident in Canada, of a subsidiary affiliate in which the particular foreign affiliate has, immediately before the calculation time, a direct equity percentage if that taxable deficit were, immediately before the calculation time, determined in the following manner:
(A) the taxable deficit, in respect of the corporation resident in Canada, of the subsidiary affiliate, were increased by the subsidiary affiliate’s proportionate share of the taxable deficit of a foreign affiliate of the corporation resident in Canada in which the subsidiary affiliate had, immediately before the time that is immediately before the calculation time, a direct equity percentage, and
(B) the taxable deficit, in respect of the corporation resident in Canada, of a subsidiary affiliate in which another subsidiary affiliate has a direct equity percentage, were increased because of this subparagraph before the increase in that other subsidiary affiliate’s taxable deficit in respect of the corporation resident in Canada,
(iii) for the purpose of subparagraph (ii), the proportionate share, at any time, of a foreign affiliate (referred to in this subparagraph as the “calculating foreign affiliate”) of the corporation resident in Canada, of the taxable deficit, in respect of the corporation resident in Canada, of another foreign affiliate (referred to in this subparagraph as the “providing foreign affiliate”) of the corporation resident in Canada in which the calculating foreign affiliate has a direct equity percentage were equal to the proportion determined by the following formula:
A/B
where
- A
- is the amount of dividends that would be received, at that time, by the calculating foreign affiliate from the providing foreign affiliate if, at that time, the providing foreign affiliate had paid dividends on all of its shares and the total of those dividends were equal to its consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such consolidated net surplus, its consolidated taxable deficit (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
- B
- is the amount of the providing foreign affiliate’s consolidated net surplus (determined using the provisions of this subsection on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, or, where it does not have such consolidated net surplus, its consolidated taxable deficit (determined in accordance with this paragraph on the assumption that the providing foreign affiliate were the particular foreign affiliate), in respect of the corporation resident in Canada, at that time, and
(iv) in determining, under this paragraph, the particular foreign affiliate’s consolidated taxable deficit, in respect of the corporation resident in Canada,
(A) no amount were included, directly or indirectly, in respect of taxable deficit, in respect of the corporation resident in Canada, of the particular shareholder, of the particular foreign affiliate, that disposed of the disposed share, and
(B) no amount were included, directly or indirectly, in respect of the taxable deficit, in respect of the corporation resident in Canada, of the particular foreign affiliate or any subsidiary affiliate more than once;
(e) for the purpose of applying subsection 5901(1) to subsection 5900(1), and for the purpose of paragraph (f),
(i) the particular foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, immediately before the dividend time, is deemed to be equal to the amount, if any, by which the particular foreign affiliate’s consolidated exempt surplus, in respect of the corporation resident in Canada, exceeds the amount of the particular foreign affiliate’s consolidated exempt deficit, in respect of the corporation resident in Canada, at that time (or, if there is no such excess, nil),
(ii) the particular foreign affiliate’s exempt deficit in respect of the corporation resident in Canada, immediately before the dividend time, is deemed to be equal to the amount, if any, by which the particular foreign affiliate’s consolidated exempt deficit, in respect of the corporation resident in Canada, exceeds the amount of the particular foreign affiliate’s consolidated exempt surplus, in respect of the corporation resident in Canada, at that time (or, if there is no such excess, nil),
(iii) the particular foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, immediately before the dividend time, is deemed to be equal to the amount, if any, by which the particular foreign affiliate’s consolidated taxable surplus, in respect of the corporation resident in Canada, exceeds the amount of the particular foreign affiliate’s consolidated taxable deficit, in respect of the corporation resident in Canada, at that time (or, if there is no such excess, nil),
(iv) the particular foreign affiliate’s taxable deficit, in respect of the corporation resident in Canada, immediately before the dividend time, is deemed to be equal to the amount, if any, by which the particular foreign affiliate’s consolidated taxable deficit, in respect of the corporation resident in Canada, exceeds the amount of the particular foreign affiliate’s consolidated taxable surplus, in respect of the corporation resident in Canada, at that time (or, if there is no such excess, nil),
(v) the particular foreign affiliate’s underlying foreign tax, in respect of the corporation resident in Canada, immediately before the dividend time, is deemed to be equal to the amount of the particular foreign affiliate’s consolidated underlying foreign tax, in respect of the corporation resident in Canada, at that time, and
(vi) the particular foreign affiliate’s consolidated net surplus, in respect of the corporation resident in Canada, immediately before the dividend time, is deemed to be equal to the amount, if any, by which
(A) the total of the particular foreign affiliate’s consolidated exempt surplus, in respect of the corporation resident in Canada, at that time, and the particular foreign affiliate’s consolidated taxable surplus, in respect of the corporation resident in Canada, at that time,
exceeds
(B) the total of the particular foreign affiliate’s consolidated exempt deficit, in respect of the corporation resident in Canada, at that time, and the particular foreign affiliate’s consolidated taxable deficit, in respect of the corporation resident in Canada, at that time;
(f) the attributed net surplus in respect of a disposed share of the specified class in respect of the particular foreign affiliate’s consolidated net surplus, in respect of the corporation resident in Canada, immediately before the dividend time, is deemed to be equal to the amount that would be received by the holder of the disposed share, in respect of the disposed share, at the dividend time, if the particular foreign affiliate paid a dividend, at that time, on all of its shares, the total of which was equal to the amount of its consolidated net surplus, in respect of the corporation resident in Canada, immediately before the dividend time;
(g) for the purpose of applying subsection 5901(1) to subsection 5900(1), the amount of the whole dividend paid by the particular foreign affiliate, at the dividend time, on the shares of the specified class is deemed to be equal to the amount obtained when the total of all amounts each of which is an amount deemed by subsection 93(1) of the Act to have been received as a dividend on a disposed share of the specified class is multiplied by the greater of
(i) one, and
(ii) the amount determined by the formula
A/B
where
- A
- is the amount determined, under subparagraph (e)(vi), to be the amount of the particular foreign affiliate’s consolidated net surplus in respect of the corporation, immediately before the dividend time, and
- B
- is the greater of
(A) one, and
(B) the total of all amounts each of which is the amount determined, under paragraph (f), to be the amount of the attributed net surplus, in respect of a disposed share of the specified class, in respect of the particular foreign affiliate’s consolidated net surplus, in respect of the corporation resident in Canada, immediately before the dividend time; and
(h) for the purposes of paragraphs (a) to (d), the consolidated net surplus, at any time, in respect of a corporation resident in Canada, of a particular foreign affiliate of the corporation resident in Canada, is the amount that would be determined in paragraph (e) in respect of the particular foreign affiliate if the reference in that paragraph to “immediately before the dividend time” were read as a reference to “at any time”.
(iii) section 5902 of the Regulations is, in respect of the designated section 93 election, to be read without reference to its subsection (2),
(iv) subsection 5902(3) of the Regulations is, in respect of the designated section 93 election, to be read as follows:
(3) If a corporation resident in Canada elects, under subsection 93(1) of the Act, in respect of the disposition of a share of the capital stock of a foreign affiliate of the corporation, no adjustment, other than an adjustment referred to in subsection 5905(2), (4), (6) or (8), may be made to the foreign affiliate’s
(a) exempt surplus in respect of the corporation;
(b) exempt deficit in respect of the corporation;
(c) taxable surplus in respect of the corporation;
(d) taxable deficit in respect of the corporation; or
(e) underlying foreign tax in respect of the corporation.
(v) subsection 5902(6) of the Regulations is, in respect of the designated section 93 election, to be read as follows:
(6) The amount designated in an election deemed by subsection 93(1.1) of the Act to have been made under subsection 93(1) of the Act is prescribed to be the amount that is the lesser of
(a) the capital gain, if any, otherwise determined in respect of the disposition of the share, and
(b) the amount of attributed net surplus (as determined under paragraph (1)(f)) in respect of the share.
(b) in respect of acquisitions that occur after February 27, 2004 and before December 19, 2009, subsection 5905(1) of the Regulations is to be read as follows:
5905. (1) If, at any time, other than in the course of a transaction to which subsection (2) or (5) applies, a corporation resident in Canada or a foreign affiliate of such a corporation acquires in any manner whatever shares of the capital stock of another corporation that was, immediately after that time, a foreign affiliate of the corporation (in this subsection referred to as the “acquired affiliate”) and as a result of that acquisition the surplus entitlement percentage of the corporation in respect of the acquired affiliate and in respect of any other foreign affiliate of the corporation resident in Canada (the acquired affiliate and each such other foreign affiliate each being referred to in this subsection as the “particular relevant foreign affiliate”), increases, the following rules apply:
(a) for the purposes of this Part, the amount of the exempt surplus or exempt deficit, the taxable surplus or taxable deficit, and the underlying foreign tax, in respect of the corporation, of the particular relevant foreign affiliate is (unless subsection (8) applies to the particular relevant foreign affiliate because of the acquisition of the shares) to be, at that time, adjusted to become the proportion of that amount, determined without making this adjustment, that
(i) the surplus entitlement percentage, immediately before that time, of the corporation in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year of the particular relevant foreign affiliate that otherwise would have included that time had ended immediately before that time
is of
(ii) the surplus entitlement percentage, immediately after that time, of the corporation in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year of the particular relevant foreign affiliate that otherwise would have included that time had ended immediately after that time; and
(b) for the purposes of applying the definitions “exempt deficit”, “exempt surplus”, “taxable deficit”, “taxable surplus” and “underlying foreign tax” in subsection 5907(1), the adjusted amounts determined under paragraph (a) are deemed to be the opening exempt deficit, opening exempt surplus, opening taxable deficit, opening taxable surplus and opening underlying foreign tax, as the case may be, of the particular relevant foreign affiliate, in respect of the corporation.
(c) in respect of dispositions in respect of which a designated section 93 election was made,
(i) subsection 5905(2) of the Regulations is to be read as follows:
(2) If at any time (referred to in this subsection as the “disposition time”) a particular foreign affiliate of a corporation resident in Canada redeems, acquires or cancels (other than a redemption, an acquisition or a cancellation in respect of which an adjustment has previously been made under this subsection or subsection (1) as it read prior to November 13, 1981) in any manner whatever (otherwise than by way of a winding-up) one or more shares (referred to in this subsection and subsections (16) to (23) as “disposed shares”) of any class of its capital stock, the following rules apply:
(a) if, because of an election made by the corporation under subsection 93(1) of the Act in respect of the disposition of the disposed shares, a dividend (referred to in this subsection and subsections (18) and (21) as the “disposition dividend”) is deemed to have been received on the disposed shares, by the corporation or by another foreign affiliate of the corporation, for the purpose of the adjustment required by paragraph (b),
(i) in computing the exempt surplus, in respect of the corporation resident in Canada, of the particular foreign affiliate or of another foreign affiliate (the particular foreign affiliate and each such other foreign affiliate being referred to in this subsection and subsections (16) to (23) as the “particular relevant foreign affiliate”) of the corporation resident in Canada in which the particular foreign affiliate has an equity percentage at the time (referred to in this subsection and subsections (16) to (22) as the “balance adjustment time”) that is immediately before the disposition time, there is to be included, under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1), the total of
(A) the amount of the exempt surplus reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(B) the amount of the exempt deficit reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares, and
(C) the amount of the taxable deficit allocation, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(ii) in computing the particular relevant foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, at the balance adjustment time, there is to be included, under subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1), the total of
(A) an amount equal to the taxable surplus reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(B) an amount equal to the taxable deficit reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares, and
(C) an amount equal to the exempt deficit allocation, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(iii) in computing the particular relevant foreign affiliate’s underlying foreign tax, in respect of the corporation resident in Canada, at the balance adjustment time, there is to be included, under subparagraph (iii) of the description of B in the definition “underlying foreign tax” in subsection 5907(1), the total of
(A) the amount determined by the formula (which is deemed to be nil, if, in respect of the particular relevant foreign affiliate, the value determined for B in the formula is nil)
A/B × C × D
where
- A
- is the portion of the particular relevant foreign affiliate’s underlying foreign tax, in respect of the corporation resident in Canada, at the balance adjustment time, that may reasonably be considered to have been included in computing the particular foreign affiliate’s consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition,
- B
- is the particular foreign affiliate’s consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition,
- C
- is the portion, of the particular foreign affiliate’s consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition), that is prescribed, by paragraph 5900(1)(d), to be applicable to the portion of the whole dividend (as determined, under paragraph 5902(1)(g), in respect of the disposition dividend in respect of the disposed shares) paid on shares of the specified class that is prescribed, by paragraph 5900(1)(c), to have been paid out of the particular foreign affiliate’s consolidated taxable surplus, in respect of the corporation resident in Canada, and
- D
- is the specified adjustment factor in respect of the particular relevant foreign affiliate, and
(B) the amount of the underlying foreign tax reduction in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposition of the disposed shares,
(iv) in computing the particular relevant foreign affiliate’s exempt deficit, in respect of the corporation resident in Canada, at the balance adjustment time, there is to be included, under subparagraph (vi.1) of the description of A in the definition “exempt surplus” in subsection 5907(1), an amount equal to the exempt deficit, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, immediately before that time, and
(v) in computing the particular relevant foreign affiliate’s taxable deficit, in respect of the corporation resident in Canada, at the balance adjustment time, there is to be included, under subparagraph (iv.1) of the description of A in the definition “taxable surplus” in subsection 5907(1), an amount equal to the taxable deficit, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, immediately before that time;
(b) the amount, at the balance adjustment time, of exempt surplus, exempt deficit, taxable surplus, taxable deficit and underlying foreign tax, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate is to be adjusted to become the proportion of that amount, determined without making this adjustment, that
(i) the surplus entitlement percentage, at the balance adjustment time, of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year, of the particular relevant foreign affiliate, that otherwise would have included that time, had ended immediately before that time
is of
(ii) the surplus entitlement percentage, immediately after the time of the disposition, of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year, of the particular relevant foreign affiliate, that otherwise would have included the balance adjustment time, had ended at the time of the disposition; and
(c) for the purposes of applying the definitions “exempt deficit”, “exempt surplus”, “taxable deficit”, “taxable surplus” and “underlying foreign tax”, in subsection 5907(1), the amounts determined under paragraph (b), in respect of the particular relevant foreign affiliate, in respect of the corporation resident in Canada, are deemed to be the opening exempt deficit, opening exempt surplus, opening taxable deficit, opening taxable surplus and opening underlying foreign tax, as the case may be, of the particular relevant foreign affiliate, in respect of the corporation resident in Canada.
(ii) subsection 5905(4) of the Regulations is to be read as follows:
(4) For the purpose of subsection (3),
(a) if, at any time, a foreign affiliate of a corporation resident in Canada disposes of one or more shares (referred to in this subsection and subsections (16) to (23) as the “disposed shares”) of a class of the capital stock of a predecessor corporation and the foreign affiliate is, because of an election made under subsection 93(1) of the Act, deemed to have received a dividend (referred to in this subsection and subsections (18) and (21) as the “disposition dividend”) on the disposed shares, for the purposes of the adjustments required by paragraphs (b) and (3)(b),
(i) in computing the exempt surplus, in respect of the corporation resident in Canada, of each predecessor corporation and of each other foreign affiliate of the corporation resident in Canada in which a predecessor foreign affiliate has an equity percentage (the particular predecessor corporation and each such other foreign affiliate being referred to in this subsection and subsections (16) to (23) as the “particular relevant foreign affiliate”) at the time (referred to in this subsection and subsections (16) to (22) as the “balance adjustment time”) that is immediately before the foreign merger, there is to be included under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1), the total of
(A) an amount equal to the exempt surplus reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(B) an amount equal to the exempt deficit reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares, and
(C) an amount equal to the taxable deficit allocation, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(ii) in computing the particular relevant foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, at the balance adjustment time, there is to be included, under subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1), the total of
(A) an amount equal to the taxable surplus reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(B) an amount equal to the taxable deficit reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares, and
(C) an amount equal to the exempt deficit allocation, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(iii) in computing the particular relevant foreign affiliate’s underlying foreign tax, in respect of the corporation resident in Canada, at the balance adjustment time, there is to be included, under subparagraph (iii) of the description of B in the definition “underlying foreign tax” in subsection 5907(1), the total of
(A) the amount determined by the formula (which is deemed to be nil, if, in respect of the particular relevant foreign affiliate, the value determined for B in the formula is nil)
A/B × C × D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s underlying foreign tax, in respect of the corporation resident in Canada, at the balance adjustment time, that may reasonably be considered to have been included in computing the amount of the consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, of the particular predecessor corporation that issued the disposed shares, in respect of the disposition,
- B
- is the amount of the consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, of the particular predecessor corporation that issued the disposed shares, in respect of the disposition,
- C
- is the total of all amounts each of which is the amount, determined by paragraph 5900(1)(d), to be the amount of foreign tax applicable to the portion of the disposition dividend prescribed to have been paid out of the taxable surplus of the issuing foreign affiliate, that relates to a disposed share, in respect of the disposition, and
- D
- is the specified adjustment factor, in respect of the corporation resident in Canada, in respect of the particular relevant foreign affiliate of the corporation resident in Canada, of the foreign affiliate of the corporation resident in Canada that disposed of the disposed shares, in respect of the disposition of the disposed shares, and
(B) the amount of the underlying foreign tax reduction in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposition of the disposed shares,
(iv) in computing the exempt deficit, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included, under subparagraph (vi.1) of the description of A in the definition “exempt surplus” in subsection 5907(1), an amount equal to the exempt deficit, in respect of the corporation resident in Canada, immediately before that time, of the particular relevant foreign affiliate, and
(v) in computing the particular relevant foreign affiliate’s taxable deficit, in respect of the corporation resident in Canada, at the balance adjustment time, there is to be included, under subparagraph (iv.1) of the description of A in the definition “taxable surplus” in subsection 5907(1), an amount equal to the taxable deficit, in respect of the corporation resident in Canada, immediately before that time, of the particular relevant foreign affiliate; and
(b) the amount, at the balance adjustment time, of exempt surplus, exempt deficit, taxable surplus, taxable deficit and underlying foreign tax, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate is to be adjusted to become the proportion of that amount, determined without making that adjustment, that
(i) the surplus entitlement percentage, at the balance adjustment time, of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year, of the particular relevant foreign affiliate that otherwise would have included that time, had ended immediately before that time
is of
(ii) the surplus entitlement percentage, immediately after the time of the disposition, of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year, of the particular relevant foreign affiliate, that otherwise would have included the balance adjustment time, had ended at the time of the disposition.
(iii) the portion of subsection 5905(5) of the Regulations between paragraphs (c) and (d) is to be read as follows:
the following rules apply for the purposes of this Part in respect of the particular affiliate and each other foreign affiliate of the predecessor corporation in which the particular affiliate has an equity percentage (the particular affiliate and each such other foreign affiliate each being referred to in subsections (16) to (23) as the “particular relevant foreign affiliate”):
(iv) subsection 5905(6) of the Regulations is to be read as follows:
(6) For the purpose of subsection (5), the following rules apply:
(a) if paragraph (5)(a) applies and the predecessor corporation is, because of an election made under subsection 93(1) of the Act, deemed to have received a dividend (referred to in this subsection and subsections (18) and (21) as the “disposition dividend”) on one or more of the shares (each of which is referred to in this subsection and subsections (16) to (23) as a “disposed share”) of the particular foreign affiliate (referred to in this subsection as the “issuing foreign affiliate”) disposed of, at that time, for the purpose of the adjustment required by paragraph (b),
(i) in computing the exempt surplus, in respect of the predecessor corporation, of a particular relevant foreign affiliate at the time (referred to in this subsection and subsections (16) to (22) as the “balance adjustment time”) that is immediately before the disposition time, the following rules apply:
(A) if the particular relevant foreign affiliate has, at the balance adjustment time, an amount of exempt surplus, in respect of the corporation resident in Canada, and the issuing foreign affiliate has, at that time, an amount of consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed share that is equal to or greater than the amount of its consolidated exempt deficit (as determined under paragraph 5902(1)(b)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, there is to be included under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1) the amount determined by the formula
A/B × C/D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s exempt surplus, in respect of the predecessor corporation, at the balance adjustment time, that may reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the predecessor corporation, in respect of the disposition of the disposed shares,
- B
- is the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the predecessor corporation, in respect of the disposition of the disposed shares,
- C
- is the portion, of the disposition dividend that is, because of an election made under subsection 93(1) of the Act in respect of the disposition of the disposed shares, deemed to be received on the disposed shares by the person that disposed of the disposed shares, that is prescribed by paragraph 5900(1)(a) to have been paid out of the issuing foreign affiliate’s exempt surplus, in respect of the predecessor corporation, and
- D
- is the surplus entitlement percentage of the predecessor corporation in respect of the particular relevant foreign affiliate at the balance adjustment time, determined on the assumption that the disposed shares were the only shares owned by the predecessor corporation at that time,
(B) if the amount determined, in respect of the particular relevant foreign affiliate, for either B or D in the formula in clause (A) is nil, the amount determined, in respect of the particular relevant foreign affiliate, by that formula is deemed to be nil,
(C) there is to be included under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1) the amount of the particular relevant foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, at the balance adjustment time if
(I) the particular relevant foreign affiliate has, at the balance adjustment time, an amount of exempt surplus, in respect of the corporation resident in Canada, and
(II) the issuing foreign affiliate has, at that time, an amount of consolidated exempt deficit (as determined under paragraph 5902(1)(b)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed share that is equal to or greater than the amount of its consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, and
(D) there is to be included under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1) an amount equal to the particular relevant foreign affiliate’s taxable deficit allocation in respect of the disposed shares,
(ii) in computing the taxable surplus, in respect of a predecessor corporation, of the particular relevant foreign affiliate, at the balance adjustment time, the following rules apply:
(A) if the particular relevant foreign affiliate has, at the balance adjustment time, an amount of taxable surplus in respect of the corporation resident in Canada, and the issuing foreign affiliate has, at that time, an amount of consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition that is equal to or greater than the amount of the issuing foreign affiliate’s consolidated taxable deficit (as determined under paragraph 5902(1)(d)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, there is to be included under subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1) the amount determined by the formula
A/B × C/D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s taxable surplus, in respect of the predecessor corporation, at the balance adjustment time, that may reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the predecessor corporation, in respect of the disposition of the disposed shares,
- B
- is the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the predecessor corporation, in respect of the disposition of the disposed shares,
- C
- is the portion, of the disposition dividend that is, because of an election made under subsection 93(1) of the Act in respect of the disposition of the disposed shares, deemed to be received on the disposed shares by the person that disposed of the disposed shares, that is prescribed by paragraph 5900(1)(b) to have been paid out of the issuing foreign affiliate’s taxable surplus, in respect of the predecessor corporation, and
- D
- is the surplus entitlement percentage of the predecessor corporation in respect of the particular relevant foreign affiliate at the balance adjustment time, determined on the assumption that the disposed shares were the only shares owned by the predecessor corporation at that time,
(B) if the amount determined, in respect of the particular relevant foreign affiliate for either B or D in the formula in clause (A) is nil, the amount determined, in respect of the particular relevant foreign affiliate, by that formula is deemed to be nil,
(C) there is to be included, under subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1), the amount of particular relevant foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, at the balance adjustment time, if
(I) the particular relevant foreign affiliate has, at the balance adjustment time, an amount of taxable surplus in respect of the corporation resident in Canada, and
(II) the issuing foreign affiliate has, at that time, an amount of consolidated taxable deficit (as determined under paragraph 5902(1)(d)), in respect of the corporation resident in Canada, in respect of the disposition that is equal to or greater than the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, and
(D) there is to be included in subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1) an amount equal to the particular relevant foreign affiliate’s exempt deficit allocation in respect of the disposed shares,
(iii) in computing the underlying foreign tax, in respect of the predecessor corporation, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included under subparagraph (iii) of the description of B in the definition “underlying foreign tax” in subsection 5907(1) the total of
(A) the amount determined by the formula (which is deemed to be nil, if, in respect of the particular relevant foreign affiliate, the value determined for either B or D in the formula is nil)
A/B × C/D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s underlying foreign tax, in respect of the predecessor corporation, at the balance adjustment time, that may reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the predecessor corporation, in respect of the disposition,
- B
- is the amount of the issuing foreign affiliate’s consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the predecessor corporation, in respect of the disposition,
- C
- is the total of all amounts each of which is the amount, determined by paragraph 5900(1)(d), to be the amount of foreign tax applicable to the portion of the disposition dividend prescribed to have been paid out of the taxable surplus of the issuing foreign affiliate, that relates to a disposed share, in respect of the disposition, and
- D
- is the surplus entitlement percentage of the predecessor corporation in respect of the particular relevant foreign affiliate at the balance adjustment time, determined on the assumption that the disposed shares were the only shares owned by the predecessor corporation at that time, and
(B) the amount determined by the formula
A × (B + C)/D
where
- A
- is the underlying foreign tax, in respect of the particular predecessor corporation, at the balance adjustment time, of the particular relevant foreign affiliate in respect of the disposition of the disposed shares,
- B
- is the amount determined under clause (ii)(C) in respect of the particular relevant foreign affiliate, in respect of the predecessor corporation, in respect of the disposition of the disposed shares,
- C
- is the exempt deficit allocation, in respect of the predecessor corporation, of the particular relevant foreign affiliate, in respect of the disposition of the disposed shares, and
- D
- is the taxable surplus in respect of the predecessor corporation, at the balance adjustment time, of the particular relevant foreign affiliate,
(iv) in computing the exempt deficit, in respect of the predecessor corporation, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included under subparagraph (vi.1) of the description of A in the definition “exempt surplus” in subsection 5907(1) an amount equal to the exempt deficit, in respect of the predecessor corporation, of the particular relevant foreign affiliate, immediately before that time, and
(v) in computing the taxable deficit, in respect of the predecessor corporation, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included under subparagraph (iv.1) of the description of A in the definition “taxable surplus” in subsection 5907(1) an amount equal to the taxable deficit, in respect of the predecessor corporation, of the particular relevant foreign affiliate, immediately before that time; and
(b) the exempt surplus or the exempt deficit, the taxable surplus or the taxable deficit and the underlying foreign tax in respect of a predecessor corporation (within the meaning assigned by subsection (5)) and in respect of the acquiring corporation (within the meaning assigned by subsection (5)) of a particular relevant foreign affiliate is, at the balance adjustment time, to be adjusted to become the proportion of the amount of the surplus, deficit or underlying foreign tax determined without reference to this paragraph that
(i) the surplus entitlement percentage, immediately before the time of the latest of the transactions referred to in paragraphs (5)(a), (b) and (c), of the predecessor corporation or the acquiring corporation, as the case may be, in respect of the particular relevant foreign affiliate, determined on the assumptions
(A) that the taxation year of the particular relevant foreign affiliate that otherwise would have included the balance adjustment time had ended immediately before that time, and
(B) if the transaction is a disposition referred to in paragraph (5)(a), that the shares referred to in that paragraph were the only shares owned by the predecessor corporation at the balance adjustment time
is of
(ii) the surplus entitlement percentage, immediately after the time of the latest of the transactions referred to in paragraphs (5)(a), (b) and (c), of the predecessor corporation or the acquiring corporation, as the case may be, in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year of the particular relevant foreign affiliate that otherwise would have included that time had ended immediately after that time.
(v) subsection 5905(8) of the Regulations is to be read as follows:
(8) If, at any time, a dividend (referred to in this subsection and subsections (18) and (21) as the “disposition dividend”) is, because of an election made by a corporation resident in Canada under subsection 93(1) of the Act, deemed to have been received on one or more shares (each of which is referred to in this subsection and subsections (16) to (23) as a “disposed share”) of a class of the capital stock of a particular foreign affiliate (referred to in this subsection as the “issuing foreign affiliate”) of the corporation resident in Canada that were disposed (which disposition is referred in this subsection and subsections (16) to (23) as the “disposition”) to the corporation resident in Canada or to another corporation that was, immediately after the disposition, a foreign affiliate of the corporation resident in Canada, the following rules apply:
(a) for the purpose of the adjustment required by paragraph (b),
(i) in computing the exempt surplus, in respect of the corporation resident in Canada, of the issuing foreign affiliate or another foreign affiliate of the corporation resident in Canada in which the issuing foreign affiliate has an equity percentage (the issuing foreign affiliate and each such other foreign affiliate each being referred to in this subsection and subsections (16) to (23) as the “particular relevant foreign affiliate”) at the time (referred to in this subsection and subsections (16) to (22) as the “balance adjustment time”) that is immediately before the time of the disposition, there is to be included under subparagraph (v) of the description of B in the definition “exempt surplus” in subsection 5907(1), the total of
(A) an amount equal to the exempt surplus reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(B) an amount equal to the exempt deficit reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares, and
(C) an amount equal to the taxable deficit allocation, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(ii) in computing the taxable surplus, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included under subparagraph (v) of the description of B in the definition “taxable surplus” in subsection 5907(1) the total of
(A) an amount equal to the taxable surplus reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(B) an amount equal to the taxable deficit reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares, and
(C) an amount equal to the exempt deficit allocation, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposed shares,
(iii) in computing the underlying foreign tax, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included under subparagraph (iii) of the description of B in the definition “underlying foreign tax” in subsection 5907(1) the total of
(A) the amount determined by the formula (which is deemed to be nil, if, in respect of the particular relevant foreign affiliate, the value determined for B in the formula is nil)
A/B × C × D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s underlying foreign tax, in respect of the corporation resident in Canada, at the balance adjustment time, that may reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition,
- B
- is the amount of the issuing foreign affiliate’s consolidated underlying foreign tax (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition,
- C
- is the total of all amounts each of which is the amount, determined by paragraph 5900(1)(d), to be the amount of foreign tax applicable to the portion of the disposition dividend prescribed to have been paid out of the taxable surplus of the issuing foreign affiliate, that relates to a disposed share, in respect of the disposition, and
- D
- is the specified adjustment factor, in respect of the corporation resident in Canada, in respect of the particular relevant foreign affiliate of the corporation resident in Canada, of the foreign affiliate of the corporation resident in Canada that disposed of the disposed shares, in respect of the disposition of the disposed shares, and
(B) the amount of the underlying foreign tax reduction in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, in respect of the disposition of the disposed shares,
(iv) in computing the exempt deficit, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included under subparagraph (vi.1) of the description of A in the definition “exempt surplus” in subsection 5907(1), an amount equal to the exempt deficit, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, immediately before that time, and
(v) in computing the taxable deficit, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, at the balance adjustment time, there is to be included under subparagraph (iv.1) of the description of A in the definition “taxable surplus” in subsection 5907(1), an amount equal to the taxable deficit, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate, immediately before that time;
(b) the amount, at the balance adjustment time, of exempt surplus, exempt deficit, taxable surplus, taxable deficit and underlying foreign tax, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate is to be adjusted to become the proportion of that amount, determined without making this adjustment, that
(i) the surplus entitlement percentage, at the balance adjustment time, of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year, of the particular relevant foreign affiliate that otherwise would have included that time, had ended immediately before that time
is of
(ii) the surplus entitlement percentage, immediately after the time of the disposition, of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, determined on the assumption that the taxation year, of the particular relevant foreign affiliate, that otherwise would have included the balance adjustment time, had ended at the time of the disposition; and
(c) for the purposes of applying the definitions “exempt deficit”, “exempt surplus”, “taxable deficit”, “taxable surplus” and “underlying foreign tax”, in subsection 5907(1), the amounts determined under paragraph (b) are deemed to be the opening exempt deficit, opening exempt surplus, opening taxable deficit, opening taxable surplus, and opening underlying foreign tax, as the case may be, of the particular relevant foreign affiliate, in respect of the corporation resident in Canada.
(vi) section 5905 of the Regulations is to be read as if it also contained the following subsections:
(16) The exempt deficit allocation, of a particular relevant foreign affiliate in respect of a corporation resident in Canada, in respect of disposed shares of the particular foreign affiliate of the corporation resident in Canada, that issued the disposed shares (in this subsection referred to as the “issuing foreign affiliate”) is, if the particular relevant foreign affiliate has, at the balance adjustment time, an amount of taxable surplus in respect of the corporation resident in Canada and the issuing foreign affiliate has, at that time, an amount of consolidated exempt deficit (as determined under paragraph 5902(1)(b)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, that exceeds the amount of its consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
(a) the amount determined by the formula
1/E × [(A – B) × C/D]
where
- A
- is the amount of the issuing foreign affiliate’s consolidated exempt deficit (as determined under paragraph 5902(1)(b)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- B
- is the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- C
- is the portion of the amount of the particular relevant foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, immediately before the disposition of the disposed shares, that can reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- D
- is the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, and
- E
- is
(i) subject to subparagraph (ii), the surplus entitlement percentage, of the issuing foreign affiliate, in respect of the particular relevant foreign affiliate, that would be determined under subsections 5905(10) to (13) at the balance adjustment time if the issuing foreign affiliate were the corporation resident in Canada referred to in those subsections and the particular relevant foreign affiliate were the particular foreign affiliate referred to in those subsections, and
(ii) if the particular relevant foreign affiliate is the issuing foreign affiliate, 1; and
(b) if the amount determined, in respect of the particular relevant foreign affiliate, for the description of D or E in the formula in paragraph (a) is nil, nil.
(17) The exempt deficit reduction, in respect of a corporation resident in Canada, of a particular relevant foreign affiliate of the corporation resident in Canada, in respect of disposed shares, is
(a) if the particular relevant foreign affiliate has, at the balance adjustment time, an amount of exempt surplus, in respect of the corporation resident in Canada, and the particular foreign affiliate, of the corporation resident in Canada, that issued the disposed shares (in this subsection referred to as the “issuing foreign affiliate”) has, at the balance adjustment time, consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, that exceeds the amount of its consolidated exempt deficit (as determined under paragraph 5902(1)(b)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
(i) the amount determined by the formula
A/B × C/D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, at the balance adjustment time, that can reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- B
- is the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- C
- is the amount of the issuing foreign affiliate’s consolidated exempt deficit (as determined under paragraph 5902(1)(b)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, and
- D
- is
(A) subject to clause (B), the surplus entitlement percentage, of the issuing foreign affiliate, in respect of the particular relevant foreign affiliate, that, under subsections 5905(10) to (13), would be determined, at the balance adjustment time, where the issuing foreign affiliate were the corporation resident in Canada referred to in those subsections and the particular relevant foreign affiliate were the particular foreign affiliate referred to in those subsections, and
(B) where the particular relevant foreign affiliate is the issuing foreign affiliate, 1, and
(ii) if the value determined, in respect of the particular relevant foreign affiliate, for the description of any of A, B or D in the formula in subparagraph (i) is nil, nil; and
(b) the amount of the particular relevant foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, at the balance adjustment time, if
(i) the particular relevant foreign affiliate has, at the balance adjustment time, an amount of exempt surplus, in respect of the corporation resident in Canada, and
(ii) the issuing foreign affiliate has, at that time, an amount of consolidated exempt deficit (as determined under paragraph 5902(1)(b)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares that is equal to or greater than the amount of its consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares.
(18) The exempt surplus reduction in respect of a corporation resident in Canada, of a particular relevant foreign affiliate in respect of disposed shares is
(a) the amount determined by the formula
A/B × C × D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, at the balance adjustment time, that can reasonably be considered to have been included in computing the amount of the consolidated exempt surplus, in respect of the corporation resident in Canada, (as determined under paragraph 5902(1)(a)) of the particular foreign affiliate, of the corporation resident in Canada, that issued the disposed shares (referred to in this subsection as the “issuing foreign affiliate”), in respect of the disposition of the disposed shares,
- B
- is the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- C
- is the portion of the disposition dividend that is, because of an election made under subsection 93(1) of the Act in respect of the disposition of the disposed shares, received on the disposed shares by the person that disposed of those shares and that is prescribed by paragraph 5900(1)(a) to have been paid out of the issuing foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, and
- D
- is the specified adjustment factor, in respect of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, of the person that disposed of the disposed shares;
(b) if the amount determined, in respect of the particular relevant foreign affiliate, for either of A or B, in the formula in paragraph (a) is nil, nil; and
(c) if an amount is determined, in respect of the particular relevant foreign affiliate, under paragraph (17)(b), nil.
(19) The taxable deficit allocation, of a particular relevant foreign affiliate of a corporation resident in Canada, in respect of disposed shares of the particular foreign affiliate, of the corporation resident in Canada, that issued the disposed shares (in this subsection referred to as the “issuing foreign affiliate”) is, if the particular relevant foreign affiliate has, at the balance adjustment time, an amount of exempt surplus in respect of the corporation resident in Canada and the issuing foreign affiliate has, at that time, an amount of consolidated taxable deficit (as determined under paragraph 5902(1)(d)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, that exceeds the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
(a) the amount determined by the formula
1/E × [(A – B) × C/D]
where
- A
- is the amount of the issuing foreign affiliate’s consolidated taxable deficit (as determined under paragraph 5902(1)(d)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- B
- is the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- C
- is the portion of the amount of the particular relevant foreign affiliate’s exempt surplus, in respect of the corporation resident in Canada, immediately before the disposition of the disposed shares, that may reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- D
- is the amount of the issuing foreign affiliate’s consolidated exempt surplus (as determined under paragraph 5902(1)(a)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, and
- E
- is
(i) subject to subparagraph (ii), the surplus entitlement percentage, of the issuing foreign affiliate, in respect of the particular relevant foreign affiliate, that would be determined under subsections 5905(10) to (13) at the balance adjustment time, where the issuing foreign affiliate were the corporation resident in Canada referred to in those subsections and the particular relevant foreign affiliate were the particular foreign affiliate referred to in those subsections, and
(ii) where the particular relevant foreign affiliate is the issuing foreign affiliate, 1; and
(b) where the amount determined, in respect of the particular relevant foreign affiliate, for the description of D or E in the formula in paragraph (a) is nil, nil.
(20) The taxable deficit reduction, in respect of a corporation resident in Canada, of a particular relevant foreign affiliate of the corporation resident in Canada, in respect of disposed shares, is
(a) if the particular relevant foreign affiliate has, at the balance adjustment time, an amount of taxable surplus, in respect of the corporation resident in Canada, and the particular foreign affiliate, of the corporation resident in Canada, that issued the disposed shares (in this subsection referred to as the “issuing foreign affiliate”) has, at the balance adjustment time, consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, that exceeds the amount of the issuing foreign affiliate’s consolidated taxable deficit (as determined under paragraph 5902(1)(d)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
(i) the amount determined by the formula
A/B × C/D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s taxable surplus, in respect of the corporation, at the balance adjustment time, that can reasonably be considered to have been included in computing the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- B
- is the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- C
- is the amount of the issuing foreign affiliate’s consolidated taxable deficit (as determined under paragraph 5902(1)(d)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, and
- D
- is
(A) subject to clause (B), the surplus entitlement percentage, of the issuing foreign affiliate, in respect of the particular relevant foreign affiliate, that would be determined under subsections 5905(10) to (13) at the balance adjustment time where the issuing foreign affiliate were the corporation resident in Canada referred to in those subsections and the particular relevant foreign affiliate were the particular foreign affiliate referred to in those subsections, and
(B) where the particular relevant foreign affiliate is the issuing foreign affiliate, 1, and
(ii) where the amount determined, in respect of the particular relevant foreign affiliate, for the description of A, B or D in the formula in subparagraph (i) is nil, nil; and
(b) the amount of the particular relevant foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, at the balance adjustment time, if
(i) the particular relevant foreign affiliate has, at the balance adjustment time, an amount of taxable surplus in respect of the corporation resident in Canada, and
(ii) the issuing foreign affiliate has, at that time, an amount of consolidated taxable deficit (as determined under paragraph 5902(1)(d)), in respect of the corporation resident in Canada, in respect of the disposition that is equal to or greater than the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares.
(21) The taxable surplus reduction, in respect of a corporation resident in Canada, of a particular relevant foreign affiliate, in respect of disposed shares, is
(a) the amount determined by the formula
A/B × C × D
where
- A
- is the portion of the amount of the particular relevant foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, at the balance adjustment time, that can reasonably be considered to have been included in computing the amount of the consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares, of the particular foreign affiliate, of the corporation resident in Canada, that issued the disposed shares (in this subsection referred to as the “issuing foreign affiliate”),
- B
- is the amount of the issuing foreign affiliate’s consolidated taxable surplus (as determined under paragraph 5902(1)(c)), in respect of the corporation resident in Canada, in respect of the disposition of the disposed shares,
- C
- is the portion, of the disposition dividend that is, because of an election made under subsection 93(1) of the Act, in respect of the disposition of the disposed shares, received on the disposed shares by the person that disposed of those shares and that is prescribed by paragraph 5900(1)(b) to have been paid out of the issuing foreign affiliate’s taxable surplus, in respect of the corporation resident in Canada, and
- D
- is the specified adjustment factor, in respect of the corporation resident in Canada, in respect of the particular relevant foreign affiliate, of the person that disposed of the disposed shares;
(b) if the amount determined, in respect of the particular relevant foreign affiliate, for the description of A or B in the formula in paragraph (a) is nil, nil; and
(c) if an amount is determined, in respect of the particular relevant foreign affiliate, under paragraph (20)(b), nil.
(22) The underlying foreign tax reduction in respect of the corporation resident in Canada, of a particular relevant foreign affiliate of the corporation resident in Canada, in respect of the disposition of the disposed shares, is the amount determined by the following formula:
A × (B + C)/D
where
- A
- is the underlying foreign tax in respect of the corporation resident in Canada, at the balance adjustment time, of the particular relevant foreign affiliate;
- B
- is the taxable deficit reduction, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate of the corporation resident in Canada, in respect of the disposition of the disposed shares;
- C
- is the exempt deficit allocation, in respect of the corporation resident in Canada, of the particular relevant foreign affiliate of the corporation resident in Canada, in respect of the disposition of the disposed shares; and
- D
- is the taxable surplus in respect of the corporation resident in Canada of the particular relevant foreign affiliate, at the balance adjustment time.
(23) The specified adjustment factor, in respect of a corporation resident in Canada, in respect of a particular relevant foreign affiliate of the corporation resident in Canada, of the person that disposed of disposed shares, in respect of the disposition of the disposed shares, is the amount determined by the formula
A/B
where
- A
- is
(a) where the corporation resident in Canada disposed of the disposed shares, 100 per cent, and
(b) where another foreign affiliate of the corporation resident in Canada disposed of the disposed shares, the surplus entitlement percentage of the corporation resident in Canada in respect of that other foreign affiliate, immediately before the disposition of the disposed shares; and
- B
- is the surplus entitlement percentage of the corporation resident in Canada in respect of the particular relevant foreign affiliate, immediately before the disposition of the disposed shares.
(d) if there is a designated section 93 election,
(i) the Regulations are, in respect of the designated shares, to be read as if they also contained the following section:
5905.1 (1) The amount prescribed for the purpose of paragraph 92(1.4)(a) of the Act, in respect of a relevant share referred to in that paragraph, in respect of a specified section 93 election related to the relevant share, is the lesser of
(a) the amount, if any, by which the fair market value of the relevant share, at the election time, exceeds the adjusted cost base, at the time of the disposition, of the relevant share to the holder, and
(b) the amount determined by the following formula:
A/C × (C – B)
where
- A
- is the amount that would, if the relevant share was the disposed share and the relevant affiliate was the disposed affiliate in respect of the specified section 93 election, be determined under paragraph 5902(1)(f) to be the attributed net surplus in respect of the relevant share in respect of the specified section 93 election,
- B
- is the amount that would be determined under subparagraph 5902(1)(e)(vi) to be the consolidated net surplus in respect of the relevant affiliate, if
(i) the relevant foreign affiliate was the disposed affiliate referred to in subsection 5902(1),
(ii) the relevant share was the disposed share referred to in subsection 5902(1) that was disposed of, immediately following the disposition of the disposed shares to which the specified section 93 election applied, and
(iii) before that determination, in respect of the relevant foreign affiliate and each foreign affiliate of the particular corporation resident in Canada in which the relevant foreign affiliate had an equity percentage, the adjustments that are required by section 5905 to be made, in respect of the whole dividend referred to in paragraph 5902(1)(g) in respect of the specified section 93 election were made, and
- C
- is the amount that would be determined under subparagraph 5902(1)(e)(vi) to be the consolidated net surplus in respect of the relevant affiliate in respect of the specified section 93 election, if the relevant foreign affiliate was the disposed foreign affiliate referred to in subsection 5902(1) and the relevant share was the disposed share referred to in subsection 5902(1).
(2) The amount prescribed for the purpose of paragraph 92(1.4)(b) of the Act, in respect of a relevant share referred to in that paragraph, in respect of a relevant specified section 93 election related to the relevant share, is the lesser of
(a) the amount, if any, by which the adjusted cost base, at the time of the disposition, of the relevant share to the holder exceeds the fair market value of the relevant share, at the election time, and
(b) the amount determined by the following formula:
A/C × (C – B)
where
- A
- is the amount that would be determined to be the attributed net surplus in respect of the relevant share under paragraph 5902(1)(f) in respect of the specified section 93 election, if
(i) the relevant share was the disposed share, and the relevant foreign affiliate was the disposed foreign affiliate, in respect of the specified section 93 election, and
(ii) the consolidated net surplus in respect of the relevant foreign affiliate was the amount, if any, determined, in respect of the relevant foreign affiliate, under the description of C,
- B
- is the amount, if any, by which the total that would be determined under clause 5902(1)(e)(vi)(B) exceeds the total that would be determined under clause 5902(1)(e)(vi)(A), in respect of the relevant foreign affiliate, if
(i) the relevant foreign affiliate was the disposed affiliate referred to in subsection 5902(1),
(ii) the relevant share was the disposed share referred to in subsection 5902(1) that was disposed of immediately following the disposition of the disposed shares to which the specified section 93 election applied, and
(iii) before that determination, in respect of the relevant foreign affiliate and each foreign affiliate of the particular corporation resident in Canada in which the relevant foreign affiliate had an equity percentage, the adjustments that are required by section 5905 to be made, in respect of the whole dividend referred to in paragraph 5902(1)(g) in respect of the specified section 93 election, were made, and
- C
- is the amount, if any, by which the total that would be determined under clause 5902(1)(e)(vi)(B) exceeds the total that would be determined under clause 5902(1)(e)(vi)(A), in respect of the relevant affiliate in respect of the specified section 93 election, if the relevant foreign affiliate was the disposed foreign affiliate referred to in subsection 5902(1) and the relevant share was the disposed share referred to in subsection 5902(1).
(3) If the amount determined in each of the formulae in paragraphs (1)(b) and (2)(b) in respect of the relevant share referred to in paragraph 92(1.4)(a) of the Act is nil, the amount determined for B in the formula in paragraph (1)(b) in respect of the relevant affiliate is greater than nil and the amount determined for C in the formula in paragraph (2)(b) in respect of the relevant affiliate is greater than nil, the amount prescribed for the purpose of paragraph 92(1.4)(a) of the Act, in respect of the relevant share referred to in that paragraph, in respect of a specified section 93 election related to the relevant share, is the lesser of
(a) the amount, if any, by which the fair market value of the relevant share, at the election time, exceeds the adjusted cost base, at the time of the disposition, of the relevant share to the holder, and
(b) the amount that would, if the relevant share was the disposed share and the relevant affiliate was the disposed affiliate in respect of the specified section 93 election, be determined under paragraph 5902(1)(f) to be the attributed net surplus in respect of the relevant share if the consolidated net surplus of the relevant foreign affiliate were the amount determined for B in the formula in paragraph (1)(b).
(ii) paragraph (b) of the definition “whole dividend” in subsection 5907(1) of the Regulations is, in respect of the designated section 93 election, to be read as follows:
(b) where a whole dividend is deemed by paragraph 5902(1)(g) to have been paid at the same time on shares of more than one class of the capital stock of an affiliate, for the purpose only of that paragraph, the whole dividend deemed to have been paid at that time on the shares of a class of the capital stock of the affiliate is deemed to be the total of all amounts each of which is a whole dividend deemed to have been paid at that time on the shares of a class of the capital stock of the affiliate, and
(iii) paragraph 5908(8)(c) of the Regulations, as enacted by subsection 47(1), is, in respect of the designated section 93 election, to be read as follows:
(c) the prescribed amount for the purposes of subparagraph 93(1.2)(a)(ii) of the Act is the lesser of
(i) the taxable capital gain, if any, of the particular affiliate otherwise determined in respect of the disposition, and
(ii) the amount that is one-half of the amount referred to in paragraph 5902(6)(b).
52. (1) Subsection (2) applies if
(a) a corporation has made an election under section 51;
(b) the corporation has made an election under subsection 93(1) or (1.2) of the Income Tax Act in respect of a disposition of a share of the capital stock of a foreign affiliate of the corporation that occurs after December 20, 2002 and on or before February 27, 2004 (other than a disposition required to be made under an agreement in writing made by a vendor on or before December 20, 2002), or in respect of a disposition that occurs after February 27, 2004 and that is required to be made under an agreement in writing made by a vendor after December 20, 2002 and before February 28, 2004; and
(c) the corporation elects in writing under this paragraph to apply subsection (2) in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the corporation’s filing-due date for the corporation’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent.
(2) If this subsection applies, section 51 does not apply in respect of dispositions referred to in paragraph (1)(b) and the Regulations are, in respect of the dispositions, to be read as if section 5902 of the Regulations also contained the following subsection:
(6.1) If an election under subsection 93(1) of the Act is made at any time by a particular corporation resident in Canada in respect of a share of the capital stock of a foreign affiliate (in this subsection referred to as the “particular affiliate”) of the particular corporation that is disposed of to the particular corporation, to another corporation resident in Canada with which the particular corporation does not deal at arm’s length or to another foreign affiliate of the particular corporation, the amount of the particular affiliate’s exempt surplus or exempt deficit, taxable surplus or taxable deficit, underlying foreign tax and net surplus in respect of the particular corporation at that time is to be determined under paragraph (1)(a) as if the amount of any dividend referred to in subparagraph (1)(a)(i) or (ii) were nil.
Assessments
53. Any assessment of a taxpayer’s tax, interest and penalties payable under the Income Tax Act for any taxation year that ends before the day on which this Act receives royal assent that would, in the absence of this section, be precluded because of subsections 152(4) to (5) of the Income Tax Act is to be made to the extent necessary to take into account any of the following:
(a) sections 50 to 52 or any provision of section 46 in respect of which section 50 applies to the taxpayer; or
(b) any provision of sections 29 to 38 and 40 to 49 (other than a provision of section 46 that is described under paragraph (a)), if the taxpayer
(i) elects in writing in respect of all of its foreign affiliates that this section apply in respect of that provision, and
(ii) files that election with the Minister of National Revenue on or before the day that is six months after the day on which this Act receives royal assent.
PART 3AMENDMENTS IN RESPECT OF FOREIGN AFFILIATES: REORGANIZATIONS AND DISTRIBUTIONS AND OTHER TECHNICAL AMENDMENTS
R.S., c. 1 (5th Supp.)Income Tax Act
54. (1) Paragraph 13(21.2)(a) of the Income Tax Act is replaced by the following:
(a) a person or partnership (in this subsection referred to as the “transferor”) disposes at a particular time (otherwise than in a disposition described in any of paragraphs (c) to (g) of the definition “superficial loss” in section 54) of a depreciable property — other than, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of a foreign affiliate of a taxpayer, in respect of the taxpayer, where the transferor is the affiliate or is a partnership of which the affiliate is a member, depreciable property that is, or would be, if the transferor were a foreign affiliate of the taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the transferor — of a particular prescribed class of the transferor,
(2) Clause 13(21.2)(e)(iii)(E) of the Act is replaced by the following:
(E) if the transferor is a corporation,
(I) for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, and taxable surplus or taxable deficit, in respect of a taxpayer for a taxation year of the transferor where the transferor is a foreign affiliate of the taxpayer, at which the liquidation and dissolution of the transferor begins, unless the liquidation and dissolution is
1. a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, or
2. a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, and
(II) for any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins, and
(3) Subsection (1) applies to dispositions that occur after August 19, 2011.
(4) Subsection (2) applies to windings-up and liquidations and dissolutions that begin after August 19, 2011.
55. (1) Paragraph 14(12)(a) of the Act is replaced by the following:
(a) a corporation, trust or partnership (in this subsection referred to as the “transferor”) disposes at any time in a taxation year of a particular eligible capital property — other than, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of a foreign affiliate of a taxpayer, in respect of the taxpayer, where the transferor is the affiliate or is a partnership of which the affiliate is a member, eligible capital property that is, or would be, if the transferor were a foreign affiliate of the taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the transferor — in respect of a business of the transferor in respect of which it would, but for this subsection, be permitted a deduction under paragraph 24(1)(a) as a consequence of the disposition, and
(2) Paragraph 14(12)(g) of the Act is replaced by the following:
(g) if the transferor is a corporation,
(i) for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, and taxable surplus or taxable deficit, in respect of a taxpayer for a taxation year of the transferor where the transferor is a foreign affiliate of the taxpayer, at which the liquidation and dissolution of the transferor begins, unless the liquidation and dissolution is
(A) a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, or
(B) a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, and
(ii) for any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins.
(3) Subsection (1) applies to dispositions that occur after August 19, 2011.
(4) Subsection (2) applies to windings-up and liquidations and dissolutions that begin after August 19, 2011.
56. (1) Paragraph 18(13)(a) of the Act is replaced by the following:
(a) a taxpayer (in this subsection and subsection (15) referred to as the “transferor”) disposes of a particular property (other than, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of a foreign affiliate of a taxpayer, in respect of the taxpayer, where the transferor is the affiliate or is a partnership of which the affiliate is a member, property that is, or would be, if the transferor were a foreign affiliate of the taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the transferor);
(2) Subparagraph 18(15)(b)(iv) of the Act is replaced by the following:
(iv) if the transferor is a corporation,
(A) for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, and taxable surplus or taxable deficit, in respect of a taxpayer for a taxation year of the transferor where the transferor is a foreign affiliate of the taxpayer, at which the liquidation and dissolution of the transferor begins, unless the liquidation and dissolution is
(I) a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, or
(II) a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, and
(B) for any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins, and
(3) Subsection (1) applies to dispositions that occur after August 19, 2011.
(4) Subsection (2) applies to windings-up and liquidations and dissolutions that begin after August 19, 2011.
57. (1) Subsection 20(13) of the Act is replaced by the following:
Marginal note:Deductions under subdivision i
(13) In computing the income for a taxation year of a taxpayer resident in Canada, there may be deducted such amounts as are provided by subdivision i.
(2) Subsection (1) applies to taxation years that end after 1994.
58. (1) Paragraph 34.2(8)(b) of the Act is replaced by the following:
(b) except to the extent that the context otherwise requires, the exempt surplus or exempt deficit, the hybrid surplus or hybrid deficit, and the taxable surplus or taxable deficit (as those terms are defined in subsection 5907(1) of the Income Tax Regulations) of the affiliate in respect of the corporation.
(2) Subsection (1) applies to taxation years that end after August 19, 2011.
59. (1) Subsection 39(2) of the Act is replaced by the following:
Marginal note:Foreign currency dispositions by an individual
(1.1) If, because of any fluctuation after 1971 in the value of one or more currencies other than Canadian currency relative to Canadian currency, an individual (other than a trust) has made one or more particular gains or sustained one or more particular losses in a taxation year from dispositions of currency other than Canadian currency and the particular gains or losses would, in the absence of this subsection, be capital gains or losses described under subsection (1)
(a) subsection (1) does not apply to any of the particular gains or losses;
(b) the amount determined by the following formula is deemed to be a capital gain of the individual for the year from the disposition of currency other than Canadian currency:
A – (B + C)
where
- A
- is the total of all the particular gains made by the individual in the year,
- B
- is the total of all the particular losses sustained by the individual in the year, and
- C
- is $200; and
(c) the amount determined by the following formula is deemed to be a capital loss of the individual for the year from the disposition of currency other than Canadian currency:
D – (E + F)
where
- D
- is the total of all the particular losses sustained by the individual in the year,
- E
- is the total of all the particular gains made by the individual in the year, and
- F
- is $200.
Marginal note:Foreign exchange capital gains and losses
(2) If, because of any fluctuation after 1971 in the value of a currency other than Canadian currency relative to Canadian currency, a taxpayer has made a gain or sustained a loss in a taxation year (other than a gain or loss that would, in the absence of this subsection, be a capital gain or capital loss to which subsection (1) or (1.1) applies, or a gain or loss in respect of a transaction or event in respect of shares of the capital stock of the taxpayer)
(a) the amount of the gain (to the extent of the amount of that gain that would not, if section 3 were read in the manner described in paragraph (1)(a), be included in computing the taxpayer’s income for the year or any other taxation year), if any, is deemed to be a capital gain of the taxpayer for the year from the disposition of currency other than Canadian currency; and
(b) the amount of the loss (to the extent of the amount of that loss that would not, if section 3 were read in the manner described in paragraph (1)(a), be deductible in computing the taxpayer’s income for the year or any other taxation year), if any, is deemed to be a capital loss of the taxpayer for the year from the disposition of currency other than Canadian currency.
Marginal note:Upstream loans — transitional set-off
(2.1) If at any time a corporation resident in Canada or a partnership of which such a corporation is a member (such corporation or partnership referred to in this subsection as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this subsection as a “creditor affiliate”) of the borrowing party or that is a partnership (referred to in this subsection as a “creditor partnership”) of which such an affiliate is a member, the loan or indebtedness is at a later time repaid, in whole or in part, and the amount of the borrowing party’s capital gain or capital loss determined, in the absence of this subsection, under subsection (2) in respect of the repayment is equal to the amount of the creditor affiliate’s or creditor partnership’s capital loss or capital gain, as the case may be, determined, in the absence of paragraph 95(2)(g.04), in respect of the repayment, then the borrowing party’s capital gain or capital loss so determined is to be reduced
(a) in the case of a capital gain
(i) if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain, that is equal to twice the amount that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the creditor affiliate’s capital loss in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, the creditor affiliate had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of the borrowing party had any income, loss, capital gain or capital loss for any taxation year — be included in computing the borrowing party’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the creditor affiliate that includes the later time, or
(ii) if the creditor is a creditor partnership, by an amount, not exceeding that capital gain, that is equal to twice the amount that is the total of each amount, determined in respect of a particular member of the creditor partnership that is a foreign affiliate of the borrowing party, that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the creditor partnership’s capital loss in respect of the repayment of the loan or indebtedness were a capital gain of the creditor partnership, the particular member had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of the borrowing party had any income, loss, capital gain or capital loss for any taxation year — be included in computing the borrowing party’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the particular member that includes the last day of the creditor partnership’s fiscal period that includes the later time, and
(b) in the case of a capital loss
(i) if the creditor is a creditor affiliate, by an amount, not exceeding that capital loss, that is equal to twice the amount, in respect of the creditor affiliate’s capital gain in respect of the repayment of the loan or indebtedness, that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the creditor affiliate had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of the borrowing party had any income, loss, capital gain or capital loss for any taxation year — be included in computing the borrowing party’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the creditor affiliate that includes the later time, or
(ii) if the creditor is a creditor partnership, by an amount, not exceeding that capital loss, that is equal to twice the amount, in respect of the creditor partnership’s capital gain in respect of the repayment of the loan or indebtedness, that is the total of each amount, determined in respect of a particular member of the creditor partnership that is a foreign affiliate of the borrowing party, that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the particular member had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of the borrowing party had any income, loss, capital gain or capital loss for any taxation year — be included in computing the borrowing party’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the particular member that includes the last day of the creditor partnership’s fiscal period that includes the later time.
(2) Subsections 39(1.1) and (2) of the Act, as enacted by subsection (1), apply
(a) in determining the capital gain or capital loss of a foreign affiliate of a taxpayer, in respect of taxation years of the foreign affiliate that end after August 19, 2011, except that, if the taxpayer has elected under subsection 70(32), those subsections 39(1.1) and (2) apply in respect of taxation years of all foreign affiliates of the taxpayer that end after June 2011; and
(b) in any other case, in respect of gains made and losses sustained in taxation years that begin after August 19, 2011.
(3) Subsection 39(2.1) of the Act, as enacted by subsection (1), applies in respect of the portions of loans received and indebtedness incurred on or before August 19, 2011 that remain outstanding on that date and that are repaid, in whole or in part, on or before August 19, 2016.
60. (1) Paragraph 40(2)(e.1) of the Act is replaced by the following:
(e.1) a particular taxpayer’s loss, if any, from the disposition at any time to a particular person or partnership of an obligation — other than, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of the particular taxpayer in respect of another taxpayer, where the particular taxpayer or, if the particular taxpayer is a partnership, a member of the particular taxpayer is a foreign affiliate of the other taxpayer, an obligation that is, or would be, if the particular taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the particular taxpayer — that was, immediately after that time, payable by another person or partnership to the particular person or partnership is nil if the particular taxpayer, the particular person or partnership and the other person or partnership are related to each other at that time or would be related to each other at that time if paragraph 80(2)(j) applied for the purpose of this paragraph;
(2) The portion of paragraph 40(2)(e.2) of the Act before the formula is replaced by the following:
(e.2) subject to paragraph (e.3), a taxpayer’s loss on the settlement or extinguishment of a particular commercial obligation (in this paragraph having the meaning assigned by subsection 80(1)) issued by a person or partnership and payable to the taxpayer is deemed to be the amount determined by the following formula if any part of the consideration given by the person or partnership for the settlement or extinguishment of the particular obligation consists of one or more other commercial obligations issued by the person or partnership to the taxpayer:
(3) Subsection 40(2) of the Act is amended by adding the following after paragraph (e.2):
(e.3) paragraph (e.2) does not apply, for the purposes of computing the exempt surplus or exempt deficit and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, to the particular commercial obligation if the particular commercial obligation is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer;
(4) The portion of paragraph 40(2)(g) of the Act before subparagraph (i) is replaced by the following:
(g) a taxpayer’s loss, if any, from the disposition of a property (other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, a property that is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer), to the extent that it is
(5) Paragraphs 40(3)(c) to (e) of the Act are replaced by the following:
(c) subject to paragraph 93(1)(b), the amount of the excess is deemed to be a gain of the taxpayer for the year from a disposition at that time of the property,
(d) for the purposes of section 93, the property is deemed to have been disposed of by the taxpayer at that time, and
(e) for the purposes of section 110.6, the property is deemed to have been disposed of by the taxpayer in the year.
(6) Paragraph 40(3.3)(a) of the Act is replaced by the following:
(a) a corporation, trust or partnership (in this subsection and subsection (3.4) referred to as the “transferor”) disposes of a particular capital property — other than depreciable property of a prescribed class and other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of a foreign affiliate of a taxpayer, in respect of the taxpayer, where the transferor is the affiliate or is a partnership of which the affiliate is a member, property that is, or would be, if the transferor were a foreign affiliate of the taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the transferor — otherwise than in a disposition described in any of paragraphs (c) to (g) of the definition “superficial loss” in section 54;
(7) Subparagraph 40(3.4)(b)(v) of the Act is replaced by the following:
(v) if the transferor is a corporation,
(A) for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit, in respect of a taxpayer for a taxation year of the transferor where the transferor is a foreign affiliate of the taxpayer, at which the liquidation and dissolution of the transferor begins, unless the liquidation and dissolution is
(I) a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the transferor, or
(II) a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the transferor, and
(B) for any other purposes, at which the winding-up (other than a winding-up to which subsection 88(1) applies) of the transferor begins,
(8) Paragraph 40(3.5)(c) of the Act is replaced by the following:
(c) if subsections (3.3) and (3.4) apply to the disposition by a transferor of a share of the capital stock of a particular corporation and after the disposition
(i) the particular corporation is merged or combined with one or more other corporations, otherwise than in a transaction in respect of which paragraph (b) applies to the share, then the corporation formed on the merger or combination is deemed to own the share while the corporation so formed is affiliated with the transferor,
(ii) the particular corporation is wound up in a winding-up to which subsection 88(1) applies, then the parent (within the meaning assigned by subsection 88(1)) is deemed to own the share while the parent is affiliated with the transferor, or
(iii) the particular corporation is liquidated and dissolved, the liquidation and dissolution is a qualifying liquidation and dissolution (within the meaning assigned by subsection 88(3.1)) of the corporation or a designated liquidation and dissolution (within the meaning assigned by subsection 95(1)) of the corporation, and the transferor is a foreign affiliate of a taxpayer, then for the purposes of computing the transferor’s foreign accrual property income, exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit, in respect of the taxpayer for a taxation year of the transferor, the taxpayer referred to in subsection 88(3.1) or the particular shareholder referred to in the definition “designated liquidation and dissolution” in subsection 95(1), as the case may be, is deemed to own the share while the taxpayer or particular shareholder is affiliated with the transferor; and
(9) The portion of subsection 40(3.6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Loss on shares
(3.6) If at any time a taxpayer disposes, to a corporation that is affiliated with the taxpayer immediately after the disposition, of a share of a class of the capital stock of the corporation (other than a share that is a distress preferred share (within the meaning assigned by subsection 80(1)) and other than, for the purposes of computing the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, and taxable surplus or taxable deficit of the taxpayer in respect of another taxpayer, where the taxpayer or, if the taxpayer is a partnership, a member of the taxpayer is a foreign affiliate of the other taxpayer, a property that is, or would be, if the taxpayer were a foreign affiliate of the other taxpayer, excluded property (within the meaning assigned by subsection 95(1)) of the taxpayer),
(10) Subsections (1), (4), (6) and (9) apply in respect of dispositions that occur after August 19, 2011.
(11) Subsections (2) and (3) apply in respect of settlements and extinguishments that occur after August 19, 2011.
(12) Subsection (5) is deemed to have come into force on August 20, 2011.
(13) Subsection (7) applies in respect of windings-up and liquidations and dissolutions that begin after August 19, 2011.
(14) Subsection (8) applies in respect of mergers or combinations that occur, and windings-up and liquidations and dissolutions that begin, after August 19, 2011.
61. (1) Paragraph 53(2)(b) of the Act is replaced by the following:
(b) where the property is a share of the capital stock of a non-resident corporation,
(i) if the corporation is a foreign affiliate of the taxpayer,
(A) any amount required under paragraph 80.1(4)(d) or section 92 to be deducted in computing the adjusted cost base to the taxpayer of the share, and
(B) any amount received by the taxpayer before that time, on a reduction of the paid-up capital of the corporation in respect of the share, that is so received
(I) after 1971 and on or before August 19, 2011, or
(II) after August 19, 2011, where the reduction is a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of the share, or
(ii) in any other case, any amount received by the taxpayer after 1971 and before that time on a reduction of the paid-up capital of the corporation in respect of the share;
(2) Subsection (1) is deemed to have come into force on August 20, 2011.
62. (1) Paragraph 55(5)(d) of the Act is replaced by the following:
(d) the income earned or realized by a corporation (referred to in this paragraph as the “affiliate”) for a period ending at a time when the affiliate was a foreign affiliate of another corporation is deemed to be the lesser of
(i) the amount that would, if the Income Tax Regulations were read without reference to their subsection 5905(5.6), be the tax-free surplus balance (within the meaning of their subsection 5905(5.5)) of the affiliate in respect of the other corporation at that time, and
(ii) the fair market value at that time of all the issued and outstanding shares of the capital stock of the affiliate;
(2) Subsection (1) applies in respect of a dividend received after August 19, 2011 by a corporation resident in Canada, except where the dividend is received as part of a series of transactions or events that includes a disposition of the shares in respect of which the dividend is received that
(a) is made to a person or partnership that, at the time of the disposition, deals at arm’s length with the corporation; and
(b) occurs under an agreement in writing entered into before August 19, 2011.
63. (1) Subsection 85.1(4) of the Act is replaced by the following:
Marginal note:Exception
(4) Subsection (3) does not apply in respect of a disposition at any time by a taxpayer of a share of the capital stock of a particular foreign affiliate of the taxpayer to another foreign affiliate of the taxpayer if
(a) both
(i) all or substantially all of the property of the particular affiliate was, immediately before that time, excluded property (within the meaning assigned by subsection 95(1)) of the particular affiliate, and
(ii) the disposition is part of a transaction or event or a series of transactions or events for the purpose of disposing of the share to a person or partnership that, immediately after the transaction, event or series, was a person or partnership (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm’s length; or
(b) the adjusted cost base to the taxpayer of the share at that time is greater than the amount that would, in the absence of subsection (3), be the taxpayer’s proceeds of disposition of the share in respect of the disposition.
(2) Subsection (1) applies in respect of dispositions that occur after August 19, 2011.
64. (1) Subparagraph 87(2)(u)(ii) of the Act is replaced by the following:
(ii) for the purposes of subsections 93(2.01), (2.11), (2.21) and (2.31), any exempt dividend received by the predecessor corporation on any such share is deemed to be an exempt dividend received by the new corporation on the share;
(2) Section 87 of the Act is amended by adding the following after subsection (8.1):
Marginal note:Absorptive mergers
(8.2) For the purposes of the definition “foreign merger” in subsection (8.1), if there is a merger or combination, otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation, of two or more non-resident corporations (each of which is referred to in this subsection as a “predecessor foreign corporation”), as a result of which one or more predecessor foreign corporations ceases to exist and, immediately after the merger or combination, another predecessor foreign corporation (referred to in this subsection as the “survivor corporation”) owns properties (except amounts receivable from, or shares of the capital stock of, any predecessor foreign corporation) representing all or substantially all of the fair market value of all such properties owned by each predecessor foreign corporation immediately before the merger or combination, then
(a) the merger or combination is deemed to be a merger or combination of the predecessor foreign corporations to form one non-resident corporation;
(b) the survivor corporation is deemed to be the non-resident corporation so formed;
(c) all of the properties of the survivor corporation immediately before the merger or combination that are properties of the survivor corporation immediately after the merger or combination are deemed to become properties of the survivor corporation as a consequence of the merger or combination;
(d) all of the liabilities of the survivor corporation immediately before the merger or combination that are liabilities of the survivor corporation immediately after the merger or combination are deemed to become liabilities of the survivor corporation as a consequence of the merger or combination;
(e) all of the shares of the capital stock of the survivor corporation that were outstanding immediately before the merger or combination that are shares of the capital stock of the survivor corporation immediately after the merger or combination are deemed to become shares of the capital stock of the survivor corporation as a consequence of the merger or combination; and
(f) all of the shares of the capital stock of each predecessor foreign corporation (other than the survivor corporation) that were outstanding immediately before the merger or combination and that cease to exist as a consequence of the merger or combination are deemed to be exchanged by the shareholders of each such predecessor corporation for shares of the survivor corporation as a consequence of the merger or combination.
(3) Subsection (1) applies if subsection 93(2.01) of the Act, as enacted by subsection 68(4), applies, except that, if that subsection 93(2.01) applies but subsection 93(2.11) of the Act, as enacted by subsection 68(4), does not apply, subparagraph 87(2)(u)(ii) of the Act, as enacted by subsection (1), is to be read as follows:
(ii) for the purposes of subsection 93(2.01), any exempt dividend received by the predecessor corporation on any such share is deemed to be an exempt dividend received by the new corporation on the share;
(4) Subsection (2) applies in respect of mergers or combinations in respect of a taxpayer that occur after 1994. However, subsection (2) does not apply in respect of all mergers or combinations in respect of the taxpayer that occur on or before August 19, 2011 if the taxpayer elects in writing under this subsection and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent.
65. (1) Subsection 88(3) of the Act is replaced by the following:
Marginal note:Liquidation and dissolution of foreign affiliate
(3) Notwithstanding subsection 69(5), if at any time a taxpayer receives a property (referred to in this subsection as the “distributed property”) from a foreign affiliate (referred to in this subsection as the “disposing affiliate”) of the taxpayer on a liquidation and dissolution of the disposing affiliate and the distributed property is received in respect of shares of the capital stock of the disposing affiliate that are disposed of on the liquidation and dissolution,
(a) subject to subsections (3.3) and (3.5), the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the relevant cost base (within the meaning assigned by subsection 95(4)) to the disposing affiliate of the distributed property in respect of the taxpayer, immediately before that time, if
(i) the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate, or
(ii) the distributed property is a share of the capital stock of another foreign affiliate of the taxpayer that was, immediately before that time, excluded property (within the meaning assigned by subsection 95(1)) of the disposing affiliate;
(b) if paragraph (a) does not apply to the distributed property, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the distributed property’s fair market value at that time;
(c) the distributed property is deemed to have been acquired, at that time, by the taxpayer at a cost equal to the amount determined under paragraph (a) or (b) to be the disposing affiliate’s proceeds of disposition of the distributed property;
(d) each share (referred to in paragraph (e) and subsections (3.3) and (3.4) as a “disposed share”) of a class of the capital stock of the disposing affiliate that is disposed of by the taxpayer on the liquidation and dissolution is deemed to be disposed of for proceeds of disposition equal to the amount determined by the formula
A/B
where
- A
- is the total of all amounts each of which is the net distribution amount in respect of a distribution of distributed property made, at any time, in respect of the class, and
- B
- is the total number of issued and outstanding shares of the class that are owned by the taxpayer during the liquidation and dissolution; and
(e) if the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate, any loss of the taxpayer in respect of the disposition of a disposed share is deemed to be nil.
Marginal note:Qualifying liquidation and dissolution
(3.1) For the purposes of subsections (3), (3.3) and (3.5), a “qualifying liquidation and dissolution” of a foreign affiliate (referred to in this subsection as the “disposing affiliate”) of a taxpayer means a liquidation and dissolution of the disposing affiliate in respect of which the taxpayer elects in accordance with prescribed rules and
(a) the taxpayer owns not less than 90% of the issued and outstanding shares of each class of the capital stock of the disposing affiliate throughout the liquidation and dissolution; or
(b) both
(i) the percentage determined by the following formula is greater than or equal to 90%:
A/B
where
- A
- is the amount, if any, by which
(A) the total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate to the taxpayer in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliate
exceeds
(B) the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the taxpayer in consideration for a property referred to in clause (A), and
- B
- is the amount, if any, by which
(A) the total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate to a shareholder of the disposing affiliate in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliate
exceeds
(B) the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by a shareholder of the disposing affiliate in consideration for a property referred to in clause (A), and
(ii) at the time of each distribution of property by the disposing affiliate in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliate, the taxpayer holds shares of that capital stock that would, if an annual general meeting of the shareholders of the disposing affiliate were held at that time, entitle it to 90% or more of the votes that could be cast under all circumstances at the meeting.
Marginal note:Net distribution amount
(3.2) For the purposes of the description of A in paragraph (3)(d), “net distribution amount” in respect of a distribution of distributed property means the amount determined by the formula
A – B
where
- A
- is the cost to the taxpayer of the distributed property as determined under paragraph (3)(c), and
- B
- is the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the taxpayer in consideration for the distribution of the distributed property.
Marginal note:Suppression election
(3.3) For the purposes of paragraph (3)(a), if the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate and the taxpayer would, in the absence of this subsection and, for greater certainty, after taking into account any election under subsection 93(1), realize a capital gain (the amount of which is referred to in subsection (3.4) as the “capital gain amount”) from the disposition of a disposed share, the taxpayer may elect, in accordance with prescribed rules, that distributed property that was, immediately before the disposition, capital property of the disposing affiliate be deemed to have been disposed of by the disposing affiliate to the taxpayer for proceeds of disposition equal to the amount claimed (referred to in subsection (3.4) as the “claimed amount”) by the taxpayer in the election.
Marginal note:Conditions for subsection (3.3) election
(3.4) An election under subsection (3.3) in respect of distributed property disposed of in the course of the liquidation and dissolution is not valid unless
(a) the claimed amount in respect of each distributed property does not exceed the amount that would, in the absence of subsection (3.3), be determined under paragraph (3)(a) in respect of the distributed property; and
(b) the amount determined by the following formula does not exceed the total of all amounts each of which is the capital gain amount in respect of a disposed share:
A – B
where
- A
- is the total of all amounts that would, in the absence of subsection (3.3), be determined under paragraph (3)(a) to be the proceeds of disposition of a distributed property in respect of which an election under subsection (3.3) is made by the taxpayer, and
- B
- is the total of all amounts each of which is the claimed amount in respect of a distributed property referred to in the description of A.
Marginal note:Taxable Canadian property
(3.5) For the purposes of paragraph (3)(a), the distributed property is deemed to have been disposed of by the disposing affiliate to the taxpayer for proceeds of disposition equal to the adjusted cost base of the distributed property to the disposing affiliate immediately before the time of its disposition, if
(a) the liquidation and dissolution is a qualifying liquidation and dissolution of the disposing affiliate;
(b) the distributed property is, at the time of its disposition, taxable Canadian property (other than treaty-protected property) of the disposing affiliate that is a share of the capital stock of a corporation resident in Canada; and
(c) the taxpayer and the disposing affiliate have jointly elected in accordance with prescribed rules.
(2) Subsection (1) applies in respect of liquidations and dissolutions of foreign affiliates of a taxpayer that begin after February 27, 2004. However, if the taxpayer elects in writing under this subsection in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent,
(a) subsection 88(3) of the Act, as enacted by subsection (1), also applies to property received by the taxpayer after February 27, 2004 and before August 19, 2011 on a redemption, acquisition or cancellation of shares of the capital stock of, on a payment of a dividend by, or on a reduction of the paid-up capital of, a foreign affiliate of the taxpayer; and
(b) in respect of property described in paragraph (a) and property received by the taxpayer on a liquidation and dissolution of a foreign affiliate of the taxpayer that began after February 27, 2004 and before August 19, 2011,
(i) subsection 88(3) of the Act, as enacted by subsection (1), is to be read as follows:
(3) Notwithstanding subsection 69(5), if at any time a taxpayer receives a property (referred to in this subsection as the “distributed property”) from a foreign affiliate (referred to in this subsection as the “disposing affiliate”) of the taxpayer, on a liquidation and dissolution of the disposing affiliate, on a redemption, acquisition or cancellation of shares of the capital stock of the disposing affiliate, on a payment of a dividend by the disposing affiliate, or on a reduction of the paid-up capital of the disposing affiliate,
(a) subject to subsections (3.3) and (3.5), the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the relevant cost base (within the meaning assigned by subsection 95(4)) to the disposing affiliate of the distributed property in respect of the taxpayer, immediately before that time, if the distributed property
(i) was received on a liquidation and dissolution of the disposing affiliate that is a qualifying liquidation and dissolution of the disposing affiliate, or
(ii) was a share of the capital stock of another foreign affiliate of the taxpayer that was, immediately before that time, excluded property (within the meaning assigned by subsection 95(1)) of the disposing affiliate;
(b) if paragraph (a) does not apply to the distributed property, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the taxpayer for proceeds of disposition equal to the distributed property’s fair market value at that time;
(c) the distributed property is deemed to have been acquired, at that time, by the taxpayer at a cost equal to the amount determined under paragraph (a) or (b) to be the disposing affiliate’s proceeds of disposition of the distributed property;
(d) if the taxpayer disposed of shares of the capital stock of the disposing affiliate on a liquidation and dissolution of the disposing affiliate (each such share being referred to in paragraph (f) and subsections (3.3) and (3.4) as a “disposed share”) or on a redemption, acquisition or cancellation of shares of the capital stock of the disposing affiliate, the taxpayer’s proceeds of disposition of the shares are deemed to be the amount determined by the formula
A – B
where
- A
- is the total of all amounts each of which is the cost to the taxpayer of a distributed property, as determined under paragraph (c), and
- B
- is the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the taxpayer because of the liquidation and dissolution or the redemption, acquisition or cancellation;
(e) if the taxpayer received the distributed property as a dividend or a reduction of paid-up capital, the amount of the dividend paid by the disposing affiliate or the amount of the reduction of the paid-up capital of the disposing affiliate, as the case may be, is deemed to be the amount determined by the formula
C – D
where
- C
- is the total of all amounts each of which is the cost to the taxpayer of a distributed property, as determined under paragraph (c), and
- D
- is the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the taxpayer because of the payment of the dividend or the reduction of paid-up capital; and
(f) if the distributed property was received on a liquidation and dissolution of the disposing affiliate that is a qualifying liquidation and dissolution of the disposing affiliate, any loss of the taxpayer in respect of the disposition of a disposed share is deemed to be nil.
(ii) section 88 of the Act is to be read without reference to its subsection (3.2), as enacted by subsection (1).
66. (1) Section 90 of the Act is replaced by the following:
Marginal note:Dividend from non-resident corporation
90. (1) In computing the income for a taxation year of a taxpayer resident in Canada, there is to be included any amount received by the taxpayer at any time in the year as, on account or in lieu of payment of, or in satisfaction of, a dividend on a share owned by the taxpayer of the capital stock of a non-resident corporation.
Marginal note:Dividend from foreign affiliate
(2) For the purposes of this Act, an amount is deemed to be a dividend paid or received, as the case may be, at any time on a share of a class of the capital stock of a non-resident corporation that is a foreign affiliate of a taxpayer if the amount is the share’s portion of a pro rata distribution (other than a distribution made in the course of a liquidation and dissolution of the corporation, on a redemption, acquisition or cancellation of the share by the corporation, or on a qualifying return of capital in respect of the share) made at that time by the corporation in respect of all the shares of that class.
Marginal note:Qualifying return of capital
(3) For the purposes of subsection (2), a distribution made at any time by a foreign affiliate of a taxpayer in respect of a share of the capital stock of the affiliate that is a reduction of the paid-up capital of the affiliate in respect of the share and that would, in the absence of this subsection, be deemed under subsection (2) to be a dividend paid or received, at that time, on the share is a qualifying return of capital, at that time, in respect of the share if an election is made under this subsection, in respect of the distribution and in accordance with prescribed rules,
(a) by the taxpayer, where there is no person or partnership that meets the conditions in subparagraphs (b)(i) and (ii); or
(b) jointly by the taxpayer and each person or partnership that is, at that time,
(i) a connected person or partnership in respect of the taxpayer, and
(ii) a person or partnership of which the affiliate would, at that time, be a foreign affiliate if paragraph (b) of the definition “equity percentage” in subsection 95(4) were read as if the reference in that paragraph to “any corporation” were a reference to “any corporation other than a corporation resident in Canada”.
Marginal note:Connected person or partnership
(4) For the purposes of subsection (3), a “connected person or partnership” in respect of a taxpayer, at any time, is
(a) a person that is, at that time, related to the taxpayer, and
(b) a partnership a member of which is, at that time,
(i) the taxpayer, or
(ii) a person that is related to the taxpayer.
Marginal note:Exclusion
(5) No amount paid or received at any time is, for the purposes of this Act, a dividend paid or received on a share of the capital stock of a non-resident corporation that is a foreign affiliate of a taxpayer unless it is so deemed under this Part.
Marginal note:Loan from foreign affiliate
(6) Except where subsection 15(2) applies, if a person or partnership receives at any time a loan from, or becomes at that time indebted to, a creditor that is at that time a foreign affiliate (referred to in subsections (9), (11) and (15) as the “creditor affiliate”) of a taxpayer resident in Canada or that is at that time a partnership (referred to in subsections (9), (11) and (15) as the “creditor partnership”) of which such an affiliate is a member and the person or partnership is at that time a specified debtor in respect of the taxpayer, then the specified amount in respect of the loan or indebtedness is to be included in computing the income of the taxpayer for the taxpayer’s taxation year that includes that time.
Marginal note:Back-to-back loans
(7) For the purposes of this subsection and subsections (6) and (8) to (15), if at any time a person or partnership (referred to in this subsection as the “intermediate lender”) makes a loan to another person or partnership (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another person or partnership (in this subsection referred to as the “initial lender”)
(a) the loan made by the intermediate lender to the intended borrower is deemed, at that time, to have been made by the initial lender to the intended borrower (to the extent of the lesser of the amount of the loan made by the initial lender to the intermediate lender and the amount of the loan made by the intermediate lender to the intended borrower) under the same terms and conditions and at the same time as it was made by the intermediate lender; and
(b) the loan made by the initial lender to the intermediate lender and the loan made by the intermediate lender to the intended borrower are deemed not to have been made to the extent of the amount of the loan deemed to have been made under paragraph (a).
Marginal note:Exceptions to subsection (6)
(8) Subsection (6) does not apply to
(a) a loan or indebtedness that is repaid, other than as part of a series of loans or other transactions and repayments, within two years of the day the loan was made or the indebtedness arose;
(b) indebtedness that arose in the ordinary course of the business of the creditor or a loan made in the ordinary course of the creditor’s ordinary business of lending money if, at the time the indebtedness arose or the loan was made, bona fide arrangements were made for repayment of the indebtedness or loan within a reasonable time; and
(c) a loan that was made, or indebtedness that arose, in the ordinary course of carrying on a life insurance business outside Canada if
(i) the loan or indebtedness is owed by the taxpayer or by a subsidiary wholly-owned corporation of the taxpayer,
(ii) the taxpayer, or the subsidiary wholly-owned corporation, as the case may be, is a life insurance corporation resident in Canada,
(iii) the loan or indebtedness directly relates to a business of the taxpayer, or of the subsidiary wholly-owned corporation, that is carried on outside Canada, and
(iv) the interest on the loan or indebtedness is, or would be if it were otherwise income from property, included in the active business income of the creditor, or if the creditor is a partnership, a member of the partnership, under clause 95(2)(a)(ii)(A).
Marginal note:Corporations: deduction for amounts included under subsection (6) or (12)
(9) There may be deducted in computing the income for a taxation year of a corporation resident in Canada a particular amount, in respect of a specified amount included under subsection (6), or an amount included under subsection (12), in computing the corporation’s income for the taxation year in respect of a particular loan or indebtedness, if
(a) the corporation demonstrates that the particular amount is the total of all amounts (not to exceed the amount so included) each of which would — if the specified amount in respect of the particular loan or indebtedness were, at the time (referred to in subparagraph (i) and subsection (11) as the “lending time”) the particular loan was made or the particular indebtedness was incurred, instead paid by the creditor affiliate, or the creditor partnership, as the case may be, to the corporation directly as part of one dividend, or indirectly as part of one or more dividends and, if applicable, partnership distributions — reasonably be considered to have been deductible, in respect of the payment, for the corporation’s taxation year in which the specified amount was included in its income under subsection (6), in computing
(i) the taxable income of the corporation under any of
(A) paragraph 113(1)(a), in respect of the exempt surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation,
(B) paragraph 113(1)(a.1), in respect of the hybrid surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation, if the amount of that hybrid surplus is less than or equal to the amount determined by the formula
[A × (B – 0.5)] + (C × 0.5)
where
- A
- is the affiliate’s hybrid underlying tax in respect of the corporation at the lending time,
- B
- is the corporation’s relevant tax factor (within the meaning assigned by subsection 95(1)) for the corporation’s taxation year that includes the lending time, and
- C
- is the affiliate’s hybrid surplus in respect of the corporation at the lending time,
(C) paragraph 113(1)(b), in respect of the taxable surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation, and
(D) paragraph 113(1)(d), in respect of the pre-acquisition surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation to the extent of the adjusted cost base to the corporation, at the lending time, of the shares of the capital stock of the affiliate, and except if the specified debtor is
(I) a non-resident person with which the corporation does not deal at arm’s length, or
(II) a partnership any member of which is a person described in subclause (I), or
(ii) the income of the corporation under subsection 91(5), in respect of the taxable surplus of a foreign affiliate of the corporation, if the specified debtor is a person or partnership described in subclause (i)(D)(I) or (II);
(b) that exempt surplus, hybrid surplus, taxable surplus, or adjusted cost base is not relevant in applying this subsection in respect of any other loan made or indebtedness incurred, or in respect of any deduction claimed under subsection 91(5) or 113(1) in respect of a dividend paid, during the period in which the particular loan or indebtedness is outstanding; and
(c) that adjusted cost base is not relevant in determining the taxability of any other distribution made during the period in which the particular loan or indebtedness is outstanding.
Marginal note:Corporate partners: application of subsection (9)
(10) In applying subsection (9) to a corporation resident in Canada that is a member of a partnership at the end of a fiscal period of the partnership,
(a) each amount that may reasonably be considered to be the corporation’s share (determined in a manner consistent with the determination of the corporation’s share of the income of the partnership under subsection 96(1)) of each specified amount that is required to be included in computing the income of the partnership for that fiscal period under subsection (6), in respect of a particular loan or indebtedness, is deemed to be a specified amount in respect of the particular loan or indebtedness that was included in the corporation’s income, for its taxation year that includes the last day of that fiscal period, under subsection (6);
(b) subparagraph (9)(a)(i) is to be read without reference to its clause (D);
(c) subparagraph (9)(a)(ii) is to be read as follows:
(ii) the income of the partnership, referred to in subsection (10), under subsection 91(5), in respect of the taxable surplus of a foreign affiliate of the partnership, to the extent of the amount that may reasonably be considered to be the corporation’s share of that deduction (determined in a manner consistent with the determination of the corporation’s share of the income of the partnership under subsection 96(1));
(d) paragraph (9)(b) is to be read as follows:
(b) that exempt surplus, hybrid surplus, or taxable surplus is not relevant in applying this subsection in respect of any other loan made or indebtedness incurred, or in respect of any deduction claimed under subsection 91(5) or 113(1) in respect of a dividend paid, during the period in which the particular loan or indebtedness is outstanding; and
(e) subsection (9) is to be read without reference to its paragraph (c).
Marginal note:Downstream surplus
(11) For the purposes of subparagraph (9)(a)(i), the amounts of exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax of the creditor affiliate, or of each foreign affiliate of the corporation that is a member of the creditor partnership, as the case may be, in respect of the corporation, at the lending time are deemed to be the amounts that would be determined, at the lending time, under subparagraph 5902(1)(a)(i) of the Income Tax Regulations if that subparagraph were applicable at the lending time and the references in that subparagraph to “the dividend time” were references to the lending time.
Marginal note:Add-back for subsection (9) deduction
(12) There is to be included in computing the income of a corporation resident in Canada for a particular taxation year any amount deducted by the corporation under subsection (9) in computing the corporation’s income for the taxation year that immediately precedes the particular year.
Marginal note:No double deduction
(13) A corporation may not claim a deduction for a taxation year under subsection (9) in respect of the same portion of the specified amount in respect of a loan or indebtedness for which a deduction is claimed for that year or a preceding year by the corporation, or by a partnership of which the corporation is a member, under subsection (14).
Marginal note:Repayment of loan
(14) There may be deducted in computing the income of a taxpayer for a particular taxation year the amount determined by the formula
A × B/C
where
- A
- is the specified amount, in respect of a loan or indebtedness, that is included under subsection (6) in computing the taxpayer’s income for a preceding taxation year,
- B
- is the portion of the loan or indebtedness that was repaid in the particular year, to the extent it is established, by subsequent events or otherwise, that the repayment was not part of a series of loans or other transactions and repayments, and
- C
- is the amount, in respect of the loan or indebtedness, that is referred to in the description of A in the definition “specified amount” in subsection (15).
Marginal note:Definitions
(15) The following definitions apply in this section.
“specified amount”
« montant déterminé »
“specified amount”, in respect of a loan or indebtedness that is required by subsection (6) to be included in computing the income of a taxpayer for a taxation year, means the amount determined by the formula
A × (B – C)
where
- A
- is the amount of the loan or indebtedness, and
- B
- is, in the case of
(a) a creditor affiliate of the taxpayer, the percentage that is or would be, if the taxpayer referred to in subsection (6) were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage (in this definition determined without reference to subsection 5908(1) of the Income Tax Regulations) in respect of the creditor affiliate at the time (referred to in this definition as the “determination time”) referred to in subsection (6), or
(b) a creditor partnership of which a foreign affiliate of the taxpayer is a member, the total of each percentage determined, in respect of a member (referred to in this paragraph as a “member affiliate”) of the creditor partnership that is a foreign affiliate of the taxpayer, by the formula
D × E/F
where
- D
- is the percentage that is or would be, if the taxpayer were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage in respect of a particular member affiliate at the determination time,
- E
- is the fair market value, at the determination time, of the particular member affiliate’s direct or indirect interest in the creditor partnership, and
- F
- is the fair market value, at the determination time, of all interests in the creditor partnership, and
- C
- is,
(a) if the debtor under the loan or indebtedness is
(i) another foreign affiliate of the taxpayer, the percentage that is or would be, if the taxpayer were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage in respect of the other affiliate at the determination time, or
(ii) a partnership (referred to in this paragraph as the “borrower partnership”) of which one or more other foreign affiliates of the taxpayer are members, the total of each percentage that is determined by the following formula in respect of each such member
G × H/I
where
- G
- is the percentage that is or would be, if the taxpayer were a corporation resident in Canada, the taxpayer’s surplus entitlement percentage in respect of a particular member of the borrower partnership at the determination time,
- H
- is the fair market value, at the determination time, of the particular member’s direct or indirect interest in the borrower partnership, and
- I
- is the fair market value, at the determination time, of all interests in the borrower partnership, and
(b) in any other case, nil.
“specified debtor”
« débiteur déterminé »
“specified debtor”, in respect of a taxpayer resident in Canada, at any time, means
(a) the taxpayer;
(b) a person with which the taxpayer does not, at that time, deal at arm’s length, other than a non-resident corporation that is at that time a controlled foreign affiliate, within the meaning assigned by section 17, of the taxpayer;
(c) a partnership a member of which is at that time a person or partnership that is a specified debtor in respect of the taxpayer because of paragraph (a) or (b); and
(d) if the taxpayer is a partnership,
(i) any member of the partnership that is a corporation resident in Canada if the creditor affiliate, or member of the creditor partnership, as the case may be, is, at that time, a foreign affiliate of the corporation,
(ii) a person with which a corporation referred to in subparagraph (i) does not, at that time, deal at arm’s length, other than a controlled foreign affiliate, within the meaning assigned by section 17, of the partnership or of a member of the partnership that owns, directly or indirectly, an interest in the partnership representing at least 90% of the fair market value of all such interests, or
(iii) a partnership a member of which is at that time a person that is a specified debtor in respect of the taxpayer because of subparagraph (i) or (ii).
(2) Subsections 90(1) to (5) of the Act, as enacted by subsection (1), apply after August 19, 2011. However, if a taxpayer has elected under paragraph 79(2)(a), those subsections 90(1) to (5) also apply after December 20, 2002 and on or before August 19, 2011 in respect of the taxpayer, except that, on or before August 19, 2011
(a) subsection 90(2) of the Act, as enacted by subsection (1), is, in respect of the taxpayer, to be read as follows:
(2) For the purposes of this Act, an amount is deemed to be a dividend paid or received, as the case may be, at any time on a share of a class of the capital stock of a non-resident corporation that is a foreign affiliate of a taxpayer if the amount is the share’s portion of a pro rata distribution (other than a distribution made in the course of a liquidation and dissolution of the corporation, on a redemption, acquisition or cancellation of the share by the corporation, or on a reduction of the paid-up capital of the corporation in respect of the share) made at that time by the corporation in respect of all the shares of that class.
(b) section 90 of the Act, as enacted by subsection (1), is to be read without reference to its subsections (3) and (4).
(3) Subsections 90(6) to (15) of the Act, as enacted by subsection (1), apply in respect of loans received and indebtedness incurred after August 19, 2011. However,
(a) subsections 90(6) to (15) of the Act, as enacted by subsection (1), also apply in respect of any portion of a particular loan received or a particular indebtedness incurred on or before August 19, 2011 that remains outstanding on August 19, 2014 as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on August 20, 2014 in the same manner and on the same terms as the particular loan or indebtedness; and
(b) if the taxpayer so elects in writing under this paragraph and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, section 90 of the Act, as enacted by subsection (1), is, in respect of the taxpayer, to be read without reference to its subsection (7) in respect of all loans received and indebtedness incurred on or before October 24, 2012.
67. (1) Section 92 of the Act is amended by adding the following after subsection (1.1):
Marginal note:Adjustment re adjusted cost base
(1.2) There is to be added in computing the adjusted cost base to a taxpayer of a share of the capital stock of a foreign affiliate of the taxpayer any amount required by paragraph 93(4)(b) to be so added.
(2) Subsection (1) is deemed to have come into force on February 28, 2004.
68. (1) The portion of subsection 93(1) of the Act before paragraph (b) is replaced by the following:
Marginal note:Election re disposition of share of foreign affiliate
93. (1) For the purposes of this Act, if a corporation resident in Canada elects, in accordance with prescribed rules, in respect of any share of the capital stock of a particular foreign affiliate of the corporation that is disposed of, at any time, by the corporation (referred to in this subsection as the “disposing corporation”) or by another foreign affiliate (referred to in this subsection as the “disposing affiliate”) of the corporation,
(a) the amount (referred to in this subsection as the “elected amount”) designated by the corporation in its election not exceeding the amount that would, in the absence of this subsection, be the gain of the disposing corporation or disposing affiliate, as the case may be, from the disposition of the share, is deemed
(i) to have been a dividend received on the share from the particular affiliate by the disposing corporation or disposing affiliate, as the case may be, immediately before that time, and
(ii) not to have been received by the disposing corporation or disposing affiliate, as the case may be, as proceeds of disposition in respect of the disposition of the share; and
(2) The portion of paragraph 93(1)(b) of the French version of the Act before subparagraph (i), as enacted by Part 2, is replaced by the following:
b) en cas d’application du paragraphe 40(3) à la société cédante ou la société affiliée cédante, selon le cas, relativement à l’action, le montant réputé en vertu de ce paragraphe être le gain de cette société tiré de la disposition de l’action est réputé, sauf pour l’application de l’alinéa 53(1)a), être égal à l’excédent du montant visé au sous-alinéa (i) sur celui visé au sous-alinéa (ii) :
(3) Subsection 93(1.1) of the Act is replaced by the following:
Marginal note:Application of subsection (1.11)
(1.1) Subsection (1.11) applies if
(a) a particular foreign affiliate of a corporation resident in Canada disposes at any time of a share (referred to in this paragraph and subsection (1.11) as the “disposed share”) of the capital stock of another foreign affiliate of the corporation and the particular affiliate would, in the absence of subsections (1) and (1.11), have a capital gain from the disposition of the disposed share; or
(b) a corporation resident in Canada would, in the absence of subsections (1) and (1.11), be deemed under subsection 40(3), because of an election under subsection 90(3) or subparagraph 5901(2)(b)(i) of the Income Tax Regulations, to have realized a gain from a disposition at any time of a share (referred to in subsection (1.11) as the “disposed share”) of the capital stock of a foreign affiliate of the corporation.
Marginal note:Deemed election
(1.11) If this subsection applies, the corporation resident in Canada referred to in subsection (1.1) is deemed
(a) to have made an election, at the time referred to in subsection (1.1), under subsection (1) in respect of the disposition of the disposed share; and
(b) to have designated, in the election, the prescribed amount in respect of the disposition of the disposed share.
(4) Subsections 93(2) to (2.3) of the Act are replaced by the following:
Marginal note:Application of subsection (2.01)
(2) Subsection (2.01) applies if
(a) a particular corporation (referred to in subparagraph (2.01)(b)(ii) as the “vendor”, as the context requires) resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.01) as the “disposition time”) of a share (referred to in subsection (2.01) as the “affiliate share”) of the capital stock of a foreign affiliate of the particular corporation; or
(b) a foreign affiliate (referred to in subparagraph (2.01)(b)(ii) as the “vendor”) of a particular corporation resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.01) as the “disposition time”) of a share (referred to in subsection (2.01) as the “affiliate share”) of the capital stock of another foreign affiliate of the particular corporation that is not excluded property.
Marginal note:Loss limitation on disposition of share of foreign affiliate
(2.01) If this subsection applies, the amount of the particular loss referred to in paragraph (2)(a) or (b) is deemed to be the greater of
(a) the amount determined by the formula
A – (B – C)
where
- A
- is the amount of the particular loss determined without reference to this section,
- B
- is the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate share or on a share for which the affiliate share was substituted, by
(i) the particular corporation referred to in subsection (2),
(ii) another corporation that is related to the particular corporation,
(iii) a foreign affiliate of the particular corporation, or
(iv) a foreign affiliate of another corporation that is related to the particular corporation, and
- C
- is the total of
(i) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate share or a share for which the affiliate share was substituted, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B,
(ii) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate share or a share for which the affiliate share was substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,
(iii) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, and
(iv) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, and
(b) the lesser of
(i) the portion of the particular loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, and
(ii) the amount determined in respect of the vendor that is
(A) if the particular loss is a capital loss, the amount of a gain (other than a specified gain) that
(I) was made within 30 days before or after the disposition time by the vendor and that
1. is deemed under subsection 39(2) to be a capital gain of the vendor for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, and
2. is in respect of the settlement or extinguishment of a foreign currency debt that was issued or incurred by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor and that was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation and can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share, or
(II) is a capital gain realized within 30 days before or after the disposition time by the vendor under an agreement that
1. was entered into by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,
2. provides for the purchase, sale or exchange of currency, and
3. can reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share, or
(B) in any other case, the amount of a gain (other than a specified gain or a capital gain) that was realized within 30 days before or after the disposition time by the vendor that is included in computing the income of the vendor for the taxation year that includes the time the gain was realized and
(I) that is in respect of the settlement or extinguishment of a foreign currency debt that
1. was issued or incurred by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor,
2. was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, and
3. can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share, or
(II) under an agreement that
1. was entered into by the vendor within 30 days before or after the acquisition of the affiliate share by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,
2. provides for the purchase, sale or exchange of currency, and
3. can reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.
Marginal note:Specified gain
(2.02) For the purposes of clauses (2.01)(b)(ii)(A) and (B), a “specified gain” means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in sub-subclause (2.01)(b)(ii)(A)(I)2 or subclause (2.01)(b)(ii)(B)(I), as the case may be, or that arises under a particular agreement referred to in subclause (2.01)(b)(ii)(A)(II) or (B)(II), if the particular corporation, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.
Marginal note:Application of subsection (2.11)
(2.1) Subsection (2.11) applies if
(a) a particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.11) as the “disposition time”) by a partnership (referred to in subsections (2.11) and (2.12) as the “disposing partnership”) of a share (referred to in subsection (2.11) as the “affiliate share”) of the capital stock of a foreign affiliate of the particular corporation; or
(b) a foreign affiliate of a particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.11) as the “disposition time”) by a partnership (referred to in subsections (2.11) and (2.12) as the “disposing partnership”) of a share (referred to in subsection (2.11) as the “affiliate share”) of the capital stock of another foreign affiliate of the particular corporation that would not be excluded property of the affiliate if the affiliate had owned the share immediately before the disposition time.
Marginal note:Loss limitation on disposition of foreign affiliate share by a partnership
(2.11) If this subsection applies, the amount of the particular allowable capital loss referred to in paragraph (2.1)(a) or (b) is deemed to be the greater of
(a) the amount determined by the formula
A – (B – C)
where
- A
- is the amount of the particular allowable capital loss determined without reference to this section,
- B
- is ½ of the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate share or on a share for which the affiliate share was substituted, by
(i) the particular corporation referred to in subsection (2.1),
(ii) another corporation that is related to the particular corporation,
(iii) a foreign affiliate of the particular corporation, or
(iv) a foreign affiliate of another corporation that is related to the particular corporation, and
- C
- is the total of
(i) the total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate share or a share for which the affiliate share was substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,
(ii) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate share or a share for which the affiliate share was substituted, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B,
(iii) the total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, and
(iv) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, and
(b) the lesser of
(i) the portion of the particular allowable capital loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, and
(ii) ½ of the amount determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.1)(b)) of the particular corporation, that is the amount of a gain (other than a specified gain) that
(A) was made within 30 days before or after the disposition time by the disposing partnership to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be, and that
(I) is deemed under subsection 39(2) to be a capital gain of the disposing partnership for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, and
(II) is in respect of the settlement or extinguishment of a foreign currency debt that
1. was issued or incurred by the disposing partnership within 30 days before or after the acquisition of the affiliate share by the disposing partnership,
2. was, at all times at which it was a debt obligation of the disposing partnership, owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, and
3. can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share, or
(B) is a capital gain (to the extent that the capital gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) realized within 30 days before or after the disposition time by the disposing partnership under an agreement that
(I) was entered into by the disposing partnership, within 30 days before or after the acquisition of the affiliate share by the disposing partnership, with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,
(II) provides for the purchase, sale or exchange of currency, and
(III) can reasonably be considered to have been entered into by the disposing partnership for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.
Marginal note:Specified gain
(2.12) For the purposes of subparagraph (2.11)(b)(ii), a “specified gain” means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in subclause (2.11)(b)(ii)(A)(II), or that arises under a particular agreement referred to in clause (2.11)(b)(ii)(B), if the disposing partnership, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.
Marginal note:Application of subsection (2.21)
(2.2) Subsection (2.21) applies if
(a) a particular corporation (referred to in subparagraph (2.21)(b)(ii) as the “vendor”, as the context requires) resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.21) as the “disposition time”) of an interest (referred to in subsection (2.21) as the “partnership interest”) in a partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.21) as the “affiliate shares”) of the capital stock of a foreign affiliate of the particular corporation; or
(b) a foreign affiliate (referred to in subparagraph (2.21)(b)(ii) as the “vendor”) of a particular corporation resident in Canada has a particular loss, determined without reference to this section, from the disposition by it at any time (referred to in subsection (2.21) as the “disposition time”) of an interest (referred to in subsection (2.21) as the “partnership interest”) in a partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.21) as the “affiliate shares”) of the capital stock of another foreign affiliate of the particular corporation that would not be excluded property of the affiliate if the affiliate had owned the shares immediately before the disposition time.
Marginal note:Loss limitation on disposition of partnership that has foreign affiliate shares
(2.21) If this subsection applies, the amount of the particular loss referred to in paragraph (2.2)(a) or (b) is deemed to be the greater of
(a) the amount determined by the formula
A – (B – C)
where
- A
- is the amount of the particular loss determined without reference to this section,
- B
- is the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on affiliate shares or on shares for which affiliate shares were substituted, by
(i) the particular corporation referred to in subsection (2.2),
(ii) another corporation that is related to the particular corporation,
(iii) a foreign affiliate of the particular corporation, or
(iv) a foreign affiliate of another corporation that is related to the particular corporation, and
- C
- is the total of
(i) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,
(ii) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,
(iii) the total of all amounts each of which is the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B, and
(iv) the total of all amounts each of which is twice the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, and
(b) the lesser of
(i) the portion of the particular loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, and
(ii) the amount determined in respect of the vendor that is
(A) if the particular loss is a capital loss, the amount of a gain (other than a specified gain) that
(I) was made within 30 days before or after the disposition time by the vendor and that
1. is deemed under subsection 39(2) to be a capital gain of the vendor for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, and
2. is in respect of the settlement or extinguishment of a foreign currency debt that was issued or incurred by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor and that was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation and can reasonably be considered to have been issued or incurred in relation to the acquisition of the partnership interest, or
(II) is a capital gain realized within 30 days before or after the disposition time by the vendor under an agreement that
1. was entered into by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,
2. provides for the purchase, sale or exchange of currency, and
3. can reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the partnership interest, or
(B) in any other case, the amount of a gain (other than a specified gain or a capital gain) that was realized within 30 days before or after the disposition time by the vendor that is included in computing the income of the vendor for the taxation year that includes the time the gain was realized and
(I) that is in respect of the settlement or extinguishment of a foreign currency debt that
1. was issued or incurred by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor,
2. was, at all times at which it was a debt obligation of the vendor owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, and
3. can reasonably be considered to have been issued or incurred in relation to the acquisition of the partnership interest, or
(II) under an agreement that
1. was entered into by the vendor within 30 days before or after the acquisition of the partnership interest by the vendor with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,
2. provides for the purchase, sale or exchange of currency, and
3. can reasonably be considered to have been entered into by the vendor for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the partnership interest.
Marginal note:Specified gain
(2.22) For the purposes of clauses (2.21)(b)(ii)(A) and (B), a “specified gain” means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in sub-subclause (2.21)(b)(ii)(A)(I)2 or subclause (2.21)(b)(ii)(B)(I), as the case may be, or that arises under a particular agreement referred to in subclause (2.21)(b)(ii)(A)(II) or (B)(II), if the particular corporation, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.
Marginal note:Application of subsection (2.31)
(2.3) Subsection (2.31) applies if
(a) a particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.31) as the “disposition time”) by a particular partnership of an interest (referred to in subsection (2.31) as the “partnership interest”) in another partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.31) as the “affiliate shares”) of the capital stock of a foreign affiliate of the particular corporation; or
(b) a foreign affiliate of a particular corporation resident in Canada has a particular allowable capital loss, determined without reference to this section, from the disposition at any time (referred to in subsection (2.31) as the “disposition time”) by a particular partnership of an interest (referred to in subsection (2.31) as the “partnership interest”) in another partnership that has a direct or indirect interest, or, for civil law, a direct or indirect right, in shares (referred to in subsection (2.31) as the “affiliate shares”) of the capital stock of a foreign affiliate of the particular corporation that would not be excluded property of the affiliate if the affiliate had owned the shares immediately before the disposition time.
Marginal note:Loss limitation on disposition by a partnership of an indirect interest in foreign affiliate shares
(2.31) If this subsection applies, the amount of the particular allowable capital loss referred to in paragraph (2.3)(a) or (b) is deemed to be the greater of
(a) the amount determined by the formula
A – (B – C)
where
- A
- is the amount of the particular allowable capital loss determined without reference to this section,
- B
- is ½ of the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate shares or on shares for which the affiliate shares were substituted, by
(i) the particular corporation referred to in subsection (2.3),
(ii) another corporation that is related to the particular corporation,
(iii) a foreign affiliate of the particular corporation, or
(iv) a foreign affiliate of another corporation that is related to the particular corporation, and
- C
- is the total of
(i) the total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,
(ii) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,
(iii) the total of all amounts each of which is ½ of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, and
(iv) the total of all amounts each of which is the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under this paragraph in respect of the exempt dividends referred to in the description of B, and
(b) the lesser of
(i) the portion of the particular allowable capital loss, determined without reference to this section, that can reasonably be considered to be attributable to a fluctuation in the value of a currency other than Canadian currency relative to Canadian currency, and
(ii) ½ of the amount determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.3)(b)), of the particular corporation, that is the amount of a gain (other than a specified gain) that
(A) was made within 30 days before or after the disposition time by the particular partnership to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be, and that
(I) is deemed under subsection 39(2) to be a capital gain of the particular partnership for the taxation year that includes the time the gain was made from the disposition of currency other than Canadian currency, and
(II) is in respect of the settlement or extinguishment of a foreign currency debt that
1. was issued or incurred by the particular partnership within 30 days before or after the acquisition of the partnership interest by the particular partnership,
2. was, at all times at which it was a debt obligation of the particular partnership, owing to a person or partnership that dealt, at all times during which the foreign currency debt was outstanding, at arm’s length with the particular corporation, and
3. can reasonably be considered to have been issued or incurred in relation to the acquisition of the partnership interest, or
(B) is a capital gain (to the extent that the capital gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) realized within 30 days before or after the disposition time by the particular partnership under an agreement that
(I) was entered into by the particular partnership, within 30 days before or after the acquisition of the partnership interest by the particular partnership, with a person or partnership that dealt, at all times during which the agreement was in force, at arm’s length with the particular corporation,
(II) provides for the purchase, sale or exchange of currency, and
(III) can reasonably be considered to have been entered into by the particular partnership for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the partnership interest.
Marginal note:Specified gain
(2.32) For the purposes of subparagraph (2.31)(b)(ii), a “specified gain” means a gain in respect of the settlement or extinguishment of a foreign currency debt referred to in subclause (2.31)(b)(ii)(A)(II), or that arises under a particular agreement referred to in clause (2.31)(b)(ii)(B), if the particular partnership, or any person or partnership with which the particular corporation was not — at any time during which the foreign currency debt was outstanding or the particular agreement was in force, as the case may be — dealing at arm’s length, entered into an agreement that may reasonably be considered to have been entered into for the principal purpose of hedging any foreign exchange exposure arising in connection with the foreign currency debt or the particular agreement.
(5) The portion of subsection 93(3) of the Act before paragraph (b) is replaced by the following:
Marginal note:Exempt dividends
(3) For the purposes of subsections (2.01), (2.11), (2.21) and (2.31),
(a) a dividend received by a corporation resident in Canada is an exempt dividend to the extent of the amount in respect of the dividend that is deductible from the income of the corporation for the purpose of computing the taxable income of the corporation because of any of paragraphs 113(1)(a) to (c); and
(6) Subsection 93(4) of the Act is replaced by the following:
Marginal note:Loss on disposition of shares of foreign affiliate
(4) If a taxpayer resident in Canada or a foreign affiliate (which taxpayer or foreign affiliate is referred to in this subsection as the “transferee”) of the taxpayer has acquired shares of the capital stock of one or more foreign affiliates (each referred to in this subsection as an “acquired affiliate”) of the taxpayer on a disposition of shares (such shares disposed of being referred to in this subsection as the “disposed shares”) of the capital stock of any other foreign affiliate of the taxpayer (other than, where the transferee is a foreign affiliate of the taxpayer, a disposition of shares that are, immediately before the acquisition, excluded property of the transferee or a disposition to which subsection 40(3.4) applies), the following rules apply:
(a) the capital loss, if any, of the transferee from the disposition, is deemed to be nil; and
(b) in computing the adjusted cost base to the transferee of a share of a particular class of the capital stock of an acquired affiliate that is owned by the transferee immediately after the disposition, there is to be added the amount determined by the formula
[(A – B) × C/D]/E
where
- A
- is the total of all amounts each of which is the cost amount to the transferee, immediately before the disposition, of a disposed share,
- B
- is the total of
(i) the total of all amounts each of which is the proceeds of disposition of a disposed share, and
(ii) the total of all amounts in respect of the computation of losses of the transferee from the dispositions of the disposed shares, each of which is, in respect of the disposition of a disposed share, the amount by which the amount for A in the formula in paragraph (2.01)(a) exceeds the amount determined by that formula,
- C
- is the fair market value, immediately after the disposition, of all shares of the particular class owned, immediately after the disposition, by the transferee,
- D
- is the fair market value, immediately after the disposition, of all shares owned, immediately after the disposition, by the transferee of the capital stock of all acquired affiliates, and
- E
- is the number of shares of the particular class that are owned by the transferee immediately after the disposition.
(7) Subsections (1) and (2) apply in respect of elections in respect of dispositions that occur after August 19, 2011. However, subsections (1) and (2) do not apply in respect of the determination of the income earned or realized of a foreign affiliate of a corporation under paragraph 55(5)(d) of the Act unless paragraph 55(5)(d) of the Act, as enacted by subsection 62(1), applies in respect of that determination.
(8) Subsection (3) applies to dispositions of shares of the capital stock of a foreign affiliate of a corporation that occur after August 19, 2011. However, if the corporation
(a) has elected under paragraph 79(2)(a), then subsection (3) also applies to dispositions of shares of the capital stock of all foreign affiliates of the corporation that occur after December 20, 2002 and on or before August 19, 2011 as if paragraph 93(1.1)(b) of the Act, as enacted by subsection (3), were read as follows:
(b) a corporation resident in Canada would, in the absence of subsections (1) and (1.11), be deemed under subsection 40(3), because of an election under subparagraph 5901(2)(b)(i) of the Income Tax Regulations, to have realized a gain from a disposition at any time of a share (referred to in subsection (1.11) as the “disposed share”) of the capital stock of a foreign affiliate of the corporation.
(b) has not elected under paragraph 79(2)(a) but elects in writing under this paragraph and files the election with the Minister of National Revenue on or before the day that is the later of the corporation’s filing-due date for the corporation’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then subsection 93(1.1) of the Act, as enacted by subsection (3), is to be read as follows in respect of any disposition of shares of the capital stock of a foreign affiliate of the corporation that occurs after February 27, 2004 and on or before August 19, 2011:
(1.1) If at any time shares of the capital stock of a foreign affiliate of a corporation resident in Canada are disposed of by another foreign affiliate of the corporation, the corporation is deemed
(a) to have made an election at that time under subsection (1) in respect of each of those shares; and
(b) to have designated, in the election, the amount prescribed in respect of each of those shares.
(9) Subsection (4) applies in respect of losses of a corporation resident in Canada, or of foreign affiliates of such a corporation, in respect of dispositions (referred to in paragraphs (a) and (c) as “relevant dispositions” in respect of the corporation) of shares and partnership interests that occur after February 27, 2004. However,
(a) subject to paragraph (c), in respect of relevant dispositions in respect of the corporation that occur before August 19, 2012, the Act is to be read without reference to its subsections 93(2.02), (2.12), (2.22) and (2.32), as enacted by subsection (4), and
(i) if the corporation does not elect under subparagraph (ii),
(A) paragraph 93(2.01)(b) of the Act, as enacted by subsection (4), is to be read as follows:
(b) the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2)(b)) of the particular corporation, as the case may be,
(i) the amount of the gain that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation or the foreign affiliate, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(A) the settlement or extinguishment of an obligation of the particular corporation or the foreign affiliate, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share by the particular corporation or the foreign affiliate, as the case may be, or
(B) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the capital stock of the particular corporation or the foreign affiliate, as the case may be, that can reasonably be considered to have been issued in relation to the acquisition of the affiliate share by the particular corporation or the foreign affiliate, as the case may be, and
(ii) the amount of any gain realized by the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired, by the particular corporation or the foreign affiliate, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.
(B) paragraph 93(2.11)(b) of the Act, as enacted by subsection (4), is to be read as follows:
(b) ½ of the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.1)(b)) of the particular corporation, as the case may be:
(i) the amount of the gain of the particular corporation, the foreign affiliate or the disposing partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation, the foreign affiliate or the disposing partnership, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(A) the settlement or extinguishment of an obligation of the particular corporation, the foreign affiliate or the disposing partnership, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share by the disposing partnership, or
(B) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the capital stock of the particular corporation or the foreign affiliate, as the case may be, that can reasonably be considered to have been issued in relation to the acquisition of the affiliate share by the disposing partnership, and
(ii) the amount of any gain realized by the disposing partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be), the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired, by the disposing partnership, the particular corporation or the foreign affiliate, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.
(C) paragraph 93(2.21)(b) of the Act, as enacted by subsection (4), is to be read as follows:
(b) the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.2)(b)) of the particular corporation, as the case may be:
(i) the amount of the gain of the particular corporation, the foreign affiliate or the partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation, the foreign affiliate or the partnership, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(A) the settlement or extinguishment of an obligation of the particular corporation, the foreign affiliate or the partnership, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate shares, or
(B) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the particular corporation or the foreign affiliate, as the case may be, or of an interest in the partnership that can reasonably be considered to have been issued in relation to the acquisition of the affiliate shares, and
(ii) the amount of any gain realized by the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired by the particular corporation, the foreign affiliate or the partnership, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate shares.
(D) paragraph 93(2.31)(b) of the Act, as enacted by subsection (4), is to be read as follows:
(b) ½ of the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.3)(b)) of the particular corporation, as the case may be:
(i) the amount of the gain of the particular corporation, the foreign affiliate or the particular partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation, the foreign affiliate or the particular partnership, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(A) the settlement or extinguishment of an obligation of the particular corporation, the foreign affiliate, the particular partnership or the other partnership, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate shares, or
(B) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the particular corporation or the foreign affiliate, as the case may be, or an interest in the particular partnership or the other partnership, as the case may be, that can reasonably be considered to have been issued in relation to the acquisition of the affiliate shares, and
(ii) the amount of any gain realized by a partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be), by the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired by the partnership, the particular corporation or the foreign affiliate, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate shares.
(E) if the corporation has elected under subsection 70(32), the references to “August 19, 2011” in clauses 93(2.01)(b)(i)(B), (2.11)(b)(i)(B), (2.21)(b)(i)(B) and (2.31)(b)(i)(B) of the Act in the read-as texts in clauses (A), (B), (C) and (D), respectively, are, in respect of the foreign affiliates referred to in those clauses of the Act, to be read as references to “June 30, 2011”,
(ii) if the corporation elects in writing under this subparagraph in respect of all relevant dispositions in respect of the corporation and files the election with the Minister of National Revenue on or before the day that is the later of the corporation’s filing-due date for the corporation’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent,
(A) in respect of subsection 93(2.01) of the Act, as enacted by subsection (4),
(I) the formula in paragraph (a) of that subsection 93(2.01) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
A – (B – C) + D
(II) paragraph (a) of that subsection 93(2.01) is, in respect of all relevant dispositions in respect of the corporation, to be read as if it contained a description of D that reads as follows:
- D
- is the lesser of
(i) the amount, if any, by which the amount determined for B exceeds the amount determined for C, and
(ii) the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2)(b)) of the particular corporation, as the case may be,
(A) the amount of the gain that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation or the foreign affiliate, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(I) the settlement or extinguishment of an obligation of the particular corporation or the foreign affiliate, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share by the particular corporation or the foreign affiliate, as the case may be, or
(II) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the capital stock of the particular corporation or the foreign affiliate, as the case may be, that can reasonably be considered to have been issued in relation to the acquisition of the affiliate share by the particular corporation or the foreign affiliate, as the case may be, and
(B) the amount of any gain realized by the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired, by the particular corporation or the foreign affiliate, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.
(III) if the corporation has elected under subsection 70(32), the reference to “August 19, 2011” in subclause (ii)(A)(II) of that description of D is, in respect of the foreign affiliate referred to in that subclause, to be read as a reference to “June 30, 2011”,
(IV) paragraph (b) of that subsection 93(2.01) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
(b) nil.
(B) in respect of subsection 93(2.11) of the Act, as enacted by subsection (4),
(I) the formula in paragraph (a) of that subsection 93(2.11) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
A – (B – C) + D
(II) paragraph (a) of that subsection 93(2.11) is, in respect of all relevant dispositions in respect of the corporation, to be read as if it contained a description of D that reads as follows:
- D
- is the lesser of
(i) the amount, if any, by which the amount determined for B exceeds the amount determined for C, and
(ii) ½ of the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.1)(b)) of the particular corporation, as the case may be:
(A) the amount of the gain of the particular corporation, the foreign affiliate or the disposing partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation, the foreign affiliate or the disposing partnership, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(I) the settlement or extinguishment of an obligation of the particular corporation, the foreign affiliate or the disposing partnership, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate share by the disposing partnership, or
(II) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the capital stock of the particular corporation or the foreign affiliate, as the case may be, that can reasonably be considered to have been issued in relation to the acquisition of the affiliate share by the disposing partnership, and
(B) the amount of any gain realized by the disposing partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be), the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired, by the disposing partnership, the particular corporation or the foreign affiliate, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate share.
(III) if the corporation has elected under subsection 70(32), the reference to “August 19, 2011” in subclause (ii)(A)(II) of that description of D is, in respect of the foreign affiliate referred to in that subclause, to be read as a reference to “June 30, 2011”, and
(IV) paragraph (b) of that subsection 93(2.11) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
(b) nil.
(C) in respect of subsection 93(2.21) of the Act, as enacted by subsection (4),
(I) the formula in paragraph (a) of that subsection 93(2.21) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
A – (B – C) + D
(II) paragraph (a) of that subsection 93(2.21) is, in respect of all relevant dispositions in respect of the corporation, to be read as if it contained a description of D that reads as follows:
- D
- is the lesser of
(i) the amount, if any, by which the amount determined for B exceeds the amount determined for C, and
(ii) the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.2)(b)) of the particular corporation, as the case may be:
(A) the amount of the gain of the particular corporation, the foreign affiliate or the partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation, the foreign affiliate or the partnership, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(I) the settlement or extinguishment of an obligation of the particular corporation, the foreign affiliate or the partnership, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate shares, or
(II) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the particular corporation or the foreign affiliate, as the case may be, or of an interest in the partnership that can reasonably be considered to have been issued in relation to the acquisition of the affiliate shares, and
(B) the amount of any gain realized by the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired by the particular corporation, the foreign affiliate or the partnership, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate shares.
(III) if the corporation has elected under subsection 70(32), the reference to “August 19, 2011” in subclause (ii)(A)(II) of that description of D is, in respect of the foreign affiliate referred to in that subclause, to be read as a reference to “June 30, 2011”, and
(IV) paragraph (b) of that subsection 93(2.21) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
(b) nil.
(D) in respect of subsection 93(2.31) of the Act, as enacted by subsection (4),
(I) the formula in paragraph (a) of that subsection 93(2.31) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
A – (B – C) + D
(II) paragraph (a) of that subsection 93(2.31) is, in respect of all relevant dispositions in respect of the corporation, to be read as if it contained a description of D that reads as follows:
- D
- is the lesser of
(i) the amount, if any, by which the amount determined for B exceeds the amount determined for C, and
(ii) ½ of the total of the following amounts determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.3)(b)) of the particular corporation, as the case may be:
(A) the amount of the gain of the particular corporation, the foreign affiliate or the particular partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be) that is included in the determination made under subsection 39(2) of the capital gain or capital loss of the particular corporation, the foreign affiliate or the particular partnership, as the case may be, for the taxation year that includes the time the gain was made from the disposition of currency of a country other than Canada if the gain is in respect of
(I) the settlement or extinguishment of an obligation of the particular corporation, the foreign affiliate, the particular partnership or the other partnership, as the case may be, that can reasonably be considered to have been issued or incurred in relation to the acquisition of the affiliate shares, or
(II) if that taxation year began on or before August 19, 2011 (in the case of the particular corporation) or ended on or before August 19, 2011 (in the case of the foreign affiliate), the redemption, acquisition or cancellation of a share of the particular corporation or the foreign affiliate, as the case may be, or an interest in the particular partnership or the other partnership, as the case may be, that can reasonably be considered to have been issued in relation to the acquisition of the affiliate shares, and
(B) the amount of any gain realized by a partnership (to the extent that the gain is reasonably attributable to the particular corporation or the foreign affiliate, as the case may be), by the particular corporation or the foreign affiliate, as the case may be, under an agreement that provides for the purchase, sale or exchange of currency, or from the disposition of a currency, which agreement or currency, as the case may be, can reasonably be considered to have been entered into or acquired by the partnership, the particular corporation or the foreign affiliate, as the case may be, for the principal purpose of hedging the foreign exchange exposure arising in connection with the acquisition of the affiliate shares.
(III) if the corporation has elected under subsection 70(32), the reference to “August 19, 2011” in subclause (ii)(A)(II) of that description of D is, in respect of the foreign affiliate referred to in that subclause, to be read as a reference to “June 30, 2011”, and
(IV) paragraph (b) of that subsection 93(2.31) is, in respect of all relevant dispositions in respect of the corporation, to be read as follows:
(b) nil.
(b) if the corporation elects in writing under this paragraph in respect of all losses of the corporation, and of all foreign affiliates of the corporation, in respect of dispositions (referred to in this paragraph as “pertinent dispositions” in respect of the corporation) of shares and partnership interests that occur on or before February 27, 2004 and files the election with the Minister of National Revenue on or before the day that is the later of the corporation’s filing-due date for the corporation’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent,
(i) subsections 93(2) and (2.01) — and if paragraph (c) applies, subsection 93(2.02) — of the Act, as enacted by subsection (4), with the modifications described in paragraph (a) (if applicable) being taken into account, also apply in respect of all pertinent dispositions in respect of the corporation that occur after 1994 and on or before February 27, 2004, except that the references to “twice” in that subsection 93(2.01), are,
(A) for taxation years of the corporation that end before February 28, 2000, to be read as references to “4/3 of”, and
(B) for taxation years of the corporation that include February 28, 2000 or October 17, 2000 or that begin after February 28, 2000 and end before October 17, 2000, to be read as references to “the fraction that is the reciprocal of the fraction in paragraph 38(a), as amended by S.C. 2001, c. 17, that applies to the taxpayer for the year, multiplied by”, and
(ii) subsections 93(2.1), (2.11), (2.2), (2.21), (2.3) and (2.31) — and if paragraph (c) applies, subsections 93(2.12), (2.22) and (2.32) — of the Act, as enacted by subsection (4), with the modifications described in paragraph (a) (if applicable) being taken into account, also apply in respect of all pertinent dispositions in respect of the corporation that occur after November 1999 and on or before February 27, 2004, except that the references to “twice” in those subsections 93(2.11), (2.21) and (2.31), are,
(A) for taxation years of the corporation that end before February 28, 2000, to be read as references to “4/3 of”, and
(B) for taxation years of the corporation that include February 28, 2000 or October 17, 2000 or that begin after February 28, 2000 and end before October 17, 2000, to be read as references to “the fraction that is the reciprocal of the fraction in paragraph 38(a), as amended by S.C. 2001, c. 17, that applies to the taxpayer for the year, multiplied by”; and
(c) if the corporation elects in writing under this paragraph in respect of all relevant dispositions in respect of the corporation that occur before August 19, 2012 and files the election with the Minister of National Revenue on or before the day that is the later of the corporation’s filing-due date for the corporation’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, paragraph (a) does not apply in respect of all those relevant dispositions.
(10) Subsection (5) applies if subsection 93(2.01) of the Act, as enacted by subsection (4), applies, except that,
(a) where that subsection 93(2.01) applies but subsection 93(2.11) of the Act, as enacted by subsection (4), does not apply, the portion of subsection 93(3) of the Act before paragraph (a), as enacted by subsection (5), is to be read as follows:
(3) For the purposes of subsection (2.01),
(b) in respect of dispositions that occur on or before August 19, 2011, paragraph 93(3)(a) of the Act, as enacted by subsection (5), is to be read as follows:
(a) a dividend received by a corporation resident in Canada is an exempt dividend to the extent of the amount in respect of the dividend that is deductible from the income of the corporation for the purposes of computing the taxable income of the corporation because of paragraph 113(1)(a), (b) or (c); and
(11) Subsection (6) applies to acquisitions of shares of the capital stock of a foreign affiliate of a taxpayer that occur after February 27, 2004. However, if
(a) the acquisition occurs on or before August 19, 2011, the portion of subsection 93(4) of the Act before paragraph (a), as enacted by subsection (6), is to be read as follows:
(4) If a taxpayer resident in Canada or a foreign affiliate (which taxpayer or foreign affiliate is referred to in this subsection as the “transferee”) of the taxpayer has acquired shares of the capital stock of one or more foreign affiliates (each referred to in this subsection as an “acquired affiliate”) of the taxpayer on a disposition of shares (such shares disposed of being referred to in this subsection as the “disposed shares”) of the capital stock of any other foreign affiliate of the taxpayer (other than a disposition to which subsection 40(3.4) applies), the following rules apply:
(b) the taxpayer has elected under paragraph (8)(b), subsection (6), with the portion of subsection 93(4) of the Act before paragraph (a), as enacted by that subsection, being read as required by paragraph (a), applies to all acquisitions of shares of the capital stock of all foreign affiliates of the taxpayer that occur after 1994.
69. (1) The portion of subsection 93.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Shares held by partnership
93.1 (1) For the purposes of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2), 20(12) and 39(2.1), sections 90, 93 and 113, paragraph 128.1(1)(d), (and any regulations made for the purposes of those provisions), section 95 (to the extent that it is applied for the purposes of those provisions), paragraph 95(2)(g.04) and section 126, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that
(2) Section 93.1 of the Act is amended by adding the following after subsection (2):
Marginal note:Tiered partnerships
(3) A person or partnership that is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership, and the person or partnership is deemed to have, directly, rights to the income or capital of the other partnership to the extent of the person or partnership’s direct and indirect rights to that income or capital, for the purposes of applying
(a) except to the extent that the context otherwise requires, a provision of this subdivision;
(b) any of paragraphs 13(21.2)(a), 14(12)(a), 18(13)(a), 40(2)(e.1), (e.3) and (g) and (3.3)(a); and
(c) subsections 39(2.1) and 40(3.6).
(3) Subsection (1) is deemed to have come into force on August 20, 2011.
(4) Subsection (2) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011.
70. (1) The formula in the definition “foreign accrual property income” in subsection 95(1) of the Act is replaced by the following:
(A + A.1 + A.2 + B + C) – (D + E + F + F.1 + G + H)
(2) The description of B in the definition “foreign accrual property income” in subsection 95(1) of the Act is replaced by the following:
- B
- is the total of all amounts each of which is the portion of the affiliate’s income (to the extent that the income is not included under the description of A) for the year, or of the affiliate’s taxable capital gain for the year that can reasonably be considered to have accrued after its 1975 taxation year, from a disposition of property
(a) that is not, at the time of disposition, excluded property of the affiliate, or
(b) that is, at the time of disposition, excluded property of the affiliate, if any of paragraphs (2)(c), (d) and (d.1), subparagraph (2)(e)(i) and paragraph 88(3)(a) applies to the disposition,
(3) The description of E in the definition “foreign accrual property income” in subsection 95(1) of the Act is replaced by the following:
- E
- is the lesser of
(a) the amount of the affiliate’s allowable capital losses for the year from dispositions of property (other than excluded property and property in respect of which an election is made by the taxpayer under subsection 88(3.3)) that can reasonably be considered to have accrued after its 1975 taxation year, and
(b) the total of all amounts each of which is the portion of a taxable capital gain of the affiliate that is included in the amount determined for B in respect of the affiliate for the year,
(4) The definition “foreign accrual property income” in subsection 95(1) of the Act is amended by adding the following after the description of F:
- F.1
- is the lesser of
(a) the prescribed amount for the year, and
(b) the amount, if any, by which
(i) the total of all amounts each of which is the portion of a taxable capital gain of the affiliate that is included in the amount determined for B in respect of the affiliate for the year
exceeds
(ii) the amount determined for E in respect of the affiliate for the year,
(5) Paragraph (b) of the description of G in the definition “foreign accrual property income” in subsection 95(1) of the Act is replaced by the following:
(b) the total of all amounts determined for D to F.1 in respect of the affiliate for the year, and
(6) Subparagraph (b)(i) of the definition “participating percentage” in subsection 95(1) of the Act is replaced by the following:
(i) the percentage that would be the taxpayer’s equity percentage in the affiliate at the end of that taxation year on the assumption that the taxpayer owned no shares other than the particular share (but in no case shall that assumption be made for the purpose of determining whether or not a corporation is a foreign affiliate of the taxpayer) if
(A) the affiliate and each corporation that is relevant to the determination of the taxpayer’s equity percentage in the affiliate have, at that time, only one class of issued shares, and
(B) no foreign affiliate (referred to in this clause as the “upper-tier affiliate”) of the taxpayer that is relevant to the determination of the taxpayer’s equity percentage in the affiliate has, at that time, an equity percentage in a foreign affiliate (including, for greater certainty, the affiliate) of the taxpayer that has an equity percentage in the upper-tier affiliate, and
(7) Subsection 95(1) of the Act is amended by adding the following in alphabetical order:
“designated liquidation and dissolution”
« liquidation et dissolution désignées »
“designated liquidation and dissolution”, of a foreign affiliate (referred to in this definition as the “disposing affiliate”) of a taxpayer, means a liquidation and dissolution of the disposing affiliate in respect of which
(a) the taxpayer had, immediately before the time of the earliest distribution of property by the disposing affiliate in the course of the liquidation and dissolution, a surplus entitlement percentage in respect of the disposing affiliate of not less than 90%,
(b) both
(i) the percentage determined by the following formula is greater than or equal to 90%:
A/B
where
- A
- is the amount, if any, by which
(A) the total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate, in respect of shares of the capital stock of the disposing affiliate, in the course of the liquidation and dissolution to one particular shareholder of the disposing affiliate that was, immediately before the time of the distribution, a foreign affiliate of the taxpayer
exceeds
(B) the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the particular shareholder in consideration for a property referred to in clause (A), and
- B
- is the amount, if any, by which
(A) the total of all amounts each of which is the fair market value, at the time at which it is distributed, of a property that is distributed by the disposing affiliate, in respect of shares of the capital stock of the disposing affiliate, to a shareholder of the disposing affiliate in the course of the liquidation and dissolution
exceeds
(B) the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by a shareholder of the disposing affiliate in consideration for a property referred to in clause (A), and
(ii) at the time of each distribution of property by the disposing affiliate in the course of the liquidation and dissolution in respect of shares of the capital stock of the disposing affiliate, the particular shareholder holds shares of that capital stock that would, if an annual general meeting of the shareholders of the disposing affiliate were held at that time, entitle it to 90% or more of the votes that could be cast under all circumstances at the meeting, or
(c) one particular shareholder of the disposing affiliate that was, throughout the liquidation and dissolution, a foreign affiliate of the taxpayer owns not less than 90% of the issued shares of each class of the capital stock of the disposing affiliate throughout the liquidation and dissolution;
“taxable Canadian business”
« entreprise canadienne imposable »
“taxable Canadian business”, at any time, of a foreign affiliate of a taxpayer resident in Canada or of a partnership of which a foreign affiliate of a taxpayer resident in Canada is a member (which foreign affiliate or partnership is referred to in this definition as the “operator”), means a business the income from which
(a) is, or would be if there were income from the business for the operator’s taxation year or fiscal period that includes that time, included in computing the foreign affiliate’s taxable income earned in Canada for a taxation year under subparagraph 115(1)(a)(ii), and
(b) is not, or would not be if there were income from the business for the operator’s taxation year or fiscal period that includes that time, exempt, because of a tax treaty with a country, from tax under this Part;
(8) Paragraph 95(2)(c) of the Act is replaced by the following:
(c) if a foreign affiliate (referred to in this paragraph as the “disposing affiliate”) of a taxpayer has, at any time, disposed of capital property (other than property the adjusted cost base of which, at that time, is greater than the amount that would, in the absence of this paragraph, be the disposing affiliate’s proceeds of disposition of the property in respect of the disposition) that was shares (referred to in this paragraph as the “shares disposed of”) of the capital stock of another foreign affiliate of the taxpayer to any other corporation that was, immediately after that time, a foreign affiliate (referred to in this paragraph as the “acquiring affiliate”) of the taxpayer for consideration that includes shares of the capital stock of the acquiring affiliate,
(i) the cost to the disposing affiliate of any property (other than shares of the capital stock of the acquiring affiliate) receivable by the disposing affiliate as consideration for the disposition is deemed to be the fair market value of the property at that time,
(ii) the cost to the disposing affiliate of each share of a class of the capital stock of the acquiring affiliate that is receivable by the disposing affiliate as consideration for the disposition is deemed to be the amount determined by the formula
(A – B) × C/D
where
- A
- is the total of all amounts each of which is the relevant cost base to the disposing affiliate at that time, in respect of the taxpayer, of a share disposed of,
- B
- is the fair market value at that time of the consideration receivable for the disposition (other than shares of the capital stock of the acquiring affiliate),
- C
- is the fair market value, immediately after that time, of the share, and
- D
- is the fair market value, immediately after that time, of all shares of the capital stock of the acquiring affiliate receivable by the disposing affiliate as consideration for the disposition,
(iii) the disposing affiliate’s proceeds of disposition of the shares are deemed to be an amount equal to the cost to it of all shares and other property receivable by it from the acquiring affiliate as consideration for the disposition, and
(iv) the cost to the acquiring affiliate of the shares acquired from the disposing affiliate is deemed to be an amount equal to the disposing affiliate’s proceeds of disposition referred to in subparagraph (iii);
(9) Subparagraph 95(2)(d)(iv) of the Act is replaced by the following:
(iv) “adjusted cost bases” were read as “relevant cost bases, in respect of the taxpayer,”;
(10) Paragraphs 95(2)(d.1) to (e.1) of the Act are replaced by the following:
(d.1) if there has been a foreign merger of two or more predecessor foreign corporations to form a new foreign corporation that is, immediately after the merger, a foreign affiliate of a taxpayer and one or more of the predecessor foreign corporations (each being referred to in this paragraph as a “foreign affiliate predecessor”) was, immediately before the merger, a foreign affiliate of the taxpayer,
(i) each property of the new foreign corporation that was a property of a foreign affiliate predecessor immediately before the merger is deemed to have been
(A) disposed of by the foreign affiliate predecessor immediately before the merger for proceeds of disposition equal to the relevant cost base of the property to the foreign affiliate predecessor, in respect of the taxpayer, at that time, and
(B) acquired by the new foreign corporation, at that time, at a cost equal to the amount determined under clause (A),
(ii) the new foreign corporation is deemed to be the same corporation as, and a continuation of, each foreign affiliate predecessor for the purposes of applying
(A) this subsection and the definition “foreign accrual property income” in subsection (1) with respect to any disposition by the new foreign corporation of any property to which subparagraph (i) applied,
(B) subsections 13(21.2), 14(12), 18(15) and 40(3.4) in respect of any property that was disposed of, at any time before the merger, by a foreign affiliate predecessor, and
(C) paragraph 40(3.5)(c) in respect of any share that was deemed under that paragraph to be owned, at any time before the merger, by a foreign affiliate predecessor, and
(iii) for the purposes of the description of A.2 in the definition “foreign accrual property income” in subsection (1), the total of all amounts each of which is the amount determined for G in respect of a foreign affiliate predecessor for its last taxation year that ends on or before the time of the merger is deemed to be the amount determined for G in respect of the new foreign corporation for its taxation year that immediately precedes its first taxation year;
(e) notwithstanding subsection 69(5), if at any time a foreign affiliate (referred to in this paragraph as the “shareholder affiliate”) of a taxpayer receives a property (referred to in this paragraph as the “distributed property”) from another foreign affiliate (referred to in this paragraph as the “disposing affiliate”) of the taxpayer on a liquidation and dissolution of the disposing affiliate and the distributed property is received in respect of shares of the capital stock of the disposing affiliate that are disposed of on the liquidation and dissolution,
(i) the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the shareholder affiliate for proceeds of disposition equal to the relevant cost base to the disposing affiliate of the distributed property in respect of the taxpayer, immediately before that time, if
(A) the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate, or
(B) the distributed property is a share of the capital stock of another foreign affiliate of the taxpayer that was, immediately before that time, excluded property of the disposing affiliate,
(ii) if subparagraph (i) does not apply to the distributed property, the distributed property is deemed to have been disposed of at that time by the disposing affiliate to the shareholder affiliate for proceeds of disposition equal to the distributed property’s fair market value at that time,
(iii) the distributed property is deemed to have been acquired, at that time, by the shareholder affiliate at a cost equal to the amount determined under subparagraph (i) or (ii) to be the disposing affiliate’s proceeds of disposition of the distributed property,
(iv) each share of a class of the capital stock of the disposing affiliate that is disposed of by the shareholder affiliate on the liquidation and dissolution of the disposing affiliate is deemed to be disposed of for proceeds of disposition equal to
(A) if the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate
(I) where the amount that would, if clause (B) applied, be determined under that clause in respect of the share is greater than or equal to the adjusted cost base of the share to the shareholder affiliate immediately before the disposition, that adjusted cost base, or
(II) where the adjusted cost base of the share to the shareholder affiliate immediately before the disposition exceeds the amount that would, if clause (B) applied, be determined under that clause in respect of the share
1. if the share is not excluded property of the shareholder affiliate, that adjusted cost base, and
2. in any other case, the amount that would be determined under clause (B), and
(B) in any other case, the amount determined by the formula
(A – B)/C
where
- A
- is the total of all amounts each of which is the cost to the shareholder affiliate of a distributed property, as determined under subparagraph (iii), received, at any time, in respect of the class,
- B
- is the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the shareholder affiliate in consideration for the distribution of a distributed property referred to in the description of A, and
- C
- is the total number of issued and outstanding shares of the class that are owned by the shareholder affiliate during the liquidation and dissolution, and
(v) if the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate,
(A) the shareholder affiliate is deemed to be the same corporation as, and a continuation of, the disposing affiliate for the purposes of applying
(I) this subsection and the definition “foreign accrual property income” in subsection (1) with respect to any disposition by the shareholder affiliate of any property to which clause (i)(A) applied,
(II) subsections 13(21.2), 14(12), 18(15) and 40(3.4) in respect of any property that was disposed of, at any time before the liquidation and dissolution, by the disposing affiliate, and
(III) paragraph 40(3.5)(c) in respect of any share that was deemed under that paragraph to be owned, at any time before the liquidation and dissolution, by the disposing affiliate, and
(B) for the purposes of the description of A.2 in the definition “foreign accrual property income” in subsection (1), the amount, if any, determined for G in respect of the disposing affiliate for its first taxation year that ends after the beginning of the liquidation and dissolution is to be added to the amount otherwise determined for G in respect of the shareholder affiliate for its taxation year that immediately precedes its taxation year that includes the time at which the liquidation and dissolution began;
(11) Subparagraph 95(2)(f.11)(i) of the Act is replaced by the following:
(i) if the amount is described in subparagraph (f)(i), this Act is to be
(A) read without reference to section 26 of the Income Tax Application Rules, and
(B) applied as if, in respect of any debt obligation owing by the foreign affiliate or a partnership of which the foreign affiliate is a member (which foreign affiliate or partnership is referred to in this clause as the “debtor”), each capital gain or loss of the debtor that is deemed to arise under subsection 39(2) or (3) in respect of the debt obligation were from a disposition of property that was held by the debtor throughout the period during which the debt obligation was owed by the debtor and, for greater certainty, at the time of the disposition,
(12) Subparagraph 95(2)(f.11)(ii) of the Act is amended by striking out “and” at the end of clause (A), adding “and” at the end of clause (B) and adding the following after clause (B):
(C) this Act is to be applied as if, in respect of any debt obligation owing by the foreign affiliate or a partnership of which the foreign affiliate is a member (which foreign affiliate or partnership is referred to in this clause as the “debtor”), each amount of income or loss of the debtor — from a property, from a business other than an active business or from a non-qualifying business — in respect of the debt obligation were from such a property that was held, or such a business that was carried on, as the case may be, by the debtor throughout the period during which the debt obligation was owed by the debtor and at the time at which the debt obligation was settled or extinguished;
(13) Subparagraph 95(2)(f.12)(i) of the Act is replaced by the following:
(i) subject to paragraph (f.13), each capital gain, capital loss, taxable capital gain and allowable capital loss (other than a gain or loss in respect of a debt referred to in subparagraph (i)(i) or (ii)) of the foreign affiliate for the taxation year from the disposition, at any time, of a property that, at that time, was an excluded property of the foreign affiliate,
(14) Paragraphs 95(2)(f.14) and (f.15) of the Act are replaced by the following:
(f.14) a foreign affiliate of a taxpayer is to determine using Canadian currency each amount of its income, loss, capital gain, capital loss, taxable capital gain or allowable capital loss for a taxation year, other than an amount to which paragraph (f.12), (f.13) or (f.15) applies;
(f.15) for the purposes of applying subparagraph (f)(i) in respect of a debt obligation owing by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member, that is a debt referred to in subparagraph (i)(i) or (ii), the references in subsection 39(2) to “Canadian currency” are to be read as references to “the taxpayer’s calculating currency”;
(15) Subparagraph 95(2)(g)(ii) of the Act is replaced by the following:
(ii) the redemption, acquisition or cancellation of, or a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of, a share of the capital stock of a qualified foreign affiliate by the qualified foreign affiliate, or
(16) Paragraph 95(2)(g.02) of the Act is repealed.
(17) Subsection 95(2) of the Act is amended by adding the following after paragraph (g.03):
(g.04) if at any time a corporation resident in Canada or a partnership of which such a corporation is a member (such corporation or partnership referred to in this paragraph as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this paragraph as a “creditor affiliate”) of the borrowing party or that is a partnership (referred to in this paragraph as a “creditor partnership”) of which such an affiliate is a member, the loan or indebtedness is at a later time repaid, in whole or in part, and the amount of the borrowing party’s capital gain or capital loss determined, in the absence of subsection 39(2.1), under subsection 39(2) in respect of the repayment is equal to the amount of the creditor affiliate’s or creditor partnership’s capital loss or capital gain, as the case may be, determined, in respect of the borrowing party and in the absence of this paragraph, in respect of the repayment, then that capital loss or capital gain is deemed to be nil;
(18) Subparagraph 95(2)(k)(iv) of the Act is replaced by the following:
(iv) if the foreign business of the affiliate is a business in respect of which the affiliate would, if the foreign business were carried on in Canada, be required by law to report to a regulating authority in Canada such as the Superintendent of Financial Institutions or a similar authority of a province,
(A) the affiliate is deemed to be required by law to report to and to be subject to the supervision of such regulating authority, and
(B) if the affiliate is a life insurer and the foreign business of the affiliate is a life insurance business, the life insurance policies issued in the conduct of that business are deemed to be life insurance policies in Canada, and
(19) Paragraph 95(2)(k) of the Act, as amended by subsection (18), is replaced by the following:
(j.1) paragraph (j.2) applies if, in a particular taxation year of a foreign affiliate of a taxpayer or in a particular fiscal period of a partnership (which foreign affiliate or partnership is referred to in this paragraph and paragraph (j.2) as the “operator” and which particular taxation year or particular fiscal period is referred to in this paragraph and paragraph (j.2) as the “specified taxation year”) a member of which is, at the end of the period, a foreign affiliate of a taxpayer,
(i) the operator carries on a business,
(ii) the business includes the insuring of risks,
(iii) the business is not, at any time, a taxable Canadian business,
(iv) the business is
(A) an investment business,
(B) a non-qualifying business, or
(C) a business whose activities include activities deemed by paragraph (a.2) or (b) to be a separate business, other than an active business, carried on by the affiliate, and
(v) in respect of the investment business, non-qualifying business or separate business (each of these businesses being referred to in this subparagraph and paragraph (j.2) as a “foreign business”), as the case may be, the operator would, if it were a corporation carrying on the foreign business in Canada, be required by law to report to, and be subject to the supervision of, a regulatory authority that is the Superintendent of Financial Institutions or is a similar authority of a province;
(j.2) if this paragraph applies, in computing the operator’s income or loss from the foreign business for the specified taxation year and each subsequent taxation year or fiscal period in which the foreign business is carried on by the operator
(i) the operator is deemed to carry on the foreign business in Canada throughout that part of the specified taxation year, and of each of those subsequent taxation years or fiscal periods, in which the foreign business is carried on by the operator, and
(ii) for the purposes of Part XIV of the Income Tax Regulations,
(A) the operator is deemed to be required by law to report to, and to be subject to the supervision of, the regulatory authority referred to in subparagraph (j.1)(v), and
(B) if the operator is a life insurer and the foreign business is part of a life insurance business, the life insurance policies issued in the conduct of the foreign business are deemed to be life insurance policies in Canada;
(k) paragraph (k.1) applies if
(i) in a particular taxation year of a foreign affiliate of a taxpayer or in a particular fiscal period of a partnership (which foreign affiliate or partnership is referred to in this paragraph and paragraph (k.1) as the “operator” and which particular taxation year or particular fiscal period is referred to in this paragraph and paragraph (k.1) as the “specified taxation year”) a member of which is, at the end of the period, a foreign affiliate of a taxpayer,
(A) the operator carries on a business,
(B) the business is not, at any time, a taxable Canadian business, and
(C) the business is
(I) an investment business,
(II) a non-qualifying business,
(III) a business whose activities include activities deemed by any of paragraphs (a.1) to (b) to be a separate business, other than an active business, carried on by the affiliate, or
(IV) a business the income from which is included by paragraph (l) in computing the affiliate’s income from property for the specified taxation year, and
(ii) in the taxation year of the affiliate or the fiscal period of the partnership that includes the day that is immediately before the beginning of the specified taxation year,
(A) the affiliate or partnership carried on the business, or the activities so deemed to be a separate business, as the case may be,
(B) the business was not, or the activities were not, as the case may be, at any time, part of a taxable Canadian business, and
(C) the business was not described in any of subclauses (i)(C)(I), (II) and (IV), or the activities were not described in subclause (i)(C)(III), as the case may be;
(k.1) if this paragraph applies, in computing the operator’s income or loss from the investment business, non-qualifying business, separate business or business described in paragraph (l) (each of these businesses being referred to in this paragraph as a “foreign business”), as the case may be, and the operator’s capital gain or capital loss from the disposition of property used or held in the course of carrying on the foreign business, for the specified taxation year and each subsequent taxation year or fiscal period in which the foreign business is carried on by the operator
(i) the operator is deemed
(A) to begin to carry on the foreign business in Canada at the beginning of the specified taxation year, and
(B) to carry on the foreign business in Canada throughout that part of the specified taxation year, and of each of those subsequent taxation years or fiscal periods, in which the foreign business is carried on by the operator,
(ii) where, in respect of the foreign business, the operator would, if it were a corporation carrying on the foreign business in Canada, be required by law to report to, and be subject to the supervision of, a regulatory authority that is the Superintendent of Financial Institutions or a similar authority of a province,
(A) the operator is deemed to be required by law to report to, and to be subject to the supervision of, the regulatory authority, and
(B) if the operator is a life insurer and the foreign business is part of a life insurance business, the life insurance policies issued in the conduct of the foreign business are deemed to be life insurance policies in Canada, and
(iii) paragraphs 138(11.91)(c) to (e) apply to the operator for the specified taxation year in respect of the foreign business as if
(A) the operator were the insurer referred to in subsection 138(11.91),
(B) the specified taxation year of the operator were the particular taxation year of the insurer referred to in that subsection,
(C) the foreign business of the operator were the business of the insurer referred to in that subsection, and
(D) the reference in paragraph 138(11.91)(e) to “property owned by it at that time that is designated insurance property in respect of the business” were read as a reference to “property owned or held by it at that time that is used or held by it in the particular taxation year in the course of carrying on the insurance business”;
(k.2) for the purposes of paragraphs (j.1) to (k.1) and the definition “taxable Canadian business” in subsection (1), any portion of a business carried on by a person or partnership that is carried on in Canada is deemed to be a business that is separate from any other portion of the business carried on by the person or partnership;
(20) Paragraph 95(2)(u) of the Act is replaced by the following:
(u) if any entity is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership,
(i) the entity is deemed to be a member of the other partnership for the purposes of
(A) subparagraph (ii),
(B) applying the reference, in paragraph (a), to “a member” of a partnership,
(C) paragraphs (a.1) to (b), (g.03), (j.1) to (k.1) and (o),
(D) paragraphs (b) and (c) of the definition “investment business” in subsection (1), and
(E) the definition “taxable Canadian business” in subsection (1), and
(ii) in applying paragraph (g.03) and the definition “taxable Canadian business” in subsection (1), the entity is deemed to have, directly, rights to the income or capital of the other partnership to the extent of the entity’s direct and indirect rights to that income or capital;
(21) Paragraph 95(2)(u) of the Act, as enacted by subsection (20), is repealed.
(22) The definition “relevant cost base” in subsection 95(4) of the Act is replaced by the following:
“relevant cost base”
« prix de base approprié »
“relevant cost base”, of a property at any time to a foreign affiliate of a taxpayer, in respect of the taxpayer, means the greater of
(a) the amount determined — or, if the taxpayer is not a corporation, the amount that would be determined if the taxpayer were a corporation resident in Canada — by the formula
A + B – C
where
- A
- is the amount for which the property could be disposed of at that time that would not, in the absence of paragraph (2)(f.1), result in any amount being added to, or deducted from, any of the affiliate’s
(i) exempt earnings, exempt loss, taxable earnings and taxable loss (all within the meaning of subsection 5907(1) of the Income Tax Regulations), in respect of the taxpayer, for the taxation year of the affiliate that includes that time, and
(ii) hybrid surplus and hybrid deficit, in respect of the taxpayer, at that time,
- B
- is the amount, if any, by which any income or gain from a disposition of the property would, if the property were disposed of at that time for proceeds of disposition equal to its fair market value at that time be reduced under paragraph (2)(f.1), and
- C
- is the amount, if any, by which any loss from a disposition of the property would, if the property were disposed of at that time for proceeds of disposition equal to its fair market value at that time be reduced under paragraph (2)(f.1), and
(b) either
(i) if the affiliate is an eligible controlled foreign affiliate of the taxpayer at that time, the amount that the taxpayer elects, in accordance with prescribed rules, in respect of the property not exceeding the fair market value at that time of the property, or
(ii) in any other case, nil.
(23) Subsection 95(4) of the Act is amended by adding the following in alphabetical order:
“eligible controlled foreign affiliate”
« société étrangère affiliée contrôlée admissible »
“eligible controlled foreign affiliate”, of a taxpayer, at any time, means a foreign affiliate at that time of the taxpayer in respect of which the following conditions are met:
(a) the affiliate is a controlled foreign affiliate of the taxpayer at that time and at the end of the affiliate’s taxation year that includes that time, and
(b) the total of all amounts each of which would be, if this definition were read without reference to this paragraph, the participating percentage (determined at the end of the taxation year) of a share owned by the taxpayer of the capital stock of a corporation, in respect of the affiliate, is not less than 90%;
(24) Subsections (1), (4) and (5) apply in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011.
(25) Subsection (2) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after December 19, 2002. However, paragraph (b) of the description of B in the definition “foreign accrual property income” in subsection 95(1) of the Act, as enacted by subsection (2), is
(a) if the taxpayer has elected under subsection (28) but not under subsection (31), to be read as follows:
(b) that is, at the time of disposition, excluded property of the affiliate, if any of paragraphs (2)(c) and (d), subparagraph (2)(e)(i) and paragraph 88(3)(a) applies to the disposition,
(b) if the taxpayer has elected under subsection (31) but not under subsection (28), to be read as follows:
(b) that is, at the time of disposition, excluded property of the affiliate, if any of paragraphs (2)(c) to (e) and 88(3)(a) applies to the disposition,
(c) if the taxpayer has elected under neither subsection (28) nor subsection (31), to be read as follows:
(b) that is, at the time of disposition, excluded property of the affiliate, if any of paragraphs (2)(c), (d), (e) and 88(3)(a) applies to the disposition,
(26) Subsection (3) applies to dispositions of property by a foreign affiliate of a taxpayer that occur after February 27, 2004, except that, in respect of such dispositions of property that occur in taxation years of the foreign affiliate that end on or before August 19, 2011, the description of E in the definition “foreign accrual property income” in subsection 95(1) of the Act, as enacted by subsection (3), is to be read as follows:
- E
- is the amount of the affiliate’s allowable capital losses for the year from dispositions of property (other than excluded property and property in respect of which an election is made by the taxpayer under subsection 88(3.3)) that can reasonably be considered to have accrued after its 1975 taxation year,
(27) Subsection (6) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after August 19, 2011.
(28) The definition “designated liquidation and dissolution” in subsection 95(1) of the Act, as enacted by subsection (7), paragraph 95(2)(e) of the Act, as enacted by subsection (10), and the repeal by subsection (10) of paragraph 95(2)(e.1) of the Act apply in respect of liquidations and dissolutions of foreign affiliates of a taxpayer that begin after August 19, 2011. However, if the taxpayer elects in writing under this subsection in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then
(a) the definition “designated liquidation and dissolution” in subsection 95(1) of the Act, as enacted by subsection (7), that paragraph 95(2)(e) and that repeal of paragraph 95(2)(e.1) apply to liquidations and dissolutions of all foreign affiliates of the taxpayer that begin after December 20, 2002; and
(b) in respect of liquidations and dissolutions of all foreign affiliates of the taxpayer that begin on or before August 19, 2011,
(i) the definition “designated liquidation and dissolution” in subsection 95(1) of the Act, as enacted by subsection (7), is to be read without reference to its subparagraph (b)(ii), and
(ii) subparagraphs 95(2)(e)(iv) and (v) of the Act, as enacted by subsection (10), are to be read as follows:
(iv) each share of a class of the capital stock of the disposing affiliate that is disposed of by the shareholder affiliate on the liquidation and dissolution of the disposing affiliate is deemed to be disposed of for proceeds of disposition equal to
(A) if the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate, the adjusted cost base of the share to the shareholder affiliate immediately before the disposition, and
(B) in any other case, the amount determined by the formula
(A – B)/C
where
- A
- is the total of all amounts each of which is the cost to the shareholder affiliate of a distributed property, as determined under subparagraph (iii), received in respect of the class,
- B
- is the total of all amounts each of which is an amount owing (other than an unpaid dividend) by, or an obligation of, the disposing affiliate that was assumed or cancelled by the shareholder affiliate in consideration for the distribution of a distributed property referred to in the description of A, and
- C
- is the total number of issued and outstanding shares of the class that are owned by the shareholder affiliate during the liquidation and dissolution, and
(v) if the liquidation and dissolution is a designated liquidation and dissolution of the disposing affiliate, for the purposes of this subsection and the definition “foreign accrual property income” in subsection (1), the shareholder affiliate is, with respect to any disposition by it of any property to which clause (i)(A) applied, deemed to be the same corporation as, and a continuation of, the disposing affiliate;
(29) The definition “taxable Canadian business” in subsection 95(1) of the Act, as enacted by subsection (7), and subsection (19) apply in respect of taxation years of a foreign affiliate of a taxpayer that begin after December 20, 2002. However,
(a) in respect of taxation years of a foreign affiliate of the taxpayer that begin before August 19, 2011,
(i) subparagraph 95(2)(j.1)(iv) of the Act, as enacted by subsection (19), is to be read without reference to its clause (B),
(ii) subparagraph 95(2)(j.1)(v) of the Act, as enacted by subsection (19), is to be read as follows:
(v) in respect of the investment business or separate business (each of these businesses being referred to in this subparagraph and paragraph (j.2) as a “foreign business”), as the case may be, the operator would, if it were a corporation carrying on the foreign business in Canada, be required by law to report to, and be subject to the supervision of, a regulatory authority that is the Superintendent of Financial Institutions or a similar authority of a province;
(iii) clause 95(2)(k)(i)(C) of the Act, as enacted by subsection (19), is to be read without reference to its subclause (II),
(iv) clause 95(2)(k)(ii)(C) of the Act, as enacted by subsection (19), is to be read as follows:
(C) the business was not described in subclause (i)(C)(I) or (IV) or the activities were not described in subclause (i)(C)(III);
(v) the portion of paragraph 95(2)(k.1) of the Act before subparagraph (i), as enacted by subsection (19), is to be read as follows:
(k.1) if this paragraph applies, in computing the operator’s income or loss from the investment business, separate business or business referred to in paragraph (l) (each of these businesses being referred to in this paragraph as a “foreign business”), as the case may be, and the operator’s capital gain or capital loss from the disposition of property used or held in the course of carrying on the foreign business, for the specified taxation year and each subsequent taxation year or fiscal period in which the foreign business is carried on by the operator
(b) if the taxpayer elects in writing under this paragraph in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent,
(i) the definition “taxable Canadian business” in subsection 95(1) of the Act, as enacted by subsection (7), and subsection (19), with paragraphs 95(2)(j.1) to (k.1) of the Act, as enacted by that subsection, being read as required by subparagraphs (a)(i) to (v), also apply in respect of taxation years of all foreign affiliates of the taxpayer that begin after 1994 and before December 21, 2002,
(ii) in applying paragraph (b) of the definition “taxable Canadian business” in subsection 95(1) of the Act, as enacted by subsection (7), in respect of the 1997 and preceding taxation years of all foreign affiliates of the taxpayer, that paragraph is to be read as follows:
(b) is not, or would not be if there were income from the business for the operator’s taxation year or fiscal period that includes that time, exempt — because of a comprehensive agreement or convention for the elimination of double taxation on income, between the Government of Canada and the government of another country, which has the force of law in Canada at that time — from tax under this Part;
(iii) in applying subparagraph 95(2)(k)(ii) of the Act, as enacted by subsection (19), in respect of taxation years of all foreign affiliates of the taxpayer that begin after 1994 and before December 21, 2002, that subparagraph is to be read as follows:
(ii) both
(A) in the taxation year of the affiliate or the fiscal period of the partnership that includes the day that is immediately before the beginning of the specified taxation year,
(I) the affiliate or partnership carried on the business, or the activities deemed to be a separate business, as the case may be,
(II) the business was not, or the activities were not, as the case may be, at any time, part of a taxable Canadian business, and
(III) the business was not described in subclause (i)(C)(IV), or the activities were not described in subclause (i)(C)(III), as the case may be, and
(B) in the case of the business, if any,
(I) the business was not described in subclause (i)(C)(I) in that taxation year or fiscal period, or
(II) the definition “investment business” in subsection (1) did not apply in respect of that taxation year or fiscal period;
(30) Subsection (8) applies to dispositions that occur after August 19, 2011.
(31) Subsection (9) and paragraph 95(2)(d.1) of the Act, as enacted by subsection (10), apply in respect of mergers or combinations in respect of a foreign affiliate of a taxpayer that occur after August 19, 2011. However, if the taxpayer elects in writing under this subsection in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent,
(a) that paragraph 95(2)(d.1) applies to mergers or combinations in respect of all foreign affiliates of the taxpayer that occur after December 20, 2002; and
(b) in respect of such mergers or combinations that occur before August 19, 2011, the portion of that paragraph 95(2)(d.1) after subparagraph (i) is to be read as follows:
(ii) for the purposes of this subsection and the definition “foreign accrual property income” in subsection (1), the new foreign corporation is, with respect to any disposition by it of any property to which subparagraph (i) applied, deemed to be the same corporation as, and a continuation of, the foreign affiliate predecessor that owned the property immediately before the merger;
(32) Subsections (11) to (16) apply in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011. However, if the taxpayer so elects in writing under this subsection in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then subsections (11) to (16) apply in respect of taxation years of all foreign affiliates of the taxpayer that end after June 2011.
(33) Subsection (17) applies in respect of the portions of loans received and indebtedness incurred on or before August 19, 2011 that remain outstanding on that date and that are repaid, in whole or in part, on or before August 19, 2016.
(34) Subsection (18) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after 1999.
(35) Subsection (20) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after December 20, 2002. However, if the taxpayer has elected under paragraph (29)(b), subsection (20) also applies in respect of taxation years of all foreign affiliates of the taxpayer that begin after 1994 and before December 21, 2002, except that, if the taxpayer has not elected under subsection 26(40) of the Budget and Economic Statement Implementation Act, 2007, paragraph 95(2)(u) of the Act, as enacted by subsection (20), is, in respect of taxation years of all foreign affiliates of the taxpayer that end before 2000, to be read as follows:
(u) if any entity is, or is deemed by this paragraph to be, a member of a particular partnership that is a member of another partnership,
(i) the entity is deemed to be a member of the other partnership for the purposes of
(A) paragraphs (j.1) to (k.1), and
(B) the definition “taxable Canadian business” in subsection (1), and
(ii) in applying the definition “taxable Canadian business” in subsection (1), the entity is deemed to have, directly, rights to the income or capital of the other partnership to the extent of the entity’s direct and indirect rights to that income or capital;
(36) Subsection (21) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011.
(37) Subsections (22) and (23) apply in respect of determinations made after February 27, 2004 in respect of property of a foreign affiliate of a taxpayer. However,
(a) if the taxpayer has elected under subsection (28) or (31), subsections (22) and (23) also apply to such determinations made after December 20, 2002 and before February 28, 2004 but only in respect of
(i) where an election is made under subsection (28) but no election is made under subsection (31), property that is subject to the application of paragraph 95(2)(e) of the Act, as enacted by subsection (10),
(ii) where no election is made under subsection (28) but an election is made under subsection (31), property that is subject to the application of paragraph 95(2)(d.1) of the Act, as enacted by subsection (10), and
(iii) where elections are made under subsections (28) and (31), property that is subject to the application of paragraph 95(2)(d.1) or (e) of the Act, as enacted by subsection (10);
(b) in respect of any such determinations made for the purposes of paragraph 88(3)(a) of the Act, as enacted by subsection 65(1),
(i) if the determination is made on or before August 19, 2011 and is in respect of property that is a share of the capital stock of a foreign affiliate of the taxpayer that is excluded property (within the meaning assigned by subsection 95(1) of the Act) of the disposing affiliate, the definition “relevant cost base” in subsection 95(4) of the Act, as enacted by subsection (22), is to be read as follows:
- “relevant cost base”
“relevant cost base”, of a property at any time to a foreign affiliate of a taxpayer, means the adjusted cost base to the affiliate of the property at that time or such greater amount as the taxpayer elects, in accordance with prescribed rules, in respect of the property not exceeding the fair market value at that time of the property.
(ii) if the determination is made on or before August 19, 2011 and is in respect of property received in the course of a qualifying liquidation and dissolution of the disposing affiliate, the definition “eligible controlled foreign affiliate” in subsection 95(4) of the Act, as enacted by subsection (23), is to be read as follows:
- “eligible controlled foreign affiliate”
“eligible controlled foreign affiliate”, of a taxpayer at any time, means a controlled foreign affiliate of the taxpayer at that time.
(c) in respect of any such determinations made on or before August 19, 2011 for the purposes of paragraph 95(2)(c), (d) or, if the taxpayer has not elected under subsection (28), paragraph 95(2)(e) of the Act, the definition “relevant cost base” in subsection 95(4) of the Act, as enacted by subsection (22), is to be read in the manner specified in subparagraph (b)(i);
(d) if the taxpayer has elected under subsection (31), in respect of any such determinations made on or before August 19, 2011 for the purposes of paragraph 95(2)(d.1) of the Act, as enacted by subsection (10), the definition “eligible controlled foreign affiliate” in subsection 95(4) of the Act, as enacted by subsection (23), is to be read in the manner specified in subparagraph (b)(ii); and
(e) if the taxpayer has elected under subsection (28), in respect of any such determinations made on or before August 19, 2011 for the purposes of paragraph 95(2)(e) of the Act, as enacted by subsection (10), the definition “eligible controlled foreign affiliate” in subsection 95(4) of the Act, as enacted by subsection (23), is to be read in the manner specified in subparagraph (b)(ii).
71. (1) The portion of subsection 96(3) of the Act before paragraph (a), as enacted by subsection 228(5), is replaced by the following:
Marginal note:Agreement or election of partnership members
(3) If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 13(4), (4.2) and (16) and 14(1.01), (1.02) and (6), section 15.2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04, subsections 86.1(2), 88(3.1), (3.3) and (3.5) and 90(3), the definition “relevant cost base” in subsection 95(4) and subsections 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,
(2) Subsection (1) applies to agreements, designations and elections made or executed after August 19, 2011.
72. (1) Subsection 113(1) of the Act is amended by adding the following after paragraph (a):
(a.1) an amount equal to the total of
(i) one-half of the portion of the dividend that is prescribed to have been paid out of the hybrid surplus, as defined by regulation (in this Part referred to as “hybrid surplus”), of the affiliate, and
(ii) the lesser of
(A) the total of
(I) the product obtained when the foreign tax prescribed to be applicable to the portion of the dividend referred to in subparagraph (i) is multiplied by the amount by which
1. the corporation’s relevant tax factor for the year
exceeds
2. one-half, and
(II) the product obtained when
1. the non-business-income tax paid by the corporation applicable to the portion of the dividend referred to in subparagraph (i)
is multiplied by
2. the corporation’s relevant tax factor for the year, and
(B) the amount determined under subparagraph (i),
(2) Subparagraph 113(2)(b)(iii.1) of the Act is replaced by the following:
(iii.1) the total of all amounts received by the corporation on the share after the end of its 1975 taxation year and before the particular time
(A) on a reduction, before August 20, 2011, of the paid-up capital of the foreign affiliate in respect of the share, or
(B) on a reduction, after August 19, 2011, of the paid-up capital of the foreign affiliate in respect of the share that is a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of the share, and
(3) Subsection (1) applies in respect of dividends received after August 19, 2011.
(4) Subsection (2) is deemed to have come into force on August 20, 2011.
73. (1) Subparagraphs 128.1(1)(d)(i) and (ii) of the Act are replaced by the following:
(i) the affiliate is deemed to have been a controlled foreign affiliate of the other taxpayer immediately before the particular time, and
(ii) the prescribed amount is to be included in the foreign accrual property income of the affiliate for its taxation year that ends immediately before the particular time.
(2) Subsection (1) applies to taxation years that begin after 2006.
74. (1) Paragraph 152(6.1)(b) of the Act, as enacted by Part 2, is replaced by the following:
(b) the amount included in computing the taxpayer’s income for the particular year under subsection 91(1) is subsequently reduced because of a reduction in the foreign accrual property income of a foreign affiliate of the taxpayer for a taxation year (referred to in this paragraph as the “claim year”) of the affiliate that ends in the particular year, if
(i) the reduction is
(A) attributable to a foreign accrual property loss (within the meaning assigned by subsection 5903(3) of the Income Tax Regulations) of the affiliate for a taxation year of the affiliate that ends in a subsequent taxation year of the taxpayer, and
(B) included in the description of F in the definition “foreign accrual property income” in subsection 95(1) in respect of the affiliate for the claim year, or
(ii) the reduction is
(A) attributable to a foreign accrual capital loss (within the meaning assigned by subsection 5903.1(3) of the Income Tax Regulations) of the affiliate for a taxation year of the affiliate that ends in a subsequent taxation year of the taxpayer, and
(B) included in the description of F.1 in the definition “foreign accrual property income” in subsection 95(1) in respect of the affiliate for the claim year, and
(2) Subsection (1) applies to taxation years that end after August 19, 2011.
75. (1) The portion of subsection 186(1) of the French version of the Act before subparagraph (b)(i) is replaced by the following:
Marginal note:Impôt sur les dividendes imposables déterminés
186. (1) Toute société qui est une société privée ou une société assujettie au cours d’une année d’imposition est tenue de payer, au plus tard à la date d’exigibilité du solde qui lui est applicable pour l’année, un impôt pour l’année en vertu de la présente partie égal à l’excédent éventuel du total des montants suivants :
a) le tiers de l’ensemble des dividendes imposables déterminés qu’elle a reçus au cours de l’année de sociétés autres que des sociétés payantes auxquelles elle est rattachée,
b) les montants représentant chacun un montant au titre d’un dividende imposable déterminé qu’elle a reçu au cours de l’année d’une société privée ou d’une société assujettie qui était une société payante à laquelle elle était rattachée, égal au produit de la multiplication du remboursement au titre de dividendes, au sens de l’alinéa 129(1)a), de la société payante pour son année d’imposition au cours de laquelle elle a versé le dividende par le rapport entre :
(2) The portion of subsection 186(1.1) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Réduction d’impôt
(1.1) Malgré le paragraphe (1), l’impôt payable par ailleurs en vertu de la présente partie par une société pour une année d’imposition est réduit de celui des montants ci-après qui est applicable si elle reçoit au cours de l’année un dividende imposable déterminé qui est inclus dans un montant sur lequel l’impôt prévu à la partie IV.1 est payable par elle pour l’année :
(3) The definition dividende déterminé in subsection 186(3) of the French version of the Act is repealed.
(4) The definition “assessable dividend” in subsection 186(3) of the English version of the Act is replaced by the following:
“assessable dividend”
« dividende imposable déterminé »
“assessable dividend” means an amount received by a corporation at a time when it is a private corporation or a subject corporation as, on account of, in lieu of payment of or in satisfaction of, a taxable dividend from a corporation, to the extent of the amount in respect of the dividend that is deductible under section 112, paragraph 113(1)(a), (a.1), (b) or (d) or subsection 113(2) in computing the recipient corporation’s taxable income for the year.
(5) Subsection 186(3) of the French version of the Act is amended by adding the following in alphabetical order:
« dividende imposable déterminé »
“assessable dividend”
dividende imposable déterminé Somme reçue par une société, à un moment où elle est une société privée ou une société assujettie, au titre ou en paiement intégral ou partiel d’un dividende imposable d’une société, jusqu’à concurrence de la somme relative au dividende qui est déductible en application de l’article 112, des alinéas 113(1)a), a.1), b) ou d) ou du paragraphe 113(2) dans le calcul du revenu imposable pour l’année de la société qui a reçu le dividende.
(6) Subsections (1) to (5) are deemed to have come into force on August 20, 2011.
76. (1) Subsection 258(4) of the Act is replaced by the following:
Marginal note:Exception
(4) Subsection (3) does not apply to a dividend described in paragraph (3)(a)
(a) if the share on which the dividend was paid was not acquired in the ordinary course of the business carried on by the corporation; or
(b) to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the corporation.
(2) Section 258 of the Act is amended by adding the following after subsection (5):
Marginal note:Exception
(6) Subsection (5) does not apply to a dividend described in that subsection to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the recipient.
(3) Subsections (1) and (2) apply to dividends paid after August 19, 2011.
77. (1) Paragraph 261(5)(e) of the Act is replaced by the following:
(e) except in applying paragraph 95(2)(f.15) in respect of a taxation year, of a foreign affiliate of the taxpayer, that is a functional currency year of the foreign affiliate within the meaning of subsection (6.1), each reference in subsection 39(2) to “Canadian currency” is to be read, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, as a reference to “the taxpayer’s elected functional currency”;
(2) Subparagraph 261(5)(f)(i) of the Act is replaced by the following:
(i) section 76.1, subsection 79(7), paragraph 80(2)(k), subsections 80.01(11), 80.1(8), 93(2.01) to (2.31), 142.4(1) and 142.7(8) and the definition “amortized cost” in subsection 248(1), and subparagraph 231(6)(a)(iv) of the Income Tax Regulations, to “Canadian currency” is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as “the taxpayer’s elected functional currency”, and
(3) Subparagraph 261(7)(a)(i) of the Act is replaced by the following:
(i) is, or is relevant to the determination of, an amount that may be deducted under subsection 37(1) or 66(4), variable F or F.1 in the definition “foreign accrual property income” in subsection 95(1), section 110.1 or 111 or subsection 126(2), 127(5), 129(1), 181.1(4) or 190.1(3), in the particular functional currency year, and
(4) Subsection (1) applies in respect of gains made and losses sustained in taxation years that begin after August 19, 2011.
(5) Subsection (2) applies in respect of taxation years that begin after December 13, 2007.
(6) Subsection (3) is deemed to have come into force on August 20, 2011.
C.R.C., c. 945Income Tax Regulations
78. (1) Subsection 5900(1) of the Income Tax Regulations is amended by adding the following after paragraph (a):
(a.1) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the portion of the dividend paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the dividend received that
(i) the portion of the whole dividend paid by the affiliate on the shares of that class at that time that was deemed by section 5901 to have been paid out of the affiliate’s hybrid surplus in respect of the corporation
is of
(ii) the whole dividend paid by the affiliate on the shares of that class at that time;
(2) Subsection 5900(1) of the Regulations is amended by striking out “and” at the end of paragraph (c) and by adding the following after paragraph (c):
(c.1) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the foreign tax applicable to the portion of the dividend prescribed to have been paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the hybrid underlying tax applicable, in respect of the corporation, to the whole dividend paid by the affiliate on the shares of that class at that time that
(i) the amount of the dividend received by the corporation or the affiliate, as the case may be, on that share at that time
is of
(ii) the whole dividend paid by the affiliate on the shares of that class at that time; and
(3) Subsections (1) and (2) apply to dividends received after August 19, 2011.
79. (1) Subsections 5901(1) and (2) of the Regulations are replaced by the following:
5901. (1) Subject to subsection (1.1), if at any time in its taxation year a foreign affiliate of a corporation resident in Canada has paid a whole dividend on the shares of any class of its capital stock, for the purposes of this Part
(a) the portion of the whole dividend deemed to have been paid out of the affiliate’s exempt surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount of the whole dividend, and
(ii) the amount, if any, by which the exempt surplus exceeds the total of
(A) the affiliate’s hybrid deficit, if any, in respect of the corporation at that time, and
(B) the affiliate’s taxable deficit, if any, in respect of the corporation at that time;
(a.1) the portion of the whole dividend deemed to have been paid out of the affiliate’s hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the portion determined under paragraph (a), and
(ii) the amount, if any, by which the hybrid surplus exceeds
(A) if the affiliate has an exempt deficit and a taxable deficit, in respect of the corporation at that time, the total of the exempt deficit and the taxable deficit,
(B) if the affiliate has an exempt deficit and no taxable deficit, in respect of the corporation at that time, the amount of the exempt deficit, and
(C) if the affiliate has a taxable deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the taxable deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time;
(b) the portion of the whole dividend deemed to have been paid out of the affiliate’s taxable surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the total of the portions determined under paragraphs (a) and (a.1), and
(ii) the amount, if any, by which the taxable surplus exceeds
(A) if the affiliate has an exempt deficit and a hybrid deficit, in respect of the corporation at that time, the total of the exempt deficit and the hybrid deficit,
(B) if the affiliate has an exempt deficit and no hybrid deficit, in respect of the corporation at that time, the amount, if any, by which the exempt deficit exceeds the affiliate’s hybrid surplus in respect of the corporation at that time, and
(C) if the affiliate has a hybrid deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the hybrid deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time; and
(c) the portion of the whole dividend deemed to have been paid out of the affiliate’s pre-acquisition surplus in respect of the corporation at that time is the amount, if any, by which the whole dividend exceeds the total of the portions determined under paragraphs (a) to (b).
(1.1) If the corporation resident in Canada that is referred to in subsection (1) elects in writing under this subsection in respect of the whole dividend referred to in subsection (1) and files the election with the Minister on or before the corporation’s filing-due date for its taxation year that includes the day the whole dividend was paid, subsection (1) applies in respect of the whole dividend as if its paragraphs (a.1) and (b) read as follows:
(a.1) the portion of the whole dividend deemed to have been paid out of the affiliate’s taxable surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the portion determined under paragraph (a), and
(ii) the amount, if any, by which the taxable surplus exceeds
(A) if the affiliate has an exempt deficit and a hybrid deficit, in respect of the corporation at that time, the total of the exempt deficit and the hybrid deficit,
(B) if the affiliate has an exempt deficit and no hybrid deficit, in respect of the corporation at that time, the amount of the exempt deficit, and
(C) if the affiliate has a hybrid deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the hybrid deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time;
(b) the portion of the whole dividend deemed to have been paid out of the affiliate’s hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the total of the portions determined under paragraphs (a) and (a.1),
(ii) the amount, if any, by which the hybrid surplus exceeds
(A) if the affiliate has an exempt deficit and a taxable deficit, in respect of the corporation at that time, the total of the exempt deficit and the taxable deficit,
(B) if the affiliate has an exempt deficit and no taxable deficit, in respect of the corporation at that time, the amount, if any, by which the exempt deficit exceeds the affiliate’s taxable surplus in respect of the corporation at that time, and
(C) if the affiliate has a taxable deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the taxable deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time; and
(2) Notwithstanding subsection (1),
(a) if a foreign affiliate of a corporation resident in Canada pays a whole dividend (other than a whole dividend referred to in subsection 5902(1)) at any particular time in its taxation year that is more than 90 days after the commencement of that year or at any particular time in its 1972 taxation year that is before January 1, 1972, the portion of the whole dividend that would, in the absence of this paragraph, be deemed to have been paid out of the affiliate’s pre-acquisition surplus in respect of the corporation (otherwise than because of an election under paragraph (b)) is instead deemed to have been paid out of the exempt surplus, hybrid surplus and taxable surplus of the affiliate in respect of the corporation to the extent that it would have been deemed to have been so paid if, immediately after the end of that year, that portion were paid as a separate whole dividend before any whole dividend paid after the particular time and after any whole dividend paid before the particular time by the affiliate, and for the purposes of determining the exempt deficit, exempt surplus, hybrid deficit, hybrid surplus, hybrid underlying tax, taxable deficit, taxable surplus and underlying foreign tax of the affiliate in respect of the corporation at any time, that portion is deemed to have been paid as a separate whole dividend immediately following the end of the year and not to have been paid at the particular time; and
(b) a whole dividend referred to in subsection (1) that is paid at any time by a foreign affiliate of a corporation resident in Canada and that would, in the absence of this paragraph, be deemed under subsection (1) to have been, in whole or in part, paid out of the exempt surplus, hybrid surplus or taxable surplus of the affiliate in respect of the corporation is instead deemed to have been paid out of the pre-acquisition surplus of the affiliate in respect of the corporation if
(i) the corporation, and each other corporation, if any, of which the affiliate would, at that time, be a foreign affiliate if paragraph (b) of the definition “equity percentage” in subsection 95(4) of the Act were read as if the reference in that paragraph to “any corporation” were a reference to “any corporation other than a corporation resident in Canada” and that is, at that time, related to the corporation,
(A) where there is no such other corporation, elects in writing under this subparagraph and files the election with the Minister on or before the filing-due date for its taxation year in which the whole dividend is paid, and
(B) in any other case, jointly elect in writing under this subparagraph and file the election with the Minister on or before the earliest of the filing-due dates for their taxation years in which the whole dividend is paid,
(ii) no shareholder of the affiliate is, at that time, a partnership a member of which is
(A) a corporation that would, in the absence of this subparagraph, be eligible to elect under subparagraph (i), or
(B) a foreign affiliate of such a corporation, and
(iii) no particular person or particular partnership — in respect of which the affiliate would, at that time, be a foreign affiliate if paragraph (b) of the definition “equity percentage” in subsection 95(4) of the Act were read in the manner required by subparagraph (i) — has elected under subsection 90(3) of the Act in respect of the distribution that is the whole dividend where
(A) in the case of a particular person, the particular person is, or is at that time related to, the corporation, or
(B) in the case of a particular partnership, a member of the particular partnership is, or is at that time related to, the corporation.
(2.1) Subsection (2.2) applies if, in respect of a whole dividend paid by a foreign affiliate of a corporation resident in Canada,
(a) the corporation determined not to make an election under subparagraph (2)(b)(i) in respect of the whole dividend before the filing-due date specified in the relevant clause of that subparagraph;
(b) the corporation demonstrates that the determination was made using reasonable efforts; and
(c) the corporation, whether jointly with one or more other corporations or otherwise, files such an election on or before the day that is 10 years after that filing-due date.
(2.2) If this subsection applies and, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit an election referred to in subsection (2.1) to be filed after the filing-due date specified in the relevant clause of subparagraph (2)(b)(i), that election is deemed to have been filed on that filing-due date.
(2) Subsection (1) applies to dividends paid after August 19, 2011 by a foreign affiliate of a corporation. However,
(a) if the corporation and each other corporation (the corporation and those other corporations together referred to in this paragraph as the “elector corporations”), if any, of which the affiliate would be a foreign affiliate if paragraph (b) of the definition “equity percentage” in subsection 95(4) of the Act were read as if the reference in that paragraph to “any corporation” were a reference to “any corporation other than a corporation resident in Canada” and that is related to the corporation jointly elect in writing under this paragraph in respect of all of their respective foreign affiliates and file the election with the Minister of National Revenue on or before the day that is the later of the earliest of the filing-due dates for their taxation years that include the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, subsections 5901(2) to (2.2) of the Regulations, as enacted by subsection (1), apply to dividends paid after December 20, 2002 by all the respective foreign affiliates of the elector corporations, except that, for such dividends paid on or before August 19, 2011,
(i) paragraph 5901(2)(a) of the Regulations, as enacted by subsection (1), is to be read as follows:
(a) if a foreign affiliate of a corporation resident in Canada pays a whole dividend (other than a whole dividend referred to in subsection 5902(1)) at any particular time in its taxation year that is more than 90 days after the commencement of that year or at any particular time in its 1972 taxation year that is before January 1, 1972, the portion of the whole dividend that would, in the absence of this paragraph, be deemed to have been paid out of the affiliate’s pre-acquisition surplus in respect of the corporation (otherwise than because of an election under paragraph (b)) is instead deemed to have been paid out of the exempt surplus and taxable surplus of the affiliate in respect of the corporation to the extent that it would have been deemed to have been so paid if, immediately after the end of that year, that portion were paid as a separate whole dividend before any whole dividend paid after the particular time and after any whole dividend paid before the particular time by the affiliate, and for the purposes of determining the exempt deficit, exempt surplus, taxable deficit, taxable surplus and underlying foreign tax of the affiliate in respect of the corporation at any time, that portion is deemed to have been paid as a separate whole dividend immediately following the end of the year and not to have been paid at the particular time, and
(ii) the portion of paragraph 5901(2)(b) of the Regulations, as enacted by subsection (1), before subparagraph (i) is to be read as follows:
(b) a whole dividend referred to in subsection (1) that is paid at any time by a foreign affiliate of a corporation resident in Canada and that would, in the absence of this paragraph, be deemed under subsection (1) to have been, in whole or in part, paid out of the exempt surplus or taxable surplus of the affiliate in respect of the corporation is instead deemed to have been paid out of the pre-acquisition surplus of the affiliate in respect of the corporation if
(iii) paragraph 5901(2)(b) of the Regulations, as enacted by subsection (1), is to be read without reference to its subparagraph (iii);
(b) any election referred to in subparagraph 5901(2)(b)(i) of the Regulations, as enacted by subsection (1), that would otherwise be required to be filed with the Minister of National Revenue before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been filed with the Minister on a timely basis if it is filed with the Minister within 365 days after the day on which this Act receives royal assent; and
(c) any determination referred to in paragraph 5901(2.1)(a) of the Regulations, as enacted by subsection (1), that would otherwise be required to be made before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been made on a timely basis if it is made within 365 days after the day on which this Act receives royal assent.
80. (1) The portion of subparagraph 5902(1)(a)(i) of the Regulations before clause (A), as enacted by Part 2, is replaced by the following:
(i) the particular affiliate’s exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, underlying foreign tax and net surplus, in respect of the corporation at the dividend time, are deemed to be those amounts that would otherwise be determined immediately before the dividend time if
(2) Paragraph 5902(1)(b) of the Regulations, as enacted by Part 2, is amended by adding the following after subparagraph (i):
(i.1) under subparagraph (vi) of the description of B in the definition “hybrid surplus” in subsection 5907(1) in computing the particular affiliate’s hybrid surplus or hybrid deficit, as the case may be, in respect of the corporation an amount equal to the product obtained when the specified adjustment factor in respect of the disposition is multiplied by the total of all amounts each of which is the portion of any elected dividend that is prescribed by paragraph 5900(1)(a.1) to have been paid out of the hybrid surplus of the particular affiliate,
(i.2) under subparagraph (iii) of the description of B in the definition “hybrid underlying tax” in subsection 5907(1) in computing the particular affiliate’s hybrid underlying tax in respect of the corporation an amount equal to the product obtained when the specified adjustment factor in respect of the disposition is multiplied by the total of all amounts each of which is the amount prescribed by paragraph 5900(1)(c.1) to be the foreign tax applicable to the portion of any elected dividend that is prescribed by paragraph 5900(1)(a.1) to have been paid out of the hybrid surplus of the particular affiliate,
(3) Subparagraphs 5902(2)(a)(i) and (ii) of the Regulations, as enacted by Part 2, are replaced by the following:
(i) if a particular foreign affiliate of a corporation has an equity percentage (within the meaning assigned by subsection 95(4) of the Act) in another foreign affiliate of the corporation that has an equity percentage in the particular affiliate, the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, underlying foreign tax and net surplus of, and the amount of a dividend paid or received by, the particular affiliate are to be determined in a manner that is
(A) reasonable in the circumstances, and
(B) consistent with the results that would be obtained if a series of actual dividends had been paid and received by the foreign affiliates of the corporation that are relevant to the determination, and
(ii) if any foreign affiliate of a corporation resident in Canada has issued shares of more than one class of its capital stock, the amount that would be paid as a dividend on the shares of any class is the portion of its net surplus that, in the circumstances, it might reasonably be expected to have paid on all the shares of the class, and
(4) The portion of subsection 5902(6) of the Regulations before paragraph (a) is replaced by the following:
(6) If at any time a corporation resident in Canada is deemed under subsection 93(1.11) of the Act to have made an election under subsection 93(1) of the Act in respect of a disposition of a share of the capital stock of a particular foreign affiliate of the corporation, the prescribed amount is the lesser of
(5) Subsections (1) to (3) apply in respect of elections in respect of dispositions of shares of the capital stock of a foreign affiliate of a taxpayer that occur after August 19, 2011.
(6) Subsection (4) applies in respect of elections in respect of dispositions of shares of the capital stock of a foreign affiliate of a corporation that occur after August 19, 2011. However, if the corporation elects under paragraph 79(2)(a), subsection (4) applies in respect of elections in respect of dispositions of shares of the capital stock of all foreign affiliates of the corporation that occur after December 20, 2002.
81. (1) Paragraph 5903(3)(a) of the Regulations, as enacted by Part 2, is replaced by the following:
(a) where, at the end of the year, the affiliate is a controlled foreign affiliate of a person or partnership that is, at the end of the year, a relevant person or partnership in respect of the taxpayer, the amount, if any, determined by the formula
J – (K + L + M + N)
where
- J
- is the amount determined for D in the formula in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the affiliate for the year,
- K
- is the amount, if any, by which
(i) the amount determined for A in that formula in respect of the affiliate for the year
exceeds
(ii) the amount determined for H in that formula in respect of the affiliate for the year,
- L
- is the amount, if any, by which
(i) the amount determined for B in that formula in respect of the affiliate for the year
exceeds
(ii) the total of
(A) the amount determined for E in that formula in respect of the affiliate for the year, and
(B) the amount determined for F.1 in that formula in respect of the affiliate for the year,
- M
- is the amount determined for C in that formula in respect of the affiliate for the year, and
- N
- is the amount, if any, by which
(i) the total of
(A) the amount determined for A.1 in that formula in respect of the affiliate for the year, and
(B) the amount determined for A.2 in that formula in respect of the affiliate for the year
exceeds
(ii) the amount determined for G in that formula in respect of the affiliate for the year; and
(2) Subsection 5903(4) of the Regulations, as enacted by Part 2, is replaced by the following:
(4) In computing under subsection (3) the foreign accrual property loss of the affiliate for a taxation year, if the affiliate or another corporation receives a payment described in subsection 5907(1.3) from a non-resident corporation that is, at the time of the payment, a foreign affiliate of a relevant person or partnership in respect of the taxpayer and any portion of the payment can reasonably be considered to relate to a loss or portion of a loss of the affiliate for the year described in the description of D in the definition “foreign accrual property income” in subsection 95(1) of the Act, the amount of the loss or portion of the loss is deemed to be nil.
(3) The portion of subsection 5903(5) of the Regulations before paragraph (a), as enacted by Part 2, is replaced by the following:
(5) For the purposes of this section and section 5903.1,
(4) Paragraphs 5903(5)(a) and (b) of the Regulations, as enacted by Part 2, are replaced by the following:
(a) if paragraph 95(2)(d.1) of the Act applies to a foreign merger, the new foreign corporation referred to in that paragraph is, except in the determination of the foreign accrual property income of a foreign affiliate predecessor referred to in that paragraph, deemed to be the same corporation as, and a continuation of, each foreign affiliate predecessor; and
(b) if paragraph 95(2)(e) of the Act applies to a liquidation and dissolution, of a disposing affiliate referred to in that paragraph, that is a designated liquidation and dissolution of the disposing affiliate, the shareholder affiliate referred to in that paragraph is, except in the determination of the foreign accrual property income of the disposing affiliate, deemed to be the same corporation as, and a continuation of, the disposing affiliate.
(5) The portion of subsection 5903(6) of the Regulations before paragraph (a), as enacted by Part 2, is replaced by the following:
(6) In this section and section 5903.1, a “relevant person or partnership”, in respect of the taxpayer at any time, means the taxpayer or a person (other than a designated acquired corporation of the taxpayer), or a partnership, that is at that time
(6) Subsections (1) to (3) and (5) apply in respect of capital losses of a foreign affiliate of a taxpayer that are incurred in taxation years of the foreign affiliate that end after August 19, 2011.
(7) Subsection (4) applies in respect of mergers or combinations that occur, and liquidations and dissolutions that begin, in respect of a foreign affiliate of a taxpayer, after August 19, 2011. However,
(a) if the taxpayer has elected under subsection 70(31),
(i) paragraph 5903(5)(a) of the Regulations, as enacted by subsection (4), also applies in respect of mergers or combinations in respect of all foreign affiliates of the taxpayer that occur after December 20, 2002 and on or before August 19, 2011, and
(ii) that paragraph is, for such mergers or combinations, to be read as follows:
(a) if paragraph 95(2)(d.1) of the Act applies to a foreign merger, the new foreign corporation referred to in that paragraph is deemed to be the same corporation as, and a continuation of, each foreign affiliate predecessor; and
(b) if the taxpayer has elected under subsection 70(28),
(i) paragraph 5903(5)(b) of the Regulations, as enacted by subsection (4), also applies in respect of liquidations and dissolutions of all foreign affiliates of the taxpayer that begin after December 20, 2002 and on or before August 19, 2011, and
(ii) that paragraph is, in respect of such liquidations and dissolutions, to be read as follows:
(b) if paragraph 95(2)(e) of the Act applies to a liquidation and dissolution, of a disposing affiliate referred to in that paragraph, that is a designated liquidation and dissolution of the disposing affiliate, the shareholder affiliate referred to in that paragraph is deemed to be the same corporation as, and a continuation of, the disposing affiliate.
82. (1) The Regulations are amended by adding the following after section 5903:
5903.1 (1) For the purposes of the description of F.1 in the definition “foreign accrual property income” in subsection 95(1) of the Act, subject to subsection (2), the prescribed amount for the year (referred to in this subsection and subsection (2) as the “particular year”) is the total of all amounts each of which is a portion designated for the particular year by the taxpayer of the foreign accrual capital loss of the affiliate for a taxation year of the affiliate that is
(a) one of the twenty taxation years of the affiliate that immediately precede the particular year; or
(b) one of the three taxation years of the affiliate that immediately follow the particular year.
(2) For the purposes of this subsection and subsection (1),
(a) a portion of a foreign accrual capital loss of the affiliate for any taxation year of the affiliate may be designated for the particular year only to the extent that the foreign accrual capital loss exceeds the total of all amounts each of which is a portion, of the foreign accrual capital loss, designated by the taxpayer for a taxation year of the affiliate that precedes the particular year;
(b) no portion of the foreign accrual capital loss of the affiliate for a taxation year of the affiliate is to be designated for the particular year until the foreign accrual capital losses of the affiliate for the preceding taxation years referred to in paragraph (1)(a) have been fully designated; and
(c) if any person or partnership that was, at the end of a taxation year (referred to in this paragraph as the “relevant loss year”) of the affiliate, a relevant person or partnership in respect of the taxpayer designates for a taxation year (referred to in this paragraph as the “relevant claim year”) of the affiliate a particular portion of the foreign accrual capital loss of the affiliate for the relevant loss year, there is deemed to have been designated for the relevant claim year by the taxpayer the portion of that loss that is the greater of
(i) the particular portion, and
(ii) the greatest of the portions of that loss that are so designated by any other relevant persons or partnerships in respect of the taxpayer.
(3) For the purposes of this section, and subject to subsection (4), “foreign accrual capital loss” of the affiliate for a taxation year of the affiliate means
(a) where, at the end of the year, the affiliate is a controlled foreign affiliate of a person or partnership that is, at the end of the year, a relevant person or partnership in respect of the taxpayer, the amount, if any, by which
(i) the amount determined under paragraph (a) of the description of E in the formula in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the affiliate for the year
exceeds
(ii) the amount determined for E in that formula in respect of the affiliate for the year; and
(b) in any other case, nil.
(4) In computing under subsection (3) the foreign accrual capital loss of the affiliate for a taxation year, if the affiliate or another corporation receives a payment described in subsection 5907(1.3) from a non-resident corporation that is, at the time of the payment, a foreign affiliate of a relevant person or partnership in respect of the taxpayer and any portion of the payment can reasonably be considered to relate to an allowable capital loss or a portion of an allowable capital loss of the affiliate for the year described in the description of E in the definition “foreign accrual property income” in subsection 95(1) of the Act, the amount of the loss or portion of the loss is deemed to be nil.
(2) Subsection (1) applies in respect of capital losses of a foreign affiliate of a taxpayer that are incurred in taxation years of the foreign affiliate that end after August 19, 2011.
83. (1) Paragraph 5904(1)(c) of the Regulations is replaced by the following:
(c) the direct equity percentage of a person in any foreign affiliate of the taxpayer, for which the total of the distribution entitlements of all the shares of all classes of the capital stock of the affiliate would not, in the absence of this paragraph, be greater than nil, was determined on the assumption that the amount determined under subparagraph (2)(b)(i) were the greater of
(i) the amount of the affiliate’s retained earnings, if any, determined at the end of the taxation year under accounting principles that are relevant to the affiliate for the taxation year, and
(ii) the amount determined by the formula
A × B
where
- A
- is the amount of the affiliate’s total assets determined at the end of the taxation year under accounting principles that are relevant to the affiliate for the taxation year, and
- B
- is 25%.
(2) Paragraph 5904(3)(b) of the Regulations is replaced by the following:
(b) if a particular foreign affiliate of a corporation has an equity percentage (within the meaning assigned by subsection 95(4) of the Act) in another foreign affiliate of the corporation that has an equity percentage in the particular affiliate, the net surplus of, or the amount of a distribution received by, the particular affiliate is to be determined in a manner that is
(i) reasonable in the circumstances, and
(ii) consistent with the results that would be obtained if a series of actual distributions had been made and received by the foreign affiliates of the corporation that are relevant to the determination;
(3) Subsections (1) and (2) apply in respect of taxation years of a foreign affiliate of a taxpayer that begin after August 19, 2011.
84. (1) The portion of subsection 5905(1) of the Regulations before the formula, as enacted by Part 2, is replaced by the following:
5905. (1) If, at any time, there is an acquisition or a disposition of shares of the capital stock of a particular foreign affiliate of a corporation resident in Canada and the surplus entitlement percentage of the corporation in respect of the particular foreign affiliate or any other foreign affiliate (the particular affiliate and those other affiliates each being referred to in this subsection as a “relevant affiliate”) of the corporation in which the particular affiliate has an equity percentage (within the meaning assigned by subsection 95(4) of the Act) changes, for the purposes of the definitions “exempt surplus”, “hybrid surplus”, “hybrid underlying tax”, “taxable surplus”, and “underlying foreign tax” in subsection 5907(1), each of the opening exempt surplus or opening exempt deficit, opening hybrid surplus or opening hybrid deficit, opening hybrid underlying tax, opening taxable surplus or opening taxable deficit, and opening underlying foreign tax, as the case may be, of the relevant affiliate in respect of the corporation is, except where the acquisition or disposition occurs in a transaction to which paragraph (3)(a) or subsection (5) or (5.1) applies, the amount determined at that time by the formula
(2) The portion of paragraph 5905(3)(a) of the Regulations before subparagraph (i), as enacted by Part 2, is replaced by the following:
(a) for the purposes of the definitions “exempt surplus”, “hybrid surplus”, “hybrid underlying tax”, “taxable surplus” and “underlying foreign tax” in subsection 5907(1), as they apply in respect of the merged affiliate,
(3) Paragraph 5905(3)(a) of the Regulations, as enacted by Part 2, is amended by adding the following after subparagraph (ii):
(ii.1) the merged affiliate’s opening hybrid surplus, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the hybrid surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the hybrid deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time,
(ii.2) the merged affiliate’s opening hybrid deficit, in respect of the corporation, shall be the amount, if any, by which the total of all amounts each of which is the hybrid deficit of a predecessor corporation, in respect of the corporation, immediately before the merger time exceeds the total of all amounts each of which is the hybrid surplus of a predecessor corporation, in respect of the corporation, immediately before the merger time,
(ii.3) the merged affiliate’s opening hybrid underlying tax in respect of the corporation shall be the total of all amounts each of which is the hybrid underlying tax of a predecessor corporation, in respect of the corporation, immediately before the merger time,
(4) The portion of subparagraph 5905(3)(b)(i) of the Regulations before the formula, as enacted by Part 2, is replaced by the following:
(i) each of the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit and underlying foreign tax, in respect of the corporation, of each predecessor corporation immediately before the merger time is deemed to be the amount determined by the formula
(5) The portion of paragraph 5905(5)(a) of the Regulations before subparagraph (i), as enacted by Part 2, is replaced by the following:
(a) each of the opening exempt surplus or opening exempt deficit, opening hybrid surplus or opening hybrid deficit, opening hybrid underlying tax, opening taxable surplus or opening taxable deficit, and opening underlying foreign tax, in respect of the acquiring corporation, of the particular affiliate and of each foreign affiliate of the disposing corporation in which the particular affiliate has, immediately before that time, an equity percentage (within the meaning assigned by subsection 95(4) of the Act) is deemed to be the amount, if any,
(6) Paragraph 5905(5)(a) of the Regulations, as enacted by Part 2, is amended by adding the following after subparagraph (ii):
(ii.1) in the case of its opening hybrid surplus, by which the total of its hybrid surplus in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time, exceeds the total of its hybrid deficit in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time,
(ii.2) in the case of its opening hybrid deficit, by which the total of its hybrid deficit in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time, exceeds the total of its hybrid surplus in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time,
(ii.3) in the case of its opening hybrid underlying tax, that is the total of its hybrid underlying tax in respect of each of the disposing corporation and the acquiring corporation, determined immediately before that time,
(7) The portion of paragraph 5905(5)(b) of the Regulations before the formula, as enacted by Part 2, is replaced by the following:
(b) for the purposes of paragraph (a), each of the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax of an affiliate in respect of the disposing corporation and the acquiring corporation, determined immediately before that time, is deemed to be the amount determined by the formula
(8) Paragraphs 5905(5)(c) and (d) of the Regulations, as enacted by Part 2, are replaced by the following:
(c) if the disposing corporation makes an election under subsection 93(1) of the Act in respect of the disposed shares,
(i) for the purposes of paragraph (b), the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax of an affiliate in respect of the disposing corporation, as determined without reference to this subsection, immediately before that time, shall be adjusted in accordance with paragraph 5902(1)(b) as if the disposing corporation’s surplus entitlement percentage that is referred to in the description of B in paragraph 5902(2)(b) were determined as if the disposed shares were the only shares owned by the disposing corporation immediately before that time, and
(ii) no adjustment shall be made to the amount of the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, or underlying foreign tax of an affiliate in respect of the disposing corporation under paragraph 5902(1)(b) other than for the purpose of paragraph (b); and
(d) for greater certainty, no adjustment shall be made under subsection (1) to the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, or underlying foreign tax of an affiliate in respect of the disposing corporation.
(9) The portion of paragraph 5905(5.1)(a) of the Regulations before subparagraph (i), as enacted by Part 2, is replaced by the following:
(a) each of the opening exempt surplus or opening exempt deficit, opening hybrid surplus or opening hybrid deficit, opening hybrid underlying tax, opening taxable surplus or opening taxable deficit, and opening underlying foreign tax, in respect of the new corporation, of the particular affiliate and of each foreign affiliate of the predecessor corporation in which the particular affiliate has, immediately before that time, an equity percentage (within the meaning assigned by subsection 95(4) of the Act) is deemed to be the amount, if any,
(10) Paragraph 5905(5.1)(a) of the Regulations, as enacted by Part 2, is amended by adding the following after subparagraph (ii):
(ii.1) in the case of its opening hybrid surplus, by which the total of its hybrid surplus in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its hybrid deficit in respect of each predecessor corporation, determined immediately before that time,
(ii.2) in the case of its opening hybrid deficit, by which the total of its hybrid deficit in respect of each predecessor corporation, determined immediately before that time, exceeds the total of its hybrid surplus in respect of each predecessor corporation, determined immediately before that time,
(ii.3) in the case of its opening hybrid underlying tax, that is the total of its hybrid underlying tax in respect of each predecessor corporation, determined immediately before that time,
(11) The portion of paragraph 5905(5.1)(b) of the Regulations before the formula, as enacted by Part 2, is replaced by the following:
(b) for the purpose of paragraph (a), each of the exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax of an affiliate in respect of a predecessor corporation, determined immediately before that time, is deemed to be the amount determined by the formula
(12) Paragraph 5905(5.5)(a) of the Regulations, as enacted by Part 2, is replaced by the following:
(a) the amount, if any, by which the affiliate’s exempt surplus in respect of the corporation at that time exceeds the total of
(i) the affiliate’s hybrid deficit, if any, in respect of the corporation at that time, and
(ii) the affiliate’s taxable deficit, if any, in respect of the corporation at that time;
(a.1) the amount, if any, by which the amount of the affiliate’s hybrid surplus in respect of the corporation at that time exceeds the amount determined under subsection (5.7) in respect of the corporation at that time if, at that time, the amount of that hybrid surplus is less than or equal to the amount determined by the formula
[A × (B – 0,5)] + (C × 0,5)
where
- A
- is the affiliate’s hybrid underlying tax in respect of the corporation at that time,
- B
- is the corporation’s relevant tax factor (within the meaning assigned by subsection 95(1) of the Act) for the corporation’s taxation year that includes that time, and
- C
- is the affiliate’s hybrid surplus in respect of the corporation at that time; and
(13) Subparagraph 5905(5.5)(b)(ii) of the Regulations, as enacted by Part 2, is replaced by the following:
(ii) the amount, if any, by which the affiliate’s taxable surplus in respect of the corporation at that time exceeds
(A) if the affiliate has an exempt deficit and a hybrid deficit, in respect of the corporation at that time, the total of the exempt deficit and the hybrid deficit,
(B) if the affiliate has an exempt deficit and no hybrid deficit, in respect of the corporation at that time, the amount, if any, by which the exempt deficit exceeds the affiliate’s hybrid surplus in respect of the corporation at that time, and
(C) if the affiliate has a hybrid deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the hybrid deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time.
(14) Subsection 5905(5.6) of the Regulations, as enacted by Part 2, is replaced by the following:
(5.6) For the purposes of subsection (5.5), the amounts of exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax, of a foreign affiliate of corporation resident in Canada, in respect of the corporation, at a particular time are those amounts that would be determined, at the particular time, under subparagraph 5902(1)(a)(i) if that subparagraph were applicable at the particular time and the references in that subparagraph to “the dividend time” were references to the particular time.
(5.7) For the purposes of paragraph (5.5)(a.1), the amount determined under this subsection in respect of the corporation at any time is
(a) if the affiliate has an exempt deficit and a taxable deficit, in respect of the corporation at that time, the total of the exempt deficit and the taxable deficit;
(b) if the affiliate has an exempt deficit and no taxable deficit, in respect of the corporation at that time, the amount of the exempt deficit; and
(c) if the affiliate has a taxable deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the taxable deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time.
(15) Subsection 5905(7) of the Regulations is replaced by the following:
(7) If at any time there has been a liquidation and dissolution of a foreign affiliate (referred to in this subsection as the “dissolved affiliate”) of a corporation resident in Canada that is a designated liquidation and dissolution (within the meaning assigned by subsection 95(1) of the Act) of the dissolved affiliate, each other foreign affiliate of the corporation that had a direct equity percentage (within the meaning assigned by subsection 95(4) of the Act) in the dissolved affiliate immediately before that time is, for the purposes of computing its exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax, in respect of the corporation, deemed to have received dividends immediately before that time the total of which is equal to the amount it might reasonably have expected to receive if the dissolved affiliate had, immediately before that time, paid dividends on all shares of its capital stock the total of which was equal to the amount of its net surplus in respect of the corporation immediately before that time, determined on the assumption that the taxation year of the dissolved affiliate that otherwise would have included that time had ended immediately before that time.
(16) Subsection 5905(11) of the Regulations is replaced by the following:
(11) For the purposes of subsection (10),
(a) if a particular foreign affiliate of a corporation has an equity percentage in another foreign affiliate of the corporation that has an equity percentage in the particular affiliate, the amount that would be the net surplus of, or the amount that would be a dividend received by, the particular affiliate is to be determined in a manner that is
(i) reasonable in the circumstances, and
(ii) consistent with the results that would be obtained if a series of actual dividends had been paid and received by the foreign affiliates of the corporation that are relevant to the determination;
(b) if any foreign affiliate of a corporation resident in Canada has issued shares of more than one class of its capital stock, the amount that would be paid as a dividend on the shares of any class is the portion of its net surplus that, in the circumstances, it might reasonably be expected to have paid on all the shares of that class; and
(c) if the particular affiliate’s net surplus as determined for the purposes of subsection (10) would, in the absence of this paragraph, be nil the particular affiliate’s net surplus for the purposes of that subsection is deemed to be the greater of
(i) the amount of the particular affiliate’s retained earnings, if any, determined at the end of its last taxation year ending before the time referred to in that subsection under accounting principles that are relevant to the particular affiliate for that year, and
(ii) the amount determined by the formula
A × B
where
- A
- is the amount of the particular affiliate’s total assets determined at the end of that year under accounting principles that are relevant to the particular affiliate for that year, and
- B
- is 25%.
(17) Subsection 5905(12) of the Regulations is repealed.
(18) Paragraph 5905(13)(a) of the Regulations is replaced by the following:
(a) the percentage that is the corporation’s equity percentage in the particular affiliate at that time if
(i) the particular affiliate and each corporation that is relevant to the determination of the corporation’s equity percentage in the particular affiliate have, at that time, only one class of issued shares, and
(ii) no foreign affiliate (referred to in this subparagraph as the “upper-tier affiliate”) of the corporation that is relevant to the determination of the corporation’s equity percentage in the particular affiliate has, at that time, an equity percentage in a foreign affiliate (including, for greater certainty, the particular affiliate) of the corporation that has an equity percentage in the upper-tier affiliate; and
(19) The portion of subsection 5905(13) of the Regulations after subparagraph (b)(ii) is repealed.
(20) Section 5905 of the Regulations is amended by adding the following after subsection (13):
(14) For the purposes of subsections (10), (11) and (13), “equity percentage” has the meaning that would be assigned by subsection 95(4) of the Act if the reference in paragraph (b) of the definition “equity percentage” in that subsection to “any corporation” were read as a reference to “any corporation other than a corporation resident in Canada”.
(21) Subsection (1) applies in respect of acquisitions and dispositions that occur after August 19, 2011.
(22) Subsections (2) to (14), (16) and (18) to (20) are deemed to have come into force on August 20, 2011.
(23) Subsection (15) applies in respect of liquidations and dissolutions of foreign affiliates of a taxpayer that begin after August 19, 2011. However, if the taxpayer has elected under subsection 70(28),
(a) subsection (15) applies in respect of all liquidations and dissolutions of foreign affiliates of the taxpayer that begin after December 20, 2002; and
(b) subsection 5905(7) of the Regulations, as enacted by subsection (15), is, in respect of all such liquidations and dissolutions that begin on or before August 19, 2011, to be read as follows:
(7) If at any time there has been a liquidation and dissolution of a foreign affiliate (referred to in this subsection as the “dissolved affiliate”) of a corporation resident in Canada that is a designated liquidation and dissolution (within the meaning assigned by subsection 95(1) of the Act) of the dissolved affiliate, each other foreign affiliate of the corporation that had a direct equity percentage (within the meaning assigned by subsection 95(4) of the Act) in the dissolved affiliate immediately before that time is, for the purposes of computing its exempt surplus or exempt deficit, taxable surplus or taxable deficit, and underlying foreign tax, in respect of the corporation, deemed to have received dividends immediately before that time the total of which is equal to the amount it might reasonably have expected to receive if the dissolved affiliate had, immediately before that time, paid dividends on all shares of its capital stock the total of which was equal to the amount of its net surplus in respect of the corporation immediately before that time, determined on the assumption that the taxation year of the dissolved affiliate that otherwise would have included that time had ended immediately before that time.
(24) Subsection (17) is deemed to have come into force on December 19, 2009.
85. (1) Paragraph (b) of the definition “earnings” in subsection 5907(1) of the Regulations, as enacted by Part 2, is replaced by the following:
(b) in any other case, the total of all amounts each of which is an amount of income that would be required under paragraph 95(2)(a) of the Act to be included in computing the affiliate’s income or loss from an active business for the year if that income were computed taking into account the rules in subsection (2.03); (gains)
(2) The portion of the definition “exempt earnings” in subsection 5907(1) of the Regulations before subparagraph (a)(iii), as amended by Part 2, is replaced by the following:
- “exempt earnings”
“exempt earnings”, of a particular foreign affiliate of a particular corporation for a taxation year of the particular affiliate, means, subject to subsection (2.02), the total of all amounts each of which is
(a) the amount by which the capital gains of the particular affiliate for the year (other than capital gains included in computing the amount, at any time in the year, of the particular affiliate’s hybrid surplus, or hybrid deficit, in respect of the particular corporation) exceed the total of
(i) the amount of the taxable capital gains for the year referred to in the description of B in the definition “foreign accrual property income” in subsection 95(1) of the Act,
(ii) the amount of the taxable capital gains for the year referred to in subparagraphs (c)(i), (e)(i) and (f)(iv) of the definition “net earnings”, and
(3) The portion of the definition “exempt loss” in subsection 5907(1) of the Regulations before subparagraph (a)(iii), as amended by Part 2, is replaced by the following:
- “exempt loss”
“exempt loss”, of a foreign affiliate of a corporation for a taxation year of the affiliate, means, subject to subsection (2.02), the total of all amounts each of which is
(a) the amount by which the capital losses of the affiliate for the year (other than capital losses included in computing the amount, at any time in the year, of the particular affiliate’s hybrid surplus, or hybrid deficit, in respect of the particular corporation) exceed the total of
(i) the amount of the allowable capital losses for the year referred to in the description of E in the definition “foreign accrual property income” in subsection 95(1) of the Act,
(ii) the amount of the allowable capital losses for the year referred to in subparagraphs (c)(i), (e)(i) and (f)(iv) of the definition “net loss”, and
(4) The portion of the definition “exempt surplus” in subsection 5907(1) of the Regulations before paragraph (a) is replaced by the following:
- “exempt surplus”
“exempt surplus”, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any particular time, means the amount determined by the following formula in respect of the period that begins with the latest of the following times and that ends with the particular time:
(5) The portion of the definition “exempt surplus” in subsection 5907(1) of the English version of the Regulations after paragraph (c) and before the description of A is replaced by the following:
A – B
where
(6) Subparagraph (vii) of the description of A in the definition “exempt surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(vii) an amount added, in the period and before the particular time, to the exempt surplus of the subject affiliate under paragraph (7.1)(d) (as that paragraph applied to dividends paid on or before August 19, 2011), and
(7) Paragraph (b) of the definition “loss” in subsection 5907(1) of the Regulations, as enacted by Part 2, is replaced by the following:
(b) in any other case, the total of all amounts each of which is an amount of a loss that would be required under paragraph 95(2)(a) of the Act to be included in computing the affiliate’s income or loss from an active business for the year if that loss were computed taking into account the rules in subsection (2.03);
(8) Paragraph (b) of the definition “net earnings” in subsection 5907(1) of the Regulations is replaced by the following:
(b) in respect of foreign accrual property income is the amount that would be its foreign accrual property income for the year, if the formula in the definition “foreign accrual property income” in subsection 95(1) of the Act were read without reference to F and F.1 in that formula and the amount determined for E in that formula were the amount determined under paragraph (a) of the description of E in that formula, minus the portion of any income or profits tax paid to the government of a country for the year by the affiliate that can reasonably be regarded as tax in respect of that income,
(9) Subparagraphs (d)(i) and (ii) of the definition “net earnings” in subsection 5907(1) of the Regulations are replaced by the following:
(i) shares of the capital stock of another foreign affiliate of the corporation that were excluded property of the affiliate (other than dispositions to which any of paragraphs 95(2)(c) to (e) of the Act was applicable and dispositions in respect of which the amount of the capital gain is included in computing the amount, at any time in the year, of the affiliate’s hybrid surplus, or hybrid deficit, in respect of the corporation), or
(ii) partnership interests that were excluded property of the affiliate (other than dispositions in respect of which the amount of the capital gain is included in computing the amount, at any time in the year, of the affiliate’s hybrid surplus, or hybrid deficit, in respect of the corporation)
(10) Paragraph (d) of the definition “net earnings” in subsection 5907(1) of the Regulations, as amended by subsection (9), is repealed.
(11) Clause (b)(i)(A) of the definition “net loss” in subsection 5907(1) of the Regulations is replaced by the following:
(A) the total of
(I) the amount determined for D in the formula in the definition “foreign accrual property income” in subsection 95(1) of the Act for the year,
(II) the amount determined under paragraph (a) of the description of E in that formula for the year,
(III) the amount determined for G in that formula for the year, and
(IV) the amount determined for H in that formula for the year
(12) Subparagraphs (d)(i) and (ii) of the definition “net loss” in subsection 5907(1) of the Regulations are replaced by the following:
(i) shares of the capital stock of another foreign affiliate of the corporation that were excluded property of the affiliate (other than dispositions to which paragraph 95(2)(c), (d) or (e) of the Act was applicable and dispositions in respect of which the amount of the capital loss is included in computing the amount, at any time in the year, of the affiliate’s hybrid surplus, or hybrid deficit, in respect of the corporation), or
(ii) partnership interests that were excluded property of the affiliate (other than dispositions in respect of which the amount of the capital loss is included in computing the amount, at any time in the year, of the affiliate’s hybrid surplus, or hybrid deficit, in respect of the corporation)
(13) Paragraph (d) of the definition “net loss” in subsection 5907(1) of the Regulations, as amended by subsection (12), is repealed.
(14) Paragraphs (a) to (c) of the definition “net surplus” in subsection 5907(1) of the Regulations are replaced by the following:
(a) if the affiliate has no exempt deficit, no hybrid deficit and no taxable deficit, the amount that is the total of its exempt surplus, hybrid surplus and taxable surplus in respect of the corporation,
(b) if the affiliate has no exempt deficit but has a hybrid deficit and a taxable deficit, the amount, if any, by which its exempt surplus exceeds the total of its hybrid deficit and taxable deficit in respect of the corporation,
(c) if the affiliate has no exempt deficit and no hybrid deficit but has a taxable deficit, the amount, if any, by which the total of its exempt surplus and hybrid surplus exceeds its taxable deficit in respect of the corporation,
(d) if the affiliate has no exempt deficit and no taxable deficit but has a hybrid deficit, the amount, if any, by which the total of its exempt surplus and taxable surplus exceeds its hybrid deficit in respect of the corporation,
(e) if the affiliate has an exempt deficit but no hybrid deficit or taxable deficit, the amount, if any, by which the total of its hybrid surplus and taxable surplus exceeds its exempt deficit in respect of the corporation,
(f) if the affiliate has an exempt deficit and a hybrid deficit but no taxable deficit, the amount, if any, by which its taxable surplus exceeds the total of its exempt deficit and hybrid deficit in respect of the corporation, or
(g) if the affiliate has an exempt deficit and a taxable deficit but no hybrid deficit, the amount, if any, by which its hybrid surplus exceeds the total of its exempt deficit and taxable deficit in respect of the corporation,
(15) Paragraph (b) of the definition “taxable earnings” in subsection 5907(1) of the Regulations, as amended by Part 2, is amended by striking out “or” at the end of subparagraph (iii), adding “or” at the end of subparagraph (iv) and adding the following after subparagraph (iv):
(iv.1) the amount, if any, by which
(A) the total of all amounts each of which is an amount required by paragraph (2.02)(a) to be included under this definition for the year
exceeds
(B) the total of all amounts each of which is an amount required by paragraph (2.02)(b) to be deducted under this definition for the year,
(16) The portion of the definition “taxable surplus” in subsection 5907(1) of the Regulations before paragraph (a) is replaced by the following:
- “taxable surplus”
“taxable surplus”, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any particular time, means the amount determined by the following formula in respect of the period that begins with the latest of the following times and that ends with the particular time:
(17) The portion of the definition “taxable surplus” in subsection 5907(1) of the English version of the Regulations after paragraph (c) and before the description of A is replaced by the following:
A – B
where
(18) Subparagraph (v) of the description of A in the definition “taxable surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(v) an amount added, in the period and before the particular time, to the subject affiliate’s taxable surplus under paragraph (7.1)(e) (as that paragraph applied to dividends paid on or before August 19, 2011), and
(19) Subparagraph (iv) of the description of B in the definition “taxable surplus” in subsection 5907(1) of the Regulations is replaced by the following:
(iv) the portion of any whole dividend paid by the subject affiliate in the period and before the particular time deemed under paragraph 5901(1)(b) or, if subsection 5901(1.1) applied to the whole dividend, paragraph 5901(1)(a.1) to have been paid out of the subject affiliate’s taxable surplus in respect of the corporation,
(20) The portion of the definition “underlying foreign tax” in subsection 5907(1) of the Regulations before paragraph (a) is replaced by the following:
- “underlying foreign tax”
“underlying foreign tax”, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any particular time, means the amount determined by the following formula in respect of the period that begins with the later of the following times and that ends with the particular time:
(21) The portion of the definition “underlying foreign tax” in subsection 5907(1) of the English version of the Regulations, as amended by Part 2, after paragraph (b) and before the description of A is replaced by the following:
A – B
where
(22) Subparagraph (ii) of the description of A in the definition “underlying foreign tax” in subsection 5907(1) of the Regulations is replaced by the following:
(ii) the portion of any income or profits tax paid to the government of a country by the subject affiliate that can reasonably be regarded as having been paid in respect of the taxable earnings, including for greater certainty any amounts included because of paragraph (2.02)(a) in computing the taxable earnings, of the affiliate for a taxation year ending in the period,
(23) Subparagraph (ii) of the description of B in the definition “underlying foreign tax” in subsection 5907(1) of the Regulations is replaced by the following:
(ii) the underlying foreign tax applicable to any whole dividend paid by the subject affiliate in the period and before the particular time deemed under paragraph 5901(1)(b) or, if subsection 5901(1.1) applied to the whole dividend, paragraph 5901(1)(a.1) to have been paid out of the subject affiliate’s taxable surplus in respect of the corporation before that time,
(24) Subsection 5907(1) of the Regulations is amended by adding the following in alphabetical order:
- “designated person or partnership”
“designated person or partnership”, in respect of a taxpayer at any time, means the taxpayer or a person or partnership that is at that time
(a) a person (other than a partnership) that does not, at that time, deal at arm’s length with the taxpayer, or
(b) a partnership a member of which is, at that time, a designated person or partnership in respect of the taxpayer under this definition; (personne ou société de personnes désignée)
- “hybrid deficit”
“hybrid deficit”, of a foreign affiliate of a corporation in respect of the corporation at any time, means the amount, if any, by which
(a) the total of all amounts each of which is an amount determined at that time under any of subparagraphs (i) to (vii) of the description of B in the definition “hybrid surplus”
exceeds
(b) the total of all amounts each of which is an amount determined at that time under any of subparagraphs (i) to (v) of the description of A in that definition; (déficit hybride)
- “hybrid surplus”
“hybrid surplus”, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any particular time, means the amount determined by the following formula in respect of the period that begins with the latest of the following times and that ends with the particular time:
(a) the first day of the taxation year of the subject affiliate in which it last became a foreign affiliate of the corporation,
(b) the last time for which the opening hybrid surplus of the subject affiliate in respect of the corporation was required to be determined under section 5905, and
(c) the last time for which the opening hybrid deficit of the subject affiliate in respect of the corporation was required to be determined under section 5905
A – B
where
- A
- is the total of all amounts, in respect of the period, each of which is
(i) the opening hybrid surplus, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (b),
(ii) the amount of a capital gain (except to the extent that the taxable portion of the capital gain is included under the description of B in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the subject affiliate), for a taxation year, of the subject affiliate, or of a partnership of which the subject affiliate is a member (to the extent that the capital gain is reasonably attributable to the subject affiliate), in respect of a disposition, at any time in the period, of
(A) a share of the capital stock of another foreign affiliate of the corporation,
(B) a partnership interest, or
(C) a property, that is an excluded property of the subject affiliate because of paragraph (c.1) of the definition “excluded property” in subsection 95(1) of the Act, that related to
(I) an amount that was receivable under an agreement that relates to the sale of a property that is referred to in clause (A) or (B) the capital gain or capital loss from the sale of which is included under this subparagraph or subparagraph (ii) of the description of B, as the case may be, or
(II) an amount payable, or an amount of indebtedness, described in clause (c.1)(ii)(B) of that definition “excluded property” arising in respect of the acquisition of an excluded property of the affiliate that is referred to in clause (A) or (B) any capital gain or capital loss from the disposition of which would, if that excluded property were disposed of, be included under this subparagraph or subparagraph (ii) of the description of B, as the case may be,
(iii) the portion of any income or profits tax refunded by the government of a country to the subject affiliate that can reasonably be regarded as having been refunded in respect of an amount referred to in subparagraph (ii) or (iii) of the description of B,
(iv) the portion of any dividend received in the period and before the particular time by the subject affiliate from another foreign affiliate of the corporation (including, for greater certainty, any dividend deemed under subsection 5905(7) to have been received by the subject affiliate) that was prescribed under paragraph 5900(1)(a.1) to have been paid out of the payer affiliate’s hybrid surplus in respect of the corporation, or
(v) an amount added to the hybrid surplus of the subject affiliate or deducted from its hybrid deficit in the period and before the particular time under subsection (1.1) or (1.2), and
- B
- is the total of those of the following amounts that apply in respect of the period:
(i) the opening hybrid deficit, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (c),
(ii) the amount of a capital loss (except to the extent that the allowable portion of the capital loss is included under paragraph (a) of the description of E in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the subject affiliate), for a taxation year, of the subject affiliate, or of a partnership of which the subject affiliate is a member (to the extent that the capital loss is reasonably attributable to the subject affiliate), in respect of a disposition, at any time in the period, of
(A) a share of the capital stock of another foreign affiliate of the corporation,
(B) a partnership interest, or
(C) a property, that is an excluded property of the subject affiliate because of paragraph (c.1) of the definition “excluded property” in subsection 95(1) of the Act, that related to
(I) an amount that was receivable under an agreement that relates to the sale of a property that is referred to in clause (A) or (B) the capital gain or capital loss from the sale of which is included under subparagraph (ii) of the description of A or this subparagraph, as the case may be, or
(II) an amount payable, or an amount of indebtedness, described in clause (c.1)(ii)(B) of that definition “excluded property” arising in respect of the acquisition of an excluded property of the affiliate that is referred to in clause (A) or (B) any capital gain or capital loss from the disposition of which would, if that excluded property were disposed of, be included under subparagraph (ii) of the description of A or this subparagraph, as the case may be,
(iii) the amount of a capital loss for a taxation year of the subject affiliate that would arise in respect of a disposition, at any time in the period, of a share of the capital stock of another foreign affiliate of the corporation in the course of the liquidation and dissolution of that other affiliate if subclause 95(2)(e)(iv)(A)(II) of the Act were read without reference to its sub-subclause 1 and section 93 of the Act were read without reference to its subsection (4),
(iv) the portion of any income or profits tax paid to the government of a country by the subject affiliate that can reasonably be regarded as having been paid in respect of an amount referred to in subparagraph (ii) or (iv) of the description of A,
(v) the portion of any whole dividend paid by the subject affiliate in the period and before the particular time deemed under paragraph 5901(1)(a.1) or, if subsection 5901(1.1) applied to the whole dividend, paragraph 5901(1)(b) to have been paid out of the subject affiliate’s hybrid surplus in respect of the corporation,
(vi) each amount that is required under section 5902 to be included under this subparagraph in the period and before the particular time, or
(vii) an amount, in the period and before the particular time, deducted from the hybrid surplus of the subject affiliate or added to its hybrid deficit under subsection (1.1) or (1.2); (surplus hybride)
- “hybrid underlying tax”
“hybrid underlying tax”, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any particular time, means the amount determined by the following formula in respect of the period that begins with the later of the following times and that ends with the particular time:
(a) the first day of the taxation year of the subject affiliate in which it last became a foreign affiliate of the corporation, and
(b) the last time for which the opening hybrid underlying tax of the subject affiliate in respect of the corporation was required to be determined under section 5905
A – B
where
- A
- is the total of all amounts, in respect of the period, each of which is
(i) the opening hybrid underlying tax, if any, of the subject affiliate in respect of the corporation as determined under section 5905, at the time established in paragraph (b),
(ii) the portion of any income or profits tax paid to the government of a country by the subject affiliate that can reasonably be regarded as having been paid in respect of any amount referred to in subparagraph (ii) or (iv) of the description of A in the definition “hybrid surplus”,
(iii) each amount that was prescribed by paragraph 5900(1)(c.1) to have been the foreign tax applicable to the portion of any dividend received in the period and before the particular time by the subject affiliate from another foreign affiliate of the corporation (including, for greater certainty, any dividend deemed under subsection 5905(7) to have been received by the subject affiliate) that was prescribed by paragraph 5900(1)(a.1) to have been paid out of the payer affiliate’s hybrid surplus in respect of the corporation, or
(iv) the amount by which the subject affiliate’s hybrid underlying tax is required to be increased under subsection (1.1) or (1.2),
- B
- is the total of those of the following amounts that apply in respect of the period:
(i) the portion of any income or profits tax refunded by the government of a country to the subject affiliate that can reasonably be regarded as having been refunded in respect of an amount referred to in subparagraph (ii) or (iii) of the description of B in the definition “hybrid surplus”,
(ii) the hybrid underlying tax applicable to any whole dividend paid by the subject affiliate in the period and before the particular time deemed under paragraph 5901(1)(a.1) or, if subsection 5901(1.1) applied to the whole dividend, paragraph 5901(1)(b) to have been paid out of the subject affiliate’s hybrid surplus in respect of the corporation before that time,
(iii) each amount that is required under section 5902 to be included under this subparagraph in the period and before the particular time, or
(iv) the amount by which the subject affiliate’s hybrid underlying tax is required to be decreased in the period and before the particular time under subsection (1.1) or (1.2); (montant intrinsèque d’impôt hybride)
- “hybrid underlying tax applicable”
“hybrid underlying tax applicable”, in respect of a corporation to a whole dividend paid at any time on the shares of any class of the capital stock of a foreign affiliate of the corporation by the affiliate, means the proportion of the hybrid underlying tax of the affiliate at that time in respect of the corporation that
(a) the portion of the whole dividend deemed to have been paid out of the affiliate’s hybrid surplus in respect of the corporation
is of
(b) the affiliate’s hybrid surplus at that time in respect of the corporation; (montant intrinsèque d’impôt hybride applicable)
(25) Subsection 5907(1.01) of the Regulations is replaced by the following:
(1.01) For the purposes of section 113 of the Act, “exempt surplus”, “hybrid surplus” and “taxable surplus” have the meanings assigned by subsection (1).
(26) Subparagraph 5907(1.1)(a)(iv) of the Regulations is amended by striking out “and” at the end of clause (A) and adding the following after clause (A):
(A.1) to the extent that such income or profits tax would otherwise have reduced the hybrid surplus or increased the hybrid deficit of the secondary affiliate,
(I) be deducted from the hybrid surplus or added to the hybrid deficit, as the case may be, of the primary affiliate, and
(II) be added to the hybrid underlying tax of the primary affiliate, and
(27) Subparagraph 5907(1.1)(a)(v) of the Regulations is amended by striking out “and” at the end of clause (C) and adding the following after clause (C):
(C.1) where such loss reduces the hybrid surplus or increases the hybrid deficit, as the case may be, of the secondary affiliate,
(I) be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the primary affiliate, and
(II) be deducted from the hybrid underlying tax of the primary affiliate, and
(28) Clause 5907(1.1)(b)(i)(B) of the Regulations is amended by striking out “and” at the end of subclause (I) and adding the following after subclause (I):
(I.1) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the secondary affiliate is, at the end of the year, to be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the primary affiliate and deducted from the hybrid underlying tax of the primary affiliate, and
(29) Clause 5907(1.1)(b)(ii)(A) of the Regulations, as enacted by Part 2, is amended by striking out “and” at the end of subclause (I) and adding the following after subclause (I):
(I.1) such portion of the amount so paid as may reasonably be regarded as relating to an amount deducted from the hybrid surplus or included in the hybrid deficit, as the case may be, of the secondary affiliate is, at the end of the year of the loss, to be deducted from the hybrid surplus or added to the hybrid deficit, as the case may be, of the primary affiliate and added to the hybrid underlying tax of the primary affiliate, and
(30) Paragraph 5907(1.2)(c) of the Regulations is amended by striking out “and” at the end of subparagraph (i) and adding the following after subparagraph (i):
(i.1) where such loss reduces the hybrid surplus or increases the hybrid deficit, as the case may be, of the loss affiliate,
(A) be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the taxpaying affiliate, and
(B) be deducted from the hybrid underlying tax of the taxpaying affiliate, and
(31) Subparagraph 5907(1.2)(d)(i) of the Regulations is amended by striking out “and” at the end of clause (A) and adding the following after clause (A):
(A.1) such portion of the amount as may reasonably be regarded as relating to an amount deducted from the hybrid surplus or included in the hybrid deficit, as the case may be, of the loss affiliate is, at the end of the year, to be deducted from the hybrid surplus or added to the hybrid deficit, as the case may be, of the taxpaying affiliate and added to the hybrid underlying tax of the taxpaying affiliate, and
(32) Subsection 5907(1.4) of the Regulations, as enacted by Part 2, is replaced by the following:
(1.4) If the amount prescribed under paragraph (1.3)(a) or (b), or any portion of the amount, can reasonably be considered to be in respect of a particular loss (other than a capital loss) or a capital loss of another corporation for a taxation year of the other corporation, then the amount so prescribed is to be reduced to the extent that it can reasonably be considered to be in respect of the portion of the particular loss or capital loss, as the case may be, that would, if sections 5903 and 5903.1 were read without reference to their subsection (4), not be a foreign accrual property loss (within the meaning assigned by subsection 5903(3)), or a foreign accrual capital loss (within the meaning assigned by subsection 5903.1(3)), as the case may be, of a controlled foreign affiliate of a person or partnership that is, at the end of that taxation year, a relevant person or partnership (within the meaning assigned by subsection 5903(6)) in respect of the taxpayer.
(33) Section 5907 of the Regulations is amended by adding the following after subsection (1.6), as enacted by Part 2:
(1.7) If the amount prescribed under paragraph (1.3)(a) or (b), or any portion of the amount, can reasonably be considered to be in respect of a capital loss of another corporation for a taxation year of the other corporation, then the amount so prescribed, as reduced by subsection (1.4), if applicable, shall be reduced to the extent that it can reasonably be considered to be in respect of the portion of that capital loss that would not be deductible by the particular affiliate in computing its foreign accrual property income for the year if the capital loss had been incurred by the particular affiliate.
(34) Subparagraph 5907(2)(f)(ii) of the Regulations is replaced by the following:
(ii) subject to subsection (2.01), does not arise with respect to a disposition (other than a disposition to which subsection (9) applies), of property by the affiliate,
(A) to a person or partnership that was, at the time of the disposition, a designated person or partnership in respect of the taxpayer, and
(B) to which a tax deferral, rollover or similar tax postponement provision of the income tax laws that are relevant in computing the earnings amount of the affiliate applied, and
(35) Subparagraph 5907(2)(j)(iii) of the Regulations is replaced by the following:
(iii) subject to subsection (2.01), does not arise with respect to a disposition (other than a disposition to which subsection (9) applies), of property by the affiliate,
(A) to a person or partnership that was, at the time of the disposition, a designated person or partnership in respect of the taxpayer, and
(B) to which a loss deferral or similar loss postponement provision of the income tax laws that are relevant in computing the earnings amount of the affiliate applied, and
(36) Paragraph 5907(2)(l) of the Regulations is replaced by the following:
(l) if any property of the affiliate that was acquired from a person or partnership that was, at the time of the acquisition, a designated person or partnership in respect of the taxpayer has been disposed of, the amount in respect of that property that may reasonably be considered as having been included under paragraph (f) in computing the earnings amount of any foreign affiliate of the taxpayer or of a person or partnership that was, at the time of the disposition, a designated person or partnership in respect of the taxpayer.
(37) Section 5907 of the Regulations is amended by adding the following after subsection (2):
(2.01) Subparagraphs (2)(f)(ii) and (j)(iii) and subsection (5.1) do not apply to a particular disposition of property (referred to in this subsection as the “affiliate property”) by a particular foreign affiliate of a taxpayer if
(a) the only consideration received in respect of the particular disposition is shares of the capital stock of another foreign affiliate of the taxpayer;
(b) all of the shares of the capital stock of the other affiliate that are, immediately after the particular disposition, owned by the particular affiliate are disposed of, at a particular time that is within 90 days of the day that includes the time of the particular disposition, to a person or partnership that at the particular time is not a designated person or partnership in respect of the taxpayer; and
(c) the affiliate property is not disposed of by the other affiliate as part of a series of transactions or events that includes the particular disposition.
(2.02) If an amount or a portion of an amount would, in the absence of this subsection, be included in computing the exempt earnings, or deducted in computing the exempt loss, of a foreign affiliate of a corporation in respect of the corporation for a taxation year of the affiliate and the amount or portion arises from a disposition of property (other than money), at any time, to a person or partnership that was, at that time, a designated person or partnership in respect of the corporation where that disposition is a transaction (within the meaning of subsection 245(1) of the Act) that is, or would be (if the amount or portion were a tax benefit for the purposes of section 245 of the Act), an avoidance transaction (within the meaning of subsection 245(3) of the Act), the following rules apply:
(a) the amount or portion is instead to be included in the affiliate’s taxable earnings for the year in respect of the corporation; and
(b) any income or profits tax relating to the transaction that would otherwise be deducted in computing the exempt earnings, or included in computing the exempt loss, of the affiliate for the year in respect of the corporation, is instead to be deducted from the affiliate’s taxable earnings for the year in respect of the corporation.
(2.03) The determination — under subparagraph (a)(iii) and paragraph (b) of the definition “earnings”, and paragraph (b) of the definition “loss”, in subsection (1) — of the earnings or loss of a foreign affiliate of a taxpayer resident in Canada for a particular taxation year from an active business is to be made as if the affiliate
(a) had, in computing its income or loss from the business for each taxation year (referred to in this paragraph as an “earnings or loss year”) that is the particular year or is any preceding taxation year that ends after August 19, 2011,
(i) claimed all deductions that it could have claimed under the Act, up to the maximum amount deductible in computing the income or loss from the business for that earnings or loss year, and
(ii) made all claims and elections and taken all steps under applicable provisions of the Act, or of enactments implementing amendments to the Act or its regulations, to maximize the amount of any deduction referred to subparagraph (i); and
(b) had, in computing its income or loss from the business for any preceding taxation year that ended on or before August 19, 2011, claimed all deductions, if any, that it actually claimed under the Act, up to the maximum amount deductible, and made all claims and elections, if any, and taken all steps, if any, under applicable provisions of the Act, or of enactments implementing amendments to the Act or its regulations, that it actually made.
(38) Subsection 5907(2.9) of the Regulations is replaced by the following:
(2.9) If paragraph 95(2)(k.1) of the Act applies in respect of a particular taxation year of a foreign affiliate of a taxpayer or in respect of a particular fiscal period of a partnership (which foreign affiliate or partnership is referred to in this subsection as the “operator” and which particular taxation year or particular fiscal period is referred to in this subsection as the “specified taxation year”) a member of which is, at the end of the period, a foreign affiliate of a taxpayer,
(a) in computing the affiliate’s earnings or loss from the foreign business referred to in that paragraph for the affiliate’s taxation year (referred to in subparagraphs (i) and (ii) as the “preceding taxation year”) that includes the day that is immediately before the beginning of the specified taxation year,
(i) there is to be added to the amount determined under paragraph (a) of the definition “earnings” in subsection (1), after adjustment in accordance with subsections (2) to (2.2),
(A) where the operator is the affiliate, the total of
(I) the amount, if any, by which the total determined under sub-subclause (ii)(A)(I)2 in respect of the operator for the preceding taxation year exceeds the total determined under sub-subclause (ii)(A)(I)1 in respect of the operator for that year, and
(II) if the operator was deemed under paragraph 95(2)(k.1) of the Act to have, at the end of the preceding taxation year, disposed of property owned by it that was used or held by it in the course of carrying on the foreign business in that year, the amount that is the total of all amounts each of which is determined by the formula
(A – B) – C
where
- A
- is the fair market value, immediately before the end of that year, of a property deemed because of that paragraph to have been disposed of,
- B
- is the amount determined under paragraph (a) of the definition “relevant cost base” in subsection 95(4) of the Act in respect of the property, in respect of the taxpayer, immediately before the time of the disposition, and
- C
- is the amount, if any, of the capital gain determined in respect of the disposition of the property at that time, and
(B) where the operator is the partnership, the amount determined under subsection 5908(13); and
(ii) there is to be added to the amount determined under paragraph (a) of the definition “loss” in subsection (1),
(A) where the operator is the affiliate, the total of
(I) the amount, if any, by which
1. the total of all amounts each of which is an amount deemed under paragraph 95(2)(k.1) of the Act to have been claimed under any of paragraphs 20(1)(l), (l.1) and (7)(c), and subparagraphs 138(3)(a)(i), (ii) and (iv), of the Act (each of which provisions is referred to in this subparagraph as a “reserve provision”) in computing the income from the foreign business for the preceding taxation year
exceeds
2. the total of all amounts each of which is an amount actually claimed by the operator as a reserve in computing its income from the foreign business for that year that can reasonably be considered to be in respect of amounts in respect of which a reserve could have been claimed under a reserve provision on the assumption that the operator could have claimed amounts in respect of the reserve provisions for that year, and
(II) the total of all amounts each of which is the amount, if any, by which the amount determined under the description of B in the formula in subclause (i)(A)(II) in respect of a property described in that subclause exceeds the amount determined under the description of A in the formula in that clause in respect of the property, and
(B) where the operator is the partnership, the amount determined under subsection 5908(13); and
(b) any property of the operator that is, under that paragraph, deemed to have been disposed of and reacquired by the operator is, for the purposes of this section, deemed to have been disposed of and reacquired by the operator in the same manner and for the same amounts as if that paragraph applied for the purposes of this section.
(39) Subsection 5907(5) of the Regulations, as enacted by Part 2, is replaced by the following:
(5) For the purposes of this section, each capital gain, capital loss, taxable capital gain or allowable capital loss of a foreign affiliate of a taxpayer from the disposition of property is to be computed in accordance with the rules set out in subsection 95(2) of the Act.
(5.01) For the purposes of subsection (6), if any capital gain, capital loss, taxable capital gain or allowable capital loss referred to in subsection (5), or any capital loss referred to in subparagraph (iii) of the description of B in the definition “hybrid surplus” in subsection (1), of a foreign affiliate of a corporation is required to be computed in Canadian currency and the currency referred to in subsection (6) is not Canadian currency, the amount of the gain or loss is to be converted from Canadian currency into the currency referred to in subsection (6) at the rate of exchange prevailing on the date of disposition of the property.
(40) The portion of subsection 5907(5.1) of the Regulations before paragraph (a) is replaced by the following:
(5.1) Notwithstanding subsection (5), if, under the income tax laws of a country other than Canada that are relevant in computing the earnings of a foreign affiliate of a taxpayer resident in Canada from an active business carried on by it in a country, no gain or loss is recognized in respect of a disposition (other than a disposition to which subsection (9) applies) by the affiliate of a capital property used or held principally for the purpose of gaining or producing income from an active business to a person or partnership (in this subsection referred to as the “transferee”) that was, at the time of the disposition, a designated person or partnership in respect of the taxpayer, for the purposes of this section,
(41) Subsection 5907(7.1) of the Regulations is repealed.
(42) Subsection 5907(8) of the Regulations is replaced by the following:
(8) For the purposes of computing the various amounts referred to in this section, the first taxation year of a foreign affiliate, of a corporation resident in Canada, that is formed as a result of a foreign merger (within the meaning assigned by subsection 87(8.1) of the Act) is deemed to have commenced at the time of the merger, and a taxation year of a predecessor corporation (within the meaning assigned by subsection 5905(3)) that would otherwise have ended after that time is deemed to have ended immediately before that time.
(43) Subsection 5907(9) of the Regulations is replaced by the following:
(9) If a foreign affiliate of a taxpayer has been liquidated and dissolved (otherwise than as a result of a foreign merger within the meaning assigned by subsection 87(8.1) of the Act), for the purposes of computing the various amounts referred to in this section, the following rules apply:
(a) where, at a particular time, property having a fair market value equal to or greater than 90 percent of the fair market value of all of the property that was owned by the affiliate immediately before the commencement of the liquidation and dissolution has been disposed of by the affiliate in the course of the liquidation and dissolution, the taxation year of the affiliate that otherwise would have included the particular time is deemed to have ended immediately before that time; and
(b) each property of the affiliate that was disposed of by the affiliate in the course of the liquidation and dissolution is deemed to have been
(i) disposed of by the affiliate, at the time that is the earlier of the time it was actually disposed of and the time that is immediately before the time that is immediately before the particular time, for proceeds of disposition equal to
(A) if the liquidation and dissolution is one to which subsection 88(3) of the Act applies in respect of the disposition, the amount that would, in the absence of subsection 88(3.3) of the Act, be determined under paragraph 88(3)(a) or (b) of the Act, as the case may be,
(B) if the liquidation and dissolution is one to which paragraph 95(2)(e) of the Act applies in respect of the disposition, the amount determined under subparagraph 95(2)(e)(i) or (ii) of the Act, as the case may be, and
(C) in any other case, the fair market value of the property at the time it was actually disposed of, and
(ii) acquired by the person or partnership to which the affiliate disposed of the property, at the time it was actually acquired, at a cost equal to the affiliate’s proceeds of disposition of the property.
(9.1) Notwithstanding any other provision of this Part, in determining the earnings or loss of a foreign affiliate of a taxpayer resident in Canada, for a taxation year of the affiliate from an active business carried on by it in a country,
(a) from a disposition of property to which paragraph 95(2)(d.1) of the Act applies, those earnings or that loss are to be determined using the rules in that paragraph; and
(b) from a disposition of property acquired in a transaction to which paragraph 95(2)(d.1) of the Act applies, the cost to the affiliate of the property is to be determined using the rules in that paragraph.
(44) Subsection 5907(13) of the Regulations is replaced by the following:
(13) For the purposes of subparagraph (ii) of paragraph 128.1(1)(d) of the Act, the prescribed amount is the amount determined by the formula
X + Y
where
- X
- is the amount, if any, by which
(a) the amount, if any, determined by the formula
A – B – (C – D) + (E – F)
where
- A
- is the taxable surplus of the foreign affiliate of the other taxpayer referred to in that paragraph, in respect of the other taxpayer, at the end of the year referred to in that subparagraph,
- B
- is the affiliate’s net earnings for the year in respect of the affiliate’s foreign accrual property income for the year to the extent those net earnings have been included in the amount referred to in the description of A,
- C
- is the total of all amounts each of which is the amount by which the affiliate’s underlying foreign tax in respect of the other taxpayer at the end of the year would have increased because of the gain or income of the affiliate that would have arisen if a disposition, deemed under paragraph 128.1(1)(b) of the Act, of a property by the affiliate had been an actual disposition of the property by the affiliate,
- D
- is the total of all amounts each of which is the amount otherwise added in computing the affiliate’s underlying foreign tax in respect of the other taxpayer at the end of the year in respect of income or profits taxes paid to the government of a country in respect of all or a portion of a gain or an income of the affiliate referred to in the description of C,
- E
- is the total of all amounts each of which is the amount by which the affiliate’s underlying foreign tax in respect of the other taxpayer at the end of the year would have decreased because of the loss of the affiliate that would have arisen if a disposition, deemed under paragraph 128.1(1)(b) of the Act, of a property by the affiliate had been an actual disposition of the property by the affiliate, and
- F
- is the total of all amounts each of which is the amount otherwise deducted in computing the affiliate’s underlying foreign tax in respect of the other taxpayer at the end of the year in respect of income or profits taxes refunded by the government of a country in respect of all or a portion of a loss of the affiliate referred to in the description of E
exceeds
(b) the amount, if any, determined by the formula
[(G – H) × (J – 1)] + K
where
- G
- is the amount determined by the formula
L + M – N
where
- L
- is the underlying foreign tax of the affiliate in respect of the other taxpayer at the end of the year,
- M
- is the amount, if any, by which the amount determined under the description of C in paragraph (a) exceeds the amount determined under the description of D in that paragraph, and
- N
- is the amount, if any, by which the amount determined under the description of E in paragraph (a) exceeds the amount determined under the description of F in that paragraph,
- H
- is the portion of the value of L that can reasonably be considered to relate to the affiliate’s net earnings for the year in respect of the affiliate’s foreign accrual property income,
- J
- is the other taxpayer’s relevant tax factor (within the meaning assigned by subsection 95(1) of the Act) for its taxation year that includes the time that is immediately before the particular time, and
- K
- is the amount, if any, by which
(i) the total of all amounts required by paragraph 92(1)(a) of the Act to be added at any time in a preceding taxation year in computing the adjusted cost base to the other taxpayer of the shares of the affiliate owned by the other taxpayer at the end of the year
exceeds
(ii) the total of all amounts required by paragraph 92(1)(b) of the Act to be deducted at any time in a preceding taxation year in computing the adjusted cost base to the other taxpayer of the shares of the affiliate owned by the other taxpayer at the end of the year, and
- Y
- is the amount, if any, by which
(a) the amount, if any, determined by the formula
P – (Q – R) + (S – T)
where
- P
- is the affiliate’s hybrid surplus in respect of the other taxpayer at the end of the year,
- Q
- is the total of all amounts each of which is the amount by which the affiliate’s hybrid underlying tax in respect of the other taxpayer at the end of the year would have increased because of the capital gain of the affiliate that would have arisen if a disposition, deemed under paragraph 128.1(1)(b) of the Act, of a property by the affiliate had been an actual disposition of the property by the affiliate,
- R
- is the total of all amounts each of which is the amount otherwise added in computing the affiliate’s hybrid underlying tax in respect of the other taxpayer at the end of the year in respect of income or profits taxes paid to the government of a country in respect of all or a portion of a capital gain of the affiliate referred to in the description of Q,
- S
- is the total of all amounts each of which is the amount by which the affiliate’s hybrid underlying tax in respect of the other taxpayer at the end of the year would have decreased because of the capital loss of the affiliate that would have arisen if a disposition, deemed under paragraph 128.1(1)(b) of the Act, of a property by the affiliate had been an actual disposition of the property by the affiliate, and
- T
- is the total of all amounts each of which is the amount otherwise deducted in computing the affiliate’s hybrid underlying tax in respect of the other taxpayer at the end of the year in respect of income or profits taxes refunded by the government of a country in respect of all or a portion of a capital loss of the affiliate referred to in the description of S;
exceeds
(b) the amount, if any, determined by the formula
[U × (V – 0.5)] + (W × 0.5)
where
- U
- is the amount determined by the formula
U.1 + U.2 – U.3
where
- U.1
- is the hybrid underlying tax of the affiliate in respect of the other taxpayer at the end of the year,
- U.2
- is the amount, if any, by which the amount determined under the description of Q in paragraph (a) exceeds the amount determined under the description of R in that paragraph, and
- U.3
- is the amount, if any, by which the amount determined under the description of S in paragraph (a) exceeds the amount determined under the description of T in that paragraph,
- V
- is the other taxpayer’s relevant tax factor (within the meaning assigned by subsection 95(1) of the Act) for its taxation year that includes the time that is immediately before the particular time, and
- W
- is the amount determined under paragraph (a).
(14) For the purposes of the description of C in paragraph (a) of the description of X in subsection (13) and the description of Q in paragraph (a) of the description of Y in subsection (13), the amount by which the underlying foreign tax or the hybrid underlying tax, as the case may be, of the affiliate in respect of the other taxpayer at the end of the year would have increased if a disposition (referred to in this subsection as the “notional actual disposition”) deemed under paragraph 128.1(1)(b) of the Act of any property by the affiliate had been an actual disposition of the property by the affiliate is the total of all amounts each of which is the amount, if any, by which
(a) the amount (determined on the assumption that the notional actual disposition occurred at the time of the deemed disposition) that can reasonably be considered to be the amount of income or profits tax that the affiliate would, because of the notional actual disposition, have had to pay to the government of a particular country (other than Canada), in addition to any other income or profits tax otherwise payable to that government, in relation to the gain or income of the affiliate from the notional actual disposition
exceeds
(b) the amount that can reasonably be considered to be the portion of the notional income or profits tax payable by the affiliate to the government of the particular country in relation to the gain or income of the affiliate from the notional actual disposition (determined on the assumptions that the notional actual disposition occurred immediately after the time that is immediately after the time of the deemed disposition and that the notional income or profits tax payable by the affiliate to the government of the particular country in relation to the notional actual disposition is equal to the amount determined under paragraph (a)) that, because of a comprehensive agreement or convention for the elimination of double taxation on income between the government of the particular country and the government of any other country, would not have been payable to the government of the particular country.
(15) For the purposes of the description of E in paragraph (a) of the description of X in subsection (13) and the description of S in paragraph (a) of the description of Y in subsection (13), the amount by which the underlying foreign tax or the hybrid underlying tax, as the case may be, of the affiliate in respect of the other taxpayer at the end of the year would have decreased if a disposition (referred to in this subsection as the “notional actual disposition”) deemed under paragraph 128.1(1)(b) of the Act of any property by the affiliate had been an actual disposition of the property by the affiliate is the total of all amounts each of which the amount, if any, by which
(a) the amount (determined on the assumption that the notional actual disposition occurred at the time of the deemed disposition) that can reasonably be considered to be the amount of income or profits tax that the affiliate would, because of the notional actual disposition, have had refunded to it by the government of a particular country (other than Canada), in addition to any other income or profits tax otherwise refundable by that government, in relation to the loss or capital loss, as the case may be, of the affiliate from the notional actual disposition
exceeds
(b) the amount that can reasonably be considered to be the portion of the notional income or profits tax refundable to the affiliate by the government of the particular country in relation to the loss or capital loss, as the case may be, of the affiliate from the notional actual disposition (determined on the assumptions that the notional actual disposition occurred immediately after the time that is immediately after the time of the deemed disposition and that the notional income or profits tax refundable to the affiliate by the government of the particular country in relation to the notional actual disposition is equal to the amount determined by paragraph (a)) that, because of a comprehensive agreement or convention for the elimination of double taxation on income between the government of the particular country and the government of any other country, would not have been refundable by the government of the particular country.
(45) Subsections (1), (7), (8), (11), (15), (22) and (26) to (33) and subsection 5907(2.03) of the Regulations, as enacted by subsection (37), apply in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011.
(46) Subsection (2) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011, except that, for taxation years of the foreign affiliate that begin before 2013, subparagraph (a)(ii) of the definition “exempt earnings” in subsection 5907(1) of the Regulations, as enacted by subsection (2), is to be read as follows:
(ii) the amount of the taxable capital gains for the year referred to in subparagraphs (c)(i), (d)(iii), (e)(i) and (f)(iv) of the definition “net earnings”, and
(47) Subsection (3) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011, except that, for taxation years of the foreign affiliate that begin before 2013, subparagraph (a)(ii) of the definition “exempt loss” in subsection 5907(1) of the Regulations, as enacted by subsection (3), is to be read as follows:
(ii) the amount of the allowable capital losses for the year referred to in subparagraphs (c)(i), (d)(iii), (e)(i) and (f)(iv) of the definition “net loss”, and
(48) Subsections (4) to (6), (14), (16) to (21), (23), (25), (39) and (41) are deemed to have come into force on August 20, 2011.
(49) Subsections (9) and (12) apply in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011. However, if the taxpayer has elected under subsection 70(31), subsection (9) also applies to all mergers or combinations in respect of foreign affiliates of the taxpayer that occur after December 20, 2002 and in taxation years of those foreign affiliates that end on or before August 19, 2011 and, in respect of those mergers or combinations, subparagraphs (d)(i) and (ii) of the definition “net earnings” in subsection 5907(1) of the Regulations, as enacted by subsection (9), are to be read as follows:
(i) shares of the capital stock of another foreign affiliate of the corporation that were excluded property of the affiliate (other than dispositions to which any of paragraphs 95(2)(c) to (e) of the Act was applicable), or
(ii) partnership interests that were excluded property of the affiliate
(50) Subsections (10) and (13) apply to taxation years of a foreign affiliate of a taxpayer that begin after 2012.
(51) Subsection (24) is deemed to have come into force on August 20, 2011. However, in respect of dispositions that occur after August 19, 2011 and before 2013,
(a) the portion of subparagraph (ii) of the description of A in the definition “hybrid surplus” in subsection 5907(1) of the Regulations before clause (A), as enacted by subsection (24), is to be read as follows:
(ii) the amount of a capital gain (except to the extent that the taxable portion of the capital gain is included under the description of B in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the subject affiliate), for a taxation year, of the subject affiliate, or of a partnership of which the subject affiliate is a member (to the extent that the capital gain is reasonably attributable to the subject affiliate), in respect of a disposition, at any time in the period, to a person or partnership that was, at that time, a designated person or partnership in respect of the corporation, of
(b) the portion of subparagraph (ii) of the description of B in the definition “hybrid surplus” in subsection 5907(1) of the Regulations before clause (A), as enacted by subsection (24), is to be read as follows:
(ii) the amount of a capital loss (except to the extent that the allowable portion of the capital loss is included under paragraph (a) of the description of E in the definition “foreign accrual property income” in subsection 95(1) of the Act in respect of the subject affiliate), for a taxation year, of the subject affiliate, or of a partnership of which the subject affiliate is a member (to the extent that the capital loss is reasonably attributable to the subject affiliate), in respect of a disposition, at any time in the period, to a person or partnership that was, at that time, a designated person or partnership in respect of the corporation, of
(c) section 5907 of the Regulations is to be read as if it contained a subsection (1.001) that reads as follows:
(1.001) For the purposes of subparagraph (ii) of the description of A, and subparagraph (ii) of the description of B, in the definition “hybrid surplus” in subsection (1)
(a) if a foreign affiliate of a corporation redeems, acquires or cancels shares of its capital stock those shares are, for greater certainty, deemed to be disposed of to the affiliate by the person or partnership that, immediately before the redemption, acquisition or cancellation, holds those shares;
(b) if a partnership redeems, acquires or cancels interests in the partnership those interests are, for greater certainty, deemed to be disposed of to the partnership by the person or partnership that, immediately before the redemption, acquisition or cancellation, holds those interests; and
(c) if a person or partnership is deemed under subsection 40(3) of the Act to have disposed of shares of the capital stock of a corporation, the person or partnership is deemed to have disposed of those shares to itself.
(52) Subsections (34) to (36) apply in respect of dispositions of property by a foreign affiliate of a taxpayer that occur after August 19, 2011. However, if the taxpayer has elected under subsection (53),
(a) subparagraph 5907(2)(f)(ii) of the Regulations, as enacted by subsection (34), and subparagraph 5907(2)(j)(iii) of the Regulations, as enacted by subsection (35), apply in respect of dispositions of property by all foreign affiliates of the taxpayer that occur after December 20, 2002;
(b) that subparagraph 5907(2)(f)(ii) is, in respect of all such dispositions that occur on or before August 19, 2011, to be read as follows:
(ii) subject to subsection (2.01), does not arise with respect to a disposition (other than a disposition to which subsection (9) applies) by the affiliate of property to another foreign affiliate of the taxpayer or to a person with whom the taxpayer does not deal at arm’s length, to which a tax deferral, rollover or similar tax postponement provision of the income tax law that is relevant in computing the earnings amount of the affiliate applied, and
(c) that subparagraph 5907(2)(j)(iii) is, in respect of all such dispositions that occur on or before August 19, 2011, to be read as follows:
(iii) subject to subsection (2.01), does not arise with respect to a disposition (other than a disposition to which subsection (9) applies) by the affiliate of property to another foreign affiliate of the taxpayer or to a person with whom the taxpayer does not deal at arm’s length, to which a loss deferral or similar loss postponement provision of the income tax law that is relevant in computing the earnings amount of the affiliate applied, and
(53) Subsection 5907(2.01) of the Regulations, as enacted by subsection (37), applies to dispositions by a foreign affiliate of a taxpayer that occur after August 19, 2011. However, if the taxpayer elects in writing under this subsection in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, that subsection 5907(2.01) applies to dispositions by all foreign affiliates of the taxpayer that occur after December 20, 2002.
(54) Subsection 5907(2.02) of the Regulations, as enacted by subsection (37), applies in respect of transactions (within the meaning of subsection 245(1) of the Act) that are entered into after August 19, 2011.
(55) Subsection (38) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after December 20, 2002. However, if the taxpayer has elected under paragraph 70(29)(b), subsection (38) applies in respect of taxation years of all foreign affiliates of the taxpayer that begin after 1994.
(56) Subsection (40) applies to dispositions that occur after August 19, 2011.
(57) Subsection (42) applies in respect of mergers or combinations in respect of a foreign affiliate of a taxpayer that occur after August 19, 2011.
(58) Subsection 5907(9) of the Regulations, as enacted by subsection (43), applies in respect of liquidations and dissolutions of foreign affiliates of a taxpayer that begin after December 20, 2002, except that
(a) if the taxpayer has elected under subsection 70(28), paragraph 5907(9)(b) of the Regulations, as enacted by subsection (43), is, in respect of liquidations and dissolutions of all foreign affiliates of the taxpayer that begin on or before February 27, 2004, to be read as follows:
(b) each property of the affiliate that was disposed of by the affiliate in the course of the liquidation and dissolution is, subject to subsection 88(3) of the Act, deemed to have been
(i) disposed of by the affiliate, at the time that is the earlier of the time it was actually disposed of and the time that is immediately before the time that is immediately before the particular time, for proceeds of disposition equal to
(A) if the liquidation and dissolution is one to which paragraph 95(2)(e) of the Act applies in respect of the disposition, the amount determined under subparagraph 95(2)(e)(i) or (ii) of the Act, and
(B) in any other case, the fair market value of the property at the time it was actually disposed of, and
(ii) acquired by the person or partnership to which the affiliate disposed of the property, at the time it was actually acquired, at a cost equal to the affiliate’s proceeds of disposition of the property.
(b) if the taxpayer has not elected under subsection 70(28), paragraph 5907(9)(b) of the Regulations, as enacted by subsection (43), is, in respect of liquidations and dissolutions of foreign affiliates of the taxpayer that
(i) begin on or before February 27, 2004, to be read as follows:
(b) each property of the affiliate that was disposed of by the affiliate in the course of the liquidation and dissolution is, subject to subsection 88(3) and paragraphs 95(2)(e) and (e.1) of the Act, deemed to have been
(i) disposed of by the affiliate, at the time that is the earlier of the time it was actually disposed of and the time that is immediately before the time that is immediately before the particular time, for proceeds of disposition equal to the fair market value of the property at the time it was actually disposed of, and
(ii) acquired by the person or partnership to which the affiliate disposed of the property, at the time it was actually acquired, at a cost equal to the affiliate’s proceeds of disposition of the property.
(ii) begin after February 27, 2004 and on or before August 19, 2011, to be read as follows:
(b) each property of the affiliate that was disposed of by the affiliate in the course of the liquidation and dissolution is, subject to paragraphs 95(2)(e) and (e.1) of the Act, deemed to have been
(i) disposed of by the affiliate, at the time that is the earlier of the time it was actually disposed of and the time that is immediately before the time that is immediately before the particular time, for proceeds of disposition equal to
(A) if the liquidation and dissolution is one to which subsection 88(3) of the Act applies in respect of the disposition, the amount that would (in the absence of subsection 88(3.3) of the Act) be determined under paragraph 88(3)(a) or (b) of the Act, as the case may be, and
(B) in any other case, the fair market value of the property at the time it was actually disposed of, and
(ii) acquired by the person or partnership to which the affiliate disposed of the property, at the time it was actually acquired, at a cost equal to the affiliate’s proceeds of disposition of the property.
(59) Subsection 5907(9.1) of the Regulations, as enacted by subsection (43), applies to mergers or combinations in respect of a foreign affiliate of a taxpayer that occur after August 19, 2011. However, if the taxpayer has elected under subsection 70(31), that subsection 5907(9.1) applies to mergers or combinations in respect of all foreign affiliates of the taxpayer that occur after December 20, 2002.
(60) Subsections 5907(13) and (14) of the Regulations, as enacted by subsection (44), apply after 1992 in respect of a foreign affiliate of a taxpayer. However,
(a) if the foreign affiliate elected in accordance with paragraph 111(4)(a) of the Statutes of Canada, 1994, chapter 21, those subsections 5907(13) and (14) apply to the foreign affiliate from the foreign affiliate’s time of continuation (within the meaning assigned by that paragraph);
(b) in their application in respect of dispositions that occur on or before August 19, 2011,
(i) subject to paragraph (c), subsection 5907(13) of the Regulations, as enacted by subsection (44), is to be read as follows:
(13) For the purposes of subparagraph (ii) of paragraph 128.1(1)(d) of the Act, the prescribed amount is the amount determined by the formula
X – Z
where
- X
- is the amount determined by the formula
A – B – (C – D)
where
- A
- is the taxable surplus of the foreign affiliate of the other taxpayer referred to in that paragraph, in respect of the other taxpayer, at the end of the year referred to in that subparagraph,
- B
- is the affiliate’s net earnings for the year in respect of the affiliate’s foreign accrual property income for the year to the extent those net earnings have been included in the amount referred to in the description of A,
- C
- is the total of all amounts each of which is the amount by which the affiliate’s underlying foreign tax in respect of the other taxpayer at the end of the year would have increased because of the gain or income of the affiliate that would have arisen if a disposition, deemed under paragraph 128.1(1)(b) of the Act, of a property by the affiliate had been an actual disposition of the property by the affiliate, and
- D
- is the total of all amounts each of which is the amount otherwise added in computing the affiliate’s underlying foreign tax in respect of the other taxpayer at the end of the year in respect of income or profits taxes paid to the government of a country in respect of all or a portion of a gain or an income of the affiliate referred to in the description of C, and
- Z
- is the amount determined by the formula
[(G – H) × (J – 1)] + K
where
- G
- is the amount determined by the formula
L + M
where
- L
- is the underlying foreign tax of the affiliate in respect of the other taxpayer at the end of the year, and
- M
- is the amount, if any, by which the amount determined under the description of C exceeds the amount determined under the description of D,
- H
- is the portion of the value of L that can reasonably be considered to relate to the affiliate’s net earnings for the year in respect of the affiliate’s foreign accrual property income,
- J
- is the other taxpayer’s relevant tax factor (within the meaning assigned by subsection 95(1) of the Act) for its taxation year that includes the time that is immediately before the particular time, and
- K
- is the amount, if any, by which
(i) the total of all amounts required by paragraph 92(1)(a) of the Act to be added at any time in a preceding taxation year in computing the adjusted cost base to the other taxpayer of the shares of the affiliate owned by the other taxpayer at the end of the year
exceeds
(ii) the total of all amounts required by paragraph 92(1)(b) of the Act to be deducted at any time in a preceding taxation year in computing the adjusted cost base to the other taxpayer of the shares of the affiliate owned by the other taxpayer at the end of the year.
(ii) the portion of subsection 5907(14) of the Regulations before paragraph (a), as enacted by subsection (44), is to be read as follows:
(14) For the purposes of the description of C in the description of X in subsection (13), the amount by which the underlying foreign tax of the affiliate in respect of the taxpayer at the end of the year would have increased, if a disposition (referred to in this subsection as the “notional actual disposition”) deemed under paragraph 128.1(1)(b) of the Act of any property by the affiliate had been an actual disposition of the property by the affiliate, is the total of all amounts each of which is the amount, if any, by which
(c) in its application in respect of dispositions that occur on or before February 27, 2004, the description of M in subsection 5907(13) of the Regulations, as enacted by subsection (44) and as required to be read by subparagraph (b)(i), is instead to be read as follows:
- M
- is the amount that would be determined to be the amount by which the amount determined under the description of C exceeds the amount determined under the description of D if this section were read without reference to subsection (14), and
(61) Subsection 5907(15) of the Regulations, as enacted by subsection (44), applies in respect of dispositions that occur after August 19, 2011.
86. (1) Paragraph 5908(10)(a) of the Regulations, as enacted by Part 2, is amended by adding the following after subparagraph (iii):
(iii.1) any amount included in computing the hybrid surplus or hybrid deficit of the affiliate before that time that may reasonably be considered to relate to a capital gain of the partnership,
(2) Paragraph 5908(10)(b) of the Regulations, as enacted by Part 2, is amended by adding the following after subparagraph (iii):
(iii.1) any amount included in computing the hybrid surplus or hybrid deficit of the affiliate before that time that may reasonably be considered to relate to a capital loss of the partnership,
(3) Section 5908 of the Regulations, as enacted by Part 2, is amended by adding the following after subsection (12):
(13) For the purposes of clauses 5907(2.9)(a)(i)(B) and (ii)(B), the amount determined under this subsection is, subject to subsection (14), the amount determined by the formula
A × B/C
where
- A
- is
(a) if clause 5907(2.9)(a)(i)(B) applies, the amount determined under clause 5907(2.9)(a)(i)(A), and
(b) if clause 5907(2.9)(a)(ii)(B) applies, the amount determined under clause 5907(2.9)(a)(ii)(A),
- B
- is the affiliate’s direct or indirect share of the partnership’s income or loss for the preceding taxation year, and
- C
- is the partnership’s income or loss for the preceding taxation year.
(14) For the purposes of subsection (13), if both the income and loss of the partnership for the preceding taxation year are nil, the descriptions of B and C in the formula in that subsection are to be applied as if the partnership had income for that year in the amount of $1,000,000.
(4) Subsections (1) and (2) are deemed to have come into force on August 20, 2011.
(5) Subsection (3) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after December 20, 2002. However, if the taxpayer has elected under paragraph 70(29)(b), the following rules apply in respect of taxation years of the foreign affiliate that begin after 1994 and before December 21, 2002:
(a) the reference to “5908(13)” in clauses 5907(2.9)(a)(i)(B) and (ii)(B) of the Regulations, as enacted by subsection 85(38), is to be read as a reference to “5907.1(1)”; and
(b) the Income Tax Regulations are to be read as if they contained a section that reads as follows
5907.1 (1) For the purposes of clauses 5907(2.9)(a)(i)(B) and (ii)(B), the amount determined under this subsection is, subject to subsection (2), the amount determined by the formula
A × B/C
where
- A
- is
(a) if clause 5907(2.9)(a)(i)(B) applies, the amount determined under clause 5907(2.9)(a)(i)(A), and
(b) if clause 5907(2.9)(a)(ii)(B) applies, the amount determined under clause 5907(2.9)(a)(ii)(A);
- B
- is the affiliate’s direct or indirect share of the partnership’s income or loss for the preceding taxation year; and
- C
- is the partnership’s income or loss for the preceding taxation year.
(2) For the purposes of subsection (1), if both the income and loss of the partnership for the preceding taxation year are nil, the descriptions of B and C in the formula in that subsection are to be applied as if the partnership had income for that year in the amount of $1,000,000.
87. (1) The description of B in paragraph 5910(1)(a) of the Regulations, as enacted by Part 2, is replaced by the following:
- B
- is the affiliate’s earnings from the business for the particular year, and
(2) Subsection 5910(3) of the Regulations, as enacted by Part 2, is repealed.
(3) Subsections (1) and (2) apply in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011.
88. (1) The Regulations are amended by adding the following after section 5910, as enacted by Part 2:
5911. (1) A listed election is to be made by the taxpayer and, if applicable, the disposing affiliate by so notifying the Minister in writing on or before
(a) if the taxpayer is a partnership, the earliest of the filing-due dates of any member of the partnership for the member’s taxation year that includes the last day of the partnership’s fiscal period that includes the last day of the foreign affiliate’s taxation year that includes the time of distribution of a distributed property; and
(b) in any other case, the taxpayer’s filing-due date for its taxation year that includes the last day of the foreign affiliate’s taxation year that includes the time of distribution of a distributed property.
(2) For the purposes of subsection (1), a listed election is any of the following:
(a) an election by the taxpayer under subsection 88(3.1) of the Act in respect of a liquidation and dissolution of a disposing affiliate;
(b) an election by the taxpayer under subsection 88(3.3) of the Act in respect of a distribution of distributed property; and
(c) a joint election by the taxpayer and a disposing affiliate under subsection 88(3.5) of the Act in respect of a distribution of distributed property.
(3) Subsection (4) applies if
(a) a taxpayer has made an election (referred to in this subsection and subsection (4) as the “initial election”) under subsection 88(3.3) of the Act in respect of a distribution of distributed property on or before the filing-due date specified in subsection (1);
(b) the taxpayer made reasonable efforts to determine all amounts, in respect of the disposing affiliate, that may reasonably be considered to be relevant in making the claim under the initial election; and
(c) the taxpayer amends the initial election on or before the day that is 10 years after the filing-due date referred to in paragraph (a).
(4) If this subsection applies and, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit the initial election to be amended, the amended election under paragraph (3)(c) is deemed to have been made on the day on which the initial election was made and the initial election is deemed not to have been made.
(5) An election under the definition “relevant cost base” in subsection 95(4) of the Act in respect of a property of a foreign affiliate of a taxpayer, in respect of the taxpayer, is to be made by the taxpayer by so notifying the Minister in writing on or before
(a) if the taxpayer is a partnership, the earliest of the filing-due dates of any member of the partnership for the member’s taxation year that includes the last day of the partnership’s fiscal period that includes the last day of the foreign affiliate’s taxation year in which the determination of the relevant cost base of the property, in respect of the taxpayer, is relevant; and
(b) in any other case, the taxpayer’s filing-due date for its taxation year that includes the last day of the foreign affiliate’s taxation year in which the determination of the relevant cost base of the property, in respect of the taxpayer, is relevant.
(6) An election, or joint election, as the case may be, under subsection 90(3) of the Act in respect of a distribution made by a foreign affiliate of a taxpayer is to be made by the taxpayer, or by the taxpayer and each connected person or partnership referred to in that subsection, as the case may be, by so notifying the Minister in writing on or before
(a) in the case of an election by the taxpayer,
(i) if the taxpayer is a partnership, the earliest of the filing-due dates of any member of the partnership for the member’s taxation year that includes the last day of the partnership’s fiscal period in which the distribution was made, and
(ii) in any other case, the taxpayer’s filing-due date for its taxation year that includes the last day of the foreign affiliate’s taxation year in which the distribution was made; and
(b) in the case of a joint election, the earliest of the filing-due dates that would be determined under paragraph (a) for each taxpayer that is required to make the joint election if there were no connected persons or partnerships in respect of the taxpayer.
(2) Subsections 5911(1) to (4) of the Regulations, as enacted by subsection (1), apply in respect of liquidations and dissolutions of foreign affiliates of a taxpayer that begin after February 27, 2004. However, any listed election referred to in that subsection 5911(1) that would otherwise be required to be filed with the Minister of National Revenue before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been filed with the Minister on a timely basis if it is filed with the Minister within 365 days after the day on which this Act receives royal assent.
(3) Subsection 5911(5) of the Regulations, as enacted by subsection (1), applies in respect of determinations in respect of which subsection 70(22) applies. However, any election referred to in that subsection 5911(5) that would otherwise be required to be filed with the Minister of National Revenue before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been filed with the Minister on a timely basis if it is filed with the Minister within 365 days after the day on which this Act receives royal assent.
(4) Subsection 5911(6) of the Regulations, as enacted by subsection (1), applies in respect of distributions made after August 19, 2011. However, any election referred to in that subsection 5911(6) that would otherwise be required to be filed with the Minister of National Revenue before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been filed with the Minister on a timely basis if it is filed with the Minister within 365 days after the day on which this Act receives royal assent.
Elections and Assessments
89. If the taxpayer referred to in any election provided for under this Part is a partnership, any reference in those elections to “the taxpayer’s filing-due date” is to be read as a reference to “the earliest of the filing-due dates of any member of the taxpayer”.
90. Any assessment of a taxpayer’s tax, interest and penalties payable under the Act for any taxation year that ends before the day on which this Act receives royal assent that would, in the absence of this section, be precluded because of subsections 152(4) to (5) of the Act shall be made to the extent necessary to take into account sections 54 to 89.
PART 4R.S., c. 1 (5th Supp.)AMENDMENTS TO THE INCOME TAX ACT RELATED TO BIJURALISM
91. (1) Subparagraph 12(1)(x)(viii) of the Income Tax Act is replaced by the following:
(viii) may not reasonably be considered to be a payment made in respect of the acquisition by the payer or the public authority of an interest in the taxpayer, an interest in, or for civil law a right in, the taxpayer’s business or an interest in, or for civil law a real right in, the taxpayer’s property;
(2) Subsection 12(4) of the Act is replaced by the following:
Marginal note:Interest from investment contract
(4) Subject to subsection (4.1), if in a taxation year a taxpayer (other than a taxpayer to whom subsection (3) applies) holds an interest in, or for civil law a right in, an investment contract on any anniversary day of the contract, there shall be included in computing the taxpayer’s income for the year the interest that accrued to the taxpayer to the end of that day with respect to the investment contract, to the extent that the interest was not otherwise included in computing the taxpayer’s income for the year or any preceding taxation year.
(3) Subsections 12(9) and (9.1) of the Act are replaced by the following:
Marginal note:Deemed accrual
(9) For the purposes of subsections (3), (4) and (11) and 20(14) and (21), if a taxpayer acquires an interest in, or for civil law a right in, a prescribed debt obligation, an amount determined in prescribed manner is deemed to accrue to the taxpayer as interest on the obligation in each taxation year during which the taxpayer holds the interest or the right in the obligation.
Marginal note:Exclusion of proceeds of disposition
(9.1) If a taxpayer disposes of an interest in, or for civil law a right in, a debt obligation that is a debt obligation in respect of which the proportion of the payments of principal to which the taxpayer is entitled is not equal to the proportion of the payments of interest to which the taxpayer is entitled, the portion of the proceeds of disposition received by the taxpayer that can reasonably be considered to represent a recovery of the cost to the taxpayer of the interest or the right in the debt obligation shall, notwithstanding any other provision of this Act, not be included in computing the taxpayer’s income, and for the purpose of this subsection, a debt obligation includes, for greater certainty, all of the issuer’s obligations to pay principal and interest under that obligation.
(4) Paragraph (i) of the definition “investment contract” in subsection 12(11) of the Act is replaced by the following:
(i) an obligation in respect of which the taxpayer has (otherwise than because of subsection (4)) at periodic intervals of not more than one year, included, in computing the taxpayer’s income throughout the period in which the taxpayer held an interest in, or for civil law a right in, the obligation, the income accrued on it for those intervals,
92. (1) The portion of subsection 13(5.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Deemed cost and depreciation
(5.2) If, at any time, a taxpayer has acquired a capital property that is depreciable property or real or immovable property in respect of which, before that time, the taxpayer or any person with whom the taxpayer was not dealing at arm’s length was entitled to a deduction in computing income in respect of any amount paid or payable for the use of, or the right to use, the property and the cost or the capital cost (determined without reference to this subsection) at that time of the property to the taxpayer is less than the fair market value thereof at that time determined without reference to any option with respect to that property, for the purposes of this section, section 20 and any regulations made under paragraph 20(1)(a), the following rules apply:
(2) Subsection 13(5.3) of the Act is replaced by the following:
Marginal note:Deemed recapture
(5.3) If, at any time in a taxation year, a taxpayer has disposed of a capital property that is an option with respect to depreciable property or real or immovable property in respect of which the taxpayer or any person with whom the taxpayer was not dealing at arm’s length was entitled to a deduction in computing income in respect of any amount paid for the use of, or the right to use, the property, for the purposes of this section, the amount, if any, by which the proceeds of disposition to the taxpayer of the option exceed the taxpayer’s cost in respect thereof is deemed to be an excess referred to in subsection (1) in respect of the taxpayer for the year.
(3) Paragraph 13(7.5)(c) of the Act is replaced by the following:
(c) if a taxpayer acquires an intangible property, or for civil law an incorporeal property, as a consequence of making a payment to which paragraph (a) applies or incurring a cost to which paragraph (b) applies,
(i) the property referred to in paragraph (a) or (b) is deemed to include the intangible or incorporeal property, and
(ii) the portion of the capital cost referred to in paragraph (a) or (b) that applies to the intangible or incorporeal property is deemed to be the amount determined by the formula
A × B/C
where
- A
- is the lesser of the amount of the payment made or cost incurred and the amount determined for C,
- B
- is the fair market value of the intangible or incorporeal property at the time the payment was made or the cost was incurred, and
- C
- is the fair market value at the time the payment was made or the cost was incurred of all intangible or incorporeal properties acquired as a consequence of making the payment or incurring the cost; and
93. (1) Paragraph (c) of the definition “eligible capital expenditure” in subsection 14(5) of the Act is replaced by the following:
(c) that is the cost of, or any part of the cost of,
(i) tangible property, or for civil law corporeal property, of the taxpayer,
(ii) intangible property, or for civil law incorporeal property, that is depreciable property of the taxpayer,
(iii) property in respect of which any deduction (otherwise than under paragraph 20(1)(b)) is permitted in computing the taxpayer’s income from the business or would be so permitted if the taxpayer’s income from the business were sufficient for the purpose, or
(iv) an interest in, or for civil law a right in, or a right to acquire any property described in any of subparagraphs (i) to (iii)
(2) Subparagraph (f)(iv) of the definition “eligible capital expenditure” in subsection 14(5) of the Act is replaced by the following:
(iv) an interest in, or for civil law a right in, or a right to acquire any property described in any of subparagraphs (i) to (iii).
94. The portion of subsection 16.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Leasing properties
16.1 (1) Where a taxpayer (in this section referred to as the “lessee”) leases tangible property, or for civil law corporeal property, that is not prescribed property and that would, if the lessee acquired the property, be depreciable property of the lessee, from a person resident in Canada other than a person whose taxable income is exempt from tax under this Part, or from a non-resident person who holds the lease in the course of carrying on a business through a permanent establishment in Canada, as defined by regulation, any income from which is subject to tax under this Part, who owns the property and with whom the lessee was dealing at arm’s length (in this section referred to as the “lessor”) for a term of more than one year, if the lessee and the lessor jointly elect in prescribed form filed with their returns of income for their respective taxation years that include the particular time when the lease began, the following rules apply for the purpose of computing the income of the lessee for the taxation year that includes the particular time and for all subsequent taxation years:
95. (1) Paragraph 18(2)(f) of the Act is replaced by the following:
(f) in the case of a corporation whose principal business is the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property owned by it, to or for a person with whom the corporation is dealing at arm’s length, the corporation’s base level deduction for the particular year.
(2) Paragraphs 18(3.4)(a) and (b) of the Act are replaced by the following:
(a) a corporation whose principal business is throughout the year the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property owned by it, to or for a person with whom the corporation is dealing at arm’s length, or
(b) a partnership
(i) each member of which is a corporation described in paragraph (a), and
(ii) the principal business of which is throughout the year the leasing, rental or sale, or the development for lease, rental or sale, or any combination thereof, of real or immovable property held by it, to or for a person with whom each member of the partnership is dealing at arm’s length,
96. (1) Paragraph 18.1(9)(b) of the French version of the Act is replaced by the following:
b) au cours de la période commençant au moment de la disposition ou de l’extinction et se terminant 30 jours après ce moment, un contribuable — qui avait une part directe ou indirecte dans le droit — a une autre semblable part dans un autre droit aux produits, laquelle autre part est un abri fiscal ou un abri fiscal déterminé au sens de l’article 143.2.
(2) Subparagraph 18.1(10)(b)(v) of the French version of the Act is replaced by the following:
(v) en cas d’application du paragraphe (9), le début d’une période de 30 jours tout au long de laquelle aucun contribuable ayant eu une part directe ou indirecte dans le droit n’a une autre semblable part dans un autre droit aux produits, laquelle autre part est un abri fiscal ou un abri fiscal déterminé au sens de l’article 143.2.
97. (1) Subparagraph 20(1)(m)(iii) of the Act is replaced by the following:
(iii) periods for which rent or other amounts for the possession or use of land or of chattels or movables have been paid in advance, or
(2) Paragraph 20(1)(n) of the Act is replaced by the following:
Marginal note:Reserve for unpaid amounts
(n) if an amount included in computing the taxpayer’s income from the business for the year or for a preceding taxation year in respect of property sold in the course of the business is payable to the taxpayer after the end of the year and, except where the property is real or immovable property, all or part of the amount was, at the time of the sale, not due until at least two years after that time, a reasonable amount as a reserve in respect of any part of the amount that can reasonably be regarded as a portion of the profit from the sale;
(3) The portion of subsection 20(11) of the Act before paragraph (a) is replaced by the following:
Marginal note:Foreign taxes on income from property exceeding 15%
(11) In computing the income of an individual from a property other than real or immovable property for a taxation year after 1975 that is income from a source outside Canada, there may be deducted the amount, if any, by which,
(4) The portion of subsection 20(21) of the Act before paragraph (a) is replaced by the following:
Marginal note:Debt obligation
(21) If a taxpayer has in a particular taxation year disposed of a property that is an interest in, or for civil law a right in, a debt obligation for consideration equal to its fair market value at the time of disposition, there may be deducted in computing the taxpayer’s income for the particular year the amount, if any, by which
98. (1) The portion of subsection 20.1(1) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Argent emprunté pour tirer un revenu d’un bien
20.1 (1) Le contribuable qui, à un moment donné, cesse d’utiliser de l’argent emprunté en vue de tirer un revenu d’une immobilisation (sauf un bien immeuble ou réel ou un bien amortissable) est réputé continuer à ainsi utiliser la fraction de l’argent emprunté qui correspond à l’excédent visé à l’alinéa b), dans la mesure où cette fraction reste à rembourser après ce moment, si les conditions ci-après sont réunies :
(2) Paragraph 20.1(1)(a) of the English version of the Act is replaced by the following:
(a) at any time after 1993 borrowed money ceases to be used by a taxpayer for the purpose of earning income from a capital property (other than real or immovable property or depreciable property), and
99. (1) Paragraph 35(1)(a) of the Act is replaced by the following:
(a) is received in a taxation year by an individual as consideration for the disposition by the individual to the corporation of a mining property or an interest, or for civil law a right, therein acquired by the individual as a result of the individual’s efforts as a prospector, either alone or with others, or
(2) Subparagraph 35(1)(b)(ii) of the Act is replaced by the following:
(ii) as consideration for the disposition by the person referred to in subparagraph (i) to the corporation of a mining property or an interest, or for civil law a right, therein acquired under the arrangement under which that person made the advance or paid the expenses, or if the prospector’s employee, acquired by the person through the employee’s efforts,
(3) Paragraphs 35(1)(e) and (f) of the Act are replaced by the following:
(e) notwithstanding subdivision c, in computing the cost to the individual, person or partnership, as the case may be, of the share, no amount shall be included in respect of the disposition of the mining property or the interest, or for civil law the right, therein, as the case may be,
(f) notwithstanding sections 66 and 66.2, in computing the cost to the corporation of the mining property or the interest, or for civil law the right, therein, as the case may be, no amount shall be included in respect of the share, and
100. Paragraph (b) of the definition “mining property” in subsection 35(2) of the Act is replaced by the following:
(b) real property or an immovable in Canada (other than depreciable property) the principal value of which depends on its mineral resource content;
101. Paragraph (h) of the definition “flow-through entity” in subsection 39.1(1) of the Act is replaced by the following:
(h) a trust maintained primarily for the benefit of employees of a corporation or two or more corporations that do not deal at arm’s length with each other, where one of the main purposes of the trust is to hold interests in, or for civil law rights in, shares of the capital stock of the corporation or corporations, as the case may be, or any corporation not dealing at arm’s length therewith,
102. Subparagraph (i) of the description of D in paragraph 40(2)(b) of the Act is replaced by the following:
(i) if the acquisition date is before February 23, 1994 and the taxpayer or the taxpayer’s spouse or common-law partner elected under subsection 110.6(19) in respect of the property or an interest, or for civil law a right, therein that was owned, immediately before the disposition, by the taxpayer, 4/3 of the lesser of
(A) the total of all amounts each of which is the taxable capital gain of the taxpayer or of their spouse or common-law partner that would have resulted from an election by the taxpayer or spouse or common-law partner under subsection 110.6(19) in respect of the property or the interest or right if
(I) this Act were read without reference to subsection 110.6(20), and
(II) the amount designated in the election were equal to the amount, if any, by which the fair market value of the property or the interest or right at the end of February 22, 1994 exceeds the amount determined by the formula
E – 1.1F
where
- E
- is the amount designated in the election that was made in respect of the property or the interest or right, and
- F
- is the fair market value of the property or the interest or right at the end of February 22, 1994, and
(B) the total of all amounts each of which is the taxable capital gain of the taxpayer or of their spouse or common-law partner that would have resulted from an election that was made under subsection 110.6(19) in respect of the property or the interest or right if the property were the principal residence of neither the taxpayer nor the spouse or common-law partner for each particular taxation year unless the property was designated, in a return of income for the taxation year that includes February 22, 1994 or for a preceding taxation year, to be the principal residence of either of them for the particular taxation year, and
103. The portion of paragraph 43.1(2)(b) of the French version of the Act before subparagraph (i) is replaced by the following:
b) lorsque la personne qui détient un domaine résiduel sur le bien réel immédiatement avant le décès du particulier a un lien de dépendance avec le détenteur du domaine viager, le moins élevé des montants ci-après est ajouté, après ce décès, au calcul du prix de base rajusté du bien pour cette personne :
104. The portion of subsection 44(6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Deemed proceeds of disposition
(6) If a taxpayer has disposed of property that was a former business property and was in part a building and in part the land (or an interest, or for civil law a right, therein) subjacent to, or immediately contiguous to and necessary for the use of, the building, for the purposes of this subdivision, the amount if any, by which
105. Paragraphs 44.1(10)(c) and (d) of the Act are replaced by the following:
(c) a corporation the principal business of which is the leasing, rental, development or sale, or any combination of those activities, of real or immovable property owned by it; or
(d) a corporation more than 50% of the fair market value of the property of which (net of debts incurred to acquire the property) is attributable to real or immovable property.
106. (1) Paragraph 53(1)(o) of the French version of the Act is replaced by the following:
o) lorsque le bien est un bien réel du contribuable, tout montant à ajouter, en application de l’alinéa 43.1(2)b), dans le calcul du prix de base rajusté du bien pour le contribuable;
(2) The portion of paragraph 53(2)(e) of the Act before subparagraph (i) is replaced by the following:
(e) if the property is a share, or an interest in or a right to — or, for civil law, a right in or to — a share, of the capital stock of a corporation acquired before August 1976, an amount equal to any expense incurred by the taxpayer in consideration therefor, to the extent that the expense was, by virtue of
107. The portion of the definition “listed personal property” in section 54 of the Act before paragraph (a) is replaced by the following:
“listed personal property”
« biens meubles déterminés »
“listed personal property” of a taxpayer means the taxpayer’s personal-use property that is all or any portion of, or any interest in or right to — or, for civil law, any right in or to — any
108. The portion of the description of A in subsection 56.1(2) of the Act before paragraph (a) is replaced by the following:
- A
- is the total of all amounts each of which is an amount (other than an amount that is otherwise a support amount) that became payable by a person in a taxation year, under an order of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the person resides or an expenditure for the acquisition of tangible property, or for civil law corporeal property, that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the taxpayer described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for the maintenance of a taxpayer, children in the taxpayer’s custody or both the taxpayer and those children, if the taxpayer is
109. The portion of the description of A in subsection 60.1(2) of the Act before paragraph (a) is replaced by the following:
- A
- is the total of all amounts each of which is an amount (other than an amount that is otherwise a support amount) that became payable by a taxpayer in a taxation year, under an order of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the taxpayer resides or an expenditure for the acquisition of tangible property, or for civil law corporeal property, that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the person described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for the maintenance of a person, children in the person’s custody or both the person and those children, if the person is
110. Subparagraph 65(2)(a)(i) of the Act is replaced by the following:
(i) natural accumulations of petroleum or natural gas, oil or gas wells or mineral resources in which the taxpayer has any interest or, for civil law, right, or
111. Paragraphs 66(12.1)(a) and (b) of the Act are replaced by the following:
(a) if as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to — or, for civil law, a right in or to — the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarded as having been primarily Canadian exploration and development expenses of the taxpayer (or would have been so regarded if they had been incurred by the taxpayer after 1971 and before May 7, 1974) or a Canadian exploration expense, there shall at that time be included in the amount determined for G in the definition “cumulative Canadian exploration expense” in subsection 66.1(6) in respect of the taxpayer the amount that became receivable by the taxpayer at that time; and
(b) if as a result of a transaction occurring after May 6, 1974 an amount has become receivable by a taxpayer at a particular time in a taxation year and the consideration given by the taxpayer therefor was property (other than a share or a Canadian resource property, or an interest in or a right to — or, for civil law, a right in or to — the share or the property) or services, the original cost of which to the taxpayer may reasonably be regarded as having been primarily a Canadian development expense, there shall at that time be included in the amount determined for G in the definition “cumulative Canadian development expense” in subsection 66.2(5) in respect of the taxpayer the amount that became receivable by the taxpayer at that time.
112. (1) Paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6) of the Act is replaced by the following:
(i) any expense referred to in any of paragraphs (a) to (g) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to — or, for civil law, any right in or to — such shares,
(2) Paragraph (j) of the definition “Canadian exploration expense” in subsection 66.1(6) of the Act is replaced by the following:
(j) any consideration given by the taxpayer for any share or any interest in or right to — or, for civil law, any right in or to — a share, except as provided by paragraph (i),
113. (1) Clause 66.2(2)(b)(ii)(A) of the Act is replaced by the following:
(A) an amount included in the taxpayer’s income for the year by virtue of a disposition in the year of inventory described in section 66.3 that was a share or any interest in or right to — or, for civil law, any right in or to — a share, acquired by the taxpayer under circumstances described in paragraph (g) of the definition “Canadian development expense” in subsection (5) or paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), or
(2) Paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5) of the Act is replaced by the following:
(g) any cost or expense referred to in any of paragraphs (a) to (e) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the cost or expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to — or, for civil law, any right in or to — such shares,
(3) Paragraph (h) of the definition “Canadian development expense” in subsection 66.2(5) of the Act is replaced by the following:
(h) any consideration given by the taxpayer for any share or any interest in or right to — or, for civil law, any right in or to — a share, except as provided by paragraph (g),
114. The portion of subsection 66.3(2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Deductions from paid-up capital
(2) If, at any time after May 23, 1985, a corporation has issued a share of its capital stock under circumstances described in paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5) or paragraph (c) of the definition “Canadian oil and gas property expense” in subsection 66.4(5) or has issued a share of its capital stock on the exercise of an interest in or right to — or, for civil law, a right in or to — such a share granted under circumstances described in any of those paragraphs, in computing, at any particular time after that time, the paid-up capital in respect of the class of shares of the capital stock of the corporation that included that share
115. (1) Clause 66.4(2)(a)(ii)(A) of the Act is replaced by the following:
(A) an amount included in the taxpayer’s income for the year by virtue of a disposition in the year of inventory described in section 66.3 that was a share or any interest in or right to — or, for civil law, any right in or to — a share acquired by the taxpayer under circumstances described in paragraph (c) of the definition “Canadian oil and gas property expense” in subsection (5), or
(2) Paragraph (c) of the definition “Canadian oil and gas property expense” in subsection 66.4(5) of the Act is replaced by the following:
(c) any cost or expense referred to in paragraph (a) incurred by the taxpayer pursuant to an agreement in writing with a corporation, entered into before 1987, under which the taxpayer incurred the cost or expense solely as consideration for shares, other than prescribed shares, of the capital stock of the corporation issued to the taxpayer or any interest in or right to — or, for civil law, any right in or to — such shares,
(3) The portion of the description of F in the definition “cumulative Canadian oil and gas property expense” in subsection 66.4(5) of the Act before paragraph (a) is replaced by the following:
- F
- is the total of all amounts each of which is an amount in respect of property described in paragraph (a), (c) or (d) of the definition “Canadian resource property” in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — such a property, other than such a right or interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as “the particular property”) disposed of by the taxpayer before that time equal to the amount, if any, by which
116. (1) Clause 66.7(1)(b)(i)(A) of the Act is replaced by the following:
(A) the amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to — or, for civil law, any right in or to — the particular property to the extent that the proceeds of the disposition have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (3)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,
(2) Clause 66.7(2)(b)(i)(A) of the Act is replaced by the following:
(A) the amount included under subsection 59(1) in computing its income for the year that can reasonably be regarded as attributable to the disposition by it of any interest in or right to — or, for civil law, any right in or to — the particular property, or
(3) Clause 66.7(3)(b)(i)(A) of the Act is replaced by the following:
(A) the amount included in computing its income for the year under paragraph 59(3.2)(c) that may reasonably be regarded as being attributable to the disposition by it in the year or a preceding taxation year of any interest in or right to — or, for civil law, any right in or to — the particular property to the extent that the proceeds have not been included in determining an amount under clause 29(25)(d)(i)(A) of the Income Tax Application Rules, this clause, clause (1)(b)(i)(A) or paragraph (10)(g) for a preceding taxation year,
117. The portion of paragraph 79.1(6)(b) of the Act before subparagraph (i) is replaced by the following:
(b) all amounts each of which is an outlay or expense made or incurred, or a specified amount at that time of a debt that is assumed, by the creditor at or before that time to protect the creditor’s interest, or for civil law the creditor’s right, in the particular property, except to the extent the outlay or expense
118. Paragraph 80(2)(o) of the Act is replaced by the following:
(o) notwithstanding paragraph (n), if a commercial debt obligation, for which a particular person is liable with one or more other persons, is settled at any time in respect of the particular person but not in respect of all of the other persons, the portion of the obligation that can reasonably be considered to be the particular person’s share of the obligation shall be considered to have been issued by the particular person and settled at that time and not at any subsequent time;
119. Subsection 80.04(11) of the English version of the Act is replaced by the following:
Marginal note:Joint and several, or solidary, liability
(11) If taxes, interest and penalties are payable under this Act by a person for a taxation year and those taxes, interest and penalties are payable by a debtor because of subsection (10), the debtor and the person are jointly and severally, or solidarily, liable to pay those amounts.
120. (1) Paragraphs 85(1.1)(a) and (b) of the Act are replaced by the following:
(a) a capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person);
(b) a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident insurer if that property and the property received as consideration for that property are designated insurance property for the year;
(2) Paragraph 85(1.1)(f) of the Act is replaced by the following:
(f) an inventory (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable);
(3) Paragraph 85(1.1)(h) of the Act is replaced by the following:
(h) a capital property that is real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, owned by a non-resident person (other than a non-resident insurer) and used in the year in a business carried on in Canada by that person; or
(4) Subparagraph 85(2)(a)(i) of the Act is replaced by the following:
(i) a capital property (other than real or immovable property, an option in respect of such property, or an interest in real property or a real right in an immovable, if the partnership was not a Canadian partnership at the time of the disposition),
121. (1) Subparagraph (a)(ii) of the definition “investment business” in subsection 95(1) of the Act is replaced by the following:
(ii) the development of real property or immovables for sale, the lending of money, the leasing or licensing of property or the insurance or reinsurance of risks,
(2) Paragraph (g) of the definition “investment property” in subsection 95(1) of the Act is replaced by the following:
(g) real property or immovables,
(3) Paragraph (j) of the definition “investment property” in subsection 95(1) of the Act is replaced by the following:
(j) interests in, or for civil law rights in, or options in respect of, property that is included in any of paragraphs (a) to (i);
122. (1) The portion of subsection 98(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Rules applicable if partnership ceases to exist
(3) If at any particular time after 1971 a Canadian partnership has ceased to exist and all the partnership property has been distributed to persons who were members of the partnership immediately before that time so that immediately after that time each such person has, in each such property, an undivided interest, or for civil law an undivided right (which undivided interest or undivided right is referred to in this subsection as an “undivided interest or right”, as the case may be) that, when expressed as a percentage (referred to in this subsection as that person’s “percentage”) of all undivided interests or rights in the property, is equal to the person’s undivided interest or right, when so expressed, in each other such property, if each such person has jointly so elected in respect of the property in prescribed form and within the time referred to in subsection 96(4), the following rules apply:
(2) The portion of paragraph 98(3)(b) of the Act before subparagraph (i) is replaced by the following:
(b) the cost to each such person of that person’s undivided interest or right in each such property is deemed to be an amount equal to the total of
(3) Subparagraph 98(3)(b)(ii) of the Act is replaced by the following:
(ii) where the amount determined under subparagraph (a)(i) exceeds the amount determined under subparagraph (a)(ii), the amount determined under paragraph (c) in respect of the person’s undivided interest or right in the property;
(4) Paragraph 98(3)(c) of the Act is replaced by the following:
(c) the amount determined under this paragraph in respect of each such person’s undivided interest or right in each such property that was a capital property (other than depreciable property) of the partnership is such portion of the excess, if any, described in subparagraph (b)(ii) as is designated by the person in respect of the property, except that
(i) in no case shall the amount so designated in respect of the person’s undivided interest or right in any such property exceed the amount, if any, by which the person’s percentage of the fair market value of the property immediately after its distribution exceeds the person’s percentage of the cost amount to the partnership of the property immediately before its distribution, and
(ii) in no case shall the total of amounts so designated in respect of the person’s undivided interest or right in all such capital properties (other than depreciable property) exceed the excess, if any, described in subparagraph (b)(ii);
(5) Paragraph 98(3)(e) of the Act is replaced by the following:
(e) if the property so distributed by the partnership was depreciable property of the partnership of a prescribed class and any such person’s percentage of the amount that was the capital cost to the partnership of that property exceeds the amount determined under paragraph (b) to be the cost to the person of the person’s undivided interest or right in the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a)
(i) the capital cost to the person of the person’s undivided interest or right in the property is deemed to be the person’s percentage of the amount that was the capital cost to the partnership of the property, and
(ii) the excess is deemed to have been allowed to the person in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the person of the undivided interest or right;
(6) Subparagraph 98(3)(g)(i) of the Act is replaced by the following:
(i) for the purposes of determining under this Act any amount relating to cumulative eligible capital, an eligible capital amount, an eligible capital expenditure or eligible capital property, each such person is deemed to have continued to carry on the business, in respect of which the property was eligible capital property and that was previously carried on by the partnership, until the time that the person disposes of the person’s undivided interest or right in the property,
123. (1) Clauses 108(2)(b)(ii)(A) and (B) of the Act are replaced by the following:
(A) the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),
(B) the acquiring, holding, maintaining, improving, leasing or managing of any real property or an interest in real property, or of any immovable or a real right in immovables, that is capital property of the trust, or
(2) Clauses 108(2)(b)(iii)(F) and (G) of the Act are replaced by the following:
(F) real property situated in Canada, and interests in such real property, or immovables situated in Canada and real rights in such immovables, and
(G) rights to and interests in — or, for civil law, rights in or to — any rental or royalty computed by reference to the amount or value of production from a natural accumulation of petroleum or natural gas in Canada, from an oil or gas well in Canada or from a mineral resource in Canada,
(3) Paragraph 108(2)(c) of the Act is replaced by the following:
(c) the fair market value of the property of the trust at the end of 1993 was primarily attributable to real property or an interest in real property — or to immovables or a real right in immovables — and the trust was a unit trust throughout any calendar year that ended before 1994 and the fair market value of the property of the trust at the particular time is primarily attributable to property described in paragraph (a) or (b) of the definition “qualified investment” in section 204, real property or an interest in real property — or immovables or a real right in immovables — or any combination of those properties.
124. Clause (a)(ii)(A) of the definition “qualified investment” in subsection 115.2(1) of the Act is replaced by the following:
(A) real or immovable property situated in Canada,
125. (1) Paragraph 116(6)(a.1) of the Act is replaced by the following:
(a.1) a property (other than real or immovable property situated in Canada, a Canadian resource property or a timber resource property) that is described in an inventory of a business carried on in Canada by the person;
(2) Paragraph 116(6)(h) of the Act is replaced by the following:
(h) an interest, or for civil law a right, in property referred to in any of paragraphs (a) to (g); and
126. The portion of the definition “specified investment business” in subsection 125(7) of the Act before paragraph (a) is replaced by the following:
“specified investment business”
« entreprise de placement déterminée »
“specified investment business”, carried on by a corporation in a taxation year, means a business (other than a business carried on by a credit union or a business of leasing property other than real or immovable property) the principal purpose of which is to derive income (including interest, dividends, rents and royalties) from property but, except where the corporation was a prescribed labour-sponsored venture capital corporation at any time in the year, does not include a business carried on by the corporation in the year where
127. (1) The portion of subparagraph 126(2.21)(a)(i) of the Act before clause (A) is replaced by the following:
(i) where the property is real or immovable property situated in a country other than Canada,
(2) Subparagraph 126(2.21)(a)(ii) of the Act is replaced by the following:
(ii) where the property is not real or immovable property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,
(3) The portion of subparagraph 126(2.22)(a)(i) of the Act before clause (A) is replaced by the following:
(i) where the property is real or immovable property situated in a country other than Canada,
(4) Subparagraph 126(2.22)(a)(ii) of the Act is replaced by the following:
(ii) where the property is not real or immovable property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,
128. Paragraph (d) of the description of A in the definition “scientific research and experimental development tax credit” in subsection 127.3(2) of the English version of the Act is replaced by the following:
(d) a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation (in this section referred to as a “debt obligation”) acquired by the taxpayer in the year where the taxpayer is the first person, other than a broker or dealer in securities, to be a registered holder of that debt obligation, or
129. (1) The portion of paragraph 128(1)(e) of the English version of the Act before subparagraph (i) is replaced by the following:
(e) if, in the case of any taxation year of the corporation ending during the period the corporation is a bankrupt, the corporation fails to pay any tax payable by it under this Act for any such year, the corporation and the trustee in bankruptcy are jointly and severally, or solidarily, liable to pay the tax, except that
(2) Subparagraph 128(1)(e)(ii) of the Act is replaced by the following:
(ii) payment by either of them discharges the liability to the extent of the amount paid;
130. (1) Subparagraph 128.1(4)(b)(i) of the Act is replaced by the following:
(i) real or immovable property situated in Canada, a Canadian resource property or a timber resource property,
(2) Subparagraph 128.1(7)(h)(ii) of the English version of the Act is replaced by the following:
(ii) if the individual alone makes such an election or specification, the individual and the trust are jointly and severally, or solidarily, liable for any amount payable under this Act by the trust as a result of the election or specification, and
131. (1) Paragraphs 130.1(6)(b) and (c) of the Act are replaced by the following:
(b) its only undertaking was the investing of funds of the corporation and it did not manage or develop any real or immovable property;
(c) none of the property of the corporation consisted of
(i) debts owing to the corporation that were secured on real or immovable property situated outside Canada,
(ii) debts owing to the corporation by non-resident persons, except any such debts that were secured on real or immovable property situated in Canada,
(iii) shares of the capital stock of corporations not resident in Canada, or
(iv) real or immovable property situated outside Canada, or any leasehold interest in such property;
(2) Paragraph 130.1(6)(g) of the Act is replaced by the following:
(g) the cost amount to the corporation of all real or immovable property of the corporation, including leasehold interests in such property (except real or immovable property acquired by the corporation by foreclosure or otherwise after default made on a mortgage, hypothec or agreement of sale of real or immovable property) did not exceed 25% of the cost amount to it of all its property;
132. Subparagraphs 131(8)(b)(i) and (ii) of the Act are replaced by the following:
(i) the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),
(ii) the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real property) or of any immovable (or real right in immovables) that is capital property of the corporation, or
133. Subparagraphs 132(6)(b)(i) and (ii) of the Act are replaced by the following:
(i) the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),
(ii) the acquiring, holding, maintaining, improving, leasing or managing of any real property (or interest in real property) or of any immovable (or real right in immovables) that is capital property of the trust, or
134. (1) Subparagraph (b)(i) of the definition “non-resident-owned investment corporation” in subsection 133(8) of the Act is replaced by the following:
(i) ownership of, or trading or dealing in, bonds, shares, debentures, mortgages, hypothecary claims, bills, notes or other similar property or any interest, or for civil law any right, therein,
(2) Subparagraph (b)(iii) of the definition société de placement appartenant à des non-résidents in subsection 133(8) of the French version of the Act is replaced by the following:
(iii) soit de loyers, de la location de chatels, de frais ou rémunérations sur chartes-parties, de rentes, de redevances, d’intérêts ou de dividendes,
(3) Paragraph (c) of the definition “société de placement appartenant à des non-résidents” in subsection 133(8) of the French version of the Act is replaced by the following:
c) au plus 10 % de son revenu brut de chaque année d’imposition se terminant au cours de la période ont été tirés de loyers, de la location de chatels, de frais ou rémunérations sur chartes-parties;
135. (1) Subsection 138(4.4) of the Act is replaced by the following:
Marginal note:Income inclusion
(4.4) If, for a period of time in a taxation year, a life insurer
(a) owned land (other than land referred to in paragraph (c) or (d)) or an interest, or for civil law a right, therein that was not held primarily for the purpose of gaining or producing income from the land for the period,
(b) had an interest, or for civil law a right, in a building that was being constructed, renovated or altered,
(c) owned land subjacent to the building referred to in paragraph (b) or an interest, or for civil law a right, therein, or
(d) owned land immediately contiguous to the land referred to in paragraph (c) or an interest, or for civil law a right, therein that was used or was intended to be used for a parking area, driveway, yard, garden or other use necessary for the use or intended use of the building referred to in paragraph (b),
there shall be included in computing the insurer’s income for the year, where the land, building, or interest or right, was designated insurance property of the insurer for the year, or property used or held by it in the year in the course of carrying on an insurance business in Canada, the total of all amounts each of which is the amount prescribed in respect of the insurer’s cost or capital cost, as the case may be, of the land, building, or interest or right, for the period, and the amount prescribed shall, at the end of the period, be included in computing
(e) where the land, or interest or right therein, is property described in paragraph (a), the cost to the insurer of the land, or of the interest or right therein, and
(f) where the land, building, or interest or right therein, is property described in paragraphs (b) to (d), the capital cost to the insurer of the interest or right in the building described in paragraph (b).
(2) Clauses 138(4.5)(b)(ii)(A) and (B) of the French version of the Act are replaced by the following:
(A) si le bien est un fonds de terre, ou un intérêt ou, pour l’application du droit civil, un droit sur un fonds de terre du cessionnaire, visé à l’alinéa (4.4)a), dans le calcul du coût de ce bien pour le cessionnaire,
(B) si le bien est un fonds de terre, un bâtiment, ou un intérêt ou, pour l’application du droit civil, un droit sur un fonds de terre ou un bâtiment, visé aux alinéas (4.4)b) à d), dans le calcul du coût en capital, pour le cessionnaire, de l’intérêt ou, pour l’application du droit civil, du droit sur le bâtiment visé à l’alinéa (4.4)b).
(3) Clauses 138(4.5)(e)(ii)(A) and (B) of the English version of the Act are replaced by the following:
(A) where the property is land or an interest, or for civil law a right, therein of the transferee described in paragraph (4.4)(a), the cost to the transferee of the land, or of the interest or right therein, and
(B) where the property is land or a building, or an interest therein or for civil law a right therein, described in paragraphs (4.4)(b) to (d), the capital cost to the transferee of the interest or of the right in the building described in paragraph (4.4)(b).
136. (1) Subparagraph 142.7(7)(a)(ii) of the Act is replaced by the following:
(ii) the entrant bank assumes an obligation of the Canadian affiliate that is an instrument or commitment described in paragraph 20(1)(l.1) or an obligation in respect of goods, services, land, or chattels or movable property, described in subparagraph 20(1)(m)(i), (ii) or (iii),
(2) Subparagraph 142.7(7)(f)(ii) of the Act is replaced by the following:
(ii) in applying paragraph 20(1)(m), an amount in respect of the goods, services, land, chattels or movable property, that was included under paragraph 12(1)(a) in computing the Canadian affiliate’s income from a business is deemed to have been so included in computing the entrant bank’s income from its Canadian banking business for a preceding taxation year,
137. (1) Subparagraph (a)(iii) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:
(iii) property, where the income is derived from the rental of real or immovable property or from royalties in respect of a work or invention of which the taxpayer was the author or inventor,
(2) Subparagraph (e)(ii) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:
(ii) property, where the loss is sustained from the rental of real or immovable property,
138. Clauses 149(1)(o.2)(ii)(A) to (C) of the Act are replaced by the following:
(A) limited its activities to
(I) acquiring, holding, maintaining, improving, leasing or managing capital property that is real property or an interest in real property — or immovables or a real right in immovables — owned by the corporation, another corporation described by this subparagraph and subparagraph (iv) or a registered pension plan, and
(II) investing its funds in a partnership that limits its activities to acquiring, holding, maintaining, improving, leasing or managing capital property that is real property or an interest in real property — or immovables or a real right in immovables — owned by the partnership,
(B) made no investments other than in real property or an interest in real property — or immovables or a real right in immovables — or investments that a pension plan is permitted to make under the Pension Benefits Standards Act, 1985 or a similar law of a province, and
(C) borrowed money solely for the purpose of earning income from real property or an interest in real property or from immovables or a real right in immovables,
139. Paragraph 153(6)(c) of the Act is replaced by the following:
(c) is authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables.
140. The portion of paragraph 159(1)(a) of the English version of the Act before subparagraph (i) is replaced by the following:
(a) the legal representative is jointly and severally, or solidarily, liable with the taxpayer
141. (1) Paragraph 160(1)(d) of the English version of the Act is replaced by the following:
(d) the transferee and transferor are jointly and severally, or solidarily, liable to pay a part of the transferor’s tax under this Part for each taxation year equal to the amount by which the tax for the year is greater than it would have been if it were not for the operation of sections 74.1 to 75.1 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in respect of any income from, or gain from the disposition of, the property so transferred or property substituted for it, and
(2) The portion of paragraph 160(1)(e) of the English version of the Act before subparagraph (i) is replaced by the following:
(e) the transferee and transferor are jointly and severally, or solidarily, liable to pay under this Act an amount equal to the lesser of
(3) The portion of subsection 160(1.1) of the English version of the Act before the formula is replaced by the following:
Marginal note:Joint and several, or solidary, liability — subsection 69(11)
(1.1) If a particular person or partnership is deemed by subsection 69(11) to have disposed of a property at any time, the person referred to in that subsection to whom a benefit described in that subsection was available in respect of a subsequent disposition of the property or property substituted for the property is jointly and severally, or solidarily, liable with each other taxpayer to pay a part of the other taxpayer’s liabilities under this Act in respect of each taxation year equal to the amount determined by the formula
(4) The portion of subsection 160(1.2) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Joint and several, or solidary, liability — tax on split income
(1.2) A parent of a specified individual is jointly and severally, or solidarily, liable with the individual for the amount required to be added because of subsection 120.4(2) in computing the specified individual’s tax payable under this Part for a taxation year if, during the year, the parent
(5) The portion of subsection 160(3) of the English version of the Act before paragraph (a), as enacted by subsection 16(2), is replaced by the following:
Marginal note:Discharge of liability
(3) If a particular taxpayer has become jointly and severally, or solidarily, liable with another taxpayer under this section or because of paragraph 94(3)(d) or (e) or subsection 94(17) in respect of part or all of a liability under this Act of the other taxpayer,
(6) Subsection 160(3)(b) of the English version of the Act is replaced by the following:
(b) a payment by the other taxpayer on account of that taxpayer’s liability discharges the particular taxpayer’s liability only to the extent that the payment operates to reduce that other taxpayer’s liability to an amount less than the amount in respect of which the particular taxpayer is, by this section, made jointly and severally, or solidarily, liable.
(7) Subsection 160(3.1) of the Act is replaced by the following:
Marginal note:Fair market value of undivided interest or right
(3.1) For the purposes of this section and section 160.4, the fair market value at any time of an undivided interest, or for civil law an undivided right, in a property, expressed as a proportionate interest or right in that property, is, subject to subsection (4), deemed to be equal to the same proportion of the fair market value of that property at that time.
142. Subsections 160.1(2.1) and (2.2) of the English version of the Act are replaced by the following:
Marginal note:Liability for refunds by reason of section 122.61
(2.1) If a person was a cohabiting spouse or common-law partner (within the meaning assigned by section 122.6) of an individual at the end of a taxation year, the person and the individual are jointly and severally, or solidarily, liable to pay any excess described in subsection (1) that was refunded in respect of the year to, or applied to a liability of, the individual as a consequence of the operation of section 122.61 if the person was the individual’s cohabiting spouse or common-law partner at the time the excess was refunded, but nothing in this subsection is deemed to limit the liability of any person under any other provision of this Act.
Marginal note:Liability for excess refunds under section 126.1 to partners
(2.2) Every taxpayer who, on the day on which an amount has been refunded to, or applied to the liability of, a member of a partnership as a consequence of the operation of subsection 126.1(7) or (13) in excess of the amount to which the member was so entitled, is a member of that partnership is jointly and severally, or solidarily, liable with each other taxpayer who on that day is a member of the partnership to pay the excess and to pay interest on the excess, but nothing in this subsection is deemed to limit the liability of any person under any other provision of this Act.
143. (1) The portion of subsection 160.2(4) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Rules applicable
(4) If a taxpayer and an annuitant have, by virtue of subsection (1) or (2), become jointly and severally, or solidarily, liable in respect of part or all of a liability of the annuitant under this Act, the following rules apply:
(2) Paragraph 160.2(4)(a) of the Act is replaced by the following:
(a) a payment by the taxpayer on account of the taxpayer’s liability shall to the extent thereof discharge their liability; but
(3) Paragraph 160.2(4)(b) of the English version of the Act is replaced by the following:
(b) a payment by the annuitant on account of the annuitant’s liability discharges the taxpayer’s liability only to the extent that the payment operates to reduce the annuitant’s liability to an amount less than the amount in respect of which the taxpayer was, by subsection (1) or (2), as the case may be, made jointly and severally, or solidarily, liable.
144. (1) The portion of subsection 160.3(3) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Rules applicable
(3) If a taxpayer and another person have, by virtue of subsection (1), become jointly and severally, or solidarily, liable in respect of part or all of a liability of the taxpayer under this Act, the following rules apply:
(2) Paragraph 160.3(3)(a) of the Act is replaced by the following:
(a) a payment by the other person on account of the other person’s liability shall to the extent thereof discharge their liability; but
(3) Paragraph 160.3(3)(b) of the English version of the Act is replaced by the following:
(b) a payment by the taxpayer on account of the taxpayer’s liability discharges the other person’s liability only to the extent that the payment operates to reduce the taxpayer’s liability to an amount less than the amount in respect of which the other person was, by subsection (1), made jointly and severally, or solidarily, liable.
145. (1) The portion of subsection 160.4(4) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Rules applicable
(4) If a corporation and another person have, because of subsection (1) or (2), become jointly and severally, or solidarily, liable in respect of part or all of a liability of the corporation under this Act
(2) Paragraph 160.4(4)(a) of the Act is replaced by the following:
(a) a payment by the other person on account of that person’s liability shall to the extent thereof discharge their liability; and
(3) Paragraph 160.4(4)(b) of the English version of the Act is replaced by the following:
(b) a payment by the corporation on account of the corporation’s liability discharges the other person’s liability only to the extent that the payment operates to reduce the corporation’s liability to an amount less than the amount in respect of which the other person was, by subsection (1) or (2), as the case may be, made jointly and severally, or solidarily, liable.
146. Subparagraph 163.2(8)(b)(i) of the French version of the Act is replaced by the following:
(i) une part a ou doit avoir un numéro d’inscription attribué en vertu de l’article 237.1 qui est le même numéro que celui qui s’applique à chacune des autres parts dans le bien,
147. Paragraph (d) of the definition “financial institution” in subsection 181(1) of the Act is replaced by the following:
(d) authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables,
148. (1) Paragraph 181.3(1)(a) of the Act is replaced by the following:
(a) the total of all amounts each of which is the carrying value at the end of the year of an asset of the financial institution (other than property held by the institution primarily for the purpose of resale that was acquired by the financial institution, in the year or the preceding taxation year, as a consequence of another person’s default, or anticipated default, in respect of a debt owed to the institution) that is tangible, or for civil law corporeal, property used in Canada and, in the case of a financial institution that is an insurance corporation, that is non-segregated property, within the meaning assigned by subsection 138(12),
(2) Subparagraph 181.3(1)(b)(i) of the Act is replaced by the following:
(i) the total of all amounts each of which is the carrying value of an asset of the partnership, at the end of its last fiscal period ending at or before the end of the year, that is tangible, or for civil law corporeal, property used in Canada
149. Subparagraph 181.4(d)(i) of the Act is replaced by the following:
(i) is a ship or aircraft operated by the corporation in international traffic or is personal or movable property used in its business of transporting passengers or goods by ship or aircraft in international traffic, and
150. (1) The portion of subsection 185(4) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Joint and several, or solidary, liability from excessive elections
(4) Each person who has received a dividend from a corporation in respect of which the corporation elected under subsection 83(2), 130.1(4) or 131(1) is jointly and severally, or solidarily, liable with the corporation to pay that proportion of the corporation’s tax payable under this Part because of the election that
(2) The portion of subsection 185(6) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Rules applicable
(6) If under subsection (4) a corporation and another person have become jointly and severally, or solidarily, liable to pay part or all of the corporation’s tax payable under this Part in respect of a dividend described in that subsection,
(3) Paragraph 185(6)(a) of the Act is replaced by the following:
(a) a payment at any time by the other person on account of the liability shall, to the extent of the payment, discharge their liability after that time; and
151. Subsection 188(4) of the English version of the Act is replaced by the following:
Marginal note:Joint and several, or solidary, liability — tax transfer
(4) If property has been transferred to a charitable organization in circumstances described in subsection (3) and it may reasonably be considered that the organization acted in concert with a charitable foundation for the purpose of reducing the disbursement quota of the foundation, the organization is jointly and severally, or solidarily, liable with the foundation for the tax imposed on the foundation by that subsection in an amount not exceeding the net value of the property.
152. Paragraph (c) of the definition “financial institution” in subsection 190(1) of the Act is replaced by the following:
(c) is authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables,
153. (1) Paragraph 191.3(1)(e) of the English version of the Act is replaced by the following:
(e) the transferor corporation and the transferee corporation are jointly and severally, or solidarily, liable to pay the amount of tax specified in the agreement and any interest or penalty in respect thereof.
(2) Subsection 191.3(5) of the English version of the Act is replaced by the following:
Marginal note:Assessment of transferor corporation
(5) The Minister may at any time assess a transferor corporation in respect of any amount for which it is jointly and severally, or solidarily, liable by reason of paragraph (1)(e) and the provisions of Division I of Part I are applicable in respect of the assessment as though it had been made under section 152.
(3) The portion of subsection 191.3(6) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Payment by transferor corporation
(6) If a transferor corporation and a transferee corporation are by reason of paragraph (1)(e) jointly and severally, or solidarily, liable in respect of tax payable by the transferee corporation under subparagraph 191.1(1)(a)(iv) and any interest or penalty in respect thereof, the following rules apply:
(4) Paragraph 191.3(6)(a) of the Act is replaced by the following:
(a) a payment by the transferor corporation on account of the liability shall, to the extent thereof, discharge their liability; and
(5) Paragraph 191.3(6)(b) of the English version of the Act is replaced by the following:
(b) a payment by the transferee corporation on account of its liability discharges the transferor corporation’s liability only to the extent that the payment operates to reduce the transferee corporation’s liability under this Act to an amount less than the amount in respect of which the transferor corporation was, by paragraph (1)(e), made jointly and severally, or solidarily, liable.
154. (1) The portion of subparagraph 204.4(2)(a)(ii) of the Act after clause (A) is replaced by the following:
(B) the amount by which the fair market value at the time of acquisition of its real or immovable property that may reasonably be regarded as being held for the purpose of producing income from property exceeds the total of all amounts each of which is owing by it on account of its acquisition of the real or immovable property
is not less than 80% of the amount by which the fair market value at the time of acquisition of all its property exceeds the total of all amounts each of which is owing by it on account of its acquisition of real or immovable property,
(2) Subparagraphs 204.4(2)(a)(iii) and (iv) of the Act are replaced by the following:
(iii) the fair market value at the time of acquisition of its shares, bonds, mortgages, hypothecary claims and other securities of any one corporation or debtor (other than bonds, mortgages, hypothecary claims and other securities of or guaranteed by Her Majesty in right of Canada or a province or Canadian municipality) is not more than 10% of the amount by which the fair market value at the time of acquisition of all its property exceeds the total of all amounts each of which is an amount owing by it on account of its acquisition of real or immovable property,
(iv) the amount by which
(A) the fair market value at the time of acquisition of any one of its real or immovable properties
exceeds
(B) the total of all amounts each of which is owing by it on account of its acquisition of the real or immovable property
is not more than 10% of the amount by which the fair market value at the time of acquisition of all its property exceeds the total of all amounts each of which is owing by it on account of its acquisition of real or immovable property,
(3) Clause 204.4(2)(a)(viii)(A) of the Act is replaced by the following:
(A) a mortgage or hypothecary claim (other than a mortgage or hypothecary claim insured under the National Housing Act or by a corporation that offers its services to the public in Canada as an insurer of mortgages or hypothecary claims and that is approved as a private insurer of mortgages or hypothecary claims by the Superintendent of Financial Institutions pursuant to the powers assigned to the Superintendent under subsection 6(1) of the Office of the Superintendent of Financial Institutions Act), or an interest therein, or for civil law a right therein, in respect of which the mortgagor or hypothecary debtor is the annuitant under a registered retirement savings plan or registered retirement income fund, or a person with whom the annuitant is not dealing at arm’s length, if any of the funds of a trust governed by such a plan or fund have been used to acquire an interest in the applicant, or
155. (1) Subparagraph 204.6(2)(b)(ii) of the Act is replaced by the following:
(ii) the total of all amounts each of which is an amount owing by the trust at the end of the month in respect of the acquisition of real property or immovables.
(2) Subsection 204.6(3) of the Act is replaced by the following:
Marginal note:Tax payable — real property or immovables
(3) If at the end of any month a taxpayer that is a registered investment described in paragraph 204.4(2)(a) holds real or immovable property, it shall, in respect of that month, pay a tax under this Part equal to 1% of the total of all amounts each of which is the amount by which the excess of
(a) the fair market value at the time of its acquisition of any one real or immovable property of the taxpayer
over
(b) the total of all amounts each of which was an amount owing by it at the end of the month on account of its acquisition of the real or immovable property
was greater than 10% of the amount by which the total of all amounts each of which is the fair market value at the time of its acquisition of a property held by it at the end of the month exceeds the total of all amounts each of which was an amount owing by it at the end of the month on account of its acquisition of real or immovable property.
156. Paragraphs (c) and (c.1) of the definition “carved-out property” in subsection 209(1) of the Act are replaced by the following:
(c) an interest, or for civil law a right, in respect of a property that was acquired by the person solely in consideration of the person’s undertaking under an agreement to incur Canadian exploration expense or Canadian development expense in respect of the property and, where the agreement so provides, to acquire gas or oil well equipment (as defined in subsection 1104(2) of the Income Tax Regulations) in respect of the property,
(c.1) an interest, or for civil law a right, in respect of a property that was retained by the person under an agreement under which another person obtained an absolute or conditional right to acquire another interest, or for civil law another right, in respect of the property, if the other interest or right is not carved-out property of the other person because of paragraph (c),
157. (1) Subparagraphs 212(1)(d)(viii) and (ix) of the Act are replaced by the following:
(viii) a payment made under a bona fide cost-sharing arrangement under which the person making the payment shares on a reasonable basis with one or more non-resident persons research and development expenses in exchange for an interest, or for civil law a right, in any or all property or other things of value that may result therefrom,
(ix) a rental payment for the use of or the right to use outside Canada any tangible, or for civil law corporeal, property,
(2) Paragraph 212(13)(f) of the Act is replaced by the following:
(f) interest on any mortgage, hypothecary claim or other indebtedness entered into or issued or modified after March 31, 1977 and secured by real property situated in Canada or an interest therein, or by immovables situated in Canada or real rights therein, to the extent that the amount so paid or credited is deductible in computing the non-resident person’s taxable income earned in Canada or the amount on which the non-resident person is liable to pay tax under Part I,
158. (1) Paragraph 216(1)(b) of the Act is replaced by the following:
(b) the non-resident person’s income from the non-resident person’s interest in real property, or real right in immovables, in Canada and interest in, or for civil law right in, timber resource properties and timber limits in Canada, and the non-resident person’s share of the income of a partnership of which the non-resident person was a member from its interest in real property, or real right in immovables, in Canada and interest in, or for civil law right in, timber resource properties and timber limits in Canada, were the non-resident person’s only income;
(2) Paragraphs 216(2)(a) and (b) of the Act are replaced by the following:
(a) rent on real or immovable property or from timber royalties paid to the person, and
(b) the person’s share of the rent on real or immovable property or from timber royalties paid to a partnership of which the person is a member
(3) The portion of subsection 216(4) of the Act before paragraph (a) is replaced by the following:
Marginal note:Optional method of payment
(4) If a non-resident person or, in the case of a partnership, each non-resident person who is a member of the partnership files with the Minister an undertaking in prescribed form to file within six months after the end of a taxation year a return of income under Part I for the year as permitted by this section, a person who is otherwise required by subsection 215(3) to remit in the year, in respect of the non-resident person or the partnership, an amount to the Receiver General in payment of tax on rent on real or immovable property or on a timber royalty may elect under this section not to remit under that subsection, and if that election is made, the elector shall,
(4) Paragraph 216(5)(b) of the Act is replaced by the following:
(b) the person’s income from the person’s interest in real property, or real right in immovables, in Canada or interest in, or for civil law right in, timber resource properties and timber limits in Canada, and the person’s share of the income of a partnership of which the person was a member from its interest in real property, or real right in immovables, in Canada or interest in, or for civil law right in, timber resource properties and timber limits in Canada, were the person’s only income;
159. Subsection 219(1.1) of the Act is replaced by the following:
Marginal note:Excluded gains
(1.1) For the purpose of subsection (1), the definition “taxable Canadian property” in subsection 248(1) shall be read without reference to paragraphs (a) and (c) to (k) of that definition and as if the only options, interests or rights referred to in paragraph (l) of that definition were those in respect of property described in paragraph (b) of that definition.
160. (1) The portion of subsection 223(5) of the Act before paragraph (a) is replaced by the following:
Marginal note:Charge on property
(5) A document issued by the Federal Court evidencing a certificate in respect of a debtor registered under subsection (3), a writ of that Court issued pursuant to the certificate or any notification of the document or writ (such document, writ or notification in this section referred to as a “memorial”) may be filed, registered or otherwise recorded for the purpose of creating a charge, lien or priority on, or a binding interest in, property in a province, or any interest in, or for civil law any right in, such property, held by the debtor in the same manner as a document evidencing
(2) Subsection 223(6) of the Act is replaced by the following:
Marginal note:Creation of charge
(6) If a memorial has been filed, registered or otherwise recorded under subsection (5),
(a) a charge, lien or priority is created on, or a binding interest is created in, property in the province, or any interest in, or for civil law any right in, such property, held by the debtor, or
(b) such property, or interest or right in the property, is otherwise bound,
in the same manner and to the same extent as if the memorial were a document evidencing a judgment referred to in paragraph (5)(a) or an amount referred to in paragraph (5)(b), and the charge, lien, priority or binding interest created shall be subordinate to any charge, lien, priority or binding interest in respect of which all steps necessary to make it effective against other creditors were taken before the time the memorial was filed, registered or otherwise recorded.
(3) Paragraphs 223(7)(c) and (d) of the Act are replaced by the following:
(c) to cancel or withdraw the memorial wholly or in respect of any of the property, or interests or rights, affected by the memorial, or
(d) to postpone the effectiveness of the filing, registration or other recording of the memorial in favour of any right, charge, lien or priority that has been or is intended to be filed, registered or otherwise recorded in respect of any property, or interest or right, affected by the memorial,
(4) Paragraph 223(8)(a) of the Act is replaced by the following:
(a) a memorial is presented for filing, registration or other recording under subsection (5) or a document relating to the memorial is presented for filing, registration or other recording for the purpose of any proceeding described in subsection (7) to any official in the land registry system, personal property or movable property registry system, or other registry system, of a province, it shall be accepted for filing, registration or other recording, or
161. The definition “security interest” in subsection 224(1.3) of the Act is replaced by the following:
“security interest”
« garantie »
“security interest” means any interest in, or for civil law any right in, property that secures payment or performance of an obligation and includes an interest, or for civil law a right, created by or arising out of a debenture, mortgage, hypothec, lien, pledge, charge, deemed or actual trust, assignment or encumbrance of any kind whatever, however or whenever arising, created, deemed to arise or otherwise provided for;
162. Section 224.2 of the Act is replaced by the following:
Marginal note:Acquisition of debtor’s property
224.2 For the purpose of collecting debts owed by a person to Her Majesty under this Act or under an Act of a province with which the Minister of Finance has entered into an agreement for the collection of taxes payable to the province under that Act, the Minister may purchase or otherwise acquire any interest in, or for civil law any right in, the person’s property that the Minister is given a right to acquire in legal proceedings or under a court order or that is offered for sale or redemption and may dispose of any interest or right so acquired in such manner as the Minister considers reasonable.
163. (1) Subsection 225(1) of the Act is replaced by the following:
Marginal note:Seizure of goods, chattels or movable property
225. (1) If a person has failed to pay an amount as required by this Act, the Minister may give 30 days notice to the person by registered mail addressed to the person’s latest known address of the Minister’s intention to direct that the person’s goods and chattels, or movable property, be seized and sold, and, if the person fails to make the payment before the expiration of the 30 days, the Minister may issue a certificate of the failure and direct that the person’s goods and chattels, or movable property, be seized.
(2) Subsection 225(5) of the Act is replaced by the following:
Marginal note:Exemptions from seizure
(5) Goods and chattels, or movable property, of any person in default that would be exempt from seizure under a writ of execution issued out of a superior court of the province in which the seizure is made are exempt from seizure under this section.
164. Subsection 226(2) of the Act is replaced by the following:
Marginal note:Seizure in case of default of payment
(2) If a taxpayer fails to pay, as required, any tax, interest or penalties demanded under this section, the Minister may direct that the goods and chattels, or movable property, of the taxpayer be seized and subsections 225(2) to (5) apply, with respect to the seizure, with any modifications that the circumstances require.
165. (1) The portion of paragraph 227(5)(b) of the English version of the Act before subparagraph (i) is replaced by the following:
(b) is jointly and severally, or solidarily, liable with the payer to pay to the Receiver General
(2) Subsection 227(8.1) of the English version of the Act is replaced by the following:
Marginal note:Joint and several, or solidary, liability
(8.1) If a particular person has failed to deduct or withhold an amount as required under subsection 153(1) or section 215 in respect of an amount that has been paid to a non-resident person, the non-resident person is jointly and severally, or solidarily, liable with the particular person to pay any interest payable by the particular person pursuant to subsection (8.3) in respect thereof.
(3) Subsection 227(10.2) of the English version of the Act is replaced by the following:
Marginal note:Joint and several, or solidary, liability re contributions to RCA
(10.2) If a non-resident person fails to deduct, withhold or remit an amount as required by subsection 153(1) in respect of a contribution under a retirement compensation arrangement that is paid on behalf of the employees or former employees of an employer with whom the non-resident person does not deal at arm’s length, the employer is jointly and severally, or solidarily, liable with the non-resident person to pay any amount payable under subsection (8), (8.2), (8.3), (9), (9.2) or (9.4) by the non-resident person in respect of the contribution.
166. (1) Subparagraphs (a)(i) and (ii) of the definition “bien étranger déterminé” in subsection 233.3(1) of the French version of the Act are replaced by the following:
(i) les fonds ou le bien intangible ou, pour l’application du droit civil, le bien incorporel situés, déposés ou détenus à l’étranger,
(ii) le bien tangible ou, pour l’application du droit civil, le bien corporel situé à l’étranger,
(2) Subparagraph (a)(viii) of the definition “bien étranger déterminé” in subsection 233.3(1) of the French version of the Act is replaced by the following:
(viii) l’intérêt ou, pour l’application du droit civil, le droit sur un bien (sauf celui appartenant à une société ou une fiducie autre que la personne) qui est un bien étranger déterminé ou le droit à un tel bien, immédiat ou futur, absolu ou conditionnel et prévu par un contrat, en equity ou autrement,
(3) Subparagraph (b)(viii) of the definition “bien étranger déterminé” in subsection 233.3(1) of the French version of the Act is replaced by the following:
(viii) l’intérêt ou, pour l’application du droit civil, le droit sur un bien visé à l’un des sous-alinéas (i) à (vii) ou le droit d’acquérir un tel bien.
(4) Paragraphs (a) and (b) of the definition “specified foreign property” in subsection 233.3(1) of the English version of the Act are replaced by the following:
(a) funds or intangible property, or for civil law incorporeal property, situated, deposited or held outside Canada,
(b) tangible property, or for civil law corporeal property, situated outside Canada,
(5) Paragraph (h) of the definition “specified foreign property” in subsection 233.3(1) of the English version of the Act is replaced by the following:
(h) an interest in, or for civil law a right in, or a right — under a contract in equity or otherwise either immediately or in the future and either absolutely or contingently — to, any property (other than any property owned by a corporation or trust that is not the person) that is specified foreign property, and
(6) Paragraph (q) of the definition “specified foreign property” in subsection 233.3(1) of the English version of the Act is replaced by the following:
(q) an interest in, or for civil law a right in, or a right to acquire, a property that is described in any of paragraphs (j) to (p).
167. (1) Paragraph (c) of the definition “foreign resource property” in subsection 248(1) of the Act is replaced by the following:
(c) an oil or gas well in that country or real or immovable property in that country the principal value of which depends on its petroleum or natural gas content (but not including depreciable property),
(2) Paragraphs (f) and (g) of the definition “foreign resource property” in subsection 248(1) of the Act are replaced by the following:
(f) a real or immovable property in that country the principal value of which depends upon its mineral resource content (but not including depreciable property),
(g) a right to or an interest in — or for civil law a right to or in — any property described in any of paragraphs (a) to (e), other than a right or an interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership, or
(h) an interest in real property described in paragraph (f) or a real right in an immovable described in that paragraph, other than an interest or a right that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership;
(3) The portion of the definition “former business property” in subsection 248(1) of the Act after paragraph (d) is replaced by the following:
and for the purpose of this definition, “rental property” of a taxpayer means real or immovable property owned by the taxpayer, whether jointly with another person or otherwise, and used by the taxpayer in the taxation year in respect of which the expression is being applied principally for the purpose of gaining or producing gross revenue that is rent (other than property leased by the taxpayer to a person related to the taxpayer and used by that related person principally for any other purpose), but, for greater certainty, does not include a property leased by the taxpayer or the related person to a lessee, in the ordinary course of a business of the taxpayer or the related person of selling goods or rendering services, under an agreement by which the lessee undertakes to use the property to carry on the business of selling or promoting the sale of the goods or services of the taxpayer or the related person;
(4) The portion of the definition “property” in subsection 248(1) of the Act before paragraph (a) is replaced by the following:
“property”
« biens »
“property” means property of any kind whatever whether real or personal, immovable or movable, tangible or intangible, or corporeal or incorporeal and, without restricting the generality of the foregoing, includes
(5) Subsection 248(4) of the Act is replaced by the following:
Marginal note:Interest in real property
(4) In this Act, an interest in real property includes a leasehold interest in real property but does not include an interest as security only derived by virtue of a mortgage, agreement for sale or similar obligation.
Marginal note:Real right in immovables
(4.1) In this Act, a real right in an immovable includes a lease but does not include a security right derived by virtue of a hypothec, agreement for sale or similar obligation.
(6) Subsections 248(20) and (21) of the Act are replaced by the following:
Marginal note:Partition of property
(20) Subject to subsections (21) to (23), for the purposes of this Act, if at any time a property owned by two or more persons is the subject of a partition, the following rules apply, notwithstanding any retroactive or declaratory effect of the partition:
(a) each such person who had, immediately before that time, an interest in, or for civil law a right in, the property (which interest or right in the property is referred to in this subsection and subsection (21) as an “interest” or a “right”, as the case may be) is deemed not to have disposed at that time of that proportion, not exceeding 100%, of the interest or right that the fair market value of that person’s interest or right in the property immediately after that time is of the fair market value of that person’s interest or right in the property immediately before that time,
(b) each such person who has an interest or a right in the property immediately after that time is deemed not to have acquired at that time that proportion of the interest or right that the fair market value of that person’s interest or right in the property immediately before that time is of the fair market value of that person’s interest or right in the property immediately after that time,
(c) each such person who had an interest or a right in the property immediately before that time is deemed to have had until that time, and to have disposed at that time of, that proportion of the person’s interest or right to which paragraph (a) does not apply,
(d) each such person who has an interest or a right in the property immediately after that time is deemed not to have had before that time, and to have acquired at that time, that proportion of the person’s interest or right to which paragraph (b) does not apply, and
(e) paragraphs (a) to (d) do not apply if the interest or right of the person is an interest or a right in fungible tangible property, or for civil law fungible corporeal property described in that person’s inventory,
and, for the purposes of this subsection, if an interest or a right in the property is an undivided interest or right, the fair market value of the interest or right at any time is deemed to be equal to that proportion of the fair market value of the property at that time that the interest or right is of all the undivided interests or rights in the property.
Marginal note:Subdivision of property
(21) If a property that was owned by two or more persons is the subject of a partition among those persons and, as a consequence of it, each such person has, in the property, a new interest or right the fair market value of which immediately after the partition, expressed as a percentage of the fair market value of all the new interests or rights in the property immediately after the partition, is equal to the fair market value of that person’s undivided interest or right immediately before the partition, expressed as a percentage of the fair market value of all the undivided interests or rights in the property immediately before the partition,
(a) subsection (20) does not apply to the property, and
(b) the new interest or right of each such person is deemed to be a continuation of that person’s undivided interest or right in the property immediately before the partition,
and, for the purposes of this subsection,
(c) subdivisions of a building or of a parcel of land that are established in the course of, or in contemplation of, a partition and that are co-owned by the same persons who co-owned the building or the parcel of land, or by their assignee, shall be regarded as one property, and
(d) if an interest or a right in the property is or includes an undivided interest or right, the fair market value of the interest or right shall be determined without regard to any discount or premium that applies to a minority or majority interest or right in the property.
(7) The portion of subsection 248(23.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Transfers after death
(23.1) If, as a consequence of the laws of a province relating to spouses’ or common-law partners’ interests or rights in respect of property as a result of marriage or common-law partnership, property is, after the death of a taxpayer,
168. Subparagraphs 253(c)(ii) and (iii) of the Act are replaced by the following:
(ii) property (other than depreciable property) that is a timber resource property, an option in respect of a timber resource property or an interest in, or for civil law a right in, a timber resource property, or
(iii) property (other than capital property) that is real or immovable property situated in Canada, including an option in respect of such property or an interest in, or for civil law a real right in, such property, whether or not the property is in existence,
PART 5OTHER AMENDMENTS TO THE INCOME TAX ACT AND RELATED LEGISLATION
R.S., c. 1 (5th Supp.)Income Tax Act
169. (1) Paragraph 4(3)(a) of the Income Tax Act is replaced by the following:
(a) subject to paragraph (b), all deductions permitted in computing a taxpayer’s income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (z), apply either wholly or in part to a particular source or to sources in a particular place; and
(2) Subsection (1) applies to the 2002 and subsequent taxation years, except that, for taxation years that end before 2007, paragraph 4(3)(a) of the Act, as enacted by subsection (1), is to be read as follows:
(a) subject to paragraph (b), all deductions permitted in computing a taxpayer’s income for a taxation year for the purposes of this Part, except any deduction permitted by any of paragraphs 60(b) to (o), (p), (r) and (v) to (x), apply either wholly or in part to a particular source or to sources in a particular place; and
170. (1) Paragraph 6(1)(a) of the Act is replaced by the following:
Marginal note:Value of benefits
(a) the value of board, lodging and other benefits of any kind whatever received or enjoyed by the taxpayer, or by a person who does not deal at arm’s length with the taxpayer, in the year in respect of, in the course of, or by virtue of the taxpayer’s office or employment, except any benefit
(i) derived from the contributions of the taxpayer’s employer to or under a deferred profit sharing plan, an employee life and health trust, a group sickness or accident insurance plan, a group term life insurance policy, a private health services plan, a registered pension plan or a supplementary unemployment benefit plan,
(ii) under a retirement compensation arrangement, an employee benefit plan or an employee trust,
(iii) that was a benefit in respect of the use of an automobile,
(iv) derived from counselling services in respect of
(A) the mental or physical health of the taxpayer or an individual related to the taxpayer, other than a benefit attributable to an outlay or expense to which paragraph 18(1)(l) applies, or
(B) the re-employment or retirement of the taxpayer,
(v) under a salary deferral arrangement, except to the extent that the benefit is included under this paragraph because of subsection (11), or
(vi) that is received or enjoyed by an individual other than the taxpayer under a program provided by the taxpayer’s employer that is designed to assist individuals to further their education, if the taxpayer deals with the employer at arm’s length and it is reasonable to conclude that the benefit is not a substitute for salary, wages or other remuneration of the taxpayer;
(2) Paragraph 6(1)(l) of the Act is replaced by the following:
Marginal note:Where standby charge does not apply
(l) the value of a benefit in respect of the operation of an automobile (other than a benefit to which paragraph (k) applies or would apply but for subparagraph (k)(iii)) received or enjoyed by the taxpayer, or by a person related to the taxpayer, in the year in respect of, in the course of or because of, the taxpayer’s office or employment.
(3) Section 6 of the Act is amended by adding the following after subsection (1.1):
Marginal note:Deeming rule — amount received
(1.2) For the purposes of paragraph (1)(g), an amount received by an individual out of or under an employee benefit plan is deemed to have been received by a taxpayer and not by the individual if
(a) the individual does not deal at arm’s length with the taxpayer;
(b) the amount is received in respect of an office or employment of the taxpayer; and
(c) the taxpayer is living at the time the amount is received by the individual.
(4) Section 6 of the Act is amended by adding the following after subsection (3):
Marginal note:Amount receivable for covenant
(3.1) If an amount (other than an amount to which paragraph (1)(a) applies because of subsection (11)) is receivable at the end of a taxation year by a taxpayer in respect of a covenant, agreed to by the taxpayer more than 36 months before the end of that taxation year, with reference to what the taxpayer is, or is not, to do, and the amount would be included in the taxpayer’s income for the year under this subdivision if it were received by the taxpayer in the year, the amount
(a) is deemed to be received by the taxpayer at the end of the taxation year for services rendered as an officer or during the period of employment; and
(b) is deemed not to be received at any other time.
(5) Subsection 6(15.1) of the French version of the Act is replaced by the following:
Marginal note:Montant remis
(15.1) Pour l’application du paragraphe (15), le montant remis à un moment donné sur une dette émise par un débiteur s’entend au sens qui serait donné à cette expression par le paragraphe 80(1) si, à la fois :
a) la dette était une dette commerciale, au sens du paragraphe 80(1), émise par le débiteur;
b) il n’était pas tenu compte d’un montant inclus dans le calcul du revenu en raison du règlement ou de l’extinction de la dette à ce moment;
c) il n’était pas tenu compte des alinéas f) et h) de l’élément B de la formule figurant à la définition de montant remis au paragraphe 80(1);
d) il n’était pas tenu compte des alinéas 80(2)b) et q).
(6) Subsections (1) to (3) apply in respect of benefits received or enjoyed on or after October 31, 2011.
(7) Subsection (4) applies to amounts receivable in respect of a covenant agreed to after October 7, 2003.
(8) Subsection (5) applies to taxation years that end after February 21, 1994.
171. (1) The portion of subsection 7(7) of the Act before the definition “qualifying person” is replaced by the following:
Marginal note:Definitions
(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.1), (1.2), (1.5) to (1.8) and (2.1).
(2) Subsection (1) is deemed to have come into force on January 1, 1999. However,
(a) it does not apply to a right under an agreement to which subsection 7(7) of the Act, as enacted by subsection 3(7) of the Income Tax Amendments Act, 1998, does not (except for the purpose of applying paragraph 7(3)(b) of the Act) apply; and
(b) before 2000, the portion of subsection 7(7) of the Act, as enacted by subsection (1), before the definition “qualifying person” is to be read as follows:
(7) The definitions in this subsection apply in this section and in paragraph 110(1)(d) and subsections 110(1.5) to (1.8).
(c) in respect of rights (other than rights referred to in paragraph (a)) exercised after 2000 but on or before 4:00 p.m. Eastern Standard Time, March 4, 2010, the portion of subsection 7(7) of the Act, as enacted by subsection (1), before the definition “qualifying person” is to be read as follows:
(7) The following definitions apply in this section and in subsection 47(3), paragraphs 53(1)(j) and 110(1)(d) and (d.01) and subsections 110(1.5) to (1.8) and (2.1).
172. (1) Paragraph 8(1)(b) of the Act is replaced by the following:
Marginal note:Legal expenses of employee
(b) amounts paid by the taxpayer in the year as or on account of legal expenses incurred by the taxpayer to collect, or to establish a right to, an amount owed to the taxpayer that, if received by the taxpayer, would be required by this subdivision to be included in computing the taxpayer’s income;
(2) The portion of paragraph 8(1)(i) of the Act before subparagraph (i) is replaced by the following:
Marginal note:Dues and other expenses of performing duties
(i) an amount paid by the taxpayer in the year, or on behalf of the taxpayer in the year if the amount paid on behalf of the taxpayer is required to be included in the taxpayer’s income for the year, as
(3) Subsection 8(1) of the Act is amended by adding the following after paragraph (l.1):
Marginal note:Quebec parental insurance plan
(l.2) an amount payable by the taxpayer in the year as an employer’s premium under the Act respecting parental insurance, R.S.Q., c. A-29.011 in respect of salary, wages or other remuneration, including gratuities, paid to an individual employed by the taxpayer as an assistant or substitute to perform the duties of the taxpayer’s office or employment if an amount is deductible by the taxpayer for the year under subparagraph (i)(ii) in respect of that individual;
(4) Subsection (1) applies to amounts paid in the 2001 and subsequent taxation years.
(5) Subsection (3) applies to the 2006 and subsequent taxation years.
173. (1) Paragraph 12(1)(j) of the Act is replaced by the following:
Marginal note:Dividends from resident corporations
(j) any amount of a dividend in respect of a share of the capital stock of a corporation resident in Canada that is required by subdivision h to be included in computing the taxpayer’s income for the year;
(2) Paragraph 12(1)(s) of the Act is repealed.
(3) Paragraph 12(1)(x) of the Act is amended by adding the following after subparagraph (v):
(v.1) is not an amount received by the taxpayer in respect of a restrictive covenant, as defined by subsection 56.4(1), that was included, under subsection 56.4(2), in computing the income of a person related to the taxpayer,
(4) Subparagraph 12(1)(x)(vii) of the French version of the Act is replaced by the following:
(vii) ne réduit pas, en application du paragraphe (2.2) ou 13(7.4) ou de l’alinéa 53(2)s), le coût ou coût en capital du bien ou le montant de la dépense,
(5) Section 12 of the Act is amended by adding the following after subsection (2):
Marginal note:No deferral of section 9 income under paragraph (1)(g)
(2.01) Paragraph (1)(g) does not defer the inclusion in income of any amount that would, if this section were read without reference to that paragraph, be included in computing the taxpayer’s income in accordance with section 9.
(6) Subsection (1) is deemed to have come into force on November 6, 2010.
(7) Subsection (2) applies to reinsurance commissions paid after 1999.
(8) Subsection (3) is deemed to have come into force on October 8, 2003.
174. (1) Section 12.3 of the Act is repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
175. (1) Subsection 13(1) of the Act is replaced by the following:
Marginal note:Recaptured depreciation
13. (1) If, at the end of a taxation year, the total of the amounts determined for E to K in the definition “undepreciated capital cost” in subsection (21) in respect of a taxpayer’s depreciable property of a particular prescribed class exceeds the total of the amounts determined for A to D.1 in that definition in respect of that property, the excess shall be included in computing the taxpayer’s income of the year.
(2) Subparagraph 13(4)(c)(ii) of the Act is replaced by the following:
(ii) the amount that has been used by the taxpayer to acquire
(A) if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, or
(B) in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,
a replacement property of a prescribed class that has not been disposed of by the taxpayer before the time at which the taxpayer disposed of the former property, and
(3) Section 13 of the Act is amended by adding the following after subsection (4.1):
Marginal note:Election — limited period franchise, concession or license
(4.2) Subsection (4.3) applies if
(a) a taxpayer (in this subsection and subsection (4.3) referred to as the “transferor”) has, pursuant to a written agreement with a person or partnership (in this subsection and subsection (4.3) referred to as the “transferee”), at any time disposed of or terminated a former property that is a franchise, concession or licence for a limited period that is wholly attributable to the carrying on of a business at a fixed place;
(b) the transferee acquired the former property from the transferor or, on the termination, acquired a similar property in respect of the same fixed place from another person or partnership; and
(c) the transferor and the transferee jointly elect in their returns of income for their taxation years that include that time to have subsection (4.3) apply in respect of the acquisition and the disposition or termination.
Marginal note:Effect of election
(4.3) If this subsection applies in respect of an acquisition and a disposition or termination,
(a) if the transferee acquired a similar property referred to in paragraph (4.2)(b), the transferee is deemed to have also acquired the former property at the time that the former property was terminated and to own the former property until the transferee no longer owns the similar property;
(b) if the transferee acquired the former property referred to in paragraph (4.2)(b), the transferee is deemed to own the former property until such time as the transferee owns neither the former property nor a similar property in respect of the same fixed place to which the former property related;
(c) for the purpose of calculating the amount deductible under paragraph 20(1)(a) in respect of the former property in computing the transferee’s income, the life of the former property remaining on its acquisition by the transferee is deemed to be equal to the period that was the life of the former property remaining on its acquisition by the transferor; and
(d) any amount that would, if this Act were read without reference to this subsection, be an eligible capital amount to the transferor or an eligible capital expenditure to the transferee in respect of the disposition or termination of the former property by the transferor is deemed to be
(i) neither an eligible capital amount nor an eligible capital expenditure,
(ii) an amount required to be included in computing the capital cost to the transferee of the former property, and
(iii) an amount required to be included in computing the proceeds of disposition to the transferor in respect of a disposition of the former property.
(4) The description of E in the definition “undepreciated capital cost” in subsection 13(21) of the Act is replaced by the following:
- E
- is the total depreciation allowed to the taxpayer for property of the class before that time, including, if the taxpayer is an insurer, depreciation deemed to have been allowed before that time under subsection (22) or (23) as they read in their application to the taxpayer’s last taxation year that began before November 2011,
(5) Subsections 13(22) to (23.1) of the Act are repealed.
(6) Subsection (1) applies to taxation years that end after February 23, 1998.
(7) Subsection (2) applies in respect of dispositions that occur in taxation years that end on or after December 20, 2000, except that for those dispositions that occur in taxation years that end before December 20, 2001, clause 13(4)(c)(ii)(B) of the Act, as enacted by subsection (2), is to be read as follows:
(B) in any other case, before the end of the first taxation year following the initial year,
(8) Subsection (3) applies in respect of dispositions and terminations that occur after December 20, 2002.
(9) Subsections (4) and (5) apply to taxation years that begin after October 31, 2011.
176. (1) Paragraph 14(3)(a) of the Act is replaced by the following:
(a) the amount determined for E in the definition “cumulative eligible capital” in subsection (5) in respect of the disposition of the property by the transferor or, if the property is the subject of an election under subsection (1.01) or (1.02) by the transferor, 3/4 of the actual proceeds referred to in that subsection,
(2) The definition “adjustment time” in subsection 14(5) of the Act is replaced by the following:
“adjustment time”
« moment du rajustement »
“adjustment time”, of a taxpayer in respect of a business, means
(a) for a corporation, the time immediately after the commencement of its first taxation year commencing after June 1988, and
(b) for any other taxpayer, the time immediately after the commencement of the taxpayer’s first fiscal period commencing after 1987 in respect of the business;
(3) The description of A in the definition “cumulative eligible capital” in subsection 14(5) of the Act is replaced by the following:
- A
- is the amount, if any, by which 3/4 of the total of all eligible capital expenditures in respect of the business made or incurred by the taxpayer after the taxpayer’s adjustment time and before that time exceeds the total of all amounts each of which is determined by the formula
1/2 × (A.1 – A.2) × (A.3/A.4)
where
- A.1
- is the amount required, because of paragraph (1)(b) or 38(a), to be included in the income of a person or partnership (in this definition referred to as the “transferor”) not dealing at arm’s length with the taxpayer in respect of the disposition after December 20, 2002 of a property that was an eligible capital property acquired by the taxpayer directly or indirectly, in any manner whatever, from the transferor and not disposed of by the taxpayer before that time,
- A.2
- is the total of all amounts that can reasonably be considered to have been claimed as deductions under section 110.6 by the transferor in respect of that disposition,
- A.3
- is the transferor’s proceeds from that disposition, and
- A.4
- is the transferor’s total proceeds of disposition of eligible capital property in the taxation year of the transferor in which the property described in A.1 was disposed of,
(4) The description of R in the definition “cumulative eligible capital” in subsection 14(5) of the Act is replaced by the following:
- R
- is the total of all amounts each of which is an amount included, in computing the taxpayer’s income from the business for a taxation year that ended before that time and after the taxpayer’s adjustment time
(a) in the case of a taxation year that ends after February 27, 2000, under paragraph (1)(a), or
(b) in the case of a taxation year that ended before February 28, 2000,
(i) under subparagraph (1)(a)(iv), as that subparagraph applied in respect of that taxation year, or
(ii) under paragraph (1)(b), as that paragraph applied in respect of that taxation year, to the extent that the amount so included is in respect of an amount included in the amount determined for P;
(5) Section 14 of the Act is amended by adding the following after subsection (5):
Marginal note:Restrictive covenant amount
(5.1) The description of E in the definition “cumulative eligible capital” in subsection (5) does not apply to an amount that is received or receivable by a taxpayer in a taxation year if that amount is required to be included in the taxpayer’s income because of subsection 56.4(2).
(6) The portion of subsection 14(6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Exchange of property
(6) If in a taxation year (in this subsection referred to as the “initial year”) a taxpayer disposes of an eligible capital property (in this section referred to as the taxpayer’s “former property”) and the taxpayer so elects under this subsection in the taxpayer’s return of income for the year in which the taxpayer acquires an eligible capital property that is a replacement property for the taxpayer’s former property, the amount, not exceeding the amount that would otherwise be included in the amount determined for E in the definition “cumulative eligible capital” in subsection (5) (if the description of E in that definition were read without reference to “3/4 of”) in respect of a business, that has been used by the taxpayer to acquire the replacement property before the later of the end of the first taxation year after the initial year and 12 months after the end of the initial year
(7) Subsections (1), (3) and (4) apply to taxation years that end after February 27, 2000, except that
(a) the reference to “subsection (1.01) or (1.02)” in paragraph 14(3)(a) of the Act, as enacted by subsection (1), is to be read as a reference to “subsection (1.01)” for taxation years that end after February 27, 2000 and before December 20, 2002; and
(b) the reference to “disposition after December 20, 2002 of a property that was an eligible capital property” in the description of A.1 in the definition “cumulative eligible capital” in subsection 14(5) of the Act, as enacted by subsection (3), is to be read as a reference to “disposition after 2003 of a property that was an eligible capital property” if
(i) the taxpayer referred to in that description of A.1 acquired the property referred to in that description from the transferor referred to in that description,
(ii) the property was so acquired under an agreement in writing made before December 21, 2002 between the transferor, or a particular person that controlled the transferor, and another person who dealt at arm’s length with the transferor and the particular person, and
(iii) no clause in the agreement or any other arrangement allows an obligation of any party to the agreement to be changed, reduced or waived in the event of a change to, or an adverse assessment under, the Act.
(8) Subsection (2) is deemed to have come into force on November 1, 2011.
(9) Subsection (5) is deemed to have come into force on October 8, 2003.
(10) Subsection (6) applies in respect of dispositions that occur in taxation years that end on or after December 20, 2001.
177. (1) Subsection 15(1) of the Act is replaced by the following:
Marginal note:Benefit conferred on shareholder
15. (1) If, at any time, a benefit is conferred by a corporation on a shareholder of the corporation, on a member of a partnership that is a shareholder of the corporation or on a contemplated shareholder of the corporation, then the amount or value of the benefit is to be included in computing the income of the shareholder, member or contemplated shareholder, as the case may be, for its taxation year that includes the time, except to the extent that the amount or value of the benefit is deemed by section 84 to be a dividend or that the benefit is conferred on the shareholder
(a) where the corporation is resident in Canada at the time,
(i) by the reduction of the paid-up capital of the corporation,
(ii) by the redemption, acquisition or cancellation by the corporation of shares of its capital stock,
(iii) on the winding-up, discontinuance or reorganization of the corporation’s business, or
(iv) by way of a transaction to which subsection 88(1) or (2) applies;
(a.1) where the corporation is not resident in Canada at the time,
(i) by way of a distribution to which subsection 86.1(1) applies,
(ii) by a reduction of the paid-up capital of the corporation to which subclause 53(2)(b)(i)(B)(II) or subparagraph 53(2)(b)(ii) applies,
(iii) by the redemption, acquisition or cancellation by the corporation of shares of its capital stock, or
(iv) on the winding-up, or liquidation and dissolution, of the corporation;
(b) by the payment of a dividend or a stock dividend;
(c) by conferring, on all owners of common shares of the capital stock of the corporation at that time, a right in respect of each common share, that is identical to every other right conferred at that time in respect of each other such share, to acquire additional shares of the capital stock of the corporation, and, for the purposes of this paragraph,
(i) the shares of a particular class of common shares of the capital stock of the corporation are deemed to be property that is identical to the shares of another class of common shares of the capital stock of the corporation if
(A) the voting rights attached to the particular class differ from the voting rights attached to the other class, and
(B) there are no other differences between the terms and conditions of the classes of shares that could cause the fair market value of a share of the particular class to differ materially from the fair market value of a share of the other class, and
(ii) rights are not considered identical if the cost of acquiring the rights differs; or
(d) by an action to which paragraph 84(1)(c.1), (c.2) or (c.3) applies.
(2) Subsection 15(1.21) of the French version of the Act is replaced by the following:
Marginal note:Montant remis
(1.21) Pour l’application du paragraphe (1.2), le montant remis à un moment donné sur une dette émise par un débiteur s’entend au sens qui serait donné à cette expression par le paragraphe 80(1) si, à la fois :
a) la dette était une dette commerciale, au sens du paragraphe 80(1), émise par le débiteur;
b) il n’était pas tenu compte d’un montant inclus dans le calcul du revenu (autrement que par l’effet de l’alinéa 6(1)a)) en raison du règlement ou de l’extinction de la dette;
c) il n’était pas tenu compte des alinéas f) et h) de l’élément B de la formule figurant à la définition de montant remis au paragraphe 80(1);
d) il n’était pas tenu compte des alinéas 80(2)b) et q).
(3) Section 15 of the Act is amended by adding the following after subsection (1.3):
Marginal note:Interpretation — subsection (1)
(1.4) For the purposes of this subsection and subsection (1),
(a) a contemplated shareholder of a corporation is
(i) a person or partnership on whom a benefit is conferred by the corporation in contemplation of the person or partnership becoming a shareholder of the corporation, or
(ii) a member of a partnership on whom a benefit is conferred by the corporation in contemplation of the partnership becoming a shareholder of the corporation;
(b) a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership;
(c) a benefit conferred by a corporation on an individual is a benefit conferred on a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation — except to the extent that the amount or value of the benefit is included in computing the income of the individual or any other person — if the individual is an individual, other than an excluded trust in respect of the corporation, who does not deal at arm’s length with, or is affiliated with, the shareholder, member of the partnership or contemplated shareholder, as the case may be; and
(d) for the purposes of paragraph (c), an excluded trust in respect of a corporation is a trust in which no individual (other than an excluded trust in respect of the corporation) who does not deal at arm’s length with, or is affiliated with, a shareholder of the corporation, a member of a partnership that is a shareholder of the corporation or a contemplated shareholder of the corporation, is beneficially interested.
(4) Subsection 15(1.4) of the Act, as enacted by subsection (3), is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) if a non-resident corporation (in this paragraph referred to as the “original corporation”) governed by the laws of a foreign jurisdiction is divided under those laws into two or more non-resident corporations and, as a consequence of the division, a shareholder of the original corporation acquires at any time one or more shares of another corporation (in this paragraph referred to as the “new corporation”), the original corporation is deemed at that time to have conferred a benefit on the shareholder equal to the value at that time of the shares of the new corporation acquired by the shareholder except to the extent that any of subparagraphs (1)(a.1)(i) to (iii) and paragraph (1)(b) applies to the acquisition of the shares.
(5) The portion of subsection 15(2.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Meaning of connected
(2.1) For the purposes of subsection (2), a person or partnership is connected with a shareholder of a particular corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is
(6) Subsections (1) and (3) apply in respect of benefits conferred on or after October 31, 2011.
(7) Subsection (2) applies to taxation years that end after February 21, 1994.
(8) Subsection (4) applies in respect of divisions of non-resident corporations that occur on or after October 24, 2012.
(9) Subsection (5) applies in respect of loans made and indebtedness arising after October 31, 2011.
178. (1) Subsection 18(1) of the Act is amended by striking out “and” at the end of paragraph (u), by adding “and” at the end of paragraph (v) and by adding the following after paragraph (v):
Marginal note:Underlying payments on qualified securities
(w) except as expressly permitted, an amount that is deemed by subsection 260(5.1) to have been received by another person as an amount described in any of paragraphs 260(5.1)(a) to (c).
(2) Paragraph 18(14)(c) of the Act is replaced by the following:
(c) the disposition is not a disposition that is deemed to have occurred by section 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c) or subsection 138(11.3) or 149(10);
(3) Subsection (1) is deemed to have come into force on January 1, 2002.
(4) Subsection (2) applies to dispositions that occur after 1998.
179. (1) Subsection 18.1(15) of the Act is replaced by the following:
Marginal note:Non-application — risks ceded between insurers
(15) Subsections (2) to (13) do not apply to a taxpayer’s matchable expenditure in respect of a right to receive production if
(a) the expenditure is in respect of commissions, or other expenses, related to the issuance of an insurance policy for which all or a portion of a risk has been ceded to the taxpayer; and
(b) the taxpayer and the person to whom the expenditure is made, or is to be made, are both insurers who are subject to the supervision of
(i) the Superintendent of Financial Institutions, if the taxpayer or that person, as the case may be, is an insurer who is required by law to report to the Superintendent of Financial Institutions, or
(ii) the Superintendent of Insurance, or other similar officer or authority, of the province under whose laws the insurer is incorporated, in any other case.
Marginal note:Non-application — no rights, tax benefits or shelters
(16) Subsections (2) to (13) do not apply to a taxpayer’s matchable expenditure in respect of a right to receive production if
(a) no portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer;
(b) no portion of the matchable expenditure can reasonably be considered to relate to a tax shelter or a tax shelter investment (within the meaning assigned by subsection 143.2(1)); and
(c) none of the main purposes for making the matchable expenditure can reasonably be considered to have been to obtain a tax benefit for the taxpayer, a person or partnership with whom the taxpayer does not deal at arm’s length, or a person or partnership that holds, directly or indirectly, an interest in the taxpayer.
Marginal note:Revenue exception
(17) Paragraph (4)(a) does not apply in determining the amount for a taxation year that may be deducted in respect of a taxpayer’s matchable expenditure in respect of a right to receive production if
(a) before the end of the taxation year in which the matchable expenditure is made, the total of all amounts each of which is included in computing the taxpayer’s income for the year (other than any portion of any of those amounts that is the subject of a reserve claimed by the taxpayer for the year under this Act) in respect of the right to receive production that relates to the matchable expenditure exceeds 80% of the matchable expenditure; and
(b) no portion of the matchable expenditure can reasonably be considered to have been paid to another taxpayer, or to a person or partnership with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer.
(2) Subject to subsection (3), subsection (1) applies in respect of expenditures made by a taxpayer on or after September 18, 2001 in respect of a right to receive production, except if
(a) the expenditure was
(i) required to be made under a written agreement made by the taxpayer before September 18, 2001,
(ii) made under, or described in, the terms of a prospectus, preliminary prospectus or registration statement that was, before September 18, 2001, filed with a public authority in Canada in accordance with the securities legislation of Canada or of a province and, if required by law, accepted for filing by the public authority before September 18, 2001, or
(iii) made under, or described in, the terms of an offering memorandum distributed as part of an offering of securities if
(A) the memorandum contains a complete, or substantially complete, description of the securities contemplated in the offering as well as the terms and conditions of the offering,
(B) the memorandum was distributed before September 18, 2001,
(C) solicitations in respect of a sale of the securities contemplated in the offering were made before September 18, 2001, and
(D) the sale of the securities contemplated in the offering was substantially in accordance with the memorandum;
(b) the expenditure was made before 2002;
(c) the expenditure was made in consideration for services that were rendered in Canada before 2002 in respect of an activity, or a business, all or substantially all of which was carried on in Canada;
(d) there is no agreement or other arrangement under which the obligation of any taxpayer in respect of the expenditure can, on or after September 18, 2001, be changed, reduced or waived if there is a change to, or an adverse assessment under, the Act;
(e) if the right to receive production is, or is related to, a tax shelter investment, a tax shelter identification number in respect of the tax shelter was obtained before September 18, 2001; and
(f) if the expenditure was made under, or described in, the terms of a document that is a prospectus, a preliminary prospectus, a registration statement or an offering memorandum (and regardless of whether the expenditure was also made under a written agreement)
(i) all of the funds raised pursuant to the document that may reasonably be used to make a matchable expenditure were received by the taxpayer before 2002,
(ii) all or substantially all of the securities distributed pursuant to the document for the purpose of raising the funds described in subparagraph (i) were acquired before 2002 by a person who is not
(A) a promoter, or an agent of a promoter, of the securities, other than an agent of the promoter who acquired the security as principal and not for resale,
(B) a vendor of the right to receive production,
(C) a broker or dealer in securities, other than a person who acquired the security as principal and not for resale, or
(D) a person who does not deal at arm’s length with a person to whom clause (A) or (B) applies, and
(iii) all or substantially all of the funds raised pursuant to the document before 2002 were used to make expenditures that were required to be made pursuant to agreements in writing made before September 18, 2001.
(3) Subsection (1) does not apply to an expenditure made by a taxpayer in respect of a right to receive production in respect of a particular film or video production if
(a) expenditures in respect of the particular film or video production
(i) were made before September 18, 2001 (as determined, for the purpose of this paragraph, without reference to subsection 143.2(10) of the Act, except if a repaid amount for the purposes of that subsection is paid after 2002), or
(ii) were required to be made by the taxpayer under a written agreement made before September 18, 2001 by the taxpayer;
(b) principal photography of the particular film or video production
(i) began before 2002,
(ii) was primarily completed before April 2002, and
(iii) was conducted primarily in Canada;
(c) the expenditure
(i) was made before April 2002 in the course of the taxpayer’s business of providing film production services in respect of the particular film or video production (as determined for the purpose of this subparagraph without reference to subsection 143.2(10) of the Act, except to the extent that a repaid amount for the purposes of that subsection is paid after 2002),
(ii) was made under, or described in, the terms of
(A) a prospectus, preliminary prospectus or registration statement that was, before September 18, 2001, filed with a public authority in Canada in accordance with the securities legislation of Canada or of a province and, if required by law, accepted for filing by the public authority before September 18, 2001, or
(B) an offering memorandum distributed as part of an offering of securities if
(I) the memorandum contains a complete, or substantially complete, description of the securities contemplated in the offering as well as the terms and conditions of the offering,
(II) the memorandum was distributed before September 18, 2001,
(III) solicitations in respect of a sale of the securities contemplated in the offering have been made before September 18, 2001, and
(IV) the sale of the securities contemplated in the offering was substantially in accordance with the memorandum, and
(iii) was not an amount in respect of advertising, marketing, promotion or market research;
(d) except where the particular film or video production is a designated production of the taxpayer, at least 75% of the total of all expenditures, each of which is an expenditure made by the taxpayer in the course of the business referred to in subparagraph (c)(i), is an expenditure described for the purpose of that subparagraph made in consideration for the supply of goods or services that are supplied or rendered in Canada before April 2002 by persons that are subject to tax on the expenditure under Part I or XIII of the Act;
(e) there is no agreement or other arrangement under which the obligation of any taxpayer to acquire a security distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum can, after September 18, 2001, be changed, reduced or waived if there is a change to, or an adverse assessment under, the Act;
(f) if the right to receive production is, or is related to, a tax shelter investment, a tax shelter identification number in respect of the tax shelter was obtained before September 18, 2001;
(g) all of the funds raised pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum that may reasonably be used to make a matchable expenditure before April 2002 in respect of the particular film or video production are received by the taxpayer before 2003;
(h) all of the securities distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum for the purpose of raising the funds described in paragraph (g) were acquired before 2002;
(i) all or substantially all of the securities distributed pursuant to the prospectus, preliminary prospectus, registration statement or offering memorandum for the purpose of raising the funds described in paragraph (g) were acquired by a person who is not
(i) a promoter, or an agent of a promoter, of the securities, other than an agent of the promoter who acquired the security as principal and not for resale,
(ii) a vendor of the right to receive production,
(iii) a broker or dealer in securities, other than a person who acquired the security as principal and not for resale, or
(iv) a person who does not deal at arm’s length with a person referred to in subparagraph (i) or (ii); and
(j) except where the particular film or video production is a designated production of the taxpayer, all or substantially all of the matchable expenditures made by the taxpayer that are wholly attributable to the principal photography of the particular film or video production are wholly attributable to principal photography conducted in Canada.
(4) For the purpose of paragraphs (3)(d) and (j), a designated production of a taxpayer is
(a) a film or video production in respect of which
(i) all of the expenditures made by the taxpayer in respect of the particular film or video production were required to be made under a written agreement made by the taxpayer before September 18, 2001,
(ii) if the taxpayer is a partnership,
(A) the taxpayer’s expenditures in respect of the particular film or video production were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the taxpayer, pursuant to subscriptions in writing for the issue of units in the taxpayer,
(B) all or substantially all of those written subscriptions were received by the taxpayer on or before September 18, 2001,
(C) at least one member of the taxpayer referred to in subparagraph (i) is a partnership (in this subsection referred to as a “master partnership”),
(D) the subscriptions in writing of all master partnerships for units in the taxpayer were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the master partnerships, pursuant to subscriptions in writing for the issue of units in the master partnerships, and
(E) all or substantially all of the subscriptions in writing referred to in clause (D) were received by the master partnership on or before September 18, 2001,
(iii) if a member of a particular master partnership is a partnership (in this subsection referred to as an “original master partnership”),
(A) the subscriptions in writing of all original master partnerships for units in the particular master partnership were funded, in whole or in part, with funds raised from the initial contribution of capital of members of the original master partnerships, pursuant to subscriptions in writing for the issue of units in the original master partnerships, and
(B) all or substantially all of those written subscriptions were received by the original master partnership on or before September 18, 2001, and
(iv) no member of an original master partnership is a partnership, an interest in which is a tax shelter; or
(b) a film or video production in respect of which
(i) principal photography was all or substantially all complete before September 18, 2001, and
(ii) all or substantially all of the taxpayer’s expenditures were made on or before September 18, 2001 (as determined, for the purpose of this paragraph, without reference to subsection 143.2(10) of the Act, except if a repaid amount for the purposes of that subsection is paid after 2002).
180. (1) Paragraph 20(1)(bb) of the Act is replaced by the following:
Marginal note:Fees paid to investment counsel
(bb) an amount, other than a commission, that
(i) is paid by the taxpayer in the year to a person or partnership the principal business of which
(A) is advising others as to the advisability of purchasing or selling specific shares or securities, or
(B) includes the provision of services in respect of the administration or management of shares or securities, and
(ii) is paid for
(A) advice as to the advisability of purchasing or selling a specific share or security of the taxpayer, or
(B) services in respect of the administration or management of shares or securities of the taxpayer;
(2) Paragraph 20(1)(jj) of the Act is repealed.
(3) Subsection 20(8) of the Act is amended by striking out “or” at the end of paragraph (a) and by adding the following after paragraph (b):
(c) the purchaser of the property sold was a corporation that, immediately after the sale,
(i) was controlled, directly or indirectly, in any manner whatever, by the taxpayer,
(ii) was controlled, directly or indirectly, in any manner whatever, by a person or group of persons that controlled the taxpayer, directly or indirectly, in any manner whatever, or
(iii) controlled the taxpayer, directly or indirectly, in any manner whatever; or
(d) the purchaser of the property sold was a partnership in which the taxpayer was, immediately after the sale, a majority interest partner.
(4) Subsection 20(12) of the Act is replaced by the following:
Marginal note:Foreign non-business income tax
(12) In computing the income of a taxpayer who is resident in Canada at any time in a taxation year from a business or property for the year, there may be deducted any amount that the taxpayer claims that does not exceed the non-business income tax paid by the taxpayer for the year to the government of a country other than Canada (within the meaning assigned by subsection 126(7) read without reference to paragraphs (c) and (e) of the definition “non-business income tax” in that subsection) in respect of that income, other than any of those taxes paid that can, in whole or in part, reasonably be regarded as having been paid by a corporation in respect of income from a share of the capital stock of a foreign affiliate of the corporation.
(5) Paragraph 20(16)(a) of the Act is replaced by the following:
(a) the total of all amounts used to determine A to D.1 in the definition “undepreciated capital cost” in subsection 13(21) in respect of a taxpayer’s depreciable property of a particular class exceeds the total of all amounts used to determine E to K in that definition in respect of that property, and
(6) Subsection 20(16.1) of the Act is replaced by the following:
Marginal note:Non-application of subsection (16)
(16.1) Subsection (16) does not apply
(a) in respect of a passenger vehicle of a taxpayer that has a cost to the taxpayer in excess of $20,000 or any other amount that is prescribed; and
(b) in respect of a taxation year in respect of a property that was a former property deemed by paragraph 13(4.3)(a) or (b) to be owned by the taxpayer, if
(i) within 24 months after the taxpayer last owned the former property, the taxpayer or a person not dealing at arm’s length with the taxpayer acquires a similar property in respect of the same fixed place to which the former property applied, and
(ii) at the end of the taxation year, the taxpayer or the person owns the similar property or another similar property in respect of the same fixed place to which the former property applied.
(7) Subsections 20(17) and (18) of the Act are repealed.
(8) Subsection 20(26) of the Act is repealed.
(9) Subsection (1) applies to amounts paid after June 2005.
(10) Subsection (2) applies to reinsurance commissions paid after 1999.
(11) Subsection (3) applies in respect of property sold by a taxpayer after December 20, 2002. However, if a property so sold pursuant to an agreement in writing made before December 21, 2002 is transferred to the purchaser before 2004
(a) subsection 20(8) of the Act, as it read immediately before the enactment of subsection (3), applies in respect of the property; and
(b) for the purpose of applying paragraph 20(1)(n) of the Act to the taxpayer for a taxation year in respect of the property, a reasonable amount as a reserve in respect of an amount not due in respect of the sale may not exceed the amount that would be reasonable if the proceeds from any subsequent disposition of the property that the purchaser receives before the end of the taxation year were received by the taxpayer.
(12) Subsection (4) applies after December 20, 2002 in respect of taxes paid at any time.
(13) Subsection (5) applies to taxation years that end after February 23, 1998.
(14) Subsection (6) applies in respect of taxation years that end after December 20, 2002.
(15) Subsection (8) applies to taxation years that begin after October 31, 2011.
181. (1) Subclause 37(8)(a)(ii)(B)(V) of the Act is replaced by the following:
(V) the cost of materials consumed or transformed in the prosecution of scientific research and experimental development in Canada, or
(2) Subsection (1) applies to costs incurred after February 23, 1998.
182. (1) The Act is amended by adding the following before section 39:
Marginal note:Allocation of gain re certain gifts
38.2 If a taxpayer is entitled to an amount of an advantage in respect of a gift of property described in paragraph 38(a.1) or (a.2),
(a) those paragraphs apply only to that proportion of the taxpayer’s capital gain in respect of the gift that the eligible amount of the gift is of the taxpayer’s proceeds of disposition in respect of the gift; and
(b) paragraph 38(a) applies to the extent that the taxpayer’s capital gain in respect of the gift exceeds the amount of the capital gain to which paragraph 38(a.1) or (a.2) applies.
(2) Subsection (1) applies to gifts made after December 20, 2002.
183. (1) Paragraph 40(1.01)(c) of the Act is replaced by the following:
(c) the amount that the taxpayer claims in prescribed form filed with the taxpayer’s return of income for the particular year, not exceeding the eligible amount of the gift, where the taxpayer is not deemed by subsection 118.1(13) to have made a gift of property before the end of the particular year as a consequence of a disposition of the security by the donee or as a consequence of the security ceasing to be a non-qualifying security of the taxpayer before the end of the particular year.
(2) Paragraph 40(2)(a) of the Act is amended by striking out “or” at the end of subparagraph (i), by adding “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):
(iii) the purchaser of the property sold is a partnership in which the taxpayer was, immediately after the sale, a majority interest partner;
(3) The descriptions of A and B in subsection 40(3.11) of the Act are replaced by the following:
- A
- is the total of
(a) all amounts required by subsection 53(2) to be deducted in computing the adjusted cost base to the member of the interest in the partnership at that time, and
(b) if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(2)(c)(i) in respect of the taxpayer for that fiscal period; and
- B
- is the total of
(a) the cost to the member of the interest determined for the purpose of computing the adjusted cost base to the member of the interest at that time,
(b) all amounts required by subsection 53(1) to be added to the cost to the member of the interest in computing the adjusted cost base to the member of the interest at that time, and
(c) if the member is a member of a professional partnership, and that time is the end of the fiscal period of the partnership, the amount referred to in subparagraph 53(1)(e)(i) in respect of the taxpayer for that fiscal period.
(4) Section 40 of the Act is amended by adding the following after subsection (3.11):
Meaning of “professional partnership”
(3.111) In this section, “professional partnership” means a partnership through which one or more persons carry on the practice of a profession that is governed or regulated under a law of Canada or a province.
(5) Paragraph 40(3.14)(a) of the English version of the Act is replaced by the following:
(a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership);
(6) Paragraph 40(3.5)(b) of the Act is replaced by the following:
(b) a share of the capital stock of a corporation that is acquired in exchange for another share in a transaction is deemed to be a property that is identical to the other share if
(i) section 51, 86 or 87 applies to the transaction, or
(ii) the following conditions are met, namely,
(A) section 85.1 applies to the transaction,
(B) subsection (3.4) applied to a prior disposition of the other share, and
(C) none of the times described in any of subparagraphs (3.4)(b)(i) to (v) has occurred in respect of the prior disposition;
(7) Subsection (1) applies to gifts made after December 20, 2002.
(8) Subsection (2) applies to sales that occur after December 20, 2002.
(9) Subsections (3) and (4) apply to fiscal periods that end after November 2001.
(10) Subsection (5) is deemed to have come into force on June 21, 2001.
(11) Subsection (6) applies to dispositions of property that occur after April 26, 1995, except that it does not apply to any of those dispositions by a person or partnership that occurred before 1996 and that is described in subsection 247(1) of the Income Tax Amendments Act, 1997 unless the person or partnership, as the case may be, made an election under subsection 247(2) of that Act.
184. (1) Section 42 of the Act is replaced by the following:
Marginal note:Dispositions subject to warranty
42. (1) For the purposes of this subdivision,
(a) an amount received or receivable by a person or partnership (referred to in this subsection as the “vendor”), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the “subject property”) disposed of by the vendor,
(i) if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
(ii) in any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receivable; and
(b) an outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,
(i) if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
(ii) in any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.
Meaning of “specified date”
(2) In subsection (1), “specified date” means,
(a) if the vendor is a partnership, the last day of the vendor’s fiscal period in which the vendor disposed of the subject property; and
(b) in any other case, the vendor’s filing-due date for the vendor’s taxation year in which the vendor disposed of the subject property.
(2) Subsection (1) applies to taxation years and fiscal periods that end after February 27, 2004 except that, in its application to taxation years and fiscal periods that end before November 5, 2010, section 42 of the Act, as enacted by subsection (1), is to be read as follows:
42. For the purposes of this subdivision,
(a) an amount received or receivable by a taxpayer in a taxation year as consideration for a warranty, a covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of a property disposed of, at any time, by the taxpayer
(i) is, if the amount is received or becomes receivable on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the taxpayer disposed of the property, to be included in computing the taxpayer’s proceeds of disposition of the property, and
(ii) is, if the amount is received or becomes receivable after that filing-due date, deemed to be a capital gain of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is received or becomes receivable; and
(b) an outlay or expense paid or payable by the taxpayer in a taxation year under a warranty, covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of property disposed of, at any time, by the taxpayer
(i) is, if the amount is paid or becomes payable on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the taxpayer disposed of the property, to be deducted in computing the taxpayer’s proceeds of disposition of the property, and
(ii) is, if the amount is paid or becomes payable after that filing-due date, deemed to be a capital loss of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is paid or becomes payable.
185. (1) The portion of subsection 43(2) of the Act before the formula in paragraph (a) is replaced by the following:
Marginal note:Ecological gifts
(2) For the purposes of subsection (1) and section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,
(a) the portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or real servitude, as the case may be, is deemed to be equal to the amount determined by the formula
(2) Subsection (1) applies to gifts made after December 20, 2002.
186. (1) Paragraphs 44(1)(c) and (d) of the Act are replaced by the following:
(c) if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, and
(d) in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,
(2) Subsection 44(7) of the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) the former property of the taxpayer was disposed of to a partnership in which the taxpayer was, immediately after the disposition, a majority interest partner.
(3) Paragraph 44(1)(c) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2000.
(4) Paragraph 44(1)(d) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2001.
(5) Subsection (2) applies to dispositions of property by a taxpayer that occur after December 20, 2002. However, if a property so disposed of pursuant to an agreement in writing made before December 21, 2002 is transferred to the purchaser before 2004
(a) subsection 44(7) of the Act, as it read immediately before the enactment of subsection (2), applies in respect of the disposition of property; and
(b) for the purpose of applying subparagraph 44(1)(e)(iii) of the Act to the taxpayer for a taxation year in respect of the property, a reasonable amount as a reserve in respect of the proceeds of disposition may not exceed the amount that would be reasonable if the proceeds from any subsequent disposition of the property that the purchaser receives before the end of the taxation year were received by the taxpayer.
187. (1) The portion of subsection 44.1(6) of the Act before paragraph (b) is replaced by the following:
Marginal note:Special rule — re eligible small business corporation share exchanges
(6) For the purpose of this section, where an individual receives shares of the capital stock of a particular corporation that are eligible small business corporation shares of the individual (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of shares issued by the particular corporation or by another corporation that were eligible small business corporation shares of the individual (in this subsection referred to as the “exchanged shares”), the new shares are deemed to have been owned by the individual throughout the period that the exchanged shares were owned by the individual if
(a) section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares; and
(2) The portion of subsection 44.1(7) of the Act before paragraph (b) is replaced by the following:
Marginal note:Special rule — re active business corporation share exchanges
(7) For the purpose of this section, where an individual receives common shares of the capital stock of a particular corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of common shares of the particular corporation or of another corporation (in this subsection referred to as the “exchanged shares”), the new shares are deemed to be eligible small business corporation shares of the individual and shares of the capital stock of an active business corporation that were owned by the individual throughout the period that the exchanged shares were owned by the individual, if
(a) section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares;
(3) Paragraph 44.1(12)(b) of the Act is replaced by the following:
(b) the new shares (or shares for which the new shares are substituted property) were
(i) issued by the corporation that issued the old shares,
(ii) issued by a corporation that, at or immediately after the time of issue of the new shares, was a corporation that was not dealing at arm’s length with
(A) the corporation that issued the old shares, or
(B) the individual, or
(iii) issued, by a corporation that acquired the old shares (or by another corporation related to that corporation), as part of the transaction or event or series of transactions or events that included that acquisition of the old shares; and
(4) Section 44.1 of the Act is amended by adding the following after subsection (12):
Marginal note:Order of disposition of shares
(13) For the purpose of this section, an individual is deemed to dispose of shares that are identical properties in the order in which the individual acquired them.
(5) Subsections (1) and (2) apply to dispositions that occur after February 27, 2000.
(6) Subsection (3) applies in respect of dispositions that occur after February 27, 2004.
(7) Subsection (4) applies in respect of dispositions that occur after December 20, 2002. However, if an individual so elects in writing and files the election with the Minister of National Revenue on or before the individual’s filing-due date for the individual’s taxation year in which this Act receives royal assent, subsection (4) applies, in respect of the individual, to dispositions that occur after February 27, 2000.
188. (1) Subsections 49(2) and (2.1) of the Act are replaced by the following:
Marginal note:Expired option — shares
(2) If at any time an option described in paragraph (1)(b) expires, the corporation that granted the option is deemed to have disposed of capital property at that time for proceeds equal to the proceeds received by it for the granting of the option, and the adjusted cost base to the corporation of that capital property immediately before that time is deemed to be nil, unless
(a) the option is held, at that time, by a person who deals at arm’s length with the corporation and the option was granted by the corporation to a person who was dealing at arm’s length with the corporation at the time that the option was granted, or
(b) the option is an option to acquire shares of the capital stock of the corporation in consideration for the incurring, pursuant to an agreement described in paragraph (e) of the definition “Canadian exploration and development expenses” in subsection 66(15), paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5) or paragraph (c) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), of any expense described in whichever of those paragraphs is applicable.
Marginal note:Expired option — trust units
(2.1) If, at a particular time, an option referred to in paragraph (1)(c) expires, and the option is held at that time by a person who does not deal at arm’s length with the trust or was granted to a person who did not deal at arm’s length with the trust at the time that the option was granted,
(a) the trust is deemed to have disposed of capital property at the particular time for proceeds equal to the proceeds received by it for the granting of the option; and
(b) the adjusted cost base to the trust of that capital property immediately before the particular time is deemed to be nil.
(2) Subsection (1) applies to options issued after October 24, 2012.
189. (1) Subsection 52(1) of the Act is replaced by the following:
Marginal note:Cost of certain property the value of which is included in income
52. (1) In applying this subdivision, an amount equal to the particular amount described by paragraph (d) shall be added in computing the cost at any time to a taxpayer of a property if
(a) the taxpayer acquired the property after 1971;
(b) the amount was not at or before that time otherwise added to the cost, or included in computing the adjusted cost base, to the taxpayer of the property;
(c) the property is not an annuity contract, a right as a beneficiary under a trust to enforce payment of an amount by the trust to the taxpayer, property acquired in circumstances to which subsection (2) or (3) applies, or property acquired from a trust in satisfaction of all or part of the taxpayer’s capital interest in the trust; and
(d) a particular amount in respect of the property’s value was
(i) included, otherwise than under section 7, in computing
(A) the taxpayer’s taxable income or taxable income earned in Canada, as the case may be, for a taxation year during which the taxpayer was non-resident, or
(B) the taxpayer’s income for a taxation year throughout which the taxpayer was resident in Canada, or
(ii) for the purpose of computing the tax payable under Part XIII by the taxpayer, included in an amount that was paid or credited to the taxpayer.
(2) Paragraph 52(3)(a) of the Act is replaced by the following:
(a) where the stock dividend is a dividend, the amount, if any, by which
(i) the amount of the stock dividend
exceeds
(ii) the amount of the dividend that the shareholder may deduct under subsection 112(1) in computing the shareholder’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the capital gain referred to in that subsection could reasonably be considered not to be attributable to anything other than income earned or realized by any corporation after 1971 and before the safe-income determination time for the transaction or event or series of transactions or events as part of which the dividend was received,
(3) Subsection (1) applies to taxation years that begin after 2006.
(4) Subsection (2) applies in respect of amounts received on or after November 9, 2006.
190. (1) Paragraph 53(1)(b) of the Act is replaced by the following:
(b) where the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by which
(i) the total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that time
exceeds
(ii) the portion of the total determined under subparagraph (i) that relates to dividends in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer’s taxable income, except any portion of the dividend that, if paid as a separate dividend, would not be subject to subsection 55(2) because the capital gain referred to in that subsection could reasonably be considered not to be attributable to anything other than income earned or realized by any corporation after 1971 and before the safe-income determination time for the transaction or event or series of transactions or events as part of which the dividend was received;
(2) Clause 53(1)(e)(i)(A.1) of the Act is repealed.
(3) Subparagraph 53(1)(e)(i) of the Act, as amended by subsection (2), is amended by adding the following after clause (A):
(A.1) subparagraph 39(1)(a)(i.1) in respect of an object referred to in that subparagraph that is not the subject of a gifting arrangement, as defined in subsection 237.1(1), nor a property that is a tax shelter,
(4) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (iv):
(iv.1) each amount that is in respect of a specified amount described in subsection 80.2(1) and that is paid by the taxpayer to the partnership, to the extent that the amount paid is not deductible in computing the income of the taxpayer,
(5) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (viii):
(viii.1) an amount deemed, before that time, by subsection 59(1.1) to be proceeds of disposition receivable by the taxpayer in respect of the disposition of a foreign resource property,
(6) Clause 53(2)(c)(i)(A.1) of the Act is repealed.
(7) Subparagraph 53(2)(c)(iii) of the Act is replaced by the following:
(iii) any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made by the taxpayer by reason of the taxpayer’s membership in the partnership at the end of a fiscal period of the partnership ending before that time,
(8) The portion of subsection 53(4) of the Act before paragraph (a) is replaced by the following:
Marginal note:Recomputation of adjusted cost base on transfers and deemed dispositions
(4) If at any time in a taxation year a person or partnership (in this subsection referred to as the “vendor”) disposes of a specified property and the proceeds of disposition of the property are determined under paragraph 48.1(1)(c), section 70 or 73, subsection 85(1), paragraph 87(4)(a) or (c) or 88(1)(a), subsection 97(2) or 98(2), paragraph 98(3)(f) or (5)(f), subsection 104(4), paragraph 107(2)(a) or (2.1)(a), 107.4(3)(a) or 111(4)(e) or section 128.1,
(9) Subsection (1) applies in respect of a dividend received by a taxpayer on or after November 9, 2006. However, if the taxpayer elects, no later than 180 days after the day on which this Act receives royal assent, by filing with the Minister of National Revenue an election in writing, in respect of the dividend received by the taxpayer before July 16, 2010, paragraph 53(1)(b) of the Act, as enacted by subsection (1), is to be read as follows:
(b) where the property is a share of the capital stock of a corporation resident in Canada, the amount, if any, by which
(i) the total of all amounts each of which is the amount of a dividend on the share deemed by subsection 84(1) to have been received by the taxpayer before that time
exceeds
(ii) the portion of the total determined under subparagraph (i) that relates to dividends
(A) in respect of which the taxpayer was permitted a deduction under subsection 112(1) in computing the taxpayer’s taxable income, and
(B) that arose directly or indirectly as a result of a conversion of contributed surplus into paid-up capital;
(10) Subsections (2) and (6) apply in respect of amounts that became payable after December 20, 2002.
(11) Subsection (3) applies in respect of the disposition of an object made after 2003.
(12) Subsection (4) applies to payments made in taxation years that end after 2002.
(13) Subsection (5) applies for fiscal periods of a partnership that begin after 2000.
(14) Subsection (7) applies in respect of gifts and contributions made after December 20, 2002, except that in its application before 2007, subparagraph 53(2)(c)(iii) of the Act, as enacted by subsection (7), is to be read as follows:
(iii) any amount deemed by subsection 110.1(4) or 118.1(8) to have been the eligible amount of a gift made, or by subsection 127(4.2) to have been an amount contributed, by the taxpayer by reason of the taxpayer’s membership in the partnership at the end of a fiscal period of the partnership ending before that time,
(15) Subsection (8) is deemed to have come into force on February 28, 2004.
191. (1) Paragraph (c) of the definition “superficial loss” in section 54 of the Act is replaced by the following:
(c) a disposition deemed to have been made by paragraph 33.1(11)(a), subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 142.5(2), section 142.6 or any of subsections 144(4.1) and (4.2) and 149(10),
(2) Subsection (1) applies to dispositions that occur after 1998, except that, in its application to taxation years that begin before October 2006, paragraph (c) of the definition “superficial loss” in section 54 of the Act, as enacted by subsection (1), is to be read as follows:
(c) a disposition deemed by paragraph 33.1(11)(a), subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(3)(a) or (c), subsection 138(11.3) or 142.5(2), paragraph 142.6(1)(b) or subsection 144(4.1) or (4.2) or 149(10) to have been made,
192. (1) The portion of subsection 54.1(1) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Exception to principal residence rules
54.1 (1) A taxation year in which a taxpayer does not ordinarily inhabit the taxpayer’s property as a consequence of the relocation of the place of employment of the taxpayer or the taxpayer’s spouse or common-law partner while the taxpayer or the taxpayer’s spouse or common-law partner, as the case may be, is employed by an employer who is not a person to whom the taxpayer or the taxpayer’s spouse or common-law partner is related is deemed not to be a previous taxation year referred to in paragraph (d) of the definition “principal residence” in section 54 if
(2) Subsection (1) applies to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act, in respect of the 1998, 1999 or 2000 taxation years, subsection (1) applies to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.
193. (1) The definition “specified class” in subsection 55(1) of the Act is amended by striking out “and” at the end of paragraph (b) and by replacing paragraph (c) with the following:
(c) no holder of the shares is entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends on the shares, and
(d) the shares are non-voting in respect of the election of the board of directors except in the event of a failure or default under the terms or conditions of the shares;
(2) Subsection 55(1) of the Act is amended by adding the following in alphabetical order:
“qualified person”
« personne admissible »
“qualified person”, in relation to a distribution, means a person or partnership with whom the distributing corporation deals at arm’s length at all times during the course of the series of transactions or events that includes the distribution if
(a) at any time before the distribution,
(i) all of the shares of each class of the capital stock of the distributing corporation that includes shares that cause that person or partnership to be a specified shareholder of the distributing corporation (in this definition all of those shares in all of those classes are referred to as the “exchanged shares”) are, in the circumstances described in paragraph (a) of the definition “permitted exchange”, exchanged for consideration that consists solely of shares of a specified class of the capital stock of the distributing corporation (in this definition referred to as the “new shares”), or
(ii) the terms or conditions of all of the exchanged shares are amended (which shares are in this definition referred to after the amendment as the “amended shares”) and the amended shares are shares of a specified class of the capital stock of the distributing corporation,
(b) immediately before the exchange or amendment, the exchanged shares are listed on a designated stock exchange,
(c) immediately after the exchange or amendment, the new shares or the amended shares, as the case may be, are listed on a designated stock exchange,
(d) the exchanged shares would be shares of a specified class if they were not convertible into, or exchangeable for, other shares,
(e) the new shares or the amended shares, as the case may be, and the exchanged shares are non-voting in respect of the election of the board of directors of the distributing corporation except in the event of a failure or default under the terms or conditions of the shares, and
(f) no holder of the new shares or the amended shares, as the case may be, is entitled to receive on the redemption, cancellation or acquisition of the new shares or the amended shares, as the case may be, by the distributing corporation or by any person with whom the distributing corporation does not deal at arm’s length an amount (other than a premium for early redemption) that is greater than the total of the fair market value of the consideration for which the exchanged shares were issued and the amount of any unpaid dividends on the new shares or on the amended shares, as the case may be;
(3) Clause 55(3)(a)(iii)(B) of the Act is replaced by the following:
(B) property (other than shares of the capital stock of the dividend recipient) more than 10% of the fair market value of which was, at any time during the course of the series, derived from shares of the capital stock of the dividend payer,
(4) Paragraph 55(3.01)(d) of the Act is replaced by the following:
(d) proceeds of disposition are to be determined without reference to
(i) the expression “paragraph 55(2)(a) or” in paragraph (j) of the definition “proceeds of disposition” in section 54, and
(ii) section 93; and
(5) Clause 55(3.1)(b)(i)(B) of the Act is replaced by the following:
(B) the vendor (other than a qualified person in relation to the distribution) was, at any time during the course of the series, a specified shareholder of the distributing corporation or of the transferee corporation, and
(6) Paragraph 55(3.2)(h) of the Act is replaced by the following:
(h) in relation to a distribution each corporation (other than a qualified person in relation to the distribution) that is a shareholder and a specified shareholder of the distributing corporation at any time during the course of a series of transactions or events, a part of which includes the distribution made by the distributing corporation, is deemed to be a transferee corporation in relation to the distributing corporation.
(7) Section 55 of the Act is amended by adding the following after subsection (3.3):
Marginal note:Specified shareholder exclusion
(3.4) In determining whether a person is a specified shareholder of a corporation for the purposes of the definition “qualified person” in subsection (1), subparagraph (3.1)(b)(i) and paragraph (3.2)(h) as it applies for the purpose of subparagraph (3.1)(b)(iii), the reference to “not less than 10% of the issued shares of any class of the capital stock of the corporation” in the definition “specified shareholder” in subsection 248(1) is to be read as “not less than 10% of the issued shares of any class of the capital stock of the corporation, other than shares of a specified class (within the meaning of subsection 55(1))”.
Marginal note:Amalgamation of related corporations
(3.5) For the purposes of paragraphs (3.1)(c) and (d), a corporation formed by an amalgamation of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) that were related to each other immediately before the amalgamation, is deemed to be the same corporation as, and a continuation of, each of the predecessor corporations.
(8) Section 55 of the Act is amended by adding the following after subsection (5):
Marginal note:Unlisted shares deemed listed
(6) A share (in this subsection referred to as the “reorganization share”) is deemed, for the purposes of subsection 116(6) and the definition “taxable Canadian property” in subsection 248(1), to be listed on a designated stock exchange if
(a) a dividend, to which subsection (2) does not apply because of paragraph (3)(b), is received in the course of a reorganization;
(b) in contemplation of the reorganization
(i) the reorganization share is issued to a taxpayer by a public corporation in exchange for another share of that corporation (in this subsection referred to as the “old share”) owned by the taxpayer, and
(ii) the reorganization share is exchanged by the taxpayer for a share of another public corporation (in this subsection referred to as the “new share”) in an exchange that would be a permitted exchange if the definition “permitted exchange” were read without reference to paragraph (a) and subparagraph (b)(ii) of that definition;
(c) immediately before the exchange, the old share
(i) is listed on a designated stock exchange, and
(ii) is not taxable Canadian property of the taxpayer; and
(d) the new share is listed on a designated stock exchange.
(9) Subsection (1) applies in respect of shares issued after December 20, 2002.
(10) Subsections (2), (5) and (6) and subsection 55(3.4) of the Act, as enacted by subsection (7), apply in respect of dividends received after 1999, except that for the period before December 14, 2007, the references to “designated stock exchange” in the definition “qualified person” in subsection 55(1) of the Act, as enacted by subsection (2), are to be read as references to “prescribed stock exchange”.
(11) Subsections (3) and (4) apply to dividends received after February 21, 1994.
(12) Subsection 55(3.5) of the Act, as enacted by subsection (7), applies in respect of dividends received after April 26, 1995.
(13) Subsection (8) applies to shares that are issued after April 26, 1995, except that for the period before December 14, 2007, the references to “designated stock exchange” in subsection 55(6) of the Act, as enacted by subsection (8), are to be read as references to “prescribed stock exchange”.
194. (1) Subparagraph 56(1)(a)(iv) of the Act is replaced by the following:
(iv) a benefit under the Unemployment Insurance Act, other than a payment relating to a course or program designed to facilitate the re-entry into the labour force of a claimant under that Act, or a benefit under Part I, VII.1, VIII or VIII.1 of the Employment Insurance Act,
(2) Paragraph 56(1)(a) of the Act is amended by striking out “or” at the end of subparagraph (v), by adding “or” at the end of subparagraph (vi) and by adding the following after subparagraph (vi):
(vii) a benefit under the Act respecting parental insurance, R.S.Q., c. A-29.011;
(3) Subsection 56(1) of the Act is amended by adding the following after paragraph (l.1):
Marginal note:Bad debt recovered
(m) any amount received by the taxpayer, or by a person who does not deal at arm’s length with the taxpayer, in the year on account of a debt in respect of which a deduction was made under paragraph 60(f) in computing the taxpayer’s income for a preceding taxation year;
(4) Paragraph 56(1)(n.1) of the Act is replaced by the following:
Marginal note:Apprenticeship grants
(n.1) the total of all amounts, each of which is an amount received by the taxpayer in the year under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program administered by the Department of Human Resources and Skills Development;
(5) Section 56 of the Act is amended by adding the following after subsection (9):
Meaning of “income”
(9.1) For the purposes of subsection (6), “income” of a person for a taxation year means the amount that would, in the absence of that subsection, paragraphs (1)(s) and (u) and 60(v.1), (w) and (y) and section 63, be the income of the person for the taxation year.
(6) Section 56 of the Act is amended by adding the following after subsection (11):
Marginal note:Foreign retirement arrangement
(12) If an amount in respect of a foreign retirement arrangement is, as a result of a transaction, an event or a circumstance, considered to be distributed to an individual under the income tax laws of the country in which the arrangement is established, the amount is, for the purpose of paragraph (1)(a), deemed to be received by the individual as a payment out of the arrangement in the taxation year that includes the time of the transaction, event or circumstance.
(7) Subsection (1) applies to the 2011 and subsequent taxation years.
(8) Subsections (2) and (5) apply to the 2006 and subsequent taxation years.
(9) Subsection (3) is deemed to have come into force on October 8, 2003.
(10) Subsection (4) applies for the 2007 and subsequent taxation years except that, for the 2007 and 2008 taxation years, paragraph 56(1)(n.1) of the Act, as enacted by subsection (4), is to be read as follows:
(n.1) the total of all amounts, each of which is an amount received by the taxpayer in the year under the Apprenticeship Incentive Grant program administered by the Department of Human Resources and Skills Development;
(11) Subsection (6) applies to the 1998 and subsequent taxation years except that, for taxation years that end before 2002, subsection 56(12) of the Act, as enacted by subsection (6), is to be read as follows:
(12) For the purpose of paragraph (1)(a),
(a) if an amount in respect of a foreign retirement arrangement is considered, under section 408A(d)(3)(C) of the Internal Revenue Code of 1986 of the United States (in this subsection referred to as the “Code”), to be distributed to an individual as a result of a conversion of the arrangement after 1998 and before 2002, the amount is deemed to be received by the individual as a payment out of the arrangement in the taxation year that includes the time of the conversion; and
(b) if an individual received an amount as a payment out of or under a foreign retirement arrangement in 1998, or an amount is considered under section 408A(d)(3)(C) of the Code to be distributed to the individual as a result of a conversion of the arrangement in 1998, the individual was resident in Canada at the time of the receipt or conversion and the amount is an amount to which section 408A(d)(3)(A)(iii) of the Code applies,
(i) the amount is deemed not to have been received by the individual, and
(ii) an amount equal to the amount that is included under section 408A(d)(3)(A)(iii) or 408A(d)(3)(E) of the Code in the individual’s gross income for a particular taxable year is deemed to be an amount received by the individual, in the taxation year that includes the day on which the particular taxable year begins, as a payment out of the arrangement, where the expressions “gross income” and “taxable year” in this subparagraph have the meanings assigned to those expressions by the Code.
195. (1) The Act is amended by adding the following after section 56.3:
Restrictive Covenants
Marginal note:Definitions
56.4 (1) The following definitions apply in this section.
“eligible corporation”
« société admissible »
“eligible corporation”, of a taxpayer, means a taxable Canadian corporation of which the taxpayer holds, directly or indirectly, shares of the capital stock.
“eligible individual”
« particulier admissible »
“eligible individual”, in respect of a vendor, at any time means an individual (other than a trust) who is related to the vendor and who has attained the age of 18 years at or before that time.
“eligible interest”
« participation admissible »
“eligible interest”, of a taxpayer, means capital property of the taxpayer that is
(a) a partnership interest in a partnership that carries on a business;
(b) a share of the capital stock of a corporation that carries on a business; or
(c) a share of the capital stock of a corporation 90% or more of the fair market value of which is attributable to eligible interests in one other corporation.
“goodwill amount”
« montant pour achalandage »
“goodwill amount”, of a taxpayer, is an amount the taxpayer has or may become entitled to receive that is required by the description of E in the definition “cumulative eligible capital” in subsection 14(5) to be included in computing the cumulative eligible capital of a business carried on by the taxpayer through a permanent establishment located in Canada.
“permanent establishment”
« établissement stable »
“permanent establishment” means a permanent establishment as defined for the purpose of subsection 16.1(1).
“restrictive covenant”
« clause restrictive »
“restrictive covenant”, of a taxpayer, means an agreement entered into, an undertaking made, or a waiver of an advantage or right by the taxpayer, whether legally enforceable or not, that affects, or is intended to affect, in any way whatever, the acquisition or provision of property or services by the taxpayer or by another taxpayer that does not deal at arm’s length with the taxpayer, other than an agreement or undertaking
(a) that disposes of the taxpayer’s property; or
(b) that is in satisfaction of an obligation described in section 49.1 that is not a disposition except where the obligation being satisfied is in respect of a right to property or services that the taxpayer acquired for less than its fair market value.
“taxpayer”
« contribuable »
“taxpayer” includes a partnership.
Marginal note:Income — restrictive covenants
(2) There is to be included in computing a taxpayer’s income for a taxation year the total of all amounts each of which is an amount in respect of a restrictive covenant of the taxpayer that is received or receivable in the taxation year by the taxpayer or by a taxpayer with whom the taxpayer does not deal at arm’s length (other than an amount that has been included in computing the taxpayer’s income because of this subsection for a preceding taxation year or in the taxpayer’s eligible corporation’s income because of this subsection for the taxation year or a preceding taxation year).
Marginal note:Non-application of subsection (2)
(3) Subsection (2) does not apply to an amount received or receivable by a particular taxpayer in a taxation year in respect of a restrictive covenant granted by the particular taxpayer to another taxpayer (referred to in this subsection and subsection (4) as the “purchaser”) with whom the particular taxpayer deals at arm’s length (determined without reference to paragraph 251(5)(b)), if
(a) section 5 or 6 applied to include the amount in computing the particular taxpayer’s income for the taxation year or would have so applied if the amount had been received in the taxation year;
(b) the amount would, if this Act were read without reference to this section, be required by the description of E in the definition “cumulative eligible capital” in subsection 14(5) to be included in computing the particular taxpayer’s cumulative eligible capital in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; or
(c) subject to subsection (9), the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definition “eligible interest” in subsection (1) where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and
(i) the disposition is to the purchaser (or to a person related to the purchaser),
(ii) the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),
(iii) the restrictive covenant may reasonably be considered to have been granted to maintain or preserve the value of the eligible interest disposed of to the purchaser;
(iv) if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,
(v) the amount is added to the particular taxpayer’s proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer’s eligible interest, and
(vi) the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.
Marginal note:Treatment of purchaser
(4) An amount paid or payable by a purchaser for a restrictive covenant is
(a) if the amount is required because of section 5 or 6 to be included in computing the income of an employee of the purchaser, to be considered to be wages paid or payable by the purchaser to the employee;
(b) if an election has been made under paragraph (3)(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of applying the definition “eligible capital expenditure” in subsection 14(5) and not to be an amount paid or payable for all other purposes of the Act; and
(c) if an election has been made under paragraph (3)(c), in respect of the amount and the amount relates to the purchaser’s acquisition of property that is, immediately after the acquisition, an eligible interest of the purchaser, to be included in computing the cost to the purchaser of that eligible interest and considered not to be an amount paid or payable for all other purposes of the Act.
Marginal note:Non-application of section 68
(5) If this subsection applies to a restrictive covenant granted by a taxpayer, section 68 does not apply to deem consideration to be received or receivable by the taxpayer for the restrictive covenant.
Marginal note:Application of subsection (5) — if employee provides covenant
(6) Subsection (5) applies to a restrictive covenant if
(a) the restrictive covenant is granted by an individual to another taxpayer with whom the individual deals at arm’s length (referred to in this subsection as the “purchaser”);
(b) the restrictive covenant directly relates to the acquisition from one or more other persons (in this subsection and subsection (12) referred to as the “vendors”) by the purchaser of an interest, or for civil law purposes a right, in the individual’s employer, in a corporation related to that employer or in a business carried on by that employer;
(c) the individual deals at arm’s length with the employer and with the vendors;
(d) the restrictive covenant is an undertaking by the individual not to provide, directly or indirectly, property or services in competition with property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates;
(e) no proceeds are received or receivable by the individual for granting the restrictive covenant; and
(f) the amount that can reasonably be regarded to be consideration for the restrictive covenant is received or receivable only by the vendors.
Marginal note:Application of subsection (5) — realization of goodwill amount and disposition of property
(7) Subject to subsection (10), subsection (5) applies to a restrictive covenant granted by a taxpayer if
(a) the restrictive covenant is granted by the taxpayer (in this subsection and subsection (8) referred to as the “vendor”) to
(i) another taxpayer (in this subsection referred to as the “purchaser”) with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)) at the time of the grant of the restrictive covenant, or
(ii) another person who is an eligible individual in respect of the vendor at the time of the grant of the restrictive covenant;
(b) where subparagraph (a)(i) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser) in the course of carrying on the business to which the restrictive covenant relates, and
(i) the amount that can reasonably be regarded as being consideration for the restrictive covenant is
(A) included by the vendor in computing a goodwill amount of the vendor, or
(B) received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or
(ii) it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing,
(A) under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (B)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or
(B) under which shares of the capital stock of a corporation (in this subsection and subsection (12) referred to as the “target corporation”) are disposed of to the purchaser or to another person that is related to the purchaser and with whom the vendor deals at arm’s length (determined without reference to paragraph 251(5)(b)),
(c) where subparagraph (a)(ii) applies, the restrictive covenant is an undertaking of the vendor not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the eligible individual (or by an eligible corporation of the eligible individual) in the course of carrying on the business to which the restrictive covenant relates, and
(i) either
(A) the amount that can reasonably be regarded as being consideration for the restrictive covenant is
(I) included by the vendor in computing a goodwill amount of the vendor, or
(II) received or receivable by a corporation that was an eligible corporation of the vendor when the restrictive covenant was granted and included by the eligible corporation in computing a goodwill amount of the eligible corporation in respect of the business to which the restrictive covenant relates, or
(B) it is reasonable to conclude that the restrictive covenant is integral to an agreement in writing
(I) under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II)) to the eligible individual, or eligible individual’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or
(II) under which shares of the capital stock of the vendor’s eligible corporation (in this subsection and subsection (12) referred to as the “family corporation”) are disposed of to the eligible individual or the eligible individual’s eligible corporation,
(ii) the vendor is resident in Canada at the time of the grant of the restrictive covenant and the disposition referred to in clause (i)(B), and
(iii) the vendor does not, at any time after the grant of the restrictive covenant and whether directly or indirectly in any manner whatever, have an interest, or for civil law a right, in the family corporation or in the eligible corporation of the eligible individual, as the case may be;
(d) no proceeds are received or receivable by the vendor for granting the restrictive covenant;
(e) subsection 84(3) does not apply in respect of the disposition of a share of the target corporation or family corporation, as the case may be;
(f) the restrictive covenant can reasonably be regarded to have been granted to maintain or preserve the fair market value of any of
(i) the benefit of the expenditure derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A) and for which a joint election referred to in paragraph (g) was made,
(ii) the property referred to in clause (b)(ii)(A) or subclause (c)(i)(B)(I), or
(iii) the shares referred to in clause (b)(ii)(B) or subclause (c)(i)(B)(II); and
(g) a joint election in prescribed form to apply subsection (5) to the amount referred to in subparagraph (b)(i) or clause (c)(i)(A), if otherwise applicable, is made by
(i) in the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, or
(ii) in the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual’s eligible corporation if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be.
Marginal note:Application of subsection (7) and section 69 — special rules
(8) For the purpose
(a) of applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) apply to a grant of a restrictive covenant only if
(i) the consideration that can reasonably be regarded as being in part the consideration for the restrictive covenant is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property, and
(ii) if all or a part of the consideration can reasonably be regarded as being for a goodwill amount, subsection (2), paragraph (3)(b), subparagraph (7)(b)(i) or clause (7)(c)(i)(A) applies to that consideration; and
(b) of determining if the conditions described in paragraph (7)(c) have been met, and for the purpose of applying section 69, in respect of a restrictive covenant granted by a vendor, the fair market value of a property is the amount that can reasonably be regarded as being the fair market value of the property if the restrictive covenant were part of the property.
Marginal note:Anti-avoidance rule — non-application of paragraph (3)(c)
(9) Paragraph (3)(c) does not apply to an amount that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property under paragraph 3(a).
Marginal note:Anti-avoidance — non-application of subsection (7)
(10) Subsection (7) does not apply in respect of a taxpayer’s grant of a restrictive covenant if one of the results of not applying section 68 to the consideration received or receivable in respect of the taxpayer’s grant of the restrictive covenant would be that paragraph 3(a) would not apply to consideration that would, if this Act were read without reference to subsections (2) to (14), be included in computing a taxpayer’s income from a source that is an office or employment or a business or property.
Marginal note:Clarification if subsection (2) applies — where another person receives the amount
(11) For greater certainty, if subsection (2) applies to include in computing a taxpayer’s income an amount received or receivable by another taxpayer, that amount is not to be included in computing the income of that other taxpayer.
Marginal note:Clarification if subsection (5) applies
(12) For greater certainty, if subsection (5) applies in respect of a restrictive covenant,
(a) the amount referred to in paragraph (6)(f) is to be added in computing the amount received or receivable by the vendors as consideration for the disposition of the interest or right referred to in paragraph (6)(b); and
(b) the amount that can reasonably be regarded as being in part consideration received or receivable for a restrictive covenant to which clause (7)(b)(ii)(B) or subclause (7)(c)(i)(B)(II) applies is to be added in computing the consideration that is received or receivable by each taxpayer who disposes of shares of the target corporation, or shares of the family corporation, as the case may be, to the extent of the portion of the consideration that is received or receivable by that taxpayer.
Marginal note:Filing of prescribed form
(13) For the purpose of paragraphs (3)(b) and (c) and subsection (7), an election in prescribed form filed under any of those provisions is to include a copy of the restrictive covenant and be filed
(a) if the person who granted the restrictive covenant was a person resident in Canada when the restrictive covenant was granted, by the person with the Minister on or before the person’s filing-due date for the taxation year that includes the day on which the restrictive covenant was granted; and
(b) in any other case, with the Minister on or before the day that is six months after the day on which the restrictive covenant is granted.
Marginal note:Non-application of section 42
(14) Section 42 does not apply to an amount received or receivable as consideration for a restrictive covenant.
(2) Subject to subsections (3) to (6), subsection (1) applies to
(a) amounts received or receivable by a taxpayer after October 7, 2003 other than to amounts received by the taxpayer before 2005 under a grant of a restrictive covenant made in writing on or before October 7, 2003 between the taxpayer and a purchaser with whom the taxpayer deals at arm’s length; and
(b) amounts paid or payable by a purchaser after October 7, 2003 other than to amounts paid or payable by the purchaser before 2005 under a grant of a restrictive covenant made in writing on or before October 7, 2003 between the purchaser and a taxpayer with whom the purchaser deals at arm’s length.
(3) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer before November 9, 2006,
(a) paragraph (b) of the definition “restrictive covenant” in subsection 56.4(1) of the Act, as enacted by subsection (1), is to be read as follows:
(b) that is in satisfaction of an obligation described in section 49.1 that is not a disposition.
(b) paragraph 56.4(3)(c) of the Act, as enacted by subsection (1), applies as enacted unless the taxpayer elects, no later than 180 days after the day on which this Act receives royal assent, by filing with the Minister of National Revenue an election in writing, that this paragraph apply, in which case paragraph 56.4(3)(c) of the Act, as enacted by subsection (1), is to be read in respect of the restrictive covenant as follows:
(c) the amount directly relates to the particular taxpayer’s disposition of property that is, at the time of the disposition, an eligible interest in the partnership or corporation that carries on the business to which the restrictive covenant relates, or that is at that time an eligible interest by virtue of paragraph (c) of the definition “eligible interest” in subsection (1) where the other corporation referred to in that paragraph carries on the business to which the restrictive covenant relates, and
(i) the disposition is to the purchaser (or to a person related to the purchaser),
(ii) the amount is consideration for an undertaking by the particular taxpayer not to provide, directly or indirectly, property or services in competition with the property or services provided or to be provided by the purchaser (or by a person related to the purchaser),
(iii) the amount does not exceed the amount determined by the formula
A – B
where
- A
- is the amount that would be the fair market value of the particular taxpayer’s eligible interest that is disposed of if all restrictive covenants that may reasonably be considered to relate to a disposition of an interest, or for civil law purposes a right, in the business by any taxpayer were provided for no consideration, and
- B
- is the amount that would be the fair market value of the particular taxpayer’s eligible interest that is disposed of if no covenant were granted by any taxpayer that held an interest, or for civil law purposes a right, in the business,
(iv) if the restrictive covenant is granted on or after July 18, 2005, subsection 84(3) does not apply to the disposition,
(v) the amount is added to the particular taxpayer’s proceeds of disposition, as defined by section 54, for the purpose of applying this Act to the disposition of the particular taxpayer’s eligible interest, and
(vi) the particular taxpayer and the purchaser elect in prescribed form to apply this paragraph in respect of the amount.
(c) section 56.4 of the Act, as enacted by subsection (1), is to be read without reference to subsections (9) and (10).
(4) For the purpose of applying subsection (1) to a restrictive covenant, an election referred to in subsection 56.4(13) of the Act, as enacted by subsection (1), is deemed to be filed on a timely basis if it is filed on or before the later of the day that it is otherwise required to be filed and the day that is 180 days after the day on which this Act receives royal assent.
(5) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer on or before July 16, 2010,
(a) paragraph 56.4(7)(d) of the Act, as enacted by subsection (1), is to be read as follows:
(d) for the purpose of applying subparagraph (7)(b)(i) and paragraph (7)(c), no proceeds are received or receivable by the vendor for granting the restrictive covenant; and
(b) paragraph 56.4(8)(a) of the Act, as enacted by subsection (1), is to be read as follows:
(a) of applying subsection (7), clause (7)(b)(ii)(A) and subclause (7)(c)(i)(B)(I) do not apply to a grant of a restrictive covenant unless the consideration, that can reasonably be regarded as being in part the consideration for the restrictive covenant, is received or receivable by the vendor or the vendor’s eligible corporation, as the case may be, as consideration for the disposition of the property;
(6) For the purpose of applying subsection (1) to a restrictive covenant granted by a taxpayer on or before October 24, 2012,
(a) subparagraph 56.4(7)(f)(i) of the Act, as enacted by subsection (1), is to be read as follows:
(i) the benefit of the expenditure made by the taxpayer derived from the goodwill amount referred to in subparagraph (b)(i) or clause (c)(i)(A),
(b) subsection 56.4(7) of the Act, as enacted by subsection (1), is to be read without reference to paragraph (g).
196. (1) Section 60 of the Act is amended by adding the following after paragraph (e):
Marginal note:Restrictive covenant — bad debt
(f) all debts owing to a taxpayer that are established by the taxpayer to have become bad debts in the taxation year and that are in respect of an amount included because of the operation of subsection 6(3.1) or 56.4(2) in computing the taxpayer’s income in a preceding taxation year;
Marginal note:Quebec parental insurance plan — self-employed premiums
(g) the amount determined by the formula
A – B
where
- A
- is the total of all amounts each of which is an amount payable by the taxpayer in respect of self-employed earnings for the taxation year as a premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, and
- B
- is the total of all amounts each of which is an amount that would be payable by the taxpayer as an employee’s premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, if those earnings were employment income of the taxpayer for the taxation year;
(2) Clause 60(l)(ii)(B) of the Act is replaced by the following:
(B) under which the taxpayer is the annuitant for a term not exceeding 18 years minus the age in whole years of the taxpayer at the time the annuity was acquired
(3) Paragraph 60(n) of the Act is amended by striking out “and” at the end of subparagraph (v) and by adding the following after subparagraph (v):
(v.1) a benefit described in subparagraph 56(1)(a)(vii), and
(4) Section 60 of the Act is amended by adding the following after paragraph (n):
Marginal note:Repayment of pension benefits
(n.1) an amount paid by the taxpayer in the year to a registered pension plan if
(i) the taxpayer is an individual,
(ii) the amount is paid as
(A) a repayment of an amount received from the plan that was included in computing the taxpayer’s income for the year or a preceding year, if
(I) it is reasonable to consider that the amount was paid under the plan as a consequence of an error and not as an entitlement to benefits, or
(II) it was subsequently determined that, as a consequence of a settlement of a dispute in respect of the taxpayer’s employment, the taxpayer was not entitled to the amount, or
(B) interest in respect of a repayment described in clause (A), and
(iii) no portion of the amount is deductible under paragraph 8(1)(m) in computing the taxpayer’s income for the year;
(5) Paragraph 60(p) of the Act is replaced by the following:
Marginal note:Repayment of apprenticeship grants
(p) the total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program or the Apprenticeship Completion Grant program of an amount that was included under paragraph 56(1)(n.1) in computing the taxpayer’s income for the taxation year or a preceding taxation year;
(6) Paragraph 60(f) of the Act, as enacted by subsection (1), is deemed to have come into force on October 8, 2003.
(7) Paragraph 60(g) of the Act, as enacted by subsection (1), and subsection (3) apply to the 2006 and subsequent taxation years.
(8) Subsection (2) is deemed to have come into force on January 1, 1989.
(9) Subsection (4) applies to the 2009 and subsequent taxation years.
(10) Subsection (5) applies to 2009 and subsequent years.
197. (1) The Act is amended by adding the following after section 60.01:
Meaning of “lifetime benefit trust”
60.011 (1) For the purpose of subsection (2), a trust is at any particular time a lifetime benefit trust with respect to a taxpayer and the estate of a deceased individual if
(a) immediately before the death of the deceased individual, the taxpayer
(i) was both a spouse or common-law partner of the deceased individual and mentally infirm, or
(ii) was both a child or grandchild of the deceased individual and dependent on the deceased individual for support because of mental infirmity; and
(b) the trust is, at the particular time, a personal trust under which
(i) no person other than the taxpayer may receive or otherwise obtain the use of, during the taxpayer’s lifetime, any of the income or capital of the trust, and
(ii) the trustees
(A) are empowered to pay amounts from the trust to the taxpayer, and
(B) are required — in determining whether to pay, or not to pay, an amount to the taxpayer — to consider the needs of the taxpayer including, without limiting the generality of the foregoing, the comfort, care and maintenance of the taxpayer.
Meaning of “qualifying trust annuity”
(2) Each of the following is a qualifying trust annuity with respect to a taxpayer:
(a) an annuity that meets the following conditions:
(i) it is acquired after 2005,
(ii) the annuitant under it is a trust that is, at the time the annuity is acquired, a lifetime benefit trust with respect to the taxpayer and the estate of a deceased individual,
(iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired, and
(iv) if it is with a guaranteed period or for a fixed term, it requires that, in the event of the death of the taxpayer during the guaranteed period or fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment;
(b) an annuity that meets the following conditions:
(i) it is acquired after 1988,
(ii) the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity,
(iii) it is for a fixed term not exceeding 18 years minus the age in whole years of the taxpayer at the time it is acquired, and
(iv) if it is acquired after 2005, it requires that, in the event of the death of the taxpayer during the fixed term, any amounts that would otherwise be payable after the death of the taxpayer be commuted into a single payment; and
(c) an annuity that meets the following conditions:
(i) it is acquired
(A) after 2000 and before 2005 at a time at which the taxpayer was mentally or physically infirm, or
(B) in 2005 at a time at which the taxpayer was mentally infirm,
(ii) the annuitant under it is a trust under which the taxpayer is the sole person beneficially interested (determined without regard to any right of a person to receive an amount from the trust only on or after the death of the taxpayer) in amounts payable under the annuity, and
(iii) it is for the life of the taxpayer (with or without a guaranteed period), or for a fixed term equal to 90 years minus the age in whole years of the taxpayer at the time it is acquired.
Application of paragraph 60(l) to “qualifying trust annuity”
(3) For the purpose of paragraph 60(l),
(a) in determining if a qualifying trust annuity with respect to a taxpayer is an annuity described in subparagraph 60(l)(ii), clauses 60(l)(ii)(A) and (B) are to be read without regard to their requirement that the taxpayer be the annuitant under the annuity; and
(b) if an amount paid to acquire a qualifying trust annuity with respect to a taxpayer would, if this Act were read without reference to this subsection, not be considered to have been paid by or on behalf of the taxpayer, the amount is deemed to have been paid on behalf of the taxpayer where
(i) it is paid
(A) by the estate of a deceased individual who was, immediately before death,
(I) a spouse or common-law partner of the taxpayer, or
(II) a parent or grandparent of the taxpayer on whom the taxpayer was dependent for support, or
(B) by the trust that is the annuitant under the qualifying trust annuity, and
(ii) it would, if it had been paid by the taxpayer, be deductible under paragraph 60(l) in computing the taxpayer’s income for a taxation year and the taxpayer elects, in the taxpayer’s return of income under this Part for that taxation year, to have this paragraph apply to the amount.
(2) Subsection (1) is deemed to have come into force on January 1, 1989 and, for the purpose of applying subparagraph 60.011(3)(b)(ii) of the Act, as enacted by subsection (1), to a taxation year that ends before 2005, a taxpayer is deemed to have made the election referred to in that subparagraph in respect of an amount paid to acquire a qualifying trust annuity if the taxpayer claimed, in their return of income for that taxation year, an amount as a deduction under paragraph 60(l) of the Act in respect of the amount paid to acquire the qualifying trust annuity.
198. (1) The portion of clause (i)(B) of the description of C in paragraph 63(2)(b) of the Act before subclause (I) is replaced by the following:
(B) a person certified in writing by a medical doctor to be a person who
(2) Subsection (1) applies to certifications made after December 20, 2002.
199. (1) The portion of subsection 66(12.6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Canadian exploration expenses to flow-through shareholder
(12.6) If a person gave consideration under an agreement to a corporation for the issue of a flow-through share of the corporation and, in the period that begins on the day on which the agreement was made and ends 24 months after the end of the month that includes that day, the corporation incurred Canadian exploration expenses (other than an expense deemed by subsection 66.1(9) to be a Canadian exploration expense of the corporation), the corporation may, after it complies with subsection (12.68) in respect of the share and before March of the first calendar year that begins after the period, renounce, effective on the day on which the renunciation is made or on an earlier day set out in the form prescribed for the purpose of subsection (12.7), to the person in respect of the share the amount, if any, by which the portion of those expenses that was incurred on or before the effective date of the renunciation (which portion is in this subsection referred to as the “specified expenses”) exceeds the total of
(2) The portion of subsection 66(12.63) of the Act before paragraph (a) is replaced by the following:
Marginal note:Effect of renunciation
(12.63) Subject to subsections (12.69) to (12.702), if under subsection (12.62) a corporation renounces an amount to a person,
(3) The portion of subsection 66(12.66) of the French version of the Act before paragraph (b) is replaced by the following:
Marginal note:Frais engagés dans l’année suivante
(12.66) Pour l’application du paragraphe (12.6) et pour l’application du paragraphe (12.601) et de l’alinéa (12.602)b), la société qui émet une action accréditive à une personne conformément à une convention est réputée avoir engagé des frais d’exploration au Canada ou des frais d’aménagement au Canada le dernier jour de l’année civile précédant une année civile donnée si les conditions ci-après sont réunies :
a) la société engage les frais au cours de l’année donnée;
a.1) la convention a été conclue au cours de l’année précédente;
(4) Subparagraph 66(12.66)(b)(iii) of the French version of the Act is replaced by the following:
(iii) seraient des dépenses visées à l’alinéa f) de la définition de frais d’aménagement au Canada au paragraphe 66.2(5) si le passage « à l’un des alinéas a) à e) » était remplacé par « aux alinéas a) ou b) »;
(5) The portion of subsection 66(12.66) of the English version of the Act after paragraph (e) is replaced by the following:
the corporation is, for the purpose of subsection (12.6), or of subsection (12.601) and paragraph (12.602)(b), as the case may be, deemed to have incurred the expenses on the last day of that preceding year.
(6) The definition “flow-through share” in subsection 66(15) of the Act is replaced by the following:
“flow-through share”
« action accréditive »
“flow-through share” means a share (other than a prescribed share) of the capital stock of a principal-business corporation, or a right (other than a prescribed right) to acquire a share of the capital stock of a principal-business corporation, issued to a person under an agreement in writing made between the person and the corporation under which the corporation, for consideration that does not include property to be exchanged or transferred by the person under the agreement in circumstances to which any of sections 51, 85, 85.1, 86 and 87 applies, agrees
(a) to incur, in the period that begins on the day on which the agreement was made and ends 24 months after the month that includes that day, Canadian exploration expenses or Canadian development expenses in an amount not less than the consideration for which the share or right is to be issued, and
(b) to renounce, in prescribed form and before March of the first calendar year that begins after that period, to the person in respect of the share or right, an amount in respect of the Canadian exploration expenses or Canadian development expenses so incurred by it not exceeding the consideration received by the corporation for the share or right;
(7) Subsection 66(18) of the Act is replaced by the following:
Marginal note:Members of partnerships
(18) For the purposes of this section, subsection 21(2), sections 59.1 and 66.1 to 66.7, paragraph (d) of the definition “investment expense” in subsection 110.6(1), the definition “pre-production mining expenditure” in subsection 127(9) and the descriptions of C and D in subsection 211.91(1), where a person’s share of an outlay or expense made or incurred by a partnership in a fiscal period of the partnership is included in respect of the person under paragraph (d) of the definition “foreign exploration and development expenses” in subsection (15), paragraph (h) of the definition “Canadian exploration expense” in subsection 66.1(6), paragraph (f) of the definition “Canadian development expense” in subsection 66.2(5), paragraph (e) of the definition “foreign resource expense” in subsection 66.21(1) or paragraph (b) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), the portion of the outlay or expense so included is deemed, except for the purposes of applying the definitions “foreign exploration and development expenses”, “Canadian exploration expense”, “Canadian development expense”, “foreign resource expense” and “Canadian oil and gas property expense” in respect of the person, to be made or incurred by the person at the end of that fiscal period.
(8) Subsections (1) and (2) apply to renunciations made after December 20, 2002.
(9) Subsection (3) applies to expenses incurred after 1996, except that
(a) subsection (3) does not apply to expenses incurred in January or February 1997 in respect of an agreement that was made in 1995; and
(b) for the purpose of applying paragraph 66(12.66)(a.1) of the French version of the Act, as enacted by subsection (3), to expenses incurred in 1998, any agreement made in 1996 is deemed to have been made in 1997.
(10) Subsection (6) applies to agreements made after December 20, 2002.
(11) Subsection (7) applies to expenses incurred in fiscal periods that begin after 2001.
200. (1) The description of B in the definition “cumulative Canadian exploration expense” in subsection 66.1(6) of the Act is replaced by the following:
- B
- is the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(b) for the taxpayer’s taxation years ending before that time,
(2) Section 66.1 of the Act is amended by adding the following after subsection (6.1):
Marginal note:Deductible expense
(6.2) An expense of a taxpayer that is not included in paragraph (f) or (g) of the definition “Canadian exploration expense” in subsection (6) because the taxpayer earned revenue from a mine in a mineral resource is deemed, for the purposes of this Part, not to be an outlay or payment described in paragraph 18(1)(b).
(3) Subsection (1) applies to taxation years that end after November 5, 2010.
(4) Subsection (2) applies in respect of expenses incurred after November 5, 2010.
201. (1) Paragraph (e) of the definition “Canadian development expense” in subsection 66.2(5) of the Act is replaced by the following:
(e) the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (b), (e) or (f) of the definition “Canadian resource property” in subsection 66(15), or any right to or interest in — or for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership),
(2) The description of B in the definition “cumulative Canadian development expense” in subsection 66.2(5) of the Act is replaced by the following:
- B
- is the total of all amounts that were, because of subsection (1), included in computing the amount referred to in paragraph 59(3.2)(c) for taxation years ending before that time,
(3) Subsection (1) applies to taxation years that begin after 2006, except that in its application to taxation years that begin in 2007, paragraph (e) of the definition “Canadian development expense” in subsection 66.2(5) of the Act, as enacted by subsection (1), is to be read as follows:
(e) notwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (b), (e) or (f) of the definition “Canadian resource property” in subsection 66(15), or any right to or interest in — or for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), but not including any payment made to any of the persons referred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer’s right in respect of a Canadian resource property, nor a payment to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),
(4) Subsection (2) applies to taxation years that end after November 5, 2010.
202. (1) The formula in the definition “cumulative foreign resource expense” in subsection 66.21(1) of the Act is replaced by the following:
(A + A.1 + B + C + D) – (E + F + G + H + I + J)
(2) The definition “cumulative foreign resource expense” in subsection 66.21(1) of the Act is amended by adding the following after the description of A:
- A.1
- is the total of all foreign resource expenses, in respect of that country, that is the cost to the taxpayer of any of the taxpayer’s foreign resource property in respect of that country that is deemed to have been acquired by the taxpayer under paragraph 128.1(1)(c) at the last time (before the particular time) that the taxpayer became resident in Canada;
(3) The description of B in the definition “cumulative foreign resource expense” in subsection 66.21(1) of the Act is replaced by the following:
- B
- is the total of all amounts included in computing the amount referred to in paragraph 59(3.2)(c.1) in respect of that country, for taxation years that ended before the particular time and at a resident time;
(4) Subsections (1) and (2) are deemed to have come into force on January 1, 2005.
(5) Subsection (3) applies to taxation years that end after November 5, 2010.
203. (1) Paragraph (a) of the definition “Canadian oil and gas property expense” in subsection 66.4(5) of the Act is replaced by the following:
(a) the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (a), (c) or (d) of the definition “Canadian resource property” in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease,
(2) Subsection (1) applies to taxation years that begin after 2006, except that in its application to the taxation years that begin in 2007, paragraph (a) of the definition “Canadian oil and gas property expense” in subsection 66.4(5) of the Act, as enacted by subsection (1), is to be read as follows:
(a) notwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer’s rights in respect of, any property described in paragraph (a), (c) or (d) of the definition “Canadian resource property” in subsection 66(15) or any right to or interest in — or, for civil law, any right in or to — the property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid or payable to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease, but not including any payment made to any of the persons referred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer’s right in respect of a Canadian resource property, nor a payment (other than a net royalty payment referred to in this paragraph) to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),
204. (1) Section 66.7 of the Act is amended by adding the following after subsection (10):
Marginal note:Amalgamation — partnership property
(10.1) For the purposes of subsections (1) to (5) and the definition “original owner” in subsection 66(15), if at any particular time there has been an amalgamation within the meaning assigned by subsection 87(1), other than an amalgamation to which subsection 87(1.2) applies, of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”) to form one corporate entity (referred to in this subsection as the “new corporation”) and immediately before the particular time a predecessor corporation was a member of a partnership that owned a Canadian resource property or a foreign resource property,
(a) the predecessor corporation is deemed
(i) to have owned, immediately before the particular time, that portion of each Canadian resource property and of each foreign resource property owned by the partnership at the particular time that is equal to the predecessor corporation’s percentage share of the total of the amounts that would be paid to all members of the partnership if the partnership were wound up immediately before the particular time, and
(ii) to have disposed of those portions to the new corporation at the particular time;
(b) the new corporation is deemed to have, by way of the amalgamation, acquired those portions at the particular time; and
(c) the income of the new corporation for a taxation year that ends after the particular time that can reasonably be attributable to production from those properties is deemed to be the lesser of
(i) the new corporation’s share of the part of the income of the partnership for fiscal periods of the partnership that end in the year that can reasonably be regarded as being attributable to production from those properties, and
(ii) the amount that would be determined under subparagraph (i) for the year if the new corporation’s share of the income of the partnership for the fiscal periods of the partnership that end in the year were determined on the basis of the percentage share referred to in paragraph (a).
(2) Subsection 66.7(16) of the Act is replaced by the following:
Marginal note:Non-successor acquisitions
(16) If at any time a Canadian resource property or a foreign resource property is acquired by a person in circumstances in which none of subsections (1) to (5), nor subsection 29(25) of the Income Tax Application Rules, apply, every person who was an original owner or predecessor owner of the property before that time is, for the purpose of applying those subsections to or in respect of the person or any other person who after that time acquires the property, deemed after that time not to be an original owner or predecessor owner of the property before that time.
(3) Subsection (1) applies to amalgamations that occur after 1996.
(4) Subsection (2) applies to property acquired after November 5, 2010.
205. (1) Paragraph 66.8(3)(a) of the Act is replaced by the following:
(a) the expression “limited partner” of a partnership has the meaning that would be assigned by subsection 96(2.4), if in subsection 96(2.5) each reference to
(i) “February 25, 1986” were a reference to “June 17, 1987”,
(ii) “February 26, 1986” were a reference to “June 18, 1987”,
(iii) “January 1, 1987” were a reference to “January 1, 1988”,
(iv) “June 12, 1986” were a reference to “June 18, 1987”, and
(v) “prospectus, preliminary prospectus or registration statement” were a reference to “prospectus, preliminary prospectus, registration statement, offering memorandum or notice that is required to be filed before any distribution of securities may commence”;
(a.1) the expression “at-risk amount” of a taxpayer in respect of a partnership has the meaning that would be assigned by subsection 96(2.2) if paragraph 96(2.2)(c) read as follows:
(c) all amounts each of which is an amount owing at that time to the partnership, or to a person or partnership not dealing at arm’s length with the partnership, by the taxpayer or by a person or partnership not dealing at arm’s length with the taxpayer, other than any amount deducted under subparagraph 53(2)(c)(i.3) in computing the adjusted cost base, or under section 143.2 in computing the cost, to the taxpayer of the taxpayer’s partnership interest at that time, or any amount owing by the taxpayer to a person in respect of which the taxpayer is a subsidiary wholly-owned corporation or where the taxpayer is a trust, to a person that is the sole beneficiary of the taxpayer, and;
(2) Subsection (1) applies to fiscal periods that end after 2003.
206. (1) The portion of subsection 67.1(1.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Meal expenses for long-haul truck drivers
(1.1) An amount paid or payable in respect of the consumption of food or beverages by a long-haul truck driver during an eligible travel period of the driver is deemed to be the amount determined by multiplying the specified percentage in respect of the amount so paid or payable by the lesser of
(2) Subsection (1) applies to amounts that are paid, or become payable, after March 18, 2007.
207. (1) The portion of section 68 of the Act before paragraph (a) is replaced by the following:
Marginal note:Allocation of amounts in consideration for property, services or restrictive covenants
68. If an amount received or receivable from a person can reasonably be regarded as being in part the consideration for the disposition of a particular property of a taxpayer, for the provision of particular services by a taxpayer or for a restrictive covenant as defined by subsection 56.4(1) granted by a taxpayer,
(2) Section 68 of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) the part of the amount that can reasonably be regarded as being consideration for the restrictive covenant is deemed to be an amount received or receivable by the taxpayer in respect of the restrictive covenant irrespective of the form or legal effect of the contract or agreement, and that part is deemed to be an amount paid or payable to the taxpayer by the person to whom the restrictive covenant was granted.
(3) Subsections (1) and (2) are deemed to have come into force on February 27, 2004, except that those subsections do not apply to a taxpayer’s grant of a restrictive covenant made in writing by the taxpayer before February 27, 2004 between the taxpayer and a person with whom the taxpayer deals at arm’s length.
208. (1) Paragraph 69(1)(b) of the English version of the Act is amended by striking out “and” at the end of subparagraph (iii).
(2) Subsection (1) applies to dispositions that occur after December 23, 1998.
209. (1) The portion of subsection 70(3) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Droits ou biens transférés aux bénéficiaires
(3) Si, avant l’expiration du délai accordé pour le choix prévu au paragraphe (2), un droit ou un bien auquel ce paragraphe s’appliquerait par ailleurs a été transféré ou distribué aux bénéficiaires ou à d’autres personnes ayant un droit de bénéficiaire sur la succession ou la fiducie, les règles ci-après s’appliquent :
(2) Subsection 70(5.2) of the Act is replaced by the following:
Marginal note:Resource property and land inventory
(5.2) If in a taxation year a taxpayer dies,
(a) the taxpayer is deemed
(i) to have disposed, at the time that is immediately before the taxpayer’s death, of each
(A) Canadian resource property of the taxpayer,
(B) foreign resource property of the taxpayer, and
(C) property that was land included in the inventory of a business of the taxpayer, and
(ii) subject to paragraph (c), to have received at that time proceeds of disposition for each such property equal to its fair market value at that time;
(b) any person who, as a consequence of the taxpayer’s death, acquires a property that is deemed by paragraph (a) to have been disposed of by the taxpayer is, subject to paragraph (c), deemed to have acquired the property at the time of the death at a cost equal to its fair market value at the time that is immediately before the death; and
(c) where the taxpayer was resident in Canada at the time that is immediately before the taxpayer’s death, a particular property described in clause (a)(i)(A), (B) or (C) is, on or after the death and as a consequence of the death, transferred or distributed to a spouse or common-law partner of the taxpayer described in paragraph (6)(a) or a trust described in paragraph (6)(b), and it can be shown within the period that ends 36 months after the death (or, where written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances) that the particular property has, within that period, vested indefeasibly in the spouse, common-law partner or trust, as the case may be,
(i) the taxpayer is deemed to have received, at the time that is immediately before the taxpayer’s death, proceeds of disposition of the particular property equal to
(A) if the particular property is Canadian resource property of the taxpayer or foreign resource property of the taxpayer, the amount specified by the taxpayer’s legal representative in the taxpayer’s return of income filed under paragraph 150(1)(b), not exceeding its fair market value at that time, and
(B) if the particular property was land included in the inventory of a business of the taxpayer, its cost amount to the taxpayer at that time, and
(ii) the spouse, common-law partner or trust, as the case may be, is deemed to have acquired at the time of the death the particular property at a cost equal to the amount determined under subparagraph (i) in respect of the disposition of it under paragraph (a).
(3) The portion of subsection 70(6) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Transfert ou distribution de biens à l’époux ou au conjoint de fait ou à une fiducie à leur profit
(6) Lorsqu’un bien d’un contribuable qui résidait au Canada immédiatement avant son décès est un bien auquel le paragraphe (5) s’appliquerait par ailleurs et qu’il est, par suite du décès du contribuable, transféré ou distribué :
(4) The portion of subsection 70(6.1) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Transfert ou distribution du compte de stabilisation du revenu net à l’époux ou au conjoint de fait ou à une fiducie
(6.1) Lorsqu’un bien qui est un compte de stabilisation du revenu net d’un contribuable est transféré ou distribué à l’une des personnes ci-après au moment du décès du contribuable ou postérieurement et par suite de ce décès, les paragraphes (5.4) et 73(5) ne s’appliquent pas au second fonds du compte de stabilisation du revenu net du contribuable :
(5) The portion of paragraph 70(7)(b) of the French version of the Act before subparagraph (i) is replaced by the following:
b) le représentant légal du contribuable peut, dans la déclaration de revenu du contribuable (sauf celle produite en vertu des paragraphes (2) ou 104(23), de l’alinéa 128(2)e) ou du paragraphe 150(4)) dans laquelle il énumère un ou plusieurs biens, sauf un compte de stabilisation du revenu net, qui ont été transférés ou distribués à la fiducie au moment du décès du contribuable ou postérieurement et par suite de ce décès et dont la juste valeur marchande globale immédiatement après ce décès est au moins égale au total des dettes non admissibles du contribuable, faire un choix pour que, à la fois :
(6) Subsection (2) applies to taxation years that begin after 2006.
210. The portion of subsection 72(2) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Choix par les représentants légaux et le bénéficiaire du transfert concernant les provisions
(2) Lorsqu’un bien d’un contribuable qui représente le droit de recevoir une somme a été, au moment du décès du contribuable ou postérieurement et par suite de ce décès, transféré ou distribué à son époux ou conjoint de fait visé à l’alinéa 70(6)a) ou à une fiducie visée à l’alinéa 70(6)b) (appelés « bénéficiaire du transfert » au présent paragraphe), que le contribuable résidait au Canada immédiatement avant son décès et que le représentant légal du contribuable et le bénéficiaire du transfert ont fait, à l’égard du bien, un choix conjoint selon le formulaire prescrit, les règles ci-après s’appliquent :
211. (1) Subsection 73(2) of the Act is replaced by the following:
Marginal note:Capital cost and amount deemed allowed to spouse, etc., or trust
(2) If a transferee is deemed by subsection (1) to have acquired any particular depreciable property of a prescribed class of a taxpayer for an amount determined under paragraph (1)(b) and the capital cost to the taxpayer of the particular property exceeds the amount determined under that paragraph, in applying sections 13 and 20 and any regulations made under paragraph 20(1)(a)
(a) the capital cost to the transferee of the particular property is deemed to be the amount that was the capital cost to the taxpayer of the particular property; and
(b) the excess is deemed to have been allowed to the transferee in respect of the particular property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition of the particular property.
(2) Paragraph 73(3)(a) of the Act is replaced by the following:
(a) the property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a fishing or farming business carried on in Canada by the taxpayer;
(3) Subsection (1) applies to transfers that occur after 1999.
(4) Subsection (2) applies to dispositions of property that occur after May 1, 2006, other than a disposition in respect of which a taxpayer has made an election under subsection 11(5) of the Budget Implementation Act, 2006, No. 2.
212. (1) Paragraph 75(3)(b) of the Act is replaced by the following:
(b) by an employee life and health trust, an employee trust, a private foundation that is a registered charity, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described by paragraph (a.1) of the definition “trust” in subsection 108(1), or a trust described by paragraph 149(1)(y);
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
213. (1) The Act is amended by adding the following after section 75.1:
Marginal note:Rules applicable with respect to “qualifying trust annuity”
75.2 If an amount paid to acquire a qualifying trust annuity with respect to a taxpayer was deductible under paragraph 60(l) in computing the taxpayer’s income,
(a) any amount that is paid out of or under the annuity at any particular time after 2005 and before the death of the taxpayer is deemed to have been received out of or under the annuity at the particular time by the taxpayer, and not to have been received by any other taxpayer; and
(b) if the taxpayer dies after 2005
(i) an amount equal to the fair market value of the annuity at the time of the taxpayer’s death is deemed to have been received, immediately before the taxpayer’s death, by the taxpayer out of or under the annuity, and
(ii) for the purpose of subsection 70(5), the annuity is to be disregarded in determining the fair market value (immediately before the taxpayer’s death) of the taxpayer’s interest in the trust that is the annuitant under the annuity.
(2) Subsection (1) is deemed to have come into force on January 1, 2006.
214. (1) Subparagraph 80.04(6)(a)(ii) of the Act is replaced by the following:
(ii) on or before the later of
(A) the expiry of the 90-day period commencing on the day of mailing of an assessment of tax payable under this Part or a notification that no tax is payable under this Part, as the case may be, for a taxation year or fiscal period described in clause (i)(A) or (B), as the case may be, and
(B) if the debtor is an individual (other than a trust) or a testamentary trust, the day that is one year after the taxpayer’s filing-due date for the year;
(2) Subsection (1) applies for taxation years that end after February 21, 1994.
215. (1) The Act is amended by adding the following after section 80.1:
Marginal note:Application
80.2 (1) Subsections (2) to (13) apply if
(a) in a taxation year, a taxpayer, under the terms of a contract, pays to a person (referred to in this section as the “recipient”) an amount (referred to in this section as the “specified amount”) that may reasonably be considered to be received by the recipient as a reimbursement of, or a contribution or an allowance in respect of, an amount (referred to in this section as the “original amount”)
(i) that was described by paragraph 18(1)(m) and was paid or payable by the recipient, or
(ii) that was, in respect of the recipient, an amount described by paragraph 12(1)(o);
(b) the original amount is paid or became payable or receivable in a taxation year or fiscal period of the recipient that begins before 2007; and
(c) the taxpayer is resident in Canada or carries on business in Canada when the specified amount is paid.
Marginal note:Rules relating to time of payment
(2) If the specified amount is paid in a taxation year of the taxpayer that begins before 2008, the eligible portion of the specified amount, referred to in subsection (11), is deemed to be a payment described by paragraph 18(1)(m). If, however, the specified amount is paid in a taxation year of the taxpayer that begins after 2007, the specified amount is deemed, for the purpose of applying this section to the taxpayer, to be nil.
Marginal note:Applying paragraph 18(1)(m)
(3) For the purpose of applying paragraph 18(1)(m) for the taxpayer’s taxation year in which the specified amount was paid, the amount to which that paragraph applies is to be determined for that taxation year
(a) if the taxpayer was in existence at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), as if the specified amount were paid by the taxpayer at that time; and
(b) in any other case, as if
(i) the taxpayer were in existence and had a calendar taxation year at the time the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), and
(ii) the specified amount were paid by the taxpayer at that time.
Marginal note:Exception for certain partnership reimbursements
(4) Subsection (3) does not apply to a specified amount paid by a taxpayer if
(a) the recipient is a partnership;
(b) the original amount became receivable by a person referred to in subparagraph 12(1)(o)(i) or became payable to a person referred to in subparagraph 18(1)(m)(i), in a particular fiscal period of the partnership;
(c) the taxpayer is a member of the partnership at the end of the particular fiscal period; and
(d) the taxpayer paid the specified amount before the end of the taxation year of the taxpayer in which that particular fiscal period ends.
Marginal note:Specified amount deemed to be paid at end of taxation year
(5) A specified amount paid by the taxpayer to a partnership is deemed to have been paid on the last day of a particular taxation year of the taxpayer, and not at the time it was paid, if
(a) the taxpayer paid an amount to the partnership in the particular taxation year (referred to in this subsection as the “initial payment”);
(b) the initial payment was paid before September 17, 2004;
(c) the initial payment is an amount to which subsection (3) did not apply because of subsection (4);
(d) the taxpayer’s share of the original amount in respect of the initial payment is greater than the initial payment;
(e) the specified amount is equal to or less than the difference between the taxpayer’s share of the original amount in respect of the initial payment and the initial payment;
(f) the taxpayer elects in the taxpayer’s return of income for the taxpayer’s taxation year that includes the time at which the specified amount would, if this Act were read without reference to this subsection, have been paid, to have this subsection apply to the specified amount; and
(g) the specified amount is paid before 2006.
Marginal note:Inclusion in recipient’s income
(6) The recipient shall include in computing the recipient’s income for the taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the eligible portion of the specified amount exceeds the portion of the original amount that was included in computing the income of the recipient for the taxation year or fiscal period because of paragraph 12(1)(o) or that was not deductible in computing the income of the recipient for the taxation year or fiscal period because of paragraph 18(1)(m).
Marginal note:Interpretation — portion of the original amount
(7) For the purpose of subsection (6), the portion of the original amount that was included in computing the income of the recipient or that was not deductible in computing the income of the recipient is the amount that would be included in computing the income of the recipient under paragraph 12(1)(o) or that would not be deductible in computing the income of the recipient under paragraph 18(1)(m), if the original amount were equal to the eligible portion of the specified amount.
Marginal note:Inclusion in recipient’s income
(8) The recipient shall include, in computing the recipient’s income for its taxation year or fiscal period in which the original amount was paid or became payable or receivable, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.
Marginal note:Deduction by taxpayer
(9) Subject to paragraphs 18(1)(a) and (b), the taxpayer may deduct in computing the taxpayer’s income for the taxpayer’s taxation year in which the specified amount was paid, the amount, if any, by which the specified amount exceeds the eligible portion of the specified amount.
Marginal note:Specified amount deemed not to be payable or receivable
(10) Except for the purposes of this section and subparagraph 53(1)(e)(iv.1),
(a) the taxpayer is deemed not to have paid, and not to have been obligated to pay, the specified amount; and
(b) the recipient is deemed not to have received, and not to have been entitled to receive, the specified amount.
Marginal note:Eligible portion of a specified amount
(11) The eligible portion of a specified amount is
(a) an amount equal to the specified amount if
(i) the specified amount was paid before September 17, 2004,
(ii) the original amount is a tax imposed under a provincial law on the production of
(A) petroleum, natural gas or related hydrocarbons from a natural accumulation of petroleum or natural gas (other than a mineral resource) located in Canada, or from an oil or gas well located in Canada if the petroleum, natural gas or related hydrocarbons are not, before extraction, owned by the Crown in right of Canada or a province, or
(B) metals, minerals or coal from a mineral resource located in Canada if the metals, minerals or coal are not, before extraction, owned by the Crown in right of Canada or a province,
(iii) the specified amount does not exceed the taxpayer’s share of the original amount, or
(iv) the original amount is a prescribed amount; and
(b) the taxpayer’s share of the original amount, in any other case.
Marginal note:Taxpayer’s share of original amount
(12) A taxpayer’s share of an original amount in respect of a specified amount paid by the taxpayer to a recipient in respect of a property is the amount that may reasonably be considered to be the taxpayer’s share of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property, which share may not exceed the total of
(a) that proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property that the taxpayer’s share of production from the property payable to the taxpayer as a royalty, which royalty is computed without reference to the costs of exploration or production, is of the total production from the property, and
(b) that proportion of the total of all amounts described in paragraph 12(1)(o) or 18(1)(m) in respect of the property (other than those amounts which the recipient has received or is entitled to receive as a reimbursement, contribution or allowance in respect of a royalty described in paragraph (a)) that the taxpayer’s share of the income from the property is of the total income from the property.
Marginal note:Reduction in original amount for Part XII of the regulations
(13) For the purpose of applying Part XII of the Income Tax Regulations, an original amount in respect of which a specified amount is received is deemed, for the taxation year in which the original amount was paid or became payable or receivable, not to include an amount equal to the eligible portion of the specified amount.
(2) Subsection (1) applies in respect of specified amounts paid after 2001.
(3) Where a person is liable to an amount of tax under Part I of the Act for a taxation year that exceeds the amount to which the person would be liable if section 80.2 of the Act applied as it read on December 31, 2001, the person is deemed, for the purpose of determining any interest or penalty payable by that person, to have paid the excess on that person’s balance-due day, if
(a) the person’s balance-due day for the taxation year was before September 17, 2004; and
(b) the excess was paid to the Receiver General before March 2005.
(4) Notwithstanding subsections 152(4) to (5) of the Act, all assessments, determinations, and redeterminations may be made as necessary to give effect to subsections (1) to (3).
216. (1) The portion of subsection 80.4(8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Meaning of connected
(8) For the purposes of subsection (2), a person or partnership is connected with a shareholder of a corporation if that person or partnership does not deal at arm’s length with, or is affiliated with, the shareholder, unless, in the case of a person, that person is
(2) Subsection (1) applies in respect of loans made and indebtedness arising after October 31, 2011.
217. (1) Paragraph 81(1)(g.3) of the Act is replaced by the following:
Marginal note:Certain government funded trusts
(g.3) the amount that, but for this paragraph, would be the income of the taxpayer for the year if
(i) the taxpayer is the trust established under
(A) the 1986-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada and Her Majesty in right of each of the provinces,
(B) the Pre-1986/Post-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada, or
(C) the Indian Residential Schools Settlement Agreement entered into by Her Majesty in right of Canada on May 8, 2006, and
(ii) the only contributions made to the taxpayer before the end of the year are those provided for under the relevant Agreement described in subparagraph (i);
(2) Subsection 81(1) of the Act is amended by striking out “or” at the end of paragraph (q), by adding “or” at the end of paragraph (r) and by adding the following after paragraph (r):
Marginal note:Salary deferral leave plans
(s) an amount paid to the taxpayer in the year under an arrangement described in paragraph 6801(a) of the Income Tax Regulations to the extent that the amount may reasonably be considered to be attributable to amounts that
(i) were included in the taxpayer’s income for a preceding taxation year and were income, interest or other additional amounts, described in subparagraph 6801(a)(iv) of the Income Tax Regulations, and
(ii) were re-contributed by the taxpayer under the arrangement in a preceding taxation year.
(3) Subsection (1) applies to the 2006 and subsequent taxation years, except that for the 2006 taxation year, subparagraph 81(1)(g.3)(i) of the Act, as enacted by subsection (1), is to be read as follows:
(i) the taxpayer is the trust established under
(A) the 1986-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada and Her Majesty in right of each of the provinces, or
(B) the Pre-1986/Post-1990 Hepatitis C Settlement Agreement entered into by Her Majesty in right of Canada, and
(4) Subsection (2) applies to the 2000 and subsequent taxation years.
218. (1) Clause 82(1)(a)(ii)(B) of the Act, as it read immediately before its repeal by S.C. 2007, c. 2, s. 44(1), is replaced by the following:
(B) where the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, an amount paid by the taxpayer in the year and deemed by subsection 260(5.1) to have been received by another person as a taxable dividend,
(2) The portion of subsection 82(1) of the Act before paragraph (c) is replaced by the following:
Marginal note:Taxable dividends received
82. (1) In computing the income of a taxpayer for a taxation year, there shall be included the total of the following amounts:
(a) the amount, if any, by which
(i) the total of all amounts, other than eligible dividends and amounts described in paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, taxable dividends,
exceeds
(ii) if the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, paid by the taxpayer in the taxation year and deemed by subsection 260(5.1) to have been received by another person as a taxable dividend (other than an eligible dividend);
(a.1) the amount, if any, by which
(i) the total of all amounts, other than amounts included in computing the income of the taxpayer because of paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, eligible dividends,
exceeds
(ii) if the taxpayer is an individual, the total of all amounts each of which is, or is deemed by paragraph 260(12)(b) to have been, paid by the taxpayer in the taxation year and deemed by subsection 260(5.1) to have been received by another person as an eligible dividend;
(b) if the taxpayer is an individual, other than a trust that is a registered charity, the total of
(i) 25% of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year, and
(ii) the product of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year multiplied by
(A) for taxation years that end after 2005 and before 2010, 45%,
(B) for the 2010 taxation year, 44%,
(C) for the 2011 taxation year, 41%, and
(D) for taxation years that end after 2011, 38%;
(3) Subsection 82(1.1) of the Act is replaced by the following:
Marginal note:Limitation as to paragraph (1)(c)
(1.1) An amount shall be included in the amounts described in paragraph (1)(c) in respect of a taxable dividend received at any time as part of a dividend rental arrangement only if that dividend was received on a share acquired before that time and after April, 1989.
(4) Subsection (1) applies
(a) to amounts paid in respect of arrangements made after 2001, except that, in its application to amounts paid in respect of an arrangement made before December 21, 2002, clause 82(1)(a)(ii)(B) of the Act, as enacted by subsection (1), is to be read without reference to the expression “or is deemed by paragraph 260(12)(b) to have been” unless an election referred to in paragraph 358(34)(b) has been made in respect of the arrangement; and
(b) to amounts paid in respect of arrangements made after November 2, 1998 and before 2002, if the parties to the arrangement have made the election referred to in paragraph 358(34)(b), except that in its application to those arrangements, the reference to “subsection 260(5.1)” in clause 82(1)(a)(ii)(B) of the Act, as enacted by subsection (1), is to be read as a reference to “subsection 260(5)”.
(5) Subsections (2) and (3) apply to amounts received or paid after 2005.
219. (1) Subsection 84(4.1) of the Act is replaced by the following:
Marginal note:Deemed dividend on reduction of paid-up capital
(4.1) Any amount paid by a public corporation on the reduction of the paid-up capital in respect of any class of shares of its capital stock, otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or by way of a transaction described in subsection (2) or section 86, is deemed to have been paid by the corporation and received by the person to whom it was paid, as a dividend, unless
(a) the amount may reasonably be considered to be derived from proceeds of disposition realized by the public corporation, or by a person or partnership in which the public corporation had a direct or indirect interest at the time that the proceeds were realized, from a transaction that occurred
(i) outside the ordinary course of the business of the corporation, or of the person or partnership that realized the proceeds, and
(ii) within the period that commenced 24 months before the payment; and
(b) no amount that may reasonably be considered to be derived from those proceeds was paid by the public corporation on a previous reduction of the paid-up capital in respect of any class of shares of its capital stock.
(2) Subsection 84(7) of the Act is replaced by the following:
Marginal note:When dividend payable
(7) A dividend that is deemed by this section or section 84.1, 128.1 or 212.1 to have been paid at a particular time is deemed, for the purposes of this subdivision and sections 131 and 133, to have become payable at that time.
(3) Subsection (1) applies to amounts paid after 1996, except that in respect of those amounts paid before February 27, 2004, subsection 84(4.1) of the Act, as enacted by subsection (1), is to be read as follows:
(4.1) Any amount paid by a public corporation on the reduction of the paid-up capital in respect of any class of shares of its capital stock, otherwise than by way of a redemption, acquisition or cancellation of any shares of that class or by way of a transaction described in subsection (2) or in section 86, is deemed to have been paid by the corporation and received by the person to whom it was paid, as a dividend, unless the amount may reasonably be considered to be derived from proceeds of disposition realized by the public corporation, or by a person or partnership in which the public corporation had a direct or indirect interest at the time that the proceeds were realized, from a transaction that occurred outside the ordinary course of the business of the public corporation, or of the person or partnership that realized the proceeds.
(4) Subsection (2) applies to dividends deemed to have been paid after February 23, 1998.
220. (1) Paragraph 85(1)(d.1) of the Act is replaced by the following:
(d.1) for the purpose of determining after the disposition time the amount to be included under paragraph 14(1)(b) in computing the corporation’s income, there shall be added to the amount otherwise determined for C in that paragraph the amount determined by the formula
1/2 × [(A × B/C) – 2(D – E)] + F + G
where
- A
- is the amount, if any, determined for Q in the definition “cumulative eligible capital” in subsection 14(5) in respect of the taxpayer’s business immediately before the disposition time,
- B
- is the fair market value immediately before the disposition time of the eligible capital property disposed of to the corporation by the taxpayer,
- C
- is the total of the fair market value immediately before the disposition time of all eligible capital property of the taxpayer in respect of the business and each amount that was described in B in respect of an earlier disposition made after the taxpayer’s adjustment time,
- D
- is the amount, if any, that would be included under subsection 14(1) in computing the taxpayer’s income as a result of the disposition if the values determined for C and D in paragraph 14(1)(b) were zero,
- E
- is the amount, if any, that would be included under subsection 14(1) in computing the taxpayer’s income as a result of the disposition if the value determined for D in paragraph 14(1)(b) were zero,
- F
- is the total of all amounts, each of which is an amount determined under this paragraph as it applied to the taxpayer in respect of a disposition to the corporation on or before the disposition time, and
- G
- is the total of all amounts, each of which is an amount determined under subparagraph 88(1)(c.1)(ii) as it applied to the taxpayer in respect of a winding-up before the disposition time;
(2) Subsection 85(1) of the Act is amended by adding the following after paragraph (d.1):
(d.11) for the purpose of determining after the time of the disposition (referred to in this paragraph and in paragraphs (d.1) and (d.12) as the “disposition time”) the amount to be included under paragraph 14(1)(a) or (b) in computing the corporation’s income, there shall be added to the amount otherwise determined for each of A and F in the definition “cumulative eligible capital” in subsection 14(5) the amount, if any, determined by the formula
(A × B/C) + D + E
where
- A
- is the amount, if any, that would be determined for F in that definition in respect of the taxpayer’s business at the beginning of the taxpayer’s following taxation year if the taxpayer’s taxation year that includes the disposition time had ended immediately after the disposition time and if, in respect of the disposition, this Act were read without reference to paragraph (d.12),
- B
- is the fair market value immediately before the disposition time of the eligible capital property disposed of to the corporation by the taxpayer,
- C
- is the fair market value immediately before the disposition time of all eligible capital property of the taxpayer in respect of the business and each amount that was described in B in respect of an earlier disposition made after the taxpayer’s adjustment time,
- D
- is the total of all amounts, each of which is an amount determined under this paragraph as it applied to the taxpayer in respect of a disposition to the corporation on or before the disposition time, and
- E
- is the total of all amounts, each of which is an amount determined under subparagraph 88(1)(c.1)(i) as it applied to the taxpayer in respect of a winding-up before the disposition time;
(d.12) for the purpose of determining after the disposition time the amount to be included under paragraph 14(1)(a) or (b) in computing the taxpayer’s income, the amount, if any, determined by the formula in paragraph (d.11) in respect of the disposition is to be deducted from each of the amounts otherwise determined
(i) by subparagraph 14(1)(a)(ii), and
(ii) for the description of B in paragraph 14(1)(b);
(3) Subsection (1) applies to taxation years of a corporation that end after December 20, 2002.
(4) Subsection (2) applies in respect of the disposition of an eligible capital property by a taxpayer to a corporation unless
(a) the disposition by the taxpayer occurred before December 21, 2002; and
(b) the corporation disposed of the eligible capital property, before June 7, 2007 and in a taxation year of the corporation ending after February 27, 2000, to a person with whom the corporation was dealing at arm’s length at the time of that disposition by the corporation.
221. (1) Section 85.1 of the Act is amended by adding the following after subsection (2.1):
Marginal note:Issuance deemed made to vendor
(2.2) For the purposes of subsection (1), if a purchaser issues shares of a class of its capital stock (in this subsection referred to as “purchaser shares”) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged shares that trade on a designated stock exchange to the purchaser solely for purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.
(2) Section 85.1 of the Act is amended by adding the following after subsection (6):
Marginal note:Issuance deemed made to vendor
(6.1) For the purposes of subsection (5), if a foreign purchaser issues shares of a class of its capital stock (in this subsection referred to as “foreign purchaser shares”) to a trust under a court-approved plan or scheme of arrangement in consideration for which a vendor disposes of exchanged foreign shares that trade on a designated stock exchange to the purchaser solely for foreign purchaser shares that are widely traded on a designated stock exchange immediately after and as part of completion of the plan or scheme of arrangement, the issuance to the trust is deemed to be an issuance to the vendor.
(3) The portion of subsection 85.1(7) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Application of subsection (8)
(7) Subsection (8) applies in respect of the disposition before 2013 by a taxpayer of SIFT wind-up entity equity (referred to in subsection (8) as the “particular unit”) to a taxable Canadian corporation if
(4) The portion of paragraph 85.1(8)(f) of the English version of the Act before the first formula is replaced by the following:
(f) in computing the paid-up capital in respect of each class of shares of the capital stock of the corporation at any time after the disposition there shall be deducted the amount determined by the formula
(5) Subsections (1) and (2) apply to share exchanges made after June 2005 except that those subsections do not apply to a particular share exchange of a taxpayer that occurs before November 5, 2010 if, within six months of being advised by the Minister of National Revenue that subsection (1) or (2), as the case may be, applies to the exchange, the taxpayer elects in writing not to have that subsection apply to the exchange.
222. (1) Subparagraphs 86.1(2)(c)(ii) and (iii) of the Act are replaced by the following:
(ii) at the time of the distribution, the shares of the class that includes the original shares are widely held and
(A) are actively traded on a designated stock exchange in the United States, or
(B) are required, under the Securities Exchange Act of 1934 of the United States, as amended from time to time, to be registered with the Securities and Exchange Commission of the United States and are so registered, and
(iii) under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution, the shareholders of the particular corporation who are resident in the United States are not taxable in respect of the distribution;
(2) Subparagraph 86.1(2)(e)(i) of the Act is replaced by the following:
(i) that, at the time of the distribution, the shares of the class that includes the original shares are shares described in subparagraph (c)(ii) or (d)(ii),
(3) Subparagraph 86.1(2)(e)(vi) of the Act is replaced by the following:
(vi) in the case of a distribution that is not prescribed, that the distribution is not taxable under the provisions of the Internal Revenue Code of 1986 of the United States, as amended from time to time, that apply to the distribution,
(4) Subsections (1) to (3) apply to distributions made after 1999, except that
(a) with respect to a distribution in respect of original shares described in clause 86.1(2)(c)(ii)(B) of the Act, as enacted by subsection (1),
(i) information referred to in paragraph 86.1(2)(e) of the Act is deemed to be provided to the Minister of National Revenue on a timely basis if it is provided to that Minister before the 90th day after the day on which this Act receives royal assent; and
(ii) an election referred to in paragraph 86.1(2)(f) of the Act is deemed to be filed on a timely basis if it is filed with the Minister of National Revenue before the 90th day after the day on which this Act receives royal assent; and
(b) for the period before December 14, 2007, the reference to “designated stock exchange” in clause 86.1(2)(c)(ii)(A), as enacted by subsection (1), is to be read as a reference to “prescribed stock exchange”.
223. (1) Paragraph 87(2)(g.2) of the Act is replaced by the following:
Marginal note:Financial institution rules
(g.2) for the purposes of paragraphs 142.4(4)(c) and (d) and subsections 142.51(11) and 142.6(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(2) Subsection 87(2) of the Act is amended by adding the following after paragraph (g.4):
Marginal note:Patronage dividends
(g.5) for the purposes of section 135, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(3) Paragraphs 87(2)(j.9) and (j.91) of the Act are replaced by the following:
Marginal note:Part I.3 tax
(j.9) for the purpose of determining the amount deductible by the new corporation for any taxation year under section 125.3, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Part I.3 and Part VI tax
(j.91) for the purpose of determining the amount deductible under subsection 181.1(4) or 190.1(3) by the new corporation for any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any corporation for any taxation year that ends before the amalgamation;
(4) Subsection 87(2) of the Act is amended by adding the following after paragraph (l.3):
Marginal note:Subsection 13(4.2) election
(l.4) for the purposes of subsection 13(4.3) and paragraph 20(16.1)(b), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
Marginal note:Contingent amount — section 143.4
(l.5) for the purposes of section 143.4, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(5) Subsection 87(2) of the Act is amended by adding the following after paragraph (m.1):
Marginal note:Gift of predecessor’s property
(m.2) for the purpose of computing the fair market value of property under subsection 248(35), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(6) Paragraph 87(2)(o) of the Act is replaced by the following:
Marginal note:Expiration of options previously granted
(o) for the purpose of subsection 49(2),
(i) any option granted by a predecessor corporation that expires after the amalgamation is deemed to have been granted by the new corporation, and any proceeds received by the predecessor corporation for the granting of the option is deemed to have been received by the new corporation,
(ii) any person to whom the option was granted who was not dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation not at arm’s length at the time that the option was granted, and
(iii) any person to whom the option was granted who was dealing at arm’s length with the predecessor corporation at the time that the option was granted is deemed to have been dealing with the new corporation at arm’s length at the time that the option was granted;
(7) Subsection 87(2) of the Act is amended by adding the following after paragraph (q):
Marginal note:Employees profit sharing plan
(r) an election made under subsection 144(10) by a predecessor corporation is deemed to be an election made by the new corporation;
(8) Subparagraph 87(2)(s)(ii) of the Act is replaced by the following:
(ii) if, on the amalgamation, the new corporation issues a share (in this subparagraph and subsection 135.1(10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition “tax deferred cooperative share” in subsection 135.1(1) to a taxpayer in exchange for a share of a predecessor corporation (in this subparagraph and subsection 135.1(10) referred to as the “old share”) that was, at the end of the predecessor corporation’s last taxation year, a tax deferred cooperative share within the meaning assigned by that definition, and the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share, subsection 135.1(10) applies in respect of the exchange;
(9) Paragraph 87(2)(mm) of the Act is repealed.
(10) Section 87 of the Act is amended by adding the following after subsection (2.2):
Marginal note:Quebec credit unions
(2.3) For the purpose of applying this section to an amalgamation governed by section 689 of An Act respecting financial services cooperatives, R.S.Q., c. C-67.3, an investment deposit of a credit union is deemed to be a share of a separate class of the capital stock of a predecessor corporation in respect of the amalgamation the adjusted cost base and paid up capital of which to the credit union is equal to the adjusted cost base to the credit union of the investment deposit immediately before the amalgamation if
(a) immediately before the amalgamation, the investment deposit is an investment deposit to which section 425 of the Savings and Credit Unions Act, R.S.Q., c. C-4.1, applies to the investment fund of that predecessor corporation; and
(b) on the amalgamation the credit union disposes of the investment deposit for consideration that consists solely of shares of a class of the capital stock of the new corporation.
(11) Paragraphs 87(4.4)(c) and (d) of the Act are replaced by the following:
(c) for the consideration under the agreement
(i) a share (in this subsection referred to as the “old share”) of the predecessor corporation that was a flow-through share (other than a right to acquire a share) was issued to the person before the amalgamation, or
(ii) a right was issued to the person before the amalgamation to acquire a share that would, if it were issued, be a flow-through share, and
(d) the new corporation
(i) issues, on the amalgamation and in consideration for the disposition of the old share, a share (in this subsection referred to as a “new share”) of any class of its capital stock to the person (or to any person or partnership that subsequently acquired the old share) and the terms and conditions of the new share are the same as, or substantially the same as, the terms and conditions of the old share, or
(ii) is, because of the right referred to in subparagraph (c)(ii), obliged after the amalgamation to issue to the person a share of any class of the new corporation’s capital stock that would, if it were issued, be a flow-through share,
(12) Subsection 87(9) of the Act is amended by adding the following after paragraph (a.2):
(a.21) for the purpose of paragraph (4.4)(d)
(i) each parent share received by a shareholder of a predecessor corporation is deemed to be a share of the capital stock of the new corporation issued to the shareholder by the new corporation on the merger, and
(ii) any obligation of the parent to issue a share of any class of its capital stock to a person in circumstances described in subparagraph (4.4)(d)(ii) is deemed to be an obligation of the new corporation to issue a share to the person;
(13) Subsection (1) and paragraph 87(2)(j.9) of the Act, as enacted by subsection (3), apply to taxation years that begin after October 31, 2011.
(14) Subsection (2) applies to amalgamations that occur, and windings-up that begin, after 1997.
(15) Paragraph 87(2)(j.91) of the Act, as enacted by subsection (3), and paragraph 87(2)(l.4) of the Act, as enacted by subsection (4), apply to amalgamations that occur, and windings-up that begin, after December 20, 2002.
(16) Paragraph 87(2)(l.5) of the Act, as enacted by subsection (4), applies in respect of taxation years that end on or after March 16, 2011.
(17) Subsection (5) applies in respect of gifts of property made after 6:00 p.m. (Eastern Standard Time) on December 4, 2003.
(18) Subsection (6) applies to options issued after October 24, 2012.
(19) Subsection (7) applies to amalgamations that occur, and windings-up that begin, after 1994.
(20) Subsection (8) is deemed to have come into force on September 29, 2009.
(21) Subsection (9) applies to amalgamations that occur after March 20, 2003.
(22) Subsection (10) applies to amalgamations that occur after June 2001.
(23) Subsections (11) and (12) apply to amalgamations that occur after 1997.
224. (1) Paragraph 88(1)(c.1) of the Act is replaced by the following:
(c.1) for the purpose of determining after the winding-up the amount to be included under subsection 14(1) in computing the parent’s income in respect of the business carried on by the subsidiary immediately before the winding-up
(i) there shall be added to the amount otherwise determined for each of the descriptions of A and F in the definition “cumulative eligible capital” in subsection 14(5), the total of all amounts, each of which is the amount, if any,
(A) determined for the description of F in that definition in respect of that business immediately before the winding up,
(B) determined under this subparagraph as it applied to the subsidiary in respect of a winding-up before that time, or
(C) determined under paragraph 85(1)(d.11) as it applied to the subsidiary in respect of a disposition to the subsidiary before that time, and
(ii) there shall be added to the amount determined for the description of C in the formula in paragraph 14(1)(b), the total of all amounts, each of which is an amount that is
(A) one-half of the amount, if any, determined for the description of Q in that definition in respect of that business immediately before the winding up,
(B) determined under this subparagraph as it applied to the subsidiary in respect of a winding-up before that time, or
(C) determined under paragraph 85(1)(d.1) as it applied to the subsidiary in respect of a disposition to the subsidiary before that time;
(2) Paragraph 88(1)(c.3) of the Act is amended by striking out “or” at the end of subparagraph (iv) and by adding the following after subparagraph (v):
(vi) a share of the capital stock of the subsidiary or a debt owing by it, if the share or debt, as the case may be, was owned by the parent immediately before the winding-up, or
(vii) a share of the capital stock of a corporation or a debt owing by a corporation, if the fair market value of the share or debt, as the case may be, was not, at any time after the beginning of the winding-up, wholly or partly attributable to property distributed to the parent on the winding-up;
(3) Subparagraph 88(1)(c.4)(i) of the Act is replaced by the following:
(i) a share of the capital stock of the parent that was
(A) received as consideration for the acquisition of a share of the capital stock of the subsidiary by the parent or by a corporation that was a specified subsidiary corporation of the parent immediately before the acquisition, or
(B) issued for consideration that consists solely of money,
(4) Paragraph 88(1)(e.6) of the Act is replaced by the following:
(e.6) if a subsidiary has made a gift in a taxation year (in this section referred to as the “gift year”), for the purposes of computing the amount deductible under section 110.1 by the parent for its taxation years that end after the subsidiary was wound up, the parent is deemed to have made a gift, in each of its taxation years in which a gift year of the subsidiary ended, equal to the amount, if any, by which the total of all amounts, each of which is the amount of a gift or, in the case of a gift made after December 20, 2002, the eligible amount of the gift, made by the subsidiary in the gift year exceeds the total of all amounts deducted under section 110.1 by the subsidiary in respect of those gifts;
(5) The portion of paragraph 88(1.1)(e) of the Act before subparagraph (i) is replaced by the following:
(e) if control of the parent has been acquired by a person or group of persons at any time after the commencement of the winding-up, or control of the subsidiary has been acquired by a person or group of persons at any time whatever, no amount in respect of the subsidiary’s non-capital loss or farm loss for a taxation year ending before that time is deductible in computing the taxable income of the parent for a particular taxation year ending after that time, except that such portion of the subsidiary’s non-capital loss or farm loss as may reasonably be regarded as its loss from carrying on a business and, where a business was carried on by the subsidiary in that year, such portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)(k) in computing its taxable income for the year is deductible only
(6) Subsection (1) applies in respect of the disposition of an eligible capital property by a subsidiary to a parent unless
(a) the disposition by the subsidiary occurred before December 21, 2002; and
(b) the parent disposed of the eligible capital property, before November 9, 2006, and in a taxation year of the parent ending after February 27, 2000, to a person with whom the parent did not deal at arm’s length at the time of that disposition by the parent.
(7) Subsections (2) and (3) apply to windings-up that begin, and amalgamations that occur, after 1997.
(8) Subsection (4) applies to windings-up that begin, and amalgamations that occur, after December 20, 2002.
(9) Subsection (5) applies to windings-up that begin after May 1996.
225. (1) Clause (a)(i)(A) of the definition “capital dividend account” in subsection 89(1) of the Act is replaced by the following:
(A) the amount of the corporation’s capital gain — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as “the period”)
(2) Clause (a)(i)(A) of the definition “capital dividend account” in subsection 89(1) of the Act, as enacted by subsection (1), is replaced by the following:
(A) the amount of the corporation’s capital gain — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(12) or that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year (that began after the corporation last became a private corporation and that ended after 1971) and ending immediately before the particular time (in this definition referred to as “the period”)
(3) Clause (a)(i)(A) of the definition “capital dividend account” in subsection 89(1) of the Act, as enacted by subsection (2), is replaced by the following:
(A) the amount of the corporation’s capital gain — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under paragraph 40(3.1)(a) or subsection 40(12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as “the period”)
(4) Clause (a)(ii)(A) of the definition “capital dividend account” in subsection 89(1) of the Act is replaced by the following:
(A) the amount of the corporation’s capital loss — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period
(5) Clause (a)(ii)(A) of the definition “capital dividend account” in subsection 89(1) of the Act, as enacted by subsection (4), is replaced by the following:
(A) the amount of the corporation’s capital loss — computed without reference to subparagraphs 52(3)(a)(ii) and 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(3.12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period
(6) The portion of paragraph (f) of the definition compte de dividendes en capital in subsection 89(1) of the French version of the Act before clause (i)(B) is replaced by the following:
f) le total des montants représentant chacun un montant relatif à une distribution qu’une fiducie a effectuée sur ses gains en capital en faveur de la société au cours de la période et dont le montant est égal au moins élevé des montants suivants :
(i) l’excédent du montant visé à la division (A) sur le montant visé à la division (B) :
(A) le montant de la distribution,
(7) Clause (f)(i)(B) of the definition “capital dividend account” in subsection 89(1) of the Act is replaced by the following:
(B) the amount designated under subsection 104(21) by the trust (other than a designation to which subsection 104(21.4), as it read in its application to the corporation’s last taxation year that began before November 2011, applied) in respect of the net taxable capital gains of the trust attributable to those capital gains, and
(8) The portion of paragraph (g) of the definition compte de dividendes en capital in subsection 89(1) of the French version of the Act before subparagraph (ii) is replaced by the following:
g) le total des montants représentant chacun un montant relatif à une distribution qu’une fiducie a effectuée en faveur de la société au cours de la période au titre d’un dividende (sauf un dividende imposable) qui a été versé à la fiducie au cours d’une année d’imposition de celle-ci tout au long de laquelle elle a résidé au Canada, sur une action du capital-actions d’une autre société résidant au Canada, et dont le montant est égal au moins élevé des montants suivants :
(i) le montant de la distribution,
(9) Paragraph (b) of the definition “taxable Canadian corporation” in subsection 89(1) of the Act is replaced by the following:
(b) was not, by reason of a statutory provision other than paragraph 149(1)(t), exempt from tax under this Part;
(10) Subsections (1) and (4) apply in respect of dispositions that occur on or after November 9, 2006.
(11) Subsection (2) applies to dispositions that occur on or after March 22, 2011.
(12) Subsection (3) applies to dispositions under paragraph 40(3.1)(a) of the Act that occur after October 31, 2011.
(13) Subsection (5) applies to dispositions under subsection 40(3.12) of the Act that occur after October 31, 2011, other than dispositions that relate to amounts deemed under subsection 40(3.1) of the Act to have been a gain from a disposition that occurred before November 1, 2011.
(14) Subsections (6) and (8) apply to elections in respect of capital dividends that become payable after 1997.
(15) Subsection (7) applies to taxation years that begin after October 31, 2011.
(16) Subsection (9) applies in respect of taxation years that end after 1999.
226. (1) Subparagraph 91(4)(a)(ii) of the Act is replaced by the following:
(ii) the taxpayer’s relevant tax factor for the year, and
(2) Section 91 of the Act is amended by adding the following after subsection (4):
Marginal note:Denial of foreign accrual tax
(4.1) For the purposes of the definition “foreign accrual tax” in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer is not to include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if, at any time in the taxation year (referred to in this subsection as the “affiliate year”) of the particular affiliate that ends in the taxation year of the taxpayer,
(a) a specified owner in respect of the taxpayer is considered,
(i) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular corporation — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the particular corporation that are considered to be owned by the specified owner for the purposes of this Act, or
(ii) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of this Act; or
(b) where the taxpayer is a partnership, the direct or indirect share of the income of the partnership of any member of the partnership that is, at any time in the affiliate year, a person resident in Canada or a foreign affiliate of such a person is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, less than the member’s direct or indirect share of that income for the purposes of this Act.
Marginal note:Specified owner
(4.2) For the purposes of subsections (4.1) and (4.5), a “specified owner”, at any time, in respect of a taxpayer means the taxpayer or a person or partnership that is, at that time,
(a) a partnership of which the taxpayer is a member;
(b) a foreign affiliate of the taxpayer;
(c) a partnership a member of which is a foreign affiliate of the taxpayer; or
(d) a person or partnership referred to in any of subparagraphs (4.4)(a)(i) to (iii).
Marginal note:Pertinent person or partnership
(4.3) For the purposes of this subsection and subsection (4.1), a “pertinent person or partnership”, at any time, in respect of a particular foreign affiliate of a taxpayer means the particular affiliate or a person or partnership that is, at that time,
(a) another foreign affiliate of the taxpayer
(i) in which the particular affiliate has an equity percentage, or
(ii) that has an equity percentage in the particular affiliate;
(b) a partnership a member of which is at that time a pertinent person or partnership in respect of the particular affiliate under this subsection; or
(c) a person or partnership referred to in any of subparagraphs (4.4)(b)(i) to (iii).
Marginal note:Series of transactions
(4.4) For the purposes of subsections (4.2) and (4.3), if, as part of a series of transactions or events that includes the earning of the foreign accrual property income that gave rise to the particular amount referred to in subsection (4.1), a foreign affiliate (referred to in this subsection as the “funding affiliate”) of the taxpayer or of a person (referred to in this subsection as the “related person”) resident in Canada that is related to the taxpayer, or a partnership (referred to in this subsection as the “funding partnership”) of which such an affiliate is a member, directly or indirectly provided funding to the particular affiliate, or a partnership of which the particular affiliate is a member, otherwise than by way of loans or other indebtedness that are subject to terms or conditions made or imposed, in respect of the loans or other indebtedness, that do not differ from those that would be made or imposed between persons dealing at arm’s length or by way of an acquisition of shares of the capital stock of any corporation, then
(a) if the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the taxpayer:
(i) the related person,
(ii) each foreign affiliate of the related person, and
(iii) each partnership a member of which is a person referred to in subparagraph (i) or (ii); and
(b) the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be pertinent persons or partnerships in respect of the particular affiliate:
(i) the funding affiliate or the funding partnership,
(ii) a non-resident corporation
(A) in which the funding affiliate has an equity percentage, or
(B) that has an equity percentage in the funding affiliate, and
(iii) a partnership a member of which is a person or partnership referred to in subparagraph (i) or (ii).
Marginal note:Exception — hybrid entities
(4.5) For the purposes of subparagraph (4.1)(a)(i), a specified owner in respect of the taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a corporation that are considered to be owned for the purposes of this Act solely because the specified owner is not treated as a corporation under the relevant foreign tax law.
Marginal note:Exceptions — partnerships
(4.6) For the purposes of subparagraph (4.1)(a)(ii) and paragraph (4.1)(b), a member of a partnership is not to be considered to have a lesser direct or indirect share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:
(a) a difference between the relevant foreign tax law and this Act in the manner of
(i) computing the income of the partnership, or
(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;
(b) the treatment of the partnership as a corporation under the relevant foreign tax law; or
(c) the fact that the member is not treated as a corporation under the relevant foreign tax law.
Marginal note:Deemed ownership
(4.7) For the purposes of subsection (4.1), if a specified owner owns, for the purposes of this Act, shares of the capital stock of a corporation and the dividends, or similar amounts, in respect of those shares are treated under the income tax laws of any country other than Canada under the laws of which any income of the corporation is subject to income taxation as interest or another form of deductible payment, the specified owner is deemed to be considered, under those tax laws, to own less than all of the shares of the capital stock of the corporation that are considered to be owned by the specified owner for the purposes of this Act.
(3) Subsection (1) applies to the 2002 and subsequent taxation years.
(4) Subsection (2) applies in respect of the computation of foreign accrual tax applicable to an amount included in computing a taxpayer’s income under subsection 91(1) of the Act, for a taxation year of the taxpayer that ends after March 4, 2010, in respect of a foreign affiliate of the taxpayer. However, for taxation years of the taxpayer that end on or before October 24, 2012,
(a) subsection 91(4.1) of the Act, as enacted by subsection (2), is to be read as follows:
(4.1) For the purposes of the definition “foreign accrual tax” in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year in respect of a particular foreign affiliate of the taxpayer shall not include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if the particular amount is earned during a period in which
(a) if the taxpayer is a partnership, the share of the income of any member of the partnership that is a person resident in Canada is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the partnership is subject to income taxation, less than its share of the income for the purposes of this Act; or
(b) in any other case, the taxpayer is considered, under the income tax laws (referred to in subsection (4.5) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the particular affiliate is subject to income taxation, to own less than all of the shares of the capital stock of the particular affiliate, of another foreign affiliate of the taxpayer in which the particular affiliate has an equity percentage, or of another foreign affiliate of the taxpayer that has an equity percentage in the particular affiliate, that are considered to be owned by the taxpayer for the purposes of this Act.
(b) subsection 91(4.5) of the Act, as enacted by subsection (2), is to be read as follows:
(4.5) For the purposes of paragraph (4.1)(b), a taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a foreign affiliate of the taxpayer that are considered to be owned by the taxpayer for the purposes of this Act solely because the taxpayer or the foreign affiliate is not treated as a corporation under the relevant foreign tax law.
(c) the portion of subsection 91(4.6) of the Act before paragraph (a), as enacted by subsection (2), is to be read as follows:
(4.6) For the purposes of paragraph (4.1)(a), a member of a partnership is not to be considered to have a lesser share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:
(d) section 91 of the Act is to be read without reference to its subsections (4.2) to (4.4) and (4.7), as enacted by subsection (2).
227. (1) The definition “relevant tax factor” in subsection 95(1) of the Act is replaced by the following:
“relevant tax factor”
« facteur fiscal approprié »
“relevant tax factor”, of a person or partnership for a taxation year, means
(a) in the case of a corporation, or of a partnership all the members of which, other than non-resident persons, are corporations, the quotient obtained by the formula
1/(A – B)
where
- A
- is the percentage set out in paragraph 123(1)(a), and
- B
- is
(i) in the case of a corporation, the percentage that is the corporation’s general rate reduction percentage (as defined by section 123.4) for the taxation year, and
(ii) in the case of a partnership, the percentage that would be determined under subparagraph (i) in respect of the partnership if the partnership were a corporation whose taxation year is the partnership’s fiscal period, and
(b) in any other case, 2.2;
(2) The portion of the definition “foreign accrual tax” in subsection 95(1) of the Act before paragraph (a) is replaced by the following:
“foreign accrual tax”
« impôt étranger accumulé »
“foreign accrual tax” applicable to any amount included in computing a taxpayer’s income under subsection 91(1) for a taxation year in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1),
(3) Subsection (1) applies to the 2002 and subsequent taxation years.
(4) Subsection (2) applies to taxation years of a taxpayer that end after March 4, 2010.
228. (1) Section 96 of the Act is amended by adding the following after subsection (1):
Marginal note:Income allocation to former member
(1.01) If, at any time in a fiscal period of a partnership, a taxpayer ceases to be a member of the partnership
(a) for the purposes of subsection (1) and sections 34.1, 34.2, 101, 103 and 249.1, and notwithstanding paragraph 98.1(1)(d), the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; and
(b) for the purposes of the application of paragraph (2.1)(b) and subparagraphs 53(1)(e)(i) and (viii) and (2)(c)(i) to the taxpayer, the fiscal period of the partnership is deemed to end
(i) immediately before the time at which the taxpayer is deemed by subsection 70(5) to have disposed of the interest in the partnership, where the taxpayer ceased to be a member of the partnership because of the taxpayer’s death, and
(ii) immediately before the time that is immediately before the time that the taxpayer ceased to be a member of the partnership, in any other case.
(2) Paragraph 96(1.01)(a) of the Act, as enacted by subsection (1), is replaced with the following:
(a) for the purposes of subsection (1), sections 34.1, 101 and 103 and paragraph 249.1(1)(b), and notwithstanding paragraph 98.1(1)(d), the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; and
(3) The portion of paragraph 96(1.01)(b) of the Act before subparagraph (i), as enacted by subsection (1), is replaced by the following:
(b) for the purposes of the application of paragraph (2.1)(b), subsection 40(3.12) and subparagraphs 53(1)(e)(i) and (viii) and (2)(c)(i) to the taxpayer, the fiscal period of the partnership is deemed to end
(4) Paragraph 96(2.4)(a) of the English version of the Act is replaced by the following:
(a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions, from misconduct or from fault of another member of the partnership or an employee, an agent or a representative of the partnership in the course of the partnership business while the partnership is a limited liability partnership);
(5) The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Agreement or election of partnership members
(3) If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 13(4), (4.2) and (16) and 14(1.01), (1.02) and (6), section 15.2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04 and subsections 86.1(2), 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,
(6) Subsection 96(9) of the Act is replaced by the following:
Marginal note:Application of foreign partnership rule
(9) For the purposes of applying subsection (8) and this subsection,
(a) where it can reasonably be considered that one of the main reasons that a member of a partnership is resident in Canada is to avoid the application of subsection (8), the member is deemed not to be resident in Canada; and
(b) where at any time a particular partnership is a member of another partnership,
(i) each person or partnership that is, at that time, a member of the particular partnership is deemed to be a member of the other partnership at that time,
(ii) each person or partnership that becomes a member of the particular partnership at that time is deemed to become a member of the other partnership at that time, and
(iii) each person or partnership that ceases to be a member of the particular partnership at that time is deemed to cease to be a member of the other partnership at that time.
(7) Subsection (1) applies in respect of a taxpayer
(a) in the case where the taxpayer ceases to be a member of a partnership because of the taxpayer’s death, to the 2003 and subsequent taxation years; and
(b) in any other case, to the 1995 and subsequent taxation years.
(8) Subsection (2) applies in respect of a taxpayer to taxation years that end after March 22, 2011.
(9) Subsection (3) applies in respect of a taxpayer to taxation years that end after October 31, 2011.
(10) Subsection (4) is deemed to have come into force on June 21, 2001.
(11) If a taxpayer, who is a member of a partnership at the end of a particular fiscal period, of the partnership, that ends in the taxpayer’s 2000 taxation year, so elects in writing and files the election with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act receives royal assent,
(a) subsection 96(1.7) of the Act does not apply to the taxpayer’s 2000 taxation year;
(b) the taxpayer is deemed to have a capital gain, a capital loss or a business investment loss in respect of the partnership for the particular fiscal period equal to the amount of the taxable capital gain, the allowable capital loss or the allowable business investment loss in respect of the partnership for the particular fiscal period, as the case may be, multiplied by the reciprocal of the fraction in paragraph 38(a) of the Act that applies to the partnership for the particular fiscal period;
(c) the amount of a capital gain, a capital loss or a business investment loss determined under paragraph (b) is deemed to be a capital gain, a capital loss or a business investment loss, as the case may be, of the taxpayer from a disposition of a capital property on the day that the particular fiscal period ends; and
(d) except as provided by this subsection, no amount shall be included in computing the taxpayer’s taxable capital gains, allowable capital losses and allowable business investment losses in respect of the taxable capital gains, allowable capital losses and allowable business investment losses of the partnership for the particular fiscal period.
(12) Subsection (5) applies to taxation years that end after February 27, 2000. However, subsection 96(3) of the Act, as enacted by subsection (5), is before December 21, 2002 to be read without reference to “, (4.2)” and “, (1.02)”.
(13) Subsection (6) applies to fiscal periods that begin after June 22, 2000.
229. Subsection 99(1) of the Act is replaced by the following:
Marginal note:Fiscal period of terminated partnership
99. (1) Subject to subsection (2), if, at any particular time in a fiscal period of a partnership, the partnership would, if this Act were read without reference to subsection 98(1), have ceased to exist, the fiscal period is deemed to have ended immediately before the time that is immediately before that particular time.
230. (1) Section 100 of the Act is amended by adding the following after subsection (4):
Marginal note:Replacement of partnership capital
(5) A taxpayer who pays an amount at any time in a taxation year is deemed to have a capital loss from a disposition of property for the year if
(a) the taxpayer disposed of an interest in a partnership before that time or, because of subsection (3), acquired before that time a right to receive property of a partnership;
(b) that time is after the disposition or acquisition, as the case may be;
(c) the amount would have been described in subparagraph 53(1)(e)(iv) had the taxpayer been a member of the partnership at that time; and
(d) the amount is paid pursuant to a legal obligation of the taxpayer to pay the amount.
(2) Subsection (1) applies to the 1995 and subsequent taxation years.
231. (1) The portion of subsection 104(1.1) of the Act before paragraph (a) is replaced by the following:
Restricted meaning of “beneficiary”
(1.1) Notwithstanding subsection 248(25), for the purposes of subsection (1), paragraph (4)(a.4), subparagraph 73(1.02)(b)(ii) and paragraph 107.4(1)(e), a person or partnership is deemed not to be a beneficiary under a trust at a particular time if the person or partnership is beneficially interested in the trust at the particular time solely because of
(2) Subparagraph 104(4)(a)(i.1) of the Act is replaced by the following:
(i.1) is a trust that was created by the will of a taxpayer who died after 1971 to which property was transferred in circumstances to which paragraph 70(5.2)(c) (or, in the case of a transfer that occurred in a taxation year before 2007, (b) or (d), as those paragraphs read in their application to that taxation year) or (6)(d) applied, and that, immediately after any such property vested indefeasibly in the trust as a consequence of the death of the taxpayer, was a trust,
(3) Paragraph 104(4)(a.2) of the French version of the Act is replaced by the following:
a.2) lorsque la fiducie effectue une distribution à un bénéficiaire au titre de la participation de celui-ci à son capital, qu’il est raisonnable de conclure que la distribution a été financée par une dette de la fiducie et que l’une des raisons pour lesquelles la dette a été contractée était d’éviter des impôts payables par ailleurs en vertu de la présente partie par suite du décès d’un particulier, le jour où la distribution est effectuée (déterminé comme si, pour la fiducie, la fin d’un jour correspondait au moment immédiatement après celui où elle distribue un bien à un bénéficiaire au titre de la participation de celui-ci à son capital);
(4) Subsections 104(5.3) to (5.7) of the Act are repealed.
(5) Subsections 104(10) and (11) of the Act are repealed.
(6) Paragraph 104(13.2)(a) of the Act is replaced by the following:
(a) for the purposes of subsections (13) and 105(2) (except in the application of subsection (13) for the purposes of subsection (21)), be deemed not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust; and
(7) Subsection 104(19) of the Act is replaced by the following:
Marginal note:Designation in respect of taxable dividends
(19) A portion of a taxable dividend received by a trust, in a particular taxation year of the trust, on a share of the capital stock of a taxable Canadian corporation is, for the purposes of this Act other than Part XIII, deemed to be a taxable dividend on the share received by a taxpayer, in the taxpayer’s taxation year in which the particular taxation year ends, and is, for the purposes of paragraphs 82(1)(b) and 107(1)(c) and (d) and section 112, deemed not to have been received by the trust, if
(a) an amount equal to that portion
(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and
(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a), subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;
(b) the taxpayer is in the particular taxation year a beneficiary under the trust;
(c) the trust is, throughout the particular taxation year, resident in Canada; and
(d) the total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the total of all amounts each of which is the amount of a taxable dividend, received by the trust in the particular taxation year, on a share of the capital stock of a taxable Canadian corporation.
(8) Subsection 104(21) of the Act is replaced by the following:
Marginal note:Designation in respect of taxable capital gains
(21) For the purposes of sections 3 and 111, except as they apply for the purposes of section 110.6, and subject to paragraph 132(5.1)(b), an amount in respect of a trust’s net taxable capital gains for a particular taxation year of the trust is deemed to be a taxable capital gain, for the taxation year of a taxpayer in which the particular taxation year ends, from the disposition by the taxpayer of capital property if
(a) the amount
(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and
(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a), subsection (14) or section 105, was included in computing the income for that taxation year of the taxpayer;
(b) the taxpayer is
(i) in the particular taxation year, a beneficiary under the trust, and
(ii) resident in Canada, unless the trust is, throughout the particular taxation year, a mutual fund trust;
(c) the trust is, throughout the particular taxation year, resident in Canada; and
(d) the total of all amounts each of which is an amount designated, under this subsection, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s net taxable capital gains for the particular taxation year.
(9) Subsection 104(21.1) of the Act is repealed.
(10) Paragraph 104(21.3)(a) of the Act is replaced by the following:
(a) the total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property, and
(11) Subsection 104(21.3) of the Act, as amended by subsection (10), is replaced by the following:
Marginal note:Net taxable capital gains of trust determined
(21.3) For the purposes of this section, the net taxable capital gains of a trust for a taxation year is the amount, if any, determined by the formula
A + B – C – D
where
- A
- is the total of all amounts each of which is a taxable capital gain of the trust for the year from the disposition of a capital property that was held by the trust immediately before the disposition,
- B
- is the total of all amounts each of which is deemed by subsection (21) to be a taxable capital gain of the trust for the year,
- C
- is the total of all amounts each of which is an allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property, and
- D
- is the amount, if any, deducted under paragraph 111(1)(b) in computing the trust’s taxable income for the year.
(12) Subsections 104(21.4) and (21.5) of the Act are repealed.
(13) Paragraph 104(21.6)(g) of the Act is replaced by the following:
(f.1) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended after October 17, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and in the period that began after February 27, 2000 and ended before October 18, 2000;
(g) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 18, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year; and
(14) Subsection 104(21.6), as amended by subsection (13), and subsection (21.7) of the Act are repealed.
(15) Subsection 104(22) of the Act is replaced by the following:
Marginal note:Designation in respect of foreign source income
(22) For the purposes of this subsection, subsection (22.1) and section 126, an amount in respect of a trust’s income for a particular taxation year of the trust from a source in a country other than Canada is deemed to be income of a taxpayer, for the taxation year of the taxpayer in which the particular taxation year ends, from that source if
(a) the amount
(i) is designated by the trust, in respect of the taxpayer, in the trust’s return of income under this Part for the particular taxation year, and
(ii) may reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust) to be part of the amount that, because of paragraph (13)(a) or subsection (14), was included in computing the income for that taxation year of the taxpayer;
(b) the taxpayer is in the particular taxation year a beneficiary under the trust;
(c) the trust is, throughout the particular taxation year, resident in Canada; and
(d) the total of all amounts each of which is an amount designated, under this subsection in respect of that source, by the trust in respect of a beneficiary under the trust in the trust’s return of income under this Part for the particular taxation year is not greater than the trust’s income for the particular taxation year from that source.
(16) Paragraphs 104(23)(a) and (b) of the Act are repealed.
(17) Subsection (1) applies to the 1998 and subsequent taxation years.
(18) Subsection (2) applies to trust taxation years that begin after 2006.
(19) Subsections (4), (9), (11), (12) and (14) apply to taxation years that begin after October 31, 2011.
(20) Subsection (5) applies to the 2005 and subsequent taxation years.
(21) Subsections (7), (8) and (15) apply to taxation years that end after February 27, 2004, except that, for taxation years that end on or before July 18, 2005, the reference to “paragraph (13)(a)” in subparagraph 104(19)(a)(ii) of the Act, as enacted by subsection (7), in subparagraph 104(21)(a)(ii) of the Act, as enacted by subsection (8), and in subparagraph 104(22)(a)(ii) of the Act, as enacted by subsection (15), is to be read as a reference to “subsection (13)”.
(22) Subsection (10) applies to trust taxation years that begin after 2000.
(23) Paragraph 104(21.6)(f.1) of the Act, as enacted by subsection (13), applies to taxation years that end after February 27, 2000.
(24) Paragraph 104(21.6)(g) of the Act, as enacted by subsection (13), applies to trust taxation years that end after December 20, 2002.
(25) Subsection (16) is deemed to have come into force on December 21, 2002.
232. Subsection 106(3) of the French version of the Act is replaced by the following:
Marginal note:Produit de disposition d’une participation au revenu
(3) Il est entendu que la fiducie qui, à un moment donné, distribue un de ses biens à un contribuable qui était un de ses bénéficiaires, en règlement total ou partiel de la participation du contribuable au revenu de la fiducie, est réputée avoir disposé du bien pour un produit égal à la juste valeur marchande du bien à ce moment.
233. (1) Subsection 107(1) of the Act is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) if the capital interest is not a capital property of the taxpayer, notwithstanding the definition “cost amount” in subsection 108(1), its cost amount is deemed to be the amount, if any, by which
(i) the amount that would, if this Act were read without reference to this paragraph and the definition “cost amount” in subsection 108(1), be its cost amount
exceeds
(ii) the total of all amounts, each of which is an amount in respect of the capital interest that has become payable to the taxpayer before the disposition and that would be described in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I).
(2) Section 107 of the Act is amended by adding the following after subsection (1.1):
Marginal note:Deemed fair market value — non-capital property
(1.2) For the purpose of section 10, the fair market value at any time of a capital interest in a trust is deemed to be equal to the amount that is the total of
(a) the amount that would, if this Act were read without reference to this subsection, be its fair market value at that time, and
(b) the total of all amounts, each of which is an amount that would be described, in respect of the capital interest, in subparagraph 53(2)(h)(i.1) if that subparagraph were read without reference to its subclause (B)(I), that has become payable to the taxpayer before that time.
(3) Subparagraph 107(2)(b.1)(iii) of the Act is replaced by following:
(iii) in any other case, 50%;
(4) The portion of paragraph 107(2)(c) of the Act before subparagraph (i) is replaced by the following:
(c) the taxpayer’s proceeds of disposition of the capital interest in the trust (or of the part of it) disposed of by the taxpayer on the distribution are deemed to be equal to the amount, if any, by which
(5) The portion of paragraph 107(2)(d) of the French version of the Act before subparagraph (i) is replaced by the following:
d) lorsque les biens ainsi distribués étaient des biens amortissables de la fiducie, appartenant à une catégorie prescrite, et que le montant du coût en capital de ces biens, supporté par la fiducie, dépasse le coût que le contribuable est réputé, en vertu du présent article, avoir supporté pour les acquérir, pour l’application des articles 13 et 20 et des dispositions réglementaires prises en vertu de l’alinéa 20(1)a) :
(6) The portion of paragraph 107(2)(f) of the French version of the Act before subparagraph (i) is replaced by the following:
f) lorsque les biens ainsi distribués étaient des immobilisations admissibles de la fiducie au titre de son entreprise :
(7) The portion of subparagraph 107(2)(f)(ii) of the French version of the Act after the formula is replaced by the following:
où :
- A
- représente le montant calculé selon cet élément Q au titre de l’entreprise de la fiducie immédiatement avant la distribution;
- B
- la juste valeur marchande, immédiatement avant la distribution, des biens ainsi distribués;
- C
- la juste valeur marchande, immédiatement avant la distribution, de l’ensemble des immobilisations admissibles de la fiducie au titre de l’entreprise.
(8) Subsection 107(2.001) of the French version of the Act is replaced by the following:
Marginal note:Roulement — choix d’une fiducie
(2.001) Lorsqu’une fiducie distribue un bien à l’un de ses bénéficiaires en règlement total ou partiel de la participation de celui-ci à son capital, le paragraphe (2) ne s’applique pas à la distribution si la fiducie en fait le choix dans un formulaire prescrit présenté au ministre avec sa déclaration de revenu pour son année d’imposition où le bien est distribué et si l’un des faits ci-après se vérifie :
a) la fiducie réside au Canada au moment de la distribution;
b) le bien est un bien canadien imposable;
c) le bien est soit une immobilisation utilisée dans le cadre d’une entreprise que la fiducie exploite par l’entremise d’un établissement stable (au sens du règlement) au Canada immédiatement avant la distribution, soit une immobilisation admissible au titre d’une telle entreprise, soit un bien à porter à l’inventaire d’une telle entreprise.
(9) The portion of subsection 107(2.002) of the French version of the Act before paragraph (b) is replaced by the following:
Marginal note:Roulement — choix d’un bénéficiaire
(2.002) Lorsqu’une fiducie non-résidente distribue un bien (sauf celui visé aux alinéas (2.001)b) ou c)) à l’un de ses bénéficiaires en règlement total ou partiel de la participation de celui-ci à son capital, les règles ci-après s’appliquent si le bénéficiaire en fait le choix en vertu du présent paragraphe dans un formulaire prescrit présenté au ministre avec sa déclaration de revenu pour son année d’imposition où le bien est distribué :
a) le paragraphe (2) ne s’applique pas à la distribution;
(10) The portion of subsection 107(2.01) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Distribution de résidence principale
(2.01) Lorsqu’une fiducie personnelle distribue à un moment donné, à un contribuable dans les circonstances visées au paragraphe (2), un bien qui serait sa résidence principale, au sens de l’article 54, pour une année d’imposition si elle l’avait désigné comme telle en application de l’alinéa c.1) de la définition de résidence principale à cet article, les règles ci-après s’appliquent si la fiducie en fait le choix dans sa déclaration de revenu pour l’année d’imposition qui comprend ce moment :
(11) The portion of paragraph 107(2.1)(c) of the French version of the Act before subparagraph (i) is replaced by the following:
c) sous réserve de l’alinéa e), le produit de disposition, pour le bénéficiaire, de la partie de l’ancienne participation dont il a disposé au moment de la distribution est réputé être égal à l’excédent :
(12) The portion of subparagraph 107(2.1)(d)(iii) of the French version of the Act before clause (B) is replaced by the following:
(iii) le produit de disposition, pour le bénéficiaire, de la partie de l’ancienne participation dont il a disposé au moment de la distribution est réputé être égal à l’excédent de la juste valeur marchande du bien sur le total des montants suivants :
(A) la partie du montant de la distribution qui est un paiement auquel s’applique l’alinéa h) ou i) de la définition de disposition au paragraphe 248(1),
(13) Paragraph 107(2.1)(e) of the French version of the Act is replaced by the following:
e) lorsque la fiducie est une fiducie de fonds commun de placement, que la distribution est effectuée au cours d’une de ses années d’imposition qui est antérieure à son année d’imposition 2003, qu’elle a fait, pour l’année, le choix prévu au paragraphe (2.11) et qu’elle en fait le choix relativement à la distribution dans le formulaire prescrit produit avec sa déclaration de revenu pour l’année :
(i) il n’est pas tenu compte de l’alinéa c),
(ii) le produit de disposition, pour le bénéficiaire, de la partie de l’ancienne participation dont il a disposé lors de la distribution est réputé être égal au montant déterminé selon l’alinéa a).
(14) Subsection 107(2.11) of the Act is replaced by the following:
Marginal note:Gains not distributed to beneficiaries
(2.11) If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies and the trust elects in prescribed form filed with the trust’s return for the year or a preceding taxation year to have one of the following paragraphs apply, the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regard
(a) if the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars) to non-resident persons (including a partnership other than a Canadian partnership); and
(b) if the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars).
(15) The portion of subsection 107(2.2) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Entité intermédiaire
(2.2) Lorsque, à un moment antérieur à 2005, une fiducie visée aux alinéas h), i) ou j) de la définition de entité intermédiaire au paragraphe 39.1(1) distribue des biens à l’un de ses bénéficiaires en règlement de tout ou partie des participations de celui-ci dans la fiducie et que le bénéficiaire présente au ministre, au plus tard à la date d’échéance de production qui lui est applicable pour son année d’imposition qui comprend ce moment, un choix concernant les biens sur le formulaire prescrit, le moins élevé des montants ci-après est à inclure dans le coût, pour le bénéficiaire, d’un bien (sauf de l’argent) qu’il a reçu dans le cadre de la distribution :
(16) The portion of subsection 107(4) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Fiducie en faveur de l’époux, du conjoint de fait ou de soi-même
(4) Si les conditions ci-après sont réunies, le paragraphe (2.1), mais non le paragraphe (2), s’applique au bien qu’une fiducie visée à l’alinéa 104(4)a) distribue à un bénéficiaire :
(17) Paragraph 107(4)(b) of the Act is replaced by the following:
(b) the distribution of the property occurs on or before the earlier of
(i) a reacquisition, in respect of any property of the trust, that occurs immediately after the day described by paragraph 104(4)(a), and
(ii) the cessation of the trust’s existence.
(18) The portion of subsection 107(4.1) of the French version of the Act before paragraph (b) is replaced by the following:
Marginal note:Cas d’application du paragraphe 75(2) à une fiducie
(4.1) Si les conditions ci-après sont réunies, le paragraphe (2.1), mais non le paragraphe (2), s’applique à la distribution d’un bien d’une fiducie personnelle donnée ou une fiducie donnée visée par règlement, effectuée par la fiducie donnée à un contribuable bénéficiaire de cette fiducie :
a) la distribution a été effectuée en règlement de la totalité ou d’une partie de la participation du contribuable au capital de la fiducie donnée;
(19) The portion of paragraph 107(4.1)(b) of the Act before subparagraph (i), as enacted by subsection 11(1), is replaced by the following:
(b) subsection 75(2) was applicable, or would have been applicable if it were read without reference to the phrase “while the person is resident in Canada” and subsection 75(3) were read without reference to paragraph (c.2), at a particular time in respect of any property of
(20) Subparagraph 107(4.1)(b)(ii) of the French version of the Act is replaced by the following:
(ii) soit d’une fiducie comptant parmi ses biens un bien qui, par suite d’une ou de plusieurs dispositions auxquelles le paragraphe 107.4(3) s’est appliqué, est devenu un bien de la fiducie donnée, lequel bien, après le moment donné et avant la distribution, n’a pas fait l’objet d’une disposition pour un produit de disposition égal à sa juste valeur marchande au moment de la disposition;
(21) Paragraph 107(4.1)(d) of the French version of the Act is replaced by the following:
d) la personne visée au sous-alinéa c)(i) existait au moment de la distribution du bien.
(22) Subsection 107(5) of the Act is replaced by the following:
Marginal note:Distribution of property received on qualifying disposition
(4.2) Subsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed after December 20, 2002 to a beneficiary by a personal trust or a trust prescribed for the purpose of subsection (2), if
(a) at a particular time before December 21, 2002 there was a qualifying disposition (within the meaning assigned by subsection 107.4(1)) of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation, as the case may be, to a trust; and
(b) the beneficiary is neither the particular partnership nor the particular corporation.
Marginal note:Distribution to non-resident
(5) Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of a property (other than a share of the capital stock of a non-resident-owned investment corporation or property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) by a trust to a non-resident taxpayer (including a partnership other than a Canadian partnership) in satisfaction of all or part of the taxpayer’s capital interest in the trust.
(23) The portion of subsection 107(5.1) of the Act before paragraph (b) is replaced by the following:
Marginal note:Instalment interest
(5.1) If, solely because of the application of subsection (5), paragraphs (2)(a) to (c) do not apply to a distribution in a taxation year of taxable Canadian property by a trust, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the trust’s tax payable under this Part for the year is deemed to be the lesser of
(a) the trust’s tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and
(24) Paragraph 107(5.1)(b) of the French version of the Act is replaced by the following:
b) le montant qui serait déterminé selon l’alinéa a) si le paragraphe (5) ne s’appliquait pas à chaque distribution, effectuée au cours de l’année, de biens canadiens imposables auxquels les règles énoncées au paragraphe (2) ne s’appliquent pas par le seul effet du paragraphe (5).
(25) Paragraphs 107(6)(a) and (b) of the Act are replaced by the following:
(a) the property or property for which it was substituted was held by a trust; and
(b) either
(i) the trust was non-resident and the property (or property for which it was substituted) was not taxable Canadian property of the trust, or
(ii) neither the vendor — nor a person that would, if section 251.1 were read without reference to the definition “controlled” in subsection 251.1(3), be affiliated with the vendor — had a capital interest in the trust.
(26) Subsections (1) and (2) apply to dispositions that occur, and valuations made,
(a) after 2001 in respect of qualified trust units, as defined in subsection 260(1) of the Act, as amended by subsection 365(5), in respect of which an amount described in paragraph 260(5.1)(b) of the Act, as enacted by subsection 365(7), or that would have been so described had no election been made under paragraph 365(12)(b), is paid after 2001 and before February 28, 2004, except that subparagraph 107(1)(e)(ii) of the Act, as enacted by subsection (1), and paragraph 107(1.2)(b) of the Act, as enacted by subsection (2), are, with respect to amounts described in subclause 53(2)(h)(i.1)(B)(I) of the Act that were payable on or before 2002, to be read without reference to the words “if that subparagraph were read without reference to its subclause (B)(I)”; and
(b) in any other case, after February 27, 2004, except that, subject to paragraph (a),
(i) subsection (1) does not apply to a disposition by a taxpayer after February 27, 2004 and before 2005 pursuant to an agreement in writing made by the taxpayer on or before February 27, 2004, and
(ii) subparagraph 107(1)(e)(ii) of the Act, as enacted by subsection (1), and paragraph 107(1.2)(b) of the Act, as enacted by subsection (2), are, with respect to amounts described in subclause 53(2)(h)(i.1)(B)(I) of the Act that were payable on or before February 27, 2004, to be read without reference to the words “if that subparagraph were read without reference to its subclause (B)(I)”.
(27) Subsection (3) and subsection 107(4.2) of the Act, as enacted by subsection (22), apply to distributions made after December 20, 2002.
(28) Subsection (4) applies to distributions made after 1999.
(29) Subsection (14) applies to the 2002 and subsequent taxation years. It also applies to the 2000 and 2001 taxation years of a trust if the trust so elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act receives royal assent, in which case the portion of subsection 107(2.11) of the Act, as enacted by subsection (14), before paragraph (a), is to be read as follows for the 2000 and 2001 taxation years of the trust:
(2.11) If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies (or, in the case of property distributed after October 1, 1996 and before 2000, in circumstances in which subsection (5) applied) and the trust elects in prescribed form filed with the trust’s return for the year or a preceding taxation year, the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regard
(30) Subsections (17), (19) and (23) apply to distributions made after October 31, 2011.
(31) Subsection 107(5) of the Act, as enacted by subsection (22), applies to distributions made after February 27, 2004.
(32) Subsection (25) applies to dispositions made after October 31, 2011.
234. (1) The portion of section 107.2 of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Montant provenant d’une fiducie de convention de retraite
107.2 Pour l’application de la présente partie et de la partie XI.3, dans le cas où, à un moment donné, une fiducie régie par une convention de retraite distribue un de ses biens à un contribuable bénéficiaire de la fiducie, en règlement de la totalité ou d’une partie de la participation de celui-ci dans la fiducie, les règles ci-après s’appliquent :
(2) Paragraph 107.2(b) of the French version of the Act is replaced by the following:
b) la fiducie est réputée verser au contribuable, au titre d’une distribution, une somme égale à cette juste valeur marchande;
235. (1) The portion of subsection 107.4(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Qualifying disposition
107.4 (1) In this section, a “qualifying disposition” of a property means a disposition of the property before December 21, 2002 by a person or partnership, and a disposition of property after December 20, 2002 by an individual, (which person, partnership or individual is referred to in this subsection as the “contributor”) as a result of a transfer of the property to a particular trust where
(2) Paragraph 107.4(1)(c) of the Act is replaced by the following:
(c) the particular trust is resident in Canada at the time of the transfer;
(3) Paragraph 107.4(1)(d) of the Act is repealed.
(4) Subparagraphs 107.4(1)(g)(ii) and (iii) of the French version of the Act are replaced by the following:
(ii) celle commençant après le 17 décembre 1999 et comprenant la disposition de la totalité ou d’une partie d’une participation au capital ou d’une participation au revenu d’une fiducie personnelle, sauf une disposition effectuée uniquement par suite de la distribution d’un bien, d’une fiducie à une personne ou à une société de personnes, en règlement de la totalité ou d’une partie de cette participation,
(iii) celle commençant après le 5 juin 2000 et comprenant le transfert d’un bien à la fiducie donnée, effectué en contrepartie de l’acquisition d’une participation au capital de cette fiducie, s’il est raisonnable de considérer que celle-ci a reçu le bien en vue de financer une distribution (sauf celle qui correspond au produit de disposition d’une participation au capital de la fiducie);
(5) Subsections (1) and (3) are deemed to have come into force on December 20, 2002.
(6) Subsection (2) applies to dispositions that occur after February 27, 2004.
236. (1) Paragraph (a.1) of the definition “cost amount” in subsection 108(1) of the Act is replaced by the following:
(a.1) where that time (in this paragraph referred to as the “particular time”) is immediately before the time that is immediately before the time of the death of the taxpayer and subsection 104(4) or (5) deems the trust to dispose of property at the end of the day that includes the particular time, the amount that would be determined under paragraph (b) if the taxpayer had died on a day that ended immediately before the time that is immediately before the particular time, and
(2) The portion of the definition “testamentary trust” in subsection 108(1) of the Act before paragraph (a) is replaced by the following:
“testamentary trust”
« fiducie testamentaire »
“testamentary trust”, in a taxation year, means a trust that arose on and as a consequence of the death of an individual (including a trust referred to in subsection 248(9.1)), other than
(3) The definition “testamentary trust” in subsection 108(1) of the Act is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):
(d) a trust that, at any time after December 20, 2002 and before the end of the taxation year, incurs a debt or any other obligation owed to, or guaranteed by, a beneficiary or any other person or partnership (which beneficiary, person or partnership is referred to in this paragraph as the “specified party”) with whom any beneficiary of the trust does not deal at arm’s length, other than a debt or other obligation
(i) incurred by the trust in satisfaction of the specified party’s right as a beneficiary under the trust
(A) to enforce payment of an amount of the trust’s income or capital gains payable at or before that time by the trust to the specified party, or
(B) to otherwise receive any part of the capital of the trust,
(ii) owed to the specified party, if the debt or other obligation arose because of a service (for greater certainty, not including any transfer or loan of property) rendered by the specified party to, for or on behalf of the trust,
(iii) owed to the specified party, if
(A) the debt or other obligation arose because of a payment made by the specified party for or on behalf of the trust,
(B) in exchange for the payment (and in full settlement of the debt or other obligation), the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the specified party within 12 months after the payment was made (or, if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), and
(C) it is reasonable to conclude that the specified party would have been willing to make the payment if the specified party dealt at arm’s length with the trust, except where the trust is the individual’s estate and that payment was made within the first 12 months after the individual’s death (or, if written application has been made to the Minister by the estate within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), or
(iv) incurred by the trust before October 24, 2012 if, in full settlement of the debt or other obligation the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the person or partnership to whom the debt or other obligation is owed within 12 months after the day on which the Technical Tax Amendments Act, 2012 receives royal assent (or if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances);
(4) Paragraph (a.1) of the definition “trust” in subsection 108(1) of the Act is replaced by the following:
(a.1) a trust (other than a trust described in paragraph (a) or (d), a trust to which subsection 7(2) or (6) applies or a trust prescribed for the purpose of subsection 107(2)) all or substantially all of the property of which is held for the purpose of providing benefits to individuals each of whom is provided with benefits in respect of, or because of, an office or employment or former office or employment of any individual,
(5) The portion of the definition “trust” in subsection 108(1) of the Act after paragraph (e.1) and before paragraph (f) is replaced by the following:
and, in applying subsections 104(4), (5), (5.2), (12), (14) and (15) at any time, does not include
(6) Subparagraph (g)(ii) of the definition “trust” in subsection 108(1) of the Act is repealed.
(7) Paragraph (a) of the definition “coût indiqué” in subsection 108(1) of the French version of the Act is replaced by the following:
a) dans le cas où de l’argent ou un autre bien de la fiducie a été distribué par celle-ci au contribuable en règlement de tout ou partie de sa participation au capital (lors de la liquidation de la fiducie ou autrement), du total des montants suivants :
(i) l’argent ainsi distribué,
(ii) les sommes représentant chacune le coût indiqué pour la fiducie, immédiatement avant la distribution, de chacun de ces autres biens,
(8) Subparagraphs (g)(v) and (vi) of the definition “fiducie” in subsection 108(1) of the French version of the Act are replaced by the following:
(v) la fiducie dont les modalités prévoient, à ce moment, que la totalité ou une partie de la participation d’une personne dans la fiducie doit prendre fin par rapport à une période (y compris celle déterminée par rapport au décès de la personne), autrement que par l’effet des modalités de la fiducie selon lesquelles une participation dans la fiducie doit prendre fin par suite de la distribution à la personne (ou à sa succession) d’un bien de la fiducie, si la juste valeur marchande du bien à distribuer doit être proportionnelle à celle de cette participation immédiatement avant la distribution,
(vi) la fiducie qui, avant ce moment et après le 17 décembre 1999, a effectué une distribution en faveur d’un bénéficiaire au titre de la participation de celui-ci à son capital, s’il est raisonnable de considérer que la distribution a été financée par une dette de la fiducie et si l’une des raisons pour lesquelles la dette a été contractée était d’éviter des impôts payables par ailleurs en vertu de la présente partie par suite du décès d’un particulier.
(9) The definition “montant de réduction admissible” in subsection 108(1) of the French version of the Act is replaced by the following:
« montant de réduction admissible »
“eligible offset”
montant de réduction admissible En ce qui concerne un contribuable à un moment donné relativement à la totalité ou à une partie de sa participation au capital d’une fiducie, toute partie de dette ou d’obligation qui est prise en charge par le contribuable et qu’il est raisonnable de considérer comme étant imputable à un bien distribué à ce moment en règlement de la participation ou de la partie de participation, si la distribution est conditionnelle à la prise en charge par le contribuable de la partie de dette ou d’obligation.
(10) Clauses 108(2)(b)(iv)(A) and (B) of the Act are replaced by the following:
(A) not less than 95% of its income for the current year (computed without regard to subsections 39(2), 49(2.1) and 104(6)) was derived from, or from the disposition of, investments described in subparagraph (iii), or
(B) not less than 95% of its income for each of the relevant periods (computed without regard to subsections 39(2), 49(2.1) and 104(6) and as though each of those periods were a taxation year) was derived from, or from the disposition of, investments described in subparagraph (iii),
(11) Subsections (2) and (3) apply to taxation years that end after December 20, 2002, except that
(a) a transfer that is required, by clause (d)(iii)(B) of the definition “testamentary trust” in subsection 108(1) of the Act, as enacted by subsection (3), to be made within 12 months after a payment was made is deemed to be made in a timely manner if it is made no later than 12 months after this Act receives royal assent; and
(b) for those taxation years that end before the day on which this Act receives royal assent, the reference to “within the first 12 months after the individual’s death” in clause (d)(iii)(C) of the definition “testamentary trust” in subsection 108(1) of the Act, as enacted by subsection (3), is to be read as a reference to “after the individual’s death and no later than 12 months after the day on which the Technical Tax Amendments Act, 2012 receives royal assent”.
(12) Subsection (4) applies to trust taxation years that begin after 2006.
(13) Subsection (5) applies to the 1998 and subsequent taxation years.
(14) Subsection (6) applies to taxation years that begin after October 31, 2011.
(15) Subsection (10) applies to the 2003 and subsequent taxation years.
237. (1) Paragraph 110(1)(k) of the Act is replaced by the following:
Marginal note:Part VI.1 tax
(k) the amount determined by multiplying the taxpayer’s tax payable under subsection 191.1(1) for the year by
(i) if the taxation year ends before 2010, 3,
(ii) if the taxation year ends after 2009 and before 2012, 3.2, and
(iii) if the taxation year ends after 2011, 3.5.
(2) Subsection 110(1.7) of the Act is replaced by the following:
Marginal note:Reduction in exercise price
(1.7) If the amount payable by a taxpayer to acquire securities under an agreement referred to in subsection 7(1) is reduced at any particular time and the conditions in subsection (1.8) are satisfied in respect of the reduction,
(a) the rights (referred to in this subsection and subsection (1.8) as the “old rights”) that the taxpayer had under the agreement immediately before the particular time are deemed to have been disposed of by the taxpayer immediately before the particular time;
(b) the rights (referred to in this subsection and subsection (1.8) as the “new rights”) that the taxpayer has under the agreement at the particular time are deemed to be acquired by the taxpayer at the particular time; and
(c) the taxpayer is deemed to receive the new rights as consideration for the disposition of the old rights.
Marginal note:Conditions for subsection (1.7) to apply
(1.8) The following are the conditions in respect of the reduction:
(a) that the taxpayer would not be entitled to a deduction under paragraph (1)(d) if the taxpayer acquired securities under the agreement immediately after the particular time and this section were read without reference to subsection (1.7); and
(b) that the taxpayer would be entitled to a deduction under paragraph (1)(d) if the taxpayer
(i) disposed of the old rights immediately before the particular time,
(ii) acquired the new rights at the particular time as consideration for the disposition, and
(iii) acquired securities under the agreement immediately after the particular time.
(3) Subsection (1) applies to the 2003 and subsequent taxation years.
(4) Subsection (2) applies to reductions that occur after 1998.
(5) An election by a taxpayer under subsection 7(10) of the Act, as it read immediately before its repeal by subsection 3(10) of the Sustaining Canada’s Economic Recovery Act, to have subsection 7(8) of the Act, as it read immediately before its repeal by subsection 3(8) of the Sustaining Canada’s Economic Recovery Act, apply is deemed to have been filed in a timely manner if
(a) it is filed on or before the 60th day after the day on which this Act receives royal assent;
(b) it is in respect of a security acquired by the taxpayer before the day on which this Act receives royal assent;
(c) the taxpayer is entitled to a deduction under paragraph 110(1)(d) of the Act in respect of the acquisition; and
(d) the taxpayer would not have been so entitled if subsection 110(1.7) of the Act, as enacted by subsection (2), did not apply.
238. (1) The portion of paragraph 110.1(1)(a) of the Act before the formula is replaced by the following:
Marginal note:Charitable gifts
(a) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (b), (c) or (d)) made by the corporation in the year or in any of the five preceding taxation years to
(i) a registered charity,
(ii) a registered Canadian amateur athletic association,
(iii) a corporation resident in Canada and described in paragraph 149(1)(i),
(iv) a municipality in Canada,
(iv.1) a municipal or public body performing the function of government in Canada,
(v) the United Nations or an agency thereof,
(vi) a university outside Canada that is prescribed to be a university the student body of which ordinarily includes students from Canada,
(vii) a charitable organization outside Canada to which Her Majesty in right of Canada has made a gift in the year or in the 12-month period preceding the year, or
(viii) Her Majesty in right of Canada or a province,
not exceeding the lesser of the corporation’s income for the year and the amount determined by the formula
(2) The portion of paragraph 110.1(1)(a) of the Act before the formula, as enacted by subsection (1), is replaced by the following:
Marginal note:Charitable gifts
(a) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (b), (c) or (d)) made by the corporation in the year or in any of the five preceding taxation years to a qualified donee, not exceeding the lesser of the corporation’s income for the year and the amount determined by the formula
(3) The description of B in paragraph 110.1(1)(a) of the Act is replaced by the following:
- B
- is the total of all amounts, each of which is that proportion of the corporation’s taxable capital gain for the taxation year in respect of a gift made by the corporation in the taxation year (in respect of which gift an eligible amount is described in this paragraph for the taxation year) that the eligible amount of the gift is of the corporation’s proceeds of disposition in respect of the gift,
(4) Clause (B) in the description of D in paragraph 110.1(1)(a) of the Act is replaced by the following:
(B) the total of all amounts each of which is determined in respect of a disposition that is the making of a gift of property of the class by the corporation in the year (in respect of which gift an eligible amount is described in this paragraph for the taxation year) equal to the lesser of
(I) that proportion, of the amount by which the proceeds of disposition of the property exceeds any outlays and expenses, to the extent that they were made or incurred by the corporation for the purpose of making the disposition, that the eligible amount of the gift is of the corporation’s proceeds of disposition in respect of the gift, and
(II) that proportion, of the capital cost to the corporation of the property, that the eligible amount of the gift is of the corporation’s proceeds of disposition in respect of the gift;
(5) Paragraph 110.1(1)(a.1) of the Act is replaced by the following:
Marginal note:Gifts of medicine
(a.1) the total of all amounts each of which is an amount, in respect of property that is the subject of an eligible medical gift made by the corporation in the taxation year or in any of the five preceding taxation years, determined by the formula
A × B/C
where
- A
- is the lesser of
(a) the cost to the corporation of the property, and
(b) 50 per cent of the amount, if any, by which the corporation’s proceeds of disposition of the property in respect of the gift exceeds the cost to the corporation of the property;
- B
- is the eligible amount of the gift; and
- C
- is the corporation’s proceeds of disposition of the property in respect of the gift.
(6) The portion of paragraph 110.1(1)(b) of the Act before subparagraph (i) is replaced by the following:
Marginal note:Gifts to Her Majesty
(b) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (c) or (d)) made by the corporation to Her Majesty in right of Canada or of a province
(7) Paragraph 110.1(1)(c) of the Act is replaced by the following:
Marginal note:Gifts to institutions
(c) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (d)) of an object that the Canadian Cultural Property Export Review Board has determined meets the criteria set out in paragraphs 29(3)(b) and (c) of the Cultural Property Export and Import Act, which gift was made by the corporation in the year or in any of the five preceding taxation years to an institution or a public authority in Canada that was, at the time the gift was made, designated under subsection 32(2) of that Act either generally or for a specified purpose related to that object; and
(8) Subparagraph 110.1(1)(d)(i) of the Act is replaced by the following:
(i) Her Majesty in right of Canada or of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada, or
(9) Paragraph 110.1(1)(d) of the Act, as amended by subsection (8), is replaced by the following:
Marginal note:Ecological gifts
(d) the total of all amounts each of which is the eligible amount of a gift of land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude) if
(i) the fair market value of the gift is certified by the Minister of the Environment,
(ii) the land is certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of that Minister or the designated person, important to the preservation of Canada’s environmental heritage, and
(iii) the gift was made by the corporation in the year or in any of the five preceding taxation years to
(A) Her Majesty in right of Canada or of a province,
(B) a municipality in Canada,
(C) a municipal or public body performing a function of government in Canada, or
(D) a registered charity one of the main purposes of which is, in the opinion of that Minister, the conservation and protection of Canada’s environmental heritage, and that is approved by that Minister or the designated person in respect of the gift.
(10) The portion of subsection 110.1(2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Proof of gift
(2) An eligible amount of a gift shall not be included for the purpose of determining a deduction under subsection (1) unless the making of the gift is evidenced by filing with the Minister
(11) Subsection 110.1(3) of the Act is replaced by the following:
Marginal note:Where subsection (3) applies
(2.1) Subsection (3) applies in circumstances where
(a) a corporation makes a gift at any time of
(i) capital property to a donee described in paragraph (1)(a), (b) or (d), or
(ii) in the case of a corporation not resident in Canada, real or immovable property situated in Canada to a prescribed donee who provides an undertaking, in a form satisfactory to the Minister, to the effect that the property will be held for use in the public interest; and
(b) the fair market value of the property otherwise determined at that time exceeds
(i) in the case of depreciable property of a prescribed class, the lesser of the undepreciated capital cost of that class at the end of the taxation year of the corporation that includes that time (determined without reference to the proceeds of disposition designated in respect of the property under subsection (3)) and the adjusted cost base to the corporation of the property immediately before that time, and
(ii) in any other case, the adjusted cost base to the corporation of the property immediately before that time.
Marginal note:Gifts of capital property
(3) If this subsection applies in respect of a gift by a corporation of property, and the corporation designates an amount in respect of the gift in its return of income under section 150 for the year in which the gift is made, the amount so designated is deemed to be its proceeds of disposition of the property and, for the purpose of subsection 248(31), the fair market value of the gift, but the amount so designated may not exceed the fair market value of the property otherwise determined and may not be less than the greater of
(a) in the case of a gift made after December 20, 2002, the amount of the advantage, if any, in respect of the gift, and
(b) the amount determined under subparagraph (2.1)(b)(i) or (ii), as the case may be, in respect of the property.
(12) Subparagraph 110.1(2.1)(a)(i) of the Act, as enacted by subsection (11), is replaced by the following:
(i) capital property to a qualified donee, or
(13) Subsection 110.1(4) of the Act is replaced by the following:
Marginal note:Gifts made by partnership
(4) If at the end of a fiscal period of a partnership a corporation is a member of the partnership, its share of any amount that would, if the partnership were a person, be the eligible amount of a gift made by the partnership to any donee is, for the purpose of this section, deemed to be the eligible amount of a gift made to that donee by the corporation in its taxation year in which the fiscal period of the partnership ends.
(14) The portion of paragraph 110.1(5)(b) of the Act before subparagraph (i) is replaced by the following:
(b) where the gift is a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, the greater of
(15) Subsections (1), (3), (4), (6), (7), (9), (10), (13) and (14) apply to gifts made after December 20, 2002.
(16) Subsections (2) and (12) are deemed to have come into force on January 1, 2012.
(17) Subsection (5) applies to gifts made after March 18, 2007.
(18) Subsection (8) applies to gifts made after May 8, 2000.
(19) Subsection (11) applies to gifts made after 1999, except that, for gifts made after 1999 and before December 21, 2002, the reference to “subsection 248(31)” in subsection 110.1(3) of the Act, as enacted by subsection (11), is to be read as a reference to “subsection (1)”.
239. (1) Paragraph (c) of the definition “qualifying amount” in subsection 110.2(1) of the Act is replaced by the following:
(c) an amount described in paragraph 6(1)(f) or (f.1), subparagraph 56(1)(a)(iv) or paragraph 56(1)(b), or
(2) Subsection (1) is deemed to have come into force on April 1, 2006.
240. (1) The portion of paragraph (a) of the definition “qualified farm property” in subsection 110.6(1) of the Act before subparagraph (i) is replaced by the following:
(a) real or immovable property that was used in the course of carrying on the business of farming in Canada by,
(2) The portion of paragraph (a) of the definition “qualified fishing property” in subsection 110.6(1) of the Act before subparagraph (i) is replaced by the following:
(a) real or immovable property or a fishing vessel that was used in the course of carrying on the business of fishing in Canada by,
(3) Paragraphs 110.6(1.3)(a) and (b) of the Act are replaced by the following:
(a) the following apply in respect of the property or property for which the property was substituted (in this paragraph referred to as “the property”),
(i) the property was owned throughout the period of at least 24 months immediately preceding that time by one or more of
(A) the individual, or a spouse, common-law partner, child or parent of the individual,
(B) a partnership, an interest in which is an interest in a family farm partnership of the individual or of the individual’s spouse or common-law partner,
(C) if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or
(D) a personal trust from which the individual or a child or parent of the individual acquired the property, and
(ii) either
(A) in at least two years while the property was owned by one or more persons referred to in subparagraph (i),
(I) the gross revenue of a person (in this subclause referred to as the “operator”) referred to in subparagraph (i) from the farming business referred to in subclause (II) for the period during which the property was owned by a person described in subparagraph (i) exceeded the income of the operator from all other sources for that period, and
(II) the property was used principally in a farming business carried on in Canada in which an individual referred to in subparagraph (i), or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or
(B) throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in subparagraph (i), the property was used by a corporation referred to in subparagraph (a)(iv) of the definition “qualified farm property” in subsection (1) or by a partnership referred to in subparagraph (a)(v) of that definition in a farming business in which an individual referred to in any of subparagraphs (a)(i) to (iii) of that definition was actively engaged on a regular and continuous basis; or
(4) The portion of subsection 110.6(6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Failure to report capital gain
(6) Notwithstanding subsections (2) to (2.3), no amount may be deducted under this section in respect of a capital gain of an individual for a particular taxation year in computing the individual’s taxable income for the particular taxation year or any subsequent year, if
(5) Paragraph 110.6(6)(a) of the French version of the Act is replaced by the following:
a) le particulier, sciemment ou dans des circonstances équivalant à faute lourde :
(i) soit ne produit pas de déclaration de revenu pour l’année donnée dans un délai de un an suivant la date d’échéance de production qui lui est applicable pour cette année,
(ii) soit ne déclare pas le gain en capital dans sa déclaration de revenu pour l’année donnée;
(6) The portion of subsection 110.6(12) of the Act before paragraph (a) is replaced by the following:
Marginal note:Trust deduction — death of spouse or common-law partner
(12) Notwithstanding any other provision of this Act, a trust (other than an alter ego trust or a joint spousal or common-law partner trust) that is described in paragraph 104(4)(a) or (a.1) may, in computing its taxable income for its taxation year that includes the day determined under paragraph 104(4)(a) or (a.1), as the case may be, in respect of the trust, deduct under this section an amount equal to the least of
(7) Subsection 110.6(14) of the Act is amended by adding the following after paragraph (d):
(d.1) a person who is a member of a partnership that is a member of another partnership is deemed to be a member of the other partnership;
(8) Subsections (1) and (2) apply to dispositions of property that occur after May 1, 2006.
(9) Subsection (3) applies to dispositions of property that occur after November 5, 2010.
(10) Subsections (4) and (5) apply to any taxation year for which a return of income has not been filed before October 31, 2011, except in respect of gains realized in another taxation year for which a return of income was filed before October 31, 2011.
(11) Subsection (6) applies to taxation years that begin after October 31, 2011.
(12) Subsection (7) applies
(a) to dispositions that occur after December 20, 2002; and
(b) to dispositions made by a taxpayer after 1999, if the taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act receives royal assent.
241. (1) Subsection 111(1.1) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) the amount, if any, that the Minister determines to be reasonable in the circumstances, after considering the application of subsections 104(21.6), 130.1(4), 131(1) and 138.1(3.2) to the taxpayer for the particular year.
(2) Paragraph 111(1.1)(c) of the Act, as enacted by subsection (1), is replaced by the following:
(c) the amount, if any, that the Minister determines to be reasonable in the circumstances for the particular year and after considering the application to the taxpayer of subsections 104(21.6), 130.1(4), 131(1) and 138.1(3.2) as they read in their application to the taxpayer’s last taxation year that began before November 2011.
(3) Subsections 111(7.1) to (7.2) of the Act are repealed.
(4) The description of C in the definition “pre-1986 capital loss balance” in subsection 111(8) of the Act is replaced by the following:
- C
- is the total of all amounts deducted under section 110.6 in computing the individual’s taxable income for taxation years that ended before 1988 or begin after October 17, 2000,
(5) Subsections (1) and (4) apply to the 2000 and subsequent taxation years.
(6) Subsections (2) and (3) apply to taxation years that begin after October 31, 2011.
242. (1) Subsection 112(2.1) of the Act is replaced by the following:
Marginal note:No deduction permitted
(2.1) No deduction may be made under subsection (1) or (2) in computing the taxable income of a specified financial institution in respect of a dividend received by it on a share that was, at the time the dividend was received, a term preferred share, other than a dividend on a share of the capital stock of a corporation that was not acquired in the ordinary course of the business carried on by the institution, and for the purposes of this subsection, if a restricted financial institution received the dividend on a share of the capital stock of a mutual fund corporation or an investment corporation at any time after the mutual fund or investment corporation has elected under subsection 131(10) not to be a restricted financial institution, the share is deemed to be a term preferred share acquired in the ordinary course of business.
(2) The portion of paragraph 112(2.2)(a) of the Act before subparagraph (i) is replaced by the following:
(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 a specified financial 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 was received, 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
(3) Subsections (1) and (2) apply to dividends received on or after November 5, 2010.
243. (1) Clause 113(1)(b)(i)(A) of the Act is replaced by the following:
(A) the corporation’s relevant tax factor for the year
(2) Clause 113(1)(c)(i)(B) of the Act is replaced by the following:
(B) the corporation’s relevant tax factor for the year, and
(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2001.
244. (1) The portion of subsection 115.2(2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Not carrying on business in Canada
(2) For the purposes of subsections 115(1) and 150(1) and Part XIV, a non-resident person is not considered to be carrying on business in Canada at any particular time solely because of the provision to the person, or to a partnership of which the person is a member, at the particular time of designated investment services by a Canadian service provider if
(2) Paragraph 115.2(2)(c) of the Act is amended by striking out “or” at the end of subparagraph (i) and by replacing subparagraph (ii) with the following:
(ii) where the non-resident person is, or is affiliated with, a person or partnership described in clause (A) or (B), the total of the fair market value of all investments in the partnership at the particular time is not less than four times the total of the fair market value of each investment in the partnership beneficially owned at the particular time by
(A) a person or partnership (other than a designated entity in respect of the Canadian service provider), more than 25% of the total of the fair market value, at the particular time, of investments in which are beneficially owned by persons and partnerships (other than a designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider, or
(B) a person or partnership (other than a designated entity in respect of the Canadian service provider) that is affiliated with the Canadian service provider, or
(iii) at the particular time, the non-resident person is not affiliated with the Canadian service provider and is not affiliated with any person or partnership (other than the partnership to which the services are provided) described in clause (ii)(A) or (B).
(3) The portion of subsection 115.2(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Interpretation
(3) For the purposes of this subsection and subparagraphs (2)(b)(iii) and (c)(ii),
(4) Section 115.2 of the Act is amended by adding the following after subsection (4):
Marginal note:Property of a partnership
(5) For the purpose of determining whether a non-resident person’s interest in a partnership is, at any particular time before March 5, 2010, a taxable Canadian property, property of the partnership shall not be considered to be used or held by the partnership in a business carried on in Canada, if because of subsection (2) the non-resident person is not considered to be carrying on business in Canada at the particular time.
(5) Subsection 115.2(5) of the Act, as enacted by subsection (4), is repealed.
(6) Subsection (1) applies to the 1999 and subsequent taxation years.
(7) Subsections (2) and (3) apply to the 2002 and subsequent taxation years, except that for the period that begins at the beginning of the 2002 taxation year of a taxpayer and that ends on October 31, 2011, paragraph 115.2(2)(c) of the Act, as amended by subsection (2), does not apply to the taxpayer if the taxpayer so elects and files the election in writing with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes October 31, 2011.
(8) Subsection (4) applies to the 2008 and subsequent taxation years.
(9) Subsection (5) is deemed to have come into force on March 5, 2010.
245. (1) The portion of subsection 116(5.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Certificates for dispositions
(5.2) If a non-resident person has, in respect of a disposition, or a proposed disposition, in a taxation year to a taxpayer of property (other than excluded property) that is a life insurance policy in Canada, a Canadian resource property, a property (other than capital property) that is real property, or an immovable, situated in Canada, a timber resource property, depreciable property that is a taxable Canadian property, eligible capital property that is a taxable Canadian property or any interest in, or for civil law any right in, or any option in respect of, a property to which this subsection applies (whether or not that property exists),
(2) Paragraph 116(6)(f) of the Act is replaced by the following:
(f) property of an authorized foreign bank that carries on a Canadian banking business;
(3) Subsection (1) is deemed to have come into force on December 24, 1998.
(4) Subsection (2) is deemed to have come into force on June 28, 1999.
246. (1) Paragraph (a) of the definition “pension income” in subsection 118(7) of the Act is amended by adding the following after subparagraph (iii):
(iii.1) a payment (other than a payment described in subparagraph (i)) payable on a periodic basis under a money purchase provision (within the meaning assigned by subsection 147.1(1)) of a registered pension plan,
(2) Subsection (1) applies to the 2004 and subsequent taxation years.
247. (1) The definition “qualified Canadian transit organization” in subsection 118.02(1) of the Act is replaced by the following:
“qualified Canadian transit organization”
« organisme de transport canadien admissible »
“qualified Canadian transit organization” means a person authorised, under a law of Canada or a province, to carry on in Canada a business that is the provision of public commuter transit services, which is carried on through a permanent establishment (as defined by regulation) in Canada.
(2) Subsection (1) applies to the 2009 and subsequent taxation years.
248. (1) The definition “total charitable gifts” in subsection 118.1(1) of the Act is replaced by the following:
“total charitable gifts”
« total des dons de bienfaisance »
“total charitable gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition “total Crown gifts”, “total cultural gifts” or “total ecological gifts”) made by the individual in the year or in any of the five preceding taxation years (other than in a year for which a deduction under subsection 110(2) was claimed in computing the individual’s taxable income) to
(a) a registered charity,
(b) a registered Canadian amateur athletic association,
(c) a housing corporation resident in Canada and exempt from tax under this Part because of paragraph 149(1)(i),
(d) a municipality in Canada,
(d.1) a municipal or public body performing a function of government in Canada,
(e) the United Nations or an agency thereof,
(f) a university outside Canada that is prescribed to be a university the student body of which ordinarily includes students from Canada,
(g) a charitable organization outside Canada to which her Majesty in right of Canada has made a gift during the individual’s taxation year or the 12 months immediately preceding that taxation year, or
(g.1) Her Majesty in right of Canada or a province,
to the extent that those amounts were
(h) not deducted in computing the individual’s taxable income for a taxation year ending before 1988, and
(i) not included in determining an amount that was deducted under this section in computing the individual’s tax payable under this Part for a preceding taxation year;
(2) The definition “total charitable gifts” in subsection 118.1(1) of the Act, as enacted by subsection (1), is replaced by the following:
“total charitable gifts”
« total des dons de bienfaisance »
“total charitable gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift the eligible amount of which is included in the total Crown gifts, the total cultural gifts or the total ecological gifts of the individual for the year) made by the individual in the year or in any of the five preceding taxation years (other than in a year for which a deduction under subsection 110(2) was claimed in computing the individual’s taxable income) to a qualified donee, to the extent that the amount was not included in determining an amount that was deducted under this section in computing the individual’s tax payable under this Part for a preceding taxation year;
(3) Paragraph (a) of the definition “total ecological gifts” in subsection 118.1(1) of the Act is replaced by the following:
(a) Her Majesty in right of Canada or of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada, or
(4) The definition “total ecological gifts” in subsection 118.1(1) of the Act, as amended by subsection (3), is replaced by the following:
“total ecological gifts”
« total des dons de biens écosensibles »
“total ecological gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition “total cultural gifts”) of land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude) if
(a) the fair market value of the gift is certified by the Minister of the Environment,
(b) the land is certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of that Minister or the designated person, important to the preservation of Canada’s environmental heritage, and
(c) the gift was made by the individual in the year or in any of the five preceding taxation years to
(i) Her Majesty in right of Canada or of a province,
(ii) a municipality in Canada,
(iii) a municipal or public body performing a function of government in Canada, or
(iv) a registered charity one of the main purposes of which is, in the opinion of that Minister, the conservation and protection of Canada’s environmental heritage, and that is approved by that Minister or the designated person in respect of the gift,
to the extent that those amounts were not included in determining an amount that was deducted under this section in computing the individual’s tax payable under this Part for a preceding taxation year;
(5) The portion of the definition “total Crown gifts” in subsection 118.1(1) of the Act before paragraph (a) is replaced by the following:
“total Crown gifts”
« total des dons à l’État »
“total Crown gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift (other than a gift described in the definition “total cultural gifts” or “total ecological gifts”) made by the individual in the year or in any of the five preceding taxation years to Her Majesty in right of Canada or of a province, to the extent that those amounts were
(6) The portion of the definition “total cultural gifts” in subsection 118.1(1) of the Act before paragraph (a) is replaced by the following:
“total cultural gifts”
« total des dons de biens culturels »
“total cultural gifts”, of an individual for a taxation year, means the total of all amounts each of which is the eligible amount of a gift
(7) The description of B in subparagraph (a)(iii) of the definition “total gifts” in subsection 118.1(1) of the Act is replaced by the following:
- B
- is the total of all amounts, each of which is that proportion of the individual’s taxable capital gain for the taxation year in respect of a gift made by the individual in the taxation year (in respect of which gift an eligible amount is included in the individual’s total charitable gifts for the taxation year) that the eligible amount of the gift is of the individual’s proceeds of disposition in respect of the gift,
(8) Clause (B) in the description of D in subparagraph (a)(iii) of the definition “total gifts” in subsection 118.1(1) of the Act is replaced by the following:
(B) the total of all amounts each of which is determined in respect of a disposition that is the making of a gift of property of the class made by the individual in the year (in respect of which gift an eligible amount is included in the individual’s total charitable gifts for the taxation year) equal to the lesser of
(I) that proportion, of the amount by which the proceeds of disposition of the property exceed any outlays and expenses, to the extent that they were made or incurred by the individual for the purpose of making the disposition, that the eligible amount of the gift is of the individual’s proceeds of disposition in respect of the gift, and
(II) that proportion, of the capital cost to the individual of the property, that the eligible amount of the gift is of the individual’s proceeds of disposition in respect of the gift, and
(9) The portion of subsection 118.1(2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Proof of gift
(2) An eligible amount of a gift shall not be included in the total charitable gifts, total Crown gifts, total cultural gifts or total ecological gifts of an individual unless the making of the gift is evidenced by filing with the Minister
(10) Subsection 118.1(6) of the Act is replaced by the following:
Marginal note:Where subsection (6) applies
(5.4) Subsection (6) applies in circumstances where
(a) an individual
(i) makes a gift (by the individual’s will or otherwise) at any time of capital property to a donee described in the definition “total charitable gifts”, “total Crown gifts” or “total ecological gifts” in subsection (1), or
(ii) who is non-resident, makes a gift (by the individual’s will or otherwise) at any time of real or immovable property situated in Canada to a prescribed donee who provides an undertaking, in a form satisfactory to the Minister, to the effect that the property will be held for use in the public interest; and
(b) the fair market value of the property otherwise determined at that time exceeds
(i) in the case of depreciable property of a prescribed class, the lesser of the undepreciated capital cost of that class at the end of the taxation year of the individual that includes that time (determined without reference to proceeds of disposition designated in respect of the property under subsection (6)) and the adjusted cost base to the individual of the property immediately before that time, and
(ii) in any other case, the adjusted cost base to the individual of the property immediately before that time.
Marginal note:Gifts of capital property
(6) If this subsection applies in respect of a gift by an individual of property, and the individual or the individual’s legal representative designates an amount in respect of the gift in the individual’s return of income under section 150 for the year in which the gift is made, the amount so designated is deemed to be the individual’s proceeds of disposition of the property and, for the purpose of subsection 248(31), the fair market value of the gift, but the amount so designated may not exceed the fair market value of the property otherwise determined and may not be less than the greater of
(a) in the case of a gift made after December 20, 2002, the amount of the advantage, if any, in respect of the gift, and
(b) the amount determined under subparagraph (5.4)(b)(i) or (ii), as the case may be, in respect of the property.
(11) Subparagraph 118.1(5.4)(a)(i) of the Act, as enacted by subsection (10), is replaced by the following:
(i) makes a gift (by the individual’s will or otherwise) at any time of capital property to a qualified donee, or
(12) Paragraph 118.1(7)(b) of the French version of the Act is replaced by the following:
b) le montant indiqué par le particulier ou par son représentant légal dans la déclaration de revenu du particulier produite conformément à l’article 150 pour l’année du don est réputé correspondre à la fois au produit de disposition de l’oeuvre d’art pour le particulier et, pour l’application du paragraphe 248(31), à la juste valeur marchande de l’oeuvre d’art; toutefois, il ne peut ni excéder la juste valeur marchande de l’oeuvre d’art, déterminée par ailleurs, ni être inférieur au plus élevé des montants suivants :
(i) le montant de l’avantage au titre du don,
(ii) le coût indiqué de l’oeuvre d’art pour le particulier.
(13) Paragraph 118.1(7)(d) of the English version of the Act is replaced by the following:
(d) the amount that the individual or the individual’s legal representative designates in the individual’s return of income under section 150 for the year in which the gift is made is deemed to be the individual’s proceeds of disposition of the work of art and, for the purpose of subsection 248(31), the fair market value of the work of art, but the amount so designated may not exceed the fair market value otherwise determined of the work of art and may not be less than the greater of
(i) the amount of the advantage, if any, in respect of the gift, and
(ii) the cost amount to the individual of the work of art.
(14) Paragraph 118.1(7.1)(b) of the French version of the Act is replaced by the following:
b) le particulier est réputé avoir reçu, au moment donné pour l’oeuvre d’art, un produit de disposition égal au coût indiqué de l’oeuvre d’art pour lui à ce moment ou, s’il est plus élevé, au montant de l’avantage au titre du don.
(15) Paragraph 118.1(7.1)(d) of the English version of the Act is replaced by the following:
(d) the individual is deemed to have received at the particular time proceeds of disposition in respect of the work of art equal to the greater of its cost amount to the individual at that time and the amount of the advantage, if any, in respect of the gift.
(16) Subsection 118.1(8) of the Act is replaced by the following:
Marginal note:Gifts made by partnership
(8) If at the end of a fiscal period of a partnership an individual is a member of the partnership, the individual’s share of any amount that would, if the partnership were a person, be the eligible amount of a gift made by the partnership to any donee is, for the purpose of this section, deemed to be the eligible amount of a gift made to that donee by the individual in the individual’s taxation year in which the fiscal period of the partnership ends.
(17) Paragraphs 118.1(13)(b) and (c) of the Act are replaced by the following:
(b) if the security ceases to be a non-qualifying security of the individual at a subsequent time that is within 60 months after the particular time and the donee has not disposed of the security at or before the subsequent time, the individual is deemed to have made a gift to the donee of property at the subsequent time and the fair market value of that property is deemed to be the lesser of the fair market value of the security at the subsequent time and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual’s total charitable gifts or total Crown gifts for a taxation year;
(c) if the security is disposed of by the donee within 60 months after the particular time and paragraph (b) does not apply to the security, the individual is deemed to have made a gift to the donee of property at the time of the disposition and the fair market value of that property is deemed to be the lesser of the fair market value of any consideration (other than a non-qualifying security of the individual or a property that would be a non-qualifying security of the individual if the individual were alive at that time) received by the donee for the disposition and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual’s total charitable gifts or total Crown gifts for a taxation year; and
(18) Paragraph 118.1(13)(c) of the Act, as enacted by subsection (17), is replaced by the following:
(c) if the security is disposed of by the donee within 60 months after the particular time and paragraph (b) does not apply to the security, the individual is deemed to have made a gift to the donee of property at the time of the disposition and the fair market value of that property is deemed to be the lesser of the fair market value of any consideration (other than a non-qualifying security of any person) received by the donee for the disposition and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual’s total charitable gifts or total Crown gifts for a taxation year; and
(19) Subsections (1), (4), (5) to (9) and (12) to (17) apply to gifts made after December 20, 2002.
(20) Subsections (2) and (11) are deemed to have come into force on January 1, 2012.
(21) Subsection (3) applies to gifts made after May 8, 2000.
(22) Subsection (10) applies to gifts made after 1999, except that, for gifts made before December 21, 2002, the reference to “subsection 248(31)” in subsection 118.1(6) of the Act, as enacted by subsection (10), is to be read as a reference to “subsection (1)”.
(23) Subsection (18) is deemed to have come into force on March 22, 2011.
249. (1) The portion of the description of B in subsection 118.2(1) of the English version of the Act before paragraph (a) is replaced by the following:
- B
- is the total of the individual’s medical expenses in respect of the individual, the individual’s spouse or common-law partner or a child of the individual who has not attained the age of 18 years before the end of the taxation year
(2) Subparagraph 118.2(2)(c)(i) of the Act is replaced by the following:
(i) the patient is, and has been certified in writing by a medical practitioner to be, a person who, by reason of mental or physical infirmity, is and is likely to be for a long-continued period of indefinite duration dependent on others for the patient’s personal needs and care and who, as a result, requires a full-time attendant,
(3) Paragraphs 118.2(2)(d) and (e) of the Act are replaced by the following:
(d) for the full-time care in a nursing home of the patient, who has been certified in writing by a medical practitioner to be a person who, by reason of lack of normal mental capacity, is and in the foreseeable future will continue to be dependent on others for the patient’s personal needs and care;
(e) for the care, or the care and training, at a school, an institution or another place of the patient, who has been certified in writing by an appropriately qualified person to be a person who, by reason of a physical or mental handicap, requires the equipment, facilities or personnel specially provided by that school, institution or other place for the care, or the care and training, of individuals suffering from the handicap suffered by the patient;
(4) Subparagraph 118.2(2)(g)(ii) of the Act is replaced by the following:
(ii) one individual who accompanied the patient, where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling without the assistance of an attendant
(5) Paragraph 118.2(2)(h) of the Act is replaced by the following:
(h) for reasonable travel expenses (other than expenses described in paragraph (g)) incurred in respect of the patient and, where the patient was, and has been certified in writing by a medical practitioner to be, incapable of travelling without the assistance of an attendant, in respect of one individual who accompanied the patient, to obtain medical services in a place that is not less than 80 km from the locality where the patient dwells if the circumstances described in subparagraphs (g)(iii) to (v) apply;
(6) Paragraph 118.2(2)(i) of the Act is replaced by the following:
(i) for, or in respect of, an artificial limb, an iron lung, a rocking bed for poliomyelitis victims, a wheel chair, crutches, a spinal brace, a brace for a limb, an ileostomy or colostomy pad, a truss for hernia, an artificial eye, a laryngeal speaking aid, an aid to hearing, an artificial kidney machine, phototherapy equipment for the treatment of psoriasis or other skin disorders, or an oxygen concentrator, for the patient;
(7) The portion of paragraph 118.2(2)(l.1) of the French version of the Act before subparagraph (i) is replaced by the following:
l.1) au nom du particulier, de son époux ou conjoint de fait ou d’une personne à charge visée à l’alinéa a), qui doit subir une transplantation de la moelle osseuse ou d’un organe :
(8) Subparagraph 118.2(2)(l.9)(iii) of the English version of the Act is replaced by the following:
(iii) at the time the remuneration is paid, the payee is neither the individual’s spouse or common-law partner nor under 18 years of age, and
(9) Subsections (1) and (8) apply to taxation years that end after October 31, 2011.
(10) Subsections (2) to (5) apply to certifications made after December 20, 2002.
250. (1) Paragraph 118.3(2)(a) of the French version of the Act is replaced by the following:
a) d’une part, le particulier demande pour l’année, pour cette personne, une déduction prévue au paragraphe 118(1), soit par application de l’alinéa 118(1)b), soit, si la personne est le père, la mère, le grand-père, la grand-mère, un enfant, un petit-enfant, le frère, la soeur, la tante, l’oncle, le neveu ou la nièce du particulier ou de son époux ou conjoint de fait, par application des alinéas 118(1)c.1) ou d), ou aurait pu demander une telle déduction pour l’année si cette personne n’avait eu aucun revenu pour l’année et avait atteint l’âge de 18 ans avant la fin de l’année et, dans le cas de la déduction prévue à l’alinéa 118(1)b), si le particulier n’avait pas été marié ou n’avait pas vécu en union de fait;
(2) Paragraph 118.3(4)(b) of the Act is replaced by the following:
(b) if the information referred to in paragraph (a) is provided by a person referred to in paragraph (1)(a.2) or (a.3), the information so provided is deemed to be included in a certificate in prescribed form.
(3) Subsection (1) applies to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act, in respect of the 1998, 1999 or 2000 taxation years, subsection (1) applies to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.
(4) Subsection (2) applies to the 2005 and subsequent taxation years.
251. Subparagraph 118.5(1)(a)(iii) of the Act is replaced by the following:
(iii) are paid on behalf of, or reimbursed to, the individual by the individual’s employer and the amount paid or reimbursed is not included in the individual’s income,
252. (1) Subparagraph (a)(i) of the definition “designated educational institution” in subsection 118.6(1) of the Act is replaced by the following:
(i) a university, college or other educational institution designated by the lieutenant governor in council of a province as a specified educational institution under the Canada Student Loans Act, designated by an appropriate authority under the Canada Student Financial Assistance Act, or designated, for the purposes of An Act respecting financial assistance for education expenses, R.S.Q, c. A-13.3, by the Minister of the Province of Quebec responsible for the administration of that Act, or
(2) Subsection (1) applies to the 1998 and subsequent taxation years.
253. (1) Section 118.7 of the Act is replaced by the following:
Marginal note:Credit for EI and QPIP premiums and CPP contributions
118.7 For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted the amount determined by the formula
A × B
where
- A
- is the appropriate percentage for the year; and
- B
- is the total of
(a) the total of all amounts each of which is an amount payable by the individual as an employee’s premium or a self-employment premium for the year under the Employment Insurance Act, not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,
(a.1) the total of all amounts each of which is an amount payable by the individual as an employee’s premium for the year under the Act respecting parental insurance, R.S.Q., c. A-29.011, not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,
(a.2) the amount, if any, by which the total of all amounts each of which is an amount payable by the individual in respect of self-employed earnings for the year as a premium under the Act respecting parental insurance, R.S.Q., c. A-29.011, (not exceeding the maximum amount of such premiums payable by the individual for the year under that Act) exceeds the amount deductible under paragraph 60(g) in computing the individual’s income for the year,
(b) the total of all amounts each of which is an amount payable by the individual for the year as an employee’s contribution under the Canada Pension Plan or under a provincial pension plan defined in section 3 of that Act, not exceeding the maximum amount of such contributions payable by the individual for the year under the plan, and
(c) the amount by which
(i) the total of all amounts each of which is an amount payable by the individual in respect of self-employed earnings for the year as a contribution under the Canada Pension Plan or under a provincial pension plan within the meaning assigned by section 3 of that Act (not exceeding the maximum amount of such contributions payable by the individual for the year under the plan)
exceeds
(ii) the amount deductible under paragraph 60(e) in computing the individual’s income for the year.
(2) Subsection (1) applies to the 2006 and subsequent taxation years, except that for taxation years ending after 2005 and before 2010, paragraph (a) of the description of B in section 118.7 of the Act, as enacted by subsection (1), is to be read as follows:
(a) the total of all amounts each of which is an amount payable by the individual as an employee’s premium for the year under the Employment Insurance Act, not exceeding the maximum amount of such premiums payable by the individual for the year under that Act,
254. (1) Paragraph 120.2(3)(b) of the Act is replaced by the following:
(b) the amount that, if this Act were read without reference to section 120, would be the individual’s tax payable under this Part for the year if the individual were not entitled to any deduction under any of sections 126, 127 and 127.4, and
(2) Subsection (1) applies to the 2000 and subsequent taxation years.
255. (1) The portion of paragraph 120.31(3)(b) of the Act before subparagraph (i) is replaced by the following:
(b) if the eligible taxation year ended before the taxation year preceding the year of receipt, an amount equal to the amount that would be calculated as interest payable on the amount, if any, by which the amount determined under paragraph (a) in respect of the eligible taxation year exceeds the taxpayer’s tax payable under this Part for that year, if the amount that would be calculated as interest payable on that excess were calculated
(2) Subsection (1) applies to the 1995 and subsequent taxation years.
256. (1) The portion of subparagraph (b)(ii) of the definition “split income” in subsection 120.4(1) of the English version of the Act before clause (A) is replaced by the following:
(ii) can reasonably be considered to be income derived from the provision of property or services by a partnership or trust to, or in support of, a business carried on by
(2) The portion of clause (c)(ii)(C) of the definition “split income” in subsection 120.4(1) of the English version of the Act before subclause (I) is replaced by the following:
(C) to be income derived from the provision of property or services by a partnership or trust to, or in support of, a business carried on by
(3) Subsections (1) and (2) apply in computing split income of a specified individual for taxation years that begin after December 20, 2002, other than in computing an amount included in that income that is from a trust or partnership for a taxation year or fiscal period of the trust or partnership that began before December 21, 2002.
257. (1) The portion of subsection 122(2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Where subsection (1) does not apply
(2) Subsection (1) does not apply for a taxation year of an inter vivos trust that is not a mutual fund trust and that
(2) Subsection (1) applies to trust taxation years that begin after 2002.
258. (1) The portion of the definition “qualified REIT property” before paragraph (c) in subsection 122.1(1) of the Act is replaced by the following:
“qualified REIT property”
« bien admissible de FPI »
“qualified REIT property”, of a trust at any time, means a property that, at that time, is held by the trust and is
(a) a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described by paragraph (a) or (b) of the definition “qualified investment” in section 204 or a deposit with a credit union;
(b) a security of a subject entity all or substantially all of the gross REIT revenue of which, for its taxation year that ends in the trust’s taxation year that includes that time, is from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of an entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or an entity of which the trust holds a share or an interest, holds together with one or more other persons or partnerships;
(2) Paragraph (d) of the definition “qualified REIT property” in subsection 122.1(1) of the Act is replaced by the following:
(d) ancillary to the earning by the trust of amounts described in subparagraphs (b)(i) and (iii) of the definition “real estate investment trust”, other than
(i) an equity of an entity, or
(ii) a mortgage, hypothecary claim, mezzanine loan or similar obligation.
(3) Paragraph (a) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is replaced by the following:
(a) at each time in the taxation year the total fair market value at that time of all non-portfolio properties that are qualified REIT properties held by the trust is at least 90% of the total fair market value at that time of all non-portfolio properties held by the trust;
(4) The portion of paragraph (b) of the definition “real estate investment trust” in subsection 122.1(1) of the Act before subparagraph (i) is replaced by the following:
(b) not less than 90% of the trust’s gross REIT revenue for the taxation year is from one or more of the following:
(5) Subparagraph (b)(iii) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is replaced by the following:
(iii) dispositions of real or immovable properties that are capital properties,
(6) Paragraph (b) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is amended by striking out “and” at the end of subparagraph (iv), by adding “and” at the end of subparagraph (v) and by adding the following after subparagraph (v):
(vi) dispositions of eligible resale properties;
(7) The portion of paragraph (c) of the definition “real estate investment trust” in subsection 122.1(1) of the Act before subparagraph (i) is replaced by the following:
(c) not less than 75% of the trust’s gross REIT revenue for the taxation year is from one or more of the following:
(8) Subparagraph (c)(iii) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is replaced by the following:
(iii) dispositions of real or immovable properties that are capital properties;
(9) The definition “real estate investment trust” in subsection 122.1(1) of the Act is amended by striking out “and” at the end of paragraph (c) and by replacing paragraph (d) with the following:
(d) at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described by paragraph (a) or (b) of the definition “qualified investment” in section 204 or a deposit with a credit union; and
(e) investments in the trust are, at any time in the taxation year, listed or traded on a stock exchange or other public market.
(10) Paragraph (a) of the definition “rent from real or immovable properties” in subsection 122.1(1) of the Act is amended by adding “and” at the end of subparagraph (i), by replacing “and” at the end of subparagraph (ii) with “but” and by repealing subparagraph (iii).
(11) Subsection 122.1(1) of the Act is amended by adding the following in alphabetical order:
“eligible resale property”
« bien de revente admissible »
“eligible resale property”, of an entity, means real or immovable property (other than capital property) of the entity
(a) that is contiguous to a particular real or immovable property that is capital property or eligible resale property, held by
(i) the entity, or
(ii) another entity affiliated with the entity; and
(b) the holding of which is ancillary to the holding of the particular property.
“gross REIT revenue”
« revenu brut de FPI »
“gross REIT revenue”, of an entity for a taxation year, means the amount, if any, by which the total of all amounts received or receivable in the year (depending on the method regularly followed by the entity in computing the entity’s income) by the entity exceeds the total of all amounts each of which is the cost to the entity of a property disposed of in the year.
(12) Section 122.1 of the Act is amended by adding the following after subsection (1):
Marginal note:Application of subsection (1.2)
(1.1) Subsection (1.2) applies to an entity for a taxation year in respect of an amount and another entity (referred to in this subsection and subsection (1.2) as the “parent entity”, “specified amount” and “source entity”, respectively), if
(a) at any time in the taxation year the parent entity
(i) is affiliated with the source entity, or
(ii) holds securities of the source entity that
(A) are described by any of paragraphs (a) to (c) of the definition “equity” in subsection (1), and
(B) have a total fair market value that is greater than 10% of the equity value of the source entity;
(b) the specified amount is included in computing the parent entity’s gross REIT revenue for the taxation year in respect of a security of the source entity held by the parent entity; and
(c) in the case of a source entity that is a subject entity described in paragraph (b) of the definition “qualified REIT property” in subsection (1) in respect of the parent entity at each time during the taxation year at which the parent entity holds securities of the source entity, the specified amount cannot reasonably be considered to be derived from the source entity’s gross REIT revenue from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the parent entity or of an entity of which the parent entity holds a share or an interest, including real or immovable properties that the parent entity, or an entity of which the parent entity holds a share or an interest, holds together with one or more other persons or partnerships.
Marginal note:Character preservation rule
(1.2) If this subsection applies to a parent entity for a taxation year in respect of a specified amount and a source entity, then for the purposes of the definition “real estate investment trust” in subsection (1), to the extent that the specified amount can reasonably be considered to be derived from gross REIT revenue of the source entity having a particular character, the specified amount is deemed to be gross REIT revenue of the parent entity having the same character and not having any other character.
Marginal note:Character of revenue — hedging arrangements
(1.3) For the purposes of the definition “real estate investment trust” in subsection (1),
(a) if an amount is included in gross REIT revenue of a trust for a taxation year and it results from an agreement that can reasonably be considered to have been made by the trust to reduce its risk from fluctuations in interest rates in respect of debt incurred by the trust to acquire or refinance real or immovable property, the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character; and
(b) if a real or immovable property is situated in a country other than Canada and an amount included in gross REIT revenue of a trust for a taxation year
(i) is a gain from fluctuations in the value of the currency of that country relative to Canadian currency recognized on
(A) revenue in respect of the real or immovable property, or
(B) debt incurred by the trust for the purpose of earning revenue in respect of the real or immovable property, or
(ii) results from an agreement that
(A) provides for the purchase, sale or exchange of currency, and
(B) can reasonably be considered to have been made by the trust to reduce its risk from currency fluctuations described in subparagraph (i),
the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character.
(13) Subsections (1) to (12) apply to
(a) taxation years of a trust that end after 2006 and before 2011 if
(i) investments in the trust are, in one or more of those taxation years, listed or traded on a stock exchange or other public market, and
(ii) the trust elects, by notifying the Minister of National Revenue in writing on or before its filing due-date for its taxation year that includes the day on which this Act receives royal assent, to have those subsections so apply; and
(b) the 2011 and subsequent taxation years, except that paragraph (d) of the definition “real estate investment trust” in subsection 122.1(1) of the Act, as enacted by subsection (9), is to be read as follows for taxation years that end before 2013:
(d) at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is real or immovable property, indebtedness of a Canadian corporation represented by a bankers’ acceptance, property described by either paragraph (a) or (b) of the definition “qualified investment” in section 204, or a deposit with a credit union; and
259. (1) The portion of subsection 122.3(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Overseas employment tax credit
122.3 (1) If an individual is resident in Canada in a taxation year and, throughout any period of more than six consecutive months that began before the end of the year and included any part of the year (in this section referred to as the “qualifying period”)
(2) Subsection 122.3(1.1) of the Act is replaced by the following:
Marginal note:Excluded income
(1.1) No amount may be included under paragraph (1)(d) in respect of an individual’s income for a taxation year from the individual’s employment by an employer
(a) if
(i) the employer carries on a business of providing services and does not employ in the business throughout the year more than five full-time employees,
(ii) the individual
(A) does not deal at arm’s length with the employer, or is a specified shareholder of the employer, or
(B) where the employer is a partnership, does not deal at arm’s length with a member of the partnership, or is a specified shareholder of a member of the partnership, and
(iii) but for the existence of the employer, the individual would reasonably be regarded as being an employee of a person or partnership that is not a specified employer; or
(b) if at any time in that portion of the qualifying period that is in the taxation year
(i) the employer provides the services of the individual to a corporation, partnership or trust with which the employer does not deal at arm’s length, and
(ii) the fair market value of all the issued shares of the capital stock of the corporation or of all interests in the partnership or trust, as the case may be, that are held, directly or indirectly, by persons who are resident in Canada is less than 10% of the fair market value of all those shares or interests.
(3) Subsections (1) and (2) apply to taxation years that begin after the day on which this Act receives royal assent.
260. Subsection 122.5(7) of the Act is replaced by the following:
Marginal note:Effect of bankruptcy
(7) For the purpose of this section, if in a taxation year an individual becomes bankrupt, the individual’s income for the taxation year shall include the individual’s income for the taxation year that begins on January 1 of the calendar year that includes the date of bankruptcy.
261. (1) Paragraph (a) of the definition “full rate taxable income” in subsection 123.4(1) of the Act is amended by striking out “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):
(iii) the corporation’s income for the year from a personal services business; and
(2) The portion of paragraph (b) of the definition “full rate taxable income” in subsection 123.4(1) of the Act before subparagraph (i) is replaced by the following:
(b) if the corporation is a Canadian-controlled private corporation throughout the year, the amount by which that portion of the corporation’s taxable income for the year that is subject to tax under subsection 123(1) exceeds the total of
(3) Subparagraph (b)(iii) of the definition “full rate taxable income” in subsection 123.4(1) of the Act is replaced by the following:
(iii) except for a corporation that is, throughout the year, a cooperative corporation (within the meaning assigned by subsection 136(2)) or a credit union, the corporation’s aggregate investment income for the year, within the meaning assigned by subsection 129(4), and
(4) Subsection (1) applies to taxation years that begin after October 31, 2011.
(5) Subsection (2) applies to taxation years that end after October 31, 2011.
(6) Subsection (3) applies to the 2001 and subsequent taxation years.
262. (1) Subparagraphs 125(1)(b)(i) and (ii) of the Act are replaced by the following:
(i) 100/28 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4,
(ii) the amount determined by multiplying the total of the amounts that would be deductible under subsection 126(2) from the tax for the year otherwise payable under this Part by it, if those amounts were determined without reference to section 123.4, by the relevant factor for the year, and
(2) The description of B in subsection 125(5.1) of the Act is replaced by the following:
- B
- is the amount determined by the formula
0.225% × (D – $10 million)
where
- D
- is
(a) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the preceding taxation year,
(b) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the particular taxation year, or
(c) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year.
(3) Subparagraph 125(1)(b)(i) of the Act, as enacted by subsection (1), applies to taxation years that end after October 31, 2011, except that, for a taxation year that includes that day, that subparagraph, as enacted by subsection (1), is to be read as follows:
(i) the total of
(A) 10/3 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4, that the number of days in the taxation year that are on or before October 31, 2011 is of the total of days in the taxation year, and
(B) 100/28 of the total of the amounts that would be deductible under subsection 126(1) from the tax for the year otherwise payable under this Part by it if those amounts were determined without reference to sections 123.3 and 123.4, that the number of days in the taxation year that are after October 31, 2011 is of the total of days in the taxation year,
(4) Subparagraph 125(1)(b)(ii) of the Act, as enacted by subsection (1), applies to the 2003 and subsequent taxation years.
(5) Subsection (2) applies to taxation years that begin after December 20, 2002, except that, in its application to a corporation described in subsection 181.1(3) of the Act for taxation years of the corporation that began before the day on which this Act receives royal assent, the description of B in subsection 125(5.1) of the Act, as enacted by subsection (2), is to be read as follows:
- B
- is
(a) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the amount that would, but for subsections 181.1(2) and (4), be the corporation’s tax payable under Part I.3 for the preceding taxation year,
(b) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the amount that would, but for subsections 181.1(2) and (4), be the corporation’s tax payable under Part I.3 for the particular taxation year, and
(c) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the amount determined by the formula
0.225% x (D – E)
where
- D
- is the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year, and
- E
- is $10 million.
263. (1) Subparagraph 125.1(1)(b)(ii) of the Act is replaced by the following:
(ii) the amount determined by multiplying the total of the amounts that would be deductible under subsection 126(2) from the tax for the year otherwise payable under this Part by it, if those amounts were determined without reference to section 123.4, by the relevant factor for the year, and
(2) The definition bénéfices de fabrication et de transformation au Canada in subsection 125.1(3) of the French version of the Act is replaced by the following:
« bénéfices de fabrication et de transformation au Canada »
“Canadian manufacturing and processing profits”
bénéfices de fabrication et de transformation au Canada En ce qui concerne une société pour une année d’imposition, la partie du total des montants représentant chacun le revenu que la société a tiré pour l’année d’une entreprise exploitée activement au Canada, déterminée en vertu des règles établies à cette fin par règlement pris sur recommandation du ministre des Finances, qui doit s’appliquer à la fabrication ou à la transformation au Canada de marchandises destinées à la vente ou à la location.
(3) Subparagraphs (l)(i) and (ii) of the definition fabrication ou transformation in subsection 125.1(3) of the French version of the Act are replaced by the following:
(i) de la vente ou de la location de marchandises qu’elle a fabriquées ou transformées au Canada,
(ii) de la fabrication ou de la transformation au Canada de marchandises destinées à la vente ou à la location, sauf des marchandises qu’elle devait vendre ou louer elle-même.
(4) Subsection (1) applies to the 2003 and subsequent taxation years.
264. (1) The definition “taxable resource income” in subsection 125.11(1) of the Act, as it read immediately before it was repealed by S.C. 2003, c. 28, s. 13(2), is replaced by the following:
“taxable resource income”
« revenu imposable provenant de ressources »
“taxable resource income”, of a taxpayer for a taxation year, is the lesser of
(a) the amount, if any, by which the taxpayer’s taxable income for the taxation year exceeds 100/16 of the amount deducted under subsection 125(1) from the taxpayer’s tax otherwise payable under this Part for the year, and
(b) the amount determined by the formula
3(A/B) + C – D – E
where
- A
- is the total of all amounts each of which is deducted by the taxpayer under paragraph 20(1)(v.1) in computing the taxpayer’s income for the taxation year,
- B
- is the percentage that is the total of
(i) that proportion of 100% that the number of days in the taxation year that are before 2003 is of the number of days in the taxation year,
(ii) that proportion of 90% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,
(iii) that proportion of 75% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,
(iv) that proportion of 65% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year, and
(v) that proportion of 35% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year,
- C
- is total of all amounts included in computing the taxpayer’s income for the taxation year under paragraph 59(3.2)(b) or (c),
- D
- is the total of all amounts deducted by the taxpayer under any of sections 65 to 66.7, other than subsections 66(4), 66.21(4) and 66.7(2) and (2.3), of this Act, and subsections 17(2) and (6) and section 29 of the Income Tax Application Rules, in computing the taxpayer’s income for the taxation year, and
- E
- is 100/16 of the amount deducted under subsection 125(1) from the taxpayer’s tax otherwise payable under this Part for the year.
(2) The definition “taxable resource income” in subsection 125.11(1) of the Act, as enacted by subsection (1), is repealed.
(3) Subsection (1) applies to taxation years that begin after February 27, 2004.
(4) Subsection (2) applies to taxation years that begin after 2006.
265. (1) Section 125.2 of the Act is repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
266. (1) Paragraph 125.3(1.1)(b) of the Act is replaced by the following:
(b) the amount, if any, by which its tax payable under this Part (determined without reference to this section) for the year exceeds the amount that would, but for subsections 181.1(4) and 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
267. (1) The portion of subsection 126(2.22) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Ancien résident — bénéficiaire de fiducie
(2.22) Lorsqu’un particulier non-résident dispose, au cours d’une année d’imposition donnée, d’un bien qu’il a acquis la dernière fois à un moment (appelé « moment de l’acquisition » au présent paragraphe) à l’occasion d’une distribution effectuée après le 1er octobre 1996 et à laquelle les alinéas 107(2)a) à c) ne s’appliquent pas par le seul effet du paragraphe 107(5), la fiducie peut déduire de son impôt payable par ailleurs en vertu de la présente partie pour l’année (appelée « année de la distribution » au présent paragraphe) qui comprend le moment de l’acquisition un montant ne dépassant pas le moins élevé des montants suivants :
(2) The portion of paragraph 126(2.22)(a) of the French version of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:
s’il est raisonnable de considérer que le montant a été payé sur la partie de tout gain ou bénéfice tiré de la disposition du bien qui s’est accumulée avant la distribution et après le dernier en date des moments ci-après, antérieur à la distribution :
(3) Subparagraphs 126(2.22)(b)(i) and (ii) of the French version of the Act are replaced by the following:
(i) le montant d’impôt en vertu de la présente partie qui était payable par ailleurs par la fiducie pour l’année de la distribution, compte tenu de l’application du présent paragraphe aux dispositions effectuées avant le moment de la disposition,
(ii) le montant de cet impôt qui aurait été payable par la fiducie pour l’année de la distribution si le bien n’avait pas été distribué au particulier.
(4) Section 126 of the Act is amended by adding the following after subsection (4.1):
Marginal note:Denial of foreign tax credit
(4.11) If a taxpayer is a member of a partnership, any income or profits tax paid to the government of a particular country other than Canada — in respect of the income of the partnership for a period during which the taxpayer’s direct or indirect share of the income of the partnership under the income tax laws (referred to in subsection (4.12) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, is less than the taxpayer’s direct or indirect share of the income for the purposes of this Act — is not included in computing the taxpayer’s business-income tax or non-business-income tax for any taxation year.
Marginal note:Exceptions
(4.12) For the purposes of subsection (4.11), a taxpayer is not to be considered to have a lesser direct or indirect share of the income of a partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:
(a) a difference between the relevant foreign tax law and this Act in the manner of
(i) computing the income of the partnership, or
(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;
(b) the treatment of the partnership as a corporation under the relevant foreign tax law; or
(c) the fact that the taxpayer is not treated as a corporation under the relevant foreign tax law.
Marginal note:Tiered partnerships
(4.13) For the purposes of subsections (4.11) and (4.12), if a taxpayer is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership, the taxpayer is deemed to be a member of the other partnership.
(5) The description of A in subsection 126(4.2) of the Act is replaced by the following:
- A
- is
(a) if the foreign tax would otherwise be included in business-income tax, the total of
(i) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and
(ii) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year, and
(b) if the foreign tax would otherwise be included in non-business-income tax, the total of
(i) if the taxpayer is a corporation that is a Canadian-controlled private corporation throughout the taxation year, that proportion of 28% that the number of days in the taxation year that are after 2010 is of the number of days in the taxation year, and
(ii) if the taxpayer is not a Canadian-controlled private corporation throughout the taxation year, the total of
(A) that proportion of 16.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and
(B) that proportion of 15% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year,
(6) Paragraph 126(4.4)(a) of the Act is replaced by the following:
(a) a disposition or acquisition of property deemed to be made by subsection 10(12) or (13), 14(14) or (15) or 45(1), section 70, 128.1 or 132.2, subsections 138(11.3) or 142.5(2), paragraph 142.6(1)(b) or subsections 142.6(1.1) or (1.2) or 149(10) is not a disposition or acquisition, as the case may be; and
(7) Subparagraph 126(5)(a)(i) of the Act is replaced by the following:
(i) the amount obtained by multiplying the taxpayer’s income from the business in the taxing country for the year by the total of
(A) that proportion of 26.5% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and
(B) that proportion of 25% that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year
(8) Subsection 126(6) of the Act is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):
(d) if, in computing a taxpayer’s income for a taxation year from a business carried on by the taxpayer in Canada, an amount is included in respect of interest paid or payable to the taxpayer by a person resident in a country other than Canada, and the taxpayer has paid to the government of that other country a non-business income tax for the year with respect to the amount, the amount is, in applying the definition “qualifying incomes” in subsection (7) for the purpose of subsection (1), deemed to be income from a source in that other country.
(9) The portion of the definition “business-income tax” in subsection 126(7) of the Act before paragraph (a) is replaced by the following:
“business-income tax”
« impôt sur le revenu tiré d’une entreprise »
“business-income tax” paid by a taxpayer for a taxation year in respect of businesses carried on by the taxpayer in a country other than Canada (referred to in this definition as the “business country”) means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of a country other than Canada that can reasonably be regarded as tax in respect of the income of the taxpayer from a business carried on by the taxpayer in the business country, but does not include a tax, or the portion of a tax, that can reasonably be regarded as relating to an amount that
(10) The portion of the definition “non-business-income tax” in subsection 126(7) of the Act before paragraph (a) is replaced by the following:
“non-business-income tax”
« impôt sur le revenu ne provenant pas d’une entreprise »
“non-business-income tax” paid by a taxpayer for a taxation year to the government of a country other than Canada means, subject to subsections (4.1) to (4.2), the portion of any income or profits tax paid by the taxpayer for the year to the government of that country that
(11) Subsections (4), (9) and (10) apply to income or profits tax paid for taxation years of a taxpayer that end after March 4, 2010, except that, for taxation years of the taxpayer that end on or before August 27, 2010,
(a) subsection 126(4.11) of the Act, as enacted by subsection (4), is to be read as follows:
(4.11) If a taxpayer is a member of a partnership, any income or profits tax paid to the government of a particular country other than Canada — in respect of the income of the partnership for a period during which the taxpayer’s share of the income of the partnership under the income tax laws (referred to in subsection (4.12) as the “relevant foreign tax law”) of any country other than Canada under the laws of which the income of the partnership is subject to income taxation, is less than the taxpayer’s share of the income for the purposes of this Act — is not included in computing the taxpayer’s business-income tax or non-business-income tax for any taxation year.
(b) the portion of subsection 126(4.12) of the Act before paragraph (a), as enacted by subsection (4), is to be read as follows:
(4.12) For the purposes of subsection (4.11), a taxpayer is not to be considered to have a lesser share of the income of a partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:
(c) section 126 of the Act is to be read without reference to its subsection (4.13), as enacted by subsection (4).
(12) Subsections (5) and (7) apply to taxation years that begin after October 31, 2011.
(13) Subsection (6) applies to dispositions and acquisitions that occur after 1998, except that, in applying paragraph 126(4.4)(a) of the Act, as enacted by subsection (6), to dispositions and acquisitions that occur before June 28, 1999, that paragraph is to be read without reference to “10(12) or (13), 14(14) or (15), or”.
(14) Subsection (8) applies to amounts received after February 27, 2004.
268. (1) Section 126.1 of the Act is repealed.
(2) Subsection (1) applies in respect of forms filed after March 20, 2003.
269. (1) Paragraphs 127(1)(a) and (b) of the French version of the Act are replaced by the following:
a) les 2/3 de tout impôt sur les opérations forestières, payé par le contribuable au gouvernement d’une province sur le revenu pour l’année tiré d’opérations forestières dans cette province;
b) 6 2/3 % du revenu du contribuable pour l’année, tiré d’opérations forestières dans la province, dont fait mention l’alinéa a).
(2) The definition revenu pour l’année tiré des opérations forestières dans la province in subsection 127(2) of the French version of the Act is repealed.
(3) The definition impôt sur les opérations forestières in subsection 127(2) of the French version of the Act is replaced by the following:
« impôt sur les opérations forestières »
“logging tax”
impôt sur les opérations forestières Impôt levé par la législature d’une province et qui est, par règlement, déclaré être un impôt d’application générale sur le revenu tiré d’opérations forestières.
(4) Subsection 127(2) of the French version of the Act is amended by adding the following in alphabetical order:
« revenu pour l’année tiré d’opérations forestières dans la province »
“income for the year from logging operations in the province”
revenu pour l’année tiré d’opérations forestières dans la province S’entend au sens du règlement.
(5) The portion of subsection 127(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Contributions to registered parties and candidates
(3) There may be deducted from the tax otherwise payable by a taxpayer under this Part for a taxation year in respect of the total of all amounts each of which is the eligible amount of a monetary contribution that is referred to in the Canada Elections Act and that is made by the taxpayer in the year to a registered party, a registered association or a candidate, as those terms are defined in that Act,
(6) Subsection 127(4.2) of the Act, as it read immediately before it was repealed by S.C. 2006, c. 9, s. 64(2), is replaced by the following:
Marginal note:Allocation of amount contributed among partners
(4.2) If at the end of a fiscal period of a partnership a taxpayer is a member of the partnership, the taxpayer’s share of the total that would, if the partnership were a person and its fiscal period were its taxation year, be the total referred to in subsection (3) in respect of the partnership for that taxation year is deemed for the purpose of that subsection to be a monetary contribution made by the taxpayer in the taxpayer’s taxation year in which the fiscal period of the partnership ends.
(7) Subsection 127(4.2) of the Act, as enacted by subsection (6), is repealed.
(8) The definition “eligible salary and wages” in subsection 127(9) of the Act is replaced by the following:
“eligible salary and wages”
« traitement et salaire admissibles »
“eligible salary and wages” payable by a taxpayer to an eligible apprentice means the amount, if any, that is the salary and wages payable by the taxpayer to the eligible apprentice in respect of the first 24 months of the apprenticeship (other than a qualified expenditure incurred by the taxpayer in a taxation year, remuneration that is based on profits, bonuses, amounts described in section 6 or 7, and amounts deemed to be incurred by subsection 78(4));
(9) Paragraph (b) of the definition “pre-production mining expenditure” in subsection 127(9) of the Act is replaced by the following:
(b) is not an expense that
(i) was renounced under subsection 66(12.6) to the taxable Canadian corporation except if the corporation is, on the effective date of the renunciation,
(A) a corporation that would be a “principal business corporation”, as defined in subsection 66(15), if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and
(B) the sole shareholder of the corporation that renounced the expenditure, or
(ii) is a member’s share of an expense incurred by a partnership unless the expense was deemed by subsection 66(18) to have been made or incurred at the end of the fiscal period of the partnership by the member and throughout the fiscal period of the partnership in which the expense was incurred
(A) each member of the partnership would (otherwise than because of being a member of the partnership) be a “principal-business corporation” as defined in subsection 66(15) of the Act, if that definition were read without reference to its paragraphs (a), (a.1), (f), (h) and (i), and
(B) the corporation is a member of the partnership at the time the expenditure is incurred and would not be a specified member of the partnership if the definition “specified member” in subsection 248(1) were read without reference to its subparagraph (b)(ii),
(10) Paragraphs 127(27)(b) and (c) of the Act are replaced by the following:
(b) the cost, or a portion of the cost, of the particular property was a qualified expenditure, or would if this Act were read without reference to subsection (26) be a qualified expenditure, to the taxpayer,
(c) the cost, or the portion of the cost, of the particular property is included, or would if this Act were read without reference to subsection (26) be included, in an amount, a percentage of which can reasonably be considered to be included in computing the taxpayer’s investment tax credit at the end of the taxation year, and
(11) The portion of subsection 127(27) of the Act after paragraph (d) is replaced by the following:
there shall be added to the taxpayer’s tax otherwise payable under this Part for the year the lesser of
(e) the amount that can reasonably be considered to be included in the taxpayer’s investment tax credit at the end of any taxation year, or that would be so included if this Act were read without reference to subsection (26), in respect of the particular property, and
(f) the amount that is the percentage — that is the sum of each percentage described in paragraph (c) that has been applied to compute the taxpayer’s investment tax credit in respect of the particular property — of
(i) in the case where the particular property or the other property is disposed of to a person who deals at arm’s length with the taxpayer,
(A) the proceeds of disposition of the property, if the property
(I) is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or
(II) is the other property,
(B) 25% of the proceeds of disposition of the property, if the property is the particular property, is first term shared-use equipment and is not second term shared-use equipment, and
(C) 50% of the proceeds of disposition of the property, if the property is the particular property and is second term shared-use equipment, and
(ii) in the case where the particular property or the other property is converted to commercial use or is disposed of to a person who does not deal at arm’s length with the taxpayer,
(A) the fair market value of the property, if the property
(I) is the particular property and is neither first term shared-use equipment nor second term shared-use equipment, or
(II) is the other property,
(B) 25% of the fair market value of the property at the time of its conversion or disposition, if the particular property is first term shared-use equipment and is not second term shared-use equipment, and
(C) 50% of the fair market value of the property at the time of its conversion or disposition, if the particular property is second term shared-use equipment.
(12) Subsection (5) applies to monetary contributions made after December 20, 2002, except that, for monetary contributions made before 2004, the reference to “to a registered party, a registered association or a candidate” in subsection 127(3) of the Act, as amended by subsection (5), is to be read as a reference to “to a registered party or a candidate”.
(13) Subsection (6) applies to monetary contributions made after December 20, 2002 and before 2007.
(14) Subsection (7) is deemed to have come into force on January 1, 2007, except that it does not apply in respect of monetary contributions made before that day.
(15) Subsection (8) applies to taxation years that end after November 5, 2010.
(16) Subsection (9) applies to the 2003 and subsequent taxation years.
(17) Subsections (10) and (11) apply to dispositions and conversions that occur after December 20, 2002.
270. (1) Paragraph (b) of the definition “approved share” in subsection 127.4(1) of the Act is replaced by the following:
(b) a share issued by a prescribed labour-sponsored venture capital corporation that is not a registered labour-sponsored venture capital corporation if, at the time of the issue, no province under the laws (described in section 6701 of the Income Tax Regulations) of which the corporation is registered or established provides assistance in respect of the acquisition of the share;
(2) Subsection 127.4(6) of the Act is amended by striking out “and” at the end of paragraph (c), by adding “and’’ at the end of paragraph (d) and by adding the following after paragraph (d):
(e) nil, if the share is issued in exchange for another share of the corporation.
(3) Subsection (1) applies to acquisitions of shares that occur after 2003.
(4) Subsection (2) applies to the 2004 and subsequent taxation years.
271. (1) The portion of subparagraph 127.52(1)(d)(ii) of the Act before the formula is replaced by the following:
(ii) each amount that is designated by a trust for a particular year of the trust in respect of the individual and deemed by subsection 104(21) to be a taxable capital gain for the year of the individual were equal to the amount obtained by the formula
(2) Paragraph 127.52(1)(d) of the Act is amended by striking out “and” at the end of subparagraph (i), by adding “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):
(iii) this Act were read without reference to subsection 104(21.6);
(3) Paragraph 127.52(1)(d) of the Act, as amended by subsections (1) and (2), is amended by adding “and” at the end of subparagraph (i), by striking out “and” at the end of subparagraph (ii) and by repealing subparagraph (iii).
(4) Paragraph 127.52(1)(e) of the Act is amended by striking out “and” at the end of subparagraph (i) and by adding the following after subparagraph (i):
(i.1) the individual’s income for the year from property, or from the business of selling the product of property, described in Class 43.1 or 43.2 in Schedule II to the Income Tax Regulations, determined before deducting those amounts, and
(5) Subparagraph 127.52(1)(h)(i) of the Act is replaced by the following:
(i) the amounts deducted under any of subsections 110(2), 110.6(2), (2.1), (2.2) and (12) and 110.7(1),
(6) Subsections (1) and (3) apply to taxation years that begin after October 31, 2011.
(7) Subsection (2) applies to the 2000 and subsequent taxation years.
(8) Subsection (4) applies in respect of taxation years that end after 2008.
272. (1) Subparagraph 128(2)(g)(iii) of the Act is replaced by the following:
(iii) the individual’s unused tuition, textbook and education tax credits (as determined under subsection 118.61(1)) at the end of the last taxation year that ended before that time is deemed to be nil;
(2) Subsection (1) applies to the 2006 and subsequent taxation years.
273. (1) The portion of subsection 128.1(5) of the Act before paragraph (b) is replaced by the following:
Marginal note:Instalment interest
(5) If an individual is deemed by subsection (4) to have disposed of a property in a taxation year, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the individual’s total tax payable under this Part for the year is deemed to be the lesser of
(a) the individual’s total tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and
(2) Paragraph 128.1(7)(b) of the French version of the Act is replaced by the following:
b) est propriétaire, à ce moment, d’un bien qu’il a acquis, la dernière fois, à l’occasion d’une distribution à laquelle le paragraphe 107(2) se serait appliqué, n’eût été le paragraphe 107(5), effectuée par une fiducie à un moment (appelé « moment de la distribution » au présent paragraphe) postérieur au 1er octobre 1996 et antérieur au moment donné;
(3) Paragraph 128.1(7)(d) of the French version of the Act is replaced by the following:
d) sous réserve des alinéas e) et f), si le particulier et la fiducie en font conjointement le choix dans un document présenté au ministre au plus tard à la première en date des dates d’échéance de production qui leur est applicable pour leur année d’imposition qui comprend le moment donné, le paragraphe 107(2.1) ne s’applique pas à la distribution pour ce qui est des biens que le particulier a acquis à l’occasion de la distribution et qui étaient des biens canadiens imposables lui appartenant tout au long de la période ayant commencé au moment de la distribution et se terminant au moment donné;
(4) Subparagraph 128.1(7)(e)(i) of the French version of the Act is replaced by the following:
(i) il résidait au Canada au moment de la distribution,
(5) Subparagraphs 128.1(7)(f)(i) and (ii) of the French version of the Act are replaced by the following:
(i) malgré l’alinéa 107(2.1)a), la fiducie est réputée avoir disposé du bien au moment de la distribution pour un produit de disposition égal au total des montants suivants :
(A) le coût indiqué du bien pour elle immédiatement avant ce moment,
(B) l’excédent du montant de la réduction prévue au paragraphe 40(3.7) et dont il est question à l’alinéa e), sur le moins élevé des montants suivants :
(I) le coût indiqué du bien pour la fiducie immédiatement avant le moment de la distribution,
(II) le montant que le particulier et la fiducie ont indiqué conjointement pour l’application du présent alinéa dans le document concernant le choix prévu à l’alinéa d) relativement au bien,
(ii) malgré l’alinéa 107(2.1)b), le particulier est réputé avoir acquis le bien au moment de la distribution à un coût égal à l’excédent du montant déterminé par ailleurs selon l’alinéa 107(2)b) sur le montant de la réduction prévue au paragraphe 40(3.7) et dont il est question à l’alinéa e), ou, s’il est moins élevé, le montant indiqué selon la subdivision (i)(B)(II);
(6) The portion of paragraph 128.1(7)(g) of the French version of the Act before subparagraph (i) is replaced by the following:
g) si le particulier et la fiducie en font conjointement le choix, dans un document présenté au ministre au plus tard à la dernière en date des dates d’échéance de production qui leur est applicable pour leur année d’imposition qui comprend le moment donné, relativement à chaque bien dont le particulier a été propriétaire tout au long de la période ayant commencé au moment de la distribution et se terminant au moment donné et dont il est réputé, par l’alinéa (1)b), avoir disposé du fait qu’il est devenu un résident du Canada, le produit de disposition pour la fiducie, selon l’alinéa 107(2.1)a), au moment de la distribution et le coût d’acquisition du bien pour le particulier au moment donné sont réputés, malgré les alinéas 107(2.1)a) et b), correspondre à ce produit et à ce coût, déterminés compte non tenu du présent alinéa, diminués du moins élevé des montants suivants :
(7) The portion of paragraph 128.1(7)(i) of the French version of the Act before subparagraph (i) is replaced by the following:
i) malgré les paragraphes 152(4) à (5), le ministre établit, pour tenir compte des choix prévus au présent paragraphe, toute cotisation concernant l’impôt payable par la fiducie ou le particulier en vertu de la présente loi pour toute année qui est antérieure à l’année comprenant le moment donné sans être antérieure à l’année comprenant le moment de la distribution; pareille cotisation est toutefois sans effet sur le calcul des montants suivants :
(8) Subsection (1) applies to taxation years that begin after October 31, 2011.
274. (1) Section 128.3 of the Act is replaced by the following:
Marginal note:Former resident — replaced shares
128.3 If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii), subsection 85.1(8) or section 86 or 87 applies, a person acquires a share (in this section referred to as the “new share”) in exchange for another share or equity in a SIFT wind-up entity (in this section referred to as the “old share”), for the purposes of section 119, subsections 126(2.21) to (2.23), subparagraph 128.1(4)(b)(iv) and subsections 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.
(2) Subsection (1) applies to taxation years that begin after 2001, except that, before December 20, 2007, section 128.3 of the Act, as enacted by subsection (1), is to be read as follows:
128.3 If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii) or section 86 or 87 applies, a person acquires a share (in this section referred to as the “new share”) in exchange for another share (in this section referred to as the “old share”), for the purposes of section 119, subsections 126(2.21) to (2.23), subparagraph 128.1(4)(b)(iv) and subsections 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.
275. (1) Clauses 129(3)(a)(ii)(B) and (C) of the Act are replaced by the following:
(B) 100/35 of the total of amounts deducted under subsection 126(1) from its tax for the year otherwise payable under this Part, and
(C) the amount determined by multiplying the total of amounts deducted under subsection 126(2) from its tax for the year otherwise payable under this Part, by the relevant factor for the year, and
(2) Subparagraph 129(3)(a)(iii) of the Act is replaced by the following:
(iii) the corporation’s tax for the year payable under this Part,
(3) Clause 129(3)(a)(ii)(B) of the Act, as enacted by subsection (1), applies to taxation years that begin after October 31, 2011.
(4) Clause 129(3)(a)(ii)(C) of the Act, as enacted by subsection (1), applies to the 2003 and subsequent taxation years.
(5) Subsection (2) applies to taxation years that begin after 2007.
276. (1) Paragraph 130.1(4)(b) of the Act is replaced by the following:
(b) notwithstanding any other provision of this Act, if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount
(i) shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and
(ii) is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.
(2) Subsections 130.1(4.2) to (4.5) of the Act are repealed.
(3) Subparagraph 130.1(6)(f)(i) of the Act is replaced by the following:
(i) debts owing to the corporation that were secured, whether by mortgages, hypothecs or in any other manner, on houses (as defined in section 2 of the National Housing Act) or on property included within a housing project (as defined in that section as it read on June 16, 1999), and
(4) Subsections (1) and (2) apply to taxation years that begin after October 31, 2011, except that if any part of a dividend declared by a corporation is in respect of capital gains of the corporation from dispositions of property that occurred before October 18, 2000, then paragraph 130.1(4)(b) of the Act, as enacted by subsection (1), is to be read, in its application to that part of the dividend, as it read in its application to the corporation’s last taxation year that began before November 1, 2011.
(5) Subsection (3) applies to property acquired by a corporation after October 31, 2011, unless
(a) the property is a particular debt
(i) that is owing to the corporation and secured on property (referred to in this paragraph as the “subject property”),
(ii) that replaces a debt (referred to in this paragraph as the “old debt”) that was on October 31, 2011 owing to the corporation and secured on the subject property, and
(iii) that has a maximum term for repayment that does not exceed the maximum term for repayment, in effect on October 31, 2011, of the old debt; and
(b) the corporation would be a mortgage investment corporation for its taxation year that includes October 31, 2011 if that taxation year were determined as though it ended on October 31, 2011.
(6) If property that is held by a corporation on October 31, 2011 consists of debt, the term for repayment of the debt is extended by agreement entered into on a particular date that is after October 31, 2011, and the extended term exceeds the maximum term for repayment of the debt in effect on October 31, 2011, then the property is deemed, for the purposes of applying subsection (5), to have been acquired by the corporation on the particular date.
277. (1) Paragraph 131(1)(b) of the Act is replaced by the following:
(b) notwithstanding any other provision of this Act (other than paragraph (5.1)(b)), if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend, the amount
(i) shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and
(ii) is deemed to be a capital gain of the taxpayer from the disposition of capital property in the year.
(2) Subsections 131(1.5) to (1.9) of the Act are repealed.
(3) Subparagraph 131(5.1)(b)(i) of the Act is replaced by the following:
(i) subparagraph (1)(b)(ii) does not apply in respect of the dividend, to the extent of the TCP gains distribution, and
(4) Paragraph (a) of the definition “capital gains dividend account” in subsection 131(6) of the Act is replaced by the following:
(a) the total of
(i) its capital gains, for all taxation years that began more than 60 days before that time, from dispositions of property after 1971 and before that time while it was a mutual fund corporation, and
(ii) all amounts each of which is an amount in respect of a distribution made by a trust to the corporation, at a time that is after its 2004 taxation year and at which it is a mutual fund corporation, in respect of capital gains of the trust equal to twice the amount determined by the following formula:
A – B
where
- A
- is the amount of the distribution, and
- B
- is the amount designated under subsection 104(21) by the trust in respect of the net taxable capital gains of the trust attributable to those capital gains
(5) Subparagraph (b)(iii) of the definition “capital gains dividend account” in subsection 131(6) of the Act is replaced by the following:
(iii) an amount equal to 100/14 of its capital gains refund for any taxation year throughout which it was a mutual fund corporation where the year ended more than 60 days before that time;
(6) Subsections (1) to (3) and (5) apply to taxation years that begin after October 31, 2011, except that
(a) if any part of a dividend declared by a corporation is in respect of capital gains of the corporation from dispositions of property that occurred before October 18, 2000, then paragraph 131(1)(b) of the Act, as enacted by subsection (1), is to be read, in its application to that part of the dividend, as it read in its application to the corporation’s last taxation year that began before November 1, 2011; and
(b) if a corporation had a capital gains refund for a taxation year that began before November 2011, then in computing the capital gains dividend account of the corporation at any time in a taxation year of the corporation that begins after October 31, 2011, subparagraph (b)(iii) of the definition “capital gains dividend account” in subsection 131(6) of the Act, as enacted by subsection (5), is to be read, in its application to the corporation, as it read in its application to the corporation’s last taxation year that began before November 1, 2011.
(7) Subsection (4) applies to the 2005 and subsequent taxation years.
278. (1) Paragraph 132(6)(c) of the Act is replaced by the following:
(c) it complied with prescribed conditions.
(2) Subsection (1) applies to the 2000 and subsequent taxation years.
279. (1) Paragraph 132.11(1)(b) of the Act is replaced by the following:
(b) if the trust’s taxation year ends on December 15 because of paragraph (a), subject to subsection (1.1), each subsequent taxation year of the trust is deemed to be the period that begins at the beginning of December 16 of a calendar year and ends at the end of December 15 of the following calendar year or at any earlier time that is determined under paragraph 132.2(3)(b) or subsection 142.6(1); and
(2) Paragraph 132.11(1)(c) of the French version of the Act is replaced by the following:
c) chacun de ses exercices qui soit commence dans une de ses années d’imposition se terminant le 15 décembre par l’effet de l’alinéa a), soit se termine dans une de ses années d’imposition ultérieures, doit prendre fin au plus tard à la fin de l’année où il a commencé.
(3) Subsection 132.11(4) of the Act is replaced by the following:
Marginal note:Amounts paid or payable to beneficiaries
(4) Notwithstanding subsection 104(24), for the purposes of subsections (5) and (6) and 104(6) and (13) and paragraph (i) of the definition “disposition” in subsection 248(1) each amount that is paid, or that becomes payable, by a trust to a beneficiary after the end of a particular taxation year of the trust that ends on December 15 of a calendar year because of subsection (1) and before the end of that calendar year, is deemed to have been paid or to have become payable, as the case may be, to the beneficiary at the end of the particular year and not at any other time.
(4) Subsection (1) is deemed to have come into force on January 1, 1999, except that, in applying paragraph 132.11(1)(b) of the Act, as enacted by subsection (1), to taxation years that end before 2000, that paragraph is to be read without reference to “subject to subsection (1.1)”.
(5) Subsection (2) applies to the 1998 and subsequent taxation years.
(6) Subsection (3) applies to amounts that, after 1999, are paid or have become payable by a trust.
280. (1) Section 132.2 of the Act is replaced by the following:
Marginal note:Definitions re qualifying exchange of mutual funds
132.2 (1) The following definitions apply in this section.
“first post-exchange year”
« première année suivant l’échange »
“first post-exchange year”, of a fund in respect of a qualifying exchange, means the taxation year of the fund that begins immediately after the acquisition time.
“qualifying exchange”
« échange admissible »
“qualifying exchange” means a transfer at any time (in this section referred to as the “transfer time”) of all or substantially all of the property of a mutual fund corporation (other than a SIFT wind-up corporation) or a mutual fund trust to a mutual fund trust (in this section referred to as the “transferor” and “transferee”, respectively, and as the “funds”) if
(a) all or substantially all of the shares issued by the transferor and outstanding immediately before the transfer time are within 60 days after the transfer time disposed of to the transferor;
(b) no person disposing of shares of the transferor to the transferor within that 60-day period (otherwise than pursuant to the exercise of a statutory right of dissent) receives any consideration for the shares other than units of the transferee; and
(c) the funds jointly so elect, by filing a prescribed form with the Minister on or before the election’s due date.
“share”
« action »
“share” means a share of the capital stock of a mutual fund corporation and a unit of a mutual fund trust.
Marginal note:Timing
(2) In respect of a qualifying exchange, a time referred to in the following list immediately follows the time that precedes it in the list
(a) the transfer time;
(b) the first intervening time;
(c) the acquisition time;
(d) the beginning of the funds’ first post-exchange years;
(e) the depreciables disposition time;
(f) the second intervening time; and
(g) the depreciables acquisition time.
Marginal note:General
(3) In respect of a qualifying exchange,
(a) each property of a fund, other than property disposed of by the transferor to the transferee at the transfer time and depreciable property, is deemed to have been disposed of, and to have been reacquired by the fund, at the first intervening time, for an amount equal to the lesser of
(i) the fair market value of the property at the transfer time, and
(ii) the greater of
(A) its cost amount, and
(B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;
(b) subject to paragraph (l), the last taxation years of the funds that began before the transfer time are deemed to have ended at the acquisition time, and their first post-exchange years are deemed to have begun immediately after those last taxation years ended;
(c) each depreciable property of a fund (other than property to which subsection (5) applies and property to which paragraph (d) would, if this Act were read without reference to this paragraph, apply) is deemed to have been disposed of, and to have been reacquired, by the fund at the second intervening time for an amount equal to the lesser of
(i) the fair market value of the property at the depreciables disposition time, and
(ii) the greater of
(A) the lesser of its capital cost and its cost amount to the disposing fund at the depreciables disposition time, and
(B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;
(d) if at the second intervening time the undepreciated capital cost to a fund of depreciable property of a prescribed class exceeds the fair market value of all the property of that class, the excess is to be deducted in computing the fund’s income for the taxation year that includes the transfer time and is deemed to have been allowed in respect of property of that class under regulations made for the purpose of paragraph 20(1)(a);
(e) except as provided in paragraph (m), the transferor’s cost of any particular property received by the transferor from the transferee as consideration for the disposition of the property is deemed to be
(i) nil, if the particular property is a unit of the transferee, and
(ii) the particular property’s fair market value at the transfer time, in any other case;
(f) the transferor’s proceeds of disposition of any units of the transferee that were disposed of by the transferor at any particular time that is within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be equal to the cost amount of the units to the transferor immediately before the particular time;
(g) if, at any particular time that is within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of the transferee
(i) the taxpayer’s proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the particular time,
(ii) for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,
(iii) where the qualifying exchange occurs after 2004, for the purposes of applying section 218.3 in respect of that exchange, the payment or crediting of the units to the taxpayer by the transferor is deemed not to be an assessable distribution,
(iv) where all of the taxpayer’s shares of the transferor have been so disposed of, for the purpose of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor,
(v) for the purpose of the definition “designated beneficiary” in section 210, the units are deemed not to have been held at any time by the transferor, and
(vi) where the taxpayer is at the particular time affiliated with one or both of the funds,
(A) those units are deemed not to be identical to any other units of the transferee,
(B) if the taxpayer is the transferee, and the units cease to exist when the taxpayer acquires them (or, for greater certainty, when the taxpayer would but for that cessation have acquired them), the taxpayer is deemed
(I) to have acquired those units at the particular time, and
(II) to have disposed of those units immediately after the particular time for proceeds of disposition equal to the cost amount to the taxpayer of those units at the particular time, and
(C) in any other case, for the purpose of computing any gain or loss of the taxpayer from the taxpayer’s first disposition, after the particular time, of each of those units,
(I) if that disposition is a renunciation or surrender of the unit by the taxpayer for no consideration, and is not in favour of any person other than the transferee, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to that unit’s cost amount to the taxpayer immediately before that disposition, and
(II) if subclause (I) does not apply, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to the greater of that unit’s fair market value and its cost amount to the taxpayer immediately before that disposition;
(h) where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1) or 207.01(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the day that includes the transfer time and the time at which it is disposed of in accordance with paragraph (g);
(i) there shall be added to the amount determined under the description of A in the definition “refundable capital gains tax on hand” in subsection 132(4) in respect of the transferee for its taxation years that begin after the transfer time the amount, if any, by which
(i) the transferor’s refundable capital gains tax on hand (within the meaning assigned by subsection 131(6) or 132(4), as the case may be) at the end of its taxation year that includes the transfer time
exceeds
(ii) the transferor’s capital gains refund (within the meaning assigned by paragraph 131(2)(a) or 132(1)(a), as the case may be) for that year;
(j) no amount in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss of a fund for a taxation year that began before the transfer time is deductible in computing the taxable income of either of the funds for a taxation year that begins after the transfer time;
(k) if the transferor is a mutual fund trust, for the purposes of subsections 132.1(1) and (3) to (5), the transferee is deemed after the transfer time to be the same mutual fund trust as, and a continuation of, the transferor;
(l) if the transferor is a mutual fund corporation
(i) for the purpose of subsection 131(4) but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor is deemed in respect of any share disposed of in accordance with paragraph (g) to be a mutual fund corporation at the time of the disposition, and
(ii) for the purpose of Part I.3 but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor’s taxation year that, if this Act were read without reference to this paragraph, would have included the transfer time is deemed to have ended immediately before the transfer time;
(m) for the purpose of determining the funds’ capital gains redemptions (as defined in subsection 131(6) or 132(4), as the case may be), for their taxation years that include the transfer time,
(i) the total of the cost amounts to the transferor of all its properties at the end of the year is deemed to be the total of all amounts each of which is
(A) the transferor’s proceeds of disposition of a property that was transferred to a transferee on the qualifying exchange, or
(B) the cost amount to the transferor at the end of the year of a property that was not transferred on the qualifying exchange, and
(ii) the transferee is deemed not to have acquired any property that was transferred to it on the qualifying exchange; and
(n) except as provided in subparagraph (l)(i), the transferor is, notwithstanding subsections 131(8) and 132(6), deemed to be neither a mutual fund corporation nor a mutual fund trust for taxation years that begin after the transfer time.
Marginal note:Qualifying exchange — non-depreciable property
(4) If a transferor transfers a property, other than a depreciable property, to a transferee in a qualifying exchange,
(a) the transferee is deemed to have acquired the property at the acquisition time and not to have acquired the property at the transfer time; and
(b) the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of
(i) the fair market value of the property at the transfer time, and
(ii) the greatest of
(A) the cost amount to the transferor of the property at the transfer time,
(B) the amount that the funds agree on in respect of the property in their election, and
(C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property.
Marginal note:Depreciable property
(5) If a transferor transfers a depreciable property to a transferee in a qualifying exchange,
(a) the transferor is deemed to have disposed of the property at the depreciables disposition time, and not to have disposed of the property at the transfer time;
(b) the transferee is deemed to have acquired the property at the depreciables acquisition time, and not to have acquired the property at the transfer time;
(c) the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of
(i) the fair market value of the property at the transfer time, and
(ii) the greatest of
(A) the lesser of its capital cost and its cost amount to the transferor immediately before the depreciables disposition time,
(B) the amount that the funds agree on in respect of the property in their election, and
(C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property;
(d) where the capital cost of the property to the transferor exceeds the transferor’s proceeds of disposition of the property under paragraph (c), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),
(i) the property’s capital cost to the transferee is deemed to be the amount that was its capital cost to the transferor, and
(ii) the excess is deemed to have been allowed to the transferee in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years ending before the transfer time; and
(e) where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, paragraph (c) applies as if each property so disposed of had been separately disposed of in the order designated by the transferor at the time of making the election in respect of the qualifying exchange or, if the transferor does not so designate any such order, in the order designated by the Minister.
Marginal note:Due date
(6) The due date of an election referred to in paragraph (c) of the definition “qualifying exchange” in subsection (1) is
(a) the day that is six months after the day that includes the transfer time; and
(b) on joint application by the funds, any later day that the Minister accepts.
Marginal note:Amendment or Revocation of Election
(7) The Minister may, on joint application by the funds on or before the due date of an election referred to in paragraph (c) of the definition “qualifying exchange” in subsection (1), grant permission to amend or revoke the election.
(2) The definitions “first post-exchange year” and “share” in subsection 132.2(1) and subsections 132.2(2) to (5) of the Act, as enacted by subsection (1), apply to qualifying exchanges that occur after 1998, except that,
(a) if a qualifying exchange occurred before July 18, 2005 and the transferee has, before that day, filed a return of income, for any taxation year, that identified the realization of any loss that would not have been realized if paragraphs 132.2(3)(f) and (g) of the Act, as enacted by subsection (1), had applied in respect of the qualifying exchange, those paragraphs are to be read in their application to the qualifying exchange as follows:
(f) the transferor’s proceeds of disposition of any units of the transferee that were received by the transferor as consideration for the disposition of the property, and that were disposed of by the transferor within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be nil;
(g) if, within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of the transferee
(i) the taxpayer’s proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the transfer time,
(ii) for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,
(iii) where the qualifying exchange occurs after 2004, for the purposes of applying section 218.3 in respect of that exchange, the payment or crediting of the units to the taxpayer by the transferor is deemed not to be an assessable distribution,
(iv) where all of the taxpayer’s shares of the transferor have been so disposed of, for the purpose of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor, and
(v) for the purpose of the definition “designated beneficiary” in section 210, the units are deemed not to have been held at any time by the transferor;
(b) before the 2008 taxation year, paragraph 132.2(3)(h) of the Act, as enacted by subsection (1), is to be read as follows:
(h) where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1) or section 204) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (g);
and
(c) for the 2008 taxation year, paragraph 132.2(3)(h) of the Act, as enacted by subsection (1), is to be read as follows:
(h) where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (g);
(3) For qualifying exchanges that occurred after June 1994 and before 1999, paragraph 132.2(1)(j) of the Act is to be read as follows:
(j) where shares of the transferor have been disposed of by a taxpayer to the transferor in exchange for units of the transferee within 60 days after the transfer time,
(i) the taxpayer’s proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the transfer time,
(ii) if all of the taxpayer’s shares of the transferor have been so disposed of, for the purposes of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor, and
(iii) for the purpose of the definition “designated beneficiary” in section 210, the units are deemed not to have been held at any time by the transferor;
(4) For qualifying exchanges that occurred after June 1994 and before 1999, subsection 132.2(1) of the Act is to be read as if it contained a paragraph (j.1) that read as follows:
(j.1) if shares of the transferor have been disposed of by a taxpayer to the transferor in exchange for units of the transferee within 60 days after the transfer time, for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer;
(5) The definition “qualifying exchange” in subsection 132.2(1) and subsections 132.2(6) and (7) of the Act, as enacted by subsection (1), apply to transfers that occur after June 1994, except that, before December 20, 2007, the portion of the definition “qualifying exchange” in subsection 132.2(1) before paragraph (a), as enacted by subsection (1), is to be read as follows:
- “qualifying exchange”
“qualifying exchange” means a transfer at any time (in this section referred to as the “transfer time”) of all or substantially all of the property of a mutual fund corporation or a mutual fund trust to a mutual fund trust (in this section referred to as the “transferor” and “transferee”, respectively, and as the “funds”) if
(6) If an election under paragraph (c) of the definition “qualifying exchange” in subsection 132.2(2) of the Act was made, the election continues to have the effect of having section 132.2 of the Act, as modified from time to time, apply to the transfer.
(7) If an election under subsection 159(4) of the Income Tax Amendments Act, 1997, S.C. 1998, c. 19, was made in respect of a transfer to read subsection 132.2(1) of the Income Tax Act without reference to paragraph 132.2(1)(p) of that Act, the election is, on the application of subsection (1), deemed to have the effect of reading subsection 132.2(3) of that Act, as enacted by subsection (1), in respect of the transfer without reference to its paragraph (i).
281. (1) Subsection 134.1(2) of the Act is replaced by the following:
Marginal note:Application
(2) For the purposes of applying subsections 104(10) and (11) and 133(6) to (9) (other than the definition “non-resident-owned investment corporation” in subsection 133(8)), section 212 and any tax treaty, a corporation described in subsection (1) is deemed to be a non-resident-owned investment corporation in its first non-NRO year in respect of dividends paid in that year on shares of its capital stock to a non-resident person, to a trust for the benefit of non-resident persons or their unborn issue or to a non-resident-owned investment corporation.
(2) Subsection (1) applies to a corporation that ceases to be a non-resident-owned investment corporation because of a transaction or an event that occurs, or a circumstance that arises, in a taxation year of the corporation that ends after February 27, 2000.
282. (1) Subsection 135.1(7) of the Act is replaced by the following:
Marginal note:Withholding on redemption
(7) A person or partnership (in this subsection referred to as the “redeeming entity”) that redeems, acquires or cancels a shareholder’s share shall withhold and forthwith remit to the Receiver General, on account of the shareholder’s tax liability, 15% from the amount otherwise payable on the redemption, acquisition or cancellation, if
(a) the share was, at the time it was issued, a tax deferred cooperative share;
(b) the redeeming entity is the corporation that issued the share, or a person or partnership with whom the corporation does not deal at arm’s length; and
(c) the shareholder is not a trust whose taxable income is exempt from tax under this Part because of paragraph 149(1)(r) or (x).
(2) Section 135.1 of the Act is amended by adding the following after subsection (8):
Marginal note:Application of subsection (10)
(9) Subsection (10) applies in respect of the disposition, after September 28, 2009, by a taxpayer of a tax deferred cooperative share (in this subsection and subsection (10) referred to as the “old share”) of an agricultural cooperative corporation if
(a) the disposition results from the acquisition, cancellation or redemption of the old share in the course of a reorganization of the capital of the corporation;
(b) in exchange for the old share the corporation issues to the taxpayer a share (in this subsection and subsection (10) referred to as the “new share”) that is described in all of paragraphs (b) to (d) of the definition “tax deferred cooperative share” in subsection (1); and
(c) the amount of paid-up capital, and the amount, if any, that the taxpayer is entitled to receive on a redemption, acquisition or cancellation, of the new share are equal to those amounts, respectively, in respect of the old share.
Marginal note:Shares issued on corporate reorganizations
(10) If this subsection applies in respect of an exchange of a taxpayer’s old share for a new share, for the purposes of this section (other than subsection (9)),
(a) the new share issued in exchange for the old share is deemed to have been issued, pursuant to an allocation in proportion to patronage, at the time the old share was issued; and
(b) provided that no person or partnership receives at any time any consideration (other than the new share) in exchange for the old share, for the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.
(3) Subsection (1) applies to redemptions, acquisitions and cancellations that occur after 2007.
(4) Subsection (2) is deemed to have come into force on September 29, 2009, except that in its application to an exchange of shares described by subparagraph 87(2)(s)(ii) of the Act, as enacted by subsection 223(8), that occurs before October 31, 2011,
(a) with respect to a new share received on the exchange that has been disposed of before October 31, 2011, paragraph 135.1(10)(a) of the Act, as enacted by subsection (2), is to be read as follows:
(a) the new share issued in exchange for the old share is deemed to have been issued at the time the old share was issued; and
and
(b) paragraph 135.1(10)(b) of the Act, as enacted by subsection (2), is to be read as follows:
(b) for the purposes of subsections (2) and (7) the taxpayer is deemed to have disposed of the old share for nil proceeds.
283. (1) Subsection 136(1) of the Act is replaced by the following:
Marginal note:Cooperative not private corporation
136. (1) Notwithstanding any other provision of this Act, a cooperative corporation that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 15.1, 123.4, 125, 125.1, 127, 127.1, 152 and 157, the definition “mark-to-market property” in subsection 142.2(1) and the definition “small business corporation” in subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).
(2) Subsection 136(2) of the Act is amended by striking out “and” at the end of paragraph (b) and by replacing paragraph (c) with the following:
(c) at least 90% of its members are individuals, other cooperative corporations, or corporations or partnerships that carry on the business of farming; and
(d) at least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds, TFSAs or registered education savings plans, the annuitants, holders or subscribers under which are members described in that paragraph.
(3) Subsection (1) applies to the 2001 and subsequent taxation years.
(4) Subsection (2) applies to the 1998 and subsequent taxation years, except that, in its application to taxation years that end before 2009, paragraph 136(2)(d) of the Act, as enacted by subsection (2), is to be read as follows:
(d) at least 90% of its shares, if any, are held by members described in paragraph (c) or by trusts governed by registered retirement savings plans, registered retirement income funds or registered education savings plans, the annuitants or subscribers under which are members described in that paragraph.
284. (1) Paragraph 137(4.3)(a) of the Act is replaced by the following:
(a) the preferred-rate amount of a corporation at the end of a taxation year is an amount equal to the total of its preferred-rate amount at the end of its immediately preceding taxation year and 100/17 of the amount deductible under section 125 from the tax for the year otherwise payable by it under this Part;
(2) The definition “member” in subsection 137(6) of the Act is replaced by the following:
“member”
« membre »
“member”, of a credit union, means
(a) a person who is recorded as a member on the records of the credit union and is entitled to participate in and use the services of the credit union, and
(b) a registered retirement savings plan, a registered retirement income fund, a TFSA or a registered education savings plan, the annuitant, holder or subscriber under which is a person described in paragraph (a).
(3) Subsection 137(7) of the Act is replaced by the following:
Marginal note:Credit union not private corporation
(7) Notwithstanding any other provision of this Act, a credit union that would, if this Act were read without reference to this section, be a private corporation is deemed not to be a private corporation except for the purposes of sections 123.1, 123.4, 125, 127, 127.1, 152 and 157 and the definition “small business corporation” in subsection 248(1) as it applies for the purpose of paragraph 39(1)(c).
(4) Subsection (1) applies to the 2008 and subsequent taxation years, except that, in the application of paragraph 137(4.3) of the Act, as amended by subsection (1), to a particular taxation year of a credit union that began in 2007 and ended in 2008, the preferred-rate amount of the credit union at the end of the particular taxation year is equal to the total of
(a) the preferred-rate amount of the credit union at the end of the taxation year that immediately preceded the particular taxation year; and
(b) the total of
(i) that proportion of the amount obtained by multiplying 25/4 by the amount deductible under section 125 of the Act for the particular taxation year, that the number of days in the particular taxation year that are in 2007 is of the number of days in the particular taxation year, and
(ii) that proportion of the amount obtained by multiplying 100/17 by the amount deductible under section 125 of the Act for the particular taxation year, that the number of days in the particular taxation year that are in 2008 is of the number of days in the particular taxation year.
(5) Subsection (2) applies to the 1996 and subsequent taxation years except that, in its application to taxation years that end before 2009, paragraph (b) of the definition “member” in subsection 137(6) of the Act, as enacted by subsection (2), is to be read as follows:
(b) a registered retirement savings plan, a registered retirement income fund or a registered education savings plan, the annuitant or subscriber under which is a person described in paragraph (a).
(6) Subsection (3) applies to the 2001 and subsequent taxation years.
285. (1) Subsection 137.1(2) of the Act is replaced by the following:
Marginal note:Amounts not included in income
(2) The following amounts shall not be included in computing the income of a deposit insurance corporation for a taxation year:
(a) any premium or assessment received, or receivable, by the corporation in the year from a member institution; and
(b) any amount received by the corporation in the year from another deposit insurance corporation to the extent that that amount can reasonably be considered to have been paid out of amounts referred to in paragraph (a) received by that other deposit insurance corporation in any taxation year.
(2) Subsection 137.1(4) of the Act is amended by striking out “or” at the end of paragraph (c) and by adding the following after paragraph (c):
(d) any amount paid by it to another deposit insurance corporation that is, because of paragraph (2)(b), not included in computing the income of that other deposit insurance corporation; or
(3) Subsections (1) and (2) apply to the 1998 and subsequent taxation years.
286. (1) Subsection 138(2) of the Act is replaced by the following:
Marginal note:Insurer’s income or loss
(2) Notwithstanding any other provision of this Act,
(a) if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, its income or loss for the year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada;
(b) if a life insurer resident in Canada carries on an insurance business in Canada and in a country other than Canada in a taxation year, for greater certainty,
(i) in computing the insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the insurer, and
(ii) in computing the insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the insurer in the course of carrying on an insurance business,
(A) there is to be included each taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the insurer, and
(B) there is not to be included any taxable capital gain or allowable capital loss of the insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the insurer;
(c) if a non-resident insurer carries on an insurance business in Canada in a taxation year, its income or loss for the taxation year from carrying on an insurance business is the amount of its income or loss for the taxation year from carrying on the insurance business in Canada; and
(d) if a non-resident insurer carries on an insurance business in Canada in a taxation year,
(i) in computing the non-resident insurer’s income or loss for the taxation year from the insurance business carried on by it in Canada, no amount is to be included in respect of the non-resident insurer’s gross investment revenue for the taxation year derived from property used or held by it in the course of carrying on an insurance business that is not designated insurance property for the taxation year of the non-resident insurer, and
(ii) in computing the non-resident insurer’s taxable capital gains or allowable capital losses for the taxation year from dispositions of capital property (referred to in this subparagraph as “insurance business property”) that, at the time of the disposition, was used or held by the non-resident insurer in the course of carrying on an insurance business,
(A) there is to be included each taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was a designated insurance property for the taxation year of the non-resident insurer, and
(B) there is not to be included any taxable capital gain or allowable capital loss of the non-resident insurer for the taxation year from a disposition in the taxation year of an insurance business property that was not a designated insurance property for the taxation year of the non-resident insurer.
(2) Subparagraphs 138(3)(a)(iii) and (iv) of the Act are replaced by the following:
(iii) the amount determined by the following formula:
A – B
where
- A
- is the total of policy dividends (except the portion paid out of segregated funds) that became payable by the insurer after its 1968 taxation year and before the end of the year under its participating life insurance policies, and
- B
- is the total of amounts deductible under this subparagraph (including as determined under subsection (3.1) as it read in its application to the insurer’s last taxation year that began before November 2011) in computing its incomes for taxation years before the year, and
(3) The portion of subsection 138(3) of the Act after paragraph (a) is replaced by the following:
(b) the total of amounts each of which is a policy loan made by the insurer in the year and after 1977; and
(c) the amount of tax under Part XII.3 payable by the insurer in respect of its taxable Canadian life investment income for the year.
(4) Subsection 138(3.1) of the Act is repealed.
(5) Paragraph 138(4)(a) of the Act is replaced by the following:
(a) each amount deducted under paragraph (3)(a), other than under subparagraph (3)(a)(ii.1), (iii) or (v), in computing the insurer’s income for the preceding taxation year;
(6) Subsections 138(4.1) to (4.3) of the Act are repealed.
(7) Paragraph 138(11.5)(j) of the Act is replaced by the following:
(j) for the purpose of determining the income of the transferor and the transferee for their taxation years following their taxation years referred to in paragraph (h), amounts deducted by the transferor as reserves under paragraph (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), paragraphs 20(1)(l) and (l.1) and 20(7)(c) of this Act and section 33 and paragraph 138(3)(c) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, in its taxation year referred to in paragraph (h) in respect of the transferred property referred to in paragraph (b) or the obligations referred to in paragraph (c) are deemed to have been deducted by the transferee, and not the transferor, for its taxation year referred to in paragraph (h),
(8) Paragraph 138(11.5)(k) of the Act is replaced by the following:
(k) for the purposes of this section, sections 12, 12.4, 20, 138.1, 140 and 142, paragraphs 142.4(4)(c) and (d), section 148 and Part XII.3, the transferee is, in its taxation years following its taxation year referred to in paragraph (h), deemed to be the same person as, and a continuation of, the transferor in respect of the business referred to in paragraph (a), the transferred property referred to in paragraph (b) and the obligations referred to in paragraph (c),
(9) Paragraph 138(11.5)(l) of the Act is replaced by the following:
(l) for the purposes of this subsection and subsections (11.7) and (11.9), the fair market value of consideration received by the transferor from the transferee in respect of the assumption or reinsurance of a particular obligation referred to in paragraph (c) is deemed to be the total of the amounts deducted by the transferor as a reserve under paragraph (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)) and paragraph 20(7)(c) in its taxation year referred to in paragraph (h) in respect of the particular obligation, and
(10) Paragraph 138(11.91)(d) of the Act is replaced by the following:
(d) for the purposes of paragraph (4)(a), subsection (9), the definition “designated insurance property” in subsection (12) and paragraphs 12(1)(d) and (e), the insurer is deemed to have carried on the business in Canada in that preceding year and to have claimed the maximum amounts to which it would have been entitled under paragraphs (3)(a) (other than under subparagraph (3)(a)(ii.1), (iii) or (v)), 20(1)(l) and (l.1) and 20(7)(c) for that year,
(11) Paragraph 138(11.91)(d) of the French version of the Act is repealed.
(12) Subsection 138(11.91) of the English version of the Act is amended by adding “and” at the end of paragraph (d.1), by striking out “and” at the end of paragraph (e) and by repealing paragraph (f).
(13) The portion of paragraph 138(11.94)(b) of the Act after subparagraph (ii) is replaced by the following:
to a corporation resident in Canada (in this subsection referred to as the “transferee”) that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that, immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,
(14) The definitions “1975 branch accounting election deficiency”,“1975-76 excess additional group term reserve”,“1975-76 excess capital cost allowance”, “1975-76 excess investment reserve”, “1975-76 excess policy dividend deduction”, “1975-76 excess policy dividend reserve” and “1975-76 excess policy reserves” in subsection 138(12) of the Act are repealed.
(15) The formula “(A + B + C) – (D + E + F + G + H)” in the definition “surplus funds derived from operations” in subsection 138(12) of the Act is replaced by the following:
(A + B + C) – (D + E + F + G)
(16) The description of B in the definition “surplus funds derived from operations” in subsection 138(12) of the Act is replaced by the following:
- B
- is the total of all amounts each of which is a portion of a non-capital loss that was deemed by subsection 111(7.1) as it read in its application to the 1976 taxation year to have been deductible in computing the insurer’s income for a taxation year that ended before 1977,
(17) The definition “surplus funds derived from operations” in subsection 138(12) of the Act is amended by adding “and” at the end of the description of F, by striking out “and” at the end of the description of G and by repealing the description of H.
(18) The definition “transition year” in subsection 138(12) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) in respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, the life insurer’s 2012 taxation year;
(19) Section 138 of the Act is amended by adding the following after subsection (25):
Marginal note:Policy reserve transition — application rules
(26) In applying subsections (16), (17), (18) and (19) to a life insurer for a taxation year of the life insurer,
(a) if the application of one or more of those subsections is in respect of the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, the life insurer’s reserve transition amount for its transition year in respect of that amendment is to be determined as though the description of A in the definition “reserve transition amount” in subsection (12) read as follows:
- A
- is the maximum amount that the life insurer would be permitted to claim under subparagraph (3)(a)(i) (and that would be prescribed by section 1404 of the Income Tax Regulations for the purposes of subparagraph (3)(a)(i)) as a policy reserve for its base year in respect of its life insurance policies in Canada if paragraph 1406(b) of the Income Tax Regulations were read as it applies to the life insurer’s 2012 taxation year, and;
(b) if one or more of those subsections applies in the same taxation year in respect of both the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year, and the International Financial Reporting Standards adopted by the Accounting Standards Board and effective as of January 1, 2011, then, for the purposes of applying those subsections in respect of a transition year described by paragraph (b) of the definition “transition year” in subsection (12), the reference to “as it reads in respect of its transition year” in paragraph (b) of the description of A in the definition “reserve transition amount” in subsection (12) is to be read as a reference to “as it reads in respect of its transition year (determined without reference to the amendment to paragraph 1406(b) of the Income Tax Regulations effective as of the life insurer’s 2012 taxation year); and
(c) if the life insurer has more than one transition year for the same taxation year of the life insurer
(i) for each transition year, the computation of the reserve transition amount for the transition year, and the requirements to include, or rights to deduct, under any of those subsections an amount in respect of that reserve transition amount, shall be determined as if that transition year were the only transition year of the life insurer for that taxation year, and
(ii) for greater certainty, the references in subsections (16), (17), (18) and (19) to a transition year include each of those transition years.
(20) Subsections (1), (11) and (12) apply to taxation years that end after 1999.
(21) Subsections (2) to (10) and (14) to (17) apply to taxation years that begin after October 31, 2011.
(22) Subsection (13) applies to transfers made after October 2004.
(23) Subsections (18) and (19) apply to the 2012 and subsequent taxation years.
287. (1) Subsections 138.1(3.1) and (3.2) of the Act are repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
288. (1) Subsections 142.5(4) to (7) of the Act are repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
289. (1) Paragraph 142.6(1)(b) of the Act is replaced by the following:
(b) if the taxpayer becomes a financial institution, the taxpayer is deemed to have disposed, immediately before the end of its particular taxation year that ends immediately before the particular time, of each of the following properties held by the taxpayer for proceeds equal to the property’s fair market value at the time of that disposition:
(i) a specified debt obligation, or
(ii) a mark-to-market property of the taxpayer for the particular taxation year or for the taxpayer’s taxation year that includes the particular time;
(2) Paragraph 142.6(1)(d) of the Act is replaced by the following:
(d) the taxpayer is deemed to have reacquired, at the end of its taxation year that ends immediately before the particular time, each property deemed by paragraph (b) or (c) to have been disposed of by the taxpayer, at a cost equal to the proceeds of disposition of the property.
(3) Subsections (1) and (2) apply to taxation years that end after 1998.
290. (1) Subsection 142.7(8) of the Act is amended by adding the following after paragraph (a):
(a.1) for the purpose of applying subparagraph 212(1)(b)(vii) in respect of the debt obligation, the obligation is deemed to have been issued by the entrant bank at the time that the obligation was issued by the Canadian affiliate;
(2) Paragraph 142.7(8)(a.1) of the Act, as enacted by subsection (1), is repealed.
(3) Subsection (1) is deemed to have come into force on June 28, 1999.
(4) Subsection (2) is deemed to have come into force on January 1, 2008.
291. (1) The portion of subsection 143(3.1) of the Act before the description of B in paragraph (b) is replaced by the following:
Marginal note:Election in respect of gifts
(3.1) For the purposes of section 118.1, if the eligible amount of a gift made in a taxation year by an inter vivos trust referred to in subsection (1) in respect of a congregation would, but for this subsection, be included in the total charitable gifts, total Crown gifts, total cultural gifts or total ecological gifts of the trust for the year and the trust so elects in its return of income under this Part for the year,
(a) the trust is deemed not to have made the gift; and
(b) each participating member of the congregation is deemed to have made, in the year, such a gift the eligible amount of which is the amount determined by the formula
A × B/C
where
- A
- is the eligible amount of the gift made by the trust,
(2) Subsection (1) applies to gifts made after December 20, 2002.
292. (1) The heading before section 143.2 of the Act is replaced by the following:
Cost of Tax Shelter Investments and Limited-recourse Debt in Respect of Gifting Arrangements
(2) Subsection (1) is deemed to have come into force on February 19, 2003.
293. (1) Section 143.2 of the Act is amended by adding the following after subsection (6):
Marginal note:Limited-recourse debt in respect of a gift or monetary contribution
(6.1) The limited-recourse debt in respect of a gift or monetary contribution of a taxpayer, at the time the gift or monetary contribution is made, is the total of
(a) each limited-recourse amount at that time, of the taxpayer and of all other taxpayers not dealing at arm’s length with the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution,
(b) each limited-recourse amount at that time, determined under this section when this section is applied to each other taxpayer who deals at arm’s length with and holds, directly or indirectly, an interest in the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution, and
(c) each amount that is the unpaid amount at that time of any other indebtedness, of any taxpayer referred to in paragraph (a) or (b), that can reasonably be considered to relate to the gift or monetary contribution if there is a guarantee, security or similar indemnity or covenant in respect of that or any other indebtedness.
(2) The portion of subsection 143.2(13) of the Act before paragraph (a) is replaced by the following:
Marginal note:Information located outside Canada
(13) For the purpose of this section, if it can reasonably be considered that information relating to indebtedness that relates to a taxpayer’s expenditure, gift or monetary contribution is available outside Canada and the Minister is not satisfied that the unpaid principal of the indebtedness is not a limited-recourse amount, the unpaid principal of the indebtedness relating to the taxpayer’s expenditure, gift or monetary contribution is deemed to be a limited-recourse amount relating to the expenditure, gift or monetary contribution unless
(3) Subsections (1) and (2) apply in respect of expenditures, gifts and monetary contributions made after February 18, 2003.
294. (1) The Act is amended by adding the following after section 143.2:
Expenditure — Limitations
Marginal note:Definitions
143.3 (1) The following definitions apply in this section.
“expenditure”
« dépense »
“expenditure” of a taxpayer means an expense, expenditure or outlay made or incurred by the taxpayer, or a cost or capital cost of property acquired by the taxpayer.
“option”
« option »
“option” means
(a) a security that is issued or sold by a taxpayer under an agreement referred to in subsection 7(1); or
(b) an option, warrant or similar right, issued or granted by a taxpayer, giving the holder the right to acquire an interest in the taxpayer or in another taxpayer with whom the taxpayer does not, at the time the option, warrant or similar right is issued or granted, deal at arm’s length.
“taxpayer”
« contribuable »
“taxpayer” includes a partnership.
Marginal note:Options — limitation
(2) In computing a taxpayer’s income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer’s tax payable, an expenditure of the taxpayer is deemed not to include any portion of the expenditure that would — if this Act were read without reference to this subsection — be included in determining the expenditure because of the taxpayer having granted or issued an option on or after November 17, 2005.
Marginal note:Corporate shares — limitation
(3) In computing a corporation’s income, taxable income or tax payable or an amount considered to have been paid on account of the corporation’s tax payable, an expenditure of the corporation that would — if this Act were read without reference to this subsection — include an amount because of the corporation having issued a share of its capital stock at any particular time on or after November 17, 2005 is reduced by
(a) if the issuance of the share is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds
(i) if the transaction under which the share is issued is a transaction to which section 85, 85.1 or 138 applies, the amount determined under that section to be the cost to the issuing corporation of the property acquired in consideration for issuing the share, or
(ii) in any other case, the amount of the consideration that is the fair market value of the property transferred or issued to, or the services provided to, the issuing corporation for issuing the share; and
(b) if the issuance of the share is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the issuing taxpayer for issuing the share.
Marginal note:Non-corporate interests — limitation
(4) In computing a taxpayer’s (other than a corporation’s) income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer’s tax payable, an expenditure of the taxpayer that would — if this Act were read without reference to this subsection — include an amount because of the taxpayer having issued an interest, or because of an interest being created, in itself at any particular time on or after November 17, 2005 is reduced by
(a) if the issuance or creation of the interest is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds
(i) if the transaction under which the interest is issued is a transaction to which paragraph 70(6)(b) or 73(1.01)(c), subsection 97(2) or section 107.4 or 132.2 applies, the amount determined under that provision to be the cost to the taxpayer of the property acquired for the interest, or
(ii) in any other case, the amount of the consideration that is the fair market value of the property transferred or issued to, or the services provided to, the taxpayer for the interest; and
(b) if the issuance or creation of the interest is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the taxpayer for the interest.
Marginal note:Clarification
(5) For greater certainty,
(a) subsection (2) does not apply to reduce an expenditure that is a commission, fee or other amount for services rendered by a person as a salesperson, agent or dealer in securities in the course of the issuance of an option;
(b) subsections (3) and (4) do not apply to reduce an expenditure of a taxpayer to the extent that the expenditure does not include an amount determined to be an excess under those subsections;
(c) this section does not apply to determine the cost or capital cost of property determined under subsection 70(6), section 73, 85 or 85.1, subsection 97(2) or section 107.4, 132.2 or 138; and
(d) this section does not apply to determine the amount of a taxpayer’s expenditure if the amount of the expenditure as determined under section 69 is less than the amount that would, if this subsection were read without reference to this paragraph, be the amount of the expenditure as determined under this section.
(2) Subsection (1) is deemed to have come into force on November 17, 2005, except that for securities issued or sold before October 24, 2012, the definition “option” in subsection 143.3(1) of the Act, as enacted by subsection (1), is to be read without reference to its paragraph (a).
295. (1) The Act is amended by adding the following after section 143.3 of the Act, as enacted by subsection 294(1):
Expenditure — Limit for Contingent Amount
Marginal note:Definitions
143.4 (1) The following definitions apply in this section.
“contingent amount”
« montant éventuel »
“contingent amount”, of a taxpayer at any time (other than a time at which the taxpayer is a bankrupt), includes an amount to the extent that the taxpayer, or another taxpayer that does not deal at arm’s length with the taxpayer, has a right to reduce the amount at that time.
“expenditure”
« dépense »
“expenditure”, of a taxpayer, means an expense, expenditure or outlay made or incurred by the taxpayer, or a cost or capital cost of property acquired by the taxpayer.
“right to reduce”
« droit de réduire »
“right to reduce” means a right to reduce or eliminate an amount in respect of an expenditure at any time, including, for greater certainty, a right to reduce that is contingent upon the occurrence of an event, or in any other way contingent, if it is reasonable to conclude, having regard to all the circumstances, that the right will become exercisable.
“taxpayer”
« contribuable »
“taxpayer” includes a partnership.
Marginal note:Limitation of amount of expenditure
(2) For the purposes of this Act, if in a taxation year of a taxpayer an expenditure of the taxpayer occurs, the amount of the expenditure at any time is the lesser of
(a) the amount of the expenditure at the time calculated under this Act without reference to this section, and
(b) the least amount of the expenditure calculated by reducing the amount of the expenditure determined under paragraph (a) by the amount that is the amount, if any, by which
(i) the total of all amounts each of which is a contingent amount of the taxpayer in the year in respect of the expenditure
exceeds
(ii) the total of all amounts each of which is
(A) an amount paid by the taxpayer to obtain a right to reduce an amount in respect of the expenditure, or
(B) a limited-recourse amount for the purposes of paragraph 143.2(6)(b) that reduces the expenditure under subsection 143.2(6) to the extent that the amount is also a contingent amount described in subparagraph (i) in respect of the expenditure.
Marginal note:Payment of contingent amount
(3) For the purposes of this Act, if in a particular taxation year, a taxpayer pays all or a portion of a contingent amount referred to in paragraph (2)(b) that reduces the amount of the taxpayer’s expenditure referred to in paragraph (2)(a), the portion of the contingent amount paid by the taxpayer in the particular year for the purpose of earning income, and to that extent only, is deemed
(a) to have been incurred by the taxpayer in the particular year;
(b) to have been incurred for the same purpose and to have the same character as the expenditure so reduced; and
(c) to have become payable by the taxpayer in respect of the particular year.
Marginal note:Subsequent years
(4) Subject to subsection (6), if at any time in a taxation year that is after a taxation year in which an expenditure of the taxpayer occurred, the taxpayer, or another taxpayer not dealing at arm’s length with the taxpayer, has a right to reduce an amount in respect of the expenditure (in this subsection and subsection (5) referred to as the “prior expenditure”) that would, if the taxpayer or the other taxpayer had had the right to reduce in a particular taxation year that ended before the time, have resulted in subsection (2) applying in the particular taxation year to reduce or eliminate the amount of the prior expenditure, the taxpayer’s subsequent contingent amount in respect of the prior expenditure, as determined under subsection (5), is deemed, to the extent subsection (2) and this subsection have not previously applied in respect of the expenditure,
(a) to be an amount received by the taxpayer at the time in the course of earning income from a business or property from a person described in subparagraph 12(1)(x)(i); and
(b) to be an amount referred to in subparagraph 12(1)(x)(iv).
Marginal note:Subsequent contingent amount
(5) For the purposes of subsection (4), a taxpayer’s subsequent contingent amount in respect of a prior expenditure of the taxpayer is the amount, if any, by which
(a) the maximum amount by which the amount (in this subsection referred to as the “particular amount”) in respect of the prior expenditure may be reduced pursuant to a right to reduce the particular amount
exceeds
(b) the amount, if any, paid to obtain the right to reduce the particular amount.
Marginal note:Anti-avoidance
(6) If a taxpayer, or another taxpayer that does not deal at arm’s length with the taxpayer, has a right to reduce an amount in respect of an expenditure of the taxpayer in a taxation year that is after the taxation year in which the expenditure otherwise occurred, determined without reference to subsection (3), the taxpayer is deemed to have the right to reduce in the taxation year in which that expenditure otherwise occurred if it is reasonable to conclude having regard to all the circumstances that one of the purposes for having the right to reduce after the end of the year in which the expenditure otherwise occurred was to avoid the application of subsection (2) to the amount of the expenditure.
Marginal note:Assessments
(7) Notwithstanding subsections 152(4) to (5), such assessments, determinations and redeterminations may be made as are necessary to give effect to this section.
(2) Subsection (1) applies in respect of taxation years that end on or after March 16, 2011.
296. (1) Paragraph (d) of the definition revenu gagné in subsection 146(1) of the French version of the Act is replaced by the following:
d) soit, dans le cas d’un contribuable visé au paragraphe 115(2), le total qui serait calculé en application de l’alinéa 115(2)e) à son égard pour l’année compte non tenu du renvoi à l’alinéa 56(1)n) au sous-alinéa 115(2)e)(ii), ni du sous-alinéa 115(2)e)(iv), à l’exception de toute partie de ce total qui est incluse, en application de l’alinea c), dans le total calculé selon la présente définition ou qui est exonérée de l’impôt sur le revenu au Canada par l’effet d’une disposition d’un accord ou convention fiscal conclu avec un autre pays et ayant force de loi au Canada,
(2) Subparagraph (d)(i) of the definition “earned income” in subsection 146(1) of the English version of the Act is replaced by the following:
(i) that paragraph were read without reference to subparagraph 115(2)(e)(iv), and
(3) Paragraph (f) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:
(f) an amount deductible under paragraph 60(b), or deducted under paragraph 60(c.2), in computing the taxpayer’s income for the year,
(4) Paragraph (h) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:
(h) the portion of an amount included under subparagraph (a)(ii) or (c)(ii) in determining the taxpayer’s earned income for the year because of paragraph 14(1)(b)
(5) Subsection 146(8.1) of the Act is replaced by the following:
Marginal note:Deemed receipt of refund of premiums
(8.1) If a payment out of or under a registered retirement savings plan of a deceased annuitant to the annuitant’s legal representative would have been a refund of premiums if it had been paid under the plan to an individual who is a beneficiary (as defined in subsection 108(1)) under the deceased’s estate, the payment is, to the extent it is so designated jointly by the legal representative and the individual in prescribed form filed with the Minister, deemed to be received by the individual (and not by the legal representative) at the time it was so paid as a benefit that is a refund of premiums.
(6) Subparagraph 146(10.1)(b)(ii) of the Act is replaced by the following:
(ii) paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.
(7) Subsections (1) and (2) apply to the 1993 and subsequent taxation years.
(8) Subsection (3) applies to the 1997 and subsequent taxation years.
(9) Subsection (4) applies to amounts included in computing income for taxation years in respect of business fiscal periods that end after February 27, 2000.
(10) Subsection (5) is deemed to have come into force on January 1, 1989, except that, before 1999, subsection 146(8.1) of the Act, as enacted by subsection (5), is to be read as follows:
(8.1) Such portion of an amount paid in a taxation year out of or under a registered retirement savings plan of a deceased annuitant to the annuitant’s legal representative as, had that portion been paid under the plan to an individual who is a beneficiary (as defined in subsection 108(1)) under the deceased’s estate, would have been a refund of premiums is, to the extent it is so designated jointly by the legal representative and the individual in prescribed form filed with the Minister, deemed to be received by the individual in the year as a benefit that is a refund of premiums.
297. (1) The definition “quarter” in subsection 146.01(1) of the Act is repealed.
(2) Subsection 146.01(8) of the Act is repealed.
(3) Subsections (1) and (2) apply in respect of the 2002 and subsequent taxation years.
298. (1) Subsection 146.1(2) of the Act is amended by adding the following after paragraph (g.2):
(g.3) the plan provides that an individual is permitted to be designated as a beneficiary under the plan, and that a contribution to the plan in respect of an individual who is a beneficiary under the plan is permitted to be made, only if
(i) in the case of a designation, the individual’s Social Insurance Number is provided to the promoter before the designation is made and either
(A) the individual is resident in Canada when the designation is made, or
(B) the designation is made in conjunction with a transfer of property into the plan from another registered education savings plan under which the individual was a beneficiary immediately before the transfer, and
(ii) in the case of a contribution, either
(A) the individual’s Social Insurance Number is provided to the promoter before the contribution is made and the individual is resident in Canada when the contribution is made, or
(B) the contribution is made by way of transfer from another registered education savings plan under which the individual was a beneficiary immediately before the transfer;
(2) Section 146.1 of the Act is amended by adding the following after subsection (2.2):
Marginal note:Social Insurance Number not required
(2.3) Notwithstanding paragraph (2)(g.3), an education savings plan may provide that an individual’s Social Insurance Number need not be provided in respect of
(a) a contribution to the plan, if the plan was entered into before 1999; and
(b) a designation of a non-resident individual as a beneficiary under the plan, if the individual was not assigned a Social Insurance Number before the designation is made.
(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2004.
299. (1) The definition “holder” in subsection 146.2(1) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) at and after the death of a holder described in paragraph (b) or in this paragraph, the holder’s survivor, if the survivor acquires
(i) all of the holder’s rights as the holder of the arrangement, and
(ii) to the extent it is not included in the rights described in subparagraph (i), the unconditional right to revoke any beneficiary designation made, or similar direction imposed, by the holder under the arrangement or relating to property held in connection with the arrangement.
(2) Subsection (1) applies to the 2009 and subsequent taxation years.
300. (1) Paragraph (b) of the definition “annuitant” in subsection 146.3(1) of the Act is replaced by the following:
(b) after the death of the first individual, a spouse or common-law partner (in this definition referred to as the “survivor”) of the first individual to whom the carrier has undertaken to make payments described in the definition “retirement income fund” out of or under the fund after the death of the first individual, if the survivor is alive at that time and the undertaking was made
(i) pursuant to an election that is described in that definition and that was made by the first individual, or
(ii) with the consent of the legal representative of the first individual, and
(2) The portion of paragraph 146.3(2)(c) of the English version of the Act before subparagraph (i) is replaced by the following:
(c) if the carrier is a person referred to as a depositary in section 146, the fund provides that
(3) Paragraph 146.3(2)(f) of the Act is amended by adding the following after subparagraph (iv):
(iv.1) a deferred profit sharing plan in accordance with subsection 147(19);
(4) The portion of subsection 146.3(5.1) of the English version of the Act before paragraph (a) is replaced by the following:
Marginal note:Amount included in income
(5.1) If at any time in a taxation year a particular amount in respect of a registered retirement income fund that is a spousal or common-law partner plan (within the meaning assigned by subsection 146(1)) in relation to a taxpayer is required to be included in the income of the taxpayer’s spouse or common-law partner and the taxpayer is not living separate and apart from the taxpayer’s spouse or common-law partner at that time by reason of the breakdown of their marriage or common-law partnership, there shall be included at that time in computing the taxpayer’s income for the year an amount equal to the least of
(5) The portion of subsection 146.3(9) of the Act before paragraph (a) is replaced by the following:
Marginal note:Tax payable on income from non-qualified investment
(9) If a trust that is governed by a registered retirement income fund holds, at any time in a taxation year, a property that is not a qualified investment,
(6) Subparagraph 146.3(9)(b)(ii) of the Act is replaced by the following:
(ii) paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.
(7) Subsections (1) and (4) apply to the 2001 and subsequent taxation years, except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act, in respect of the 1998, 1999 or 2000 taxation years, subsections (1) and (4) apply to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.
(8) Subsection (2) is deemed to have come into force on January 1, 2002.
(9) Subsection (3) is deemed to have come into force on March 21, 2003.
(10) Subsection (5) applies to the 2003 and subsequent taxation years.
301. (1) Paragraph 147(2)(e) of the Act is replaced by the following:
(e) the plan includes a provision stipulating that no right of a person under the plan is capable of any surrender or assignment other than
(i) an assignment under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between an individual and the individual’s spouse or common-law partner, or former spouse or common-law partner, in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership,
(ii) an assignment by a deceased individual’s legal representative on the distribution of the individual’s estate, and
(iii) a surrender of benefits to avoid revocation of the plan’s registration;
(2) Subsection 147(5.11) of the Act is repealed.
(3) Subparagraph 147(19)(b)(ii) of the Act is replaced by the following:
(ii) who is a spouse or common-law partner, or former spouse or common-law partner, of an employee or former employee referred to in subparagraph (i) and who is entitled to the amount
(A) as a consequence of the death of the employee or former employee, or
(B) under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between the employee or former employee and the individual in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership;
(4) The portion of paragraph 147(19)(d) of the French version of the Act before subparagraph (i) is replaced by the following:
d) le montant est transféré directement à l’un des régimes ou fonds ci-après au profit du particulier :
(5) Paragraph 147(19)(d) of the Act is amended by striking out “or” at the end of subparagraph (ii), by adding “or” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):
(iv) a registered retirement income fund under which the individual is the annuitant (within the meaning assigned by subsection 146.3(1)).
(6) Subsection (1) is deemed to have come into force on March 21, 2003.
(7) Subsection (2) applies to cessations of employment that occur after 2002.
(8) Subsections (3) to (5) apply to transfers that occur after March 20, 2003.
302. (1) The portion of paragraph (a) of the definition “compensation” in subsection 147.1(1) of the Act that is after subparagraph (ii) and before subparagraph (iii) is replaced by the following:
that is required (or that would be required but for paragraph 81(1)(a) as it applies with respect to the Indian Act or the Foreign Missions and International Organizations Act) by section 5 or 6 to be included in computing the individual’s income for the year, except such portion of the amount as
(2) Subsection (1) is deemed to have come into force on January 1, 1991.
303. (1) The portion of subsection 147.2(7) of the Act before paragraph (a) is replaced by the following:
Marginal note:Letter of credit
(7) For the purposes of this section and any regulations made under subsection 147.1(18) in respect of eligible contributions, an amount paid to a registered pension plan by the issuer of a letter of credit issued in connection with an employer’s funding obligations under a defined benefit provision of the plan is deemed to be an eligible contribution made to the plan in respect of the provision by the employer with respect to the employer’s employees or former employees, if
(2) Section 147.2 of the Act is amended by adding the following after subsection (7):
Marginal note:Former employee of predecessor employer
(8) For the purposes of this section and any regulations made under subsection 147.1(18) in respect of eligible contributions, a former employee of a predecessor employer (as defined by regulation) of a participating employer in relation to a pension plan is deemed to be a former employee of the participating employer in relation to the plan if
(a) the former employee would not otherwise be an employee or former employee of the participating employer; and
(b) benefits are provided to the former employee under a defined benefit provision of the plan in respect of periods of employment with the predecessor employer.
(3) Subsection (1) is deemed to have come into force on November 6, 2010.
(4) Subsection (2) applies to contributions made after 1990.
304. (1) Paragraph 147.3(6)(b) of the Act is replaced by the following:
(b) is transferred on behalf of a member who is entitled to the amount as a return of contributions made (or deemed by regulation to have been made) by the member under a defined benefit provision of the plan before 1991, or as interest (computed at a rate not exceeding a reasonable rate) in respect of those contributions; and
(2) Subsection (1) applies to transfers that occur after 1999.
305. (1) Paragraph 148(1)(e) of the Act is replaced by the following:
(e) an annuity contract
(i) the payment for which was deductible in computing the policyholder’s income by virtue of paragraph 60(l), or
(ii) that is a qualifying trust annuity with respect to a taxpayer, the payment for which was deductible under paragraph 60(l) in computing the taxpayer’s income,
(2) Paragraph 148(1)(e) of the Act, as enacted by subsection (1), is replaced by the following:
(e) an annuity contract if
(i) the payment for the annuity contract was deductible under paragraph 60(l) in computing the policyholder’s income,
(i.1) the annuity contract is a qualifying trust annuity with respect to a taxpayer and the amount paid to acquire it was deductible under paragraph 60(l) in computing the taxpayer’s income, or
(ii) the policyholder acquired the annuity contract in circumstances to which subsection 146(21) applied,
(3) Subsection 148(8.2) of the French version of the Act is replaced by the following:
Marginal note:Transfert à l’époux ou au conjoint de fait au décès
(8.2) Malgré les autres dispositions du présent article, l’intérêt d’un titulaire de police dans une police d’assurance-vie (sauf une police qui est un régime ou un contrat visé à l’un des alinéas (1)a) à e) ou qui est établie aux termes d’un tel régime ou contrat) qui est transféré ou distribué à l’époux ou au conjoint de fait du titulaire par suite du décès de ce dernier est réputé, si le titulaire et son époux ou conjoint de fait résidaient au Canada immédiatement avant ce décès, avoir fait l’objet d’une disposition par le titulaire immédiatement avant son décès pour un produit égal au coût de base rajusté de l’intérêt pour lui immédiatement avant le transfert et avoir été acquis par l’époux ou le conjoint de fait à un coût égal à ce produit; toutefois, un choix peut être fait dans la déclaration de revenu du titulaire produite en vertu de la présente partie pour l’année d’imposition au cours de laquelle le titulaire est décédé pour que le présent paragraphe ne s’applique pas.
(4) Subsection (1) is deemed to have come into force on January 1, 1989.
(5) Subsection (2) is deemed to have come into force on September 1, 1992.
306. (1) The definition versement admissible in subsection 148.1(1) of the French version of the Act is replaced by the following:
« versement admissible »
“relevant contribution”
versement admissible Est un versement admissible effectué pour un particulier dans le cadre d’un arrangement donné :
a) le versement effectué dans le cadre de l’arrangement donné en vue du financement de services de funérailles ou de cimetière relatifs au particulier, à l’exception d’un versement effectué au moyen d’un transfert d’un arrangement de services funéraires;
b) la partie d’un versement effectué dans le cadre d’un arrangement de services funéraires (à l’exception d’un tel versement effectué au moyen d’un transfert d’un arrangement de services funéraires) qu’il est raisonnable de considérer comme ayant ultérieurement servi à effectuer un versement dans le cadre de l’arrangement donné au moyen d’un transfert d’un arrangement de services funéraires en vue du financement de services de funérailles ou de cimetière relatifs au particulier.
(2) The description of C in subsection 148.1(3) of the Act is replaced by the following:
- C
- is the amount determined by the formula
D – E
where
- D
- is the total of all relevant contributions made before the particular time in respect of the individual under the arrangement (other than contributions in respect of the individual that were in a cemetery care trust), and
- E
- is the total of all amounts each of which is the amount, if any, by which
(a) an amount relating to the balance in respect of the individual under the arrangement that is deemed by subsection (4) to have been distributed before the particular time from the arrangement
exceeds
(b) the portion of the amount referred to in paragraph (a) that is added, because of this subsection, in computing a taxpayer’s income.
(3) Section 148.1 of the Act is amended by adding the following after subsection (3):
Marginal note:Deemed distribution on transfer
(4) If at a particular time an amount relating to the balance in respect of an individual (referred to in this subsection and in subsection (5) as the “transferor”) under an eligible funeral arrangement (referred to in this subsection and in subsection (5) as the “transferor arrangement”) is transferred, credited or added to the balance in respect of the same or another individual (referred to in this subsection and in subsection (5) as the “recipient”) under the same or another eligible funeral arrangement (referred to in this subsection and in subsection (5) as the “recipient arrangement”),
(a) the amount is deemed to be distributed to the transferor (or, if the transferor is deceased at the particular time, to the recipient) at the particular time from the transferor arrangement and to be paid from the balance in respect of the transferor under the transferor arrangement; and
(b) the amount is deemed to be a contribution made (other than by way of a transfer from an eligible funeral arrangement) at the particular time under the recipient arrangement for the purpose of funding funeral or cemetery services with respect to the recipient.
Marginal note:Non-application of subsection (4)
(5) Subsection (4) does not apply if
(a) the transferor and the recipient are the same individual;
(b) the amount that is transferred, credited or added to the balance in respect of the individual under the recipient arrangement is equal to the balance in respect of the individual under the transferor arrangement immediately before the particular time; and
(c) the transferor arrangement is terminated immediately after the transfer.
(4) Subsections (2) and (3) apply to amounts that are transferred, credited or added after December 20, 2002.
307. (1) Paragraph 149(1)(d.5) of the Act is replaced by the following:
Marginal note:Income within boundaries of entities
(d.5) subject to subsections (1.2) and (1.3), a corporation, commission or association not less than 90% of the capital of which was owned by one or more entities each of which is a municipality in Canada, or a municipal or public body performing a function of government in Canada, if the income for the period of the corporation, commission or association from activities carried on outside the geographical boundaries of the entities does not exceed 10% of its income for the period;
(2) Subparagraphs 149(1)(d.6)(i) and (ii) of the Act are replaced by the following:
(i) if paragraph (d.5) applies to the other corporation, commission or association, the geographical boundaries of the entities referred to in that paragraph in its application to that other corporation, commission or association, or
(ii) if this paragraph applies to the other corporation, commission or association, the geographical boundaries of the entities referred to in subparagraph (i) in its application to that other corporation, commission or association,
(3) Paragraph 149(1)(d.6) of the Act, as amended by subsection (2), is replaced by the following:
Marginal note:Subsidiaries of municipal corporations
(d.6) subject to subsections (1.2) and (1.3), a particular corporation all of the shares (except directors’ qualifying shares) or of the capital of which was owned by one or more entities (referred to in this paragraph as “qualifying owners”) each of which is, for the period, a corporation, commission or association to which paragraph (d.5) applies, a corporation to which this paragraph applies, a municipality in Canada, or a municipal or public body performing a function of government in Canada, if no more than 10% of the particular corporation’s income for the period is from activities carried on outside
(i) if a qualifying owner is a municipality in Canada, or a municipal or public body performing a function of government in Canada, the geographical boundaries of each such qualifying owner,
(ii) if paragraph (d.5) applies to a qualifying owner, the geographical boundaries of the municipality, or municipal or public body, referred to in that paragraph in its application to each such qualifying owner, and
(iii) if this paragraph applies to a qualifying owner, the geographical boundaries of the municipality, or municipal or public body, referred to in subparagraph (i) or paragraph (d.5), as the case may be, in their respective applications to each such qualifying owner;
(4) Clause 149(1)(o.2)(iii)(B) of the Act is replaced by the following:
(B) that had not accepted deposits or issued bonds, notes, debentures or similar obligations, and
(5) Section 149 of the Act is amended by adding the following after subsection (1.11):
Marginal note:Deemed election
(1.12) If at any time there is an amalgamation (within the meaning assigned by subsection 87(1)) of a corporation (in this subsection referred to as the “parent”) and one or more other corporations (each of which in this subsection is referred to as the “subsidiary”) each of which is a subsidiary wholly-owned corporation of the parent, and immediately before that time the parent is a person to which subsection (1) does not apply by reason of the application of subsection (1.11), the new corporation is deemed, for the purposes of subsection (1.11), to be the same corporation as, and a continuation of, the parent.
(6) The portion of subsection 149(1.2) of the Act before paragraph (b) is replaced by the following:
Marginal note:Income test
(1.2) For the purposes of paragraphs (1)(d.5) and (d.6), income of a corporation, a commission or an association from activities carried on outside the geographical boundaries of a municipality or of a municipal or public body does not include income from activities carried on
(a) under an agreement in writing between
(i) the corporation, commission or association, and
(ii) a person who is Her Majesty in right of Canada or of a province, a municipality, a municipal or public body or a corporation to which any of paragraphs (1)(d) to (d.6) applies and that is controlled by Her Majesty in right of Canada or of a province, by a municipality in Canada or by a municipal or public body in Canada
within the geographical boundaries of,
(iii) if the person is Her Majesty in right of Canada or a corporation controlled by Her Majesty in right of Canada, Canada,
(iv) if the person is Her Majesty in right of a province or a corporation controlled by Her Majesty in right of a province, the province,
(v) if the person is a municipality in Canada or a corporation controlled by a municipality in Canada, the municipality, and
(vi) if the person is a municipal or public body performing a function of government in Canada or a corporation controlled by such a body, the area described in subsection (11) in respect of the person; or
(7) Subsection 149(1.3) of the Act is replaced by the following:
Marginal note:Votes or de facto control
(1.3) Paragraphs (1)(d) to (d.6) do not apply in respect of a person’s taxable income for a period in a taxation year if at any time during the period
(a) the person is a corporation shares of the capital stock of which are owned by one or more other persons that, in total, give them more than 10% of the votes that could be cast at a meeting of shareholders of the corporation, other than shares that are owned by one or more persons each of which is
(i) Her Majesty in right of Canada or of a province,
(ii) a municipality in Canada,
(iii) a municipal or public body performing a function of government in Canada, or
(iv) a corporation, a commission or an association, to which any of paragraphs (1)(d) to (d.6) apply; or
(b) the person is, or would be if the person were a corporation, controlled, directly or indirectly in any manner whatever, by a person, or by a group of persons that includes a person, who is not
(i) Her Majesty in right of Canada or of a province,
(ii) a municipality in Canada,
(iii) a municipal or public body performing a function of government in Canada, or
(iv) a corporation, a commission or an association, to which any of paragraphs (1)(d) to (d.6) apply.
(8) Paragraph 149(10)(c) of the Act is replaced by the following:
(c) for the purposes of applying sections 37, 65 to 66.4, 66.7, 111 and 126, subsections 127(5) to (36) and section 127.3 to the corporation, the corporation is deemed to be a new corporation the first taxation year of which began at that time; and
(9) Section 149 of the Act is amended by adding the following after subsection (10):
Marginal note:Geographical boundaries — body performing government functions
(11) For the purpose of this section, the geographical boundaries of a municipal or public body performing a function of government are
(a) the geographical boundaries that encompass the area in respect of which an Act of Parliament or an agreement given effect by an Act of Parliament recognizes or grants to the body a power to impose taxes; or
(b) if paragraph (a) does not apply, the geographical boundaries within which that body has been authorized by the laws of Canada or of a province to exercise that function.
(10) Subsections (1), (2), (6), (7) and (9) apply to taxation years that begin after May 8, 2000, except that, for those taxation years that began before December 21, 2002, subsection 149(1.3) of the Act, as enacted by subsection (7), is to be read as follows:
(1.3) For the purposes of paragraph (1)(d.5) and subsection (1.2), 90% of the capital of a corporation that has issued share capital is owned by one or more entities, each of which is a municipality or a municipal or public body, only if the entities own shares of the capital stock of the corporation that give the entities 90% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation.
(11) Subsection (3) applies in respect of taxation years that end after April 2004.
(12) Subsection (4) applies to taxation years that end after February 21, 1994.
(13) Subsection (5) applies to amalgamations that occur after October 4, 2004.
(14) Subsection (8) applies to each corporation that after 2006 becomes or ceases to be exempt from tax on its taxable income under Part I of the Act.
(15) Notwithstanding subsections 152(4) to (5) of the Act, any assessment of a taxpayer’s tax payable under the Act for any taxation year that began before October 24, 2012 is to be made that is necessary to give effect to the provisions of the Act enacted by subsections (1), (2), (6), (7) and (9).
308. (1) The definition “public foundation” in subsection 149.1(1) of the Act is replaced by the following:
“public foundation”
« fondation publique »
“public foundation”, at a particular time, means a charitable foundation
(a) more than 50% of the directors, trustees, officers or like officials of which deal at arm’s length with each other and with
(i) each of the other directors, trustees, officers and like officials of the foundation,
(ii) each person described by subparagraph (b)(i) or (ii), and
(iii) each member of a group of persons (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)) who do not deal with each other at arm’s length, if the group would, if it were a person, be a person described by subparagraph (b)(i), and
(b) that is not, at the particular time, and would not at the particular time be, if the foundation were a corporation, controlled directly or indirectly in any manner whatever
(i) by a person (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)),
(A) who immediately after the particular time, has contributed to the foundation amounts that are, in total, greater than 50% of the capital of the foundation immediately after the particular time, and
(B) who immediately after the person’s last contribution at or before the particular time, had contributed to the foundation amounts that were, in total, greater than 50% of the capital of the foundation immediately after the making of that last contribution, or
(ii) by a person, or by a group of persons that do not deal at arm’s length with each other, if the person or any member of the group does not deal at arm’s length with a person described in subparagraph (i);
(2) The portion of the definition “charitable organization” in subsection 149.1(1) of the Act before paragraph (a) is replaced by the following:
“charitable organization”
« oeuvre de bienfaisance »
“charitable organization”, at any particular time, means an organization, whether or not incorporated,
(3) Paragraphs (c) and (d) of the definition “charitable organization” in subsection 149.1(1) of the Act are replaced by the following:
(c) more than 50% of the directors, trustees, officers or like officials of which deal at arm’s length with each other and with
(i) each of the other directors, trustees, officers and like officials of the organization,
(ii) each person described by subparagraph (d)(i) or (ii), and
(iii) each member of a group of persons (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)) who do not deal with each other at arm’s length, if the group would, if it were a person, be a person described by subparagraph (d)(i), and
(d) that is not, at the particular time, and would not at the particular time be, if the organization were a corporation, controlled directly or indirectly in any manner whatever
(i) by a person (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)),
(A) who immediately after the particular time, has contributed to the organization amounts that are, in total, greater than 50% of the capital of the organization immediately after the particular time, and
(B) who immediately after the person’s last contribution at or before the particular time, had contributed to the organization amounts that were, in total, greater than 50% of the capital of the organization immediately after the making of that last contribution, or
(ii) by a person, or by a group of persons that do not deal at arm’s length with each other, if the person or any member of the group does not deal at arm’s length with a person described in subparagraph (i);
(4) Paragraph (d) of the definition “enduring property” in subsection 149.1(1) of the English version of the Act, as it read immediately before its repeal by subsection 37(1) of the Sustaining Canada’s Economic Recovery Act, is replaced by the following:
(d) a gift received by the registered charity as a transferee from an original recipient charity or another transferee of a property that was, before that gift was so received, an enduring property of the original recipient charity or of the other transferee because of paragraph (a) or (c) or this paragraph, or property substituted for the gift, if, in the case of a property that was an enduring property of an original recipient charity because of paragraph (c), the gift is subject to the same terms and conditions under the trust or direction as applied to the original recipient charity;
(5) Subsection 149.1(2) of the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) makes a disbursement by way of a gift, other than a gift made
(i) in the course of charitable activities carried on by it, or
(ii) to a donee that is a qualified donee at the time of the gift.
(6) Subsection 149.1(3) of the Act is amended by adding the following after paragraph (b):
(b.1) makes a disbursement by way of a gift, other than a gift made
(i) in the course of charitable activities carried on by it, or
(ii) to a donee that is a qualified donee at the time of the gift;
(7) Subsection 149.1(4) of the Act is amended by adding the following after paragraph (b):
(b.1) makes a disbursement by way of a gift, other than a gift made
(i) in the course of charitable activities carried on by it, or
(ii) to a donee that is a qualified donee at the time of the gift;
(8) The portion of subsection 149.1(9) of the Act after paragraph (b), as it read immediately before its repeal by subsection 37(8) of the Sustaining Canada’s Economic Recovery Act, is replaced by the following:
is, notwithstanding subsection (8), deemed to be income of the charity for, and the eligible amount of a gift for which it issued a receipt described in subsection 110.1(2) or 118.1(2) in, its taxation year in which the period referred to in paragraph (a) expires or the time referred to in paragraph (b) occurs, as the case may be.
(9) Subsection (1) is deemed to have come into force on January 1, 2000, except that, in respect of a foundation that has not been designated before 2000 as a private foundation or a charitable organization under subsection 149.1(6.3) of the Act or under subsection 110(8.1) or (8.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and that has not applied after February 15, 1984 for registration under paragraph 110(8)(c) of that Act or under the definition “registered charity” in subsection 248(1) of the Act, subparagraph (a)(iii) and paragraph (b) of the definition “public foundation” in subsection 149.1(1) of the Act, as enacted by subsection (1), are, in their application before the earlier of the day, if any, on which the foundation is designated after 1999 as a private foundation or a charitable organization under subsection 149.1(6.3) of the Act and January 1, 2005, to be read
(a) without reference to “(other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l))”; and
(b) as if the references to “50%” in paragraph (b) of that definition were references to “75%”.
(10) Subsections (2) and (3) are deemed to have come into force on January 1, 2000, except that, in respect of a charitable organization that has not been designated before 2000 as a private foundation or a public foundation under subsection 149.1(6.3) of the Act or under subsection 110(8.1) or (8.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and that has not applied after February 15, 1984 for registration under paragraph 110(8)(c) of that Act or under the definition “registered charity” in subsection 248(1) of the Act, subparagraphs (c)(ii) and (iii) of the definition “charitable organization” in subsection 149.1(1) of the Act, as enacted by subsection (3), apply after the earlier of the day, if any, on which the organization is designated after 1999 as a private foundation or a public foundation under subsection 149.1(6.3) of the Act and December 31, 2004.
(11) Subsection (4) applies to taxation years that begin after March 22, 2004 but that end before March 4, 2010. For greater certainty, paragraph (d) of the definition “enduring property” in subsection 149.1(1) of the English version of the Act, as enacted by subsection (4), is deemed to have been repealed in respect of taxation years that end on or after March 4, 2010.
(12) Subsections (5) to (7) apply to gifts made after December 20, 2002.
(13) Subsection (8) is deemed to have come into force on December 21, 2002 but it applies only to taxation years that end before March 4, 2010. For greater certainty, subsection 149.1(9) of the Act, as amended by subsection (8), is deemed to have been repealed in respect of taxation years that end on or after March 4, 2010.
(14) In its application to gifts made after December 20, 2002 but in a taxation year that begins before March 23, 2004, the portion of the description of A in the definition “disbursement quota” in subsection 149.1(1) of the Act before paragraph (a) is to be read as follows:
- A
- is 80% of the total of all amounts each of which is the eligible amount of a gift for which the foundation issued a receipt described in subsection 110.1(2) or 118.1(2) in its immediately preceding taxation year, other than
(15) In its application to gifts made after December 20, 2002 but in a taxation year that begins before March 23, 2004, the portion of the description of A.1 in the definition “disbursement quota” in subsection 149.1(1) of the Act before paragraph (a) is to be read as follows:
- A.1
- is 80% of the total of all amounts each of which is the eligible amount of a gift received in a preceding taxation year, to the extent that the eligible amount
(16) An application referred to in subsection 149.1(6.3) of the Act, in respect of one or more taxation years after 1999, may be made after 1999 and before the 90th day after the day on which this Act receives royal assent. If a designation referred to in that subsection for any of those taxation years is made in response to the application, the charity is deemed to be registered as a charitable organization, a public foundation or a private foundation, as the case may be, for the taxation years that the Minister of National Revenue specifies.
309. (1) Subsections 152(3.4) and (3.5) of the Act are repealed.
(2) Subsection 152(4.1) of the Act is replaced by the following:
Marginal note:If waiver revoked
(4.1) If the Minister would, but for this subsection, be entitled to reassess, make an additional assessment or assess tax, interest or penalties by virtue only of the filing of a waiver under subparagraph (4)(a)(ii) or paragraph (4)(c), the Minister may not make such a reassessment, additional assessment or assessment after the day that is six months after the date on which a notice of revocation of the waiver in prescribed form is filed.
(3) Subsection 152(4.3) of the Act is replaced by the following:
Marginal note:Consequential assessment
(4.3) Notwithstanding subsections (4), (4.1) and (5), if the result of an assessment or a decision on an appeal is to change a particular balance of a taxpayer for a particular taxation year, the Minister may, or if the taxpayer so requests in writing, shall, before the later of the expiration of the normal reassessment period in respect of a subsequent taxation year and the end of the day that is one year after the day on which all rights of objection and appeal expire or are determined in respect of the particular year, reassess the tax, interest or penalties payable by the taxpayer, redetermine an amount deemed to have been paid or to have been an overpayment by the taxpayer or modify the amount of a refund or other amount payable to the taxpayer, under this Part in respect of the subsequent taxation year, but only to the extent that the reassessment, redetermination or modification can reasonably be considered to relate to the change in the particular balance of the taxpayer for the particular year.
(4) Paragraph 152(6)(c.1) of the Act is repealed.
(5) Paragraph 152(6)(e) of the Act is repealed.
(6) Section 152 of the Act is amended by adding the following after subsection (6.2):
Marginal note:Reassessment for section 119 credit
(6.3) If a taxpayer has filed for a particular taxation year the return of income required by section 150 and an amount is subsequently claimed by the taxpayer, or on the taxpayer’s behalf, for the particular year as a deduction under section 119 in respect of a disposition in a subsequent taxation year, and the taxpayer files with the Minister a prescribed form amending the return on or before the filing-due date of the taxpayer for the subsequent taxation year, the Minister shall reassess the taxpayer’s tax for any relevant taxation year (other than a taxation year preceding the particular taxation year) in order to take into account the deduction claimed.
(7) Subsection (1) applies in respect of forms filed after March 20, 2003.
(8) Subsection (3) applies to reassessments, redeterminations and modifications in respect of taxation years that relate to changes in balances for other taxation years as a result of assessments made, or decisions on appeal rendered, after November 5, 2010.
(9) Subsection (4) applies to taxation years that end after October 1, 1996.
(10) Subsection (5) applies to taxation years that begin after October 31, 2011.
(11) Subsection (6) applies in respect of particular taxation years that end after October 1, 1996. However, if a prescribed form referred to in subsection 152(6.3) of the Act, as enacted by subsection (6), is filed with the Minister on or before the filing-due date of the taxpayer for the taxation year that includes the day on which this Act receives royal assent, the form is deemed to have been filed with the Minister on a timely basis.
310. (1) Paragraph 153(1)(d.1) of the Act is replaced by the following:
(d.1) an amount described in subparagraph 56(1)(a)(iv) or (vii),
(2) Subsection (1) applies to the 2006 and subsequent taxation years.
311. (1) Paragraphs 157(1.4)(a) and (b) of the Act are replaced by the following:
(a) if the corporation is not associated with another corporation in the particular taxation year, the amount that is the corporation’s taxable capital employed in Canada (for the purpose of this subsection, within the meaning assigned by section 181.2 or 181.3, as the case may be) for the particular taxation year; or
(b) if the corporation is associated with another corporation in the particular taxation year, the amount that is the total of all amounts each of which is the taxable capital employed in Canada of the corporation for the particular taxation year or the taxable capital employed in Canada of a corporation with which it is associated in the particular taxation year for a taxation year of that other corporation that ends in the particular taxation year.
(2) Paragraph 157(3)(c) of the Act is replaced by the following:
(c) if the corporation is a mutual fund corporation, 1/12 of the total of
(i) the corporation’s capital gains refund (within the meaning assigned by section 131) for the year, and
(ii) the amount that, because of subsection 131(5) or (11), is the corporation’s dividend refund (within the meaning assigned by section 129) for the year,
(3) Subsection (1) applies to taxation years that begin after 2007.
(4) Subsection (2) applies to the 1999 and subsequent taxation years.
312. (1) Subsection 159(3) of the Act is replaced by the following:
Marginal note:Personal liability
(3) If a legal representative (other than a trustee in bankruptcy) of a taxpayer distributes to one or more persons property in the possession or control of the legal representative, acting in that capacity, without obtaining a certificate under subsection (2) in respect of the amounts referred to in that subsection,
(a) the legal representative is personally liable for the payment of those amounts to the extent of the value of the property distributed;
(b) the Minister may at any time assess the legal representative in respect of any amount payable because of this subsection; and
(c) the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it had been made under section 152 in respect of taxes payable under this Part.
(2) Subsection (1) applies to assessments made after December 20, 2002.
313. (1) The portion of subsection 160(1) of the Act after subparagraph (e)(i) is replaced by the following:
(ii) the total of all amounts each of which is an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (2) for that amount) in or in respect of the taxation year in which the property was transferred or any preceding taxation year,
but nothing in this subsection limits the liability of the transferor under any other provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection.
(2) The portion of subsection 160(1.1) of the Act after the description of B is replaced by the following:
but nothing in this subsection limits the liability of the other taxpayer under any other provision of this Act or of any person for the interest that the person is liable to pay under this Act on an assessment in respect of the amount that the person is liable to pay because of this subsection.
(3) Paragraphs 160(1.2)(a) and (b) of the Act are replaced by the following:
(a) carried on a business that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual’s split income for the year,
(b) was a specified shareholder of a corporation that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual’s split income for the year,
(4) Paragraph 160(1.2)(d) of the Act is replaced by the following:
(d) was a shareholder of a professional corporation that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual’s split income for the year, or
(5) Subsection 160(1.2) of the Act is amended by adding the following after paragraph (e):
but nothing in this subsection limits the liability of the specified individual under any other provision of this Act or of the parent for the interest that the parent is liable to pay under this Act on an assessment in respect of the amount that the parent is liable to pay because of this subsection.
(6) Subsection 160(2) of the Act is replaced by the following:
Marginal note:Assessment
(2) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.
(7) Subsections (1), (2), (5) and (6) apply in respect of assessments made after December 20, 2002.
(8) Subsections (3) and (4) are deemed to have come into force on December 21, 2002.
314. (1) Subsection 160.1(3) of the Act is replaced by the following:
Marginal note:Assessment
(3) The Minister may at any time assess a taxpayer in respect of any amount payable by the taxpayer because of subsection (1) or (1.1) or for which the taxpayer is liable because of subsection (2.1) or (2.2), and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section, as though it were made under section 152 in respect of taxes payable under this Part, except that no interest is payable on an amount assessed in respect of an excess referred to in subsection (1) that can reasonably be considered to arise as a consequence of the operation of section 122.5 or 122.61.
(2) Subsection (1) applies to assessments made after December 20, 2002.
315. (1) The portion of subsection 160.2(1) of the Act after paragraph (b) is replaced by the following:
the taxpayer and the last annuitant under the plan are jointly and severally, or solidarily, liable to pay a part of the annuitant’s tax under this Part for the year of the annuitant’s death equal to that proportion of the amount by which the annuitant’s tax for the year is greater than it would have been if it were not for the operation of subsection 146(8.8) that the total of all amounts each of which is an amount determined under paragraph (b) in respect of the taxpayer is of the amount included in computing the annuitant’s income because of that subsection, but nothing in this subsection limits the liability of the annuitant under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection.
(2) The portion of subsection 160.2(2) of the Act after paragraph (b) is replaced by the following:
the taxpayer and the annuitant are jointly and severally, or solidarily, liable to pay a part of the annuitant’s tax under this Part for the year of the annuitant’s death equal to that proportion of the amount by which the annuitant’s tax for the year is greater than it would have been if it were not for the operation of subsection 146.3(6) that the amount determined under paragraph (b) is of the amount included in computing the annuitant’s income because of that subsection, but nothing in this subsection limits the liability of the annuitant under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection.
(3) Section 160.2 of the Act is amended by adding the following after subsection (2):
Marginal note:Joint and several liability in respect of a qualifying trust annuity
(2.1) If a taxpayer is deemed by section 75.2 to have received at any time an amount out of or under an annuity that is a qualifying trust annuity with respect to the taxpayer, the taxpayer, the annuitant under the annuity and the policyholder are jointly and severally, or solidarily, liable to pay the part of the taxpayer’s tax under this Part for the taxation year of the taxpayer that includes that time that is equal to the amount, if any, determined by the formula
A – B
where
- A
- is the amount of the taxpayer’s tax under this Part for that taxation year; and
- B
- is the amount that would be the taxpayer’s tax under this Part for that taxation year if no amount were deemed by section 75.2 to have been received by the taxpayer out of or under the annuity in that taxation year.
Marginal note:No limitation on liability
(2.2) Subsection (2.1) limits neither
(a) the liability of the taxpayer referred to in that subsection under any other provision of this Act; nor
(b) the liability of an annuitant or policyholder referred to in that subsection for the interest that the annuitant or policyholder is liable to pay under this Act on an assessment in respect of the amount that the annuitant or policyholder is liable to pay because of that subsection.
(4) Subsection 160.2(3) of the Act is replaced by the following:
Marginal note:Assessment
(3) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.
(5) Section 160.2 of the Act is amended by adding the following after subsection (4):
Marginal note:Rules applicable — qualifying trust annuity
(5) If an annuitant or policyholder has, because of subsection (2.1), become jointly and severally, or solidarily, liable with a taxpayer in respect of part or all of a liability of the taxpayer under this Act, the following rules apply:
(a) a payment by the annuitant on account of the annuitant’s liability, or by the policyholder on account of the policyholder’s liability, shall to the extent of the payment discharge their liability, but
(b) a payment by the taxpayer on account of the taxpayer’s liability only discharges the annuitant’s and the policyholder’s liability to the extent that the payment operates to reduce the taxpayer’s liability to an amount less than the amount in respect of which the annuitant and the policyholder were, by subsection (2.1), made liable.
(6) Subsections (1), (2) and (4) apply to assessments made after December 20, 2002.
(7) Subsections (3) and (5) apply to assessments made after 2005.
316. (1) Subsections 160.3(1) and (2) of the Act are replaced by the following:
Marginal note:Liability in respect of amounts received out of or under RCA trust
160.3 (1) If an amount required to be included in the income of a taxpayer because of paragraph 56(1)(x) is received by a person with whom the taxpayer is not dealing at arm’s length, that person is jointly and severally, or solidarily, liable with the taxpayer to pay a part of the taxpayer’s tax under this Part for the taxation year in which the amount is received equal to the amount by which the taxpayer’s tax for the year exceeds the amount that would be the taxpayer’s tax for the year if the amount had not been received, but nothing in this subsection limits the liability of the taxpayer under any other provision of this Act or of the person for the interest that the person is liable to pay under this Act on an assessment in respect of the amount that the person is liable to pay because of this subsection.
Marginal note:Assessment
(2) The Minister may at any time assess a person in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.
(2) Subsection (1) applies to assessments made after December 20, 2002.
317. (1) Subsection 160.4(1) of the Act is replaced by the following:
Marginal note:Liability in respect of transfers by insolvent corporations
160.4 (1) If property is transferred at any time by a corporation to a taxpayer with whom the corporation does not deal at arm’s length at that time and the corporation is not entitled because of subsection 61.3(3) to deduct an amount under section 61.3 in computing its income for a taxation year because of the transfer or because of the transfer and one or more other transactions, the taxpayer is jointly and severally, or solidarily, liable with the corporation to pay the lesser of the corporation’s tax payable under this Part for the year and the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the corporation under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection.
(2) The portion of subsection 160.4(2) of the Act after paragraph (c) is replaced by the following:
the transferee is jointly and severally, or solidarily, liable with the transferor and the debtor to pay an amount of the debtor’s tax under this Part equal to the lesser of the amount of that tax that the transferor was liable to pay at that time and the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the debtor or the transferor under any provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection.
(3) Subsection 160.4(3) of the Act is replaced by the following:
Marginal note:Assessment
(3) The Minister may at any time assess a person in respect of any amount payable by the person because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section, as though it had been made under section 152 in respect of taxes payable under this Part.
(4) Subsections (1) to (3) apply to assessments made after December 20, 2002.
318. (1) Subparagraph 161(7)(a)(vi) of the Act is repealed.
(2) Paragraph 161(11)(b.1) of the Act is replaced by the following:
(b.1) in the case of a penalty under subsection 237.1(7.4) or 237.3(8), from the day on which the taxpayer became liable to the penalty to the day of payment; and
(3) Subsection (1) applies to taxation years that begin after October 31, 2011.
(4) Subsection (2) applies in respect of avoidance transactions that are entered into after 2010 or that are part of a series of transactions that began before 2011 and is completed after 2010.
319. (1) Subsection 162(6) of the French version of the Act is replaced by the following:
Marginal note:Défaut de fournir son numéro d’identification
(6) Toute personne ou société de personnes qui ne fournit pas son numéro d’assurance sociale ou son numéro d’entreprise à la personne — tenue par la présente loi ou par une disposition réglementaire de remplir une déclaration de renseignements devant comporter ce numéro — qui lui enjoint de le fournir est passible d’une pénalité de 100 $ pour chaque défaut à moins que, dans les 15 jours après avoir été enjoint de fournir ce numéro, elle ait demandé qu’un numéro d’assurance sociale ou un numéro d’entreprise lui soit attribué et qu’elle l’ait fourni à cette personne dans les 15 jours après qu’elle l’a reçu.
(2) Subsection (1) is deemed to have come into force on June 19, 1998.
320. (1) Paragraph 163(2)(c.1) of the Act is replaced by the following:
(c.1) the amount, if any, by which
(i) the total of all amounts each of which is an amount that would be deemed by section 122.5 to be paid by that person during a month specified for the year or, where that person is the qualified relation of an individual in relation to that specified month (within the meaning assigned by subsection 122.5(1)), by that individual, if that total were calculated by reference to the information provided in the person’s return of income (within the meaning assigned by subsection 122.5(1)) for the year
exceeds
(ii) the total of all amounts each of which is an amount that is deemed by section 122.5 to be paid by that person or by an individual of whom the person is the qualified relation in relation to a month specified for the year (within the meaning assigned to subsection 122.5(1)),
(2) Subsection 163(2.9) of the Act is replaced by the following:
Marginal note:Partnership liable to penalty
(2.9) If a partnership is liable to a penalty under subsection (2.4) or section 163.2, 237.1 or 237.3, sections 152, 158 to 160.1, 161 and 164 to 167 and Division J apply, with any changes that the circumstances require, in respect of the penalty as if the partnership were a corporation.
(3) Subsection (1) applies to amounts deemed to be paid during months specified for the 2001 and subsequent taxation years.
(4) Subsection (2) applies in respect of avoidance transactions that are entered into after 2010 or that are part of a series of transactions that began before 2011 and is completed after 2010.
321. (1) Section 164 of the Act is amended by adding the following after subsection (1.5):
Marginal note:When subsection (1.52) applies
(1.51) Subsection (1.52) applies to a taxpayer for a taxation year if, at any time after the beginning of the year
(a) the taxpayer has, in respect of the tax payable by the taxpayer under this Part (and, if the taxpayer is a corporation, Parts I.3, VI, VI.1 and XIII.1) for the year, paid under any of sections 155 to 157 one or more instalments of tax;
(b) it is reasonable to conclude that the total amount of those instalments exceeds the total amount of taxes that will be payable by the taxpayer under those Parts for the year; and
(c) the Minister is satisfied that the payment of the instalments has caused or will cause undue hardship to the taxpayer.
Marginal note:Instalment refund
(1.52) If this subsection applies to a taxpayer for a taxation year, the Minister may refund to the taxpayer all or any part of the excess referred to in paragraph (1.51)(b).
Marginal note:Penalties, interest not affected
(1.53) For the purpose of the calculation of any penalty or interest under this Act, an instalment is deemed not to have been paid to the extent that all or any part of the instalment can reasonably be considered to have been refunded under subsection (1.52).
(2) Subsection 164(1.6) of the Act is repealed.
(3) The portion of subsection 164(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Interest on refunds and repayments
(3) If, under this section, an amount in respect of a taxation year (other than an amount, or a portion of the amount, that can reasonably be considered to arise from the operation of section 122.5 or 122.61) is refunded or repaid to a taxpayer or applied to another liability of the taxpayer, the Minister shall pay or apply interest on it at the prescribed rate for the period that begins on the day that is the latest of the days referred to in the following paragraphs and that ends on the day on which the amount is refunded, repaid or applied:
(4) Paragraph 164(5)(g) of the Act is repealed.
(5) Subsection (2) is deemed to have come into force on March 21, 2003.
(6) Subsection (3) applies in respect of forms filed after March 20, 2003.
(7) Subsection (4) applies to taxation years that begin after October 31, 2011.
322. Subsection 170(2) of the Act is repealed.
323. Section 176 of the Act is repealed.
324. (1) Paragraph (g) of the definition “financial institution” in subsection 181(1) of Act is replaced by the following:
(g) a corporation
(i) listed in the schedule, or
(ii) all or substantially all of the assets of which are shares or indebtedness of financial institutions to which the corporation is related;
(2) Subsection (1) is deemed to have come into force on December 23, 1997, but in applying paragraph (g) of the definition “financial institution” in subsection 181(1) of the Act, as enacted by subsection (1), in respect of taxation years that end before December 20, 2002, that paragraph is to be read as follows:
(g) prescribed, or listed in the schedule;
325. (1) Subparagraph 181.2(3)(g)(i) of the Act is replaced by the following:
(i) the total of all amounts (other than amounts owing to the member or to other corporations that are members of the partnership) that would, if this paragraph and paragraphs (b) to (d) and (f) applied to partnerships in the same way that they apply to corporations, be determined under those paragraphs in respect of the partnership at the end of its last fiscal period that ends at or before the end of the year
(2) Paragraph 181.2(3)(g) of the Act, as amended by subsection (1), is replaced by the following:
(g) the total of all amounts, each of which is the amount, if any, in respect of a partnership in which the corporation held a membership interest at the end of the year, either directly or indirectly through another partnership, determined by the formula
(A – B) × C/D
where
- A
- is the total of all amounts that would be determined under paragraphs (b) to (d) and (f) in respect of the partnership for its last fiscal period that ends at or before the end of the year if
(a) those paragraphs applied to partnerships in the same manner that they apply to corporations, and
(b) those amounts were computed without reference to amounts owing by the partnership
(i) to any corporation that held a membership interest in the partnership either directly or indirectly through another partnership, or
(ii) to any partnership in which a corporation described in subparagraph (i) held a membership interest either directly or indirectly through another partnership,
- B
- is the partnership’s deferred unrealized foreign exchange losses at the end of the period,
- C
- is the share of the partnership’s income or loss for the period to which the corporation is entitled either directly or indirectly through another partnership, and
- D
- is the partnership’s income or loss for the period
(3) Paragraph 181.2(3)(i) of the Act is replaced by the following:
(i) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year,
(4) Paragraph 181.2(4)(d.1) of the Act is replaced by the following:
(d.1) a loan or advance to, or a bond, debenture, note, mortgage, hypothecary claim or similar obligation of, a partnership each member of which was, throughout the year,
(i) another corporation (other than a financial institution) that was not exempt from tax under this Part (otherwise than because of paragraph 181.1(3)(d)), or
(ii) another partnership described in this paragraph,
(5) Subsection 181.2(5) of the Act is replaced by the following:
Marginal note:Value of interest in partnership
(5) For the purposes of subsection (4) and this subsection, the carrying value at the end of a taxation year of an interest of a corporation or of a partnership (each of which is referred to in this subsection as the “member”) in a particular partnership is deemed to be the member’s specified proportion, for the particular partnership’s last fiscal period that ends at or before the end of the taxation year, of the amount that would, if the particular partnership were a corporation, be the particular partnership’s investment allowance at the end of that fiscal period.
(6) Subsections (1) and (5) apply to taxation years that begin after December 20, 2002.
(7) Subsection (2) applies to the 2012 and subsequent taxation years.
(8) Subsection (3) applies to taxation years that begin after 1995.
(9) Subsection (4) applies to the 2004 and subsequent taxation years.
(10) In applying paragraphs 181.2(4)(b), (c) and (d.1) of the Act to a particular corporation in respect of an asset that is a loan or an advance to, or an obligation of, another corporation or partnership that the particular corporation holds at the end of a taxation year of the particular corporation that began before December 20, 2002, those paragraphs are to be read without reference to “(other than a financial institution)” and to “(other than financial institutions)” if, at the end of the taxation year,
(a) the particular corporation deals at arm’s length with the other corporation or the partnership, as the case may be; and
(b) the other corporation is a financial institution, or the partnership is not a partnership described in paragraph 181.2(4)(d.1) of the Act, as the case may be, solely because of section 324 and subsections 366(1) and (3) of this Act.
326. (1) Subparagraph 181.3(3)(a)(v) of the Act is replaced by the following:
(v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year, and
(2) Subparagraph 181.3(3)(b)(iv) of the Act is replaced by the following:
(iv) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year;
(3) Subparagraph 181.3(3)(c)(v) of the Act is replaced by the following:
(v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year,
(4) Paragraph 181.3(3)(c) of the Act is amended by striking out “and” at the end of subparagraph (v), by adding “and” at the end of subparagraph (vi) and by adding the following after subparagraph (vi):
(vii) any amount recoverable through reinsurance, to the extent that it can reasonably be regarded as being included in the amount determined under subparagraph (iii) in respect of a claims reserve;
(5) Subparagraph 181.3(3)(d)(iv) of the Act is amended by striking out “and” at the end of clause (D) and by adding the following after clause (E):
(F) the total of all amounts each of which is an amount recoverable through reinsurance, to the extent that it can reasonably be regarded as being included in the amount determined under clause (A) in respect of a claims reserve; and
(6) Subsections (1) to (5) apply to taxation years that begin after 1995.
327. (1) Subsections 184(2) to (5) of the Act are replaced by the following:
Marginal note:Tax on excessive elections
(2) If a corporation has elected in accordance with subsection 83(2), 130.1(4) or 131(1) in respect of the full amount of any dividend payable by it on shares of any class of its capital stock (in this section referred to as the “original dividend”) and the full amount of the original dividend exceeds the portion of the original dividend deemed by that subsection to be a capital dividend or capital gains dividend, as the case may be, the corporation shall, at the time of the election, pay a tax under this Part equal to 3/5 of the excess.
Marginal note:Election to treat excess as separate dividend
(3) If, in respect of an original dividend payable at a particular time, a corporation would, but for this subsection, be required to pay a tax under this Part in respect of an excess referred to in subsection (2), and the corporation elects in prescribed manner on or before the day that is 90 days after the day of sending of the notice of assessment in respect of the tax that would otherwise be payable under this Part, the following rules apply:
(a) the portion of the original dividend deemed by subsection 83(2), 130.1(4) or 131(1) to be a capital dividend or capital gains dividend, as the case may be, is deemed for the purposes of this Act to be the amount of a separate dividend that became payable at the particular time;
(b) if the corporation identifies in its election any part of the excess, that part is, for the purposes of any election under subsection 83(2), 130.1(4) or 131(1) in respect of that part, and, where the corporation has so elected, for all purposes of this Act, deemed to be the amount of a separate dividend that became payable immediately after the particular time;
(c) the amount by which the excess exceeds any portion deemed by paragraph (b) to be a separate dividend for all purposes of this Act is deemed to be a separate taxable dividend that became payable at the particular time; and
(d) each person who held any of the issued shares of the class of shares of the capital stock of the corporation in respect of which the original dividend was paid is deemed
(i) not to have received any portion of the original dividend, and
(ii) to have received, at the time that any separate dividend determined under any of paragraphs (a) to (c) became payable, the proportion of that dividend that the number of shares of that class held by the person at the particular time is of the number of shares of that class outstanding at the particular time except that, for the purpose of Part XIII, the separate dividend is deemed to be paid on the day that the election in respect of this subsection is made.
Marginal note:Concurrence with election
(4) An election under subsection (3) is valid only if
(a) it is made with the concurrence of the corporation and all its shareholders
(i) who received or were entitled to receive all or any portion of the original dividend, and
(ii) whose addresses were known to the corporation; and
(b) either
(i) it is made on or before the day that is 30 months after the day on which the original dividend became payable, or
(ii) each shareholder described in subparagraph (a)(i) concurs with the election, in which case, notwithstanding subsections 152(4) to (5), any assessment of the tax, interest and penalties payable by each of those shareholders for any taxation year shall be made that is necessary to take the corporation’s election into account.
Marginal note:Exception for non-taxable shareholders
(5) If each person who, in respect of an election made under subsection (3), is deemed by subsection (3) to have received a dividend at a particular time is also, at the particular time, a person all of whose taxable income is exempt from tax under Part I,
(a) subsection (4) does not apply to the election; and
(b) the election is valid only if it is made on or before the day that is 30 months after the day on which the original dividend became payable.
(2) Subsection (1) applies to original dividends paid by a corporation after its 1999 taxation year, except that,
(a) the reference to “sending” in subsection 184(3) of the Act, as enacted by subsection (1), is to be read as a reference to “mailing” for notices of assessments sent before December 15, 2010; and
(b) for the purpose of subsection 184(5) of the Act, as enacted by subsection (1), an election made before the 90th day after the day on which this Act receives royal assent is deemed to have been made in a timely manner.
328. In applying the description of B in paragraph 188(1)(a) of the Act in respect of gifts made to a charity after December 20, 2002, to the extent that those gifts are relevant in respect of notices of intention to revoke the registration of the charity and certificates under subsection 5(1) of the Charities Registration (Security Information) Act that are issued by the Minister of National Revenue before June 13, 2005, that description is to be read as follows:
- B
- is the total of all amounts each of which is the eligible amount of a gift for which it issued a receipt described in subsection 110.1(2) or 118.1(2) in the period (in this section referred to as the “winding-up period”) that begins on the valuation day and ends immediately before the payment day, or an amount received by it in the winding-up period from a registered charity,
329. (1) Paragraph 190.1(3)(a) of the Act is replaced by the following:
(a) the corporation’s tax payable under Part I for the year; and
(2) The definition “unused Part I tax credit” in subsection 190.1(5) of the Act is replaced by the following:
“unused Part I tax credit”
« crédit d’impôt de la partie I inutilisé »
“unused Part I tax credit”, of a corporation for a taxation year, means the amount, if any, by which
(a) the corporation’s tax payable under Part I for the year
exceeds
(b) the amount that would, but for subsection (3), be its tax payable under this Part for the year;
(3) Subsections (1) and (2) apply to taxation years that begin after 2007.
330. (1) Subparagraph 190.13(a)(v) of the Act is replaced by the following:
(v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares);
(2) Subparagraph 190.13(b)(iv) of the Act is replaced by the following:
(iv) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares);
(3) Subsections (1) and (2) apply to taxation years that begin after 1995.
331. (1) Section 190.16 of the Act and the heading before it are repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
332. (1) Section 191 of the Act is amended by adding the following after subsection (5):
Marginal note:Excluded dividend — partner
(6) If at any time a corporation pays a dividend to a partnership, the corporation is, for the purposes of this subsection and paragraph (a) of the definition “excluded dividend” in subsection (1), deemed to have paid at that time to each member of the partnership a dividend equal to the amount determined by the formula
A × B
where
- A
- is the amount of the dividend paid to the partnership; and
- B
- is the member’s specified proportion for the last fiscal period of the partnership that ended before that time (or, if the partnership’s first fiscal period includes that time, for that first fiscal period).
(2) Subsection (1) applies to dividends paid after December 20, 2002.
333. (1) Subparagraph 191.1(1)(a)(i) of the Act is replaced by the following:
(i) the amount determined by multiplying the amount by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year and after 1987 on short-term preferred shares exceeds the corporation’s dividend allowance for the year, by
(A) 50% for dividends paid in a taxation year that ends before 2010,
(B) 45% for dividends paid in a taxation year that ends after 2009 and before 2012,
(C) 40% for dividends paid in a taxation year that ends after 2011,
(2) Subsection (1) applies to the 2003 and subsequent taxation years.
334. Section 200 of the French version of the Act is replaced by the following:
Marginal note:Distribution assimilée à une disposition
200. Pour l’application de la présente partie, la distribution par une fiducie d’un placement non admissible à un bénéficiaire de la fiducie est réputée être une disposition du placement, et le produit de disposition du placement est réputé être sa juste valeur marchande au moment de la distribution.
335. (1) The definition “reserve” in subsection 204.8(1) of the Act is replaced by the following:
“reserve”
« réserve »
“reserve” means
(a) property described in any of paragraphs (a), (b), (c), (f) and (g) of the definition “qualified investment” in section 204, and
(b) deposits with a credit union that is a “member institution” in relation to a deposit insurance corporation (within the meaning assigned by subsection 137.1(5));
(2) Subsection 204.8(1) of the Act is amended by adding the following in alphabetical order:
“terminating corporation”
« société sortante »
“terminating corporation” in respect of a particular corporation means a predecessor corporation in circumstances where
(a) subsection 204.85(3) applies to a merger of the particular corporation and the predecessor corporation,
(b) Class A shares of the particular corporation have been issued to the predecessor corporation in exchange for property of the predecessor corporation, and
(c) within a reasonable period of time after the exchange, Class A shareholders of the predecessor corporation receive all of the Class A shares of the particular corporation issued to the predecessor corporation in the course of a wind-up of the predecessor corporation.
(3) Paragraph 204.8(2)(b) of the Act is replaced by the following:
(b) at the time it begins to wind-up, and for the purpose of this paragraph a corporation is not to be considered to have begun to wind up solely because it discontinues its venture capital business under prescribed wind-up rules;
(4) Subsection (1) applies to taxation years that end after 2006.
(5) Subsection (2) is deemed to have come into force on January 1, 2005.
(6) Subsection (3) is deemed to have come into force on October 24, 2012.
336. (1) The portion of clause 204.81(1)(c)(ii)(A) of the Act before subclause (I) is replaced by the following:
(A) Class A shares that are issuable only to individuals (other than trusts), terminating corporations in respect of the corporation and trusts governed by registered retirement savings plans or by TFSAs and that entitle their holders
(2) Subparagraph 204.81(1)(c)(iv) of the Act is replaced by the following:
(iv) the corporation shall not reduce its paid-up capital in respect of a class of shares (other than Class B shares) otherwise than by way of
(A) a redemption of shares of the corporation, or
(B) a reduction in its paid-up capital attributable to a class of shares for which no shares have been issued in the eight-year period ending at the time of the reduction,
(3) Clause 204.81(1)(c)(v)(E) of the Act is replaced by the following:
(E) the redemption occurs
(I) more than eight years after the day on which the share was issued, or
(II) if the day that is eight years after that issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day, or
(4) Subparagraph 204.81(1)(c)(vii) of the Act is amended by adding the following after clause (A):
(B) the transfer occurs more than eight years after the day on which the share was issued,
(5) Section 204.81 of the Act is amended by adding the following after subsection (1):
Marginal note:Corporations incorporated before March 6, 1996
(1.1) In applying clause (1)(c)(v)(E) in relation to any time before 2004 in respect of a corporation incorporated before March 6, 1996, the references in that clause to “eight” are replaced with references to “five” if, at that time, the relevant statements in the corporation’s articles refer to “five”.
Marginal note:Deemed provisions in articles
(1.2) In applying subsection (1) in relation to any time before 2004, to a corporation incorporated before February 7, 2000, if the articles of the corporation comply with subclause (1)(c)(v)(E)(I) (as modified, where relevant, by subsection (1.1)), those articles are deemed to provide the statement required by subclause (1)(c)(v)(E)(II).
(6) Section 204.81 of the Act is amended by adding the following after subsection (8.2):
Marginal note:Discontinuance of provincial program
(8.3) If a corporation is a prescribed labour-sponsored venture capital corporation because of the laws of a province, which province has discontinued its labour-sponsored venture capital corporation credit program, notifies the Minister in writing of its intent to revoke its registration under this Part, and meets the requirements under prescribed wind-up rules, then the following rules apply:
(a) the corporation shall not, on or after the day the notice is provided to the Minister (referred to in this subsection and subsection (8.4) as the “notification date”), issue any tax credit certificates, other than duplicate certificates to replace certificates issued before that day;
(b) section 204.841 does not apply on the discontinuance of its venture capital business;
(c) subsections 204.82(1) to (4) do not apply to taxation years of the corporation that begin on or after the notification date; and
(d) subsection 204.83(1) does not apply in respect of a period, referred to in that subsection as the “second period”, that ends after the notification date.
Marginal note:Discontinuance of provincial program
(8.4) Subsection (8.3) applies to a corporation only if,
(a) on the notification date, the percentage determined in respect of the corporation by the following formula is less than 20 per cent:
A/(B – C) × 100
where
- A
- is the amount of equity capital received by the corporation on the issue of Class A shares that were issued in the 24 months immediately preceding the notification date and are still outstanding on that date,
- B
- is the total amount of equity capital received by the corporation on the issue of Class A shares that are still outstanding on the notification date, and
- C
- is the amount of equity capital received by the corporation on the issue of Class A shares that, as of the notification date, have been outstanding for at least eight years.
(b) the corporation has revoked its registration before the third anniversary of the notification date.
(7) Subsection (1) is deemed to have come into force on January 1, 2005.
(8) Subsections (2) and (6) are deemed to have come into force on October 24, 2012.
(9) Subsection (3) applies after February 6, 2000 to corporations incorporated at any time.
(10) Subsection (4) applies as of October 24, 2012 to corporations incorporated after March 5, 1996.
(11) Subsection (5) is deemed to have come into force on February 7, 2000.
337. (1) The portion of subsection 204.9(5) of the French version of the Act before paragraph (b) is replaced by the following:
Marginal note:Transferts entre régimes
(5) Pour l’application de la présente partie, dans le cas où un bien détenu par une fiducie régie par un régime enregistré d’épargne-études (appelé « régime cédant » au présent paragraphe) est distribué, à un moment donné, à une fiducie régie par un autre semblable régime (appelé « régime cessionnaire » au présent paragraphe), les règles ci-après s’appliquent :
a) sauf disposition contraire énoncée aux alinéas b) et c), le montant de la distribution est réputé ne pas avoir été versé au régime cessionnaire;
(2) The portion of paragraph 204.9(5)(c) of the French version of the Act before subparagraph (i) is replaced by the following:
c) sauf pour l’application du présent paragraphe à une distribution effectuée après le moment donné, du paragraphe (4) à un remplacement de bénéficiaire effectué après ce moment et du paragraphe 204.91(3) à des faits s’étant produits après ce moment, l’alinéa b) ne s’applique pas par suite de la distribution si, selon le cas :
(3) Paragraph 204.9(5)(d) of the French version of the Act is replaced by the following:
d) dans le cas où les sous-alinéas c)(i) ou (ii) s’appliquent à la distribution, le montant de la distribution est réputé ne pas avoir été retiré du régime cédant;
338. (1) The portion of subsection 204.94(2) of the Act before the formula is replaced by the following:
Marginal note:Charging provision
(2) Every person (other than a public primary caregiver that is exempt from tax under Part I) shall pay a tax under this Part for each taxation year equal to the amount determined by the formula
(2) Subsection (1) applies to the 2007 and subsequent taxation years.
339. (1) The definition “specified proportion” in subsection 206(1) of the Act, as it read before 2005, is repealed.
(2) In their application to months that end after December 20, 2002 and before 2005, subparagraphs (b)(i) to (iii) of the definition “cost amount” in subsection 206(1) of the Act are to be read as follows:
(i) after 2000 and at or before the end of the taxation year, by the trust in respect of the interest (otherwise than as proceeds of disposition of the interest), and
(ii) that has not been satisfied at or before that time by the issue of new units of the trust or by a payment of an amount by the trust;
(3) In its application to months that end after October 2003 and before 2005, paragraph (d.1) of the definition “foreign property” in subsection 206(1) of the Act, as it read immediately before it was repealed by S.C. 2005, c. 30, s. 14, is to be read as follows:
(d.1) any share (other than an excluded share) of the capital stock of, or any debt obligation (other than a debt obligation described in subparagraph (g)(iii)) issued by, a corporation (other than an investment corporation, a mutual fund corporation or a registered investment) that is a Canadian corporation, if shares of the corporation can reasonably be considered to derive their value, directly or indirectly, primarily from foreign property,
(4) In its application to months that end after October 2003 and before 2005, paragraph (g) of the definition “foreign property” in subsection 206(1) of the Act is to be read as follows:
(g) indebtedness of a non-resident person, other than
(i) indebtedness issued by an authorized foreign bank and payable at a branch in Canada of the bank,
(ii) indebtedness issued or guaranteed by
(A) the International Bank for Reconstruction and Development,
(B) the International Finance Corporation,
(C) the Inter-American Development Bank,
(D) the Asian Development Bank,
(E) the Caribbean Development Bank,
(F) the European Bank for Reconstruction and Development,
(G) the African Development Bank, or
(H) a prescribed person, or
(iii) a debt obligation that is fully secured by a mortgage, charge, hypothec or similar instrument in respect of real or immovable property situated in Canada or that would be fully secured were it not for a decline in the fair market value of the property after the debt obligation was issued,
(5) In its application to months that end after 1997 and before 2005, the portion of subsection 206(3.1) of the French version of the Act before paragraph (a) is to be read as follows:
(3.1) Pour ce qui est de l’application du sous-alinéa (2)a)(ii) à un moment donné ou postérieurement, lorsqu’un titre déterminé par rapport à un autre titre est acquis au moment donné par le contribuable mentionné au paragraphe (3.2) relativement au titre et que le titre est un bien étranger à ce moment, les règles ci-après s’appliquent :
(6) Subsection (1) is deemed to have come into force on December 21, 2002.
340. (1) Section 207.31 of the Act is replaced by the following:
Marginal note:Tax payable by recipient of an ecological gift
207.31 Any charity, municipality in Canada or municipal or public body performing a function of government in Canada (referred to in this section as the “recipient”) that at any time in a taxation year, without the authorization of the Minister of the Environment or a person designated by that Minister, disposes of or changes the use of a property described in paragraph 110.1(1)(d) or in the definition “total ecological gifts” in subsection 118.1(1) and given to the recipient shall, in respect of the year, pay a tax under this Part equal to 50% of the amount that would be determined for the purposes of section 110.1 or 118.1, if this Act were read without reference to subsections 110.1(3) and 118.1(6), to be the fair market value of the property if the property were given to the recipient immediately before the disposition or change.
(2) Subsection (1) applies in respect of dispositions of or changes of use of property after July 18, 2005.
341. (1) Sections 210 and 210.1 of the Act are replaced by the following:
Marginal note:Definitions
210. (1) The following definitions apply in this Part.
“designated beneficiary”
« bénéficiaire étranger ou assimilé »
“designated beneficiary”, under a particular trust at any time, means a beneficiary, under the particular trust, who is at that time
(a) a non-resident person;
(b) a non-resident-owned investment corporation;
(c) a person who is, because of subsection 149(1), exempt from tax under Part I on all or part of their taxable income and who acquired an interest as a beneficiary under the particular trust after October 1, 1987 directly or indirectly from a beneficiary under the particular trust except if
(i) the interest was, at all times after the later of October 1, 1987 and the day on which the interest was created, held by persons who were exempt from tax under Part I on all of their taxable income because of subsection 149(1), or
(ii) the person is a trust, governed by a registered retirement savings plan or a registered retirement income fund, who acquired the interest, directly or indirectly, from an individual or the spouse or common-law partner, or former spouse or common-law partner, of the individual who was, immediately after the interest was acquired, a beneficiary under the trust governed by the fund or plan;
(d) another trust (referred to in this paragraph as the “other trust”) that is not a testamentary trust, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time
(i) a non-resident person,
(ii) a non-resident-owned investment corporation,
(iii) a trust that is not
(A) a testamentary trust,
(B) a mutual fund trust,
(C) a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, or
(D) a trust
(I) whose interest, at that time, in the other trust was held, at all times after the day on which the interest was created, either by it or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and
(II) none of the beneficiaries under which is, at that time, a designated beneficiary under it, or
(iv) a person or partnership that
(A) is a designated beneficiary under the other trust because of paragraph (c) or (e), or
(B) would be a designated beneficiary under the particular trust because of paragraph (c) or (e) if, instead of being a beneficiary under the other trust, the person or partnership were at that time a beneficiary, under the particular trust, whose interest as a beneficiary under the particular trust were
(I) identical to its interest (referred to in this clause as the “particular interest”) as a beneficiary under the other trust,
(II) acquired from each person or partnership from whom it acquired the particular interest, and
(III) held, at all times after the later of October 1, 1987 and the day on which the particular interest was created, by the same persons or partnerships that held the particular interest at those times; or
(e) a particular partnership any of the members of which is at that time
(i) another partnership, except if
(A) each such other partnership is a Canadian partnership,
(B) the interest of each such other partnership in the particular partnership is held, at all times after the day on which the interest was created, by the other partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,
(C) the interest of each member, of each such other partnership, that is a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income was held, at all times after the day on which the interest was created, by that member or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and
(D) the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,
(ii) a non-resident person,
(iii) a non-resident-owned investment corporation,
(iv) another trust that is, under paragraph (d), a designated beneficiary of the particular trust or that would, under paragraph (d), be a designated beneficiary of the particular trust if the other trust were at that time a beneficiary under the particular trust whose interest as a beneficiary under the particular trust were
(A) acquired from each person or partnership from whom the particular partnership acquired its interest as a beneficiary under the particular trust, and
(B) held, at all times after the later of October 1, 1987 and the day on which the particular partnership’s interest as a beneficiary under the particular trust was created, by the same persons or partnerships that held that interest of the particular partnership at those times, or
(v) a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income except if the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income.
“designated income”
« revenu de distribution »
“designated income”, of a trust for a taxation year, means the amount that would be the income of the trust for the year determined under section 3 if
(a) this Act were read without reference to subsections 104(6), (12) and (30);
(b) the trust had no income other than taxable capital gains from dispositions described in paragraph (c) and incomes from
(i) real or immovable properties in Canada (other than Canadian resource properties),
(ii) timber resource properties,
(iii) Canadian resource properties (other than properties acquired by the trust before 1972), and
(iv) businesses carried on in Canada;
(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from
(i) dispositions of taxable Canadian property, and
(ii) dispositions of particular property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)), or property for which the particular property is substituted, that was transferred at any particular time to a particular trust in circumstances in which subsection 73(1) or 107.4(3) applied, if
(A) it is reasonable to conclude that the property was so transferred in anticipation that a person beneficially interested at the particular time in the particular trust would subsequently cease to reside in Canada, and a person beneficially interested at the particular time in the particular trust did subsequently cease to reside in Canada, or
(B) when the property was so transferred, the terms of the particular trust satisfied the conditions in subparagraph 73(1.01)(c)(i) or (iii), and it is reasonable to conclude that the transfer was made in connection with the cessation of residence, on or before the transfer, of a person who was, at the time of the transfer, beneficially interested in the particular trust and a spouse or common-law partner, as the case may be, of the transferor of the property to the particular trust; and
(d) the only losses referred to in paragraph 3(d) were losses from sources described in any of subparagraphs (b)(i) to (iv).
Marginal note:Tax not payable
(2) No tax is payable under this Part for a taxation year by a trust that was throughout the year
(a) a testamentary trust;
(b) a mutual fund trust;
(c) exempt from tax under Part I because of subsection 149(1);
(d) a trust to which paragraph (a), (a.1) or (c) of the definition “trust” in subsection 108(1) applies; or
(e) non-resident.
(2) Subsection (1) applies to the 1996 and subsequent taxation years, except that paragraph (c) of the definition “designated income” in subsection 210(1) of the Act, as enacted by subsection (1), is to be read
(a) in respect of dispositions that occur after October 1, 1996 and before December 21, 2002, as follows:
(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of taxable Canadian property; and
(b) in respect of dispositions that occur in a 1996 taxation year and before October 2, 1996, as follows:
(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of property that would have been taxable Canadian property if, at no time in the year, the trust had been resident in Canada; and
342. (1) Subsections 210.2(1.1) and (2) of the Act are replaced by the following:
Marginal note:Amateur athlete trusts
(2) Notwithstanding subsection 210(2), a trust shall pay a tax under this Part in respect of a particular taxation year of the trust equal to 56.25% of the amount that is required by subsection 143.1(2) to be included in computing the income under Part I for a taxation year of a beneficiary under the trust, if
(a) the beneficiary is at any time in the particular taxation year a designated beneficiary under the trust; and
(b) the particular taxation year ends in that taxation year of the beneficiary.
(2) The portion of subsection 210.2(3) of the French version of the Act before the formula is replaced by the following:
Marginal note:Crédit d’impôt remboursable aux bénéficiaires résidant au Canada
(3) Dans le cas où une partie du revenu d’une fiducie pour une année d’imposition est incluse, en application du paragraphe 104(13) ou 105(2), dans le calcul du revenu en vertu de la partie I d’une personne qui n’a été bénéficiaire étranger ou assimilé de la fiducie à aucun moment de l’année ou dans la partie du revenu d’une personne non-résidente qui est soumise, par application du paragraphe 2(3), à l’impôt payable en vertu de la partie I et n’en est pas exonérée par un traité fiscal — sauf s’il s’agit d’une personne qui, à un moment de l’année, serait un bénéficiaire étranger ou assimilé de la fiducie si l’article 210 s’appliquait compte non tenu de l’alinéa a) de la définition de bénéficiaire étranger ou assimilé à cet article —, le montant, calculé selon la formule ci-après, attribué à la personne par la fiducie dans sa déclaration pour l’année en vertu de la présente partie est réputé payé le quatre-vingt-dixième jour suivant la fin de l’année d’imposition de la fiducie au titre de l’impôt payable en vertu de la partie I par cette personne pour l’année d’imposition de celle-ci au cours de laquelle l’année d’imposition de la fiducie se termine :
(3) Paragraph 210.2(3)(b) of the English version of the Act is replaced by the following:
(b) the income of a non-resident person (other than a person who, at any time in the year, would be a designated beneficiary under the trust if section 210 were read without reference to paragraph (a) of the definition “designated beneficiary” in that section) that is subject to tax under Part I by reason of subsection 2(3) and is not exempt from tax under Part I by reason of a provision contained in a tax treaty,
(4) Subsections (1) to (3) apply to the 1996 and subsequent taxation years, except that
(a) in applying the portion of subsection 210.2(3) of the French version of the Act before the formula, as enacted by subsection (2), for the 1996 and 1997 taxation years, the reference to “un traité fiscal” is to be read as a reference to “un accord ou une convention fiscal ayant force de loi au Canada et conclu entre le gouvernement du Canada et le gouvernement d’un pays étranger”; and
(b) in applying paragraph 210.2(3)(b) of the English version of the Act, as enacted by subsection (3), for the 1996 and 1997 taxation years the reference to “treaty” is to be read as a reference to “convention or agreement with another country that has the force of law in Canada”.
343. (1) Subsection 211.7(1) of the Act is amended by adding the following in alphabetical order:
“qualifying exchange”
« échange admissible »
“qualifying exchange” means an exchange by a taxpayer of an approved share, that is part of a series of Class A shares of the capital stock of a corporation, for another approved share, that is part of another series of Class A shares of the capital stock of the corporation, if
(a) the only consideration received by the taxpayer on the exchange is the other share; and
(b) the rights in respect of the series are identical except for the portion of the reserve (within the meaning assigned by subsection 204.8(1)) of the corporation that is attributable to each series.
(2) Section 211.7 of the Act is amended by adding the following after subsection (2):
Marginal note:Exchangeable shares
(3) For the purposes of this Part and Part X.3, if an approved share of the capital stock of a corporation (referred to in this subsection as the “new share”) has been issued in exchange for another approved share (referred to in this subsection as the “original share”) in a qualifying exchange, the new share is deemed not to have been issued on the exchange and is deemed to have been issued at the time the corporation issued the original share.
(3) Subsections (1) and (2) are deemed to have come into force on January 1, 2004.
344. (1) The portion of subsection 211.8(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Disposition of approved share
211.8 (1) If an approved share of the capital stock of a registered labour-sponsored venture capital corporation or a revoked corporation is, before the first discontinuation of its venture capital business, redeemed, acquired or cancelled by the corporation less than eight years after the day on which the share was issued (other than in circumstances described in subclause 204.81(1)(c)(v)(A)(I) or (III) or clause 204.81(1)(c)(v)(B) or (D) or other than if the share is a Class A share of the capital stock of the corporation that is exchanged for another Class A share of the capital stock of the corporation as part of a qualifying exchange) or any other share that was issued by any other labour-sponsored venture capital corporation is disposed of, the person who was the shareholder immediately before the redemption, acquisition, cancellation or disposition shall pay a tax under this Part equal to the lesser of
(2) Subparagraph (i) of the description of B in paragraph 211.8(1)(a) of the Act is amended by striking out “or” at the end of clause (A) and by replacing clause (B) with the following:
(B) more than five years after its issuance, or
(C) if the day that is five years after its issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day,
(3) The description of B in paragraph 211.8(1)(a) of the Act is amended by adding the following after subparagraph (i):
(i.1) nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was after March 5, 1996 and the redemption, acquisition or cancellation is in February or on March 1st of a calendar year but is not more than 31 days before the day that is eight years after the day on which the share was issued,
(4) Subsection (1) applies in respect of shares redeemed, acquired or cancelled after 2003.
(5) Subsections (2) and (3) apply to redemptions, acquisitions, cancellations and dispositions that occur after November 15, 1995.
345. (1) The Act is amended by adding the following after section 211.8:
Marginal note:Tax for failure to re-acquire certain shares
211.81 If a particular amount is payable under a prescribed provision of a provincial law for a taxation year of an individual as determined for the purposes of that provincial law (referred to in this section as the “relevant provincial year”), and an amount has been included in the computation of the labour-sponsored funds tax credit of the individual under subsection 127.4(6) in respect of an approved share that has been disposed of by a qualifying trust in respect of the individual, the individual shall pay a tax for the taxation year in which the relevant provincial year ends equal to the particular amount.
Marginal note:Return
211.82 (1) Every person that is liable to pay tax under this Part for a taxation year shall, not later than the day on or before which the person is required by section 150 to file a return of income for the year under Part I, file with the Minister a return for the year under this Part in prescribed form containing an estimate of the tax payable by the person for the year.
Marginal note:Provisions applicable to this Part
(2) Subsections 150(2) and (3), sections 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I apply to this Part, with any modifications that the circumstances require.
(2) Section 211.81 of the Act, as enacted by subsection (1), is deemed to have come into force on October 24, 2012.
(3) Section 211.82 of the Act, as enacted by subsection (1), applies to taxation years that end after October 24, 2012.
346. (1) Section 211.9 of the Act is repealed.
(2) Subsection (1) applies to taxation years that end after October 24, 2012.
347. (1) Subparagraph 212(1)(b)(iv) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(2), is replaced by the following:
(iv) interest payable to a person with whom the payer is dealing at arm’s length and to whom a certificate of exemption that is in force on the day the amount is paid or credited was issued under subsection (14),
(2) The portion of subparagraph 212(1)(b)(xii) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(2), before clause (A) is replaced by the following:
(xii) interest payable by a lender under a securities lending arrangement, if the lender and the borrower deal with each other at arm’s length and the lender is a financial institution prescribed for the purpose of clause (iii)(D), or a registered securities dealer resident in Canada, on money provided to the lender either as collateral or as consideration for the particular security lent or transferred under the arrangement where
(3) Paragraph 212(1)(b) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(2), is amended by striking out “and” at the end of subparagraph (xi), by adding “and” at the end of subparagraph (xii) and by adding the following after subparagraph (xii):
(xiii) an amount paid or credited under a securities lending arrangement that is deemed by subparagraph 260(8)(c)(i) to be a payment made by a borrower to a lender of interest if
(A) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and
(B) the security that is transferred or lent to the borrower under the securities lending arrangement is described in paragraph (b) or (c) of the definition “qualified security” in subsection 260(1) and issued by a non-resident issuer;
(4) Paragraph 212(1)(b) of the Act, as amended by subsections (1) to (3), is replaced by the following:
Marginal note:Interest
(b) interest that
(i) is not fully exempt interest, and is paid or payable to a person with whom the payer is not dealing at arm’s length, or
(ii) is participating debt interest;
(5) Subparagraph 212(1)(b)(i) of the Act, as enacted by subsection (4), is replaced by the following:
(i) is not fully exempt interest and is paid or payable
(A) to a person with whom the payer is not dealing at arm’s length, or
(B) in respect of a debt or other obligation to pay an amount to a person with whom the payer is not dealing at arm’s length, or
(6) Subparagraph 212(1)(c)(ii) of the French version of the Act is replaced by the following:
(ii) peut raisonnablement être considérée, compte tenu des circonstances, y compris les modalités de la succession ou de l’acte de fiducie, comme la distribution d’un montant reçu par la succession ou la fiducie, ou comme une somme provenant d’un tel montant, au titre d’un dividende non imposable sur une action du capital-actions d’une société résidant au Canada;
(7) Subparagraph 212(1)(d)(iv) of the Act is replaced by the following:
(iv) unless paragraph (i) applies to the amount, made pursuant to an agreement between a person resident in Canada and a non-resident person under which the non-resident person agrees not to use or not to permit any other person to use any thing referred to in subparagraph (i) or any information referred to in subparagraph (ii), or
(8) Subparagraph 212(1)(d)(xi) of the Act is amended by striking out “or” at the end of clause (B) and by adding the following after clause (C):
(D) air navigation equipment utilized in the provision of services under the Civil Air Navigation Services Commercialization Act or computer software the use of which is necessary for the operation of that equipment that is used by the payer for no other purpose; or
(9) Paragraph 212(1)(d) of the Act is amended by striking out “or” at the end of subparagraph (x), by adding “or” at the end of subparagraph (xi) and by adding the following after subparagraph (xi):
(xii) an amount to which subsection (5) would apply if that subsection were read without reference to “to the extent that the amount relates to that use or reproduction”;
(10) Subsection 212(1) of the Act is amended by adding the following after paragraph (h):
Marginal note:Restrictive covenant amount
(i) an amount that would, if the non-resident person had been resident in Canada throughout the taxation year in which the amount was received or receivable, be required by paragraph 56(1)(m) or subsection 56.4(2) to be included in computing the non-resident person’s income for the taxation year;
(11) Section 212 of the Act is amended by adding the following after subsection (2):
Marginal note:Exempt dividends
(2.1) Subsection (2) does not apply to an amount paid or credited, by a borrower, under a securities lending arrangement if
(a) the amount is deemed by subparagraph 260(8)(c)(i) to be a dividend;
(b) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada; and
(c) the security that is transferred or lent to the borrower under the securities lending arrangement is a share of a class of the capital stock of a non-resident corporation.
(12) Subsection 212(3) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(3), is amended by adding “and” at the end of paragraph (a) and by repealing paragraph (b).
(13) Subsection 212(3) of the Act, as amended by subsection (12), is replaced by the following:
Marginal note:Interest — definitions
(3) The following definitions apply for the purpose of paragraph (1)(b).
“fully exempt interest”
« intérêts entièrement exonérés »
“fully exempt interest” means
(a) interest that is paid or payable on a bond, debenture, note, mortgage, hypothecary claim or similar debt obligation
(i) of, or guaranteed (otherwise than by being insured by the Canada Deposit Insurance Corporation) by, the Government of Canada,
(ii) of the government of a province,
(iii) of an agent of a province,
(iv) of a municipality in Canada or a municipal or public body performing a function of government in Canada,
(v) of a corporation, commission or association to which any of paragraphs 149(1)(d) to (d.6) applies, or
(vi) of an educational institution or a hospital if repayment of the principal amount of the obligation and payment of the interest is to be made, or is guaranteed, assured or otherwise specifically provided for or secured by the government of a province;
(b) interest that is paid or payable on a mortgage, hypothecary claim or similar debt obligation secured by, or on an agreement for sale or similar obligation with respect to, real property situated outside Canada or an interest in any such real property, or to immovables situated outside Canada or a real right in any such immovable, except to the extent that the interest payable on the obligation is deductible in computing the income of the payer under Part I from a business carried on by the payer in Canada or from property other than real or immovable property situated outside Canada;
(c) interest that is paid or payable to a prescribed international organization or agency; or
(d) an amount paid or payable or credited under a securities lending arrangement that is deemed by subparagraph 260(8)(c)(i) to be a payment made by a borrower to a lender of interest, if
(i) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and
(ii) the security that is transferred or lent to the borrower under the securities lending arrangement is described in paragraph (b) or (c) of the definition “qualified security” in subsection 260(1) and issued by a non-resident issuer.
“participating debt interest”
« intérêts sur des créances participatives »
“participating debt interest” means interest (other than interest described in any of paragraphs (b) to (d) of the definition “fully exempt interest”) that is paid or payable on an obligation, other than a prescribed obligation, all or any portion of which interest is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation.
(14) Subsection 212(5) of the French version of the Act is replaced by the following:
Marginal note:Films cinématographiques
(5) Toute personne non-résidente doit payer un impôt sur le revenu de 25 % sur toute somme qu’une personne résidant au Canada lui verse ou porte à son crédit, ou est réputée, en vertu de la partie I, lui verser ou porter à son crédit, au titre ou en paiement intégral ou partiel d’un droit sur les oeuvres ci-après qui ont été ou doivent être utilisées ou reproduites au Canada, ou d’un droit d’utilisation de telles oeuvres, dans la mesure où la somme se rapporte à cette utilisation ou reproduction :
a) un film cinématographique;
b) un film, une bande magnétoscopique ou d’autres procédés de reproduction à utiliser pour la télévision, sauf ceux utilisés uniquement pour une émission d’information produite au Canada.
(15) The portion of subsection 212(5) of the English version of the Act after paragraph (b) is replaced by the following:
that has been, or is to be, used or reproduced in Canada to the extent that the amount relates to that use or reproduction.
(16) Subsection 212(9) of the Act is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):
(d) a dividend or interest is received by a trust that is created under a reinsurance trust agreement
(i) to which a regulatory authority — being the Superintendent of Financial Institutions or a provincial regulatory authority having powers similar to those of the Superintendent — is a party, and
(ii) that accords with guidelines issued by the regulatory authority relating to reinsurance arrangements with unregistered insurers
(17) Subsection 212(13) of the Act is amended by striking out “or” at the end of paragraph (e), by adding “or” at the end of paragraph (f) and by adding the following after paragraph (f):
(g) an amount to which paragraph (1)(i) would apply if the amount paid or credited were paid or credited by a person resident in Canada, and that amount affects, or is intended to affect, in any way whatever,
(i) the acquisition or provision of property or services in Canada,
(ii) the acquisition or provision of property or services outside Canada by a person resident in Canada, or
(iii) the acquisition or provision outside Canada of a taxable Canadian property,
(18) Subsection 212(13.2) of the Act is replaced by the following:
Marginal note:Application of Part XIII tax — non-resident operates in Canada
(13.2) For the purposes of this Part, a particular non-resident person, who in a taxation year pays or credits to another non-resident person an amount other than an amount to which subsection (13) applies, is deemed to be a person resident in Canada in respect of the portion of the amount that is deductible in computing the particular non-resident person’s taxable income earned in Canada for any taxation year from a source that is neither a treaty-protected business nor a treaty-protected property.
(19) Subparagraph (b)(i) of the description of B in subsection 212(19) of the Act, as it read immediately before it was amended by S.C. 2007, c. 35, s. 59(6), is replaced by the following:
(i) 10 times the greatest amount determined, under the laws of the province or provinces in which the taxpayer is a registered securities dealer, to be the capital employed by the taxpayer at the end of the day, and
(20) Subsection (1) applies to the 1998 and subsequent taxation years.
(21) Subsection (2) applies to arrangements made after 2002.
(22) Subsections (3) and (11) apply to securities lending arrangements entered into after May 1995, except that, in their application to arrangements made before 2002, each reference to “subparagraph 260(8)(c)(i)” in subparagraph 212(1)(b)(xiii) and paragraph 212(2.1)(a) of the Act, as respectively enacted by subsections (3) and (11), is to be read as a reference to “subparagraph 260(8)(a)(i)”.
(23) Subsections (4) and (13) are deemed to have come into force on January 1, 2008.
(24) Subsection (5) applies to interest that is paid or payable by a person or partnership (referred to in this subsection as the “payer”) to a person or partnership (referred to in this subsection as the “recipient”) on or after March 16, 2011, unless
(a) the interest is paid in respect of a debt or obligation incurred by the payer before March 16, 2011; and
(b) the recipient acquired the entitlement to the interest as a consequence of an agreement or other arrangement entered into by the recipient, and evidenced in writing, before March 16, 2011.
(25) Subsection (7) applies to amounts paid or credited after October 7, 2003.
(26) Subsection (8) applies to payments made after July 2003.
(27) Subsections (9), (14) and (15) apply to the 2000 and subsequent taxation years.
(28) Subsections (10) and (17) apply to amounts paid or credited after October 7, 2003, except that the portion of paragraph 212(13)(g) of the Act before subparagraph (i), as enacted by subsection (17), is to be read as follows before July 16, 2010:
(g) an amount to which paragraph (1)(i) applies if that amount affects, or is intended to affect, in any way whatever,
(29) Subsection (12) applies to replacement obligations issued after 2000.
(30) Subsection (16) applies to amounts paid or credited after 2000.
(31) A written application made under subsection 227(6) of the Act in respect of a particular amount that has been paid to the Receiver General is deemed to be filed on time if
(a) the application is filed with the Minister of National Revenue within 180 days after the day on which this Act receives royal assent; and
(b) the particular amount is an amount on which tax would not be payable because of the application of subsection 212(9) of the Act, as amended by subsection (16), if that subsection 212(9) were read without reference to its paragraphs (a) to (c).
(32) Subsection (18) applies to amounts paid or credited under obligations entered into after December 20, 2002.
(33) Subsection (19) applies to securities lending arrangements entered into after May 28, 1993.
348. Paragraph 214(3)(k) of the French version of the Act is replaced by the following:
k) le montant distribué par une fiducie au profit d’un athlète amateur à un moment donné, qui serait à inclure, en application du paragraphe 143.1(2), dans le calcul du revenu d’un particulier si la partie I s’appliquait est réputé avoir été payé au particulier à ce moment à titre de paiement relatif à une fiducie au profit d’un athlète amateur;
349. (1) The portion of subsection 216(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Alternatives re rents and timber royalties
216. (1) If an amount has been paid during a taxation year to a non-resident person or to a partnership of which that person was a member as, on account of, in lieu of payment of or in satisfaction of, rent on real or immovable property in Canada or a timber royalty, that person may, within two years (or, if that person has filed an undertaking described in subsection (4) in respect of the year, within six months) after the end of the year, file a return of income under Part I for that year in prescribed form. On so filing and without affecting the liability of the non-resident person for tax otherwise payable under Part I, the non-resident person is, in lieu of paying tax under this Part on that amount, liable to pay tax under Part I for the year as though
(2) The portion of subsection 216(5) of the Act before paragraph (a) is replaced with the following:
Marginal note:Disposition by non-resident
(5) If a person or a trust under which a person is a beneficiary has filed a return of income under Part I for a taxation year as permitted by this section or as required by section 150 and, in computing the amount of the person’s income under Part I an amount has been deducted under paragraph 20(1)(a), or is deemed by subsection 107(2) to have been allowed under that paragraph, in respect of property that is real property in Canada — or an interest therein — or an immovable in Canada — or a real right therein —, a timber resource property or a timber limit in Canada, the person shall file a return of income under Part I in prescribed form on or before the person’s filing-due date for any subsequent taxation year in which the person is non-resident and in which the person, or a partnership of which the person is a member, disposes of that property or any interest, or for civil law any right, in it. On so filing and without affecting the person’s liability for tax otherwise payable under Part I, the person is, in lieu of paying tax under this Part on any amount paid, or deemed by this Part to have been paid, in that subsequent taxation year in respect of any interest in, or for civil law any right in, that property to the person or to a partnership of which the person is a member, liable to pay tax under Part I for that subsequent taxation year as though
(3) Subsection 216(7) of the Act is repealed.
(4) Subsections (1) and (2) apply to taxation years that end after December 20, 2002.
350. (1) Section 220 of the Act is amended by adding the following after subsection (2.1):
Marginal note:Exception
(2.2) Subsection (2.1) does not apply in respect of a prescribed form, receipt or document, or prescribed information, that is filed with the Minister on or after the day specified, in respect of the form, receipt, document or information, in subsection 37(11) or paragraph (m) of the definition “investment tax credit” in subsection 127(9).
(2) Paragraph 220(4.6)(a) of the French version of the Act is replaced by the following:
a) par le seul effet du paragraphe 107(5), les alinéas 107(2)a) à c) ne s’appliquent pas à une distribution de biens canadiens imposables effectuée par une fiducie au cours d’une année d’imposition (appelée « année de la distribution » au présent article);
(3) Paragraph 220(4.6)(c) of the French version of the Act is replaced by the following:
c) le ministre accepte, jusqu’à la date d’exigibilité du solde applicable à la fiducie pour une année d’imposition ultérieure, une garantie suffisante fournie par la fiducie, ou en son nom, au plus tard à la date d’exigibilité du solde qui lui est applicable pour l’année de la distribution pour le moins élevé des montants suivants :
(i) le montant obtenu par la formule suivante :
A – B – [((A – B)/A) × C]
où :
- A
- représente le total des impôts prévus par les parties I et I.1 qui seraient payables par la fiducie pour l’année de la distribution s’il n’était pas tenu compte de l’exclusion ou de la déduction de chaque montant visé à l’alinéa 161(7)a),
- B
- le total des impôts prévus par ces parties qui auraient été ainsi payables si les règles énoncées au paragraphe 107(2) (sauf celle portant sur le choix prévu à ce paragraphe) s’étaient appliquées à chaque distribution, effectuée par la fiducie au cours de l’année de la distribution, de biens auxquels s’applique l’alinéa a) (sauf les biens dont il est disposé ultérieurement avant le début de l’année ultérieure),
- C
- le total des montants réputés par la présente loi ou une autre loi avoir été payés au titre de l’impôt de la fiducie en vertu de la présente partie pour l’année de la distribution,
(ii) si l’année ultérieure suit immédiatement l’année de la distribution, le montant déterminé selon le sous-alinéa (i); sinon, le montant déterminé selon le présent alinéa relativement à la fiducie pour l’année d’imposition précédant l’année ultérieure;
(4) The portion of subsection 220(4.61) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Restriction
(4.61) Malgré le paragraphe (4.6), le ministre est réputé, à un moment donné, ne pas avoir accepté de garantie aux termes de ce paragraphe pour l’année de la distribution d’une fiducie pour un montant supérieur à l’excédent du total visé à l’alinéa a) sur le total visé à l’alinéa b) :
(5) Paragraph 220(4.61)(b) of the French version of the Act is replaced by the following:
b) le total des impôts qui seraient déterminés selon l’alinéa a) si les alinéas 107(2)a) à c) s’étaient appliqués à chaque distribution effectuée par la fiducie au cours de l’année de biens auxquels s’applique l’alinéa (1)a).
(6) Subsection (1) applies in respect of a prescribed form, receipt and document, and prescribed information, filed with the Minister of National Revenue on or after November 17, 2005 other than a prescribed form, receipt or document, or prescribed information, in respect of which the Minister of National Revenue has received, before November 17, 2005, a request made in writing with the Minister that the Minister waive the filing requirements in subsection 37(11) of the Act and paragraph (m) of the definition “investment tax credit” in subsection 127(9) of the Act that apply, but for any waiver, to the expenditures to which the prescribed form, receipt or document, or prescribed information, relates.
351. (1) The portion of subsection 227(8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Penalty
(8) Subject to subsection (9.5), every person who in a calendar year has failed to deduct or withhold any amount as required by subsection 153(1) or section 215 is liable to a penalty of
(2) Paragraph 227(10)(b) of the Act is replaced by the following:
(b) subsection 237.1(7.4) or (7.5) or 237.3(8) by a person or partnership,
352. (1) Paragraph 230(2)(a) of the French version of the Act is replaced by the following:
a) des renseignements sous une forme qui permet au ministre de déterminer s’il existe des motifs de révocation de l’enregistrement de l’organisme ou de l’association en vertu de la présente loi;
(2) Subsection 230(3) of the French version of the Act is replaced by the following:
Marginal note:Ordre du ministre quant à la tenue de registres
(3) Le ministre peut exiger de la personne qui n’a pas tenue les registres et livres de compte voulus pour l’application de la présente loi qu’elle tienne ceux qu’il spécifie. Dès lors, la personne doit tenir les registres et livres de compte qui sont ainsi exigés d’elle.
353. The portion of subsection 231.2(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Requirement to provide documents or information
231.2 (1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act (including the collection of any amount payable under this Act by any person), of a listed international agreement or, for greater certainty, of a tax treaty with another country, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice,
354. Subparagraph 233.4(1)(c)(ii) of the Act is replaced by the following:
(ii) of which a non-resident corporation or trust is a foreign affiliate at any time in the fiscal period.
355. (1) Paragraph (b) of the definition “gifting arrangement” in subsection 237.1(1) of the Act is replaced by the following:
(b) incur a limited-recourse debt, determined under subsection 143.2(6.1), that can reasonably be considered to relate to a gift to a qualified donee or a monetary contribution referred to in subsection 127(4.1);
(2) Subsection (1) applies in respect of gifts and monetary contributions made after 6:00 p.m. (Eastern Standard Time) on December 5, 2003.
356. (1) The Act is amended by adding the following after section 237.2:
Marginal note:Definitions
237.3 (1) The following definitions apply in this section.
“advisor”
« conseiller »
“advisor”, in respect of a transaction or series of transactions, means each person who provides, directly or indirectly in any manner whatever, any contractual protection in respect of the transaction or series, or any assistance or advice with respect to creating, developing, planning, organizing or implementing the transaction or series, to another person (including any person who enters into the transaction for the benefit of another person).
“avoidance transaction”
« opération d’évitement »
“avoidance transaction” has the meaning assigned by subsection 245(3).
“confidential protection”
« droit à la confidentialité »
“confidential protection”, in respect of a transaction or series of transactions, means anything that prohibits the disclosure to any person or to the Minister of the details or structure of the transaction or series under which a tax benefit results, or would result but for section 245, but for greater certainty, the disclaiming or restricting of an advisor’s liability shall not be considered confidential protection if it does not prohibit the disclosure of the details or structure of the transaction or series.
“contractual protection”
« protection contractuelle »
“contractual protection”, in respect of a transaction or series of transactions, means
(a) any form of insurance (other than standard professional liability insurance) or other protection, including, without limiting the generality of the foregoing, an indemnity, compensation or a guarantee that, either immediately or in the future and either absolutely or contingently,
(i) protects a person against a failure of the transaction or series to achieve any tax benefit from the transaction or series, or
(ii) pays for or reimburses any expense, fee, tax, interest, penalty or similar amount that may be incurred by a person in the course of a dispute in respect of a tax benefit from the transaction or series; and
(b) any form of undertaking provided by a promoter, or by any person who does not deal at arm’s length with a promoter, that provides, either immediately or in the future and either absolutely or contingently, assistance, directly or indirectly in any manner whatever, to a person in the course of a dispute in respect of a tax benefit from the transaction or series.
“fee”
« honoraires »
“fee”, in respect of a transaction or series of transactions, means any consideration that is, or could be, received or receivable, directly or indirectly in any manner whatever, by an advisor or a promoter, or any person who does not deal at arm’s length with an advisor or promoter, for
(a) providing advice or an opinion with respect to the transaction or series;
(b) creating, developing, planning, organizing or implementing the transaction or series;
(c) promoting or selling an arrangement, plan or scheme that includes, or relates to, the transaction or series;
(d) preparing documents supporting the transaction or series, including tax returns or any information returns to be filed under this Act; or
(e) providing contractual protection.
“person”
« personne »
“person” includes a partnership.
“promoter”
« promoteur »
“promoter”, in respect of a transaction or series of transactions, means each person who
(a) promotes or sells (whether as principal or agent and whether directly or indirectly) an arrangement, plan or scheme (referred to in this definition as an “arrangement”), if it may reasonably be considered that the arrangement includes or relates to the transaction or series;
(b) makes a statement or representation (whether as principal or agent and whether directly or indirectly) that a tax benefit could result from an arrangement, if it may reasonably be considered that
(i) the statement or representation was made in furtherance of the promoting or selling of the arrangement, and
(ii) the arrangement includes or relates to the transaction or series; or
(c) accepts (whether as principal or agent and whether directly or indirectly) consideration in respect of an arrangement referred to in paragraph (a) or (b).
“reportable transaction”
« opération à déclarer »
“reportable transaction”, at any time, means an avoidance transaction that is entered into by or for the benefit of a person, and each transaction that is part of a series of transactions that includes the avoidance transaction, if at the time any two of the following paragraphs apply in respect of the avoidance transaction or series:
(a) an advisor or a promoter, or any person who does not deal at arm’s length with the advisor or promoter, has or had an entitlement, either immediately or in the future and either absolutely or contingently, to a fee that to any extent
(i) is based on the amount of a tax benefit that results, or would result but for section 245, from the avoidance transaction or series,
(ii) is contingent upon the obtaining of a tax benefit that results, or would result but for section 245, from the avoidance transaction or series, or may be refunded, recovered or reduced, in any manner whatever, based upon the failure of the person to obtain a tax benefit from the avoidance transaction or series, or
(iii) is attributable to the number of persons
(A) who participate in the avoidance transaction or series, or in a similar avoidance transaction or series, or
(B) who have been provided access to advice or an opinion given by the advisor or promoter regarding the tax consequences from the avoidance transaction or series, or from a similar avoidance transaction or series;
(b) an advisor or promoter in respect of the avoidance transaction or series, or any person who does not deal at arm’s length with the advisor or promoter, obtains or obtained confidential protection in respect of the avoidance transaction or series,
(i) in the case of an advisor, from a person to whom the advisor has provided any assistance or advice with respect to the avoidance transaction or series under the terms of an engagement of the advisor by that person to provide such assistance or advice, or
(ii) in the case of a promoter, from a person
(A) to whom an arrangement, plan or scheme has been promoted or sold in the circumstances described in paragraph (a) of the definition “promoter”,
(B) to whom a statement or representation described in paragraph (b) of the definition “promoter” has been made, or
(C) from whom consideration described in paragraph (c) of the definition “promoter” has been received; or
(c) either
(i) the person (in this subparagraph referred to as the “particular person”), another person who entered into the avoidance transaction for the benefit of the particular person or any other person who does not deal at arm’s length with the particular person or with a person who entered into the avoidance transaction for the benefit of the particular person, has or had contractual protection in respect of the avoidance transaction or series, otherwise than as a result of a fee described in paragraph (a), or
(ii) an advisor or promoter in respect of the avoidance transaction or series, or any person who does not deal at arm’s length with the advisor or promoter, has or had contractual protection in respect of the avoidance transaction or series, otherwise than as a result of a fee described in paragraph (a).
“solicitor-client privilege”
« privilège des communications entre client et avocat »
“solicitor-client privilege” has the meaning assigned by subsection 232(1).
“tax benefit”
« avantage fiscal »
“tax benefit” has the meaning assigned by subsection 245(1).
“transaction”
« opération »
“transaction” has the meaning assigned by subsection 245(1).
Marginal note:Application
(2) An information return in prescribed form and containing prescribed information in respect of a reportable transaction must be filed with the Minister by
(a) every person for whom a tax benefit results, or would result but for section 245, from the reportable transaction, from any other reportable transaction that is part of a series of transactions that includes the reportable transaction or from the series of transactions;
(b) every person who has entered into, for the benefit of a person described in paragraph (a), an avoidance transaction that is a reportable transaction;
(c) every advisor or promoter in respect of the reportable transaction, or in respect of any other transaction that is part of a series of transactions that includes the reportable transaction, who is or was entitled, either immediately or in the future and either absolutely or contingently, to a fee in respect of any of those transactions that is
(i) described in paragraph (a) of the definition “reportable transaction” in subsection (1), or
(ii) in respect of contractual protection provided in circumstances described in paragraph (c) of the definition “reportable transaction” in subsection (1); and
(d) every person who is not dealing at arm’s length with an advisor or promoter in respect of the reportable transaction and who is or was entitled, either immediately or in the future and either absolutely or contingently, to a fee that is referred to in paragraph (c).
Marginal note:Clarification of reporting transactions in series
(3) For greater certainty, and subject to subsection (11), if subsection (2) applies to a person in respect of each reportable transaction that is part of a series of transactions that includes an avoidance transaction, the filing of a prescribed form by the person that reports each transaction in the series is deemed to satisfy the obligation of the person under subsection (2) in respect of each transaction so reported.
Marginal note:Application
(4) For the purpose of subsection (2), if any person is required to file an information return in respect of a reportable transaction under that subsection, the filing by any such person of an information return with full and accurate disclosure in prescribed form in respect of the transaction is deemed to have been made by each person to whom subsection (2) applies in respect of the transaction.
Marginal note:Time for filing return
(5) An information return required by subsection (2) to be filed by a person for a reportable transaction is to be filed with the Minister on or before June 30 of the calendar year following the calendar year in which the transaction first became a reportable transaction in respect of the person.
Marginal note:Tax benefits disallowed
(6) Notwithstanding subsection 245(4), subsection 245(2) is deemed to apply at any time to any reportable transaction in respect of a person described in paragraph (2)(a) in relation to the reportable transaction if, at that time,
(a) the obligation under subsection (2) of the person in respect of the reportable transaction, or any other reportable transaction that is part of a series of transactions that includes the reportable transaction, has not been satisfied;
(b) a person is liable to a penalty under subsection (8) in respect of the reportable transaction or any other reportable transaction that is part of a series of transactions that includes the reportable transaction; and
(c) the penalty under subsection (8) or interest on the penalty has not been paid, or has been paid but an amount on account of the penalty or interest has been repaid under subsection 164(1.1) or applied under subsection 164(2).
Marginal note:Assessments
(7) Notwithstanding subsections 152(4) to (5), the Minister may make any assessments, determinations and redeterminations that are necessary to give effect to subsection (8).
Marginal note:Penalty
(8) Every person who fails to file an information return in respect of a reportable transaction as required under subsection (2) on or before the day required under subsection (5) is liable to a penalty equal to the total of each amount that is a fee to which an advisor or a promoter (or any person who does not deal at arm’s length with the advisor or the promoter) in respect of the reportable transaction is or was entitled, either immediately or in the future and either absolutely or contingently, to receive in respect of the reportable transaction, any transaction that is part of the series of transactions that includes the reportable transaction or the series of transactions that includes the reportable transaction, if the fee is
(a) described in paragraph (a) of the definition “reportable transaction” in subsection (1); or
(b) in respect of contractual protection provided in circumstances described in paragraph (c) of the definition “reportable transaction” in subsection (1).
Marginal note:Joint and several liability
(9) If more than one person is liable to a penalty under subsection (8) in respect of a reportable transaction, each of those persons are jointly and severally, or solidarily, liable to pay the penalty.
Marginal note:Joint and several liability — special cases
(10) Notwithstanding subsections (8) and (9), the liability of an advisor or a promoter, or a person with whom the advisor or promoter does not deal at arm’s length, to a penalty under those subsections in respect of a reportable transaction shall not exceed the total of each amount that is a fee referred to in subsection (8) to which that advisor or promoter, or a person with whom the advisor or promoter does not deal at arm’s length, is or was entitled, either immediately or in the future and either absolutely or contingently, to receive in respect of the reportable transaction.
Marginal note:Due diligence
(11) A person required to file an information return in respect of a reportable transaction is not liable for a penalty under subsection (8) if the person has exercised the degree of care, diligence and skill to prevent the failure to file that a reasonably prudent person would have exercised in comparable circumstances.
Marginal note:Reporting not an admission
(12) The filing of an information return under this section by a person in respect of a reportable transaction is not an admission by the person that
(a) section 245 applies in respect of any transaction; or
(b) any transaction is part of a series of transactions.
Marginal note:Application of sections 231 to 231.3
(13) Without restricting the generality of sections 231 to 231.3, even if a return of income has not been filed by a taxpayer under section 150 for the taxation year of the taxpayer in which a tax benefit results, or would result but for section 245, from a reportable transaction, sections 231 to 231.3 apply, with such modifications as the circumstances require, for the purpose of permitting the Minister to verify or ascertain any information in respect of that transaction.
Marginal note:Tax shelters and flow-through shares
(14) For the purpose of this section, a reportable transaction does not include a transaction that is, or is part of a series of transactions that includes,
(a) the acquisition of a tax shelter for which an information return has been filed with the Minister under subsection 237.1(7); or
(b) the issuance of a flow-through share for which an information return has been filed with the Minister under subsection 66(12.68).
Marginal note:Tax shelters and flow-through shares — penalty
(15) Notwithstanding subsection (8), the amount of the penalty, if any, that applies on a person under that subsection in respect of a reportable transaction shall not exceed the amount determined by the formula
A – B
where
- A
- is the amount of the penalty imposed on the person under subsection (8), determined without reference to this subsection; and
- B
- is
(a) if the reportable transaction is the acquisition of a tax shelter, the amount of the penalty, if any, that applies on the person under subsection 237.1(7.4) in respect of the tax shelter,
(b) if the reportable transaction is the issuance of a flow-through share, the amount of the penalty, if any, that applies on the person under subsection 66(12.74) in respect of the issuance of the flow-through share, and
(c) in any other case, nil.
Marginal note:Anti-avoidance
(16) Subsection (14) does not apply to a reportable transaction if it is reasonable, having regard to all of the circumstances, to conclude that one of the main reasons for the acquisition of a tax shelter, or the issuance of a flow-through share, is to avoid the application of this section.
Marginal note:Solicitor-client privilege
(17) For greater certainty, for the purpose of this section, a lawyer who is an advisor in respect of a reportable transaction is not required to disclose in an information return in respect of the transaction any information in respect of which the lawyer, on reasonable grounds, believes that a client of the lawyer has solicitor-client privilege.
(2) Subsection (1) applies in respect of avoidance transactions that are entered into after 2010 or that are part of a series of transactions that began before 2011 and is completed after 2010, except that, in its application to an avoidance transaction that is part of a series that began before 2011, the definition “confidential protection” in subsection 237.3(1) of the Act, as enacted by subsection (1), is to be read as follows:
- “confidential protection”
“confidential protection”, in respect of a transaction or series of transactions, means anything that prohibits the disclosure to any person or to the Minister of the details or structure of the transaction or series under which a tax benefit results, or would result but for section 245, but does not include a prohibition on disclosure that relates to an agreement entered into before March 4, 2010 between an advisor and his or her client for the provision of accounting, legal or similar tax advisory services, and for greater certainty, the disclaiming or restricting of an advisor’s liability shall not be considered confidential protection if it does not prohibit the disclosure of the details or structure of the transaction or series.
(3) If the filing of an information return under section 237.3 of the Act, as enacted by subsection (1), would be required before July 1, 2012, the information return is deemed to be filed before that day if it is filed before the day that is 120 days after the day on which this Act receives royal assent.
357. (1) Subparagraph 241(4)(e)(xii) of the Act is replaced by the following:
(xii) a provision contained in a tax treaty with another country or in a listed international agreement;
(2) Subsection 241(11) of the Act is replaced by the following:
Marginal note:References to “this Act”
(11) The references in subsections (1), (3), (4) and (10) to “this Act” shall be read as references to “this Act or the Federal-Provincial Fiscal Arrangements Act”.
358. (1) The definition “common-law partner” in subsection 248(1) of the Act is replaced by the following:
“common-law partner”
« conjoint de fait »
“common-law partner”, with respect to a taxpayer at any time, means a person who cohabits at that time in a conjugal relationship with the taxpayer and
(a) has so cohabited throughout the 12-month period that ends at that time, or
(b) would be the parent of a child of whom the taxpayer is a parent, if this Act were read without reference to paragraphs 252(1)(c) and (e) and subparagraph 252(2)(a)(iii),
and, for the purpose of this definition, where at any time the taxpayer and the person cohabit in a conjugal relationship, they are, at any particular time after that time, deemed to be cohabiting in a conjugal relationship unless they were living separate and apart at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship;
(2) The definition “controlled foreign affiliate” in subsection 248(1) of the Act is replaced by the following:
“controlled foreign affiliate”
« société étrangère affiliée contrôlée »
“controlled foreign affiliate” has, except as expressly otherwise provided in this Act, the meaning assigned by subsection 95(1);
(3) The definition “dividend rental arrangement” in subsection 248(1) of the Act, as amended by subsection (13), is replaced by the following:
“dividend rental arrangement”
« mécanisme de transfert de dividendes »
“dividend rental arrangement”, of a person or a partnership (each of which is referred to in this definition as the “person”),
(a) means any arrangement entered into by the person where it can reasonably be considered that
(i) the main reason for the person entering into the arrangement was to enable the person to receive a dividend on a share of the capital stock of a corporation, other than a dividend on a prescribed share or on a share described in paragraph (e) of the definition “term preferred share” in this subsection or an amount deemed by subsection 15(3) to be received as a dividend on a share of the capital stock of a corporation, and
(ii) under the arrangement someone other than that person bears the risk of loss or enjoys the opportunity for gain or profit with respect to the share in any material respect, and
(b) includes, for greater certainty, any arrangement under which
(i) a corporation at any time receives on a particular share a taxable dividend that would, if this Act were read without reference to subsection 112(2.3), be deductible in computing its taxable income or taxable income earned in Canada for the taxation year that includes that time, and
(ii) the corporation or a partnership of which the corporation is a member is obligated to pay to another person or partnership an amount
(A) that is compensation for
(I) the dividend described in subparagraph (i),
(II) a dividend on a share that is identical to the particular share, or
(III) a dividend on a share that, during the term of the arrangement, can reasonably be expected to provide to a holder of the share the same or substantially the same proportionate risk of loss or opportunity for gain as the particular share, and
(B) that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person or partnership, as the case may be, as a taxable dividend;
(4) The definition “eligible relocation” in subsection 248(1) of the Act is replaced by the following:
“eligible relocation”
« réinstallation admissible »
“eligible relocation” means a relocation of a taxpayer in respect of which the following apply:
(a) the relocation occurs to enable the taxpayer
(i) to carry on a business or to be employed at a location (in section 62 and this definition referred to as “the new work location”) that is, except if the taxpayer is absent from but resident in Canada, in Canada, or
(ii) to be a student in full-time attendance enrolled in a program at a post-secondary level at a location of a university, college or other educational institution (in section 62 and this definition referred to as “the new work location”),
(b) the taxpayer ordinarily resided before the relocation at a residence (in section 62 and this definition referred to as “the old residence”) and ordinarily resided after the relocation at a residence (in section 62 and this definition referred to as “the new residence”),
(c) except if the taxpayer is absent from but resident in Canada, both the old residence and the new residence are in Canada, and
(d) the distance between the old residence and the new work location is not less than 40 kilometres greater than the distance between the new residence and the new work location;
(5) The definition “share” in subsection 248(1) of the Act is replaced by the following:
“share”
« action »
“share”, except as the context otherwise requires, means a share or a fraction of a share of the capital stock of a corporation and, for greater certainty, a share of the capital stock of a corporation includes a share of the capital of a cooperative corporation (within the meaning assigned by subsection 136(2)), a share of the capital of an agricultural cooperative corporation (within the meaning assigned by subsection 135.1(1)) and a share of the capital of a credit union;
(6) The definition “amount” in subsection 248(1) of the Act is amended by striking out “and” at the end of paragraph (b) and by adding the following after that paragraph:
(b.1) if a taxpayer files an election in writing with the Minister of National Revenue on or before the taxpayer’s filing-due date for the 2012 taxation year, then in the case of each stock dividend declared after July 17, 2005 and paid to the taxpayer before 2013 by a corporation that is, when the dividend is paid, a non-resident corporation, the “amount” of the stock dividend is, except where subsection 95(7) applies to the dividend, the greater of
(i) the amount by which the paid-up capital of the corporation that paid the dividend is increased by reason of the payment of the dividend, and
(ii) the fair market value of the share or shares paid as a stock dividend at the time of payment, and
(7) The definition “amount” in subsection 248(1) of the Act, as amended by subsection (6), is amended by adding “and” at the end of paragraph (b) and by repealing paragraph (b.1).
(8) Paragraph (d) of the definition “Canadian real, immovable or resource property” in subsection 248(1) of the Act is replaced by the following:
(d) a share of the capital stock of a corporation, an income or a capital interest in a trust or an interest in a partnership — other than a taxable Canadian corporation, a SIFT trust (determined without reference to subsection 122.1(2)), a SIFT partnership (determined without reference to subsection 197(8)) or a real estate investment trust (as defined in subsection 122.1(1)) — if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in paragraphs (a) to (c), or
(9) Subparagraph (b)(i) of the definition “disposition” in subsection 248(1) of the Act is replaced by the following:
(i) where the property is a share, bond, debenture, note, certificate, mortgage, hypothecary claim, agreement of sale or similar property, or interest, or for civil law a right, in it, the property is in whole or in part redeemed, acquired or cancelled,
(10) The definition “disposition” in subsection 248(1) of the Act is amended by adding the following after paragraph (b):
(b.1) where the property is an interest in a life insurance policy, a disposition within the meaning of section 148,
(11) Subparagraphs (f)(i) and (ii) of the definition “disposition” in subsection 248(1) of the Act are replaced by the following:
(i) the transferor and the transferee are trusts that are, at the time of the transfer, resident in Canada,
(12) The definition “disposition” in subsection 248(1) of the Act is amended by striking out “and” at the end of paragraph (l), by adding “and” at the end of paragraph (m) and by adding the following after paragraph (m):
(n) a redemption, an acquisition or a cancellation of a share or of a right to acquire a share (which share or which right, as the case may be, is referred to in this paragraph as the “security”) of the capital stock of a corporation (referred to in this paragraph as the “issuing corporation”) held by another corporation (referred to in this paragraph as the “disposing corporation”) if
(i) the redemption, acquisition or cancellation occurs as part of a merger or combination of two or more corporations (including the issuing corporation and the disposing corporation) to form one corporate entity (referred to in this paragraph as the “new corporation”),
(ii) the merger or combination
(A) is an amalgamation (within the meaning assigned by subsection 87(1)) to which subsection 87(11) does not apply,
(B) is an amalgamation (within the meaning assigned by subsection 87(1)) to which subsection 87(11) applies, if the issuing corporation and the disposing corporation are described by subsection 87(11) as the parent and the subsidiary, respectively,
(C) is a foreign merger (within the meaning assigned by subsection 87(8.1)), or
(D) would be a foreign merger (within the meaning assigned by subsection 87(8.1)) if subparagraph 87(8.1)(c)(ii) were read without reference to the words “that was resident in a country other than Canada”, and
(iii) either
(A) the disposing corporation receives no consideration for the security, or
(B) in the case where the merger or combination is described by clause (ii)(C) or (D), the disposing corporation receives no consideration for the security other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, becomes property of the new corporation;
(13) The portion of paragraph (d) of the definition “dividend rental arrangement” in subsection 248(1) of the Act after subparagraph (iii) is replaced by the following:
that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person as a taxable dividend;
(14) The portion of the definition “employee benefit plan” in subsection 248(1) of the Act before paragraph (a) is replaced by the following:
“employee benefit plan”
« régime de prestations aux employés »
“employee benefit plan” means an arrangement under which contributions are made by an employer or by any person with whom the employer does not deal at arm’s length to another person (in this Act referred to as the “custodian” of an employee benefit plan) and under which one or more payments are to be made to or for the benefit of employees or former employees of the employer or persons who do not deal at arm’s length with any such employee or former employee (other than a payment that, if section 6 were read without reference to subparagraph 6(1)(a)(ii) and paragraph 6(1)(g), would not be required to be included in computing the income of the recipient or of an employee or former employee), but does not include any portion of the arrangement that is
(15) Paragraphs (d) and (e) of the definition “foreign resource property” in subsection 248(1) of the Act are replaced by the following:
(d) any right to a rental or royalty computed by reference to the amount or value of production from an oil or gas well in that country, or from a natural accumulation of petroleum or natural gas in that country, if the payer of the rental or royalty has an interest in, or for civil law a right in, the well or accumulation, as the case may be, and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the well or accumulation,
(e) any right to a rental or royalty computed by reference to the amount or value of production from a mineral resource in that country, if the payer of the rental or royalty has an interest in, or for civil law a right in, the mineral resource and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the mineral resource,
(16) The portion of the definition “former business property” in subsection 248(1) of the Act before paragraph (a) is replaced by the following:
“former business property”
« ancien bien d’entreprise »
“former business property”, in respect of a taxpayer, means a capital property of the taxpayer that was used by the taxpayer or a person related to the taxpayer primarily for the purpose of gaining or producing income from a business, and that was real or immovable property of the taxpayer, an interest of the taxpayer in real property, a right of the taxpayer in an immovable or a property that is the subject of an election under subsection 13(4.2), but does not include
(17) Paragraph (f) of the definition “short-term preferred share” in subsection 248(1) of the Act is replaced with the following:
(f) if a share of the capital stock of a corporation was issued after December 15, 1987 and at the time the share was issued the existence of the corporation was, or there was an arrangement under which it could be, limited to a period that was within five years from the date of its issue, the share is deemed to be a short-term preferred share of the corporation unless
(i) the share is a grandfathered share and the arrangement is a written arrangement entered into before December 16, 1987, or
(ii) the share is issued to an individual after April 14, 2005 under an agreement referred to in subsection 7(1), if when the individual last acquired a right under the agreement to acquire a share of the capital stock of the corporation, the existence of the corporation was not, and no arrangement was in effect under which it could be, limited to a period that was within five years from the date of that last acquisition,
(18) The portion of paragraph (d) of the definition “taxable Canadian property” in subsection 248(1) of the Act before subparagraph (i) is replaced by the following:
(d) a share of the capital stock of a corporation (other than a mutual fund corporation) that is not listed on a designated stock exchange, an interest in a partnership or an interest in a trust (other than a unit of a mutual fund trust or an income interest in a trust resident in Canada), if, at any particular time during the 60-month period that ends at that time, more than 50% of the fair market value of the share or interest, as the case may be, was derived directly or indirectly (otherwise than through a corporation, partnership or trust the shares or interests in which were not themselves taxable Canadian property at the particular time) from one or any combination of
(19) Paragraph (d) of the definition activités de recherche scientifique et de développement expérimental in subsection 248(1) of the French version of the Act is replaced by the following:
d) les travaux entrepris par le contribuable ou pour son compte relativement aux travaux de génie, à la conception, à la recherche opérationnelle, à l’analyse mathématique, à la programmation informatique, à la collecte de données, aux essais et à la recherche psychologique, lorsque ces travaux sont proportionnels aux besoins des travaux visés aux alinéas a), b) ou c) qui sont entrepris au Canada par le contribuable ou pour son compte et servent à les appuyer directement.
(20) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:
“listed international agreement”
« accord international désigné »
“listed international agreement” means
(a) the Convention on Mutual Administrative Assistance in Tax Matters, concluded at Strasbourg on January 25, 1988, as amended from time to time by a protocol, or other international instrument, as ratified by Canada, or
(b) a comprehensive tax information exchange agreement that Canada has entered into and that has effect, in respect of another country or jurisdiction;
“qualifying trust annuity”
« rente admissible de fiducie »
“qualifying trust annuity” has the meaning assigned by subsection 60.011(2);
“relevant factor”
« facteur de référence »
“relevant factor” means
(a) for taxation years that end before 2010, 3, and
(b) for taxation years that end after 2009, the amount determined by the formula
1/(A – B)
where
- A
- is the percentage set out in paragraph 123(1)(a), and
- B
- is the percentage that is the corporation’s general rate reduction percentage (as defined by section 123.4) for the taxation year;
“specified proportion”
« proportion déterminée »
“specified proportion”, of a member of a partnership for a fiscal period of the partnership, means the proportion that the member’s share of the total income or loss of the partnership for the partnership’s fiscal period is of the partnership’s total income or loss for that period and, for the purpose of this definition, where that income or loss for a period is nil, that proportion shall be computed as if the partnership had income for that period in the amount of $1,000,000;
(21) Section 248 of the Act is amended by adding the following after subsection (1):
Marginal note:Non-disposition before December 24, 1998
(1.1) A redemption, an acquisition or a cancellation, at any particular time after 1971 and before December 24, 1998, of a share or of a right to acquire a share (which share or which right, as the case may be, is referred to in this subsection as the “security”) of the capital stock of a corporation (referred to in this subsection as the “issuing corporation”) held by another corporation (referred to in this subsection as the “disposing corporation”) is not a disposition (within the meaning of the definition “disposition” in section 54 as that section read in its application to transactions and events that occurred at the particular time) of the security if
(a) the redemption, acquisition or cancellation occurred as part of a merger or combination of two or more corporations (including the issuing corporation and the disposing corporation) to form one corporate entity (referred to in this subsection as the “new corporation”);
(b) the merger or combination
(i) is an amalgamation (within the meaning assigned by subsection 87(1) as it read at the particular time) to which subsection 87(11) if in force, and as it read, at the particular time did not apply,
(ii) is an amalgamation (within the meaning assigned by subsection 87(1) as it read at the particular time) to which subsection 87(11) if in force, and as it read, at the particular time applies, if the issuing corporation and the disposing corporation are described by subsection 87(11) (if in force, and as it read, at the particular time) as the parent and the subsidiary, respectively,
(iii) occurred before November 13, 1981 and is a merger of corporations that is described by subsection 87(8) (as it read in respect of the merger or combination), or
(iv) occurred after November 12, 1981 and
(A) is a foreign merger (within the meaning assigned by subsection 87(8.1) as it read in respect of the merger or combination), or
(B) all of the following conditions are met:
(I) the merger or combination is not a foreign merger (within the meaning assigned by subsection 87(8.1) as it read in respect of the merger or combination),
(II) subsection 87(8.1), as it read in respect of the merger or combination, contained a subparagraph (c)(ii), and
(III) the merger or combination would be a foreign merger (within the meaning of subsection 87(8.1), as it read in respect of the merger or combination) if that subparagraph 87(8.1)(c)(ii) were read as follows:
“(ii) if, immediately after the merger, the new foreign corporation was controlled by another foreign corporation (in this subsection referred to as the “parent corporation”), shares of the capital stock of the parent corporation,”;
and
(c) either
(i) the disposing corporation received no consideration for the security, or
(ii) in the case where the merger or combination is described by subparagraph (b)(iv), the disposing corporation received no consideration for the security other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, became property of the new corporation.
(22) Paragraphs 248(8)(a) and (b) of the French version of the Act are replaced by the following:
a) un transfert, une distribution ou une acquisition de biens effectué en vertu du testament ou autre acte testamentaire d’un contribuable ou de son époux ou conjoint de fait, par suite d’un tel testament ou acte ou par l’effet de la loi en cas de succession ab intestat du contribuable ou de son époux ou conjoint de fait, est considéré comme un transfert, une distribution ou une acquisition de biens effectué par suite du décès du contribuable ou de son époux ou conjoint de fait, selon le cas;
b) un transfert, une distribution ou une acquisition de biens effectué par suite d’une renonciation ou d’un abandon par une personne qui était bénéficiaire en vertu du testament ou autre acte testamentaire d’un contribuable ou de son époux ou conjoint de fait, ou qui était héritier ab intestat de l’un ou l’autre, est considéré comme un transfert, une distribution ou une acquisition de biens effectué par suite du décès du contribuable ou de son époux ou conjoint de fait, selon le cas;
(23) Subsection 248(16) of the Act is replaced by the following:
Marginal note:Goods and services tax — input tax credit and rebate
(16) For the purposes of this Act, other than this subsection and subsection 6(8), an amount claimed by a taxpayer as an input tax credit or rebate with respect to the goods and services tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer
(a) where the amount was claimed by the taxpayer as an input tax credit in a return under Part IX of the Excise Tax Act for a reporting period under that Act,
(i) at the particular time that is the earlier of the time that the goods and services tax in respect of the input tax credit was paid and the time that it became payable,
(A) if the particular time is in the reporting period, or
(B) if,
(I) the taxpayer’s threshold amount, determined in accordance with subsection 249(1) of the Excise Tax Act, is greater than $500,000 for the taxpayer’s fiscal year (within the meaning assigned by that Act) that includes the particular time, and
(II) the taxpayer claimed the input tax credit at least 120 days before the end of the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer in respect of the taxation year that includes the particular time,
(ii) at the end of the reporting period, if
(A) subparagraph (i) does not apply, and
(B) the taxpayer’s threshold amount, determined in accordance with subsection 249(1) of the Excise Tax Act, is $500,000 or less for the fiscal year (within the meaning assigned by that Act) of the taxpayer that includes the particular time, and
(iii) in any other case, on the last day of the taxpayer’s earliest taxation year
(A) that begins after the taxation year that includes the particular time, and
(B) for which the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer ends at least 120 days after the time that the input tax credit was claimed; or
(b) where the amount was claimed as a rebate with respect to the goods and services tax, at the time the amount was received or credited.
(24) Section 248 of the Act is amended by adding the following after subsection (16):
Marginal note:Quebec input tax refund and rebate
(16.1) For the purpose of this Act, other than this subsection and subsection 6(8), an amount claimed by a taxpayer as an input tax refund or a rebate with respect to the Quebec sales tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer
(a) where the amount was claimed by the taxpayer as an input tax refund in a return under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, for a reporting period under that Act,
(i) at the particular time that is the earlier of the time that the Quebec sales tax in respect of the input tax refund was paid and the time that it became payable,
(A) if the particular time is in the reporting period, or
(B) if,
(I) the taxpayer’s threshold amount, determined in accordance with section 462 of that Act is greater than $500,000 for the taxpayer’s fiscal year (within the meaning assigned by that Act) that includes the particular time, and
(II) the taxpayer claimed the input tax refund at least 120 days before the end of the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer in respect of the taxation year that includes the particular time,
(ii) at the end of the reporting period, if
(A) subparagraph (i) does not apply, and
(B) the taxpayer’s threshold amount, determined in accordance with section 462 of that Act is $500,000 or less for the fiscal year (within the meaning assigned by that Act) of the taxpayer that includes the particular time, and
(iii) in any other case, on the last day of the taxpayer’s earliest taxation year
(A) that begins after the taxation year that includes the particular time, and
(B) for which the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer ends at least 120 days after the time that the input tax refund was claimed; or
(b) where the amount was claimed as a rebate with respect to the Quebec sales tax, at the time the amount was received or credited.
(25) The portion of subsection 248(17) of the Act before the portion enclosed by quotation marks is replaced by the following:
Marginal note:Application of subsection (16) to passenger vehicles and aircraft
(17) If the input tax credit of a taxpayer under Part IX of the Excise Tax Act in respect of a passenger vehicle or aircraft is determined with reference to subsection 202(4) of that Act, subparagraphs (16)(a)(i) to (iii) are to be read as they apply in respect of the passenger vehicle or aircraft, as the case may be, as follows:
(26) Section 248 of the Act is amended by adding the following after subsection (17):
Marginal note:Application of subsection (16.1) to passenger vehicles and aircraft
(17.1) If the input tax refund of a taxpayer under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, in respect of a passenger vehicle or aircraft is determined with reference to section 252 of that Act, subparagraphs (16.1)(a)(i) to (iii) are to be read as they apply in respect of the passenger vehicle or aircraft, as the case may be, as follows:
“(i) at the beginning of the first taxation year or fiscal period of the taxpayer that begins after the end of the taxation year or fiscal period, as the case may be, in which the Quebec sales tax in respect of such property was considered for the purposes of determining the input tax refund to be payable, if the tax was considered for the purposes of determining the input tax refund to have become payable in the reporting period, or
(ii) if no such tax was considered for the purposes of determining the input tax refund to have become payable in the reporting period, at the end of the reporting period; or”.
Marginal note:Input tax credit on assessment
(17.2) An amount in respect of an input tax credit that is deemed by subsection 296(5) of the Excise Tax Act to have been claimed in a return or application filed under Part IX of that Act is deemed to have been so claimed for the reporting period under that Act that includes the time when the Minister makes the assessment referred to in that subsection.
Marginal note:Quebec input tax refund on assessment
(17.3) An amount in respect of an input tax refund that is deemed by section 30.5 of the Tax Administration Act, R.S.Q., c. A-6.002, to have been claimed is deemed to have been so claimed for the reporting period under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, that includes the day on which an assessment is issued to the taxpayer indicating that the refund has been allocated under that section 30.5.
(27) Section 248 of the Act is amended by adding the following after subsection (18):
Marginal note:Repayment of Quebec input tax refund
(18.1) For the purposes of this Act, if an amount is added at a particular time in determining the net tax of a taxpayer under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, in respect of an input tax refund relating to property or service that had been previously deducted in determining the net tax of the taxpayer, that amount is deemed to be assistance repaid at the particular time in respect of the property or service under a legal obligation to repay all or part of that assistance.
(28) Paragraphs 248(23.1)(a) and (b) of the French version of the Act are replaced by the following:
a) soit transféré ou distribué à la personne qui était l’époux ou le conjoint de fait du contribuable au moment du décès de celui-ci, ou acquis par cette personne, le bien est réputé avoir été ainsi transféré, distribué ou acquis, selon le cas, par suite de ce décès;
b) soit transféré ou distribué à la succession du contribuable, ou acquis par celle-ci, le bien est réputé avoir été ainsi transféré, distribué ou acquis, selon le cas, immédiatement avant le moment immédiatement avant le décès.
(29) Subparagraph 248(25.3)(c)(i) of the Act is replaced by the following:
(i) the particular unit is capital property and the amount is not proceeds of disposition of a capital interest in the trust, or
(30) Section 248 of the Act is amended by adding the following after subsection (29):
Marginal note:Intention to give
(30) The existence of an amount of an advantage in respect of a transfer of property does not in and by itself disqualify the transfer from being a gift to a qualified donee if
(a) the amount of the advantage does not exceed 80% of the fair market value of the transferred property; or
(b) the transferor of the property establishes to the satisfaction of the Minister that the transfer was made with the intention to make a gift.
Marginal note:Eligible amount of gift or monetary contribution
(31) The eligible amount of a gift or monetary contribution is the amount by which the fair market value of the property that is the subject of the gift or monetary contribution exceeds the amount of the advantage, if any, in respect of the gift or monetary contribution.
Marginal note:Amount of advantage
(32) The amount of the advantage in respect of a gift or monetary contribution by a taxpayer is the total of
(a) the total of all amounts, other than an amount referred to in paragraph (b), each of which is the value, at the time the gift or monetary contribution is made, of any property, service, compensation, use or other benefit that the taxpayer, or a person or partnership who does not deal at arm’s length with the taxpayer, has received, obtained or enjoyed, or is entitled, either immediately or in the future and either absolutely or contingently, to receive, obtain, or enjoy
(i) that is consideration for the gift or monetary contribution,
(ii) that is in gratitude for the gift or monetary contribution, or
(iii) that is in any other way related to the gift or monetary contribution, and
(b) the limited-recourse debt, determined under subsection 143.2(6.1), in respect of the gift or monetary contribution at the time the gift or monetary contribution is made.
Marginal note:Cost of property acquired by donor
(33) The cost to a taxpayer of a property, acquired by the taxpayer in circumstances where subsection (32) applies to include the value of the property in computing the amount of the advantage in respect of a gift or monetary contribution, is equal to the fair market value of the property at the time the gift or monetary contribution is made.
Marginal note:Repayment of limited-recourse debt
(34) If at any time in a taxation year a taxpayer has paid an amount (in this subsection referred to as the “repaid amount”) on account of the principal amount of an indebtedness which was, before that time, an unpaid principal amount that was a limited-recourse debt referred to in subsection 143.2(6.1) (in this subsection referred to as the “former limited-recourse debt”) in respect of a gift or monetary contribution (in this subsection referred to as the “original gift” or “original monetary contribution”, respectively, as the case may be) of the taxpayer (otherwise than by way of an assignment or transfer of a guarantee, security or similar indemnity or covenant, or by way of a payment in respect of which any taxpayer referred to in subsection 143.2(6.1) has incurred an indebtedness that would be a limited-recourse debt referred to in that subsection if that indebtedness were in respect of a gift or monetary contribution made at the time that that indebtedness was incurred), the following rules apply:
(a) if the former limited-recourse debt is in respect of the original gift, for the purposes of sections 110.1 and 118.1, the taxpayer is deemed to have made in the taxation year a gift to a qualified donee, the eligible amount of which deemed gift is the amount, if any, by which
(i) the amount that would have been the eligible amount of the original gift, if the total of all such repaid amounts paid at or before that time were paid immediately before the original gift was made,
exceeds
(ii) the total of
(A) the eligible amount of the original gift, and
(B) the eligible amount of all other gifts deemed by this paragraph to have been made before that time in respect of the original gift; and
(b) if the former limited-recourse debt is in respect of the original monetary contribution, for the purposes of subsection 127(3), the taxpayer is deemed to have made in the taxation year a monetary contribution referred to in that subsection, the eligible amount of which is the amount, if any, by which
(i) the amount that would have been the eligible amount of the original monetary contribution, if the total of all such repaid amounts paid at or before that time were paid immediately before the original monetary contribution was made,
exceeds
(ii) the total of
(A) the eligible amount of the original monetary contribution, and
(B) the eligible amount of all other monetary contributions deemed by this paragraph to have been made before that time in respect of the original monetary contribution.
Marginal note:Deemed fair market value
(35) For the purposes of subsection (31), paragraph 69(1)(b) and subsections 110.1(2.1) and (3) and 118.1(5.4) and (6), the fair market value of a property that is the subject of a gift made by a taxpayer to a qualified donee is deemed to be the lesser of the fair market value of the property otherwise determined and the cost or, in the case of capital property, the adjusted cost base or, in the case of a life insurance policy in respect of which the taxpayer is a policyholder, the adjusted cost basis (as defined in subsection 148(9)), of the property to the taxpayer immediately before the gift is made if
(a) the taxpayer acquired the property under a gifting arrangement that is a tax shelter as defined in subsection 237.1(1); or
(b) except where the gift is made as a consequence of the taxpayer’s death,
(i) the taxpayer acquired the property less than three years before the day that the gift is made, or
(ii) the taxpayer acquired the property less than 10 years before the day that the gift is made and it is reasonable to conclude that, at the time the taxpayer acquired the property, one of the main reasons for the acquisition was to make a gift of the property to a qualified donee.
Marginal note:Non-arm’s length transaction
(36) If a taxpayer acquired a property, otherwise than by reason of the death of an individual, that is the subject of a gift to which subsection (35) applies because of subparagraph (35)(b)(i) or (ii) and the property was, at any time within the 3-year or 10-year period, respectively, that ends when the gift was made, acquired by a person or partnership with whom the taxpayer does not deal at arm’s length, for the purpose of applying subsection (35) to the taxpayer, the cost, or in the case of capital property, the adjusted cost base, of the property to the taxpayer immediately before the gift is made is deemed to be equal to the lowest amount that is the cost, or in the case of capital property, the adjusted cost base, to the taxpayer or any of those persons or partnerships immediately before the property was disposed of by that person or partnership.
Marginal note:Non-application of subsection (35)
(37) Subsection (35) does not apply to a gift
(a) of inventory;
(b) of real property or an immovable situated in Canada;
(c) of an object referred to in subparagraph 39(1)(a)(i.1);
(d) of property to which paragraph 38(a.1) or (a.2) applies;
(e) of a share of the capital stock of a corporation if
(i) the share was issued by the corporation to the donor,
(ii) immediately before the gift, the corporation was controlled by the donor, a person related to the donor or a group of persons each of whom is related to the donor, and
(iii) subsection (35) would not have applied in respect of the consideration for which the share was issued had that consideration been donated by the donor to the qualified donee when the share was so donated;
(f) by a corporation of property if
(i) the property was acquired by the corporation in circumstances to which subsection 85(1) or (2) applied,
(ii) immediately before the gift, the shareholder from whom the corporation acquired the property controlled the corporation or was related to a person or each member of a group of persons that controlled the corporation, and
(iii) subsection (35) would not have applied in respect of the property had the property not been transferred to the corporation and had the shareholder made the gift to the qualified donee when the corporation so made the gift; or
(g) of a property that was acquired in circumstances where subsection 70(6) or (9) or 73(1), (3) or (4) applied, unless subsection (36) would have applied if this subsection were read without reference to this paragraph.
Marginal note:Artificial transactions
(38) The eligible amount of a particular gift of property by a taxpayer is nil if it can reasonably be concluded that the particular gift relates to a transaction or series of transactions
(a) one of the purposes of which is to avoid the application of subsection (35) to a gift of any property; or
(b) that would, if this Act were read without reference to this paragraph, result in a tax benefit to which subsection 245(2) applies.
Marginal note:Substantive gift
(39) If a taxpayer disposes of a property (in this subsection referred to as the “substantive gift”) that is a capital property or an eligible capital property of the taxpayer, to a recipient that is a registered party, a registered association or a candidate, as those terms are defined in the Canada Elections Act, or that is a qualified donee, subsection (35) would have applied in respect of the substantive gift if it had been the subject of a gift by the taxpayer to a qualified donee, and all or a part of the proceeds of disposition of the substantive gift are (or are substituted, directly or indirectly in any manner whatever, for) property that is the subject of a gift or monetary contribution by the taxpayer to the recipient or any person dealing not at arm’s length with the recipient, the following rules apply:
(a) for the purpose of subsection (31), the fair market value of the property that is the subject of the gift or monetary contribution made by the taxpayer is deemed to be that proportion of the lesser of the fair market value of the substantive gift and the cost, or if the substantive gift is capital property of the taxpayer, the adjusted cost base, of the substantive gift to the taxpayer immediately before the disposition to the recipient, that the fair market value otherwise determined of the property that is the subject of the gift or monetary contribution is of the proceeds of disposition of the substantive gift;
(b) if the substantive gift is capital property of the taxpayer, for the purpose of the definitions “proceeds of disposition” of property in subsection 13(21) and section 54, the sale price of the substantive gift is to be reduced by the amount by which the fair market value of the property that is the subject of the gift (determined without reference to this section) exceeds the fair market value determined under paragraph (a); and
(c) if the substantive gift is eligible capital property of the taxpayer, the amount determined under paragraph (a) in the description of E in the definition “cumulative eligible capital” in subsection 14(5) in respect of the substantive gift is to be reduced by the amount by which the fair market value of the property that is the subject of the gift (determined without reference to this section) exceeds the fair market value determined under paragraph (a).
Marginal note:Inter-charity gifts
(40) Subsection (30) does not apply in respect of a gift received by a qualified donee from a registered charity.
Marginal note:Information not provided
(41) Notwithstanding subsection (31), the eligible amount of a gift or monetary contribution made by a taxpayer is nil if the taxpayer does not — before a receipt referred to in subsection 110.1(2), 118.1(2) or 127(3), as the case may be, is issued in respect of the gift or monetary contribution — inform the qualified donee or the recipient, as the case may be, of any circumstances in respect of which subsection (31), (35), (36), (38) or (39) requires that the eligible amount of the gift or monetary contribution be less than the fair market value, determined without reference to subsections (35), 110.1(3) and 118.1(6), of the property that is the subject of the gift or monetary contribution.
(31) The portion of subsection 248(35) of the Act before paragraph (a), as enacted by subsection (30), is replaced by the following:
Marginal note:Deemed fair market value
(35) For the purposes of subsection (31), paragraph 69(1)(b) and subsections 110.1(2.1) and (3) and 118.1(5.4), (6) and (13.2), the fair market value of a property that is the subject of a gift made by a taxpayer to a qualified donee is deemed to be the lesser of the fair market value of the property otherwise determined and the cost or, in the case of capital property, the adjusted cost base or, in the case of a life insurance policy in respect of which the taxpayer is a policyholder, the adjusted cost basis (as defined in subsection 148(9)), of the property to the taxpayer immediately before the gift is made if
(32) Subsection (1) applies in determining whether a person is, for the 2001 and subsequent taxation years, a common-law partner of a taxpayer, except that subsection does not apply to so determine whether a person is a common-law partner of a taxpayer for a taxation year to which an election, made under section 144 of the Modernization of Benefits and Obligations Act, applied before February 27, 2004. However, on and after February 27, 2004, no such election may be made to affect a current or subsequent taxation year.
(33) Subsections (2), (5) and (10) apply to taxation years that begin after 2006.
(34) Subsection (3) applies
(a) to arrangements made after December 20, 2002; and
(b) to an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement jointly so elect in writing and file the election with the Minister of National Revenue within 90 days after the day on which this Act receives royal assent, except that the reference to “subsection 260(5.1)” in clause (b)(ii)(B) of the definition “dividend rental arrangement” in subsection 248(1) of the Act, as enacted by subsection (3), is to be, in the application of that definition to any of those arrangements made before 2002, read as a reference to “subsection 260(5)”.
(35) Subsection (4) applies to taxation years that end after October 31, 2011.
(36) Subsection (6) is deemed to have come into force on July 17, 2005 and, if a taxpayer files an election referred to in paragraph (b.1) of the definition “amount” in subsection 248(1) of the Act, as enacted by subsection (6), on or before the taxpayer’s filing-due date for the taxation year in which this Act receives royal assent, the election is deemed to have been filed on time.
(37) Subsection (7) applies to taxation years that begin after 2012.
(38) Subsection (8) applies to taxation years to which subsections 258(1) to (10) of this Act apply.
(39) Subsections (9) and (12) apply to redemptions, acquisitions and cancellations that occur after December 23, 1998.
(40) Subsection (11) applies to transfers that occur after February 27, 2004.
(41) Subsection (13) applies to arrangements made after 2001 and before December 21, 2002, other than an arrangement to which paragraph (34)(b) applies.
(42) Subsection (14) is deemed to have come into force on November 1, 2011.
(43) Subsection (15) applies to property acquired after December 20, 2002.
(44) Subsection (16) applies in respect of dispositions and terminations that occur after December 20, 2002.
(45) Subsection (17) applies to shares issued after April 14, 2005.
(46) Subsection (18) applies in determining after March 4, 2010 whether a property is taxable Canadian property of a taxpayer.
(47) The definition “qualifying trust annuity” in subsection 248(1) of the Act, as enacted by subsection (20), is deemed to have come into force on January 1, 1989.
(48) The definition “relevant factor” in subsection 248(1) of the Act, as enacted by subsection (20), applies to the 2003 and subsequent taxation years.
(49) The definition “specified proportion” in subsection 248(1) of the Act, as enacted by subsection (20), applies after December 20, 2002.
(50) Subsections (23) and (25) and subsection 248(17.2) of the Act, as enacted by subsection (26), apply in respect of input tax credits that become eligible to be claimed in taxation years that begin after December 20, 2002.
(51) Subsection (24) and subsections 248(17.1) and (17.3) of the Act, as enacted by subsection (26), apply in respect of input tax refunds and rebates that become eligible to be claimed in taxation years that begin after February 27, 2004, except that, before April 1, 2011, the reference to “the Tax Administration Act, R.S.Q., c. A-6.002” in subsection 248(17.3) of the Act, as enacted by subsection (26), is to be read as a reference to “An Act respecting the Ministère du Revenu, R.S.Q., c. M-31”.
(52) Subsection (27) is deemed to have come into force on February 28, 2004.
(53) Subsection (29) applies to units issued after December 20, 2002.
(54) Subsection (30) applies in respect of gifts and monetary contributions made after December 20, 2002, except that
(a) subsection 248(32) of the Act, as enacted by subsection (30), is to be read without reference to
(i) its paragraph (b) in respect of gifts and monetary contributions made before February 19, 2003, and
(ii) its subparagraph (a)(iii) in respect of gifts and monetary contributions made before 6:00 p.m. (Eastern Standard Time) on December 5, 2003;
(b) subsection 248(34) of the Act, as enacted by subsection (30), does not apply in respect of gifts and monetary contributions made before February 19, 2003;
(c) subsections 248(35), (37) and (38) of the Act, as enacted by subsection (30), apply only in respect of gifts made on or after 6:00 p.m. (Eastern Standard Time) on December 5, 2003 but
(i) in respect of gifts made after that time but before March 18, 2007, paragraph 248(37)(d) of the Act, as enacted by subsection (30), is to be read as follows:
(d) of property to which paragraph 38(a.1) or (a.2) would apply, if those paragraphs were read without reference to “other than a private foundation”;
(ii) in respect of gifts made after that time but before July 18, 2005, subsection 248(38) of the Act, as enacted by subsection (30), is to be read as follows:
(38) If it can reasonably be concluded that one of the reasons for a series of transactions, that includes a disposition or acquisition of a property of a taxpayer that is the subject of a gift by the taxpayer, is to increase the amount that would be deemed by subsection (35) to be the fair market value of the property, the cost of the property for the purpose of that subsection is deemed to be the lowest cost to the taxpayer to acquire that property or an identical property at any time.
(d) subsection 248(36) of the Act, as enacted by subsection (30), does not apply in respect of gifts or monetary contributions made before July 18, 2005;
(e) subsection 248(39) of the Act, as enacted by subsection (30), does not apply in respect of gifts or monetary contributions made before February 27, 2004;
(f) subsection 248(40) of the Act, as enacted by subsection (30), does not apply in respect of gifts made before November 9, 2006; and
(g) subsection 248(41) of the Act, as enacted by subsection (30), does not apply in respect of gifts and monetary contributions made before 2006.
(55) Subsection (31) is deemed to have come into force on October 24, 2012.
359. (1) Subsection 249(1) of the Act is replaced by the following:
Definition of “taxation year”
249. (1) In this Act, except as expressly otherwise provided, a “taxation year” is
(a) in the case of a corporation or Canadian resident partnership, a fiscal period;
(b) in the case of an individual (other than a testamentary trust), a calendar year; and
(c) in the case of a testamentary trust, the period for which the accounts of the trust are made up for purposes of assessment under this Act.
Marginal note:References to calendar year
(1.1) When a taxation year is referred to by reference to a calendar year, the reference is to the taxation year or taxation years that coincide with, or that end in, that calendar year.
(2) Subsection 249(3) of the Act is replaced by the following:
Marginal note:Fiscal period exceeding 365 days
(3) If a fiscal period of a corporation exceeds 365 days and for that reason the corporation does not have a taxation year that ends in a particular calendar year, for the purposes of this Act,
(a) the corporation’s first taxation year that would otherwise end in the immediately following calendar year is deemed to end on the last day of the particular calendar year and its next taxation year is deemed to commence on the first day of the immediately following calendar year; and
(b) the corporation’s first fiscal period that would otherwise end in the immediately following calendar year is deemed to end on the last day of the particular calendar year and its next fiscal period is deemed to commence on the first day of the immediately following calendar year.
(3) Section 249 of the Act is amended by adding the following after subsection (4):
Marginal note:Testamentary trusts
(5) The period for which the accounts of a testamentary trust are made up for the purposes of an assessment under this Act may not exceed 12 months, and no change in the time when such a period ends may be made for the purposes of this Act without the concurrence of the Minister.
Marginal note:Loss of testamentary trust status
(6) If at a particular time after December 20, 2002 a transaction or event, described in any of paragraphs (b) to (d) of the definition “testamentary trust” in subsection 108(1), occurs and as a result of that occurrence a trust or estate is not a testamentary trust, the following rules apply:
(a) the fiscal period for a business or property of the trust or estate that would, if this Act were read without reference to this subsection and those paragraphs, have included the particular time is deemed to have ended immediately before the particular time;
(b) the taxation year of the trust or estate that would, if this Act were read without reference to this subsection and those paragraphs, have included the particular time is deemed to have ended immediately before the particular time;
(c) a new taxation year of the trust or estate is deemed to have started at the particular time; and
(d) in determining the fiscal period for a business or property of the trust or estate after the particular time, the trust or estate is deemed not to have established a fiscal period before that time.
(4) Subsection (1) and subsection 249(5) of the Act, as enacted by subsection (3), are deemed to have come into force on December 21, 2002, except that paragraph 249(1)(a) of the Act, as enacted by subsection (1), is to be read before October 31, 2006 without reference to “or Canadian resident partnership”.
(5) Subsection (2) applies to the 2012 and subsequent taxation years.
(6) Subsection 249(6) of the Act, as enacted by subsection (3), is deemed to have come into force on July 19, 2005 and, if a trust or estate so elects in writing by filing the election with the Minister of National Revenue on or before its filing-due date for its taxation year in which this Act receives royal assent, it also applies to that trust or estate, as the case may be, after December 20, 2002.
(7) Subsection (8) applies to a trust or estate (referred to in this subsection and subsection (8) as the “trust”) for a particular taxation year of the trust that ends in the period that begins on December 21, 2002 and ends on October 24, 2012 (in this subsection referred to as the “relevant period”), if
(a) the particular taxation year would have — if paragraph (d) of the definition “testamentary trust”, as contained in section 100 of Bill C-10 of the second session of the 39th Parliament as passed by the House of Commons on October 29, 2007, had applied to the particular taxation year — been deemed by paragraph 249(6)(b) of the Act, as enacted by subsection (3), to have ended on a day (in subsection (8) referred to as the “deemed year-end day”) in the relevant period; and
(b) the trust filed, before October 24, 2012, a return of income for the particular taxation year.
(8) If this subsection applies to a trust for a particular taxation year, for purposes of the Act
(a) the particular taxation year is deemed to have ended on the deemed year-end day and not at any other time;
(b) the trust is deemed to be an inter vivos trust for the purpose of determining each of the trust’s taxation years that ends
(i) after the particular taxation year and in the relevant period, and
(ii) unless the trust elects under paragraph (c), after October 24, 2012; and
(c) if the trust so elects — by filing an election in writing with the Minister of National Revenue on or before its filing-due date for its taxation year in which this Act receives royal assent — for each of the trust’s taxation years that ends after October 24, 2012, the period for which the accounts of the trust are made up for purposes of assessment under the Act is deemed to be the period for which the accounts of the trust were made up for purposes of the Act for the trust’s last taxation year that ended before the particular taxation year.
360. (1) The portion of paragraph 249.1(1)(b) of the Act after subparagraph (iii) is replaced by the following:
after the end of the calendar year in which the period began unless, in the case of a business, the business is not carried on in Canada,
(2) Paragraph 249.1(9)(b) of the French version of the Act is replaced by the following:
b) la date donnée est antérieure au 22 mars 2012;
(3) Subsection (1) applies to fiscal periods that begin after the day on which this Act receives royal assent.
(4) Subsection (2) applies to fiscal periods that end in or after 2011.
361. (1) Paragraph 251(1)(c) of the Act is replaced by the following:
(c) in any other case, it is a question of fact whether persons not related to each other are, at a particular time, dealing with each other at arm’s length.
(2) Subsection (1) is deemed to have come into force on December 24, 1998.
362. (1) Subsection 252(3) of the Act is amended by replacing “subparagraph 210(c)(ii) and subsections 248(22) and (23)” with “and subsections 210(1) and 248(22) and (23)”.
(2) Subsection (1) applies to the 1996 and subsequent taxation years.
363. (1) Section 253.1 of the Act is replaced by the following:
Marginal note:Investments in limited partnerships
253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b) and 146.1(2.1)(c), subsection 146.2(6), paragraphs 146.4(5)(b) and 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.
(2) Subsection (1) is deemed to have come into force on January 1, 1998, except that
(a) for taxation years that end after December 16, 1999 and before 2003, section 253.1 of the Act, as enacted by subsection (1), is to be read as follows:
253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b), 146.1(2.1)(c) and 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation is a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member is deemed
(a) to undertake an investing of its funds because of its acquisition and holding of its interest as a member of the partnership; and
(b) not to carry on any business or other activity of the partnership.
(b) for taxation years that end after 2002 and before 2008, section 253.1 of the Act, as enacted by subsection (1), is to be read without reference to “146.4(5)(b)”; and
(c) for taxation years that end after 2002 and before 2009, section 253.1 of the Act, as enacted by subsection (1), is to be read without reference to “subsection 146.2(6), paragraphs”.
364. (1) Subparagraph 256(6)(b)(ii) of the French version of the Act is replaced by the following:
(ii) soit à des actions du capital-actions de la société contrôlée qui appartenaient à l’entité dominante au moment donné et qui, selon la convention ou l’arrangement, devaient être rachetées par la société contrôlée ou achetées par la personne ou le groupe de personnes visé au sous-alinéa a)(ii).
(2) Subparagraph 256(7)(a)(i) of the Act is amended by striking out “or” at the end of clause (C) and by adding the following after clause (D):
(E) a corporation on a distribution (within the meaning assigned by subsection 55(1)) by a specified corporation (within the meaning assigned by that subsection) if a dividend, to which subsection 55(2) does not apply because of paragraph 55(3)(b), is received in the course of the reorganization in which the distribution occurs,
(3) Paragraph 256(7)(a) of the Act is amended by adding “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):
(iii) the acquisition at any time of shares of the particular corporation if
(A) the acquisition of those shares would otherwise result in the acquisition of control of the particular corporation at that time by a related group of persons, and
(B) each member of each group of persons that controls the particular corporation at that time was related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the particular corporation immediately before that time;
(4) Subsection 256(7) of the Act is amended by adding the following after paragraph (c):
(c.1) subject to paragraph (a), if, at any particular time, as part of a series of transactions or events, two or more persons acquire shares of a corporation (in this paragraph referred to as the “acquiring corporation”) in exchange for or upon a redemption or surrender of interests in, or as a consequence of a distribution from, a SIFT trust (determined without reference to subsection 122.1(2)), SIFT partnership (determined without reference to subsection 197(8)) or real estate investment trust (as defined in subsection 122.1(1)), control of the acquiring corporation and of each corporation controlled by it immediately before the particular time is deemed to have been acquired by a person or group of persons at the particular time unless
(i) in respect of each of the corporations, a person (in this subparagraph referred to as a “relevant person”) affiliated (within the meaning assigned by section 251.1 read without reference to the definition “controlled” in subsection 251.1(3)) with the SIFT trust, SIFT partnership or real estate investment trust owned shares of the particular corporation having a total fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the particular corporation at all times during the period that
(A) begins on the latest of July 14, 2008, the date the particular corporation came into existence and the time of the last acquisition of control, if any, of the particular corporation by a relevant person, and
(B) ends immediately before the particular time,
(ii) if all the securities (in this subparagraph as defined in subsection 122.1(1)) of the acquiring corporation that were acquired as part of the series of transactions or events at or before the particular time were acquired by one person, the person would
(A) not at the particular time control the acquiring corporation, and
(B) have at the particular time acquired securities of the acquiring corporation having a fair market value of not more than 50% of the fair market value of all the issued and outstanding shares of the acquiring corporation, or
(iii) this paragraph previously applied to deem an acquisition of control of the acquiring corporation upon an acquisition of shares that was part of the same series of transactions or events;
(5) Paragraph 256(7)(e) of the Act is replaced by the following:
(e) control of a particular corporation and of each corporation controlled by it immediately before a particular time is deemed not to have been acquired at the particular time by a corporation (in this paragraph referred to as the “acquiring corporation”) if at the particular time, the acquiring corporation acquires shares of the particular corporation’s capital stock for consideration that consists solely of shares of the acquiring corporation’s capital stock, and if
(i) immediately after the particular time
(A) the acquiring corporation owns all the shares of each class of the particular corporation’s capital stock (determined without reference to shares of a specified class, within the meaning assigned by paragraph 88(1)(c.8)),
(B) the acquiring corporation is not controlled by any person or group of persons, and
(C) the fair market value of the shares of the particular corporation’s capital stock that are owned by the acquiring corporation is not less than 95% of the fair market value of all of the assets of the acquiring corporation, or
(ii) any of clauses (i)(A) to (C) do not apply and the acquisition occurs as part of a plan of arrangement that, on completion, results in
(A) the acquiring corporation (or a new corporation that is formed on an amalgamation of the acquiring corporation and a subsidiary wholly-owned corporation of the acquiring corporation) owning all the shares of each class of the particular corporation’s capital stock (determined without reference to shares of a specified class, within the meaning assigned by paragraph 88(1)(c.8)),
(B) the acquiring corporation (or the new corporation) not being controlled by any person or group of persons, and
(C) the fair market value of the shares of the particular corporation’s capital stock that are owned by the acquiring corporation (or the new corporation) being not less than 95% of the fair market value of all of the assets of the acquiring corporation (or the new corporation);
(6) Subsection 256(7) of the Act is amended by adding “and” at the end of paragraph (f) and by adding the following after that paragraph:
(g) a corporation (in this paragraph referred to as the “acquiring corporation”) that acquires shares of another corporation on a distribution that is a SIFT trust wind-up event of a SIFT wind-up entity is deemed not to acquire control of the other corporation because of that acquisition if the following conditions are met:
(i) the SIFT wind-up entity is a trust whose only beneficiary immediately before the distribution is the acquiring corporation,
(ii) the SIFT wind-up entity controlled the other corporation immediately before the distribution,
(iii) as part of a series of transactions or events under which the acquiring corporation became the only beneficiary under the trust, two or more persons acquired shares in the acquiring corporation in exchange for their interests as beneficiaries under the trust, and
(iv) if all the shares described in subparagraph (iii) had been acquired by one person, the person would
(A) control the acquiring corporation, and
(B) have acquired shares of the acquiring corporation having a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the acquiring corporation.
(7) Subsections (2) and (3) apply to acquisitions of shares that occur after 2000.
(8) Subsections (4) and (6) apply to transactions undertaken after 4:00 p.m. Eastern Standard Time March 4, 2010, other than transactions the parties to which are obligated to complete pursuant to the terms of an agreement in writing between the parties entered into before that time. However, the parties to a transaction shall be considered not to be obligated to complete the transaction if one or more of those parties may be excused from completing the transaction as a result of amendments to the Act.
(9) Subsections (4) and (6) also apply to transactions completed or agreed to in writing in the period that begins on July 14, 2008 and ends at 4:00 pm Eastern Standard Time March 4, 2010 if the parties to the transactions jointly elect in writing to the Minister of National Revenue on or before
(a) if a party to the transactions is a partnership, the day that is the later of
(i) the day that is the latest on which a return is required by section 229 of the Income Tax Regulations to be filed in respect of the partnership’s fiscal period that includes the day on which this Act receives royal assent, and
(ii) the day that is the latest filing-due date of any party for its taxation year that includes the day on which this Act receives royal assent, and
(b) if none of the parties to the transaction is a partnership, the day that is the latest filing-due date of any party for its taxation year that includes the day on which this Act receives royal assent.
For the purposes of this subsection, the parties shall be considered to be the relevant SIFT trust, SIFT partnership, real estate investment trust and acquiring corporation described in paragraph 256(7)(c.1) or (g) of the Act, as the case may be.
(10) Subsection (5) applies in respect of shares acquired after 1999.
365. (1) The definition “qualified security” in subsection 260(1) of the Act is amended by striking out “or” at the end of paragraph (c), by adding “or” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) a qualified trust unit;
(2) Paragraph (a) of the definition “securities lending arrangement” in subsection 260(1) of the Act is replaced by the following:
(a) a person (in this section referred to as the “lender”) transfers or lends at any particular time a qualified security to another person (in this section referred to as the “borrower”),
(3) Paragraph (c) of the definition “securities lending arrangement” in subsection 260(1) of the Act is replaced by the following:
(c) the borrower is obligated to pay to the lender amounts equal to and as compensation for all amounts, if any, paid on the security that would have been received by the borrower if the borrower had held the security throughout the period that begins after the particular time and that ends at the time an identical security is transferred or returned to the lender,
(4) The definition “securities lending arrangement” in subsection 260(1) of the Act is amended by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) if the lender and the borrower do not deal with each other at arm’s length, it is intended that neither the arrangement nor any series of securities lending arrangements, loans or other transactions of which the arrangement is a part be in effect for more than 270 days,
(5) Subsection 260(1) of the Act is amended by adding the following in alphabetical order:
“dealer compensation payment”
« paiement compensatoire (courtier) »
“dealer compensation payment” means an amount received by a taxpayer as compensation, for an underlying payment,
(a) from a registered securities dealer resident in Canada who paid the amount in the ordinary course of a business of trading in securities, or
(b) in the ordinary course of the taxpayer’s business of trading in securities, where the taxpayer is a registered securities dealer resident in Canada;
“qualified trust unit”
« unité de fiducie déterminée »
“qualified trust unit” means an interest, as a beneficiary under a trust, that is listed on a stock exchange;
“security distribution”
« paiement de titre »
“security distribution” means an amount that is
(a) an underlying payment, or
(b) an SLA compensation payment, or a dealer compensation payment, that is deemed by subsection (5.1) to be an amount received as an amount described by any of paragraphs (5.1)(a) to (c);
“SLA compensation payment”
« paiement compensatoire (MPVM) »
“SLA compensation payment” means an amount paid pursuant to a securities lending arrangement as compensation for an underlying payment;
“underlying payment”
« paiement sous-jacent »
“underlying payment” means an amount paid on a qualified security by the issuer of the security.
(6) The portion of subsection 260(1.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Eligible dividend
(1.1) This subsection applies to an amount if the amount is received by a person who is resident in Canada, the amount is deemed under subsection (5.1) to be a taxable dividend, and the amount is either
(7) Subsections 260(5) and (6) of the Act are replaced by the following:
Marginal note:Where subsection (5.1) applies
(5) Subsection (5.1) applies to a taxpayer for a taxation year in respect of a particular amount (other than an amount received as proceeds of disposition or an amount received by a person under an arrangement where it may reasonably be considered that one of the main reasons for the person entering into the arrangement was to enable the person to receive an SLA compensation payment or a dealer compensation payment that would be deductible in computing the taxable income, or not included in computing the income, for any taxation year of the person) received by the taxpayer in the taxation year
(a) as an SLA compensation payment,
(i) from a person resident in Canada, or
(ii) from a non-resident person who paid the particular amount in the course of carrying on business in Canada through a permanent establishment as defined by regulation; or
(b) as a dealer compensation payment.
Marginal note:Deemed character of compensation payments
(5.1) If this subsection applies in respect of a particular amount received by a taxpayer in a taxation year as an SLA compensation payment or as a dealer compensation payment, the particular amount is deemed, to the extent of the underlying payment to which the amount relates, to have been received by the taxpayer in the taxation year as,
(a) where the underlying payment is a taxable dividend paid on a share of the capital stock of a public corporation (other than an underlying payment to which paragraph (b) applies), a taxable dividend on the share and, if subsection (1.1) applies to the particular amount, an eligible dividend on the share;
(b) where the underlying payment is paid by a trust on a qualified trust unit issued by the trust,
(i) an amount of the trust’s income that was, to the extent that subsection 104(13) applied to the underlying payment,
(A) paid by the trust to the taxpayer as a beneficiary under the trust, and
(B) designated by the trust in respect of the taxpayer to the extent of a valid designation, if any, by the trust under this Act in respect of the recipient of the underlying payment, and
(ii) to the extent that the underlying payment is a distribution of a property from the trust, a distribution of that property from the trust; or
(c) in any other case, interest.
Marginal note:Deductibility
(6) In computing the income of a taxpayer under Part I from a business or property for a taxation year, there may be deducted a particular amount, paid by the taxpayer in the year as an SLA compensation payment or as a dealer compensation payment, that is equal to
(a) if the taxpayer is a registered securities dealer and the particular amount is deemed by subsection (5.1) to have been received as a taxable dividend, no more than 2/3 of the particular amount; or
(b) if the particular amount is in respect of an amount other than an amount that is, or is deemed by subsection (5.1) to have been, received as a taxable dividend,
(i) where the taxpayer disposes of the borrowed security and includes the gain or loss, if any, from the disposition in computing its income from a business, the particular amount, or
(ii) in any other case, the lesser of
(A) the particular amount, and
(B) the amount, if any, in respect of the security distribution to which the SLA compensation payment or dealer compensation payment relates that is included in computing the income, and not deducted in computing the taxable income, for any taxation year of the taxpayer or of any person to whom the taxpayer is related.
(8) Paragraph 260(6.1)(a) of the Act is replaced by the following:
(a) the total of all amounts each of which is an amount that the corporation becomes obligated in the taxation year to pay to another person under an arrangement described in paragraph (b) of the definition “dividend rental arrangement” in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and
(9) Subsections 260(7) and (8) of the Act are replaced by the following:
Marginal note:Dividend refund
(7) For the purpose of section 129, if a corporation pays an amount for which no deduction in computing the corporation’s income may be claimed under subsection (6.1) and subsection (5.1) deems the amount to have been received by another person as a taxable dividend,
(a) the corporation is deemed to have paid the amount as a taxable dividend, where the corporation is not a registered securities dealer; and
(b) the corporation is deemed to have paid 1/3 of the amount as a taxable dividend, where the corporation is a registered securities dealer.
Marginal note:Non-resident withholding tax
(8) For the purpose of Part XIII, any amount paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender
(a) as an SLA compensation payment is, subject to paragraph (b) or (c), deemed to be a payment of interest made by the borrower to the lender;
(b) as an SLA compensation payment in respect of a security that is a qualified trust unit, is deemed, to the extent of the amount of the underlying payment to which the SLA compensation payment relates, to be an amount paid by the trust and having the same character and composition as the underlying payment;
(c) as an SLA compensation payment, if the security is not a qualified trust unit and throughout the term of the securities lending arrangement, the borrower has provided the lender under the arrangement with money in an amount of, or securities described in paragraph (c) of the definition “qualified security” in subsection (1) that have a fair market value of, not less than 95% of the fair market value of the security and the borrower is entitled to enjoy, directly or indirectly, the benefits of all or substantially all income derived from, and opportunity for gain with respect of, the money or securities,
(i) is, to the extent of the amount of the interest or dividend paid in respect of the security, deemed to be a payment made by the borrower to the lender of interest or a dividend, as the case may be, payable on the security, and
(ii) is, to the extent of the amount of the interest, if any, paid in respect of the security, deemed to have been payable on a security described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3) if the security is described in paragraph (c) of the definition “qualified security” in subsection (1); and
(d) as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security is deemed to be a payment of interest made by the borrower to the lender.
Marginal note:Deemed fee for borrowed security
(8.1) For the purpose of paragraph (8)(d), if under a securities lending arrangement the borrower has at any time provided the lender with money, either as collateral or consideration for the security, and the borrower does not, under the arrangement, pay or credit a reasonable amount to the lender as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security, the borrower is deemed to have, at the time that an identical security is or can reasonably be expected to be transferred or returned to the lender, paid to the lender under the arrangement an amount as a fee for the use of the security equal to the amount, if any, by which
(a) the interest on the money computed at the prescribed rates in effect during the term of the arrangement
exceeds
(b) the amount, if any, by which any amount that the lender pays or credits to the borrower under the arrangement exceeds the amount of the money.
Marginal note:Effect for tax treaties
(8.2) In applying subsection (8), any amount, paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender, that is deemed by paragraph (8)(a), (b) or (d) to be a payment of interest, is deemed for the purposes of any tax treaty not to be payable on or in respect of the security.
(10) Subsection 260(10) of the Act is renumbered as subsection 260(9.1).
(11) Section 260 of the Act is amended by adding the following in numerical order:
Marginal note:Partnerships
(10) For the purpose of this section,
(a) a person includes a partnership; and
(b) a partnership is deemed to be a registered securities dealer if each member of the partnership is a registered securities dealer.
Marginal note:Corporate members of partnerships
(11) A corporation that is, in a taxation year, a member of a partnership is deemed
(a) for the purpose of applying subsection (5) in respect of the taxation year,
(i) to receive its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and
(ii) in respect of the receipt of its specified proportion of that amount, to be the same person as the partnership;
(b) for the purpose of applying paragraph (6.1)(a) in respect of the taxation year, to become obligated to pay its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of the amount the partnership becomes, in that fiscal period, obligated to pay to another person under the arrangement described in that paragraph; and
(c) for the purpose of applying section 129 in respect of the taxation year, to have paid
(i) if the partnership is not a registered securities dealer, the corporation’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation), and
(ii) if the partnership is a registered securities dealer, 1/3 of the corporation’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation).
Marginal note:Individual members of partnerships
(12) An individual that is, in a taxation year, a member of a partnership is deemed
(a) for the purpose of applying subsection (5) in respect of the taxation year,
(i) to receive the individual’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and
(ii) in respect of the receipt of the individual’s specified proportion of that amount, to be the same person as the partnership; and
(b) for the purpose of subsection 82(1), to have paid the individual’s specified proportion, for each fiscal period of the partnership that ends in the year, of each amount paid by the partnership in that fiscal period that is deemed by subsection (5.1) to have been received by another person as a taxable dividend.
(12) Subsections (1), (3), (5), (7) and (9) apply to arrangements made after 2001, except that,
(a) the definition “qualified trust unit” in subsection 260(1) of the Act, as enacted by subsection (5), is to be read,
(i) in its application to arrangements made before October 24, 2012, as follows:
- “qualified trust unit”
“qualified trust unit” means a unit of a mutual fund trust that is listed on a stock exchange;
and
(ii) before December 14, 2007 as though the reference to “stock exchange” in the read-as text in subparagraph (i) were a reference to “prescribed stock exchange”;
(b) if the parties to an arrangement jointly so elect in writing and file the election with the Minister of National Revenue within 90 days after the day on which this Act receives royal assent, subsection 260(5.1) of the Act, as enacted by subsection (7), is to be read, in its application to SLA compensation payments or dealer compensation payments received under the arrangement before February 28, 2004, without reference to paragraph 260(5.1)(b) or (c), or to both of those paragraphs, as specified by the parties in the election;
(c) for amounts received as compensation for dividends paid before 2006, paragraph 260(5.1)(a) of the Act, as enacted by subsection (7), is to be read without reference to “and, if subsection (1.1) applies to the amount, an eligible dividend on the share from the corporation”; and
(d) before 2008, subparagraph 260(8)(c)(ii) of the Act, as enacted by subsection (9), is to be read as follows:
(ii) is, to the extent of the amount of the interest, if any, paid in respect of the security, deemed
(A) for the purpose of subparagraph 212(1)(b)(vii) to have been payable by the issuer of the security, and
(B) to have been payable on a security that is a security described in subparagraph 212(1)(b)(ii) where the security is a security described in paragraph (c) of the definition “qualified security” in subsection (1); and
(13) Subsections (2) and (4) apply to arrangements made after 2002.
(14) Subsection (6) applies to amounts received as compensation for dividends paid after 2005.
(15) Subsection (8) applies to
(a) arrangements made after December 20, 2002;
(b) an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 358(34)(b), except that, in its application to an arrangement made before 2002, the reference to “subsection (5.1)” in paragraph 260(6.1)(a) of the Act, as enacted by subsection (8), is to be read as a reference to “subsection (5)”; and
(c) an arrangement, other than an arrangement to which paragraph (b) applies, made after 2001 and before December 21, 2002, except that, in its application before December 21, 2002, paragraph 260(6.1)(a) of the Act, as enacted by subsection (8), is to be read as follows:
(a) the amount that the corporation is obligated to pay to another person under an arrangement described in paragraphs (c) and (d) of the definition “dividend rental arrangement” in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and
(16) Subsection (10) is deemed to have come into force on January 1, 2008.
(17) Subsection (11) applies to
(a) arrangements made after December 20, 2002; and
(b) an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 358(34)(b), except that, in its application to an arrangement made before 2002, the reference to “subsection (5.1)” in paragraph 260(12)(b) of the Act, as enacted by subsection (11), is to be read as a reference to “subsection (5)”.
366. (1) The Act is amended by adding, after section 262, the schedule set out in the schedule to this Act.
(2) Subject to subsection (3), subsection (1) is deemed to have come into force on December 20, 2002.
(3) Subsection (1) is deemed to have come into force to enact the schedule set out in that subsection so as to, as of the dates set out below, list each of the following corporations in the schedule:
(a) 2419726 Canada Inc., January 1, 1998, except that, in its application
(i) after May 1999 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to “CitiFinancial Canada, Inc./CitiFinancière Canada, Inc.”, and
(ii) after 1997 and before June 1999, the reference in the schedule to that corporation is to be read as a reference to “Commercial Credit Corporation CCC Limited/Corporation De Credit Commerciale CCC Limitee”;
(b) Ally Credit Canada Limited/Ally Crédit Canada Limitée, January 1, 1991, except that, in its application after 1990 and before August 23, 2010, the reference in the schedule to that corporation is to be read as a reference to “General Motors Acceptance Corporation of Canada Limited”;
(c) AmeriCredit Financial Services of Canada Ltd., June 30, 2001;
(d) Canaccord Capital Credit Corporation/Corporation de crédit Canaccord capital, September 25, 2000;
(e) Canaccord Financial Holdings Inc./Corporation financière Canaccord Inc., January 1, 2004;
(f) Citibank Canada Investment Funds Limited, December 31, 2001;
(g) Citicapital Commercial Corporation/Citicapital Corporation Commerciale, January 1, 2000, except that, in its application after 1999 and before July 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Commercial Corporation of Canada Ltd./Les Associés, Corporation Commerciale du Canada Ltee”;
(h) Citi Cards Canada Inc./Cartes Citi Canada Inc., September 25, 2003;
(i) Citi Commerce Solutions of Canada Ltd., January 1, 2003;
(j) CitiFinancial Canada East Company/CitiFinancière, corporation du Canada Est, December 23, 1997, except that, in its application
(i) after April 2001 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to “CitiFinancial Services of Canada East Company/CitiFinancière, compagnie de services du Canada Est”,
(ii) after September 26, 1999 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Financial Services of Canada East Company/Les Associés, Compagnie de Services Financiers du Canada Est”,
(iii) after February 12, 1998 and before September 27, 1999, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Services Canada East Company/Compagnie Services Financiers Avco Canada Est”,
(iv) after December 29, 1997 and before February 13, 1998, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Services Canada East Company/Services Financiers Avco Canada Est Compagnie”, and
(v) after December 22, 1997 and before December 30, 1997, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Services Canada East Company”;
(k) CitiFinancial Canada, Inc./CitiFinancière Canada, Inc., March 2, 1998, except that, in its application
(i) after April 2001 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to “CitiFinancial Services of Canada, Ltd./CitiFinancière, services du Canada, Ltée”, and
(ii) after March 1, 1998 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Financial Services of Canada Ltd./Les Associés, Services Financières du Canada Ltée”;
(l) CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires, March 2, 1998, except that, in its application after March 1, 1998 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Mortgage Corporation/Les Associés, Corporation de Prêts Hypothécaires”;
(m) CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l’Est, December 23, 1997, except that, in its application
(i) after November 2, 1999 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Mortgage East Corporation/Les Associés, Corporation de Prêts Hypothécaires de l’Est”,
(ii) after September 27, 1999 and before November 3, 1999, the reference in the schedule to that corporation is to be read as a reference to “Associates Mortgage East Corporation/Les Associés, Corporation de Financiers du Prêts Hypothécaires de l’Est”,
(iii) after February 12, 1998 and before September 28, 1999, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Services Realty East Company/Compagnie Services Financiers Immobiliers Avco Est”,
(iv) after December 29, 1997 and before February 13, 1998, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Services Realty East Company/Services Financiers Immobiliers Avco Est Compagnie”, and
(v) after December 22, 1997 and before December 30, 1997, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Services Realty East Company”;
(n) Citigroup Finance Canada Inc., January 1, 1998, except that, in its application after 1997 and before June 11, 2003, the reference in the schedule to that corporation is to be read as a reference to “Associates Capital Corporation of Canada/Corporation de capital associés du Canada”;
(o) Ford Credit Canada Limited, December 23, 1997;
(p) GE Card Services Canada Inc./GE Services de Cartes du Canada Inc., August 2, 2000;
(q) GMAC Residential Funding of Canada, Limited, January 1, 2003;
(r) John Deere Credit Inc./Crédit John Deere Inc., January 1, 1999;
(s) PACCAR Financial Ltd./Compagnie Financière Paccar Ltée, January 1, 2003;
(t) Paradigm Fund Inc./Le Fonds Paradigm Inc., January 1, 2002;
(u) Prêts étudiants Atlantique Inc./Atlantic Student Loans Inc., January 1, 1998, except that, in its application after 1997 and before June 13, 2002, the reference in the schedule to that corporation is to be read as a reference to “Prêts étudiants Acadie Inc./Acadia Student Loans Inc.”;
(v) State Farm Finance Corporation of Canada/ Corporation de Crédit State Farm du Canada, January 1, 2002, except that, in its application after 2001 and before May 2002, the reference in the schedule to that corporation is to be read as a reference to “VNB Financial Services Inc./Services financiers VNB, Inc.”;
(w) Trans Canada Retail Services Company/Société de services de détails trans Canada, January 1, 1999, except that, in its application after 1998 and before January 15, 2002, the reference in the schedule to that corporation is to be read as a reference to “National Retail Credit Services Company/Société de services de crédit aux détaillants national”; and
(x) Wells Fargo Financial Canada Corporation, January 1, 1999, except that, in its application after 1998 and before September 7, 2001, the reference in the schedule to that corporation is to be read as a reference to “Norwest Financial Canada Company”.
(4) Ford Credit Canada Limited is deemed to have been, from July 1, 1989 to December 22, 1997, prescribed by a regulation made under paragraph 181(1)(g) of the Act.
(5) The schedule, as enacted by subsection (1), is amended by removing from the list, as of the dates set out below, the following corporations:
(a) GE Card Services Canada Inc./ GE Services Cartes du Canada Inc., January 1, 2003;
(b) 2419726 Canada Inc., March 31, 2002;
(c) CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires, March 31, 2002; and
(d) CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l’Est, April 1, 2002.
367. If a provision of this Part applies or comes into force before the day on which this Act receives royal assent, for the purpose of and to the extent necessary to take into account that provision, in applying subsection 152(4.2) of the Act to a taxation year that ends before that day, that subsection is to be read as follows:
(4.2) Notwithstanding subsections (4), (4.1) and (5), for the purpose of determining, at any time after the end of the normal reassessment period of a taxpayer in respect of a taxation year, an amount payable under this Part by the taxpayer for the taxation year, the Minister may, if the taxpayer makes an application for that determination,
(a) reassess tax, interest or penalties payable under this Part by the taxpayer in respect of that taxation year; and
(b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer’s liability under this Part for the taxation year.
2003, c. 28An Act to amend the Income Tax Act (natural resources)
368. (1) The portion of subsection 2(5) of An Act to Amend the Income Tax Act (Natural Resources) before paragraph (a) is replaced by the following:
(5) For each taxation year that ends after 2002 and begins before 2008, paragraph 18(1)(m) of the Act applies, notwithstanding paragraph 20(1)(v) of the Act, only to the percentage of each amount described by paragraph 18(1)(m) of the Act that is the total of:
(2) Subsection 2(7) of the Act is replaced by the following:
(7) Subsection (3) applies to taxation years that begin after 2007.
1988, c. 28Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act
369. (1) Subsections 216(1) and (2) of the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act are replaced by the following:
Marginal note:Imposition of corporate income tax and capital tax in offshore area
216. (1) There shall be imposed, levied and collected under this Part in respect of the taxable income earned by, and the taxable capital of, a corporation in a taxation year in the offshore area, in accordance with subsection (3), the taxes, interest, penalties and other sums that would be imposed, levied and collected under the Nova Scotia Income Tax Act in respect of that taxable income and that taxable capital if the offshore area were in the land portion of the Province.
Marginal note:Exception
(2) Despite subsection (1), if taxes are imposed under the Nova Scotia Income Tax Act in respect of the taxable income earned by, or the taxable capital of, a corporation in a taxation year in the Province and taxes would, in the absence of this subsection, be imposed under subsection (1) in respect of that taxable income or that taxable capital, no taxes shall be imposed under subsection (1) in respect of that taxable income or that taxable capital.
(2) Subsection 216(4) of the Act is replaced by the following:
Marginal note:Determination of taxable income earned in the offshore area
(4) For the purpose of this section, the taxable income of a corporation earned in a taxation year in the offshore area or in the Province shall be determined in accordance with Part IV of the Income Tax Regulations as though the offshore area were a province and the Income Tax Act were read without reference to the definition “province” in subsection 124(4) of that Act, and “taxable capital” means taxable capital employed in Canada determined in accordance with Part I.3 of that Act.
(3) Subsections (1) and (2) are deemed to have come into force on April 1, 1997.
R.S., c. F-8; 1995, c. 17, s. 45(1)Federal-Provincial Fiscal Arrangements Act
Marginal note:1990, c. 39, s. 56(1); 1999, c. 31, s. 237(F)
370. (1) Paragraph 12.2(1)(b) of the Federal-Provincial Fiscal Arrangements Act is replaced by the following:
(b) the Act of the legislature of the province imposing a tax on the income of corporations provides, in the opinion of the Minister, for a deduction in computing taxable income of a corporation for taxation years ending in the fiscal year of an amount that is not less than the amount deductible by the corporation for the year under paragraph 110(1)(k) of the Income Tax Act.
(2) Subsection (1) is deemed to have come into force on January 1, 2004.
1998, c. 19Income Tax Amendments Act, 1997
371. (1) The version of subparagraph 130(3)(a)(vii) of the Income Tax Act found in subsection 155(2) of the Income Tax Amendments Act, 1997, as amended by subsection 92(1) of the Income Tax Amendments Act, 1998, chapter 22 of the Statutes of Canada, 1999, which subsection 155(2) is in this section referred to as the “enacting subsection”, is amended by adding the following immediately after clause (B):
(B.1) paragraph (b) of that definition were read as follows:
(b) each beneficiary of a trust (except a beneficiary of a trust governed by a registered education savings plan who has not attained 19 years of age) is deemed to own that proportion of all such shares owned by the trust at that time that the fair market value at that time of the beneficial interest of the beneficiary in the trust is of the fair market value at that time of all beneficial interests in the trust,
(2) The version of subparagraph 130(3)(a)(vii) of the Income Tax Act found in the enacting subsection is amended by adding the following immediately after clause (C):
(C.1) paragraph (e) of that definition were read as follows:
(e) notwithstanding paragraph (b), where a beneficiary’s share of the income or capital of the trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, the beneficiary (except a beneficiary of a trust governed by a registered education savings plan who has not attained 19 years of age) is deemed to own each share of the capital stock of a corporation owned at that time by the trust;
(3) Clause 130(3)(a)(vii)(B.1) of the Income Tax Act, as enacted by subsection (1), is repealed.
(4) Clause 130(3)(a)(vii)(C.1) of the Income Tax Act, as enacted by subsection (2), is repealed.
(5) Subsections (1) and (2) are deemed to have come into force on June 18, 1998.
(6) Subsections (3) and (4) apply to taxation years that begin after October 31, 2011.
2001, c. 17Income Tax Amendments Act, 2000
372. (1) Subsection 59(2) of the Income Tax Amendments Act, 2000 is replaced by the following:
(2) Subsection (1) applies to taxation years that end after February 27, 2000, except that, for a taxation year of a debtor that includes either February 28, 2000 or October 17, 2000, or began after February 28, 2000 and ended before October 17, 2000, the reference to “½” in subsection 80.01(10) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act that applied to the debtor for the year in which the commercial debt obligation was deemed to have been settled.
(2) Subsection (1) is deemed to have come into force on June 14, 2001.
373. (1) Subsection 70(11) of the Act is replaced by the following:
(11) Subsections (4), (5) and (7) apply to taxation years that end after February 27, 2000, except that, for a taxation year of a taxpayer that includes February 28, 2000 or October 17, 2000, or began after February 28, 2000 and ended before October 17, 2000, the references to “twice” in subsection 93(1.2) of the Act, as enacted by subsection (4), in subsection 93(2) of the Act, as enacted by subsection (5), and in subsection 93(2.2) of the Act, as enacted by subsection (7), are to be read as references to “the fraction that is the reciprocal of the fraction in paragraph 38(a), as enacted by subsection 22(1) of the Income Tax Amendments Act, 2000, that applies to the taxpayer for the year, multiplied by”.
(2) Subsection (1) is deemed to have come into force on June 14, 2001.
374. (1) Subsection 80(27) of the Act is replaced by the following:
(27) Subsection (17) applies to distributions made on or after March 16, 2001, except that for a distribution made after 2001 and before 2009 by a particular trust of property (in this subsection referred to as “distributed property”), paragraph 107(4.1)(b) of the Act, as enacted by subsection (17), is to be read without reference to its subparagraph (ii), if
(a) subsection 75(2) of the Act was not applicable in respect of the distributed property, or property for which it was substituted (in this subsection referred to as “substituted property”), at any time during which the distributed property or the substituted property was held by
(i) the particular trust,
(ii) a trust that made a disposition, to which subsection 107.4(3) of the Act applied, to the particular trust, or
(iii) a trust that made a disposition, to which subsection 107.4(3) of the Act applied, to a trust described by subparagraph (ii) or by this subparagraph; and
(b) the only property in respect of which subsection 75(2) of the Act was applicable at a time at which it was held by a trust described in paragraph (a) is a property that was held by the trust before 1989 at a time at which subsection 75(2) of the Income Tax Act, R.S.C. 1952, was applicable in respect of the property.
(2) Subsection (1) is deemed to have come into force on June 14, 2001.
2011, c. 24Keeping Canada’s Economy and Jobs Growing Act
375. Subsection 73(3) of the Keeping Canada’s Economy and Jobs Growing Act is replaced by the following:
(3) Subsections (1) and (2) apply to fiscal periods that end in or after 2011, except that an election referred to in subsection 249.1(10) of the Act, as enacted by subsection (2), is deemed to be filed on time if it is filed in writing with the Minister of National Revenue on or before January 31, 2012.
C.R.C., c. 945Income Tax Regulations
376. (1) Paragraph 104(3)(e) of the Income Tax Regulations is replaced by the following:
(e) the total amount of the payment and all other such payments received by the annuitant in respect of the home at or before the time of the payment does not exceed the dollar amount specified in paragraph (h) of the definition “regular eligible amount” in subsection 146.01(1) of the Act;
(2) Subsection (1) is deemed to have come into force on January 28, 2009.
377. (1) The portion of subsection 229(1) of the Regulations before paragraph (a) is replaced by the following:
229. (1) Every member, of a partnership that carries on a business in Canada at any time in a fiscal period of the partnership (other than a member that is, because of subsection 115.2(2) of the Act, not considered to be carrying on business in Canada at that time), or of a partnership that is at any time in a fiscal period of the partnership, a Canadian partnership or a SIFT partnership, shall make for that period an information return in prescribed form containing the following information:
(2) Subsection (1) applies to fiscal periods that end after 2007.
378. (1) Subclause 304(1)(c)(iv)(B)(II) of the Regulations is replaced by the following:
(II) if the holder is a trust
1. in the case of a specified trust, for the life of an individual referred to in paragraph 104(4)(a) of the Act who is entitled to receive all of the income of the trust that arose before the individual’s death, or, in the case of a joint spousal or common-law partner trust, until the day of the later of the death of the individual and the death of the beneficiary under the trust who is the individual’s spouse or common-law partner,
2. in the case of a testamentary trust (other than a specified trust) where the annuity is issued before October 24, 2012, for the life of an individual who is entitled to receive income from the trust, and
3. in the case of any other testamentary trust other than a specified trust, for the life of an individual who was entitled when the contract was first held to receive all of the income of the trust that arose before the individual’s death,
(2) Clauses 304(1)(c)(iv)(C) to (E) of the Regulations are replaced by the following:
(C) if the annuity payments are to be made over a term that is guaranteed or fixed, the guaranteed or fixed term not exceed 91 years minus the age, when the contract was first held, in whole years of the following individual:
(I) if the holder is not a trust, the individual who is
1. in the case of a joint and last survivor annuity, the younger of the first holder and the survivor,
2. in the case of a contract that is held jointly, the younger of the first holders, and
3. in any other case, the first holder,
(II) if the holder is a specified trust, the individual who is
1. in the case of a joint and last survivor annuity held by a joint spousal or common-law partner trust, the younger of the individuals referred to in paragraph 104(4)(a) of the Act who are in combination entitled to receive all of the income of the trust that arose before the later of their deaths, and
2. in the case of an annuity that is not a joint and last survivor annuity, the individual referred to in paragraph 104(4)(a) of the Act who is entitled to receive all of the income of the trust that arose before the individual’s death,
(III) if the holder is a testamentary trust other than a specified trust, the individual who was the youngest beneficiary under the trust when the contract was first held,
(D) no loans exist under the contract,
(E) the holder’s rights under the contract not be disposed of otherwise than
(I) if the holder is an individual, on the holder’s death,
(II) if the holder is a specified trust (other than a joint spousal or common-law partner trust), on the death of the individual referred to in paragraph 104(4)(a) of the Act who is entitled to receive all of the income of the trust that arose before the individual’s death,
(III) if the holder is a specified trust that is a joint spousal or common-law partner trust, on the later of the deaths of the individuals referred to in paragraph 104(4)(a) of the Act who are in combination entitled to receive all of the income of the trust that arose before the later of their deaths, and
(IV) if the holder is a testamentary trust, other than a specified trust, and the contract was first held after October 2011, on the earlier of
1. the time at which the trust ceases to be a testamentary trust, and
2. the death of the individual referred to in subclause (B)(II) or (C)(III), as the case may be, in respect of the trust, and
(F) no payments be made out of the contract other than as permitted by this section,
(3) Subsections (1) and (2) apply to the 2000 and subsequent taxation years, except that with regard to a contract held by a trust created by a taxpayer at a particular time in 2000 for the benefit of another individual, subclauses 304(1)(c)(iv)(B)(II) and (C)(II) of the Regulations, as enacted by subsections (1) and (2), are to be read without reference to “or common-law partner”, unless, because of an election made under section 144 of the Modernization of Benefits and Obligations Act, chapter 12 of the Statutes of Canada, 2000, sections 130 to 142 of that Act apply at the particular time to the taxpayer and the other individual.
379. (1) Subparagraph 309(1)(e)(i) of the Regulations is replaced by the following:
(i) policy dividends or other distributions of the life insurer’s income from its participating life insurance business, or
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
380. (1) The Regulations are amended by adding the following after section 309:
Income from participating life insurance businesses
309.1 For the purpose of subparagraph 309(1)(e)(i), in computing a life insurer’s income for a taxation year from its participating life insurance business carried on in Canada,
(a) there shall be included the amount determined by the formula
A × B/C
where
- A
- is the insurer’s gross Canadian life investment income (in this section as defined in subsection 2400(1)) for the year,
- B
- is the total of
(i) the insurer’s mean maximum tax actuarial reserve (in this section as defined in subsection 2400(1)) for the year in respect of participating life insurance policies in Canada, and
(ii) 1/2 of the total of
(A) all amounts on deposit with the insurer as at the end of the year in respect of policies described in subparagraph (i), and
(B) all amounts on deposit with the insurer as at the end of the immediately preceding taxation year in respect of policies described in subparagraph (i), and
- C
- the total of all amounts, each of which is
(i) the insurer’s mean maximum tax actuarial reserve for the year in respect of a class of life insurance policies in Canada, or
(ii) 1/2 of the total of
(A) all amounts on deposit with the insurer as at the end of the year in respect of a class of policies described in subparagraph (i), and
(B) all amounts on deposit with the insurer as at the end of the immediately preceding taxation year in respect of a class of policies described in subparagraph (i);
(b) there shall be included
(i) the insurer’s maximum tax actuarial reserve for the immediately preceding taxation year in respect of participating life insurance policies in Canada, and
(ii) the maximum amount deductible by the insurer under subparagraph 138(3)(a)(ii) of the Act in computing its income for the immediately preceding taxation year in respect of participating life insurance policies in Canada;
(c) there shall not be included any amount in respect of the insurer’s participating life insurance policies in Canada that was deducted under subparagraph 138(3)(a)(i) or (ii) of the Act in computing its income for the immediately preceding taxation year;
(d) subject to paragraph (a),
(i) there shall not be included any amount
(A) as a reserve that was deducted under paragraph 20(1)(l) of the Act in computing the insurer’s income for the immediately preceding taxation year, or
(B) that was included in determining the insurer’s gross Canadian life investment income for the year, and
(ii) no deduction shall be made in respect of any amount
(A) taken into account in determining the insurer’s gross Canadian life investment income for the year, or
(B) deductible under paragraph 20(1)(l) of the Act in computing the insurer’s income for the year;
(e) there shall be deducted
(i) the insurer’s maximum tax actuarial reserve for the year in respect of participating life insurance policies in Canada, and
(ii) the maximum amount deductible by the insurer under subparagraph 138(3)(a)(ii) of the Act in computing its income for the year in respect of participating life insurance policies in Canada;
(f) no deduction shall be made in respect of any amount deductible under subparagraph 138(3)(a)(iii) of the Act in computing the insurer’s income for the year;
(g) except as otherwise provided in paragraph (e), no deduction shall be made in respect of a reserve deductible under subparagraph 138(3)(a)(i) or (ii) of the Act in computing the insurer’s income for the year; and
(h) except as otherwise provided in this section, the provisions of the Act relating to the computation of income from a source shall apply.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011, except that if a taxpayer has deducted an amount under subparagraph 138(3)(a)(iv) of the Act, as it read in its application to the taxpayer’s last taxation year that began before November 1, 2011, in computing the taxpayer’s income for that taxation year, then for the taxpayer’s first taxation year that begins after October 31, 2011 paragraph 309.1(b) of the Regulations, as enacted by subsection (1), is to be read as follows:
(b) there shall be included
(i) the amount deducted by the insurer under subparagraph 138(3)(a)(iv) of the Act, as it read in its application to the insurer’s last taxation year that began on or before October 31, 2011, in computing its income for the immediately preceding taxation year,
(ii) the insurer’s maximum tax actuarial reserve for the immediately preceding taxation year in respect of participating life insurance policies in Canada, and
(iii) the maximum amount deductible by the insurer under subparagraph 138(3)(a)(ii) of the Act in computing its income for the immediately preceding taxation year in respect of participating life insurance policies in Canada;
381. (1) Paragraph 407(1)(b) of the Regulations is replaced by the following:
(b) that proportion of its taxable income for the year that three times the number of revenue plane miles flown by its aircraft during the year in the province is of the total of all amounts, each of which is the total number of revenue plane miles flown by its aircraft during the year in a province in which the corporation had a permanent establishment.
(2) Subsection (1) applies to taxation years that end after October 24, 2012.
382. (1) Paragraph 600(b) of the Regulations is replaced by the following :
(b) subsections 7(10), 13(4), (7.4) and (29), 14(6), 20(24), 44(1) and (6), 45(2) and (3), 50(1), 53(2.1), 56.4(13), 70(6.2), (9.01), (9.11), (9.21) and (9.31), 72(2), 73(1), 80.1(1), 82(3), 83(2), 104(5.3) and (14), 107(2.001), 143(2), 146.01(7), 146.02(7), 164(6) and (6.1), 184(3) and 256(9) of the Act;
(2) Paragraph 600(b) of the Regulations, as enacted by subsection (1), is replaced by the following:
(b) subsections 13(4), (7.4) and (29), 14(6), 20(24), 44(1) and (6), 45(2) and (3), 50(1), 53(2.1), 56.4(13), 70(6.2), (9.01), (9.11), (9.21) and (9.31), 72(2), 73(1), 80.1(1), 82(3), 83(2), 104(14), 107(2.001), 143(2), 146.01(7), 146.02(7), 164(6) and (6.1), 184(3) and 256(9) of the Act;
(3) Subsection (1) is deemed to have come into force on May 13, 2010.
(4) Subsection (2) is deemed to have come into force on November 1, 2011.
383. (1) Subsection 1100(1.13) of the Regulations is amended by adding the following after paragraph (a):
(a.1) notwithstanding paragraph (a), “exempt property” does not include property that is the subject of a lease if that property had, at the time the lease was entered into, an aggregate fair market value in excess of $1,000,000 and the lessee of the property is
(i) a person who is exempt from tax by reason of section 149 of the Act,
(ii) a person who uses the property in the course of carrying on a business, the income from which is exempt from tax under Part I of the Act by reason of any provision of the Act,
(iii) a Canadian government, or
(iv) a person not resident in Canada, except if the person uses the property primarily in the course of carrying on a business in Canada that is not a treaty-protected business;
(a.2) for the purposes of paragraph (a.1), if it is reasonable, having regard to all the circumstances, to conclude that one of the main reasons for the existence of two or more leases was to avoid the application of paragraph (a.1) by reason of each such lease being a lease of property where the property that was the subject of the lease had an aggregate fair market value, at the time the lease was entered into, not in excess of $1,000,000, each such lease shall be deemed to be a lease of property that had, at the time the lease was entered into, an aggregate fair market value in excess of $1,000,000;
(2) Subsection (1) applies to property that is the subject of a lease entered into after 4:00 p.m. Eastern Standard Time, March 4, 2010.
384. (1) Section 1101 of the Regulations is amended by adding the following after subsection (1af):
(1ag) If more than one property of a taxpayer is described in the same class in Schedule II, and one or more of the properties is a property in respect of which the taxpayer is a transferee that has elected under subsection 13(4.2) of the Act (each of which is referred to in this subsection as an “elected property”), a separate class is prescribed for each elected property of the taxpayer that would otherwise be included in the same class.
(2) Subsection (1) is deemed to have come into force on December 21, 2002.
385. (1) Subsection 1106(11) of the Regulations is replaced by the following:
(11) For the purpose of the definition “assistance” in subsection 125.4(1) of the Act, “prescribed amount” means an amount paid or payable to a taxpayer under the License Fee Program of the Canada Media Fund.
(2) Subsection (1) is deemed to have come into force on April 1, 2010.
386. (1) Subsection 1403(8) of the Regulations is replaced by the following:
(8) Subsections (9) and (10) apply to an insurer if
(a) in a taxation year of the insurer, there has been a disposition to the insurer by another person with whom the insurer was dealing at arm’s length in respect of which subsection 138(11.92) of the Act applied;
(b) as a result of the disposition, the insurer assumed obligations under life insurance policies (in this subsection and subsections (9) and (10) referred to as the “transferred policies”) in respect of which an amount may be claimed by the insurer as a reserve under paragraph 1401(1)(c) for the taxation year;
(c) the amount (referred to in this subsection and subsections (9) and (10) as the “reserve deficiency”) determined by the following formula is a positive amount:
(A – B) – C
where
- A
- is the total of all amounts received or receivable by the insurer from the other person in respect of the transferred policies,
- B
- is the total of all amounts paid or payable by the insurer to the other person in respect of commissions in respect of the amounts referred to in the description of A, and
- C
- is the total of the maximum amounts that may be claimed by the insurer as a reserve under 1401(1)(c) (determined without reference to this subsection) in respect of the transferred policies for the taxation year; and
(d) the reserve deficiency can reasonably be attributed to the fact that the rates of interest, mortality or policy lapse used by the issuer of the transferred policies in determining the cash surrender values or premiums under the transferred policies are no longer reasonable in the circumstances.
(9) If this subsection applies to an insurer in respect of transferred policies for which there was a reserve deficiency, then, for the purposes of subsection (1) and subject to subsection (10),
(a) the insurer may make such revisions to the rates of interest, mortality or policy lapse used by the issuer of the transferred policies to eliminate all or any part of the reserve deficiency; and
(b) the revised rates are deemed to have been used by the issuer of the transferred policies in determining the cash surrender value or premiums under the policies.
(10) If, under subsection (9), an insurer has revised the rates of interest, mortality or policy lapse used by the issuer of transferred policies, the Minister may, for the purposes of subsection (1) and paragraph (9)(b), make further revisions to the revised rates to the extent that the insurer’s revisions to those rates are not reasonable in the circumstances.
(2) Subsection (1) applies to dispositions that occur after November 1999.
387. (1) Paragraph 1406(b) of the Regulations is replaced by the following:
(b) by excluding any obligation to pay a benefit under a segregated fund policy if
(i) the amount of the benefit varies with the fair market value of the segregated fund at the time the benefit becomes, or may become, payable, and
(ii) the benefit is not in respect of a guarantee given by the insurer under a segregated fund policy; and
(2) Subsection (1) applies to the 2012 and subsequent taxation years.
388. (1) Subsections 2000(1) and (2) of the Regulations are replaced by the following:
2000. (1) Every official receipt issued by a particular person who is a registered agent of a registered party or an electoral district agent of a registered association, to an individual who makes a monetary contribution to the registered party or registered association, as the case may be, shall contain a statement that it is an official receipt for income tax purposes and shall, in a manner that cannot readily be altered, show clearly
(a) the name of the registered party or registered association, as the case may be;
(b) the serial number of the receipt;
(c) the name of the particular person, as recorded in the registry maintained by the Chief Electoral Officer under section 374 or 403.08 of the Canada Elections Act;
(d) the date on which the receipt is issued;
(e) the date on which the monetary contribution is received;
(f) the individual’s name and address;
(g) the amount of the monetary contribution;
(h) a description of the advantage, if any, in respect of the monetary contribution and the amount of that advantage; and
(i) the eligible amount of the monetary contribution.
(2) Subject to subsection (3), every official receipt issued by an official agent of a candidate to an individual who makes a monetary contribution to the candidate shall contain a statement that it is an official receipt for income tax purposes and shall, in a manner that cannot readily be altered, show clearly
(a) the name of the candidate, as it appears in the candidate’s nomination papers;
(b) the serial number of the receipt;
(c) the name of the official agent;
(d) the date on which the receipt is issued;
(e) the date on which the monetary contribution is received;
(f) the polling day;
(g) the individual’s name and address;
(h) the amount of the monetary contribution;
(i) a description of the advantage, if any, in respect of the monetary contribution and the amount of that advantage; and
(j) the eligible amount of the monetary contribution.
(2) Subsections 2000(5) and (6) of the Regulations are replaced by the following.
(5) A spoiled official receipt form shall be marked “cancelled” and, together with its duplicate, shall be filed by the electoral district agent, the official agent or the registered agent, as the case may be, together with the information return required to be filed with the Minister under subsection 230.1(2) of the Act.
(6) An official receipt form on which any of the following is incorrectly or illegibly entered is to be regarded as spoiled:
(a) the date on which the monetary contribution is received;
(b) the amount of the monetary contribution;
(c) a description of the advantage, if any, in respect of the monetary contribution and the amount of that advantage; and
(d) the eligible amount of the monetary contribution.
(3) Subsections (1) and (2) apply in respect of receipts issued after the day on which this Act receives royal assent, except that if this Act receives royal assent before 2013, in respect of receipts issued before that year
(a) paragraph 2000(1)(h) of the Regulations, as enacted by subsection (1), is to be read as follows:
(h) the amount of the advantage, if any, in respect of the monetary contribution; and
(b) paragraph 2000(2)(i) of the Regulations, as enacted by subsection (1), is to be read as follows:
(i) the amount of the advantage, if any, in respect of the monetary contribution; and
(c) paragraph 2000(6)(c) of the Regulations, as enacted by subsection (2), is to be read as follows:
(c) the amount of the advantage, if any, in respect of the monetary contribution; and
389. (1) Section 2001 of the Regulations and the heading before it are repealed.
(2) Subsection (1) is deemed to have come into force on January 1, 2004.
390. Section 2002 of the Regulations is replaced by the following:
2002. (1) The following definitions apply in this Part.
“Chief Electoral Officer”
« directeur général des élections »
“Chief Electoral Officer” means the person named as chief electoral officer or substitute chief electoral officer under section 13 or 14 of the Canada Elections Act.
“nomination paper”
« acte de candidature »
“nomination paper” means, in respect of a candidate, a nomination paper filed in respect of the candidate under the Canada Elections Act, with the corrections, if any, made under that Act to the nomination paper after its filing.
“official receipt”
« reçu officiel »
“official receipt” means a receipt issued for the purposes of subsection 127(3) of the Act containing the information that is required under that subsection.
“official receipt form”
« formulaire de reçu officiel »
“official receipt form” means
(a) in the case of an official receipt issued by an electoral district agent or a registered agent under subsection 2000(1), any printed form that an electoral district agent or a registered agent, as the case may be, has that is capable of being completed, or that originally was intended to be completed, as an official receipt of the electoral district agent or registered agent; and
(b) in the case of an official receipt issued by an official agent under subsection 2000(2), the official form prescribed under section 477 of the Canada Elections Act.
(2) In this Part, “official agent”,“polling day” and “registered agent” have the meanings assigned to them by the Canada Elections Act.
391. (1) Section 2402 of the Regulations and the heading before it are repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
392. (1) The heading before section 2404 and sections 2404 to 2409 of the Regulations are repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
393. (1) The portion of subsection 3501(1) of the Regulations after paragraph (d) and before subparagraph (e.1)(ii) is replaced by the following:
(e) where the gift is a cash gift, the date on which or the year during which the gift was received;
(e.1) where the gift is of property other than cash
(i) the date on which the gift was received,
(2) Paragraph 3501(1)(f) of the Regulations is replaced by the following:
(f) the date on which the receipt was issued;
(3) Paragraphs 3501(1)(g) and (h) of the Regulations are replaced by the following:
(g) the name and address of the donor including, in the case of an individual, the individual’s first name and initial;
(h) the amount that is
(i) the amount of a cash gift, or
(ii) if the gift is of property other than cash, the amount that is the fair market value of the property at the time that the gift is made;
(h.1) a description of the advantage, if any, in respect of the gift and the amount of that advantage;
(h.2) the eligible amount of the gift;
(4) Paragraph 3501(1)(i) of the English version of the Regulations is replaced by the following:
(i) the signature, as provided in subsection (2) or (3), of a responsible individual who has been authorized by the organization to acknowledge gifts; and
(5) The portion of subsection 3501(1.1) of the Regulations after paragraph (c) and before subparagraph (e)(ii) is replaced by the following:
(d) where the gift is a cash gift, the date on which the gift was received;
(e) where the gift is of property other than cash
(i) the date on which the gift was received,
(6) Paragraph 3501(1.1)(f) of the Regulations is replaced by the following:
(f) the date on which the receipt was issued;
(7) Paragraphs 3501(1.1)(g) and (h) of the Regulations are replaced by the following:
(g) the name and address of the donor including, in the case of an individual, the individual’s first name and initial;
(h) the amount that is
(i) the amount of a cash gift, or
(ii) if the gift is of property other than cash, the amount that is the fair market value of the property at the time that the gift was made;
(h.1) a description of the advantage, if any, in respect of the gift and the amount of that advantage;
(h.2) the eligible amount of the gift;
(8) Subsection 3501(6) of the Regulations is replaced by the following:
(6) Every official receipt form on which any of the following is incorrectly or illegibly entered is deemed to be spoiled:
(a) the date on which the gift is received;
(b) the amount of the gift, in the case of a cash gift;
(c) a description of the advantage, if any, in respect of the gift and the amount of that advantage; and
(d) the eligible amount of the gift.
(9) Subsections (1) to (8) apply in respect of gifts made after December 20, 2002, except that, in respect of receipts issued before 2013,
(a) paragraph 3501(1)(h.1) of the Regulations, as enacted by subsection (3), is to be read as follows:
(h.1) the amount of the advantage, if any, in respect of the gift;
(b) paragraph 3501(1.1)(h.1) of the Regulations, as enacted by subsection (7), is to be read as follows:
(h.1) the amount of the advantage, if any, in respect of the gift;
(c) paragraph 3501(6)(c) of the Regulations, as enacted by subsection (8), is to be read as follows:
(c) the amount of the advantage, if any, in respect of the gift; and
394. (1) The portion of section 3504 of the Regulations before paragraph (a) is replaced by the following:
3504. For the purposes of subparagraphs 110.1(2.1)(a)(ii) and 118.1(5.4)(a)(ii) of the Act, the following are prescribed donees:
(2) Subsection (1) is deemed to have come into force on May 2, 2007.
395. (1) Paragraph 4600(2)(k) of the Regulations is replaced by the following:
(k) a property included in Class 21, 24, 27, 29, 34, 39, 40, 43, 45, 46, 50 or 52 in Schedule II;
(2) Subsection (1) applies to property acquired after March 18, 2007, except that for property acquired before January 28, 2009, paragraph 4600(2)(k) of the Regulations, as enacted by subsection (1), is to be read without reference to Class 52.
396. (1) Paragraph 4800(1)(a) of the French version of the Regulations is replaced by the following:
a) une catégorie d’actions du capital-actions de la société désignée par la société dans son choix ou par le ministre dans son avis à la société, selon le cas, doit pouvoir faire l’objet d’un appel public à l’épargne;
(2) Paragraph 4800(2)(c) of the French version of the Regulations is replaced by the following:
c) aucune catégorie d’actions du capital-actions de la société ne peut faire l’objet d’un appel public à l’épargne ni ne remplit les conditions énoncées aux alinéas (1)b) et c).
(3) Subsections (1) and (2) apply to the 2000 and subsequent taxation years.
397. (1) The portion of section 4800.1 of the Regulations before paragraph (a) is replaced by the following:
4800.1 For the purposes of paragraph 107(1)(a) and subsections 107(1.1), (2) and (4.1) of the Act, the following are prescribed trusts:
(2) Subsection (1) is deemed to have come into force on January 1, 2000.
398. (1) The portion of section 4801 of the Regulations before subparagraph (b)(i) is replaced by the following:
4801. In applying at any time paragraph 132(6)(c) of the Act, the following are prescribed conditions in respect of a trust:
(a) either
(i) the following conditions are met:
(A) there has been at or before that time a lawful distribution in a province to the public of units of the trust and a prospectus, registration statement or similar document was not, under the laws of the province, required to be filed in respect of the distribution, and
(B) the trust
(I) was created after 1999 and on or before that time, or
(II) satisfies, at that time, the conditions prescribed in section 4801.001, or
(ii) a class of the units of the trust is, at that time, qualified for distribution to the public; and
(b) in respect of a class of the trust’s units that meets at that time the conditions described in paragraph (a), there are at that time no fewer than 150 beneficiaries of the trust, each of whom holds
(2) Subsection (1) applies to the 2000 and subsequent taxation years, except that for the purpose of applying clause 4801(a)(i)(B) of the Regulations, as enacted by subsection (1), to taxation years that end before 2004, that clause is to be read as follows:
(B) the trust was created after 1999 and on or before that time, or
399. (1) The Regulations are amended by adding the following after section 4801:
4801.001 For the purpose of applying at any particular time subclause 4801(a)(i)(B)(II), the following are the prescribed conditions:
(a) the trust was created before 2000;
(b) the trust was a unit trust on July 18, 2005;
(c) the particular time is after 2003; and
(d) the trusts elects by notifying the Minister, in writing before the trust’s filing-due date for its 2012 taxation year, that this section applies to it.
(2) Subsection (1) applies to the 2004 and subsequent taxation years.
400. (1) The portion of subsection 4803(2) of the French version of the Regulations before paragraph (d) is replaced by the following:
(2) Pour l’application de la présente partie, une catégorie d’actions du capital-actions d’une société ou une catégorie d’unités d’une fiducie ne peut faire l’objet d’un appel public à l’épargne que si, selon le cas :
a) un prospectus, une déclaration d’enregistrement ou un document semblable a été produit auprès d’une administration au Canada selon la législation fédérale ou provinciale et, si la législation le prévoit, approuvé par l’administration, et les actions ou unités de cette catégorie ont fait l’objet d’un appel public légal à l’épargne conformément à ce document;
b) il s’agit d’une catégorie d’actions, dont une ou plusieurs des actions ont été émises par la société à un moment, postérieur à 1971, où elle était une société publique, en échange d’actions de toute autre catégorie du capital-actions de la société qui pouvait, immédiatement avant l’échange, faire l’objet d’un appel public à l’épargne;
c) dans le cas d’une catégorie d’actions, dont une ou plusieurs des actions avaient été émises et étaient en circulation le 1er janvier 1972, la catégorie remplissait à cette date les conditions énoncées aux alinéas 4800(1)b) et c);
(2) Subsection (1) applies to the 2000 and subsequent taxation years.
401. (1) The portion of the description of A in the definition “underlying foreign tax” in subsection 5907(1) of the Regulations before subparagraph (i) is replaced by the following:
- A
- is, subject to subsection (1.03), the total of all amounts, in respect of the period, each of which is
(2) Section 5907 of the Regulations is amended by adding the following in numerical order:
(1.03) For the purposes of the description of A in the definition “underlying foreign tax” in subsection (1), income or profits tax paid in respect of the taxable earnings of a particular foreign affiliate of a particular corporation or in respect of a dividend received by the particular affiliate from another foreign affiliate of the particular corporation, and amounts by which the underlying foreign tax of the particular affiliate or any other foreign affiliate of the particular corporation is required under subsection (1.1) or (1.2) to be increased, is not to include any income or profits tax paid, or amounts by which the underlying foreign tax would otherwise be so required to be increased, as the case may be, in respect of the foreign accrual property income of the particular affiliate for a taxation year of the particular affiliate if, at any time in the year, a specified owner in respect of the particular corporation is considered,
(a) under the income tax laws (referred to in subsection (1.07) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of another corporation — that is, at any time in the year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the other corporation that are considered to be owned by the specified owner for the purposes of the Act; or
(b) under the income tax laws (referred to in subsection (1.08) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of the Act.
(1.04) For the purposes of subsections (1.03) and (1.07), a “specified owner”, at any time, in respect of a corporation means the corporation or a person or partnership that is, at that time,
(a) a partnership of which the corporation is a member;
(b) a foreign affiliate of the corporation;
(c) a partnership a member of which is a foreign affiliate of the corporation; or
(d) a person or partnership referred to in any of subparagraphs (1.06)(a)(i) to (iii).
(1.05) For the purposes of this subsection and subsection (1.03), a “pertinent person or partnership”, at any time, in respect of a particular foreign affiliate of a corporation means the particular affiliate or a person or partnership that is, at that time,
(a) another foreign affiliate of the corporation
(i) in which the particular affiliate has an equity percentage, or
(ii) that has an equity percentage in the particular affiliate;
(b) a partnership a member of which is at that time a pertinent person or partnership in respect of the particular affiliate under this subsection; or
(c) a person or partnership referred to in any of subparagraphs (1.06)(b)(i) to (iii).
(1.06) For the purposes of subsections (1.04) and (1.05), if, as part of a series of transactions or events that includes the earning of the foreign accrual property income referred to in subsection (1.03), a foreign affiliate (referred to in this subsection as the “funding affiliate”) of the corporation or of a person (referred to in this subsection as the “related person”) resident in Canada that is related to the corporation, or a partnership (referred to in this subsection as the “funding partnership”) of which such an affiliate is a member, directly or indirectly provided funding to the particular affiliate, or a partnership of which the particular affiliate is a member, otherwise than by way of loans or other indebtedness that are subject to terms or conditions made or imposed, in respect of the loans or other indebtedness, that do not differ from those that would be made or imposed between persons dealing at arm’s length or by way of an acquisition of shares of the capital stock of any corporation, then
(a) if the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the corporation:
(i) the related person,
(ii) each foreign affiliate of the related person, and
(iii) each partnership a member of which is referred to in subparagraph (i) or (ii); and
(b) the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be pertinent persons or partnerships in respect of the particular affiliate:
(i) the funding affiliate or the funding partnership,
(ii) a non-resident corporation
(A) in which the funding affiliate has an equity percentage, or
(B) that has an equity percentage in the funding affiliate, and
(iii) a partnership a member of which is a person or partnership referred to in subparagraph (i) or (ii).
(1.07) For the purposes of paragraph (1.03)(a), a specified owner in respect of the particular corporation is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of another corporation that are considered to be owned for the purposes of the Act solely because the specified owner is not treated as a corporation under the relevant foreign tax law.
(1.08) For the purposes of paragraph (1.03)(b), a member of a partnership is not to be considered to have a lesser direct or indirect share of the income of the partnership under the relevant foreign tax law than for the purposes of the Act solely because of one or more of the following:
(a) a difference between the relevant foreign tax law and the Act in the manner of
(i) computing the income of the partnership, or
(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;
(b) the treatment of the partnership as a corporation under the relevant foreign tax law; or
(c) the fact that the member is not treated as a corporation under the relevant foreign tax law.
(1.09) For the purposes of subsection (1.03), if a specified owner owns, for the purposes of the Act, shares of the capital stock of a corporation and the dividends, or similar amounts, in respect of those shares are treated under the income tax laws of any country other than Canada under the laws of which any income of the corporation is subject to income taxation as interest or another form of deductible payment, the specified owner is deemed to be considered, under those tax laws, to own less than all of the shares of the capital stock of the corporation that are considered to be owned by the specified owner for the purposes of the Act.
(3) Subsections (1) and (2) apply to income or profits tax paid, and amounts referred to in subsections 5907(1.1) and (1.2) of the Regulations, in respect of the income of a foreign affiliate of a corporation for taxation years of the foreign affiliate that end in taxation years of the corporation that end after March 4, 2010, except that, for taxation years of the corporation that end on or before October 24, 2012,
(a) subsection 5907(1.03) of the Regulations, as enacted by subsection (2), is to be read as follows:
(1.03) For the purposes of the description of A in the definition “underlying foreign tax” in subsection (1), income or profits tax paid in respect of the taxable earnings of a particular foreign affiliate of a corporation or in respect of a dividend received by the particular affiliate from another foreign affiliate of the corporation, and amounts by which the underlying foreign tax of the particular affiliate, or any other foreign affiliate of the corporation, is required under subsection (1.1) or (1.2) to be increased, is not to include any income or profits tax paid, or amounts by which the underlying foreign tax would otherwise be so required to be increased, as the case may be, in respect of the foreign accrual property income of the particular affiliate that is earned during a period in which
(a) the corporation is considered, under the income tax laws (referred to in subsection (1.07) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the particular affiliate is subject to income taxation, to own less than all of the shares of the capital stock of the particular affiliate, of another foreign affiliate of the corporation in which the particular affiliate has an equity percentage, or of another foreign affiliate of the corporation that has an equity percentage in the particular affiliate, that are considered to be owned by the corporation for the purposes of the Act; or
(b) the corporation’s share of the income of a partnership that owns, based on the assumptions contained in paragraph 96(1)(c) of the Act, shares of the capital stock of the particular affiliate is, under the income tax laws (referred to in subsection (1.08) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the partnership is subject to income taxation, less than its share of the income for the purposes of the Act.
(b) subsection 5907(1.07) of the Regulations, as enacted by subsection (2), is to be read as follows:
(1.07) For the purposes of paragraph (1.03)(a), a corporation is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a foreign affiliate of the corporation that are considered to be owned for the purposes of the Act solely because the corporation or the foreign affiliate is not treated as a corporation under the relevant foreign tax law.
(c) the portion of subsection 5907(1.08) of the Regulations before paragraph (a), as enacted by subsection (2), is to be read as follows:
(1.08) For the purposes of paragraph (1.03)(b), a member of a partnership is not to be considered to have a lesser share of the income of the partnership under the relevant foreign tax law than for the purposes of the Act solely because of one or more of the following:
(d) section 5907 of the Regulations is to be read without reference to its subsections (1.04) to (1.06) and (1.09), as enacted by subsection (2).
402. (1) The portion of paragraph 6202.1(1)(a) of the French version of the Regulations before subparagraph (i) is replaced by the following:
a) conformément aux conditions de l’action ou à une convention relative à l’action ou à son émission, l’un des énoncés ci-après se vérifie :
(2) Clauses 6202.1(1)(a)(iii)(A) and (B) of the Regulations are replaced by the following:
(A) it is convertible or exchangeable only into
(I) another share of the corporation that, if issued, would not be a prescribed share,
(II) a right (including a right conferred by a warrant) that
1. if it were issued, would not be a prescribed right, and
2. if it were exercised, would allow the person exercising it to acquire only a share of the corporation that, if the share were issued, would not be a prescribed share, or
(III) both a share described in subclause (I) and a right described in subclause (II), and
(B) all the consideration receivable by the holder on the conversion or exchange of the share is the share described in subclause (A)(I) or the right described in subclause (A)(II), or both, as the case may be, or
(3) Section 6202.1 of the Regulations is amended by adding the following after subsection (1):
(1.1) For the purpose of the definition “flow-through share” in subsection 66(15) of the Act, a new right to acquire a share of the capital stock of a corporation is a prescribed right if, at the time the right is issued,
(a) the amount that the holder of the right is entitled to receive in respect of the right on the dissolution, liquidation or winding-up of the corporation or on the redemption, acquisition or cancellation of the right by the corporation or by specified persons in relation to the corporation (referred to in this section as the “liquidation entitlement” of the right) can reasonably be considered to be, by way of a formula or otherwise, fixed, limited to a maximum or established to be not less than a minimum;
(b) the right is convertible or exchangeable into another security issued by the corporation unless
(i) the right is convertible or exchangeable only into
(A) a share of the corporation that, if issued, would not be a prescribed share,
(B) another right (including a right conferred by a warrant) that
(I) if it were issued, would not be a prescribed right, and
(II) if it were exercised, would allow the person exercising it to acquire only a share of the corporation that, if the share were issued, would not be a prescribed share, or
(C) both a share described in clause (A) and a right described in clause (B), and
(ii) all the consideration receivable by the holder on the conversion or exchange of the right is the share described in clause (A) or the right described in clause (B), or both, as the case may be;
(c) any person or partnership has, either absolutely or contingently, an obligation (other than an excluded obligation in relation to the right)
(i) to provide assistance,
(ii) to make a loan or payment,
(iii) to transfer property, or
(iv) to otherwise confer a benefit by any means whatever, including the payment of a dividend,
either immediately or in the future, that can reasonably be considered to be, directly or indirectly, a repayment or return by the corporation or a specified person in relation to the corporation of all or part of the consideration for which the right was issued or for which a partnership interest was issued in a partnership that acquires the right;
(d) any person or partnership has, either absolutely or contingently, an obligation (other than an excluded obligation in relation to the right) to effect any undertaking, either immediately or in the future, with respect to the right or the agreement under which the right is issued (including any guarantee, security, indemnity, covenant or agreement and including the lending of funds to or the placing of amounts on deposit with, or on behalf of, the holder of the right or where the holder is a partnership, the members of the partnership or specified persons in relation to the holder or the members of the partnership, as the case may be) that can reasonably be considered to have been given to ensure, directly or indirectly, that
(i) any loss that the holder of the right and, where the holder is a partnership, the members of the partnership or specified persons in relation to the holder or the members of the partnership, as the case may be, may sustain because of the holding, ownership or disposition of the right or any other property is limited in any respect, or
(ii) the holder of the right and, where the holder is a partnership, the members of the partnership or specified persons in relation to the holder or the members of the partnership, as the case may be, will derive earnings, because of the holding, ownership or disposition of the right or any other property;
(e) the corporation or a specified person in relation to the corporation can reasonably be expected
(i) to acquire or cancel the right in whole or in part otherwise than on a conversion or exchange of the right that meets the conditions set out in subparagraphs (b)(i) and (ii), or
(ii) to make a payment, transfer or other provision (otherwise than pursuant to an excluded obligation in relation to the right), directly or indirectly, by way of a dividend, loan, purchase of rights, financial assistance to any purchaser of the right or, where the purchaser is a partnership, the members of the partnership or in any other manner whatever, that can reasonably be considered to be a repayment or return of all or part of the consideration for which the right was issued or for which a partnership interest was issued in a partnership that acquires the right,
within five years after the date the right is issued, otherwise than as a consequence of an amalgamation of a subsidiary wholly-owned corporation, a winding-up of a subsidiary wholly-owned corporation to which subsection 88(1) of the Act applies or the payment of a dividend by a subsidiary wholly-owned corporation to its parent;
(f) any person or partnership can reasonably be expected to effect, within five years after the day the right is issued, any undertaking which, if it were in effect at the time the right was issued, would result in the right being a prescribed right because of paragraph (d);
(g) it can reasonably be expected that, within five years after the date the right is issued,
(i) any of the terms or conditions of the right or any existing agreement relating to the right or its issue will be modified in such a manner that the right would be a prescribed right if it had been issued at the time of the modification, or
(ii) any new agreement relating to the right or its issue will be entered into in such a manner that the right would be a prescribed right if it had been issued at the time the new agreement is entered into; or
(h) it can reasonably be expected that the right, if exercised, would allow the person exercising the right to acquire a share in a corporation that, if that share were issued, would be a prescribed share within five years after the day the right was issued.
(4) Subsections 6202.1(3) and (4) of the Regulations are replaced by the following:
(2.1) For the purpose of the definition “flow-through share” in subsection 66(15) of the Act, a new right is a prescribed right if
(a) the consideration for which the new right is to be issued is to be determined more than 60 days after entering into the agreement pursuant to which the new right is to be issued;
(b) the corporation or a specified person in relation to the corporation, directly or indirectly, for the purpose of assisting any person or partnership to acquire the new right or any person or partnership to acquire an interest in a partnership acquiring the new right (otherwise than because of an excluded obligation in relation to the new right),
(i) provided assistance,
(ii) made or arranged for a loan or payment,
(iii) transferred property, or
(iv) otherwise conferred a benefit by any means whatever, including the payment of a dividend; or
(c) the holder of the new right or, where the holder is a partnership, a member of the partnership, has a right under any agreement or arrangement entered into under circumstances where it is reasonable to consider that the agreement or arrangement was contemplated at or before the time the agreement to issue the new right was entered into,
(i) to dispose of the new right, and
(ii) through a transaction or event or a series of transactions or events contemplated by the agreement or arrangement, to acquire
(A) a share (referred to in this paragraph as the “acquired share”) of the capital stock of another corporation that would be a prescribed share under subsection (1) if the acquired share were issued at the time the new right was issued, other than a share that would not be a prescribed share if subsection (1) were read without reference to subparagraphs (1)(a)(iv) and (1)(d)(i) and (ii) where the acquired share is a share
(I) of a mutual fund corporation, or
(II) of a corporation that becomes a mutual fund corporation within 90 days after the acquisition of the acquired share, or
(B) a right (referred to in this paragraph as the “acquired right”) to acquire a share of the capital stock of another corporation that would, if it were issued at the time the new right was issued, be a prescribed right, other than a right that would not be a prescribed right if subsection (1.1) were read without reference to subparagraph (1.1)(e)(i) where the acquired right is a right to acquire a share of the capital stock
(I) of a mutual fund corporation, or
(II) of a corporation that becomes a mutual fund corporation within 90 days after the acquisition of the acquired right.
(3) For the purposes of subsections (1) and (1.1),
(a) the dividend entitlement of a share of the capital stock of a corporation is deemed not to be fixed, limited to a maximum or established to be not less than a minimum where all dividends on the share are determined solely by reference to a multiple or fraction of the dividend entitlement of another share of the capital stock of the corporation, or of another corporation that controls the corporation, where the dividend entitlement of that other share is not described in subparagraph (1)(a)(i); and
(b) the liquidation entitlement of a share of the capital stock of a corporation, or of a right to acquire a share of the capital stock of the corporation, as the case may be, is deemed not to be fixed, limited to a maximum or established to be not less than a minimum where
(i) all the liquidation entitlement is determinable solely by reference to
(A) the liquidation entitlement of another share of the capital stock of the corporation (or a share of the capital stock of another corporation that controls the corporation), or
(B) the liquidation entitlement of a right to acquire the capital stock of the corporation (or another corporation that controls the corporation),
(ii) the liquidation entitlement described in clause (i)(A), if any, is not described in subparagraph (1)(a)(ii), and
(iii) the liquidation entitlement described in clause (i)(B), if any, is not described in paragraph (1.1)(a).
(4) For the purposes of paragraphs (1)(c) and (e) and (1.1)(d) and (f), an agreement entered into between the first holder of a share or right and another person or partnership for the sale of the share or right to that other person or partnership for its fair market value at the time the share or right is acquired by the other person or partnership (determined without regard to the agreement) is deemed not to be an undertaking with respect to the share or right, as the case may be.
(5) The definition “excluded obligation” in subsection 6202.1(5) of the Regulations is replaced by the following:
- “excluded obligation”
“excluded obligation”, in relation to a share or new right issued by a corporation, means
(a) an obligation of the corporation
(i) with respect to eligibility for, or the amount of, any assistance under the Canadian Exploration and Development Incentive Program Act, the Canadian Exploration Incentive Program Act, the Ontario Mineral Exploration Program Act, R.S.O., c. O.27, or The Mineral Exploration Incentive Program Act, S.M. 1991-92, c. 45, or
(ii) with respect to the making of an election respecting such assistance and the flowing out of such assistance to the holder of the share or the new right in accordance with any of those Acts,
(b) an obligation of the corporation, in respect of the share or the new right, to distribute an amount that represents a payment out of assistance to which the corporation is entitled
(i) as a consequence of the corporation making expenditures funded by consideration received for shares or new rights issued by the corporation in respect of which the corporation purports to renounce an amount under subsection 66(12.6) of the Act, and
(ii) under section 25.1 of the Income Tax Act, R.S.B.C., 1996, c. 215, or
(c) an obligation of any person or partnership to effect an undertaking to indemnify a holder of the share or the new right or, where the holder is a partnership, a member of the partnership, for an amount not exceeding the amount of any tax payable under the Act or the laws of a province by the holder or the member of the partnership, as the case may be, as a consequence of
(i) the failure of the corporation to renounce an amount to the holder in respect of the share or the new right, or
(ii) a reduction, under subsection 66(12.73) of the Act, of an amount purported to be renounced to the holder in respect of the share or the new right; (obligation exclue)
(6) Subsection 6202.1(5) of the Regulations is amended by adding the following in alphabetical order:
- “new right”
“new right” means a right that is issued after December 20, 2002 to acquire a share of the capital stock of a corporation, other than a right that is issued at a particular time before 2003
(a) pursuant to an agreement in writing made on or before December 20, 2002,
(b) as part of a distribution of rights to the public made in accordance with the terms of a prospectus, preliminary prospectus, registration statement, offering memorandum or notice, required by law to be filed before distribution of the rights begins, filed on or before December 20, 2002 with a public authority in Canada in accordance with the securities legislation of the province in which the rights are distributed, or
(c) to a partnership interests in which were issued as part of a distribution to the public made in accordance with the terms of a prospectus, preliminary prospectus, registration statement, offering memorandum or notice, required by law to be filed before distribution of the interests begins, filed on or before December 20, 2002 with a public authority in Canada in accordance with the securities legislation of the province in which the interests are distributed, where all interests in the partnership issued at or before the particular time were issued
(i) as part of the distribution, or
(ii) before the beginning of the distribution; (nouveau droit)
(7) Subsections (1) to (6) apply to shares and rights issued under an agreement made after December 20, 2002.
403. (1) The portion of section 6701 of the Regulations before paragraph (a) is replaced by the following:
6701. For the purposes of paragraph 40(2)(i), clause 53(2)(k)(i)(C), the definition “public corporation” in subsection 89(1), the definition “specified investment business” in subsection 125(7), the definition “approved share” in subsection 127.4(1), subsections 131(8) and (11), section 186.1, the definition “financial intermediary corporation” in subsection 191(1), the definition “eligible investment” in subsection 204.8(1) and subsection 204.81(8.3) of the Act, “prescribed labour-sponsored venture capital corporation” means, at any particular time,
(2) Subsection (1) is deemed to have come into force on October 24, 2012.
404. (1) The Regulations are amended by adding the following after section 6707:
6708. For the purpose of paragraph 204.8(2)(b) and subsection 204.81(8.3) of the Act, section 27.2 of the Community Small Business Investment Funds Act, 1992, S.O. 1992, c. 18, is a prescribed wind-up rule.
6709. For the purposes of section 211.81 of the Act, sections 1086.14 and 1086.20 of the Taxation Act, R.S.Q., c. I-3, are prescribed provisions of a provincial law.
(2) Subsection (1) is deemed to have come into force on October 24, 2012.
405. (1) Section 6802 of the Regulations is amended by striking out “or” at the end of paragraph (f), by adding “or” at the end of paragraph (g) and by adding the following after paragraph (g):
(h) a trust established
(i) to hold shares of Air Canada, pursuant to the June 2009 memorandum of understanding between Air Canada and certain trade unions who represent employees of Air Canada, if
(A) the shares are held by the trust for the benefit of the trade unions, and
(B) each of the trade unions may direct the trustee to contribute, from time to time, amounts received or receivable by the trust in respect of the shares, whether as dividends, proceeds of disposition or otherwise, to one or more registered pension plans under which Air Canada is a participating employer, or
(ii) in relation to the wind-up of a registered pension plan sponsored by Fraser Papers Inc., if
(A) shares are held by the trust for the benefit of the registered pension plan, and
(B) the trustee will contribute amounts received or receivable by the trust in respect of the shares, whether as dividends, proceeds of disposition or otherwise, to the registered pension plan, not later than December 31, 2018.
(2) Subsection (1) is deemed to have come into force on January 1, 2009.
406. (1) Part LXXXI of the Regulations is repealed.
(2) Subsection (1) applies to taxation years that begin after October 31, 2011.
407. (1) The definition “predecessor employer” in subsection 8500(1) of the Regulations is replaced by the following:
- “predecessor employer”
“predecessor employer” means, in relation to a particular employer, an employer (in this definition referred to as the “vendor”) who has sold, assigned or otherwise disposed of all or part of the vendor’s business or undertaking or all or part of the assets of the vendor’s business or undertaking to the particular employer or to another employer who, at any time after the sale, assignment or other disposition, becomes a predecessor employer in relation to the particular employer, if all or a significant number of employees of the vendor have, in conjunction with the sale, assignment or disposition, become employees of the employer acquiring the business, undertaking or assets; (employeur remplacé)
(2) Section 8500 of the Regulations is amended by adding the following after subsection (1.1):
(1.2) The definition “predecessor employer” in subsection (1) applies for the purpose of subsection 147.2(8) of the Act.
(3) Section 8500 of the Regulations is amended by adding the following after subsection (8):
(9) For the purposes of paragraph 147.3(6)(b) of the Act and subparagraphs 8502(d)(iv) and 8503(2)(h)(iii), if an amount is transferred in accordance with subsection 147.3(3) of the Act to a defined benefit provision (referred to in this subsection as the “current provision”) of a registered pension plan from a defined benefit provision (referred to in this subsection as the “former provision”) of another registered pension plan on behalf of all or a significant number of members whose benefits under the former provision are replaced by benefits under the current provision, each current service contribution made at a particular time under the former provision by a member whose benefits are so replaced is deemed to be a current service contribution made at that particular time under the current provision by the member.
(4) Subsection (1) is deemed to have come into force on November 6, 2010, except that it does not apply in respect of a sale, assignment or disposition of a business or undertaking that occurred before that date.
(5) Subsection (2) applies to contributions made after 1990.
(6) Subsection (3) applies is deemed to have come into force on January 1, 2000.
408. (1) Paragraph 8502(b) of the Regulations is amended by striking out “or” at the end of subparagraph (iv), by adding “or” at the end of subparagraph (v) and by adding the following after subparagraph (v):
(v.1) is paid by the trustee of a trust described in paragraph 6802(h), where the amount would have been an eligible contribution if the amount had been paid in respect of a defined benefit provision of the plan by an employer with respect to the employer’s employees or former employees,
(2) Subsection (1) is deemed to have come into force on January 1, 2009.
409. (1) Section 8504 of the Regulations is amended by adding the following after subsection (2):
Predecessor Employer
(2.1) For the purposes of subsection (2), if the pensionable service of the member under the provision includes a period throughout which the member was employed by a predecessor employer to an employer who participates in the plan, the predecessor employer is deemed to have participated under the provision for the benefit of the member.
(2) Subsection (1) is deemed to have come into force on January 1, 1991.
410. (1) Paragraph 8514(2.1)(a) of the Regulations is replaced by the following:
(a) the plan contains no money purchase provision other than a money purchase provision under which each member account is credited, on a reasonable basis and no less frequently than annually, an amount based on the income earned, losses incurred and capital gains and capital losses realized, on all of the property held by the plan;
(2) Subsection (1) is deemed to have come into force on January 1, 2011.
411. (1) Section 8604 of the Regulations is repealed.
(2) Subsection (1) is deemed to have come into force on December 20, 2002.
412. (1) Section 8901 of the Regulations and the heading before it are repealed.
(2) Subsection (1) applies to fiscal periods that begin after the day on which this Act receives royal assent.
PART 6MEASURES IN RESPECT OF SALES TAX
R.S., c. E-15Excise Tax Act
Marginal note:R.S., c. 7 (2nd Supp.), s. 38(1); R.S., c. 47 (4th Supp.), s. 52, Sch., item 5(3); 1999, c. 17, par. 155(a)
413. Subsection 81.25(2) of the Excise Tax Act is repealed.
Marginal note:R.S., c. 7 (2nd Supp.), s. 38(1); 1999, c. 17, par. 155(b); 2002, c. 8, par. 183(1)(j)
414. Subsection 81.29(3) of the Act is repealed.
415. (1) The Act is amended by adding the following after section 177:
Collecting Body and Collective Societies
Meaning of “collective society”
177.1 (1) In this section, “collective society” means a collective society, as defined in section 2 of the Copyright Act, that is a registrant.
Marginal note:Copyright Act expressions
(2) In this section, the expressions “collecting body”, “eligible author”, “eligible maker” and “eligible performer” have the same meanings as in section 79 of the Copyright Act.
Marginal note:Supply by collecting body or collective society
(3) If a collecting body or a collective society makes a taxable supply to a person that is an eligible author, eligible maker, eligible performer or a collective society and the supply includes a service of collecting or distributing the levy payable under section 82 of the Copyright Act, the value of the consideration for the supply is, for the purpose of determining tax payable in respect of the supply, deemed to be equal to the amount determined by the formula:
A – B
where
- A
- is the value of that consideration as otherwise determined for the purposes of this Part; and
- B
- is the part of the value of the consideration referred to in the description of A that is exclusively attributable to the service.
(2) Subsection (1) is deemed to have come into force on March 19, 1998.
Marginal note:1997, c. 10, s. 45(1)
416. (1) Subsection 225.1(4.1) of the Act is replaced by the following:
Marginal note:Restriction
(4.1) An amount is not to be included in the total for B in the formula set out in subsection (2) for a reporting period of a charity to the extent that, before the end of the period, the amount was refunded to the charity under this or any other Act of Parliament or was remitted to the charity under the Financial Administration Act or the Customs Tariff.
(2) Subsection (1) applies for the purpose of determining the net tax of a charity for reporting periods beginning after 1996.
PART 7AMENDMENTS IN RESPECT OF TAX AGREEMENTS
R.S., c. F-8; 1995, c. 17, s. 45(1)Federal-Provincial Fiscal Arrangements Act
Marginal note:1992, c. 10, s. 1(2); 1998, c. 21, s. 76(1)
417. (1) The definition “administration agreement” in subsection 2(1) of the Federal-Provincial Fiscal Arrangements Act is replaced by the following:
“administration agreement”
« accord d’application »
“administration agreement” means
(a) an agreement between the Government of Canada and the government of a province or an aboriginal government under which
(i) the Government of Canada will administer and enforce an Act of the legislature of the province, or legislation made by an aboriginal government, that imposes a tax and will make payments to the province or the aboriginal government in respect of the taxes collected, in accordance with the terms and conditions of the agreement, or
(ii) the government of the province will administer and enforce an Act of Parliament that imposes a tax and will make payments to the Government of Canada in respect of the taxes collected, in accordance with the terms and conditions of the agreement, or
(b) an agreement between the Government of Canada and the government of a province under which the government of the province will administer and enforce a First Nation law that imposes a tax and will make payments to the Government of Canada in respect of the taxes collected, in accordance with the terms and conditions of the agreement;
(2) Subsection 2(1) of the Act is amended by adding the following in alphabetical order:
“First Nation law”
« texte législatif autochtone »
“First Nation law” has the meaning assigned by subsection 11(1) or 12(1) of the First Nations Goods and Services Tax Act.
418. (1) Section 7 of the Act is amended by adding the following after subsection (1):
Marginal note:Restriction
(1.1) An administration agreement referred to in paragraph (b) of the definition “administration agreement” in subsection 2(1) can only be entered into if the government of the province that is to administer and enforce the First Nation law also administers and enforces Part IX of the Excise Tax Act under an administration agreement referred to in paragraph (a) of that definition.
(2) Section 7 of the Act is amended by adding the following after subsection (2):
Marginal note:Amending agreement — exception to general rule
(2.1) Subsection (2) does not apply to an amendment made to an administration agreement if the agreement authorizes the Minister or the Minister of National Revenue to make the amendment and the amendment does not fundamentally alter the terms and conditions of the agreement.
Marginal note:Confirmation of past amendments
(2.2) Amendments that were made to an administration agreement before the day on which the Technical Tax Amendments Act, 2012 received royal assent and that, if subsection (2.1) had been in force on the date those amendments were made, would have been authorized under that subsection are, for greater certainty, ratified and confirmed and all actions taken and payments made as a result of those amendments are ratified and confirmed.
419. The Act is amended by adding the following after section 7.3:
Marginal note:Payments — First Nation law
7.31 If an administration agreement has been entered into in respect of a First Nation law, any amount that is payable by a person under the First Nation law shall, despite the First Nation law or any Act of Parliament, be remitted by that person to the government of the province that is a party to the administration agreement.
420. The Act is amended by adding the following after section 7.4:
Marginal note:Net remittance — First Nation law
7.5 Despite any other enactment, if an administration agreement has been entered into in respect of a First Nation law, the government of the province that is a party to the administration agreement may, in accordance with the terms and conditions of the administration agreement, reduce the remittance to the Government of Canada of any amount it has collected on account of the tax imposed under the First Nation law by any amount it has paid to a person under that law.
2003, c. 15, s. 67First Nations Goods and Services Tax Act
Marginal note:2005, c. 19, s. 3(1)
421. The definition “administration agreement” in subsection 2(1) of the First Nations Goods and Services Tax Act is replaced by the following:
“administration agreement”
« accord d’application »
“administration agreement”, in Part 1, means an agreement referred to in subsection 5(2) and entered into with the authorized body of a first nation and, in Part 2, means an agreement referred to in section 22 and entered into with a council of the band.
Marginal note:2005, c. 19, s. 5
422. Subsection 3(1.1) of the Act is replaced by the following:
Marginal note:Section 89 of Indian Act
(1.1) A first nation law, as defined in subsection 11(1) or 12(1), or an obligation to pay an amount that arises from the application of section 14, may, despite section 89 of the Indian Act, be administered and enforced by Her Majesty in right of Canada, by an agent of the first nation or, if the first nation law is administered by the government of a province under an agreement entered into under section 7 of the Federal-Provincial Fiscal Arrangements Act, by Her Majesty in right of the province.
423. Subsection 4(9) of the Act is replaced by the following:
Marginal note:Reporting and payment of tax
(9) Tax that is imposed under a law of a first nation enacted under subsection (1) in respect of the bringing of property onto the lands of the first nation shall become payable by the person who brings it onto the lands at the time it is brought onto the lands and
(a) if the person is a registrant who acquired the property for consumption, use or supply primarily in the course of commercial activities of the person, the person shall, on or before the day on or before which the person’s return in respect of net tax is required to be filed under the law of the first nation for the reporting period in which the tax became payable,
(i) report the tax in that return, and
(ii) pay the tax to the Receiver General, or, if the law of the first nation is administered by the government of a province under an agreement entered into under section 7 of the Federal-Provincial Fiscal Arrangements Act, to the appropriate minister for that province; and
(b) in any other case, the person shall, on or before the last day of the month following the calendar month in which the tax became payable,
(i) file with the Minister of National Revenue or, if the law of the first nation is administered by the government of a province under an agreement entered into under section 7 of the Federal-Provincial Fiscal Arrangements Act, with the appropriate minister for that province a return in respect of the tax, in the manner and in the form authorized by the Minister of National Revenue and containing information specified by that Minister, and
(ii) pay the tax to the Receiver General or to the appropriate minister for that province, as the case may be.
424. (1) Paragraphs 5(2)(e) and (f) of the Act are replaced by the following:
(e) for the administration and enforcement of the first nation law by the Government of Canada or, if the first nation law is administered by the government of a province under an agreement entered into under section 7 of the Federal-Provincial Fiscal Arrangements Act, by the government of the province and for the collection, by the Government of Canada or the government of the province, as the case may be, of amounts imposed under that law;
(f) for the provision by the Government of Canada or, if the first nation law is administered by the government of a province under an agreement entered into under section 7 of the Federal-Provincial Fiscal Arrangements Act, by the government of the province to the first nation of information acquired in the administration and enforcement of the first nation law or, subject to section 295 of the Excise Tax Act, of Part IX of that Act, and for the provision by the first nation to the Government of Canada or the government of the province, as the case may be, of information acquired in the administration of the first nation law;
(2) Subsection 5(5) of the Act is replaced by the following:
Marginal note:Payments to other persons
(5) Subject to subsection (6), if an administration agreement has been entered into in respect of a first nation law, as defined in subsection 11(1) or 12(1), payments may be made to a person out of the Consolidated Revenue Fund on account of any amount that is payable to the person under that law in accordance with the agreement unless the first nation law is administered by the government of a province under an agreement entered into under section 7 of the Federal-Provincial Fiscal Arrangements Act.
425. Section 16 of the Act is replaced by the following:
Marginal note:Information reports
16. (1) If an administration agreement entered into by the authorized body of a first nation is in effect in respect of a first nation law, as defined in subsection 11(1) or 12(1), the Minister of National Revenue or, if the first nation law is administered by the government of a province under an agreement entered into under section 7 of the Federal-Provincial Fiscal Arrangements Act, the appropriate minister for that province may, for the purposes of the administration agreement, require any person having a place of business, or maintaining assets of a business, on the lands of the first nation to make a report respecting supplies relating to that business made by the person or property or services acquired or imported for consumption, use or supply in connection with those lands and that business.
Marginal note:Form and manner of filing
(2) A report under subsection (1) shall be made in the manner and form authorized by the Minister of National Revenue and at the time and containing information specified by that Minister. The report shall be filed with the Minister of National Revenue or, if a first nation law is administered by the government of a province under an agreement referred to in that subsection, with the appropriate minister for that province.
PART 8COORDINATING AMENDMENTS
Marginal note:2012, c. 16
426. (1) In this section, “other Act” means the Pooled Registered Pension Plans Act.
(2) If this Act receives royal assent after the first day on which both the other Act and subsection 2(1) of the Jobs and Growth Act, 2012 are in force, then, on the day on which this Act receives royal assent, subparagraph 6(1)(a)(i) of the Income Tax Act, as enacted by subsection 170(1) of this Act, is replaced by the following:
(i) derived from the contributions of the taxpayer’s employer to or under a deferred profit sharing plan, an employee life and health trust, a group sickness or accident insurance plan, a group term life insurance policy, a pooled registered pension plan, a private health services plan, a registered pension plan or a supplementary unemployment benefit plan,
(3) If both the other Act and subsection 2(1) of the Jobs and Growth Act, 2012 come into force on the same day as this Act receives royal assent, then this Act is deemed to have received royal assent before the coming into force of that subsection 2(1).
(4) On the first day on which the other Act is in force and this Act has received royal assent,
(a) the portion of paragraph 60(n.1) of the Income Tax Act before subparagraph (i), as enacted by subsection 196(4) of this Act, is replaced by the following:
Marginal note:Repayment of pension benefits
(n.1) an amount paid by the taxpayer in the year to a pooled registered pension plan or registered pension plan if
(b) subparagraph 60(n.1)(iii) of the Income Tax Act, as enacted by subsection 196(4) of this Act, is replaced by the following:
(iii) no portion of the amount is deductible under any of paragraph 8(1)(m) and subsections 146(5) to (5.2) in computing the taxpayer’s income for the year;
(5) On the first day on which the other Act is in force and on which both this Act and the Jobs and Growth Act, 2012 have received royal assent
(a) section 253.1 of the Income Tax Act, as enacted by subsection 363(1) of this Act, is replaced by the following:
Marginal note:Investments in limited partnerships
253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b) and 146.1(2.1)(c), subsection 146.2(6), paragraph 146.4(5)(b), subsection 147.5(8), paragraph 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.
(b) section 57 of the Jobs and Growth Act, 2012 is deemed never to have come into force and is repealed.
(6) Subsection (4) applies to the 2009 and subsequent taxation years, except that, before the day on which the other Act comes into force
(a) the portion of paragraph 60(n.1) of the Income Tax Act before subparagraph (i), as enacted by paragraph (4)(a), is to be read without reference to “pooled registered pension plan or”; and
(b) subparagraph 60(n.1)(iii) of the Income Tax Act, as enacted by paragraph (4)(b), is to be read as follows:
(iii) no portion of the amount is deductible under paragraph 8(1)(m) in computing the taxpayer’s income for the year;
Marginal note:Bill C-45
427. (1) Subsections (2) to (5) apply if Bill C-45, introduced in the 1st session of the 41st Parliament and entitled Jobs and Growth Act, 2012 (in this section referred to as the “other Act”), receives royal assent.
(2) On the first day on which both the other Act and this Act have received royal assent,
(a) the portion of subsection 18(5) of the Income Tax Act before the definition “outstanding debts to specified non-residents” is replaced by the following:
Marginal note:Definitions
(5) Notwithstanding any other provision of this Act (other than subsection (5.1)), in this subsection and subsections (4) to (6),
(b) the definition “specified proportion” in subsection 18(5) of the Income Tax Act is repealed;
(c) the portion of subsection 93.1(1) of the Income Tax Act before paragraph (a) is replaced by the following:
Marginal note:Shares held by partnership
93.1 (1) For the purposes of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2), 20(12) and 39(2.1), sections 90, 93 and 113, paragraphs 128.1(1)(c.3) and (d), section 212.3 and subsection 219.1(2), (and any regulations made for the purposes of those provisions), section 95 (to the extent that it is applied for the purposes of those provisions), paragraph 95(2)(g.04) and section 126, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that
(d) clause 212.3(9)(c)(ii)(B) of the Income Tax Act, as enacted by subsection 49(1) of the other Act, is replaced by the following:
(B) as a dividend or qualifying return of capital, within the meaning assigned by subsection 90(3), in respect of a class of subject shares, or the portion of a dividend or qualifying return of capital in respect of a class of substituted shares that may reasonably be considered to relate to the subject shares, or
(e) subparagraph 212.3(18)(b)(vii) of the Income Tax Act, as enacted by subsection 49(1) of the other Act, is replaced by the following:
(vii) as a dividend or a qualifying return of capital, within the meaning assigned by subsection 90(3), in respect of the shares of another non-resident corporation that is, immediately before the investment time, a foreign affiliate of the CRIC;
(f) paragraph 212.3(20)(a) of the Income Tax Act, as enacted by subsection 49(1) of the other Act, is replaced by the following:
(a) the total of all amounts each of which is the amount of a debt obligation assumed by the CRIC in respect of the liquidation and dissolution, redemption, dividend or qualifying return of capital, as the case may be, and
(g) the portion of section 8201 of the Income Tax Regulations before paragraph (a) is replaced by the following:
8201. For the purposes of subsection 16.1(1), the definition “outstanding debts to specified non-residents” in subsection 18(5), subsections 100(1.3) and 112(2), the definition “qualified Canadian transit organization” in subsection 118.02(1), subsections 125.4(1) and 125.5(1), the definition “taxable supplier” in subsection 127(9), subparagraph 128.1(4)(b)(ii), paragraphs 181.3(5)(a) and 190.14(2)(b), the definition “Canadian banking business” in subsection 248(1) and paragraph 260(5)(a) of the Act, a “permanent establishment” of a person or partnership (either of whom is referred to in this section as the “person”) means a fixed place of business of the person, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse if the person has a fixed place of business and, where the person does not have any fixed place of business, the principal place at which the person’s business is conducted, and
(3) Paragraph (2)(c) is deemed to have come into force on August 20, 2011, except that before March 29, 2012, the portion of subsection 93.1(1) of the Income Tax Act before paragraph (a), as enacted by subsection paragraph 2(c), is to be read as follows:
93.1 (1) For the purposes of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2), 20(12) and 39(2.1), sections 90, 93 and 113, paragraph 128.1(1)(d), (and any regulations made for the purposes of those provisions), section 95 (to the extent that it is applied for the purposes of those provisions), paragraph 95(2)(g.04) and section 126, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that
(4) Clause 212.3(9)(c)(ii)(B) of the Income Tax Act, as enacted by paragraph (2)(d), subparagraph 212.3(18)(b)(vii) of that Act, as enacted by paragraph (2)(e), and paragraph 212.3(20)(a) of that Act, as enacted by paragraph (2)(f), apply in respect of transactions and events that occur after March 28, 2012, other than transactions and events to which subsections 212.3(9), (18) and (20) of the Income Tax Act, as enacted by subsection 49(1) of the other Act, do not apply because of subsection 49(2) or (3) of the other Act.
(5) Paragraph (2)(g) applies to the 2012 and subsequent taxation years.
SCHEDULE(Section 366)
SCHEDULE(Subsection 181(1))LISTED CORPORATIONS
- 2419726 Canada Inc.
- Ally Credit Canada Limited/Ally Crédit Canada Limitée
- AmeriCredit Financial Services of Canada Ltd.
- AVCO Financial Services Quebec Limited
- Bombardier Capital Ltd.
- Canaccord Capital Credit Corporation/Corporation de crédit Canaccord capital
- Canaccord Financial Holdings Inc./Corporation financière Canaccord Inc.
- Canadian Cooperative Agricultural Financial Services
- Canadian Home Income Plan Corporation
- Citibank Canada Investment Funds Limited
- Citicapital Commercial Corporation/Citicapital Corporation Commerciale
- Citi Cards Canada Inc./Cartes Citi Canada Inc.
- Citi Commerce Solutions of Canada Ltd.
- CitiFinancial Canada East Corporation/CitiFinancière, corporation du Canada Est
- CitiFinancial Canada, Inc./CitiFinancière Canada, Inc.
- CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires
- CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l’Est
- Citigroup Finance Canada Inc.
- Crédit Industriel Desjardins
- CU Credit Inc.
- Ford Credit Canada Limited
- GE Card Services Canada Inc./GE Services de Cartes du Canada Inc.
- GMAC Residential Funding of Canada, Limited
- Household Commercial Canada Inc.
- Household Finance Corporation Limited
- Household Finance Corporation of Canada
- Household Realty Corporation Limited
- Hudson’s Bay Company Acceptance Limited
- John Deere Credit Inc./Crédit John Deere Inc.
- Merchant Retail Services Limited
- PACCAR Financial Ltd./Compagnie Financière Paccar Ltée
- Paradigm Fund Inc./Le Fonds Paradigm Inc.
- Prêts étudiants Atlantique Inc./Atlantic Student Loans Inc.
- Principal Fund Incorporated
- RT Mortgage-Backed Securities Limited
- RT Mortgage-Backed Securities II Limited
- State Farm Finance Corporation of Canada/Corporation de Crédit State Farm du Canada
- Trans Canada Credit Corporation
- Trans Canada Retail Services Company/Société de services de détails trans Canada
- Wells Fargo Financial Canada Corporation
- Date modified: