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Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)

Assented to 2013-06-26

  •  (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.

  •  (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.

  •  (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.

 
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