Economic Action Plan 2013 Act, No. 2 (S.C. 2013, c. 40)
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Assented to 2013-12-12
PART 1MEASURES RELATING TO INCOME TAX
R.S., c. 1 (5th Supp.)Income Tax Act
6. (1) Paragraph 13(7)(f) of the Act is replaced by the following:
(f) if a taxpayer is deemed under paragraph 111(4)(e) to have disposed of and reacquired depreciable property (other than a timber resource property), the capital cost to the taxpayer of the property at the time of the reacquisition is deemed to be equal to the total of
(i) the capital cost to the taxpayer of the property at the time of the disposition, and
(ii) 1/2 of the amount, if any, by which the taxpayer’s proceeds of disposition of the property exceed the capital cost to the taxpayer of the property at the time of the disposition;
(2) Subsection 13(18.1) of the Act is replaced by the following:
Marginal note:Ascertainment of certain property
(18.1) For the purpose of determining whether property meets the criteria set out in the Income Tax Regulations in respect of prescribed energy conservation property, the Technical Guide to Class 43.1 and 43.2, as amended from time to time and published by the Department of Natural Resources, shall apply conclusively with respect to engineering and scientific matters.
(3) Clause 13(21.2)(e)(iii)(D) of the Act is replaced by the following:
(D) that is immediately before the transferor is subject to a loss restriction event, or
(4) Subsections 13(24) and (25) of the Act are replaced by the following:
Marginal note:Loss restriction event
(24) If at any time a taxpayer is subject to a loss restriction event and, within the 12-month period that ended immediately before that time, the taxpayer, a partnership of which the taxpayer was a majority-interest partner or a trust of which the taxpayer was a majority-interest beneficiary (as defined in subsection 251.1(3)) acquired depreciable property (other than property that was held, by the taxpayer, partnership or trust or by a person that would be affiliated with the taxpayer if section 251.1 were read without reference to the definition “controlled” in subsection 251.1(3), throughout the period that began immediately before the 12-month period began and ended at the time the property was acquired by the taxpayer, partnership or trust) that was not used, or acquired for use, by the taxpayer, partnership or trust in a business that was carried on by it immediately before the 12-month period began
(a) subject to paragraph (b), for the purposes of the description of A in the definition “undepreciated capital cost” in subsection (21) and of sections 127 and 127.1, the property is deemed
(i) not to have been acquired by the taxpayer, partnership or trust, as the case may be, before that time, and
(ii) to have been acquired by it immediately after that time; and
(b) if the property was disposed of by the taxpayer, partnership or trust, as the case may be, before that time and was not reacquired by it before that time, for the purposes of the description of A in that definition, the property is deemed to have been acquired by it immediately before the property was disposed of.
Marginal note:Affiliation — subsection (24)
(25) For the purposes of subsection (24), if the taxpayer referred to in that subsection was formed or created in the 12-month period referred to in that subsection, the taxpayer is deemed to have been, throughout the period that began immediately before the 12-month period and ended immediately after it was formed or created,
(a) in existence; and
(b) affiliated with every person with whom it was affiliated (otherwise than because of a right referred to in paragraph 251(5)(b)) throughout the period that began when it was formed or created and that ended immediately before the time at which the taxpayer was subject to the loss restriction event referred to in that subsection.
(5) Subsections (1), (3) and (4) are deemed to have come into force on March 21, 2013, except that subsection 13(24) of the Act, as enacted by subsection (4), is to be read as follows before September 13, 2013:
(24) If at any time a taxpayer is subject to a loss restriction event and, within the 12-month period that ended immediately before that time, the taxpayer or a partnership of which the taxpayer was a majority-interest partner acquired depreciable property (other than property that was held, by the taxpayer or partnership or by a person that would be affiliated with the taxpayer if section 251.1 were read without reference to the definition “controlled” in subsection 251.1(3), throughout the period that began immediately before the 12-month period began and ended at the time the property was acquired by the taxpayer or partnership) that was not used, or acquired for use, by the taxpayer or partnership in a business that was carried on by it immediately before the 12-month period began
(a) subject to paragraph (b), for the purposes of the description of A in the definition “undepreciated capital cost” in subsection (21) and of sections 127 and 127.1, the property is deemed
(i) not to have been acquired by the taxpayer or partnership, as the case may be, before that time, and
(ii) to have been acquired by it immediately after that time; and
(b) if the property was disposed of by the taxpayer or partnership, as the case may be, before that time and was not reacquired by it before that time, for the purposes of the description of A in that definition, the property is deemed to have been acquired by it immediately before the property was disposed of.
(6) Subsection (2) comes into force, or is deemed to have come into force, on the day on which the Technical Guide to Class 43.1 and 43.2 is first published by the Department of Natural Resources.
7. (1) Paragraph 14(12)(f) of the Act is replaced by the following:
(f) that is immediately before the transferor is subject to a loss restriction event, or
(2) Subsection (1) is deemed to have come into force on March 21, 2013.
8. (1) Subsection 18(4) of the Act is replaced by the following:
Marginal note:Limitation on deduction of interest
(4) Notwithstanding any other provision of this Act (other than subsection (8)), in computing the income for a taxation year of a corporation or a trust from a business (other than the Canadian banking business of an authorized foreign bank) or property, no deduction shall be made in respect of that proportion of any amount otherwise deductible in computing its income for the year in respect of interest paid or payable by it on outstanding debts to specified non-residents that
(a) the amount, if any, by which
(i) the average of all amounts each of which is, in respect of a calendar month that ends in the year, the greatest total amount at any time in the month of the outstanding debts to specified non-residents of the corporation or trust,
exceeds
(ii) 1.5 times the equity amount of the corporation or trust for the year,
is of
(b) the amount determined under subparagraph (a)(i) in respect of the corporation or trust for the year.
(2) The portion of the definition “outstanding debts to specified non-residents” in subsection 18(5) of the Act before paragraph (b) is replaced by the following:
“outstanding debts to specified non-residents”
« dettes impayées envers des non-résidents déterminés »
“outstanding debts to specified non-residents”, of a corporation or trust at any particular time in a taxation year, means
(a) the total of all amounts each of which is an amount outstanding at that time as or on account of a debt or other obligation to pay an amount
(i) that was payable by the corporation or trust to a person who was, at any time in the year,
(A) a specified non-resident shareholder of the corporation or a specified non-resident beneficiary of the trust, or
(B) a non-resident person who was not dealing at arm’s length with a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, and
(ii) on which any amount in respect of interest paid or payable by the corporation or trust is or would be, but for subsection (4), deductible in computing the income of the corporation or trust for the year,
but does not include
(3) Subsection 18(5) of the Act is amended by adding the following in alphabetical order:
“beneficiary”
« bénéficiaire »
“beneficiary” has the same meaning as in subsection 108(1);
“equity amount”
« montant des capitaux propres »
“equity amount”, of a corporation or trust for a taxation year, means
(a) in the case of a corporation resident in Canada, the total of
(i) the retained earnings of the corporation at the beginning of the year, except to the extent that those earnings include retained earnings of any other corporation,
(ii) the average of all amounts each of which is the corporation’s contributed surplus (other than any portion of that contributed surplus that arose in connection with an investment, as defined in subsection 212.3(10), to which subsection 212.3(2) applies) at the beginning of a calendar month that ends in the year, to the extent that it was contributed by a specified non-resident shareholder of the corporation, and
(iii) the average of all amounts each of which is the corporation’s paid-up capital at the beginning of a calendar month that ends in the year, excluding the paid-up capital in respect of shares of any class of the capital stock of the corporation owned by a person other than a specified non-resident shareholder of the corporation,
(b) in the case of a trust resident in Canada, the amount, if any, by which
(i) the total of
(A) the average of all amounts each of which is the total amount of all equity contributions to the trust made before a calendar month that ends in the year, to the extent that the contributions were made by a specified non-resident beneficiary of the trust, and
(B) the tax-paid earnings of the trust for the year,
exceeds
(ii) the average of all amounts each of which is the total of all amounts that were paid or became payable by the trust to a beneficiary of the trust in respect of the beneficiary’s interest under the trust before a calendar month that ends in the year except to the extent that the amount is
(A) included in the beneficiary’s income for a taxation year because of subsection 104(13),
(B) an amount from which tax was deducted under Part XIII because of paragraph 212(1)(c), or
(C) paid or payable to a person other than a specified non-resident beneficiary of the trust, and
(c) in the case of a corporation or trust that is not resident in Canada, including a corporation or trust that files a return under this Part in accordance with subsection 216(1) in respect of the year, 40% of the amount, if any, by which
(i) the average of all amounts each of which is the cost of a property, other than an interest as a member of a partnership, owned by the corporation or trust at the beginning of a calendar month that ends in the year
(A) that is used by the corporation or trust in the year in, or held by it in the year in the course of, carrying on business in Canada, or
(B) that is an interest in real property, or a real right in immovables, in Canada, or an interest in, or for civil law a right in, timber resource properties and timber limits, in Canada, and in respect of which the corporation or trust files a return under this Part in accordance with subsection 216(1) in respect of the year,
exceeds
(ii) the average of all amounts each of which is the total of all amounts outstanding, at the beginning of a calendar month that ends in the year, as or on account of a debt or other obligation to pay an amount that was payable by the corporation or trust that may reasonably be regarded as relating to a business carried on by it in Canada or to an interest or right described in clause (i)(B), other than a debt or obligation that is included in the outstanding debts to specified non-residents of the corporation or trust;
“equity contribution”
« apport de capitaux propres »
“equity contribution”, to a trust, means a transfer of property to the trust that is made
(a) in exchange for an interest as a beneficiary under the trust,
(b) in exchange for a right to acquire an interest as a beneficiary under the trust, or
(c) for no consideration by a person beneficially interested in the trust;
“specified beneficiary”
« bénéficiaire déterminé »
“specified beneficiary”, of a trust at any time, means a person who at that time, either alone or together with persons with whom that person does not deal at arm’s length, has an interest as a beneficiary under the trust with a fair market value that is not less than 25% of the fair market value of all interests as a beneficiary under the trust and for the purpose of determining whether a particular person is a specified beneficiary of a trust,
(a) if the particular person, or a person with whom the particular person does not deal at arm’s length, has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, an interest as a beneficiary under a trust, the particular person or the person with whom the particular person does not deal at arm’s length, as the case may be, is deemed at that time to own the interest,
(b) if the particular person, or a person with whom the particular person does not deal at arm’s length, has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently to cause a trust to redeem, acquire or terminate any interest in it as a beneficiary (other than an interest held by the particular person or a person with whom the particular person does not deal at arm’s length), the trust is deemed at that time to have redeemed, acquired or terminated the interest, unless the right is not exercisable at that time because the exercise of the right is contingent on the death, bankruptcy or permanent disability of an individual, and
(c) if the amount of income or capital of the trust that the particular person, or a person with whom the particular person does not deal at arm’s length, may receive as a beneficiary of the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be;
“specified non-resident beneficiary”
« bénéficiaire non-résident déterminé »
“specified non-resident beneficiary”, of a trust at any time, means a specified beneficiary of the trust who at that time is a non-resident person;
“tax-paid earnings”
« bénéfices libérés d’impôt »
“tax-paid earnings”, of a trust resident in Canada for a taxation year, means the total of all amounts each of which is the amount in respect of a particular taxation year of the trust that ended before the year determined by the formula
A – B
where
- A
- is the taxable income of the trust under this Part for the particular year, and
- B
- is the total of tax payable under this Part by the trust, and all income taxes payable by the trust under the laws of a province, for the particular year.
(4) Subsections 18(5.1) and (6) of the Act are replaced by the following:
Marginal note:Specified shareholder or specified beneficiary
(5.1) For the purposes of subsections (4) to (6), if
(a) a particular person would, but for this subsection, be a specified shareholder of a corporation or a specified beneficiary of a trust at any time,
(b) there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular person will cease to be a specified shareholder of the corporation or a specified beneficiary of the trust, and
(c) the purpose for which the particular person became a specified shareholder or specified beneficiary was the safeguarding of rights or interests of the particular person or a person with whom the particular person is not dealing at arm’s length in respect of any indebtedness owing at any time to the particular person or a person with whom the particular person is not dealing at arm’s length,
the particular person is deemed not to be a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, at that time.
Marginal note:Specified shareholder or specified beneficiary
(5.2) For the purposes of subsections (4) to (6), a non-resident corporation is deemed to be a specified shareholder of itself and a non-resident trust is deemed to be a specified beneficiary of itself.
Marginal note:Property used in business — cost attribution
(5.3) For the purposes of subparagraph (c)(i) of the definition “equity amount” in subsection (5),
(a) if a property is partly used or held by a taxpayer in a taxation year in the course of carrying on business in Canada, the cost of the property to the taxpayer is deemed for the year to be equal to the same proportion of the cost to the taxpayer of the property (determined without reference to this subsection) that the proportion of the use or holding made of the property in the course of carrying on business in Canada in the year is of the whole use or holding made of the property in the year; and
(b) if a corporation or trust is deemed to own a portion of a property of a partnership because of subsection (7) at any time,
(i) the property is deemed to have, at that time, a cost to the corporation or trust equal to the same proportion of the cost of the property to the partnership as the proportion of the debts and other obligations to pay an amount of the partnership allocated to it under subsection (7) is of the total amount of all debts and other obligations to pay an amount of the partnership, and
(ii) in the case of a partnership that carries on business in Canada, the corporation or trust is deemed to use or hold the property in the course of carrying on business in Canada to the extent the partnership uses or holds the property in the course of carrying on business in Canada for the fiscal period of the partnership that includes that time.
Marginal note:Rules — trust income
(5.4) For the purposes of this Act, a trust resident in Canada may designate in its return of income under this Part for a taxation year that all or any portion of an amount paid or credited as interest by the trust, or by a partnership, in the year to a non-resident person is deemed to be income of the trust that has been paid to the non-resident person as a beneficiary of the trust, and not to have been paid or credited by the trust or the partnership as interest, to the extent that an amount in respect of the interest
(a) is included in computing the income of the trust for the year under paragraph 12(1)(l.1); or
(b) is not deductible in computing the income of the trust for the year because of subsection (4).
Marginal note:Loans made on condition
(6) If any loan (in this subsection referred to as the “first loan”) has been made
(a) by a specified non-resident shareholder of a corporation or a specified non-resident beneficiary of a trust, or
(b) by a non-resident person who was not dealing at arm’s length with a specified shareholder of a corporation or a specified non-resident beneficiary of a trust,
to another person on condition that a loan (in this subsection referred to as the “second loan”) be made by any person to a particular corporation or trust, for the purposes of subsections (4) and (5), the lesser of
(c) the amount of the first loan, and
(d) the amount of the second loan
is deemed to be a debt incurred by the particular corporation or trust to the person who made the first loan.
(5) The portion of paragraph 18(7)(a) of the Act before subparagraph (i) is replaced by the following:
(a) to owe the portion (in this subsection and paragraph 12(1)(l.1) referred to as the “debt amount”) of each debt or other obligation to pay an amount of the partnership and to own the portion of each property of the partnership that is equal to
(6) Subparagraph 18(15)(b)(iii) of the Act is replaced by the following:
(iii) that is immediately before the transferor is subject to a loss restriction event, or
(7) Subsections (1) to (5) apply to taxation years that begin after 2013, except that if a trust that is resident in Canada on March 21, 2013 elects in writing and files the election with the Minister of National Revenue on or before the trust’s filing-due date for its first taxation year that begins after 2013,
(a) for the purpose of determining the trust’s equity amount, as defined in subsection 18(5) of the Act, as enacted by subsection (3), the trust is deemed
(i) to not have received any equity contributions, as defined in subsection 18(5) of the Act, as enacted by subsection (3), before March 21, 2013,
(ii) to not have paid or made payable any amount to a beneficiary of the trust before March 21, 2013, and
(iii) to have tax-paid earnings, as defined in subsection 18(5) of the Act, as enacted by subsection (3), of nil for each taxation year that ends before March 21, 2013, and
(b) each beneficiary of the trust at the beginning of March 21, 2013 is deemed to have made an equity contribution at that time to the trust equal to the amount determined by the formula
A/B × (C – D)
where
- A
- is the fair market value of the beneficiary’s interest as a beneficiary under the trust at that time,
- B
- is the fair market value of all the beneficial interests under the trust at that time,
- C
- is the total fair market value of all the properties of the trust at that time, and
- D
- is the total amount of the trust’s liabilities at that time.
(8) Subsection (6) is deemed to have come into force on March 21, 2013.
- Date modified: