Budget Implementation Act, 2017, No. 2 (S.C. 2017, c. 33)
Full Document:
Assented to 2017-12-14
28 (1) Section 91 of the Act is amended by adding the following after subsection (1):
Marginal note:Conditions for application of subsection (1.2)
(1.1) Subsection (1.2) applies at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada if
(a) an amount would be included under subsection (1) in computing the income of the taxpayer, in respect of a share of the particular affiliate or another foreign affiliate of the taxpayer that has an equity percentage (as defined in subsection 95(4)) in the particular affiliate, for the taxation year of the particular affiliate (determined without reference to subsection (1.2)) that includes the particular time (referred to in this subsection and subsection (1.3) as the “ordinary taxation year” of the particular affiliate), if the ordinary taxation year of the particular affiliate ended at the particular time;
(b) immediately after the particular time, there is
(c) if subparagraph (b)(i) applies, all or a portion of an amount described in paragraph 95(2)(f) that accrued to the particular affiliate during the portion of the ordinary taxation year of the particular affiliate before the particular time is excluded in computing the income of another taxpayer because paragraph 95(2)(f.1) applies as a result of the taxpayer being, at a time before the acquisition of control, a designated acquired corporation of the other taxpayer; and
(d) if subparagraph (b)(ii) applies, none of the following is the case:
(i) the change referred to in that subparagraph
(A) is a decrease, and
(B) is equal to the total of all amounts each of which is the increase — that can reasonably be considered to result from the triggering event — in the aggregate participating percentage of another taxpayer, in respect of the particular affiliate for the ordinary taxation year of the particular affiliate, if the other taxpayer
(I) is a person resident in Canada, other than a person that is — or a trust, any of the beneficiaries under which is — by reason of a statutory provision, exempt from tax under this Part, and
(II) is related to the taxpayer,
1 if the triggering event results from a winding-up of the taxpayer to which subsection 88(1) applies, at the particular time, and
2 in any other case, immediately after the particular time,
(ii) the triggering event is on an amalgamation as defined in subsection 87(1),
(iii) the triggering event is an excluded acquisition or disposition, in respect of the ordinary taxation year of the particular affiliate, and
(iv) if one or more triggering events — all of which are described in subparagraph (b)(ii) and in respect of which none of the conditions in subparagraphs (i) to (iii) are satisfied — occur in the ordinary taxation year of the particular affiliate, the percentage determined by the following formula is not greater than 5%:
A — B
where
- A
- is the total of all amounts each of which is the decrease — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate, and
- B
- is the total of all amounts each of which is the increase — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate.
Marginal note:Deemed year-end
(1.2) If this subsection applies at a particular time in respect of a foreign affiliate of a particular taxpayer resident in Canada, then for the purposes of this section and section 92,
(a) in respect of the particular taxpayer and each connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s taxation year that would, in the absence of this subsection, have included the particular time is deemed to have ended at the time (referred to in this section as the “stub-period end time”) that is immediately before the particular time;
(b) if the affiliate is, immediately after the particular time, a foreign affiliate of the particular taxpayer or a connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s next taxation year after the stub-period end time is deemed, in respect of the particular taxpayer or the connected person or connected partnership, as the case may be, to begin immediately after the particular time; and
(c) in determining the foreign accrual property income of the affiliate for the taxation year referred to in paragraph (a) in respect of the particular taxpayer or a connected person or connected partnership, in respect of the particular taxpayer, all transactions or events that occur at the particular time are deemed to occur at the stub-period end time.
Marginal note:Definitions
(1.3) The following definitions apply in this subsection and subsections (1.1) and (1.2).
- aggregate participating percentage
aggregate participating percentage, of a taxpayer in respect of a foreign affiliate of the taxpayer for a taxation year of the affiliate, means the total of all amounts, each of which is the participating percentage, in respect of the affiliate, of a share of the capital stock of a corporation that is owned by the taxpayer at the end of the taxation year. (pourcentage de participation total)
- connected person
connected person, in respect of a particular taxpayer, means a person that — at or immediately after the particular time at which subsection (1.2) applies in respect of a foreign affiliate of the particular taxpayer — is resident in Canada and
(a) does not deal at arm’s length with the particular taxpayer; or
(b) deals at arm’s length with the particular taxpayer, if
(i) the foreign affiliate is a foreign affiliate of the person at the particular time, and
(ii) the aggregate participating percentage of the person in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). (personne rattachée)
- connected partnership
connected partnership, in respect of a particular taxpayer, means a partnership if, at or immediately after the particular time at which subsection (1.2) applies in respect of a foreign affiliate of the particular taxpayer,
(a) the particular taxpayer or a connected person in respect of the particular taxpayer is, directly or indirectly through one or more partnerships, a member of the partnership; or
(b) if paragraph (a) does not apply,
(i) the foreign affiliate is a foreign affiliate of the partnership at the particular time, and
(ii) the aggregate participating percentage of the partnership in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). (société de personnes rattachée)
- excluded acquisition or disposition
excluded acquisition or disposition, in respect of a taxation year of a foreign affiliate of a taxpayer, means an acquisition or disposition of an equity interest in a corporation, partnership or trust that can reasonably be considered to result in a change in the aggregate participating percentage of the taxpayer in respect of the affiliate for the taxation year of the affiliate, if
(a) the change is less than 1%; and
(b) it cannot reasonably be considered that one of the main reasons the acquisition or disposition occurs as a separate acquisition or disposition from one or more other acquisitions or dispositions is to avoid the application of subsection (1.2). (acquisition ou disposition exclue)
- triggering event
triggering event means
(a) an acquisition or disposition of an equity interest in a corporation, partnership or trust;
(b) a change in the terms or conditions of a share of the capital stock of a corporation or the rights as a member of a partnership or as a beneficiary under a trust; and
(c) a disposition or change of a right referred to in paragraph 95(6)(a). (événement déclencheur)
Marginal note:Election for application of subsection (1.2)
(1.4) If the conditions in subsection (1.1) are not met at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada, subsection (1.2) applies in respect of the particular affiliate at that time if
(a) the conditions in paragraph (1.1)(a) are met in respect of the particular affiliate at the particular time;
(b) immediately after the particular time there is a disposition of shares of the capital stock of the particular affiliate or another foreign affiliate of the taxpayer that had an equity percentage (as defined in subsection 95(4)) in the particular affiliate by
(c) the taxpayer and all specified corporations jointly elect in writing to apply subsection (1.2) in respect of the disposition and file the election with the Minister on or before the day that is the earliest filing-due date for all taxpayers making the election in respect of the taxation year in which the transaction to which the election relates occurred, and for this purpose, a specified corporation means a corporation that at or immediately after the particular time meets the following conditions:
(i) the corporation is resident in Canada,
(ii) the corporation does not deal at arm’s length with the taxpayer, and
(iii) the particular affiliate is a foreign affiliate of the corporation, or of a partnership of which the corporation is, directly or indirectly through one or more partnerships, a member.
Marginal note:Election for application of subsection (1.2)
(1.5) A particular taxpayer resident in Canada may elect, by filing with the Minister in prescribed manner a form containing prescribed information on or before the particular taxpayer’s filing-due date for its taxation year that includes a particular time, to have subsection (1.2) apply at the particular time in respect of a particular foreign affiliate of the particular taxpayer if
(a) immediately after the particular time, there is an acquisition or disposition of shares of the capital stock of a foreign affiliate of another taxpayer that results in a decrease to the surplus entitlement percentage of the other taxpayer in respect of the particular affiliate;
(b) as a result of the acquisition or disposition described in paragraph (a), subsection (1.2) applies to the other taxpayer resident in Canada in respect of the particular affiliate;
(c) the surplus entitlement percentage of the particular taxpayer in respect of the particular affiliate increases as a result of the acquisition or disposition described in paragraph (a);
(d) subsection (1.2) does not apply, in the absence of this subsection, to the particular taxpayer in respect of the acquisition or disposition; and
(e) the particular affiliate is a foreign affiliate of the particular taxpayer at the particular time.
(2) Subsection 91(1.5) of the Act, as enacted by subsection (1), is repealed.
(3) Subsection 91(4.5) of the Act is replaced by the following:
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 or the corporation is not treated as a corporation under the relevant foreign tax law.
(4) Subsection (1) is deemed to have come into force on July 12, 2013, except that
(a) an election referred to in subsection 91(1.4) of the Act, as enacted by subsection (1), is deemed to have been filed by the particular taxpayer and all specified corporations (within the meaning assigned by subsection 91(1.4) of the Act) referred to in that subsection on a timely basis if the election is filed on or before the earliest filing-due date, for all taxpayers making the election, for the respective taxation year that includes the day on which this Act receives royal assent;
(b) an election referred to in subsection 91(1.5) of the Act, as enacted by subsection (1), is deemed to have been filed by the particular taxpayer referred to in that subsection on a timely basis if the election is filed on or before the filing-due date for the particular taxpayer for its taxation year that includes the day on which this Act receives royal assent;
(c) subject to paragraph (d), for the purpose of applying subsections 91(1.1) to (1.4) of the Act, as enacted by subsection (1), if the particular time referred to in subsection 91(1.1) of the Act, as enacted by subsection (1), is before September 8, 2017, those subsections are to be read as follows:
Marginal note:Conditions for application of subsection (1.2)
(1.1) Subsection (1.2) applies at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada if
(a) an amount would be included under subsection (1) in computing the income of the taxpayer, in respect of a share of the particular affiliate or another foreign affiliate of the taxpayer that has an equity percentage (as defined in subsection 95(4)) in the particular affiliate, for the taxation year of the particular affiliate (determined without reference to subsection (1.2)) that includes the particular time, if that taxation year ended at the particular time; and
(b) immediately after the particular time, there is an acquisition or disposition of shares of the capital stock of a foreign affiliate of the taxpayer that results in a change to the surplus entitlement percentage of the taxpayer in respect of the particular affiliate (determined as if the taxpayer were a corporation resident in Canada), unless
(i) the change is a decrease in the surplus entitlement percentage of the taxpayer (determined as if the taxpayer were a corporation resident in Canada) in respect of the particular affiliate and, as a result of the acquisition or disposition, one or more taxpayers, each of which is a taxable Canadian corporation that does not deal at arm’s length with the taxpayer immediately after the particular time, have increases to their surplus entitlement percentages in respect of the particular affiliate that are, in total, equal to the reduction in the taxpayer’s surplus entitlement percentage in respect of the particular affiliate immediately after the particular time,
(ii) the acquisition or disposition is on an amalgamation as defined in subsection 87(1), or
(iii) if one or more such acquisitions or dispositions in respect of which the conditions in subparagraphs (i) and (ii) are not satisfied occur in a particular taxation year of the particular affiliate (determined without reference to this subsection and subsection (1.2)), the percentage determined by the following formula is not greater than 5%:
A – B
where
- A
- is the total of all amounts each of which is the decrease in the surplus entitlement percentage of the taxpayer in respect of the particular affiliate resulting from such acquisition or disposition in the particular year (other than an acquisition or disposition described in subparagraph (i) or (ii)), and
- B
- is the total of all amounts each of which is the increase in the surplus entitlement percentage of the taxpayer in respect of the particular affiliate resulting from such acquisition or disposition in the particular year (other than an acquisition from a person that does not deal at arm’s length with the taxpayer).
Marginal note:Deemed year-end
(1.2) If this subsection applies at a particular time in respect of a foreign affiliate of a particular taxpayer resident in Canada, then for the purposes of this section and section 92,
(a) in respect of the particular taxpayer and each corporation or partnership that is connected to the particular taxpayer, the affiliate’s taxation year that would, in the absence of this subsection, have included the particular time is deemed to have ended at the time (referred to in this section as the “stub-period end time”) that is immediately before the particular time;
(b) if the affiliate is, immediately after the particular time, a foreign affiliate of the particular taxpayer or a corporation or partnership that is connected to the particular taxpayer, the affiliate’s next taxation year after the stub-period end time is deemed, in respect of the taxpayer or the connected corporation or partnership, as the case may be, to begin immediately after the particular time; and
(c) in determining the foreign accrual property income of the affiliate for that taxation year in respect of the particular taxpayer or a corporation or partnership that is connected to the particular taxpayer, all transactions or events that occur at the particular time are deemed to occur at the stub-period end time.
Marginal note:Connected — meaning
(1.3) For the purposes of subsection (1.2),
(a) a corporation is connected to the particular taxpayer if, at or immediately after the particular time, it is resident in Canada and does not deal at arm’s length with the taxpayer; and
(b) a partnership is connected to the particular taxpayer if, at or immediately after the particular time, the particular taxpayer or a corporation described in paragraph (a) is, directly or indirectly through one or more partnerships, a member of the partnership.
Marginal note:Election for application of subsection (1.2)
(1.4) If the conditions in subsection (1.1) are not met at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada, subsection (1.2) applies in respect of the particular affiliate at that time if
(a) the conditions in paragraph (1.1)(a) are met in respect of the particular affiliate at the particular time;
(b) immediately after the particular time there is a disposition of shares of the capital stock of the particular affiliate or another foreign affiliate of the taxpayer that had an equity percentage (as defined in subsection 95(4)) in the particular affiliate by
(c) the taxpayer and all specified corporations jointly elect, by filing with the Minister in prescribed manner a form containing prescribed information on or before the day that is the earliest filing-due date for all taxpayers making the election in respect of the taxation year in which the transaction to which the election relates occurred, and for this purpose, a specified corporation means a corporation that at or immediately after the particular time meets the following conditions:
(i) the corporation is resident in Canada,
(ii) the corporation does not deal at arm’s length with the taxpayer, and
(iii) the particular affiliate is a foreign affiliate of the corporation, or of a partnership of which the corporation is, directly or indirectly through one or more partnerships, a member.
(d) paragraph (c) does not apply in respect of a taxpayer if
(i) the taxpayer and all connected persons and connected partnerships (within the meanings assigned by subsection 91(1.3) of the Act, as enacted by this subsection) in respect of the taxpayer jointly elect in writing, and
(ii) the election is filed with the Minister by the later of the taxpayer’s filing-due date for its taxation year that includes September 8, 2017 and six months after the day on which this Act receives royal assent; and
(e) if paragraph (c) does not apply in respect of a taxpayer because of paragraph (d),
(i) section 91 of the Act, as amended by subsection (1), shall be read without reference to its subsection (1.5), and
(ii) subsection 91(1.1) of the Act, as enacted by subsection (1), shall be read without reference to its subparagraph (b)(i) and paragraph (c) in respect of any acquisition of control of the taxpayer that occurs before September 8, 2017.
(5) Subsection (2) applies to taxation years that begin after September 7, 2017.
(6) Subsection (3) 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), for a taxation year of the taxpayer that ends after October 24, 2012, in respect of a foreign affiliate of the taxpayer.
- Date modified: