Budget Implementation Act, 2021, No. 1 (S.C. 2021, c. 23)
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Assented to 2021-06-29
PART 1Amendments to the Income Tax Act and Other Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
25 (1) Subclause 126(1)(b)(ii)(A)(III) of the Act is replaced by the following:
(III) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (g) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and
(2) Subclause 126(2.1)(a)(ii)(A)(III) of the Act is replaced by the following:
(III) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (g) and sections 112 and 113, in computing the taxpayer’s taxable income for the year, and
(3) Subsections (1) and (2) come into force or are deemed to have come into force on July 1, 2021.
26 (1) The portion of paragraph 128.1(1)(c.3) of the Act before subparagraph (i) is replaced by the following:
Marginal note:Foreign affiliate dumping — immigrating corporation
(c.3) if the taxpayer is a corporation that was, immediately before the particular time, controlled by one non-resident person or, if no single non-resident person controlled the CRIC, a group of non-resident persons not dealing with each other at arm’s length (in this section, that one non-resident person, or each member of the group of non-resident persons, as the case may be, is referred to as a “parent”, and the group of non-resident persons, if any, is referred to as the “group of parents”) and the taxpayer owned, immediately before the particular time, one or more shares of one or more non-resident corporations (each of which is in this paragraph referred to as a “subject affiliate”) that, immediately after the particular time, were — or that became, as part of a transaction or event or series of transactions or events that includes the taxpayer having become resident in Canada — foreign affiliates of the taxpayer, then
(2) Subparagraph 128.1(1)(c.3)(ii) of the Act is replaced by the following:
(ii) for the purposes of Part XIII, the taxpayer is deemed, immediately after the particular time, to have paid to each parent, and each parent is deemed, immediately after the particular time, to have received from the taxpayer, a dividend in an amount determined by the formula
(A – B) × C/D
where
- A
- is the amount determined under clause (B) of the description of A in subparagraph (i),
- B
- is the amount determined under clause (A) of the description of A in subparagraph (i),
- C
- is the fair market value, immediately after the particular time, of the shares of the capital stock of the taxpayer that are held, directly or indirectly, by the parent, and
- D
- is the total of all amounts each of which is the fair market value, immediately after the particular time, of the shares of the capital stock of the taxpayer that are held, directly or indirectly, by a parent.
(3) Subsections (1) and (2) apply in respect of transactions or events that occur after March 18, 2019.
27 (1) Section 132 of the Act is amended by adding the following after subsection (5.2):
Marginal note:Allocation to redeemers
(5.3) If a trust that is a mutual fund trust throughout a taxation year paid or made payable, at any time in the taxation year, to a beneficiary an amount on a redemption by that beneficiary of a unit of the trust (in this subsection referred to as the “allocated amount”), and the beneficiary’s proceeds from the disposition of that unit do not include the allocated amount, in computing its income for the taxation year no deduction may be made by the trust in respect of
(a) the portion of the allocated amount that would be, without reference to subsection 104(6), an amount paid out of the income (other than taxable capital gains) of the trust; and
(b) the portion of the allocated amount determined by the formula
A − ½(B + C − D)
where
- A
- is the portion of the allocated amount that would be, without reference to subsection 104(6), an amount paid out of the taxable capital gains of the trust,
- B
- is the beneficiary’s proceeds from the disposition of the unit on the redemption,
- C
- is the allocated amount, and
- D
- is the amount determined by the trustee to be the beneficiary’s cost amount of that unit, using reasonable efforts to obtain the information required to determine the cost amount.
(2) Subsection (1) applies to taxation years that begin after March 18, 2019. However, paragraph 132(5.3)(b) of the Act, as enacted by subsection (1), does not apply to a taxation year of a mutual fund trust that begins before December 16, 2021, if, in that taxation year, units of the trust are
(a) listed on a designated stock exchange in Canada; and
(b) in continuous distribution.
28 Paragraph (a) of the definition tax deferred cooperative share in subsection 135.1(1) of the Act is replaced by the following:
(a) issued, after 2005 and before 2026, by an agricultural cooperative corporation to a person or partnership that is at the time the share is issued an eligible member of the agricultural cooperative corporation, pursuant to an allocation in proportion to patronage;
29 (1) Subsection 143.3(5) 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) this section does not apply to prohibit the deduction of an amount under paragraph 110(1)(e).
(2) Subsection (1) comes into force or is deemed to have come into force on July 1, 2021.
30 (1) The definition designated employee benefit in subsection 144.1(1) of the Act is replaced by the following:
- designated employee benefit
designated employee benefit means a benefit that is
(a) from a group sickness or accident insurance plan;
(b) from a group term life insurance policy;
(c) from a private health services plan;
(d) in respect of a counselling service described in subparagraph 6(1)(a)(iv); or
(e) not a death benefit, but that would be a death benefit if the amounts determined for paragraphs (a) and (b) of the definition death benefit in subsection 248(1) were nil. (prestation désignée)
(2) Paragraph 144.1(2)(a) of the Act is replaced by the following:
(a) the only purpose of the trust is to provide benefits to, or for the benefit of, persons described in subparagraph (d)(i) or (ii) and all or substantially all of the total cost of the benefits is applicable to designated employee benefits;
(3) Paragraph 144.1(2)(c) of the Act is replaced by the following:
(c) the trust meets one of the following conditions:
(i) the trust is required to be resident in Canada, determined without reference to section 94, or
(ii) if the condition in subparagraph (i) is not met, it is the case that
(A) employee benefits are provided to employees who are resident in Canada and to employees who are not resident in Canada,
(B) one or more participating employers are employers that are resident in a country other than Canada, and
(C) the trust is required to be resident in a country in which a participating employer resides;
(4) Subparagraph 144.1(2)(d)(i) of the Act is replaced by the following:
(i) an employee of a participating employer or former participating employer,
(5) The portion of subparagraph 144.1(2)(d)(ii) of the Act before clause (A) is replaced by the following:
(ii) an individual who, in respect of an employee of a participating employer or former participating employer, is (or, if the employee is deceased, was, at the time of the employee’s death)
(6) Paragraph 144.1(2)(e) of the Act is replaced by the following:
(e) the trust meets one of the following conditions:
(i) it contains at least one class of beneficiaries where
(A) the members of the class represent at least 25% of all of the beneficiaries of the trust who are employees of the participating employers under the trust, and
(B) either of the following conditions is met:
(I) at least 75% of the members of the class are not key employees of any of the participating employers under the trust, or
(II) the contributions to the trust in respect of key employees who deal at arm’s length with their employer are determined in connection with a collective bargaining agreement, or
(ii) in respect of the private health services plan under the trust, the total cost of benefits provided to each key employee (and to persons described in subparagraph (2)(d)(ii) in respect of the key employee) in relation to the year does not exceed the amount determined by the formula
$2,500 × A(B/C)
where
- A
- is the total number of persons each of whom
(A) is a person to whom designated employee benefits are provided under the plan, and
(B) is the key employee or a person described in subparagraph (2)(d)(ii) in respect of the key employee,
- B
- is the number of days in the year that the key employee was employed on a full-time basis by an employer that participates in the plan, and
- C
- is the number of days in the year;
(7) Subsection 144.1(2) of the Act is amended by adding “and” at the end of paragraph (g) and by replacing paragraphs (h) and (i) with the following:
(i) trustees who do not deal at arm’s length with one or more participating employers must not constitute the majority of the trustees of the trust.
(8) Paragraphs 144.1(3)(a) and (b) of the Act are replaced by the following:
(a) is not operated in accordance with the terms required by subsection (2) to govern the trust, unless it is reasonable to conclude that its trustees neither knew nor ought to have known that designated employee benefits have been provided to, or contributions have been made in respect of, beneficiaries other than those described in subparagraph (2)(d)(i) or (ii); or
(b) provides any benefit for which, if the benefit had been paid directly to the employee and not out of the trust, the contributions or premiums would not be deductible in computing the income of an employer in respect of any taxation year.
(9) Subsection 144.1(6) of the Act is replaced by the following:
Marginal note:Deductibility — collectively bargained or similar agreement
(6) Despite subsection (4) and paragraph 18(9)(a), an employer may deduct in computing its income for a taxation year the amount that it is required to contribute for the year to an employee life and health trust if the following conditions are met at the time that the contribution is made:
(a) the employer contributes to the trust in accordance with a contribution formula that does not provide for any variation in contributions determined by reference to the financial experience of the trust and either of the following conditions is met:
(i) if there is a collective bargaining agreement, the trust provides benefits
(A) negotiated under the collective bargaining agreement, or
(B) under a participation agreement that are substantially the same as under the collective bargaining agreement, or
(ii) in any other case, the trust provides benefits in accordance with an arrangement that meets the following conditions:
(A) there is a legal requirement for each employer to participate in accordance with the terms and conditions that govern the trust,
(B) there are a minimum of 50 beneficiaries under the trust who are employees of the participating employers in respect of the trust, and
(C) each employee who is a beneficiary under the trust deals at arm’s length with each participating employer in respect of the trust; and
(b) contributions that are to be made by each employer are determined, in whole or in part, by reference to the number of hours worked by individual employees of the employer or some other measure that is specific to each employee with respect to whom contributions are made to the trust.
(10) Section 144.1 of the Act is amended by adding the following after subsection (13):
Marginal note:Conditions — deemed employee life and health trust
(14) Subsection (15) applies in respect of a trust if
(a) the trust was established before February 28, 2018;
(b) the contributions to the trust are determined in connection with a collective bargaining agreement;
(c) all or substantially all of the employee benefits provided by the trust are designated employee benefits; and
(d) the trust elects in prescribed form and manner that subsection (15) applies as of a particular date after 2018.
Marginal note:Deemed employee life and health trust
(15) If this subsection applies in respect of a trust,
(a) the trust is deemed for the purposes of the Act to be an employee life and health trust from the particular date referred to in paragraph (14)(d) until the earliest of
(i) the end of 2022,
(ii) the day that the trust satisfies the conditions in subsection (2), and
(iii) any day on which the condition in paragraph (14)(c) is not satisfied; and
(b) at any time that the trust is an employee life and health trust because of paragraph (a),
(i) subsection 111(7.5) applies to the trust as if the reference in paragraph (b) of that subsection to “subsection 144.1(3)” were read as a reference to “paragraph 144.1(3)(b)”, and
(ii) subsection (3) applies to the trust without reference to its paragraph (a).
Marginal note:Trust-to-trust transfer
(16) If a property is transferred from a trust that provides employee benefits substantially all of which are designated employee benefits (referred to in this subsection as the “transferor trust”) to an employee life and health trust (referred to in this subsection as the “receiving trust”), and if the Minister has been so notified in prescribed form, then
(a) the transferred property is deemed to have been disposed of by the transferor trust, and to have been acquired by the receiving trust, for an amount equal to the cost amount of the property to the transferor trust immediately before the disposition; and
(b) section 107.1 does not apply to the transfer.
Marginal note:Deductibility of transferred property
(17) If subsection (16) applies to a transfer of property to an employee life and health trust, the transfer shall not be considered to be a contribution to the employee life and health trust for the purposes of subsections (4) and (6).
Marginal note:Requirement to file
(18) A trust shall, on or before its first filing-due date after 2021, notify the Minister in prescribed form that it is an employee life and health trust if
(a) prior to February 27, 2018, it provided employee benefits substantially all of which are designated employee benefits;
(b) after February 26, 2018, it becomes an employee life and health trust because it satisfies the conditions in subsection (2); and
(c) subsections (15) and (16) do not apply to the trust.
(11) Subsections (1) to (10) are deemed to have come into force on February 27, 2018. As of that date, section 144.1 of the Act, as amended by subsections (1) to (10), applies in respect of trusts regardless of the date that the trust was established.
- Date modified: