Budget Implementation Act, 2023, No. 1 (S.C. 2023, c. 26)

• 17 (1) Paragraph 87(2)(j.6) of the Act is replaced by the following:

  • Marginal note:Continuing corporation

    (j.6) for the purposes of paragraphs 12(1)(t) and (x), subsections 12(2.2) and 13(7.1), (7.4) and (24), paragraphs 13(27)(b) and (28)(c), subsections 13(29) and 18(9.1), paragraphs 20(1)(e), (e.1), (v) and (hh), sections 20.1 and 32, paragraph 37(1)(c), subsection 39(13), subparagraphs 53(2)(c)(vi) and (h)(ii), paragraph 53(2)(s), subsections 53(2.1), 66(11.4), 66.7(11) and 127(10.2), section 139.1, subsection 152(4.3), the determination of D in the definition undepreciated capital cost in subsection 13(21) and the determination of L in the definition cumulative Canadian exploration expense in subsection 66.1(6), 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 2007 except that, for taxation years that end before March 19, 2019, paragraph 87(2)(j.6) of the Act, as enacted by subsection (1), does not apply to subsection 127(10.2) of the Act.

• 18 (1) Paragraph 90(8)(b) of the Act is replaced by the following:

  • (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 (other than a business of lending money if, at any time during which the loan is outstanding, less than 90% of the aggregate outstanding amount of the loans of the business is owing by borrowers that deal at arm’s length with the creditor) 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;

• (2) Section 90 of the Act is amended by adding the following after subsection (8):

  • Marginal note:Interpretation — partnerships

    (8.01) For the purposes of paragraph (8)(b), a borrower shall be considered to deal at arm’s length with a creditor only if

    • (a) for greater certainty, the borrower and the creditor deal with each other at arm’s length;

    • (b) where either the borrower or the creditor is a partnership and the other party is not, each member of the partnership deals at arm’s length with the other party; and

    • (c) where both the borrower and the creditor are partnerships, the borrower and each member of the borrower deal at arm’s length with the creditor and each member of the creditor.

• (3) Subsections (1) and (2) apply to loans made after 2022. Subsection (1), subsection 90(6) of the Act and all provisions of the Act relevant to the interpretation and application of subsection 90(6) of the Act also apply in respect of any portion of a particular loan made before 2023 that remains outstanding on January 1, 2023 – as if that portion were a separate loan that was made on January 1, 2023 in the same manner and on the same terms as the particular loan – if, at the time when the particular loan was made, it met the requirements of subsection 90(6) of the Act as in force at the time when the particular loan was made.

• 19 (1) The portion of subsection 93.3(1) of the Act before paragraph (a) is replaced by the following:

  Marginal note:Definition of specified trust

  • 93.3 (1) In this section, specified trust, at any time, means a trust in respect of which the following apply at that time:

• (2) Paragraph 93.3(1)(b) of the Act is replaced by the following:

  • (b) the trust is resident in Australia or India (in this section referred to as the “specified jurisdiction”);

• (3) Paragraph 93.3(2)(c) of the Act is replaced by the following:

  • (c) the trust is at that time a specified trust;

• (4) The portion of paragraph 93.3(2)(e) of the Act before subparagraph (i) is replaced by the following:

  • (e) unless the non-resident corporation first acquires a beneficial interest in the trust at that time or the non-resident corporation first becomes a foreign affiliate of the taxpayer at that time, immediately before that time (referred to in this paragraph as the “preceding time”) subsection (3) applied

• (5) The portion of subsection 93.3(3) of the Act before paragraph (b) is replaced by the following:

  • Marginal note:Specified trusts

    (3) If this subsection applies at any time to a taxpayer resident in Canada in respect of a trust, the following rules apply at that time for the specified purposes:

    • (a) the trust is deemed to be a non-resident corporation that is resident in the specified jurisdiction and not to be a trust;

• (6) Paragraph 93.3(4)(a) of the Act is replaced by the following:

  • (a) the determination, in respect of an interest in a specified trust, of the Canadian tax results (as defined in subsection 261(1)) of the taxpayer resident in Canada referred to in subsection (3) for a taxation year in respect of shares of the capital stock of a foreign affiliate of the taxpayer;

• (7) Subsections (1) to (3), (5) and (6) are deemed to have come into force on January 1, 2022.

• (8) Subsection (4) is deemed to have come into force on July 12, 2013. However, if section 93.3 of the Act is deemed to have come into force on January 1, 2006 in respect of a corporation resident in Canada because of an election filed under subsection 22(3) of the Economic Action Plan 2014 Act, No. 2, then subsection (4) is deemed to have come into force on January 1, 2006 in respect of that corporation.

• (9) For the purpose of determining if the condition in paragraph 93.3(2)(e) of the Act, as amended by subsection (4), is met at any particular time on or after January 1, 2022, if a non-resident corporation has a beneficial interest in a trust resident in India at the beginning of the day on January 1, 2022, the non-resident corporation is deemed to have first acquired a beneficial interest in the trust at that time.

• 20 (1) The portion of paragraph 95(2)(b) of the French version of the Act before subparagraph (i) is replaced by the following:

  • b) la fourniture, par une société étrangère affiliée d’un contribuable, de services ou d’un engagement de fournir des services est réputée constituer une entreprise distincte, autre qu’une entreprise exploitée activement, que la société affiliée exploite, et le revenu qui est tiré de cette entreprise, qui s’y rapporte ou qui y est accessoire est réputé être un revenu tiré d’une entreprise autre qu’une entreprise exploitée activement, dans la mesure où, selon le cas :

• (2) The definition eligible controlled foreign affiliate in subsection 95(4) of the Act is replaced by the following:

  eligible controlled foreign affiliate

  eligible controlled foreign affiliate, of a taxpayer, at any time, means a foreign affiliate of the taxpayer at that time, if

  • (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 following condition is met:

    A ≥ 90%

    where

    A

    is the total of all amounts each of which would be 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, if

    • (i) the definition relevant cost base were read without reference to the words “if the affiliate is an eligible controlled foreign affiliate of the taxpayer at that time,” in its subparagraph (b)(i), and

    • (ii) the definition participating percentage in subsection (1) were read without reference to its paragraph (a) and the portion of its paragraph (b) before subparagraph (i); (société étrangère affiliée contrôlée admissible)

• (3) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that begin on or after February 27, 2004.

• (4) Subsection (2) applies in respect of determinations made after August 19, 2011 in respect of property of a foreign affiliate of a taxpayer. 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, paragraph (b) of the definition eligible controlled foreign affiliate in subsection 95(4) of the Act, as enacted by subsection (2), is, in respect of any such determination made before August 9, 2022, to be read without reference to subparagraph (ii) of the description of A and subparagraph (i) of the description of A is to be read as follows:

  • (i) the amount determined for paragraph (b) in the definition relevant cost base were nil;

21 The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:

• 22 (1) Paragraph 98(3)(c) of the Act is amended by striking out “and” at the end of subparagraph (i) and by adding the following after that subparagraph:

  • (i.1) if such property is a membership interest in a partnership (in this subparagraph referred to as the “other partnership”), the person’s percentage of the fair market value of the property immediately after its distribution to the person is deemed to be determined by the formula

    A − B

    where

    A

    is the amount that is the person’s percentage of the fair market value (determined without reference to this subparagraph) of the property immediately after its distribution,

    B

    is the portion of the amount by which the person’s percentage of the fair market value (determined without reference to this subparagraph) 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 as may reasonably be regarded as being attributable to the total of all amounts each of which is immediately after the particular time

    • (A) in the case of depreciable property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such depreciable property exceeds its cost amount,

    • (B) in the case of a Canadian resource property or a foreign resource property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the fair market value (determined without reference to liabilities) of such Canadian or foreign resource property, or

    • (C) in the case of other property that is not a capital property, a Canadian resource property or a foreign resource property and that is held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such other property exceeds its cost amount, and

• (2) Paragraph 98(5)(c) of the Act is amended by striking out “and” at the end of subparagraph (i) and by adding the following after that subparagraph:

  • (i.1) if such property is a membership interest in a partnership (in this subparagraph referred to as the “other partnership”), the fair market value of the property immediately after the particular time is deemed to be determined by the formula

    A − B

    where

    A

    is the amount that is the fair market value (determined without reference to this subparagraph) of the property immediately after its distribution to the proprietor,

    B

    is the portion of the amount by which the fair market value (determined without reference to this subparagraph) of the property immediately after its distribution to the proprietor exceeds the cost amount to the partnership of the property immediately before its distribution that may reasonably be regarded as being attributable to the total of all amounts each of which is immediately after the particular time

    • (A) in the case of depreciable property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such depreciable property exceeds its cost amount,

    • (B) in the case of a Canadian resource property or a foreign resource property held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the fair market value (determined without reference to liabilities) of such Canadian or foreign resource property, or

    • (C) in the case of a property that is not a capital property, a Canadian resource property or a foreign resource property and that is held directly by the other partnership or held indirectly by the other partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of such property exceeds its cost amount, and

• (3) Subsections (1) and (2) apply in respect of partnerships that cease to exist on or after August 9, 2022.