Fall Economic Statement Implementation Act, 2023 (S.C. 2024, c. 15)
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Assented to 2024-06-20
PART 1Amendments to the Income Tax Act and to Other Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
51 (1) Subsection 160.2(2.3) of the Act is repealed.
(2) Subsection (1) is deemed to have come into force on April 1, 2023.
52 (1) Subsection 163(2) of the Act is amended by adding the following after paragraph (d):
(d.1) the amount, if any, by which
(i) the amount that would be deemed by subsection 127.44(2) to be paid for the year by the person if that amount were calculated by reference to the information provided in the return or form filed for the year under that subsection
exceeds
(ii) the amount that is deemed by subsection 127.44(2) to be paid for the year by the person,
(2) Paragraph 163(2)(d.1) of the Act, as enacted by subsection (1), is replaced by the following:
(d.1) the amount, if any, by which
(i) the amount that would be deemed by subsection 127.44(2) or 127.45(2), as the case may be, to be paid for the year by the person if that amount were calculated by reference to the information provided in the return or form filed for the year under that subsection
exceeds
(ii) the amount that is deemed by subsection 127.44(2) or 127.45(2), as the case may be, to be paid for the year by the person,
(3) Subsection (1) is deemed to have come into force on January 1, 2022.
(4) Subsection (2) is deemed to have come into force on March 28, 2023.
53 (1) The Act is amended by adding the following after section 183.2:
PART II.2Tax on Repurchases of Equity
Marginal note:Definitions
183.3 (1) The following definitions apply in this Part.
- covered entity
covered entity for a taxation year, means an entity that is a corporation, trust or partnership if at any time in the taxation year
(a) equity of the entity is listed on a designated stock exchange; and
(b) the entity is
(i) a corporation resident in Canada (other than a mutual fund corporation),
(ii) a trust that
(A) is a real estate investment trust (as defined in subsection 122.1(1)),
(B) is a SIFT trust, or
(C) would be a SIFT trust (other than a mutual fund trust that has one or more classes of units in continuous distribution) if
(I) each reference in paragraph (a) of the definition non-portfolio property in subsection 122.1(1) to “subject entity” were read as “corporation, partnership or trust” and paragraph (c) of that definition were read without reference to the words “in Canada”,
(II) paragraph (a) of the definition Canadian real, immovable or resource property in subsection 248(1) were read without reference to the words “situated in Canada”, and
(III) the definitions timber resource property in subsection 13(21) and Canadian resource property in subsection 66(15) were read without references to the words “in Canada”, or
(iii) a partnership that
(A) is a SIFT partnership, or
(B) would be a SIFT partnership if
(I) each reference in paragraph (a) of the definition non-portfolio property in subsection 122.1(1) to “subject entity” were read as “corporation, partnership or trust” and paragraph (c) of that definition were read without reference to the words “in Canada”,
(II) paragraph (a) of the definition Canadian real, immovable or resource property in subsection 248(1) were read without reference to the words “situated in Canada”, and
(III) the definitions timber resource property in subsection 13(21) and Canadian resource property in subsection 66(15) were read without references to the words “in Canada”. (entité visée)
- equity
equity of an entity, means, if the entity is
(a) a corporation, a share of the capital stock of the corporation;
(b) a trust, an income or capital interest in the trust; and
(c) a partnership, an interest as a member of the partnership. (capitaux propres)
- qualifying issuance
qualifying issuance means any portion of an issuance that is made
(a) in exchange for
(i) cash,
(ii) a bond, debenture, note or other security (other than equity) of the covered entity that was issued solely for cash consideration, the terms of which confer on the holder the right to make the exchange, or
(iii) any combination of properties described in subparagraph (i) or (ii);
(b) to an employee of the covered entity (or an entity related to the covered entity) in the course of the employee’s employment; or
(c) to a person or partnership, with which the covered entity deals at arm’s length and is not affiliated, in exchange for property used in the covered entity’s active business. (émission admissible)
- reorganization transaction
reorganization transaction means a redemption, acquisition or cancellation of equity by a covered entity that is made
(a) on an exchange of equity by a holder for consideration that includes equity (other than substantive debt) of
(i) the covered entity,
(ii) another entity that is related to the covered entity immediately before the exchange and is a covered entity immediately after the exchange, or
(iii) another covered entity that controls the covered entity (or an amalgamated successor entity of the covered entity) immediately after the exchange;
(b) on an amalgamation of the covered entity with one or more other predecessor corporations to which subsection 87(1) applies if a holder of that equity, immediately before the amalgamation, receives consideration that includes equity (other than substantive debt) of the new corporation (within the meaning of subsection 87(1)) for the disposition of their equity on the amalgamation;
(c) on a winding-up of the covered entity during which all or substantially all of the property owned by the covered entity is distributed to the equity holders of the covered entity;
(d) in the course of a reorganization to which paragraph 55(3)(a) or (b) applies;
(e) on a qualifying disposition (as defined in subsection 107.4(1));
(f) on a qualifying exchange (as defined in subsection 132.2(1));
(g) at the demand of a holder in accordance with the conditions referred to in paragraph 108(2)(a), included in the issued units of the trust, for an amount that does not exceed the fair market value of the equity at the time of the redemption, acquisition or cancellation; or
(h) pursuant to the exercise of a statutory right of dissent by a holder of the equity. (opération de réorganisation)
- specified affiliate
specified affiliate at any time, of a covered entity, means a corporation, trust or partnership (in this definition referred to as an “affiliate”) where, at that time,
(a) if the affiliate is a corporation, the covered entity
(i) controls the corporation, or
(ii) has a direct or indirect interest in the equity of the corporation having a fair market value equal to more than 50% of the fair market value of the total equity of the corporation;
(b) if the affiliate is a trust, the covered entity
(i) is a majority-interest beneficiary (as defined in subsection 251.1(3)) of the trust, or
(ii) has a direct or indirect interest in the equity of the trust having a fair market value equal to more than 50% of the fair market value of the total equity of the trust; and
(c) if the affiliate is a partnership, the covered entity
(i) is a majority-interest partner of the partnership, or
(ii) has a direct or indirect interest in the equity of the partnership having a fair market value equal to more than 50% of the fair market value of the total equity of the partnership. (entité affiliée déterminée)
- substantive debt
substantive debt of a covered entity means equity that, in accordance with its terms
(a) is not convertible or exchangeable other than for
(i) equity that if issued would be substantive debt of the same covered entity,
(ii) a bond, debenture or note of the covered entity, the fair market value of which does not exceed the total of the amounts referred to in subparagraphs (d)(i) to (iv), or
(iii) equity that would be issued only after the occurrence of a trigger event pursuant to a non-viability contingent capital provision included in the terms of the equity to satisfy regulatory capital requirements applicable to the covered entity;
(b) is non-voting in respect of the election of the board of directors, the trustees or the general partner (as applicable) of the covered entity, except in the event of a failure or default under the terms or conditions of the equity;
(c) requires the amount of any dividend or other distribution payable to be calculated
(i) as a fixed amount, or
(ii) by reference to a percentage of an amount equal to the fair market value of the consideration for which the equity was issued if the percentage is
(A) fixed, or
(B) determined by reference to a market interest rate (including a Government of Canada Treasury Bill) plus a fixed amount, if any; and
(d) entitles any holder of the equity to receive, on the redemption, cancellation or acquisition of the equity by the covered entity or by a person or partnership with whom the covered entity does not deal at arm’s length or is affiliated, an amount that does not exceed the total of the following amounts:
(i) the fair market value of the consideration for which the equity was issued,
(ii) any unpaid distributions or dividends on the equity that are payable to the holder,
(iii) any premium that is payable to the holder solely due to the early redemption, cancellation or acquisition of the equity, and
(iv) any other amount in respect of an amount described in subparagraphs (i) to (iii) that is attributable to an increase in the value of a currency other than Canadian currency relative to Canadian currency. (dette substantielle)
Marginal note:Tax payable
(2) Each person or partnership that is a covered entity for a taxation year shall pay a tax for the taxation year equal to the amount determined by the formula
0.02 × (A + B − C)
where
- A
- is the total fair market value of equity (other than substantive debt) of the covered entity that is redeemed, acquired or cancelled in the taxation year by the covered entity, other than equity that is
(a) redeemed, acquired or cancelled in a reorganization transaction, or
(b) acquired from a specified affiliate, if that equity was previously deemed by subsection (5) to have been acquired by the covered entity and was previously included in the description of A;
- B
- is
(a) if equity of a covered entity (other than substantive debt) is redeemed, acquired or cancelled in the taxation year pursuant to a reorganization transaction described in paragraph (a) or (b) of that definition and any portion of the consideration received by a holder for the equity is not equity consideration described in paragraph (a) or (b) of the definition reorganization transaction, the amount determined by the formula
D − E
where
- D
- is the total fair market value of the equity of the covered entity (other than substantive debt) that is redeemed, acquired or cancelled in a reorganization transaction described in this paragraph; and
- E
- is the total fair market value of any equity consideration described in paragraph (a) or (b) of the definition reorganization transaction that is received by a holder as consideration for the equity that is redeemed, acquired or cancelled in a reorganization transaction described in this paragraph; and
(b) in any other case, nil; and
- C
- is the total fair market value of equity (other than substantive debt) of the covered entity that is
(a) issued in a qualifying issuance in the taxation year, or
(b) disposed of in the taxation year by a specified affiliate of the covered entity (except a disposition to the covered entity or another specified affiliate of the covered entity), if that equity was previously deemed by subsection (5) to have been acquired by the covered entity and was previously included in the description of A.
Marginal note:Tax payable — anti-avoidance
(3) Equity that is redeemed, acquired or cancelled, or that is issued by a covered entity, as part of a transaction (as defined in subsection 245(1)) or series of transactions shall be included in the description of A or B or excluded from the description of C in subsection (2) (as the case may be) if it is reasonable to consider that the primary purpose of the transaction or series is to cause a decrease in the amount referred to in the description of A or B in that subsection or an increase in the amount referred to in the description of C in that subsection.
Marginal note:De minimis rule
(4) Despite subsection (2), if the total of the amounts determined for A and B in subsection (2) for a taxation year is less than $1,000,000 (prorated based upon the number of days in the taxation year if the taxation year is less than 365 days), no tax is payable under this Part for the taxation year.
Marginal note:Similar transactions
(5) For the purposes of subsection (2), if a specified affiliate of a covered entity acquires equity of the covered entity, the equity is deemed to be acquired by the covered entity unless the specified affiliate is
(a) a registered securities dealer that
(i) acquires the equity in the capacity of an agent in the ordinary course of business, and
(ii) disposes of the equity, other than to the covered entity or another specified affiliate of the covered entity, within a reasonable period of time that is consistent with the holding of equity in the ordinary course of business;
(b) a trust established for the benefit of employees and former employees of the covered entity (or of a specified affiliate of the covered entity) that satisfies the following conditions
(i) the trust is an employee benefit plan, and
(ii) the terms of the trust provide that any equity of the covered entity acquired or held by the trust cannot be transferred to, or otherwise be available for the benefit of, the covered entity or any specified affiliate of the covered entity;
(c) a trust governed by an employees profit sharing plan; or
(d) a trust governed by a deferred profit sharing plan.
Marginal note:Similar transactions — anti-avoidance
(6) If it is reasonable to consider that one of the main purposes of a transaction (as defined in subsection 245(1)) or series of transactions is to cause a person or partnership to acquire equity of a covered entity to avoid the tax otherwise payable under this Part, the person or partnership shall be deemed to be a specified affiliate of the covered entity from the time that the transaction or series commenced until immediately after the time the transaction or series ends.
Marginal note:Return
183.4 (1) If a covered entity redeems, acquires or cancels equity of the entity in a taxation year,
(a) if the entity is a corporation, on or before the day it is required to file its return of income under Part I for the year, the corporation shall file with the Minister a return for the year under this Part in prescribed form;
(b) if the entity is a trust, within 90 days after the end of the taxation year, the trustee of the trust shall file with the Minister a return for the year under this Part in prescribed form; and
(c) if the entity is a partnership, a member of the partnership that has authority to act for the partnership shall file with the Minister a return for the year under this Part in prescribed form on or before the earlier of
(i) the day that is five months after the end of the taxation year, and
(ii) March 31 in the calendar year immediately following the calendar year in which the taxation year ended.
Marginal note:Payment
(2) Every covered entity that is liable to pay tax under this Part for a taxation year, shall
(a) if the entity is a corporation or trust, pay its tax payable under this Part for the year to the Receiver General on or before its balance-due day for the year; and
(b) if the entity is a partnership, pay its tax payable under this Part for the year to the Receiver General on or before the day which the partnership is required to file a return for the year under paragraph (1)(c).
Marginal note:Provisions applicable to Part
(3) Subsections 150(2) and (3), sections 152, 158 and 159, subsections 160.1(1) and 161(1) and (11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
(2) Subsection (1) applies to transactions that occur after 2023.
- Date modified: