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)
9 (1) Subsection 20(1) of the Act is amended by striking out “and” at the end of paragraph (ww), by adding “and” at the end of paragraph (xx) and by adding the following after paragraph (xx):
Marginal note:Adjustment for hybrid mismatch
(yy) if subsection 18.4(4) has applied to deny a taxpayer a deduction, for the year or a preceding taxation year, for all or a portion of an amount in respect of a payment arising under a hybrid mismatch arrangement, and the taxpayer demonstrates that an amount is foreign ordinary income of an entity in respect of the payment (other than any amount of foreign ordinary income already taken into account in determining the amount of the deduction that was previously denied or a deduction under this paragraph) for a foreign taxation year that ends on or before the day that is 12 months after the end of the year,
(i) the lesser of
(A) the amount by which the deduction that was denied exceeds the total of all amounts already deducted under this paragraph in respect of the payment for the year or any previous year, and
(B) the amount of the foreign ordinary income, and
(ii) the amount that is deductible under this paragraph is deemed to be deductible in respect of the payment.
(2) Subsection (1) applies in respect of payments arising on or after July 1, 2022.
10 (1) The portion of subparagraph 40(1)(a)(iii) of the Act before clause (A) is replaced by the following:
(iii) subject to subsections (1.1) to (1.3), such amount as the taxpayer may claim
(2) Section 40 of the Act is amended by adding the following after subsection (1.1):
Marginal note:Reserve — intergenerational business transfers
(1.2) In computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) on a disposition of shares of the capital stock of a corporation resident in Canada to another corporation, that subparagraph is to be read as if the references to “1/5” and “4” were references to “1/10” and “9” respectively, if the conditions set out in subsection 84.1(2.31) or (2.32) are satisfied in respect of the disposition.
Marginal note:Reserve — dispositions to employee ownership trusts
(1.3) In computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) in computing the taxpayer’s gain from the disposition of a share of the capital stock of a qualifying business, that subparagraph is to be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively, if the shares of the qualifying business were disposed of by the taxpayer to an employee ownership trust, or to a Canadian-controlled private corporation that is controlled and wholly-owned by an employee ownership trust, pursuant to a qualifying business transfer.
(3) Subsections (1) and (2) apply in respect of transactions that occur on or after January 1, 2024.
11 (1) Subparagraph 53(1)(e)(xiii) of the Act is replaced by the following:
(xiii) any amount required by subsection 127(30) or section 211.92 to be added to the taxpayer’s tax otherwise payable under this Part for a taxation year that ended before that time in respect of the interest in the partnership;
(2) Subparagraph 53(1)(e)(xiii) of the Act, as amended by subsection (1), is replaced by the following:
(xiii) any amount required by subsection 127(30) or 127.45(17) or section 211.92 to be added to the taxpayer’s tax otherwise payable under this Part for a taxation year that ended before that time in respect of the interest in the partnership;
(3) Paragraph 53(2)(c) of the Act is amended by adding the following after subparagraph (vi):
(vi.1) an amount equal to that portion of all amounts of a CCUS tax credit deducted under subsection 127.44(3) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the tax credit of the taxpayer because of subsection 127.44(11),
(4) Paragraph 53(2)(c) of the Act, as amended by subsection (3), is amended by adding the following after subparagraph (vi.1):
(vi.2) an amount equal to that portion of all amounts of a clean technology investment tax credit deducted under subsection 127.45(6) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the tax credit of the taxpayer because of subsection 127.45(8),
(5) Subsections (1) and (3) are deemed to have come into force on January 1, 2022.
(6) Subsections (2) and (4) are deemed to have come into force on March 28, 2023.
12 (1) Paragraphs (f.1) and (g) of the definition principal-business corporation in subsection 66(15) of the Act are replaced by the following:
(f.1) the production or marketing of calcium chloride, gypsum, kaolin, lithium, sodium chloride or potash,
(g) the manufacturing of products, where the manufacturing involves the processing of calcium chloride, gypsum, kaolin, lithium, sodium chloride or potash,
(2) Section 66 of the Act is amended by adding the following after subsection (20):
Marginal note:Lithium brine well
(21) For the purposes of paragraph (f) of the definition Canadian exploration expense in subsection 66.1(6) and paragraphs (c.2) and (d) of the definition Canadian development expense in subsection 66.2(5),
(a) a mine includes a well for the extraction of material from a lithium brine deposit;
(b) all wells of a taxpayer for the extraction of material from one or more lithium brine deposits, the material produced from which is sent to the same plant for processing, are deemed to be one mine of the taxpayer; and
(c) all wells of a taxpayer for the extraction of material from one or more lithium brine deposits that the Minister, in consultation with the Minister of Natural Resources, determines constitute one project, are deemed to be one mine of the taxpayer.
(3) Subsections (1) and (2) are deemed to have come into force on March 28, 2023.
13 (1) Paragraphs (c.2) and (d) of the definition Canadian development expense in subsection 66.2(5) of the Act are replaced by the following:
(c.2) any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer after March 20, 2013 for the purpose of bringing a new mine in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, into production in reasonable commercial quantities and incurred before the new mine comes into production in such quantities, including an expense for clearing, removing overburden, stripping, sinking a mine shaft, constructing an adit or other underground entry or drilling a well for the extraction of lithium from brines,
(d) any expense (other than an amount included in the capital cost of depreciable property) incurred by the taxpayer after 1987
(i) in sinking or excavating a mine shaft, main haulage way or similar underground work designed for continuing use, for a mine in a mineral resource in Canada built or excavated after the mine came into production,
(ii) in extending any such shaft, haulage way or work referred to in subparagraph (i), or
(iii) in drilling or completing a well for the extraction of lithium from brines in Canada after the mine came into production,
(2) Subsection (1) applies in respect of expenses incurred on or after March 28, 2023.
14 (1) Subclause 66.8(1)(a)(ii)(B)(I) of the Act is replaced by the following:
(I) the total of all amounts required by subsections 127(8) and 127.44(11) in respect of the partnership to be added in computing the investment tax credit or the CCUS tax credit (as defined in subsection 127.44(1)) of the taxpayer in respect of the fiscal period, and
(2) Subclause 66.8(1)(a)(ii)(B)(I) of the Act, as amended by subsection (1), is replaced by the following:
(I) the total of all amounts required by subsections 127(8), 127.44(11) and 127.45(8) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.44(1)) or the clean technology investment tax credit (as defined in subsection 127.45(1)) of the taxpayer in respect of the fiscal period, and
(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.
15 (1) The portion of the definition commercial debt obligation in subsection 80(1) of the Act after paragraph (b) is replaced by the following:
an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Act were read without reference to paragraph 18(1)(g), subsections 18(2), (3.1) and (4) and 18.2(2) and section 21; (créance commerciale)
(2) Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023.
16 (1) Subsection 80.4(3) of the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) that satisfies the conditions set out in subsection 15(2.51) and is repaid within 15 years after the qualifying business transfer referred to in that subsection.
(2) Subsection (1) comes into force or is deemed to have come into force on January 1, 2024.
17 (1) Paragraph 84.1(2)(e) of the Act is replaced by the following:
(e) notwithstanding any other paragraph in this subsection, if this paragraph applies because of subsection (2.31) or (2.32) to a disposition of subject shares by a taxpayer to a purchaser corporation, the taxpayer and the purchaser corporation are deemed to deal with each other at arm’s length at the time of the disposition of the subject shares.
(2) Subsection 84.1(2.3) of the Act is replaced by the following:
Marginal note:Rules for subsections (2.31) and (2.32)
(2.3) For the purposes of this subsection and subsections (2.31) and (2.32),
(a) a child of a taxpayer has the same meaning as in subsection 70(10) and also includes
(i) a niece or nephew of the taxpayer,
(ii) a niece or nephew of the taxpayer’s spouse or common-law partner,
(iii) a spouse or common-law partner of a niece or nephew referred to in subparagraph (i) or (ii), and
(iv) a child of a niece or nephew referred to in subparagraph (i) or (ii);
(b) in applying subparagraphs (2.31)(c)(iii) and (2.32)(c)(iii), if the relevant group entity is a partnership,
(i) the partnership is deemed to be a corporation (in this paragraph referred to as the “deemed corporation”),
(ii) the deemed corporation is deemed to have a capital stock of a single class of shares, with a total of 100 issued and outstanding shares,
(iii) each member (in this paragraph referred to as a “deemed shareholder”) of the partnership is deemed to be a shareholder of the deemed corporation,
(iv) each deemed shareholder of the deemed corporation is deemed to hold a number of shares in the capital stock of the deemed corporation determined by the formula
A × 100
where
- A
- is equal to
(A) the deemed shareholder’s specified proportion for the last fiscal period of the deemed corporation, or
(B) if the deemed shareholder does not have a specified proportion described in clause (A), the proportion that is the fair market value of the deemed shareholder’s interest in the deemed corporation at that time relative to the fair market value of all interests in the deemed corporation at that time, and
(v) the deemed corporation’s fiscal period is deemed to be its taxation year;
(c) own, directly or indirectly, in respect of a property, means
(i) direct ownership of the property, and
(ii) an ownership interest or, for civil law, a right in the shares of a corporation, an interest in a partnership or an interest in a trust that has a direct or indirect interest or, for civil law, a right, in the property, except that for the purposes of paragraphs (2.31)(d) and (e) and (2.32)(d) and (e), this subparagraph does not apply as a look-through rule for an interest, or for civil law, a right in non-voting preferred shares or debt of
(A) the purchaser corporation (within the meaning of subsections (2.31) and (2.32)),
(B) the subject corporation (within the meaning of subsections (2.31) and (2.32)), or
(C) any relevant group entity (within the meaning of subsections (2.31) and (2.32));
(d) if a person or partnership’s share of the accumulating income or capital of a trust in respect of which the person or partnership has an interest as a beneficiary depends on the exercise by a person (in this paragraph referred to as a “trustee”) of, or the failure by any trustee to exercise, a discretionary power, that trustee is deemed to have fully exercised the power, or to have failed to exercise the power, as the case may be;
(e) if one or more children referred to in
(i) subparagraph (2.31)(f)(i) have disposed of, or caused the disposition of, all of the shares in the capital stock of the purchaser corporation, the subject corporation or all relevant group entities to an arm’s length person or group of persons, the conditions set out in paragraphs (2.31)(f) and (g) are deemed to be met as of the time of the disposition, provided that all equity interests in all relevant businesses owned, directly or indirectly, by each child referred to in subparagraph (2.31)(f)(i) are included in the disposition, or
(ii) subparagraph (2.32)(g)(i) have disposed of, or caused the disposition of, all of the shares in the capital stock of the purchaser corporation, the subject corporation or all relevant group entities to an arm’s length person or group of persons, the conditions set out in paragraphs (2.32)(g) and (h) are deemed to be met as of the time of the disposition, provided that all equity interests in all relevant businesses owned, directly or indirectly, by each child referred to in subparagraph (2.32)(g)(i) are included in the disposition; and
(f) if one or more children referred to in
(i) subparagraph (2.31)(f)(i) have disposed of, or caused the disposition of, any of the shares in the capital stock of the purchaser corporation, the subject corporation or a relevant group entity to another child or group of children of the taxpayer (in this paragraph referred to as the “new child” or the “new children”), the conditions set out in paragraphs (2.31)(f) and (g) are deemed
(A) to be met as of the time of the disposition, and
(B) to continue to apply to the new child (or the new children) and any other member of the group of children that controls the subject corporation and the purchaser corporation at the time of the disposition, or
(ii) subparagraph (2.32)(g)(i) have disposed of, or caused the disposition of, any of the shares in the capital stock of the purchaser corporation, the subject corporation, or a relevant group entity to another child or group of children of the taxpayer (in this paragraph referred to as the “new child” or the “new children”), the conditions set out in paragraphs (2.32)(g) and (h) are deemed
(A) to be met as of the time of the disposition, and
(B) to continue to apply to the new child (or the new children) and any other member of the group of children that controls the subject corporation and the purchaser corporation at the time of the disposition;
(g) if a child, or each of the children, referred to in
(i) subparagraph (2.31)(f)(ii) has died or has, after the disposition of the subject shares, suffered one or more severe and prolonged impairments in physical or mental functions, the conditions set out in paragraphs (2.31)(f) and (g) are deemed to be met as of the time of the death or mental or physical impairment, or
(ii) subparagraph (2.32)(g)(ii) has died or has, after the disposition of the subject shares, suffered one or more severe and prolonged impairments in physical or mental functions, the conditions set out in paragraphs (2.32)(g) and (h) are deemed to be met as of the time of the death or mental or physical impairment;
(h) if a business of a subject corporation or a relevant group entity has ceased to be carried on due to the disposition of all of the assets that were used to carry on the business in order to satisfy debts owed to creditors of the corporation or of the entity, the conditions set out in respect of the business in subparagraphs (2.31)(f)(ii) and (iii) and (2.31)(g)(i) or (2.32)(g)(ii) and (iii) and (2.32)(h)(i), as applicable, are deemed to be met as of the time of the disposition; and
(i) in applying paragraphs (2.31)(g) and (2.32)(h), management refers to the direction or supervision of business activities but does not include the provision of advice.
Marginal note:Immediate intergenerational business transfer
(2.31) Paragraph (2)(e) applies at the time of a disposition of subject shares (in this subsection referred to as the “disposition time”) by a taxpayer to a purchaser corporation if the following conditions are met:
(a) the taxpayer has not previously, at any time after 2023, sought an exception to the application of subsection (1) under paragraph (2)(e) in respect of a disposition of shares that, at that time, derived their value from an active business that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)(iii);
(b) at the disposition time,
(i) the taxpayer is an individual (other than a trust),
(ii) the purchaser corporation is controlled by one or more children (within the meaning of paragraph (2.3)(a), in this subsection referred to as the “child” or “children”) of the taxpayer, each of whom is 18 years of age or older, and
(iii) the subject shares are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.6(1));
(c) at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — control, directly or indirectly in any manner whatever,
(i) the subject corporation,
(ii) the purchaser corporation, or
(iii) any other person or partnership (in this subsection referred to as a “relevant group entity”) that carries on, at the disposition time, an active business (referred to in this subsection as a “relevant business”) that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)(iii);
(d) at all times after the disposition time, the taxpayer does not – either alone or together with a spouse or common law partner of the taxpayer – own, directly or indirectly,
(i) 50% or more of any class of shares, other than shares of a specified class as defined in subsection 256(1.1) (in this subsection referred to as “non-voting preferred shares”), of the capital stock of the subject corporation or of the purchaser corporation, or
(ii) 50% or more of any class of equity interest (other than non-voting preferred shares) in any relevant group entity;
(e) within 36 months after the disposition time and at all times thereafter, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,
(i) any shares, other than non-voting preferred shares of the capital stock of the subject corporation or of the purchaser corporation, or
(ii) any equity interest (other than non-voting preferred shares) in any relevant group entity;
(f) subject to subsection (2.3), from the disposition time until 36 months after that time,
(i) the child or group of children, as the case may be, controls the purchaser corporation,
(ii) the child, or at least one member of the group of children, as the case may be, is actively engaged on a regular, continuous and substantial basis (within the meaning of paragraph 120.4(1.1)(a)) in a relevant business of the subject corporation or a relevant group entity, and
(iii) each relevant business of the subject corporation and any relevant group entity is carried on as an active business;
(g) subject to subsection (2.3), within 36 months after the disposition time or such greater period as is reasonable in the circumstances, the taxpayer and a spouse or common-law partner of the taxpayer take reasonable steps to
(i) transfer management of each relevant business of the subject corporation and any relevant group entity to the child or at least one member of the group of children referred to in subparagraph (f)(ii), and
(ii) permanently cease to manage each relevant business of the subject corporation and any relevant group entity; and
(h) the taxpayer and the child, or the taxpayer and each member of the group of children, as the case may be,
(i) jointly elect, in prescribed form, for paragraph (2)(e) to apply in respect of the disposition of the subject shares, and
(ii) file the election with the Minister on or before the taxpayer’s filing-due date for the taxation year that includes the disposition time.
Marginal note:Gradual intergenerational business transfer
(2.32) Paragraph (2)(e) applies at the time of a disposition of subject shares (referred to in this subsection as the “disposition time”) by a taxpayer to a purchaser corporation if the following conditions are met:
(a) the taxpayer has not previously, at any time after 2023, sought an exception to the application of subsection (1) pursuant to paragraph (2)(e) in respect of a disposition of shares that, at that time, derived their value from an active business that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)(iii);
(b) at the disposition time,
(i) the taxpayer is an individual (other than a trust),
(ii) the purchaser corporation is controlled by one or more children (within the meaning of paragraph (2.3)(a), and referred to in this subsection as the “child” or “children”) of the taxpayer, each of whom is 18 years of age or older, and
(iii) the subject shares are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.6(1));
(c) at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — control
(i) the subject corporation,
(ii) the purchaser corporation, or
(iii) any person or partnership (referred to in this subsection as a “relevant group entity”) that carries on, at the disposition time, an active business (referred to in this subsection as a “relevant business”) that is relevant to the determination of whether the subject shares satisfy the condition in subparagraph (b)(iii);
(d) at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — own, directly or indirectly,
(i) 50% or more of any class of shares, other than shares of a specified class as defined in subsection 256(1.1) (in this subsection referred to as “non-voting preferred shares”), of the capital stock of the subject corporation or of the purchaser corporation, or
(ii) 50% or more of any class of equity interest (other than non-voting preferred shares) in any relevant group entity;
(e) within 36 months after the disposition time and at all times thereafter, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,
(i) any shares, other than non-voting preferred shares of the capital stock of the subject corporation or of the purchaser corporation, or
(ii) any equity interest (other than non-voting preferred shares) in any relevant group entity;
(f) within 10 years after the disposition time (referred to in this subsection as the “final sale time”) and at all times after the final sale time, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,
(i) in the case of a disposition of subject shares that are, at the disposition time, shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.6(1)), interests (including any debt or equity interest) in any of the subject corporation, the purchaser corporation, and any relevant group entity with a fair market value that exceeds 50% of the fair market value of all the interests that were owned, directly or indirectly, by the taxpayer and a spouse or common-law partner of the taxpayer immediately before the disposition time, or
(ii) in the case of a disposition of subject shares that are, at the disposition time, qualified small business corporation shares as those terms are defined in subsection 110.6(1) (other than subject shares described in subparagraph (i)), interests (including any debt or equity interest) in any of the subject corporation, the purchaser corporation and any relevant group entity with a fair market value that exceeds 30% of the fair market value of all the interests that were owned, directly or indirectly, by the taxpayer and a spouse or common-law partner of the taxpayer immediately before the disposition time;
(g) subject to subsection (2.3), from the disposition time until the later of 60 months after the disposition time and the final sale time,
(i) the child or group of children, as the case may be, controls the purchaser corporation,
(ii) the child, or at least one member of the group of children, as the case may be, is actively engaged on a regular, continuous and substantial basis (within the meaning of paragraph 120.4(1.1)(a)) in a relevant business of the subject corporation or a relevant group entity, and
(iii) any relevant business of the subject corporation and any relevant group entity is carried on as an active business;
(h) subject to subsection (2.3), within 60 months of the disposition time or such greater period as is reasonable in the circumstances, the taxpayer and a spouse or common-law partner of the taxpayer take reasonable steps to
(i) transfer management of each relevant business of the subject corporation and any relevant group entity to the child or at least one member of the group of children referred to in subparagraph (g)(ii), and
(ii) permanently cease to manage each relevant business of the subject corporation and any relevant group entity; and
(i) the taxpayer and the child, or the taxpayer and each member of the group of children, as the case may be,
(i) jointly elect, in prescribed form, for paragraph (2)(e) to apply in respect of the disposition of the subject shares, and
(ii) file the election with the Minister on or before the taxpayer’s filing-due date for the taxation year that includes the disposition time.
(3) Subsections (1) and (2) apply to dispositions of shares that occur on or after January 1, 2024.
- Date modified: