Budget Implementation Act, 2016, No. 1 (S.C. 2016, c. 7)
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Assented to 2016-06-22
PART 2R.S., c. E-15Amendments to the Excise Tax Act (GST/HST Measures)
63 (1) Section 149 of the Excise Tax Act is amended by adding the following after subsection (4.01):
Marginal note:Exclusion of interest
(4.02) In determining a total under paragraph (1)(c) for a person (in this subsection and subsection (4.03) referred to as the depositor), interest from another person in respect of a deposit of money received or held by the other person in the usual course of its deposit-taking business is not to be included if
(a) the other person is
(i) a bank,
(ii) a credit union,
(iii) a corporation authorized under the laws of Canada or a province to carry on the business of offering to the public its services as a trustee, or
(iv) a corporation authorized under the laws of Canada or a province to accept deposits from the public and that carries on the business of lending money on the security of real property or investing in indebtedness on the security of mortgages or hypothecs on real property; and
(b) the other person is obligated, or may by the demand of the depositor become obligated, to repay the money on or before the particular day that is 364 days after the day on which the deposit of money is made.
Marginal note:Repayment obligation — special cases
(4.03) For the purpose of paragraph (4.02)(b), in determining whether the other person is obligated, or may by the demand of the depositor become obligated, to repay the money on or before the particular day that is 364 days after the day on which the deposit of money is made, the following rules apply:
(a) if the other person is obligated to repay the money to the depositor on a fixed day and also is or may become obligated to repay the money on an earlier day by virtue of a right of withdrawal, reinvestment or other right afforded to the depositor by the terms under which the money was solicited or received or is held, then only the obligation to repay on the fixed day is to be considered, whether or not the right is exercised; and
(b) if the other person is obligated to repay the money to the depositor on a fixed day and also is or may become obligated to repay the money on a later day by virtue of a right afforded to any person to extend the term of the deposit at a rate or rates of interest determined at the time the money was solicited or received, then only the obligation to repay on the later day is to be considered, whether or not the right is exercised.
(2) Subsection (1) applies
(a) for the purpose of determining if a person is a financial institution throughout the person’s taxation years that begin on or after March 22, 2016; and
(b) for the purpose of determining if a person is a reporting institution under section 273.2 of the Act throughout the person’s fiscal year that begins before March 22, 2016 and that ends on or after that day.
64 (1) The Act is amended by adding the following after section 163:
Marginal note:Donation — value of consideration
164 For the purposes of this Part, if a charity or a public institution makes a taxable supply of property or service to another person, if the value of the property or service is included in determining the amount of the advantage in respect of a gift by the other person to the charity or public institution under subsection 248(32) of the Income Tax Act and if a receipt referred to in subsection 110.1(2) or 118.1(2) of that Act may be issued, or could be issued if the other person were an individual, in respect of part of the consideration for the supply, then the value of the consideration for the supply is deemed to be equal to the fair market value of the property or service at the time the supply is made.
(2) Subsection (1) applies to any supply made after March 22, 2016. It also applies to any taxable supply, other than a supply to which subsection (3) applies, made by a person on or before that day but after December 20, 2002 if, on or before March 22, 2016, the person
(a) did not charge, collect or remit an amount as or on account of tax under Part IX of the Act in respect of the supply; or
(b) charged an amount as or on account of tax under Part IX of the Act that is less than the amount of tax that would have been payable under that Part in respect of the supply in the absence of section 164 of the Act, as enacted by subsection (1).
(3) For the purposes of Part IX of the Act (other than sections 232 and 261 of the Act, section 5 of Part V.1 of Schedule V to the Act and section 10 of Part VI of Schedule V to the Act), a taxable supply of property or service made by a charity or a public institution to another person after December 20, 2002 but on or before March 22, 2016 is deemed to have been made for no consideration if
(a) the value of the property or service is included in determining the amount of the advantage in respect of a gift by the other person to the charity or public institution under subsection 248(32) of the Income Tax Act;
(b) a receipt referred to in subsection 110.1(2) or 118.1(2) of the Income Tax Act may be issued, or could be issued if the other person were an individual, in respect of part of the consideration for the supply;
(c) the fair market value of the property or service at the time the supply is made is less than $500; and
(d) on or before March 22, 2016, the charity or public institution
(i) did not charge, collect or remit an amount as or on account of tax under Part IX of the Act in respect of the supply, or
(ii) charged an amount as or on account of tax under Part IX of the Act that is less than the amount of tax that would have been payable under that Part in respect of the supply in the absence of section 164 of the Act, as enacted by subsection (1).
Marginal note:2010, c. 12, s. 61(2)
65 (1) The description of B in the definition external charge in section 217 of the Act is replaced by the following:
- B
- is the total of all amounts, each of which is included in the amount determined under the description of A and is
(a) a permitted deduction for the specified year or a preceding specified year of the qualifying taxpayer, other than a returned commission included in paragraph (b), or
(b) if a particular amount, included in the amount determined under the description of A, is any part of the value of the consideration for a supply made to the qualifying taxpayer of a financial service that includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance in respect of one or more particular insurance policies issued by the qualifying taxpayer, an amount (in this description referred to as a returned commission) included in the particular amount that
(i) is attributable to expenses incurred exclusively in Canada by the qualifying taxpayer to issue and administer the particular insurance policies,
(ii) is returned to the qualifying taxpayer as a ceding commission in respect of the particular insurance policies, and
(iii) is required to be included under the Income Tax Act in computing the qualifying taxpayer’s income for the specified year or for another specified year of the qualifying taxpayer, or would be so required to be included if the conditions set out in subparagraphs (a)(i) to (iii) of the description of A applied to the qualifying taxpayer. (frais externes)
Marginal note:2010, c. 12, s. 61(2)
(2) Paragraph (a) of the definition loading in section 217 of the Act is replaced by the following:
(a) if the financial service includes the issuance, renewal, variation or transfer of ownership of an insurance policy but not of any other qualifying instrument, the total of
Marginal note:2010, c. 12, s. 61(2)
(3) The description of A in paragraph (c) of the definition loading in section 217 of the Act is replaced by the following:
Marginal note:2010, c. 12, s. 61(2)
(4) Paragraph (k) of the definition permitted deduction in section 217 of the Act is replaced by the following:
(k) consideration (other than interest referred to in paragraph (g), dividends referred to in paragraph (h) or consideration referred to in paragraph (k.1)) for a specified non-arm’s length supply made to the qualifying taxpayer less the total of all amounts, each of which is a part of the value of the consideration and is loading;
(k.1) consideration (other than interest referred to in paragraph (g) or dividends referred to in paragraph (h)) for a specified non-arm’s length supply made to the qualifying taxpayer of a financial service of issuing, renewing, varying or transferring the ownership of a policy of reinsurance, issued by an insurer to the qualifying taxpayer, in respect of one or more particular insurance policies issued by the qualifying taxpayer, if
(i) the policy of reinsurance is in accordance with all applicable guidelines with respect to sound reinsurance practices and procedures, as amended from time to time, that are issued by the Superintendent or a provincial regulatory authority having powers similar to those of the Superintendent,
(ii) the qualifying taxpayer pays to the insurer, or to persons related to the insurer (each of which is referred to in this paragraph as an affiliate), amounts (each of which is referred to in this paragraph as a fee) under one or more agreements in writing, each of which is not the policy of reinsurance and is between the qualifying taxpayer and the insurer or an affiliate,
(iii) the fees include 99% or more of the total of all amounts, each of which
(iv) each fee paid by the qualifying taxpayer to the insurer or an affiliate
(A) is commensurate with the arm’s length transfer price, as defined in subsection 247(1) of the Income Tax Act, for the provision of the property and services to which the fee relates, and
(B) is allowed as a deduction, an allowance or an allocation for a reserve under the Income Tax Act in computing the qualifying taxpayer’s income for a specified year, or would be so allowed if the conditions set out in subparagraphs (a)(i) to (iii) of the description of A in the definition qualifying consideration applied to the qualifying taxpayer, and
(v) the qualifying taxpayer pays or remits any amount that is payable or remittable under this Part by the qualifying taxpayer in respect of each fee paid by the qualifying taxpayer to the insurer or an affiliate;
Marginal note:2010, c. 12, s. 61(2)
(5) Paragraph (a) of the description of B in the definition qualifying consideration in section 217 of the Act is replaced by the following:
(a) an amount that is a permitted deduction for the specified year or a preceding specified year of the qualifying taxpayer, other than an amount that is included in paragraph (b) or that is a returned commission included in paragraph (c),
(6) The description of B in the definition qualifying consideration in section 217 of the Act is amended by adding “or” at the end of paragraph (b) and by adding the following after that paragraph:
(c) if a particular amount, included in the amount determined under the description of A, is any part of the value of the consideration for a supply made to the qualifying taxpayer of a financial service that includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance in respect of one or more particular insurance policies issued by the qualifying taxpayer, an amount (in this description referred to as a returned commission) included in the particular amount that
(i) is attributable to expenses incurred exclusively in Canada by the qualifying taxpayer to issue and administer the particular insurance policies,
(ii) is returned to the qualifying taxpayer as a ceding commission in respect of the particular insurance policies, and
(iii) is required to be included under the Income Tax Act in computing the qualifying taxpayer’s income for the specified year or for another specified year of the qualifying taxpayer, or would be so required to be included if the conditions set out in subparagraphs (a)(i) to (iii) of the description of A applied to the qualifying taxpayer. (contrepartie admissible)
(7) Section 217 of the Act is amended by adding the following in alphabetical order:
- ceding commission
ceding commission means an amount that is paid to a particular insurer by another insurer under an agreement for the supply of a financial service that includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance issued by the other insurer in respect of one or more particular insurance policies issued by the particular insurer and that compensates the particular insurer for property acquired, manufactured or produced, and for services acquired or performed, exclusively in Canada by the particular insurer in order to issue and administer the particular insurance policies. (commission de réassurance)
- margin for risk transfer
margin for risk transfer means an amount payable to a particular insurer by another insurer under an agreement for the supply of a financial service, which includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance issued by the particular insurer, that exclusively represents compensation for the assumption, by the particular insurer, of the risk of potential future claims under particular insurance policies issued by the other insurer and that is in addition to the estimate of the net premium of the policy of reinsurance. (marge de transfert de risques)
(8) Subsections (1) to (7) apply to any specified year of a person that ends after November 16, 2005, except that for purposes of applying the definition permitted deduction in section 217 of the Act, as amended by subsection (4), in respect of an amount of consideration for a specified non-arm’s length supply that became due, or was paid without having become due, on or before that day, paragraph (k) of that definition is to be read without reference to the words “less the total of all amounts, each of which is a part of the value of the consideration and is loading”.
(9) If, in assessing under section 296 of the Act tax payable by a person under Division IV of Part IX of the Act for a particular specified year of the person, an amount was taken into consideration as an external charge or as qualifying consideration for the particular specified year and as a result of the application of the definitions ceding commission, external charge, loading, margin for risk transfer, permitted deduction and qualifying consideration in section 217 of the Act, as enacted or amended by subsections (1) to (7), the amount or part of the amount is not qualifying consideration for any specified year of the person and is not an external charge for any specified year of the person for which an election under subsection 217.2(1) of the Act is in effect, the person is entitled until the day that is one year after the day on which this Act receives royal assent to request in writing that the Minister of National Revenue make an assessment, reassessment or additional assessment for the purpose of taking into account that the amount or the part of the amount, as the case may be, is not, if an election under subsection 217.2(1) of the Act is in effect for the particular specified year, an external charge for the particular specified year or, in any other case, qualifying consideration for the particular specified year and, on receipt of the request, the Minister must with all due dispatch
(a) consider the request; and
(b) under section 296 of the Act assess, reassess or make an additional assessment of the tax payable by the person under Division IV of Part IX of the Act for any specified year of the person, and of any interest, penalty or other obligation of the person, solely for the purpose of taking into account that the amount or the part of the amount, as the case may be, is not, if an election under subsection 217.2(1) of the Act is in effect for the particular specified year, an external charge for the particular specified year or, in any other case, qualifying consideration for the particular specified year.
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