Budget Implementation Act, 2016, No. 1 (S.C. 2016, c. 7)
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Assented to 2016-06-22
PART 1Amendments to the Income Tax Act and to Related Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
8 (1) Subsection 81(1) of the Act is amended by adding the following after paragraph (g.5):
Marginal note:Ontario Electricity Support Program
(g.6) an amount of rate assistance received under section 79.2 of the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sch B, as amended from time to time;
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
9 (1) Subparagraph 82(1)(b)(i) of the Act is replaced by the following:
(i) the product of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year multiplied by 17%, and
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
10 (1) Clause (a)(i)(A) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(A) the amount of the corporation’s capital gain — computed without reference to subclause 52(3)(a)(ii)(A)(II) and subparagraph 53(1)(b)(ii) — from the disposition (other than a disposition under paragraph 40(3.1)(a) or subsection 40(12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as the period)
(2) Clause (a)(ii)(A) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(A) the amount of the corporation’s capital loss — computed without reference to subclause 52(3)(a)(ii)(A)(II) and subparagraph 53(1)(b)(ii) — from the disposition (other than a disposition under subsection 40(3.12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period
(3) Subparagraph (b)(iii) of the definition paid-up capital in subsection 89(1) of the Act is replaced by the following:
(iii) where the particular time is after March 31, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act except subsections 51(3) and 66.3(2) and (4), sections 84.1 and 84.2, subsections 85(2.1), 85.1(2.1) and (8), 86(2.1), 87(3) and (9), paragraph 128.1(1)(c.3), subsections 128.1(2) and (3), section 135.2, subsections 138(11.7), 139.1(6) and (7), 192(4.1) and 194(4.1) and sections 212.1 and 212.3,
(4) Subsections (1) and (2) apply to dispositions made after April 20, 2015.
(5) Subsection (3) is deemed to have come into force on July 1, 2015.
11 (1) Paragraph 94(4)(b) of the Act is replaced by the following:
(b) subsections (8.1) and (8.2), paragraph (14)(a), subsections 70(6) and 73(1), the definition Canadian partnership in subsection 102(1), paragraph 107.4(1)(c), the definition qualified disability trust in subsection 122(3), paragraph (a) of the definition mutual fund trust in subsection 132(6) and the definition eligible trust in subsection 135.2(1);
(2) Subsection (1) is deemed to have come into force on July 1, 2015, except that, for taxation years that end before 2016, paragraph 94(4)(b) of the Act, as enacted by subsection (1), is to be read without reference to “the definition qualified disability trust in subsection 122(3),”.
12 (1) Paragraphs 95(2)(a.2) and (a.21) of the Act are replaced by the following:
(a.2) in computing the income from a business other than an active business for a taxation year of a foreign affiliate of a taxpayer
(i) there shall be included the income of the affiliate for the year from the insurance of specified Canadian risks (which, for the purposes of this paragraph, includes income for the year from the reinsurance of specified Canadian risks), unless more than 90% of the gross premium revenue of the affiliate for the year from the insurance of risks (net of reinsurance ceded) was in respect of the insurance of risks (other than specified Canadian risks) of persons with whom the affiliate deals at arm’s length,
(ii) if subparagraph (i) applies to include income of the affiliate from the insurance of specified Canadian risks,
(A) the insurance of those risks is deemed to be a separate business, other than an active business, carried on by the affiliate, and
(B) any income of the affiliate that pertains to or is incident to that business is deemed to be income from a business other than an active business,
(iii) there shall be included the income of the affiliate for the year in respect of the ceding of specified Canadian risks — except to the extent that the income is included because of subparagraph (i) or (ii) — which, for the purposes of this paragraph, includes
(A) income of the affiliate from services in respect of the ceding of specified Canadian risks, and
(B) except to the extent the amount is included under clause (A), the amount, if any, by which the fair market value of the consideration provided in respect of the ceding of the specified Canadian risks exceeds the affiliate’s cost in respect of those specified Canadian risks, and
(iv) if subparagraph (iii) applies to include income of the affiliate in respect of the ceding of specified Canadian risks,
(A) the ceding of those risks is deemed to be a separate business, other than an active business, carried on by the affiliate, and
(B) any income of the affiliate that pertains to or is incident to that business is deemed to be income from a business other than an active business;
(a.21) for the purposes of paragraph (a.2), one or more risks insured by a foreign affiliate of a taxpayer that, if this Act were read without reference to this paragraph, would not be specified Canadian risks (in this paragraph referred to as the foreign policy pool) are deemed to be specified Canadian risks if
(i) the affiliate, or a person or partnership that does not deal at arm’s length with the affiliate, enters into one or more agreements or arrangements in respect of the foreign policy pool,
(ii) the affiliate’s risk of loss or opportunity for gain or profit in respect of the foreign policy pool, in combination with its risk of loss or opportunity for gain in respect of the agreements or arrangements, can reasonably be considered to be — or could reasonably be considered to be if the affiliate had entered into the agreements or arrangements entered into by the person or partnership — determined, in whole or in part, by reference to one or more criteria in respect of one or more risks insured by another person or partnership (in this paragraph referred to as the tracked policy pool), which criteria are
(A) the fair market value of the tracked policy pool,
(B) the revenue, income, loss or cash flow from the tracked policy pool, or
(C) any other similar criteria, and
(iii) 10% or more of the tracked policy pool consists of specified Canadian risks;
(2) Subsection 95(2) of the Act is amended by adding the following after paragraph (a.22):
(a.23) for the purposes of paragraphs (a.2) and (a.21), specified Canadian risk means a risk in respect of
(i) a person resident in Canada,
(ii) a property situated in Canada, or
(iii) a business carried on in Canada;
(3) Subsections (1) and (2) apply to taxation years of a taxpayer that begin after April 20, 2015.
13 (1) Clauses 110.7(1)(b)(ii)(A) and (B) of the Act are replaced by the following:
(A) $11.00 multiplied by the number of days in the year included in the qualifying period in which the taxpayer resided in the particular area, and
(B) $11.00 multiplied by the number of days in the year included in that portion of the qualifying period throughout which the taxpayer maintained and resided in a self-contained domestic establishment in the particular area (except any day included in computing a deduction claimed under this paragraph by another person who resided on that day in the establishment).
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
14 (1) Subsection 112(2.3) of the Act is replaced by the following:
Marginal note:Where no deduction permitted
(2.3) No deduction may be made under subsection (1) or (2) or 138(6) in computing the taxable income of a particular corporation in respect of a dividend received on a share of the capital stock of a corporation where there is, in respect of the share, a dividend rental arrangement of the particular corporation, a partnership of which the particular corporation is directly or indirectly a member or a trust under which the particular corporation is a beneficiary.
Marginal note:Dividend rental arrangements — exception
(2.31) Subsection (2.3) does not apply to a dividend received on a share where there is, in respect of the share, a dividend rental arrangement of a person or partnership (referred to in this subsection and subsection (2.32) as the taxpayer) throughout a particular period during which the synthetic equity arrangement referred to in paragraph (c) of the definition dividend rental arrangement in subsection 248(1) is in effect if
(a) the dividend rental arrangement is a dividend rental arrangement because of that paragraph; and
(b) the taxpayer establishes that, throughout the particular period, no tax-indifferent investor or group of tax-indifferent investors, each member of which is affiliated with every other member, has all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share because of the synthetic equity arrangement or a specified synthetic equity arrangement.
Marginal note:Representations
(2.32) A taxpayer is considered to have satisfied the condition described in paragraph (2.31)(b) in respect of a share if
(a) the taxpayer or the connected person referred to in paragraph (a) of the definition synthetic equity arrangement in subsection 248(1) (either of which is referred to in this subsection as the synthetic equity arrangement party) obtains accurate representations in writing from its counterparty, or from each member of a group comprised of all its counterparties each of which is affiliated with each other (each member of this group of counterparties is referred to in this subsection as an affiliated counterparty), with respect to the synthetic equity arrangement, as appropriate, that
(i) it is not a tax-indifferent investor and it does not reasonably expect to become a tax-indifferent investor during the particular period referred to in subsection (2.31), and
(ii) it has not eliminated and it does not reasonably expect to eliminate all or substantially all of its risk of loss and opportunity for gain or profit in respect of the share during the particular period referred to in subsection (2.31);
(b) the synthetic equity arrangement party obtains accurate representations in writing from its counterparty, or from each affiliated counterparty, with respect to the synthetic equity arrangement that the counterparty, or each affiliated counterparty, as appropriate
(i) is not a tax-indifferent investor and does not reasonably expect to become a tax-indifferent investor during the particular period referred to in subsection (2.31),
(ii) has entered into one or more specified synthetic equity arrangements that have the effect of eliminating all or substantially all of its risk of loss and opportunity for gain or profit, in respect of the share, in one of the following circumstances:
(A) in the case of a counterparty, that counterparty
(I) has entered into a specified synthetic equity arrangement with its own counterparty (a counterparty of a counterparty or of an affiliated counterparty is referred to in this subsection as a specified counterparty), or
(II) has entered into a specified synthetic equity arrangement with each member of a group of its own counterparties each member of which is affiliated with each other member (each member of this group of counterparties is referred to in this subsection as an affiliated specified counterparty), or
(B) in the case of an affiliated counterparty, each affiliated counterparty
(I) has entered into a specified synthetic equity arrangement with the same specified counterparty, or
(II) has entered into a specified synthetic equity arrangement with an affiliated specified counterparty that is part of the same group of affiliated specified counterparties, and
(iii) has obtained accurate representations in writing from each of its specified counterparties, or from each member of the group of affiliated specified counterparties referred to in subclause (A)(II) or (B)(II), as appropriate, that
(A) it is not a tax-indifferent investor and it does not reasonably expect to become a tax-indifferent investor during the particular period referred to in subsection (2.31), and
(B) it has not eliminated and it does not reasonably expect to eliminate all or substantially all of its risk of loss and opportunity for gain or profit in respect of the share during the particular period referred to in subsection (2.31);
(c) the synthetic equity arrangement party obtains accurate representations in writing from its counterparty, or from each affiliated counterparty, with respect to the synthetic equity arrangement that the counterparty, or each affiliated counterparty, as appropriate
(i) is not a tax-indifferent investor and does not reasonably expect to become a tax-indifferent investor during the particular period referred to in subsection (2.31),
(ii) has entered into specified synthetic equity arrangements
(A) that have the effect of eliminating all or substantially all of its risk of loss and opportunity for gain or profit in respect of the share,
(B) where no single specified counterparty or group of affiliated specified counterparties has been provided with all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share, and
(C) where each specified counterparty or affiliated specified counterparty deals at arm’s length with each other (other than in the case of affiliated specified counterparties, within the same group, of affiliated specified counterparties), and
(iii) has obtained accurate representations in writing from each of its specified counterparties, or from each of its affiliated specified counterparties, that
(A) it is a person resident in Canada and it does not reasonably expect to cease to be resident in Canada during the particular period referred to in subsection (2.31), and
(B) it has not eliminated and it does not reasonably expect to eliminate all or substantially all of its risk of loss and opportunity for gain or profit in respect of the share during the particular period referred to in subsection (2.31); or
(d) where a person or partnership is a party to a synthetic equity arrangement chain in respect of the share, the person or partnership
(i) has obtained all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share under the synthetic equity arrangement chain,
(ii) has entered into one or more specified synthetic equity arrangements that have the effect of eliminating all or substantially all of its risk of loss and opportunity for gain or profit in respect of the share, and
(iii) obtains accurate representations in writing of the type described in paragraph (a), (b) or (c), as if it were a synthetic equity arrangement party, from each of its counterparties where each such counterparty deals at arm’s length with that person or partnership.
Marginal note:End of particular period
(2.33) If, at a time during a particular period referred to in subsection (2.31), a counterparty, specified counterparty, affiliated counterparty or affiliated specified counterparty reasonably expects to become a tax-indifferent investor or, if it has provided a representation described by subparagraph (2.32)(a)(ii) or clause (2.32)(b)(iii)(B) or (c)(iii)(B) in respect of a share, to eliminate all or substantially all of its risk of loss and opportunity for gain or profit in respect of the share, the particular period for which it has provided a representation in respect of the share is deemed to end at that time.
Marginal note:Interpretation
(2.34) For greater certainty, each reference in subsection (2.32) to a “counterparty”, a “specified counterparty”, an “affiliated counterparty” or an “affiliated specified counterparty” is to be read as referring only to a person or partnership that obtains all or any portion of the risk of loss or opportunity for gain or profit in respect of the share.
(2) Section 112 of the Act is amended by adding the following after subsection (9):
Marginal note:Synthetic equity arrangements — ordering
(10) For the purposes of subsections (3), (3.1), (4), (4.1) and (5.2), if a synthetic equity arrangement is in respect of a number of shares that are identical properties (referred to in this subsection as identical shares) that is less than the total number of such identical shares owned by a person or partnership at that time and in respect of which there is no other synthetic equity arrangement, the synthetic equity arrangement is deemed to be in respect of those identical shares in the order in which the person or partnership acquired them.
(3) Subsection (1) applies to
(a) dividends that are paid or become payable after April 2017; and
(b) dividends that are paid or become payable at any time after October 2015 and before May 2017 on a share if
(i) there is a synthetic equity arrangement, or one or more agreements or arrangements described by paragraph (d) of the definition dividend rental arrangement in subsection 248(1) of the Act, as enacted by subsection 48(1) of this Act, in respect of the share at that time, and
(ii) after April 21, 2015 and before that time, all or any part of the synthetic equity arrangement, or the agreements or arrangements, referred to in subparagraph (i) — including an option, swap, futures contract, forward contract or other financial or commodity contract or instrument as well as a right or obligation under the terms of such a contract or instrument — that contributes or could contribute to the effect of providing all or substantially all of the risk of loss and opportunity for gain or profit, in respect of the share, to one or more persons or partnerships is
(A) entered into, acquired, extended or renewed after April 21, 2015, or
(B) in the case of a right to increase the notional amount under an agreement that is or is part of the synthetic equity arrangement, is exercised or acquired after April 21, 2015.
(4) Subsection (2) is deemed to have come into force on April 22, 2015.
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