Budget Implementation Act, 2016, No. 1 (S.C. 2016, c. 7)

Marginal note:Repeated failure to report income

• 163 (1) Every person is liable to a penalty who

  • (a) fails to report an amount, equal to or greater than $500, required to be included in computing the person’s income in a return filed under section 150 for a taxation year (in this subsection and subsection (1.1) referred to as the unreported amount);

  • (b) had failed to report an amount, equal to or greater than $500, required to be included in computing the person’s income in any return filed under section 150 for any of the three preceding taxation years; and

  • (c) is not liable to a penalty under subsection (2) in respect of the unreported amount.

• Marginal note:Amount of penalty

  (1.1) The amount of the penalty to which the person is liable under subsection (1) is equal to the lesser of

  • (a) 10% of the unreported amount, and

  • (b) the amount determined by the formula

    0.5 × (A – B)

    where

    A

    is the total of the amounts that would be determined under paragraphs (2)(a) to (g) if subsection (2) applied in respect of the unreported amount, and

    B

    is any amount deducted or withheld under subsection 153(1) that may reasonably be considered to be in respect of the unreported amount.

• (c.5) the amount, if any, by which

  • (i) the total of all amounts each of which is an amount that would be deemed by subsection 122.9(2) to have been paid on account of the person’s tax payable under this Part for the year if that amount were calculated by reference to the person’s claim for the year under the subsection

  exceeds

  • (ii) the total of all amounts each of which is the amount that the person is entitled to claim for the year under subsection 122.9(2),

• (b) in any other case, the amount that would be determined under subsection 127.4(6) in respect of the share if this Act were read without reference to its paragraphs (b) and (d). (crédit d’impôt relatif à un fonds de travailleurs)

• (i) such of the amounts that would have been deductible under any of section 118.2, subsections 118.3(2) and (3) and sections 118.8 and 118.9 in computing the person’s tax payable under Part I for the year if the person had been resident in Canada throughout the year, as can reasonably be considered wholly applicable, and

• Marginal note:No penalty — qualifying non-resident employers

  (8.6) Subsection (8) does not apply to a qualifying non-resident employer (as defined in subsection 153(6)) in respect of a payment made to an employee if, after reasonable inquiry, the employer had no reason to believe at the time of the payment that the employee was not a qualifying non-resident employee (as defined in subsection 153(6)).

• (xviii) to an official of the Canada Revenue Agency solely for the purpose of the collection of amounts owing to Her Majesty in right of Canada or of a province under the Government Employees Compensation Act, the Canada Labour Code, the Merchant Seamen Compensation Act, the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Postal Services Continuation Act, 1997, the Wage Earner Protection Program Act, the Apprentice Loans Act or a law of a province governing the granting of financial assistance to students at the post-secondary school level;

• (t) provide taxpayer information to an official solely for the purpose of enabling the Chief Actuary of the Office of the Superintendent of Financial Institutions to conduct actuarial reviews of pension plans established under the Old Age Security Act as required by the Public Pensions Reporting Act.

dividend rental arrangement

dividend rental arrangement, of a person or a partnership (each of which is referred to in this definition as the person), means

• (a) any arrangement entered into by the person where it can reasonably be considered that

  • (i) the main reason for the person entering into the arrangement was to enable the person to receive a dividend on a share of the capital stock of a corporation, other than a dividend on a prescribed share or on a share described in paragraph (e) of the definition term preferred share in this subsection or an amount deemed by subsection 15(3) to be received as a dividend on a share of the capital stock of a corporation, and

  • (ii) under the arrangement someone other than that person bears the risk of loss or enjoys the opportunity for gain or profit with respect to the share in any material respect,

• (b) for greater certainty, any arrangement under which

  • (i) a corporation at any time receives on a particular share a taxable dividend that would, if this Act were read without reference to subsection 112(2.3), be deductible in computing its taxable income or taxable income earned in Canada for the taxation year that includes that time, and

  • (ii) the corporation or a partnership of which the corporation is a member is obligated to pay to another person or partnership an amount

    • (A) that is compensation for

      • (I) the dividend described in subparagraph (i),

      • (II) a dividend on a share that is identical to the particular share, or

      • (III) a dividend on a share that, during the term of the arrangement, can reasonably be expected to provide to a holder of the share the same or substantially the same proportionate risk of loss or opportunity for gain as the particular share, and

    • (B) that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person or partnership, as the case may be, as a taxable dividend,

• (c) any synthetic equity arrangement, in respect of a DRA share of the person, and

• (d) one or more agreements or arrangements (other than agreements or arrangements described in paragraph (c)) entered into by the person, the connected person referred to in paragraph (a) of the definition synthetic equity arrangement or, for greater certainty, by any combination of the person and connected persons, if

  • (i) the agreements or arrangements have the effect, or would have the effect if each agreement or arrangement entered into by a connected person were entered into by the person, of eliminating all or substantially all of the person’s risk of loss and opportunity for gain or profit in respect of a DRA share of the person,

  • (ii) as part of a series of transactions that includes these agreements or arrangements, a tax-indifferent investor, or a group of tax-indifferent investors each member of which is affiliated with every other member, obtains all or substantially all of the risk of loss and opportunity for gain or profit in respect of the DRA share or an identical share (as defined in subsection 112(10)), and

  • (iii) it is reasonable to conclude that one of the purposes of the series of transactions is to obtain the result described in subparagraph (ii); (mécanisme de transfert de dividendes)

DRA share

DRA share, of a person or partnership, means a share

• (a) that is owned by the person or partnership,

• (b) in respect of which the person or partnership is deemed to have received a dividend under subsection 260(5.1) and is provided with all or substantially all of the risk of loss and opportunity for gain or profit under an agreement or arrangement,

• (c) that is held by a trust under which the person or partnership is a beneficiary and in respect of which the person or partnership is deemed to have received a dividend as a result of a designation by the trust under subsection 104(19),

• (d) in respect of which the person or partnership is deemed to have received a dividend under subsection 82(2), or

• (e) in any other case, in respect of which the person or partnership is (or would be in the absence of subsection 112(2.3)) entitled to a deduction under subsection 112(1) in respect of dividends received on the share; (action de mécanisme de transfert de dividendes ou AMTD)

recognized derivatives exchange

recognized derivatives exchange means a person or partnership recognized or registered under the securities laws of a province to carry on the business of providing the facilities necessary for the trading of options, swaps, futures contracts or other financial contracts or instruments whose market price, value, delivery obligations, payment obligations or settlement obligations are derived from, referenced to or based on an underlying interest; (bourse reconnue en instruments financiers dérivés)

specified mutual fund trust

specified mutual fund trust, at any time, means a mutual fund trust other than a mutual fund trust for which it can reasonably be considered, having regard to all the circumstances, including the terms and conditions of the units of the trust, that the total of all amounts each of which is the fair market value, at that time, of a unit issued by the trust and held by a person exempt from tax under section 149 is all or substantially all of the total of all amounts each of which is the fair market value, at that time, of a unit issued by the trust; (fiducie de fonds commun de placement déterminée)

specified synthetic equity arrangement

specified synthetic equity arrangement, in respect of a DRA share of a person or partnership, means one or more agreements or other arrangements that

• (a) have the effect of providing to a person or partnership all or any portion of the risk of loss or opportunity for gain or profit in respect of the DRA share and, for greater certainty, opportunity for gain or profit includes rights to, benefits from and distributions on a share, and

• (b) can reasonably be considered to have been entered into in connection with a synthetic equity arrangement, in respect of the DRA share, or in connection with another specified synthetic equity arrangement, in respect of the DRA share; (arrangement de capitaux propres synthétiques déterminé)

synthetic equity arrangement

synthetic equity arrangement in respect of a DRA share of a person or partnership (referred to in this definition as the particular person),

• (a) means one or more agreements or other arrangements that

  • (i) are entered into by the particular person, by a person or partnership that does not deal at arm’s length with, or is affiliated with, the particular person (referred to in this definition as a connected person) or, for greater certainty, by any combination of the particular person and connected persons, with one or more persons or partnerships (referred to in this definition as a counterparty and in subsection 112(2.32) as a counterparty or an affiliated counterparty as appropriate),

  • (ii) have the effect, or would have the effect, if each agreement entered into by a connected person were entered into by the particular person, of providing all or substantially all of the risk of loss and opportunity for gain or profit in respect of the DRA share to a counterparty or a group of counterparties each member of which is affiliated with every other member and, for greater certainty, opportunity for gain or profit includes rights to, benefits from and distributions on a share, and

  • (iii) if entered into by a connected person, can reasonably be considered to have been entered into with the knowledge, or where there ought to have been the knowledge, that the effect described in subparagraph (ii) would result, and

• (b) does not include

  • (i) an agreement that is traded on a recognized derivatives exchange unless it can reasonably be considered that, at the time the agreement is entered into,

    • (A) the particular person or the connected person, as the case may be, knows or ought to know that the agreement is part of a series of transactions that has the effect of providing all or substantially all of the risk of loss and opportunity for gain or profit in respect of the DRA share to a tax-indifferent investor, or a group of tax-indifferent investors each member of which is affiliated with every other member, or

    • (B) one of the main reasons for entering into the agreement is to obtain the benefit of a deduction in respect of a payment, or a reduction of an amount that would otherwise have been included in income, under the agreement, that corresponds to an expected or actual dividend in respect of a DRA share,

  • (ii) one or more agreements or other arrangements that, but for this subparagraph, would be a synthetic equity arrangement, in respect of a share owned by the particular person (in this subparagraph referred to as the synthetic short position), if

    • (A) the particular person has entered into one or more other agreements or other arrangements (other than, for greater certainty, an agreement under which the share is acquired or an agreement or arrangement under which the particular person receives a deemed dividend and is provided with all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share) that have 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 the particular person (in this subparagraph referred to as the synthetic long position),

    • (B) the synthetic short position has the effect of offsetting all amounts included or deducted in computing the income of the particular person with respect to the synthetic long position, and

    • (C) the synthetic short position was entered into for the purpose of obtaining the effect referred to in clause (B), and

  • (iii) an agreement to purchase the shares of a corporation, or a purchase agreement that is part of a series of agreements to purchase the shares of a corporation, under which a counterparty or a group of counterparties each member of which is affiliated with every other member acquires control of the corporation that has issued the shares being purchased, unless the main reason for establishing, incorporating or operating the corporation is to have this subparagraph apply; (arrangement de capitaux propres synthétiques)

synthetic equity arrangement chain

synthetic equity arrangement chain, in respect of a share owned by a person or partnership, means a synthetic equity arrangement — or a synthetic equity arrangement in combination with one or more specified synthetic equity arrangements — where

• (a) no party to the synthetic equity arrangement or a specified synthetic equity arrangement, if any, is a tax-indifferent investor, and

• (b) each other party to these agreements or arrangements is affiliated with the person or partnership; (chaîne d’arrangements de capitaux propres synthétiques)

tax-indifferent investor

tax-indifferent investor, at any time, means a person or partnership that is at that time

• (a) a person exempt from tax under section 149,

• (b) a non-resident person, other than a person to which all amounts paid or credited under a synthetic equity arrangement or a specified synthetic equity arrangement may reasonably be attributed to the business carried on by the person in Canada through a permanent establishment (as defined by regulation) in Canada,

• (c) a trust resident in Canada (other than a specified mutual fund trust) if any of the interests as a beneficiary under the trust is not a fixed interest (as defined in subsection 251.2(1)) in the trust (in this definition referred to as a discretionary trust),

• (d) a partnership more than 10% of the fair market value of all interests in which can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraphs (a) to (c), or

• (e) a trust resident in Canada (other than a specified mutual fund trust or a discretionary trust) if more than 10% of the fair market value of all interests as beneficiaries under the trust can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraph (a) or (c); (investisseur indifférent relativement à l’impôt)

• Marginal note:Synthetic equity arrangements — disaggregation

  (42) For the purposes of the definition synthetic equity arrangement in subsection (1), paragraphs (c) and (d) of the definition dividend rental arrangement in subsection (1) and subsections 112(2.31), (2.32) and (10), an arrangement that reflects the fair market value of more than one type of identical share (as defined in subsection 112(10)) is considered to be a separate arrangement with respect to each type of identical share the value of which the arrangement reflects.