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Budget Implementation Act, 2018, No. 2 (S.C. 2018, c. 27)

Assented to 2018-12-13

PART 1Amendments to the Income Tax Act and to Other Legislation (continued)

R.S., c. 1 (5th Supp.)Income Tax Act (continued)

  •  (1) Paragraph 152(1)(b) of the Act is replaced by the following:

    • (b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(4), 122.9(2), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year.

  • (2) Subparagraph 152(4)(b)(iii) of the French version of the Act is replaced by the following:

    • (iii) est établie par suite de la conclusion d’une opération impliquant le contribuable et une personne non-résidente avec laquelle il avait un lien de dépendance,

  • (3) Subparagraph 152(4)(b)(iii) of the Act is replaced by the following:

    • (iii) is made

      • (A) as a consequence of a transaction involving the taxpayer and a non-resident person with whom the taxpayer was not dealing at arm’s length, or

      • (B) in respect of any income, loss or other amount in relation to a foreign affiliate of the taxpayer,

  • (4) Subsection 152(4) of the Act is amended by adding the following after paragraph (b.3):

    • (b.4) the assessment, reassessment or additional assessment is made before the day that is six years after the end of the normal reassessment period for the taxpayer in respect of the year if

      • (i) a reassessment of tax for the year was required under subsection (6), or would have been so required if the taxpayer had claimed an amount by filing the prescribed form referred to in that subsection on or before the day referred to in that subsection, in order to take into account a deduction claimed under section 111 in respect of a loss for a subsequent taxation year,

      • (ii) an assessment, reassessment, additional assessment of tax or notification that no tax is payable for the subsequent taxation year referred to in subparagraph (i) was made or issued after the normal reassessment period in respect of the subsequent taxation year as a consequence of a transaction involving the taxpayer and a non-resident person with whom the taxpayer was not dealing at arm’s length, and

      • (iii) the assessment, reassessment, additional assessment or notification that no tax is payable referred to in subparagraph (ii) reduced the amount of the loss for the subsequent taxation year;

  • (5) The portion of subsection 152(4.01) of the Act before paragraph (a) is replaced by the following:

    • Marginal note:Extended period of assessment

      (4.01) Notwithstanding subsections (4) and (5), an assessment, reassessment or additional assessment to which paragraph (4)(a), (b), (b.1), (b.3), (b.4) or (c) applies in respect of a taxpayer for a taxation year may be made after the taxpayer’s normal reassessment period in respect of the year to the extent that, but only to the extent that, it can reasonably be regarded as relating to,

  • (6) Subparagraph 152(4.01)(b)(iii) of the Act is replaced by the following:

    • (iii) the transaction, income, loss or other amount referred to in subparagraph (4)(b)(iii),

  • (7) Subsection 152(4.01) of the Act is amended by striking out “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):

    • (d) if paragraph (4)(b.4) applies to the assessment, reassessment or additional assessment, the reduction under subparagraph (4)(b.4)(iii).

  • (8) Paragraph 152(4.2)(b) of the Act is replaced by the following:

    • (b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(4), 122.9(2), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer’s liability under this Part for the year.

  • (9) Subsections (1) and (8) apply to the 2018 and subsequent taxation years.

  • (10) Subsection (2) is deemed to have come into force on February 27, 2018.

  • (11) Subsections (3) and (6) apply to taxation years of a taxpayer that begin after February 26, 2018.

  • (12) Subsections (4), (5) and (7) apply in respect of a taxation year if a reassessment of tax for the year was required under subsection 152(6) of the Act, or would have been so required if the taxpayer had claimed an amount by filing the prescribed form referred to in that subsection on or before the day referred to in that subsection, in order to take into account a deduction claimed under section 111 of the Act in respect of a loss for a subsequent taxation year that ends after February 26, 2018.

  •  (1) Subsection 163(2) of the Act is amended by adding the following after paragraph (c.3):

    • (c.4) the amount, if any, by which

      • (i) the total of all amounts each of which is an amount that would be deemed by section 122.8 to be paid by that person for the year or, where that person is the qualified relation of an individual for that year (within the meaning assigned by subsection 122.8(1)), by that individual, if that total were calculated by reference to the information provided in the person’s return of income (within the meaning assigned by subsection 122.8(1)) for the year

      exceeds

      • (ii) the total of all amounts each of which is an amount that is deemed by section 122.8 to be paid by that person or by an individual of whom the person is the qualified relation for the year (within the meaning assigned by subsection 122.8(1)),

  • (2) Subsection (1) applies to the 2018 and subsequent taxation years.

  •  (1) Subsection 188.2(2) of the Act is amended by adding “or” at the end of paragraph (d) and by replacing paragraphs (e) to (g) with the following:

    • (e) in the case of a person that is a registered charity or registered Canadian amateur athletic association, if the person devotes any part of its resources to the direct or indirect support of, or opposition to, any political party or candidate for public office.

  • (2) Subsection (1) is deemed to have come into force

    • (a) on June 29, 2012 in respect of organizations, corporations and trusts that are registered charities on September 14, 2018 and in respect of associations that are registered Canadian amateur athletic associations on that date; and

    • (b) on September 14, 2018 in any other case.

  •  (1) Subsection 212.1(1) of the Act is replaced by the following:

    Marginal note:Non-arm’s length sales of shares by non-residents

    • 212.1 (1) Subsection (1.1) applies if a non-resident person disposes of shares (in this section referred to as the “subject shares”) of any class of the capital stock of a corporation resident in Canada (in this section referred to as the “subject corporation”) to another corporation resident in Canada (in this section referred to as the “purchaser corporation”) with which the non-resident person does not (otherwise than because of a right referred to in paragraph 251(5)(b)) deal at arm’s length and, immediately after the disposition, the subject corporation is connected (within the meaning that would be assigned by subsection 186(4) if the references in that subsection to “payer corporation” and “particular corporation” were read as “subject corporation” and “purchaser corporation”, respectively, and if section 186 were read without reference to its subsection (6)) with the purchaser corporation.

  • (2) The portion of paragraph 212.1(1.1)(a) of the Act before subparagraph (i) is replaced by the following:

    • (a) the amount, if any, by which the fair market value of any consideration (other than any share of the capital stock of the purchaser corporation) received by the non-resident person referred to in subsection (1) from the purchaser corporation for the subject shares exceeds the paid-up capital in respect of the subject shares immediately before the disposition shall, for the purposes of this Act, be deemed to be a dividend

  • (3) Subsection 212.1(1.2) of the Act is replaced by the following:

    • Marginal note:Deemed consideration

      (1.2) For the purposes of subsections (1) and (1.1), if, in the absence of this subsection, no consideration would be received by the non-resident person referred to in subsection (1) from the purchaser corporation for the subject shares, the non-resident person is deemed to receive consideration other than shares of the capital stock of the purchaser corporation from the purchaser corporation for the subject shares, the fair market value of which is equal to the amount, if any, by which the fair market value of the subject shares disposed of by the non-resident person exceeds the amount of any increase because of the disposition in the fair market value of the shares of the capital stock of the purchaser corporation.

  • (4) The portion of paragraph 212.1(3)(a) of the Act before subparagraph (i) is replaced by the following:

    • (a) a non-resident person shall, for greater certainty, be deemed not to deal at arm’s length with a purchaser corporation at the time of a disposition described in subsection (1) if the non-resident person was,

  • (5) Paragraph 212.1(3)(b) of the Act is replaced by the following:

    • (b) for the purposes of determining whether or not a non-resident person referred to in paragraph (a) was a member of a group of less than six persons that controlled a corporation at any time, any shares of the capital stock of that corporation owned at that time by any of the following persons shall be deemed to be owned at that time by the non-resident person and not by the person who actually owned the shares at that time:

      • (i) the non-resident person’s child (within the meaning assigned by subsection 70(10)), who is under 18 years of age, or the non-resident person’s spouse or common-law partner,

      • (ii) a trust of which the non-resident person, a person described in subparagraph (i) or a corporation described in subparagraph (iii) is a beneficiary,

      • (iii) a corporation controlled by the non-resident person, a person described in subparagraph (i), a trust described in subparagraph (ii) or any combination thereof, and

      • (iv) a partnership of which the non-resident person or a person described in one of subparagraphs (i) to (iii) is a majority-interest partner or a member of a majority-interest group of partners (as defined in subsection 251.1(3));

  • (6) Subsection 212.1(3) of the Act is amended by adding “and” at the end of paragraph (d) and by repealing paragraph (e).

  • (7) The portion of paragraph 212.1(4)(b) of the Act before subparagraph (ii) is replaced by the following:

    • (b) it is not the case that, at the time of the disposition, or as part of a transaction or event or series of transactions or events that includes the disposition, a non-resident person

      • (i) holds, directly or indirectly, shares of the capital stock of the purchaser corporation, and

  • (8) Section 212.1 of the Act is amended by adding the following after subsection (4):

    • Marginal note:Tiered trusts and partnerships

      (5) For the purposes of this section and paragraph (k) of the definition proceeds of disposition in section 54, a person or partnership that is, at any time, a beneficiary under a trust (other than a trust that is the non-resident person referred to in subsection (1)), or a member of a partnership (such trust or partnership referred to in this subsection as the “particular conduit”), that is a beneficiary under a trust or member of a partnership (such trust or partnership referred to in this subsection as the “other conduit”) is deemed

      • (a) to be a beneficiary under or member of, as the case may be, the other conduit; and

      • (b) to hold the interest in the other conduit that is held by the particular conduit in the proportion expressed by the formula

        A/B

        where

        A
        is the portion of the fair market value, at that time, of the person or partnership’s interest in the particular conduit that is attributable to the interest in the other conduit held by the particular conduit, and
        B
        is the total fair market value, at that time, of all direct interests (determined without reference to this subsection) in the other conduit.
    • Marginal note:Trusts and partnerships look-through rule

      (6) The following rules apply for the following purposes:

      • (a) for the purposes of this subsection and subsections (1) and (1.1), if at any time an interest (in this paragraph referred to as the “pertinent interest”) in a trust or a partnership (each referred to in this subsection as a “conduit”) is disposed of by a person or partnership with an interest as a beneficiary under the conduit or that is a member of the conduit (each referred to in this subsection as a “holder”), as the case may be, to a purchaser and any portion of the fair market value of the pertinent interest is attributable to shares of the capital stock of a corporation resident in Canada held, directly or indirectly (unless all of the shares are held indirectly through one or more non-resident corporations), by the conduit (in this paragraph referred to as the “shares held by the conduit”), then

        • (i) the holder is deemed, on a class-by-class basis, to have disposed, at that time, of the shares held by the conduit to the purchaser, and the purchaser is deemed to have acquired the shares, in the proportion expressed by the formula

          A/B

          where

          A
          is the portion of the fair market value, at that time, of the pertinent interest that is attributable to the shares held by the conduit, and
          B
          is the total fair market value, at that time, of the shares held by the conduit, and
        • (ii) the holder is deemed to have received from the purchaser and the purchaser is deemed to have paid to the holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula

          A × B/C

          where

          A
          is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is received by the holder from the purchaser for the pertinent interest,
          B
          is the amount determined for A in subparagraph (i), and
          C
          is the total fair market value of the pertinent interest;
      • (b) for the purposes of subsections (1) and (1.1) and paragraph (c), if at any time a conduit (other than a non-resident trust) disposes of shares of the capital stock of a corporation resident in Canada to a purchaser, then

        • (i) each holder of an interest in the conduit is deemed, on a class-by-class basis, to have disposed, at that time, of the shares to the purchaser in the proportion expressed by the formula

          A/B

          where

          A
          is the fair market value, at that time, of the holder’s interest in the conduit, and
          B
          is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit, and
        • (ii) each holder of an interest in the conduit is deemed to have received from the purchaser and the purchaser is deemed to have paid to each such holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula

          A × B/C

          where

          A
          is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is received by the conduit from the purchaser for the shares,
          B
          is the amount determined for A in subparagraph (i), and
          C
          is the amount determined for B in subparagraph (i);
      • (c) for the purposes of subsections (1) and (1.1), if at any time a conduit acquires shares of the capital stock of a corporation resident in Canada from a vendor, then

        • (i) each holder of an interest in the conduit is deemed to have acquired, at that time, the shares from the vendor, on a class-by-class basis, in the proportion expressed by the formula

          A/B

          where

          A
          is the fair market value, at that time, of the holder’s interest in the conduit, and
          B
          is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit, and
        • (ii) each holder of an interest in the conduit is deemed to have paid to the vendor and the vendor is deemed to have received from each such holder, as consideration for the shares deemed to have been acquired in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula

          A × B/C

          where

          A
          is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is paid by the conduit to the vendor for the shares,
          B
          is the amount determined for A in subparagraph (i), and
          C
          is the amount determined for B in subparagraph (i); and
      • (d) for the purpose of determining whether the subject corporation is connected with the purchaser corporation for the purposes of subsection (1) at any time, if at that time a conduit owns shares of the capital stock of the subject corporation, each holder of an interest in the conduit is deemed to own, at that time, the shares of each class of the capital stock of the subject corporation that are owned by the conduit the number of which is determined by the formula

        A × B/C

        where

        A
        is the total number of shares of the class of the capital stock of the subject corporation that are owned by the conduit at that time,
        B
        is the fair market value, at that time, of the holder’s interest in the conduit, and
        C
        is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit.
    • Marginal note:Avoidance of subsections (5) and (6)

      (7) The amounts determined for A and B in paragraph (5)(b), for A and B in subparagraph (6)(c)(i) and for B and C in paragraph (6)(d) are, in respect of an interest as a beneficiary under a trust held by a person or partnership, deemed to be equal to one if

      • (a) the person or partnership’s share of the accumulating income or capital of the trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power; and

      • (b) it can reasonably be considered that one of the reasons for the discretionary power is to avoid or limit the application of subsection (1.1).

  • (9) Subsections (1) to (8) apply in respect of dispositions that occur after February 26, 2018.

 
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