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(i) any amount deducted under paragraph
20(1)(l), (l.1), (m) or (n) by the Canadian
affiliate in respect of the property or
obligation in computing its income for its
taxation year that ended immediately
before the particular time, or under
paragraph 20(1)(p) in computing its
income for that year or for a preceding
taxation year (to the extent that the
amount has not been included in the
affiliate's income under paragraph
12(1)(i)), is deemed to have been so
deducted by the entrant bank in
computing its income for its last taxation
year that ended before the particular time
and not to have been deducted by the
Canadian affiliate,
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(ii) in applying paragraph 20(1)(m), an
amount in respect of the goods, services,
land or chattels that was included under
paragraph 12(1)(a) in computing the
Canadian affiliate's income from a
business is deemed to have been so
included in computing the entrant bank's
income from its Canadian banking
business for a preceding taxation year,
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(iii) in applying paragraph 20(1)(n) in
respect of a property described in
subparagraph (a)(i) and paragraphs (b),
(c) and (d) sold by the Canadian affiliate
in the course of a business, the property
is deemed to have been disposed of by the
entrant bank (and not by the Canadian
affiliate) at the time it was disposed of by
the Canadian affiliate, and the amount in
respect of the sale that was included in
computing the Canadian affiliate's
income from a business is deemed to
have been included in computing the
entrant bank's income from its Canadian
banking business for its taxation year that
includes the time at which the property
was so disposed of, and
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(iv) in applying paragraph 40(1)(a) or
44(1)(e) in respect of a property
described in subparagraph (a)(i) and
paragraphs (b), (c) and (d) disposed of by
the Canadian affiliate, the property is
deemed to have been disposed of by the
entrant bank (and not by the Canadian
affiliate) at the time it was disposed of by
the Canadian affiliate, the amount
determined under subparagraph
40(1)(a)(i) or 44(1)(e)(i) in respect of the
Canadian affiliate is deemed to be the
amount determined under that
subparagraph in respect of the entrant
bank, and any amount claimed by the
Canadian affiliate under subparagraph
40(1)(a)(iii) or 44(1)(e)(iii) in computing
its gain from the disposition of the
property for its last taxation year that
ended before the particular time is
deemed to have been so claimed by the
entrant bank for its last taxation year that
ended before the particular time.
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| Assumption
of debt
obligation
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(8) If a Canadian affiliate of an entrant bank
described in paragraph (11)(a) transfers at any
time within the period described in paragraph
(11)(c) property to the entrant bank, and any
part of the consideration for the transfer is the
assumption by the entrant bank in respect of its
Canadian banking business of a debt
obligation of the Canadian affiliate,
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(a) where the Canadian affiliate and the
entrant bank jointly elect in accordance
with subsection (11) to have this paragraph
apply,
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(A) the value of that part of the
consideration for the transfer of the
property, and
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(B) for the purpose of determining the
consequences of the assumption of the
obligation and any subsequent
settlement or extinguishment of it, the
value of the consideration given to the
entrant bank for the assumption of the
obligation,
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are deemed to be an amount (in this
paragraph referred to as the ``assumption
amount'') equal to the amount
outstanding on account of the principal
amount of the obligation at that time, and
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(ii) the assumption amount shall not be
considered a term of the transaction that
differs from that which would have been
made between persons dealing at arm's
length solely because it is not equal to the
fair market value of the obligation at that
time;
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(b) where the obligation is denominated in
a foreign currency, and the Canadian
affiliate and the entrant bank jointly elect in
accordance with subsection (11) to have
this paragraph apply,
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(i) the amount of any income, loss,
capital gain or capital loss in respect of
the obligation due to the fluctuation in
the value of the foreign currency relative
to Canadian currency realized by
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(A) the Canadian affiliate on the
assumption of the obligation is
deemed to be nil, and
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(B) the entrant bank on the settlement
or extinguishment of the obligation
shall be determined based on the
amount of the obligation in Canadian
currency at the time it became an
obligation of the Canadian affiliate,
and
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(ii) for the purpose of an election made in
respect of the obligation under paragraph
(a), the amount outstanding on account
of the principal amount of the obligation
at that time is the total of all amounts each
of which is an amount that was advanced
to the Canadian affiliate on account of
principal, that remains outstanding at
that time, and that is determined using the
exchange rate that applied between the
foreign currency and Canadian currency
at the time of the advance; and
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(c) for the purpose of applying paragraphs
20(1)(e) and (f) in respect of the debt
obligation, the obligation is deemed not to
have been settled or extinguished by virtue
of its assumption by the entrant bank and
the entrant bank is deemed to be the same
corporation as, and a continuation of, the
Canadian affiliate.
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| Branch-establi
shment
dividend
|
(9) Notwithstanding any other provision of
this Act, the rules in subsection (10) apply if
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(a) a dividend is paid by a Canadian affiliate
of an entrant bank to the entrant bank or to
a person that is affiliated with the Canadian
affiliate and that is resident in the country in
which the entrant bank is resident, or
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(b) a dividend is deemed to be paid for the
purposes of this Part or Part XIII (other than
by paragraph 214(3)(a)) as a result of a
transfer of property from the Canadian
affiliate to such a person,
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and the Canadian affiliate and the entrant bank
jointly elect in accordance with subsection
(11) to have subsection (10) apply in respect of
the dividend.
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| Treatment of
dividend
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(10) If the conditions in subsection (9) are
met,
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(a) the dividend is deemed (except for the
purposes of subsections 112(3) to (7)) not to
be a taxable dividend; and
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(b) there is added to the amount otherwise
determined under paragraph 219(1)(g) in
respect of the entrant bank for its first
taxation year that ends after the time at
which the dividend is paid, the amount of
the dividend less, where the dividend is paid
by means of, or arises as a result of, a
transfer of eligible property in respect of
which the Canadian affiliate and the entrant
bank have jointly elected under subsection
(3), the amount by which the fair market
value of the property transferred exceeds
the amount the Canadian affiliate and the
entrant bank have agreed on in their
election.
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| Elections
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(11) An election under subsection (3) or (7),
paragraph (8)(a) or (b) or subsection (10), (12)
or (14) is valid only if
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(a) the entrant bank by which the election is
made has, on or before the day that is 6
months after the day on which the Income
Tax Amendments Act, 2000 receives royal
assent, complied with paragraphs 1.1(b)
and (c) of the ``Guide to Foreign Bank
Branching'' in respect of the establishment
and commencement of business of a foreign
bank branch in Canada issued by the Office
of the Superintendent of Financial
Institutions, as it read on December 31,
2000;
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(b) the election is made in prescribed form
on or before the earlier of the filing-due date
of the Canadian affiliate and the filing-due
date of the entrant bank, for the taxation
year that includes the time at which
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(i) in the case of an election under
subsection (3) or (7), paragraph (8)(a) or
(b) or subsection (10), the dividend,
transfer or assumption to which the
election relates is paid, made or effected,
or
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(ii) in the case of an election under
subsection (12), the dissolution order was
granted or the winding up commenced;
and
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(c) in the case of an election under
subsection (3) or (7), paragraph (8)(a) or (b)
or subsection (10), the dividend, transfer or
assumption to which the election relates is
paid, made or effected within the period that
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(i) begins on the day on which the
Superintendent makes an order in respect
of the entrant bank under subsection
534(1) of the Bank Act, and
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(ii) ends on the later of
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(I) the day that is one year after the
day referred to subparagraph (i), and
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(II) the day that is three years after
the day on which the Income Tax
Amendments Act, 2000 receives
royal assent, and
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(B) the day that is one year after the
day on which the Income Tax
Amendments Act, 2000 receives royal
assent.
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| Winding-up
of Canadian
affiliate:
losses
|
(12) If
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(a) within the period described in paragraph
(11)(c) in respect of the entrant bank,
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(i) the Minister of Finance has issued
letters patent under section 342 of the
Bank Act or section 347 of the Trust and
Loan Companies Act dissolving the
Canadian affiliate or an order under
section 345 of the Bank Act or section 350
of the Trust and Loan Companies Act
approving the Canadian affiliate's
application for dissolution (such letters
patent or order being referred to in this
subsection as the ``dissolution order''), or
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(ii) the affiliate has been wound up under
the terms of the corporate law that
governs it,
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(b) the entrant bank carries on all or part of
the business in Canada that was formerly
carried on by the Canadian affiliate, and
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(c) the Canadian affiliate and the entrant
bank jointly elect in accordance with
subsection (11) to have this section apply
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then in applying section 111 for the purpose of
computing the taxable income earned in
Canada of the entrant bank for any taxation
year that begins after the date of the
dissolution order or the commencement of the
winding up, as the case may be,
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(d) subject to paragraphs (e) and (h), the
portion of a non-capital loss of the Canadian
affiliate for a taxation year (in this
paragraph referred to as the ``Canadian
affiliate's loss year'') that can reasonably be
regarded as being its loss from carrying on
a business in Canada (in this paragraph
referred to as the ``loss business'') or being
in respect of a claim made under section
110.5, to the extent that it
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(i) was not deducted in computing the
taxable income of the Canadian affiliate
or any other entrant bank for any taxation
year, and
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(ii) would have been deductible in
computing the taxable income of the
Canadian affiliate for any taxation year
that begins after the date of the
dissolution order or the commencement
of the winding up, as the case may be, on
the assumption that it had such a taxation
year and that it had sufficient income for
that year,
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is deemed, for the taxation year of the
entrant bank in which the Canadian
affiliate's loss year ended, to be a
non-capital loss of the entrant bank from
carrying on the loss business (or, in respect
of a claim made under section 110.5, to be
a non-capital loss of the entrant bank in
respect of a claim under subparagraph
115(1)(a)(vii)) that was not deductible by
the entrant bank in computing its taxable
income earned in Canada for any taxation
year that began before the date of the
dissolution order or the commencement of
the winding up, as the case may be,
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(e) if at any time control of the Canadian
affiliate or entrant bank has been acquired
by a person or group of persons, no amount
in respect of the Canadian affiliate's
non-capital loss for a taxation year that ends
before that time is deductible in computing
the taxable income earned in Canada of the
entrant bank for a particular taxation year
that ends after that time, except that the
portion of the loss that can reasonably be
regarded as the Canadian affiliate's loss
from carrying on a business in Canada and,
where a business was carried on by the
Canadian affiliate in Canada in the earlier
year, the portion of the loss that can
reasonably be regarded as being in respect
of an amount deductible under paragraph
110(1)(k) in computing its taxable income
for the year are deductible only
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(i) if that business is carried on by the
Canadian affiliate or the entrant bank for
profit or with a reasonable expectation of
profit throughout the particular year, and
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(ii) to the extent of the total of the entrant
bank's income for the particular year
from that business, and where properties
were sold, leased, rented or developed or
services rendered in the course of
carrying on that business before that
time, from any other business
substantially all of the income of which
was derived from the sale, leasing, rental
or development, as the case may be, of
similar properties or the rendering of
similar services,
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and, for the purpose of this paragraph,
where subsection 88(1.1) applied to the
dissolution of another corporation in
respect of which the Canadian affiliate was
the parent and paragraph 88(1.1)(e) applied
in respect of losses of that other
corporation, the Canadian affiliate is
deemed to be the same corporation as, and
a continuation of, that other corporation
with respect to those losses,
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(f) subject to paragraphs (g) and (h), a net
capital loss of the Canadian affiliate for a
taxation year (in this paragraph referred to
as the ``Canadian affiliate's loss year'') is
deemed to be a net capital loss of the entrant
bank for its taxation year in which the
Canadian affiliate's loss year ended to the
extent that the loss
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(i) was not deducted in computing the
taxable income of the Canadian affiliate
or any other entrant bank for any taxation
year, and
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(ii) would have been deductible in
computing the taxable income of the
Canadian affiliate for any taxation year
beginning after the date of the dissolution
order or the commencement of the
winding-up, as the case may be, on the
assumption that the Canadian affiliate
had such a taxation year and that it had
sufficient income and taxable capital
gains for that year,
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(g) if at any time control of the Canadian
affiliate or the entrant bank has been
acquired by a person or group of persons, no
amount in respect of the Canadian
affiliate's net capital loss for a taxation year
that ends before that time is deductible in
computing the entrant bank's taxable
income earned in Canada for a taxation year
that ends after that time, and
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(h) any loss of the Canadian affiliate that
would otherwise be deemed by paragraph
(d) or (f) to be a loss of the entrant bank for
a particular taxation year that begins after
the date of the dissolution order or the
commencement of the winding-up, as the
case may be, is deemed, for the purpose of
computing the entrant bank's taxable
income earned in Canada for taxation years
that begin after that date, to be such a loss
of the entrant bank for its immediately
preceding taxation year and not for the
particular year, if the entrant bank so elects
in its return of income for the particular
year.
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| Winding-up
of Canadian
affiliate: stop
loss
|
(13) If a Canadian affiliate and its entrant
bank have at any time made a joint election
under either of subsection (3) or (12),
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(a) in respect of any transfer of property,
directly or indirectly, by the Canadian
affiliate to the entrant bank or a person with
whom the entrant bank does not deal at
arm's length,
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(i) subparagraph 13(21.2)(e)(iii) shall be
read without reference to clause (E) of
that subparagraph,
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(ii) subsection 14(12) shall be read
without reference to paragraph (g) of that
subsection,
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(iii) paragraph 18(15)(b) shall be read
without reference to subparagraph (iv) of
that paragraph, and
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(iv) paragraph 40(3.4)(b) shall be read
without reference to subparagraph (v) of
that paragraph;
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(b) in respect of any property of the
Canadian affiliate appropriated to or for the
benefit of the entrant bank or any person
with whom the entrant bank does not deal at
arm's length, section 69(5) shall be read
without reference to paragraph (d); and
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(c) for the purposes of applying subsection
13(21.2), 14(12), 18(15) and 40(3.4) to any
property that was disposed of by the
affiliate, after the dissolution or winding-up
of the affiliate, the entrant bank is deemed
to be the same corporation as, and a
continuation of, the affiliate.
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| Winding-up
of Canadian
affiliate:
SDOs
|
(14) If a Canadian affiliate of an entrant
bank and the entrant bank meet the conditions
set out in paragraphs (12)(a) and (b) and
jointly elect in accordance with subsection
(11) to have this subsection apply, and the
Canadian affiliate has not made an election
under this subsection with any other entrant
bank, the entrant bank is deemed to be the
same corporation as, and a continuation of, the
Canadian affiliate for the purposes of
paragraphs 142.4(4)(c) and (d) in respect of
any specified debt obligation disposed of by
the Canadian affiliate.
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(2) Subsection (1) applies after June 27,
1999.
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139. (1) Paragraph (b) of the definition
``qualified investment'' in subsection 146(1)
of the Act is replaced by the following:
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(b) a bond, debenture, note or similar
obligation
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(i) issued by a corporation the shares of
which are listed on a prescribed stock
exchange in Canada, or
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(ii) issued by an authorized foreign
bank and payable at a branch in
Canada of the bank,
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(2) Subsection (1) applies after June 27,
1999.
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140. (1) Paragraph (b) of the definition
``qualified investment'' in subsection
146.1(1) of the Act is replaced by the
following:
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(b) a bond, debenture, note or similar
obligation
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(i) issued by a corporation the shares of
which are listed on a prescribed stock
exchange in Canada, or
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(ii) issued by an authorized foreign
bank and payable at a branch in
Canada of the bank,
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(2) Subsection (1) applies after June 27,
1999.
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141. (1) Paragraph (b) of the definition
``qualified investment'' in subsection
146.3(1) of the Act is replaced by the
following:
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(b) a bond, debenture, note or similar
obligation
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(i) issued by a corporation the shares of
which are listed on a prescribed stock
exchange in Canada, or
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(ii) issued by an authorized foreign
bank and payable at a branch in
Canada of the bank,
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(2) Subsection (1) applies after June 27,
1999.
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142. (1) Subsection 147(10.5) of the Act is
repealed.
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(2) Subsection (1) applies to shares
acquired, but not disposed of, before
February 28, 2000 and to shares acquired
after February 27, 2000.
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