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Bill C-29

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First Session, Forty-second Parliament,
64-65 Elizabeth II, 2015-2016
STATUTES OF CANADA 2016
CHAPTER 12
A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures
ASSENTED TO
December 15, 2016
BILL C-29


RECOMMENDATION
His Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled “A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures”.
SUMMARY
Part 1 implements certain income tax measures proposed in the March 22, 2016 budget by
(a)eliminating the eligible capital property rules and introducing a new class of depreciable property;
(b)introducing rules to prevent the avoidance of the shareholder loan rules using back-to-back arrangements;
(c)excluding derivatives from the application of the inventory valuation rules;
(d)ensuring that the return on a linked note retains the same character whether it is earned at maturity or reflected in a secondary market sale;
(e)clarifying the tax treatment of emissions allowances and eliminating the double taxation of certain free emissions allowances;
(f)introducing rules so that any accrued foreign exchange gains on a foreign currency debt will be realized when the debt becomes a parked obligation;
(g)ensuring that amounts are not inappropriately received tax-free by a policyholder as a result of a disposition of an interest in a life insurance policy;
(h)preventing the misuse of an exception in the anti-avoidance rules in the Income Tax Act for cross-border surplus-stripping transactions;
(i)indexing to inflation the maximum benefit amounts and the phase-out thresholds under the Canada child benefit, beginning in the 202021 benefit year;
(j)amending the anti-avoidance rules in the Income Tax Act that prevent the multiplication of access to the small business deduction and the avoidance of the business limit and the taxable capital limit;
(k)ensuring that an exchange of shares of a mutual fund corporation or investment corporation that results in the investor switching between funds will be considered for tax purposes to be a disposition at fair market value;
(l)implementing the country-by-country reporting standards recommended by the Organisation for Economic Co-operation and Development;
(m)clarifying the application of anti-avoidance rules in the Income Tax Act for back-to-back loans to multiple intermediary structures and character substitution; and
(n)introducing rules to prevent the avoidance of withholding tax on rents, royalties and similar payments using back-to-back arrangements.
Part 1 implements other income tax measures confirmed in the March 22, 2016 budget by
(a)allowing greater flexibility for recognizing charitable donations made by an individual’s former graduated rate estate;
(b)clarifying what types of investment funds are excluded from the loss restriction event rules that otherwise limit a trust’s use of certain tax attributes;
(c)ensuring that income arising in certain trusts on the death of the trust’s primary beneficiary is taxed in the trust and not in the hands of that beneficiary, subject to a joint election for certain testamentary trusts to report the income in that beneficiary’s final tax return;
(d)clarifying that the Canada Revenue Agency and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided the total amount of the assessment does not increase; and
(e)implementing the common reporting standard recommended by the Organisation for Economic Co-operation and Development for the automatic exchange of financial account information between tax authorities.
Part 1 also amends the Employment Insurance Act and various regulations to replace the term “child tax benefit” with “Canada child benefit”.
Part 2 implements certain goods and services tax and harmonized sales tax (GST/HST) measures proposed or confirmed in the March 22, 2016 budget by
(a)adding certain exported call centre services to the list of GST/HST zero-rated exports;
(b)strengthening the test for determining whether two corporations, or a partnership and a corporation, can be considered closely related;
(c)ensuring that the application of the GST/HST is unaffected by income tax amendments that convert eligible capital property into a new class of depreciable property; and
(d)clarifying that the Canada Revenue Agency and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided the total amount of the assessment does not increase.
Part 3 implements an excise measure confirmed in the March 22, 2016 budget by clarifying that the Canada Revenue Agency and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided the total amount of the assessment does not increase.
Division 1 of Part 4 amends the Employment Insurance Act to specify what does not constitute suitable employment for the purposes of certain provisions of the Act.
Division 2 of Part 4 amends the Old Age Security Act to provide that, in the case of low-income couples who have to live apart for reasons not attributable to either of them, the amount of the allowance is to be based on the income of the allowance recipient only.
Division 3 of Part 4 amends the Canada Education Savings Act to replace the term “child tax benefit” with “Canada child benefit”. It also amends that Act to change the manner in which the eligibility for the Canada Learning Bond is established, including by eliminating the national child benefit supplement as an eligibility criterion and by adding an eligibility formula based on income and number of children.
Division 4 of Part 4 amends the Canada Disability Savings Act to replace the term “child tax benefit” with “Canada child benefit”. It also amends the definition “phase-out income”.
Division 5 of Part 4 amends the Royal Canadian Mint Act to enable the Royal Canadian Mint to anticipate profit with respect to the provision of goods or services, to clarify the powers of the Royal Canadian Mint, to confirm the current and legal tender status of all non-circulation $350 coins dated between 1999 and 2006 and to remove the requirement that the directors of the Royal Canadian Mint have experience in respect of metal fabrication or production, industrial relations or a related field.
Division 6 of Part 4 amends the Financial Administration Act, the Bank of Canada Act and the Canada Mortgage and Housing Corporation Act to clarify certain powers of the Minister of Finance in relation to the sound and efficient management of federal funds and the operation of Crown corporations. It amends the Financial Administration Act to provide that the Minister of Finance may lend, by way of auction, excess funds out of the Consolidated Revenue Fund and, with the authorization of the Governor in Council, may enter into contracts and agreements of a financial nature for the purpose of managing risks related to the financial position of the Government of Canada. It also amends the Bank of Canada Act to provide that the Minister of Finance may delegate to the Bank of Canada the management of the lending of money to agent corporations. Finally, it amends the Canada Mortgage and Housing Corporation Act to provide that the Bank of Canada may act as a custodian of the financial assets of the Canada Mortgage and Housing Corporation.
Available on the Parliament of Canada Web Site at the following address:
http://www.parl.gc.ca


TABLE OF PROVISIONS
A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures
Short Title
1
Budget Implementation Act, 2016, No. 2
PART 1
Amendments to the Income Tax Act and to Related Legislation
2
PART 2
Amendments to the Excise Tax Act (GST/HST Measures) and Other Related Texts
89
Part 3
Excise Act, 2001
100
PART 4
Various Measures
DIVISION 1
Employment Insurance Act
101
DIVISION 2
Old Age Security Act
104
DIVISION 3
Canada Education Savings Act
107
DIVISION 4
Canada Disability Savings Act
114
Division 5
Royal Canadian Mint Act
117
DIVISION 6
Funds Management
121


64-65 Elizabeth II
CHAPTER 12
A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2016 and other measures
[Assented to 15th December, 2016]
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
Short Title
Short title
1This Act may be cited as the Budget Implementation Act, 2016, No. 2.
PART 1
Amendments to the Income Tax Act and to Related Legislation
R.‍S.‍, c. 1 (5th Supp.‍)
Income Tax Act
2(1)Section 10 of the Income Tax Act is amended by adding the following after subsection (14):
Derivatives
(15)For the purposes of this section, property of a taxpayer that is a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement, or any similar agreement is deemed not to be inventory of the taxpayer.
(2)Subsection (1) applies to agreements entered into after March 21, 2016.
3(1)The portion of paragraph 13(4.‍3)‍(d) of the Act before subparagraph (ii) is replaced by the following:
(d)any amount that would, if this Act were read without reference to this subsection, be included in the cost of a property of the transferor included in Class 14.‍1 of Schedule II to the Income Tax Regulations (including a deemed acquisition under subsection (35)) or included in the proceeds of disposition of a property of the transferee included in that Class (including a deemed disposition under subsection (37)) in respect of the disposition or termination of the former property by the transferor is deemed to be
(i)neither included in the cost nor the proceeds of disposition of property included in that Class,
(2)Section 13 of the Act is amended by adding the following after subsection (7.‍4):
Deemed capital cost
(7.‍41)Subsection (38) applies in respect of an amount repaid after 2016 as if that amount was repaid immediately before 2017, if
(a)the amount is repaid by the taxpayer under a legal obligation to repay all or part of an amount the taxpayer received or was entitled to receive that was assistance from a government, municipality or other public authority (whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance) in respect of, or for the acquisition of, property the cost of which was an eligible capital expenditure of the taxpayer in respect of the business;
(b)the amount of an eligible capital expenditure of the taxpayer in respect of the business was reduced by paragraph 14(10)‍(c) because of the assistance referred to in paragraph (a); and
(c)paragraph 20(1)‍(hh.‍1) does not apply in respect of the amount repaid.
Timing of deduction
(7.‍42)No amount may be deducted under paragraph 20(1)‍(a) in respect of an amount of repaid assistance referred to in subsection (7.‍41) for any taxation year prior to the taxation year in which the assistance is repaid.
(3)Subsection 13(34) of the Act is replaced by the following:
Goodwill
(34)Where a taxpayer carries on a particular business,
(a)there is deemed to be a single goodwill property in respect of the particular business;
(b)if at any time the taxpayer acquires goodwill as part of an acquisition of all or a part of another business that is carried on, after the acquisition, as part of the particular business — or is deemed by subsection (35) to acquire goodwill in respect of the particular business — the cost of the goodwill is added at that time to the cost of the goodwill property in respect of the particular business;
(c)if at any time the taxpayer disposes of goodwill as part of the disposition of part of the particular business, receives proceeds of disposition a portion of which is attributable to goodwill and continues to carry on the particular business or is deemed by subsection (37) to dispose of goodwill in respect of the particular business,
(i)the taxpayer is deemed to dispose at that time of a portion of the goodwill property in respect of the particular business having a cost equal to the lesser of the cost of the goodwill property in respect of the particular business otherwise determined and the portion of the proceeds attributable to goodwill, and
(ii)the cost of the goodwill property in respect of the particular business is reduced at that time by the amount determined under subparagraph (i); and
(d)if paragraph (c) applies to more than one disposition of goodwill at the same time, that paragraph and subsection (39) apply as if each disposition had occurred separately in the order designated by the taxpayer or, if the taxpayer does not designate an order, in the order designated by the Minister.
Outlays not relating to property
(35)If at any time a taxpayer makes or incurs an outlay or expense on account of capital for the purpose of gaining or producing income from a business carried on by the taxpayer, the taxpayer is deemed to acquire at that time goodwill in respect of the business with a cost equal to the amount of the outlay or expense if no portion of the amount is
(a)the cost, or any part of the cost, of a property;
(b)deductible in computing the taxpayer’s income from the business (determined without reference to this subsection);
(c)not deductible in computing the taxpayer’s income from the business because of any provision of this Act (other than paragraph 18(1)‍(b)) or the Income Tax Regulations;
(d)paid or payable to a creditor of the taxpayer as, on account of or in lieu of payment of, any debt, or on account of the redemption, cancellation or purchase of any bond or debenture; or
(e)where the taxpayer is a corporation, partnership or trust, paid or payable to a person as a shareholder, partner or beneficiary, as the case may be, of the taxpayer.
No addition to goodwill
(36)For greater certainty, no amount paid or payable may be included in Class 14.‍1 of Schedule II to the Income Tax Regulations, if the amount is
(a)in consideration for the purchase of shares; or
(b)in consideration for the cancellation or assignment of an obligation to pay consideration referred to in paragraph (a).
Receipts not relating to property
(37)If at any time in a taxation year a taxpayer has or may become entitled to receive an amount (in this subsection referred to as the receipt) on account of capital in respect of a business that is or was carried on by the taxpayer, the taxpayer is deemed to dispose, at that time, of goodwill in respect of the business for proceeds of disposition equal to the amount by which the receipt exceeds the total of all outlays or expenses that were made or incurred by the taxpayer for the purpose of obtaining the receipt and that were not otherwise deductible in computing the taxpayer’s income, if the following conditions are satisfied (determined without reference to this subsection):
(a)the receipt is not included in computing the taxpayer’s income, or deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts for the taxation year or a preceding taxation year;
(b)the receipt does not reduce the cost or capital cost of a property or the amount of an outlay or expense; and
(c)the receipt is not included in computing any gain or loss of the taxpayer from a disposition of a capital property.
Class 14.‍1 — transitional rules
(38)If a taxpayer has incurred an eligible capital expenditure in respect of a business before January 1, 2017,
(a)at the beginning of that day, the total capital cost of all property of the taxpayer included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of the business, each of which was an eligible capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is deemed to be the amount determined by the formula
4/3 × (A + B – C)
where
A
is the amount that is the cumulative eligible capital in respect of the business at the beginning of that day,
B
is the amount determined for F in the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day) in respect of the business at the beginning of that day, and
C
is the amount by which the total of all amounts determined, in respect of the business, for E or F in the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day), exceeds the total of all amounts determined for A to D.‍1 in that definition in respect of the business at the beginning of that day, including any adjustment required by subparagraph (d)‍(i);
(b)at the beginning of that day, the capital cost of each property of the taxpayer included in the class in respect of the business, each of which was an eligible capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is to be determined as follows:
(i)the taxpayer shall designate the order in which the capital cost of each property that is not the goodwill property is determined and, if the taxpayer does not designate an order, the Minister may designate the order,
(ii)the capital cost of a particular property that is not the goodwill property in respect of the business is deemed to be the lesser of the eligible capital expenditure of the taxpayer in respect of the particular property and the amount by which the total capital cost of the class determined under paragraph (a) exceeds the total of all amounts each of which is an amount deemed by this subparagraph to be the capital cost of a property that is determined in advance of the determination of the capital cost of the particular property, and
(iii)the capital cost of the goodwill property is deemed to be the amount by which the total capital cost of the class exceeds the total of all amounts each of which is an amount deemed by subparagraph (ii) to be the capital cost of a property;
(c)an amount is deemed to have been allowed to the taxpayer in respect of property of the class under regulations made under paragraph 20(1)‍(a) in computing the taxpayer’s income for taxation years ending before that day equal to the amount by which
(i)the total of the total capital cost of the class and the amount determined for C in paragraph (a)
exceeds
(ii)the amount determined for A in paragraph (a); and
(d)if no taxation year of the taxpayer ends immediately before that day and the taxpayer would have had a particular amount included, because of paragraph 14(1)‍(b) (as that paragraph applied immediately before that day), in computing the taxpayer’s income from the business for the particular taxation year that includes that day if the particular year had ended immediately before that day,
(i)for the purposes of the formula in paragraph (a), 3/2 of the particular amount is to be included in computing the amount for B of the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day),
(ii)the taxpayer is deemed to dispose of a capital property in respect of the business immediately before that day for proceeds of disposition equal to twice the particular amount,
(iii)if the taxpayer elects in writing to have this subparagraph apply and files that election with the Minister on or before the filing-due date for the particular year, subparagraph (ii) does not apply and an amount equal to the particular amount is to be included in computing the taxpayer’s income from the business for the particular year,
(iv)if, on or after that day and in the particular year, the taxpayer acquires a property included in the class in respect of the business, or is deemed by subsection (35) to acquire goodwill in respect of the business, and the taxpayer elects in writing to have this subparagraph apply and files that election with the Minister on or before the filing-due date for the particular year,
(A)for the purposes of subparagraphs (ii) and (iii), the particular amount is to be reduced by the lesser of the particular amount otherwise determined and 1/2 of the capital cost of the property or goodwill acquired (determined without reference to clause (B)), and
(B)the capital cost of the property or goodwill acquired, as the case may be, is to be reduced by twice the amount by which the particular amount is reduced under clause (A), and
(v)if, in the particular year and before that day, the taxpayer disposed of a qualified farm or fishing property (as defined in subsection 110.‍6(1)) that was an eligible capital property of the taxpayer, the capital property disposed of under subparagraph (ii), if any, is deemed to be a qualified farm or fishing property to the extent of the lesser of
(A)the proceeds of disposition of the capital property, and
(B)the amount by which the proceeds of disposition of the qualified farm or fishing property exceed its cost.
Class 14.‍1 — transitional rule
(39)If at any time a taxpayer disposes of a particular property included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of a business and none of subsections 24(2), 70(5.‍1), 73(3.‍1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.‍4(3) apply to the disposition, then for the purpose of determining the undepreciated capital cost of the class, the taxpayer is deemed to have acquired a property of the class immediately before that time with a capital cost equal to the least of 1/4 of the proceeds of disposition of the particular property, 1/4 of the capital cost of the particular property and
(a)if the particular property is not goodwill and is acquired before January 1, 2017 by the taxpayer, 1/4 of the capital cost of the particular property;
(b)if the particular property is not goodwill, is acquired on or after that day by the taxpayer and subsection (40) deems an amount to have been allowed under paragraph 20(1)‍(a) in respect of the taxpayer’s acquisition of the particular property, that amount;
(c)if the particular property (other than a property to which paragraph (b) applies) is not goodwill and is acquired on or after that day by the taxpayer — in circumstances under which any of subsections 24(2), 70(5.‍1), 73(3.‍1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.‍4(3) apply — from a person or partnership that would have been deemed under this subsection to have acquired a property if none of those subsections had applied, the capital cost of the property that would have been deemed under this subsection to have been acquired by the person or partnership;
(d)if the particular property is goodwill, the amount by which
(i)the total of all amounts each of which is
(A)1/4 of the amount determined under subparagraph (38)‍(b)‍(iii) in respect of the business,
(B)if goodwill is acquired on or after that day by the taxpayer and subsection (40) deems an amount to have been allowed under paragraph 20(1)‍(a) in respect of the taxpayer’s acquisition of the goodwill, that amount, or
(C)if goodwill is acquired (other than an acquisition in respect of which clause (B) applies) on or after that day by the taxpayer — in circumstances under which any of subsections 24(2), 70(5.‍1), 73(3.‍1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.‍4(3) apply — from a person or partnership that would have been deemed under this subsection to have acquired a property if none of those subsections had applied, the capital cost of the property that would have been deemed under this subsection to have been acquired by the person or partnership
exceeds
(ii)the total of all amounts each of which is the capital cost of a property deemed by this subsection to have been acquired by the taxpayer at or before that time in respect of another disposition of goodwill in respect of the business; and
(e)in any other case, nil.
Class 14.‍1 — transitional rule
(40)If at any time a taxpayer acquires a particular property included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of a business, the acquisition of the particular property is part of a transaction or series of transactions or events that includes a disposition (in this subsection referred to as the prior disposition) at or before that time of the particular property, or a similar property, by the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer and subsection (39) applies in respect of the prior disposition, then for the purpose of determining the undepreciated capital cost of the class, an amount is deemed to have been allowed under paragraph 20(1)‍(a) to the taxpayer in respect of the particular property in computing the taxpayer’s income for taxation years ending before the acquisition equal to the lesser of the capital cost of the property deemed by subsection (39) to be acquired in respect of the prior disposition and 1/4 of the capital cost of the particular property.
Class 14.‍1 — transitional rule
(41)For the purposes of subsections (38) to (40) and (42), paragraph 20(1)‍(hh.‍1), subsections 40(13) to (16) and paragraph 79(4)‍(b), cumulative eligible capital, eligible capital expenditure, eligible capital property and exempt gains balance have the meanings that would be assigned to those expressions if the Act read as it did immediately before 2017.
Class 14.‍1 — transitional rules
(42)If a taxpayer owns property included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of a business at the beginning of 2017, that was an eligible capital property in respect of the business immediately before 2017,
(a)for the purposes of the Act and its regulations (other than this section, section 20 and any regulations made for the purposes of paragraph 20(1)‍(a)), if the amount determined for A in the definition cumulative eligible capital in subsection 14(5) would have been increased immediately before 2017 if the property had been disposed of immediately before that time, the capital cost of the property is deemed to be increased by 4/3 of the amount of that increase;
(b)for purposes of this section, section 20 and any regulations made for the purposes of paragraph 20(1)‍(a), if the taxpayer was deemed by subsection 14(12) to continue to own eligible capital property in respect of the business and not to have ceased to carry on the business until a time that is after 2016, the taxpayer is deemed to continue to own the property and to continue to carry on the business until the time that is immediately before the first time one of the events that would be described in any of paragraphs 14(12)‍(c) to (g) (as they read immediately before 2017, if the reference to “eligible capital property” in paragraph 14(12)‍(d) were read as “eligible capital property or capital property”) occurs;
(c)for the purposes of the descriptions of D.‍1 and K in the definition undepreciated capital cost in subsection (21), the taxpayer is deemed not to have paid or received any amounts before 2017 as or on account of an existing or proposed countervailing or anti-dumping duty in respect of depreciable property of the class; and
(d)subsection (7.‍1) does not apply to assistance that a taxpayer received or is entitled to receive before 2017 in respect of a property that was an eligible capital property immediately before 2017.
(4)Subsection (1) applies in respect of dispositions and terminations that occur after 2016.
(5)Subsections (2) and (3) come into force or are deemed to have come into force on January 1, 2017.
4(1)Section 14 of the Act is repealed.
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
5(1)Section 15 of the Act is amended by adding the following after subsection (2.‍15):
Back-to-back arrangement — application
(2.‍16)Subsection (2.‍17) applies at any time if
(a)at that time, a person or partnership (referred to in this subsection and subsections (2.‍17) to (2.‍192) as the intended borrower) has an amount outstanding as or on account of a debt or other obligation to pay an amount (in this subsection and subsections (2.‍17) to (2.‍192) referred to as the shareholder debt) to a person or partnership (in this subsection and subsections (2.‍17) to (2.‍192) referred to as the immediate funder);
(b)subsection (2) would not, in the absence of this subsection and subsection (2.‍17), apply to the shareholder debt;
(c)at that time, a funder, in respect of a particular funding arrangement,
(i)has an amount outstanding as or on account of a debt or other obligation to pay an amount (other than a debt or other obligation to pay an amount to which subsection (2) applies or would apply if it were not a pertinent loan or indebtedness, as defined in subsection (2.‍11)) to a person or partnership that meets either of the following conditions:
(A)recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to a funding arrangement, or
(B)it can reasonably be concluded that all or a portion of the particular funding arrangement was entered into or was permitted to remain outstanding because
(I)all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or
(II)the funder anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or
(ii)has a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership and
(A)the existence of the specified right is required under the terms and conditions of the particular funding arrangement, or
(B)it can reasonably be concluded that all or a portion of the particular funding arrangement was entered into, or was permitted to remain in effect, because
(I)the specified right was granted, or
(II)the funder anticipated that the specified right would be granted; and
(d)at that time, one or more funders is an ultimate funder.
Back-to-back arrangement — consequences
(2.‍17)If this subsection applies at a particular time, then for the purposes of this section and section 80.‍4, the intended borrower is deemed to receive a loan from each particular ultimate funder at the particular time, the amount of which is equal to the amount determined by the formula
A × B/C – (D – E)
where
A
is the lesser of
(a)the amount outstanding as or on account of the shareholder debt at the particular time, and
(b)the total of all amounts, each of which is, at the particular time,
(i)an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, or
(ii)the fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt;
B
is the total of all amounts, each of which is, at the particular time,
(a)an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, or
(b)the fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt;
C
is the total amount determined under paragraph (b) of the description of A;
D
is the total of all amounts, each of which is, in respect of the shareholder debt, an amount that the intended borrower has been deemed by this subsection to have received from the particular ultimate funder as a loan at any time before the particular time; and
E
is the total amount of any repayments deemed by subsections (2.‍19) and (2.‍191) to have occurred before the particular time, in respect of any deemed loans from the particular ultimate funder that are referred to in the description of D.
Back-to-back arrangement — conditions for deemed repayment
(2.‍18)Subsection (2.‍19) applies in respect of an intended borrower and a particular ultimate funder at a particular time if
(a)prior to the particular time, subsection (2.‍17) has applied in respect of a shareholder debt to deem one or more loans to have been received by the intended borrower from the particular ultimate funder; and
(b)at the particular time,
(i)an amount owing in respect of the shareholder debt is repaid in whole or in part,
(ii)an amount owing in respect of a debt or other obligation owing to the particular ultimate funder by a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt is repaid in whole or in part, or
(iii)either
(A)there is a decrease in the fair market value of a property in respect of which a specified right was granted by the particular ultimate funder to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, or
(B)a right described in clause (A) is extinguished.
Back-to-back arrangement — deemed repayment
(2.‍19)If this subsection applies in respect of an intended borrower and a particular ultimate funder at a particular time,
(a)the intended borrower is deemed, for the purposes of this section, paragraph 20(1)‍(j), section 80.‍4 and subsection 227(6.‍1), to repay, in whole or in part, one or more of the deemed loans referred to in paragraph (2.‍18)‍(a) at the particular time; and
(b)the total amount of the deemed repayments referred to in paragraph (a) is to be determined by the following formula:
A – B – C
where
A
is the total of all amounts, each of which is the amount of a loan deemed by subsection (2.‍17) to have been received, at any time before the particular time, by the intended borrower from the particular ultimate funder in respect of the shareholder debt,
B
is the total of all amounts deemed by this subsection to have been repaid, at any time before the particular time, by the intended borrower in respect of any loans referred to in the description of A, and
C
is the amount determined by the formula
D × E/F
where
D
is the lesser of
(i)the amount outstanding as or on account of the shareholder debt, immediately after the particular time, and
(ii)the total of all amounts, each of which is, immediately after the particular time,
(A)an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to an ultimate funder under a funding arrangement in respect of the shareholder debt, or
(B)the fair market value of a particular property in respect of which an ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt,
E
is the total of all amounts, each of which is, immediately after the particular time
(i)an amount outstanding as or on account of a debt or other obligation that is owed by a funder (other than an ultimate funder) to the particular ultimate funder under a funding arrangement in respect of the shareholder debt, or
(ii)the fair market value of a particular property in respect of which the particular ultimate funder has granted a specified right to a funder (other than an ultimate funder) under a funding arrangement in respect of the shareholder debt, and
F
is the amount determined under subparagraph (ii) in the description of D.
Negative amounts
(2.‍191)If, in the absence of section 257, the formula in subsection (2.‍17) would result in a negative amount at a particular time,
(a)the intended borrower is deemed, for the purposes of this section, paragraph 20(1)‍(j), section 80.‍4 and subsection 227(6.‍1), to repay, in whole or in part, one or more of the loans deemed by subsection (2.‍17) to have been received by the intended borrower from the particular ultimate funder before the particular time; and
(b)the total amount of the deemed repayments referred to in paragraph (a) is equal to the absolute value of that negative amount.
Back-to-back arrangement — definitions
(2.‍192)The following definitions apply in this subsection and subsections (2.‍16) to (2.‍191).
funder, in respect of a funding arrangement, means
(a)if the funding arrangement is described in paragraph (a) of the definition funding arrangement, the immediate funder;
(b)if the funding arrangement is described in paragraph (b) of the definition funding arrangement, the creditor in respect of the debt or other obligation or the grantor of the specified right, as the case may be; and
(c)a person or partnership that does not deal at arm’s length with a person or partnership referred to in paragraph (a) or (b). (bailleur de fonds)
funding arrangement means
(a)the shareholder debt; and
(b)each debt or other obligation or specified right, owing by or granted to a funder, in respect of a particular funding arrangement, if the debt or other obligation or specified right meets the conditions in subparagraph (2.‍16)‍(c)‍(i) or (ii) in respect of a funding arrangement. (mécanisme de financement)
specified right has the same meaning as in subsection 18(5). (droit déterminé)
ultimate funder means a funder, if subsection (2) would apply to the shareholder debt if the creditor under the shareholder debt were the funder instead of the immediate funder. (bailleur de fonds ultime)
(2)Subsection (1) applies in respect of
(a)if the immediate funder in respect of a shareholder debt is a debtor, or holder of a specified right, under a funding arrangement under which an ultimate funder is the creditor or the grantor of the specified right,
(i)loans received and indebtedness incurred in respect of the shareholder debt after March 21, 2016, and
(ii)any portion of a particular loan received or indebtedness incurred in respect of the shareholder debt before March 22, 2016 that remains outstanding on that day, as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on March 22, 2016 in the same manner and on the same terms as the particular loan or indebtedness; and
(b)in any other case,
(i)loans received and indebtedness incurred after 2016, and
(ii)any portion of a particular loan received or indebtedness incurred before January 1, 2017 that remains outstanding on that day, as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on January 1, 2017 in the same manner and on the same terms as the particular loan or indebtedness.
6(1)Subsection 18(1) of the Act is amended by striking out “and” at the end of paragraph (v), by adding “and” at the end of paragraph (w) and by adding the following after paragraph (w):
Derivatives — lower of cost and market
(x)any reduction in a taxation year in the value of a property if
(i)the method used by the taxpayer to value the property at the end of the year for purposes of computing the taxpayer’s profit from a business or property is the cost at which the taxpayer acquired it or its fair market value at the end of the year, whichever is lower,
(ii)the property is described in subsection 10(15), and
(iii)the property is not disposed of by the taxpayer in the year; and
Payment for shares
(y)an amount referred to in subsection 13(36).
(2)Paragraph 18(1)‍(x) of the Act, as enacted by subsection (1), applies to agreements entered into after March 21, 2016.
(3)Paragraph 18(1)‍(y) of the Act, as enacted by subsection (1), comes into force or is deemed to have come into force on January 1, 2017.
7(1)Paragraph 20(1)‍(b) of the Act is replaced by the following:
Incorporation expenses
(b)the lesser of
(i)the portion of the amount (that is not otherwise deductible in computing the income of the taxpayer) that is an expense incurred in the year for the incorporation of a corporation, and
(ii)$3,000 less the total of all amounts each of which is an amount deducted by another taxpayer in respect of the incorporation of the corporation;
(2)Paragraph 20(1)‍(hh.‍1) of the Act is replaced by the following:
Repayment of obligation
(hh.‍1)3/4 of any amount repaid by the taxpayer in the year (on or after the time the taxpayer ceases to carry on a business) under a legal obligation to repay all or part of an amount the taxpayer received or was entitled to receive that was assistance from a government, municipality or other public authority (whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance) in respect of, or for the acquisition of, property the cost of which was an eligible capital expenditure of the taxpayer in respect of the business if the amount of the eligible capital expenditure of the taxpayer in respect of the business was reduced by paragraph 14(10)‍(c) because of the amount of the assistance the taxpayer received or was entitled to receive;
(3)Subsections 20(4.‍2) and (4.‍3) of the Act are replaced by the following:
Former eligible capital property
(4.‍2)If an amount is deductible under subsection (4) in respect of the disposition of a depreciable property and subsection 13(39) applied to the disposition of the depreciable property, the amount deductible under subsection (4) is equal to 3/4 of the amount that would be deductible without reference to this subsection.
(4)Section 20 of the Act is amended by adding the following after subsection (14.‍1):
Sales of linked notes
(14.‍2)For the purposes of subsection (14), the amount determined by the following formula is deemed to be interest that accrued on an assigned or otherwise transferred debt obligation — that is, at any time, described in paragraph 7000(1)‍(d) of the Income Tax Regulations — to which the transferee has become entitled to for a period commencing before the time of the transfer and ending at that particular time that is not payable until after that particular time:
A − B
where
A
is the price for which the debt obligation was assigned or otherwise transferred at the particular time; and
B
is the amount by which the price (converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) for which the debt obligation was issued exceeds the portion, if any, of the principal amount of the debt obligation (converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) that was repaid by the issuer on or before the particular time.
(5)Subsection 20(16.‍1) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c)in respect of a taxation year in respect of property included in Class 14.‍1 of Schedule II to the Income Tax Regulations unless the taxpayer has ceased to carry on the business to which the class relates.
(6)Subsection (1) applies in respect of expenses incurred after 2016.
(7)Subsections (2) and (5) come into force or are deemed to have come into force on January 1, 2017.
(8)Subsection (3) applies to dispositions that occur after 2016.
(9)Subsection (4) applies to transfers occurring after 2016.
8(1)Subsection 24(1) of the Act is repealed.
(2)Subsection 24(2) of the Act is replaced by the following:
Business carried on by spouse or common-law partner or controlled corporation
(2)If, at any time, an individual ceases to carry on a business and the individual’s spouse or common-law partner, or a corporation controlled directly or indirectly in any manner whatever by the individual, carries on the business and acquires all of the property included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of the business owned by the individual immediately before that time and that had value at that time, the following rules apply:
(a)the individual is deemed to have, immediately before that time, disposed of the property and received proceeds of disposition equal to the lesser of the capital cost and the cost amount to the individual of the property immediately before the disposition;
(b)the spouse, common-law partner or corporation, as the case may be, is deemed to have acquired the property at a cost equal to those proceeds; and
(c)if the amount that was the capital cost to the individual of the property exceeds the amount determined under paragraph 70(5)‍(b) to be the cost to the person that acquired the property, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)‍(a),
(i)the capital cost to the person of the property is deemed to be the amount that was the capital cost to the individual of the property, and
(ii)the excess is deemed to have been allowed to the person in respect of the property under regulations made for the purposes of paragraph 20(1)‍(a) in computing income for taxation years that ended before the person acquired the property.
(3)Subsection 24(3) of the Act is repealed.
(4)Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
9(1)Subsection 25(3) of the Act is replaced by the following:
Dispositions in extended fiscal period
(3)If subsection (1) applies in respect of a fiscal pe­riod of a business of an individual, for the purpose of computing the individual’s income for the fiscal period, section 13 is to be read without reference to its subsection (8).
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
10(1)The Act is amended by adding the following after section 27:
Emissions allowances
27.‍1(1)Notwithstanding section 10, for the purpose of computing a taxpayer’s income from a business, an emissions allowance shall be valued at the cost at which the taxpayer acquired it.
Determination of cost of emissions allowances
(2)If at any particular time a taxpayer that owns one emissions allowance, or two or more identical emissions allowances (for the purposes of this subsection two or more emissions allowances will be considered identical if they could be used to settle the same emissions obligations), acquires one or more other emissions allowances (in this subsection referred to as newly acquired emissions allowances), each of which is identical to each of the previously-acquired emissions allowances, for the purposes of computing, at any subsequent time, the cost of the taxpayer of each of the identical emissions allowances,
(a)the taxpayer is deemed to have disposed of each of the previously-acquired emissions allowances immediately before the particular time for proceeds equal to its cost to the taxpayer immediately before the particular time; and
(b)the taxpayer is deemed to have acquired each of the identical emissions allowances at the particular time at a cost equal to the amount determined by the formula
(A + B)/C
where
A
is the total cost to the taxpayer immediately before the particular time of the previously-acquired emissions allowances,
B
is the total cost to the taxpayer (determined without reference to this section) of the newly-acquired emissions allowances, and
C
is the number of the identical emissions allowances owned by the taxpayer immediately after the particular time.
Expense restriction
(3)Notwithstanding any other provision of this Act, in computing a taxpayer’s income from a business for a taxation year, the total amount deductible in respect of a particular emissions obligation for a taxation year shall not exceed the amount determined by the formula
A + B x C
where
A
is the total cost of emissions allowances either
(a)used by the taxpayer to settle the particular emissions obligation in the year, or
(b)held by the taxpayer at the end of the taxation year that can be used to satisfy the particular emissions obligation in respect of the year;
B
is the amount determined by the formula
D − (E + F)
where
D
is the number of emissions allowances required to satisfy the particular emissions obligation in respect of the taxation year,
E
is the number of emissions allowances used by the taxpayer to settle the particular emissions obligation in the year, and
F
is the number of emissions allowances held by the taxpayer at the end of the taxation year that can be used to satisfy the particular emissions obligation in respect of the year; and
C
is the fair market value of an emissions allowance at the end of the taxation year that could be used to satisfy the particular emissions obligation in respect of the year.
Income inclusion in following year
(4)There shall be included in computing the income of a taxpayer for a taxation year as income from a business the amount deducted in respect of an emissions obligation referred to in subsection (3) for the immediately preceding taxation year to the extent that the emissions obligation was not settled in the immediately preceding taxation year.
Proceeds of disposition
(5)If a taxpayer surrenders an emissions allowance to settle an emissions obligation, the taxpayer’s proceeds from the disposition of the emissions allowance are deemed to be equal to the taxpayer’s cost of the emissions allowance.
Loss restriction event
(6)Notwithstanding subsection (1), each emissions allowance held at the end of the taxpayer’s taxation year that ends immediately before the time at which the taxpayer is subject to a loss restriction event is to be valued at the cost at which the taxpayer acquired the property, or its fair market value at the end of the year, whichever is lower, and after that time the cost at which the taxpayer acquired the property is, subject to a subsequent application of this subsection and subsection (2), deemed to be that lower amount.
(2)Subsection (1) applies in respect of emissions allowances acquired in taxation years that begin after 2016. However, if a taxpayer elects in their return of income for their 2016 or 2017 taxation year, subsection (1) applies in respect of emissions allowances acquired by the taxpayer in taxation years that end after 2012.
11(1)Paragraph 28(1)‍(d) of the Act is replaced by the following:
(d)the total of all amounts each of which is an amount included in computing the taxpayer’s income for the year from the business because of subsection 13(1), 80(13) or 80.‍3(3) or (5),
(2)Paragraph 28(1)‍(g) of the Act is replaced by the following:
(g)the total of all amounts each of which is an amount deducted for the year under paragraph 20(1)‍(a) or (uu), subsection 20(16), section 30 or subsection 80.‍3(2) or (4) in respect of the business,
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
12(1)Clause 38(a.‍1)‍(ii)‍(B) of the Act is replaced by the following:
(B)the subject of a gift to which subsection 118.‍1(5.‍1) applies and that is made by the taxpayer’s estate to a qualified donee, or
(2)Clause 38(a.‍2)‍(ii)‍(B) of the Act is replaced by the following:
(B)the subject of a gift to which subsection 118.‍1(5.‍1) applies and that is made by the taxpayer’s estate to a qualified donee (other than a private foundation);
(3)Subsections (1) and (2) apply to the 2016 and subsequent taxation years.
13(1)Subparagraph 39(1)‍(a)‍(i) of the Act is repealed.
(2)Clause 39(1)‍(a)‍(i.‍1)‍(B) of the Act is replaced by the following:
(B)the disposition is deemed by section 70 to have occurred and the object is the subject of a gift to which subsection 118.‍1(5.‍1) applies and that is made by the taxpayer’s estate to an institution that would be described in clause (A) if the disposition were made at the time the estate makes the gift,
(3)Subparagraph 39(1)‍(b)‍(ii) of the Act is replaced by the following:
(ii)property described in any of subparagraphs 39(1)‍(a)‍(ii) to (iii) and (v); and
(4)Section 39 of the Act is amended by adding the following after subsection (2):
Deemed gain — parked obligation
(2.‍01)For the purposes of subsection (2), if a debt obligation owing by a taxpayer (referred to in this subsection and subsections (2.‍02) and (2.‍03) as the debtor) is denominated in a foreign currency and the debt obligation has become a parked obligation at a particular time, the debtor is deemed at that time to have made the gain, if any, that the debtor otherwise would have made if it had paid an amount at the particular time in satisfaction of the debt obligation equal to
(a)if the debt obligation has become a parked obligation at the particular time as a result of its acquisition by the holder of the debt obligation, the amount paid by the holder to acquire the debt obligation; and
(b)in any other case, the fair market value of the debt obligation at the particular time.
Parked obligation
(2.‍02)For the purposes of subsection (2.‍01), a debt obligation owing by a debtor is a parked obligation at a particular time if
(a)both
(i)at that time, the holder of the debt obligation does not deal at arm’s length with the debtor or, if the debtor is a corporation, has a significant interest in the debtor, and
(ii)at any previous time, a person who held the debt obligation dealt at arm’s length with the debtor and, where the debtor is a corporation, did not have a significant interest in the debtor; and
(b)it can reasonably be considered that one of the main purposes of the transaction or event or series of transactions or events that resulted in the debt obligation meeting the condition in subparagraph (a)‍(i) is to avoid the application of subsection (2).
Interpretation
(2.‍03)For the purposes of subsections (2.‍01) and (2.‍02),
(a)paragraph 80(2)‍(j) applies for the purpose of determining whether two persons are related to each other or whether any person is controlled by any other person; and
(b)paragraph 80.‍01(2)‍(b) applies for the purpose of determining whether a person has a significant interest in a corporation.
(5)Subsections (1) and (3) come into force or are deemed to have come into force on January 1, 2017.
(6)Subsection (2) applies to the 2016 and subsequent taxation years.
(7)Subsection (4) is deemed to have come into force on March 22, 2016. However, subsection 39(2.‍01) of the Act, as enacted by subsection (4), does not apply to a debtor in respect of a debt obligation owing by that debtor at the time that the obligation meets the conditions to become a parked obligation under subsection 39(2.‍02) of the Act, as enacted by subsection (4), because of a written agreement entered into before March 22, 2016, if that time is before 2017.
14(1)Paragraph (b) of the description of B in subsection 39.‍1(2) of the Act is replaced by the following:
(b)if the entity is a partnership, twice the amount, if any, claimed under subsection (4) by the individual for the year in respect of the entity, and
(2)Subsection 39.‍1(5) of the Act is repealed.
(3)Subsections (1) and (2) apply in respect of taxation years that begin after 2016.
15(1)Section 40 of the Act is amended by adding the following after subsection (12):
Class 14.‍1 — transitional rules
(13)Subsection (14) applies in respect of a disposition by a taxpayer of a property that is included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of a business of the taxpayer if
(a)the property was an eligible capital property of the taxpayer immediately before January 1, 2017;
(b)the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before January 1, 2017 is greater than nil;
(c)the amount determined for B in that definition in respect of the business immediately before January 1, 2017 is nil; and
(d)no amount is included in the taxpayer’s income for a taxation year because of paragraph 13(38)‍(d).
Class 14.‍1 — transitional rules
(14)If this subsection applies in respect of a disposition at any time by a taxpayer of a property, the taxpayer’s capital gain from the disposition is to be reduced by such amount as the taxpayer claims, not exceeding the amount by which
(a)2/3 of the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before 2017
exceeds
(b)the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.
Class 14.‍1 — transitional rules
(15)Subsection (16) applies in respect of a disposition by an individual of a property that is included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of a business of the individual if
(a)the property was an eligible capital property of the individual immediately before January 1, 2017; and
(b)the individual’s exempt gains balance in respect of the business is greater than nil for the taxation year that includes January 1, 2017.
Class 14.‍1 — transitional rules
(16)If this subsection applies in respect of a disposition at any time by an individual of a property, the individual’s capital gain from the disposition is to be reduced by such amount as the individual claims, not exceeding the amount by which
(a)twice the amount of the individual’s exempt gains balance in respect of the business for the taxation year that includes January 1, 2017
exceeds
(b)the total of
(i)if paragraph 13(38)‍(d) applies in respect of the business for the individual’s taxation year that includes January 1, 2017, the amount determined for D in paragraph 14(1)‍(b) for the purposes of paragraph 13(38)‍(d), and
(ii)the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
16Subparagraph 53(1)‍(e)‍(iii) of the Act is replaced by the following:
(iii)the taxpayer’s share of the amount, if any, by which
(A)any proceeds of a life insurance policy received by the partnership after 1971 and before that time in consequence of the death of any person whose life was insured under the policy,
exceeds the total of all amounts each of which is
(B)the adjusted cost basis (in this subparagraph as defined in subsection 148(9)), immediately before the death, of
(I)if the death occurs before March 22, 2016, the policy to the partnership, and
(II)if the death occurs after March 21, 2016, a policyholder’s interest in the policy,
(C)the amount by which the fair market value of consideration given in respect of a disposition of an interest in the policy exceeds the greater of the amount determined under subparagraph 148(7)‍(a)‍(i) in respect of the disposition and the adjusted cost basis to the policyholder of the interest immediately before the disposition, if
(I)the death occurs after March 21, 2016, and
(II)the disposition was by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016, or
(D)if the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the amount, if any, determined by the formula
A − B
where
A
is the amount, if any, by which the lesser of the adjusted cost basis to the policyholder of the interest immediately before the disposition and the fair market value of consideration given in respect of the disposition exceeds the amount determined under subparagraph 148(7)‍(a)‍(i) in respect of the disposition, and
B
is the absolute value of the negative amount, if any, that would be, in the absence of section 257, the adjusted cost basis, immediately before the death, of the interest in the policy,
17(1)The definition eligible capital property in section 54 of the Act is repealed.
(2)Paragraph (k) of the definition proceeds of disposition in section 54 of the Act is replaced by the following:
(k)any amount that would otherwise be proceeds of disposition of property of a taxpayer to the extent that the amount is deemed by subsection 84.‍1(1), 212.‍1(1.‍1) or 212.‍2(2) to be a dividend paid to the taxpayer; (produit de disposition)
(3)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
(4)Subsection (2) applies in respect of dispositions that occur after March 21, 2016.
18(1)The definition goodwill amount in subsection 56.‍4(1) of the Act is replaced by the following:
goodwill amount, of a taxpayer, is an amount the taxpayer has or may become entitled to receive that would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.‍1 of Schedule II to the Income Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of a business carried on by the taxpayer through a permanent establishment located in Canada. (montant pour achalandage)
(2)Paragraph 56.‍4(3)‍(b) of the Act is replaced by the following:
(b)the amount would, if this Act were read without reference to this section, be required to be included in the proceeds of disposition of a property included in Class 14.‍1 of Schedule II to the Income Tax Regulations, or is an amount to which subsection 13(38) applies, in respect of the business to which the restrictive covenant relates, and the particular taxpayer elects (or if the amount is payable by the purchaser in respect of a business carried on in Canada by the purchaser, the particular taxpayer and the purchaser jointly elect) in prescribed form to apply this paragraph in respect of the amount; or
(3)Paragraph 56.‍4(4)‍(b) of the Act is replaced by the following:
(b)if an election has been made under paragraph (3)‍(b) in respect of the amount, to be considered to be incurred by the purchaser on account of capital for the purpose of determining the cost of the property or for the purposes of subsection 13(35), as the case may be, and not to be an amount paid or payable for all other purposes of the Act; and
(4)Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
19(1)Paragraph 69(5)‍(d) of the Act is replaced by the following:
(d)subsections 13(21.‍2), 18(15) and 40(3.‍4) and (3.‍6) do not apply in respect of any property disposed of on the winding-up.
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
20(1)Subsection 70(3.‍1) of the Act is replaced by the following:
Exception
(3.‍1)For the purposes of this section, rights or things do not include an interest in a life insurance policy (other than an annuity contract of a taxpayer where the payment therefor was deductible in computing the taxpayer’s income because of paragraph 60(l) or was made in circumstances in which subsection 146(21) applied), land included in the inventory of a business, a Canadian resource property or a foreign resource property.
(2)Subsection 70(5.‍1) of the Act is replaced by the following:
Transfer or distribution — Class 14.‍1
(5.‍1)Notwithstanding subsection (6), if property included in Class 14.‍1 of Schedule II to the Income Tax Regulations of the taxpayer in respect of a business carried on by the taxpayer immediately before the taxpayer’s death that is a property to which subsection (5) would otherwise apply is, as a consequence of the death, transferred or distributed (otherwise than by way of a distribution of property by a trust that claimed a deduction under paragraph 20(1)‍(a) or (b) in respect of the property or in circumstances to which subsection 24(2) applies) to any person (in this subsection referred to as the beneficiary), the following rules apply:
(a)paragraphs (5)‍(a) and (b) do not apply in respect of the property;
(b)the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of the property and received proceeds of disposition equal to the lesser of the capital cost and the cost amount to the taxpayer of the property immediately before the death;
(c)the beneficiary is deemed to have acquired the property at the time of the death at a cost equal to those proceeds; and
(d)paragraph (5)‍(c) applies as if the references to “paragraph (a)” were read as references to “paragraph (5.‍1)‍(b)” and the reference to “paragraph (b)” were read as reference to “paragraph (5.‍1)‍(c)”.
(3)Subsection 70(6.‍2) of the Act is replaced by the following:
Election
(6.‍2)Subsection (5.‍1), (6) or (6.‍1) does not apply to any property of a deceased taxpayer in respect of which the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part (other than a return of income filed under subsection (2) or 104(23), paragraph 128(2)‍(e) or subsection 150(4)) for the year in which the taxpayer died, to have subsection (5) or (5.‍4), as the case may be, apply.
(4)The portion of subsection 70(9.‍8) of the Act before paragraph (a) is replaced by the following:
Leased farm or fishing property
(9.‍8)For the purposes of subsections (9) and 73(3) and paragraph (d) of the definition qualified farm or fishing property in subsection 110.‍6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a farming or fishing business carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a farming or fishing business in Canada, by
(5)Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
21(1)Paragraph 73(3)‍(a) of the Act is replaced by the following:
(a)the property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer;
(2)Paragraph 73(3.‍1)‍(c) of the Act is repealed.
(3)Subsection 73(3.‍1) of the Act is amended by adding “and” at the end of paragraph (e) and by repealing paragraphs (f) and (g).
(4)Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
22(1)Paragraph 79(4)‍(b) of the Act is replaced by the following:
(b)paragraph 20(1)‍(hh.‍1) applies, where the cost of the property to the person was an eligible capital expenditure at the time the property was acquired;
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
23(1)Paragraph 80(2)‍(c) of the Act is replaced by the following:
(c)subsections (3) to (5) and (8) to (13) apply in numerical order to the forgiven amount in respect of a commercial obligation;
(2)Paragraph 80(2)‍(f) of the Act is repealed.
(3)Subsection 80(7) of the Act is repealed.
(4)The portion of subsection 80(9) of the Act before paragraph (a) is replaced by the following:
Reductions of adjusted cost bases of capital properties
(9)If a commercial obligation issued by a debtor is settled at any time and amounts have been designated under subsections (5) and (8) to the maximum extent permitted in respect of the settlement, subject to subsection (18)
(5)Subsection 80(10) of the Act is replaced by the following:
Reduction of adjusted cost bases of certain shares and debts
(10)If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties, owned by the debtor immediately after that time, that are shares of the capital stock of corporations of which the debtor is a specified shareholder at that time and debts issued by corporations of which the debtor is a specified shareholder at that time (other than shares of the capital stock of corporations related to the debtor at that time, debts issued by corporations related to the debtor at that time and excluded properties).
(6)The portion of subsection 80(11) of the Act before paragraph (a) is replaced by the following:
Reduction of adjusted cost bases of certain shares, debts and partnership interests
(11)If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of
(7)The portion of subsection 80(12) of the Act before paragraph (a) is replaced by the following:
Capital gain where current year capital loss
(12)If a commercial obligation issued by a debtor (other than a partnership) is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement,
(8)The portion of paragraph (a) of the description of D in subsection 80(13) of the Act before subparagraph (i) is replaced by the following:
(a)if the debtor has designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, the amount, if any, by which
(9)Paragraph 80(14.‍1)‍(c) of the Act is replaced by the following:
(c)amounts were designated under subsections (5), (8), (9) and (10) by each of those directed persons to the maximum extent permitted in respect of the settlement of each of those notional obligations; and
(10)Paragraph 80(15)‍(b) of the Act is replaced by the following:
(b)for the purpose of paragraph (a), the relevant limit in respect of the partnership obligation is the amount that would be included in computing the member’s income for the year as a consequence of the application of subsection (13) and section 96 to the settlement of the partnership obligation if the partnership had designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of each obligation settled in that fiscal period and if income arising from the application of subsection (13) were from a source of income separate from any other sources of partnership income; and
(11)Subsections (1) to (10) come into force or are deemed to have come into force on January 1, 2017.
24(1)Paragraph 80.‍4(2)‍(e) of the Act is replaced by the following:
(e)the total of
(i)the amount of interest for the year paid on all such loans and debts (other than loans deemed to have been made under subsection 15(2.‍17)) not later than 30 days after the end of the year, and
(ii)the specified interest amounts, for the year, in respect of all such loans that are deemed to have been made under subsection 15(2.‍17).
(2)Subsection 80.‍4(7) of the Act is amended by adding the following in alphabetical order:
specified interest amount, for a year, in respect of a loan (referred to in this definition as the deemed loan) deemed to have been made under subsection 15(2.‍17) by an ultimate funder (as defined in subsection 15(2.‍192)), means the amount determined by the formula
A × (B/C)
where
A
is the amount of interest for the year paid not later than 30 days after the end of the year on all debts — owing by one or more funders (as defined in subsection 15(2.‍192), but excluding any funders that are ultimate funders as defined in subsection 15(2.‍192)) under one or more funding arrangements (as defined in subsection 15(2.‍192)) to the ultimate funder — that gave rise to the deemed loan;
B
is the average amount outstanding for the year in respect of the deemed loan; and
C
is the total of all amounts each of which is the average amount outstanding in the year as or on account of an amount owing under a debt described in A. (montant d’intérêts déterminé)
(3)Subsections (1) and (2) apply in respect of
(a)loans received and indebtedness incurred after March 21, 2016; and
(b)any portion of a particular loan received or indebtedness incurred before March 22, 2016 that remains outstanding on that day, as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on March 22, 2016 in the same manner and on the same terms as the particular loan or indebtedness.
25(1)Subparagraph 84(1)‍(c.‍3)‍(i) of the Act is replaced by the following:
(i)on the issuance of shares of that class or shares of another class for which the shares of that class were substituted (other than an issuance to which section 51, 66.‍3, 84.‍1, 85, 85.‍1, 86 or 87 or subsection 192(4.‍1), 194(4.‍1) or 212.‍1(1.‍1) applied),
(2)Subsection (1) comes into force or is deemed to have come into force on March 22, 2016.
26(1)Paragraphs 85(1)‍(d) to (d.‍12) of the Act are repealed.
(2)Paragraph 85(1)‍(e.‍1) of the Act is replaced by the following:
(e.‍1)where two or more properties, each of which is a property described in paragraph (e), are disposed of at the same time, paragraph (e) applies as if each property so disposed of had been separately disposed of in the order designated by the taxpayer before the time referred to in subsection (6) for the filing of an election in respect of those properties or, if the taxpayer does not so designate any such order, in the order designated by the Minister;
(3)The portion of paragraph 85(1)‍(e.‍3) of the Act before subparagraph (ii) is replaced by the following:
(e.‍3)where, under any of paragraphs (c.‍1) and (e), the amount that the taxpayer and the corporation have agreed on in their election in respect of the property (in this paragraph referred to as the elected amount) would be deemed to be an amount that is greater or less than the amount that would be deemed, subject to paragraph (c), to be the elected amount under paragraph (b), the elected amount is deemed to be the greater of
(i)the amount deemed by paragraph (c.‍1) or (e), as the case may be, to be the elected amount, and
(4)Paragraph 85(1.‍1)‍(e) of the Act is repealed.
(5)Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
27(1)Paragraph 87(2)‍(f) of the Act is repealed.
(2)Paragraph 87(2)‍(g.‍3) of the Act is replaced by the following:
(g.‍3)for the purposes of applying subsections 13(21.‍2), 18(15) and 40(3.‍4) to any property that was disposed of by a predecessor corporation before the amalgamation, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
28(1)Paragraph 88(1)‍(c.‍1) of the Act is repealed.
(2)Paragraph 88(1)‍(d.‍1) of the Act is replaced by the following:
(d.‍1)subsection 84(2) and section 21 of the Income Tax Application Rules do not apply to the winding-up of the subsidiary, and subsection 13(21.‍2) does not apply to the winding-up of the subsidiary with respect to property acquired by the parent on the winding-up;
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
29(1)Subparagraph (c.‍1)‍(i) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(i)1/2 of the total of all amounts each of which is an amount required by paragraph 14(1)‍(b) (as it read before 2017) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000,
(2)Subparagraph (c.‍2)‍(i) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(i)the total of all amounts each of which is an amount required by paragraph 14(1)‍(b) (as it read before 2017) or subparagraph 13(38)‍(d)‍(iii) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after October 17, 2000,
(3)Subparagraph (d)‍(iii) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(iii)the adjusted cost basis (in this paragraph as defined in subsection 148(9)), immediately before the death, of
(A)if the death occurs before March 22, 2016, a policy referred to in subparagraph (i) or (ii) to the corporation, and
(B)if the death occurs after March 21, 2016, a policyholder’s interest in a policy referred to in subparagraph (i) or (ii),
(4)Paragraph (d) of the definition capital dividend account in subsection 89(1) of the Act is amended by adding the following after subparagraph (iv):
(v)if the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the total of
(A)the amount, if any, by which the fair market value of consideration given in respect of the disposition exceeds the total of
(I)the greater of the amount determined under subparagraph 148(7)‍(a)‍(i) in respect of the disposition and the adjusted cost basis to the policyholder of the interest immediately before the disposition, and
(II)the amount by which the paid-up capital of any class of the capital stock of a corporation resulting from the disposition is reduced at the beginning of March 22, 2016 because of the application of paragraphs 148(7)‍(c) and (f) in respect of the disposition, and
(B)if the paid-up capital in respect of a class of shares of the capital stock of a corporation was increased before March 22, 2016 as described in subparagraph 148(7)‍(f)‍(iii) in respect of the disposition, the amount, if any, by which the total reduction in the paid-up capital in respect of that class — not exceeding the amount of that increase — after that increase and before March 22, 2016 (except to the extent that the amount of the reduction was deemed by subsection 84(4) or (4.‍1) to be a dividend received by a taxpayer) exceeds the amount determined under subparagraph 148(7)‍(a)‍(i) in respect of the disposition, or
(vi)if the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the amount, if any, determined by the formula
A − B
where
A
is the amount, if any, by which the lesser of the adjusted cost basis to the policyholder of the interest immediately before the disposition and the fair market value of consideration given in respect of the disposition exceeds the amount determined under subparagraph 148(7)‍(a)‍(i) in respect of the disposition, and
B
is the absolute value of the negative amount, if any, that would be, in the absence of section 257, the adjusted cost basis, immediately before the death, of the interest in the policy,
(5)Subparagraph (b)‍(iii) of the definition paid-up capital in subsection 89(1) of the Act is replaced by the following:
(iii)if 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), 148(7), 192(4.‍1) and 194(4.‍1) and sections 212.‍1 and 212.‍3,
(6)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
30(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), the definition eligible trust in subsection 135.‍2(1) and subparagraph (b)‍(i) of the definition investment fund in subsection 251.‍2(1);
(2)Subsection (1) is deemed to have come into force on March 21, 2013, except that paragraph 94(4)‍(b) of the Act, as enacted by subsection (1), is to be read without reference to
(a)before July 1, 2015, “the definition eligible trust in subsection 135.‍2(1)”; and
(b)for taxation years that end before 2016, “the definition qualified disability trust in subsection 122(3),”.
31(1)Clause 95(2)‍(d.‍1)‍(ii)‍(B) of the Act is replaced by the following:
(B)subsections 13(21.‍2), 18(15) and 40(3.‍4) in respect of any property that was disposed of, at any time before the merger, by a foreign affiliate predecessor, and
(2)Subclause 95(2)‍(e)‍(v)‍(A)‍(II) of the Act is replaced by the following:
(II)subsections 13(21.‍2), 18(15) and 40(3.‍4) in respect of any property that was disposed of, at any time before the liquidation and dissolution, by the disposing affiliate, and
(3)Clause 95(2)‍(f.‍11)‍(ii)‍(A) of the Act is replaced by the following:
(A)this Act is to be read without reference to subsections 17(1) and 18(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,
(4)Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
32(1)The portion of subsection 96(1.‍7) of the Act before the formula is replaced by the following:
Gains and losses
(1.‍7)Notwithstanding subsection (1) or section 38, if in a particular taxation year of a taxpayer, the taxpayer is a member of a partnership with a fiscal period that ends in the particular year, the amount of a taxable capital gain, allowable capital loss or allowable business investment loss of the taxpayer for the particular year determined in respect of the partnership is the amount determined by the formula
(2)The description of A in subsection 96(1.‍7) of the Act is replaced by the following:
A
is the amount of the taxpayer’s taxable capital gain, allowable capital loss or allowable business investment loss, as the case may be, for the particular year otherwise determined under this section in respect of the partnership;
(3)The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:
Agreement or election of partnership members
(3)If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 13(4), (4.‍2) and (16), section 15.‍2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)‍(a)‍(ii)‍(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.‍04, subsections 86.‍1(2), 88(3.‍1), (3.‍3) and (3.‍5) and 90(3), the definition relevant cost base in subsection 95(4) and subsections 97(2), 139.‍1(16) and (17) and 249.‍1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,
(4)Subsection 96(8) of the Act is amended by adding “and” at the end of paragraph (b), by striking out “and” at the end of paragraph (c) and by repealing paragraph (d).
(5)Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
33(1)The portion of subsection 97(2) of the Act before paragraph (a) is replaced by the following:
(2)Notwithstanding any other provision of this Act other than subsections (3) and 13(21.‍2), where a taxpayer at any time disposes of any property that is a capital property, Canadian resource property, foreign resource property or inventory of the taxpayer to a partnership that immediately after that time is a Canadian partnership of which the taxpayer is a member, if the taxpayer and all the other members of the partnership jointly so elect in prescribed form within the time referred to in subsection 96(4),
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
34(1)Paragraph 98(3)‍(b) of the Act is amended by adding “and” at the end of subparagraph (i) and by repealing subparagraph (i.‍1).
(2)Subsection 98(3) of the Act is amended by adding “and” at the end of paragraph (e), by striking out “and” at the end of paragraph (f) and by repealing paragraph (g).
(3)Paragraph 98(5)‍(b) of the Act is amended by adding “and” at the end of subparagraph (i) and by repealing subparagraph (i.‍1).
(4)Subsection 98(5) of the Act is amended by adding “and” at the end of paragraph (f), by striking out “and” at the end of paragraph (g) and by repealing paragraph (h).
(5)Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
35(1)Subparagraph (i) of the description of B in paragraph 104(6)‍(b) of the Act is replaced by the following:
(i)if the trust is a trust for which a day is to be determined under paragraph (4)‍(a) or (a.‍4) by reference to a death or later death, as the case may be, that has not occurred before the beginning of the year, the total of
(A)the part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary (other than an individual whose death is that death or later death, as the case may be), and
(B)the total of all amounts each of which
(I)is included in its income (determined without reference to this subsection and subsection (12)) for the year — if the year is the year in which that death or later death, as the case may be, occurs and paragraph (13.‍4)‍(b) does not apply in respect of the trust for the year — because of the application of subsection (4), (5), (5.‍1) or (5.‍2) or 12(10.‍2), and
(II)is not included in the amount determined for clause (A) for the year, and
(2)The portion of paragraph 104(13.‍4)‍(b) of the Act before subparagraph (i) is replaced by the following:
(b)subject to paragraph (b.‍1), the trust’s income (determined without reference to subsections (6) and (12)) for the particular year is, notwithstanding subsection (24), deemed
(3)Subsection 104(13.‍4) of the Act is amended by striking out “and” at the end of paragraph (b) and by adding the following after that paragraph:
(b.‍1)paragraph (b) does not apply in respect of the trust for the particular year, unless
(i)the individual is resident in Canada immediately before the death,
(ii)the trust is, immediately before the death, a testamentary trust that
(A)is a post-1971 spousal or common-law partner trust, and
(B)was created by the will of a taxpayer who died before 2017, and
(iii)an election — made jointly between the trust and the legal representative administering the individual’s graduated rate estate in prescribed form — that paragraph (b) applies is filed with
(A)the individual’s return of income under this Part for the individual’s year, and
(B)the trust’s return of income under this Part for the particular year; and
(4)Subparagraph 104(13.‍4)‍(c)‍(i) of the Act is replaced by the following:
(i)the references in paragraph 150(1)‍(c) to “year” and in subparagraph (a)‍(ii) of the definition balance-due day in subsection 248(1) to “taxation year” are to be read as “calendar year in which the taxation year ends”, and
(5)Subsections (1) to (4) apply to the 2016 and subsequent taxation years.
36(1)Paragraph 107(2)‍(b.‍1) of the Act is amended by adding “and” at the end of subparagraph (i) and by repealing subparagraph (ii).
(2)Paragraph 107(2)‍(f) of the Act is repealed.
(3)Paragraph 107(2.‍001)‍(c) of the Act is replaced by the following:
(c)the property is capital property used in, or property described in the inventory of, a business carried on by the trust through a permanent establishment (as defined by regulation) in Canada immediately before the time of the distribution.
(4)Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
37(1)Paragraph 107.‍4(3)‍(e) of the Act is repealed.
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
38(1)Subsection 108(1.‍1) of the Act is replaced by the following:
Testamentary trust not disqualified
(1.‍1)For the purpose of the definition testamentary trust in subsection (1), a contribution to a particular trust does not include
(a)a qualifying expenditure (within the meaning of section 118.‍04 or 118.‍041) of a beneficiary under the trust; or
(b)an amount paid to, or on behalf of, the trust by another trust if
(i)the trust is an individual’s graduated rate estate (determined without regard to the payment and this subsection),
(ii)paragraph 104(13.‍4)‍(b) applies to the other trust, for a taxation year that ends at a time determined by reference to the individual’s death, because of a joint election made under subparagraph 104(13.‍4)‍(b.‍1)‍(iii) by the other trust and the legal representative administering the estate,
(iii)the payment is on account of the tax payable by the individual, for the individual’s taxation year that includes the day on which the individual dies, under
(A)this Part, or
(B)the law of the province, in which the individual was resident immediately before the individual’s death, that imposes a tax on the taxable income of individuals resident in that province, and
(iv)the amount of the payment does not exceed the amount by which that tax payable is greater than it would have been if paragraph 104(13.‍4)‍(b) did not apply to the other trust in respect of the taxation year referred to in subparagraph (ii).
(2)Subsection (1) applies to the 2016 and subsequent taxation years.
39(1)Paragraph (d) of the definition qualified farm or fishing property in subsection 110.‍6(1) of the Act is replaced by the following:
(d)a property included in Class 14.‍1 of Schedule II to the Income Tax Regulations, used by a person or partnership referred to in any of subparagraphs (a)‍(i) to (v), or by a personal trust from which the individual acquired the property, in the course of carrying on a farming or fishing business in Canada; (bien agricole ou de pêche admissible)
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
40(1)Subsection 111(5.‍2) of the Act is repealed.
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
41(1)The portion before paragraph (a) of subsection 116(5.‍2) of the Act is replaced by the following:
Certificates for dispositions
(5.‍2)If a non-resident person has, in respect of a disposition, or a proposed disposition, in a taxation year to a taxpayer of property (other than excluded property) that is a life insurance policy in Canada, a Canadian resource property, a property (other than capital property) that is real property, or an immovable, situated in Canada, a timber resource property, depreciable property that is a taxable Canadian property or any interest in, or for civil law any right in, or any option in respect of, a property to which this subsection applies (whether or not that property exists),
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
42(1)Clause (c)‍(i)‍(C) of the definition total charitable gifts in subsection 118.‍1(1) of the Act is replaced by the following:
(C)by the individual’s estate if subsection (5.‍1) applies to the gift and the particular year is the taxation year in which the individual dies or the preceding taxation year, or
(2)Subparagraph (c)‍(ii) of the definition total charitable gifts in subsection 118.‍1(1) of the Act is amended by striking out “or” at the end of clause (A) and by replacing clause (B) with the following:
(B)by the trust if
(I)the trust is an individual’s estate,
(II)subsection (5.‍1) applies to the gift, and
(III)the particular year is a taxation year
1in which the estate is the individual’s graduated rate estate, and
2that precedes the taxation year in which the gift is made, or
(C)by the trust if
(I)the end of the particular year is determined by paragraph 104(13.‍4)‍(a) because of an individual’s death,
(II)the gift is made after the particular year and on or before the trust’s filing-due date for the particular year, and
(III)the subject of the gift is property that is held by the trust at the time of the individual’s death or is property that was substituted for that property; (total des dons de bienfaisance)
(3)Clause (c)‍(i)‍(C) of the definition total cultural gifts in subsection 118.‍1(1) of the Act is replaced by the following:
(C)by the individual’s estate if subsection (5.‍1) applies to the gift and the particular year is the taxation year in which the individual dies or the preceding taxation year, or
(4)Subparagraph (c)‍(ii) of the definition total cultural gifts in subsection 118.‍1(1) of the Act is amended by striking out “or” at the end of clause (A) and by replacing clause (B) with the following:
(B)by the trust if
(I)the trust is an individual’s estate,
(II)subsection (5.‍1) applies to the gift, and
(III)the particular year is a taxation year
1in which the estate is the individual’s graduated rate estate, and
2that precedes the taxation year in which the gift is made, or
(C)by the trust if
(I)the end of the particular year is determined by paragraph 104(13.‍4)‍(a) because of an individual’s death,
(II)the gift is made after the particular year and on or before the trust’s filing-due date for the particular year, and
(III)the subject of the gift is property that is held by the trust at the time of the individual’s death or is property that was substituted for that property; (total des dons de biens culturels)
(5)Clause (c)‍(i)‍(A) of the definition total ecological gifts in subsection 118.‍1(1) of the Act is replaced by the following:
(A)by the individual, or the individual’s spouse or common-law partner, in the particular year or any of the 10 preceding taxation years,
(6)Clause (c)‍(i)‍(C) of the definition total ecological gifts in subsection 118.‍1(1) of the Act is replaced by the following:
(C)by the individual’s estate if subsection (5.‍1) applies to the gift and the particular year is the taxation year in which the individual dies or the preceding taxation year, or
(7)Subparagraph (c)‍(ii) of the definition total ecological gifts in subsection 118.‍1(1) of the Act is amended by striking out “or” at the end of clause (A) and by replacing clause (B) with the following:
(B)by the trust if
(I)the trust is an individual’s estate,
(II)subsection (5.‍1) applies to the gift, and
(III)the particular year is a taxation year
1in which the estate is the individual’s graduated rate estate, and
2that precedes the taxation year in which the gift is made, or
(C)by the trust if
(I)the end of the particular year is determined by paragraph 104(13.‍4)‍(a) because of an individual’s death,
(II)the gift is made after the particular year and on or before the trust’s filing-due date for the particular year, and
(III)the subject of the gift is property that is held by the trust at the time of the individual’s death or is property that was substituted for that property; (total des dons de biens écosensibles)
(8)The portion of subsection 118.‍1(5.‍1) of the Act before paragraph (a) is replaced by the following:
Gifts by graduated rate estate
(5.‍1)This subsection applies to a gift made by an individual’s graduated rate estate (determined without reference to paragraph (a) of the definition graduated rate estate in subsection 248(1)) if the gift is made no more than 60 months after the individual’s death, the death occurs after 2015 and either
(9)Paragraph 118.‍1(19)‍(c) of the Act is replaced by the following:
(c)either,
(i)if the taxpayer is an individual’s graduated rate estate,
(A)the individual dealt at arm’s length with the donee immediately before the individual’s death, and
(B)the graduated rate estate deals at arm’s length with the donee (determined without reference to paragraph 251(1)‍(b)), or
(ii)if subparagraph (i) does not apply, the taxpayer deals at arm’s length with the donee; and
(10)Subsections (1) to (9) apply to the 2016 and subsequent taxation years.
43(1)Section 122.‍61 of the Act is amended by adding the following after subsection (4):
Annual adjustment
(5)Each amount expressed in dollars in subsection (1) shall be adjusted so that, where the base taxation year in relation to a particular month is after 2018, the amount to be used under that subsection for the month is the total of
(a)the amount that would, but for subsection (7), be the relevant amount used under subsection (1) for the month that is one year before the particular month, and
(b)the product obtained by multiplying
(i)the amount referred to in paragraph (a)
by
(ii)the amount, adjusted in such manner as is prescribed and rounded to the nearest one-thousandth or, where the result obtained is equidistant from 2 such consecutive one-thousandths, to the higher thereof, that is determined by the formula
(A/B) − 1
where
A
is the Consumer Price Index (within the meaning assigned by subsection 117.‍1(4)) for the 12- month period that ended on September 30 of the base taxation year, and
B
is the Consumer Price Index for the 12 month period preceding the period referred to in the description of A.
(2)Section 122.‍61 of the Act is amended by adding the following after subsection (6.‍1):
Rounding
(7)If an amount referred to in subsection (1), when adjusted as provided in subsection (5), is not a multiple of one dollar, it shall be rounded to the nearest multiple of one dollar or, where it is equidistant from 2 such consecutive multiples, to the higher thereof.
44(1)Subparagraphs 125(1)‍(a)‍(i) and (ii) of the Act are replaced by the following:
(i)the total of all amounts each of which is the amount of income of the corporation for the year from an active business carried on in Canada, other than an amount that is
(A)described in paragraph (a) of the description of A in the definition specified partnership income in subsection (7) for the year,
(B)described in subparagraph (a)‍(i) of the definition specified corporate income in subsection (7) for the year, or
(C)paid or payable to the corporation by another corporation with which it is associated, that is deemed by subsection 129(6) to be income for the year from an active business carried on by the corporation in circumstances where the associated corporation is not a Canadian-controlled private corporation or is a Canadian-controlled private corporation that has made an election under subsection 256(2) in respect of its taxation year in which the amount was paid or payable,
(ii)the specified partnership income of the corporation for the year, and
(ii.‍1)the specified corporate income of the corporation for the year
(2)Section 125 of the Act is amended by adding the following after subsection (3):
Reduction — business limit
(3.‍1)The business limit for the year of a corporation under subsection (2), (3) or (4) is reduced by the total of all amounts each of which is the portion, if any, of the business limit that the corporation assigns to another corporation under subsection (3.‍2).
Assignment
(3.‍2)For the purpose of this section, a Canadian-controlled private corporation (in this subsection referred to as the first corporation) may assign all or any portion of its business limit under subsection (2), (3) or (4) for a taxation year of the first corporation to another Canadian-controlled private corporation (in this subsection referred to as the second corporation) for a taxation year of the second corporation if
(a)the second corporation has an amount of income, for its taxation year, referred to in subparagraph (a)‍(i) of the definition specified corporate income in subsection (7) from the provision of services or property directly to the first corporation;
(b)the first corporation’s taxation year ends in the second corporation’s taxation year;
(c)the amount assigned does not exceed the amount determined by the formula
A − B
where
A
is the amount of income referred to in paragraph (a), and
B
is the portion of the amount described in A that is deductible by the first corporation in respect of the amount of income referred to in clause (1)‍(a)‍(i)‍(A) or (B) for the year; and
(d)a prescribed form is filed with the Minister by
(i)the first corporation in its return of income for its taxation year, and
(ii)the second corporation in its return of income for its taxation year.
(3)The portion of subsection 125(5) of the Act before paragraph (a) is replaced by the following:
Special rules for business limit
(5)Notwithstanding subsections (2), (3) and (4),
(4)The portion of subsection 125(5.‍1) of the Act before the formula is replaced by the following:
Business limit reduction
(5.‍1)Notwithstanding subsections (2), (3), (4) and (5), a Canadian-controlled private corporation’s business limit for a particular taxation year ending in a calendar year is the amount, if any, by which its business limit otherwise determined for the particular year exceeds the amount determined by the formula
(5)The description of A in the definition specified partnership income in subsection 125(7) is replaced by the following:
A
is the total of all amounts each of which is an amount in respect of a partnership of which the corporation was a member, or a designated member, in the year equal to the least of
(a)the total of all amounts each of which is an amount in respect of an active business carried on in Canada by the corporation as a member, or a designated member, of the partnership determined by the formula
G – H
where
G
is the total of all amounts each of which is
(i)the corporation’s share of the income (determined in accordance with Subdivision J of Division B) of the partnership for a fiscal period of the business that ends in the year,
(ii)income of the corporation for the year from the provision (directly or indirectly, in any manner whatever) of services or property to the partnership, or
(iii)an amount included in the corporation’s income for the year in respect of the business under any of subsections 34.‍2(2), (3) and (12), and
H
is the total of all amounts deducted in computing the corporation’s income for the year from the business (other than amounts that were deducted in computing the income of the partnership from the business or the income of the corporation described under subparagraph (ii) of the description of G) or in respect of the business under subsection 34.‍2(4) or (11),
(b)an amount equal to
(i)if the corporation was a member of the partnership, the corporation’s specified partnership business limit for the year, and
(ii)if the corporation was a designated member of the partnership, the total of all amounts assigned to it under subsection (8) for the year and, where no such amounts have been assigned, nil, and
(c)nil, if
(i)the corporation is a member, or a designated member, of the partnership (including indirectly through one or more other partnerships) in the year, and
(ii)the partnership provides services or property to either
(A)a private corporation (directly or indirectly in any manner whatever) in the year, if
(I)the corporation (or one of its shareholders) or a person who does not deal at arm’s length with the corporation (or one of its shareholders) holds a direct or indirect interest in the private corporation, and
(II)it is not the case that all or substantially all of the partnership’s income for the year from an active business is from the provision of services or property to
1persons (other than the private corporation) that deal at arm’s length with the partnership and each person that holds a direct or indirect interest in the partnership, or
2partnerships with which the partnership deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest, or
(B) a particular partnership (directly or indirectly in any manner whatever) in the year, if
(I)the corporation (or one of its shareholders) does not deal at arm’s length with the particular partnership or a person that holds a direct or indirect interest in the particular partnership, and
(II)it is not the case that all or substantially all of the partnership’s income for the year from an active business is from the provision of services or property to
1persons that deal at arm’s length with the partnership and each person that holds a direct or indirect interest in the partnership, or
2partnerships (other than the particular partnership) with which the partnership deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest, and
(6)Paragraph (b) of the description of B in the definition specified partnership income in subsection 125(7) of the Act is replaced by the following:
(b)the total of all amounts each of which is an amount in respect of a partnership of which the corporation was a member, or a designated member, in the year equal to the amount determined by the formula
N – O
where
N
is the amount determined in respect of the partnership for the year under paragraph (a) of the description of A, and
O
is the amount determined in respect of the partnership for the year
(i)if the corporation was a member of the partnership, under subparagraph (b)‍(i) of the description of A, and
(ii)if the corporation was a designated member of the partnership, under subparagraph (b)‍(ii) of the description of A; (revenu de société de personnes déterminé)
(7)Subsection 125(7) of the Act is amended by adding the following in alphabetical order:
designated member, of a particular partnership in a taxation year, means a Canadian-controlled private corporation that provides (directly or indirectly, in any manner whatever) services or property to the particular partnership at any time in the corporation’s taxation year where, at any time in the year,
(a)the corporation is not a member of the particular partnership, and
(b)either
(i)one of its shareholders holds a direct or indirect interest in the particular partnership, or
(ii)if subparagraph (i) does not apply,
(A)the corporation does not deal at arm’s length with a person that holds a direct or indirect interest in the particular partnership, and
(B)it is not the case that all or substantially all of the corporation’s income for the year from an active business is from providing services or property to
(I)persons with which the corporation deals at arm’s length, or
(II)partnerships (other than the particular partnership) with which the corporation deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest; (associé désigné)
specified corporate income, of a corporation for a taxation year, means the lesser of
(a)the lesser of
(i)the total of all amounts each of which is income from an active business of the corporation for the year from the provision of services or property to a private corporation (directly or indirectly, in any manner whatever) if
(A)at any time in the year, the corporation (or one of its shareholders) or a person who does not deal at arm’s length with the corporation (or one of its shareholders) holds a direct or indirect interest in the private corporation, and
(B)it is not the case that all or substantially all of the corporation’s income for the year from an active business is from the provision of services or property to
(I)persons (other than the private corporation) with which the corporation deals at arm’s length, or
(II)partnerships with which the corporation deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest, and
(ii)the total of all amounts each of which is the portion, if any, of the business limit of a private corporation described in subparagraph (i) for a taxation year that the private corporation assigns to the corporation under subsection (3.‍2), and
(b)an amount that the Minister determines to be reasonable in the circumstances; (revenu de société déterminé)
specified partnership business limit, of a person for a taxation year, at any particular time, means the amount determined by the formula
(K/L) × M – T
where
K
is the total of all amounts each of which is the person’s share of the income (determined in accordance with Subdivision J of Division B) of a partnership of which the person was a member for a fiscal period ending in the year from an active business carried on in Canada,
L
is the total of all amounts each of which is the income of the partnership for a fiscal period referred to in paragraph (a) of the description of A in the definition specified partnership income in this subsection from an active business carried on in Canada,
M
is the lesser of
(a)the amount of the business limit indicated in subsection (2) for a corporation that is not associated in a taxation year with one or more other Canadian-controlled private corporations, and
(b)the product obtained by the formula
(Q/R) × S
where
Q
is the amount referred to in paragraph (a),
R
is 365, and
S
is the total of all amounts each of which is the number of days in a fiscal period of the partnership that ends in the year, and
T
is the total of all amounts each of which is an amount, if any, that the person assigns under subsection (8); (plafond des affaires de société de personnes déterminé)
(8)Section 125 of the Act is amended by adding the following after subsection (7):
Assignment — specified partnership business limit
(8)For the purpose of the definition specified partnership income in subsection (7), a person that is a member of a partnership in a taxation year may assign to a designated member of the partnership — for a taxation year of the designated member — all or any portion of the person’s specified partnership business limit (determined without reference to this assignment) in respect of the person’s taxation year if
(a)the person is described in paragraph (b) of the definition designated member in subsection (7) in respect of the designated member in the designated member’s taxation year;
(b)the specified partnership business limit of the person is in respect of a fiscal period of the partnership that ends in the designated member’s taxation year; and
(c)a prescribed form is filed with the Minister by
(i)the designated member in its return of income for the designated member’s taxation year, and
(ii)the person in its return of income for the person’s taxation year.
Anti-avoidance
(9)If a corporation provides services or property to a person or partnership that holds a direct or indirect interest in a particular partnership or corporation and one of the reasons for the provision of the services or property to the person or partnership, instead of to the particular partnership or corporation, is to avoid the application of subparagraph (1)‍(a)‍(ii) or (ii.‍1) in respect of the income from the provision of the services or property, no amount in respect of the corporation’s income from the provision of the services or property is to be included in the total amount determined under paragraph (1)‍(a).
Computational rule — specified corporate income
(10)For the purpose of determining an amount for a taxation year in respect of a corporation under clause (1)‍(a)‍(i)‍(B) or subparagraph (1)‍(a)‍(ii.‍1), an amount of income is to be excluded if the amount is
(a)income from an active business of the corporation for the year from the provision of services or property to another corporation with which the corporation is associated (in this subsection referred to as the associated corporation); and
(b)not deductible by the associated corporation for its taxation year in respect of an amount included in the income of the associated corporation that is
(i)referred to in any of clauses (1)‍(a)‍(i)‍(A) to (C), or
(ii)reasonable to consider as being attributable to or derived from an amount referred to in clause (1)‍(a)‍(i)‍(C).
(9)Subsections (1) to (8) apply to
(a)taxation years that begin after March 21, 2016; and
(b)a person’s taxation year that begins before March 22, 2016 and ends after March 21, 2016 if
(i)the person would be entitled to make an assignment to a corporation under subsection 125(3.‍2) of the Act (as enacted by subsection (2)) or under subsection 125(8) of the Act (as enacted by subsection (8)) if subsections (1) to (8) applied to the person’s taxation year that begins before March 22, 2016 and ends after March 21, 2016,
(ii)the taxation year of the corporation referred to in subparagraph (i) begins after March 21, 2016,
(iii)the person makes such an assignment for its taxation year that begins before March 22, 2016 and ends after March 21, 2016 and the assignment is to the corporation for its taxation year that begins after March 21, 2016, and
(iv)the person files with the Minister of National Revenue the prescribed form that is required to be filed under subsection 125(3.‍2) of the Act (as enacted by subsection (2)) in its return of income for its taxation year that begins before March 22, 2016 and ends after March 21, 2016, on or before the day that is the later of the filing-due date of the person (as defined under subsection 248(1) of the Act) or 60 days after this Act receives royal assent.
45(1)Paragraph 126(4.‍4)‍(a) of the Act is replaced by the following:
(a)a disposition or acquisition of property deemed to be made by subsection 10(12) or (13) or 45(1), section 70, 128.‍1 or 132.‍2, subsections 138(11.‍3) or 142.‍5(2), paragraph 142.‍6(1)‍(b) or subsections 142.‍6(1.‍1) or (1.‍2) or 149(10) is not a disposition or acquisition, as the case may be; and
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
46(1)Subparagraph 128.‍1(1)‍(b)‍(iii) of the Act is replaced by the following:
(iii)property included in Class 14.‍1 of Schedule II to the Income Tax Regulations, in respect of a business carried on by the taxpayer in Canada at the time of disposition, and
(2)Subparagraph 128.‍1(4)‍(b)‍(ii) of the Act is replaced by the following:
(ii)capital property used in, property included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of or property described in the inventory of, a business carried on by the taxpayer through a permanent establishment (as defined by regulation) in Canada at the particular time,
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
47(1)The portion of subsection 130(2) of the Act before paragraph (a) is replaced by the following:
Application of subsections 131(1) to (3.‍2), (4.‍1) and (6)
(2)Where a corporation was an investment corporation throughout a taxation year (other than a corporation that was a mutual fund corporation throughout the year), subsections 131(1) to (3.‍2), (4.‍1) and (6) apply in respect of the corporation for the year
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
48(1)Section 131 of the Act is amended by adding the following after subsection (4):
Sections not applicable
(4.‍1)Sections 51, 85, 85.‍1, 86 and 87 do not apply to a taxpayer that holds a share (in this subsection referred to as the old share) of a class of shares, that is recognized under securities legislation as or as part of an investment fund, of a mutual fund corporation if the taxpayer exchanges or otherwise disposes of the old share for another share (in this subsection referred to as the new share) of a mutual fund corporation, unless
(a)if the exchange or disposition occurs in the course of a transaction, event or series of transactions or events described in subsections 86(1) or 87(1),
(i)all shares of the class (determined without reference to subsection 248(6)) that includes the old share at the time of the exchange or disposition are exchanged for shares of the class that includes the new share,
(ii)the old share and the new share derive their value in the same proportion from the same property or group of properties, and
(iii)the transaction, event or series was undertaken solely for bona fide purposes and not to cause this paragraph to apply; or
(b)if the old share and the new share are shares of the same class (determined without reference to subsection 248(6)) of shares of the same mutual fund corporation,
(i)the old share and the new share derive their value in the same proportion from the same property or group of properties held by the corporation that is allocated to that class, and
(ii)that class is recognized under securities legislation as or as part of a single investment fund.
(2)The description of A in the definition capital gains redemptions in subsection 131(6) of the Act is replaced by the following:
A
is the sum of
(a)the total of all amounts paid by the corporation in the year on the redemption of shares of its capital stock, and
(b) the total of all amounts each of which is an amount equal to the fair market value of the shares of the corporation’s capital stock that were exchanged in the year for other shares of the corporation’s capital stock if
(i)paragraph (4.‍1) applies to the exchange, and
(ii)the amount is not included in the amount determined for paragraph (a),
(3)Section 131 of the Act is amended by adding the following after subsection (8):
Election to be a mutual fund corporation
(8.‍01)A corporation is deemed to be a mutual fund corporation, from the date it was incorporated until the earlier of the date the corporation meets the conditions to qualify as a mutual fund corporation under subsection (8) and December 31, 2017, if the corporation
(a)was incorporated after 2014 and before March 22, 2016;
(b)would have been a mutual fund corporation on March 22, 2016 if it could have elected on or before that date to be a public corporation under paragraph (b) of the definition public corporation in subsection 89(1), had the conditions prescribed in paragraph 4800(1)‍(b) of the Income Tax Regulations been satisfied;
(c)on March 22, 2016, had at least one class of shares that was recognized under securities legislation as an investment fund; and
(d)elects to have this subsection apply in the corporation’s return of income for the corporation’s first taxation year that ends after March 21, 2016.
(4)Subsection (1) applies in respect of transactions and events that occur after 2016.
(5)Subsections (2) and (3) come into force or are deemed to have come into force on January 1, 2017.
49(1)Paragraph 132.‍11(1)‍(b) of the Act is replaced by the following:
(b)if the trust’s taxation year ends on December 15 because of paragraph (a), subject to subsection (1.‍1), each subsequent taxation year of the trust is deemed to be the period that begins at the beginning of December 16 of a calendar year and that ends at the end of December 15 of the following calendar year or at any earlier time that is determined under paragraph 128.‍1(4)‍(a), 132.‍2(3)‍(b), 142.‍6(1)‍(a) or 249(4)‍(a); and
(2)Subsection (1) is deemed to have come into force on March 21, 2013.
50(1)Paragraph 139.‍1(4)‍(b) of the Act is replaced by the following:
(b)no amount paid or payable to a stakeholder in connection with the disposition, alteration or dilution of the stakeholder’s ownership rights in the particular corporation may be included in Class 14.‍1 of Schedule II to the Income Tax Regulations;
(2)The portion of subsection 139.‍1(18) of the Act before paragraph (a) is replaced by the following:
Acquisition of control
(18)For the purposes of subsections 10(10), 13(21.‍2) and (24) and 18(15), sections 18.‍1 and 37, subsection 40(3.‍4), the definition superficial loss in section 54, section 55, subsections 66(11), (11.‍4) and (11.‍5), 66.‍5(3) and 66.‍7(10) and (11), section 80, paragraph 80.‍04(4)‍(h), subsections 85(1.‍2) and 88(1.‍1) and (1.‍2), sections 111 and 127 and subsections 249(4) and 256(7), control of an insurance corporation (and each corporation controlled by it) is deemed not to be acquired solely because of the acquisition of shares of the capital stock of the insurance corporation, in connection with the demutualization of the insurance corporation, by a particular corporation that at a particular time becomes a holding corporation in connection with the demutualization where, immediately after the particular time,
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
51(1)Subparagraph 142.‍7(13)‍(a)‍(ii) of the Act is repealed.
(2)Paragraph 142.‍7(13)‍(c) of the Act is replaced by the following:
(c)for the purposes of applying subsection 13(21.‍2), 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.
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
52(1)The definition earned income in subsection 146(1) of the Act is amended by adding “or” at the end of paragraph (f), by striking out “or” at the end of paragraph (g) and by repealing paragraph (h).
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
53Subsection 148(7) of the Act is replaced by the following:
Disposition at non-arm’s length and similar cases
(7)If an interest of a policyholder in a life insurance policy is, at any time (referred to in this subsection as the disposition time), disposed of (other than a disposition under paragraph (2)‍(b)) by way of a gift, by distribution from a corporation or by operation of law only to any person, or in any manner whatever to any person with whom the policyholder was not dealing at arm’s length,
(a)the policyholder is deemed to become entitled to receive, at the disposition time, proceeds of the disposition equal to the greatest of
(i)the value of the interest at the disposition time,
(ii)an amount equal to
(A)if the disposition time is before March 22, 2016, nil, and
(B)if the disposition time is after March 21, 2016, the fair market value at the disposition time of the consideration, if any, given for the interest, and
(iii)an amount equal to
(A)if the disposition time is before March 22, 2016, nil, and
(B)if the disposition time is after March 21, 2016, the adjusted cost basis to the policyholder of the interest immediately before the disposition time;
(b)the person that acquires the interest because of the disposition is deemed to acquire it, at the disposition time, at a cost equal to the amount determined under paragraph (a) in respect of the disposition;
(c)in computing the paid-up capital in respect of each class of shares of the capital stock of a corporation at any time at or after the disposition time there shall be deducted the amount determined by the formula
(A − B × C/D) × E/A
where
A
is the increase, if any, as a result of the disposition, in the paid-up capital in respect of all the shares of the capital stock of the corporation,
B
is the amount determined under paragraph (a) in respect of the disposition,
C
is
(i)if consideration is given for the interest, the fair market value at the disposition time of consideration that is shares of the capital stock of the corporation given for the interest, and
(ii)if no consideration is given for the interest, 1,
D
is
(i)if consideration is given for the interest, the fair market value at the disposition time of the consideration given for the interest, and
(ii)if no consideration is given for the interest, 1, and
E
is the increase, if any, as a result of the disposition, in the paid-up capital in respect of the class of shares, computed without reference to this paragraph as it applies to the disposition;
(d)any contribution of capital to a corporation or partnership in connection with the disposition is deemed, to the extent that it exceeds the amount determined under subparagraph (a)‍(i) in respect of the disposition, not to result in a contribution of capital for the purpose of applying paragraphs 53(1)‍(c) and (e) at or after the disposition time;
(e)any contributed surplus of a corporation that arose in connection with the disposition is deemed, to the extent that it exceeds the amount determined under subparagraph (a)‍(i) in respect of the disposition, not to be contributed surplus for the purpose of applying subsection 84(1) at or after the disposition time; and
(f)if the disposition time is before March 22, 2016,
(i)subparagraphs (ii) and (iii) and paragraphs (c) to (e) apply in respect of the disposition only if the disposition is after 1999 and at least one person whose life was insured under the policy before March 22, 2016 is alive on March 22, 2016,
(ii)in applying paragraphs (c) to (e) in respect of the disposition, a reference in those paragraphs to “the disposition time” is to be read as “the beginning of March 22, 2016”,
(iii)if at any time (referred to in this subparagraph as the conversion time) before March 22, 2016 the paid-up capital of a class of shares of the capital stock of a corporation was increased, the increase occurred as a result of any action by which the corporation converted any of its contributed surplus into paid-up capital in respect of the class of shares, the contributed surplus arose in connection with the disposition, and subsection 84(1) did not apply to deem the corporation to pay a dividend at the conversion time in respect of the increase, in computing the paid-up capital in respect of that class of shares after March 21, 2016, there shall be deducted the amount determined by the formula
(A − B × A/D) × C/A
where
A
is the increase, if any, as a result of the conversion, in the paid-up capital in respect of all the shares of the capital stock of the corporation, computed without reference to this paragraph as it applies to the disposition,
B
is the amount determined under subparagraph (a)‍(i) in respect of the disposition,
C
is the increase, if any, as a result of the conversion, in the paid-up capital in respect of the class of shares, computed without reference to this paragraph as it applies to the disposition, and
D
is the total amount of the corporation’s contributed surplus that arose in connection with the disposition, and
(iv)if any consideration given for the interest includes a share of the capital stock of a corporation, the share (or a share substituted for the share) is disposed of (referred to in this subparagraph as the share disposition) after March 21, 2016 by a taxpayer and subsection 84.‍1(1) applies in respect of the share disposition, then for the purposes of applying section 84.‍1, the adjusted cost base to the taxpayer of the share immediately before the share disposition is to be reduced by the amount determined by the formula
(A − B x A/C)/D
where
A
is the total of all amounts each of which is the fair market value at the disposition time of a share of that capital stock given as consideration for the interest,
B
is the greater of the amount determined under subparagraph 148(7)‍(a)‍(i) in respect of the disposition and the adjusted cost basis to the policyholder of the interest immediately before the disposition,
C
is the fair market value at the disposition time of the consideration, if any, given for the interest, and
D
is the total number of shares of that capital stock given as consideration for the interest.
54(1)Subsection 149(10) of the Act is amended by adding “and” at the end of paragraph (b), by striking out “and” at the end of paragraph (c) and by repealing paragraph (d).
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
55(1)The portion of subsection 152(9) of the Act before paragraph (a) is replaced by the following:
Alternative basis for assessment
(9)At any time after the normal reassessment period, the Minister may advance an alternative basis or argument — including that all or any portion of the income to which an amount relates was from a different source — in support of all or any portion of the total amount determined on assessment to be payable or remittable by a taxpayer under this Act unless, on an appeal under this Act
(2)Subsection (1) comes into force on the day on which this Act receives royal assent, except that subsection (1) does not apply in respect of appeals instituted on or before that day.
56Paragraph 162(10)‍(a) of the Act is replaced by the following:
(a)knowingly or under circumstances amounting to gross negligence, fails to file an information return as and when required by any of sections 233.‍1 to 233.‍4 and 233.‍8, or
57(1)Subsections 212(3.‍1) to (3.‍3) of the Act are replaced by the following:
Back-to-back loan arrangement
(3.‍1)Subsection (3.‍2) applies at any time in respect of a taxpayer if
(a)the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, interest (determined without reference to paragraph 18(6.‍1)‍(b) and subsection 214(16)) in respect of a particular debt or other obligation to pay an amount to a person or partnership (in this subsection and subsection (3.‍2) referred to as the immediate funder);
(b)the immediate funder is not
(i)a person resident in Canada that does not deal at arm’s length with the taxpayer, or
(ii)a partnership each member of which is a person described in subparagraph (i);
(c)at any time in the period during which the interest accrued (in this subsection and subsections (3.‍2) and (3.‍3) referred to as the relevant period), a relevant funder, in respect of a particular relevant funding arrangement,
(i)has an amount outstanding as or on account of a debt or other obligation to pay an amount to a person or partnership that meets any of the following conditions:
(A)recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to a relevant funding arrangement, or
(B)it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because
(I)all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or
(II)the relevant funder anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or
(ii)has a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership and
(A)the existence of the specified right is required under the terms and conditions of the particular relevant funding arrangement, or
(B)it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because
(I)the specified right was granted, or
(II)the relevant funder anticipated that the specified right would be granted;
(d)the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to any ultimate funder rather than the immediate funder, is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.‍2)) in respect of the particular amount; and
(e)at any time during the relevant period, the total of all amounts  — each of which is an amount outstanding as or on account of a debt or other obligation owed by the immediate funder that is a relevant funding arrangement or the fair market value of a particular property in respect of which the immediate funder is granted a specified right that is a relevant funding arrangement — is equal to at least 25% of the total of
(i)the amount outstanding as or on account of the particular debt or other obligation, and
(ii)the total of all amounts each of which is an amount (other than the amount described in subparagraph (i)) that the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the immediate funder under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into where
(A)the immediate funder is granted a security interest (as defined in subsection 18(5)) in respect of a property that is the debt or other obligation owed by the immediate funder or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other obligation, and
(B)each security interest that secures the payment of a debt or other obligation referred to in clause (A) secures the payment of every debt or other obligation referred to in that clause.
Back-to-back loan arrangement
(3.‍2)If this subsection applies at any time in respect of a taxpayer, then for the purposes of paragraph (1)‍(b), the taxpayer is deemed, at that time, to pay interest to each ultimate funder, the amount of which is determined for each particular ultimate funder by the formula
(A – B) × C/D × (E – F)/E
where
A
is the particular amount referred to in paragraph (3.‍1)‍(a);
B
is the portion, if any, of the particular amount deemed by subsection 214(16) to have been paid by the taxpayer as a dividend;
C
is the average of all amounts each of which is, at a particular time in the relevant period, the amount determined by the formula
G – H
where
G
is the lesser of the following amounts:
(a)the amount of the particular debt or other obligation referred to in paragraph (3.‍1)‍(a) outstanding at the particular time, and
(b)the total of all amounts each of which is at that particular time
(i)an amount outstanding as or on account of a debt or other obligation that is owed to the particular ultimate funder under a relevant funding arrangement,
(ii)the fair market value of a particular property referred to in subparagraph (3.‍1)‍(c)‍(ii) in respect of which the particular ultimate funder has granted a specified right under a relevant funding arrangement, or
(iii)if neither subparagraph (i) nor (ii) applies at that particular time, nil, and
H
is the total of all amounts each of which is, at the particular time, the amount that is
(a)an amount outstanding as or on account of a debt or other obligation that is owed by the particular ultimate funder under a relevant funding arrangement,
(b)the fair market value of a particular property referred to in subparagraph (3.‍1)‍(c)‍(ii) in respect of which the particular ultimate funder has a specified right under a relevant funding arrangement, or
(c)if neither paragraph (a) nor (b) applies at that particular time, nil;
D
is the average of all amounts each of which is the amount of the particular debt or other obligation outstanding at a time in the relevant period;
E
is the rate of tax (determined without reference to subsection 214(16)) that would be imposed under this Part on the particular amount if the particular amount were paid by the taxpayer to the particular ultimate funder at that time; and
F
is the rate of tax (determined without reference to subsection 214(16)) imposed under this Part on the immediate funder in respect of all or the portion of the particular amount paid or credited to the immediate funder.
Back-to-back arrangement — election
(3.‍21)Subsection (3.‍22) applies in respect of a taxpayer and two or more ultimate funders (referred to in this subsection and subsection (3.‍22) as the electing ultimate funders) at any time if
(a)at that time, subsection (3.‍2) applies in respect of the taxpayer;
(b)prior to that time, the taxpayer and the electing ultimate funders have jointly filed an election under this subsection;
(c)the election designates one of the electing ultimate funders to be the recipient of interest payments that are deemed to be made by the taxpayer under subsection (3.‍22);
(d)at that time, the tax that would be payable under this Part in respect of an interest payment by the taxpayer to the designated ultimate funder is not less than the tax that would be payable under this Part if the interest payment were made by the taxpayer to any of the other electing ultimate funders; and
(e)the election has not been revoked prior to that time.
Back-to-back arrangement — election
(3.‍22)If this subsection applies at any time in respect of a taxpayer and two or more electing ultimate funders, then each interest payment that would, in the absence of this subsection, have been deemed under subsection (3.‍2) to have been made at that time by the taxpayer to an electing ultimate funder, and received by the electing ultimate funder from the taxpayer, is deemed to have instead been
(a)made by the taxpayer to the designated ultimate funder; and
(b)received by the designated ultimate funder from the taxpayer.
Excess funding
(3.‍3)Subsection (3.‍4) applies in respect of a particular relevant funder if the amount determined by the following formula is greater than nil:
A – B
where
A
is the total of all amounts each of which is the amount owing by the particular relevant funder, or is the fair market value of a property in respect of which the particular relevant funder has a specified right, under a relevant funding arrangement; and
B
is the total of all amounts each of which is the amount owed to the particular relevant funder, or is the fair market value of a property in respect of which the particular relevant funder has granted a specified right, under a relevant funding arrangement.
Excess funding — deemed funding allocation
(3.‍4)If this subsection applies in respect of a particular relevant funder, for the purposes of subsections (3.‍2) to (3.‍4) (other than for the purpose of applying subsections (3.‍3) and (3.‍4) in respect of the particular relevant funder), each amount that is owed by the particular relevant funder, or that is the fair market value of a property in respect of which the particular relevant funder has been granted a specified right, under a relevant funding arrangement, is deemed to be the amount determined by the formula
C/D x E
where
C
is the amount owing or the fair market value of the property, as the case may be;
D
is the amount determined for A in subsection (3.‍3); and
E
is the amount determined for B in subsection (3.‍3).
Multiple funding arrangements
(3.‍5)If an amount owing by a relevant funder or a specified right held by the relevant funder is a relevant funding arrangement in respect of more than one particular debt or other obligation referred to in paragraph (3.‍1)‍(a), for the purposes of applying subsections (3.‍2) to (3.‍4) in respect of each of the particular debts or other obligations, the amount owing, or the fair market value of the property in respect of which the specified right was granted, as the case may be, is deemed, in respect of each particular debt or other obligation, to be the amount determined by the formula
A/B × C
where
A
is the total of all amounts each of which is an amount owing to the relevant funder, or the fair market value of a property in respect of which the relevant funder has granted a specified right, under a relevant funding arrangement, in respect of the particular debt or other obligation;
B
is the total of all amounts each of which is an amount owing to the relevant funder, or the fair market value of a property in respect of which the relevant funder has granted a specified right, under a relevant funding arrangement, in respect of all of the particular debts or other obligations; and
C
is the amount owing by the relevant funder or the fair market value of the property in respect of which the relevant funder holds the specified right.
Back-to-back loan arrangement — character substitution
(3.‍6)Subsection (3.‍7) applies in respect of
(a)shares (other than specified shares) of the capital stock of a particular relevant funder, in respect of a particular relevant funding arrangement, if — at any time at or after the time when the particular debt or other obligation referred to in paragraph (3.‍1)‍(a) was entered into — the particular relevant funder has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, a dividend on the shares, either immediately or in the future and either absolutely or contingently, to a person or partnership, and any of the following conditions is met:
(i)the amount of the dividend is determined, in whole or in part, by reference to an amount of interest paid or credited, or an obligation to pay or credit interest, under a relevant funding arrangement, or
(ii)it can reasonably be concluded that the particular relevant funding arrangement was entered into or was permitted to remain in effect, because
(A)the shares were issued or were permitted to remain issued and outstanding, or
(B)it was anticipated that the shares would be issued or would be permitted to remain issued and outstanding; or
(b)a specified royalty arrangement, if — at any time at or after the time when the particular debt or other obligation referred to in paragraph (3.‍1)‍(a) was entered into — a particular relevant funder, in respect of a particular relevant funding arrangement, is a specified licensee that has an obligation to pay or credit an amount under the specified royalty arrangement, either immediately or in the future and either absolutely or contingently, to a person or partnership, and any of the following conditions is met:
(i)the amount is determined, in whole or in part, by reference to an amount of interest paid or credited, or an obligation to pay or credit interest, under a relevant funding arrangement, or
(ii)it can reasonably be concluded that the particular relevant funding arrangement was entered into or was permitted to remain in effect, because
(A)the specified royalty arrangement was entered into or was permitted to remain in effect, or
(B)it was anticipated that the specified royalty arrangement would be entered into or remain in effect.
Back-to-back loan arrangement — character substitution
(3.‍7)If this subsection applies in respect of a specified royalty arrangement (under which a particular relevant funder is a specified licensee) or shares of the capital stock of a particular relevant funder, then, for the purposes of subsections (3.‍1) to (3.‍8),
(a)the specified royalty arrangement or the holding of the shares, as the case may be, is deemed to be a relevant funding arrangement;
(b)the specified licensor or shareholder, as the case may be, in respect of the relevant funding arrangement, is deemed to be a relevant funder, in respect of the relevant funding arrangement;
(c)the conditions in paragraph (3.‍1)‍(c) are deemed to be met in respect of the relevant funding arrangement; and
(d)the relevant funder is deemed to be owed, under the relevant funding arrangement and by the particular relevant funder, an amount as or on account of a debt, the outstanding amount of which is determined by the formula
(A – B) × C/D
where
A
is the total of all amounts each of which is at the particular time,
(i)an amount outstanding as or on account of a debt or other obligation that is owed to the particular relevant funder under a relevant funding arrangement,
(ii)the fair market value of a particular property referred to in subparagraph (3.‍1)‍(c)‍(ii) in respect of which the particular relevant funder has granted a specified right under a relevant funding arrangement, or
(iii)if neither subparagraph (i) nor (ii) applies at that particular time, nil,
B
is the total of all amounts each of which is, at the particular time, in respect of a relevant funding arrangement (other than a relevant funding arrangement deemed under paragraph (a)) and is
(i)an amount outstanding as or on account of a debt or other obligation that is owed by the particular relevant funder under the relevant funding arrangement,
(ii)the fair market value of a particular property referred to in subparagraph (3.‍1)‍(c)‍(ii) in respect of which the particular relevant funder has been granted a specified right under a relevant funding arrangement, or
(iii)if neither subparagraph (i) nor (ii) applies at that particular time, nil,
C
is the fair market value, at the particular time, of
(i)if the relevant funding arrangement is described in paragraph (3.‍6)‍(a), the shares, or
(ii)if the relevant funding arrangement is described in paragraph (3.‍6)‍(b), the specified royalty arrangement, and
D
is the total of all amounts each of which is, in respect of a relevant funding arrangement referred to in the description of C, the amount determined for C at the particular time.
Back-to-back loan arrangement — definitions
(3.‍8)The following definitions apply in this subsection and subsections (3.‍1) to (3.‍7) and (3.‍81).
relevant funder, in respect of a relevant funding arrangement, means
(a)if the relevant funding arrangement is described in paragraph (a) of the definition relevant funding arrangement, the immediate funder referred to in paragraph (3.‍1)‍(a);
(b)if the relevant funding arrangement is described in paragraph (b) of the definition relevant funding arrangement, the creditor in respect of the debt or other obligation or the grantor of the specified right, as the case may be; or
(c)a person or partnership that does not deal at arm’s length with a person or partnership that is referred to in paragraph (a) or (b) and that deals at arm’s length with the taxpayer. (bailleur de fonds considéré)
relevant funding arrangement means
(a)the particular debt or other obligation referred to in paragraph (3.‍1)‍(a); and
(b)each debt or other obligation or specified right, owing by or granted to a relevant funder, in respect of a particular relevant funding arrangement, if the debt or other obligation or specified right meets the conditions in subparagraph (3.‍1)‍(c)‍(i) or (ii) in respect of a relevant funding arrangement. (mécanisme de financement considéré)
specified licensee means
(a)a lessee, licensee or grantee of a right similar to a right granted under a lease or licence, under a specified royalty arrangement;
(b)an assignee under a specified royalty arrangement; or
(c)a purchaser under a specified royalty arrangement. (porteur de licence déterminé)
specified licensor means
(a)a lessor, licensor or grantor of a right similar to a right granted under a lease or licence, under a specified royalty arrangement;
(b)an assignor under a specified royalty arrangement; or
(c)a seller under a specified royalty arrangement. (cédant de licence déterminé)
specified right has the same meaning as in subsection 18(5). (droit déterminé)
specified royalty arrangement has the same meaning as in subsection (3.‍94). (mécanisme de redevance déterminé)
specified share means a share of the capital stock of a corporation if, under the terms or conditions of the share, or any agreement or arrangement relating to the share,
(a)the holder of the share may cause the share to be redeemed, acquired or cancelled;
(b)the issuing corporation is, or may be, required to redeem, acquire or cancel the share at a specific time; or
(c)the share is convertible or exchangeable into a share that meets the conditions in paragraph (a) or (b). (action déterminée)
ultimate funder means a relevant funder, in respect of a relevant funding arrangement (other than the immediate funder) that either
(a)is not a debtor, or a holder of a specified right, under a relevant funding arrangement; or
(b)is a debtor, or a holder of a specified right, under a relevant funding arrangement, if the amount that would — if the relevant funder were an ultimate funder — be determined for C in the formula in subsection (3.‍2) is greater than nil. (bailleur de fonds ultime)
Specified shares
(3.‍81)For the purposes of subsections (3.‍1) to (3.‍8),
(a)specified shares of a relevant funder, in respect of a relevant funding arrangement, held at any time by a person or partnership are deemed to be a debt of the relevant funder owing to the person or partnership; and
(b)the amount outstanding at that time as or on account of the debt is deemed to be equal to the fair market value of the specified shares at that time.
Back-to-back arrangement — rents, royalties, similar payments
(3.‍9)Subsection (3.‍91) applies at any time in respect of a taxpayer if
(a)the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, rent, royalty or similar payment, in respect of a particular lease, licence or similar agreement, to a non-resident person or a partnership any member of which is a non-resident person (in this subsection and subsections (3.‍91) to (3.‍94) referred to as the immediate licensor);
(b)at any time at or after the time when the particular lease, licence or similar agreement was entered into,
(i)a relevant licensor in respect of a particular relevant royalty arrangement has an obligation to pay or credit an amount, either immediately or in the future and either absolutely or contingently, to a person or partnership, in respect of a specified royalty arrangement, and either of the following additional conditions is met:
(A)the amount is determined, in whole or in part, by reference to
(I)an amount paid or credited, or an obligation to pay or credit an amount, in respect of a relevant royalty arrangement, or
(II)one or more of the fair market value of, any revenue, profits, income, or cash flow from, or any other similar criteria in respect of, a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B)it can reasonably be concluded that the particular relevant royalty arrangement was entered into, or was permitted to remain in effect, because
(I)the specified royalty arrangement was entered into or was permitted to remain in effect, or
(II)it was anticipated that the specified royalty arrangement would be entered into or remain in effect, and
(ii)either the person or partnership
(A)does not deal at arm’s length with the taxpayer, or
(B)deals at arm’s length with the taxpayer, if it can reasonably be concluded that one of the main purposes of the specified royalty arrangement was
(I)to reduce or avoid the tax payable under this Part in respect of the particular amount, or
(II)to avoid the application of subsection (3.‍91); and
(c)the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to an ultimate licensor rather than the immediate licensor, is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.‍91)) in respect of the particular amount.
Back-to-back arrangement — rents, royalties, similar payments
(3.‍91)If this subsection applies at any time in respect of a taxpayer, then, for the purposes of paragraph (1)‍(d), the taxpayer is deemed, at that time, to pay to each ultimate licensor an amount — of the same character as the particular amount referred to in paragraph (3.‍9)‍(a) — determined for each particular ultimate licensor by the formula
(A × B/C) × (D – E)/D
where
A
is the particular amount referred to in paragraph (3.‍9)‍(a);
B
is
(a)the portion of the amount referred to in paragraph (3.‍9)‍(a) that is demonstrated, to the satisfaction of the Minister, to be reasonably allocable to the particular ultimate licensor, and
(b)if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, one;
C
is
(a)the total of all amounts, each of which is the portion of the amount referred to in paragraph (3.‍9)‍(a) that is demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each ultimate licensor, and
(b)if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, the number of ultimate licensors;
D
is
(a)if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, the highest rate of tax that would be imposed under this Part on the particular amount referred to in paragraph (3.‍9)‍(a) if the particular amount were paid by the taxpayer to any of the ultimate licensors at that time, and
(b)in any other case, the rate of tax that would be imposed under this Part on the particular amount referred to in paragraph (3.‍9)‍(a) if the particular amount were paid by the taxpayer to the particular ultimate licensor at that time; and
E
is the rate of tax imposed under this Part at that time on the immediate licensor in respect of the particular amount, referred to in paragraph (3.‍9)‍(a), paid or credited to the immediate licensor.
Back-to-back arrangement — character substitution
(3.‍92)Subsection (3.‍93) applies in respect of
(a)shares of the capital stock of a particular relevant licensor, in respect of a particular relevant royalty arrangement, if — at any time at or after the time when a particular lease, license or similar agreement referred to in paragraph (3.‍9)‍(a) was entered into — the particular relevant licensor has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, a dividend on the shares, either immediately or in the future and either absolutely or contingently, to a person or partnership, and
(i)either of the following conditions is met:
(A)the amount of the dividend is determined, in whole or in part, by reference to
(I)an amount of rent, royalty or similar payment paid or credited, or an obligation to pay or credit rent, royalty or similar payment, under a relevant royalty arrangement, or
(II)one or more of the fair market value of, any revenue profits, income or cash flow from, or any other similar criteria in respect of a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B)it can reasonably be concluded that the particular relevant royalty arrangement was entered into or was permitted to remain in effect, because
(I)the shares were issued or were permitted to remain issued and outstanding, or
(II)it was anticipated that the shares would be issued or would be permitted to remain issued and outstanding, and
(ii)either the person or partnership
(A)does not deal at arm’s length with the taxpayer referred to in paragraph (3.‍9)‍(a), or
(B)deals at arm’s length with that taxpayer, if it can reasonably be concluded that one of the main purposes of the issuance of the shares was
(I)to reduce or avoid the tax payable under this Part in respect of the particular amount referred to in paragraph (3.‍9)‍(a), or
(II)to avoid the application of subsection (3.‍91); and
(b)an amount outstanding as or on account of a debt or other obligation to pay an amount, if — at any time at or after the time when a particular lease, license or similar agreement referred to in paragraph (3.‍9)‍(a) was entered into — a particular relevant licensor, in respect of a particular relevant royalty arrangement, has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, interest under the debt or other obligation, either immediately or in the future and either absolutely or contingently, to a person or partnership, and
(i)either of the following conditions is met:
(A)the amount of the interest is determined, in whole or in part, by reference to
(I)an amount of rent, royalty or similar payment paid or credited, or an obligation to pay or credit rent, royalty or similar payment, under a relevant royalty arrangement, or
(II)one or more of the fair market value of, any revenue profits, income or cash flow from, or any other similar criteria in respect of a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B)it can reasonably be concluded that the particular relevant royalty arrangement was entered into or was permitted to remain in effect, because
(I)the debt or other obligation was entered into or was permitted to remain in effect, or
(II)it was anticipated that the debt or other obligation would be entered into or remain in effect, and
(ii)either the person or partnership
(A)does not deal at arm’s length with the taxpayer referred to in paragraph (3.‍9)‍(a), or
(B)deals at arm’s length with that taxpayer, if it can reasonably be concluded that one of the main purposes of entering into the debt or other obligation was
(I)to reduce or avoid the tax payable under this Part in respect of the particular amount referred to in paragraph (3.‍9)‍(a), or
(II)to avoid the application of subsection (3.‍91).
Back-to-back arrangement — character substitution
(3.‍93)If this subsection applies in respect of a debt or other obligation to pay an amount (under which a particular relevant licensor is a borrower) or shares of the capital stock of a particular relevant licensor, then, for the purposes of subsections (3.‍9) to (3.‍94),
(a)the debt or other obligation or the holding of the shares, as the case may be, is deemed to be a relevant royalty arrangement;
(b)the creditor or shareholder, as the case may be, in respect of the relevant royalty arrangement, is deemed to be a relevant licensor, in respect of the relevant royalty arrangement; and
(c)the relevant royalty arrangement is deemed to be a specified royalty arrangement in respect of which the conditions in paragraph (3.‍9)‍(b) are met.
Back-to-back arrangement — definitions
(3.‍94)The following definitions apply in this subsection and subsections (3.‍9) to (3.‍93).
lease, licence or similar agreement means an agreement under which a rent, royalty or similar payment is or could be made. (convention de bail, licence ou autre convention semblable)
relevant licensor, in respect of a relevant royalty arrangement, means
(a) if the relevant royalty arrangement is described in paragraph (a) of the definition relevant royalty arrangement, the immediate licensor referred to in paragraph (3.‍9)‍(a);
(b)if the relevant royalty arrangement is described in paragraph (b) of the definition relevant royalty arrangement, a person or partnership that is the lessor, the licensor or the grantor of a right similar to a right granted under a lease or licence, the assignor or the seller, as the case may be; or
(c)a person or partnership that does not deal at arm’s length with a relevant licensor referred to in paragraph (a) or (b). (cédant de licence considéré)
relevant royalty arrangement means
(a)the particular lease, licence or similar agreement referred to in paragraph (3.‍9)‍(a); and
(b)each specified royalty arrangement that
(i)meets, in respect of a relevant royalty arrangement, the conditions in clause (3.‍9)‍(b)‍(i)‍(A) or (B), and
(ii)is an arrangement in respect of which the person or partnership referred to in subparagraph (3.‍9)‍(b)‍(ii) meets the conditions in clause (3.‍9)‍(b)‍(ii)‍(A) or (B). (mécanisme de redevance considéré)
rent, royalty or similar payment means a rent, royalty or similar payment described in paragraph (1)‍(d) and, for greater certainty, includes any payment described in subparagraphs (1)‍(d)‍(i) to (v) but does not include any payment described in subparagraphs (1)‍(d)‍(vi) to (xii). (loyer, redevance ou paiement semblable)
specified royalty arrangement means a lease, license or similar agreement, an assignment or an instalment sale. (mécanisme de redevance déterminé)
ultimate licensor means a relevant licensor (other than the immediate licensor), in respect of a relevant royalty arrangement, that is not, under a relevant royalty arrangement,
(a)a lessee, a licensee or a grantee of a right similar to a right granted under a lease or licence;
(b)an assignee; or
(c)a purchaser. (cédant de licence ultime)
(2)Subsection (1) applies in respect of amounts paid or credited after 2016.
58(1)Subsection 212.‍1(1) of the Act is replaced by the following:
Non-arm’s length sales of shares by non-residents
212.‍1(1)Subsection (1.‍1) applies if a non-resident person or designated partnership (in this subsection and subsections (1.‍1) and (1.‍2) referred to as the 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) with the purchaser corporation.
Non-arm’s length sales of shares by non-residents
(1.‍1)If this subsection applies,
(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 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
(i)in the case that, immediately before the disposition, the purchaser corporation controlled the non-resident person,
(A)paid at the time of the disposition by the subject corporation to the non-resident person, and
(B)received at that time by the non-resident person from the subject corporation, and
(ii)in any other case,
(A)paid at the time of the disposition by the purchaser corporation to the non-resident person, and
(B)received at that time by the non-resident person from the purchaser corporation; and
(b)in computing the paid-up capital at any particular time after March 31, 1977 of any particular class of shares of the capital stock of the purchaser corporation, there shall be deducted that proportion of the amount, if any, by which the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of all of the shares of the capital stock of the purchaser corporation exceeds the amount, if any, by which
(i)the paid-up capital in respect of the subject shares immediately before the disposition
exceeds
(ii)the fair market value of the consideration described in paragraph (a),
that the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of the particular class of shares is of the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of all of the issued shares of the capital stock of the purchaser corporation.
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 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.
(2)Subparagraph 212.‍1(2)‍(a)‍(ii) of the Act is replaced by the following:
(ii)the total that would be determined under subparagraph (i) if this Act were read without reference to paragraph (1.‍1)‍(b), and
(3)Paragraph 212.‍1(2)‍(b) of the Act is replaced by the following:
(b)the total of all amounts each of which is an amount required by paragraph (1.‍1)‍(b) to be deducted in computing the paid-up capital in respect of the particular class of shares after March 31, 1977 and before the particular time.
(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 or designated partnership 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 or designated partnership was,
(5)The portion of paragraph 212.‍1(3)‍(b) of the Act before subparagraph (i) is replaced by the following:
(b)for the purposes of determining whether or not a particular non-resident person or designated partnership (in this paragraph referred to as the taxpayer) referred to in paragraph (a) was a member of a group of less than 6 persons that controlled a corporation at any time, any shares of the capital stock of that corporation owned at that time by
(6)Subsection 212.‍1(4) of the Act is replaced by the following:
Where section does not apply
(4)Notwithstanding subsection (1), subsection (1.‍1) does not apply in respect of a disposition by a non-resident corporation of shares of a subject corporation to a purchaser corporation if
(a)immediately before the disposition, the purchaser corporation controlled the non-resident corporation; and
(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 or designated partnership
(i)owns, directly or indirectly, shares of the capital stock of the purchaser corporation, and
(ii)does not deal at arm’s length with the purchaser corporation.
(7)Subsections (1) to (6) apply in respect of dispositions that occur after March 21, 2016.
59(1)Paragraph 212.‍2(1)‍(b) of the Act is replaced by the following:
(b)subsection 212.‍1(1.‍1) does not apply in respect of the disposition;
(2)Subsection (1) applies in respect of dispositions that occur after March 21, 2016.
60(1)Subsection 225.‍1(6) of the Act is amended by adding the following after paragraph (a):
(a.‍1)an amount payable under section 281;
(2)Subsection (1) comes into force on July 1, 2017.
61(1)The Act is amended by adding the following after section 233.‍7:
Country-by-country report — definitions
233.‍8(1)The following definitions apply in this section.
business entity means
(a)a person (other than an individual that is not a trust) or partnership; and
(b)a business that is carried on through a permanent establishment, if a separate financial statement for the business is prepared for financial reporting, regulatory, tax reporting or internal management control purposes. (entité)
consolidated financial statements means financial statements in which the assets, liabilities, income, expenses and cash flows of the members of a group are presented as those of a single economic entity. (états financiers consolidés)
constituent entity, of an MNE group, means
(a)any business entity of the MNE group that
(i)is included in the consolidated financial statements of the MNE group for financial reporting purposes, or
(ii)would be required to be included if equity interests in any of the business entities in the MNE group were traded on a public securities exchange; and
(b)any business entity that is excluded from the MNE group’s consolidated financial statements solely because of size or materiality. (entité constitutive)
excluded MNE group means two or more business entities that meet the conditions in paragraphs (a) and (b) of the definition MNE group, if, with respect to a particular fiscal year of the MNE group, it has a total consolidated group revenue of less than €750 million during the fiscal year immediately preceding the particular fiscal year, as reflected in its consolidated financial statements for the preceding fiscal year. (groupe d’entreprises multinationales exclu)
fiscal year, of an MNE group, means an annual accounting period with respect to which the ultimate parent entity of the MNE group prepares its financial statements. (exercice)
multinational enterprise group or MNE group means two or more business entities, if
(a)they are either required to prepare consolidated financial statements for financial reporting purposes under applicable accounting principles or would be so required if equity interests in any of the business entities were traded on a public securities exchange;
(b)one of the business entities is resident in a particular jurisdiction and
(i)another business entity resides in a different jurisdiction, or
(ii)is subject to tax in a different jurisdiction with respect to a business carried on by it through a business entity — described in paragraph (b) of the definition business entity — in that other jurisdiction; and
(c)they are not an excluded MNE group. (groupe d’entreprises multinationales)
permanent establishment has the meaning assigned by regulation. (établissement stable)
qualifying competent authority agreement means an agreement that
(a)is between authorized representatives of those jurisdictions that are parties to a listed international agreement; and
(b)requires the automatic exchange of country-by-country reports between the party jurisdictions. (accord admissible)
reporting fiscal year means a fiscal year, if the financial and operational results of the fiscal year are reflected in the country-by-country report. (exercice déclarable)
surrogate parent entity means a constituent entity of an MNE group that has been appointed by the MNE group — in substitution for the ultimate parent entity — to file the country-by-country report on behalf of the MNE group, if one or more of the conditions in subparagraph (3)‍(b)‍(ii) applies. (entité mère de substitution)
systemic failure means, with respect to a jurisdiction, that the jurisdiction has a qualifying competent authority agreement in effect with Canada, but
(a)has suspended automatic exchange (for reasons other than those that are in accordance with the terms of the agreement); or
(b)has persistently failed to automatically provide country-by-country reports in its possession — in respect of MNE groups that have constituent entities in Canada — to Canada. (défaillance systémique)
ultimate parent entity means a constituent entity of an MNE group that meets the following conditions:
(a)the constituent entity holds directly or indirectly a sufficient interest in one or more constituent entities of the MNE group so that it is required to prepare consolidated financial statements under accounting principles generally applied in its jurisdiction of residence, or would be so required if its equity interests were traded on a public securities exchange in its jurisdiction of residence; and
(b)no other constituent entity of the MNE group holds, directly or indirectly, an interest in it that is described in paragraph (a). (entité mère ultime)
Determination of residence — ultimate parent entity
(2)For the purposes of this section, if an ultimate parent entity is a partnership, it is deemed to be resident
(a)if it is, under the laws of another jurisdiction, resident in that other jurisdiction for tax purposes, in that other jurisdiction; and
(b)in any other case, in the jurisdiction under the laws of which it was organized.
Filing obligations
(3)A report in prescribed form (this report, along with each substantially similar report required to be filed in a jurisdiction other than Canada, collectively referred to in this section as a country-by-country report), in respect of a reporting fiscal year of an MNE group, shall be filed in prescribed manner with the Minister on or before the date specified in subsection (6) by
(a)the ultimate parent entity of the MNE group, if it is resident in Canada in the reporting fiscal year; or
(b)a constituent entity of the MNE group — which is not the ultimate parent entity of the MNE group — with respect to the reporting fiscal year of the MNE group, if the following conditions are satisfied:
(i)the constituent entity is resident in Canada in the reporting fiscal year, and
(ii)one of the following conditions applies:
(A)the ultimate parent entity of the MNE group is not obligated to file a country-by-country report in its jurisdiction of residence,
(B)the jurisdiction of residence of the ultimate parent entity of the MNE group does not have a qualifying competent authority agreement in effect to which Canada is a party on or before the time specified in subsection (6) for filing the country-by-country report for the reporting fiscal year, or
(C)there has been a systemic failure of the jurisdiction of residence of the ultimate parent entity and the Minister has notified the constituent entity of the systemic failure.
Designation for multiple constituent entities
(4)If more than one constituent entity of an MNE group is described in paragraph (3)‍(b) in respect of a reporting fiscal year, one of those constituent entities may be designated — on or before the date specified in subsection (6) in respect of the reporting fiscal year — so that it is entitled to file a country-by-country report for the reporting fiscal year with the Minister on behalf of all such constituent entities in the MNE group.
Surrogate filing
(5)Notwithstanding subsection (3), a constituent entity of an MNE group described in paragraph (3)‍(b) is not required to file a country-by-country report with the Minister with respect to a reporting fiscal year if
(a)a surrogate parent entity of the MNE group files a country-by-country report in respect of the reporting fiscal year with the tax authority of its jurisdiction of residence on or before the date specified in subsection (6); and
(b)the jurisdiction of residence of the surrogate parent entity
(i)requires filing of country-by-country reports,
(ii)has a qualifying competent authority agreement in effect to which Canada is a party on or before the time specified in subsection (6) for filing the country-by-country report in respect of the reporting fiscal year,
(iii)is not in a position of systemic failure, and
(iv)has been notified by the surrogate parent entity that it is the surrogate parent entity.
Time for filing
(6)A country-by-country report in respect of a reporting fiscal year of an MNE group that is required to be filed by a constituent entity under this section shall be filed on or before the later of
(a)if notification of systemic failure has been received by the constituent entity, 30 days after receipt of the notification, and
(b)12 months after the last day of the reporting fiscal year.
(2)Subsection (1) applies to reporting fiscal years of MNE groups that begin after 2015.
62(1)Paragraph (a) of the definition transfer pricing capital adjustment in subsection 247(1) of the Act is amended by adding “or” at the end of subparagraph (i) and by repealing subparagraph (ii).
(2)Paragraph (b) of the definition transfer pricing capital adjustment in subsection 247(1) of the Act is amended by adding “and” at the end of subparagraph (i) and by repealing subparagraph (ii).
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
63(1)The definitions adjustment time, cumulative eligible capital, eligible capital amount, eligible capital expenditure and eligible capital property in subsection 248(1) of the Act are repealed.
(2)The definition inventory in subsection 248(1) of the Act is replaced by the following:
inventory means a description of property the cost or value of which is relevant in computing a taxpayer’s income from a business for a taxation year or would have been so relevant if the income from the business had not been computed in accordance with the cash method and includes
(a)with respect to a farming business, all of the livestock held in the course of carrying on the business, and
(b)an emissions allowance; (inventaire)
(3)Paragraph (a) of the definition balance-due day in subsection 248(1) of the Act is replaced by the following:
(a)if the taxpayer is a trust,
(i)in the case where the time at which the taxation year ends is determined under paragraph 249(4)‍(a), the day that is
(A)in the case where that time occurs in a calendar year after the end of the trust’s particular taxation year that ends on December 15 of that calendar year because of an election made under paragraph 132.‍11(1)‍(a), the balance-due day of the trust for the particular taxation year,
(B)in the case where clause (A) does not apply and the trust’s particular taxation year that begins immediately after that time ends in the calendar year that includes that time, the balance-due day of the trust for the particular taxation year, and
(C)in any other case, 90 days after the end of the calendar year that includes that time, and
(ii)in any other case, the day that is 90 days after the end of the taxation year,
(4)Paragraph (d) of the definition cost amount in subsection 248(1) of the Act is repealed.
(5)The definition property in subsection 248(1) of the Act is amended by striking out “and” at the end of paragraph (c), by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):
(e)the goodwill of a business, as referred to in subsection 13(34); (biens)
(6)The portion of paragraph (b) of the definition taxable Canadian property in subsection 248(1) of the Act before subparagraph (i) is replaced by the following:
(b)property used or held by the taxpayer in, property included in Class 14.‍1 of Schedule II to the Income Tax Regulations in respect of, or property described in an inventory of, a business carried on in Canada, other than
(7)Subsection 248(1) of the Act is amended by adding the following in alphabetical order:
emissions allowance means an allowance, credit or similar instrument that represents a unit of emissions that can be used to satisfy a requirement under the laws of Canada or a province governing emissions of a regulated substance, such as greenhouse gas emissions; (droit d’émissions)
emissions obligation means an obligation to surrender an emissions allowance, or an obligation that can otherwise be satisfied through the use of an emissions allowance, under a law of Canada or a province governing emissions of a regulated substance; (obligation d’émissions)
(8)The portion of subsection 248(39) of the Act before paragraph (a) is replaced by the following:
Substantive gift
(39)If a taxpayer disposes of a property (in this subsection referred to as the substantive gift) that is a capital property of the taxpayer, to a recipient that is a registered party, a registered association or a candidate, as those terms are defined in the Canada Elections Act, or that is a qualified donee, subsection (35) would have applied in respect of the substantive gift if it had been the subject of a gift by the taxpayer to a qualified donee, and all or a part of the proceeds of disposition of the substantive gift are (or are substituted, directly or indirectly in any manner whatever, for) property that is the subject of a gift or monetary contribution by the taxpayer to the recipient or any person dealing not at arm’s length with the recipient, the following rules apply:
(9)Subsection 248(39) of the Act is amended by adding “and” at the end of paragraph (a), by striking out “and” at the end of paragraph (b) and by repealing paragraph (c).
(10)Subsections (1), (4) to (6), (8) and (9) come into force or are deemed to have come into force on January 1, 2017.
(11)Subsections (2) and (7) come into force or are deemed to have come into force on January 1, 2017, except that paragraph (b) of the definition inventory in subsection 248(1) of the Act, as enacted by subsection (2), does not apply in respect of emissions allowances acquired in taxation years that begin before 2017. In addition, if a taxpayer elects under subsection 10(2), subsections (2) and (7) apply in respect of emissions allowances acquired by the taxpayer in taxation years that end after 2012.
(12)Subsection (3) is deemed to have come into force on March 21, 2013.
64(1)Paragraph 249(4)‍(b) of the Act is replaced by the following:
(b)subject to paragraph 128(1)‍(d), section 128.‍1 and paragraphs 142.‍6(1)‍(a) and 149(10)‍(a), and notwithstanding subsections (1) and (3), if the taxpayer is a corporation and the taxpayer’s taxation year that would, but for this subsection, have been its last taxation year that ended before that time, would, but for this paragraph, have ended within the seven-day period that ended immediately before that time, that taxation year is, except if the taxpayer is subject to a loss restriction event within that period, deemed to end immediately before that time, provided that the taxpayer so elects in its return of income under Part I for that taxation year.
(2)Subsection (1) is deemed to have come into force on March 21, 2013.
65(1)The definition portfolio investment fund in subsection 251.‍2(1) of the Act is repealed.
(2)The definitions investment fund and majority-interest beneficiary in subsection 251.‍2(1) of the Act are replaced by the following:
investment fund, at any time, means a trust, if
(a)at all times throughout the period that begins at the later of March 21, 2013 and the end of the calendar year in which it is created and that ends at that time, the trust has a class of units outstanding that complies with the conditions prescribed for the purposes of paragraph 132(6)‍(c) determined without reference to paragraph 4801(b) of the Income Tax Regulations; and
(b)at all times throughout the period that begins at the later of March 21, 2013 and the time of its creation and that ends at that time, the trust
(i)is resident in Canada,
(ii)has no beneficiaries who may for any reason receive directly from the trust any of the income or capital of the trust, other than beneficiaries whose interests as beneficiaries under the trust are fixed interests described by reference to units of the trust,
(iii)follows a reasonable policy of investment diversification,
(iv)limits its undertaking to the investing of its funds in property,
(v)does not alone, or as a member of a group of persons, control a corporation, and
(vi)does not hold
(A)property that the trust, or a person with which the trust does not deal at arm’s length, uses in carrying on a business,
(B)real or immovable property, an interest in real property or an immovable, or a real right in an immovable,
(C)Canadian resource property, foreign resource property, or an interest or right in Canadian resource property or foreign resource property, or
(D)more than 20% of the securities of any class of securities of a person (other than an investment fund or a mutual fund corporation that would meet the conditions in this paragraph, other than in subparagraph (ii), if it were a trust), unless at that time
(I)the securities (other than liabilities) of the person held by the trust have a total fair market value that is no more than 10% of the equity value of the person, and
(II)the liabilities of the person held by the trust have a total fair market value that is no more than 10% of the fair market value of all of the liabilities of the person. (fiducie de placement déterminée)
majority-interest beneficiary has the same meaning as in subsection 251.‍1(3) read without reference to the expression “, if any,” in the definition majority-interest beneficiary in that subsection. (bénéficiaires détenant une participation majoritaire)
(3)Paragraph 251.‍2(3)‍(f) of the Act is replaced by the following:
(f)the acquisition or disposition of equity of the particular trust at any time if
(i)the particular trust is an investment fund immediately before that time, and
(ii)the acquisition or disposition, as the case may be, is not part of a series of transactions or events that includes the particular trust ceasing to be an investment fund.
(4)Subsection 251.‍2(5) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and’’ at the end of paragraph (b) and by adding the following after paragraph (b):
(c)if, at any time as part of a series of transactions or events a person acquires a security (as defined in subsection 122.‍1(1)) and it can reasonably be concluded that one of the reasons for the acquisition, or for making any agreement or undertaking in respect of the acquisition, is to cause a condition in subparagraph (b)‍(v) or clause (b)‍(vi)‍(D) of the definition investment fund in subsection (1) to be satisfied at a particular time in respect of a trust, the condition is deemed not to be satisfied at the particular time in respect of the trust.
(5)Subsection 251.‍2(7) of the Act is replaced by the following:
Filing and other deadlines
(7)If at any time a trust is subject to a loss restriction event, in respect of the trust for its taxation year that ends immediately before that time,
(a)the reference in paragraph 132(2.‍1)‍(a) to “the day that is 90 days after the end of the year” is to be read as “the balance-due day of the trust for the year”;
(b)the reference in subsection 132(6.‍1) to “before the 91st day after the end of” is to be read as “on or before the balance-due day of the trust for”;
(c)the reference in paragraph 150(1)‍(c) to “within 90 days from the end of” is to be read as “on or before the balance-due day of the trust for”;
(d)the reference in subsection 204.‍7(1) to “Within 90 days from the end of each taxation year commencing after 1980” is to be read as “On or before the balance-due day of the trust for each taxation year”;
(e)the reference in subsection 210.‍2(5), and in subsection 221(2) of the Income Tax Regulations, to “within 90 days after the end of” is to be read as “on or before the balance-due day of the trust for”; and
(f)the references in subsections 202(8) and 204(2) of the Income Tax Regulations to “within 90 days from the end of” are to be read as “on or before the balance-due day of the trust for”.
(6)Subsections (1) to (5) are deemed to have come into force on March 21, 2013, except that
(a)if a trust elects in writing to have paragraph 251.‍2(3)‍(f) of the Act, as enacted by subsection (3), apply as of the first day of the trust’s 2014 taxation year and files the election with the Minister of National Revenue on or before the trust’s filing-due date for its last 2014 taxation year, then subsections (1) to (4) are deemed to have come into force in respect of that trust on the first day of the trust’s first 2014 taxation year;
(b)if a trust elects in writing to have paragraph 251.‍2(3)‍(f) of the Act, as enacted by subsection (3), apply as of the first day of the trust’s 2015 taxation year and files the election with the Minister of National Revenue on or before the trust’s filing-due date for its last 2014 taxation year, then subsections (1) to (4) are deemed to have come into force in respect of that trust on the first day of the trust’s first 2015 taxation year; and
(c)in applying paragraph (a) of the definition investment fund in subsection 251.‍2(1) of the Act, as enacted by subsection (1), to a trust created before 2016, the expression “and the end of the calendar year” is to be read as “and 90 days after the end of the calendar year”.
66(1)Subsection 253.‍1(1) of the Act is replaced by the following:
Investments in limited partnerships
253.‍1(1)For the purposes of subparagraph 108(2)‍(b)‍(ii), paragraphs 130.‍1(6)‍(b), 131(8)‍(b), 132(6)‍(b) and 146.‍1(2.‍1)‍(c), subsection 146.‍2(6), paragraph 146.‍4(5)‍(b), subsection 147.‍5(8), paragraph 149(1)‍(o.‍2), the definition private holding corporation in subsection 191(1), the definition investment fund in subsection 251.‍2(1) and regulations made for the purposes of paragraphs 149(1)‍(o.‍3) and (o.‍4), if a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.
(2)Subsection (1) is deemed to have come into force on March 21, 2013.
67(1)Subsection 256(2) of the Act is replaced by the following:
Corporations associated through a third corporation
(2)For the purposes of
(a)this Act, subject to paragraph (b), two corporations are deemed to be associated with each other at a particular time if
(i)they would, but for this subsection, not be associated with each other at the particular time, and
(ii)each corporation is associated with, or is deemed by this subsection to be associated with, the same corporation (in this subsection referred to as the third corporation) at the particular time; and
(b)section 125,
(i)if the third corporation is not a Canadian-controlled private corporation at the particular time, the two corporations are deemed not to be associated with each other at the particular time, and
(ii)if the third corporation is a Canadian-controlled private corporation that elects in prescribed form to apply this subparagraph in its taxation year that includes the particular time, the two corporations are deemed not to be associated with each other at the particular time and the business limit of the third corporation for its taxation year that includes the particular time is deemed to be nil.
(2)The portion of subsection 256(8) of the French version of the Act before paragraph (a) is replaced by the following:
Présomption d’exercice de droit
(8)Pour ce qui est de déterminer, d’une part, si le contrôle d’une société a été acquis pour l’application des paragraphes 10(10) et 13(24), de l’article 37, des paragraphes 55(2), 66(11), (11.‍4) et (11.‍5), 66.‍5(3) et 66.‍7(10) et (11), de l’article 80, de l’alinéa 80.‍04(4)h), du sous-alinéa 88(1)c)‍(vi), de l’alinéa 88(1)c.‍3), des paragraphes 88(1.‍1) et (1.‍2), des articles 111 et 127, des paragraphes 181.‍1(7), 190.‍1(6) et 249(4) et de l’alinéa 251.‍2(2)a) et, d’autre part, si une société est contrôlée par une personne ou par un groupe de personnes pour l’application de l’article 251.‍1, de l’alinéa b) de la définition de fiducie de placement déterminée au paragraphe 251.‍2(1) et des alinéas 251.‍2(3)c) et d), le contribuable qui a acquis un droit visé à l’alinéa 251(5)b) afférent à une action est réputé être dans la même position relativement au contrôle de la société que si le droit était immédiat et absolu et que s’il l’avait exercé au moment de l’acquisition, dans le cas où il est raisonnable de conclure que l’un des principaux motifs de l’acquisition du droit consistait :
(3)Paragraph 256(8)‍(b) of the Act is replaced by the following:
(b)to avoid the application of subsection 10(10) or 13(24), paragraph 37(1)‍(h) or subsection 55(2) or 66(11.‍4) or (11.‍5), paragraph 88(1)‍(c.‍3) or subsection 111(4), (5.‍1) or (5.‍3), 181.‍1(7), 190.‍1(6) or 251.‍2(2),
(4)The portion of subsection 256(8) of the English version of the Act after paragraph (e) is replaced by the following:
the taxpayer is deemed to be in the same position in relation to the control of the corporation as if the right were immediate and absolute and as if the taxpayer had exercised the right at that time for the purpose of determining whether control of a corporation has been acquired for the purposes of subsections 10(10) and 13(24), section 37, subsections 55(2), 66(11), (11.‍4) and (11.‍5), 66.‍5(3), 66.‍7(10) and (11), section 80, paragraph 80.‍04(4)‍(h), subparagraph 88(1)‍(c)‍(vi), paragraph 88(1)‍(c.‍3), subsections 88(1.‍1) and (1.‍2), sections 111 and 127, subsections 181.‍1(7), 190.‍1(6) and 249(4) and paragraph 251.‍2(2)‍(a) and in determining for the purposes of section 251.‍1, paragraph (b) of the definition investment fund in subsection 251.‍2(1) and paragraphs 251.‍2(3)‍(c) and (d) and 256(7)‍(i) whether a corporation is controlled by any other person or group of persons.
(5)Subsection (1) applies to taxation years that begin after March 21, 2016.
(6)Subsections (2) and (4) are deemed to have come into force on March 21, 2013.
(7)Subsection (3) comes into force or is deemed to have come into force on January 1, 2017.
68(1)The definition specified provision in subsection 256.‍1(1) of the Act is replaced by the following:
specified provision means any of subsections 10(10) and 13(24), paragraph 37(1)‍(h), subsections 66(11.‍4) and (11.‍5), 66.‍7(10) and (11), 69(11) and 111(4), (5), (5.‍1) and (5.‍3), paragraphs (j) and (k) of the definition investment tax credit in subsection 127(9), subsections 181.‍1(7) and 190.‍1(6) and any provision of similar effect.‍ (dispositions déterminées)
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
69(1)Paragraph 261(2)‍(b) of the Act is replaced by the following:
(b)subject to this section, other than this subsection, subsections 20(14.‍2) and 79(7) and paragraphs 80(2)‍(k) and 142.‍7(8)‍(b), if a particular amount that is relevant in computing those Canadian tax results is expressed in a currency other than Canadian currency, the particular amount is to be converted to an amount expressed in Canadian currency using the relevant spot rate for the day on which the particular amount arose.
(2)Paragraph 261(5)‍(c) of the Act is replaced by the following:
(c)subject to paragraph (9)‍(b), subsection (15), subsections 20(14.‍2) and 79(7) and paragraphs 80(2)‍(k) and 142.‍7(8)‍(b), if a particular amount that is relevant in computing the taxpayer’s Canadian tax results for the particular taxation year is expressed in a currency other than the taxpayer’s elected functional currency, the particular amount is to be converted to an amount expressed in the taxpayer’s elected functional currency using the relevant spot rate for the day on which the particular amount arose;
(3)Subparagraph 261(5)‍(f)‍(i) of the Act is replaced by the following:
(i)section 76.‍1, subsections 20(14.‍2) and 79(7), paragraph 80(2)‍(k), subsections 80.‍01(11), 80.‍1(8), 93(2.‍01) to (2.‍31), 142.‍4(1) and 142.‍7(8) and the definition amortized cost in subsection 248(1), and subparagraph 231(6)‍(a)‍(iv) of the Income Tax Regulations, to “Canadian currency” is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as “the taxpayer’s elected functional currency”, and
(4)Subparagraph 261(7)‍(d)‍(i) of the Act is replaced by the following:
(i)is in respect of the taxpayer’s undepreciated capital cost of depreciable property of a prescribed class, cumulative Canadian exploration expense (as defined in subsection 66.‍1(6)), cumulative Canadian development expense (as defined in subsection 66.‍2(5)), cumulative foreign resource expense in respect of a country other than Canada (as defined in subsection 66.‍21(1)) or cumulative Canadian oil and gas property expense (as defined in subsection 66.‍4(5)) (each of which is referred to in this paragraph as a pool amount), and
(5)Section 261 of the Act is amended by adding the following after subsection (10):
Debt parking — foreign exchange
(10.‍1)For the purposes of determining a taxpayer’s gain under subsection (10), if at a particular time a pre-transition debt of the taxpayer (referred to in this subsection as the debtor) that is denominated in a currency other than Canadian currency becomes a parked obligation (within the meaning assigned by subsection 39(2.‍02)), the debtor is deemed to have made, at that time, a particular payment on account of the principal amount of the debt equal to
(a)if the debt has become a parked obligation at that particular time as a result of its acquisition by the holder of the debt, the portion of the amount paid by the holder to acquire the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time; and
(b)in any other case, the portion of the fair market value of the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time.
(6)Section 261 of the Act is amended by adding the following after subsection (14):
Debt parking — foreign exchange
(14.‍1)For the purposes of determining a taxpayer’s gain under subsection (14), if at a particular time a pre-reversion debt of the taxpayer (referred to in this subsection as the debtor) that is denominated in a currency other than the taxpayer’s elected functional currency becomes a parked obligation (within the meaning assigned by subsection 39(2.‍02)), the debtor is deemed to have made, at that time, a particular payment on account of the principal amount of the debt equal to
(a)if the debt has become a parked obligation at that particular time as a result of its acquisition by the holder of the debt, the portion of the amount paid by the holder to acquire the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time; and
(b)in any other case, the portion of the fair market value of the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time.
(7)Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
(8)Subsections (5) and (6) are deemed to have come into force on March 22, 2016. However, subsections (5) and (6) do not apply to a debtor in respect of a debt owing by that debtor at the time that the debt meets the conditions to become a parked obligation under subsection 39(2.‍02) of the Act (as enacted by subsection 13(4)), because of a written agreement entered into before March 22, 2016, if that time is before 2017.
70(1)Paragraph 265(2)‍(c) of the Act is replaced by the following:
(c)for new individual accounts, other than accounts described in paragraph A of section III of Annex I to the agreement, the procedures described in paragraph B of section III of Annex I to the agreement;
(2)Paragraph 265(3)‍(b) of the Act is replaced by the following:
(b)if the account is a new individual account described in paragraph A of section III of Annex I to the agreement, the procedures described in paragraph B of section III of Annex I to the agreement;
(3)Subsections (1) and (2) come into force on July 1, 2017.
71(1)The Act is amended by adding the following after Part XVIII:
Part XIX 
Common Reporting Standard
Definitions
270(1)The following definitions apply in this Part.
account holder means
(a)the person listed or identified as the holder of a financial account by the financial institution that maintains the account, other than a person (other than a financial institution) holding a financial account for the benefit of, or on behalf of, another person as agent, custodian, nominee, signatory, investment advisor or intermediary; and
(b)in the case of a cash value insurance contract or an annuity contract,
(i)any person entitled to access the cash value or change the beneficiary,
(ii)if no person can access the cash value or change the beneficiary,
(A)any person named as the owner in the contract, and
(B)any person with a vested entitlement to payment under the terms of the contract, and
(iii)upon maturity of the cash value insurance contract or annuity contract, each person entitled to receive a payment under the contract. (titulaire de compte)
active NFE means, at any time, a non-financial entity that meets any of the following criteria:
(a)less than 50% of the NFE’s gross income for the preceding fiscal period is passive income and less than 50% of the assets held by the NFE during the preceding fiscal period are assets that produce or are held for the production of passive income;
(b)either
(i)interests in the NFE are regularly traded on an established securities market, or
(ii)the NFE is a related entity of an entity interests in which are regularly traded on an established securities market;
(c)the NFE is
(i)a governmental entity,
(ii)an international organization,
(iii)a central bank, or
(iv)an entity wholly owned by one or more entities described in subparagraphs (i) to (iii);
(d)both
(i)all or substantially all of the activities of the NFE consist of holding (in whole or in part) the outstanding stock of, or providing financing and services to, one or more of its subsidiaries that engage in trades or businesses other than the business of a financial institution, and
(ii)the NFE does not function as (and is not represented or promoted to the public as) an investment fund, including
(A)a private equity fund,
(B)a venture capital fund,
(C)a leveraged buyout fund, and
(D)an investment vehicle whose purpose is to acquire or fund companies and then hold interests in those companies as capital assets for investment purposes;
(e)the NFE
(i)is not yet operating a business,
(ii)has no prior operating history,
(iii)is investing capital into assets with the intent to operate a business other than that of a financial institution, and
(iv)was initially organized no more than 24 months prior to that time;
(f)the NFE has not been a financial institution in any of the past five years and is in the process of liquidating its assets or is reorganizing with the intent to continue or recommence operations in a business other than that of a financial institution;
(g)the NFE primarily engages in financing and hedging transactions with, or for, related entities that are not financial institutions, and does not provide financing or hedging services to any entity that is not a related entity, provided that the group of those related entities is primarily engaged in a business other than that of a financial institution; and
(h)the NFE meets all of the following requirements:
(i)it
(A)is established and operated in its jurisdiction of residence exclusively for religious, charitable, scientific, artistic, cultural, athletic or educational purposes, or
(B)is established and operated in its jurisdiction of residence and it is a professional organization, business league, chamber of commerce, labour organization, agricultural or horticultural organization, civic league or an organization operated exclusively for the promotion of social welfare,
(ii)it is exempt from income tax in its jurisdiction of residence,
(iii)it has no shareholders or members who have a proprietary or beneficial interest in its income or assets,
(iv)the applicable laws of the NFE’s jurisdiction of residence or the NFE’s formation documents do not permit any income or assets of the NFE to be distributed to, or applied for the benefit of, a private person or non-charitable entity other than pursuant to the conduct of the NFE’s charitable activities, or as payment of reasonable compensation for services rendered, or as payment representing the fair market value of property which the NFE has purchased, and
(v)the applicable laws of the NFE’s jurisdiction of residence or the NFE’s formation documents require that, upon the NFE’s liquidation or dissolution, all of its assets be distributed to a governmental entity or other non-profit organization, or escheat to the government of the NFE’s jurisdiction of residence or any political subdivision thereof. (ENF active)
annuity contract means a contract under which the issuer agrees to make payments for a period of time determined in whole or in part by reference to the life expectancy of one or more individuals and includes a contract
(a)that is considered to be an annuity contract in accordance with the law, regulation or practice of the jurisdiction in which the contract was issued; and
(b)under which the issuer agrees to make payments for a term of years. (contrat de rente)
anti-money laundering and know your customer procedures or AML/KYC procedures means the record keeping, verification of identity, reporting of suspicious transactions and registration requirements required of a reporting financial institution under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. (procédures de connaissance de la clientèle et de lutte contre le blanchiment d’argent ou procédures AML/KYC)
broad participation retirement fund means a fund that is established to provide retirement, disability or death benefits to beneficiaries that are current or former employees (or persons designated by those employees) of one or more employers in consideration for services rendered, if the fund
(a)does not have a single beneficiary with a right to more than 5% of the fund’s assets;
(b)is subject to government regulation and provides information reporting to the Minister; and
(c)satisfies at least one of the following requirements:
(i)the fund is generally exempt from tax on investment income, or taxation of investment income is deferred or taxed at a reduced rate, due to its status as a retirement or pension plan,
(ii)the fund receives at least 50% of its total contributions (other than transfers of assets from broad participation retirement funds, narrow participation retirement funds or from retirement and pension accounts described in paragraph (a) of the definition excluded account) from the sponsoring employers,
(iii)distributions or withdrawals from the fund are
(A)allowed only upon the occurrence of specified events related to retirement, disability or death (except rollover distributions to broad participation retirement funds, narrow participation retirement funds and pension funds of a governmental entity, international organization or central bank or retirement and pension accounts described in paragraph (a) of the definition excluded account), or
(B)subject to penalties if they are made before such specified events, and
(iv)contributions (other than permitted make-up contributions) by an employee to the fund
(A)are limited by reference to the employee’s remuneration, or
(B)must not exceed 50,000 USD annually, applying the rules set forth in subsection 277(3). (fonds de retraite à large participation)
Canadian financial institution means a financial institution that is
(a)either
(i)resident in Canada, but excluding any branch of the financial institution that is located outside Canada, or
(ii)a branch of a financial institution that is not resident in Canada, if the branch is located in Canada; and
(b)a listed financial institution as defined in subsection 263(1). (institution financière canadienne)
cash value, in respect of a contract held by a policyholder, means the greater of the amount that the policyholder is entitled to receive upon surrender or termination of the contract (determined without reduction for any surrender charge or policy loan) and the amount the policyholder can borrow under or with regard to the contract, but does not include an amount payable under an insurance contract
(a)solely by reason of the death of an individual insured under a life insurance contract;
(b)as a personal injury or sickness benefit, or other benefit, providing indemnification of an economic loss incurred upon the occurrence of an event insured against;
(c)as a refund of a previously paid premium (less any cost of insurance charges whether or not actually imposed) under an insurance contract (other than an investment-linked life insurance or annuity contract) due to the cancellation or termination of the contract, a decrease in risk exposure during the effective period of the contract or arising from the correction of a posting or similar error with regard to the premium for the contract;
(d)as a policyholder dividend (other than a termination dividend) if the dividend relates to an insurance contract under which the only benefits payable are described in paragraph (b); or
(e)as a return of an advance premium or premium deposit for an insurance contract for which the premium is payable at least annually, if the amount of the advance premium or premium deposit does not exceed the next annual premium that will be payable under the contract. (valeur de rachat)
cash value insurance contract means an insurance contract (other than an indemnity reinsurance contract between two insurance companies) that has a cash value. (contrat d’assurance avec valeur de rachat)
central bank means an institution that is, by law or government sanction, the principal authority, other than the government of the jurisdiction itself, issuing instruments intended to circulate as currency and may include an instrumentality that is separate from the government of the jurisdiction, whether or not owned in whole or in part by the jurisdiction. (banque centrale)
controlling persons, in respect of an entity, means the natural persons who exercise control over the entity (interpreted in a manner consistent with the Financial Action Task Force Recommendations — International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation, adopted in February 2012 and as amended from time to time) and includes
(a)in the case of a trust,
(i)its settlors,
(ii)its trustees,
(iii)its protectors (if any),
(iv)its beneficiaries (for this purpose, a discretionary beneficiary of a trust will only be considered a beneficiary of the trust in a calendar year if a distribution has been paid or made payable to the discretionary beneficiary in the calendar year), and
(v)any other natural persons exercising ultimate effective control over the trust; and
(b)in the case of a legal arrangement other than a trust, persons in equivalent or similar positions to those described in paragraph (a). (personnes déte­nant le contrôle)
custodial account means an account (other than an insurance contract or annuity contract) that holds one or more financial assets for the benefit of another person. (compte de dépositaire)
custodial institution means an entity, if the entity’s gross income attributable to the holding of financial assets for the account of others and related financial services equals or exceeds 20% of the entity’s gross income during the shorter of
(a)the three-year period that ends at the end of the entity’s last fiscal period, and
(b)the period during which the entity has been in existence. (établissement de garde de valeurs)
depository account includes
(a)any commercial, chequing, savings, time or thrift account, or an account that is evidenced by a certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness or other similar instrument maintained by a financial institution in the ordinary course of a banking or similar business; and
(b)an amount held by an insurance company under a guaranteed investment contract or similar agreement to pay or credit interest on the contract. (compte de dépôt)
depository institution means any entity that accepts deposits in the ordinary course of a banking or similar business. (établissement de dépôt)
documentary evidence includes
(a)a certificate of residence issued by an authorized government body (such as a government or agency thereof, or a municipality) of the jurisdiction in which the payee claims to be a resident;
(b)with respect to an individual (other than a trust), any valid identification issued by an authorized government body that includes the individual’s name and is typically used for identification purposes;
(c)with respect to an entity, any official documentation issued by an authorized government body that includes the name of the entity and either the address of its principal office in the jurisdiction in which it claims to be resident or the jurisdiction in which the entity was incorporated or organized; and
(d)any audited financial statement, third-party credit report, bankruptcy filing or securities regulator’s report. (preuve documentaire)
entity means a person (other than a natural person) or a legal arrangement, such as a corporation, partnership, trust or foundation. (entité)
equity or debt interest includes, in the case of a partnership that is a financial institution, either a capital or profits interest in the partnership. (titre de participation ou d’intérêt)
established securities market means an exchange that
(a)is officially recognized and supervised by a governmental authority in which the market is located; and
(b)has an annual value of shares traded on the exchange (or a predecessor exchange) exceeding one billion USD during each of the three calendar years immediately preceding the calendar year in which the determination is being made. For this purpose, if an exchange has more than one tier of market level on which stock may be separately listed or traded, each of those tiers must be treated as a separate exchange. (marché boursier réglementé)
excluded account means
(a)a retirement or pension account that satisfies the following requirements:
(i)the account is
(A)subject to regulation as a personal retirement account, or
(B)part of a registered or regulated retirement or pension plan for the provision of retirement or pension benefits (including disability or death benefits),
(ii)the account is tax-favoured in that
(A)contributions to the account that would otherwise be subject to tax are deductible or excluded from the gross income of the account holder or taxed at a reduced rate, or
(B)taxation of investment income within the account is deferred or investment income within the account is taxed at a reduced rate,
(iii)information reporting to the Minister is required with respect to the account,
(iv)withdrawals are
(A)conditioned on reaching a specified retirement age, disability or death, or
(B)subject to penalties if made before the events specified in clause (A), and
(v)after applying the rules in subsection 277(3) to all similar accounts, annual contributions to the account are limited to 50,000 USD or less or there is a maximum lifetime contribution limit to the account of 1,000,000 USD or less (and an account that otherwise satisfies this requirement will not fail to satisfy this requirement solely because the account may receive assets or funds transferred from one or more accounts that meet the requirements of this paragraph or paragraph (b) or from one or more broad participation retirement funds, narrow participation retirement funds or pension funds of a governmental entity, international organization or central bank);
(b)an account that satisfies the following requirements:
(i)the account is
(A)both
(I)subject to regulation as an investment vehicle for purposes other than for retirement, and
(II)regularly traded on an established securities market, or
(B)subject to regulation as a savings vehicle for purposes other than for retirement,
(ii)the account is tax-favoured in that
(A)contributions to the account that would otherwise be subject to tax are deductible or excluded from the gross income of the account holder or taxed at a reduced rate, or
(B)taxation of investment income within the account is deferred or investment income within the account is taxed at a reduced rate,
(iii)withdrawals are
(A)conditioned on meeting specific criteria related to the purpose of the investment or savings account (including the provision of educational or medical benefits), or
(B)subject to penalties if made before the criteria in clause (A) are met, and
(iv)annual contributions are, after applying the rules in subsection 277(3) to all similar accounts, limited to 50,000 USD or less (and an account that otherwise satisfies this requirement will not fail to satisfy this requirement solely because the account may receive assets or funds transferred from one or more accounts that meet the requirements of paragraph (a) or this paragraph or from one or more broad participation retirement funds, narrow participation retirement funds or pension funds of a governmental entity, international organization or central bank);
(c)a life insurance contract with a coverage period that ends before the insured individual attains age 90, if the contract satisfies the following requirements:
(i)periodic premiums, which do not decrease over time, are payable at least annually until the earlier of
(A)the end of the period in which the contract is in existence, and
(B)the date that the insured attains age 90,
(ii)the contract has no contract value that any person can access (by withdrawal, loan or otherwise) without terminating the contract,
(iii)the amount (other than a death benefit) payable upon cancellation or termination of the contract must not exceed the amount determined by the formula
A − (B + C)
where
A
is the aggregate premiums paid for the contract,
B
is the total of all mortality, morbidity and expense charges (whether or not actually imposed) for the period or periods of the contract’s existence, and
C
is the total of all amounts paid prior to the cancellation or termination of the contract, and
(iv)the contract has not been acquired by a transferee for value;
(d)an account held solely by an estate of a deceased individual, if the documentation for the account includes a copy of the will or death certificate of the individual;
(e)an account established in connection with any of the following:
(i)a court order or judgement,
(ii)a sale, exchange or lease of property, if the account satisfies the following requirements:
(A)the account is funded
(I)solely with a down payment, earnest money, deposit in an amount appropriate to secure an obligation directly related to the transaction or a similar payment, or
(II)with a financial asset that is deposited in the account in connection with the sale, exchange or lease of the property,
(B)the account is established and used solely to secure the obligation of
(I)the purchaser to pay the purchase price for the property,
(II)the seller to pay any contingent liability, or
(III)the lessor or lessee to pay for any damages relating to the leased property as agreed under the lease,
(C)the assets of the account, including the income earned on the account, will be paid or otherwise distributed for the benefit of the purchaser, seller, lessor or lessee (including to satisfy such person’s obligation) when the property is sold, exchanged or surrendered or the lease terminates,
(D)the account is not a margin or similar account established in connection with a sale or exchange of a financial asset, and
(E)the account is not associated with an account described in paragraph (f),
(iii)an obligation of a financial institution servicing a loan secured by real or immovable property to set aside a portion of a payment solely to facilitate the payment of taxes or insurance related to the property at a later time, or
(iv)an obligation of a financial institution solely to facilitate the payment of taxes at a later time;
(f)a depository account that satisfies the following requirements:
(i)the account exists solely because a customer makes a payment in excess of a balance due with respect to a credit card or other revolving credit facility and the overpayment is not immediately returned to the customer, and
(ii)after June 2017, policies and procedures are in effect relating to overpayments (for this purpose, a customer overpayment does not include credit balances to the extent of disputed charges but does include credit balances resulting from merchandise returns) to either
(A)prevent a customer from making an overpayment in excess of 50,000 USD, or
(B)ensure that any customer overpayment in excess of 50,000 USD is refunded to the customer within 60 days; and
(g)a prescribed account. (compte exclu)
exempt collective investment vehicle means an investment entity that is regulated as a collective investment vehicle, provided that all of the interests in the collective investment vehicle are held by or through individuals or entities (other than a passive NFE with a controlling person who is a reportable person) that are not reportable persons. (mécanisme de placement collectif dispensé)
financial account means an account maintained by a financial institution, and
(a)includes
(i)a depository account,
(ii)a custodial account,
(iii)in the case of an investment entity, any equity or debt interest in the financial institution, except that it does not include any equity or debt interest in an entity that is an investment entity solely because it,
(A)renders investment advice to, and acts on behalf of, a customer for the purpose of investing, managing or administering financial assets deposited in the name of the customer with a financial institution other than such entity, or
(B)manages portfolios for, and acts on behalf of, a customer for the purpose of investing, managing, or administering financial assets deposited in the name of the customer with a financial institution other than such entity,
(iv)any equity or debt interest in the financial institution if one of the purposes of establishing the class of interests was to avoid reporting in accordance with section 271, except that it does not include any equity or debt interest in an entity that is an investment entity solely because it meets the conditions described in clauses (iii)‍(A) or (B),
(v)any cash value insurance contract and any annuity contract issued or maintained by a financial institution, other than a non-investment-linked, non-transferable immediate life annuity that is issued to an individual and monetizes a pension or disability benefit provided under an account that is an excluded account, and
(vi)an account that is a client name account maintained by a person or entity that is authorized under provincial legislation to engage in the business of dealing in securities or any other financial instruments, or to provide portfolio management or investment advising services; and
(b)despite paragraph (a), does not include an excluded account. (compte financier)
financial asset
(a)includes
(i)a security, such as
(A)a share of the capital stock of a corporation,
(B)an income or capital interest in a widely held or publicly traded trust, or
(C)a note, bond, debenture or other evidence of indebtedness,
(ii)a partnership interest,
(iii)a commodity,
(iv)a swap (such as interest rate swaps, currency swaps, basis swaps, interest rate caps, interest rate floors, commodity swaps, equity swaps, equity index swaps and similar agreements),
(v)an insurance contract or annuity contract, and
(vi)any interest (including a futures or forward contract or option) in a security, partnership interest, commodity, swap, insurance contract or annuity contract; and
(b)does not include a non-debt, direct interest in real or immovable property. (actif financier)
financial institution means an entity, other than a passive NFE, that is a custodial institution, a depository institution, an investment entity or a specified insurance company. (institution financière)
governmental entity means the government of a jurisdiction, any political subdivision of a jurisdiction (which, for greater certainty, includes a state, province, county or municipality), a public body performing a function of government in a jurisdiction or any agency or instrumentality of a jurisdiction wholly owned by one or more of the foregoing, unless it is not an integral part or a controlled entity of a jurisdiction (or a political subdivision of a jurisdiction) and for these purposes
(a)an integral part of a jurisdiction means any person, organization, agency, bureau, fund, instrumentality or other body, however designated, that constitutes a governing authority of a jurisdiction and where the net earnings of the governing authority are credited to its own account or to other accounts of the jurisdiction, with no portion inuring to the benefit of any private person, except that an integral part does not include any individual who is a sovereign, official or administrator acting in a private or personal capacity;
(b)a controlled entity means an entity that is separate in form from the jurisdiction or that otherwise constitutes a separate juridical entity, provided that
(i)the entity is wholly owned and controlled by one or more governmental entities directly or indirectly through one or more controlled entities,
(ii)the entity’s net earnings are credited to its own account or to the accounts of one or more governmental entities, with no portion of its income inuring to the benefit of any private person, and
(iii)the entity’s assets vest in one or more governmental entities upon liquidation and dissolution; and
(c)for the purposes of paragraphs (a) and (b),
(i)income is deemed not to inure to the benefit of private persons if such persons are the intended beneficiaries of a governmental program and the program activities are performed for the general public with respect to the common welfare or relate to the administration of government, and
(ii)income is deemed to inure to the benefit of private persons if the income is derived from the use of a governmental entity to conduct a commercial business that provides financial services to private persons. (entité gouvernementale)
group annuity contract means an annuity contract under which the obligees are individuals who are associated through an employer, trade association, labour union or other association or group. (contrat de rente de groupe)
group cash value insurance contract means a cash value insurance contract that
(a)provides coverage on individuals who are associated through an employer, trade association, labour union or other association or group; and
(b)charges a premium for each member of the group (or member of a class within the group) that is determined without regard to the individual health characteristics other than age, gender and smoking habits of the member (or class of members) of the group. (contrat d’assurance de groupe avec valeur de rachat)
high value account means a preexisting individual account with an aggregate balance or value that exceeds 1 million USD on June 30, 2017 or on December 31 of any subsequent year. (compe de valeur élevée)
insurance contract means a contract (other than an annuity contract) under which the issuer agrees to pay an amount upon the occurrence of a specified contingency involving mortality, morbidity, accident, liability or property risk. (contrat d’assurance)
international organization means any intergovernmental organization (or wholly owned agency or instrumentality thereof), including a supranational organization
(a)that is comprised primarily of governments;
(b)that has in effect a headquarters or substantially similar agreement with a jurisdiction; and
(c)the income of which does not inure to the benefit of private persons. (organisation internationale)
investment entity means any entity (other than an entity that is an active NFE because of any of paragraphs (d) to (g) of that definition)
(a)that primarily carries on as a business one or more of the following activities or operations for or on behalf of a customer:
(i)trading in money market instruments (such as cheques, bills, certificates of deposit and derivatives), foreign exchange, transferable securities or commodity futures, exchange, interest rate and index instruments,
(ii)individual and collective portfolio management, or
(iii)otherwise investing, administering or managing financial assets or money on behalf of other persons; or
(b)the gross income of which is primarily attributable to investing, reinvesting or trading in financial assets, if the entity is managed by another entity that is a depository institution, a custodial institution, a specified insurance company or an investment entity described in paragraph (a). (entité d’investissement)
lower value account means a preexisting individual account with an aggregate balance or value as of June 30, 2017 that does not exceed 1 million USD. (compte de faible valeur)
narrow participation retirement fund means a fund that is established to provide retirement, disability or death benefits to beneficiaries who are current or former employees (or persons designated by those employees) of one or more employers in consideration for services rendered, if
(a)the fund has fewer than 50 participants;
(b)the fund is sponsored by one or more employers that are not investment entities or passive NFEs;
(c)the employee and employer contributions to the fund (other than transfers of assets from retirement and pension accounts described in paragraph (a) of the definition excluded account) are limited by reference to the employee’s remuneration;
(d)participants that are not resident in Canada are not entitled to more than 20% of the fund’s assets; and
(e)the fund is subject to government regulation and provides information reporting to the Minister. (fonds de retraite à participation étroite)
natural person means an individual other than a trust. (personne physique)
new account means a financial account maintained by a reporting financial institution opened after June 2017. (nouveau compte)
new entity account means a new account held by one or more entities. (nouveau compte d’entité)
new individual account means a new account held by one or more individuals (other than trusts). (nouveau compte de particulier)
non-financial entity or NFE means an entity if
(a)in the case of an entity that is resident in Canada, it is not a Canadian financial institution; and
(b)in the case of a non-resident entity, it is not a financial institution. (entité non financière ou ENF)
non-reporting financial institution means a Canadian financial institution that is
(a)the Bank of Canada;
(b)a governmental entity or international organization, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a specified insurance company, custodial institution or depository institution;
(c)a broad participation retirement fund, a narrow participation retirement fund, a pension fund of a governmental entity, international organization or central bank, or a qualified credit card issuer;
(d)an exempt collective investment vehicle;
(e)a trust if a trustee of the trust is a reporting financial institution and reports all information required to be reported under this Part with respect to all reportable accounts of the trust; or
(f)a prescribed entity. (institution financière non déclarante)
participating jurisdiction means
(a)Canada; and
(b)each jurisdiction identified as a participating jurisdiction by the Minister on the Internet website of the Canada Revenue Agency or by any other means that the Minister considers appropriate. (juridiction partenaire)
participating jurisdiction financial institution means
(a)a financial institution that is resident in a participating jurisdiction, but excludes a branch of that financial institution that is located outside a participating jurisdiction; and
(b)a branch of a financial institution that is not resident in a participating jurisdiction, if that branch is located in a participating jurisdiction. (institution financière d’une jurisdiction partenaire)
passive NFE means
(a)a non-financial entity that is not an active NFE; and
(b)an entity that is
(i)described in paragraph (b) of the definition investment entity, and
(ii)not a participating jurisdiction financial institution. (ENF passive)
pension fund of a governmental entity, international organization or central bank means a fund that is established by a governmental entity, international organization or central bank to provide retirement, disability or death benefits to beneficiaries or participants
(a)that are current or former employees (or persons designated by those employees); or
(b)that are not current or former employees, if the benefits provided to them are in consideration of personal services performed for the governmental entity, international organization or central bank. (fonds de pension désigné)
preexisting account means
(a)a financial account maintained by a reporting financial institution on June 30, 2017; and
(b)a financial account of an account holder (other than a financial account described in paragraph (a)) maintained by a reporting financial institution if
(i)the account holder also holds with the reporting financial institution (or with a related entity within Canada) a financial account that is a preexisting account under paragraph (a),
(ii)the reporting financial institution (and, as applicable, the related entity within Canada) treats both of the aforementioned financial accounts, and any other financial accounts of the account holder that are preexisting accounts under this paragraph, as a single financial account for the purposes of
(A)satisfying the standards and knowledge requirements set forth under this Part, and
(B)determining the balance or value of any of the financial accounts, when applying any of the account thresholds,
(iii)with respect to a financial account that is subject to AML/KYC procedures, the reporting financial institution is permitted to satisfy those AML/KYC procedures for the financial account by relying upon the AML/KYC procedures performed for the preexisting account described in paragraph (a), and
(iv)the opening of the financial account does not require the provision of new, additional or amended customer information by the account holder other than for purposes of this Part. (compte préexistant)
preexisting entity account means a preexisting account held by one or more entities. (compte d’entité préexistant)
preexisting individual account means a preexisting account held by one or more individuals (other than trusts). (compte de particulier préexistant)
qualified credit card issuer means a financial institution that satisfies the following requirements:
(a)the financial institution is a financial institution solely because it is an issuer of credit cards that accepts deposits only when a customer makes a payment in excess of a balance due with respect to the card and the overpayment is not immediately returned to the customer; and
(b)the financial institution has policies and procedures either to prevent a customer from making an overpayment in excess of 50,000 USD or to ensure that any customer overpayment in excess of 50,000 USD is refunded to the customer within 60 days, in each case applying the rules set forth in subsection 277(3) for account aggregation, and, for the purposes of this paragraph, a customer overpayment does not refer to credit balances to the extent of disputed charges but does include credit balances resulting from merchandise returns. (émetteur de carte de crédit déterminé)
related entity, in respect of an entity, means an entity if either entity controls the other entity or the two entities are controlled by the same entity or individual (and in the case of two entities that are investment entities described under paragraph (b) of the definition investment entity, the two entities are under common management and such management fulfils the due diligence obligations of the investment entities). For this purpose, control includes direct or indirect ownership of
(a)in the case of a corporation, shares of the capital stock of a corporation that
(i)give their holders more than 50% of the votes that could be cast at the annual meeting of the shareholders of the corporation, and
(ii)have a fair market value of more than 50% of the fair market value of all the issued and outstanding shares of the capital stock of the corporation;
(b)in the case of a partnership, an interest as a member of the partnership that entitles the member to more than 50% of
(i)the income or loss of the partnership, or
(ii)the assets (net of liabilities) of the partnership if it were to cease to exist; and
(c)in the case of a trust, an interest as a beneficiary under the trust with a fair market value that is greater than 50% of the fair market value of all interests as a beneficiary under the trust. (entité liée)
reportable account means an account that
(a)is held by
(i)one or more reportable persons, or
(ii)by a passive NFE, if one or more controlling persons of the passive NFE is a reportable person; and
(b)has been identified as meeting the conditions in paragraph (a) in accordance with the due diligence procedures described in sections 272 to 277. (compte déclarable)
reportable jurisdiction means a jurisdiction other than Canada and the United States of America. (juridiction soumise à déclaration)
reportable jurisdiction person means a natural person or entity that is resident in a reportable jurisdiction under the tax laws of that jurisdiction, or an estate of an individual who was a resident of a reportable jurisdiction under the tax laws of that jurisdiction immediately before death. For this purpose, an entity that has no residence for tax purposes is deemed to be resident in the jurisdiction in which its place of effective management is situated. (personne d’une juridiction soumise à déclaration)
reportable person means a reportable jurisdiction person other than
(a)a corporation the stock of which is regularly traded on one or more established securities markets;
(b)any corporation that is a related entity of a corporation described in paragraph (a);
(c)a governmental entity;
(d)an international organization;
(e)a central bank; or
(f)a financial institution. (personne devant faire l’objet d’une déclaration)
reporting financial institution means a Canadian financial institution that is not a non-reporting financial institution. (institution financière déclarante)
specified insurance company means any entity that is an insurance company (or the holding company of an insurance company) that issues, or is obligated to make payments with respect to, cash value insurance contracts or annuity contracts. (compagnie d’assurance particu­lière)
TIN means
(a)the number used by the Minister to identify an individual or entity, including
(i)a social insurance number,
(ii)a business number, and
(iii)an account number issued to a trust; and
(b)in respect of a jurisdiction other than Canada, a taxpayer identification number used in that jurisdiction to identify an individual or entity (or a functional equivalent in the absence of a taxpayer identification number). (NIF)
USD means dollars of the United States of America. (USD)
Interpretation
(2)This Part relates to the implementation of the Common Reporting Standard set out in the Standard for Automatic Exchange of Financial Account Information in Tax Matters approved by the Council of the Organisation for Economic Co-operation and Development and, unless the context otherwise requires, the provisions in this Part are to be interpreted consistently with the Common Reporting Standard, as amended from time to time.
Interpretation — investment entity
(3)For the purposes of the definition investment entity in subsection (1), an entity is considered to be primarily carrying on as a business one or more of the activities described in paragraph (a) of that definition, or an entity’s gross income is primarily attributable to investing, reinvesting or trading in financial assets for the purposes of paragraph (b) of that definition, if the entity’s gross income attributable to the relevant activities equals or exceeds 50% of the entity’s gross income during the shorter of
(a)the three-year period that ends at the end of the entity’s last fiscal period, and
(b)the period during which the entity has been in existence.
Equity or debt interest – deeming rule
(4)In the case of a trust that is a financial institution,
(a)an equity interest is deemed to be held by any person treated as a settlor or beneficiary of all or a portion of the trust or any other natural person exercising ultimate effective control over the trust, and
(b)a reportable person is treated as a beneficiary of a trust if the reportable person has the right to receive directly or indirectly (such as through a nominee) a mandatory distribution from the trust or may receive, directly or indirectly, a discretionary distribution from the trust.
General reporting requirements
271(1)Subject to subsections (3) and (4), each reporting financial institution must report the following information to the Minister with respect to each of its reportable accounts:
(a)the name, address, jurisdiction of residence, TIN and date of birth (in the case of a natural person) of each reportable person that is an account holder of the account;
(b)in the case of any entity that is an account holder of the account and that, after applying the due diligence procedures in sections 275 to 277, is identified as having one or more controlling persons that is a reportable person,
(i)the name, address, jurisdiction of residence and TIN of the entity, and
(ii)the name, address, jurisdiction of residence, TIN and date of birth of each of those controlling persons;
(c)the account number (or functional equivalent in the absence of an account number) of the account;
(d)the name and identifying number (if any) of the reporting financial institution;
(e)the account balance or value (including, in the case of a cash value insurance contract or annuity contract, the cash value or surrender value)
(i)at the end of the relevant calendar year or other appropriate reporting period, or
(ii)if the account was closed during the relevant calendar year or period, on closure of the account;
(f)in the case of any custodial account,
(i)the total gross amount of interest, the total gross amount of dividends and the total gross amount of other income generated with respect to the assets held in the account, in each case paid or credited to the account (or with respect to the account) during the calendar year or other appropriate reporting period, and
(ii)the total gross proceeds from the sale or redemption of financial assets paid or credited to the account during the calendar year or other appropriate reporting period with respect to which the reporting financial institution acted as a custodian, broker, nominee or otherwise as an agent for the account holder;
(g)in the case of any depository account, the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period; and
(h)in the case of any account not described in paragraph (f) or (g), the total gross amount paid or credited to the account holder with respect to the account during the calendar year or other appropriate reporting period with respect to which the reporting financial institution is the obligor or debtor, including the aggregate amount of any redemption payments made to the account holder during the calendar year or other appropriate reporting period.
Currrency
(2)The information reported must identify the currency in which each amount is denominated.
TIN and date of birth
(3)With respect to each reportable account that is a preexisting account,
(a)notwithstanding paragraphs (1)‍(a) and (b), the TIN or date of birth are not required to be reported if the TIN or the date of birth (as appropriate)
(i)are not in the records of the reporting financial institution, and
(ii)are not otherwise required to be collected by the reporting financial institution under the Act; and
(b)a reporting financial institution is required to use reasonable efforts to obtain the TIN and the date of birth with respect to a preexisting account by the end of the second calendar year following the year in which the preexisting account is identified as a reportable account.
Exceptions
(4)Notwithstanding paragraphs (1)‍(a) and (b), a TIN of a reportable person is not required to be reported if
(a)the relevant reportable jurisdiction does not issue TINs; or
(b)the domestic law of the relevant reportable jurisdiction does not require the collection of the TIN issued by such reportable jurisdiction.
General due diligence rules
272(1)An account is treated as a reportable account as of the date it is identified as a reportable account under the due diligence procedures set out in this section and in sections 273 to 277.
Timing — determination of balance or value
(2)The balance or value of an account is determined on the last day of the calendar year or other appropriate reporting period.
Determination — balance or value
(3)For the purpose of determining whether the balance or value of an account exceeds a particular threshold on the last day of a calendar year, the balance or value must be determined on the last day of the last reporting period that ends on or before the end of the calendar year.
Service provider
(4)A reporting financial institution may use service providers to fulfil its reporting and due diligence obligations imposed, but these obligations shall remain the responsibility of the reporting financial institution.
Optional due diligence procedures
(5)A reporting financial institution may, either with respect to all preexisting accounts or, separately, with respect to any clearly identified group of those accounts, apply the due diligence procedures
(a)for new accounts to preexisting accounts (with the other rules for preexisting accounts continuing to apply); and
(b)for high value accounts to lower value accounts.
Documentation of due diligence procedures
(6)Every reporting financial institution shall establish, maintain and document the due diligence procedures set out in this section and sections 273 to 277.
Due diligence for preexisting individual accounts
273(1)A preexisting individual account that is a cash value insurance contract or an annuity contract is not required to be reviewed, identified or reported, if the reporting financial institution is effectively prevented by law from selling those contracts to residents of a reportable jurisdiction.
Lower value accounts
(2)The following review procedures apply with respect to lower value accounts that are preexisting individual accounts:
(a)if the reporting financial institution has in its records the address of the individual account holder’s current residence (in this section, their current residence address) based on documentary evidence, the reporting financial institution may treat the individual account holder as being a resident for tax purposes of the jurisdiction in which the address is located for purposes of determining whether the individual account holder is a reportable person;
(b)if the reporting financial institution does not rely on a current residence address for the individual account holder based on documentary evidence as described in paragraph (a), the reporting financial institution must review electronically searchable data maintained by the reporting financial institution for any of the following indicia and apply paragraphs (c) to (f):
(i)identification of the account holder as a resident of a reportable jurisdiction,
(ii)current mailing or residence address (including post office box) in a reportable jurisdiction,
(iii)one or more telephone numbers in a reportable jurisdiction and no telephone number in the jurisdiction of the reporting financial institution,
(iv)standing instructions (other than with respect to a depository account) to transfer funds to an account maintained in a reportable jurisdiction,
(v)currently effective power of attorney or signatory authority granted to a person with an address in a reportable jurisdiction, and
(vi)a hold mail instruction or in-care-of address in a reportable jurisdiction if the reporting financial institution does not have any other address on file for the account holder;
(c)if none of the indicia listed in paragraph (b) are discovered in the electronic search, then no further review is required until the earlier of
(i)a change in circumstances that results in one or more of the indicia referred to in paragraph (b) being associated with the account, and
(ii)the account becoming a high value account;
(d)if any of the indicia listed in subparagraphs (b)‍(i) to (v) are discovered in the electronic search or if there is a change in circumstances that results in one or more of the indicia in paragraph (b) being associated with the account, then the reporting financial institution must treat the account holder as a resident for tax purposes of each reportable jurisdiction for which an indicium is identified, unless one of the exceptions in paragraph (f) applies with respect to that account;
(e)if a hold mail instruction or in-care-of address in a reportable jurisdiction is discovered in the electronic search and no other address and none of the other indicia listed in subparagraphs (b)‍(i) to (v) are identified for the account holder, then
(i)the reporting financial institution must do one (if the relevant information is obtained) or both (in the order most appropriate to the circumstances) of the following:
(A)apply the paper record search described in paragraph (3)‍(b), and
(B)seek to obtain from the account holder a self-certification or documentary evidence to establish the residence for tax purposes of the account holder, and
(ii)if the paper record search referred to in clause (i)‍(A) fails to establish an indicium and the attempt to obtain the self-certification or documentary evidence referred to in clause (i)‍(B) is not successful, then the reporting financial institution must report the account as an undocumented account; and
(f)notwithstanding the discovery of indicia under paragraph (b), a reporting financial institution is not required to treat an account holder as a resident of a reportable jurisdiction if
(i)both
(A)the account holder information contains
(I)a current mailing or residence address in the reportable jurisdiction,
(II)one or more telephone numbers in the reportable jurisdiction (and no telephone number in the jurisdiction of the reporting financial institution), or
(III)standing instructions (with respect to financial accounts other than depository accounts) to transfer funds to an account maintained in a reportable jurisdiction, and
(B)the reporting financial institution obtains, or has previously reviewed and currently maintains a record of,
(I)a self-certification from the account holder of the jurisdictions of residence of the account holder that does not include the reportable jurisdiction, and
(II)documentary evidence establishing the account holder’s non-reportable status in relation to that jurisdiction, or
(ii)both
(A)the account holder information contains a currently effective power of attorney or signatory authority granted to a person with an address in the reportable jurisdiction, and
(B)the reporting financial institution obtains, or has previously reviewed and currently maintains a record of,
(I)a self-certification from the account holder of the jurisdictions of residence of the account holder that does not include the reportable jurisdiction, or
(II)documentary evidence establishing the account holder’s non-reportable status in relation to that jurisdiction.
Enhanced review procedure – high value accounts
(3)The following enhanced review procedures apply with respect to high value accounts that are preexisting individual accounts:
(a)the reporting financial institution must review electronically searchable data maintained by the reporting financial institution for any of the indicia described in paragraph (2)‍(b);
(b)subject to paragraph (c), the reporting financial institution must review for any of the indicia described in paragraph (2)‍(b)
(i)the current customer master file, and
(ii)the following documents associated with the account, and obtained by the reporting financial institution within the last five years, to the extent that they are not contained in the current customer master file:
(A)the most recent documentary evidence collected with respect to the account,
(B)the most recent account opening contract or documentation,
(C)the most recent documentation obtained by the reporting financial institution in accordance with AML/KYC procedures or for other regulatory purposes,
(D)any power of attorney or signature authority forms currently in effect, and
(E)any standing instructions (other than with respect to a depository account) to transfer funds currently in effect;
(c)a reporting financial institution is not required to perform the paper record search described in paragraph (b) to the extent that the reporting financial institution’s electronically searchable information includes the following:
(i)the account holder’s residence status,
(ii)the account holder’s residence address and mailing address currently on file with the reporting financial institution,
(iii)the account holder’s telephone number currently on file, if any, with the reporting financial institution,
(iv)in the case of financial accounts other than depository accounts, whether there are standing instructions to transfer funds in the account to another account (including an account at another branch of the reporting financial institution or at another financial institution),
(v)whether there is a hold mail instruction or current in-care-of address for the account holder, and
(vi)whether there is any power of attorney or signatory authority for the account;
(d)in addition to the electronic and paper record searches described in paragraphs (a) to (c), the reporting financial institution must treat as a reportable account any high value account assigned to a relationship manager (including any financial accounts aggregated with that high value account under section 277) if the relationship manager has actual knowledge that the account holder is a reportable person;
(e)with respect to the enhanced review of high value accounts described in paragraphs (a) to (d),
(i)if none of the indicia listed in paragraph (2)‍(b) are discovered in the enhanced review and the account is not identified as being held by a reportable person in paragraph (d), then further action is not required until there is a change in circumstances that results in one or more indicia being associated with the account,
(ii)if any of the indicia listed in subparagraphs (2)‍(b)‍(i) through (v) are discovered in the enhanced review, or if there is a subsequent change in circumstances that results in one or more indicia being associated with the account, then the reporting financial institution must treat the account as a reportable account with respect to each reportable jurisdiction for which an indicium is identified unless one of the exceptions in paragraph (2)‍(f) applies with respect to that account, and
(iii)if a hold mail instruction or in-care-of address is discovered in the enhanced review and no other address or other indicia listed in subparagraphs (2)‍(b)‍(i) to (v) are identified for the account holder, then the reporting financial institution must
(A)obtain from the account holder a self-certification or documentary evidence to establish the residence for tax purposes of the account holder, and
(B)if the reporting financial institution cannot obtain a self-certification or documentary evidence, report the account as an undocumented account;
(f)if a preexisting individual account is not a high value account on June 30, 2017, but becomes a high value account as of the last day of a subsequent calendar year,
(i)the reporting financial institution must complete the enhanced review procedures described in this subsection with respect to the account within the calendar year following the year in which the account becomes a high value account, and
(ii)if the account is identified as a reportable account based on the review in subparagraph (i), the reporting financial institution must report the required information about the account with respect to the year in which it is identified as a reportable account (and subsequent years on an annual basis, unless the account holder ceases to be a reportable person);
(g)if a reporting financial institution applies the enhanced review procedures described in this subsection to a high value account in a year, then the reporting financial institution is not required to reapply those procedures – other than the relationship manager inquiry described in paragraph (d) – to the same high value account in any subsequent year unless the account is undocumented, in which case the reporting financial institution must re-apply them annually until the account ceases to be undocumented;
(h)if there is a change of circumstances with respect to a high value account that results in one or more indicia described in paragraph (2)‍(b) being associated with the account, then the reporting financial institution must treat the account as a reportable account with respect to each reportable jurisdiction for which an indicium is identified unless one of the exceptions in paragraph (2)‍(f) applies with respect to that account; and
(i)a reporting financial institution must implement procedures to ensure that a relationship manager identifies any change in circumstances of an account.
Timing of review
(4)Each preexisting individual account must be reviewed in accordance with subsection (2) or (3) before
(a)2019, if the account is a high value account; or
(b)2020, if the account is a lower value account.
Reportable preexisting individual accounts
(5)Any preexisting individual account that has been identified as a reportable account under this section must be treated as a reportable account in all subsequent years, unless the account holder ceases to be a reportable person.
Due diligence – new individual accounts
274(1)Upon opening a new individual account, the reporting financial institution must obtain a self-certification (which may be a part of the account opening documentation) that allows the reporting financial institution to
(a)determine the account holder’s residence for tax purposes; and
(b)confirm the reasonableness of the self-certification taking into account information obtained by the reporting financial institution in connection with the opening of the account, including any documentation collected in accordance with the AML/KYC procedures.
Determination of reportable account
(2)If the self-certification for a new individual account establishes that the account holder is resident for tax purposes in a reportable jurisdiction, then
(a)the reporting financial institution must treat the account as a reportable account; and
(b)the self-certification must also include the account holder’s TIN with respect to the reportable jurisdiction (subject to subsection 271(4)) and the account holder’s date of birth.
Requirement to obtain new self-certification
(3)If there is a change in circumstances with respect to a new individual account that causes the reporting financial institution to know, or have reason to know, that the original self-certification is incorrect or unreliable, then the reporting financial institution
(a)cannot rely on the original self-certification; and
(b)must obtain a valid self-certification that establishes the residence for tax purposes of the account holder.
Due diligence – preexisting entity accounts
275(1)Unless the reporting financial institution elects otherwise — either with respect to all preexisting entity accounts or, separately, with respect to any clearly identified group of those accounts — a preexisting entity account with an aggregate account balance or value that does not exceed 250,000 USD on June 30, 2017 is not required to be reviewed, identified or reported as a reportable account until the aggregate account balance or value exceeds 250,000 USD on the last day of any subsequent calendar year.
Application of subsection (4)
(2)The review procedures set forth in subsection (4) apply to a preexisting entity account if it has an aggregate account balance or value that exceeds 250,000 USD on
(a)June 30, 2017; or
(b)the last day of any subsequent calendar year.
Determination of reportable accounts
(3)With respect to preexisting entity accounts described in subsection (2), the only accounts that shall be treated as reportable accounts are accounts that are held by
(a)one or more entities that are reportable persons; or
(b)passive NFEs with one or more controlling persons who are reportable persons.
Review procedures — preexisting entity account
(4)If this subsection applies to a preexisting entity account, a reporting financial institution must apply the following review procedures to determine whether the account is held by one or more reportable persons or by passive NFEs with one or more controlling persons who are reportable persons:
(a)review information maintained for regulatory or customer relationship purposes (including information collected in accordance with AML/KYC procedures) to determine whether the information indicates that the account holder is resident in a reportable jurisdiction and, if so, the reporting financial institution must treat the account as a reportable account unless it
(i)obtains a self-certification from the account holder to establish that the account holder is not a reportable person, or
(ii)reasonably determines, based on information in its possession or that is publicly available, that the account holder is not a reportable person; and
(b)with respect to an account holder of a preexisting account (including an entity that is a reportable person), the reporting financial institution must determine whether the account holder is a passive NFE with one or more controlling persons who are reportable persons and for the purposes of
(i)determining whether the account holder is a passive NFE, the reporting financial institution must obtain a self-certification from the account holder to establish its status, unless it has information in its possession or information is publicly available, based on which it can reasonably determine that the account holder is
(A)an active NFE, or
(B)a financial institution other than an entity described in paragraph (b) of the definition investment entity that is not a participating jurisdiction financial institution,
(ii)determining the controlling persons of an account holder, a reporting financial institution may rely on information collected and maintained in accordance with AML/KYC procedures, and
(iii)determining whether a controlling person of a passive NFE is a reportable person, a reporting financial institution may rely on
(A)information collected and maintained in accordance with AML/KYC procedures in the case of a preexisting entity account held by one or more NFEs with an aggregate account balance or value that does not exceed 1 million USD, or
(B)a self-certification from the account holder or the controlling person indicating the jurisdiction in which the controlling person is resident for tax purposes.
Timing of review
(5)Each preexisting entity account must be reviewed in accordance with subsection (4) before
(a)2020, if the account has an aggregate account balance or value that exceeds 250,000 USD on June 30, 2017; or
(b)the end of the calendar year following the year in which the aggregate account balance or value exceeds 250,000 USD on December 31, if paragraph (a) does not apply.
Change of circumstances
(6)If there is a change of circumstances with respect to a preexisting entity account that causes the reporting financial institution to know, or have reason to know, that the self-certification or other documentation associated with the account is incorrect or unreliable, the reporting financial institution must redetermine the status of the account in accordance with subsection (4).
Due diligence for new entity accounts
276For new entity accounts, a reporting financial institution must apply the following review procedures to determine whether the account is held by one or more reportable persons or by passive NFEs with one or more controlling persons who are reportable persons:
(a)the reporting financial institution must
(i)obtain a self-certification (which may be part of the account opening documentation) that allows the reporting financial institution to determine the account holder’s residence for tax purposes and confirm the reasonableness of the self-certification based on the information obtained by the reporting financial institution in connection with the opening of the account, including any documentation collected in accordance with AML/KYC procedures, and
(ii)if the self-certification referred to in subparagraph (i) indicates that the account holder is resident in a reportable jurisdiction, treat the account as a reportable account unless it reasonably determines, based on information in its possession or information that is publicly available, that the account holder is not a reportable person with respect to the reportable jurisdiction; and
(b)with respect to an account holder of a new entity account (including an entity that is a reportable person), the reporting financial institution must determine whether the account holder is a passive NFE with one or more controlling persons who are reportable persons and, if so, treat the account as a reportable account and, for the purposes of
(i)determining whether the account holder is a passive NFE, the reporting financial institution must obtain a self-certification from the account holder to establish its status, unless it has information in its possession or information is publicly available, based on which it can reasonably determine that the account holder is
(A)an active NFE, or
(B)a financial institution other than an entity that
(I)is an investment entity because of paragraph (b) of that definition, and
(II)is not a participating jurisdiction financial institution,
(ii)determining the controlling persons of an account holder, a reporting financial institution may rely on information collected and maintained in accordance with AML/KYC procedures, and
(iii)determining whether a controlling person of a passive NFE is a reportable person, a reporting financial institution may rely on a self-certification from the account holder or the controlling person.
Special due diligence rules
277(1)A reporting financial institution may not rely on a self-certification or documentary evidence if the reporting financial institution knows or has reason to know that the self-certification or documentary evidence is incorrect or unreliable.
Exception — individual beneficiary receiving death benefit
(2)A reporting financial institution may presume that an individual beneficiary (other than the owner) of a cash value insurance contract or an annuity contract receiving a death benefit is not a reportable person and may treat the financial account as other than a reportable account unless it has actual knowledge, or reason to know, that the beneficiary is a reportable person.
Aggregation rules
(3)For the purposes of
(a)determining the aggregate balance or value of financial accounts held by an individual or entity,
(i)a reporting financial institution is required to aggregate all financial accounts maintained by the reporting financial institution, or by a related entity, but only to the extent that the reporting financial institution’s computerized systems
(A)link the financial accounts by reference to a data element such as a client number or TIN, and
(B)allow account balances or values to be aggregated, and
(ii)each holder of a jointly held financial account shall be attributed the entire balance or value of the jointly held financial account; and
(b)determining the aggregate balance or value of financial accounts held by an individual in order to determine whether a financial account is a high value account, a reporting financial institution is also required — in the case of any financial accounts that a relationship manager knows, or has reason to know, are directly or indirectly owned, controlled or established (other than in a fiduciary capacity) by the same individual — to aggregate all such accounts.
Dealer accounts
(4)Subsection (5)
(a)applies to a reporting financial institution in respect of a client name account maintained by the institution if
(i)property recorded in the account is also recorded in a financial account (in this subsection and subsection (5) referred to as the related account) maintained by a financial institution (in this subsection and subsection (5) referred to as the dealer) that is authorized under provincial legislation
(A)to engage in the business of dealing in securities or any other financial instrument, or
(B)to provide portfolio management or investment advising services, and
(ii)the dealer has advised the institution whether the related account is a reportable account; and
(b)does not apply, despite paragraph (a), if it can reasonably be concluded by the institution that the dealer has failed to comply with its obligations under this Part.
Dealer accounts
(5)If this subsection applies to a reporting financial institution in respect of a client name account,
(a)sections 272 to 276 do not apply to the institution in respect of the account; and
(b)the institution shall rely on the determination of the dealer in respect of the related account in determining whether the account is a reportable account.
Group insurance and annuities
(6)A reporting financial institution may treat a financial account that is a member’s interest in a group cash value insurance contract or group annuity contract as a financial account that is not a reportable account until the day on which an amount becomes payable to the employee, certificate holder or beneficiary, if the financial account meets the following requirements:
(a)the group cash value insurance contract or group annuity contract is issued to an employer and covers 25 or more employees or certificate holders;
(b)the employees or certificate holders are entitled to
(i)receive any contract value related to their interest, and
(ii)name beneficiaries for the benefit payable upon the employee’s or certificate holder’s death; and
(c)the aggregate amount payable to any employee or certificate holder or beneficiary does not exceed 1 million USD.
Reporting
278(1)Every reporting financial institution shall file with the Minister, before May 2 of each calendar year, an information return in prescribed form relating to each reportable account maintained by the institution at any time during the immediately preceding calendar year and after June 30, 2017.
Electronic filing
(2)The information return required under subsection (1) shall be filed by way of electronic filing.
Record keeping
279(1)Every reporting financial institution shall keep, at the institution’s place of business or at such other place as may be designated by the Minister, records that the institution obtains or creates for the purpose of complying with this Part, including self-certifications and records of documentary evidence.
Form of records
(2)Every reporting financial institution required by this Part to keep records that does so electronically shall retain them in an electronically readable format for the retention period referred to in subsection (3).
Retention of records
(3)Every reporting financial institution that is required to keep, obtain or create records under this Part shall retain those records for a period of at least six years following
(a)in the case of a self-certification, the last day on which a related financial account is open; and
(b)in any other case, the end of the last calendar year in respect of which the record is relevant.
Anti-avoidance
280If a person enters into an arrangement or engages in a practice, the primary purpose of which can reasonably be considered to be to avoid an obligation under this Part, the person is subject to the obligation as if the person had not entered into the arrangement or engaged in the practice.
Production of TIN
281(1)Every reportable person shall provide their TIN at the request of a reporting financial institution that is required under this Part to make an information return requiring the TIN.
Confidentiality of TIN
(2)A person required to make an information return referred to in subsection (1) shall not knowingly use, communicate or allow to be communicated, otherwise than as required or authorized under this Act or a regulation, the TIN without the written consent of the reportable person.
Penalty for failure to provide TIN
(3)Every reportable person who fails to provide on request their TIN to a reporting financial institution that is required under this Part to make an information return requiring the TIN is liable to a penalty of $500 for each such failure, unless
(a)an application for the assignment of the TIN is made to the relevant reportable jurisdiction not later than 90 days after the request was made and the TIN is provided to the reporting financial institution that requested it within 15 days after the reportable person received it; or
(b)the reportable person is not eligible to obtain a TIN from the relevant reportable jurisdiction (including because the relevant reportable jurisdiction does not issue TINs).
Assessment
(4)The Minister may at any time assess any amount payable under subsection (3) by any person and, if the Minister sends a notice of assessment to the person, sections 150 to 163, subsections 164(1) and (1.‍4) to (7), sections 165 to 167 and Division J of Part I apply with such modifications as the circumstances require.
(2)Subsection (1) comes into force on July 1, 2017.
R.‍S.‍, c. 2 (5th Supp.‍)
Income Tax Application Rules
72(1)The portion of subsection 20(1) of the Income Tax Application Rules before paragraph (a) is replaced by the following:
Depreciable property
20(1)If the capital cost to a taxpayer of any depreciable property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 and owned by the taxpayer without interruption from December 31, 1971 until such time after 1971 as the taxpayer disposed of it is less than the fair market value of the property on valuation day and less than the proceeds of disposition thereof otherwise determined,
(2)Subsections 20(1.‍3) to (2) of the Rules are replaced by the following:
Transfers before 1972 not at arm’s length
(1.‍3)Without restricting the generality of section 18, if any depreciable property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) has been transferred before 1972 in circumstances such that subsection 20(4) of the former Act would, if that provision applied to transfers of property made in the 1972 taxation year, apply, paragraph 69(1)‍(b) of the amended Act does not apply to the transfer and subsection 20(4) of the former Act applies thereto.
Depreciable property received as dividend in kind
(1.‍4)The capital cost to a taxpayer, as of any particular time after 1971, of any depreciable property (other than depreciable property referred to in subsection (1.‍3) or deemed by subparagraph (1)‍(b)‍(ii) to have been acquired by the taxpayer before 1972 or a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 as, on account of, in lieu of payment of or in satisfaction of, a dividend payable in kind (other than a stock dividend) in respect of a share owned by the taxpayer of the capital stock of a corporation, is deemed to be the fair market value of that property at the time the property was so received.
Recapture of capital cost allowances
(2)In determining a taxpayer’s income for a taxation year from farming or fishing, subsection 13(1) of the amended Act does not apply in respect of the disposition by the taxpayer of property (other than a property that was, at any time, eligible capital property as defined in the amended Act at that time) acquired by the taxpayer before 1972 unless the taxpayer has elected to make a deduction for that or a preceding taxation year, in respect of the capital cost of property acquired by the taxpayer before 1972, under regulations made under paragraph 20(1)‍(a) of that Act other than a regulation providing solely for an allowance for computing income from farming or fishing.
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
73(1)Subsection 21(1) of the Rules is replaced by the following:
Government right
21(1)If as a result of a disposition occurring after 1971 a taxpayer has or may become entitled to receive an amount (in this section referred to as the actual amount) that may reasonably be considered to be consideration received by the taxpayer for the disposition of, or for allowing the expiration of, a government right, in respect of a business carried on by the taxpayer throughout the period beginning January 1, 1972 and ending immediately after the disposition occurred, for the purposes of the amended Act the amount that the taxpayer has or may become entitled to receive is deemed to be the amount, if any, by which the actual amount exceeds the greater of
(a)the total of all amounts each of which is an outlay or expenditure made or incurred by the taxpayer as a result of a transaction that occurred before 1972 for the purpose of acquiring the government right, or the taxpayer’s original right in respect of the government right, to the extent that the outlay or expenditure was not otherwise deducted in computing the income of the taxpayer for any taxation year and would, if made or incurred by the taxpayer as a result of a transaction that occurred after 1971, be an eligible capital expenditure of the taxpayer; and
(b)the fair market value to the taxpayer on December 31, 1971 of the taxpayer’s specified right in respect of the government right, if no outlay or expenditure was made or incurred by the taxpayer for the purpose of acquiring the right or, if an outlay or expenditure was made or incurred, if that outlay or expenditure would have been an eligible capital expenditure of the taxpayer if it had been made or incurred as a result of a transaction that occurred after 1971.
(2)The portion of subsection 21(2.‍1) of the Rules after paragraph (b) is replaced by the following:
and an actual amount subsequently becomes payable to the taxpayer as consideration for the disposition by the taxpayer of, or for the taxpayer allowing the expiration of, the particular government right or any other government right acquired by the taxpayer for the purpose of effecting the continuation, without interruption, of rights that are substantially similar to the rights that the taxpayer had under the particular government right, for the purpose of the amended Act, the amount that has so become payable to the taxpayer shall be deemed to be the amount that would, if that person and the taxpayer had at all times been the same person, be determined under subsection (1) to be the amount that would have become so payable to the taxpayer.
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
C.‍R.‍C.‍, c. 945
Income Tax Regulations
74(1)Subsection 201(1) of the Income Tax Regulations is amended by striking out “or” at the end of paragraph (e), by adding “or” at the end of paragraph (f) and by adding the following after paragraph (f):
(g)the portion of the price for which a debt obligation was assigned or otherwise transferred that is deemed by subsection 20(14.‍2) of the Act to be interest that accrued on the debt obligation to which the transferee has become entitled to for a period commencing before the time of the transfer and ending at that particular time that is not payable until after that particular time if the payment is made by a person that is a financial company (whether acting as principal or as agent for the transferee) for the purposes of section 211
(2)Subsection 201(4) of the Regulations is replaced by the following:
(4)A person or partnership that is indebted in a calendar year under a debt obligation in respect of which subsection 12(4) of the Act and paragraph (1)‍(b) apply with respect to a taxpayer shall make an information return in prescribed form in respect of the amount (other than an amount to which paragraph (1)‍(g) applies) that would, if the year were a taxation year of the taxpayer, be included as interest in respect of the debt obligation in computing the taxpayer’s income for the year.
(3)Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
75(1)The definition security in subsection 230(1) of the Regulations is amended by adding the following after paragraph (c):
(c.‍1)a debt obligation that is, at any time, described in paragraph 7000(1)‍(d),
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
76(1)Paragraph 600(b) of the Regulations is replaced by the following:
(b)subsections 13(4), (7.‍4) and (29), 20(24), 44(1) and (6), 45(2) and (3), 50(1), 53(2.‍1), 56.‍4(13), 70(6.‍2), (9.‍01), (9.‍11), (9.‍21) and (9.‍31), 72(2), 73(1), 80.‍1(1), 82(3), 83(2), 104(14), 107(2.‍001), 143(2), 146.‍01(7), 146.‍02(7), 164(6) and (6.‍1), 184(3), 251.‍2(6) and 256(9) of the Act;
(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
77(1)Paragraph 808(2)‍(c) of the Regulations is repealed.
(2)Paragraph 808(2)‍(e) of the Income Tax Regulations is replaced by the following:
(e)an amount equal to the aggregate of the cost amount to the corporation at the end of the year of each debt owing to it, or any other right of the corporation to receive an amount, that was outstanding as a result of the disposition by it of property in respect of which an amount would be included, by virtue of paragraph (a), (b) or (h), in its qualified investment in property in Canada at the end of the year if the property had not been disposed of by it before the end of that year,
(3)Paragraph 808(2)‍(l) of the Regulations is amended by adding “or” at the end of subparagraph (ii) and by repealing subparagraph (iii).
(4)Subsections (1) to (3) come into force or are deemed to come into force on January 1, 2017.
78(1)Paragraph 1100(1)‍(a) of the Regulations is amended by adding the following after subparagraph (xii):
(xii.‍1)of Class 14.‍1, 5 per cent,
(2)Subsection 1100(1) of the Regulations is amended by adding the following after paragraph (c):
Additional Allowances — Class 14.‍1
(c.‍1)for a taxation year that ends before 2027, such additional amount as the taxpayer may claim in respect of property of Class 14.‍1 of Schedule II not exceeding
(i)2% of the particular amount by which the undepreciated capital cost of the class at the beginning of 2017 exceeds the total of all amounts each of which is
(A)the amount of a deduction taken under paragraph 20(1)‍(a) of the Act in respect of the class for a preceding taxation year, and
(B)equal to three times the amount of the capital cost of a property deemed by subsection 13(39) of the Act to be acquired by the taxpayer in the year or a preceding year, and
(ii)the amount determined by the formula
A − B
where
A
<