Bill C-25

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	A - C
	(2) The definition ``farm loss'' in subsection 111(8) of the Act is amended by adding the word ``and'' at the end of the description of A and by repealing the description of B.
	(3) The first formula in the definition ``non-capital loss'' in subsection 111(8) of the Act is replaced by the following:
	(A + B) - (D + D.1 + D.2)
	(4) The description of C in the definition ``non-capital loss'' in subsection 111(8) of the Act is repealed.
	(5) Subsections (1) to (4) apply to the 1998 and subsequent taxation years.
	20. (1) Section 111.1 of the Act is replaced by the following:
Order of applying provisions	111.1 In computing an individual's taxable income for a taxation year, the provisions of this Division shall be applied in the following order: sections 110, 110.2, 111, 110.6 and 110.7.
	(2) Subsection (1) applies to the 1998 and subsequent taxation years.
	21. (1) The Act is amended by adding the following after section 115.1:
	Non-Residents with Canadian Investment Service Providers
Definitions	115.2 (1) The definitions in this subsection apply in this section.
``Canadian service provider'' « fournisseur de services canadien »	``Canadian service provider'' means a corporation resident in Canada, a trust resident in Canada or a Canadian partnership.
``designa- ted investment services'' « services de placement déterminés »	``designated investment services'' provided to a qualified non-resident means any one or more of the services described in the following paragraphs:
	(a) investment management and advice with respect to qualified investments, regardless of whether the manager has discretionary authority to buy or sell;
	(b) purchasing and selling qualified investments, exercising rights incidental to the ownership of qualified investments such as voting, conversion and exchange, and entering into and executing agreements with respect to such purchasing and selling and the exercising of such rights;
	(c) investment administration services, such as receiving, delivering and having custody of investments, calculating and reporting investment values, receiving subscription amounts from, and paying distributions and proceeds of disposition to, investors in and beneficiaries of the qualified non-resident, record keeping, accounting and reporting to the qualified non-resident and its investors and beneficiaries; and
	(d) if the qualified non-resident is a corporation, trust or partnership the only undertaking of which is the investing of its funds in qualified investments, marketing investments in the qualified non-resident to non-resident investors.
``promoter'' « promoteur »	``promoter'' of a qualified non-resident that is a corporation, trust or partnership means a person or partnership that initiates or directs the founding, organization or substantial reorganization of the non-resident, or a person or partnership affiliated with such a person or partnership.
``qualified investment'' « placement admissible »	``qualified investment'' of a qualified non-resident means
	(a) a share of the capital stock of a corporation, or an interest in a partnership, trust, entity, fund or organization, other than a share or an interest
	(i) that is either
	(A) not listed on a prescribed stock exchange, or
	(B) listed on a prescribed stock exchange, if the qualified non-resident, together with all persons with whom the non-resident does not deal at arm's length, owns 25% or more of the issued shares of any class of the capital stock of the corporation or of the total value of interests in the partnership, entity, trust, fund or organization, as the case may be, and
	(ii) of which more than 50% of the fair market value is derived from one or more of
	(A) real property situated in Canada,
	(B) Canadian resource property, and
	(C) timber resource property;
	(b) indebtedness;
	(c) annuities;
	(d) commodities or commodities futures purchased or sold, directly or indirectly in any manner whatever, on a commodities or commodities futures exchange;
	(e) currency; and
	(f) options, interests, rights and forward and futures agreements in respect of property described in any of paragraphs (a) to (e) or this paragraph, and agreements under which obligations are derived from interest rates, from the price of property described in any of those paragraphs, from payments made in respect of such a property by its issuer to holders of the property, or from an index reflecting a composite measure of such rates, prices or payments, whether or not the agreement creates any rights in or obligations regarding the referenced property itself.
``qualified non-resident'' « non-résident admissible »	``qualified non-resident'' means a non-resident person or a partnership no member of which is resident in Canada.
Not carrying on business in Canada	(2) For the purposes of subsection 115(1) and Part XIV, a qualified non-resident is not considered to be carrying on business in Canada at any particular time solely because of the provision to the non-resident at the particular time of designated investment services by a Canadian service provider if
	(a) in the case of a non-resident who is an individual other than a trust, the non-resident is not affiliated at the particular time with the Canadian service provider; and
	(b) in the case of a non-resident that is a corporation, trust or partnership,
	(i) the non-resident has not, before the particular time, directly or through its agents, directed any promotion of investments in itself principally at, or sold such investments to, persons that the non-resident knew or ought to have known after reasonable enquiry were resident in Canada or partnerships that the non-resident knew or ought to have known after reasonable enquiry had members that were resident in Canada,
	(ii) the non-resident has not, before the particular time, directly or through its agents, filed any document with a public authority in Canada in accordance with the securities legislation of Canada or of any province in order to permit the distribution of interests in the non-resident to persons resident in Canada, and
	(iii) when the particular time is more than one year after the time at which the non-resident was created, the total of the fair market value, at the particular time, of investments in the non-resident that are beneficially owned by persons and partnerships (other than a designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider does not exceed 25% of the fair market value, at the particular time, of all investments in the non-resident.
Interpreta- tion	(3) For the purposes of subparagraph (2)(b)(iii) and this subsection,
	(a) the fair market value of an investment in a corporation, trust or partnership shall be determined without regard to any voting rights attaching to that investment; and
	(b) a person or partnership is, at a particular time, a designated entity in respect of a Canadian service provider if the total of the fair market value at the particular time, of investments in the entity that are beneficially owned by persons and partnerships (other than another designated entity in respect of the Canadian service provider) that are affiliated with the Canadian service provider does not exceed 25% of the fair market value, at the particular time, of all investments in the entity.
Transfer pricing	(4) For the purpose of section 247, where subsection (2) applies to a qualified non-resident, if the Canadian service provider referred to in that subsection does not deal at arm's length with the promoter of the qualified non-resident, the service provider is deemed not to deal at arm's length with the non-resident.
	(2) Subsection (1) applies to taxation years that end after 1998.
	22. (1) Subsection 117(1) of the Act is replaced by the following:
Tax payable under this Part	117. (1) For the purposes of this Division, except section 120 (other than subparagraph (a)(ii) of the definition ``tax otherwise payable under this Part'' in subsection 120(4)), tax payable under this Part, tax otherwise payable under this Part and tax under this Part shall be computed as if this Part were read without reference to Division E.1.
	(2) Subsection 117(6) of the Act is repealed.
	(3) Subsections (1) and (2) apply to the 1998 and subsequent taxation years except that, in its application to the 1998 and 1999 taxation years, the reference to ``subparagraph (a)(ii)'' in subsection 117(1) of the Act, as enacted by subsection (1), shall be read as a reference to ``paragraph (b)''.
	23. (1) The portion of subsection 117.1(1) of the Act before subparagraph (d)(ii) is replaced by the following:
Annual adjustment	117.1 (1) Each of the amounts expressed in dollars in subsection 117(2), the description of B in subsection 118(1), subsections 118(2), 118.2(1), 118.3(1), 122.5(3) and 122.51(1) and (2) and Part I.2 in relation to tax payable under this Part or Part I.2 for a taxation year shall be adjusted so that the amount to be used under those provisions for the year is the total of
	(a) the amount that would, but for subsection (3), be the amount to be used under those provisions for the preceding taxation year, and
	(b) the product obtained by multiplying
	(i) the amount referred to in paragraph (a)
	by
	(2) Subsection 117.1(2) of the Act is repealed.
	(3) Subsection (1) applies to the 2001 and subsequent taxation years.
	(4) Subsection (2) applies to the 1999 and subsequent taxation years.
	24. (1) Subparagraphs (a)(i) and (ii) of the description of B in subsection 118(1) of the Act are replaced by the following:
	(i) $7,131, and
	(ii) the amount determined by the formula
	$6,055 - (C - $606)
	where
	C is the greater of $606 and the income of the individual's spouse for the year or, where the individual and the individual's spouse are living separate and apart at the end of the year because of a breakdown of their marriage, the spouse's income for the year while married and not so separated,
	(2) Subparagraphs (b)(iii) and (iv) of the description of B in subsection 118(1) of the Act are replaced by the following:
	(iii) $7,131, and
	(iv) the amount determined by the formula
	$6,055 - (D - $606)
	where
	D is the greater of $606 and the dependent person's income for the year,
	(3) The portion of paragraph (b.1) of the description of B in subsection 118(1) of the Act before subparagraph (i) is replaced by the following:
Supplemen- tary amount	(b.1) for each individual (otherl than a trust), 1/2 of the amount, if any, by which the total of
	(4) Paragraph (b.1) of the description of B in subsection 118(1) of the Act is repealed.
	(5) Paragraph (c) of the description of B in subsection 118(1) of the Act is replaced by the following:
Single status	(c) except in the case of an individual entitled to a deduction because of paragraph (a) or (b), $7,131,
	(6) The portion of paragraph (d) of the description of B in subsection 118(1) of the Act after subparagraph (ii) is replaced by the following:
	the amount determined by the formula
	$7,131 - E
	where
	E is the greater of $4,778 and the dependant's income for the year, and
	(7) Subsections (1), (2), (5) and (6) apply to the 1999 and subsequent taxation years except that, in their application to the 1999 taxation year, the references to ``$7,131'', ``$6,055'', ``$606'' and ``$4,778'' in subparagraphs (a)(i) and (ii) and (b)(iii) and (iv) and paragraphs (c) and (d) of the description of B in subsection 118(1) of the Act, as enacted or amended by those subsections, as the case may be, shall be read as references to ``$6,794'', ``$5,718'', ``$572'' and ``$4,441'', respectively.
	(8) Subsection (3) applies to the 1999 taxation year.
	(9) Subsection (4) applies to the 2000 and subsequent taxation years.
	25. (1) Paragraph (b) of the description of D in subsection 118.2(1) of the Act is replaced by the following:
	(b) the amount used under paragraph (c) of the description of B in subsection 118(1) for the year.
	(2) Subparagraph 118.2(2)(b.1)(ii) of the Act is replaced by the following:
	(ii) no part of the remuneration is included in computing a deduction claimed in respect of the patient under section 63 or 64 or paragraph (b), (b.2), (c), (d) or (e) for any taxation year,
	(3) Subsection 118.2(2) of the Act is amended by adding the following after paragraph (b.1):
	(b.2) as remuneration for the patient's care or supervision provided in a group home in Canada maintained and operated exclusively for the benefit of individuals who have a severe and prolonged impairment, if
	(i) because of the patient's impairment, the patient is a person in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer's tax payable under this Part for the taxation year in which the expense is incurred,
	(ii) no part of the remuneration is included in computing a deduction claimed in respect of the patient under section 63 or 64 or paragraph (b), (b.1), (c), (d) or (e) for any taxation year, and
	(iii) each receipt filed with the Minister to prove payment of the remuneration was issued by the payee and contains, where the payee is an individual, that individual's Social Insurance Number;

Bill C-25

Non-Residents with Canadian Investment Service Providers