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Bill C-45

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Pooled Registered Pension Plans

Definitions

147.5 (1) The following definitions apply in this section.

“administrator”
« administrateur »

“administrator”, of a pooled pension plan, means

(a) a corporation resident in Canada that is responsible for the administration of the plan and that is authorized under the Pooled Registered Pension Plans Act or a similar law of a province to act as an administrator for one or more pooled pension plans; or

(b) an entity designated in respect of the plan under section 21 of the Pooled Registered Pension Plans Act or any provision of a law of a province that is similar to that section.

“designated pooled pension plan”
« régime de pension collectif désigné »

“designated pooled pension plan”, for a calendar year, means a pooled pension plan that, at any time in the year (other than the year in which the plan became registered as a PRPP), meets any of the following conditions:

(a) the plan has fewer than 10 participating employers;

(b) the fair market value of the property held in connection with the accounts of all members of the plan employed by a particular participating employer exceeds 50% of the fair market value of the property held in connection with the plan;

(d) it is reasonable to conclude that the participation in the plan of one or more participating employers occurs primarily to avoid the application of any of paragraphs (a) to (c).

“exempt earned income”
« revenu gagné exonéré »

“exempt earned income”, of a taxpayer for a taxation year, means the total of all amounts each of which is an amount that is

(a) not included in the taxpayer’s earned income (as defined in subsection 146(1)) for the year and that would be so included but for paragraph 81(1)(a) as it applies with respect to the Indian Act; and

(b) reported by the taxpayer in prescribed form filed with the Minister by the taxpayer’s filing-due date for the year, or such later date as is acceptable to the Minister, provided that the later date is within three calendar years following the end of the year.

“exempt-income contribution amount”
« cotisation provenant du revenu exonéré »

“exempt-income contribution amount”, of a taxpayer for a taxation year, means the total of

(a) all amounts each of which is a contribution to a PRPP made by the taxpayer for the year that is not deductible in computing the income of the taxpayer because of subsection (32), and

(b) the amount, if any, designated under subsection (34) by the taxpayer for the year in prescribed form filed with the Minister by the taxpayer’s filing-due date for the year, or such later date as is acceptable to the Minister, provided that the later date is within three calendar years following the end of the year.

“member”
« participant »

“member”, of a pooled pension plan, means an individual (other than a trust) who holds an account under the plan.

“participating employer”
« employeur participant »

“participating employer”, in relation to a pooled pension plan for a calendar year, means an employer that, in the year,

(a) makes contributions to the plan in respect of all or a class of its employees or former employees; or

(b) remits to the administrator of the plan contributions made by members of the plan under a contract with the administrator in respect of all or a class of its employees.

“pooled pension plan”
« régime de pension collectif »

“pooled pension plan” means a plan that is registered under the Pooled Registered Pension Plan Act or a similar law of a province.

“pooled registered pension plan” or “PRPP”
« régime de pension agréé collectif » ou « RPAC »

“pooled registered pension plan” or “PRPP” means a pooled pension plan that has been accepted for registration by the Minister for the purposes of this Act, which registration has not been revoked.

“qualifying annuity”
« rente admissible »

“qualifying annuity”, for an individual, means an annuity that

(a) is payable to

(i) the individual for the individual’s life, or

(ii) the individual for the lives, jointly, of the individual and the individual’s spouse or common-law partner and to the survivor of them for the survivor’s life;

(b) is payable beginning no later than the later of

(i) the end of the calendar year in which the individual attains 71 years of age, and

(ii) the end of the calendar year in which the annuity is acquired;

(i) at least annually, and

(ii) in equal amounts or is not so payable solely because of an adjustment that would, if the annuity were an annuity under a retirement savings plan, in accord-ance with any of subparagraphs 146(3)(b)(iii) to (v);

(d) if the annuity includes a guaranteed period, requires that

(i) the period not exceed 15 years, and

(ii) in the event of the later of the death of the individual and that of the individual’s spouse or common-law partner during the period, any remaining amounts otherwise payable be commuted into a single payment as soon as practicable after the later death; and

(e) does not permit any premiums to be paid, other than the premium paid from the PRPP to acquire the annuity.

“qualifying survivor”
« survivant admissible »

“qualifying survivor”, in relation to a member of a PRPP, means an individual who, immediately before the death of the member

(a) was a spouse or common-law partner of the member; or

(b) was a child or grandchild of the member who was financially dependent on the member for support.

“restricted investment”
« placement non admissible »

“restricted investment”, for a pooled pension plan, means

(a) a debt of a member of the plan;

(b) a share of, an interest in, or a debt of

(i) a corporation, partnership or trust in which a member of the plan has a significant interest, or

(ii) a person or partnership that does not deal at arm’s length with the member of the plan or with a person or partnership described in subparagraph (i);

(c) an interest (or, for civil law, a right) in, or a right to acquire, a share, interest or debt described in paragraph (a) or (b); or

(d) prescribed property.

“single amount”
« montant unique »

“single amount” means an amount that is not part of a series of periodic payments.

“successor member”
« participant remplaçant »

“successor member” means an individual who was the spouse or common-law partner of a member of a PRPP immediately before the death of the member and who acquires, as a consequence of the death, all of the member’s rights in respect of the member’s account under the PRPP.

“unused non-deductible PRPP room”
« somme inutilisée non déductible au titre des RPAC »

“unused non-deductible PRPP room”, of a taxpayer at the end of a taxation year, means the amount determined by the formula

A – B

where

A is the amount of the taxpayer’s unused RRSP deduction room at the end of the year, determined in accordance with subsection (33); and

B is the taxpayer’s unused RRSP deduction room at the end of the year.

Registration conditions

(2) The Minister may accept for registration a pooled pension plan for the purposes of this Act, but shall not accept for registration any plan unless application for registration is made in prescribed manner by the plan administrator and, in the Minister’s opinion, the plan complies with the following conditions:

(a) the primary purpose of the plan is to accept and invest contributions in order to provide retirement income to plan members, subject to the limits and other requirements under this Act;

(b) a single and separate account is maintained for each member under the member’s Social Insurance Number

(i) to which are credited all contributions made to the plan in respect of the member, and any earnings of the plan allocated to the member, and

(ii) to which are charged all payments and distributions made in respect of the member;

(c) the only benefits provided under the plan in respect of each member are benefits determined solely with reference to, and provided by, the amount in the member’s account;

(d) all earnings of the plan are allocated to plan members on a reasonable basis and no less frequently than annually;

(e) the arrangement under which property is held in connection with the plan is acceptable to the Minister;

(f) no right of a person under the plan is capable of being assigned, charged, anticipated, given as security or surrendered, other than

(i) an assignment pursuant to a decree, order or judgment of a competent tribunal, or a under a written agreement, relating to a division of property between the member and the member’s spouse or common-law partner or former spouse or common-law partner, in settlement of rights arising out of, or on a breakdown of, their marriage or common-law partnership, or

(ii) an assignment by the legal representative of a deceased individual on the distribution of the individual’s estate;

(g) the plan requires that all amounts contributed or allocated to a member’s account vest immediately and indefeasibly for the benefit of the member;

(h) the plan permits the payment of an amount to a member if the amount is paid to reduce the amount of tax that would otherwise be payable under Part X.1 by the member;

(i) any amount payable from an account of a member after the death of the member is paid as soon as practicable after the death;

(j) there is no reason to expect that the plan may become a revocable plan; and

(k) any prescribed conditions.

Conditions applicable to PRPPs

(3) A pooled registered pension plan becomes a revocable plan at any time that

(a) a contribution is made to the plan other than an amount

(i) paid by a member of the plan,

(ii) paid by an employer or former employer of a member of the plan in respect of the member, or

(iii) transferred to the plan in accordance with any of subsections (21), 146(16) and (21), 146.3(14) and (14.1), 147(19) and 147.3(1), (4) and (5) to (7);

(b) a contribution is made to the plan in respect of a member after the calendar year in which the member attains 71 years of age, other than an amount described in subparagraph (a)(iii);

(c) a participating employer makes contributions to the plan in a calendar year in respect of a member of the plan in excess of the RRSP dollar limit for the year, except in accordance with a direction by the member;

(d) a distribution is made from the plan other than

(i) a payment of benefits in accordance with subsection (5), or

(ii) a return of contributions

(A) if a contribution to the plan has been made as a result of a reasonable error by a member of the plan or a participating employer in relation to the plan and the return of contributions is made to the person who made the contribution no later than December 31 of the year following the calendar year in which the contribution was made,

(B) to avoid the revocation of the registration of the plan,

(D) to comply with any requirement under this Act;

(e) property is held in connection with the plan that

(i) the administrator knew or ought to have known was a restricted investment for the plan, or

(ii) in the case of a designated pooled pension plan, is a share or debt of, or an interest in, a participating employer of the plan or any person or partnership that does not deal at arm’s length with a participating employer, or an interest (or, for civil law, a right) in, or a right to acquire, such a share, debt or interest;

(f) the value of a member’s right under the plan depends on the value of, or income or capital gains in respect of, property that would be described in paragraph (e) if it were held in connection with the plan;

(g) the administrator borrows money or other property for the purposes of the plan; or

(h) the plan or the administrator does not comply with a prescribed condition.

Non-payment of minimum amount

(4) A PRPP becomes a revocable plan at the beginning of a calendar year if the total amount distributed from a member’s account under the PRPP in the calendar year is less than the amount that would be the minimum amount for the calendar year under subsection 8506(5) of the Income Tax Regulations if the member’s account were an account under a money purchase provision of a registered pension plan.

Permissible benefits

(5) The following benefits may be provided under a pooled pension plan:

(a) the payment of benefits to a member that would be in accordance with paragraph 8506(1)(e.1) of the Income Tax Regulations if the benefits were provided under a money purchase provision of a registered pension plan; and

(b) the payment of a single amount from the member’s account.

Additional conditions

(6) The Minister may, at any time, impose reasonable conditions, in writing, applicable with respect to PRPPs, a class of PRPPs or a particular PRPP.

Acceptance of amendments

(7) The Minister shall not accept an amendment to a PRPP unless

(a) application for the acceptance is made in prescribed manner by the administrator of the PRPP; and

(b) the amendment and the PRPP as amended comply with the registration conditions specified in subsection (2).

Trust not taxable

(8) No tax is payable under this Part by a trust governed by a PRPP on its taxable income for a taxation year, except that, if at any time in the year, it carries on a business, tax is payable under this Part by the trust on the amount that would be its taxable income for the year if it had no income or losses from sources other than the business, and for this purpose,

(a) all capital gains and capital losses from the disposition of property held in connection with the business are deemed to be income or losses, as the case may be, from the business; and

(b) the trust’s income is to be computed without reference to subsections 104(6), (19) and (21).

Obligations of administrator

(9) The administrator of a PRPP shall exercise the care, diligence and skill of a reasonably prudent trustee to minimize the possibility that the registration of the PRPP may be revoked other than at the request of the administrator.

Employer contributions deductible

(10) There may be deducted in computing a taxpayer’s income for a taxation year, the total of all amounts each of which is a contribution made by the taxpayer in the year or within 120 days after the end of the year to a PRPP in respect of the taxpayer’s employees or former employees to the extent that the contribution

(a) was made in accordance with the PRPP as registered and in respect of periods before the end of the year; and

(b) was not deducted in computing the taxpayer’s income for a preceding taxation year.

Member contributions

(11) For the purposes of paragraphs 60(j), (j.1) and (l), section 146 (other than subsections (8.3) to (8.7)), paragraphs 146.01(3)(a) and 146.02(3)(a) and Parts X.1 and X.5, a contribution made to a PRPP by a member of a PRPP is deemed to be a premium paid by the member to an RRSP under which the member is the annuitant.

Member’s account

(12) For the purposes of paragraph 18(1)(u), subparagraph (a)(i) of the definition “excluded right or interest” in subsection 128.1(10), paragraph 146(8.2)(b), subsection 146(8.21), paragraphs 146(16)(a) and (b), subparagraph 146(21)(a)(i), paragraph (b) of the definition “excluded premium” in subsection 146.01(1), paragraph (c) of the definition “excluded premium” in subsection 146.02(1), subsections 146.3(14) and 147(19) to (21), section 147.3 and paragraphs 212(1)(j.1) and (m), and of regulations made under 147.1(18), a member’s account under a PRPP is deemed to be a registered retirement savings plan under which the member is the annuitant.

Taxable amounts

(13) There shall be included in computing the income of a taxpayer for a taxation year

(a) if the taxpayer is a member of a PRPP, the total of all amounts each of which is a distribution made in the year from the member’s account under the PRPP, other than an amount that is

(i) included in computing the income of another taxpayer for the year under paragraph (b),

(ii) described in subsection (22), or

(iii) distributed after the death of the member;

(b) if the taxpayer is a participating employer in relation to a PRPP, the total of all amounts each of which is a return of contributions that is described in clause (3)(d)(ii)(A) and that is made to the taxpayer in the year.

Treatment on death — no successor member

(14) If a member of a PRPP dies and there is no successor member in respect of the deceased member’s account under the PRPP, an amount, equal to the amount by which the fair market value of all property held in connection with the account immediately before the death exceeds the total of all amounts distributed from the account that are described in subsection (16), is deemed to have been distributed from the account immediately before the death.

Treatment on death — successor member

(15) If a member of a PRPP dies and there is a successor member in respect of the deceased member’s account under the PRPP,

(a) the account ceases to be an account of the deceased member at the time of the death;

(b) the successor member is, after the time of the death, deemed to hold the account as a member of the PRPP; and

(c) the successor member is deemed to be a separate member in respect of any other account under the PRPP that the successor member holds.

Qualifying survivor

(16) If, as a consequence of the death of a member of a PRPP, an amount is distributed in a taxation year from the member’s account under the PRPP to, or on behalf of, a qualifying survivor of the member, the amount shall be included in computing the survivor’s income for the year, except to the extent that it is an amount described in subsection (22).

Deemed distribution to qualifying survivor

(17) If an amount is distributed at any time from a deceased member’s account under a PRPP to the member’s legal representative and a qualifying survivor of the member is entitled to all or a portion of the amount in full or partial satisfaction of the survivor’s rights as a beneficiary (as defined in subsection 108(1)) under the deceased’s estate, then, for the purposes of subsection (16), the amount or portion of the amount, as the case may be, is deemed to have been distributed at that time from the member’s account to the qualifying survivor (and not to the legal representative) to the extent that it is so designated jointly by the legal representative and the qualifying survivor in prescribed form filed with the Minister.

Post-death increase in value

(18) There shall be included in computing the income for a taxation year of a taxpayer who is not a qualifying survivor in relation to a member of a PRPP, the total of all amounts each of which is an amount determined by the formula

A – B

where

A is the amount of a distribution made in the year from the member’s account under the PRPP as a consequence of the member’s death to, or on behalf of, the taxpayer, and

B is an amount designated by the administrator of the PRPP not exceeding the lesser of

(a) the amount of the distribution, and

(b) the amount by which the fair market value of all property held in connection with the account immediately before the death exceeds the total of all amounts each of which is

(i) the value of B in respect of any prior distribution made from the account, or

(ii) an amount included under subsection (16) in computing the income of a qualifying survivor in relation to the member.

Post-death decrease in value

(19) There may be deducted in computing the income of a member of a PRPP for the taxation year in which the member dies, an amount not exceeding the amount determined, after all amounts payable from the member’s account under the PRPP have been distributed, by the formula

A – B

where

A is the total of all amounts each of which is an amount in respect of the account

(a) included in the member’s income under subsection (13) because of the application of subsection (14),

(b) included in the income of another taxpayer under subsection (16) or (18), or

B is the total of all distributions made from the account after the member’s death.

Subsection (19) not applicable

(20) Except where the Minister has waived in writing the application of this subsection with respect to all or any portion of the amount determined in subsection (19) in respect of a member’s account under a PRPP, that subsection does not apply if the last distribution from the account was made after the end of the calendar year following the year in which the member died.

Transfer of amounts

(21) An amount is transferred from a member’s account under a PRPP in accordance with this subsection if the amount

(a) is a single amount;

(b) is transferred on behalf of an individual who

(i) is the member,

(ii) is a spouse or common-law partner or former spouse or common-law partner of the member and who is entitled to the amount under a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the member and the individ-ual, in settlement of rights arising out of, or on a breakdown of, their marriage or common-law partnership, or

(iii) is entitled to the amount as a consequence of the death of the member and was a spouse or common-law partner of the member immediately before the death; and

(i) the individual’s account under the PRPP,

(ii) another PRPP in respect of the individual,

(iii) a registered pension plan for the benefit of the individual,

(iv) a registered retirement savings plan or registered retirement income fund under which the individual is the annuitant, or

(v) a licensed annuities provider to acquire a qualifying annuity for the individual.

Taxation of transfers

(22) If subsection (21) applies to an amount transferred from a member’s account under a PRPP on behalf of an individual,

(a) the amount shall not, by reason only of that transfer, be included in computing the income of the individual; and

(b) no deduction may be made in respect of the amount in computing the income of any taxpayer.

Taxation of qualifying annuity

(23) If an amount is transferred in accord-ance with subsection (21) to acquire a qualifying annuity, there shall be included — under this section and not under any other provision of this Act — in computing an individual’s income for a taxation year any amount received by the individual during the year out of or under the annuity or as proceeds from a disposition in respect of the annuity.

Notice of intent

(24) The Minister may give notice (in subsections (25) and (26) referred to as a “notice of intent”) to an administrator of a PRPP in writing that the Minister intends to revoke the registration of the plan as a PRPP if

(a) the plan does not comply with the conditions for registration in subsection (2);

(b) the plan is not administered in accord-ance with the terms of the plan as registered;

(d) a condition imposed under subsection (6) that applies with respect to the plan is not complied with; or

(e) registration of the plan under the Pooled Registered Pension Plans Act or a similar law of a province is refused or revoked.

Date of revocation

(25) The notice of intent shall specify the date on which revocation of a PRPP is to be effective, which date shall not be earlier than the earliest date on which one of the events described in subsection (24) occurs.

Notice of revocation

(26) At any time after 30 days after the day on which the notice of intent is mailed to an administrator of a PRPP, the Minister may give notice (in this subsection and in subsection (27) referred to as a “notice of revocation”) in writing to the administrator that the registration of the PRPP is revoked as of the date specified in the notice of revocation and that date may not be earlier than the date specified in the notice of intent.

Revocation of registration

(27) If the Minister gives a notice of revocation to the administrator of a PRPP, the registration of the PRPP is revoked as of the date specified in the notice of revocation, unless the Federal Court of Appeal or a judge of that Court, on application made at any time before the determination of an appeal pursuant to subsection 172(3), orders otherwise.

Voluntary revocation

(28) If the administrator of a PRPP so requests in writing, the Minister may give notice in writing to the administrator that the registration of the PRPP is revoked as of a specified date and that date may not be earlier than the date specified in the administrator’s request.

Single employer

(29) For the purposes of the definition “designated pooled pension plan” in subsection (1), all employers that are related to each other are deemed to be a single employer and all the structural units of a trade union, including each local, branch, national and international unit, are deemed to be a single employer.

Significant interest

(30) For the purposes of the definition “restricted investment” in subsection (1), a member of a pooled pension plan has a significant interest in a corporation, trust or partnership at any time if, at that time,

(a) in the case of a corporation, the member is a specified shareholder of the corporation; and

(b) in the case of a partnership or trust,

(i) the member is a specified unitholder of the partnership or the trust, as the case may be, or

(ii) the total fair market value of the member’s interests in the partnership or the trust, as the case may be, together with all interests in the partnership or the trust held by persons or partnerships with whom the member does not deal at arm’s length or is affiliated, is 10% or more of the fair market value of all interests in the partnership or the trust.

Contributions from exempt income

(31) Contributions may be made to a PRPP in respect of a member of the PRPP as if the member’s earned income (as defined in subsection 146(1)) for a taxation year included the member’s exempt earned income for the year.

Non-deductible contributions

(32) A contribution made by a member of a PRPP to the member’s account under the PRPP out of or from the member’s exempt earned income may not be deducted in computing the income of the member for any taxation year.

Exempt contributions not over-contributions

(33) For the purposes of Part X.1 as it applies because of subsection (11) in respect of contributions made to a PRPP,

(a) an individual’s earned income (as defined in subsection 146(1)) for any taxation year after 2012 includes the individual’s exempt earned income for that year;

(b) an individual’s exempt-income contribution amount for any taxation year is deemed to have been deducted by the individual under subsection 146(5) in computing the individual’s income for that year; and

(c) the description of D in paragraph (b) of the definition “unused RRSP deduction room” in subsection 146(1) is to be read without reference to subparagraph (iv).

Designation of exempt-income contribution amount

(34) A taxpayer may designate an amount as the taxpayer’s exempt-income contribution amount for a taxation year if the amount designated does not exceed the lesser of

(a) the taxpayer’s unused non-deductible PRPP room at the end of the preceding taxation year, and

(b) the total of the taxpayer’s contributions as a member to a PRPP for the year (other than contributions to which subsection (32) applies).

Regulations — other

(35) The Governor in Council may make regulations

(a) prescribing conditions applicable to administrators;

(b) requiring administrators to file information returns respecting pooled pension plans;

(c) enabling the Minister to require any person to provide the Minister with information for the purposes and provisions of this Act relating to PRPPs; and

(d) generally to carry out the purposes and provisions of this Act relating to PRPPs.

(2) Subsection (1) comes into force or is deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

37. (1) Subsection 148(1) of the Act is amended by adding the following after paragraph (b.2):

(b.3) a pooled registered pension plan,

(2) Subsection (1) comes into force or is deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

38. (1) Subsection 149(1) of the Act is amended by adding the following after paragraph (u.2):

Pooled registered pension plan

(u.3) a trust governed by a pooled registered pension plan to the extent provided under section 147.5;

(2) Subsection (1) comes into force or is deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

39. (1) Paragraph 152(6)(f.3) of the Act is replaced by following:

(f.3) a deduction (including for the purposes of this subsection a reduction of an amount otherwise required to be included in computing a taxpayer’s income) under subsection 146(8.9) or (8.92), 146.3(6.2) or (6.3) or 147.5(14) or (19),

(2) Subsection (1) comes into force or is deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

40. (1) The description of A in the definition “net tax owing” in subsection 156.1(1) of the Act is replaced by the following:

A is the total of the taxes payable under this Part and Parts I.2, X.5 and XI.4 by the individual for the year,

(2) Subsection (1) applies to the 2012 and subsequent taxation years.

41. (1) Subsection 172(3) of the Act is amended by striking out “or” at the end of paragraph (f.1) and by adding the following after paragraph (g):

(h) refuses to accept for registration for the purposes of this Act any pooled pension plan or gives notice under subsection 147.5(24) to the administrator of a pooled registered pension plan that the Minister proposes to revoke its registration, or

(i) refuses to accept an amendment to a pooled registered pension plan,

(2) The portion of subsection 172(3) of the Act, as amended by subsection (1), after paragraph (i) is replaced by the following:

the person described in paragraph (a), (a.1) or (a.2), the applicant in a case described in paragraph (b), (e) or (g), a trustee under the plan or an employer of employees who are beneficiaries under the plan, in a case described in paragraph (c), the promoter in a case described in paragraph (e.1), the administrator of the plan or an employer who participates in the plan, in a case described in paragraph (f) or (f.1), or the administrator of the plan in a case described in paragraph (h) or (i), may appeal from the Minister’s decision, or from the giving of the notice by the Minister, to the Federal Court of Appeal.

(3) Paragraphs 172(5)(a) and (b) of the Act are replaced by the following:

(a) to register for the purposes of this Act any pension plan or pooled pension plan, or

(b) to accept an amendment to a registered pension plan or a pooled registered pension plan

(4) Subsections (1) to (3) come into force or are deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

42. (1) Subsection 180(1) of the Act is amended by striking out “or” at the end of paragraph (c.1) and by replacing paragraph (d) with the following:

(c.2) the mailing of notice to the administrator of the pooled registered pension plan under subsection 147.5(24), or

(d) the time the decision of the Minister to refuse the application for acceptance of the amendment to the registered pension plan or pooled registered pension plan was mailed, or otherwise communicated in writing, by the Minister to any person,

(2) Subsection (1) comes into force or is deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

43. (1) The description of D in paragraph 204.2(1.1)(b) of the Act is replaced by the following:

D is the group plan amount in respect of the individual at that time,

(2) Subparagraph (a)(iii) of the description of I in subsection 204.2(1.2) of the Act is replaced by the following:

(iii) an amount transferred to the plan on behalf of the individual in accordance with any of subsections 146(16), 147(19), 147.3(1) and (4) to (7) and 147.5(21) or in circumstances to which subsection 146(21) applies,

(3) The description of I in subsection 204.2(1.2) of the Act is amended by striking out “or” at the end of paragraph (a), by replacing “and” at the end of paragraph (b) with “or” and by adding the following after paragraph (b):

(c) an amount contributed in the year and before that time by an employer or former employer of the individual to an account of the individual under a pooled registered pension plan, and

(4) Paragraph (a) of the description of J in subsection 204.2(1.2) of the Act is replaced by following:

(a) the total of all amounts each of which is an amount (other than the portion of it that reduces the amount on which tax is payable by the individual under subsection 204.1(1)) received by the individual in the year and before that time out of or under a pooled registered pension plan, a registered retirement savings plan or a registered retirement income fund and included in computing the individual’s income for the year

(5) The portion of subsection 204.2(1.3) of the Act before paragraph (a) is replaced by the following:

Group plan amount

(1.3) For the purposes of this section, the group plan amount in respect of an individual at any time in a taxation year is the lesser of

(6) Subparagraph (i) of the description F in paragraph 204.2(1.3)(a) of the Act is replaced by the following:

(i) the total of all amounts each of which is a qualifying group plan amount in respect of the individual, to the extent that the amount is included in determining the value of I in subsection (1.2) in respect of the individual at that time, and

(7) Subparagraph (ii) of the description K in paragraph 204.2(1.3)(a) of the Act is replaced by the following:

(ii) in any other case, the group plan amount in respect of the individual at the end of the preceding taxation year, and

(8) Subsection 204.2(1.31) of the Act is replaced by the following:

Qualifying group plan amount

(1.31) For the purposes of the description of F in paragraph (1.3)(a), a qualifying group plan amount in respect of an individual is a premium paid under a registered retirement savings plan or an amount contributed by an employer or former employer of the individual to an account of the individual under a pooled registered pension plan if

(a) the plan is part of a qualifying arrangement or is a pooled registered pension plan,

(b) the premium or contribution is an amount to which the individual is entitled for services rendered by the individual (whether or not as an employee), and

(c) the premium or contribution was remitted to the plan on behalf of the individual by the person or body of persons that is required to remunerate the individual for the services, or by an agent for that person or body,

but does not include the part, if any, of a premium or contribution that, by making (or failing to make) an election or exercising (or failing to exercise) any other right under the plan after beginning to participate in the plan and within 12 months before the time the premium was paid or the contribution was made, the individual could have prevented the premium or contribution and that would not as a consequence have been required to be remitted on behalf of the individual to another registered retirement savings plan or pooled registered pension plan or to a money purchase provision of a registered pension plan.

(9) Section 204.2 of the Act is amended by adding the following after subsection (4):

PRPP withdrawals

(5) Notwithstanding the Pooled Registered Pension Plans Act or any similar law of a province, a member of a PRPP may withdraw an amount from the member’s account under the PRPP to reduce the amount of tax that would otherwise be payable by the member under this Part, to the extent that the reduction cannot be achieved by withdrawals from plans other than PRPPs.

(10) Subsections (1) to (9) come into force or are deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

44. (1) Subsection 207.5(1) of the Act is amended by adding the following in alphabetical order:

“advantage”
« avantage »

“advantage”, in relation to a retirement compensation arrangement, means

(a) any benefit, loan or indebtedness that is conditional in any way on the existence of the arrangement, other than

(i) a benefit derived from the provision of administrative or investment services in respect of the arrangement,

(ii) a loan or an indebtedness the terms and conditions of which are terms and conditions that persons dealing at arm’s length with each other would have entered into, and

(iii) a payment out of or under the arrangement that is included in computing a taxpayer’s income under Part I, and

(b) a benefit that is an increase in the total fair market value of the subject property of the arrangement if it is reasonable to consider, having regard to all the circumstances, that the increase is attributable, directly or indi-rectly, to a transaction or event or a series of transactions or events one of the main purposes of which was to enable a person or a partnership to benefit from a provision of this Part, or from the exemption from tax under paragraph 149(1)(q.1), if the transaction, event or series

(i) would not have occurred in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly, or

(ii) included a payment received as, on account or in lieu of, or in satisfaction of, a payment

(A) for services provided by a person who is, or does not deal at arm’s length with, a specified beneficiary of the arrangement, or

(B) of interest, of a dividend, of rent, of a royalty or of any other return on investment, or of proceeds of disposition, in respect of property (other than subject property of the arrangement) held by a person who is, or does not deal at arm’s length with, a specified beneficiary of the arrangement,

(i) a prohibited investment in respect of the arrangement,

(ii) an amount received by a specified beneficiary of the arrangement, or by a person who does not deal at arm’s length with the specified beneficiary, if it is reasonable to consider, having regard to all the circumstances, that the amount was paid in relation to, or would not have been paid but for, subject property of the arrangement and the amount was paid as, on account or in lieu of, or in satisfaction of, a payment

(A) for services provided by a person who is, or who does not deal at arm’s length with, the specified beneficiary, or

(B) of interest, of a dividend, of rent, of a royalty or of any other return on investment, or of proceeds of disposition,

(d) an RCA strip in respect of the arrangement, and

(e) a prescribed benefit;

“prohibited investment”
« placement interdit »

“prohibited investment”, for a retirement compensation arrangement at any time, means property (other than prescribed excluded property) that is at that time

(a) a debt of a specified beneficiary of the arrangement,

(b) a share of the capital stock of, an interest in, or a debt of

(i) a corporation, partnership or trust in which the specified beneficiary has a significant interest, or

(ii) a person or partnership that does not deal at arm’s length with, or is affiliated with, the specified beneficiary,

(c) an interest (or, for civil law, a right) in, or a right to acquire, a share, interest or debt described in paragraph (a) or (b), or

(d) prescribed property;

“RCA strip”
« somme découlant d’un dépouillement de CR »

“RCA strip”, in respect of a retirement compensation arrangement, means the amount of a reduction in the fair market value of subject property of the arrangement, if the value is reduced as part of a transaction or event or a series of transactions or events one of the main purposes of which is to enable a specified beneficiary of the arrangement, or a person or a partnership who does not deal at arm’s length with the specified beneficiary, to benefit from a provision of this Part or to obtain a benefit in respect of subject property of the arrangement or as a result of the reduction, but does not include an amount that is included in computing the income of the specified beneficiary or of an employer or former employer of the specified beneficiary;

“significant interest”
« participation notable »

“significant interest” has the same meaning as in subsection 207.01(4);

“specified beneficiary”
« bénéficiaire déterminé »

“specified beneficiary”, of a retirement compensation arrangement, means an individual who has an interest or a right in respect of the arrangement and who has or had a significant interest in an employer or former employer in respect of the arrangement;

(2) Section 207.5 of the Act is amended by adding the following after subsection (2):

Limitation on election

(3) Subsection (2) does not apply in respect of an RCA trust if any part of a decline in the fair market value of subject property of the retirement compensation arrangement is reasonably attributable to a prohibited investment for, or an advantage in relation to, the RCA trust unless the Minister is satisfied that it is just and equitable to allow the election to be made, having regard to all the circumstances, in which case, the Minister may adjust the amount deemed by subsection (2) to be the refundable tax of the arrangement to take into account all or part of the decline in the fair market value of the subject property.

(3) Subsection (1) applies after March 28, 2012, except that the definition “advantage” in subsection 207.5(1) of the Act, as enacted by subsection (1), does not apply in respect of transactions or events that relate to subject property of a retirement compensation arrangement acquired before March 29, 2012

(a) if the amount of what would otherwise be an advantage is included in computing the income of a beneficiary of the arrangement, or an employer in respect of the arrangement, for the taxation year in which the amount arose or the immediately following taxation year; or

(b) if the subject property is a promissory note or similar debt obligation, commercially reasonable payments of principal and interest are made at least annually after 2012 in respect of the note or obligation and no RCA strip arises after March 28, 2012 in respect of the arrangement. For the purposes of this paragraph, an amendment to the terms of the note or obligation to provide for such payments is deemed not to be a disposition or an acquisition of the note or obligation.

(4) Subsection (2) applies to elections in respect of tax paid under subsection 207.7(1) of the Act in respect of contributions made to a retirement compensation arrangement after March 28, 2012 and income earned, capital gains realized and losses incurred, in respect of such contributions.

45. (1) The Act is amended by adding the following after section 207.6:

Tax payable on prohibited investment

207.61 (1) A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, at any time in the year,

(a) the arrangement acquires property that is a prohibited investment for the arrangement; or

(b) subject property of the arrangement becomes a prohibited investment for the arrangement after March 29, 2012.

Amount of tax payable

(2) The amount of tax payable in respect of each property described in subsection (1) is 50% of the fair market value of the property at the time referred to in that subsection.

Refund

(3) If in a calendar year an RCA trust disposes of a property in respect of which a tax is imposed under subsection (1) on the custodian of the retirement compensation arrangement, the custodian is entitled to a refund for the year of an amount equal to

(a) the amount of the tax so imposed, unless paragraph (b) applies; or

(b) nil,

(i) if it is reasonable to consider that the custodian, or a specified beneficiary of the arrangement, knew, or ought to have known, at the time the property was acquired by the arrangement, that it was, or would become, a property described in subsection (1), or

(ii) if the property is not disposed of by the arrangement before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances.

Deemed disposition and reacquisition

(4) If, at any time, a property held by an RCA trust ceases to be, or becomes, a prohibited investment for the RCA trust, the RCA trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.

Tax payable in respect of advantage

207.62 (1) A custodian of a retirement compensation arrangement shall pay a tax under this Part for a calendar year if, in the year, an advantage in relation to the arrangement is extended to, or is received or receivable by, an RCA trust under the arrangement, a specified beneficiary of the arrangement or any person who does not deal at arm’s length with the specified beneficiary.

Amount of tax payable

(2) The amount of tax payable in respect of an advantage described in subsection (1) is

(a) in the case of a benefit, the fair market value of the benefit;

(b) in the case of a loan or an indebtedness, the amount of the loan or indebtedness; and

Joint liability

207.63 If a custodian of a retirement compensation arrangement is liable to pay a tax under section 207.61 or 207.62, a specified beneficiary of the arrangement is jointly and severally, or solidarily, liable for that tax to the extent that the specified beneficiary participated in, assented to or acquiesced in the making of, the transaction or event or series of transactions or events that resulted in the liability.

Waiver of tax payable

207.64 If a person would otherwise be liable to pay a tax under this Part because of any of sections 207.61 to 207.63, the Minister may waive or cancel all or part of the liability if the Minister considers it just and equitable to do so having regard to all the circumstances, including

(a) whether the tax arose as a consequence of reasonable error; and

(b) the extent to which the transaction or event or series of transactions or events that gave rise to the tax also gave rise to another tax under this Act.

Deemed distribution

207.65 For the purposes of the definition “refundable tax” in subsection 207.5(1), tax paid under section 207.61 or 207.62 by a custodian of a retirement compensation arrangement out of property held in connection with the arrangement is deemed to be a distribution under the arrangement for the taxation year in which the tax is paid to the extent that the tax has not been refunded, waived or cancelled.

(2) Subsection (1) applies after March 28, 2012. For the purposes of section 207.61 of the Act, as enacted by subsection (1), an amendment to the terms of a promissory note, or similar debt obligation, that is subject property of a retirement compensation arrangement acquired before March 29, 2012 to provide for commercially reasonable payments of principal and interest is deemed not to be a disposition or an acquisition of the note or obligation.

46. (1) The Act is amended by adding the following after Part XI.3:

PART XI.4

TAX ON EXCESS EPSP AMOUNTS

Excess EPSP amount

207.8 (1) In this Part, “excess EPSP amount”, of a specified employee for a taxation year in respect of an employer, means the amount determined by the formula

A – (20% × B)

where

A is the portion of the total of all amounts paid by the employer of the specified employee (or by a corporation with which the employer does not deal at arm’s length) to a trust governed by an employees profit sharing plan that is allocated for the year to the specified employee; and

B is the specified employee’s total income for the year from an office or employment with the employer computed without reference to paragraph 6(1)(d) and sections 7 and 8.

Tax payable

(2) If a specified employee has an excess EPSP amount for a taxation year, the specified employee shall pay a tax for the year equal to the amount determined by the formula

(A + B) × C

where

A is 29%;

B is

(a) if the specified employee is resident in Quebec at the end of the year, 0%,

(b) if the specified employee is resident in a province other than Quebec at the end of the year, the highest percentage rate of tax, including surtaxes but not taxes that are limited to a maximum amount, imposed by the province for the year on the income of an individual who is a resident of the province, or

C is the total of all excess EPSP amounts of the specified employee for the year.

Waiver or cancellation

(3) If a specified employee would otherwise be liable to pay a tax under subsection (2), the Minister may waive or cancel all or part of the liability if the Minister considers it just and equitable to do so having regard to all the circumstances.

Return and payment of tax

(4) Every person who is liable to pay tax under this Part for a taxation year shall

(a) on or before the person’s filing-due date for the year, file with the Minister a return for the year under this Part in prescribed form and containing prescribed information; and

(b) on or before the person’s balance-due day for the year, pay to the Receiver General the amount of tax payable under this Part by the person for the year.

Provisions applicable to this Part

(5) Subsections 150(2) and (3), sections 152, 155 to 156.1, 158 to 160.1, 161 and 161.2 to 167 and Division J of Part I apply to this Part with any modifications that the circumstances require.

(2) Subsection (1) applies to the 2012 and subsequent taxation years, except that it does not apply in respect of payments made to a trust governed by an employees profit sharing plan

(a) before March 29, 2012; or

(b) before 2013 pursuant to an obligation arising under a written agreement or arrangement entered into before March 29, 2012.

47. (1) The definition “registered life insurance policy” in subsection 211(1) of the Act is replaced by the following:

“registered life insurance policy”
« police d’assurance-vie agréée »

“registered life insurance policy” means a life insurance policy issued or effected as or under a pooled registered pension plan, a registered retirement savings plan, a deferred profit sharing plan or a registered pension plan;

(2) Subsection (1) comes into force or is deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

48. (1) Paragraph 212(1)(h) of the Act is amended by adding the following before subparagraph (iii):

(ii) an amount distributed from a pooled registered pension plan that has been designated by the administrator of the plan in accordance with subsection 147.5(18),

(2) The portion of subparagraph 212(1)(h)(iii.1) of the Act before clause (B) is replaced by the following:

(iii.1) the portion of the payment that is transferred by the payer on behalf of the non-resident person, pursuant to an authorization in prescribed form, to a pooled registered pension plan, registered pension plan, registered retirement savings plan or registered retirement income fund and that

(A) because of any of subsections 146(21), 147.3(9) and 147.5(22) would not, if the non-resident person had been resident in Canada throughout the taxation year in which the payment was made, be included in computing the non-resident person’s income, or

(3) Subsections (1) and (2) come into force or are deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

49. (1) The Act is amended by adding the following after section 212.2:

Foreign affiliate dumping — conditions for application

212.3 (1) Subsection (2) applies to an investment in a non-resident corporation (in this section referred to as the “subject corporation”) made at any time (in this section referred to as the “investment time”) by a corporation resident in Canada (in this section referred to as the “CRIC”) if

(a) the subject corporation is immediately after the investment time, or becomes as part of a transaction or event or series of transactions or events that includes the making of the investment, a foreign affiliate of the CRIC;

(b) the CRIC is at the investment time, or becomes as part of a transaction or event or series of transactions or events that includes the making of the investment, controlled by a non-resident corporation (in this section referred to as the “parent”); and

Foreign affiliate dumping — consequences

(2) If this subsection applies to an investment in a subject corporation made by a CRIC,

(a) for the purposes of this Part and subject to subsections (3) and (7), the CRIC is deemed to have paid to the parent, and the parent is deemed to have received from the CRIC, at the investment time, a dividend equal to the total of all amounts each of which is the portion of the fair market value at the investment time of any property (not including shares of the capital stock of the CRIC) transferred, any obligation assumed or incurred, or any benefit otherwise conferred, by the CRIC, or of any property transferred to the CRIC which transfer results in the reduction of an amount owing to the CRIC, that can reasonably be considered to relate to the investment; and

(b) in computing the paid-up capital in respect of any class of shares of the capital stock of the CRIC at any time that is at or after the investment time, there is to be deducted the amount of any increase in the paid-up capital in respect of the class, determined without reference to this section, that can reasonably be considered to relate to the investment.

Dividend substitution election

(3) If a CRIC, all corporations that are, at the investment time, qualifying substitute corporations in respect of the CRIC, and the parent (or the parent and another non-resident corporation that is at the investment time controlled by the parent) jointly elect in writing under this subsection in respect of an investment, amounts are agreed on in respect of classes of shares of the capital stock of any of the CRIC and one or more of the qualifying substitute corporations, the total of the amounts agreed on equals the amount of the dividend that would, in the absence of this subsection, be deemed under paragraph (2)(a) to be paid and received, and the election is filed with the Minister on or before the earliest of the filing-due dates of the CRIC and the qualifying substitute corporations for their respective taxation years that include the investment time, then

(a) the dividend that would, in the absence of this subsection, be deemed under paragraph (2)(a) to have been paid by the CRIC to the parent and received by the parent from the CRIC

(i) is reduced by the total of all amounts each of which is an amount agreed on in the election in respect of a class of shares of the capital stock of a qualifying substitute corporation, and

(ii) is, as reduced by the application of subparagraph (i), deemed to be paid to, and received by, the parent or the other non-resident corporation (if the other non-resident corporation has elected under this subsection), as one or more dividends in the amounts, and in respect of the classes of shares of the capital stock of the CRIC, agreed on in the election; and

(b) a dividend is deemed, at the investment time, to be paid to either the parent or the other non-resident corporation, as the case may be, by each qualifying substitute corporation in respect of which an amount has been agreed on in the election, and received by the parent, or the other non-resident corporation, from that qualifying substitute corporation, in the amount, and in respect of each class referred to in subparagraph (a)(i), agreed on in the election.

Qualifying substitute corporation

(4) For the purposes of this section, “qualifying substitute corporation”, at any time in respect of a CRIC, means a corporation resident in Canada

(a) that is, at that time, controlled by the parent;

(b) that has, at that time, an equity percent-age (as defined in subsection 95(4)) in the CRIC; and

(c) shares of the capital stock of which are, at that time, owned by the parent or another non-resident corporation with which the parent does not, at that time, deal at arm’s length.

Modification of terms — paragraph (10)(e)

(5) In the case of an investment described in paragraph (10)(e), the CRIC is deemed for the purposes of paragraph (2)(a) to transfer to the subject corporation property that relates to the investment, the fair market value of which property is

(a) if the investment is described in subparagraph (10)(e)(i), the amount owing in respect of the debt obligation referred to in that subparagraph immediately after the investment time, or

(b) if the investment is described in subparagraph (10)(e)(ii), the fair market value of the shares referred to in that subparagraph immediately after the investment time.

Application of subsection (7)

(6) Subsection (7) applies if paragraph (2)(a) or (3)(b) applies to an investment in a subject corporation made by a CRIC and

(a) if an election is made under subsection (3) in respect of the investment,

(i) each class of shares of the capital stock of the CRIC or of a qualifying substitute corporation, in respect of which an amount has been agreed on in the election, is a class of which the parent, or another non-resident corporation with which the parent does not, at the investment time, deal at arm’s length, owns shares, and

(ii) the election results in the greatest possible amount that is the total of all amounts each of which would, if subparagraph (7)(b)(i) applied in respect of the investment, be a reduction of paid-up capital in respect of a share of the capital stock of the CRIC, or a qualifying substitute corporation, that is owned by the parent or another non-resident corporation with which the parent does not, at the investment time, deal at arm’s length; or

(b) in any other case, the following conditions are met:

(i) either

(A) there was only one class of issued and outstanding shares of the capital stock of the CRIC at the investment time, or

(B) the CRIC demonstrates that an amount of paid-up capital in respect of one or more classes of shares of the capital stock of the CRIC arose from one or more transfers of property to the CRIC and that

(I) in the case of an investment described in paragraph (10)(f), all the property transferred was used by the CRIC to make, in whole or in part, the direct acquisition referred to in that paragraph, and

(II) in any other case, all the property transferred was used by the CRIC to make, in whole or in part, the investment; and

(ii) at the investment time, each share of the capital stock of the CRIC that was not owned by the parent was owned by

(A) a person who was dealing at arm’s length with the CRIC, or

(B) a non-resident person who was not dealing at arm’s length with the CRIC.

Reduction of deemed dividend

(7) If this subsection applies, the following rules apply:

(a) the amount of any dividend deemed under this section to have been paid by the CRIC or a qualifying substitute corporation and to have been received by a non-resident corporation in respect of the investment is to be reduced by the lesser of

(i) the amount that would, in the absence of this subsection, be deemed to be paid and received as a dividend under this section, and

(ii) one of

(A) if paragraph (6)(a) applies, the amount of paid-up capital in respect of the class of shares in respect of which the dividend is deemed to be paid,

(B) if clause (6)(b)(i)(A) applies, the amount of paid-up capital in respect of the class referred to in that clause immediately before the investment time, or

(C) if clause (6)(b)(i)(B) applies, the total of all amounts of paid-up capital, determined under that clause, in respect of a class of shares of the capital stock of the CRIC; and

(b) in computing the paid-up capital in respect of a class of shares of the capital stock of the CRIC or a qualifying substitute corporation, as the case may be, at any time that is at or after the investment time, there is to be deducted

(i) if clause (a)(ii)(A) applies, the amount determined under paragraph (a) in respect of the class, and

(ii) if clause (a)(ii)(B) or (C) applies, the amount determined under paragraph (a) that can reasonably be considered to relate to the class.

Paid-up capital adjustment

(8) In computing the paid-up capital at any time after March 28, 2012 in respect of a class of shares of the capital stock of a corporation, there is to be added an amount equal to the lesser of

(a) the amount, if any, by which

(i) the total of all amounts deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of the class paid after March 28, 2012 and before that time by the corporation

exceeds

(ii) the total that would be determined under subparagraph (i) if this Act were read without reference to paragraphs (2)(b) and (7)(b) and subsection (9), and

(b) the amount, if any, by which

(i) the total of all amounts required by paragraph (2)(b) or (7)(b) to be deducted in computing the paid-up capital in respect of the class before that time

exceeds

(ii) the total of all amounts required by subsection (9) to be added in computing the paid-up capital in respect of the class before that time.

Paid-up capital reinstatement

(9) If, in respect of an investment in a subject corporation made by a CRIC that is described in paragraph (10)(a), (b) or (f), an amount is required by paragraph (2)(b) or (7)(b) to be deducted in computing the paid-up capital in respect of a class of shares of the capital stock of a particular corporation, and the particular corporation reduces, at a time subsequent to the investment time, the paid-up capital in respect of the class, then the paid-up capital in respect of the class is to be increased, immediately before the subsequent time, by the least of

(a) the amount of the reduction of the paid-up capital at the subsequent time,

(b) the amount, if any, by which

(i) the amount required by paragraph (2)(b) or (7)(b), as the case may be, to be deducted, in respect of the investment, in computing the paid-up capital in respect of the class

exceeds

(ii) the total of all amounts required under this subsection to be added, in respect of the investment, to the paid-up capital of the class in respect of a reduction of paid-up capital made before the subsequent time, and

(i) if the property distributed on the reduction of paid-up capital is shares of the capital stock of the subject corporation (in this paragraph referred to as the “subject shares”) or shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for the subject shares, is equal to the fair market value of the subject shares, or the portion of the fair market value of the substituted shares that may reasonably be considered to relate to the subject shares, as the case may be, at the subsequent time,

(ii) the particular corporation demonstrates that it has received directly or indirectly after the investment time and no more than 180 days before the subsequent time

(A) as proceeds from the disposition of the subject shares, or as the portion of the proceeds from the disposition of the substituted shares that may reasonably be considered to relate to the subject shares, other than as proceeds from a disposition in respect of which the related acquisition is one to which subsection (18) applies, or

(B) as a dividend or reduction of paid-up capital in respect of a class of subject shares, or the portion of a dividend or reduction of paid-up capital in respect of a class of substituted shares that may reasonably be considered to relate to the subject shares, or

(iii) if neither subparagraph (i) nor (ii) applies, is equal to nil.

Investment in subject corporation

(10) In this section, “investment”, in a subject corporation made by a CRIC, means any of

(a) an acquisition of shares of the capital stock of the subject corporation by the CRIC;

(b) a contribution of capital to the subject corporation by the CRIC, which is deemed to include any transaction or event under which a benefit is conferred on the subject corporation by the CRIC;

(i) that arises in the ordinary course of the business of the CRIC and that is repaid, other than as part of a series of loans or other transactions and repayments, within 180 days after the day on which the amount becomes owing, or

(ii) that is a pertinent loan or indebtedness immediately after the time of the transaction;

(d) an acquisition of a debt obligation of the subject corporation by the CRIC from a person, other than

(i) if the acquisition is made in the ordinary course of the business of the CRIC, a debt obligation acquired from a person with which the CRIC deals at arm’s length at the time of the acquisition, or

(ii) a debt obligation that is a pertinent loan or indebtedness immediately after the time of the acquisition;

(e) an extension of

(i) the maturity date of a debt obligation (other than a debt obligation that is a pertinent loan or indebtedness immediately after the time of the extension) owing by the subject corporation to the CRIC, or

(ii) the redemption, acquisition or cancellation date of shares of the capital stock of the subject corporation owned by the CRIC;

(f) an indirect acquisition by the CRIC of shares of the capital stock of the subject corporation that results from a direct acquisition by the CRIC of shares of the capital stock of another corporation resident in Canada, of which the subject corporation is a foreign affiliate, if the total fair market value of all the shares that are held directly or indirectly by the other corporation and are shares of foreign affiliates of the other corporation exceeds 75% of the total fair market value (determined without reference to debt obligations of any corporation resident in Canada in which the other corporation has a direct or indirect interest) of all of the properties owned by the other corporation; and

(g) an acquisition by the CRIC of an option in respect of, or an interest in, or for civil law a right in, shares of the capital stock of, an amount owing by (other than an amount owing described in subparagraph (c)(i) or (ii)), or a debt obligation of (other than a debt obligation described in subparagraph (d)(i) or (ii)), the subject corporation.

Pertinent loan or indebtedness

(11) For the purposes of subsection (10) and subject to subsection 17.1(3), “pertinent loan or indebtedness”, at any time, means an amount owing at that time by the subject corporation to the CRIC in respect of which all of the following apply:

(a) either

(i) the amount became owing after March 28, 2012, or

(ii) the amount became owing before March 29, 2012 and is a debt obligation for which the maturity date was extended after March 28, 2012 and at or before that time;

(b) the amount owing is not an amount owing described in subparagraph (10)(c)(i) or a debt obligation described in subparagraph (10)(d)(i); and

(c) the CRIC and the parent jointly elect in writing under this paragraph in respect of the amount owing and file the election with the Minister on or before the filing-due date of the CRIC

(i) in the case of an amount owing described in subparagraph (a)(i), for the year in which the amount became owing, or

(ii) in the case of an amount owing described in subparagraph (a)(ii), for the year in which the extension was made.

Late-filed elections

(12) Where an election referred to in subsection (3) or paragraph (11)(c) was not made on or before the day on or before which the election was required by that paragraph to be made, the election is deemed to have been made on that day if the election is made on or before the day that is three years after that day and the penalty in respect of the election is paid by the CRIC when the election is made.

Penalty for late-filed election

(13) For the purposes of subsection (12), the penalty in respect of an election referred to in that subsection is the amount equal to the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period commenc-ing with the day on or before which the election is required by subsection (3) or paragraph (11)(c), as the case may be, to be made and ending on the day on which the election is made.

Rules for paragraph (10)(f)

(14) For the purposes of paragraph (10)(f),

(a) the condition in that paragraph is deemed to be satisfied at the time of the acquisition if

(i) any property (other than shares of foreign affiliates of the other corporation that is referred to in that paragraph) held directly or indirectly by that other corporation is disposed of, after the time of the acquisition, directly or indirectly by that corporation as part of a series of transactions or events that includes the acquisition, and

(ii) at any time that is subsequent to the time of the acquisition and that is in the period during which the series occurs, the condition in that paragraph would have been satisfied had the acquisition occurred at the subsequent time; and

(b) the fair market value of properties held directly or indirectly by the other corporation is not to be taken into account more than once in determining whether the condition in that paragraph is satisfied.

Control

(15) For the purposes of this section and paragraph 128.1(1)(c.3), a CRIC that would, in the absence of this subsection, be controlled at any time

(a) by more than one non-resident corporation is deemed not to be controlled at that time by any such non-resident that controls at that time another non-resident corporation that controls at that time the CRIC, unless the application of this subsection would otherwise result in no non-resident corporation controlling the CRIC; and

(b) by a particular non-resident corporation is deemed not to be controlled at that time by the particular corporation if the particular corporation is controlled at that time by another corporation that is at that time

(i) resident in Canada, and

(ii) not controlled by any non-resident person.

Exception — more closely connected business activities

(16) Subject to subsection (19), subsection (2) does not apply to an investment in a subject corporation made by a CRIC if the CRIC demonstrates that all of the following conditions are met:

(a) the business activities carried on by the subject corporation and all other corporations (those other corporations in this subsection and subsection (17) referred to as the “subject subsidiary corporations”) in which the subject corporation has, at the investment time, an equity percentage (as defined in subsection 95(4)) are at the investment time, and are expected to remain, on a collective basis, more closely connected to the business activities carried on in Canada by the CRIC, or by any corporation resident in Canada with which the CRIC does not, at the investment time, deal at arm’s length, than to the business activities carried on by any non-resident corporation with which the CRIC, at the investment time, does not deal at arm’s length, other than

(i) the subject corporation,

(ii) the subject subsidiary corporations, and

(iii) any corporation that is, immediately before the investment time, a controlled foreign affiliate of the CRIC for the purposes of section 17,

(b) officers of the CRIC had and exercised the principal decision-making authority in respect of the making of the investment and a majority of those officers were, at the investment time, persons each of whom was resident, and working principally,

(i) in Canada, or

(ii) in a country in which a particular corporation is resident if the particular corporation (in this subsection and subsection (17) referred to as a “connected affiliate”) is a controlled foreign affiliate of the CRIC for the purposes of section 17 and carries on business activities that are, at the investment time, and are expected to remain, at least as closely connected to those of the subject corporation and the subject subsidiary corporations, on a collective basis, as the business activities carried on in Canada by the CRIC, or any corporation resident in Canada with which the CRIC does not, at the investment time, deal at arm’s length, as the case may be, are to those of the subject corporation and the subject subsidiary corporations, on a collective basis; and

(i) officers of the CRIC will have and exercise the ongoing principal decision-making authority in respect of the investment,

(ii) a majority of those officers will be persons each of whom will be resident, and working principally, in Canada or in a country in which a connected affiliate is resident, and

(iii) the performance evaluation and compensation of the officers of the CRIC who are resident, and work principally, in Canada, or in a country in which a connected affiliate is resident, will be based on the results of operations of the subject corporation to a greater extent than will be the performance evaluation and compensation of any officer of a non-resident corporation (other than the subject corporation, a corporation controlled by the subject corporation or a connected affiliate) that does not deal at arm’s length with the CRIC.

Dual officers

(17) For the purposes of paragraphs (16)(b) and (c), any person who is an officer of the CRIC and of a non-resident corporation with which the CRIC, at the investment time, does not deal at arm’s length (other than the subject corporation, a subject subsidiary corporation or a connected affiliate) is deemed to not be resident, and to not work principally, in a country in which a connected affiliate is resident.

Exception — corporate reorganizations

(18) Subject to subsections (19) and (20), subsection (2) does not apply to an investment in a subject corporation made by a CRIC if

(a) the investment is described in paragraph (10)(a) and is an acquisition of shares of the capital stock of the subject corporation

(i) from a corporation resident in Canada

(A) to which the CRIC is, immediately before the investment time, related (deter-mined without reference to paragraph 251(5)(b)), and

(B) that is, at no time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm’s length (determined without reference to paragraph 251(5)(b)) with the CRIC, or

(ii) on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a “predecessor corporation”) to form the CRIC if

(A) all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)), and

(B) none of the predecessor corporations deal at arm’s length (determined without reference to paragraph 251(5)(b)) with another predecessor corporation at any time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time;

(b) the investment is described in paragraph (10)(a) and is an acquisition of shares of the capital stock of the subject corporation in which the shares are acquired by the CRIC

(i) in an exchange to which subsection 51(1) applies,

(ii) as consideration for a disposition of shares to which subsection 85.1(3) applies (determined without reference to subsection 85.1(4)),

(iii) in the course of a reorganization of the capital of the subject corporation to which subsection 86(1) applies,

(iv) as a result of a foreign merger (as defined in subsection 87(8.1)) under which the subject corporation was formed,

(v) on a liquidation and dissolution to which subsection 88(3) applies,

(vi) on a redemption of shares of another non-resident corporation that is, immediately before the investment time, a foreign affiliate of the CRIC, or

(vii) as a dividend or a reduction of paid-up capital in respect of the shares of another non-resident corporation that is, immediately before the investment time, a foreign affiliate of the CRIC;

(c) the investment is an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada

(i) from a corporation

(A) to which the CRIC is, immediately before the investment time, related (determined without reference to paragraph 251(5)(b)), and

(ii) on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a “predecessor corporation”) to form the CRIC if

(A) all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)), and

(iii) in an exchange to which subsection 51(1) applies,

(iv) in the course of a reorganization of the capital of the other corporation to which subsection 86(1) applies, or

(v) to the extent that an investment (other than one described in paragraph (10)(f)) is made in the subject corporation by the other corporation, or by a particular corporation resident in Canada to which the CRIC and the other corporation are related at the investment time, using property transferred, directly or indirectly, by the CRIC to the other corporation or the particular corporation, as the case may be, if the two investments

(A) occur within 30 days of each other, and

(B) are part of the same series of transactions or events; or

(d) the investment is an acquisition of shares of the capital stock of the subject corporation that is described in paragraph (10)(a), or an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada, under which the shares of the subject corporation or the other corporation, as the case may be, are received by the CRIC as the sole consideration for an exchange of a debt obligation owing to the CRIC, other than an exchange to which subsection 51(1) applies.

Preferred shares

(19) Subsection (16) and paragraphs (18)(b) and (d) do not apply to an acquisition of shares of the capital stock of a subject corporation by a CRIC if, having regard to all the terms and conditions of the shares and any agreement in respect of the shares, the shares may not reasonably be considered to fully participate in the profits of the subject corporation and any appreciation in the value of the subject corporation, unless the subject corporation would be a subsidiary wholly-owned corporation of the CRIC throughout the period during which the series of transactions or events that includes the acquisition occurs if the CRIC owned all of the shares of the capital stock of the subject corporation that are owned by any of

(a) the CRIC;

(b) a corporation resident in Canada that is a subsidiary wholly-owned corporation of the CRIC; and

Assumption of debt on liquidation or distribution

(20) Subsection (2) applies to an investment in a subject corporation made by a CRIC that is an acquisition of shares of the capital stock of the subject corporation described in any of subparagraphs (18)(b)(v) to (vii) to the extent of the lesser of

(a) the total of all amounts each of which is the amount of a debt obligation assumed by the CRIC in respect of the liquidation and dissolution, redemption, dividend or reduction of paid-up capital, as the case may be, and

(b) the fair market value of the shares at the investment time.

Persons deemed not to be related

(21) If it can reasonably be considered that one of the main purposes of one or more transactions or events is to cause two or more persons to be related to each other so that, in the absence of this subsection, subsection (2) would not apply because of subsection (18) to an investment in a subject corporation made by a CRIC, those persons are deemed not to be related to each other for the purposes of subsection (18).

Mergers

(22) For the purposes of this section and subsections 219.1(3) and (4),

(a) if there has been an amalgamation to which subsection 87(11) applies,

(i) the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, the parent and each subsidiary referred to in that subsection, and

(ii) the new corporation is deemed not to acquire any property of the parent, or of any subsidiary, as a result of the amalgamation; and

(b) if there has been a winding-up to which subsection 88(1) applies,

(i) the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection, and

(ii) the parent is deemed not to acquire any property of the subsidiary as a result of the winding-up.

Indirect investment

(23) Subsection (2) applies to an investment in a subject corporation made by a CRIC to which, in the absence of this subsection, subsection (2) would not apply because of subsection (16), to the extent that one or more properties received by the subject corporation from the CRIC as a result of the investment, or property substituted for any such property, may reasonably be considered to have been used by the subject corporation, directly or indirectly as part of a series of transactions or events that includes the making of the investment, in a transaction or event to which subsection (2) would have applied if the CRIC had entered into the transaction, or participated in the event, as the case may be, instead of the subject corporation.

Indirect funding

(24) Subsection (2) does not apply to an investment in a subject corporation made by a CRIC to which, in the absence of this subsection, subsection (2) would apply, if the CRIC demonstrates that

(a) all the properties received by the subject corporation from the CRIC as a result of the investment were used, at a particular time that is within 30 days after the investment time and at all times after the particular time, by the subject corporation to make a loan to a particular corporation that was, at the time of the loan, a controlled foreign affiliate of the CRIC for the purposes of section 17;

(b) the particular corporation is, throughout the period that begins at the investment time and during which the series of transactions or events that includes the making of the loan occurs, a corporation in which an investment made by the CRIC would not be subject to subsection (2) because of subsection (16); and

(c) the particular corporation uses, throughout the period during which the loan is outstanding, the proceeds of the loan in an active business (as defined in subsection 95(1)) carried on by it in the country in which it is resident.

Partnerships

(25) For the purposes of this section, subsection 17.1(1) (as it applies in respect of a pertinent loan or indebtedness as defined in subsection (11)), paragraph 128.1(1)(c.3) and subsection 219.1(2),

(a) any transaction entered into, or event participated in, by a partnership is deemed to have been entered into, or participated in, as the case may be, by each member of the partnership in the proportion that the fair market value, at the time of the transaction or event, of the member’s interest — held directly or indirectly through one or more other partnerships — in the partnership is of the fair market value, at that time, of all direct interests in the partnership;

(b) if at any time, based on the assumptions contained in paragraph 96(1)(c), property would be owned by a partnership, that property is deemed to be owned at that time by each member of the partnership in the proportion that the fair market value, at that time, of the member’s interest — held directly or indirectly through one or more other partnerships — in the partnership is of the fair market value, at that time, of all direct interests in the partnership;

(c) if at any time there is an increase (including, for greater certainty, as a result of a particular acquisition of an interest in a partnership in which, immediately prior to the particular acquisition, the member did not have an interest) in the portion of a property that is deemed under paragraph (b) to be owned by a member of a partnership, the member is deemed at that time

(i) to acquire the additional portion of the property, and

(ii) to transfer property that relates to the acquisition of the additional portion and that has a fair market value equal to the fair market value at that time of the additional portion;

(d) if at any time, based on the assumptions contained in paragraph 96(1)(c), an amount would be owing by a partnership, that amount is deemed to be owed by each member of the partnership in the proportion that the fair market value, at that time, of the member’s interest — held directly or indirectly through one or more other partnerships — in the partnership is of the fair market value, at that time, of all direct interests in the partnership;

(e) if a member of a partnership enters into a transaction, or participates in an event, with the partnership, paragraph (a) does not apply to the transaction or event to the extent that the transaction or event would, in the absence of this paragraph, be deemed by paragraph (a) to have been entered into, or participated in, as the case may be, by the member; and

(f) a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership.

(2) Subject to subsection (3), subsection (1) applies in respect of transactions and events that occur after March 28, 2012. However,

(a) subsection (1) does not apply to transactions that occur before 2013 between parties that deal at arm’s length with each other if

(i) either

(A) in the case of an indirect acqui-sition referred to in paragraph 212.3(10)(f) of the Act, as enacted by subsection (1), the CRIC referred to in that paragraph is obligated to complete the direct acquisition referred to in that paragraph under the terms of an agreement in writing entered into before March 29, 2012 between the CRIC and a public corporation that is the other corporation resident in Canada referred to in that paragraph, or

(B) the parties are obligated to complete the transaction under the terms of an agreement in writing entered into between the parties before March 29, 2012, and

(ii) no party to the agreement may be excused from the obligation as a result of amendments to the Act; and

(b) any election referred to in subsection 212.3(3) or paragraph 212.3(11)(c) of the Act, as enacted by subsection (1), that would otherwise be required to be filed with the Minister of National Revenue on or before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been filed with the Minister on a timely basis if it is filed with the Minister on or before the day that is 365 days after the day on which this Act receives royal assent.

(3) If a corporation resident in Canada (in this subsection referred to as the “CRIC”) and a non-resident corporation that controls the CRIC jointly elect in writing under this subsection in respect of all transactions and events to which subsection 212.3(2) of the Act, as enacted by subsection (1), would, in the absence of this subsection, apply and file the election with the Minister of National Revenue on or before the day that is the later of the CRIC’s filing-due date for the CRIC’s taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then, in respect of transactions and events that occur before August 14, 2012, section 212.3 of the Act, as enacted by subsection (1), is to be read without reference to its subsections (3) to (7), (9), (11) to (14), (17) to (22) and (24) and the following rules apply:

(a) subsections 212.3(1) and (2) of the Act are to be read as follows:

212.3 (1) Subsection (2) applies to an investment in a non-resident corporation (referred to in this section as the “subject corporation”) that is made, at any time, by a corporation resident in Canada (referred to in this section as the “CRIC”) if

(a) the subject corporation is, immediately after that time, or becomes, as part of a transaction or event or series of transactions or events that includes the investment, a foreign affiliate of the CRIC;

(b) the CRIC is at that time controlled by another non-resident corporation (referred to in this section as the “parent”); and

(c) the investment may not reasonably be considered to have been made by the CRIC, instead of being made or retained by the parent or another non-resident person that does not deal at arm’s length with the parent, primarily for bona fide purposes other than to obtain a tax benefit (as defined in subsection 245(1)).

(2) If this subsection applies to an investment in a subject corporation,

(a) for the purposes of this Part, the CRIC is deemed to have paid to the parent at the time the investment was made, and the parent is deemed to have received from the CRIC at that time, a dividend equal to the total of all amounts each of which is the fair market value, at that time, of any property (not including shares of the capital stock of the CRIC) transferred, or obligation assumed or incurred, by the CRIC in respect of the investment; and

(b) in computing the paid-up capital at any time after March 28, 2012 of any class of shares of the capital stock of the CRIC, there is to be deducted the amount of any increase, because of the investment, in the paid-up capital in respect of the shares of the class, computed without reference to this section.

(b) subsection 212.3(8) of the Act is to be read as follows:

(8) In computing the paid-up capital at any time after March 28, 2012 in respect of a class of shares of the capital stock of a corporation, there is to be added an amount equal to the lesser of

(a) the amount, if any, by which

(i) the total of all amounts deemed by subsection 84(3), (4) or (4.1) to be a dividend on shares of the class paid after March 28, 2012 and before that time by the corporation,

exceeds

(ii) the total that would be determined under subparagraph (i) if this Act were read without reference to paragraph (2)(b); and

(b) the total of all amounts required by paragraph (2)(b) to be deducted in computing the paid-up capital in respect of the class before that time.

(10) For the purposes of this section, an investment made in a subject corporation by a CRIC means any of

(a) an acquisition of shares of the capital stock of the subject corporation by the CRIC;

(b) a contribution of capital to the subject corporation by the CRIC;

(c) a transaction under which an amount became owing by the subject corporation to the CRIC, other than an amount owing that arises in the ordinary course of the business of the CRIC and that is repaid within a commercially reasonable period;

(d) an acquisition of a debt obligation of the subject corporation by the CRIC from another person, other than, if the acquisition was made in the ordinary course of the business of the CRIC, an acquisition from a person with which the CRIC dealt, at the time of the acquisition, at arm’s length;

(e) an acquisition by the CRIC of an option in respect of, or an interest in, or for civil law a right in, shares of the capital stock, or a debt obligation, of the subject corporation; and

(f) any transaction or event that is similar in effect to any of the transactions described in paragraphs (a) to (e).

(d) subsections 212.3(15) and (16) of the Act are to be read as follows:

(15) For the purposes of this section and paragraph 128.1(1)(c.3), a CRIC that is controlled by more than one non-resident corporation is deemed not to be controlled by any such non-resident that controls another non-resident corporation that controls the CRIC, unless the application of this subsection would otherwise result in no non-resident corporation controlling the CRIC.

(16) In determining whether paragraph (1)(c) applies, the following factors are to be given primary consideration:

(a) whether the business activities carried on by the subject corporation and any other corporation in which the subject corporation has, at the time referred to in subsection (1), an equity percentage (as defined in subsection 95(4)) are at that time, and are expected to remain, more closely connected to the business activities carried on by the CRIC (or by a corporation resident in Canada that is a subsidiary wholly-owned corporation of the CRIC or that is a corporation of which the CRIC is a subsidiary wholly-owned corporation) than to the business activities carried on by any non-resident corporation (other than the subject corporation or any corporation in which the subject corporation has such an equity percentage) with which the CRIC, at that time, does not deal at arm’s length;

(b) whether the terms or conditions of any shares of the subject corporation that are owned by the CRIC at that time, or any agreement in respect of the shares or their issue, are such that the CRIC does not fully participate in the profits of the subject corporation or any appreciation in the value of the subject corporation (for greater certainty, the fact that the shares owned by the CRIC do fully participate in the profits of the subject corporation and any appreciation in the value of the subject corporation is not a relevant factor);

(c) whether the investment was made at the direction or request of a non-resident corporation with which the CRIC was not, at that time, dealing at arm’s length;

(d) whether, in the case of an investment described in paragraph (10)(a), (d), (e) or (f), negotiations with the vendor in respect of the investment were initiated by senior officers of the CRIC who were resident in, and worked principally in, Canada or, if the vendor initiated the transaction, the vendor’s principal point of contact was an officer of the CRIC who was resident in, and worked principally in, Canada;

(e) whether senior officers of the CRIC who were resident in, and worked principally in, Canada had and exercised the principal decision-making authority in respect of the making of the investment, and have and exercise the principal decision making authority in respect of the investment;

(f) whether the performance evaluation or compensation of senior officers of the CRIC who are resident in, and work principally in, Canada is connected to the results of operations of the subject corporation to a greater extent than the performance evaluation or compensation of any senior officers of a non-resident corporation (other than the subject corporation or a corporation controlled by the subject corporation) that does not deal at arm’s length with the CRIC is so connected; and

(g) whether senior officers of the subject corporation report to, and are functionally accountable to, senior officers of the CRIC who are resident in, and work principally in, Canada to a greater extent than to any senior officers of any non-resident corporation (other than the subject corporation) that does not deal at arm’s length with the CRIC.

(e) subsection 212.3(23) of the Act is to be read as follows:

(23) A particular investment by a CRIC in a subject corporation that would, in the absence of this subsection, be excluded from the application of subsection (2) because of paragraph (1)(c) is not to be so excluded to the extent that one or more properties, if any, received by the subject corporation from the CRIC as a result of the particular investment, or property substituted for any such property, may reasonably be considered to have been used by the subject corporation, directly or indirectly as part of a transaction or event or series of transactions or events that includes the particular investment, to make another investment in a non-resident corporation that would, if the other investment had been made by the CRIC, have been subject to subsection (2).

(f) subsection 212.3(25) of the Act is to be read as follows:

(25) For the purposes of this section, paragraph 128.1(1)(c.3) and subsection 219.1(2),

(a) any transaction entered into by a partnership is deemed to have been entered into by each member of the partnership in proportion to the fair market value of the member’s direct or indirect interest in the partnership;

(b) property that would, in the absence of this paragraph, be owned by a partnership is deemed to be owned by each member of the partnership in proportion to the fair market value of the member’s direct or indirect interest in the partnership; and

(c) amounts that would, in the absence of this paragraph, be owing by a partnership are deemed to be owed by each member of the partnership in proportion to the fair market value of the member’s direct or indirect interest in the partnership.

50. (1) Section 214 of the Act is amended by adding the following after subsection (15):

Deemed dividends

(16) For the purposes of this Part,

(a) an amount paid or credited as interest by a corporation resident in Canada, or by a partnership, in a taxation year of the corporation to a non-resident person is deemed to have been paid by the corporation as a dividend, and not to have been paid or credited by the corporation or the partnership as interest, to the extent that an amount in respect of the interest

(i) is not deductible in computing the income of the corporation for the year because of subsection 18(4), or

(ii) is included in computing the income of the corporation for the year under paragraph 12(1)(l.1); and

(b) to the extent that amounts paid or credited to a non-resident person in the year are deemed by paragraph (a) to have been paid by a corporation as dividends, the corporation may designate in its return of income under Part I for the year which amounts paid or credited as interest to the non-resident person in the year are deemed to have been paid as dividends and not as interest.

Deemed interest payments

(17) For the purposes of subsection (16),

(a) interest payable (other than interest payable pursuant to a legal obligation to pay interest on an amount of interest) by a corporation resident in Canada, or by a partnership, in respect of a taxation year of the corporation, but that has not been paid or credited in the year, is deemed to have been paid immediately before the end of the year and not to have been paid or credited at any other time; and

(b) if subsection (6) or (7) deems a payment of interest to have been made to a non-resident person in respect of a debt or other obligation of a corporation, interest that, at the time of the transfer or assignment, is payable by the corporation in respect of the debt or other obligation and has not been paid or credited is deemed to have been paid by the corporation immediately before that time to the non-resident person.

(2) Subsection (1) applies to taxation years that end after March 28, 2012, except that

(a) for taxation years that include March 29, 2012, the amount of each dividend deemed by paragraph 214(16)(a) of the Act, as enacted by subsection (1), to have been paid in the taxation year is the proportion of the amount of the dividend otherwise determined under the paragraph that the number of days in the taxation year that are after March 28, 2012 is of the number of days in the taxation year; and

(b) before August 14, 2012, subsection 214(17) of the Act, as enacted by subsection (1), is to be read as follows:

(17) For the purposes of subsection (16), interest payable (other than interest payable pursuant to a legal obligation to pay interest on an amount of interest) by a corporation resident in Canada, or by a partnership, in respect of a taxation year of the corporation, but that has not been paid or credited in the year, is deemed to have been paid immediately before the end of the year and not at any other time.

51. (1) Section 219.1 of the Act is replaced by the following:

Corporate emigration

219.1 (1) If a taxation year of a corporation (in this subsection and subsection (2) referred to as the “emigrating corporation”) is deemed by paragraph 128.1(4)(a) to have ended at any time, the emigrating corporation shall, on or before its filing-due date for the year, pay a tax under this Part for the year equal to the amount determined by the formula

25% × (A – B)

where

A is the fair market value of all the property owned by the emigrating corporation immediately before that time; and

B is the total of

(a) the paid-up capital in respect of all the shares of the capital stock of the emigrating corporation immediately before that time,

(b) all amounts (other than amounts payable by the emigrating corporation in respect of dividends and amounts payable under this section) each of which is a debt owing by the emigrating corporation, or an obligation of the emigrating corporation to pay an amount, that is outstanding at that time, and

(c) if a tax was payable by the emigrating corporation under subsection 219(1) or this section for a preceding taxation year that began before 1996 and after the emigrating corporation last became resident in Canada, four times the total of all amounts that would, but for sections 219.2 and 219.3 and any tax treaty, have been so payable.

Foreign affiliate dumping — emigrating corporation

(2) The paid-up capital referred to in paragraph (a) of the description of B in subsection (1) is deemed to be nil if

(a) one or more shares of the emigrating corporation are, at the time the emigrating corporation ceases to be resident in Canada, owned by another corporation resident in Canada;

(b) the other corporation is controlled, at that time, by a non-resident corporation; and

(c) the emigrating corporation is, immediately after that time — or becomes, as part of a transaction or event or series of transactions or events that includes the emigrating corporation ceasing to be resident in Canada — a foreign affiliate of the other corporation.

Application of subsection (4)

(3) Subsection (4) applies if

(a) a corporation ceases to be resident in Canada at any time (referred to in subsection (4) as the “emigration time”);

(b) an amount is required by paragraph 212.3(2)(b) or (7)(b) to be deducted in computing the paid-up capital in respect of a class of shares of the capital stock of the corporation because of an investment in a subject corporation made by a CRIC that is described in paragraph 212.3(10)(a), (b) or (f);

(c) subsection 212.3(9) has not applied in respect of any reduction of the paid-up capital in respect of a class of shares of the capital stock of the corporation or a specified predecessor corporation (as defined in subsection 95(1)) of the corporation; and

(d) subsection (2) does not apply in respect of the cessation of residence.

Paid-up capital reinstatement

(4) If this subsection applies, the paid-up capital referred to in paragraph (a) of the description of B in subsection (1) is to be increased, immediately before the time that is immediately before the emigration time, by the lesser of

(a) the total of all amounts each of which is an amount by which the paid-up capital of a class of shares of the capital stock of the corporation was required by paragraph 212.3(2)(b) or (7)(b) to be reduced in respect of an investment in a subject corporation made by the CRIC that is described in paragraph 212.3(10)(a), (b) or (f), and

(b) the total of all amounts each of which is

(i) the fair market value of a share of the capital stock of a subject corporation that is owned by the corporation immediately before the emigration time, or

(ii) the portion of the fair market value of a particular share of the capital stock of a foreign affiliate of the corporation owned by the corporation immediately before the emigration time that may reasonably be considered to relate to a share of the capital stock of a subject corporation that was previously owned by the corporation and for which the particular share was substituted.

Assigned meanings from section 212.3

(5) For the purposes of subsections (3) and (4), “CRIC” and “subject corporation” have the meaning assigned to those terms by subsection 212.3(1) and “investment” has the same meaning as in subsection 212.3(10).

(2) Subsection (1) applies to corporations that cease to be resident in Canada after March 28, 2012.

52. (1) Section 227 of the Act is amended by adding the following after subsection (8.4):

No penalty — certain deemed payments

(8.5) Subsection (8) does not apply to a corporation in respect of

(a) an amount of interest deemed by subsection 214(16) to have been paid as a dividend by the corporation unless, if the Act were read without reference to subsection 214(16), a penalty under subsection (8) would have applied in respect of the amount; and

(b) an amount deemed by subsection 247(12) to have been paid as a dividend by the corporation.

(2) Subsection (1) applies to taxation years that end after March 28, 2012.

53. (1) Subparagraph 241(4)(d)(vii) of the Act is replaced by the following:

(vii) to an official solely for the purposes of the administration or enforcement of the Pension Benefits Standards Act, 1985, the Pooled Registered Pension Plans Act or a similar law of a province,

(2) Paragraph (b) of the definition “official” in subsection 241(10) of the Act is replaced by the following:

(b) an authority engaged in administering a law of a province similar to the Pension Benefits Standards Act, 1985 or the Pooled Registered Pension Plans Act,

(3) Subsections (1) and (2) come into force or are deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

54. (1) Section 247 of the Act is amended by adding the following after subsection (11):

Deemed dividends to non-residents

(12) For the purposes of Part XIII, if a particular corporation that is a resident of Canada for the purposes of Part XIII would have a transfer pricing capital adjustment or a transfer pricing income adjustment for a taxation year, if the particular corporation, or a partnership of which the particular corporation is a member, had undertaken no transactions or series of transactions other than those in which a particular non-resident person, or a partnership of which the particular non-resident person is a member, that does not deal at arm’s length with the particular corporation (other than a corporation that was for the purposes of section 17 a controlled foreign affiliate of the particular corporation throughout the period during which the transaction or series of transactions occurred) was a participant,

(a) a dividend is deemed to have been paid by the particular corporation and received by the particular non-resident person immediately before the end of the taxation year; and

(b) the amount of the dividend is the amount, if any, by which

(i) the amount that would be the portion of the total of the particular corporation’s transfer pricing capital adjustment and transfer pricing income adjustment for the taxation year that could reasonably be considered to relate to the particular non-resident person if

(A) the only transactions or series of transactions undertaken by the particular corporation were those in which the particular non-resident person was a participant, and

(B) the definition “transfer pricing cap-ital adjustment” in subsection (1) were read without reference to the references therein to “1/2 of” and “3/4 of”

exceeds

(ii) the amount that would be the portion of the total of the particular corporation’s transfer pricing capital setoff adjustment, and transfer pricing income setoff adjustment, for the taxation year that could reasonably be considered to relate to the particular non-resident person if

(A) the only transactions or series of transactions undertaken by the particular corporation were those in which the particular non-resident person was a participant, and

(B) the definition “transfer pricing cap-ital adjustment” in subsection (1) were read without reference to the references therein to “1/2 of” and “3/4 of”.

Repatriation

(13) If a dividend is deemed by subsection (12) to have been paid by a corporation and received by a non-resident person, and a particular amount has been paid with the concurrence of the Minister by the non-resident person to the corporation,

(a) the amount of the dividend may be reduced by the amount (in this subsection referred to as the “reduction”) that the Minister considers appropriate, having regard to all the circumstances, and

(b) subsections 227(8.1) and (8.3) apply as if

(i) the amount of the dividend were not reduced, and

(ii) on the day on which the particular amount was paid, the corporation paid to the Receiver General an amount equal to the amount that would be required to be withheld and remitted under Part XIII in respect of the reduction.

Repatriation — interest

(14) If the amount of a dividend is reduced under paragraph (13)(a), the amount of interest payable by a taxpayer because of paragraph (13)(b) may be reduced to the amount that the Minister considers appropriate, having regard to all the circumstances, including the provision of reciprocal treatment by the country in which the non-resident person referred to in subsection (13) is resident.

Non-application of provisions

(15) Section 15, subsections 56(2) and 212.3(2) and section 246 do not apply in respect of an amount to the extent that a dividend is deemed by subsection (12) (determined without reference to subsection (13)) to have been paid in respect of the amount.

(2) Subsection (1) applies in respect of any transaction that occurs after March 28, 2012.

55. (1) The definitions “registered disability savings plan”, “registered education savings plan” and “registered pension plan” in subsection 248(1) of the Act are replaced by the following:

“registered disability savings plan” or “RDSP”
« régime enregistré d’épargne-invalidité » ou « REEI »

“registered disability savings plan” or “RDSP” has the same meaning as in subsection 146.4(1);

“registered education savings plan” or “RESP”
« régime enregistré d’épargne-études » ou « REEE »

“registered education savings plan” or “RESP” has the same meaning as in subsection 146.1(1);

“registered pension plan”
« régime de pension agréé »

“registered pension plan” means a pension plan (other than a pooled pension plan) that has been registered by the Minister for the purposes of this Act and whose registration has not been revoked;

(2) The definition “retirement compensation arrangement” in subsection 248(1) of the Act is amended by adding the following after paragraph (a):

(a.1) a pooled registered pension plan,

(3) The definition “salary deferral arrangement” in subsection 248(1) of the Act is amended by adding the following after paragraph (a):

(a.1) a pooled registered pension plan,

(4) The portion of the definition “superannuation or pension benefit” in subsection 248(1) of the Act before paragraph (a) is replaced by the following:

“superannuation or pension benefit”
« prestation de retraite ou de pension »

“superannuation or pension benefit” includes any amount received out of or under a superannuation or pension fund or plan (including, except for the purposes of subparagraph 56(1)(a)(i), a pooled registered pension plan) and, without restricting the generality of the foregoing, includes any payment made to a beneficiary under the fund or plan or to an employer or former employer of the beneficiary under the fund or plan

(5) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

“pooled pension plan”
« régime de pension collectif »

“pooled pension plan” has the same meaning as in subsection 147.5(1);

“pooled registered pension plan” or “PRPP”
« régime de pension agréé collectif » ou « RPAC »

“pooled registered pension plan” or “PRPP” has the same meaning as in subsection 147.5(1);

“specified unitholder”
« détenteur d’unité déterminé »

“specified unitholder”, of a partnership or trust (referred to in this definition as the “entity”), the interests in which are described by reference to units, means a taxpayer who would be a specified shareholder of the entity if the entity were a corporation and each unit of the entity were a share of a class of the corporation having the same attributes as the unit;

(6) The definition “registered pension plan” in subsection 248(1) of the Act, as enacted by subsection (1), and subsections (2) to (5) come into force or are deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

56. (1) Subsection 252(3) of the Act is replaced by the following:

Extended meaning of “spouse” and “former spouse”

(3) For the purposes of paragraph 56(1)(b), section 56.1, paragraphs 60(b) and (j), section 60.1, subsections 70(6) and (6.1), 73(1) and (5) and 104(4), (5.1) and (5.4), the definition “pre-1972 spousal trust” in subsection 108(1), subsection 146(16), the definition “survivor” in subsection 146.2(1), subparagraph 146.3(2)(f)(iv), subsections 146.3(14), 147(19) and 147.3(5) and (7), section 147.5, subsections 148(8.1) and (8.2), the definition “qualifying transfer” in subsection 207.01(1), subparagraph 210(c)(ii) and subsections 248(22) and (23), “spouse” and “former spouse” of a particular individual include another individual who is a party to a void or voidable marriage with the particular individual.

(2) Subsection (1) comes into force or is deemed to have come into force on the day on which the Pooled Registered Pension Plans Act comes into force.

57. (1) Section 253.1 of the Act is replaced by the following:

Investments in limited partnerships

253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b) and 132(6)(b), 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) 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) comes into force or is deemed to have come into force on the day on which the the Pooled Registered Pension Plans Act comes into force.