Income Tax Amendments Act, 2000 (S.C. 2001, c. 17)
Full Document:
Assented to 2001-06-14
48. (1) The definitions “disposition” and “proceeds of disposition” in subsection 66.4(5) of the Act are replaced by the following:
“proceeds of disposition”
« produit de disposition »
“proceeds of disposition” has the meaning assigned by section 54.
(2) Subsection (1) applies to transactions and events that occur after December 23, 1998.
49. (1) Subparagraph 66.7(2)(a)(i) of the Act is replaced by the following:
(i) the foreign exploration and development expenses incurred by the original owner before the original owner disposed of the particular property to the extent that those expenses were incurred when the original owner was resident in Canada, were not otherwise deducted in computing the successor’s income for the year, were not deducted in computing the successor’s income for a preceding taxation year and were not deductible by the original owner, nor deducted by any predecessor owner of the particular property, in computing income for any taxation year
(2) Section 66.7 of the Act is amended by adding the following after subsection (2):
Marginal note:Country-by-country successor FEDE allocations
(2.1) For greater certainty, the portion of an amount deducted under subsection (2) in computing a taxpayer’s income for a taxation year that can reasonably be considered to be in respect of specified foreign exploration and development expenses of the taxpayer in respect of a country is considered to apply to a source in that country.
Marginal note:Method of allocation
(2.2) For the purpose of subsection (2.1), where a taxpayer has incurred specified foreign exploration and development expenses in respect of two or more countries, an allocation to each of those countries for a taxation year shall be determined in a manner that is
(a) reasonable having regard to all the circumstances, including the level and timing of
(i) the taxpayer’s specified foreign exploration and development expenses in respect of the country, and
(ii) the profits or gains to which those expenses relate; and
(b) not inconsistent with the allocation made under subsection (2.1) for the preceding taxation year.
Marginal note:Successor of foreign resource expenses
(2.3) Subject to subsections (6) and (8), where a corporation (in this subsection referred to as the “successor”) acquired a particular foreign resource property in respect of a country (whether by way of a purchase, amalgamation, merger, winding-up or otherwise), there may be deducted by the successor in computing its income for a taxation year an amount not exceeding the total of all amounts each of which is an amount determined in respect of an original owner of the particular property that is the lesser of
(a) 30% of the amount, if any, by which
(i) the cumulative foreign resource expense, in respect of the country, of the original owner determined immediately after the disposition of the particular property by the original owner to the extent that it has not been
(A) deducted by the original owner or any predecessor owner of the particular property in computing income for any taxation year,
(B) otherwise deducted in computing the income of the successor for the year, or
(C) deducted by the successor in computing its income for any preceding taxation year
exceeds the total of
(ii) all amounts each of which is an amount (other than any portion of the amount that can reasonably be considered to result in a reduction of the amount otherwise determined under this paragraph in respect of another original owner of a relevant resource property who is not a predecessor owner of a relevant resource property or who became a predecessor owner of a relevant resource property before the original owner became a predecessor owner of a relevant resource property) that became receivable by a predecessor owner of the particular property, or by the successor in the year or a preceding taxation year, and that
(A) was included by the predecessor owner or the successor in computing an amount determined under paragraph (a) of the description of F in the definition “cumulative foreign resource expense” in subsection 66.21(1) at the end of the year, and
(B) can reasonably be regarded as attributable to the disposition of a property (in this subparagraph referred to as a “relevant resource property”) that is
(I) the particular property, or
(II) another foreign resource property in respect of the country that was acquired from the original owner with the particular property by the successor or a predecessor owner of the particular property, and
(iii) all amounts each of which is an amount by which the amount described in this paragraph is required by reason of subsection 80(8) to be reduced at or before the end of the year, and
(b) the amount, if any, by which the total of
(i) the part of the successor’s income for the year that can reasonably be regarded as attributable to production from the particular property, computed as if no deduction were permitted under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, except that, where the successor acquired the particular property from the original owner at any time in the year (otherwise than by way of an amalgamation or merger or solely by reason of the application of paragraph (10)(c)) and did not deal with the original owner at arm’s length at that time, the amount determined under this subparagraph is deemed to be nil, and
(ii) unless the amount determined under subparagraph (i) is nil by reason of the exception provided under that subparagraph, the lesser of
(A) the total of all amounts each of which is the amount designated by the successor for the year in respect of a Canadian resource property owned by the original owner immediately before being acquired with the particular property by the successor or a predecessor owner of the particular property, not exceeding the amount included in the successor’s income for the year, computed as if no deduction were permitted under section 29 of the Income Tax Application Rules, this section or any of sections 65 to 66.5, that can reasonably be regarded as being attributable to the production from the Canadian resource property, and
(B) the amount, if any, by which 10% of the amount described in paragraph (a) for the year, in respect of the original owner, exceeds the total of all amounts each of which would, but for this subparagraph, clause (2)(b)(iii)(B) and subparagraph (10)(h)(vi), be determined under this paragraph for the year in respect of the particular property or other foreign resource property, in respect of the country, owned by the original owner immediately before being acquired with the particular property by the successor or by a predecessor owner of the particular property
exceeds the total of
(iii) all other amounts each of which is an amount deducted for the year under this subsection or subsection (2) that can reasonably be regarded as attributable to
(A) the part of its income for the year described in subparagraph (i) in respect of the particular property, or
(B) a part of its income for the year described in clause (ii)(A) in respect of which an amount is designated by the successor under clause (ii)(A), and
(iv) all amounts added by reason of subsection 80(13) in computing the amount determined under subparagraph (i),
and income in respect of which an amount is designated under clause (b)(ii)(A) is, for the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses (1)(b)(i)(C), (3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) and subparagraph (10)(g)(iii), deemed not to be attributable to production from a Canadian resource property.
(3) The portion of subsection 66.7(8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Application of subsections (2) and (2.3)
(8) Subsections (2) and (2.3) apply only to a corporation that has acquired a particular foreign resource property
(4) The portion of subsection 66.7(10) of the Act after paragraph (b) and before paragraph (c) is replaced by the following:
for the purposes of the provisions of the Income Tax Application Rules and this Act (other than subsections 66(12.6), (12.601), (12.602), (12.62) and (12.71)) relating to deductions in respect of drilling and exploration expenses, prospecting, exploration and development expenses, Canadian exploration and development expenses, foreign resource pool expenses, Canadian exploration expenses, Canadian development expenses and Canadian oil and gas property expenses (in this subsection referred to as “resource expenses”) incurred by the corporation before that time, the following rules apply:
(5) Subsection 66.7(10) of the Act is amended by adding the following after paragraph (e):
(f) the original owner is deemed to have been resident in Canada before that time while the corporation was resident in Canada,
(6) Subparagraphs 66.7(10)(h)(v) and (vi) of the Act are replaced by the following:
(v) for the purposes of determining the amounts under paragraphs (2)(b) and (2.3)(b), to be income from the sources described in subparagraph (iii) or (iv), as the case may be, of the transferee for its taxation year in which that taxation year of the transferor ends, and
(vi) for the purposes of determining the amounts under paragraphs (2)(b) and (2.3)(b), not to be income from the sources described in subparagraph (iii) or (iv), as the case may be, of the transferor for that year,
(7) The portion of subparagraph 66.7(10)(j)(ii) of the Act before clause (A) is replaced by the following:
(ii) for the purposes of clause 29(25)(d)(i)(B) of the Income Tax Application Rules, clauses (1)(b)(i)(C) and (2)(b)(i)(B), subparagraph (2.3)(b)(i) and clauses (3)(b)(i)(C), (4)(b)(i)(B) and (5)(b)(i)(B) for a taxation year ending after that time, the lesser of
(8) Section 66.7 of the Act is amended by adding the following after subsection (13):
Marginal note:Reduction of foreign resource expenses
(13.1) Where in a taxation year an original owner of foreign resource properties in respect of a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which subsection (2.3) applies,
(a) in determining the cumulative foreign resource expense of the original owner in respect of the country at any time after the time referred to in subparagraph (2.3)(a)(i), there shall be deducted the amount of that cumulative foreign resource expense determined immediately after the disposition; and
(b) for the purpose of paragraph (2.3)(a), the cumulative foreign resource expense of the original owner in respect of the country determined immediately after the disposition that was deducted under subsection 66.21(4) in computing the original owner’s income for the year is deemed to be equal to the lesser of
(i) the amount deducted under paragraph (a) in respect of the disposition, and
(ii) the amount, if any, by which
(A) the specified amount determined under subsection (13.2) in respect of the original owner and the country for the year
exceeds
(B) the total of all amounts determined under this paragraph in respect of another disposition of foreign resource property in respect of the country made by the original owner before the disposition and in the year.
Marginal note:Specified amount — foreign resource expenses
(13.2) Where in a taxation year an original owner of foreign resource properties in respect of a country disposes of all or substantially all of the original owner’s foreign resource properties in circumstances to which subsection (2.3) applies, the specified amount in respect of the country and the original owner for the year for the purposes of clause (13.1)(b)(ii)(A) and of determining the value of D in the definition “cumulative foreign resource expense” in subsection 66.21(1) is the lesser of
(a) the total of all amounts each of which is the amount, if any, by which
(i) an amount deducted under paragraph (13.1)(a) in respect of a disposition in the year by the original owner of foreign resource property in respect of the country
exceeds
(ii) the amount, if any, designated by the original owner in the prescribed form filed with the Minister within six months after the end of the year in respect of an amount described under subparagraph (i), and
(b) the total of
(i) the amount claimed under subsection 66.21(4) by the original owner in respect of the country for the year, and
(ii) the amount that would, but for paragraph 66.21(3)(c), be determined under subsection 66.21(3) in respect of the country and the original owner for the year.
(9) Section 66.7 of the Act is amended by adding the following after subsection (15):
Marginal note:Disposal of foreign resource properties — subsection (2.3)
(15.1) Where in a taxation year a predecessor owner of foreign resource properties disposes of foreign resource properties to a corporation in circumstances to which subsection (2.3) applies,
(a) for the purpose of applying that subsection to the predecessor owner in respect of its acquisition of any foreign resource properties owned by it immediately before the disposition, it is deemed, after the disposition, never to have acquired any such properties except for the purposes of
(i) where the predecessor owner and the corporation dealt with each other at arm’s length at the time of the disposition or the disposition was by way of an amalgamation or merger, determining an amount deductible under subsection (2.3) for the year, and
(ii) determining the value of F in the definition “cumulative foreign resource expense” in subsection 66.21(1); and
(b) where the corporation or another corporation acquires any of the properties on or after the disposition in circumstances to which subsection (2.3) applies, amounts that become receivable by the predecessor owner after the disposition in respect of foreign resource properties retained by it at the time of the disposition are, for the purposes of applying subsection (2.3) to the corporation or the other corporation in respect of the acquisition, deemed not to have become receivable by the predecessor owner.
(10) Subsection 66.7(18) of the Act is replaced by the following:
Marginal note:Application of interpretation provisions
(18) The definitions in subsection 66(15) and sections 66.1 to 66.4 apply in this section.
(11) Subsections (1) and (5) apply to the 1999 and subsequent taxation years.
(12) Subsections 66.7(2.1) and (2.2) of the Act, as enacted by subsection (2), apply to taxation years of a taxpayer that begin after the earlier of
(a) December 31, 1999; and
(b) where, for the purposes of subsection 117(26), a date is designated in writing by the taxpayer and the designation is filed with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent, the later of
(i) the date so designated, and
(ii) December 31, 1994.
(13) Subsection 66.7(2.3) of the Act, as enacted by subsection (2), and subsections (3), (4) and (6) to (10) apply to taxation years that begin after 2000.
- Date modified: