Income Tax Amendments Act, 2000 (S.C. 2001, c. 17)
Full Document:
Assented to 2001-06-14
8. (1) Section 17 of the Act is amended by adding the following after subsection (11):
Marginal note:Determination of whether persons related
(11.1) For the purposes of this section, in determining whether persons are related to each other at any time, any rights referred to in subparagraph 251(5)(b)(i) that exist at that time are deemed not to exist at that time to the extent that the exercise of those rights is prohibited at that time under a law of the country under the law of which the corporation was formed or last continued and is governed, that restricts the foreign ownership or control of the corporation.
Marginal note:Back-to-back loans
(11.2) For the purposes of subsection (2) and paragraph (3)(b), where a non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “intermediate lender”) makes a loan to a non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another non-resident person, or a partnership each member of which is non-resident, (in this subsection referred to as the “initial lender”)
(a) the loan made by the intermediate lender to the intended borrower is deemed to have been made by the initial lender to the intended borrower (to the extent of the lesser of the amount of the loan made by the initial lender to the intermediate lender and the amount of the loan made by the intermediate lender to the intended borrower) under the same terms and conditions and at the same time as it was made by the intermediate lender; and
(b) the loan made by the initial lender to the intermediate lender and the loan made by the intermediate lender to the intended borrower are deemed not to have been made to the extent of the amount of the loan deemed to have been made under paragraph (a).
Marginal note:Determination of whether persons related
(11.3) For the purpose of applying paragraph (3)(b) in respect of a corporation resident in Canada described in paragraph (2)(b), in determining whether persons described in subparagraph (3)(b)(i) are related to each other at any time, any rights referred to in paragraph 251(5)(b) that otherwise exist at that time are deemed not to exist at that time where, if the rights were exercised immediately before that time,
(a) all of those persons would at that time be controlled foreign affiliates of the corporation resident in Canada; and
(b) because of subsection (8), subsection (1) would not apply to the corporation resident in Canada in respect of the amount that would, but for this subsection, have been deemed to have been owing at that time to the corporation resident in Canada by the non-resident person described in subparagraph (3)(b)(i).
(2) The definition “exempt loan or transfer” in subsection 17(15) of the Act is replaced by the following:
“exempt loan or transfer”
« prêt ou transfert de biens exclu »
“exempt loan or transfer” means
(a) a loan made by a corporation resident in Canada where the interest rate charged on the loan is not less than the interest rate that a lender and a borrower would have been willing to agree to if they were dealing at arm’s length with each other at the time the loan was made;
(b) a transfer of property (other than a transfer of property made for the purpose of acquiring shares of the capital stock of a foreign affiliate of a corporation or a foreign affiliate of a person resident in Canada with whom the corporation was not dealing at arm’s length) or payment of an amount owing by a corporation resident in Canada pursuant to an agreement made on terms and conditions that persons who were dealing at arm’s length at the time the agreement was entered into would have been willing to agree to;
(c) a dividend paid by a corporation resident in Canada on shares of a class of its capital stock; and
(d) a payment made by a corporation resident in Canada on a reduction of the paid-up capital in respect of shares of a class of its capital stock (not exceeding the total amount of the reduction).
(3) Subsections (1) and (2) apply to taxation years that begin after February 23, 1998.
9. (1) Subsection 18(1) of the Act is amended by striking out the word “and” at the end of paragraph (t), by adding the word “and” at the end of paragraph (u) and by adding the following after paragraph (u):
Marginal note:Interest — authorized foreign bank
(v) where the taxpayer is an authorized foreign bank, an amount in respect of interest that would otherwise be deductible in computing the taxpayer’s income from a business carried on in Canada, except as provided in section 20.2.
(2) Paragraph 18(3.1)(b) of the Act is replaced by the following:
(b) the amount of such an outlay or expense shall, to the extent that it would otherwise be deductible in computing the taxpayer’s income for the year, be included in computing the cost or capital cost, as the case may be, of the building to the taxpayer, to the person with whom the taxpayer does not deal at arm’s length, to the corporation of which the taxpayer is a specified shareholder or to the partnership of which the taxpayer’s share of any income or loss is 10% or more, as the case may be.
(3) Paragraph 18(4)(a) of the Act is replaced by the following:
(a) the amount, if any, by which
(i) the average of all amounts each of which is, in respect of a calendar month that ends in the year, the greatest total amount at any time in the month of the corporation’s outstanding debts to specified non-residents,
exceeds
(ii) two times the total of
(A) the retained earnings of the corporation at the beginning of the year, except to the extent that those earnings include retained earnings of any other corporation,
(B) the average of all amounts each of which is the corporation’s contributed surplus at the beginning of a calendar month that ends in the year, to the extent that it was contributed by a specified non-resident shareholder of the corporation, and
(C) the average of all amounts each of which is the corporation’s paid-up capital at the beginning of a calendar month that ends in the year, excluding the paid-up capital in respect of shares of any class of the capital stock of the corporation owned by a person other than a specified non-resident shareholder of the corporation,
(4) Paragraph (b) of the definition “outstanding debts to specified non-residents” in subsection 18(5) of the Act is replaced by the following:
(b) an amount outstanding at the particular time as or on account of a debt or other obligation to pay an amount to
(i) a non-resident insurance corporation to the extent that the obligation was, for the non-resident insurance corporation’s taxation year that included the particular time, designated insurance property in respect of an insurance business carried on in Canada through a permanent establishment as defined by regulation, or
(ii) an authorized foreign bank, if the bank uses or holds the obligation at the particular time in its Canadian banking business;
(5) Subsection 18(8) of the Act is repealed.
(6) Subparagraph 18(9)(a)(ii) of the Act is replaced by the following:
(ii) as, on account of, in lieu of payment of or in satisfaction of, interest, taxes (other than taxes imposed on an insurer in respect of insurance premiums of a non-cancellable or guaranteed renewable accident and sickness insurance policy, or a life insurance policy other than a group term life insurance policy that provides coverage for a period of 12 months or less), rent or royalties in respect of a period that is after the end of the year, or
(7) Section 18 of the Act is amended by adding the following after subsection (9.01):
Marginal note:Application of subsection (9) to insurers
(9.02) For the purpose of subsection (9), an outlay or expense made or incurred by an insurer on account of the acquisition of an insurance policy (other than a non-cancellable or guaranteed renewable accident and sickness insurance policy or a life insurance policy other than a group term life insurance policy that provides coverage for a period of 12 months or less) is deemed to be an expense incurred as consideration for services rendered consistently throughout the period of coverage of the policy.
(8) Subsections (1) and (4) apply after June 27, 1999.
(9) Subsection (2) applies to outlays and expenses made or incurred after December 21, 2000.
(10) Subsections (3) and (5) apply to taxation years that begin after 2000.
(11) Subsections (6) and (7) apply to taxation years that begin after 1999 except that, where a taxpayer so elects in writing and files the election with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act receives royal assent, they apply to taxation years that end after 1997.
10. (1) Subsection 18.1(15) of the Act is replaced by the following:
Marginal note:Non-applicability of section 18.1
(15) Subject to subsections (1) and (14), this section does not apply to a taxpayer’s matchable expenditure in respect of a right to receive production if
(a) no portion of the expenditure can reasonably be considered to have been paid to another taxpayer, or to a person with whom the other taxpayer does not deal at arm’s length, to acquire the right from the other taxpayer and
(i) the taxpayer’s expenditure cannot reasonably be considered to relate to a tax shelter or tax shelter investment (within the meaning assigned by subsection 143.2(1)) and none of the main purposes for making the expenditure is that the taxpayer, or a person with whom the taxpayer does not deal at arm’s length, obtain a tax benefit, or
(ii) before the end of the taxation year in which the expenditure is made, the total of all amounts each of which is included in computing the taxpayer’s income for the year (other than any portion of such an amount that is the subject of a reserve claimed by the taxpayer for the year under this Act) in respect of the right to receive production to which the matchable expenditure relates exceeds 80% of the expenditure; or
(b) the expenditure is in respect of commissions or other expenses related to the issuance of an insurance policy for which all or a portion of a risk has been ceded to the taxpayer (in this paragraph referred to as the “reinsurer”) and both the reinsurer and the person to whom the expenditure is made or is to be made are insurers subject to the supervision of
(i) the Superintendent of Financial Institutions, in the case of an insurer that is required by law to report to the Superintendent of Financial Institutions, or
(ii) in any other case, the Superintendent of Insurance or other similar officer or authority of the province under whose laws the insurer is incorporated.
(2) Subsection (1) applies to expenditures made after November 17, 1996.
- Date modified: