Budget Implementation Act, 2006, No. 2 (S.C. 2007, c. 2)
Full Document:
Assented to 2007-02-21
28. (1) Subparagraph 118.91(b)(i) of the Act is replaced by the following:
(i) such of the deductions permitted under subsections 118(3), (10) and 118.6(2.1) and sections 118.01, 118.02, 118.03, 118.1, 118.2, 118.5, 118.6, 118.62 and 118.7 as can reasonably be considered wholly applicable, and
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, subparagraph 118.91(b)(i) of the Act, as enacted by subsection (1), is to be read without its reference to section 118.03.
29. (1) Sections 118.92 to 118.94 of the Act are replaced by the following:
Marginal note:Ordering of credits
118.92 In computing an individual’s tax payable under this Part, the following provisions shall be applied in the following order: subsections 118(1) and (2), section 118.7, subsections 118(3) and (10) and sections 118.01, 118.02, 118.03, 118.3, 118.61, 118.5, 118.6, 118.9, 118.8, 118.2, 118.1, 118.62 and 121.
Marginal note:Credits in separate returns
118.93 If a separate return of income with respect to a taxpayer is filed under subsection 70(2), 104(23) or 150(4) for a particular period and another return of income under this Part with respect to the taxpayer is filed for a period ending in the calendar year in which the particular period ends, for the purpose of computing the tax payable under this Part by the taxpayer in those returns, the total of all deductions claimed in all those returns under any of subsections 118(3) and (10) and sections 118.01 to 118.7 and 118.9 shall not exceed the total that could be deducted under those provisions for the year with respect to the taxpayer if no separate returns were filed under any of subsections 70(2), 104(23) and 150(4).
Marginal note:Tax payable by non-residents (credits restricted)
118.94 Sections 118, 118.01, 118.02, 118.03 and 118.2, subsections 118.3(2) and (3) and sections 118.6, 118.8 and 118.9 do not apply for the purpose of computing the tax payable under this Part for a taxation year by an individual who at no time in the year is resident in Canada unless all or substantially all of the individual’s income for the year is included in computing the individual’s taxable income earned in Canada for the year.
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, sections 118.92 and 118.94 of the Act, as enacted by subsection (1), are to be read without their references to section 118.03.
30. (1) Paragraph 118.95(a) of the Act is replaced by the following:
(a) such of the deductions as the individual is entitled to under subsections 118(3) and (10) and sections 118.01, 118.02, 118.03, 118.1, 118.2, 118.5, 118.6, 118.62 and 118.7 as can reasonably be considered wholly applicable to the taxation year, and
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, paragraph 118.95(a) of the Act, as enacted by subsection (1), is to be read without its reference to section 118.03.
31. (1) Subparagraph (b)(i) of the description of A in subsection 122.51(2) of the Act is replaced by the following:
(i) the amount determined by the formula
(25/C) × D
where
- C
- is the appropriate percentage for the particular taxation year, and
- D
- is the total of all amounts each of which is the amount determined by the formula in subsection 118.2(1) for the purpose of computing the individual’s tax payable under this Part for a taxation year that ends in the calendar year, and
(2) Subsection (1) applies to the 2005 and subsequent taxation years.
32. (1) The portion of paragraph (a) of the definition “full-rate taxable income” in subsection 123.4(1) of the Act before subparagraph (i) is replaced by the following:
(a) if the corporation is not a corporation described in paragraph (b) or (c) for the year, the amount by which that portion of the corporation’s taxable income for the year (or, for greater certainty, if the corporation is non-resident, that portion of its taxable income earned in Canada for the year) that is subject to tax under subsection 123(1) exceeds the total of
(2) Subparagraph (a)(iv) of the definition “full-rate taxable income” in subsection 123.4(1) of the Act is replaced by the following:
(iv) if the corporation is a credit union throughout the year and the corporation deducted an amount for the year under subsection 125(1) (because of the application of subsections 137(3) and (4)), the amount if any, by which, the lesser of the amounts described in paragraphs 137(3)(a) and (b) exceeds the amount described in paragraph 137(3)(c) in respect of the corporation for the year;
(3) Subparagraph (b)(ii) of the definition “full-rate taxable income” in subsection 123.4(1) of the Act is replaced by the following:
(ii) the least of the amounts, if any, determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the year, and
(4) Subsection (1) applies to taxation years that begin on or after May 2, 2006.
(5) Subsections (2) and (3) apply to the 2008 and subsequent taxation years.
33. (1) The portion of subsection 125(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Small business deduction
125. (1) There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the taxation year, a Canadian-controlled private corporation, an amount equal to the corporation’s small business deduction rate for the taxation year multiplied by the least of
(2) Section 125 of the Act is amended by adding the following after subsection (1):
Marginal note:Small business deduction rate
(1.1) For the purpose of subsection (1), a corporation’s small business deduction rate for a taxation year is the total of
(a) that proportion of 16% that the number of days in the taxation year that are before 2008 is of the number of days in the taxation year,
(b) that proportion of 16.5% that the number of days in the taxation year that are in 2008 is of the number of days in the taxation year, and
(c) that proportion of 17% that the number of days in the taxation year that are after 2008 is of the number of days in the taxation year.
(3) Subsection 125(2) of the Act is replaced by the following:
Marginal note:Business limit
(2) For the purpose of this section, a corporation’s business limit for a taxation year is $400,000 unless the corporation is associated in the taxation year with one or more other Canadian-controlled private corporations, in which case, except as otherwise provided in this section, its business limit is nil.
(4) Paragraph 125(3)(a) of the Act is replaced by the following:
(a) if the total of the percentages assigned in the agreement does not exceed 100%, $400,000 multiplied by the percentage assigned to that corporation in the agreement; and
(5) The description of M in the definition “specified partnership income” in subsection 125(7) of the Act is replaced by the following:
- M
- is the lesser of
(i) $400,000, and
(ii) the product obtained when $1,096 is multiplied by the total of all amounts each of which is the number of days in a fiscal period of the partnership that ends in the year, and
(6) Subsections (1) and (2) apply to the 2008 and subsequent taxation years.
(7) Subsection (3) applies to the 2007 and subsequent taxation years except that, for a 2007 or 2008 taxation year that began before 2007, the reference in subsection 125(2) of the Act, as enacted by subsection (3), to “$400,000” is to be read as a reference to the total of
(a) that proportion of $300,000 that the number of days in the taxation year that are before 2007 is of the number of days in the taxation year, and
(b) that proportion of $400,000 that the number of days in the taxation year that are after 2006 is of the number of days in the taxation year.
(8) Subsection (4) applies to the 2007 and subsequent taxation years except that, for a 2007 or 2008 taxation year that began before 2007, the reference in subsection 125(3) of the Act, as enacted by subsection (4), to “$400,000” is to be read as a reference to “the amount that would, if the corporation were not associated in the year with any other corporation, be its business limit for the year determined without reference to subsections (5) and (5.1)”.
(9) Subsection (5) applies to partnership fiscal periods that end after 2006.
(10) In applying subsection 125(5) of the Act to a corporation for a 2007 or 2008 taxation year, of the corporation, that began before 2007, subparagraph 125(5)(a)(i) of the Act is to be read as follows:
(i) the amount that would have been its business limit determined under subsection (3) or (4) for the first such taxation year ending in the calendar year if the reference to $300,000 in subsection (3), as it applied in respect of that first such taxation year, had been read in the same manner as it is read in respect of the particular taxation year ending in the calendar year, and
34. (1) The portion of paragraph 127(5)(a) of the Act before clause (ii)(B) is replaced by the following:
(a) the total of
(i) the taxpayer’s investment tax credit at the end of the year in respect of property acquired before the end of the year, of the taxpayer’s apprenticeship expenditure for the year or a preceding taxation year, of the taxpayer’s flow-through mining expenditure for the year or a preceding taxation year, of the taxpayer’s pre-production mining expenditure for the year or a preceding taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the year or at the end of a preceding taxation year, and
(ii) the lesser of
(A) the taxpayer’s investment tax credit at the end of the year in respect of property acquired in a subsequent taxation year, of the taxpayer’s apprenticeship expenditure for a subsequent taxation year, of the taxpayer’s flow-through mining expenditure for a subsequent taxation year, of the taxpayer’s pre-production mining expenditure for a subsequent taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the subsequent taxation year to the extent that an investment tax credit was not deductible under this subsection for the subsequent taxation year, and
(2) Subsection 127(7) of the Act is replaced by the following:
Marginal note:Investment tax credit of testamentary trust
(7) If, in a particular taxation year of a taxpayer who is a beneficiary under a testamentary trust or under an inter vivos trust that is deemed to be in existence by section 143, an amount is determined in respect of the trust under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9) for its taxation year that ends in that particular taxation year, the trust may, in its return of income for its taxation year that ends in that particular taxation year, designate the portion of that amount that can, having regard to all the circumstances including the terms and conditions of the trust, reasonably be considered to be attributable to the taxpayer and was not designated by the trust in respect of any other beneficiary of the trust, and that portion shall be added in computing the investment tax credit of the taxpayer at the end of that particular taxation year and shall be deducted in computing the investment tax credit of the trust at the end of its taxation year that ends in that particular taxation year.
(3) The portion of subsection 127(8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Investment tax credit of partnership
(8) Subject to subsection (28), where, in a particular taxation year of a taxpayer who is a member of a partnership, an amount would be determined in respect of the partnership, for its taxation year that ends in the particular taxation year, under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9), if
(4) Subsection 127(8.1) of the Act is replaced by the following:
Marginal note:Investment tax credit of limited partner
(8.1) Notwithstanding subsection (8), if a taxpayer is a limited partner of a partnership at the end of a fiscal period of the partnership, the amount, if any, determined under subsection (8) to be added in computing the taxpayer’s investment tax credit at the end of the taxpayer’s taxation year in which that fiscal period ends shall not exceed the lesser of
(a) the portion of the amount that would, if this section were read without reference to this subsection, be determined under subsection (8) to be the amount to be added in computing the taxpayer’s investment tax credit at the end of the taxpayer’s taxation year in which that fiscal period ends as is considered to have arisen because of the expenditure by the partnership of an amount equal to the taxpayer’s expenditure base (as determined under subsection (8.2) in respect of the partnership) at the end of that fiscal period, and
(b) the taxpayer’s at-risk amount in respect of the partnership at the end of that fiscal period.
(5) Subparagraph 127(8.2)(b)(i) of the Act is amended by striking out the word “or” at the end of clause (A) and by adding the following after that clause:
(A.1) an amount that would be the apprenticeship expenditure of the partnership if the reference to “$2,000” in paragraph (a) of the definition “apprenticeship expenditure” in subsection (9) were read as a reference to “$20,000” and paragraph (b) of that definition were read without reference to “10% of”, or
(6) Subsection 127(8.3) of the Act is replaced by the following:
Marginal note:Investment tax credit — allocation of unallocated partnership ITCs
(8.3) For the purpose of subsection (8), and subject to subsection (8.4), if a taxpayer is a member of a partnership (other than a specified member) throughout a fiscal period of the partnership, there shall be added to the amount that can reasonably be considered to be that member’s share of the amount determined under subsection (8) the amount, if any, that is such portion of the amount determined under subsection (8.31) in respect of that fiscal period as is reasonable in the circumstances (having regard to the investment in the partnership, including debt obligations of the partnership, of each of those members of the partnership who was a member of the partnership throughout the fiscal period of the partnership and who was not a specified member of the partnership during the fiscal period of the partnership).
Marginal note:Amount of unallocated partnership ITC
(8.31) For the purpose of subsection (8.3), the amount determined under this subsection in respect of a fiscal period of a partnership is the amount, if any, by which
(a) the total of all amounts each of which is an amount that would, if the partnership were a person and its fiscal period were its taxation year, be determined in respect of the partnership under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9) for a taxation year that is the fiscal period,
exceeds
(b) the total of
(i) the total of all amounts each of which is the amount determined under subsection (8) in respect of the fiscal period to be the share of the total determined under paragraph (a) of a partner of the partnership (other than a member of the partnership who was at any time in the fiscal period of the partnership a specified member of the partnership),
(ii) the total of all amounts each of which is the amount determined under subsection (8), with reference to subsection (8.1), in respect of the fiscal period to be the share of the total determined under paragraph (a) of a partner of the partnership who was at any time in the fiscal period of the partnership a specified member of the partnership, and
(iii) the amount, if any, by which
(A) the amount that would be determined under subparagraph (i) in respect of the partners referred to in subparagraph (ii) if subparagraph (i) applied only to those partners and those partners were not specified members of the partnership,
exceeds
(B) the amount determined under subparagraph (ii) in respect of those partners.
(7) The definition “investment tax credit” in subsection 127(9) of the Act is amended by adding the following after paragraph (a.3):
(a.4) the total of all amounts each of which is an apprenticeship expenditure of the taxpayer for the taxation year in respect of an eligible apprentice,
(8) Subsection 127(9) of the Act is amended by adding the following in alphabetical order:
“apprenticeship expenditure”
« dépense d’apprentissage »
“apprenticeship expenditure” of a taxpayer for a taxation year in respect of an eligible apprentice is the lesser of
(a) $2,000, and
(b) 10% of the eligible salary and wages payable by the taxpayer in the taxation year to the eligible apprentice in respect of the eligible apprentice’s employment, in the taxation year and on or after May 2, 2006, by the taxpayer in a business carried on in Canada by the taxpayer in the taxation year;
“eligible apprentice”
« apprenti admissible »
“eligible apprentice” means an individual who is employed in a prescribed trade in Canada during the first two years of the individual’s apprenticeship contract, which is registered with Canada or a province under an apprenticeship program designed to certify or license individuals in the trade;
“eligible salary and wages”
« traitement et salaire admissibles »
“eligible salary and wages” payable by a taxpayer to an eligible apprentice means the amount, if any, that is the salary and wages payable by the taxpayer to the eligible apprentice in respect of the first 24 months of the apprenticeship (other than remuneration that is based on profits, bonuses, amounts described in section 6 or 7, and amounts deemed to be incurred by subsection 78(4));
(9) The portion of subsection 127(10.2) of the Act before paragraph (a) of the description of A is replaced by the following:
Marginal note:Expenditure limit determined
(10.2) For the purpose of subsection (10.1), a corporation’s expenditure limit for a particular taxation year is the amount determined by the formula
($6,000,000 - 10A) × B/C
where
- A
- is the greater of $400,000 and either
(10) Subsection 127(11.1) of the Act is amended by striking out the word “and” at the end of paragraph (c.3) and by adding the following after that paragraph:
(c.4) the amount of a taxpayer’s apprenticeship expenditure for a taxation year is deemed to be the amount of the taxpayer’s apprenticeship expenditure for the year otherwise determined less the amount of any government assistance or non-government assistance in respect of the expenditure for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive; and
(11) Section 127 of the Act is amended by adding the following after subsection (11.3):
Marginal note:Special rule for eligible salary and wages — apprentices
(11.4) For the purpose of the definition “eligible salary and wages” in subsection (9), the eligible salary and wages payable by a taxpayer in a taxation year to an eligible apprentice in respect of the eligible apprentice’s employment in the taxation year is, if the eligible apprentice is employed by any other taxpayer who is related to the taxpayer (including a partnership that has a member that is related to the taxpayer) in the calendar year that includes the end of the taxpayer’s taxation year, deemed to be nil unless the taxpayer is designated in prescribed form by all of those related taxpayers to be the only employer of the eligible apprentice for the purpose of the taxpayer applying that definition to the salary and wages payable by the taxpayer to the eligible apprentice in that taxation year, in which case
(a) the eligible salary and wages payable by the taxpayer in the taxation year to the eligible apprentice in respect of the eligible apprentice’s employment in the taxation year shall be the amount determined without reference to this subsection; and
(b) the eligible salary and wages payable to the eligible apprentice by each of the other related taxpayers in their respective taxation years that end in the calendar year is deemed to be nil.
(12) Subsections (1) to (8), (10) and (11) apply to taxation years that end on or after May 2, 2006 except that, in respect of a taxpayer’s taxation year that ends in 2006, subsections 127(8.3) and (8.31) of the Act, as enacted by subsection (6), shall be read as follows:
(8.3) Where
(a) the amount that would, if the partnership were a person and its fiscal period were its taxation year, be determined in respect of the partnership under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9) for a taxation year
exceeds
(b) the total of all amounts each of which is the amount determined, under subsections (8) and (8.1), to be the share thereof of a limited partner of the partnership,
such portion of the excess as is reasonable in the circumstances (having regard to the investment in the partnership, including debt obligations of the partnership, of each of those members of the partnership who was a member of the partnership throughout the fiscal period of the partnership and who was not a limited partner of the partnership during the fiscal period of the partnership) shall, for the purposes of subsection (8), be considered to be the amount that may reasonably be considered to be that member’s share of the amount described in paragraph (a).
(13) Subsection (9) applies to the 2007 and subsequent taxation years except that, for a 2007 or 2008 taxation year that immediately follows a taxation year that ended before 2007, the reference in the formula in subsection 127(10.2) of the Act, as enacted by subsection (9), to “$6,000,000” is to be read as a reference to “$5,000,000” and the reference to “$400,000” in the description of A is to be read as a reference to “$300,000”.
- Date modified: