Budget Implementation Act, 2007 (S.C. 2007, c. 29)
Full Document:
Assented to 2007-06-22
11. (1) Subsection 120(3) of the Act is amended by striking out the word “and” at the end of paragraph (b), by adding the word “and” at the end of paragraph (c) and by adding the following after paragraph (c):
(d) in the case of a SIFT trust, the amount, if any, by which its income for the year determined without reference to this paragraph exceeds its taxable SIFT trust distributions (as defined in subsection 122(3)) for the year.
(2) Subsection (1) is deemed to have come into force on October 31, 2006.
12. (1) Subsection 122(1) of the Act is replaced by the following:
Marginal note:Tax payable by inter vivos trust
122. (1) Notwithstanding section 117, the tax payable under this Part for a taxation year by an inter vivos trust is the total of
(a) 29% of its amount taxable for the taxation year, and
(b) if the trust is a SIFT trust for the taxation year, the positive or negative amount determined by the formula
A × B
where
- A
- is the positive or negative decimal fraction determined by the formula
C + D - E
where
- C
- is the net corporate income tax rate in respect of the SIFT trust for the taxation year,
- D
- is the provincial SIFT tax factor for the taxation year, and
- E
- is the decimal fraction equivalent of the percentage rate of tax provided in paragraph (a) for the taxation year, and
- B
- is the SIFT trust’s taxable SIFT trust distributions for the taxation year.
(2) Section 122 of the Act is amended by adding the following after subsection (2):
Marginal note:Definitions
(3) The following definitions apply in this section.
“non-deductible distributions amount”
« montant de distribution non déductible »
“non-deductible distributions amount” for a taxation year has the meaning assigned by subsection 104(16).
“taxable SIFT trust distributions”
« montant de distribution imposable »
“taxable SIFT trust distributions”, of a SIFT trust for a taxation year, means the lesser of
(a) its amount taxable for the taxation year, and
(b) the amount determined by the formula
A/(1 - (B + C))
where
- A
- is its non-deductible distributions amount for the taxation year,
- B
- is the net corporate income tax rate in respect of the SIFT trust for the taxation year, and
- C
- is the provincial SIFT tax factor for the taxation year.
(3) Subsections (1) and (2) are deemed to have come into force on October 31, 2006.
13. (1) The Act is amended by adding the following after section 122:
Marginal note:Definitions
122.1 (1) The following definitions apply in this section and in sections 104 and 122.
“entity”
« entité »
“entity” means a corporation, trust or partnership.
“equity value”
« valeur des capitaux propres »
“equity value”, of an entity at any time, means the total fair market value at that time of
(a) if the entity is a corporation, all of the issued and outstanding shares of the capital stock of the corporation;
(b) if the entity is a trust, all of the income or capital interests in the trust; or
(c) if the entity is a partnership, all of the interests in the partnership.
“investment”
« placement »
“investment”, in a trust or partnership, means
(a) a property that is a security of the trust or partnership; or
(b) a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership.
“non-portfolio earnings”
« gains hors portefeuille »
“non-portfolio earnings”, of a SIFT trust for a taxation year, means the total of
(a) the amount, if any, by which
(i) the total of all amounts each of which is the SIFT trust’s income for the taxation year from a business carried on by it in Canada or from a non-portfolio property, other than income that is a taxable dividend received by the SIFT trust,
exceeds
(ii) the total of all amounts each of which is the SIFT trust’s loss for the taxation year from a business carried on by it in Canada or from a non-portfolio property, and
(b) the amount, if any, by which
(i) the total of
(A) all taxable capital gains of the SIFT trust from dispositions of non-portfolio properties during the taxation year, and
(B) one-half of the total of all amounts each of which is deemed under subsection 131(1) to be a capital gain of the SIFT trust for the taxation year in respect of a non-portfolio property of the SIFT trust for the taxation year
exceeds
(ii) the total of the allowable capital losses of the SIFT trust for the taxation year from dispositions of non-portfolio properties during the taxation year.
“non-portfolio property”
« bien hors portefeuille »
“non-portfolio property” of a trust or partnership for a taxation year means a property, held by the trust or partnership at any time in the taxation year, that is
(a) a security of a subject entity, if at that time the trust or partnership holds
(i) securities of the subject entity that have a total fair market value that is greater than 10% of the equity value of the subject entity, or
(ii) securities of the subject entity that, together with all of the securities that the trust or partnership holds of entities affiliated with the subject entity, have a total fair market value that is greater than 50% of the equity value of the trust or partnership;
(b) a Canadian real, immovable or resource property, if at any time in the taxation year the total fair market value of all properties held by the trust or partnership that are Canadian real, immovable or resource properties is greater than 50% of the equity value of the trust or partnership; or
(c) a property that the trust or partnership, or a person or partnership with whom the trust or partnership does not deal at arm’s length, uses at that time in the course of carrying on a business in Canada.
“public market”
« marché public »
“public market” includes any trading system or other organized facility on which securities that are qualified for public distribution are listed or traded, but does not include a facility that is operated solely to carry out the issuance of a security or its redemption, acquisition or cancellation by its issuer.
“qualified REIT property”
« bien admissible de FPI »
“qualified REIT property” of a trust means a property, held by the trust, that is
(a) a real or immovable property situated in Canada;
(b) a security of a subject entity, if the entity derives all or substantially all of its revenues from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of an entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or an entity of which the trust holds a share or an interest, holds together with one or more other persons or partnerships;
(c) a security of a subject entity, if the entity holds no property other than
(i) legal title to real or immovable property of the trust (including real or immovable property that the trust holds together with one or more other persons or partnerships), and
(ii) property described in paragraph (d); or
(d) ancillary to the earning by the trust of the amounts described in subparagraphs (b)(i) and (iii) of the definition “real estate investment trust”.
“real estate investment trust”
« fiducie de placement immobilier »
“real estate investment trust”, for a taxation year, means a trust that is resident in Canada throughout the taxation year, if
(a) the trust at no time in the taxation year holds any non-portfolio property other than qualified REIT properties;
(b) not less than 95% of the trust’s revenues for the taxation year are derived from one or more of the following:
(i) rent from real or immovable properties,
(ii) interest,
(iii) capital gains from dispositions of real or immovable properties,
(iv) dividends, and
(v) royalties;
(c) not less than 75% of the trust’s revenues for the taxation year are derived from one or more of the following:
(i) rent from real or immovable properties, to the extent that it is derived from real or immovable properties situated in Canada,
(ii) interest from mortgages, or hypothecs, on real or immovable properties situated in Canada, and
(iii) capital gains from dispositions of real or immovable properties situated in Canada; and
(d) at no time in the taxation year is the total fair market value of all properties held by the trust, each of which is a real or immovable property situated in Canada, cash, or a prop-erty described in clause 212(1)(b)(ii)(C), less than 75% of the equity value of the trust at that time.
“real or immovable property”
« bien immeuble ou réel »
“real or immovable property”, of a taxpayer,
(a) includes
(i) a security held by the taxpayer, if the security is a security of a trust that satisfies (or of any other entity that would, if it were a trust, satisfy) the conditions set out in paragraphs (a) to (d) of the definition “real estate investment trust”, or
(ii) an interest in real property or a real right in immovables (other than a right to a rental or royalty described in paragraph (d) or (e) of the definition “Canadian resource property” in subsection 66(15)); but
(b) does not include any depreciable property, other than
(i) a property included, otherwise than by an election permitted by regulation, in Class 1, 3 or 31 of Schedule II to the Income Tax Regulations,
(ii) a property ancillary to the ownership or utilization of a property described in subparagraph (i), or
(iii) a lease in, or a leasehold interest in respect of, land or property described in subparagraph (i).
“rent from real or immovable properties”
« loyer de biens immeubles ou réels »
“rent from real or immovable properties”
(a) includes
(i) rent or similar payments for the use of, or right to use, real or immovable properties,
(ii) payment for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties; but
(b) does not include
(i) payment for services supplied or rendered, other than those described in subparagraph (a)(ii), to the tenants of such properties,
(ii) fees for managing or operating such properties,
(iii) payment for the occupation of, use of, or right to use a room in a hotel or other similar lodging facility, or
(iv) rent based on profits.
“security”
« titre »
“security” of a particular entity means any right, whether absolute or contingent, conferred by the particular entity or by an entity that is affiliated with the particular entity, to receive, either immediately or in the future, an amount that can reasonably be regarded as all or any part of the capital, of the revenue or of the income of the particular entity, or as interest paid or payable by the particular entity, and for greater certainty includes
(a) a liability of the particular entity;
(b) if the particular entity is a corporation,
(i) a share of the capital stock of the corporation, and
(ii) a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation;
(c) if the particular entity is a trust, an income or a capital interest in the trust;
(d) if the particular entity is a partnership, an interest as a member of the partnership; and
(e) a right to, or to acquire, anything described in this paragraph and any of paragraphs (a) to (d).
“SIFT trust”
« fiducie intermédiaire de placement déterminée »
“SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust (other than a trust that is a real estate investment trust for the taxation year) that meets the following conditions at any time during the taxation year:
(a) the trust is resident in Canada;
(b) investments in the trust are listed or traded on a stock exchange or other public market; and
(c) the trust holds one or more non-portfolio properties.
“subject entity”
« entité déterminée »
“subject entity” means a person or partnership that is
(a) a corporation resident in Canada;
(b) a trust resident in Canada;
(c) a Canadian resident partnership; or
(d) a non-resident person, or a partnership that is not described in paragraph (c), the principal source of income of which is one or any combination of sources in Canada.
Application of definition “SIFT trust”
(2) The definition “SIFT trust” applies to a trust for a taxation year of the trust that ends after 2006, except that if the trust would have been a SIFT trust on October 31, 2006 had that definition been in force and applied to the trust as of that date, that definition does not apply to the trust for a taxation year of the trust that ends before the earlier of
(a) 2011, and
(b) the first day after December 15, 2006 on which the trust exceeds normal growth as determined by reference to the normal growth guidelines issued by the Department of Finance on December 15, 2006, as amended from time to time, unless that excess arose as a result of a prescribed transaction.
(2) Subsection (1) is deemed to have come into force on October 31, 2006.
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