SHORT TITLE

Marginal note:Short title

1. This Act may be cited as the Budget and Economic Statement Implementation Act, 2007.

PART 1AMENDMENTS IN RESPECT OF THE GOODS AND SERVICES TAX/HARMONIZED SALES TAX

R.S., c. E-15Excise Tax Act

• 2. (1) Section 217 of the Excise Tax Act is amended by adding the following after paragraph (c):

  • (c.1) a taxable supply made in Canada of intangible personal property that is a zero-rated supply only because it is included in section 10 or 10.1 of Part V of Schedule VI, other than

    • (i) a supply that is made to a consumer of the property, or

    • (ii) a supply of intangible personal property that is acquired for consumption, use or supply exclusively in the course of commercial activities of the recipient of the supply or activities that are engaged in exclusively outside Canada by the recipient of the supply and that are not part of a business or adventure or concern in the nature of trade engaged in by that recipient in Canada,

• (2) Subsection (1) applies to supplies made after March 19, 2007.

Marginal note:2001, c. 15, s. 8(1)

• 3. (1) Paragraph 218.1(1)(d) of the Act is replaced by the following:

  • (d) every person who is the recipient of a supply that is  included  in any of paragraphs 217(c.1), (d) or (e) and that is made in a particular participating province

• (2) Subsection (1) applies to supplies made after March 19, 2007.

Marginal note:2000, c. 30, s. 64(1)

• 4. (1) Paragraph 236(1)(b) of the Act is replaced by the following:

  • (b) one or both of the following situations apply:

    • (i) subsection 67.1(1) of the Income Tax Act applies, or would apply, if the person were a taxpayer under that Act, to all of the composite amount or that part of it that is, for the purposes of that Act, an amount (other than an amount to which subsection 67.1(1.1) of that Act applies) paid or payable in respect of the human consumption of food or beverages or the enjoyment of entertainment and section 67.1 of that Act deems the composite amount or that part to be 50% of a particular amount,

    • (ii) subsection 67.1(1.1) of that Act applies, or would apply, if the person were a taxpayer under that Act, to all of the composite amount or that part of it that is, for the purposes of that Act, an amount paid or payable in respect of the consumption of food or beverages by a long-haul truck driver during the driver’s eligible travel period (as those terms are defined in section 67.1 of that Act), and section 67.1 of that Act deems the composite amount or that part to be a percentage of a specified particular amount, and

• Marginal note:2000, c. 30, s. 64(1)

  (2) The formula and its descriptions in subsection 236(1) of the Act are replaced by the following:

  [50% × (A/B) × C] + [40% × (D/B) × C]

  where

  A

  is

  • (i) in the case where subparagraph (b)(i) applies, the particular amount, and

  • (ii) in any other case, zero,

  B

  is the composite amount,

  C

  is the input tax credit, and

  D

  is

  • (i) in the case where subparagraph (b)(ii) applies, the specified particular amount, and

  • (ii) in any other case, zero.

• (3) The formula in subsection 236(1) of the Act, as enacted by subsection (2), is replaced by the following:

  [50% × (A/B) × C] + [35% × (D/B) × C]

• (4) The formula in subsection 236(1) of the Act, as enacted by subsection (3), is replaced by the following:

  [50% × (A/B) × C] + [30% × (D/B) × C]

• (5) The formula in subsection 236(1) of the Act, as enacted by subsection (4), is replaced by the following:

  [50% × (A/B) × C] + [25% × (D/B) × C]

• (6) The formula in subsection 236(1) of the Act, as enacted by subsection (5), is replaced by the following:

  [50% × (A/B) × C] + [20% × (D/B) × C]

• (7) Subsection (1) applies to

  • (a) amounts in respect of a supply of food, beverages or entertainment if tax under Part IX of the Act in respect of the supply becomes payable, or is paid without having become payable, after March 19, 2007 and no allowance or reimbursement is paid in respect of the supply; and

  • (b) amounts paid after March 19, 2007 as an allowance or reimbursement in respect of a supply of food, beverages or entertainment.

• (8) Subsection (2) applies to

  • (a) amounts in respect of a supply of food, beverages or entertainment if tax under Part IX of the Act in respect of the supply becomes payable, or is paid without having become payable, after March 19, 2007 and before 2008 and no allowance or reimbursement is paid in respect of the supply; and

  • (b) amounts paid after March 19, 2007 and before 2008 as an allowance or reimbursement in respect of a supply of food, beverages or entertainment.

• (9) Subsection (3) applies to

  • (a) amounts in respect of a supply of food, beverages or entertainment if tax under Part IX of the Act in respect of the supply becomes payable, or is paid without having become payable, in 2008 and no allowance or reimbursement is paid in respect of the supply; and

  • (b) amounts paid in 2008 as an allowance or reimbursement in respect of a supply of food, beverages or entertainment.

• (10) Subsection (4) applies to

  • (a) amounts in respect of a supply of food, beverages or entertainment if tax under Part IX of the Act in respect of the supply becomes payable, or is paid without having become payable, in 2009 and no allowance or reimbursement is paid in respect of the supply; and

  • (b) amounts paid in 2009 as an allowance or reimbursement in respect of a supply of food, beverages or entertainment.

• (11) Subsection (5) applies to

  • (a) amounts in respect of a supply of food, beverages or entertainment if tax under Part IX of the Act in respect of the supply becomes payable, or is paid without having become payable, in 2010 and no allowance or reimbursement is paid in respect of the supply; and

  • (b) amounts paid in 2010 as an allowance or reimbursement in respect of a supply of food, beverages or entertainment.

• (12) Subsection (6) applies to

  • (a) amounts in respect of a supply of food, beverages or entertainment if tax under Part IX of the Act in respect of the supply becomes payable, or is paid without having become payable, after 2010 and no allowance or reimbursement is paid in respect of the supply; and

  • (b) amounts paid after 2010 as an allowance or reimbursement in respect of a supply of food, beverages or entertainment.

Marginal note:1993, c. 27, s. 98(3)

• 5. (1) Subsection 237(3) of the Act is replaced by the following:

  • Marginal note:Minimum instalment base

    (3) For the purposes of subsection (1), if a registrant’s instalment base for a reporting period is less than $3,000, it is deemed to be nil.

• (2) Subsection (1) applies to reporting periods beginning after 2007.

Marginal note:1997, c. 10, s. 57(1)

• 6. (1) Subsection 248(1) of the Act is replaced by the following:

  Marginal note:Election for fiscal years

  • 248. (1) A registrant that is a charity on the first day of a fiscal year of the registrant or whose threshold amount for a fiscal year does not exceed $1,500,000 may make an election to have reporting periods that are fiscal years of the registrant, to take effect on the first day of that fiscal year.

• Marginal note:1997, c. 10, s. 57(2)

  (2) Paragraphs 248(2)(b) and (c) of the Act are replaced by the following:

  • (b) if the person is not a charity and the threshold amount of the person for the second or third fiscal quarter of the person in a fiscal year of the person exceeds $1,500,000, the beginning of the first fiscal quarter of the person for which the threshold amount exceeds that amount, and

  • (c) if the person is not a charity and the threshold amount of the person for a fiscal year of the person exceeds $1,500,000, the beginning of that fiscal year.

• (3) Subsections (1) and (2) apply to fiscal years beginning after 2007.

• 7. (1) Schedule VII to the Act is amended by adding the following after section 1.1:

  • 1.2 For the purposes of section 1, subsection 140(2) of the Customs Tariff does not apply in respect of the reference to heading 98.04.

• (2) Subsection (1) is deemed to have come into force on January 1, 1998.

PART 2AMENDMENT RELATING TO EXCISE TAX ON RENEWABLE FUELS

R.S., c. E-15Excise Tax Act

Marginal note:1993, c. 25, s. 56; 2003, c. 15, ss. 61(1) and 62(1)

• 8. (1) Sections 23.4 and 23.5 of the Excise Tax Act are repealed.

• (2) Subsection (1) comes into force, or is deemed to have come into force, on April 1, 2008.

PART 3AMENDMENTS RELATING TO INCOME TAX

R.S., c. 1 (5th Supp.)Income Tax Act

• 9. (1) Paragraph (a) of the description of B in subsection 12(10.2) of the Income Tax Act is replaced by the following:

  • (a) the total of all amounts each of which is

    • (i) deemed by subsection (10.4) or 104(5.1) or (14.1) to have been paid out of the taxpayer’s NISA Fund No. 2 before the particular time, or

    • (ii) deemed by subsection 70(5.4) or 73(5) to have been paid out of another person’s NISA Fund No. 2 on being transferred to the taxpayer’s NISA Fund No. 2 before the particular time,

• (2) Section 12 of the Act is amended by adding the following after subsection (10.3):

  • Marginal note:Acquisition of control — corporate NISA Fund No. 2

    (10.4) For the purpose of subsection (10.2), if at any time there is an acquisition of control of a corporation, the balance of the corporation’s NISA Fund No. 2, if any, at that time is deemed to be paid out to the corporation immediately before that time.

• (3) Subsections (1) and (2) apply to the balance in a NISA Fund No. 2 to the extent that that balance consists of contributions made to the fund, and amounts earned on those contributions, in the 2008 and subsequent taxation years.

• 10. (1) The portion of subsection 17(8) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Exception

    (8) Subsection (1) does not apply to a corporation resident in Canada for a taxation year of the corporation in respect of an amount owing to the corporation by a non-resident person if the non-resident person is a controlled foreign affiliate of the corporation throughout the period in the year during which the amount is owing to the extent that it is established that the amount owing

• (2) Section 17 of the Act is amended by adding the following after subsection (8):

  • Marginal note:Borrowed money

    (8.1) Subsection (8.2) applies in respect of money (referred to in this subsection and in subsection (8.2) as “new borrowings”) that a controlled foreign affiliate of a particular corporation resident in Canada has borrowed from the particular corporation to the extent that the affiliate has used the new borrowings

    • (a) to repay money (referred to in this subsection and in subsection (8.2) as “previous borrowings”) previously borrowed from any person or partnership, if

      • (i) the previous borrowings became owing after the last time at which the affiliate became a controlled foreign affiliate of the particular corporation, and

      • (ii) the previous borrowings were, at all times after they became owing, used for a purpose described in subparagraph (8)(a)(i) or (ii); or

    • (b) to pay an amount owing (referred to in this subsection and in subsection (8.2) as the “unpaid purchase price”) by the affiliate for property previously acquired from any person or partnership, if

      • (i) the property was acquired, and the unpaid purchase price became owing, by the affiliate after the last time at which it became a controlled foreign affiliate of the particular corporation,

      • (ii) the unpaid purchase price is in respect of the property, and

      • (iii) throughout the period that began when the unpaid purchase price became owing by the affiliate and ended when the unpaid purchase price was so paid, the property had been used principally to earn income described in clause (8)(a)(i)(A) or (B).

  • Marginal note:Deemed use

    (8.2) To the extent that this subsection applies in respect of new borrowings, the new borrowings are, for the purpose of subsection (8), deemed to have been used for the purpose for which the proceeds from the previous borrowings were used or were deemed by this subsection to have been used, or to acquire the property in respect of which the unpaid purchase price was payable, as the case may be.

• (3) The definition “controlled foreign affiliate” in subsection 17(15) of the Act is replaced by the following:

  “controlled foreign affiliate”

  « société étrangère affiliée contrôlée »

  “controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means a corporation that would, at that time, be a controlled foreign affiliate of the taxpayer within the meaning assigned by the definition “controlled foreign affiliate” in subsection 95(1) if the word “or” were added at the end of paragraph (a) of that definition and

  • (a) subparagraph (b)(ii) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with the taxpayer,”; and

  • (b) subparagraph (b)(iv) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with any relevant Canadian shareholder;”.

• (4) Subsections (1) and (2) apply to taxation years that begin after February 23, 1998 and, notwithstanding subsections 152(4) to (5) of the Act, any assessment of the taxpayer’s tax, interest and penalties payable under the Act for any taxation year that begins after February 23, 1998 and ends before October 2, 2007 shall be made that is necessary to take subsections (1) and (2) into account.

• (5) Subsection (3) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998, except that, in applying the definition “controlled foreign affiliate”, in subsection 17(15) of the Act, as enacted by subsection (3),

  • (a) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, that definition is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate” has the meaning that would be assigned by the definition “controlled foreign affiliate” in subsection 95(1) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, if the word “or” were added at the end of paragraph (a) of that definition and

    • (a) subparagraph (b)(ii) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with the taxpayer,”; and

    • (b) subparagraph (b)(iv) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with any relevant Canadian shareholder;”.

  • (b) for taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998 and before 2003, that definition is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate” has the meaning that would be assigned by the definition “controlled foreign affiliate” in subsection 95(1) for taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998 and before 2003, if subparagraph (b)(iii) of that definition were read as “each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any person resident in Canada with whom the taxpayer does not deal at arm’s length.”.

• 11. (1) Subsection 18(9) of the Act is amended by striking out the word “and” at the end of paragraph (d), by adding the word “and” at the end of paragraph (e) and by adding the following after paragraph (e):

  • (f) for the purpose of the definition “eligible child care space expenditure” in subsection 127(9), the portion of an expenditure (other than for the acquisition of depreciable property) that is made or incurred by a taxpayer in a taxation year and that would, but for paragraph (a), have been deductible under this Act in computing the taxpayer’s income for the year, is deemed

    • (i) not to be made or incurred by the taxpayer in the year, and

    • (ii) to be made or incurred by the taxpayer in the subsequent taxation year to which the expenditure can reasonably be considered to relate.

• (2) Subsection (1) applies to expenses incurred on or after March 19, 2007.

• 12. (1) The Act is amended by adding the following after section 18.1:

  Marginal note:Definitions

  • 18.2 (1) The following definitions apply in this section.

    “aggregate double-dip income”

    « revenu total résultant d’un cumul de déductions »

    “aggregate double-dip income”, of a particular corporation for a taxation year in respect of an inter-affiliate loan, means the total of the double-dip exempt earnings amount and the double-dip taxable earnings amount of the particular corporation for the taxation year in respect of the inter-affiliate loan.

    “double-dip exempt earnings amount”

    « montant des gains exonérés résultant d’un cumul de déductions »

    “double-dip exempt earnings amount”, of a particular corporation for a taxation year in respect of an inter-affiliate loan owing to a foreign affiliate (referred to in this definition as the “earning foreign affiliate”) of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, means the total of all amounts each of which is the amount, in respect of a share (referred to in this definition as the “specified share”) of the capital stock of a particular foreign affiliate of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, determined by the formula

    A × [B - (C × D)]

    where

    A

    is the participating percentage of the specified share in respect of the earning foreign affiliate at the end of a taxation year of the earning foreign affiliate that ends in the taxation year of the particular corporation;

    B

    is the amount of the re-characterized exempt earnings income of the earning foreign affiliate in respect of the inter-affiliate loan for the taxation year of the earning foreign affiliate;

    C

    is the foreign accrual tax applicable to the amount determined under the description of B; and

    D

    is the relevant tax factor of the particular corporation for the taxation year of the particular corporation.

    “double-dip taxable earnings amount”

    « montant des gains imposables résultant d’un cumul de déductions »

    “double-dip taxable earnings amount” of a particular corporation for a taxation year in respect of an inter-affiliate loan owing to a foreign affiliate (referred to in this definition as the “earning foreign affiliate”), of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, means the total of all amounts each of which is the amount, in respect of a share (referred to in this definition as the “specified share”) of the capital stock of a particular foreign affiliate of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, determined by the formula

    A × [B - (C × D)]

    where

    A

    is the participating percentage of the specified share in respect of the earning foreign affiliate at the end of a taxation year of the earning foreign affiliate that ends in the taxation year of the particular corporation;

    B

    is the amount of the re-characterized taxable earnings income of the earning foreign affiliate in respect of the inter-affiliate loan for the taxation year of the earning foreign affiliate;

    C

    is the foreign accrual tax applicable to the amount determined under the description of B; and

    D

    is the relevant tax factor of the particular corporation for the taxation year of the particular corporation.

    “foreign accrual tax”

    « impôt étranger accumulé »

    “foreign accrual tax” applicable to an amount of re-characterized income of a foreign affiliate (referred to in this definition as the “earning foreign affiliate”), of a particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, for a taxation year in respect of an inter-affiliate loan owing to the earning foreign affiliate means the total of

    • (a) the amount equal to that portion of any foreign income or profit taxes that was paid by the earning foreign affiliate or any other foreign affiliate, of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, that can reasonably be regarded as applicable to the re-characterized income, and

    • (b) the amount that would, if the re-characterized income were an amount included in computing the particular corporation’s income under subsection 91(1) in respect of the earning foreign affiliate, be prescribed in respect of the earning foreign affiliate to be foreign accrual tax that is applicable to the re-characterized income for the purpose of the definition “foreign accrual tax” in subsection 95(1).

    “inter-affiliate loan”

    « prêt entre sociétés affiliées »

    “inter-affiliate loan” in respect of a particular corporation for a taxation year means a debt that is owing to a foreign affiliate of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation or to a partnership of which such a foreign affiliate is a member, if the income that the foreign affiliate derives in a taxation year from the interest paid or payable in respect of the debt is re-characterized income of the foreign affiliate for the taxation year.

    “participating percentage”

    « pourcentage de participation »

    “participating percentage” of a share (referred to in this definition as the “specified share”) of the capital stock of a particular foreign affiliate of a particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, held by the particular corporation at the end of a particular taxation year of a non-resident corporation (referred to in this definition as the “earning foreign affiliate”) that ends in the particular corporation’s taxation year, which earning foreign affiliate was, at the end of the particular taxation year, a foreign affiliate of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, means the percentage that would, if the earning foreign affiliate were a controlled foreign affiliate of the particular corporation, be determined under subparagraph (b)(i) or (ii) of the definition “participating percentage” in subsection 95(1) in respect of the specified share in respect of the earning foreign affiliate at the end of the particular taxation year.

    “re-characterized income”

    « revenu redéfini »

    “re-characterized income” of a foreign affiliate of a corporation for a taxation year in respect of a debt owing to the foreign affiliate means the total of the re-characterized exempt earnings income and the re-characterized taxable earnings income of the foreign affiliate for the taxation year from the debt.

    “re-characterized exempt earnings income”

    « montant des gains exonérés redéfinis »

    “re-characterized exempt earnings income” of a foreign affiliate of a corporation for a taxation year in respect of a debt owing to the foreign affiliate means that portion of the income of the foreign affiliate for the taxation year from the debt that is included

    • (a) under subparagraph 95(2)(a)(ii) in computing the income from an active business of the foreign affiliate for the taxation year, or that would be so included if the income were income from property; and

    • (b) in computing the amount prescribed to be the exempt earnings of the foreign affiliate for the taxation year.

    “re-characterized taxable earnings income”

    « montant des gains imposables redéfinis »

    “re-characterized taxable earnings income” of a foreign affiliate of a corporation for a taxation year in respect of a debt owing to the foreign affiliate means that portion of the income of the foreign affiliate for the taxation year from the debt that is included

    • (a) under subparagraph 95(2)(a)(ii) in computing the income from an active business of the foreign affiliate for the taxation year, or that would be so included if the income were income from property; and

    • (b) in computing the amount prescribed to be the taxable earnings of the foreign affiliate for the taxation year.

    “taxable earnings base adjustment”

    « montant de rajustement des gains imposables »

    “taxable earnings base adjustment” of a partic-ular corporation for a taxation year in respect of a share (referred to in this definition as the “specified share”) of a particular foreign affiliate of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation and in respect of an inter-affiliate loan owing to a foreign affiliate of the particular corporation or of a corporation that does not deal at arm’s length with the particular corporation, means the amount determined by the formula

    A × B/C

    where

    A

    is the amount of interest deduction denied under subsection (2) in respect of the particular corporation in respect of interest relating to the inter-affiliate loan for the taxation year;

    B

    is the amount determined to be the double-dip taxable earnings amount of the particular corporation in respect of the inter-affiliate loan that can be attributed to the specified share for the taxation year; and

    C

    is the aggregate double-dip income of the particular corporation in respect of the inter-affiliate loan for the taxation year.

  • Marginal note:Double-dip interest not deductible

    (2) Notwithstanding any other provision of this Act, in computing the income of a corporation for a taxation year, no amount may be deducted in respect of the corporation’s specified financing expense in respect of an inter-affiliate loan for the taxation year, except to the extent that that specified financing expense exceeds the corporation’s aggregate double-dip income for the taxation year in respect of that inter-affiliate loan.

  • Marginal note:Specified financing expense

    (3) A particular corporation’s specified financing expense in respect of an inter-affiliate loan for a taxation year, is the amount, if any, by which

    • (a) the total of all amounts of interest paid or payable in the taxation year by the particular corporation on, and other costs referred to in paragraph 20(1)(e) deductible in computing the particular corporation’s income for the taxation year in respect of,

      • (i) borrowed money, to the extent that it is reasonable to consider that the borrowed money is used, in that taxation year, directly or indirectly, for the purpose of funding, in whole or in part, the inter-affiliate loan, and

      • (ii) an amount payable for property where it is reasonable to consider that the property, or property substituted for it (or, where the property or property substituted for it is a share of the capital stock of a corporation, property of the corporation or of a person related to the corporation, or property substituted for such property) is used, directly or indirectly, for the purpose of funding, in whole or in part, the inter-affiliate loan,

    exceeds

    • (b) if the particular corporation has subsequently loaned the property referred to in paragraph (a), the total of all amounts that are, in respect of that subsequent loan, included in computing the income of the particular corporation for the taxation year and that relate to the period or periods of use referred to in that paragraph.

  • Marginal note:Aggregate double-dip income — related parties

    (4) Subsection (5) applies to a corporation (referred to in this subsection and subsections (5) to (7) as the “debtor corporation”) and another corporation in respect of a particular taxation year of the debtor corporation and an inter-affiliate loan if

    • (a) the debtor corporation’s specified financing expense for the particular taxation year in respect of the inter-affiliate loan exceeds the debtor corporation’s aggregate double-dip income for the particular taxation year in respect of the inter-affiliate loan;

    • (b) the other corporation’s aggregate double-dip income for a taxation year in respect of the inter-affiliate loan exceeds the other corporation’s specified financing expense for that taxation year in respect of the inter-affiliate loan;

    • (c) the other corporation’s taxation year referred to in paragraph (b) ends in the particular taxation year; and

    • (d) at the end of the particular taxation year, the other corporation and the debtor corporation are related.

  • Marginal note:Deemed effects

    (5) If this subsection applies to a debtor corporation and another corporation in respect of a particular taxation year of the debtor corporation and an inter-affiliate loan,

    • (a) the lesser of the excess determined under paragraph (4)(b) in respect of the other corporation and the excess determined under paragraph (4)(a) in respect of the debtor corporation is deemed to be included in the aggregate double-dip income of the debtor corporation in respect of the inter-affiliate loan and not to be included in the aggregate double-dip income of the other corporation;

    • (b) this subsection shall not apply to any other corporation in respect of the amount determined under paragraph (a); and

    • (c) for the purpose of determining the taxable earnings base adjustment of the other corporation, the amount determined under paragraph (a) is deemed to be

      • (i) an amount of interest deduction denied to it under subsection (2) in respect of interest relating to the inter-affiliate loan for its taxation year referred to in paragraph 4(b), and

      • (ii) an amount that is included in the aggregate double-dip income in respect of the inter-affiliate loan for its taxation year referred to in paragraph 4(b).

  • Marginal note:Allocation by debtor corporation

    (6) If subsections (4) and (5) apply to more than one other corporation in respect of a debtor corporation and an inter-affiliate loan, the debtor corporation may allocate the excess double-dip incomes of the other corporations against the specified financing expense of the debtor corporation.

  • Marginal note:Allocation by Minister

    (7) If a debtor corporation is entitled to make an allocation under subsection (6) but fails to do so, or does so in a manner that allows an excess to remain under subparagraph (4)(a) in respect of the debtor corporation and an excess to remain under subparagraph (4)(b) in respect of one or more other corporations, the Minister may allocate the excess double-dip incomes of the other corporations against the specified financing expense of the debtor corporation.

  • Marginal note:Inter-affiliate loans — exceptions

    (8) A debt that would, at any time, otherwise be an inter-affiliate loan in respect of a corporation for a taxation year of a particular foreign affiliate is not an inter-affiliate loan at that time, if

    • (a) it is the case that

      • (i) another foreign affiliate, of the corporation or a corporation that does not deal at arm’s length with the corporation, owes the debt,

      • (ii) the particular foreign affiliate and the other foreign affiliate are, at the end of their taxation years that include that time, resident in the same country, and

      • (iii) the particular foreign affiliate and the other foreign affiliate determine their income, for income tax purposes under the income tax laws of that country, on a consolidated or combined basis; or

    • (b) it is the case that

      • (i) the corporation is a taxpayer described in paragraph 95(2)(l)(iv),

      • (ii) the particular foreign affiliate holds the debt, and the other foreign affiliate owes the debt, in the ordinary course of businesses that are described in subparagraph (a)(i) of the definition “investment business” in subsection 95(1) and conducted principally with persons with which those affiliates deal at arm’s length, and

      • (iii) the terms and conditions of the debt are substantially the same as the terms and conditions of similar debt entered into between persons dealing at arm’s length.

  • Marginal note:Partnership rules

    (9) If a partnership that holds, directly or indirectly, a share of the capital stock of a specified corporation in respect of the partnership has borrowed money or become liable for an amount payable (in this subsection referred to as the “partnership indebtedness”) the interest in respect of which is deductible under paragraph 20(1)(c),

    • (a) there shall be added to the income of each corporation or partnership that is a member of the partnership, an amount equal to the member’s specified proportion of the interest and other borrowing costs referred to in paragraph 20(1)(e) that are deductible in computing the partnership’s income in respect of that member’s specified proportion of the partnership indebtedness;

    • (b) for the purpose of this section and paragraphs 20(1)(c) and (e), an amount equal to the amount added to the member’s income by paragraph (a) shall be deemed to be an amount of interest or other borrowing cost, as the case may be, that is deductible by the member; and

    • (c) the member shall be deemed to have incurred its specified proportion of the partnership indebtedness and to use the proceeds or property acquired in respect of that indebtedness in the same manner as the partnership.

  • Marginal note:Interpretation

    (10) For the purpose of subsection (9),

    • (a) a specified corporation in respect of a partnership means a corporation that is, for the purpose of section 95,

      • (i) a foreign affiliate of a member of the partnership,

      • (ii) a foreign affiliate of a person with whom the partnership does not deal at arm’s length, or

      • (iii) a foreign affiliate of a person that does not deal at arm’s length with a member of the partnership; and

    • (b) the specified proportion of a member of a partnership for a fiscal period of the partnership means the proportion that the member’s share of the total income or loss of the partnership for the partnership’s fiscal period is of the partnership’s total income or loss for that period and, for the purpose of this definition, where that income or loss for a period is nil, that proportion shall be computed as if the partnership had income for that period in the amount of $1,000,000.

• (2) Subsection (1) applies in respect of interest and other borrowing costs paid or payable in respect of a period or periods that begin after 2011.

• 13. (1) The portion of paragraph (e) of the definition “Canadian newspaper” in subsection 19(5) of the Act before clause (iii)(C) is replaced by the following:

  • (e) a corporation

    • (i) that is incorporated under the laws of Canada or a province,

    • (ii) of which the chairperson or other presiding officer and at least 3/4 of the directors or other similar officers are Canadian citizens, and

    • (iii) that, if it is a corporation having share capital, is

      • (A) a public corporation a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, other than a corporation controlled by citizens or subjects of a country other than Canada, or

      • (B) a corporation of which at least 3/4 of the shares having full voting rights under all circumstances, and shares having a fair market value in total of at least 3/4 of the fair market value of all of the issued shares of the corporation, are beneficially owned by Canadian citizens or by public corporations a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, other than a public corporation controlled by citizens or subjects of a country other than Canada,

      and, for the purposes of clause (B), where shares of a class of the capital stock of a corporation are owned, or deemed by this definition to be owned, at any time by another corporation (in this definition referred to as the “holding corporation”), other than a public corporation a class or classes of shares of the capital stock of which are listed on a designated stock exchange in Canada, each shareholder of the holding corporation shall be deemed to own at that time that proportion of the number of such shares of that class that

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

• 14. (1) Subsection 20(1) of the Act is amended by adding the following after paragraph (nn):

  • Marginal note:Recapture of investment tax credits — child care space amount

    (nn.1) total of all amounts (other than an amount in respect of a disposition of a depreciable property) added because of subsection 127(27.1) or (28.1) to the taxpayer’s tax otherwise payable under this Part for any preceding taxation year;

• (2) Subsection 20(3) of the Act is replaced by the following:

  • Marginal note:Borrowed money

    (3) For greater certainty, if a taxpayer uses borrowed money to repay money previously borrowed, or to pay an amount payable for property described in subparagraph (1)(c)(ii) previously acquired (which previously borrowed money or amount payable in respect of previously acquired property is, in this subsection, referred to as the “previous indebtedness”), subject to subsection 20.1(6), for the purposes of paragraphs (1)(c), (e) and (e.1), section 18.2, subsections 20.1(1) and (2), section 21 and subparagraph 95(2)(a)(ii), and for the purpose of paragraph 20(1)(k) of the Income Tax Act, Chapter 148 of the Revised Statutes of Canada, 1952, the borrowed money is deemed to be used for the purpose for which the previous indebtedness was used or incurred, or was deemed by this subsection to have been used or incurred.

• (3) Subsection (1) applies on and after March 19, 2007.

• (4) Subsection (2) applies in respect of interest paid or payable in respect of a period or periods that begin after 2011.

• 15. (1) Subparagraph 38(a.1)(i) of the Act is replaced by the following:

  • (i) the disposition is the making of a gift to a qualified donee of a share, debt obligation or right listed on a designated stock exchange, a share of the capital stock of a mutual fund corporation, a unit of a mutual fund trust, an interest in a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)) or a prescribed debt obligation, or

• (2) Subsection (1) applies in respect of gifts made on or after March 19, 2007, except that, in its application before the day on which this Act is assented to, the reference to “designated stock exchange” in subparagraph 38(a.1)(i) of the Act, as enacted by subsection (1), shall be read as a reference to “prescribed stock exchange”.

• 16. (1) Paragraph 53(1)(e) of the Act is amended by striking out the word “and” at the end of subparagraph (xii), by adding the word “and” at the end of subparagraph (xiii) and by adding the following after subparagraph (xiii):

  • (xiv) the total of all amounts each of which is the amount of the taxpayer’s taxable earnings base adjustment (within the meaning assigned by subsection 18.2(1)) in respect of an interest in the partnership for a taxation year that ended before that time;

• (2) Paragraph 53(2)(c) of the Act is amended by striking out the word “and” at the end of subparagraph (xi), by adding the word “and” at the end of subparagraph (xii) and by adding the following after subparagraph (xii):

  • (xiii) the lesser of

    • (A) the total of all amounts each of which is the amount of a dividend that is included in computing the income of the taxpayer under section 93.1 in respect of the partnership for a taxation year that ended before that time, and

    • (B) the total of all amounts each of which is

      • (I) an amount deducted by the taxpayer under subsection 91(5.2) for a taxation year that ended before that time in respect of a dividend included in computing the amount determined under clause (A), or

      • (II) twice the amount deducted by the taxpayer under subsection 91(5.3) for a taxation year that ended before that time in respect of the disposition of a share on which a dividend included in computing the amount determined under clause (A) was paid;

• (3) Subsections (1) and (2) apply after 2011.

• 17. (1) Paragraph 56(3)(a) of the Act is replaced by the following:

  • (a) the total of all amounts each of which is the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship or bursary received in connection with the taxpayer’s enrolment

    • (i) in an educational program in respect of which an amount may be deducted under subsection 118.6(2) in computing the taxpayer’s tax payable under this Part for the taxation year, for the immediately preceding taxation year or for the following taxation year, or

    • (ii) in an elementary or secondary school educational program,

• (2) Subsection (1) applies to the 2007 and subsequent taxation years.

• 18. (1) Subsection 60(x) of the Act is replaced by the following:

  • Marginal note:Repayment under Canada Education Savings Act

    (x) the total of all amounts each of which is an amount paid by the taxpayer in the year as a repayment, under the Canada Education Savings Act or under a designated provincial program (as defined in subsection 146.1(1)), of an amount that was included because of subsection 146.1(7) in computing the taxpayer’s income for the year or a preceding taxation year; and

• (2) Subsection (1) applies to the 2007 and subsequent taxation years.

• 19. (1) Paragraphs (h) and (i) of the definition “principal-business corporation” in subsection 66(15) of the Act are replaced by the following:

  • (h) the generation of energy using property described in Class 43.1 or 43.2 of Schedule II to the regulations, or any combination thereof, and

  • (i) the development of projects for which it is reasonable to expect that at least 50% of the capital cost of the depreciable property to be used in each project would be the capital cost of property described in Class 43.1 or 43.2 of Schedule II to the regulations or any combination thereof,

• (2) Subsection (1) applies on and after February 23, 2005.

• 20. (1) The portion of subsection 67.1(1) of the Act before paragraph (a) is replaced by the following:

  Marginal note:Expenses for food, etc.

  • 67.1 (1) Subject to subsection (1.1), for the purposes of this Act, other than sections 62, 63, 118.01 and 118.2, an amount paid or payable in respect of the human consumption of food or beverages or the enjoyment of entertainment is deemed to be 50 per cent of the lesser of

• (2) Section 67.1 of the Act is amended by adding the following after subsection (1):

  • Marginal note:Expenses for food and beverages of long-haul truck drivers

    (1.1) An amount paid or payable by a long-haul truck driver in respect of the consumption of food or beverages by the driver during an eligible travel period of the driver is deemed to be the amount determined by multiplying the specified percentage in respect of the amount so paid or payable by the lesser of

    • (a) the amount so paid or payable, and

    • (b) a reasonable amount in the circumstances.

• (3) Section 67.1 of the Act is amended by adding the following after subsection (4):

  • Marginal note:Definitions

    (5) The following definitions apply for the purpose of this section.

    “eligible travel period”

    « période de déplacement admissible »

    “eligible travel period” in respect of a long-haul truck driver is a period during which the driver is away from the municipality or metropolitan area where the specified place in respect of the driver is located for a period of at least 24 continuous hours for the purpose of driving a long-haul truck that transports goods to, or from, a location that is beyond a radius of 160 kilometres from the specified place.

    “long-haul truck”

    « grand routier »

    “long-haul truck” means a truck or a tractor that is designed for hauling freight and that has a gross vehicle weight rating (as that term is defined in subsection 2(1) of the Motor Vehicle Safety Regulations) that exceeds 11 788 kilograms.

    “long-haul truck driver”

    « conducteur de grand routier »

    “long-haul truck driver” means an individual whose principal business or principal duty of employment is driving a long-haul truck that transports goods.

    “specified percentage”

    « pourcentage déterminé »

    “specified percentage” in respect of an amount paid or payable is

    • (a) 60 per cent, if the amount is paid or becomes payable on or after March 19, 2007 and before 2008;

    • (b) 65 per cent, if the amount is paid or becomes payable in 2008;

    • (c) 70 per cent, if the amount is paid or becomes payable in 2009;

    • (d) 75 per cent, if the amount is paid or becomes payable in 2010; and

    • (e) 80 per cent, if the amount is paid or becomes payable after 2010.

    “specified place”

    « endroit déterminé »

    “specified place” means, in the case of an employee, the employer’s establishment to which the employee ordinarily reports to work is located and, in the case of an individual whose principal business is to drive a long-haul truck to transport goods, the place where the individual resides.

• (4) Subsections (1) to (3) apply to amounts that are paid, or become payable, on or after March 19, 2007.

• 21. (1) Paragraph (b) of the definition “excluded security” in subsection 80(1) of the Act is replaced by the following:

  • (b) a share issued by the corporation to the person under the terms of the debt, where the debt was a bond, debenture or note listed on a designated stock exchange in Canada and the terms for the conversion to the share were not established or substantially modified after the later of February 22, 1994 and the time that the bond, debenture or note was issued;

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

• 22. (1) Paragraph 85(1.1)(i) of the Act is replaced by the following:

  • (i) a NISA Fund No. 2, if that property is owned by an individual.

• (2) Subsection (1) applies to the balance in a NISA Fund No. 2 to the extent that that blance consists of contributions made to the fund, and amounts earned on those contributions, in the 2008 and subsequent taxation years.

• 23. (1) Paragraph (a) of the definition “public corporation” in subsection 89(1) of the Act is replaced by the following:

  • (a) a corporation that is resident in Canada at the particular time if at that time a class of shares of the capital stock of the corporation is listed on a designated stock exchange in Canada,

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

• 24. (1) Section 91 of the Act is amended by adding the following after subsection (5):

  • Marginal note:Deduction of dividend by shareholder

    (5.1) Where in a taxation year a corporation resident in Canada receives a dividend on a share of the capital stock of a corporation that was at any time a foreign affiliate of the corporation and subsection (5) does not apply in respect of that dividend, there may be deducted, in respect of such portion of the dividend as is prescribed to have been paid out of the taxable surplus of the affiliate, in computing the corporation’s income for the year, the lesser of

    • (a) the amount, if any, by which that portion of the dividend exceeds the amount, if any, deductible in respect of the dividend under paragraph 113(1)(b), and

    • (b) the amount, if any, by which

      • (i) the total of all amounts required under subparagraph 92(1)(a)(ii) to be added in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the corporation

      exceeds

      • (ii) the total of all amounts required under paragraph 92(1)(b) to be deducted in computing the adjusted cost base to the taxpayer of the share before the dividend was so received by the taxpayer.

  • Marginal note:Deduction of dividend by member of partnership

    (5.2) Where in a taxation year a corporation is deemed under section 93.1 to have received a dividend from a foreign affiliate, there may be deducted, in respect of such portion of the dividend as is prescribed to have been paid out of the taxable surplus of the affiliate, in computing the corporation’s income for the year, the lesser of

    • (a) the amount, if any, by which that portion of the dividend exceeds the amount, if any, deductible in respect of the dividend under paragraph 113(1)(b), and

    • (b) the amount, if any, by which

      • (i) the total of all amounts required under subparagraph 53(1)(e)(xiv) to be added in computing the adjusted cost base to the taxpayer of the partnership interest that are reasonably attributable to a share in respect of which the dividend was paid

      exceeds

      • (ii) the total of all amounts required under subparagraph 53(2)(c)(xiii) to be deducted in computing the adjusted cost base to the taxpayer of the partnership interest that are reasonably attributable to a share in respect of which the dividend was paid.

  • Marginal note:Deduction of capital gain by member of partnership

    (5.3) Where in a taxation year a taxpayer is a member of a partnership, there may be deducted from the taxpayer’s income for the taxation year an amount equal to the lesser of

    • (a) ½ the amount of the taxpayer’s specified proportion (within the meaning of paragraph 18.2(10)(b)) of any capital gain that is attributable to a disposition by the partnership of a share of the capital stock of a corporation, and

    • (b) the amount, if any, by which

      • (i) the total of all amounts required under subparagraph 53(1)(e)(xiv) to be added in computing the adjusted cost base to the taxpayer of its interest in the partnership that are reasonably attributable to the share

      exceeds

      • (ii) the total of all amounts required under subparagraph 53(2)(c)(xiii) to be deducted in computing the adjusted cost base to the taxpayer of the partnership interest that are reasonably attributable to the share.

• (2) Subsection (1) applies after 2011.

• 25. (1) Subsection 92(1) of the Act is replaced by the following:

  Marginal note:Adjusted cost base of share of foreign affiliate

  • 92. (1) In computing, at any time in a taxation year, the adjusted cost base to a taxpayer resident in Canada of any share owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer,

    • (a) there shall be added in respect of that share

      • (i) any amount included in respect of that share under subsection 91(1) or (3) in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been required to have been so included in computing the taxpayer’s income but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952), and

      • (ii) the taxable earnings base adjustment (as defined in subsection 18.2(1)) of the taxpayer in respect of the share for the year or any preceding taxation year; and

    • (b) there shall be deducted in respect of that share

      • (i) any amount deducted by the taxpayer under subsection 91(2) or (4), and

      • (ii) any dividend received by the taxpayer before that time, to the extent of the amount deducted by the taxpayer, in respect of the dividend, under subsection 91(5) or (5.1)

      in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been deductible by the taxpayer but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada,1952).

• (2) Subsection (1) applies after 2011.

• 26. (1) The definitions “active business”, “controlled foreign affiliate”, “income from an active business” and “income from property” in subsection 95(1) of the Act are replaced by the following:

  “active business”

  « entreprise exploitée activement »

  “active business” of a foreign affiliate of a taxpayer means any business carried on by the foreign affiliate other than

  • (a) an investment business carried on by the foreign affiliate,

  • (b) a business that is deemed by subsection (2) to be a business other than an active business carried on by the foreign affiliate, or

  • (c) a non-qualifying business of the foreign affiliate;

  “controlled foreign affiliate”

  « société étrangère affiliée contrôlée »

  “controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means

  • (a) a foreign affiliate of the taxpayer that is, at that time, controlled by the taxpayer, or

  • (b) a foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer owned

    • (i) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the taxpayer,

    • (ii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with the taxpayer,

    • (iii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without ref-erence to the existence of or the absence of any relationship, connection or action in concert between those persons), who

      • (A) are resident in Canada,

      • (B) are not the taxpayer or a person described in subparagraph (ii), and

      • (C) own, at that time, shares of the capital stock of the foreign affiliate, and

    • (iv) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder;

  “income from an active business”

  « revenu provenant d’une entreprise exploitée activement »

  “income from an active business” of a foreign affiliate of a taxpayer for a taxation year includes the foreign affiliate’s income for the taxation year that pertains to or is incident to that active business but does not include

  • (a) the foreign affiliate’s income from property for the taxation year,

  • (b) the foreign affiliate’s income for the taxation year from a business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate, or

  • (c) the foreign affiliate’s income from a non-qualifying business of the foreign affiliate for the taxation year;

  “income from property”

  « revenu de biens »

  “income from property” of a foreign affiliate of a taxpayer for a taxation year includes the foreign affiliate’s income for the taxation year from an investment business and the foreign affiliate’s income for the taxation year from an adventure or concern in the nature of trade, but does not include

  • (a) the foreign affiliate’s income for the taxation year from a business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate, or

  • (b) the foreign affiliate’s income for the taxation year that pertains to or is incident to

    • (i) an active business of the foreign affiliate, or

    • (ii) a non-qualifying business of the foreign affiliate;

• (2) The portion of the definition “excluded property” in subsection 95(1) of the Act before paragraph (a) of that definition and paragraphs (a) to (c) of that definition are replaced by the following:

  “excluded property”

  « bien exclu »

  “excluded property”, at a particular time, of a foreign affiliate of a taxpayer means any property of the foreign affiliate that is

  • (a) used or held by the foreign affiliate principally for the purpose of gaining or producing income from an active business carried on by it,

  • (b) shares of the capital stock of another foreign affiliate of the taxpayer where all or substantially all of the fair market value of the property of the other foreign affiliate is attributable to property, of that other foreign affiliate, that is excluded property,

  • (c) property all or substantially all of the income from which is, or would be, if there were income from the property, income from an active business (which, for this purpose, includes income that would be deemed to be income from an active business by paragraph (2)(a) if that paragraph were read without reference to subparagraph (v)), or

  • (c.1) property arising under or as a result of an agreement that

    • (i) provides for the purchase, sale or exchange of currency, and

    • (ii) either

      • (A) can reasonably be considered to have been made by the affiliate to reduce its risk, with respect to an amount that was receivable under an agreement that relates to the sale of excluded property or with respect to an amount that was receivable and was a property described in paragraph (c), of fluctuations in the value of the currency in which the amount receivable was denominated, or

      • (B) can reasonably be considered to have been made by the affiliate to reduce its risk, with respect to any of the following amounts, of fluctuations in the value of the currency in which that amount was denominated:

        • (I) an amount that was payable under an agreement that relates to the purchase of property that (at all times between the time of the acquisition of the property and the particular time) is excluded property of the affiliate,

        • (II) an amount of indebtedness, to the extent that the proceeds derived from the issuance or incurring of the indebtedness can reasonably be considered to have been used to acquire property that (at all times between the time of the acquisition of that property and the particular time) is excluded property of the affiliate, or

        • (III) an amount of indebtedness, to the extent that the proceeds derived from the issuance or incurring of the indebtedness can reasonably be considered to have been used to repay the outstanding balance of

          1. an amount that, immediately before the time of that repayment, is described by subclause (I),

          2. an amount of indebtedness of the affiliate that, immediately before the time of that repayment, is described by subclause (II), or

          3. an amount of indebtedness of the affiliate that, immediately before the time of that repayment, is described by this subclause,

• (3) The portion of the description of A in the definition “foreign accrual property income” in subsection 95(1) of the Act before paragraph (a) is replaced by the following:

  A

  is the amount that would, if section 80 did not apply to the affiliate for the year or a preceding taxation year, be the total of all amounts, each of which is the affiliate’s income for the year from property, the affiliate’s income for the year from a business other than an active business or the affiliate’s income for the year from a non-qualifying business of the affiliate, in each case that amount being determined as if each amount described in clause (2)(a)(ii)(D) that was paid or payable, directly or indirectly, by the affiliate to another foreign affiliate of the taxpayer or of a person with whom the taxpayer does not deal at arm’s length were nil where an amount in respect of the income derived by the other foreign affiliate from that amount that was paid or payable to it by the affiliate was added in computing its income from an active business, other than

• (4) The description of D in the definition “foreign accrual property income” in subsection 95(1) of the Act is replaced by the following:

  D

  is the total of all amounts, each of which is the affiliate’s loss for the year from property, the affiliate’s loss for the year from a business other than an active business of the affiliate or the affiliate’s loss for the year from a non-qualifying business of the affiliate, in each case that amount being determined as if there were not included in the affiliate’s income any amount described in any of paragraphs (a) to (d) of the description of A and as if each amount described in clause (2)(a)(ii)(D) that was paid or payable, directly or indirectly, by the affiliate to another foreign affiliate of the taxpayer or of a person with whom the taxpayer does not deal at arm’s length were nil where an amount in respect of the income derived by the other foreign affiliate from that amount that was paid or payable to it by the affiliate was added in computing its income from an active business,

• (5) The description of E in the definition “foreign accrual property income” in subsection 95(1) of the Act is replaced by the following:

  E

  is the amount of the affiliate’s allowable capital losses for the year from dispositions of property (other than excluded property) that can reasonably be considered to have accrued after its 1975 taxation year,

• (6) The portion of the definition “investment business” in subsection 95(1) of the Act before paragraph (a) is replaced by the following:

  “investment business”

  « entreprise de placement »

  “investment business” of a foreign affiliate of a taxpayer means a business carried on by the foreign affiliate in a taxation year (other than a business deemed by subsection (2) to be a business other than an active business carried on by the foreign affiliate and other than a non-qualifying business of the foreign affiliate) the principal purpose of which is to derive income from property (including interest, dividends, rents, royalties or any similar returns or substitutes for such interest, dividends, rents, royalties or returns), income from the insurance or reinsurance of risks, income from the factoring of trade accounts receivable, or profits from the disposition of investment property, unless it is established by the taxpayer or the foreign affiliate that, throughout the period in the taxation year during which the business was carried on by the foreign affiliate,

• (7) Subparagraph (a)(i) of the definition “investment business” in subsection 95(1) of the Act is replaced by the following:

  • (i) a business carried on by it as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated under the laws

    • (A) of each country in which the business is carried on through a permanent establishment (as defined by regulation) in that country and of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued,

    • (B) of the country in which the business is principally carried on, or

    • (C) if the affiliate is related to a non-resident corporation, of the country under whose laws that non-resident corporation is governed and any of exists, was (unless that non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, or

• (8) The definition “investment business” in subsection 95(1) of the Act is amended by striking out the word “and” at the end of paragraph (a) and by replacing paragraph (b) with the following:

  • (b) either

    • (i) the affiliate (otherwise than as a member of a partnership) carries on the business (the affiliate being, in respect of those times, in that period of the year, that it so carries on the business, referred to in paragraph (c) as the “operator”), or

    • (ii) the affiliate carries on the business as a qualifying member of a partnership (the partnership being, in respect of those times, in that period of the year, that the affiliate so carries on the business, referred to in paragraph (c) as the “operator”), and

  • (c) the operator employs

    • (i) more than five employees full time in the active conduct of the business, or

    • (ii) the equivalent of more than five employees full time in the active conduct of the business taking into consideration only

      • (A) the services provided by employees of the operator, and

      • (B) the services provided outside Canada to the operator by any one or more persons each of whom is, during the time at which the services were performed by the person, an employee of

        • (I) a corporation related to the affiliate (otherwise than because of a right referred to in paragraph 251(5)(b)),

        • (II) in the case where the operator is the affiliate,

          1. a corporation (referred to in this subparagraph as a “providing shareholder”) that is a qualifying shareholder of the affiliate,

          2. a designated corporation in respect of the affiliate, or

          3. a designated partnership in respect of the affiliate, and

        • (III) in the case where the operator is the partnership described in subparagraph (b)(ii),

          1. any person (referred to in this subparagraph as a “providing member”) who is a qualifying member of that partnership,

          2. a designated corporation in respect of the affiliate, or

          3. a designated partnership in respect of the affiliate,

      if the corporations referred to in subclause (B)(I) and the designated corporations, designated partnerships, providing shareholders or providing members referred to in subclauses (B)(II) and (III) receive compensation from the operator for the services provided to the operator by those employees the value of which is not less than the cost to those corporations, partnerships, shareholders or members of the compensation paid or accruing to the benefit of those employees that performed the services during the time at which the services were performed by those employees;

• (9) Subsection 95(1) of the Act is amended by adding the following in alphabetical order:

  “eligible trust”

  « fiducie admissible »

  “eligible trust”, at any time, means a trust, other than a trust

  • (a) created or maintained for charitable purposes,

  • (b) governed by an employee benefit plan,

  • (c) described in paragraph (a.1) of the definition “trust” in subsection 108(1),

  • (d) governed by a salary deferral arrangement,

  • (e) operated for the purpose of administering or providing superannuation, pension, retirement or employee benefits, or

  • (f) where the amount of income or capital that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power;

  “entity”

  « entité »

  “entity” includes an association, a corporation, a fund, a natural person, a joint venture, an organization, a partnership, a syndicate and a trust;

  “exempt trust”

  « fiducie exonérée »

  “exempt trust”, at a particular time in respect of a taxpayer resident in Canada, means a trust that, at that time, is a trust under which the interest of each beneficiary under the trust is, at all times that the interest exists during the trust’s taxation year that includes the particular time, a specified fixed interest of the beneficiary in the trust, if at the particular time

  • (a) the trust is an eligible trust,

  • (b) there are at least 150 beneficiaries each of whom holds a specified fixed interest, in the trust, that has a fair market value of at least $500, and

  • (c) the total of all amounts each of which is the fair market value of an interest as a beneficiary under the trust held by a specified purchaser in respect of the taxpayer is not more than 10% of the total fair market value of all interests as a beneficiary under the trust;

  “income from a non-qualifying business”

  « revenu provenant d’une entreprise non admissible »

  “income from a non-qualifying business” of a foreign affiliate of a taxpayer resident in Canada for a taxation year includes the foreign affiliate’s income for the taxation year that pertains to or is incident to that non-qualifying business, but does not include

  • (a) the foreign affiliate’s income from property for the taxation year, or

  • (b) the foreign affiliate’s income for the taxation year from a business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate;

  “non-qualifying business”

  « entreprise non admissible »

  “non-qualifying business” of a foreign affiliate of a taxpayer at any time means a business carried on by the foreign affiliate through a permanent establishment in a jurisdiction that, at the end of the foreign affiliate’s taxation year that includes that time, is a non-qualifying country, other than

  • (a) an investment business of the foreign affiliate, or

  • (b) a business that is deemed by subsection (2) to be a business other than an active business of the foreign affiliate;

  “non-qualifying country”

  « pays non admissible »

  “non-qualifying country” at any time means a country or other jurisdiction with which

  • (a) Canada neither has a tax treaty at that time nor has, before that time, signed an agreement that will, on coming into effect, be a tax treaty,

  • (b) Canada does not have a comprehensive tax information exchange agreement that is in force and has effect at that time, and

  • (c) Canada has, more than 60 months before that time, either

    • (i) begun negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction), or

    • (ii) sought, by written invitation, to enter into negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction);

  “specified fixed interest”

  « participation fixe désignée »

  “specified fixed interest”, at any time, of an entity in a trust, means an interest of the entity as a beneficiary under the trust if

  • (a) the interest includes, at that time, rights of the entity as a beneficiary under the trust to receive, at or after that time and directly from the trust, income and capital of the trust,

  • (b) the interest was issued by the trust, at or before that time, to an entity, in exchange for consideration and the fair market value, at the time at which the interest was issued, of that consideration was equal to the fair market value, at the time at which it was issued, of the interest,

  • (c) the only manner in which any part of the interest may cease to be the entity’s is by way of a disposition (determined without reference to paragraph (i) of the definition “disposition” in subsection 248(1) and paragraph 248(8)(c)) by the entity of that part, and

  • (d) no amount of income or capital of the trust that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power;

  “specified purchaser”

  « acheteur déterminé »

  “specified purchaser”, at any time, in respect of a particular taxpayer resident in Canada, means an entity that is, at that time,

  • (a) the particular taxpayer,

  • (b) an entity resident in Canada with which the particular taxpayer does not deal at arm’s length,

  • (c) a foreign affiliate of an entity described in any of paragraphs (a) and (b) and (d) to (f),

  • (d) a trust (other than an exempt trust) in which an entity described in any of paragraphs (a) to (c) and (e) and (f) is beneficially interested,

  • (e) a partnership of which an entity described in any of paragraphs (a) to (d) and (f) is a member, or

  • (f) an entity (other than an entity described in any of paragraphs (a) to (e)) with which an entity described in any of paragraphs (a) to (e) does not deal at arm’s length;

• (10) Paragraph 95(2)(a) of the Act is replaced by the following:

  • (a) in computing the income or loss from an active business for a taxation year of a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the year or that is a controlled foreign affiliate of the taxpayer throughout the year, there shall be included any income or loss of the particular foreign affiliate for the year from sources in a country other than Canada that would otherwise be income or loss from property of the particular foreign affiliate for the year to the extent that

    • (i) the income or loss

      • (A) is derived by the particular foreign affiliate from activities that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by

        • (I) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, or

        • (II) a life insurance corporation that is resident in Canada throughout the year and that is

          1. the taxpayer,

          2. a person who controls the taxpayer,

          3. a person controlled by the taxpayer, or

          4. a person controlled by a person who controls the taxpayer, and

      • (B) would be included in computing the amount prescribed to be the earnings or loss, from an active business carried on in a country other than Canada, of

        • (I) that other foreign affiliate referred to in subclause (A)(I) if the income were earned by it, or

        • (II) the life insurance corporation referred to in subclause (A)(II) if that life insurance corporation were a foreign affiliate of the taxpayer and the income were earned by it,

    • (ii) the income or loss is derived from amounts that were paid or payable, directly or indirectly, to the particular foreign affiliate or a partnership of which the particular foreign affiliate was a member

      • (A) by a life insurance corporation that is resident in Canada and that is the taxpayer, a person who controls the taxpayer, a person controlled by the taxpayer or a person controlled by a person who controls the taxpayer, to the extent that those amounts that were paid or payable were for expenditures that are deductible in a taxation year of the life insurance corporation by the life insurance corporation in computing its income or loss for a taxation year from carrying on its life insurance business outside Canada and are not deductible in computing its income or loss for a taxation year from carrying on its life insurance business in Canada,

      • (B) by

        • (I) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, to the extent that those amounts that were paid or payable are for expenditures that were deductible by that other foreign affiliate in computing the amounts prescribed to be its earnings or loss for a taxation year from an active business (other than an active business carried on in Canada), or

        • (II) a partnership of which another foreign affiliate of the taxpayer (in respect of which other foreign affiliate the taxpayer has a qualifying interest throughout the year) is a qualifying member throughout each period, in the fiscal period of the partnership that ends in the year, in which that other foreign affiliate was a member of the partnership, to the extent that those amounts that were paid or payable are for expenditures that are deductible by the partnership in computing that other foreign affiliate’s share of any income or loss of the partnership, for a fiscal period, that is included in computing the amounts prescribed to be that other foreign affiliate’s earnings or loss for a taxation year from an active business (other than an active business carried on in Canada),

      • (C) by a partnership of which the particular foreign affiliate is a qualifying member throughout each period, in the fiscal period of the partnership that ends in the year, in which the particular foreign affiliate was a member of the partnership, to the extent that those amounts that were paid or payable are for expenditures that are deductible by the partnership in computing the partic-ular foreign affiliate’s share of any income or loss of the partnership, for a fiscal period, that is included in computing the amounts prescribed to be the particular foreign affiliate’s earnings or loss for a taxation year from an active business (other than an active business carried on in Canada), or

      • (D) by another foreign affiliate (referred to in this clause as the “second affiliate”) of the taxpayer — in respect of which the taxpayer has a qualifying interest throughout the year — to the extent that the amounts are paid or payable by the second affiliate, in respect of any particular period in the year,

        • (I) under a legal obligation to pay interest on borrowed money used for the purpose of earning income from property, or

        • (II) on an amount payable for property acquired for the purpose of gaining or producing income from property

        where

        • (III) the property is, throughout the particular period, excluded property of the second affiliate that is shares of the capital stock of a corporation (referred to in this clause as the “third affiliate”) which is, throughout the particular period, a foreign affiliate (other than the particular foreign affiliate) of the taxpayer in respect of which the taxpayer has a qualifying interest,

        • (IV) the second affiliate and the third affiliate are resident in the same country for each of their taxation years (each of which taxation years is referred to in subclause (V) as a “relevant taxation year” of the second affiliate or of the third affiliate, as the case may be) that end in the year, and

        • (V) in respect of each of the second affiliate and the third affiliate for each relevant taxation year of that affiliate, either

          1. that affiliate is subject to income taxation in that country in that relevant taxation year, or

          2. the members or shareholders of that affiliate (which, for the purpose of this sub-subclause, includes a person that has, directly or indi-rectly, an interest, or for civil law a right, in a share of the capital stock of, or in an equity interest in, the affiliate) at the end of that relevant taxation year are subject to income taxation in that country on, in aggregate, all or substantially all of the income of that affiliate for that relevant taxation year in their taxation years in which that relevant taxation year ends,

    • (iii) the income or loss is derived by the particular foreign affiliate from the factoring of trade accounts receivable acquired by the particular foreign affiliate, or a partnership of which the particular foreign affiliate was a member, from another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year to the extent that the accounts receivable arose in the course of an active business carried on in a country other than Canada by that other foreign affiliate,

    • (iv) the income or loss is derived by the particular foreign affiliate from loans or lending assets acquired by the particular foreign affiliate, or a partnership of which the particular foreign affiliate was a member, from another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, to the extent that the loans or lending assets arose in the course of an active business carried on in a country other than Canada by that other foreign affiliate,

    • (v) the income or loss is derived by the particular foreign affiliate from the disposition of excluded property that is not capital property, or

    • (vi) the income or loss is derived by the particular foreign affiliate under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the particular foreign affiliate to reduce

      • (A) its risk — with respect to an amount that increases the amount required by this paragraph to be included in computing the particular foreign affiliate’s income for a taxation year from an active business or that decreases the amount required by this paragraph to be included in computing the particular foreign affiliate’s loss for a taxation year from an active business — of fluctuations in the value of the currency in which the amount was denominated, or

      • (B) its risk — with respect to an amount that decreases the amount required by this paragraph to be included in computing the particular foreign affiliate’s income for a taxation year from an active business or that increases the amount required by this paragraph to be included in computing the particular foreign affiliate’s loss for a taxation year from an active business — of fluctuations in the value of the currency in which the amount was denominated;

• (11) Subparagraphs 95(2)(a.1)(i) and (ii) of the Act are replaced by the following:

  • (i) it is reasonable to conclude that the cost to any person of the property (other than property that is designated property) is relevant in computing the income from a business carried on by the taxpayer or by a person resident in Canada with whom the taxpayer does not deal at arm’s length or is relevant in computing the income from a business carried on in Canada by a non-resident person with whom the taxpayer does not deal at arm’s length, and

  • (ii) the property was neither

    • (A) manufactured, produced, grown, extracted or processed in the country

      • (I) under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and

      • (II) in which the affiliate’s business is principally carried on, nor

    • (B) an interest in real property, or a real right in an immovable, located in, or a foreign resource property in respect of, the country

      • (I) under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and

      • (II) in which the affiliate’s business is principally carried on,

• (12) Paragraph 95(2)(b) of the Act is replaced by the following:

  • (b) the provision, by a foreign affiliate of a taxpayer, of services or of an undertaking to provide services

    • (i) is deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the amounts paid or payable in consideration for those services or for the undertaking to provide services

      • (A) are deductible, or can reasonably be considered to relate to amounts that are deductible, in computing the income from a business carried on in Canada, by

        • (I) any taxpayer of whom the affiliate is a foreign affiliate, or

        • (II) another taxpayer who does not deal at arm’s length with

          1. the affiliate, or

          2. any taxpayer of whom the affiliate is a foreign affiliate, or

      • (B) are deductible, or can reasonably be considered to relate to an amount that is deductible, in computing the foreign accrual property income of a foreign affiliate of

        • (I) any taxpayer of whom the affiliate is a foreign affiliate, or

        • (II) another taxpayer who does not deal at arm’s length with

          1. the affiliate, or

          2. any taxpayer of whom the affiliate is a foreign affiliate, and

    • (ii) is deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, to the extent that the services are, or are to be, performed by

      • (A) any taxpayer of whom the affiliate is a foreign affiliate,

      • (B) another taxpayer who does not deal at arm’s length with

        • (I) the affiliate, or

        • (II) any taxpayer of whom the affiliate is a foreign affiliate,

      • (C) a partnership any member of which is a person described in clause (A) or (B), or

      • (D) a partnership in which any person or partnership described in any of clauses (A) to (C) has, directly or indirectly, a partnership interest;

• (13) Paragraph 95(2)(g) of the Act is replaced by the following:

  • (g) income earned, a loss incurred or a capital gain or capital loss realized, as the case may be, in a taxation year by a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the taxation year or a particular foreign affiliate of a taxpayer that is a controlled foreign affiliate of the taxpayer throughout the taxation year, because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency, is deemed to be nil if it is earned, incurred or realized in reference to any of the following sources:

    • (i) a debt obligation that was owing to

      • (A) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year (which other foreign affiliate is referred to in this paragraph as a “qualified foreign affiliate”) by the particular affiliate, or

      • (B) the particular affiliate by a qualified foreign affiliate,

    • (ii) the redemption, cancellation or acquisition of a share of the capital stock of, or the reduction of the capital of, the particular affiliate or a qualified foreign affiliate (which particular affiliate or which qualified foreign affiliate is referred to in this subparagraph as the “issuing corporation”) by the issuing corporation, or

    • (iii) the disposition to a qualified foreign affiliate of a share of the capital stock of another qualified foreign affiliate;

  • (g.01) any income, loss, capital gain or capital loss, derived by a foreign affiliate of a taxpayer under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the foreign affiliate to reduce its risk (with respect to any source, any particular income, gain or loss determined in reference to which is deemed by paragraph (g) to be nil) of fluctuations in the value of currency, is, to the extent of the absolute value of the particular income, gain or loss, deemed to be nil;

  • (g.02) in applying subsection 39(2) for the purpose of this subdivision (other than sections 94 and 94.1), the gains and losses of a foreign affiliate of a taxpayer in respect of excluded property are to be computed in respect of the taxpayer separately from the gains and losses of the foreign affiliate in respect of property that is not excluded property;

  • (g.03) if at any time a particular foreign affiliate referred to in paragraph (g) is a member of a partnership or a qualified foreign affiliate referred to in that paragraph is a member of a partnership,

    • (i) in applying this paragraph, where a debt obligation is owing at that time by a debtor to the partnership of which the particular foreign affiliate is a member, the debt obligation is deemed to be owing at that time by the debtor to the particular foreign affiliate in the proportion that the particular foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation,

    • (ii) in applying this paragraph, where a debt obligation is owing at that time to a creditor by the partnership of which the particular foreign affiliate is a member, the debt obligation is deemed to be owing at that time to the creditor by the particular foreign affiliate in the proportion that the particular foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation,

    • (iii) in applying paragraph (g) and this paragraph, where a debt obligation is owing at that time by a debtor to the partnership of which the qualified foreign affiliate is a member, the debt obligation is deemed to be owing at that time by the debtor to the qualified foreign affiliate in the proportion that the qualified foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation,

    • (iv) in applying paragraph (g) and this paragraph, where a debt obligation is owing at that time to a creditor by the partnership of which the qualified foreign affiliate is a member, the debt obligation is deemed to be owing at that time to the creditor by the qualified foreign affiliate in the proportion that the qualified foreign affiliate shared in any income earned, loss incurred or capital gain or capital loss realized by the partnership in respect of the debt obligation, and

    • (v) in computing the particular foreign affiliate’s income or loss from a partnership, any income earned, loss incurred or capital gain or capital loss realized, as the case may be, by the partnership — in respect of the portion of a debt obligation owing to or owing by the partnership that is deemed by any of subparagraphs (i) to (iv) to be a debt obligation owing to or owing by the particular foreign affiliate (referred to in this subparagraph as the “allocated debt obligation”) — because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency, that is attrib-utable to the allocated debt obligation is deemed to be nil to the extent that paragraph (g) would, if the rules in subparagraphs (i) to (iv) were applied, have applied to the particular foreign affiliate, to deem to be nil the income earned, loss incurred or capital gain or capital loss realized, as the case may be, by the particular foreign affiliate in respect of the allocated debt obligation, because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency;

• (14) Paragraph 95(2)(i) of the Act is replaced by the following:

  • (i) any income, gain or loss of a foreign affiliate of a taxpayer or of a partnership of which a foreign affiliate of a taxpayer is a member (which foreign affiliate or partnership is referred to in this paragraph as the “debtor”), for a taxation year or fiscal period of the debtor, as the case may be, is deemed to be income, a gain or a loss, as the case may be, from the disposition of an excluded property of the debtor, if the income, gain or loss is

    • (i) derived from the settlement or extinguishment of a debt of the debtor all or substantially all of the proceeds from which

      • (A) were used to acquire property, if at all times after the time at which the debt became debt of the debtor and before the time of that settlement or extinguishment, the property (or property substituted for the property) was property of the debtor and was, or would if the debtor were a foreign affiliate of the taxpayer be, excluded property of the debtor,

      • (B) were used at all times to earn income from an active business carried on by the debtor, or

      • (C) were used by the debtor for a combination of the uses described in clause (A) or (B),

    • (ii) derived from the settlement or extinguishment of a debt of the debtor all or substantially all of the proceeds from which were used to settle or extinguish a debt referred to in subparagraph (i) or in this subparagraph, or

    • (iii) derived under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the debtor to reduce its risk, with respect to a debt referred to in subparagraph (i) or (ii), of fluctuations in the value of the currency in which the debt was denominated;

• (15) Subparagraph 95(2)(l)(iii) of the Act is replaced by the following:

  • (iii) the business is carried on by the affiliate as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated under the laws

    • (A) of each country in which the business is carried on through a permanent establishment (as defined by regulation) in that country and of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued,

    • (B) of the country in which the business is principally carried on, or

    • (C) if the affiliate is related to a non-resident corporation, of the country under whose laws that non-resident corporation is governed and any of exists, was (unless that non-resident corporation was continued in any ju-risdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, and

• (16) Subsection 95(2) of the Act is amended by striking out the word “and” at the end of paragraph (l) and by adding the following after paragraph (m):

  • (n) in applying paragraphs (a) and (g) and subsections (2.2) and (2.21), in applying paragraph (b) of the description of A in the formula in the definition “foreign accrual property income” in subsection (1) and in applying paragraph (d) of the definition “exempt earnings”, and paragraph (c) of the definition “exempt loss”, in subsection 5907(1) of the Regulations, a non-resident corporation is deemed to be, at any time, a foreign affiliate of a particular corporation resident in Canada, and a foreign affiliate of the particular corporation in respect of which the particular corporation has a qualifying interest, if at that time

    • (i) the non-resident corporation is a foreign affiliate of another corporation that is resident in Canada and that is related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the particular corporation, and

    • (ii) that other corporation has a qualifying interest in respect of the non-resident corporation;

  • (o) a particular person is a qualifying member of a partnership at a particular time if, at that time, the particular person is a member of the partnership and

    • (i) throughout the period, in the fiscal period of the partnership that includes the particular time, during which the member was a member of the partnership, the particular person is, on a regular, continuous and substantial basis

      • (A) actively engaged in those activities, of the principal business of the partnership carried on in that fiscal period by the partnership, that are other than activities connected with the provision of or the acquisition of funds required for the operation of that principal business, or

      • (B) actively engaged in those activities, of a particular business carried on in that fiscal period by the particular person (otherwise than as a member of a partnership) that is similar to the principal business carried on in that fiscal period by the partnership, that are other than activities connected with the provision of or the acquisition of funds required for the operation of the particular business, or

    • (ii) throughout the period, in the fiscal period of the partnership that includes the particular time, during which the particular person was a member of the partnership

      • (A) the total of the fair market value of all partnership interests in the partnership owned by the particular person was equal to or greater than 1% of the total of the fair market value of all partnership interests in the partnership owned by all members of the partnership, and

      • (B) the total of the fair market value of all partnership interests in the partnership owned by the particular person or persons (other than trusts) related to the particular person was equal to or greater than 10% of the total of the fair market value of all partnership interests in the partnership owned by all members of the partnership;

  • (p) a particular person is a qualifying shareholder of a corporation at any time if throughout the period, in the taxation year of the corporation that includes that time, during which the particular person was a shareholder of the corporation

    • (i) the particular person owned 1% or more of the issued and outstanding shares (having full voting rights under all circumstances) of the capital stock of the corporation,

    • (ii) the particular person, or the particular person and persons (other than trusts) related to the particular person, owned 10% or more of the issued and outstanding shares (having full voting rights under all circumstances) of the capital stock of the corporation,

    • (iii) the total of the fair market value of all the issued and outstanding shares of the capital stock of the corporation owned by the particular person is 1% or more of the total fair market value of all the issued and outstanding shares of the capital stock of the corporation, and

    • (iv) the total of the fair market value of all the issued and outstanding shares of the capital stock of the corporation owned by the particular person or by persons (other than trusts) related to the particular person is 10% or more of the total fair market value of all the issued and outstanding shares of the capital stock of the corporation;

  • (q) in applying paragraphs (o) and (p),

    • (i) where interests in any partnership or shares of the capital stock of any corporation (which interests or shares are referred to in this subparagraph as “equity interests”) are, at any time, property of a particular partnership or are deemed under this paragraph to be, at any time, property of the particular partnership, the equity interests are deemed to be owned at that time by each member of the particular partnership in a proportion equal to the proportion of the equity interests that

      • (A) the fair market value, at that time, of the member’s partnership interest in the particular partnership

      is of

      • (B) the fair market value, at that time, of all members’ partnership interests in the particular partnership, and

    • (ii) where interests in a partnership or shares of the capital stock of a corporation (which interests or shares are referred to in this subparagraph as “equity interests”) are, at any time, property of a non-discretionary trust (within the meaning assigned by subsection 17(15)) or are deemed under this paragraph to be, at any time, property of such a non-discretionary trust, the equity interests are deemed to be owned at that time by each beneficiary under that trust in a proportion equal to that proportion of the equity interests that

      • (A) the fair market value, at that time, of the beneficiary’s beneficial interest in the trust

      is of

      • (B) the fair market value, at that time, of all beneficial interests in the trust;

  • (r) in applying paragraph (a) and in applying paragraph (d) of the definition “exempt earnings”, and paragraph (c) of the definition “exempt loss”, in subsection 5907(1) of the Regulations, a partnership is deemed to be, at any time, a partnership of which a foreign affiliate — of a particular corporation resident in Canada and in respect of which foreign affiliate the particular corporation has a qualifying interest — is a qualifying member, if at that time

    • (i) a particular foreign affiliate — of another corporation that is resident in Canada and that is related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the particular corporation — is a member of the partnership,

    • (ii) that other corporation has a qualifying interest in respect of the particular foreign affiliate, and

    • (iii) the particular foreign affiliate is a qualifying member of the partnership;

  • (s) in applying the definition “investment business” in subsection (1), a particular corporation is, at any time, a designated corporation in respect of a foreign affiliate of a taxpayer, if at that time

    • (i) a qualifying shareholder of the foreign affiliate or a person related to such a qualifying shareholder is a qualifying shareholder of the particular corporation,

    • (ii) the particular corporation

      • (A) is controlled by a qualifying shareholder of the foreign affiliate, or

      • (B) would be controlled by a particular qualifying shareholder of the foreign affiliate if the particular qualifying shareholder of the foreign affiliate owned each share of the capital stock of the particular corporation that is owned by a qualifying shareholder of the foreign affiliate or by a person related to a qualifying shareholder of the foreign affiliate, and

    • (iii) the total of all amounts each of which is the fair market value of a share of the capital stock of the particular corporation owned by a qualifying shareholder of the foreign affiliate or by a person related to a qualifying shareholder of the foreign affiliate is greater than 50% of the total fair market value of all the issued and outstanding shares of the capital stock of the particular corporation;

  • (t) in applying the definition “investment business” in subsection (1) in respect of a business carried on by a foreign affiliate of a taxpayer in a taxation year, a particular partnership is, at any time, a designated partnership in respect of the foreign affiliate of the taxpayer, if at that time

    • (i) the foreign affiliate or a person related to the foreign affiliate is a qualifying member of the particular partnership, and

    • (ii) the total of all amounts — each of which is the fair market value of a partnership interest in the particular partnership held by the foreign affiliate, by a person related to the foreign affiliate or (where the foreign affiliate carries on, at that time, the business as a qualifying member of another partnership) by a qualifying member of the other partnership — is greater than 50% of the total fair market value of all partnership interests in the particular partnership owned by all members of the particular partnership;

  • (u) if any entity is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership,

    • (i) the entity is deemed to be a member of the other partnership for the purpose of

      • (A) subparagraph (ii),

      • (B) applying the reference, in paragraph (a), to “a member” of a partnership,

      • (C) paragraphs (a.1) to (b), (g.03) and (o), and

      • (D) paragraphs (b) and (c) of the definition “investment business” in subsection (1), and

    • (ii) in applying paragraph (g.03), the entity is deemed to have, directly, rights to the income or capital of the other partnership, to the extent of the entity’s direct and indirect rights to that income or capital;

  • (v) in applying paragraph (p),

    • (i) where shares of the capital stock of any corporation (referred to in this paragraph as the “issuing corporation”) are, at any time, owned by a corporation (referred to in this paragraph as the “holding corporation”) or are deemed under this paragraph to be, at any time, owned by a corporation (referred to in this paragraph as the “holding corporation”), those shares are deemed to be owned at that time by each shareholder of the holding corporation in a proportion equal to the proportion of those shares that

      • (A) the fair market value, at that time, of the shares of the capital stock of the issuing corporation that are owned by the shareholder

      is of

      • (B) the fair market value, at that time, of all the issued and outstanding shares of the capital stock of the issuing corporation, and

    • (ii) a person who is deemed by subparagraph (i) to own, at any time, shares of the capital stock of a corporation is deemed to be, at that time, a shareholder of the corporation;

  • (w) where a foreign affiliate of a corporation resident in Canada carries on an active business in more than one country,

    • (i) where the business is carried on in a country other than Canada, it is deemed to carry on that business in that country only to the extent that the profit or loss from that business can reasonably be attributed to a permanent establishment situated in that country, and

    • (ii) where the business is carried on in Canada, it is deemed to carry on that business in Canada only to the extent that the income from the active business is subject to tax under this Part;

  • (x) the loss from an active business, from a non-qualifying business or from property (as the case may be) of a foreign affiliate of a taxpayer resident in Canada for a taxation year is the amount of that loss, if any, that is computed by applying the provisions in this subdivision with respect to the computation of income from the active business, from the non-qualifying business or from property (as the case may be) of the foreign affiliate for the taxation year with any modifications that the circumstances require;

  • (y) in determining — for the purpose of paragraph (a) and for the purpose of applying subsections (2.2) and (2.21) for the purpose of applying that paragraph — whether a non-resident corporation is, at any time, a foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest, where interests in any partnership or shares of the capital stock of any corporation (which interests or shares are referred to in this paragraph as “equity interests”) are, at that time, property of a particular partnership or are deemed under this paragraph to be, at any time, property of the particular partnership, the equity interests are deemed to be owned at that time by each member of the particular partnership in a proportion equal to the proportion of the equity interests that

    • (i) the fair market value, at that time, of the member’s partnership interest in the particular partnership

    is of

    • (ii) the fair market value, at that time, of all members’ partnership interests in the particular partnership; and

  • (z) where a particular foreign affiliate of a taxpayer — in respect of which the taxpayer has a qualifying interest or that is a controlled foreign affiliate of the taxpayer — is a member of a partnership, the particular foreign affiliate’s foreign accrual property income or loss in respect of the taxpayer for a taxation year shall not include any income or loss of the partnership to the extent that the income or loss

    • (i) is attributable to the foreign accrual property income or loss of a foreign affiliate of the partnership that is also a foreign affiliate of the taxpayer (referred to in this paragraph as the “second foreign affiliate”) in respect of which the taxpayer has a qualifying interest or that is a controlled foreign affiliate of the taxpayer, and

    • (ii) is, because of paragraph (a) as applied in respect of the taxpayer, included in computing the income or loss from an active business of the second foreign affiliate for a taxation year.

• (17) Section 95 of the Act is amended by adding the following after subsection (2):

  • Rules for the definition “controlled foreign affiliate”

    (2.01) In applying paragraph (b) of the definition “controlled foreign affiliate” in subsection (1) and in applying this subsection,

    • (a) shares of the capital stock of a corporation that are at any time owned by, or that are deemed by this subsection to be at any time owned by, another corporation are deemed to be, at that time, owned by, or property of, as the case may be, each shareholder of the other corporation in the proportion that

      • (i) the fair market value at that time of the shares of the capital stock of the other corporation that, at that time, are owned by, or are property of, the shareholder

      is of

      • (ii) the fair market value at that time of all the issued and outstanding shares of the capital stock of the other corporation;

    • (b) shares of the capital stock of a corporation that are, or are deemed by this subsection to be, at any time, property of a partnership, are deemed to be, at that time, owned by, or property of, as the case may be, each member of the partnership in the proportion that

      • (i) the fair market value at that time of the member’s partnership interest in the partnership

      is of

      • (ii) the fair market value at that time of all partnership interests in the partnership;

    • (c) shares of the capital stock of a corporation that are at any time owned by, or that are deemed by this subsection to be at any time owned by, a non-discretionary trust (within the meaning assigned by subsection 17(15)) other than an exempt trust (within the meaning assigned by subsection (1)) are deemed to be, at that time, owned by, or property of, as the case may be, each beneficiary of the trust in the proportion that

      • (i) the fair market value at that time of the beneficiary’s beneficial interest in the trust

      is of

      • (ii) the fair market value at that time of all beneficial interests in the trust; and

    • (d) all of the shares of the capital stock of a corporation that are at any time owned by, or that are deemed by this subsection to be at any time owned by, a particular trust (other than an exempt trust within the meaning assigned by subsection (1) or a non-discretionary trust within the meaning assigned by subsection 17(15)) are deemed to be, at that time, owned by, or property of, as the case may be,

      • (i) each beneficiary of the particular trust at that time, and

      • (ii) each settlor (within the meaning assigned by subsection 17(15)) in respect of the particular trust at that time.

  • Marginal note:Rule against double-counting

    (2.02) In applying the assumption in paragraph (b) of the definition “controlled foreign affiliate” in subsection (1) in respect of a taxpayer resident in Canada to determine whether a foreign affiliate of the taxpayer is at any time a controlled foreign affiliate of the taxpayer, nothing in that paragraph or in subsection (2.01) is to be read or construed as requiring an interest, or for civil law a right, in a share of the capital stock of the foreign affiliate of the taxpayer owned at that time by the taxpayer to be taken into account more than once.

• (18) Paragraph 95(2.1)(c) of the Act is replaced by the following:

  • (c) the affiliate entered into the agreements in the course of a business carried on by the affiliate, if

    • (i) the business is carried on by the affiliate principally in a country (other than Canada) and principally with persons with whom the affiliate deals at arm’s length, and

    • (ii) the business activities of the affiliate are regulated in that country; and

• (19) Subsection 95(2.2) of the Act is replaced by the following:

  • Marginal note:Rule re subsection (2)

    (2.2) For the purpose of subsection (2), other than paragraph (2)(f), a non-resident corporation that is not a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout a particular taxation year is deemed to be a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout that particular taxation year if

    • (a) a person or partnership has, in that particular taxation year, acquired or disposed of shares of the capital stock of that non-resident corporation or of any other corporation and, because of that acquisition or disposition, that non-resident corporation becomes or ceases to be a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest, and

    • (b) at the beginning of that particular taxation year or at the end of that particular taxation year, the non-resident corporation is a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest.

  • Marginal note:Rule re subsection (2.2)

    (2.21) Subsection (2.2) does not apply for the purpose of paragraph (2)(a) in respect of any income or loss referred to in that paragraph, of a particular foreign affiliate of the taxpayer, to the extent that that income or loss can reasonably be considered to have been realized or to have accrued before the earlier of

    • (a) the time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, and

    • (b) the time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of another person resident in Canada in respect of which the other person resident in Canada had a qualifying interest, where

      • (i) the taxpayer is a corporation,

      • (ii) the taxpayer did not exist at the beginning of the taxation year,

      • (iii) the particular affiliate became a foreign affiliate of the taxpayer in the taxation year because of a disposition, in the taxation year, of shares of the capital stock of the particular affiliate to the taxpayer by the other person resident in Canada, and

      • (iv) the other person resident in Canada was, immediately before that disposition, related to the taxpayer.

• (20) Paragraph 95(2.3)(b) of the Act is replaced by the following:

  • (b) the sale or exchange was made by the affiliate in the course of a business conducted principally with persons with whom the affiliate deals at arm’s length, if

    • (i) the business is principally carried on in the country (other than Canada) under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, or

    • (ii) the affiliate is a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities and the activities of the business are regulated

      • (A) under the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment (as defined by regulation) in that country,

      • (B) under the laws of the country (other than Canada) in which the business is principally carried on, or

      • (C) if the affiliate is related to a corporation, under the laws of the country under the laws of which that related corporation is governed and any of exists, was (unless that related corporation was continued in any ju-risdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union; and

• (21) Paragraph 95(2.4)(a) of the Act is replaced by the following:

  • (a) the income is derived by the affiliate in the course of a business conducted principally with persons with whom the affiliate deals at arm’s length carried on by it as a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, the activities of which are regulated under the laws

    • (i) of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued and of each country in which the business is carried on through a permanent establishment (as defined by regulation) in that country,

    • (ii) of the country in which the business is principally carried on, or

    • (iii) if the affiliate is related to a corporation, of the country under the laws of which that related corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, and

• (22) Section 95 of the Act is amended by adding the following after subsection (2.4):

  • Marginal note:Application of paragraph (2)(a.3)

    (2.41) Paragraph (2)(a.3) does not apply to a foreign affiliate of a taxpayer resident in Canada in respect of the foreign affiliate’s income for a taxation year derived, directly or indirectly, from indebtedness of persons resident in Canada or from indebtedness in respect of businesses carried on in Canada (referred to in this subsection as the “Canadian indebtedness”) if

    • (a) the taxpayer is, at the end of the foreign affiliate’s taxation year

      • (i) a life insurance corporation resident in Canada, the business activities of which are subject by law to the supervision of the Superintendent of Financial Institutions or a similar authority of a province, or

      • (ii) a corporation resident in Canada that is a subsidiary controlled corporation of a corporation described in subparagraph (i);

    • (b) the Canadian indebtedness is used or held by the foreign affiliate, throughout the period in the taxation year that that Canadian indebtedness was used or held by the foreign affiliate, in the course of carrying on a business (referred to in this subsection as the “foreign life insurance business”) that is a life insurance business carried on outside Canada (other than a business deemed by paragraph (2)(a.2) to be a separate business other than an active business), the activities of which are regulated

      • (i) under the laws of the country under whose laws the foreign affiliate is governed and any of exists, was (unless the foreign affiliate was continued in any jurisdiction) formed or organized, or was last continued, and

      • (ii) under the laws of the country, if any, in which the business is principally carried on;

    • (c) more than 90% of the gross premium revenue of the foreign affiliate for the taxation year in respect of the foreign life insurance business was derived from the insurance or reinsurance of risks (net of reinsurance ceded) in respect of persons

      • (i) that were non-resident at the time at which the policies in respect of those risks were issued or effected, and

      • (ii) that were at that time dealing at arm’s length with the foreign affiliate, the taxpayer and all persons that were related at that time to the foreign affiliate or the taxpayer; and

    • (d) it is reasonable to conclude that the foreign affiliate used or held the Canadian indebtedness

      • (i) to fund a liability or reserve of the foreign life insurance business, or

      • (ii) as capital that can reasonably be considered to have been required for the foreign life insurance business.

  • Marginal note:Exception re paragraph (2)(a.3)

    (2.42) If, at any time in a taxation year of a foreign affiliate of a taxpayer referred to in paragraph (2)(a.3), a life insurance corporation resident in Canada is the taxpayer referred to in paragraph (2)(a.3) or is a person who controls, or is controlled by, such a taxpayer, a particular indebtedness or a particular lease obligation of the life insurance corporation is, for the purposes of that paragraph, deemed, at that time, not to be an indebtedness or a lease obligation of a person resident in Canada, to the extent of the portion of the particular indebtedness or lease obligation that can reasonably be considered to have been issued by the life insurance corporation to the foreign affiliate

    • (a) in respect of the life insurance corporation’s life insurance business carried on outside Canada; and

    • (b) not in respect of

      • (i) the life insurance corporation’s life insurance business carried on in Canada, or

      • (ii) any other use.

• (23) The definition “indebtedness” in subsection 95(2.5) of the Act is replaced by the following:

  “indebtedness”

  « dette »

  “indebtedness” does not include obligations of a particular person under agreements with non-resident corporations providing for the purchase, sale or exchange of currency where

  • (a) the agreements are swap agreements, forward purchase or sale agreements, forward rate agreements, futures agreements, options or rights agreements, or similar agreements,

  • (b) the particular person is a bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority in Canada such as the Superintendent of Financial Institutions or a similar authority of a province,

  • (c) the agreements are entered into by the non-resident corporation in the course of a business conducted principally with persons with whom the non-resident corporation deals at arm’s length, if

    • (i) the business is principally carried on in the country (other than Canada) under whose laws the non-resident corporation is governed and any of exists, was (unless the non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued, or

    • (ii) the non-resident corporation is a foreign affiliate of the particular person, or of a person related to the particular person, and

      • (A) the non-resident corporation is a foreign bank, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities, and

      • (B) the activities of the business are regulated

        • (I) under the laws of the country under whose laws the non-resident corporation is governed and any of exists, was (unless the non-resident corporation was continued in any jurisdiction) formed or organized, or was last continued and under the laws of each country in which the business is carried on through a permanent establishment (as defined by regulation) in that country,

        • (II) under the laws of the country (other than Canada) in which the business is principally carried, or

        • (III) if the affiliate is related to a corporation, under the laws of the country under the laws of which a corporation related to the non-resident corporation is governed and any of exists, was (unless that related corporation was continued in any ju-risdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the Eu-ropean Union, and

  • (d) the terms and conditions of such agreements are substantially the same as the terms and conditions of similar agreements made by persons dealings at arm’s length;

• (24) Subsection 95(3) of the Act is amended by striking out the word “or” at the end of paragraph (a) and by adding the following after paragraph (b):

  • (c) the transmission of electronic signals or electricity along a transmission system located outside Canada; or

  • (d) the manufacturing or processing outside Canada, in accordance with the taxpayer’s specifications and under a contract between the taxpayer and the affiliate, of tangible property, or for civil law corporeal property, that is owned by the taxpayer if the property resulting from the manufacturing or processing is used or held by the taxpayer in the ordinary course of the taxpayer’s business carried on in Canada.

• (25) Section 95 of the Act is amended by adding the following after subsection (3):

  • Marginal note:Designated property — subparagraph (2)(a.1)(i)

    (3.1) Designated property referred to in subparagraph (2)(a.1)(i) is property that is described in the portion of paragraph (2)(a.1) that is before subparagraph (i) that is

    • (a) property that was sold to non-resident persons other than the affiliate, or sold to the affiliate for sale to non-resident persons, and

      • (i) that

        • (A) was — in the course of carrying on a business in Canada — manufactured, produced, grown, extracted or processed in Canada by the taxpayer, or by a person with whom the taxpayer does not deal at arm’s length, or

        • (B) was — in the course of a business carried on by a foreign affiliate of the taxpayer outside Canada — manufactured or processed from tangible property, or for civil law corporeal property, that, at the time of the manufacturing or processing, was owned by the taxpayer or by a person related to the taxpayer and used or held by the owner in the course of carrying on a business in Canada, if the manufacturing or processing was in accordance with the specifications of the owner of that tangible or corporeal property and under a contract between that owner and that foreign affiliate,

      • (ii) that was acquired, in the course of carrying on a business in Canada, by a purchaser from a vendor, if

        • (A) the purchaser is the taxpayer or is a person resident in Canada with whom the taxpayer does not deal at arm’s length, and

        • (B) the vendor is a person

          • (I) with whom the taxpayer deals at arm’s length,

          • (II) who is not a foreign affiliate of the taxpayer, and

          • (III) who is not a foreign affiliate of a person resident in Canada with whom the taxpayer does not deal at arm’s length, or

      • (iii) that was acquired by a purchaser from a vendor, if

        • (A) the purchaser is the taxpayer or is a person resident in Canada with whom the taxpayer does not deal at arm’s length,

        • (B) the vendor is a foreign affiliate of

          • (I) the taxpayer, or

          • (II) a person resident in Canada with whom the taxpayer does not deal at arm’s length, and

        • (C) that property was manufactured, produced, grown, extracted or processed in the country

          • (I) under whose laws the vendor is governed and any of exists, was (unless the vendor was continued in any jurisdiction) formed or organized, or was last continued, and

          • (II) in which the vendor’s business is principally carried on; or

    • (b) property that is an interest in real property, or a real right in an immovable, located in, or a foreign resource property in respect of, the country

      • (i) under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and

      • (ii) in which the affiliate’s business is principally carried on.

• (26) The definitions “active business”, “income from an active business” and “income from property” in subsection 95(1) of the Act, as enacted by subsection (1), subsections (3), (4), and (6), the definitions “income from a non-qualifying business”, “non-qualifying business” and “non-qualifying country” in subsection 95(1) of the Act, as enacted by subsection (9), and paragraphs 95(2)(w) and (x) of the Act, as enacted by subsection (16), apply in respect of taxation years, of a foreign affiliate of a taxpayer, that begin after 2008.

• (27) The definition “controlled foreign affiliate” in subsection 95(1) of the Act, as enacted by subsection (1), applies to taxation years, of a foreign affiliate of a taxpayer, that begin after 1995, except that

  • (a) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, the definition “controlled foreign affiliate” in subsection 95(1) of the Act, as enacted by subsection (1), is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means

    • (a) a foreign affiliate of the taxpayer that is, at that time, controlled

      • (i) by the taxpayer,

      • (ii) by the taxpayer and not more than four other persons resident in Canada, or

      • (iii) by not more than four persons resident in Canada, other than the taxpayer, or

    • (b) a foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer owned

      • (i) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the taxpayer,

      • (ii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with the taxpayer,

      • (iii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without ref-erence to the existence of or the absence of any relationship, connection or action in concert between those persons), who

        • (A) are resident in Canada,

        • (B) are not the taxpayer or a person described in subparagraph (ii), and

        • (C) own, at that time, shares of the capital stock of the foreign affiliate, and

      • (iv) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder;

  • (b) for taxation years, of a foreign affiliate of a taxpayer, that begin after 1995 and before 2003, the definition “controlled foreign affiliate” in subsection 95(1) of the Act, as enacted by subsection (1), is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate”, at any time of a taxpayer resident in Canada, means a foreign affiliate of the taxpayer that

    • (a) is, at that time, controlled

      • (i) by the taxpayer,

      • (ii) by the taxpayer and not more than four other persons resident in Canada, or

      • (iii) by not more than four persons resident in Canada, other than the taxpayer, or

    • (b) would, at that time, be controlled by the taxpayer if the taxpayer owned

      • (i) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any of not more than four other persons resident in Canada,

      • (ii) each share of the capital stock of a corporation that is owned at that time by any of not more than four persons resident in Canada (other than the taxpayer), and

      • (iii) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any person with whom the taxpayer does not deal at arm’s length;

• (28) Subject to subsection (46), subsections (2) and (14) apply to taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002, except that paragraph 95(2)(i) of the Act, as enacted by subsection (14), shall, in respect of settlements and extinguishments of debt held by a foreign affiliate of the taxpayer that occur in those taxation years and before October 2, 2007, be read as follows:

  • (i) any gain or loss determined in accordance with subsection 39(2) of a foreign affiliate of a taxpayer is deemed to be a gain or loss, as the case may be, from the disposition of an excluded property if the gain or loss is

    • (i) derived from the settlement or extinguishment of a debt all or substantially all of the proceeds from which were used at all times to acquire excluded property or to earn income from an active business or for a combination of those uses, or

    • (ii) derived under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the affiliate to reduce its risk, with respect to a debt referred to in subparagraph (i), of fluctuations in the value of the currency in which the debt was denominated;

• (29) Subsection (5) applies in respect of taxation years, of a foreign affiliate of a taxpayer, that end on or after December 20, 2002.

• (30) Subject to subsection (46), subsections (7), (15), (18) and (20) to (23) apply to taxation years, of a foreign affiliate of a taxpayer, that begin after 1999.

• (31) Subject to subsection (46), subsection (8) applies to taxation years, of a foreign affiliate of a taxpayer, that end after 1999.

• (32) Subject to subsection (45), subsection (11) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002.

• (33) The definition “entity” in subsection 95(1) of the Act, as enacted by subsection (9), applies in respect of taxation years, of a foreign affiliate of a taxpayer, that begin after 1994.

• (34) The definitions “eligible trust”, “exempt trust”, “specified fixed interest” and “specified purchaser” in subsection 95(1) of the Act, as enacted by subsection (9), apply after February 27, 2004, except that, after February 27, 2004 and before October 2, 2007, the definition “specified purchaser” in subsection 95(1) of the Act, as enacted by subsection (9), shall be read as follows:

  “specified purchaser”

  “specified purchaser”, at any time in respect of a particular taxpayer resident in Canada, means a person or partnership that is, at that time,

  • (a) the particular taxpayer;

  • (b) a taxpayer resident in Canada with which the particular taxpayer does not deal at arm’s length;

  • (c) a foreign affiliate of a person described in paragraph (a) or (b);

  • (d) a non-resident person with which a person described in any of paragraphs (a) to (c) does not deal at arm’s length;

  • (e) a trust (other than an exempt trust) in which a person or partnership described in any of paragraphs (a) to (d) and (f) is beneficially interested; and

  • (f) a partnership of which a person or partnership described in any of paragraphs (a) to (e) is a member.

• (35) Subject to subsection (46), subsection (10) and paragraph 95(2)(z) of the Act, as enacted by subsection (16), apply to taxation years, of a foreign affiliate of a taxpayer, that end after 1999. However,

  • (a) subject to paragraph (b), paragraph 95(2)(a) of the Act, as enacted by subsection (10), shall, for taxation years, of a foreign affiliate of a taxpayer, that end after 1999 and begin before 2009, be read as follows:

    • (a) in computing the income or loss from an active business for a taxation year of a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the year or that is a controlled foreign affiliate of the taxpayer throughout the year, there shall be included any income or loss of the particular foreign affiliate for that year from sources in a country other than Canada that would otherwise be income or loss from property of the particular foreign affiliate for the year to the extent that

      • (i) the income or loss

        • (A) is derived by the particular foreign affiliate from activities that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by

          • (I) another corporation

            1. that is a non-resident corporation to which the particular foreign affiliate and the taxpayer are related throughout the year, or

            2. that is a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, or

          • (II) a life insurance corporation that is resident in Canada throughout the year and that is

            1. the taxpayer,

            2. a person who controls the taxpayer,

            3. a person controlled by the taxpayer, or

            4. a person controlled by a person who controls the taxpayer, and

        • (B) would be included in computing the amount prescribed to be the earnings or loss, from an active business carried on in a country other than Canada, of

          • (I) the non-resident corporation referred to in sub-subclause (A)(I)1 or the life insurance corporation referred to in subclause (A)(II), if that non-resident corporation or that life insurance corporation were a foreign affiliate of the taxpayer and the income were earned by it, or

          • (II) the foreign affiliate referred to in sub-subclause (A)(I)2, if the income were earned by it,

      • (ii) the income or loss is derived from amounts that were paid or payable, directly or indirectly, to the particular foreign affiliate or a partnership of which the particular foreign affiliate was a member

        • (A) by

          • (I) a non-resident corporation to which the particular foreign affiliate and the taxpayer are related throughout the year, or

          • (II) a partnership of which a non-resident corporation to which the particular foreign affiliate and the taxpayer are related throughout the year is a qualifying member throughout each period, in the fiscal period of the partnership that ends in the year, in which that non-resident corporation was a member of the partnership

          to the extent that those amounts that were paid or payable are for expenditures that would, if the non-resident corporation or the partnership were a foreign affiliate of the taxpayer, be deductible by it in computing the amounts prescribed to be its earnings or loss for a taxation year from an active business (other than an active business carried on in Canada),

        • (B) by

          • (I) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year, or

          • (II) a partnership of which another foreign affiliate of the taxpayer — in respect of which other foreign affiliate the taxpayer has a qualifying interest throughout the year or to which other foreign affiliate the particular foreign affiliate and the taxpayer are related throughout the year — is a qualifying member throughout each period, in the fiscal period of the partnership that ends in the year, in which that other foreign affiliate was a member of the partnership

          to the extent that those amounts that were paid or payable are for expenditures that were deductible by the other foreign affiliate or would (if the partnership were a foreign affiliate of the taxpayer) be deductible by the partnership in computing the amounts prescribed to be its earnings or loss for a taxation year from an active business (other than an active business carried on in Canada),

        • (C) by a partnership of which the particular foreign affiliate is a qualifying member throughout each period, in the fiscal period of the partnership that ends in the year, in which the particular foreign affiliate was a member of the partnership, to the extent that those amounts that were paid or payable were for expenditures that would, if the partnership were a foreign affiliate of the taxpayer, be deductible in computing the amounts prescribed to be its earnings or loss for a taxation year from an active business (other than an active business carried on in Canada),

        • (D) by another foreign affiliate (referred to in this clause as the “second affiliate”) of the taxpayer — in respect of which the taxpayer has a qualifying interest throughout the year or to which the particular foreign affiliate and the taxpayer are related throughout the year — to the extent that the amounts are paid or payable by the second affiliate, in respect of any particular period in the year,

          • (I) under a legal obligation to pay interest on borrowed money used for the purpose of earning income from property, or

          • (II) on an amount payable for property acquired for the purpose of gaining or producing income from property

          where

          • (III) the property is, throughout the particular period, excluded property of the second affiliate that is shares of the capital stock of a corporation (referred to in this clause as the “third affiliate”) which is, throughout the particular period, a foreign affiliate (other than the particular foreign affiliate) of the taxpayer in respect of which the taxpayer has a qualifying interest or to which the particular foreign affiliate and the taxpayer are related,

          • (IV) the second affiliate and the third affiliate are resident in the same country for each of their taxation years (each of which taxation years is referred to in subclause (V) as a “relevant taxation year” of the second affiliate or of the third affiliate, as the case may be) that end in the year, and

          • (V) in respect of each of the second affiliate and the third affiliate for each relevant taxation year of that affiliate, either

            1. that affiliate is subject to income taxation in that country in that relevant taxation year, or

            2. the members or shareholders of that affiliate (which, for the purpose of this sub-subclause, includes a person that has, directly or indi-rectly, an interest, or for civil law a right, in a share of the capital stock of, or in an equity interest in, the affiliate) at the end of that relevant taxation year are subject to income taxation in that country on, in aggregate, all or substantially all of the income of that affiliate for that relevant taxation year in their taxation years in which that relevant taxation year ends, or

        • (E) by a life insurance corporation that is resident in Canada and that is the taxpayer, a person who controls the taxpayer, a person controlled by the taxpayer or a person controlled by a person who controls the taxpayer, to the extent that those amounts that were paid or payable were for expenditures that are deductible by the life insurance corporation in computing its income or loss for a taxation year from carrying on its life insurance business outside Canada and are not deductible in computing its income or loss for a taxation year from carrying on its life insurance business in Canada,

      • (iii) the income or loss is derived by the particular foreign affiliate from the factoring of trade accounts receivable acquired by the particular foreign affiliate, or a partnership of which the particular foreign affiliate was a member, from a non-resident corporation to which the particular foreign affiliate and the taxpayer are related throughout the year to the extent that the accounts receivable arose in the course of an active business carried on in a country other than Canada by the non-resident corporation,

      • (iv) the income or loss is derived by the particular foreign affiliate from loans or lending assets acquired by the particular foreign affiliate, or a partnership of which the particular foreign affiliate was a member, from a non-resident corporation to which the particular foreign affiliate and the taxpayer are related throughout the year to the extent that the loans or lending assets arose in the course of an active business carried on in a country other than Canada by the non-resident corporation,

      • (v) the income or loss is derived by the particular foreign affiliate from the disposition of excluded property that is not capital property, or

      • (vi) the income or loss is derived by the particular foreign affiliate under or as a result of an agreement that provides for the purchase, sale or exchange of currency and that can reasonably be considered to have been made by the particular foreign affiliate to reduce

        • (A) its risk — with respect to an amount that increases the amount required by this paragraph to be included in computing the particular foreign affiliate’s income for a taxation year from an active business or that decreases the amount required by this paragraph to be included in computing the particular foreign affiliate’s loss for a taxation year from an active business — of fluctuations in the value of the currency in which the amount was denominated, or

        • (B) its risk — with respect to an amount that decreases the amount required by this paragraph to be included in computing the particular foreign affiliate’s income for a taxation year from an active business or that increases the amount required by this paragraph to be included in computing the particular foreign affiliate’s loss for a taxation year from an active business — of fluctuations in the value of the currency in which the amount was denominated;

  • (b) if 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 that includes the day on which this Act is assented to,

    • (i) subclauses 95(2)(a)(ii)(D)(III) to (V) of the Act, as enacted by subsection (10), as required to be read by paragraph (a), also apply to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000, except that the references in those subclauses, as those subclauses apply to those taxation years of a foreign affiliate of a taxpayer, to “particular foreign affiliate” shall be read as references to “particular affiliate”; and

    • (ii) where the taxpayer has not validly made the election provided by subsection (46), clauses 95(2)(a)(ii)(A) to (C) and (E) of the Act, as enacted by subsection (10), as required to be read by paragraph (a), also apply to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000, except that the references in those clauses 95(2)(a)(ii)(A) to (C), as those clauses apply to those taxation years of a foreign affiliate of a taxpayer, to “particular foreign affiliate” shall be read as references to “particular affiliate” and

      • (A) subclause (II) of that clause 95(2)(a)(ii)(A) shall be read as follows:

        • (II) a partnership of which a non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year is a member and of which that non-resident corporation is not a specified member at any time in a fiscal period of the partnership that ends in the year

      • (B) subclause (II) of that clause 95(2)(a)(ii)(B) shall be read as follows:

        • (II) a partnership of which another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year is a member and of which that other foreign affiliate is not a specified member at any time in a fiscal period of the partnership that ends in the year

      • (C) that clause 95(2)(a)(ii)(C) shall be read as follows:

        • (C) by a partnership of which the particular affiliate is a member and of which the particular affiliate is not a specified member at any time in a fiscal period of the partnership that ends in the year, to the extent that those amounts that were paid or payable were for expenditures that would be, if the partnership were a foreign affiliate of the taxpayer, deductible in a taxation year in computing the amounts prescribed to its earnings or loss from an active business carried on by it outside Canada,

• (36) Subsection (12) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002, except that, in applying paragraph 95(2)(b) of the Act, as enacted by subsection (12), to taxation years, of a foreign affiliate of the taxpayer, that begin after December 20, 2002 and before February 28, 2004, that paragraph shall be read as follows:

  • (b) the provision, by a foreign affiliate of a taxpayer, of services or of an undertaking to provide services is deemed to be a separate business, other than an active business, carried on by the affiliate, and any income from that business or that pertains to or is incident to that business is deemed to be income from a business other than an active business, if

    • (i) the amount paid or payable in consideration for those services or for the undertaking to provide those services

      • (A) is deductible, or can reasonably be considered to relate to an amount that is deductible, in computing the income from a business carried on in Canada, by

        • (I) any taxpayer of whom the affiliate is a controlled foreign affiliate, or

        • (II) another person who is related to any taxpayer of whom the affiliate is a controlled foreign affiliate, or

      • (B) is deductible, or can reasonably be considered to relate to an amount that is deductible, in computing the foreign accrual property income of a controlled foreign affiliate of

        • (I) any taxpayer of whom the affiliate is a controlled foreign affiliate, or

        • (II) another person who is related to any taxpayer of whom the affiliate is a controlled foreign affiliate, or

    • (ii) the services are, or are to be, performed by

      • (A) any taxpayer of whom the affiliate is a controlled foreign affiliate and who is an individual resident in Canada, or

      • (B) another person who is related to any taxpayer of whom the affiliate is a controlled foreign affiliate and who is an individual resident in Canada;

• (37) Subject to subsection (46), paragraphs 95(2)(g) to (g.03) of the Act, as enacted by subsection (13), apply to taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002, except that, for taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002 and before 2009, paragraph 95(2)(g) of the Act, as enacted by subsection (13), shall be read as follows:

  • (g) income earned, a loss incurred or a capital gain or capital loss realized, as the case may be, in a taxation year by a particular foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout the taxation year or that is a controlled foreign affiliate of the taxpayer throughout the taxation year, because of a fluctuation in the value of the currency of a country other than Canada relative to the value of Canadian currency, is deemed to be nil if it is earned, incurred or realized in reference to any of the following sources:

    • (i) a debt obligation that was owing to

      • (A) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year or any other non-resident corporation to which the particular affiliate and the taxpayer are related throughout the year (which other foreign affiliate or other non-resident corporation is referred to in this paragraph as a “qualified foreign corporation”), or

      • (B) the particular affiliate by a qualified foreign corporation,

    • (ii) the redemption, cancellation or acquisition of a share of the capital stock of, or the reduction of the capital of, the particular affiliate or a qualified foreign corporation (which particular affiliate or which qualified foreign affiliate is referred to in this subparagraph as the “issuing corporation”) by the issuing corporation, or

    • (iii) the disposition to a qualified foreign corporation of a share of the capital stock of another qualified foreign corporation;

• (38) Subject to subsection (46), paragraphs 95(2)(n) and (p), (r) to (t), (v) and (y) of the Act, as enacted by subsection (16), apply to taxation years, of a foreign affiliate of a taxpayer, that end after 1999. However, if 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 that includes the day on which this Act is assented to, paragraph 95(2)(n) of the Act, as enacted by subsection (16), applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994.

• (39) Subject to subsection (46), paragraphs 95(2)(o) and (q) of the Act, as enacted by subsection (16), apply to taxation years that end after 1999.

• (40) Paragraph 95(2)(u) of the Act, as enacted by subsection (16), applies in respect of taxation years, of foreign affiliates of a taxpayer, that end after 1999. However, if 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 that includes the day on which this Act is assented to, paragraph 95(2)(u) of the Act, as enacted by subsection (16), applies in respect of taxation years, of all foreign affiliates of the taxpayer, that begin after 1994.

• (41) Subsection (17) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after February 27, 2004.

• (42) Subsection 95(2.2) of the Act, as enacted by subsection (19), applies to taxation years, of a foreign affiliate of a taxpayer, that end after 1999. However,

  • (a) subsection 95(2.2) of the Act, as enacted by subsection (19), shall be read as follows for taxation years, of a foreign affiliate of a taxpayer, that end after 1999 and begin before 2009:

    • (2.2) For the purpose of subsection (2), other than paragraph (2)(f),

      • (a) a non-resident corporation that was not a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout a particular taxation year shall be deemed to be a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest throughout that year where

        • (i) a person or partnership has, in that year, acquired or disposed of shares of the capital stock of that non-resident corporation or any other corporation and, because of that acquisition or disposition, that non-resident corporation became or ceased to be a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, and

        • (ii) at the beginning of that year or at the end of that year, the non-resident corporation was a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest; and

      • (b) a non-resident corporation that was not related to a taxpayer or to a taxpayer and a foreign affiliate of the taxpayer, as the case may be, throughout a particular taxation year is deemed to be related to the taxpayer or to the taxpayer and the foreign affiliate of the taxpayer throughout that year if

        • (i) a person or partnership has, in that year, acquired or disposed of shares of the capital stock of the non-resident corporation or any other corporation and, because of that acquisition or disposition, the non-resident corporation became (or would have become, if paragraph 251(5)(b) did not apply to rights contained in the agreement under which the person acquired the shares), or ceased to be, a non-resident corporation that was related to the taxpayer or to the taxpayer and the foreign affiliate of the taxpayer, and

        • (ii) at the beginning, or at the end, of that year, the non-resident corporation was related to the taxpayer or to the taxpayer and the foreign affiliate of the taxpayer.

  • (b) if a taxpayer 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 that includes the day on which this Act is assented to, subsection 95(2.2) of the Act, as enacted by subsection (19), also applies to taxation years, of all its foreign affiliates, that begin after 1994 and end before 2000, as though subsection 95(2.2) of the Act, as enacted by subsection (19), read as follows:

    • (2.2) For the purpose of subsection (2), other than paragraph (2)(f),

      • (a) a non-resident corporation that was not a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout a particular taxation year shall be deemed to be a foreign affiliate of a taxpayer in respect of which the taxpayer had a qualifying interest throughout that year where

        • (i) a person has, in that year, acquired or disposed of shares of the capital stock of that non-resident corporation or any other corporation and, because of that acquisition or disposition, that non-resident corporation became or ceased to be a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, and

        • (ii) at the beginning of that year or at the end of that year, the non-resident corporation was a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest; and

      • (b) a non-resident corporation that was not related to a taxpayer or to a taxpayer and a foreign affiliate of the taxpayer, as the case may be, throughout a particular taxation year is deemed to be related to the taxpayer or to the taxpayer and the foreign affiliate of the taxpayer throughout that year if

        • (i) a person has, in that year, acquired or disposed of shares of the capital stock of the non-resident corporation or any other corporation and, because of that acquisition or disposition, the non-resident corporation became (or would have become, if paragraph 251(5)(b) did not apply to rights contained in the agreement under which the person acquired the shares), or ceased to be, a non-resident corporation that was related to the taxpayer or to the taxpayer and the foreign affiliate of the taxpayer, and

        • (ii) at the beginning, or at the end, of that year, the non-resident corporation was related to the taxpayer or to the taxpayer and the foreign affiliate of the taxpayer.

• (43) Subsection 95(2.21) of the Act, as enacted by subsection (19), applies to taxation years, of a foreign affiliate of a taxpayer, that end after 1999. However,

  • (a) for taxation years, of a foreign affiliate of a taxpayer, that end after 1999 and begin before 2009, subsection 95(2.21) of the Act, as enacted by subsection (19), is to be read as follows:

    • (2.21) Subsection (2.2) does not apply for the purpose of paragraph (2)(a) in respect of any income or loss referred to in that paragraph, of a particular foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the taxation year of the particular affiliate or to which the taxpayer is related throughout the taxation year, to the extent that that income or loss can reasonably be considered to have been realized or to have accrued

      • (a) before the earlier of

        • (i) the time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest or to which the taxpayer is related, and

        • (ii) the time at which the particular affiliate became, as determined without reference to subsection (2.2), a foreign affiliate of another person resident in Canada in respect of which the other person resident in Canada had a qualifying interest or to which the other person resident in Canada is related, where

          • (A) the taxpayer is a corporation,

          • (B) the taxpayer did not exist at the beginning of the taxation year,

          • (C) the particular affiliate became a foreign affiliate of the taxpayer in the taxation year because of a disposition, in the taxation year, of shares of the capital stock of the particular affiliate to the taxpayer by the other person resident in Canada, and

          • (D) the other person resident in Canada was, immediately before that disposition, related to the taxpayer; or

      • (b) before the earlier of

        • (i) the time at which a non-resident corporation (other than the particular affiliate), or a foreign affiliate of the taxpayer (other than the particular affiliate), referred to in paragraph (2.2)(a) became, as determined without reference to subsection (2.2),

          • (A) a foreign affiliate of the taxpayer in respect of which the taxpayer had a qualifying interest, or

          • (B) related to the taxpayer and to the particular affiliate, and

        • (ii) the time at which a non-resident corporation (other than the particular affiliate), or a foreign affiliate of the taxpayer (other than the particular affiliate), referred to in paragraph (2.2)(a) became, as determined without reference to subsection (2.2), a foreign affiliate, of another person resident in Canada, in respect of which the other person resident in Canada had a qualifying interest (or became, as determined without reference to subsection (2.2), related to the other person resident in Canada and to the particular affiliate), where

          • (A) the taxpayer is a corporation,

          • (B) the taxpayer did not exist at the beginning of the taxation year,

          • (C) the particular affiliate became a foreign affiliate of the taxpayer in the taxation year because of a disposition, in the taxation year, of shares of the capital stock of the particular affiliate to the taxpayer by the other person resident in Canada, and

          • (D) the other person resident in Canada was, immediately before that disposition, related to the taxpayer.

  • (b) if a taxpayer makes a valid election under paragraph (42)(b) in respect of all its foreign affiliates, subsection 95(2.21) of the Act, as enacted by subsection (19), being read in the manner described in paragraph (a), also applies to taxation years, of all its foreign affiliates, that begin after 1994 and end before 2000.

• (44) Subject to subsection (46), subsection (24) applies to the 2001 and subsequent taxation years of a foreign affiliate of a taxpayer. However, if a taxpayer 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 that includes the day on which this Act is assented to, that subsection applies to taxation years, of all its foreign affiliates, that begin after 1994.

• (45) Subsection (25) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after December 20, 2002. However, if a taxpayer 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 that includes the day on which this Act is assented to, subsections (11) and (25) apply to taxation years, of all its foreign affiliates, that begin after 1994.

• (46) If 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 that includes the day on which this Act is assented to,

  • (a) paragraphs (a), (c) and (c.1) of the definition “excluded property” in subsection 95(1) of the Act, as enacted by subsection (2), subsection (8), paragraphs 95(2)(g.01) and (g.02) of the Act, as enacted by subsection (13), paragraph 95(2)(i) of the Act, as enacted by subsection (14), paragraphs 95(2)(o) to (t) and (z) of the Act, as enacted by subsection (16), subsections (18) and (22) and paragraph 95(3)(d) of the Act, as enacted by subsection (24), apply to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994;

  • (b) subparagraph 95(2)(a)(i) of the Act, as enacted by subsection (10), read in the manner described in paragraph (35)(a) but read without reference to sub-subclause 95(2)(a)(i)(A)(I)2 of the Act, subclause 95(2)(a)(i)(B)(II) of the Act and the word “or” at the end of subclause 95(2)(a)(i)(B)(I) of the Act, also applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000;

  • (c) clauses 95(2)(a)(ii)(A) to (C) and (E) of the Act and subparagraphs 95(2)(a)(v) and (vi) of the Act, all as enacted by subsection (10), read in the manner described in paragraph (35)(a), also apply to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and end before 2000, except that the references to “income or loss” in that subparagraph 95(2)(a)(v) and that portion of subparagraph 95(2)(a)(vi) before clause (A) of that subparagraph 95(2)(a)(vi), as those subparagraphs apply to those taxation years of a foreign affiliate of the taxpayer, shall be replaced by a reference to “income”;

  • (d) paragraph 95(2)(g) of the Act, as enacted by subsection (13), being read in the manner described in subsection (37), also applies to taxation years, of all foreign affiliates of the taxpayer, that begin after 1994 and before December 21, 2002; and

  • (e) paragraph 95(2)(i) of the Act, as enacted by subsection (14), as required by subsection (28) to be read, in respect of settlements and extinguishments of debt held by a foreign affiliate of the taxpayer that occur before October 2, 2007 in taxation years, of the foreign affiliate of the taxpayer, that begin after December 20, 2002, also applies in respect of settlements and extinguishments of debt held by a foreign affiliate of the taxpayer that occur in taxation years, of the foreign affiliate of the taxpayer, that begin after 1994 and before December 21, 2002.

• (47) If a taxpayer has made what would, but for this subsection, be a valid election under subsection (46) and the taxpayer has, on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day that is the third anniversary of the day on which this Act is assented to, filed with the Minister of National Revenue a notice in writing to revoke the election, the election is deemed, otherwise than for the purpose of this subsection, never to have been made.

• (48) Notwithstanding subsections 152(4) to (5) of the Act, any assessment of a taxpayer’s tax, interest and penalties payable under the Act for any taxation year shall be made that is necessary to take an election referred to in any of subsections (35), (38), (40), (42) and (44) to (46), or a revocation referred to in subsection (47), into account.

• 27. (1) Section 104 of the Act is amended by adding the following after subsection (21.2):

  • Marginal note:Beneficiaries’ taxable capital gain — QFP taxable capital gain

    (21.21) If clause (21.2)(b)(ii)(A) applies to deem, for the purpose of section 110.6, the beneficiary to have a taxable capital gain (referred to in this subsection as the “QFP taxable capital gain”) from a disposition of capital property that is qualified farm property of the beneficiary, for the beneficiary’s taxation year that includes March 19, 2007 and in which the designation year of the trust ends, for the purpose of subsection 110.6(2.3), the beneficiary is, where the trust complies with the requirements of subsection (21.24), deemed to have a taxable capital gain from the disposition of qualified farm property of the beneficiary on or after March 19, 2007 equal to the amount determined by the formula

    A × B/C

    where

    A

    is the amount of the QFP taxable capital gain;

    B

    is, where the designation year of the trust includes March 19, 2007, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified farm property of the trust that were disposed of by the trust on or after March 19, 2007; and

    C

    is, where the designation year of the trust includes March 19, 2007, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified farm property.

  • Marginal note:Beneficiaries’ taxable capital gain — QSBC taxable capital gain

    (21.22) If clause (21.2)(b)(ii)(B) applies to deem, for the purpose of section 110.6, the beneficiary to have a taxable capital gain (referred to in this subsection as the “QSBC taxable capital gain”) from a disposition of capital property that is a qualified small business corporation share of the beneficiary, for the beneficiary’s taxation year in which the designation year of the trust ends, for the purpose of subsection 110.6(2.3), the beneficiary, where the trust complies with requirements of subsection (21.24), is deemed to have a taxable capital gain from the disposition of a qualified small business corporation share of the beneficiary on or after March 19, 2007 equal to the amount determined by the formula

    A × B/C

    where

    A

    is the amount of the QSBC taxable capital gain;

    B

    is, where the designation year of the trust includes March 19, 2007, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified small business corporation shares of the trust that were disposed of by the trust on or after March 19, 2007; and

    C

    is, where the designation year of the trust includes March 19, 2007, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified small business corporation shares of the trust.

  • Marginal note:Beneficiaries’ taxable capital gain — QFFP taxable capital gain

    (21.23) If clause (21.2)(b)(ii)(C) applies to deem, for the purpose of section 110.6, the beneficiary to have a taxable capital gain (referred to in this subsection as the “QFFP taxable capital gain”), from a disposition of capital property that is qualified fishing property of the beneficiary, for the beneficiary’s taxation year in which the designation year of the trust ends, for the purpose of subsection 110.6(2.3), the beneficiary, where the trust complies with requirements of subsection (21.24), is deemed to have a taxable capital gain from the disposition of qualified fishing property on or after March 19, 2007 equal to the amount determined by the formula

    A × B/C

    where

    A

    is the amount of the QFFP taxable capital gain;

    B

    is, where the designation year of the trust includes March 19, 2007, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified fishing property that were disposed of by the trust on or after March 19, 2007; and

    C

    is, where the designation year of the trust includes March 19, 2007, the amount that would be determined in respect of the trust for the designation year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified fishing property of the trust.

  • Marginal note:Trusts to designate amounts

    (21.24) A trust shall determine and designate, in its return of income under this part for a designation year of the trust, the following amounts in respect of a beneficiary:

    • (a) the amount that is, under subsection (21.21), determined to be the beneficiary’s taxable capital gain from the disposition, on or after March 19, 2007, of qualified farm property of the beneficiary,

    • (b) the amount that is, under subsection (21.22), determined to be the beneficiary’s taxable capital gain from the disposition, on or after March 19, 2007, of qualified small business corporation share of the beneficiary, and

    • (c) the amount that is, under subsection (21.23), determined to be the beneficiary’s taxable capital gain from the disposition, on or after March 19, 2007, of qualified fishing property of the beneficiary.

• (2) Subsection (1) applies to taxation years of trusts that end on or after March 19, 2007.

• 28. (1) Subparagraph 108(2)(b)(vi) of the Act is replaced by the following:

  • (vi) where the trust would not be a unit trust at the particular time if this paragraph were read without reference to this subparagraph and subparagraph (iii) were read without reference to clause (F), the units of the trust are listed at any time in the current year or in the following taxation year on a designated stock exchange in Canada, or

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

• 29. (1) The portion of paragraph 110(1)(d.01) of the Act before subparagraph (i) is replaced by the following:

  • (d.01) subject to subsection (2.1), if the taxpayer disposes of a security acquired in the year by the taxpayer under an agreement referred to in subsection 7(1) by making a gift of the security to a qualified donee, an amount in respect of the disposition of the security equal to 1/2 of the lesser of the benefit deemed by paragraph 7(1)(a) to have been received by the taxpayer in the year in respect of the acquisition of the security and the amount that would have been that benefit had the value of the security at the time of its acquisition by the taxpayer been equal to the value of the security at the time of the disposition, if

• (2) Subsection (1) applies in respect of gifts made on or after March 19, 2007.

• 30. (1) Subsection 110.1(1) of the Act is amended by adding the following after paragraph (a):

  • Marginal note:Gifts of medicine

    (a.1) the total of all amounts in respect of property that is the subject of an eligible medical gift made by the corporation in the taxation year or in any of the five preceding taxation years, each of which is the lesser of

    • (i) the cost to the corporation of the property, and

    • (ii) 50% of the amount, if any, by which the corporation’s proceeds of disposition of the property in respect of the gift exceeds the cost to the corporation of the property.

• (2) Section 110.1 of the Act is amended by adding the following after subsection (7):

  • Marginal note:Eligible medical gift

    (8) For the purpose of paragraph (1)(a.1), a gift referred to in paragraph (1)(a) is an eligible medical gift of a corporation if

    • (a) the corporation has directed the donee to apply the gift to charitable activities outside of Canada;

    • (b) in the case of a gift made on or before October 2, 2007, the property that is the subject of the gift is medicine;

    • (c) in the case of a gift made after October 2, 2007, the property that is the subject of the gift is a medicine that qualifies as a drug, within the meaning of the Food and Drugs Act, and the drug

      • (i) meets the requirements of that Act, or would meet those requirements if that Act were read without reference to its subsection 37(1), and

      • (ii) is not a food, cosmetic or device (as those terms are defined in that Act), a natural health product (as defined in the Natural Health Products Regulations) or a veterinary drug;

    • (d) the property was, immediately before the making of the gift, described in an inventory in respect of a business of the corporation; and

    • (e) the donee is a registered charity that has received a disbursement under a program of the Canadian International Development Agency.

• (3) Subsections (1) and (2) apply in respect of gifts of property made after March 18, 2007.

• 31. (1) The formula in paragraph 110.6(2)(a) of the Act is replaced by the following:

  [$375,000 - (A + B + C + D)] × E

• (2) Section 110.6 of the Act is amended by adding the following after subsection (2.2):

  • Marginal note:Additional capital gains deduction — taxation year that includes March 19, 2007

    (2.3) In computing the taxable income of an individual (other than a trust) for the individ-ual’s taxation year that includes March 19, 2007 (referred to in this subsection as the “transition year”), there may be deducted, where that individual was resident in Canada throughout the transition year and that individual disposed of in the transition year, and on or after March 19, 2007, a qualified small business corporation share of the individual, a qualified farm property of the individual, or a qualified fishing property of the individual, such amount as the individual may claim not exceeding the least of

    • (a) $125,000,

    • (b) the amount, if any, by which the individual’s cumulative gains limit at the end of the transition year exceeds the total of all amounts each of which is an amount deducted by the individual under subsection (2), (2.1) or (2.2) in computing the individ-ual’s taxable income for the transition year,

    • (c) the amount, if any, by which the individual’s annual gains limit for the transition year exceeds the total of all amounts each of which is an amount deducted by the individual under subsection (2), (2.1) or (2.2) in computing the individual’s taxable income for the transition year, and

    • (d) the amount that would be determined in respect of the individual for the transition year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the individual, qualified farm properties of the individual, and qualified fishing properties of the individual, disposed of by the individual on or after March 19, 2007.

• (3) Subsection 110.6(4) of the Act is replaced by the following:

  • Marginal note:Maximum capital gains deduction

    (4) Notwithstanding subsections (2), (2.1) and (2.2), the total amount that may be deducted under this section in computing an individual’s income for a taxation year shall not exceed the total of the amount determined by the formula in paragraph 2(a) and the amount that may be deducted under subsection (2.3), in respect of the individual for the year.

• (4) The portion of subsection 110.6(5) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Deemed resident in Canada

    (5) For the purposes of subsections (2) to (2.3), an individual is deemed to have been resident in Canada throughout a particular taxation year if

• (5) The portion of subsection 110.6(6) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Failure to report capital gain

    (6) Notwithstanding subsections (2) to (2.3), no amount may be deducted under this section in respect of a capital gain of an individual for a particular taxation year in computing the individual’s taxable income for the particular taxation year, if

• (6) The portion of subsection 110.6(7) of the Act before paragraph (b) is replaced by the following:

  • Marginal note:Deduction not permitted

    (7) Notwithstanding subsections (2) to (2.3), no amount may be deducted under this section in computing an individual’s taxable income for a taxation year in respect of a capital gain of the individual for the taxation year if the capital gain is from a disposition of property which disposition is part of a series of transactions or events

    • (a) that includes a dividend received by a corporation to which dividend subsection 55(2) does not apply but would apply if this Act were read without reference to paragraph 55(3)(b); or

• (7) Subsection 110.6(8) of the Act is replaced by the following:

  • Marginal note:Deduction not permitted

    (8) Notwithstanding subsections (2) to (2.3), where an individual has a capital gain for a taxation year from the disposition of a property and it can reasonably be concluded, having regard to all the circumstances, that a significant part of the capital gain is attributable to the fact that dividends were not paid on a share (other than a prescribed share) or that dividends paid on such a share in the taxation year or in any preceding taxation year were less than 90% of the average annual rate of return on that share for that year, no amount in respect of that capital gain shall be deducted under this section in computing the individual’s taxable income for the year.

• (8) Section 110.6 of the Act is amended by adding the following after subsection (30):

  • Marginal note:Conditions for the application of subsection (32)

    (31) Subsection (32) applies to an individual for a taxation year that begins after March 19, 2007 if

    • (a) in the taxation year the individual has a taxable capital gain from the disposition, before March 19, 2007, of a qualified small business corporation share of the individual, a qualified farm property of the individual or a qualified fishing property of the individual; and

    • (b) the total of all amounts each of which is an amount of a taxable capital gain of the individual described in paragraph (a) exceeds the amount that would be determined under paragraph (2)(a) in respect of the individual for the taxation year were the reference to “$375,000” in that paragraph read as a reference to “$250,000” (the amount of which excess is referred to in subsection (32) as the “denied excess”).

  • Marginal note:Deduction denied

    (32) Notwithstanding subsections (2) to (2.3), if this subsection applies to an individual for a taxation year, no amount may be deducted under this section for the taxation year by the individual in respect of the individual’s taxable capital gains for the year described in paragraph (31)(a) to the extent of the denied excess.

• (9) Subsection (1) applies to taxation years that begin after March 19, 2007.

• (10) Subsections (2) to (5), (7) and (8) apply to taxation years that end on or after March 19, 2007.

• (11) Subsection (6) applies to taxation years that end after May 1, 2006, except that for taxation years that end before March 19, 2007, the portion of subsection 110.6(7) of the Act before paragraph (a), as amended by subsection (5), shall be read as follows:

  • (7) Notwithstanding subsections (2) to (2.2), no amount may be deducted under this section in computing an individual’s taxable income for a taxation year in respect of a capital gain of the individual for the taxation year, if the capital gain is from a disposition of property which disposition is part of a series of transactions or events

32. Section 115 of the Act is amended by adding the following after subsection (2.2):

• 33. (1) Paragraph 116(6)(b) of the Act is amended by replacing “prescribed stock exchange” with “recognized stock exchange”.

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

• 34. (1) Section 117 of the Act is amended by adding the following after subsection 117(2):

  • Marginal note:Tax payable — WITB advance payment

    (2.1) The tax payable under this Part on the individual’s taxable income for a taxation year, as computed under subsection (2), is deemed to be the total of the amount otherwise computed under that subsection and, except for the purposes of sections 118 to 118.9, 120.2, 121, 122.3 and subdivision c, the total of all amounts received by the individual in respect of the taxation year under subsection 122.7(7).

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 35. (1) The portion of subsection 117.1(1) of the Act before paragraph (a) is replaced by the following:

  Marginal note:Annual adjustment

  • 117.1 (1) The amount of $1,000 referred to in the formula in paragraph 8(1)(s), each of the amounts expressed in dollars in subparagraph 6(1)(b)(v.1), subsection 117(2), the description of B in subsection 118(1), subsection 118(2), paragraph (a) of the description of B in subsection 118(10), subsection 118.01(2), the descriptions of C and F in subsection 118.2(1), subsections 118.3(1), 122.5(3) and 122.51(1) and (2), the amounts of $500 and $1,000 referred to in the description of A, and the amounts of $9,500 and $14,500 referred to in the description of B, in the formula in subsection 122.7(2), the amount of $250 referred to in the description of C, and the amounts of $12,833 and $21,167 referred to in the description of D, in the formula in subsection 122.7(3), and each of the amounts expressed in dollars in Part I.2 in relation to tax payable under this Part or Part I.2 for a taxation year shall be adjusted so that the amount to be used under those provisions for the year is the total of

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 36. (1) Subparagraph (b.1)(ii) of the description of B in subsection 118(1) of the Act is replaced by the following:

  • (ii) except where subparagraph (i) applies, the individual may deduct an amount under paragraph (b) in respect of the individual’s child who is under the age of 18 years at the end of the taxation year, or could deduct such an amount in respect of that child if paragraph 118(4)(a) did not apply to the individual for the taxation year and if the child had no income for the year, $2,000 for each such child.

• (2) Section 118 of the Act is amended by adding the following after subsection (5):

  • Marginal note:Where subsection (5) does not apply

    (5.1) Where, if this Act were read without reference to this subsection, solely because of the application of subsection (5), no individual is entitled to a deduction under paragraph (b) or (b.1) of the description of B in subsection (1) for a taxation year in respect of a child, subsection (5) shall not apply in respect of that child for that taxation year.

• (3) Subsections (1) and (2) apply to the 2007 and subsequent taxation years.

• 37. (1) Paragraph (b) of the definition “eligible public transit pass” in subsection 118.02(1) of the Act is replaced by the following:

  • (b) identifying the right of an individual who is the holder or owner of the document to use public commuter transit services of that qualified Canadian transit organization

    • (i) on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days, or

    • (ii) on an unlimited number of occasions during an uninterrupted period of at least five consecutive days, if the combination of that document and one or more other such documents gives the right to the individual to use those public commuter transit services on at least 20 days in a 28-day period.

• (2) Subsection 118.02(1) of the Act is amended by adding the following in alphabetical order:

  “eligible electronic payment card”

  « carte de paiement électronique admissible »

  “eligible electronic payment card” means an electronic payment card that is

  • (a) used by an individual for at least 32 one-way trips, between the place of origin of the trip and its termination, during an uninterrupted period not exceeding 31 days, and

  • (b) issued by or on behalf of a qualified Canadian transit organization, which organization records and receipts the cost and usage of the electronic payment card and identifies the right, of the individual who is the holder or owner of such a card, to use public commuter transit services of that qualified Canadian transit organization.

• (3) The description of C in subsection 118.02(2) of the Act is replaced by the following:

  C

  is the total of all amounts each of which is the portion of the cost of an eligible public transit pass or of an eligible electronic payment card, attributable to the use of public commuter transit services in the taxation year by the individual or by a person who is in the taxation year a qualifying relation of the individual, and

• (4) Subsection 118.02(3) of the Act is replaced by the following:

  • Marginal note:Apportionment of credit

    (3) If more than one individual is entitled to a deduction under this section for a taxation year in respect of an eligible public transit pass or of an eligible electronic payment card, the total of all amounts so deductible shall not exceed the maximum amount that would be so deductible for the year by any one of those individuals for that eligible public transit pass or eligible electronic payment card if that individual were the only individual entitled to deduct an amount for the year under this section, and if the individuals cannot agree as to what portion of the amount each can so deduct, the Minister may fix the portions.

• (5) Subsections (1) to (4) apply to the 2007 and subsequent taxation years.

• 38. (1) The definitions “qualifying child” and “qualifying entity” in subsection 118.03(1) of the Act are replaced by the following:

  “qualifying child”

  « enfant admissible »

  “qualifying child” of an individual for a taxation year means a child of the individual who is, at the beginning of the taxation year,

  • (a) under 16 years of age; or

  • (b) in the case where an amount is deductible under section 118.3 in computing any person’s tax payable under this Part for the taxation year in respect of that child, under 18 years of age.

  “qualifying entity”

  « entité admissible »

  “qualifying entity” means a person or partnership that offers one or more prescribed programs of physical activity.

• (2) The portion of the definition “eligible fitness expense” in subsection 118.03(1) of the Act before paragraph (a) is replaced by the following:

  “eligible fitness expense”

  « dépense admissible pour activités physiques »

  “eligible fitness expense” in respect of a qualifying child of an individual for a taxation year means the amount of a fee paid to a qualifying entity (other than an amount paid to a person that is, at the time the amount is paid, the individual’s spouse or common-law partner or another individual who is under 18 years of age) to the extent that the fee is attributable to the cost of registration or membership of the qualifying child in a prescribed program of physical activity and, for the purposes of this section, that cost

• (3) Section 118.03 of the Act is amended by adding the following after subsection (2):

  • Marginal note:Child fitness tax credit — child with disability

    (2.1) For the purpose of computing the tax payable under this Part by an individual for a taxation year there may be deducted in respect of a qualifying child of the individual an amount equal to $500 multiplied by the appropriate percentage for the taxation year if

    • (a) the amount referred to in the description of B in subsection (2) is $100 or more; and

    • (b) an amount is deductible in respect of the qualifying child under section 118.3 in computing any person’s tax payable under this Part for the taxation year.

• (4) Subsections (1) to (3) apply to the 2007 and subsequent taxation years.

• 39. (1) Section 118.1 of the Act is amended by adding the following after subsection (14):

  • Marginal note:Exchange of beneficial interest in trust

    (14.1) Where a donee disposes of a beneficial interest in a trust that is a non-qualifying security of an individual in circumstances where paragraph (13)(c) would, but for this subsection, apply in respect of the disposition, and in respect of which the donee receives no consideration other than other non-qualifying securities of the individual, for the purpose of subsection (13) the gift referred to in that subsection is to be read as a reference to a gift of those other non-qualifying securities.

• (2) Subparagraph 118.1(16)(c)(ii) of the Act is replaced by the following:

  • (ii) the individual or any person or partnership with which the individual does not deal at arm’s length uses property of the donee under an agreement that was made or modified after the time that is 60 months before the particular time, and the property was not used in the carrying on of the donee’s charitable activities,

• (3) Paragraphs 118.1(18)(b) and (c) of the Act are replaced by the following:

  • (b) a share (other than a share listed on a designated stock exchange) of the capital stock of a corporation with which the individual or the estate or, where the individual is a trust, a person affiliated with the trust, does not deal at arm’s length immediately after that time;

  • (b.1) a beneficial interest of the individual or the estate in a trust that

    • (i) immediately after that time is affiliated with the individual or the estate, or

    • (ii) holds, immediately after that time, a non-qualifying security of the individual or estate, or held, at or before that time, a share described in paragraph (b) that is, after that time, held by the donee; or

  • (c) any other security (other than a security listed on a designated stock exchange) issued by the individual or the estate or by any person or partnership with which the individ-ual or the estate does not deal at arm’s length (or, in the case where the person is a trust, with which the individual or estate is affiliated) immediately after that time.

• (4) Subsections (1) to (3) apply in respect of gifts made on or after March 19, 2007, except that in applying subsection 118.1(18) of the Act, as amended by subsection (3), before the day on which this Act is assented to, the references to “designated stock exchange” in that subsection 118.1(18) shall be read as references to “prescribed stock exchange”.

• 40. (1) Clause (a)(ii)(A) of the definition “tax otherwise payable under this Part” in subsection 120(4) of the Act is replaced by the following:

  • (A) subsection 117(2.1), section 119, subsection 120.4(2) and sections 126, 127, 127.4 and 127.41, and

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 41. (1) Paragraph (d) of the definition “real estate investment trust” in subsection 122.1(1) of the Act is replaced by the following:

  • (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 property described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3), less than 75% of the equity value of the trust at that time.

• (2) Subsection (1) applies after 2007.

• 42. (1) The Act is amended by adding the following after section 122.64:

  Subdivision a.2Working Income Tax Benefit

  Marginal note:Definitions

  • 122.7 (1) The following definitions apply in this section.

    “adjusted net income”

    « revenu net rajusté »

    “adjusted net income” of an individual for a taxation year means the amount that would be the individual’s income for the taxation year if

    • (a) this Act were read without reference to paragraph 81(1)(a) and subsection 81(4);

    • (b) in computing that income, no amount were included under paragraph 56(1)(q.1) or subsection 56(6), or in respect of any gain from a disposition of property to which section 79 applies; and

    • (c) in computing that income, no amount were deductible under paragraph 60(y) or (z).

    “cohabiting spouse or common-law partner”

    « conjoint visé »

    “cohabiting spouse or common-law partner” of an individual at any time has the meaning assigned by section 122.6.

    “designated educational institution”

    « établissement d’enseignement agréé »

    “designated educational institution” has the meaning assigned by subsection 118.6(1).

    “eligible dependant”

    « personne à charge admissible »

    “eligible dependant” of an individual for a taxation year means a child of the individual who, at the end of the year,

    • (a) resided with the individual;

    • (b) was under the age of 19 years; and

    • (c) was not an eligible individual.

    “eligible individual”

    « particulier admissible »

    “eligible individual” for a taxation year means an individual (other than an ineligible individ-ual) who was resident in Canada throughout the taxation year and who was, at the end of the taxation year,

    • (a) 19 years of age or older;

    • (b) the cohabiting spouse or common-law partner of another individual; or

    • (c) the parent of a child with whom the individual resides.

    “eligible spouse”

    « conjoint admissible »

    “eligible spouse” of an eligible individual for a taxation year means an individual (other than an ineligible individual) who was resident in Canada throughout the taxation year and who was, at the end of the taxation year, the cohabiting spouse or common-law partner of the eligible individual.

    “ineligible individual”

    « particulier non admissible »

    “ineligible individual” for a taxation year means an individual

    • (a) who is described in paragraph 149(1)(a) or (b) at any time in the taxation year;

    • (b) who, except where the individual has an eligible dependant for the taxation year, was enrolled as a full-time student at a designated educational institution for a total of more than 13 weeks in the taxation year; or

    • (c) who was confined to a prison or similar institution for a period of at least 90 days during the taxation year.

    “return of income”

    « déclaration de revenu »

    “return of income” filed by an individual for a taxation year means a return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) that is required to be filed for the taxation year or that would be required to be filed if the individual had tax payable under this Part for the taxation year.

    “working income”

    « revenu de travail »

    “working income” of an individual for a taxation year means the total of

    • (a) the total of all amounts each of which would, if this Act were read without reference to section 8, paragraph 81(1)(a) and subsection 81(4), be the individual’s income for the taxation year from an office or employment;

    • (b) all amounts that are included, or that would, but for paragraph 81(1)(a), be included, because of paragraph 56(1)(n) or (o) in computing the individual’s income for the taxation years; and

    • (c) the total of all amounts each of which would, if this Act were read without reference to paragraph 81(1)(a), be the individual’s income for the taxation year from a business carried on by the individual otherwise than as a specified member of a partnership.

  • Marginal note:Deemed payment on account of tax

    (2) Subject to subsections (4) and (5), an eligible individual for a taxation year who files a return of income for the taxation year and who makes a claim under this subsection, is deemed to have paid, at the end of the taxation year, on account of tax payable under this Part for the taxation year, an amount equal to the amount, if any, determined by the formula

    A - B

    where

    A

    is

    • (a) if the individual had neither an eligible spouse nor an eligible dependant, for the taxation year, the lesser of $500 and 20% of the amount, if any, by which the individual’s working income for the taxation year exceeds $3,000, or

    • (b) if the individual had an eligible spouse or an eligible dependant, for the taxation year, the lesser of $1,000 and 20% of the amount, if any, by which the total of the working incomes of the individual and, if applicable, of the eligible spouse of the individual, for the taxation year, exceeds $3,000; and

    B

    is

    • (a) if the individual had neither an eligible spouse nor an eligible dependant, for the taxation year, 15% of the amount, if any, by which the individual’s adjusted net income for the taxation year exceeds $9,500, or

    • (b) if the individual had an eligible spouse or an eligible dependant, for the taxation year, 15% of the amount, if any, by which the total of the adjusted net incomes of the individual and, if appli-cable, of the eligible spouse of the individual, for the taxation year, exceeds $14,500.

  • Marginal note:Deemed payment on account of tax — disability supplement

    (3) An eligible individual for a taxation year who files a return of income for the taxation year and who may deduct an amount under subsection 118.3(1) in computing tax payable under this Part for the taxation year is deemed to have paid, at the end of the taxation year, on account of tax payable under this Part for the taxation year, an amount equal to the amount, if any, determined by the formula

    C - D

    where

    C

    is the lesser of $250 and 20% of the amount, if any, by which the individual’s working income for the taxation year exceeds $1,750, and

    D

    is

    • (a) if the individual had neither an eligible spouse nor an eligible dependant, for the taxation year, 15% of the amount, if any, by which the individual’s adjusted net income for the taxation year exceeds $12,833,

    • (b) if the individual had an eligible spouse for the taxation year who was not entitled to deduct an amount under subsection 118.3(1) for the taxation year, or had an eligible dependant for the taxation year, 15% of the amount, if any, by which the total of the adjusted net incomes of the individual and, if appli-cable, of the eligible spouse, for the taxation year, exceeds $21,167, or

    • (c) if the individual had an eligible spouse for the taxation year who was entitled to deduct an amount under subsection 118.3(1) for the taxation year, 7.5% of the amount, if any, by which the total of the adjusted net incomes of the individual and of the eligible spouse, for the taxation year, exceeds $21,167.

  • Marginal note:Eligible spouse deemed not to be an eligible individual

    (4) An eligible spouse of an eligible individ-ual for a taxation year is deemed, for the purpose of subsection (2), not to be an eligible individual for the taxation year if the eligible spouse made a joint application described in subsection (6) with the eligible individual and the eligible individual received an amount under subsection (7) in respect of the taxation year.

  • Marginal note:Amount deemed to be nil

    (5) If an eligible individual had an eligible spouse for a taxation year and both the eligible individual and the eligible spouse make a claim for the taxation year under subsection (2), the amount deemed to have been paid under that subsection by each of them on account of tax payable under this Part for the taxation year, is nil.

  • Marginal note:Application for advance payment

    (6) Subsection (7) applies to an individual for a taxation year if,

    • (a) at any time after January 1 and before September 1 of the taxation year, the individual makes an application (or in the case of an individual who has, at that time, a cohabiting spouse or common-law partner, the two of them make a joint application designating the individual for the purpose of subsection (7)), to the Minister in prescribed form, containing prescribed information; and

    • (b) where the individual and a cohabiting spouse or common-law partner have made a joint application referred to in paragraph (a)

      • (i) the individual’s working income for the taxation year can reasonably be expected to be greater than the working income of the individual’s cohabiting spouse or common-law partner for the taxation year, or

      • (ii) the individual can reasonably be expected to be deemed by subsection (3) to have paid an amount on account of tax payable under this Part for the taxation year.

  • Marginal note:Advance payment

    (7) Subject to subsection (8), the Minister may pay to an individual before the end of January of the year following a taxation year, one or more amounts that, in total, do not exceed one-half of the total of the amounts that the Minister estimates will be deemed to be paid by the individual under subsection (2) or (3) at the end of the taxation year, and any amount paid by the Minister under this subsection is deemed to have been received by the individual in respect of the taxation year.

  • Marginal note:Limitation — advance payment

    (8) No payment shall be made under subsection (7) to an individual in respect of a taxation year

    • (a) if the total amount that the Minister may pay under that subsection is less than $100; or

    • (b) before the day on which the individual has filed a return of income for a preceding taxation year in respect of which the individual received a payment under that subsection.

  • Marginal note:Notification to Minister

    (9) If, in a taxation year, an individual makes an application described in subsection (6), the individual shall notify the Minister of the occurrence of any of the following events before the end of the month following the month in which the event occurs

    • (a) the individual ceases to be resident in Canada in the taxation year;

    • (b) the individual ceases, before the end of the taxation year, to be a cohabiting spouse or common-law partner of another person with whom the individual made the application;

    • (c) the individual enrols as a full-time student at a designated educational institution in the taxation year; or

    • (d) the individual is confined to a prison or similar institution in the taxation year.

  • Marginal note:Special rule re eligible dependant

    (10) For the purpose of applying subsections (2) and (3), an individual (referred to in this subsection as the “child”) is deemed not to be an eligible dependant of an eligible individual for a taxation year if the child is an eligible dependant of another eligible individual for the taxation year and both eligible individuals identified the child as an eligible dependant for the purpose of claiming or computing an amount under this section for the taxation year.

  • Marginal note:Effect of bankruptcy

    (11) For the purpose of this subdivision, if an individual becomes bankrupt in a particular calendar year

    • (a) notwithstanding subsection 128(2), any reference to the taxation year of the individ-ual (other than in this subsection) is deemed to be a reference to the particular calendar year; and

    • (b) the individual’s working income and adjusted net income for the taxation year ending on December 31 of the particular calendar year is deemed to include the individual’s working income and adjusted net income for the taxation year that begins on January 1 of the particular calendar year.

  • Marginal note:Special rules in the event of death

    (12) For the purpose of this subdivision, if an individual dies after June 30 of a calendar year

    • (a) the individual is deemed to be resident in Canada from the time of death until the end of the year and to reside at the same place in Canada as the place where the individual resided immediately before death;

    • (b) the individual is deemed to be the same age at the end of the year as the individual would have been if the individual were alive at the end of the year;

    • (c) the individual is deemed to be the cohabiting spouse or common-law partner of another individual (referred to in this paragraph as the “surviving spouse”) at the end of the year if,

      • (i) immediately before death, the individ-ual was the cohabiting spouse or common-law partner of the surviving spouse, and

      • (ii) the surviving spouse is not the cohab-iting spouse or common-law partner of another individual at the end of the year; and

    • (d) any return of income filed by a legal representative of the individual is deemed to be a return of income filed by the individual.

  Marginal note:Modification for purposes of provincial program

  122.71 The Minister of Finance may enter into an agreement with the government of a province whereby the amounts determined under subsections 122.7(2) and (3) with respect to an eligible individual resident in the province at the end of the taxation year shall, for the purpose of calculating amounts deemed to be paid on account of the tax payable of an individual under those subsections, be replaced by amounts determined in accordance with the agreement.

• (2) Subsection (1) applies to the 2007 and subsequent taxation years except that

  • (a) for the 2007 taxation year, paragraphs (b) and (c) of the definition “adjusted net income” in subsection 122.7(1) of the Act, as enacted by subsection (1), shall be read as follows:

    • (b) in computing that income, no amount were included under subsection 56(6), as a beneficiary of a registered disability savings plan or in respect of any gain from a disposition of property to which section 79 applies; and

    • (c) in computing that income, no amount were deductible under paragraph 60(y).

  • (b) subsections 122.7(6) to (8) of the Act, as enacted by subsection (1), apply to the 2008 and subsequent taxation years.

• 43. (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 child care space amount 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 child care space amount 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), (a.5), (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 subsections (28) and (28.1), 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), (a.5), (b) or (e.1) of the definition “investment tax credit” in subsection (9), if

• (4) Subparagraph 127(8.2)(b)(i) of the Act is amended by striking out the word “or” at the end of clause (A.1) and by adding the following after clause (A.1):

  • (A.2) an amount that would be the child care space amount in respect of a property of the partnership if the reference to “$10,000” in paragraph (a) of the definition “child care space amount” in subsection (9) were read as a reference to “$40,000” and paragraph (b) of that definition were read without reference to “25% of”, or

• (5) Paragraph 127(8.31)(a) of the Act is replaced by the following:

  • (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), (a.5), (b) or (e.1) of the definition “investment tax credit” in subsection (9) for a taxation year that is the fiscal period,

• (6) Subsection 127(8.31) of the Act is amended by adding the word “and” at the end of subparagraph (b)(i), by striking out the word “and” at the end of subparagraph (b)(ii), and by repealing subparagraph (b)(iii).

• (7) The definition “eligible apprentice” in subsection 127(9) of the Act is replaced by the following;

  “eligible apprentice”

  « apprenti admissible »

  “eligible apprentice” means an individual who is employed in Canada in a trade prescribed in respect of a province or in respect of Canada, during the first twenty-four months of the individual’s apprenticeship contract registered with the province or Canada, as the case may be, under an apprenticeship program designed to certify or license individuals in the trade;

• (8) Paragraph (a) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act is replaced by the following:

  • (a) that is a Canadian exploration expense incurred by a corporation after March 2007 and before 2009 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2009) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definition “mineral resource” in subsection 248(1),

• (9) Paragraphs (c) and (d) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act are replaced by the following:

  • (c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after March 2007 and before April 2008, and

  • (d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after March 2007 and before April 2008;

• (10) The definition “investment tax credit” in subsection 127(9) of the Act is amended by adding the following after paragraph (a.4):

  • (a.5) the child care space amount of the taxpayer for the taxation year,

• (11) Paragraph (e.1) of the definition “investment tax credit” in subsection 127(9) of the Act is amended by striking out the word “or” at the end of subparagraph (iv), by striking out the word “and” at the end of subparagraph (v) and by adding the following after subparagraph (v):

  • (vi) the amount of eligible salary and wages payable by the taxpayer to an eligible apprentice under paragraph (11.1)(c.4), to the extent that that reduction had the effect of reducing the amount of an apprenticeship expenditure of the taxpayer, or

  • (vii) the amount of an eligible child care space expenditure of the taxpayer under paragraph (11.1)(c.5), to the extent that that reduction had the effect of reducing the amount of a child care space amount of the taxpayer, and

• (12) Paragraph (f.1) of the definition “specified percentage” in subsection 127(9) is replaced by the following:

  • (f.1) in respect of the repayment of government assistance, non-government assistance or a contract payment that reduced

    • (i) a qualified expenditure incurred by the taxpayer under any of subsections (18) to (20), 20%,

    • (ii) the amount of eligible salary and wages payable (by the taxpayer) to an eligible apprentice under paragraph (11.1)(c.4), 10%, or

    • (iii) the amount of the taxpayer’s eligible child care space expenditure under paragraph (11.1)(c.5), 25%;

• (13) Subsection 127(9) of the Act is amended by adding the following definitions in alphabetical order:

  “child care space amount”

  « somme relative à une place en garderie »

  “child care space amount” of a taxpayer for a taxation year is, if the provision of child care spaces is ancillary to one or more businesses of the taxpayer that are carried on in Canada in the taxation year and that do not otherwise include the provision of child care spaces, the lesser of

  • (a) the amount obtained when $10,000 is multiplied by the number of new child care spaces created by the taxpayer during the taxation year in a licensed child care facility for the benefit of children of the taxpayer’s employees, or of a combination of children of the taxpayer’s employees and other children; and

  • (b) 25% of the taxpayer’s eligible child care space expenditure for the taxation year;

  “eligible child care space expenditure”

  « dépense admissible relative à une place en garderie »

  “eligible child care space expenditure” of a taxpayer for a taxation year is the total of all amounts each of which is an amount

  • (a) that is incurred by the taxpayer in the taxation year for the sole purpose of the creation of one or more new child care spaces in a licensed child care facility operated for the benefit of children of the taxpayer’s employees, or of a combination of children of the taxpayer’s employees and other children, and

  • (b) that is

    • (i) incurred by the taxpayer to acquire depreciable property of a prescribed class (other than a specified property) for use in the child care facility, or

    • (ii) incurred by the taxpayer to make a specified child care start-up expenditure in respect of the child care facility;

  “specified child care start-up expenditure”

  « dépense de démarrage déterminée pour la garde d’enfants »

  “specified child care start-up expenditure” of a taxpayer in respect of a child care facility is an expenditure incurred by the taxpayer (other than to acquire a depreciable property) that is

  • (a) a landscaping cost incurred to create, at the child care facility, an outdoor play area for children,

  • (b) an architectural fee for designing the child care facility or a fee for advice on planning, designing and establishing the child care facility,

  • (c) a cost of construction permits in respect of the child care facility,

  • (d) an initial licensing or regulatory fee in respect of the child care facility, including fees for mandatory inspections,

  • (e) a cost of educational materials for children, or

  • (f) a similar amount incurred for the sole purpose of the initial establishment of the child care facility;

  “specified property”

  « bien déterminé »

  “specified property” in respect of a taxpayer means any property that is

  • (a) a motor vehicle or any other motorized vehicle, or

  • (b) a property that is, or is located in, or attached to, a residence

    • (i) of the taxpayer,

    • (ii) an employee of the taxpayer,

    • (iii) a person who holds an interest in the taxpayer, or

    • (iv) a person related to a person referred to in any of subparagraphs (i) to (iii);

• (14) Paragraph 127(11.1)(c.4) of the Act is replaced by the following:

  • (c.4) the amount of a taxpayer’s eligible salary and wages for a taxation year is deemed to be the amount of the taxpayer’s eligible salary and wages for the year otherwise determined less the amount of any government assistance or non-government assistance in respect of the eligible salary and wages 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;

  • (c.5) the amount of a taxpayer’s eligible child care space expenditure for a taxation year is deemed to be the amount of the taxpayer’s eligible child care space expenditure for the taxation year otherwise determined less the amount of any government assistance or non-government assistance in respect of the eligible child care space expenditure for the taxation year that, at the time of the filing of the taxpayer’s return of income for the taxation year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive; and

• (15) Subsection 127(11.2) of the Act is replaced by the following:

  • Marginal note:Time of expenditure and acquisition

    (11.2) In applying subsections (5), (7) and (8), paragraphs (a), (a.1) and (a.5) of the definition “investment tax credit” in subsection (9) and section 127.1,

    • (a) certified property, qualified property and first term shared-use-equipment are deemed not to have been acquired, and

    • (b) expenditures incurred to acquire property described in subparagraph 37(1)(b)(i) or included in an eligible child care expenditure are deemed not to have been incurred

    by a taxpayer before the property is considered to have become available for use by the taxpayer, determined without reference to paragraphs 13(27)(c) and 13(28)(d), and subparagraph (27.12)(b)(i).

• (16) Section 127 of the Act is amended by adding the following after subsection (27):

  • Marginal note:Recapture of investment tax credit — child care space amount

    (27.1) There shall be added to a taxpayer’s tax otherwise payable under this Part for a particular taxation year, the total of all amounts each of which is an amount determined under subsection (27.12) in respect of a disposition by the taxpayer in the particular taxation year of a property a percentage of the cost of which can reasonably be considered to have been included in the child care space amount of the taxpayer for a taxation year, if the property was acquired in respect of a child care space that was created at a time that is less than 60 months before the disposition.

  • Marginal note:Disposition

    (27.11) For the purpose of subsection (27.1),

    • (a) if a particular child care space, in respect of which any amount is included in the child care space amount of a taxpayer or a partnership for a taxation year or a fiscal period, ceases at any particular time to be available, the child care space is, except where the child care space has been disposed of by the taxpayer or the partnership before the particular time, deemed to be a property

      • (i) disposed of by the taxpayer or the partnership, as the case maybe, at the particular time,

      • (ii) a percentage of the cost of which can reasonably be considered to be included in the child care space amount of the taxpayer or the partnership, as the case may be, for a taxation year or a fiscal period, and

      • (iii) acquired in respect of a child care space that was created at the time the child care space was created,

    • (b) child care spaces that cease to be available are deemed to so cease in reverse chronological order to their creation, and

    • (c) a property acquired by a taxpayer or a partnership in respect of a child care space is deemed to be disposed of by the taxpayer or the partnership, as the case maybe, in a disposition described in clause (27.12)(b)(ii)(B) if the property is leased by the taxpayer or the partnership to a lessee for any purpose or is converted to a use by the taxpayer or the partnership other than to a use for the child care space.

  • Marginal note:Amount of recapture

    (27.12) For the purposes of subsection (27.1) and (27.11), the amount determined under this subsection in respect of a disposition of a property by a taxpayer or a partnership is,

    • (a) where the property disposed of is a child care space, the amount that can reasonably be considered to have been included under paragraph (a.5) of the definition “investment tax credit” in subsection (9) in respect of the taxpayer or partnership in respect of the child care space, and

    • (b) in any other case, the lesser of,

      • (i) the amount that can reasonably be considered to have been included under paragraph (a.5) of the definition “investment tax credit” in subsection (9) in respect of the taxpayer or partnership in respect of the cost of the property, and

      • (ii) 25% of

        • (A) if the property, or a part of the property, is disposed of to a person who deals at arm’s length with the taxpayer or the partnership, the proceeds of disposition of the property, or of the part of the property, and

        • (B) in any other case, the fair market value of the property or of the part of the property, at the time of the disposition.

• (17) Section 127 of the Act is amended by adding the following after subsection (28):

  • Marginal note:Recapture of partnership’s investment tax credits — child care property

    (28.1) For the purpose of computing the amount determined under subsection (8) in respect of a partnership at the end of a particular fiscal period of the partnership, there shall be deducted the total of all amounts, each of which is an amount determined under subsection (27.12) in respect of a disposition by the partnership in the particular fiscal period of a property a percentage of the cost of which can reasonably be considered to have been included in the child care space amount of the partnership for a fiscal period, if the property was acquired in respect of a child care space that was created at a time that is less than 60 months before the disposition.

• (18) Subsection 127(30) of the Act is replaced by the following:

  • Marginal note:Addition to tax

    (30) Where a taxpayer is a member of a partnership at the end of a fiscal period of the partnership, there shall be added to the taxpayer’s tax otherwise payable under this Part for the taxpayer’s taxation year in which that fiscal period ends the amount that can reasonably be considered to be the taxpayer’s share of the amount, if any, by which

    • (a) the total of

      • (i) the total of all amounts each of which is the lesser of the amounts described in paragraphs (28)(d) and (e) in respect of the partnership in respect of the fiscal period,

      • (ii) the total of all amounts each of which is the lesser of the amounts described in paragraphs (35)(c) and (d) in respect of the partnership in respect of the fiscal period, and

      • (iii) the total of all amounts each of which is an amount required by subsection (28.1) to be deducted in computing the amount determined in respect of the partnership in respect of the fiscal period under subsection (8),

    exceeds

    • (b) the amount that would be determined in respect of the partnership under subsection (8) if that subsection were read without reference to subsections (28), (28.1), and (35).

• (19) Subsections (1) to (5) and (15) to (18) apply on and after March 19, 2007.

• (20) Subsection (6) applies to the 2007 and subsequent taxation years.

• (21) Subsection (7) applies to taxation years ending on or after May 2, 2006.

• (22) Subsections (8) and (9) apply to expenses renounced under agreements made after March 2007.

• (23) Subsections (10) and (13) apply to expenditures incurred on and after March 19, 2007.

• (24) Subsections (11), (12) and (14) apply to taxation years that end on or after May 2, 2006, except that subparagraph (e.1) (vii) of the definition “investment tax credit” in subsection 127(9) of the Act, as enacted by subsection (11), subparagraph (f.1)(iii) of the definition “specified percentage” in subsection 127(9) of the Act, as enacted by subsection (12), and paragraph 127(11.1)(c.5) of the Act, as enacted by subsection (14), apply to taxation years that end on or after March 19, 2007.

• 44. (1) The portion of subsection 141(5) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Exclusion from taxable Canadian property

    (5) For the purpose of paragraph (d) of the definition “taxable Canadian property” in subsection 248(1), a share of the capital stock of a corporation is deemed to be listed at any time on a designated stock exchange if

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

• 45. (1) The definition “contribution” in subsection 146.1(1) of the Act is replaced by the following:

  “contribution”

  « cotisation »

  “contribution”, into an education savings plan, does not include an amount paid into the plan under the Canada Education Savings Act or under a designated provincial program;

• (2) Paragraph (c.1) of the definition “trust” in subsection 146.1(1) of the Act is replaced by the following:

  • (c.1) the repayment of amounts (and the payment of amounts related to that repayment) under the Canada Education Savings Act or under a designated provincial program,

• (3) Subsection 146.1(1) of the Act is amended by adding the following in alphabetical order:

  “designated provincial program”

  « programme provincial désigné »

  “designated provincial program” means

  • (a) a program administered pursuant to an agreement entered into under section 12 of the Canada Education Savings Act, or

  • (b) a prescribed program;

• (4) Subsections (1) to (3) apply to the 2007 and subsequent taxation years.

• 46. (1) The portion of subsection 149.1(1) of the Act before the definition “capital gains pool” is replaced by the following:

  Marginal note:Definitions

  • 149.1 (1) In this section and section 149.2,

• (2) Subsection 149.1(1) of the Act is amended by adding the following in alphabetical order:

  “divestment obligation percentage”

  « pourcentage de dessaisissement »

  “divestment obligation percentage” of a private foundation for a particular taxation year, in respect of a class of shares of the capital stock of a corporation, is the percentage, if any, greater than 0%, determined by the formula

  A + B - C

  where

  A

  is the percentage determined under this definition in respect of the private foundation in respect of the class for the preceding taxation year,

  B

  is the total of all percentages, each of which is the portion of a net increase in the excess corporate holdings percentage of the private foundation in respect of the class for the particular taxation year or for a preceding taxation year that is allocated to the particular taxation year in accordance with subsection 149.2(5), and

  C

  is the total of all percentages, each of which is the portion of a net decrease in the excess corporate holdings percentage of the private foundation in respect of the class for the particular taxation year or for a preceding taxation year that is allocated to the particular taxation year in accordance with subsection 149.2(7);

  “entrusted shares percentage”

  « pourcentage d’actions visées par une stipulation »

  “entrusted shares percentage” of a private foundation, in respect of a class of shares of the capital stock of a corporation, at any particular time means the percentage of the issued and outstanding shares of that class that are held at the particular time by the private foundation that are shares that were acquired by the private foundation by way of a gift that was subject to a trust or direction that the shares are to be held by the private foundation for a period ending not earlier than the particular time, if the gift was made

  • (a) before March 19, 2007,

  • (b) on or after March 19, 2007 and before March 19, 2012

    • (i) under the terms of a will that was executed by a taxpayer before March 19, 2007 and not amended, by codicil or otherwise, on or after March 19, 2007, and

    • (ii) in circumstances where no other will of the taxpayer was executed or amended on or after March 19, 2007, or

  • (c) on or after March 19, 2007, under the terms of a testamentary or inter vivos trust created before March 19, 2007, and not amended on or after March 19, 2007;

  “excess corporate holdings percentage”

  « pourcentage de participation excédentaire »

  “excess corporate holdings percentage” of a private foundation, in respect of a class of shares of the capital stock of a corporation, at any time means

  • (a) if the private foundation is not, at that time, a registered charity, 0%,

  • (b) if the private foundation holds, at that time, an insignificant interest in respect of the class, 0%, and

  • (c) in any other case, the number of percent-age points, if any, by which the total corporate holdings percentage of the private foundation in respect of the class, at that time, exceeds the greater of 20% and the entrusted shares percentage, at that time, of the private foundation in respect of the class;

  “material transaction”

  « opération importante »

  “material transaction” of a private foundation, in respect of a class of shares of the capital stock of a corporation, means a transaction or a series of transactions or events in shares of the class, in respect of which the total fair market value of the shares of the class that are acquired or disposed of by the private foundation or any relevant person in respect of the private foundation as part of the transaction or series (determined at the time of the transaction, or at the end of the series, as the case may be) exceeds the lesser of

  • (a) $100,000, and

  • (b) 0.5% of the total fair market value of all of the issued and outstanding shares of the class;

  “original corporate holdings percentage”

  « pourcentage de participation initiale »

  “original corporate holdings percentage” of a private foundation, in respect of a class of shares of the capital stock of a corporation, means the total corporate holdings percentage of the private foundation, in respect of that class, held on March 18, 2007;

  “relevant person”

  « personne intéressée »

  “relevant person” in respect of a private foundation means a person who, at any time in respect of which the expression is relevant, deals not at arm’s length with the private foundation (determined as if subsection 251(2) were applied as if the private foundation were a corporation), but does not include

  • (a) a person who at that time is considered to deal not at arm’s length with the private foundation solely because of a right referred to in paragraph 251(5)(b), or

  • (b) an individual

    • (i) who at that time has attained the age of 18 years and lives separate and apart from any other individual (referred to in this definition as a “controlling individual”) who would, if the private foundation were a corporation, control, or be a member of a related group that controls, the private foundation, and

    • (ii) in respect of whom the Minister is satisfied, upon review of an application by the private foundation, that the individual would, if subsection 251(1) were read without reference to its paragraphs (a) and (b), at that time, deal at arm’s length with all controlling individuals;

  “total corporate holdings percentage”

  « pourcentage de participation totale »

  “total corporate holdings percentage” of a private foundation, in respect of a class of shares of the capital stock of a corporation, at any particular time means the percentage of the issued and outstanding shares of that class that are held at that time by the private foundation, or by a relevant person in respect of the private foundation who holds a material interest in respect of that class;

• (3) Paragraph 149.1(4)(c) of the Act is replaced by the following:

  • (c) has, in respect of a class of shares of the capital stock of a corporation, a divestment obligation percentage at the end of any taxation year;

• (4) The portion of paragraph 149.1(12)(a) of the Act after subparagraph (ii) is replaced by the following:

  but, for the purpose of paragraph (3)(c), a charitable foundation is deemed not to have acquired control of a corporation if it has not purchased or otherwise acquired for consideration more than 5% of the issued shares of any class of the capital stock of that corporation;

• (5) Subsection 149.1(15) of the Act is amended by striking out the word “and” at the end of paragraph (a), by adding the word “and” at the end of paragraph (b) and by adding the following after paragraph (b):

  • (c) if, at any time during a taxation year of a private foundation that is a registered charity, the private foundation holds more than an insignificant interest in respect of a class of shares of the capital stock of a corporation, the Minister shall make available to the public in such manner as the Minister deems appropriate,

    • (i) the name of the corporation, and

    • (ii) in respect of each class of shares of the corporation, that portion of the total corporate holdings percentage of the private foundation in respect of the class that is attributable to

      • (A) holdings of shares of that class by the private foundation, and

      • (B) the total of all holdings of shares of that class by relevant persons in respect of the private foundation.

• (6) Subsections (1) and (2) apply on and after March 19, 2007.

• (7) Subsections (3) to (5) apply to taxation years, of foundations, that begin after March 18, 2007, except that subsections (3) and (4) do not apply to a taxation year of a private foundation if subsection 149.2(8) of the Act, as enacted by clause 47(1), applies to the private foundation in respect of any class of shares of the capital stock of a corporation.

• 47. (1) The Act is amended by adding the following after section 149.1:

  Marginal note:Material and insignificant interests

  • 149.2 (1) In this section and section 149.1,

    • (a) a person has, at any time, a material interest in respect of a class of shares of the capital stock of a corporation if, at that time,

      • (i) the percentage of the shares of that class held by the person exceeds 0.5% of all the issued and outstanding shares of that class, or

      • (ii) the fair market value of the shares so held exceeds $100,000; and

    • (b) a private foundation has, at any time, an insignificant interest in respect of a class of shares of the capital stock of a corporation if, at that time, the percentage of shares of that class held by the private foundation does not exceed 2% of all the issued and outstanding shares of that class.

  • Marginal note:Material transaction — anti-avoidance

    (2) If a private foundation or a relevant person in respect of the private foundation has engaged in one or more transactions or series of transactions or events, a purpose of which may reasonably be considered to be to avoid the application of the definition “material transaction”, each of those transactions or series of transactions or events is deemed to be a material transaction.

  • Marginal note:Net increase in excess corporate holdings percentage

    (3) The net increase in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, determined by the formula

    A - B

    where

    A

    is the excess corporate holdings percentage of the private foundation at the end of the taxation year, in respect of the class, and

    B

    is

    • (a) 0%, if

      • (i) at the beginning of the taxation year the private foundation was not both a private foundation and a registered charity, or

      • (ii) the private foundation was both a registered charity and a private foundation on March 18, 2007 and the taxation year is the first taxation year of the private foundation that begins after that date; and

    • (b) in any other case, the excess corporate holdings percentage of the private foundation in respect of the class at the end of its preceding taxation year.

  • Marginal note:Net decrease in excess corporate holdings percentage

    (4) The net decrease in the excess corporate holdings percentage of a private foundation for a taxation year, in respect of a class of shares of the capital stock of a corporation, is the number of percentage points, if any, by which the percentage determined for B in the formula in subsection (3) for the taxation year exceeds the percentage determined for A in that formula for the taxation year.

  • Marginal note:Allocation of net increase in excess corporate holdings percentage

    (5) For the purpose of the description of B in the definition “divestment obligation percent-age” in subsection 149.1(1), the net increase in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation, for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order:

    • (a) first to the divestment obligation percent-age of the private foundation in respect of that class for the current year, to the extent that the private foundation has in the current year acquired for consideration shares of that class;

    • (b) then to the divestment obligation percent-age of the private foundation in respect of that class for its fifth subsequent taxation year, to the extent of the lesser of

      • (i) that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), and

      • (ii) the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of bequest;

    • (c) then to the divestment obligation percent-age of the private foundation in respect of that class for its second subsequent taxation year, to the extent of the lesser of

      • (i) that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a) or (b), and

      • (ii) the total of

        • (A) the percentage of the issued and outstanding shares of that class that were acquired by the private foundation in the current year by way of gift, other than from a relevant person or by way of bequest, and

        • (B) the portion of the net increase in the excess corporate holdings percentage of the private foundation that is attributable to the redemption, acquisition or cancellation of any of the issued and outstanding shares of that class in the current year by the corporation; and

    • (d) then to the divestment obligation percent-age of the private foundation in respect of that class for its subsequent taxation year, to the extent of that portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), (b) or (c).

  • Marginal note:Minister’s discretion

    (6) Notwithstanding subsection (5), on application by a private foundation, the Minister may, if the Minister believes it would be just and equitable to do so, reallocate any portion of the net increase in the excess corporate holdings percentage of the private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year, that would otherwise be allocated under subsection (5) to the private foundation’s divestment obligation percentage in respect of that class for a particular taxation year, to the private foundation’s divestment obligation percentage in respect of that class for any of the ten taxation years subsequent to the particular taxation year.

  • Marginal note:Allocation of net decrease in excess corporate holdings percentage

    (7) For the purpose of the description of C in the definition “divestment obligation percent-age” in subsection 149.1(1), the net decrease in the excess corporate holdings percentage of a private foundation in respect of a class of shares of the capital stock of a corporation for a taxation year (in this subsection referred to as the “current year”) is to be allocated in the following order:

    • (a) first, to the divestment obligation percentage of the private foundation in respect of that class for the current year, to the extent of that divestment obligation percentage; and

    • (b) then to the divestment obligation percent-age of the private foundation in respect of that class for a subsequent taxation year of the private foundation (referred to in this paragraph as the “subject year”), to the extent of the lesser of

      • (i) that portion of the net decrease in the excess corporate holdings percentage of the private foundation in respect of that class for the current year that is not allocated under paragraph (a), or under this paragraph, to the divestment obligation percentage of the private foundation in respect of that class for a taxation year of the private foundation that precedes the subject year, and

      • (ii) the amount of the divestment obligation percentage of the private foundation in respect of that class for the subject year, calculated as at the end of the current year and without reference to this subsection.

  • Marginal note:Transitional rule

    (8) If the original corporate holdings percent-age of a private foundation in respect of a class of shares of the capital stock of a corporation exceeds 20%, for the purpose of applying the definition “excess corporate holdings percent-age” in subsection 149.1(1) to

    • (a) the first taxation year of the private foundation that begins after March 18, 2007, the reference to 20% in that definition in respect of that class is to be read as the original corporate holdings percentage of the private foundation in respect of that class;

    • (b) taxation years of the private foundation that are after the taxation year referred to in paragraph (a) and that begin before March 19, 2012, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the immediately preceding taxation year, and

        • (B) the original corporate holdings percentage in respect of that class;

    • (c) taxation years of the private foundation that begin after March 18, 2012 and before March 19, 2017, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 20%;

    • (d) taxation years of the private foundation that begin after March 18, 2017 and before March 19, 2022, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 40%; and

    • (e) taxation years of the private foundation that begin after March 18, 2022 and before March 19, 2027, the reference to 20% in that definition in respect of that class is to be read as the greater of

      • (i) 20%, and

      • (ii) the lesser of

        • (A) the total corporate holdings percentage of the private foundation in respect of the class at the end of the preceding taxation year, and

        • (B) the number of percentage points, if any, by which the private foundation’s original corporate holdings percentage in respect of that class exceeds 60%.

• (2) Subsection (1) applies to taxation years, of private foundations, that begin on or after March 19, 2007.

• 48. (1) Paragraph 152(1)(b) of the Act is replaced by the following:

  • (b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year.

• (2) Paragraph 152(4.2)(b) of the Act is replaced by the following:

  • (b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer’s liability under this Part for the year.

• (3) Subsections (1) and (2) apply to the 2007 and subsequent taxation years.

• 49. (1) Paragraph 153(1)(a) of the Act is replaced by the following:

  • (a) salary, wages or other remuneration, other than amounts described in subsection 115(2.3) or 212(5.1),

• (2) Paragraph 153(1)(g) of the Act is replaced by the following:

  • (g) fees, commissions or other amounts for services, other than amounts described in subsection 115(2.3) or 212(5.1),

• 50. (1) Paragraphs (a) and (b) of the definition “instalment threshold” in subsection 156.1(1) of the Act are replaced by the following:

  • (a) in the case of an individual resident in the Province of Quebec at the end of the year, $1,800, and

  • (b) in any other case, $3,000;

• (2) Subsection (1) applies to the 2008 and subsequent taxation years and, for the purpose of applying subsection 156.1(2) of the Act in respect of the 2008 and 2009 taxation years, to the 2006 and 2007 taxation years.

• 51. (1) The portion of subsection 157(1) of the Act before subparagraph (a)(ii) is replaced by the following:

  Marginal note:Payment by corporation

  • 157. (1) Subject to subsections (1.1) and (1.5), every corporation shall, in respect of each of its taxation years, pay to the Receiver General

    • (a) either

      • (i) on or before the last day of each month in the year, an amount equal to 1/12 of the total of the amounts estimated by it to be the taxes payable by it under this Part and Parts VI, VI.1 and XIII.1 for the year,

• (2) Paragraph 157(1)(b) of the Act is replaced by the following:

  • (b) the remainder of the taxes payable by it under this Part and Parts VI, VI.1 and XIII.1 for the year on or before its balance-due day for the year.

• (3) Section 157 of the Act is amended by adding the following after subsection (1):

  • Marginal note:Special case

    (1.1) A small-CCPC may, in respect of each of its taxation years, pay to the Receiver General

    • (a) one of the following:

      • (i) on or before the last day of each three-month period in the taxation year (or if the period that remains in a taxation year after the end of the last such three-month period is less than three months, on or before the last day of that remaining period), an amount equal to 1/4 of the total of the amounts estimated by it to be the taxes payable by it under this Part and Part VI.1 for the taxation year,

      • (ii) on or before the last day of each three-month period in the taxation year (or if the period that remains in a taxation year after the end of the last such three-month period is less than three months, on or before the last day of that remaining period), an amount equal to 1/4 of its first instalment base for the taxation year, or

      • (iii) on or before the last day

        • (A) of the first period in the taxation year not exceeding three months, an amount equal to 1/4 of its second instalment base for the taxation year, and

        • (B) of each of the following three-month periods in the taxation year (or if the period that remains in a taxation year after the end of the last such three-month period is less than three months, on or before the last day of that remaining period), an amount equal to 1/3 of the amount remaining after deducting the amount computed pursuant to clause (A) from its first instalment base for the taxation year; and

    • (b) the remainder of the taxes payable by it under this Part and Part VI.1 for the taxation year on or before its balance-due day for the taxation year.

  • Marginal note:Small-CCPC

    (1.2) For the purpose of subsection (1.1), a small-CCPC, at a particular time during a taxation year, is a Canadian-controlled private corporation

    • (a) for which the amount determined under subsection (1.3) for the taxation year, or for the preceding taxation year, does not exceed $400,000;

    • (b) for which the amount determined under subsection (1.4) for the taxation year, or for the preceding taxation year, does not exceed $10 million;

    • (c) in respect of which an amount is deducted under section 125 of the Act in computing the corporation’s tax payable for the taxation year or for the preceding taxation year; and

    • (d) that has throughout the 12-month period that ends at the time its last remittance under this section is due,

      • (i) remitted, on or before the day on or before which the amounts were required to be remitted, all amounts that were required to be remitted under subsection 153(1), under Part IX of the Excise Tax Act, under subsection 82(1) of the Employment Insurance Act or under subsection 21(1) of the Canada Pension Plan; and

      • (ii) filed, on or before the day on or before which the returns were required to be filed, all returns that were required to be filed under this Act or under Part IX of the Excise Tax Act.

  • Marginal note:Taxable income — small-CCPC

    (1.3) The amount determined under this subsection in respect of a corporation for a particular taxation year is

    • (a) if the corporation is not associated with another corporation in the particular taxation year, the amount that is the corporation’s taxable income for the particular taxation year; or

    • (b) if the corporation is associated with another corporation in the particular taxation year, the amount that is the total of all amounts each of which is the taxable income of the corporation for the particular taxation year or the taxable income of a corporation with which it is associated in the particular taxation year for a taxation year of that other corporation that ends in the particular taxation year.

  • Marginal note:Taxable capital — small-CCPC

    (1.4) The amount determined under this subsection in respect of a corporation for a particular taxation year is

    • (a) if the corporation is not associated with another corporation in the particular taxation year, the amount that is the corporation’s taxable capital employed in Canada (within the meaning assigned by section 181.2) for the particular taxation year; or

    • (b) if the corporation is associated with another corporation in the particular taxation year, the amount that is the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by section 181.2) of the corporation for the particular taxation year or the taxable capital employed in Canada (within the meaning assigned by section 181.2) of a corporation with which it is associated in the particular taxation year for a taxation year of that other corporation that ends in the particular taxation year.

  • Marginal note:No longer a small-CCPC

    (1.5) Notwithstanding subsection (1), where a corporation, that has remitted amounts in accordance with subsection (1.1), ceases at any particular time in a taxation year to be eligible to remit in accordance with subsection (1.1), the corporation shall pay to the Receiver General, the following amounts for the taxation year,

    • (a) on or before the last day of each month, in the taxation year, that ends after the particular time, either

      • (i) the amount determined by the formula

        (A - B)/C

        where

        A

        is the total of the amounts estimated by the corporation to be the taxes payable by it under this Part and Parts VI, VI.1 and XIII.1 for the taxation year,

        B

        is the total of all payments payable by the corporation in the taxation year in accordance with subsection (1.1), and

        C

        is the number of months that end in the taxation year and after the particular time, or

      • (ii) the total of

        • (A) the amount determined by the formula

          (A - B)/C

          where

          A

          is the corporation’s first instalment base for the taxation year,

          B

          is the total of all payments payable by the corporation in the taxation year in accordance with subsection (1.1), and

          C

          is the number of months that end in the taxation year and after the particular time; and

        • (B) the amount obtained when the estimated tax payable by the corporation, if any, under Part VI and XIII.1 for the taxation year is divided by the number of months that end in the taxation year and after the particular time; and

    • (b) the remainder of the taxes payable by it under this Part and Parts VI, VI.1 and XIII.1 for the taxation year on or before its balance-due date for the taxation year.

• (4) Subsection 157(2.1) of the Act is replaced by the following:

  • Marginal note:$3,000 threshold

    (2.1) A corporation may, instead of paying the instalments required for a taxation year by paragraph (1)(a) or by subsection (1.1), pay to the Receiver General, under paragraph (1)(b), the total of the taxes payable by it under this Part and Parts VI, VI.1 and XIII.1 for the taxation year, if

    • (a) the total of the taxes payable under this Part and Parts VI, VI.1 and XIII.1 by the corporation for the taxation year (determined before taking into consideration the specified future tax consequences for the year) is equal to or less than $3,000; or

    • (b) the corporation’s first instalment base for the year is equal to or less than $3,000.

• (5) The portion of subsection 157(3) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Reduced instalments

    (3) Notwithstanding subsection (1) and (1.5), the amount payable under subsection (1) or (1.5) for a taxation year by a corporation to the Receiver General on or before the last day of any month in the yearis deemed to be the amount, if any, by which

• (6) Section 157 of the Act is amended by adding the following after subsection (3):

  • Marginal note:Amount of payment — three-month period

    (3.1) Notwithstanding subsection (1.1), the amount payable under subsection (1.1) for a taxation year by a corporation to the Receiver General on or before the last day of any period in the yearis deemed to be the amount, if any, by which

    • (a) the amount so payable as determined under that subsection for the period

    exceeds the total of

    • (b) 1/4 of the corporation’s dividend refund (within the meaning assigned by subsection 129(1)) for the taxation year, and

    • (c) 1/4 of the total of the amounts each of which is deemed by subsection 125.4(3), 125.5(3), 127.1(1) or 127.41(3) to have been paid on account of the corporation’s tax payable under this Part for the taxation year.

• (7) Subsections (1) to (6) apply to taxation years that begin after 2007.

• 52. (1) Subsection 161(4.1) of the Act is replaced by the following:

  • Marginal note:Limitation — corporations

    (4.1) For the purposes of subsection (2) and section 163.1, where a corporation is required to pay a part or instalment of tax for a taxation year computed by reference to a method described in subsection 157(1), (1.1) or (1.5), as the case may be, the corporation is deemed to have been liable to pay on or before each day on or before which subparagraph 157(1)(a)(i), (ii) or (iii), subparagraph 157(1.1)(a)(i), (ii) or (iii), or subparagraph 157(1.5)(a)(i) or (ii), as the case may be, requires a part or instalment to be made equal to the amount, if any, by which

    • (a) the part or instalment due on that day computed in accordance with whichever allowable method in the circumstances gives rise to the least total amount of such parts or instalments of tax for the year, computed by reference to

      • (i) the total of the taxes payable under this Part and Parts VI, VI.1 and XIII.1 by the corporation for the year, determined before taking into consideration the specified future tax consequences for the year,

      • (ii) its first instalment base for the year, or

      • (iii) its second instalment base and its first instalment base for the year,

    exceeds

    • (b) the amount, if any, determined under any of paragraphs 157(3)(b) to (e) or under paragraph 157(3.1)(b) or (c), as the case may be, in respect of that instalment.

• (2) Subsections (1) applies to taxation years that begin after 2007.

• 53. (1) Subsection 163(2) of the Act is amended by adding the following after paragraph (c.2):

  • (c.3) the amount, if any, by which

    • (i) the total of all amounts each of which is an amount that would be deemed by subsection 122.7(2) or (3) to be a payment on account of the person’s tax payable under this Part or another person’s tax payable under this Part for the year if those amounts were calculated by reference to the information provided in the return

    exceeds

    • (ii) the total of all amounts each of which is an amount that is deemed by subsection 122.7(2) or (3) to be a payment on account of the person’s tax payable under this Part and, where applicable, the other person’s tax payable under this Part for the year,

• (2) Subsection (1) applies to the 2007 and subsequent taxation years.

• 54. (1) The definition “tobacco manufacturing” in subsection 182(2) of the Act is replaced by the following:

  “tobacco manufacturing”

  « fabrication du tabac »

  “tobacco manufacturing” means any activity, other than an exempt activity, relating to the manufacture or processing in Canada of tobacco or tobacco products in or into any form that is, or would after any further activity become, suitable for smoking;

• (2) Subsection 182(2) of the Act is amended by adding the following in alphabetical order:

  “exempt activity”

  « activité exclue »

  “exempt activity”, of a particular corporation, means

  • (a) farming; or

  • (b) processing leaf tobacco, if

    • (i) that processing is done by, and is the principal business of, the particular corporation,

    • (ii) the particular corporation does not manufacture any tobacco product, and

    • (iii) the particular corporation is not related to any other corporation that carries on tobacco manufacturing (determined, in respect of the other corporation, as if the particular corporation did not exist and the definition “tobacco manufacturing” were read without reference to the words “in Canada”);

• (3) Subsections (1) and (2) apply to taxation years that end after 2006.

• 55. (1) Subparagraph 186.1(b)(vii) of the Act is replaced by the following:

  • (vii) a registered securities dealer that was throughout the year a member, or a participating organization, of a designated stock exchange in Canada.

• (2) Subsection (1) applies after April 2, 2000, except that, in its application before the day on which this Act is assented to, the reference to “designated stock exchange” in subparagraph 186.1(b)(vii) of the Act, as amended by subsection (1), shall be read as a reference to “prescribed stock exchange”.

56. Section 188.1 of the Act is amended by adding the following after subsection (3):

• 57. (1) Paragraph (b) of the definition “qualified investment” in section 204 of the Act is replaced by the following:

  • (b) debt obligations described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3),

• (2) Subparagraphs (c)(i) and (ii) of the definition “qualified investment” in section 204 of the Act are replaced by the following:

  • (i) a corporation, mutual fund trust or limited partnership the shares or units of which are listed on a designated stock exchange in Canada,

  • (ii) a corporation the shares of which are listed on a designated stock exchange outside Canada, or

• (3) Paragraph (d) of the definition “qualified investment” in section 204 of the Act is replaced by the following:

  • (d) securities (other than futures contracts or other derivative instruments in respect of which the holder’s risk of loss may exceed the holder’s cost) that are listed on a designated stock exchange,

• (4) Subsection (1) applies after 2007.

• (5) Subsections (2) and (3) apply on and after the day on which this Act is assented to.

• 58. (1) Subsection 207.1(5) of the Act is replaced by the following:

  • Marginal note:Tax payable in respect of agreement to acquire shares

    (5) Where at any time a taxpayer whose taxable income is exempt from tax under Part I makes an agreement (otherwise than as a consequence of the acquisition or writing by it of an option listed on a designated stock exchange) to acquire a share of the capital stock of a corporation (otherwise than from the corporation) at a price that may differ from the fair market value of the share at the time the share may be acquired, the taxpayer shall, in respect of each month during which the taxpayer is a party to the agreement, pay a tax under this Part equal to the total of all amounts each of which is the amount, if any, by which the amount of a dividend paid on the share at a time in the month at which the taxpayer is a party to the agreement exceeds the amount, if any, of the dividend that is received by the taxpayer.

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

• 59. (1) Subparagraph 212(1)(b)(vii) of the Act is amended by striking out the word “or” at the end of clause (E), by adding the word “or” at the end of clause (F) and by adding the following after clause (F):

  • (G) in the event that a change to this Act or to a tax treaty has the effect of relieving the non-resident person from liability for tax under this Part in respect of the interest;

• (2) Paragraph 212(1)(b) of the Act is replaced by the following:

  • (b) interest that

    • (i) is not fully exempt interest, and is paid or payable to a person with whom the payer is not dealing at arm’s length, or

    • (ii) is participating debt interest;

• (3) Subsection 212(3) of the Act is replaced by the following:

  • Marginal note:Interest — definitions

    (3) The following definitions apply for the purpose of paragraph (1)(b).

    “fully exempt interest”

    « intérêts entièrement exonérés »

    “fully exempt interest” means

    • (a) interest that is paid or payable on a bond, debenture, note, mortgage, hypothecary claim or similar debt obligation

      • (i) of, or guaranteed (otherwise than by being insured by the Canada Deposit Insurance Corporation) by, the Government of Canada,

      • (ii) of the government of a province,

      • (iii) of an agent of a province,

      • (iv) of a municipality in Canada or a municipal or public body performing a function of government in Canada,

      • (v) of a corporation, commission or association to which any of paragraphs 149(1)(d) to (d.6) applies, or

      • (vi) of an educational institution or a hospital if repayment of the principal amount of the obligation and payment of the interest is to be made, or is guaranteed, assured or otherwise specifically provided for or secured by the government of a province;

    • (b) interest that is paid or payable on a mortgage, hypothecary claim or similar debt obligation secured by, or on an agreement for sale or similar obligation with respect to, real property situated outside Canada or an interest in any such real property, or to immovables situated outside Canada or a real right in any such immovable, except to the extent that the interest payable on the obligation is deductible in computing the income of the payer under Part I from a business carried on by the payer in Canada or from property other than real or immovable property situated outside Canada;

    • (c) interest that is paid or payable to a prescribed international organization or agency; or

    • (d) an amount paid or payable or credited under a securities lending arrangement that is deemed by subparagraph 260(8)(a)(i) to be a payment made by a borrower to a lender of interest, if

      • (i) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and

      • (ii) the security that is transferred or lent to the borrower under the securities lending arrangement is described in paragraph (b) or (c) of the definition “qualified security” in subsection 260(1) and issued by a non-resident issuer.

    “participating debt interest”

    « intérêts sur des créances participatives »

    “participating debt interest” means interest (other than interest described in any of paragraphs (b) to (d) of the definition “fully exempt interest”) that is paid or payable on an obligation, other than a prescribed obligation, all or any portion of which interest is contingent or dependent on the use of or production from property in Canada or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation.

• (4) Subsection 212(14) of the Act is repealed.

• (5) Section 212 of the Act is amended by adding the following after subsection (17):

  • Marginal note:Payments to the International Olympic Committee and the International Paralympic Committee

    (17.1) Notwithstanding subsections (1) and (2),

    • (a) the International Olympic Committee is not taxable under this Part on any amount paid or credited to it, after 2005 and before 2011, in respect of the 2010 Olympic Winter Games, and

    • (b) the International Paralympic Committee is not taxable under this Part on any amount paid or credited to it, after 2005 and before 2011, in respect of the 2010 Paralympic Winter Games.

• (6) Subsections 212(18) and (19) of the Act are replaced by the following:

  • Marginal note:Undertaking

    (18) Every person who in a taxation year is a prescribed financial institution or a person resident in Canada who is a registered securities dealer shall on demand from the Minister, served personally or by registered letter, file within such reasonable time as may be stipulated in the demand, an undertaking in prescribed form relating to the avoidance of payment of tax under this Part.

  • Marginal note:Tax on registered securities dealers

    (19) Every taxpayer who is a registered securities dealer resident in Canada shall pay a tax under this Part equal to the amount determined by the formula

    1/365 × .25 × (A - B) × C

    where

    A

    is the total of all amounts each of which is the amount of money provided before the end of a day to the taxpayer (and not returned or repaid before the end of the day) by or on behalf of a non-resident person as collateral or as consideration for a security that was lent or transferred under a designated securities lending arrangement,

    B

    is the total of

    • (a) all amounts each of which is the amount of money provided before the end of the day by or on behalf of the taxpayer (and not returned or repaid before the end of the day) to a non-resident person as collateral or as consideration for a security that is described in paragraph (a) of the definition “fully exempt interest” in subsection (3), or that is an obligation of the government of any country, province, state, municipality or other political subdivision, and that was lent or transferred under a securities lending arrangement, and

    • (b) the greater of

      • (i) 10 times the greatest amount determined, under the laws of the province or provinces in which the taxpayer is a registered securities dealer, to be the capital employed by the taxpayer at the end of the day, and

      • (ii) 20 times the greatest amount of capital required, under the laws of the province or provinces in which the taxpayer is a registered securities dealer, to be maintained by the taxpayer as a margin in respect of securities described in paragraph (a) of the definition “fully exempt interest” in subsection (3), or that is an obligation of the government of any country, province, state, municipality or other political subdivision, at the end of the day, and

    C

    is the prescribed rate of interest in effect for the day,

    and shall remit that amount to the Receiver General on or before the 15th day of the month after the month in which the day occurs.

  • Marginal note:Designated SLA

    (20) For the purpose of subsection (19), a designated securities lending arrangement is a securities lending arrangement

    • (a) under which

      • (i) the lender is a prescribed financial institution or a registered securities dealer resident in Canada,

      • (ii) the particular security lent or transferred is an obligation described in paragraph (a) of the definition “fully exempt interest” in subsection (3) or an obligation of the government of any country, prov- ince, state, municipality or other political subdivision,

      • (iii) the amount of money provided to the lender at any time during the term of the arrangement either as collateral or as consideration for the particular security does not exceed 110% of the fair market value at that time of the particular security; and

    • (b) that was neither intended, nor made as a part of a series of securities lending arrangements, loans or other transactions that was intended, to be in effect for more than 270 days.

• (7) Subsection (1) applies to obligations entered into on or after March 19, 2007.

• (8) Subsections (2) to (4) and (6) apply after 2007.

• 60. (1) Paragraph 214(8)(a) of the Act is replaced by the following:

  • (a) that is described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3), or on which the interest would have been exempt under subparagraph 212(1)(b)(iii) or (vii) as they applied to the 2007 taxation year;

• (2) Subsection 214(11) of the Act is repealed.

• (3) Subsections (1) and (2) apply after 2007.

• 61. (1) Section 220 of the Act is amended by adding the following after subsection (3.2):

  • Marginal note:Joint election — pension income split

    (3.201) On application by a taxpayer, the Minister may extend the time for making an election, or grant permission to amend or revoke an election, under section 60.03 if

    • (a) the application is made on or before the day that is three calendar years after the taxpayer’s filing-due date for the taxation year to which the election applies; and

    • (b) the taxpayer is resident in Canada

      • (i) if the taxpayer is deceased at the time of the application, at the time that is immediately before the taxpayer’s death, or

      • (ii) in any other case, at the time of the application.

• (2) The portion of subsection 220(3.5) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Penalty for late filed, amended or revoked elections

    (3.5) Where, on application by a taxpayer or a partnership, the Minister extends the time for making an election or grants permission to amend or revoke an election (other than an extension or permission under subsection (3.201)), the taxpayer or the partnership, as the case may be, is liable to a penalty equal to the lesser of

• (3) Subsections (1) and (2) applies to the 2007 and subsequent taxation years.

• 62. (1) Subsection 221(1) of the Act is amended by adding the following after paragraph (d.1):

  • (d.2) requiring any class of persons to make information available to the public for the purpose of making information returns respecting any class of information required in connection with assessments under this Act;

• (2) Subsection (1) applies to information in respect of taxation years of taxpayers and fiscal periods of partnerships that end on or after July 4, 2007.

63. The portion of subsection 231.2(1) of the Act before paragraph (a) is replaced by the following:

• 64. (1) Subparagraph 241(4)(e)(xii) of the Act is replaced by the following:

  • (xii) a provision contained in a tax treaty with another country or in a comprehensive tax information exchange agreement between Canada and another country or jurisdiction that is in force and has effect;

• (2) Subsection 241(4) of the Act is amended by striking out the word “or” at the end of paragraph (o), by adding the word “or” at the end of paragraph (p) and by adding the following after paragraph (p):

  • (q) provide taxpayer information to an official of the government of a province solely for the use in the management or administration by that government of a program relating to earning supplementation or income support.

• 65. (1) The definition “NISA Fund No. 2” in subsection 248(1) of the Act is replaced by the following:

  “NISA Fund No. 2”

  « second fonds du compte de stabilisation du revenu net »

  “NISA Fund No. 2” means the portion of a taxpayer’s net income stabilization account

  • (a) that is described in paragraph 8(2)(b) of the Farm Income Protection Act, and

  • (b) that can reasonably be considered to be attributable to a program that allows the funds in the account to accumulate;

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

  “designated stock exchange”

  « bourse de valeurs désignée »

  “designated stock exchange” means a stock exchange, or that part of a stock exchange, for which a designation by the Minister of Finance under section 262 is in effect;

  “functional currency”

  « monnaie fonctionnelle »

  “functional currency” of a taxpayer for a particular taxation year has the meaning assigned by section 261;

  “recognized stock exchange”

  « bourse de valeurs reconnue »

  “recognized stock exchange” means

  • (a) a designated stock exchange, and

  • (b) any other stock exchange, if that other stock exchange is located in Canada or in a country that is a member of the Organisation for Economic Co-operation and Development and that has a tax treaty with Canada;

• (3) Subsection 248(29) of the Act is repealed.

• (4) Subsection (1) applies to the 2008 and subsequent taxation years.

• (5) The definitions “designated stock exchange” and “recognized stock exchange” in subsection 248(1) of the Act, as enacted by subsection (2), and subsection (3) apply on and after the day on which this Act is assented to.

• (6) The definition “functional currency” in subsection 248(1) of the Act, as enacted by subsection (2), applies in respect of taxation years that begin on or after the day on which this Act is assented to.

• 66. (1) Paragraph (a) of the definition “qualified security” in subsection 260(1) of the Act is replaced by the following:

  • (a) a share of a class of the capital stock of a corporation that is listed on a stock exchange or of a class of the capital stock of a corporation that is a public corporation by reason of the designation of the class by the corporation in an election made under subparagraph (b)(i) of the definition “public corporation” in subsection 89(1) or by the Minister in a notice to the corporation under subparagraph (b)(ii) of that definition,

• (2) Paragraph 260(8)(a) of the Act is amended by adding the word “and” at the end of subparagraph (i) and by replacing subparagraphs (ii) and (iii) with the following:

  • (ii) the security is deemed to be a security described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3) if the security is described in paragraph (c) of the definition “qualified security” in subsection (1), and

• (3) Section 260 of the Act is amended by adding the following after subsection (9):

  • Marginal note:Non-arm’s length compensation payment

    (10) For the purpose of Part XIII, where the lender under a securities lending arrangement is not dealing at arm’s length with either the borrower under the arrangement or the issuer of the security that is transferred or lent under the arrangement, or both, and subsection (8) deems an amount to be a payment of interest by a person to the lender in respect of that security, the lender is deemed, in respect of that payment, not to be dealing at arm’s length with that person.

• (4) Subsection (1) applies on and after the day on which this Act is assented to.

• (5) Subsections (2) and (3) apply after 2007.

• 67. (1) The Act is amended by adding the following after section 260:

  Marginal note:Definitions

  • 261. (1) The definitions in this subsection apply in this section.

    “Canadian currency year”

    « année de déclaration en monnaie canadienne »

    “Canadian currency year” of a taxpayer means a taxation year of the taxpayer in respect of which subsection (4) did not apply to the taxpayer.

    “Canadian tax results”

    « résultats fiscaux canadiens »

    “Canadian tax results” of a taxpayer for a particular taxation year of the taxpayer means

    • (a) the amount of the income of the taxpayer for the particular taxation year;

    • (b) the amount of the taxable income of the taxpayer for the particular taxation year;

    • (c) the amount (other than an amount payable on behalf of another person under subsection 153(1) or section 215) of tax or other amount payable under this Act by the taxpayer in respect of the particular taxation year;

    • (d) the amount (other than an amount refundable on behalf of another person in respect of amounts payable on behalf of that person under subsection 153(1) or section 215) of tax or other amount refundable under this Act to the taxpayer in respect of the particular taxation year; and

    • (e) any amount that is relevant in determining the amounts described in respect of the taxpayer under paragraphs (a) to (d).

    “consolidated financial statements”

    « états financiers consolidés »

    “consolidated financial statements” of a taxpayer for a taxation year means the financial statements of the taxpayer that are prepared in accordance with generally accepted accounting principles that are applicable to that taxation year.

    “currency exchange rate”

    « taux de change monétaire »

    “currency exchange rate” on a particular day means, in respect of a conversion of an amount determined in a particular currency into an amount determined in another currency, the average, for the 12 month period ending on the particular day,

    • (a) where the particular currency is Canadian currency, of the rate of exchange (calculated by reference to the rate of exchange quoted by the Bank of Canada at noon on each business day in the period) for the exchange of the Canadian dollar for a unit of the other currency or such rate or rates of exchange acceptable to the Minister;

    • (b) where the other currency is Canadian currency, of the rate of exchange (calculated by reference to the rate of exchange quoted by the Bank of Canada at noon on each business day in the period) for the exchange of a unit of the particular currency for the Canadian dollar or such rate or rates of exchange acceptable to the Minister; or

    • (c) where neither the particular currency nor the other currency is Canadian currency, of the rate of exchange (calculated by reference to the rates of exchange quoted by the Bank of Canada at noon on each business day in the period for the exchange of the Canadian dollar for a unit of each of those currencies) for the exchange of a unit of the particular currency for a unit of the other currency or such rate or rates of exchange acceptable to the Minister.

    “functional currency”

    « monnaie fonctionnelle »

    “functional currency” of a taxpayer for a particular taxation year of the taxpayer means the currency of a country other than Canada if that currency is

    • (a) a qualifying currency;

    • (b) the currency that is, more often than any other currency, used in the conduct of the taxpayer’s principal business activities in the particular taxation year; and

    • (c) the currency in which the financial results of the taxpayer for the particular taxation year are computed in the taxpayer’s consolidated financial statements and legal-entity financial statements for the particular taxation year.

    “functional currency year”

    « année de déclaration en monnaie fonctionnelle »

    “functional currency year” of a taxpayer means a taxation year of the taxpayer in respect of which subsection (4) applies to the taxpayer.

    “generally accepted accounting principles”

    « principes comptables généralement reconnus »

    “generally accepted accounting principles” means the accounting principles established or recommended by the Accounting Standards Board of Canada or such other accounting principles as are determined to be acceptable by the Minister.

    “initial functional currency year”

    « année initiale de déclaration en monnaie fonctionnelle »

    “initial functional currency year” of a taxpayer means a functional currency year of the taxpayer if the particular taxation year of the taxpayer ending immediately before the beginning of that functional currency year of the taxpayer was a Canadian currency year of the taxpayer.

    “initial reversionary year”

    « année initiale de déclaration en monnaie canadienne »

    “initial reversionary year” of a taxpayer means the first taxation year of the taxpayer that begins immediately after the last functional currency year of the taxpayer.

    “last Canadian currency year”

    « dernière année de déclaration en monnaie canadienne »

    “last Canadian currency year” of a taxpayer means the last taxation year of the taxpayer that ends before the beginning of the initial functional currency year of the taxpayer.

    “last functional currency year”

    « dernière année de déclaration en monnaie fonctionnelle »

    “last functional currency year” of a taxpayer means a functional currency year of the taxpayer if the particular taxation year of the taxpayer beginning immediately after the end of that functional currency year is a Canadian currency year of the taxpayer.

    “legal-entity financial statements”

    « états financiers individuels »

    “legal-entity financial statements” of a taxpayer for a taxation year means the financial statements of the taxpayer that would be prepared for that taxation year in accordance with generally accepted accounting principles that are applica-ble to that taxation year if those generally accepted accounting principles did not require consolidation.

    “qualifying currency”

    « monnaie admissible »

    “qualifying currency” of a taxpayer for a taxation year means each of

    • (a) the currency of the United States of America;

    • (b) the currency of the European Monetary Union;

    • (c) the currency of the United Kingdom; and

    • (d) a prescribed currency.

    “reversionary exchange rate”

    « taux de change canadien »

    “reversionary exchange rate” of a taxpayer for a functional currency year of the taxpayer means the average, for the 12-month period ending on the last day of the functional currency year of the taxpayer, of the rate of exchange (quoted by the Bank of Canada at noon on each business day in the period) for the exchange of a unit of the functional currency of the taxpayer for the functional currency year for the Canadian dollar.

    “tax credit”

    « crédit d’impôt »

    “tax credit” means an amount deductible in computing a taxpayer’s tax payable, or deemed to have been paid on account of a taxpayer’s tax payable, under any Part of this Act for a taxation year.

    “transitional exchange rate”

    « taux de change transitoire »

    “transitional exchange rate” of a taxpayer means the average, for the 12-month period ending on the last day of the last Canadian currency year of the taxpayer, of the rate of exchange (calculated by reference to the rate of exchange quoted by the Bank of Canada at noon on each business day in the period) for the exchange of the Canadian dollar for a unit of the functional currency of the taxpayer for the initial functional currency year of the taxpayer.

  • Marginal note:Canadian currency requirement

    (2) Subject to subsections (3) to (10),

    • (a) the Canadian tax results of a taxpayer for a particular taxation year are to be determined using Canadian currency; and

    • (b) subject to subsection 79(7), paragraphs 80(2)(k) and 142.7(8)(b), if a particular amount that is relevant in computing the taxpayer’s Canadian tax results for the particular taxation year is an amount expressed in a currency other than Canadian currency, that amount is to be converted to an amount expressed in Canadian currency using the rate of exchange quoted by the Bank of Canada at noon on the day on which that amount first arose for the exchange of a unit of that other currency for a unit of Canadian currency or such other rate of exchange as is acceptable to the Minister.

  • Marginal note:Application of subsection (4)

    (3) Subsection (4) applies to a taxpayer in respect of a particular taxation year of the taxpayer if

    • (a) the taxpayer is, throughout the particular taxation year, a corporation (other than an investment corporation, a mortgage investment corporation or a mutual fund corporation) resident in Canada;

    • (b) the taxpayer has elected that subsection (4) apply to the taxpayer in respect of the particular taxation year, or a preceding taxation year, and each subsequent taxation year of the taxpayer and has filed that election with the Minister in prescribed form and manner on or before the taxpayer’s filing due date

      • (i) for the taxation year immediately preceding the first taxation year in respect of which the election was made, or

      • (ii) where there was not a taxation year immediately preceding the first taxation year in respect of which the election was made, for the first taxation year in respect of which the election was made;

    • (c) there is a functional currency of the taxpayer for the particular taxation year;

    • (d) where the taxpayer’s taxation year immediately preceding the particular taxation year was a functional currency year of the taxpayer, the functional currency of the taxpayer for that preceding taxation year is the same as the functional currency of the taxpayer for the particular taxation year; and

    • (e) where the taxpayer’s taxation year immediately preceding the particular taxation year was a Canadian currency year of the taxpayer, no preceding taxation year of the taxpayer was a functional currency year of the taxpayer.

  • Marginal note:Functional currency reporting

    (4) If, because of subsection (3), this subsection applies to a taxpayer for a particular taxation year of the taxpayer,

    • (a) the taxpayer’s Canadian tax results for the particular taxation year are to be determined using the taxpayer’s functional currency for the particular taxation year;

    • (b) each reference in the Act or the regulations to a particular amount expressed in Canadian dollars is to be read as a reference to a particular amount expressed in the taxpayer’s functional currency for the partic-ular taxation year determined by applying the currency exchange rate in respect of the conversion of Canadian currency into that functional currency as of the first day of the particular taxation year;

    • (c) subject to subsection 79(7), paragraphs 80(2)(k) and 142.7(8)(b), if a particular amount that is relevant in computing the taxpayer’s Canadian tax results for the particular taxation year is an amount expressed in a currency other than the taxpayer’s functional currency for the particular taxation year, that amount is to be converted to an amount expressed in the taxpayer’s functional currency for the particular taxation year by using the rates of exchange quoted by the Bank of Canada at noon on the day that the particular amount first arose for the exchange of the Canadian dollar for a unit of each of those currencies or such other rate of exchange as is acceptable to the Minister;

    • (d) each reference in subsection 79(7), paragraph 80(2)(k) and subsections 80.01(11) and 80.1(8) to “Canadian currency” is to be read as a reference to “the taxpayer’s functional currency”;

    • (e) the reference in subsection 39(2) to “the value of the currency or currencies of one or more countries other than Canada relative to Canadian currency, a taxpayer has made a gain or sustained a loss in a taxation year” is to be read as reference to “the value of the currency or currencies of one or more countries (other than the taxpayer’s functional currency for the taxation year) relative to a taxpayer’s functional currency for a taxation year, the taxpayer has made a gain or sustained a loss in the taxation year” and the references in that subsection to “currency of a country other than Canada” shall be read as references to “currency other than the taxpayer’s functional currency for the taxation year”;

    • (f) the definition “foreign currency” in subsection 248(1) is, in respect of the taxpayer, to be, at any time in the particular taxation year, read as:

      “foreign currency”

      “foreign currency” in respect of a taxpayer, at any time in a particular taxation year, means a currency other than the taxpayer’s functional currency for the particular taxation year;

    • (g) where a taxation year of a foreign affiliate of the taxpayer ends in the particular taxation year of the taxpayer, the references in section 95 and in regulations made for the purposes of that section (other than subsection 5907(6) of the Regulations) to “Canadian currency” shall be read, in respect of the foreign affiliate, as a reference to “the taxpayer’s functional currency for the particular taxation year ”.

  • Marginal note:Converting Canadian currency amounts

    (5) In applying this Act to a taxpayer for a particular functional currency year of the taxpayer

    • (a) subject to subparagraph (10)(b)(iii), in determining the amount (expressed in the taxpayer’s functional currency for the partic-ular functional currency year) that may be deducted, or relevant in determining the amount that may be deducted, under subsection 37(1) or 66(4), section 110.1 or 111 or subsection 126(2), 127(5), 129(1), 181.1(4) or 190.1(3) in the particular functional currency year, each amount (determined in Canadian currency) that is relevant to the determination and that was determined for a taxation year of the taxpayer that preceded the initial functional currency year of the taxpayer, is to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer;

    • (b) in determining, at any time in the particular functional currency year, the cost (expressed in the taxpayer’s functional currency for the particular functional currency year) to the taxpayer of a property that was acquired by the taxpayer before the beginning of the taxpayer’s initial functional currency year, the cost (determined in Canadian currency) to the taxpayer of the property at the end of the last Canadian currency year of the taxpayer is to be converted to the taxpayer’s functional currency for the partic-ular functional currency year using the transitional exchange rate of the taxpayer;

    • (c) in determining, at any time in the particular functional currency year, the adjusted cost base (expressed in the taxpayer’s functional currency for the particular functional currency year) to the taxpayer of a capital property that was acquired by the taxpayer before the beginning of the taxpayer’s initial functional currency year, each amount (determined in Canadian currency) that was required by section 53 to be added or deducted in computing, at any time before the beginning of the initial functional currency year of the taxpayer, the adjusted cost base of the property to the taxpayer is to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer;

    • (d) in determining, at any time in the particular functional currency year, the amount (expressed in the taxpayer’s functional currency for the particular functional currency year) of the taxpayer’s undepreciated capital cost of depreciable property of a prescribed class, cumulative eligible capital in respect of a business, cumulative Canadian exploration expense (within the meaning assigned by subsection 66.1(6)), cumulative Canadian development expense (within the meaning assigned by subsection 66.2(5)), cumulative foreign resource expense in respect of a country other than Canada (within the meaning assigned by subsection 66.21(1)) and cumulative Canadian oil and gas property expense (within the meaning assigned by subsection 66.4(5)), (each of which is referred to in this paragraph as a “pool amount”) each amount (determined in Canadian currency) that was added to or deducted from a particular pool amount of the taxpayer in respect of a taxation year of the taxpayer preceding the initial functional currency year of the taxpayer is to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer;

    • (e) in determining any amount (expressed in the taxpayer’s functional currency for the particular functional currency year) that has been deducted or claimed as a reserve in computing the income of the taxpayer for its last Canadian currency year, that amount (determined in Canadian currency) deducted or claimed as a reserve is to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer;

    • (f) in determining the amount (expressed in the taxpayer’s functional currency for the particular functional currency year) of any outlay or expense referred to in subsection 18(9) that was made or incurred by the taxpayer and the amount that was deducted in respect of that outlay or expense in respect of a taxation year preceding the initial functional currency year of the taxpayer, such amounts of outlay or expense or deductions (determined in Canadian currency for those years) are to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer;

    • (g) in determining, at any time in the particular functional currency year, the amount (expressed in the taxpayer’s functional currency for the particular functional currency year) of the taxpayer’s paid-up capital in respect of any class of shares of its capital stock, any amount (determined in Canadian currency) added or deducted in computing the taxpayer’s paid-up capital in respect of the class in a taxation year preceding the initial functional currency year of the taxpayer is to be converted to the taxpayer’s functional currency for the partic-ular functional currency year using the transitional exchange rate of the taxpayer;

    • (h) where the taxpayer issued a debt obligation in a taxation year of the taxpayer preceding the initial functional currency year of the taxpayer, in determining the amount (expressed in the taxpayer’s functional currency for the particular functional currency year) for which the obligation was issued, the principal amount (expressed in the taxpayer’s functional currency for the particular functional currency year) of the obligation, any amount (expressed in the taxpayer’s functional currency for the particular functional currency year) paid in satisfaction of the principal amount of the obligation in a taxation year of the taxpayer preceding the initial functional currency year of the taxpayer, and the amount (determined in the taxpayer’s functional currency for the partic-ular functional currency year) of any gain or loss attributable to the fluctuation in the values of currencies,

      • (i) where the obligation was issued in the taxpayer’s functional currency for the particular functional currency year, the amount (determined in the taxpayer’s functional currency for the particular functional currency year) for which the obligation was issued, the principal amount (determined in the taxpayer’s functional currency for the particular functional currency year) of the obligation and the amounts (determined in the taxpayer’s functional currency for the particular functional currency year) paid in satisfaction of the principal amount of the obligation, in a taxation year of the taxpayer preceding the initial functional currency year of the taxpayer are those amounts determined in those years in the taxpayer’s functional currency for the particular functional currency year,

      • (ii) where the obligation was issued in Canadian currency, the amount for which the obligation was issued (determined in Canadian currency), the principal amount (determined in Canadian currency) of the obligation and the amounts (determined in Canadian currency) paid in satisfaction of the principal amount of the obligation, in a taxation year preceding the initial functional currency year are to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer, and

      • (iii) where the obligation was issued in a currency (referred to in this subparagraph as the “third currency”) other than Canadian currency or the taxpayer’s functional currency for the particular functional currency year, the amount (determined in the third currency) for which the obligation was issued, the principal amount (determined in the third currency) of the obligation and the amounts (determined in the third currency) paid in satisfaction of the principal amount of the obligation in a taxation year of the taxpayer preceding the initial functional currency year of the taxpayer, are to be converted to the taxpayer’s functional currency for the particular functional currency year using the currency exchange rate in respect of a conversion of an amount determined in the third currency into an amount determined in the taxpayer’s functional currency for the particular functional currency year on the last day of the last Canadian currency year of the taxpayer;

    • (i) in determining the amount (expressed in the taxpayer’s functional currency for the particular functional currency year) of tax payable under Part I for a Canadian currency year for the purpose of determining the taxpayer’s first instalment base or second instalment base for the taxpayer’s initial functional currency year, the amount (determined in Canadian currency) of tax payable is to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer; and

    • (j) any amount (expressed in Canadian currency), other than an amount referred to in paragraphs (a) to (i), determined under the provisions of this Act in or in respect of a taxation year preceding the initial functional currency year of the taxpayer that is relevant in determining the Canadian tax results (expressed in the taxpayer’s functional currency for the particular functional currency year) of the taxpayer for the particular functional currency year is to be converted to the taxpayer’s functional currency for the particular functional currency year using the transitional exchange rate of the taxpayer.

  • Marginal note:Deferred amounts relating to debt

    (6) In applying this Act to a taxpayer for a particular functional currency year of the taxpayer

    • (a) where, at any time in the particular functional currency year, the taxpayer has made a particular payment (expressed in the taxpayer’s functional currency for the partic-ular functional currency year) on account of the principal amount (expressed in the taxpayer’s functional currency for the partic-ular functional currency year) of a debt obligation that was issued by the taxpayer in a Canadian currency year of the taxpayer that ended before the beginning of the initial functional currency year of the taxpayer

      • (i) the taxpayer is deemed to have a capital gain under paragraph 39(2)(a) or income, as the case may be, attributable to the fluctuation in the values of currencies in respect of the particular payment for the particular functional currency year equal to the amount determined by the formula

        A × B/C

        where

        A

        is the amount determined by the formula

        D × E

        where

        D

        is the amount (expressed in Canadian currency), if any, that would have been determined to be the taxpayer’s capital gain under paragraph 39(2)(a) or income, as the case may be, if the principal amount of the debt obligation outstanding (determined in Canadian currency), immediately before the end of the last Canadian currency year of the taxpayer, had been settled by a payment by the taxpayer to the holder of the obligation of an amount equal to that outstanding principal amount at that time, and

        E

        is the transitional exchange rate of the taxpayer,

        B

        is the amount of the particular payment (expressed in the taxpayer’s functional currency for the particular functional currency year), and

        C

        is the principal amount of the debt obligation outstanding (determined in the taxpayer’s functional currency for the particular functional currency year) at the beginning of the initial functional currency year of the taxpayer,

      • (ii) the taxpayer is deemed to have a capital loss under paragraph 39(2)(b) or a loss, as the case may be, attributable to the fluctuation in the values of currencies in respect of the particular payment for the particular functional currency year equal to the amount determined by the formula

        F × G/H

        where

        F

        is the amount determined by the formula

        I × J

        where

        I

        is the amount (expressed in Canadian currency), if any, that would have been determined to be the taxpayer’s capital loss under paragraph 39(2)(b) or loss, as the case may be, if the principal amount of the debt obligation outstanding (determined in Canadian currency), immediately before the end of the last Canadian currency year of the taxpayer, had been settled by a payment by the taxpayer to the holder of the obligation of an amount equal to that outstanding principal amount at that time, and

        J

        is the transitional exchange rate of the taxpayer,

        G

        is the amount of the particular payment (expressed in the taxpayer’s functional currency for the particular functional currency year), and

        H

        is the principal amount of the debt obligation outstanding (determined in the taxpayer’s functional currency for the particular functional currency year) at the beginning of the initial functional currency year of the taxpayer, and

      • (iii) where a debt obligation is denominated in a currency other than the taxpayer’s functional currency for the particular functional currency year, any amount determined under element B in the formula in subparagraph (i) or element G in the formula in subparagraph (ii) is to be determined with reference to the relative value of that currency and the taxpayer’s functional currency for the particular functional currency year at the beginning of the initial functional currency year of the taxpayer, and

    • (b) notwithstanding paragraph 80(2)(k), where an obligation of the taxpayer was issued in a taxation year of the taxpayer preceding the initial functional currency year of the taxpayer in a currency other than the taxpayer’s functional currency for the partic-ular functional currency year, a forgiven amount arising at any time in the particular functional currency year in respect of the obligation is to be determined by reference to the currency exchange rate on the last day of the taxpayer’s last Canadian currency year in respect of a conversion of an amount determined in the other currency into an amount determined in the taxpayer’s functional currency for the particular functional currency year.

  • Marginal note:Amounts payable or refundable in respect of a functional currency year

    (7) Notwithstanding subsection (4),

    • (a) if, at any particular time, an amount (determined in the taxpayer’s functional currency for the particular functional currency year) first becomes payable under this Act by a taxpayer to the Receiver General in respect of a particular functional currency year of the taxpayer,

      • (i) that amount (determined in the taxpayer’s functional currency for the partic-ular functional currency year) is to be converted to Canadian currency using the currency exchange rate on the earlier of the day the amount is so paid and the day that includes the particular time in respect of a conversion of an amount determined in the taxpayer’s functional currency for the particular functional currency year into an amount determined in Canadian currency, and

      • (ii) the amount so determined in Canadian currency under subparagraph (i) is to be paid to the Receiver General in Canadian currency; and

    • (b) if, at any particular time, an amount (determined in a taxpayer’s functional currency for the particular functional currency year) first becomes payable under this Act to the taxpayer by the Minister, for a particular functional currency year of the taxpayer, or is deemed to be paid on account of an amount payable by the taxpayer under the Act for that particular functional currency year,

      • (i) that amount (determined in the taxpayer’s functional currency for the partic-ular functional currency year) is to be converted to Canadian currency using the currency exchange rate on the day that includes the particular time in respect of the conversion of an amount determined in the taxpayer’s functional currency for the particular functional currency year into an amount determined in Canadian currency, and

      • (ii) the amount so determined in Canadian currency under subparagraph (i) is to be paid to the taxpayer by the Minister or is deemed to have been paid to the taxpayer by the Minister, as the case may be, in Canadian currency.

  • Marginal note:Application of subsection (9)

    (8) Subsection (9) applies to a taxpayer for a particular Canadian currency year that begins after the last functional currency year of the taxpayer.

  • Marginal note:Converting functional currency amounts

    (9) Where, because of subsection (8), this subsection applies to a taxpayer for a particular Canadian currency year of the taxpayer, in applying this Act to the taxpayer for that particular Canadian currency year, the following rules apply:

    • (a) subject to subparagraph (10)(a)(iii), in determining the amount (expressed in Canadian currency) that may be deducted, or relevant in determining the amount that may be deducted, under subsection 37(1) or 66(4), section 110.1 or 111 or subsection 126(2), 127(5), 129(1), 181.1(4) or 190.1(3) in the particular Canadian currency year,

      • (i) each amount (determined in the taxpayer’s functional currency for the functional currency year of the taxpayer) that is relevant to the determination and that was first required to be determined in a functional currency year of the taxpayer that preceded the particular Canadian currency year, is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) each amount (determined in Canadian currency) that is relevant to the determination and that was first required to be determined in a Canadian currency year of the taxpayer preceding the particular Canadian currency year is the amount that was so determined in Canadian currency in that Canadian currency year;

    • (b) in determining, at any time in the particular Canadian currency year, the cost (expressed in Canadian currency) to the taxpayer of a property,

      • (i) where the property was acquired by the taxpayer in a functional currency year of the taxpayer preceding the particular Canadian currency year, the cost (determined in the taxpayer’s functional currency for the functional currency year) to the taxpayer of the property is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) where the property was acquired by the taxpayer in a Canadian currency year of the taxpayer preceding the particular Canadian currency year, the cost (determined in Canadian currency) to the taxpayer of the property is the cost so determined in Canadian currency in that Canadian currency year;

    • (c) in determining, at any time in the particular Canadian currency year, the adjusted cost base (expressed in Canadian currency) to the taxpayer of a capital property

      • (i) each amount (determined in the taxpayer’s functional currency for the functional currency year) that is required by section 53 to be added or deducted in computing the adjusted cost base of the property to the taxpayer and was first required by that section to be added or deducted at any time in a functional currency year of the taxpayer preceding the particular Canadian currency year is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) each amount (determined in Canadian currency) that is required by section 53 to be added or deducted in computing the adjusted cost base of the property to the taxpayer and was first required by that section to be added or deducted at any time in a Canadian currency year of the taxpayer preceding the particular Canadian currency year is the amount that was so determined in Canadian currency in that Canadian currency year;

    • (d) in determining, at any time in the particular Canadian currency year, the amount (expressed in Canadian currency) of the taxpayer’s undepreciated capital cost of depreciable property of a prescribed class, cumulative eligible capital in respect of a business, cumulative Canadian exploration expense (within the meaning assigned by subsection 66.1(6)), cumulative Canadian development expense (within the meaning assigned by subsection 66.2(5)), cumulative foreign resource expense in respect of a country other than Canada (within the meaning assigned by subsection 66.21(1)) and cumulative Canadian oil and gas property expense (within the meaning assigned by subsection 66.4(5)), (each of which is referred to in this paragraph as a “pool amount”),

      • (i) each amount (determined in the taxpayer’s functional currency for the functional currency year) that is required to be added to or deducted from a particular pool amount of the taxpayer and was first required to be added or deducted in respect of a functional currency year of the taxpayer preceding the particular Canadian currency year is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) each amount (determined in Canadian currency) that is required to be added to or deducted from a particular pool amount of the taxpayer and was first required to be added or deducted in respect of a Canadian currency year of the taxpayer preceding the particular Canadian currency year is the amount that was so determined in Canadian currency in that Canadian currency year;

    • (e) in determining any amount (expressed in Canadian currency) that has been deducted or claimed as a reserve in computing the income of the taxpayer for its last functional currency year preceding the particular Canadian currency year, that amount (determined in the taxpayer’s functional currency for the last functional currency year) deducted or claimed as a reserve for that last functional currency year is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that last functional currency year;

    • (f) in determining the amount (expressed in Canadian currency) of any outlay or expense referred to in subsection 18(9) that was made or incurred by the taxpayer and the amount that was deducted by the taxpayer in respect of that outlay or expense in respect of a taxation year of the taxpayer preceding the particular Canadian currency year,

      • (i) such of those amounts (determined in the taxpayer’s functional currency for the functional currency year) that were first made or incurred or deducted by the taxpayer in or in respect of a functional currency year of the taxpayer preceding the particular Canadian currency year are to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) such of those amounts (determined in Canadian currency) that were first made or incurred or deducted by the taxpayer in or in respect of a Canadian currency year of the taxpayer preceding the particular Canadian currency year are the amounts that were so determined in Canadian currency in that Canadian currency year;

    • (g) in determining, at any time in the particular Canadian currency year, the amount (expressed in Canadian currency) of the taxpayer’s paid-up capital in respect of any class of shares of its capital stock,

      • (i) any amount (determined in the taxpayer’s functional currency for the functional currency year) that was first added or deducted in computing the taxpayer’s paid-up capital in respect of the class in a functional currency year of the taxpayer preceding the particular Canadian currency year is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) any amount (determined in Canadian currency) that was first added or deducted in computing the taxpayer’s paid-up capital in respect of the class in a Canadian currency year of the taxpayer preceding the particular Canadian currency year is the amount that was so determined in Canadian currency in that Canadian currency year;

    • (h) where an obligation was issued in a taxation year of the taxpayer preceding the initial reversionary year of the taxpayer, in determining, at any time in the particular Canadian currency year, the amount (expressed in Canadian currency) for which an obligation was issued, the principal amount (expressed in Canadian currency) of the obligation, the amounts (expressed in Canadian currency) paid in satisfaction of the principal amount of the obligation, and the amount (determined in Canadian currency), if any, of any gain or loss attributable to the fluctuation in the value of the Canadian currency relative to the value of the currency in which the obligation was issued,

      • (i) subject to paragraph (i), where the obligation was issued in a currency other than Canadian currency,

        • (A) the amount (determined in the currency in which the obligation was issued) for which the obligation was issued and the principal amount (determined in the currency in which the obligation was issued) of the obligation are

          • (I) where the taxation year of the taxpayer in which the obligation was issued was a Canadian currency year of the taxpayer, the amounts (determined in Canadian currency) that were so determined in Canadian currency in that Canadian currency year, or

          • (II) where the taxation year of the taxpayer in which the obligation was issued was a functional currency year of the taxpayer, the amounts determined by converting those amounts (determined in the taxpayer’s functional currency for the functional currency year) to Canadian currency by using the reversionary exchange rate of the taxpayer for that functional currency year, and

        • (B) the amounts (determined in the currency in which the obligation was issued) paid at any time in a taxation year of the taxpayer preceding the initial reversionary year of the taxpayer in satisfaction of the principal amount of the obligation are

          • (I) where the taxation year of the taxpayer in which an amount was paid was a Canadian currency year of the taxpayer, the amount (determined in Canadian currency) that was so determined in Canadian currency in that Canadian currency year, or

          • (II) where the taxation year of the taxpayer in which an amount was paid was a functional currency year of the taxpayer, the amount determined by converting that amount (determined in the taxpayer’s functional currency for the functional currency year) to Canadian currency by using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) where the obligation was issued in Canadian currency, the amount (determined in Canadian currency) for which the obligation was issued, the principal amount (determined in Canadian currency) of the obligation and the amounts (determined in Canadian currency) paid, in a taxation year of the taxpayer preceding the initial reversionary year of the taxpayer, in satisfaction of the principal amount of the obligation, are the amounts so determined in Canadian currency in those preceding years;

    • (i) where an obligation was issued in a currency other than Canadian currency in a taxation year of the taxpayer preceding the initial reversionary year of the taxpayer, in determining, in respect of subsection 79(7) or paragraph 80(2)(k) or 142.7(8)(b), the amount (expressed in Canadian currency) for which the obligation was issued, the principal amount (determined in Canadian currency) of the obligation, and the amounts (determined in Canadian currency) paid in satisfaction of the principal amount of the obligation, at any time in the particular Canadian currency year, those amounts are to be determined as if subsections (1) to (7) had not applied to the taxpayer for any preceding taxation year;

    • (j) where the particular Canadian currency year is the initial reversionary year of the taxpayer, for the purpose of determining the taxpayer’s first instalment base or second instalment base in the particular Canadian currency year, the amount (determined in the taxpayer’s functional currency for the functional currency year) of tax payable by the taxpayer under Part I for the last functional currency year of the taxpayer is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that last functional currency year; and

    • (k) in determining any amount (determined in Canadian currency and referred to in this paragraph as the “specified amount”), at any time in the particular Canadian currency year, other than an amount referred to in paragraphs (a) to (j), that is relevant in determining the Canadian tax results of the taxpayer for the particular Canadian currency year

      • (i) any amount (determined in the taxpayer’s functional currency for the functional currency year) that is relevant in determining the specified amount and was first determined in or in respect of a functional currency year of the taxpayer preceding the particular Canadian currency year, is to be converted to Canadian currency using the reversionary exchange rate of the taxpayer for that functional currency year, and

      • (ii) any amount (determined in Canadian currency) that is relevant in determining the specified amount and was first determined in or in respect of a Canadian currency year of the taxpayer preceding the particular Canadian currency year is the amount that was so determined in Canadian currency in that Canadian currency year.

  • Marginal note:Functional currency and Canadian currency amounts carried back

    (10) In determining an amount that a taxpayer may claim under section 111 or subsection 126(2), 127(5), 181.1(4) or 190.1(3), for a particular taxation year of the taxpayer, the following rules apply:

    • (a) if the particular taxation year is a Canadian currency year of the taxpayer, the amount that may be claimed (determined in Canadian currency) is to be determined,

      • (i) by converting each amount (determined in the taxpayer’s functional currency for the particular functional currency year) of a loss incurred, tax credit arising and expenditure made in or in respect of a particular functional currency year of the taxpayer that ends after the particular taxation year to Canadian currency using the currency exchange rate in respect of the conversion of an amount determined in the taxpayer’s functional currency for the particular functional currency year into an amount determined in Canadian currency on the last day of that particular functional currency year,

      • (ii) as if each amount (determined in Canadian currency) of a loss incurred, tax credit arising, expenditure made and deduction claimed in or in respect of a Canadian currency year of the taxpayer were the amount of that loss incurred, tax credit arising, expenditure made and deduction claimed in Canadian currency in or in respect of that Canadian currency year of the taxpayer, and

      • (iii) by converting each amount (determined in the taxpayer’s functional currency for the particular functional currency year) claimed in or in respect of a particular functional currency year of the taxpayer preceding the initial reversionary year of the taxpayer (in respect of an amount of loss incurred, tax credit arising or expenditure made by a taxpayer in or in respect of a Canadian currency year) to Canadian currency using the currency exchange rate on the last day of the Canadian currency year of the taxpayer in or in respect of which the amount claimed arose in respect of the conversion of an amount determined in the taxpayer’s functional currency for the particular functional currency year to an amount determined in Canadian currency; and

    • (b) if the particular taxation year is a functional currency year of the taxpayer, the amount that may be claimed (determined in the taxpayer’s functional currency for the particular taxation year) is to be determined,

      • (i) by converting each amount (determined in Canadian currency) of a loss incurred, tax credit arising and expenditure made in or in respect of a particular Canadian currency year of the taxpayer that ends after the particular taxation year to the taxpayer’s functional currency for the particular taxation year using the currency exchange rate in respect of the conversion of an amount determined in Canadian currency into an amount determined in the taxpayer’s functional currency for the particular taxation year on the last day of that particular Canadian currency year,

      • (ii) as if each amount (determined in the taxpayer’s functional currency for the particular taxation year) of a loss incurred, tax credit arising, expenditure made and deduction claimed in or in respect of a functional currency year of the taxpayer were the amount of that loss incurred, tax credit arising, expenditure made and deduction claimed in the taxpayer’s functional currency for the particular taxation year, and

      • (iii) by converting each amount (determined in Canadian currency) claimed in or in respect of a particular Canadian currency year of the taxpayer preceding the initial functional currency year of the taxpayer (in respect of an amount of loss incurred, tax credit arising or expenditure made by a taxpayer in or in respect of a functional currency year of the taxpayer) to the taxpayer’s functional currency for the particular taxation year using the currency exchange rate on the last day of the functional currency year of the taxpayer in or in respect of which the amount claimed arose in respect of the conversion of an amount determined in Canadian currency to an amount determined in the taxpayer’s functional currency for the particular taxation year.

  • Marginal note:Subsection 88(1) wind-ups — effect on subsidiary

    (11) Subsection (12) applies to a corporation (referred to in this subsection and subsection (12) as the “subsidiary”) that has been wound up into another corporation (referred to in this subsection as the “parent”) if

    • (a) subsection 88(1) applied to the subsidiary and the parent in respect of the winding-up of the subsidiary;

    • (b) the taxation year of the subsidiary (referred to in this subsection and subsection (12) as the “distribution year of the subsidiary”) in which any portion of a property (such portion of the property referred to in this subsection as the “distributed property”) of the subsidiary was distributed to the parent, or any portion of an obligation (such portion of the obligation referred to in this subsection as the “assumed obligation”) of the subsidiary was assumed by the parent, on the winding-up of the subsidiary would, were this section read without reference to this subsection, be a functional currency year of the subsidiary; and

    • (c) either

      • (i) where the taxation year of the parent (referred to in this paragraph as the “acquisition year of the parent”) in which the subsidiary distributed the distributed property to the parent, or the assumed obligation of the subsidiary was assumed by the parent, on the winding-up of the subsidiary was a functional currency year of the parent, the functional currency for the acquisition year of the parent was not the functional currency of the subsidiary for the distribution year of the subsidiary, or

      • (ii) the acquisition year of the parent was not a functional currency year of the parent.

  • Marginal note:Taxation year of subsidiary

    (12) Where, because of subsection (11), this subsection applies to the subsidiary, for the purposes of this section

    • (a) the last taxation year of the subsidiary that ends before the beginning of the distribution year of the subsidiary is deemed to be the last functional currency year of the subsidiary; and

    • (b) subsection (4) is deemed not to apply to the subsidiary for each taxation year of the subsidiary commencing after the end of the last functional currency year of the subsidiary described in paragraph (a).

  • Marginal note:Amalgamations — effect on predecessor corporations

    (13) Subsection (14) applies to a corporation (referred to in this subsection and subsection (14) as the “specified predecessor”) that has merged with one or more other corporations to form one corporate entity (referred to in this subsection as the “new corporation”) if

    • (a) the merger was an amalgamation (within the meaning assigned by subsection 87(1));

    • (b) the taxation year of the specified pred- ecessor (referred to in this subsection and subsection (14) as the “last taxation year of the specified predecessor”) that ended immediately before the amalgamation would, were this section read without reference to subsection (14), be a functional currency year of the specified predecessor; and

    • (c) either

      • (i) where the taxation year of the new corporation (referred to in this paragraph as the “first taxation year of the new corporation”) that began at the time of the amalgamation was a functional currency year of the new corporation, the functional currency of the new corporation for the first taxation year of the new corporation was not the functional currency of the specified predecessor for the last taxation year of the specified predecessor, or

      • (ii) the first taxation year of the new corporation was not a functional currency year of the new corporation.

  • Marginal note:Taxation year of specified predecessor

    (14) Where, because of subsection (13), this subsection applies to the specified predecessor, for the purposes of this section

    • (a) the taxation year of the specified pred- ecessor that ends immediately before the beginning of the last taxation year of the specified predecessor is deemed to be the last functional currency year of the specified predecessor; and

    • (b) subsection (4) is deemed not to apply to the specified predecessor corporation for each taxation year of the specified predecessor commencing after the end of the last functional currency year of the specified predecessor described in paragraph (a).

  • Marginal note:Deemed continuation on winding-up or amalgamation

    (15) For the purpose of this section,

    • (a) subject to subsection (16), where there has been a winding-up of a taxpayer (referred to in this subsection and subsection (16) as the “subsidiary”) into another taxpayer (referred to in this subsection and subsection (16) as the “parent”) to which subsection 88(1) has applied, the parent is deemed to be the same corporation as and a continuation of the subsidiary; and

    • (b) subject to subsection (17), where there has been an amalgamation (within the meaning assigned by subsection 87(1)) of two or more corporations (each such taxpayer referred to in this subsection and subsection (17) as a “predecessor”) to form one corporate entity (referred to in this subsection and subsection (17) as the “new corporation”) the new corporation is deemed to be the same corporation as and a continuation of each such predecessor corporation.

  • Marginal note:Exception to deemed continuation — winding-up

    (16) Where the parent would not, in a taxation year of the parent ending after the time the subsidiary was wound up, satisfy the requirements of paragraph (3)(e) because the last functional currency year of the subsidiary referred to in subsection (12) in respect of the winding-up is, because of paragraph (15)(a), the last functional currency year of the parent, paragraph (15)(a) shall not apply, for the purposes of paragraph (3)(e), to the parent in respect of the subsidiary if the total of all amounts each of which is the cost amount, at the end of the taxation year of the parent in which the property of the subsidiary was distributed to the parent in the course of winding-up, to the parent of a property that was distributed to the parent on the winding-up (or property substituted for such property) is less than 50% of the total of all amounts each of which is the cost amount, at the end of that taxation year, to the parent of a property of the parent.

  • Marginal note:Exception to deemed continuation — amalgamation

    (17) Where the new corporation would not, in a taxation year of the new corporation commencing on or after the time of the amalgamation, satisfy the requirements of paragraph (3)(e) because the last functional currency year of the predecessor referred to in subsection (14) in respect of the amalgamation is, because of paragraph (15)(b) the last functional currency year of the new corporation, paragraph (15)(b) shall not apply, for the purposes of paragraph (3)(e), to the new corporation in respect of the predecessor if the total of all amounts each of which is the cost amount, at the end of the taxation year of the new corporation that began at the time of the amalgamation, to the new corporation of a property that, immediately before the amalgamation, was a property of the predecessor (or property substituted for such property) is less than 50% of the total of all amounts each of which is the cost amount, at the end of that taxation year of the new corporation, to the new corporation of a property of the new corporation.

  • Marginal note:Anti-avoidance

    (18) Where, at any time, all or substantially all of the property (referred to in this subsection as the “transferred property”) of a business (referred to in this subsection as the “transferred business”) of a taxpayer has been disposed of by the taxpayer (referred to in this subsection as the “transferor”) and acquired, either directly or indirectly by a corporation resident in Canada (referred to in this subsection as the “transferee”) that, immediately after the acquisition, was related to the taxpayer, and a taxation year of the transferor beginning before that time was a functional currency year of the transferor, for the purposes of this section, the transferee is deemed to be the same corporation as and a continuation of the transferor if the total of all amounts each of which is the cost amount, at the end of the taxation year of the transferee in which the transferred business was transferred, to the transferee of a property that was a transferred property (or property substituted for such property) is greater than 50% of the total of all amounts each of which is the cost amount, at the end of that taxation year of the transferree, to the transferree of a property of the transferree.

  Marginal note:Authority to designate stock exchange

  • 262. (1) The Minister of Finance may designate a stock exchange, or a part of a stock exchange, for the purposes of this Act.

  • Marginal note:Revocation of designation

    (2) The Minister of Finance may revoke the designation of a stock exchange, or a part of a stock exchange, designated under subsection (1).

  • Marginal note:Timing

    (3) A designation under subsection (1) or a revocation under subsection (2) shall specify the time at and after which it is in effect, which time may, for greater certainty, precede the time at which the designation or revocation is made.

  • Marginal note:Publication

    (4) The Minister of Finance shall cause to be published, by posting on the Internet website of the Department of Finance or by any other means that the Minister of Finance considers appropriate, the names of those stock exchanges, or parts of stock exchanges, as the case may be, that are or at any time were designated under subsection (1).

  • Marginal note:Transition

    (5) The Minister of Finance is deemed to have designated under subsection (1) each stock exchange and each part of a stock exchange that was, immediately before the day on which this section came into force, a prescribed stock exchange, with effect on and after that day.

• (2) The definition “Canadian tax results” in subsection 261(1), and subsection 261(2), of the Act, as enacted by subsection (1), apply for all taxation years.

• (3) Subsection 261(1) (other than the definition “Canadian tax results”), and subsections 261(3) to (18), of the Act, as enacted by subsection (1), apply in respect of taxation years that begin on or after the day on which this Act is assented to.

• (4) Subsection 261(10) of the Act, as enacted by subsection (1), applies on and after the day on which this Act is assented to.

• (5) Section 262 of the Act, as enacted by subsection (1), applies on and after the day on which this Act is assented to.

• 68. (1) The Act is amended by replacing “prescribed stock exchange” with “designated stock exchange” in the following provisions:

  • (a) the portion of paragraph 187.3(2)(d) before subparagraph (i); and

  • (b) paragraph (d.1) of the definition “term preferred share” in subsection 248(1).

• (2) The Act is amended by replacing “prescribed stock exchange” with “designated stock exchange” in the following provisions:

  • (a) subparagraphs 7(9)(d)(i) and (ii);

  • (b) subparagraph 13(27)(f)(i);

  • (c) subparagraph 48.1(1)(a)(ii);

  • (d) subparagraphs 86.1(2)(c)(ii) and (d)(ii);

  • (e) subsection 87(4.3) and paragraphs 87(9)(a.2) and (10)(e);

  • (f) subsection 110.1(6);

  • (g) paragraph 112(2.21)(c);

  • (h) clauses (a)(i)(A) and (B) of the definition “qualified investment” in subsection 115.2(1);

  • (i) paragraph 118.1(18)(a);

  • (j) subparagraphs (a)(i) and (ii) and clauses (c)(ii)(A) and (B) of the definition “split income” in subsection 120.4(1);

  • (k) paragraph (c) of the definition “Canadian-controlled private corporation” in subsection 125(7);

  • (l) subsection 137(4.1);

  • (m) paragraph (b) of the definition “non-qualified investment” in subsection 149.1(1);

  • (n) subsection 207.5(2);

  • (o) paragraph (a) of the definition “Canadian property mutual fund investment” in subsection 218.3(1);

  • (p) paragraph (d) of the definition “grandfathered share” in subsection 248(1); and

  • (q) paragraphs (d) to (f) of the definition “taxable Canadian property” in subsection 248(1).

• (3) Subsections (1) and (2) apply on and after the day on which this Act is assented to.

R.S., c. 2 (5th Supp.)Income Tax Application Rules

• 69. (1) Subsection 10(5) of the Income Tax Application Rules is repealed.

• (2) Subsection (1) applies after 2007.

R.S., c. I-4Income Tax Conventions Interpretation Act

• 70. (1) The Income Tax Conventions Interpretation Act is amended by adding the following after section 4.1:

  Marginal note:Stock exchanges

  4.2 Notwithstanding the provisions of a convention or the Act giving the convention the force of law in Canada, each reference in a convention to a stock exchange that is prescribed under, or for the purposes of, the Income Tax Act shall be read as a reference to a designated stock exchange, as defined in the Income Tax Act.

• (2) Subsection (1) applies on and after the day on which this Act is assented to.

C.R.C., c. 945Income Tax Regulations

• 71. (1) Paragraphs 108(1.12)(a) and (b) of the Income Tax Regulations are replaced by the following:

  • (a) the average monthly withholding amount in respect of an employer for either the first or the second calendar year before the particular calendar year that includes that time is less than $3,000,

  • (b) throughout the 12-month period before that time, the employer has remitted, on or before the day on or before which the amounts were required to be remitted, all amounts each of which was required to be remitted under subsection 153(1) of the Act, under subsection 21(1) of the Canada Pension Plan, under subsection 82(1) of the Employment Insurance Actor under Part IX of the Excise Tax Act, and

• (2) Subsection (1) applies in respect of amounts required to be deducted or withheld after 2007.

• 72. (1) The Regulations are amended by adding the following after section 204:

  Interpretation

  • 204.1 (1) The following definitions apply in this section.

    “public investment trust”

    “public investment trust”, at any time, means a public trust all or substantially all of the fair market value of the property of which is, at that time, attributable to the fair market value of property of the trust that is

    • (a) units of public trusts;

    • (b) partnership interests in public partnerships (as defined in subsection 229.1(1));

    • (c) shares of the capital stock of public corporations; or

    • (d) any combination of properties referred to in paragraphs (a) to (c). (fiducie de placement ouverte)

    “public trust”

    “public trust”, at any time, means a mutual fund trust the units of which are, at that time, listed on a designated stock exchange in Canada. (fiducie ouverte)

  •  

    Required Information Disclosure

  • (2) A trust that is, at any time in a taxation year of the trust, a public trust shall, within the time required by subsection (3),

    • (a) make public, in prescribed form, information in respect of the trust for the taxation year by posting that prescribed form, in a manner that is accessible to the general public, on the Internet website of CDS Innovations Inc.; and

    • (b) notify the Minister in writing as to when the posting of the prescribed form, as required by paragraph (a), has been made.

    Required Disclosure Time

  • (3) The time required for a public trust to satisfy the requirements of subsection (2) in respect of the public trust for a taxation year of the public trust is

    • (a) subject to paragraph (b), on or before the day that is 60 days after the end of the taxation year; and

    • (b) where the public trust is, at any time in the taxation year, a public investment trust, on or before the day that is 67 days after the end of the calendar year in which the taxation year ends.

• (2) Subsection (1) applies to information in respect of taxation years that end on or after July 4, 2007.

• 73. (1) The Regulations are amended by adding the following after section 229:

  Definitions

  • 229.1 (1) The definitions in this subsection apply in this section.

    “public investment partnership”

    “public investment partnership”, at any time, means a public partnership all or substantially all of the fair market value of the property of which is, at that time, attributable to the fair market value of property of the partnership that is

    • (a) units of public trusts (as defined in subsection 204.1(1));

    • (b) partnership interests in public partnerships;

    • (c) shares of the capital stock of public corporations; or

    • (d) any combination of properties referred to in paragraphs (a) to (c). (société de personnes de placement ouverte)

    “public partnership”

    “public partnership”, at any time, means a partnership the partnership interests in which are, at that time, listed on a designated stock exchange in Canada if, at that time, the partnership carries on a business in Canada or is a Canadian partnership. (société de personnes ouverte)

  •  

    Required Information Disclosure

  • (2) Every member of a partnership that is, at any time in a fiscal period of the partnership, a public partnership shall, within the time required by subsection (3),

    • (a) make public, in prescribed form, information in respect of the public partnership for the fiscal period by posting the prescribed form, in a manner that is accessible to the general public, on the Internet website of CDS Innovations Inc.; and

    • (b) notify the Minister in writing as to when the posting of the prescribed form, as required by paragraph (a), has been made.

    Required Disclosure Time

  • (3) The time required for the members of a public partnership to satisfy the requirements of subsection (2) in respect of the public partnership for a fiscal period of the public partnership is

    • (a) subject to paragraph (b), on or before the day that is the earlier of

      • (i) 60 days after the end of the calendar year in which the fiscal period ends, and

      • (ii) four months after the end of the fiscal period; and

    • (b) where the public partnership is, at any time in the fiscal period, a public investment partnership, on or before the day that is 67 days after the end of the calendar year in which the fiscal period ends.

    Obligation Fulfilled by One Partner Deemed Fulfilled by All

  • (4) Every member of a partnership that is required to satisfy the requirements of subsection (2) in respect of the partnership for a fiscal period of the partnership will be deemed to have satisfied those requirements if a particular member of the partnership, who has authority to act for the partnership, has satisfied those requirements in respect of the partnership for the fiscal period.

• (2) Subsection (1) applies to information in respect of fiscal periods that end on or after July 4, 2007.

• 74. (1) Section 3201 of the Regulations is amended

  • (a) by replacing “the Australian Stock Exchange” in paragraph (a) with “the Australian Securities Exchange”;

  • (b) by replacing “the Brussels Stock Exchange” in paragraph (b) with “Euronext Brussels”;

  • (c) by replacing “the Paris Stock Exchange” in paragraph (c) with “Euronext Paris”;

  • (d) by replacing “the Amsterdam Stock Exchange” in paragraph (i) with “Euronext Amsterdam”;

  • (e) by replacing “the Zurich Stock Exchange” in paragraph (m) with “the SWX Swiss Exchange”;

  • (f) by replacing “the Cincinnati Stock Exchange” in subparagraph (o)(v) with “the National Stock Exchange”;

  • (g) by repealing subparagraph (o)(vi);

  • (h) by replacing “the Midwest Stock Exchange” in subparagraph (o)(vii) with “the Chicago Stock Exchange”;

  • (i) by replacing “the Pacific Stock Exchange” in subparagraph (o)(x) with “NYSE Arca”; and

  • (j) by replacing subparagraphs (o)(xi) and (xii) with the following:

    • (xi) the Philadelphia Stock Exchange;

• (2) Sections 3200 and 3201 of the Regulations are repealed.

• (3) Paragraphs (1)(a) to (d), (f) to (h) and (j) are deemed to have come into force on the day immediately before the day on which this Act is assented to.

• (4) Paragraph (1)(e) is deemed to have come into force on January 1, 2007.

• (5) Paragraph (1)(i) is deemed to have come into force on April 1, 2006.

• (6) Subsection (2) comes into force on the day on which this Act is assented to.

• 75. (1) The definition “prescribed stock exchange” in section 3700 of the Regulations is repealed.

• (2) Subsection (1) comes into force on the day on which this Act is assented to.

• 76. (1) Subparagraphs 3702(1)(b)(i) and (ii) of the Regulations are amended by replacing “prescribed stock exchange” with “designated stock exchange”.

• (2) Subsection (1) comes into force on the day on which this Act is assented to.

• 77. (1) Subparagraph 4800(2)(a)(i) and paragraph 4800(3)(a) of the Regulations are amended by replacing “stock exchange in Canada prescribed for the purposes of section 89 of the Act” with “designated stock exchange in Canada”.

• (2) Subsection (1) comes into force on the day on which this Act is assented to.

• 78. (1) The portion of subsection 6201(5) of the Regulations before paragraph (a) is replaced by the following:

  • (5) For the purpose of paragraph (f) of the definition “term preferred share” in subsection 248(1) of the Act, a share of a class of the capital stock of a corporation that is listed on a designated stock exchange in Canada is a prescribed share at any particular time with respect to another corporation that is registered or licensed under the laws of a province to trade in securities and that holds the share for the purpose of sale in the course of the business ordinarily carried on by it unless

• (2) The portion of subsection 6201(5.1) of the Regulations before paragraph (a) is replaced by the following:

  • (5.1) For the purpose of the definition “taxable RFI share” in subsection 248(1) of the Act, a share of a class of the capital stock of a corporation that is listed on a designated stock exchange in Canada is a prescribed share at any particular time with respect to another corporation that is registered or licensed under the laws of a province to trade in securities and that holds the share for the purpose of sale in the course of the business ordinarily carried on by it unless

• (3) Subsections (1) and (2) apply to dividends received in taxation years that begin after October 1994, except that in its application before the day on which this Act is assented to, the references to “a designated stock exchange in Canada” in subsections 6201(5) and (5.1) of the Regulations, as enacted by subsections (1) and (2), shall be read as a reference to “a stock exchange referred to in section 3200”.

• 79. (1) Paragraph 7303.1(1)(a) of the Regulations is replaced by the following:

  • (a) the Yukon Territory, the Northwest Territories or Nunavut;

• (2) Paragraph 7303.1(2)(a) of the Regulations is amended by striking out the word “or” at the end of subparagraph (i), by adding the word “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

  • (iii) north of 55°13′N latitude and east of 123°16′W longitude;

• (3) Subsection (1) applies after March 31, 1999.

• (4) Subsection (2) applies to the 2007 and subsequent taxation years.

• 80. (1) The Regulations are amended by adding the following after section 7309:

  7310. For the purpose of the definition “eligible apprentice” in subsection 127(9) of the Act, a prescribed trade in respect of a province means, at all times in a taxation year, a trade that is, at any time in that taxation year, a Red Seal trade for the province under the Interprovincial Standards Red Seal Program.

• (2) Subsection (1) applies to taxation years ending on or after May 2, 2006, except that in its application to taxation years ending before October 2007, section 7310 of the Regulations, as enacted by subsection (1), is to be read as follows:

  7310. For the purpose of the definition “eligible apprentice” in subsection 127(9) of the Act, a prescribed trade in respect of a province means, at all times in a taxation year, a trade that is, on September 30, 2007, a Red Seal trade for the province under the Interprovincial Standards Red Seal Program.

• 81. (1) Clause 8303(5)(f.1)(ii)(C) of the Regulations is replaced by the following:

  • (C) the plan is not a designated plan,

• (2) Subparagraph 8303(5)(f.2)(iv) of the Regulations is replaced by the following:

  • (iv) the plan is not a designated plan,

• (3) Subsections (1) and (2) apply to past service events that occur after 2007.

• 82. (1) Subsection 8500(1) of the Regulations is amended by adding the following in alphabetical order:

  “designated plan”

  “designated plan” has the meaning assigned by section 8515; (régime désigné)

• (2) Subsection 8500(2) of the Regulations is replaced by the following:

  • (2) All words and expressions used in this Part that are defined in subsection 147.1(1) of the Act or in Part LXXXIII have the meanings assigned in those provisions.

• (3) Subsections (1) and (2) apply after 2007.

• 83. (1) The portion of paragraph 8503(3)(a) of the Regulations before subparagraph (i) is replaced by the following:

  Eligible Service

  • (a) the only lifetime retirement benefits provided under the provision to a member (other than additional lifetime retirement benefits provided to a member because the member is totally and permanently disabled at the time the member’s retirement benefits commence to be paid) are lifetime retirement benefits provided in respect of one or more of the following periods (other than the portion of a period that is after the calendar year in which the member attains 71 years of age), namely,

• (2) Subsection 8503(9) of the Regulations is amended by striking out the word “and” at the end of paragraph (e), by adding the word “and” at the end of paragraph (f) and by adding the following after paragraph (f):

  • (g) the provisions in paragraph (2)(m), Part LXXXIII and subsection 8517(4) that depend on whether the member’s retirement benefits have commenced to be paid apply to past service events, commutations and transfers occurring in the period in which the member’s benefits are suspended as if the member’s benefits had not previously commenced to be paid.

• (3) Section 8503 of the Regulations is amended by adding the following after subsection (15):

  •  

    Definitions

  • (16) The following definitions apply in this subsection and in subsections (17) to (23).

    “qualifying period”

    “qualifying period” of a member under a defined benefit provision of a pension plan means a period throughout which the member is employed by an employer who participates in the plan but does not include any period that is before the day that is the first day, on or after the later of the following days, in respect of which retirement benefits are provided under the provision to the member:

    • (a) the day on which retirement benefits first commenced to be paid to the member under the provision; and

    • (b) the member’s specified eligibility day under the provision. (période admissible)

    “specified eligibility day”

    “specified eligibility day” of a member under a defined benefit provision of a pension plan means the earlier of

    • (a) the later of

      • (i) the day on which the member attains 55 years of age, and

      • (ii) the day on which the member attains the earliest age at which payment of the member’s lifetime retirement benefits may commence under the terms of the provision without a reduction computed by reference to the member’s age, duration of service, or both (and without any other similar reduction), otherwise than because of the member being totally and permanently disabled; and

    • (b) the day on which the member attains 60 years of age. (date d’admissibilité)

  •  

    Bridging Benefits Payable on a Stand-alone Basis

  • (17) The condition in subparagraph (2)(b)(i) that bridging benefits be payable to a member under a defined benefit provision of a pension plan for a period beginning no earlier than the time lifetime retirement benefits commence to be paid under the provision to the member does not apply where the following conditions are satisfied:

    • (a) the bridging benefits do not commence to be paid before the member’s specified eligibility day under the provision;

    • (b) the plan provides that bridging benefits are payable under the provision to the member only for calendar months

      • (i) at any time in which the member is employed by an employer who participates in the plan, or

      • (ii) that begin on or after the time the member’s lifetime retirement benefits under the provision commence to be paid;

    • (c) the member was not, at any time before the time at which the bridging benefits commence to be paid, connected with an employer who participates in the plan; and

    • (d) the plan is not a designated plan.

    Rules of Application

  • (18) Where bridging benefits under a defined benefit provision of a pension plan commence to be paid to a member in circumstances to which subsection (17) applies, the following rules apply:

    • (a) if the member dies before lifetime retirement benefits under the provision commence to be paid to the member, subsections (2) and (6) apply in respect of benefits provided under the provision on the death of the member as if the bridging benefits had not commenced to be paid before the member’s death; and

    • (b) the provisions in paragraph (2)(m), Part LXXXIII and subsection 8517(4) that depend on whether the member’s retirement benefits have commenced to be paid apply to past service events, commutations and transfers occurring before lifetime retirement benefits under the provision commence to be paid to the member as if the bridging benefits had not commenced to be paid.

    Benefit Accruals After Pension Commencement

  • (19) Paragraph (3)(b) does not apply to retirement benefits (in this subsection and in subsections (20) and (21) referred to as “additional benefits”) provided under a defined benefit provision of a pension plan to a member of the plan if the following conditions are satisfied:

    • (a) the additional benefits are provided in respect of all or part of a qualifying period of the member under the provision;

    • (b) the amount of retirement benefits payable to the member under the provision for each whole calendar month in the qualifying period does not exceed 5% of the amount (expressed on an annualized basis) of retirement benefits that have accrued under the provision to the member to the beginning of the month, determined without a reduction computed by reference to the member’s age, duration of service, or both, and without any other similar reduction (except that, if the plan limits the amount of pensionable service of a member or prohibits the provision of benefits in respect of periods after a member attains a specific age or combination of age and pensionable service, this condition does not apply to any calendar month in respect of which no benefits can be provided to the member because of the limit or prohibition, as the case may be);

    • (c) no part of the additional benefits are provided as a consequence of a past service event, unless the benefits are provided in circumstances to which subsection 8306(1) would apply if no qualifying transfers were made in connection with the past service event;

    • (d) the member was not, at any time before the additional benefits become provided, connected with an employer who participates in the plan; and

    • (e) the plan is not a designated plan.

    Redetermination of Benefits

  • (20) Where the amount of retirement benefits payable under a defined benefit provision of a pension plan to a member is redetermined to include additional benefits provided to the member in respect of a qualifying period of the member under the provision, the conditions in paragraph (2)(b) and section 8504 apply in respect of benefits payable under the provision to the member after the redetermination as if the member’s retirement benefits had first commenced to be paid at the time of the redetermination.

    Rules of Application

  • (21) Where additional benefits are provided under a defined benefit provision of a pension plan to a member in respect of a qualifying period of the member under the provision, the following rules apply:

    • (a) if the qualifying period ends as a consequence of the member’s death, subsections (2) and (6) apply in respect of benefits provided under the provision on the death of the member as if the member’s retirement benefits had not commenced to be paid before the member’s death; and

    • (b) the provisions in paragraph (2)(m), Part LXXXIII and subsection 8517(4) that depend on whether the member’s retirement benefits have commenced to be paid apply to past service events, commutations and transfers occurring in the qualifying period as if the member’s retirement benefits had not commenced to be paid.

    Anti-avoidance

  • (22) Subsections (20) and (21) do not apply where it is reasonable to consider that one of the main reasons for the provision of additional benefits to the member is to obtain the benefit of any of those subsections.

    Cross-plan Rules

  • (23) Where a member is provided with benefits under two or more associated defined benefit provisions, the determination of whether the conditions in subsections (17) and (19) are satisfied in respect of benefits payable or provided to the member under a particular associated provision shall be made on the basis of the following assumptions:

    • (a) benefits payable to the member under each of the other associated provisions were payable under the particular associated provision;

    • (b) if, before the member’s specified eligi-bility day (determined without reference to this paragraph) under the particular associated provision, the member had commenced to receive retirement benefits under another associated provision on or after the member’s specified eligibility day under that provision, the member’s specified eligibility day under the particular associated provision were the member’s specified eligibility day under that other associated provision; and

    • (c) if one or more of the other associated provisions is in a designated plan, the plan that includes the particular provision were also a designated plan.

    Associated Defined Benefit Provisions

  • (24) For the purpose of subsection (23), a defined benefit provision is associated with another defined benefit provision (other than a provision that is not in a registered pension plan) if

    • (a) the provisions are in the same pension plan; or

    • (b) the provisions are in separate pension plans and

      • (i) there is an employer who participates in both plans, or

      • (ii) an employer who participates in one of the plans does not deal at arm’s length with an employer who participates in the other plan.

    Subsection (24) not Applicable

  • (25) A particular defined benefit provision of a pension plan is not associated with a defined benefit provision of another pension plan if it is unreasonable to expect the benefits under the particular provision to be coordinated with the benefits under the other provision and the Minister has agreed not to treat the particular provision as being associated with the other provision.

• (4) Subsections (1) to (3) apply to benefits that are provided or payable after 2007.

• 84. (1) The portion of subsection 8504(2) of the Regulations before paragraph (a) is replaced by the following:

  • (2) For the purposes of subsection (1) and paragraph 8505(3)(d), the highest average compensation of a member of a pension plan for the purpose of a defined benefit provision of the plan, indexed to the calendar year (in this subsection referred to as the “year of commencement”) in which the member’s lifetime retirement benefits under the provision commence to be paid, is,

• (2) Subsection (1) applies to the 2008 and subsequent calendar years.

• 85. (1) Paragraph 8507(3)(a) of the Regulations is amended by striking out the word “and” at the end of subparagraph (v) and by adding the following after subparagraph (vi):

  • (vii) no part of the period is after the earlier of

    • (A) the time at which bridging benefits commence to be paid to the individual in circumstances to which subsection 8503(17) applied, and

    • (B) the earliest day in respect of which benefits have been provided to the individual in circumstances to which subsection 8503(19) applied; and

• (2) Subsection (1) applies to the 2008 and subsequent calendar years.

• 86. (1) Paragraph 8514(2)(a) of the Regulations is replaced by the following:

  • (a) a debt obligation described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3) of the Act;

• (2) Paragraphs 8514(2)(b) and (c) of the Regulations are amended by replacing “stock exchange referred to in section 3200 or 3201” in those paragraphs with “designated stock exchange”.

• (3) Subsection (1) applies after 2007.

• (4) Subsection (2) comes into force on the day on which this Act is assented to.

• 87. (1) Paragraph 8516(2)(d) of the Regulations is replaced by the following:

  • (d) at the time the contribution is made, the plan is not a designated plan.

• (2) Paragraph 8516(3)(d) of the Regulations is replaced by the following:

  • (d) at the time the contribution is made, the plan is not a designated plan.

• (3) Paragraph 8516(4)(e) of the Regulations is replaced by the following:

  • (e) at the time the contribution is made, the plan is not a designated plan.

• (4) Subsections (1) to (3) apply after 2007.

• 88. (1) The Regulations are amended by adding the following after Part XCIII:

  PART XCIVPRESCRIBED PROGRAMS OF PHYSICAL ACTIVITY

  Interpretation

  • 9400. (1) The following definitions apply in this Part.

    “physical activity”

    “physical activity” means a supervised activity suitable for children (other than an activity where a child rides on or in a motorized vehicle as an essential component of the activity) that

    • (a) in the case of a qualifying child in respect of whom an amount is deductible under section 118.3 of the Act in computing any person’s income for the taxation year, results in movement and in an observable expenditure of energy in a recreational context; and

    • (b) in the case of any other child, contributes to cardio-respiratory endurance and to one or more of the following:

      • (i) muscular strength,

      • (ii) muscular endurance,

      • (iii) flexibility, and

      • (iv) balance. (activité physique)

    “qualifying child”

    “qualifying child” has the meaning assigned by subsection 118.03(1) of the Act. (enfant admissible)

  •  

    Prescribed Program of Physical Activity

  • (2) For the purpose of the definition “eligible fitness expense” in subsection 118.03(1) of the Act, a prescribed program of physical activity is

    • (a) a weekly program, that is not part of a school’s curriculum, of a duration of eight or more consecutive weeks in which all or substantially all of the activities include a significant amount of physical activity;

    • (b) a program, that is not part of a school’s curriculum, of a duration of five or more consecutive days of which more than 50% of the daily activities include a significant amount of physical activity;

    • (c) a program, that is not part of a school’s curriculum, of a duration of eight or more consecutive weeks, offered to children by a club, association or similar organization (in this section referred to as an “organization”) in circumstances where a participant in the program may select amongst a variety of activities if

      • (i) more than 50% of those activities offered to children by the organization are activities that include a significant amount of physical activity, or

      • (ii) more than 50% of the time scheduled for activities offered to children in the program is scheduled for activities that include a significant amount of physical activity; or

    • (d) a membership in an organization, that is not part of a school’s curriculum, of a duration of eight or more consecutive weeks if more than 50% of all the activities offered to children by the organization include a significant amount of physical activity.

    Mixed-use Facility

  • (3) For the purpose of the definition “eligible fitness expense” in subsection 118.03(1) of the Act, a prescribed program of physical activity is that portion of a program, which program does not meet the requirements of paragraph (2)(c) and is not part of a school’s curriculum, of a duration of eight or more consecutive weeks, offered to children by an organization in circumstances where a participant in the program may select amongst a variety of activities

    • (a) that is the percentage of those activities offered to children by the organization that are activities that include a significant amount of physical activity; or

    • (b) that is the percentage of the time scheduled for activities in the program that is scheduled for activities that include a significant amount of physical activity.

    Membership

  • (4) For the purpose of the definition “eligible fitness expense” in subsection 118.03(1) of the Act, a prescribed program of physical activity is that portion of a membership in an organization, which membership does not meet the requirements of paragraph (2)(d) and is not part of a school’s curriculum, of a duration of eight or more consecutive weeks that is the percentage of all the activities offered to children by the organization that are activities that include a significant amount of physical activity.

    Horseback Riding

  • (5) For the purpose of the definition “physical activity” in subsection (1), horseback riding is deemed to be an activity that contributes to cardio-respiratory endurance and to one or more of muscular strength, muscular endurance, flexibility and balance.

• (2) Subsection (1) applies after 2006.

• 89. (1) The Regulations are amended by replacing “stock exchange referred to in section 3200” with “designated stock exchange in Canada” in the following provisions:

  • (a) subparagraph 4900(1)(i)(i);

  • (b) the portion of subparagraph 4900(1)(i)(ii) after clause (C);

  • (c) the portion of 6201(1) before paragraph (a);

  • (d) the portion of subsection 6201(2) before paragraph (a); and

  • (e) the portion of subsection 6201(4) before paragraph (a).

• (2) Subsection (1) comes into force on the day on which this Act is assented to.

C.R.C., c. 385Canada Pension Plan Regulations

Marginal note:SOR/97-472, s. 1(2)

• 90. (1) Paragraphs 8(1.12)(a) and (b) of the Canada Pension Plan Regulations are replaced by the following:

  • (a) the average monthly withholding amount in respect of an employer for either the first or the second calendar year before the particular calendar year that includes that time is less than $3,000;

  • (b) throughout the 12-month period before that time, the employer has remitted, on or before the day on or before which the amounts were required to be remitted, all amounts each of which was required to be remitted under subsection 21(1) of the Act, under subsection 82(1) of the Employment Insurance Act, under Part IX of the Excise Tax Act or under subsection 153(1) of the Income Tax Act; and

• (2) Subsection (1) applies in respect of amounts required to be deducted or withheld after 2007.

SOR/97-33Insurable Earnings and Collection of Premiums Regulations

Marginal note:SOR/97-472, s. 2(2)

• 91. (1) Paragraphs 4(3.1)(a) and (b) of the Insurable Earnings and Collection of Premiums Regulations are replaced by the following:

  • (a) the average monthly withholding amount in respect of an employer for either the first or the second calendar year before the particular calendar year that includes that time is less than $3,000;

  • (b) throughout the 12-month period before that time, the employer has remitted, on or before the day on or before which the amounts were required to be remitted, all amounts each of which was required to be remitted under subsection 82(1) of the Act, under subsection 21(1) of the Canada Pension Plan, under Part IX of the Excise Tax Act, or under subsection 153(1) of the Income Tax Act; and

• (2) Subsection (1) applies in respect of amounts required to be deducted or withheld after 2007.

Coordinating Amendments

Marginal note:Bill C-10

92. Sections 93 to 100 apply if Bill C-10, introduced in the 2nd session of the 39th Parliament and entitled the Income Tax Amendments Act, 2006 (referred to in those sections as the “other Act”), receives royal assent.

• 93. (1) If this Act receives royal assent before the other Act receives royal assent, section 4 of the other Act is repealed.

• (2) The definition “controlled foreign affiliate” in subsection 17(15) of the Income Tax Act, as enacted by subsection 10(3) of this Act, is replaced by the following:

  “controlled foreign affiliate”

  « société étrangère affiliée contrôlée »

  “controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means a corporation that would, at that time, be a controlled foreign affiliate of the taxpayer within the meaning assigned by the definition “controlled foreign affiliate” in subsection 95(1) if the word “or” were added at the end of paragraph (a) of that definition and

  • (a) subparagraph (b)(ii) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with the taxpayer,”;

  • (b) subparagraph (b)(iv) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with any relevant Canadian shareholder;”; and

  • (c) that definition were read without reference to its paragraph (c).

• (3) Subsection (2) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998, except that, in applying the definition “controlled foreign affiliate” in subsection 17(15) of the Income Tax Act, as enacted by subsection (2),

  • (a) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, that definition is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate” has the meaning that would be assigned by the definition “controlled foreign affiliate” in subsection 95(1) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, if the word “or” were added at the end of paragraph (a) of that definition and

    • (a) subparagraph (b)(ii) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with the taxpayer,”;

    • (b) subparagraph (b)(iv) of that definition were read as “all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons resident in Canada who do not deal at arm’s length with any relevant Canadian shareholder;”; and

    • (c) that definition were read without reference to its paragraph (c).

  • (b) for taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998 and before 2003, that definition is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate” has the meaning that would be assigned by the definition “controlled foreign affiliate” in subsection 95(1) for taxation years, of a foreign affiliate of a taxpayer, that begin after February 23, 1998 and before 2003, if subparagraph (b)(iii) of that definition were read as “each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any person resident in Canada with whom the taxpayer does not deal at arm’s length.”.

• 94. (1) If this Act receives royal assent before the other Act receives royal assent, subsection 19(2) of the other Act is repealed.

• (2) The definition “controlled foreign affiliate” in subsection 95(1) of the Income Tax Act, as enacted by subsection 26(1) of this Act, is replaced by the following:

  “controlled foreign affiliate”

  « société étrangère affiliée contrôlée »

  “controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means

  • (a) a foreign affiliate of the taxpayer that is, at that time, controlled by the taxpayer,

  • (b) a foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer owned

    • (i) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the taxpayer,

    • (ii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with the taxpayer,

    • (iii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without ref-erence to the existence of or the absence of any relationship, connection or action in concert between those persons), who

      • (A) are resident in Canada,

      • (B) are not the taxpayer or a person described in subparagraph (ii), and

      • (C) own, at that time, shares of the capital stock of the foreign affiliate, and

    • (iv) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder, or

  • (c) a foreign affiliate of the taxpayer that is, at that time, a controlled foreign affiliate of the taxpayer because of paragraph 94.1(2)(h);

• (3) Subsection (2) applies to taxation years, of a foreign affiliate of a taxpayer, that begin after 1995, except that

  • (a) for taxation years, of a foreign affiliate of a taxpayer, that begin after 2002 and on or before February 27, 2004, the definition “controlled foreign affiliate” in subsection 95(1) of the Income Tax Act, as enacted by subsection (2), is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate”, at any time, of a taxpayer resident in Canada, means

    • (a) a foreign affiliate of the taxpayer that is, at that time, controlled

      • (i) by the taxpayer,

      • (ii) by the taxpayer and not more than four other persons resident in Canada, or

      • (iii) by not more than four persons resident in Canada, other than the taxpayer,

    • (b) a foreign affiliate of the taxpayer that would, at that time, be controlled by the taxpayer if the taxpayer owned

      • (i) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the taxpayer,

      • (ii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with the taxpayer,

      • (iii) all of the shares of the capital stock of the foreign affiliate that are owned at that time by the persons (each of whom is referred to in this definition as a “relevant Canadian shareholder”), in any set of persons not exceeding four (which set of persons shall be determined without ref-erence to the existence of or the absence of any relationship, connection or action in concert between those persons), who

        • (A) are resident in Canada,

        • (B) are not the taxpayer or a person described in subparagraph (ii), and

        • (C) own, at that time, shares of the capital stock of the foreign affiliate, and

      • (iv) all of the shares of the capital stock of the foreign affiliate that are owned at that time by persons who do not deal at arm’s length with any relevant Canadian shareholder, or

    • (c) a foreign affiliate of the taxpayer that is, at that time, a controlled foreign affiliate of the taxpayer because of paragraph 94.1(2)(h);

  • (b) for taxation years, of a foreign affiliate of a taxpayer, that begin after 1995 and before 2003, the definition “controlled foreign affiliate” in subsection 95(1) of the Income Tax Act, as enacted by subsection (2), is to be read as follows:

    “controlled foreign affiliate”

    “controlled foreign affiliate”, at any time of a taxpayer resident in Canada, means a foreign affiliate of the taxpayer that

    • (a) is, at that time, controlled

      • (i) by the taxpayer,

      • (ii) by the taxpayer and not more than four other persons resident in Canada, or

      • (iii) by not more than four persons resident in Canada, other than the taxpayer, or

    • (b) would, at that time, be controlled by the taxpayer if the taxpayer owned

      • (i) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any of not more than four other persons resident in Canada,

      • (ii) each share of the capital stock of a corporation that is owned at that time by any of not more than four persons resident in Canada (other than the taxpayer), and

      • (iii) each share of the capital stock of a corporation that is owned at that time by the taxpayer and each share of the capital stock of a corporation that is owned at that time by any person with whom the taxpayer does not deal at arm’s length.