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.”.