Budget and Economic Statement Implementation Act, 2007 (S.C. 2007, c. 35)
Full Document:
Assented to 2007-12-14
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):
Marginal note:Penalty for excess corporate holdings
(3.1) A private foundation is liable to a penalty under this Part for a taxation year, in respect of a class of shares of the capital stock of a corporation, equal to
(a) 5% of the amount, if any, determined by multiplying the divestment obligation percentage of the private foundation for the taxation year in respect of the class by the total fair market value of all of the issued and outstanding shares of the class, except if the private foundation is liable for the taxation year under paragraph (b) for a penalty in respect of the class; or
(b) 10% of the amount, if any, determined by multiplying the divestment obligation percentage of the private foundation for the taxation year in respect of the class by the total fair market value of all of the issued and outstanding shares of the class, if
(i) the private foundation has failed to disclose, in its return required under subsection 149.1(14) for the taxation year,
(A) a material transaction, in the taxation year, of the private foundation in respect of the class,
(B) a material interest held at the end of the taxation year by a relevant person in respect of the private foundation, or
(C) the total corporate holdings percent-age of the private foundation in respect of the class at the end of the taxation year, unless at no time in the taxation year the private foundation held greater than an insignificant interest in respect of the class, or
(ii) the Minister has, less than five years before the end of the taxation year, assessed a liability under paragraph (a) or this paragraph for a preceding taxation year of the private foundation in respect of any divestment obligation percentage.
Marginal note:Avoidance of divestiture
(3.2) If, at the end of a taxation year, a private foundation would — but for a transaction or series of transactions entered into by the private foundation or a relevant person in respect of the private foundation (in this subsection referred to as the “holder”) a result of which is that the holder holds, directly or indirectly, an interest (or for civil law, a right), in a corporation other than shares — have a divestment obligation percentage for that taxation year in respect of the private foundation’s holdings of a class of shares of the capital stock of the corporation, and it can reasonably be considered that a purpose of the transaction or series is to avoid that divestment obligation percentage by substituting shares of the class for that interest or right, for the purposes of applying this section, subsection 149.1(1) and section 149.2,
(a) each of those interests or rights is deemed to have been converted, immediately after the time it was first held, directly or indirectly by the holder, into that number of shares of that class that would, if those shares were shares of the class that were issued by the corporation, have a fair market value equal to the fair market value of the interest or right at that time;
(b) each such share is deemed to be a share that is issued by the corporation and outstanding and to continue to be held by the holder until such time as the holder no longer holds the interest or right; and
(c) each such share is deemed to have a fair market value, at any particular time, equal to the fair market value, at the particular time, of a share of the class issued by the corporation.
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.
- Date modified: