Budget Implementation Act, 2009 (S.C. 2009, c. 2)
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Assented to 2009-03-12
PART 1AMENDMENTS IN RESPECT OF INCOME TAX
R.S., c. 1 (5th Supp.)Income Tax Act
23. (1) Subsections 91(5.1) to (5.3) of the Act are repealed.
(2) Subsection (1) applies after 2011.
24. (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 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
(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)
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.
25. (1) Subsection 95(1) of the Act is amended by adding the following in alphabetical order:
“antecedent corporation”
« société antécédente »
“antecedent corporation” of a particular corporation means
(a) a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation to which subsection 87(11) applied and by which the particular corporation was formed,
(b) a predecessor corporation (within the meaning of subsection 87(1)) of the corporation (referred to in this definition as the “first amalco”) that was formed on an amalgamation of the predecessor corporation and another corporation, where
(i) shares of the capital stock of the predecessor corporation that were not owned by the other corporation, or by a corporation of which the other corporation is a subsidiary wholly-owned corporation, were exchanged on the amalgamation for shares of the capital stock of the first amalco that were, during the series of transactions or events that includes the amalgamation, redeemed, acquired or cancelled by the first amalco for money,
(ii) the first amalco was a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation to which subsection 87(11) applied and by which the particular corporation was formed, and
(iii) the amalgamation referred to in subparagraph (i) occurred in a series of transactions or events that included the amalgamation referred to in subparagraph (ii),
(c) a corporation that was wound-up into the particular corporation in a winding-up to which subsection 88(1) applied, or
(d) an antecedent corporation of an antecedent corporation of the particular corporation;
“calculating currency”
« monnaie de calcul »
“calculating currency” for a taxation year of a foreign affiliate of a taxpayer means
(a) the currency of the country in which the foreign affiliate is resident at the end of the taxation year, or
(b) any currency that the taxpayer demonstrates to be reasonable in the circumstances;
“designated acquired corporation”
« société acquise désignée »
“designated acquired corporation” of a taxpayer means a particular antecedent corporation of the taxpayer if
(a) the taxpayer or another antecedent corporation of the taxpayer acquired control of
(i) the particular antecedent corporation, or
(ii) a corporation (referred to in this definition as a “successor corporation”) of which the particular antecedent corporation is an antecedent corporation, and
(b) immediately before the acquisition of control or a series of transactions or events that includes the acquisition of control, the taxpayer, the other antecedent corporation or a corporation resident in Canada of which the taxpayer or the other antecedent corporation is a subsidiary wholly-owned corporation, as the case may be, dealt at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b)) with the particular antecedent corporation or the successor corporation, as the case may be;
“specified person or partnership”
« personne ou société de personnes déterminée »
“specified person or partnership”, in respect of a taxpayer, at any time means the taxpayer or a person (other than a designated acquired corporation of the taxpayer), or a partnership, that is at that time
(a) a person (other than a partnership) that is resident in Canada and does not, at that time, deal at arm’s length with the taxpayer,
(b) a specified predecessor corporation of the taxpayer or of a specified person or partnership in respect of the taxpayer,
(c) a foreign affiliate of
(i) the taxpayer,
(ii) a person that is at that time a specified person or partnership in respect of the taxpayer under this definition because of paragraph (a) or (b), or
(iii) a partnership that is at that time a specified person or partnership in respect of the taxpayer under this definition because of paragraph (d), or
(d) a partnership a member of which is at that time a specified person or partnership in respect of the taxpayer under this definition;
“specified predecessor corporation”
« société remplacée déterminée »
“specified predecessor corporation” of a particular corporation means
(a) an antecedent corporation of the particular corporation,
(b) a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation by which the particular corporation was formed, or
(c) a specified predecessor corporation of a specified predecessor corporation of the particular corporation;
(2) Paragraph 95(2)(f) of the Act is replaced by the following:
(f) except as otherwise provided in this subdivision and except to the extent that the context otherwise requires, a foreign affiliate of a taxpayer is deemed to be at all times resident in Canada for the purposes of determining, in respect of the taxpayer for a taxation year of the foreign affiliate, each amount that is the foreign affiliate’s
(i) capital gain, capital loss, taxable capital gain or allowable capital loss from a disposition of a property, or
(ii) income or loss from a property, from a business other than an active business or from a non-qualifying business;
(f.1) in computing an amount described in paragraph (f) in respect of a property or a business, there is not to be included any portion of that amount that can reasonably be considered to have accrued, in respect of the property (including for the purposes of this paragraph any property for which the property was substituted) or the business, while no person or partnership that held the property or carried on the business was a specified person or partnership in respect of the taxpayer referred to in paragraph (f);
(f.11) in determining an amount described in paragraph (f) for a taxation year of a foreign affiliate of a taxpayer,
(i) if the amount is described in subparagraph (f)(i), this Act is to be read without reference to section 26 of the Income Tax Application Rules, and
(ii) if the amount is described in subparagraph (f)(ii),
(A) this Act is to be read without reference to subsections 14(1.01) to (1.03), 17(1) and 18(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership, and
(B) if the foreign affiliate has, in the taxation year, disposed of a foreign resource property in respect of a country, it is deemed to have designated, in respect of the disposition and in accordance with subparagraph 59(1)(b)(ii) for the taxation year, the amount, if any, by which
(I) the amount determined under paragraph 59(1)(a) in respect of the disposition
exceeds
(II) the amount determined under subparagraph 59(1)(b)(i) in respect of the disposition;
(f.12) a foreign affiliate of a taxpayer shall determine each of the following amounts using its calculating currency for a taxation year:
(i) subject to paragraph (f.13), each capital gain, capital loss, taxable capital gain and allowable capital loss of the foreign affiliate for the taxation year from the disposition, at any time, of a property that, at that time, was an excluded property of the foreign affiliate,
(ii) its income or loss for the taxation year from each active business carried on by it in the taxation year in a country, and
(iii) its income or loss that is included in computing its income or loss from an active business for the taxation year because of paragraph (a);
(f.13) where the calculating currency of a foreign affiliate of a taxpayer is a currency other than Canadian currency, the foreign affiliate shall determine the amount included in computing its foreign accrual property income, in respect of the taxpayer for a taxation year of the foreign affiliate, attributable to its capital gain or taxable capital gain, from the disposition of an excluded property in the taxation year, in Canadian currency by converting the amount of the capital gain, or taxable capital gain, otherwise determined under subparagraph (f.12)(i) using its calculating currency for the taxation year into Canadian currency using the rate of exchange quoted by the Bank of Canada at noon on the day on which the disposition was made;
(f.14) a foreign affiliate of a taxpayer shall determine using Canadian currency each amount of its income, loss, capital gain, capital loss, taxable capital gain or allowable capital loss for a taxation year, other than an amount to which paragraph (f.12) or (f.13) applies;
(f.15) for the purpose of applying subparagraph (f.12)(i), the reference in subsection 39(2) to “the currency or currencies of one or more countries other than Canada relative to Canadian currency” is to be read as a reference to “one or more currencies other than the calculating currency relative to the calculating currency” and the references in that subsection to “of a country other than Canada” are to be read as references to “other than the calculating currency”;
(3) The portion of subsection 95(2.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Qualifying interest throughout year
(2.2) For the purposes of paragraphs (2)(a) and (g), a non-resident corporation that is not a foreign affiliate of a taxpayer in respect of which the taxpayer has 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
(4) Section 95 of the Act is amended by adding the following after subsection (2.2):
Marginal note:Controlled foreign affiliate throughout year
(2.201) For the purposes of paragraphs (2)(a) and (g), a non-resident corporation is deemed to be a controlled foreign affiliate of a taxpayer throughout a taxation year of the non-resident corporation if
(a) in the taxation year, a person or partnership acquires or disposes of shares of the capital stock of a corporation and, because of the acquisition or disposition, the non-resident corporation becomes or ceases to be a controlled foreign affiliate of the taxpayer; and
(b) at either or both of the beginning and end of the taxation year, the non-resident corporation is a controlled foreign affiliate of the taxpayer.
(5) Section 95 of the Act is amended by adding the following after subsection (2.5):
Rule for the definition “specified person or partnership”
(2.6) For the purposes of paragraphs (a) to (d) of the definition “specified person or partnership” in subsection (1), if a person or partnership (referred to in this subsection as the “taxpayer”) is not dealing at arm’s length with another person or partnership (referred to in this subsection as the “particular person”) at a particular time, the taxpayer is deemed to have existed and not to have dealt at arm’s length with the particular person, nor with each specified predecessor corporation of the particular person, throughout the period that began when the particular person or the specified predecessor corporation, as the case may be, came into existence and that ends at the particular time.
(6) Subsections (1), (2) and (5) apply to taxation years of a foreign affiliate of a taxpayer that begin after October 2, 2007. However,
(a) for taxation years of a foreign affiliate that begin before 2009, subparagraph 95(2)(f)(ii) of the Act, as enacted by subsection (2), shall be read as follows:
(ii) income or loss from a property or from a business other than an active business;
(b) if the taxpayer elects in writing in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day (referred to in this subsection as the taxpayer’s “election day”) that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act is assented to and the day that is one year after the day on which this Act is assented to, subsection 95(2.6) of the Act, as enacted by subsection (5), shall, in its application to a taxation year of a foreign affiliate of the taxpayer that begins after October 2, 2007 and before July 14, 2008, be read as follows:
(2.6) For the purposes of paragraphs (a) to (d) of the definition “specified person or partnership” in subsection (1), in determining whether, at a particular time, a person was not, at a time (referred to in this subsection as the “prior time”) that is before the particular time and at which that person did not exist, dealing at arm’s length with another person, where the person exists at the particular time but did not exist at the prior time
(a) the person is deemed to exist at the prior time; and
(b) where the person is related to another person at the particular time, the person is deemed to have been related to that other person at the prior time.
(c) if the taxpayer elects in writing in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the taxpayer’s election day, subsections (1), (2) and (5) also apply to taxation years of a foreign affiliate of the taxpayer that begin before October 2, 2007 and after the date chosen by the taxpayer under paragraph (d), except that subparagraph 95(2)(f)(ii) of the Act, as enacted by subsection (2), shall be read in its application to those taxation years in the manner described in paragraph (a); and
(d) to be valid, an election under paragraph (c) must include the identification by the taxpayer of its choice of one of the following dates:
(i) December 31, 1994,
(ii) December 20, 2002, or
(iii) February 27, 2004.
(7) Subsection (3) applies to taxation years of a foreign affiliate of a taxpayer that begin after 1994. However, the portion of subsection 95(2.2) of the Act before paragraph (a), as enacted by subsection (3), shall, in its application to taxation years of a foreign affiliate that begin after 1994 and before 2009, be read as follows:
(2.2) For the purposes of paragraphs (2)(a) and (g),
(8) Subsection (4) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999. However,
(a) subject to paragraph (b), for taxation years of a foreign affiliate that begin before December 21, 2002, the reference to “for the purposes of paragraphs (2)(a) and (g)” in subsection 95(2.201) of the Act, as enacted by subsection (4), shall be read as a reference to “for the purpose of paragraph (2)(a)”; and
(b) if the taxpayer has made a valid election under subsection 26(46) of the Budget and Economic Statement Implementation Act, 2007, subsection (4) applies to taxation years of a foreign affiliate of the taxpayer that begin after 1994.
(9) 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 into account the provisions of subsections (1) to (8).
- Date modified: