Economic Action Plan 2013 Act, No. 2 (S.C. 2013, c. 40)
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Assented to 2013-12-12
PART 1MEASURES RELATING TO INCOME TAX
R.S., c. 1 (5th Supp.)Income Tax Act
7. (1) Paragraph 14(12)(f) of the Act is replaced by the following:
(f) that is immediately before the transferor is subject to a loss restriction event, or
(2) Subsection (1) is deemed to have come into force on March 21, 2013.
8. (1) Subsection 18(4) of the Act is replaced by the following:
Marginal note:Limitation on deduction of interest
(4) Notwithstanding any other provision of this Act (other than subsection (8)), in computing the income for a taxation year of a corporation or a trust from a business (other than the Canadian banking business of an authorized foreign bank) or property, no deduction shall be made in respect of that proportion of any amount otherwise deductible in computing its income for the year in respect of interest paid or payable by it on outstanding debts to specified non-residents that
(a) the amount, if any, by which
(i) the average of all amounts each of which is, in respect of a calendar month that ends in the year, the greatest total amount at any time in the month of the outstanding debts to specified non-residents of the corporation or trust,
exceeds
(ii) 1.5 times the equity amount of the corporation or trust for the year,
is of
(b) the amount determined under subparagraph (a)(i) in respect of the corporation or trust for the year.
(2) The portion of the definition “outstanding debts to specified non-residents” in subsection 18(5) of the Act before paragraph (b) is replaced by the following:
“outstanding debts to specified non-residents”
« dettes impayées envers des non-résidents déterminés »
“outstanding debts to specified non-residents”, of a corporation or trust at any particular time in a taxation year, means
(a) the total of all amounts each of which is an amount outstanding at that time as or on account of a debt or other obligation to pay an amount
(i) that was payable by the corporation or trust to a person who was, at any time in the year,
(A) a specified non-resident shareholder of the corporation or a specified non-resident beneficiary of the trust, or
(B) a non-resident person who was not dealing at arm’s length with a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, and
(ii) on which any amount in respect of interest paid or payable by the corporation or trust is or would be, but for subsection (4), deductible in computing the income of the corporation or trust for the year,
but does not include
(3) Subsection 18(5) of the Act is amended by adding the following in alphabetical order:
“beneficiary”
« bénéficiaire »
“beneficiary” has the same meaning as in subsection 108(1);
“equity amount”
« montant des capitaux propres »
“equity amount”, of a corporation or trust for a taxation year, means
(a) in the case of a corporation resident in Canada, the total of
(i) the retained earnings of the corporation at the beginning of the year, except to the extent that those earnings include retained earnings of any other corporation,
(ii) the average of all amounts each of which is the corporation’s contributed surplus (other than any portion of that contributed surplus that arose in connection with an investment, as defined in subsection 212.3(10), to which subsection 212.3(2) applies) at the beginning of a calendar month that ends in the year, to the extent that it was contributed by a specified non-resident shareholder of the corporation, and
(iii) the average of all amounts each of which is the corporation’s paid-up capital at the beginning of a calendar month that ends in the year, excluding the paid-up capital in respect of shares of any class of the capital stock of the corporation owned by a person other than a specified non-resident shareholder of the corporation,
(b) in the case of a trust resident in Canada, the amount, if any, by which
(i) the total of
(A) the average of all amounts each of which is the total amount of all equity contributions to the trust made before a calendar month that ends in the year, to the extent that the contributions were made by a specified non-resident beneficiary of the trust, and
(B) the tax-paid earnings of the trust for the year,
exceeds
(ii) the average of all amounts each of which is the total of all amounts that were paid or became payable by the trust to a beneficiary of the trust in respect of the beneficiary’s interest under the trust before a calendar month that ends in the year except to the extent that the amount is
(A) included in the beneficiary’s income for a taxation year because of subsection 104(13),
(B) an amount from which tax was deducted under Part XIII because of paragraph 212(1)(c), or
(C) paid or payable to a person other than a specified non-resident beneficiary of the trust, and
(c) in the case of a corporation or trust that is not resident in Canada, including a corporation or trust that files a return under this Part in accordance with subsection 216(1) in respect of the year, 40% of the amount, if any, by which
(i) the average of all amounts each of which is the cost of a property, other than an interest as a member of a partnership, owned by the corporation or trust at the beginning of a calendar month that ends in the year
(A) that is used by the corporation or trust in the year in, or held by it in the year in the course of, carrying on business in Canada, or
(B) that is an interest in real property, or a real right in immovables, in Canada, or an interest in, or for civil law a right in, timber resource properties and timber limits, in Canada, and in respect of which the corporation or trust files a return under this Part in accordance with subsection 216(1) in respect of the year,
exceeds
(ii) the average of all amounts each of which is the total of all amounts outstanding, at the beginning of a calendar month that ends in the year, as or on account of a debt or other obligation to pay an amount that was payable by the corporation or trust that may reasonably be regarded as relating to a business carried on by it in Canada or to an interest or right described in clause (i)(B), other than a debt or obligation that is included in the outstanding debts to specified non-residents of the corporation or trust;
“equity contribution”
« apport de capitaux propres »
“equity contribution”, to a trust, means a transfer of property to the trust that is made
(a) in exchange for an interest as a beneficiary under the trust,
(b) in exchange for a right to acquire an interest as a beneficiary under the trust, or
(c) for no consideration by a person beneficially interested in the trust;
“specified beneficiary”
« bénéficiaire déterminé »
“specified beneficiary”, of a trust at any time, means a person who at that time, either alone or together with persons with whom that person does not deal at arm’s length, has an interest as a beneficiary under the trust with a fair market value that is not less than 25% of the fair market value of all interests as a beneficiary under the trust and for the purpose of determining whether a particular person is a specified beneficiary of a trust,
(a) if the particular person, or a person with whom the particular person does not deal at arm’s length, has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to, or to acquire, an interest as a beneficiary under a trust, the particular person or the person with whom the particular person does not deal at arm’s length, as the case may be, is deemed at that time to own the interest,
(b) if the particular person, or a person with whom the particular person does not deal at arm’s length, has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently to cause a trust to redeem, acquire or terminate any interest in it as a beneficiary (other than an interest held by the particular person or a person with whom the particular person does not deal at arm’s length), the trust is deemed at that time to have redeemed, acquired or terminated the interest, unless the right is not exercisable at that time because the exercise of the right is contingent on the death, bankruptcy or permanent disability of an individual, and
(c) if the amount of income or capital of the trust that the particular person, or a person with whom the particular person does not deal at arm’s length, may receive as a beneficiary of the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be;
“specified non-resident beneficiary”
« bénéficiaire non-résident déterminé »
“specified non-resident beneficiary”, of a trust at any time, means a specified beneficiary of the trust who at that time is a non-resident person;
“tax-paid earnings”
« bénéfices libérés d’impôt »
“tax-paid earnings”, of a trust resident in Canada for a taxation year, means the total of all amounts each of which is the amount in respect of a particular taxation year of the trust that ended before the year determined by the formula
A – B
where
- A
- is the taxable income of the trust under this Part for the particular year, and
- B
- is the total of tax payable under this Part by the trust, and all income taxes payable by the trust under the laws of a province, for the particular year.
(4) Subsections 18(5.1) and (6) of the Act are replaced by the following:
Marginal note:Specified shareholder or specified beneficiary
(5.1) For the purposes of subsections (4) to (6), if
(a) a particular person would, but for this subsection, be a specified shareholder of a corporation or a specified beneficiary of a trust at any time,
(b) there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular person will cease to be a specified shareholder of the corporation or a specified beneficiary of the trust, and
(c) the purpose for which the particular person became a specified shareholder or specified beneficiary was the safeguarding of rights or interests of the particular person or a person with whom the particular person is not dealing at arm’s length in respect of any indebtedness owing at any time to the particular person or a person with whom the particular person is not dealing at arm’s length,
the particular person is deemed not to be a specified shareholder of the corporation or a specified beneficiary of the trust, as the case may be, at that time.
Marginal note:Specified shareholder or specified beneficiary
(5.2) For the purposes of subsections (4) to (6), a non-resident corporation is deemed to be a specified shareholder of itself and a non-resident trust is deemed to be a specified beneficiary of itself.
Marginal note:Property used in business — cost attribution
(5.3) For the purposes of subparagraph (c)(i) of the definition “equity amount” in subsection (5),
(a) if a property is partly used or held by a taxpayer in a taxation year in the course of carrying on business in Canada, the cost of the property to the taxpayer is deemed for the year to be equal to the same proportion of the cost to the taxpayer of the property (determined without reference to this subsection) that the proportion of the use or holding made of the property in the course of carrying on business in Canada in the year is of the whole use or holding made of the property in the year; and
(b) if a corporation or trust is deemed to own a portion of a property of a partnership because of subsection (7) at any time,
(i) the property is deemed to have, at that time, a cost to the corporation or trust equal to the same proportion of the cost of the property to the partnership as the proportion of the debts and other obligations to pay an amount of the partnership allocated to it under subsection (7) is of the total amount of all debts and other obligations to pay an amount of the partnership, and
(ii) in the case of a partnership that carries on business in Canada, the corporation or trust is deemed to use or hold the property in the course of carrying on business in Canada to the extent the partnership uses or holds the property in the course of carrying on business in Canada for the fiscal period of the partnership that includes that time.
Marginal note:Rules — trust income
(5.4) For the purposes of this Act, a trust resident in Canada may designate in its return of income under this Part for a taxation year that all or any portion of an amount paid or credited as interest by the trust, or by a partnership, in the year to a non-resident person is deemed to be income of the trust that has been paid to the non-resident person as a beneficiary of the trust, and not to have been paid or credited by the trust or the partnership as interest, to the extent that an amount in respect of the interest
(a) is included in computing the income of the trust for the year under paragraph 12(1)(l.1); or
(b) is not deductible in computing the income of the trust for the year because of subsection (4).
Marginal note:Loans made on condition
(6) If any loan (in this subsection referred to as the “first loan”) has been made
(a) by a specified non-resident shareholder of a corporation or a specified non-resident beneficiary of a trust, or
(b) by a non-resident person who was not dealing at arm’s length with a specified shareholder of a corporation or a specified non-resident beneficiary of a trust,
to another person on condition that a loan (in this subsection referred to as the “second loan”) be made by any person to a particular corporation or trust, for the purposes of subsections (4) and (5), the lesser of
(c) the amount of the first loan, and
(d) the amount of the second loan
is deemed to be a debt incurred by the particular corporation or trust to the person who made the first loan.
(5) The portion of paragraph 18(7)(a) of the Act before subparagraph (i) is replaced by the following:
(a) to owe the portion (in this subsection and paragraph 12(1)(l.1) referred to as the “debt amount”) of each debt or other obligation to pay an amount of the partnership and to own the portion of each property of the partnership that is equal to
(6) Subparagraph 18(15)(b)(iii) of the Act is replaced by the following:
(iii) that is immediately before the transferor is subject to a loss restriction event, or
(7) Subsections (1) to (5) apply to taxation years that begin after 2013, except that if a trust that is resident in Canada on March 21, 2013 elects in writing and files the election with the Minister of National Revenue on or before the trust’s filing-due date for its first taxation year that begins after 2013,
(a) for the purpose of determining the trust’s equity amount, as defined in subsection 18(5) of the Act, as enacted by subsection (3), the trust is deemed
(i) to not have received any equity contributions, as defined in subsection 18(5) of the Act, as enacted by subsection (3), before March 21, 2013,
(ii) to not have paid or made payable any amount to a beneficiary of the trust before March 21, 2013, and
(iii) to have tax-paid earnings, as defined in subsection 18(5) of the Act, as enacted by subsection (3), of nil for each taxation year that ends before March 21, 2013, and
(b) each beneficiary of the trust at the beginning of March 21, 2013 is deemed to have made an equity contribution at that time to the trust equal to the amount determined by the formula
A/B × (C – D)
where
- A
- is the fair market value of the beneficiary’s interest as a beneficiary under the trust at that time,
- B
- is the fair market value of all the beneficial interests under the trust at that time,
- C
- is the total fair market value of all the properties of the trust at that time, and
- D
- is the total amount of the trust’s liabilities at that time.
(8) Subsection (6) is deemed to have come into force on March 21, 2013.
9. (1) Subparagraph 18.1(10)(b)(ii) of the Act is replaced by the following:
(ii) that is immediately before the taxpayer is subject to a loss restriction event,
(2) Subsection (1) is deemed to have come into force on March 21, 2013.
10. (1) The Act is amended by adding the following before section 19:
Marginal note:Definitions
18.3 (1) The following definitions apply in this section.
“entity”
« entité »
“entity” has the same meaning as in subsection 122.1(1).
“equity value”
« valeur des capitaux propres »
“equity value” has the same meaning as in subsection 122.1(1).
“real estate investment trust”
« fiducie de placement immobilier »
“real estate investment trust” has the same meaning as in subsection 122.1(1).
“security”
« titre »
“security”, of an entity, means
(a) a liability of the entity;
(b) if the entity is a corporation,
(i) a share of the capital stock of the corporation, and
(ii) a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation if it can reasonably be concluded that one of the reasons that a person or partnership holds the right to control is to avoid the application of subsection (3) or 12.6(3);
(c) if the entity is a trust, an income or a capital interest in the trust; and
(d) if the entity is a partnership, an interest as a member of the partnership.
“stapled security”
« titre agrafé »
“stapled security”, of a particular entity at any time, means a particular security of the particular entity if at that time
(a) another security (referred to in this section as the “reference security”)
(i) is or may be required to be transferred together or concurrently with the particular security as a term or condition of the particular security, the reference security, or an agreement or arrangement to which the particular entity (or if the reference security is a security of another entity, the other entity) is a party, or
(ii) is listed or traded with the particular security on a stock exchange or other public market under a single trading symbol;
(b) the particular security or the reference security is listed or traded on a stock exchange or other public market; and
(c) any of the following applies:
(i) the reference security and the particular security are securities of the particular entity and the particular entity is a corporation, SIFT partnership or SIFT trust,
(ii) the reference security is a security of another entity, one of the particular entity or the other entity is a subsidiary of the other, and the particular entity or the other entity is a corporation, SIFT partnership or SIFT trust, or
(iii) the reference security is a security of another entity and the particular entity or the other entity is a real estate investment trust or a subsidiary of a real estate investment trust.
“subsidiary”
« filiale »
“subsidiary”, of a particular entity at any time, means
(a) an entity in which the particular entity holds at that time securities that have a total fair market value greater than 10% of the equity value of the entity; and
(b) an entity that at that time is a subsidiary of an entity that is a subsidiary of the particular entity.
“transition period”
« période de transition »
“transition period”, of an entity, means
(a) if one or more securities of the entity would have been stapled securities of the entity on October 31, 2006 and July 19, 2011 had the definition “stapled security” in this subsection come into force on October 31, 2006, the period that begins on July 20, 2011 and ends on the earliest of
(i) January 1, 2016,
(ii) the first day after July 20, 2011 on which any of those securities is materially altered, and
(iii) the first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way of
(A) a transaction
(I) that is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, and
(II) that is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, or
(B) the issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011;
(b) if paragraph (a) does not apply to the entity and one or more securities of the entity would have been stapled securities of the entity on July 19, 2011 had the definition “stapled security” in this subsection come into force on July 19, 2011, the period that begins on July 20, 2011 and ends on the earliest of
(i) July 20, 2012,
(ii) the first day after July 20, 2011 on which any of those securities is materially altered, and
(iii) the first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way of
(A) a transaction
(I) that is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, and
(II) that is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, or
(B) the issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011; and
(c) in any other case, if the entity is a subsidiary of another entity on July 20, 2011 and the other entity has a transition period, the period that begins on July 20, 2011 and ends on the earliest of
(i) the day on which the other entity’s transition period ends,
(ii) the first day after July 20, 2011 on which the entity ceases to be a subsidiary of the other entity, and
(iii) the first day after July 20, 2011 on which any security of the entity becomes a stapled security other than by way of
(A) a transaction
(I) that is completed under the terms of an agreement in writing entered into before July 20, 2011 if no party to the agreement may be excused from completing the transaction as a result of amendments to this Act, and
(II) that is not the issuance of a security in satisfaction of a right to enforce payment of an amount by the entity, or
(B) the issuance of the security in satisfaction of a right to enforce payment of an amount that became payable by the entity on another security of the entity before July 20, 2011, if the other security was a stapled security on July 20, 2011 and the issuance was made under a term or condition of the other security in effect on July 20, 2011.
Marginal note:Property representing security
(2) For the purpose of determining whether a particular security of an entity is a stapled security, if a receipt or similar property (referred to in this subsection as the “receipt”) represents all or a portion of the particular security and the receipt would be described in paragraphs (a) and (b) of the definition “stapled security” in subsection (1) if it were a security of the entity, then
(a) the particular security is deemed to be described in those paragraphs; and
(b) a security that would be a reference security in respect of the receipt is deemed to be a reference security in respect of the particular security.
Marginal note:Amounts not deductible
(3) Notwithstanding any other provision of this Act, in computing the income of a particular entity for a taxation year from a business or property, no deduction may be made in respect of an amount
(a) that is paid or payable after July 19, 2011, unless the amount is paid or payable in respect of the entity’s transition period; and
(b) that is
(i) interest paid or payable on a liability of the particular entity that is a stapled security, unless each reference security in respect of the stapled security is a liability, or
(ii) if a security of the particular entity, a subsidiary of the particular entity or an entity of which the particular entity is a subsidiary is a reference security in respect of a stapled security of a real estate investment trust or a subsidiary of a real estate investment trust, an amount paid or payable to
(A) the real estate investment trust,
(B) a subsidiary of the real estate investment trust, or
(C) any person or partnership on condition that any person or partnership pays or makes payable an amount to the real estate investment trust or a subsidiary of the real estate investment trust.
(2) Subsection (1) is deemed to have come into force on July 20, 2011.
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