Economic Action Plan 2014 Act, No. 2 (S.C. 2014, c. 39)
Full Document:
Assented to 2014-12-16
53. (1) The portion of subsection 149(5) of the Act before paragraph (a) is replaced by the following:
Marginal note:Exception — investment income of certain clubs
(5) Notwithstanding subsections (1) and (2), where a club, society or association was for any period, a club, society or association described in paragraph (1)(l) the main purpose of which was to provide dining, recreational or sporting facilities for its members (in this subsection referred to as the “club”), a trust is deemed to have been created on the later of the commencement of the period and the end of 1971 and to have continued in existence throughout the period, and, throughout that period, the following rules apply:
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
54. (1) Subparagraph (a)(iii) of the definition “exempt shares” in subsection 149.1(1) of the Act is replaced by the following:
(iii) on or after March 19, 2007, under the terms of a trust created before March 19, 2007, and not amended on or after March 19, 2007,
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
55. (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), 122.8(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) The portion of subsection 152(4.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Reassessment with taxpayer’s consent
(4.2) Notwithstanding subsections (4), (4.1) and (5), for the purpose of determining — at any time after the end of the normal reassessment period, of a taxpayer who is an individual (other than a trust) or a graduated rate estate, in respect of a taxation year — the amount of any refund to which the taxpayer is entitled at that time for the year, or a reduction of an amount payable under this Part by the taxpayer for the year, the Minister may, if the taxpayer makes an application for that determination on or before the day that is 10 calendar years after the end of that taxation year,
(3) 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), 122.8(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.
(4) Subsections (1) and (3) apply to the 2015 and subsequent taxation years.
(5) Subsection (2) applies to the 2016 and subsequent taxation years.
56. (1) Subsection 156.1(2) of the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) the individual is a graduated rate estate for the particular year.
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
57. (1) Section 160 of the Act is amended by adding the following after subsection (1.3):
Marginal note:Joint liability — spousal and similar trusts
(1.4) If subsection 104(13.4) deems an amount to have become payable in a taxation year of a trust to an individual, the individual and the trust are jointly and severally, or solidarily, liable for the tax payable by the individual under this Part for the individual’s taxation year that includes the day on which the individual dies to the extent that that tax payable is greater than it would have been if the amount were not included in computing the individual’s income under this Part for the taxation year.
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
58. (1) The portion of subsection 161(2.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Contra interest
(2.2) Notwithstanding subsections (1) and (2), the total amount of interest payable by a taxpayer (other than a graduated rate estate) under those subsections, for the period that begins on the first day of the taxation year for which a part or instalment of tax is payable and ends on the taxpayer’s balance-due day for the year, in respect of the taxpayer’s tax or instalments of tax payable for the year shall not exceed the amount, if any, by which
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
59. (1) Subsection 163(2) of the Act is amended by adding the following after paragraph (c.3):
(c.4) the amount, if any, by which
(i) the total of all amounts each of which is an amount that would be deemed by subsections 122.8(2) or (3) to have been paid on account of the person’s tax payable under this Part for the year if that amount were calculated by reference to the person’s claim for the year under those subsections
exceeds
(ii) the total of all amounts each of which is the amount that the person is entitled to claim for the year under subsections 122.8(2) or (3),
(2) Subsection (1) applies to the 2015 and subsequent taxation years.
60. (1) Paragraph 164(1.5)(a) of the Act is replaced by the following:
(a) if the taxpayer is an individual (other than a trust) or a graduated rate estate for the year and the taxpayer’s return of income under this Part for the year was filed on or before the day that is 10 calendar years after the end of the year;
(2) The portion of subsection 164(6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Disposition by legal representative of deceased
(6) If in the course of administering the graduated rate estate of a taxpayer, the taxpayer’s legal representative has, within the first taxation year of the estate,
(3) The portion of subsection 164(6.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Realization of deceased employees’ options
(6.1) Notwithstanding any other provision of this Act, if a right to acquire securities (as defined in subsection 7(7)) under an agreement in respect of which a benefit was deemed by paragraph 7(1)(e) to have been received by a taxpayer (in this subsection referred to as “the right”) is exercised or disposed of by the taxpayer’s legal representative within the first taxation year of the graduated rate estate of the taxpayer and the representative so elects in prescribed manner and on or before a prescribed day,
(4) Subsections (1) to (3) apply to the 2016 and subsequent taxation years.
61. (1) The portion of paragraph 165(1)(a) of the Act before subparagraph (i) is replaced by the following:
(a) if the assessment is in respect of the taxpayer for a taxation year and the taxpayer is an individual (other than a trust) or a graduated rate estate for the year, on or before the later of
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
62. (1) Paragraph 207.6(1)(a) of the Act is replaced by the following:
(a) a trust is deemed to be created on the day that the arrangement is established;
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
63. (1) Paragraph (b) of the definition “designated beneficiary” in subsection 210(1) of the Act is repealed.
(2) The portion of paragraph (d) of the definition “designated beneficiary” in subsection 210(1) of the Act before subparagraph (i) is replaced by the following:
(d) another trust (in this paragraph referred to as the “other trust”) that is not a graduated rate estate, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time
(3) Subparagraph (d)(ii) of the definition “designated beneficiary” in subsection 210(1) of the Act is repealed.
(4) Clause (d)(iii)(A) of the definition “designated beneficiary” in subsection 210(1) of the Act is replaced by the following:
(A) a graduated rate estate,
(5) Subparagraph (e)(iii) of the definition “designated beneficiary” in subsection 210(1) of the Act is repealed.
(6) Paragraph 210(2)(a) of the Act is replaced by the following:
(a) a graduated rate estate;
(7) Subsections (2), (4) and (6) apply to the 2016 and subsequent taxation years.
64. (1) Section 212 of the Act is amended by adding the following after subsection (3):
Marginal note:Back-to-back loan arrangement
(3.1) Subsections (3.2) and (3.3) apply at any time in respect of a taxpayer if
(a) the taxpayer pays or credits a particular amount at that time on account or in lieu of payment of, or in satisfaction of, interest (determined without reference to paragraph 18(6.1)(b) and subsection 214(16)) in respect of a particular debt or other obligation to pay an amount to a person or partnership (in this subsection referred to as the “intermediary”);
(b) the intermediary is not
(i) a person resident in Canada that does not deal at arm’s length with the taxpayer, or
(ii) a partnership each member of which is a person described in subparagraph (i);
(c) at any time in the period during which the interest accrued (in subsections (3.2) and (3.3) referred to as the “relevant period”), the intermediary, or a person or partnership that does not deal at arm’s length with the intermediary,
(i) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a non-resident person that meets any of the following conditions (in this subsection and subsection (3.2) referred to as the “intermediary debt”):
(A) recourse in respect of the debt or other obligation is limited in whole or in part, either immediately or in the future and either absolutely or contingently, to the particular debt or other obligation, or
(B) it can reasonably be concluded that all or a portion of the particular debt or other obligation became owing, or was permitted to remain owing, because
(I) all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or
(II) the intermediary anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or
(ii) has a specified right (as defined in subsection 18(5)) in respect of a particular property that was granted directly or indirectly by a non-resident person and
(A) the existence of the specified right is required under the terms and conditions of the particular debt or other obligation, or
(B) it can reasonably be concluded that all or a portion of the particular debt or other obligation became owing, or was permitted to remain owing, because
(I) the specified right was granted, or
(II) the intermediary anticipated that the specified right would be granted;
(d) the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to the non-resident person rather than the intermediary, is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.2)) in respect of the particular amount; and
(e) the total of all amounts — each of which is, in respect of the particular debt or other obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph (c)(ii) — is equal to at least 25% of the total of
(i) the amount outstanding as or on account of the particular debt or other obligation, and
(ii) the total of all amounts each of which is an amount (other than the amount described in subparagraph (i)) that the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, has outstanding as or on account of a debt or other obligation to pay an amount to the intermediary under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into where
(A) the intermediary is granted a security interest (as defined in subsection 18(5)) in respect of a property that is the intermediary debt or the particular property, as the case may be, and the security interest secures the payment of two or more debts or other obligations that include the debt or other obligation and the particular debt or other obligation, and
(B) each security interest that secures the payment of a debt or other obligation referred to in clause (A) secures the payment of every debt or other obligation referred to in that clause.
Marginal note:Back-to-back loan arrangement
(3.2) If this subsection applies at any time in respect of a taxpayer, then for the purposes of paragraph (1)(b), the taxpayer is deemed, at that time, to pay interest to a non-resident person referred to in subparagraph (3.1)(c)(i) or (ii), the amount of which is determined by the formula
[(A × B/C) – D] × (E – F)/E
where
- A
- is the particular amount referred to in paragraph (3.1)(a);
- B
- is the average of all amounts each of which is the lesser of
(i) the amount of the particular debt or other obligation referred to in paragraph (3.1)(a) outstanding at a particular time in the relevant period; and
(ii) the total of all amounts each of which is at that particular time
(A) an amount outstanding as or on account of an intermediary debt, in respect of the particular debt or other obligation, that is owed to the non-resident person,
(B) the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of the particular debt or other obligation, or
(C) if neither clause (A) nor (B) applies at that particular time, nil;
- C
- is the average of all amounts each of which is the amount of the particular debt or other obligation outstanding at a time in the relevant period;
- D
- is the portion, if any, of the particular amount deemed by subsection 214(16) to have been paid by the taxpayer as a dividend;
- E
- is the rate of tax (determined without reference to subsection 214(16)) that would be imposed under this Part on the particular amount if the particular amount were paid by the taxpayer to the non-resident person at that time; and
- F
- is the rate of tax (determined without reference to subsection 214(16)) imposed under this Part on the intermediary in respect of all or the portion of the particular amount paid or credited to the intermediary.
Marginal note:Back-to-back loan arrangement
(3.3) If subsection (3.2) applies at any time to deem a taxpayer to pay interest at that time to more than one non-resident person referred to in subparagraph (3.1)(c)(i) or (ii) in respect of a particular debt or other obligation and the total of all amounts determined (without reference to this subsection) for B in subsection (3.2) in respect of the particular debt or other obligation exceeds the average of all amounts each of which is the amount of the particular debt or other obligation outstanding at a time in the relevant period, then the taxpayer may reduce the amount determined for B in respect of one or more of the non-resident persons by one or more amounts designated by the taxpayer, as is reasonable in the circumstances, the total of which designated amounts shall not be greater than that excess.
(2) Subsection (1) applies to amounts paid or credited after 2014.
- Date modified: