Economic Action Plan 2014 Act, No. 2 (S.C. 2014, c. 39)
Full Document:
Assented to 2014-12-16
22. (1) The Act is amended by adding the following after section 93.1:
Marginal note:Definitions
93.2 (1) The definitions in this subsection apply in this section.
“equity interest”
« participation »
“equity interest”, in a non-resident corporation without share capital, means any right, whether absolute or contingent, conferred by the non-resident corporation to receive, either immediately or in the future, an amount that can reasonably be regarded as all or any part of the capital, revenue or income of the non-resident corporation, but does not include a right as creditor.
“non-resident corporation without share capital”
« société non-résidente sans capital-actions »
“non-resident corporation without share capital” means a non-resident corporation that, determined without reference to this section, does not have capital divided into shares.
Marginal note:Non-resident corporation without share capital
(2) For the purposes of this Act,
(a) equity interests in a non-resident corporation without share capital that have identical rights and obligations, determined without reference to proportionate differences in all of those rights and obligations, are deemed to be shares of a separate class of the capital stock of the corporation;
(b) the corporation is deemed to have 100 issued and outstanding shares of each class of its capital stock;
(c) each person or partnership that holds, at any time, an equity interest in a particular class of the capital stock of the corporation is deemed to own, at that time, that number of shares of the particular class that is equal to the proportion of 100 that
(i) the fair market value, at that time, of all the equity interests of the particular class held by the person or partnership
is of
(ii) the fair market value, at that time, of all the equity interests of the particular class; and
(d) shares of a particular class of the capital stock of the corporation are deemed to have rights and obligations that are the same as those of the corresponding equity interests.
Marginal note:Non-resident corporation without share capital
(3) For the purposes of section 51, subsection 85.1(3), section 86 and paragraph 95(2)(c),
(a) subject to paragraph (b), if at any time a taxpayer resident in Canada or a foreign affiliate of the taxpayer (in this subsection referred to as the “vendor”) disposes of capital property that is shares of the capital stock of a foreign affiliate of the taxpayer, or a debt obligation owing to the taxpayer by the affiliate, to — or exchanges the shares or debt for shares of the capital stock of — a non-resident corporation without share capital, that is immediately after that time a foreign affiliate of the taxpayer, in a manner that increases the fair market value of a class of shares of the capital stock of the non-resident corporation, the non-resident corporation is deemed to have issued, and the vendor is deemed to have received, new shares of the class as consideration in respect of the disposition or exchange; and
(b) if the taxpayer elects under this paragraph and files the election in writing with the Minister on or before its filing-due date for the taxation year that includes the day on which the disposition or exchange occurs, paragraph (a) does not apply to the disposition or exchange.
Definition of “Australian trust”
93.3 (1) In this section, “Australian trust”, at any time, means a trust in respect of which the following apply at that time:
(a) in the absence of subsection (3), the trust would be described in paragraph (h) of the definition “exempt foreign trust” in subsection 94(1);
(b) the trust is resident in Australia;
(c) the interest of each beneficiary under the trust is described by reference to units of the trust; and
(d) the liability of each beneficiary under the trust is limited by the operation of any law governing the trust.
Marginal note:Conditions for subsection (3)
(2) Subsection (3) applies at any time to a taxpayer resident in Canada in respect of a trust if
(a) a non-resident corporation is at that time beneficially interested in the trust;
(b) the non-resident corporation is at that time a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest;
(c) the trust is at that time an Australian trust;
(d) the total fair market value at that time of all fixed interests (in this section as defined in subsection 94(1)) of a class in the trust held by the non-resident corporation, or persons or partnerships that do not deal at arm’s length with the non-resident corporation, is at least 10% of the total fair market value at that time of all fixed interests of the class; and
(e) unless the non-resident corporation first acquires a beneficial interest in the trust at that time, immediately before that time (referred to in this paragraph as the “preceding time”) subsection (3) applied
(i) to the taxpayer in respect of the trust, or
(ii) to a corporation resident in Canada, that at the preceding time did not deal at arm’s length with the taxpayer, in respect of the trust.
Marginal note:Australian trusts
(3) If this subsection applies at any time to a taxpayer resident in Canada in respect of a trust, the following rules apply at that time for the specified purposes:
(a) the trust is deemed to be a non-resident corporation that is resident in Australia and not to be a trust;
(b) each particular class of fixed interests in the trust is deemed to be a separate class of 100 issued shares, of the capital stock of the non-resident corporation, that have the same attributes as the interests of the particular class;
(c) each beneficiary under the trust is deemed to hold the number of shares of each separate class described in paragraph (b) equal to the proportion of 100 that the fair market value at that time of that beneficiary’s fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class;
(d) the non-resident corporation is deemed to be controlled by the taxpayer resident in Canada — a foreign affiliate of which is referred to in paragraph (2)(b) and is beneficially interested in the trust — that has the greatest equity percentage in the non-resident corporation;
(e) a particular foreign affiliate of the taxpayer in which the taxpayer has a direct equity percentage (as defined in subsection 95(4)) at a particular time, and that is not a controlled foreign affiliate of the taxpayer at that time, is deemed to be a controlled foreign affiliate of the taxpayer at that time if, at that time,
(i) the particular affiliate has an equity percentage (as defined in subsection 95(4)) in the foreign affiliate referred to in paragraph (2)(b), or
(ii) the particular affiliate is the foreign affiliate referred to in paragraph (2)(b); and
(f) section 94.2 does not apply to the taxpayer in respect of the trust.
Marginal note:Specified purposes
(4) For the purposes of subsection (3), the specified purposes are
(a) the determination, in respect of an interest in an Australian trust, of the Canadian tax results (as defined in subsection 261(1)) of the taxpayer resident in Canada referred to in subsection (3) for a taxation year in respect of shares of the capital stock of a foreign affiliate of the taxpayer;
(b) the filing obligations of the taxpayer under section 233.4; and
(c) if the taxpayer is a corporation resident in Canada, the application of section 212.3 in respect of an investment (as defined in subsection 212.3(10)) by the taxpayer.
Marginal note:Mergers
(5) For the purposes of this section,
(a) if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection; and
(b) if there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection.
(2) Section 93.2 of the Act, as enacted by subsection (1), applies in respect of taxation years of non-resident corporations that end after 1994 except that
(a) if a taxpayer elects in writing under this subsection and files the election with the Minister of National Revenue on or before the 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 receives royal assent and the day that is one year after the day on which this Act receives royal assent, then section 93.2 of the Act, as enacted by subsection (1), applies, in respect of the taxpayer, in respect of taxation years of non-resident corporations that end after July 12, 2013;
(b) in respect of dispositions that occur before July 12, 2013, section 93.2 of the Act, as enacted by subsection (1), is to be read without reference to its subsection (3); and
(c) in respect of dispositions that occur after July 11, 2013 and before October 10, 2014, the reference in paragraph 93.2(3)(b), as enacted by subsection (1), to the taxpayer’s “filing-due date” is to be read as the filing-due date for the taxpayer’s taxation year that includes the day on which this Act receives royal assent.
(3) Section 93.3 of the Act, as enacted by subsection (1), is deemed to have come into force on July 12, 2013. However, if a corporation resident in Canada and each other corporation resident in Canada that, at any time after 2005 and before July 12, 2013, was both related to the corporation and had a foreign affiliate (determined as if the reference in paragraph (b) of the definition “equity percentage” in subsection 95(4) of the Act to “any corporation” were a reference to “any corporation other than a corporation resident in Canada”) that was beneficially interested in an Australian trust (as defined in subsection 93.3(1) of the Act, as enacted by subsection (1)), jointly elect in writing under this subsection and file the election with the Minister of National Revenue on or before the day that is one year after the day on which this Act receives royal assent, then in respect of each corporation that has elected under this subsection, section 93.3 of the Act, as enacted by subsection (1),
(a) is deemed to have come into force on January 1, 2006; and
(b) before July 12, 2013 is to be read as if it contained the following after subsection (5):
(6) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of this section, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that
(a) the fair market value of the member’s interest in the partnership at that time
is of
(b) the fair market value of all members’ interests in the partnership at that time.
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