Budget Implementation Act, 2016, No. 2 (S.C. 2016, c. 12)
Full Document:
Assented to 2016-12-15
43 (1) Section 122.61 of the Act is amended by adding the following after subsection (4):
Marginal note:Annual adjustment
(5) Each amount expressed in dollars in subsection (1) shall be adjusted so that, where the base taxation year in relation to a particular month is after 2018, the amount to be used under that subsection for the month is the total of
(a) the amount that would, but for subsection (7), be the relevant amount used under subsection (1) for the month that is one year before the particular month, and
(b) the product obtained by multiplying
(i) the amount referred to in paragraph (a)
by
(ii) the amount, adjusted in such manner as is prescribed and rounded to the nearest one-thousandth or, where the result obtained is equidistant from 2 such consecutive one-thousandths, to the higher thereof, that is determined by the formula
(A/B) − 1
where
- A
- is the Consumer Price Index (within the meaning assigned by subsection 117.1(4)) for the 12-month period that ended on September 30 of the base taxation year, and
- B
- is the Consumer Price Index for the 12 month period preceding the period referred to in the description of A.
(2) Section 122.61 of the Act is amended by adding the following after subsection (6.1):
Marginal note:Rounding
(7) If an amount referred to in subsection (1), when adjusted as provided in subsection (5), is not a multiple of one dollar, it shall be rounded to the nearest multiple of one dollar or, where it is equidistant from 2 such consecutive multiples, to the higher thereof.
44 (1) Subparagraphs 125(1)(a)(i) and (ii) of the Act are replaced by the following:
(i) the total of all amounts each of which is the amount of income of the corporation for the year from an active business carried on in Canada, other than an amount that is
(A) described in paragraph (a) of the description of A in the definition specified partnership income in subsection (7) for the year,
(B) described in subparagraph (a)(i) of the definition specified corporate income in subsection (7) for the year, or
(C) paid or payable to the corporation by another corporation with which it is associated, that is deemed by subsection 129(6) to be income for the year from an active business carried on by the corporation in circumstances where the associated corporation is not a Canadian-controlled private corporation or is a Canadian-controlled private corporation that has made an election under subsection 256(2) in respect of its taxation year in which the amount was paid or payable,
(ii) the specified partnership income of the corporation for the year, and
(ii.1) the specified corporate income of the corporation for the year
(2) Section 125 of the Act is amended by adding the following after subsection (3):
Marginal note:Reduction — business limit
(3.1) The business limit for the year of a corporation under subsection (2), (3) or (4) is reduced by the total of all amounts each of which is the portion, if any, of the business limit that the corporation assigns to another corporation under subsection (3.2).
Marginal note:Assignment
(3.2) For the purpose of this section, a Canadian-controlled private corporation (in this subsection referred to as the first corporation) may assign all or any portion of its business limit under subsection (2), (3) or (4) for a taxation year of the first corporation to another Canadian-controlled private corporation (in this subsection referred to as the second corporation) for a taxation year of the second corporation if
(a) the second corporation has an amount of income, for its taxation year, referred to in subparagraph (a)(i) of the definition specified corporate income in subsection (7) from the provision of services or property directly to the first corporation;
(b) the first corporation’s taxation year ends in the second corporation’s taxation year;
(c) the amount assigned does not exceed the amount determined by the formula
A − B
where
- A
- is the amount of income referred to in paragraph (a), and
- B
- is the portion of the amount described in A that is deductible by the first corporation in respect of the amount of income referred to in clause (1)(a)(i)(A) or (B) for the year; and
(d) a prescribed form is filed with the Minister by
(3) The portion of subsection 125(5) of the Act before paragraph (a) is replaced by the following:
Marginal note:Special rules for business limit
(5) Notwithstanding subsections (2), (3) and (4),
(4) The portion of subsection 125(5.1) of the Act before the formula is replaced by the following:
Marginal note:Business limit reduction
(5.1) Notwithstanding subsections (2), (3), (4) and (5), a Canadian-controlled private corporation’s business limit for a particular taxation year ending in a calendar year is the amount, if any, by which its business limit otherwise determined for the particular year exceeds the amount determined by the formula
(5) The description of A in the definition specified partnership income in subsection 125(7) is replaced by the following:
- A
- is the total of all amounts each of which is an amount in respect of a partnership of which the corporation was a member, or a designated member, in the year equal to the least of
(a) the total of all amounts each of which is an amount in respect of an active business carried on in Canada by the corporation as a member, or a designated member, of the partnership determined by the formula
G – H
where
- G
- is the total of all amounts each of which is
(i) the corporation’s share of the income (determined in accordance with Subdivision J of Division B) of the partnership for a fiscal period of the business that ends in the year,
(ii) income of the corporation for the year from the provision (directly or indirectly, in any manner whatever) of services or property to the partnership, or
(iii) an amount included in the corporation’s income for the year in respect of the business under any of subsections 34.2(2), (3) and (12), and
- H
- is the total of all amounts deducted in computing the corporation’s income for the year from the business (other than amounts that were deducted in computing the income of the partnership from the business or the income of the corporation described under subparagraph (ii) of the description of G) or in respect of the business under subsection 34.2(4) or (11),
(b) an amount equal to
(i) if the corporation was a member of the partnership, the corporation’s specified partnership business limit for the year, and
(ii) if the corporation was a designated member of the partnership, the total of all amounts assigned to it under subsection (8) for the year and, where no such amounts have been assigned, nil, and
(c) nil, if
(i) the corporation is a member, or a designated member, of the partnership (including indirectly through one or more other partnerships) in the year, and
(ii) the partnership provides services or property to either
(A) a private corporation (directly or indirectly in any manner whatever) in the year, if
(I) the corporation (or one of its shareholders) or a person who does not deal at arm’s length with the corporation (or one of its shareholders) holds a direct or indirect interest in the private corporation, and
(II) it is not the case that all or substantially all of the partnership’s income for the year from an active business is from the provision of services or property to
1 persons (other than the private corporation) that deal at arm’s length with the partnership and each person that holds a direct or indirect interest in the partnership, or
2 partnerships with which the partnership deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest, or
(B) a particular partnership (directly or indirectly in any manner whatever) in the year, if
(I) the corporation (or one of its shareholders) does not deal at arm’s length with the particular partnership or a person that holds a direct or indirect interest in the particular partnership, and
(II) it is not the case that all or substantially all of the partnership’s income for the year from an active business is from the provision of services or property to
1 persons that deal at arm’s length with the partnership and each person that holds a direct or indirect interest in the partnership, or
2 partnerships (other than the particular partnership) with which the partnership deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest, and
(6) Paragraph (b) of the description of B in the definition specified partnership income in subsection 125(7) of the Act is replaced by the following:
(b) the total of all amounts each of which is an amount in respect of a partnership of which the corporation was a member, or a designated member, in the year equal to the amount determined by the formula
N – O
where
- N
- is the amount determined in respect of the partnership for the year under paragraph (a) of the description of A, and
- O
- is the amount determined in respect of the partnership for the year
(7) Subsection 125(7) of the Act is amended by adding the following in alphabetical order:
- designated member
designated member, of a particular partnership in a taxation year, means a Canadian-controlled private corporation that provides (directly or indirectly, in any manner whatever) services or property to the particular partnership at any time in the corporation’s taxation year where, at any time in the year,
(a) the corporation is not a member of the particular partnership, and
(b) either
(i) one of its shareholders holds a direct or indirect interest in the particular partnership, or
(ii) if subparagraph (i) does not apply,
(A) the corporation does not deal at arm’s length with a person that holds a direct or indirect interest in the particular partnership, and
(B) it is not the case that all or substantially all of the corporation’s income for the year from an active business is from providing services or property to
(I) persons with which the corporation deals at arm’s length, or
(II) partnerships (other than the particular partnership) with which the corporation deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest; (associé désigné)
- specified corporate income,
specified corporate income, of a corporation for a taxation year, means the lesser of
(a) the lesser of
(i) the total of all amounts each of which is income from an active business of the corporation for the year from the provision of services or property to a private corporation (directly or indirectly, in any manner whatever) if
(A) at any time in the year, the corporation (or one of its shareholders) or a person who does not deal at arm’s length with the corporation (or one of its shareholders) holds a direct or indirect interest in the private corporation, and
(B) it is not the case that all or substantially all of the corporation’s income for the year from an active business is from the provision of services or property to
(I) persons (other than the private corporation) with which the corporation deals at arm’s length, or
(II) partnerships with which the corporation deals at arm’s length, other than a partnership in which a person that does not deal at arm’s length with the corporation holds a direct or indirect interest, and
(ii) the total of all amounts each of which is the portion, if any, of the business limit of a private corporation described in subparagraph (i) for a taxation year that the private corporation assigns to the corporation under subsection (3.2), and
(b) an amount that the Minister determines to be reasonable in the circumstances; (revenu de société déterminé)
- specified partnership business limit,
specified partnership business limit, of a person for a taxation year, at any particular time, means the amount determined by the formula
(K/L) × M – T
where
- K
- is the total of all amounts each of which is the person’s share of the income (determined in accordance with Subdivision J of Division B) of a partnership of which the person was a member for a fiscal period ending in the year from an active business carried on in Canada,
- L
- is the total of all amounts each of which is the income of the partnership for a fiscal period referred to in paragraph (a) of the description of A in the definition specified partnership income in this subsection from an active business carried on in Canada,
- M
- is the lesser of
(a) the amount of the business limit indicated in subsection (2) for a corporation that is not associated in a taxation year with one or more other Canadian-controlled private corporations, and
(b) the product obtained by the formula
(Q/R) × S
where
- Q
- is the amount referred to in paragraph (a),
- R
- is 365, and
- S
- is the total of all amounts each of which is the number of days in a fiscal period of the partnership that ends in the year, and
- T
- is the total of all amounts each of which is an amount, if any, that the person assigns under subsection (8); (plafond des affaires de société de personnes déterminé)
(8) Section 125 of the Act is amended by adding the following after subsection (7):
Marginal note:Assignment — specified partnership business limit
(8) For the purpose of the definition specified partnership income in subsection (7), a person that is a member of a partnership in a taxation year may assign to a designated member of the partnership — for a taxation year of the designated member — all or any portion of the person’s specified partnership business limit (determined without reference to this assignment) in respect of the person’s taxation year if
(a) the person is described in paragraph (b) of the definition designated member in subsection (7) in respect of the designated member in the designated member’s taxation year;
(b) the specified partnership business limit of the person is in respect of a fiscal period of the partnership that ends in the designated member’s taxation year; and
(c) a prescribed form is filed with the Minister by
Marginal note:Anti-avoidance
(9) If a corporation provides services or property to a person or partnership that holds a direct or indirect interest in a particular partnership or corporation and one of the reasons for the provision of the services or property to the person or partnership, instead of to the particular partnership or corporation, is to avoid the application of subparagraph (1)(a)(ii) or (ii.1) in respect of the income from the provision of the services or property, no amount in respect of the corporation’s income from the provision of the services or property is to be included in the total amount determined under paragraph (1)(a).
Marginal note:Computational rule — specified corporate income
(10) For the purpose of determining an amount for a taxation year in respect of a corporation under clause (1)(a)(i)(B) or subparagraph (1)(a)(ii.1), an amount of income is to be excluded if the amount is
(a) income from an active business of the corporation for the year from the provision of services or property to another corporation with which the corporation is associated (in this subsection referred to as the associated corporation); and
(b) not deductible by the associated corporation for its taxation year in respect of an amount included in the income of the associated corporation that is
(9) Subsections (1) to (8) apply to
(a) taxation years that begin after March 21, 2016; and
(b) a person’s taxation year that begins before March 22, 2016 and ends after March 21, 2016 if
(i) the person would be entitled to make an assignment to a corporation under subsection 125(3.2) of the Act (as enacted by subsection (2)) or under subsection 125(8) of the Act (as enacted by subsection (8)) if subsections (1) to (8) applied to the person’s taxation year that begins before March 22, 2016 and ends after March 21, 2016,
(ii) the taxation year of the corporation referred to in subparagraph (i) begins after March 21, 2016,
(iii) the person makes such an assignment for its taxation year that begins before March 22, 2016 and ends after March 21, 2016 and the assignment is to the corporation for its taxation year that begins after March 21, 2016, and
(iv) the person files with the Minister of National Revenue the prescribed form that is required to be filed under subsection 125(3.2) of the Act (as enacted by subsection (2)) in its return of income for its taxation year that begins before March 22, 2016 and ends after March 21, 2016, on or before the day that is the later of the filing-due date of the person (as defined under subsection 248(1) of the Act) or 60 days after this Act receives royal assent.
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