Budget Implementation Act, 2016, No. 2 (S.C. 2016, c. 12)
Full Document:
Assented to 2016-12-15
56 Paragraph 162(10)(a) of the Act is replaced by the following:
(a) knowingly or under circumstances amounting to gross negligence, fails to file an information return as and when required by any of sections 233.1 to 233.4 and 233.8, or
57 (1) Subsections 212(3.1) to (3.3) of the Act are replaced by the following:
Marginal note:Back-to-back loan arrangement
(3.1) Subsection (3.2) applies at any time in respect of a taxpayer if
(a) the taxpayer pays or credits a particular amount at that time as, 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 and subsection (3.2) referred to as the immediate funder);
(b) the immediate funder is not
(c) at any time in the period during which the interest accrued (in this subsection and subsections (3.2) and (3.3) referred to as the relevant period), a relevant funder, in respect of a particular relevant funding arrangement,
(i) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a person or partnership that meets any of the following conditions:
(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 a relevant funding arrangement, or
(B) it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because
(ii) has a specified right in respect of a particular property that was granted directly or indirectly by a person or partnership and
(A) the existence of the specified right is required under the terms and conditions of the particular relevant funding arrangement, or
(B) it can reasonably be concluded that all or a portion of the particular relevant funding arrangement was entered into, or was permitted to remain in effect, because
(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 any ultimate funder rather than the immediate funder, 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) at any time during the relevant period, the total of all amounts — each of which is an amount outstanding as or on account of a debt or other obligation owed by the immediate funder that is a relevant funding arrangement or the fair market value of a particular property in respect of which the immediate funder is granted a specified right that is a relevant funding arrangement — 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 immediate funder 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 immediate funder is granted a security interest (as defined in subsection 18(5)) in respect of a property that is the debt or other obligation owed by the immediate funder 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 each ultimate funder, the amount of which is determined for each particular ultimate funder 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 portion, if any, of the particular amount deemed by subsection 214(16) to have been paid by the taxpayer as a dividend;
- C
- is the average of all amounts each of which is, at a particular time in the relevant period, the amount determined by the formula
G – H
where
- G
- is the lesser of the following amounts:
(a) the amount of the particular debt or other obligation referred to in paragraph (3.1)(a) outstanding at the particular time, and
(b) the total of all amounts each of which is at that particular time
(i) an amount outstanding as or on account of a debt or other obligation that is owed to the particular ultimate funder under a relevant funding arrangement,
(ii) the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular ultimate funder has granted a specified right under a relevant funding arrangement, or
(iii) if neither subparagraph (i) nor (ii) applies at that particular time, nil, and
- H
- is the total of all amounts each of which is, at the particular time, the amount that is
(a) an amount outstanding as or on account of a debt or other obligation that is owed by the particular ultimate funder under a relevant funding arrangement,
(b) the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular ultimate funder has a specified right under a relevant funding arrangement, or
(c) if neither paragraph (a) nor (b) applies at that particular time, nil;
- D
- 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;
- 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 particular ultimate funder at that time; and
- F
- is the rate of tax (determined without reference to subsection 214(16)) imposed under this Part on the immediate funder in respect of all or the portion of the particular amount paid or credited to the immediate funder.
Marginal note:Back-to-back arrangement — election
(3.21) Subsection (3.22) applies in respect of a taxpayer and two or more ultimate funders (referred to in this subsection and subsection (3.22) as the electing ultimate funders) at any time if
(a) at that time, subsection (3.2) applies in respect of the taxpayer;
(b) prior to that time, the taxpayer and the electing ultimate funders have jointly filed an election under this subsection;
(c) the election designates one of the electing ultimate funders to be the recipient of interest payments that are deemed to be made by the taxpayer under subsection (3.22);
(d) at that time, the tax that would be payable under this Part in respect of an interest payment by the taxpayer to the designated ultimate funder is not less than the tax that would be payable under this Part if the interest payment were made by the taxpayer to any of the other electing ultimate funders; and
(e) the election has not been revoked prior to that time.
Marginal note:Back-to-back arrangement — election
(3.22) If this subsection applies at any time in respect of a taxpayer and two or more electing ultimate funders, then each interest payment that would, in the absence of this subsection, have been deemed under subsection (3.2) to have been made at that time by the taxpayer to an electing ultimate funder, and received by the electing ultimate funder from the taxpayer, is deemed to have instead been
Marginal note:Excess funding
(3.3) Subsection (3.4) applies in respect of a particular relevant funder if the amount determined by the following formula is greater than nil:
A – B
where
- A
- is the total of all amounts each of which is the amount owing by the particular relevant funder, or is the fair market value of a property in respect of which the particular relevant funder has a specified right, under a relevant funding arrangement; and
- B
- is the total of all amounts each of which is the amount owed to the particular relevant funder, or is the fair market value of a property in respect of which the particular relevant funder has granted a specified right, under a relevant funding arrangement.
Marginal note:Excess funding — deemed funding allocation
(3.4) If this subsection applies in respect of a particular relevant funder, for the purposes of subsections (3.2) to (3.4) (other than for the purpose of applying subsections (3.3) and (3.4) in respect of the particular relevant funder), each amount that is owed by the particular relevant funder, or that is the fair market value of a property in respect of which the particular relevant funder has been granted a specified right, under a relevant funding arrangement, is deemed to be the amount determined by the formula
C/D x E
where
- C
- is the amount owing or the fair market value of the property, as the case may be;
- D
- is the amount determined for A in subsection (3.3); and
- E
- is the amount determined for B in subsection (3.3).
Marginal note:Multiple funding arrangements
(3.5) If an amount owing by a relevant funder or a specified right held by the relevant funder is a relevant funding arrangement in respect of more than one particular debt or other obligation referred to in paragraph (3.1)(a), for the purposes of applying subsections (3.2) to (3.4) in respect of each of the particular debts or other obligations, the amount owing, or the fair market value of the property in respect of which the specified right was granted, as the case may be, is deemed, in respect of each particular debt or other obligation, to be the amount determined by the formula
A/B × C
where
- A
- is the total of all amounts each of which is an amount owing to the relevant funder, or the fair market value of a property in respect of which the relevant funder has granted a specified right, under a relevant funding arrangement, in respect of the particular debt or other obligation;
- B
- is the total of all amounts each of which is an amount owing to the relevant funder, or the fair market value of a property in respect of which the relevant funder has granted a specified right, under a relevant funding arrangement, in respect of all of the particular debts or other obligations; and
- C
- is the amount owing by the relevant funder or the fair market value of the property in respect of which the relevant funder holds the specified right.
Marginal note:Back-to-back loan arrangement — character substitution
(3.6) Subsection (3.7) applies in respect of
(a) shares (other than specified shares) of the capital stock of a particular relevant funder, in respect of a particular relevant funding arrangement, if — at any time at or after the time when the particular debt or other obligation referred to in paragraph (3.1)(a) was entered into — the particular relevant funder has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, a dividend on the shares, either immediately or in the future and either absolutely or contingently, to a person or partnership, and any of the following conditions is met:
(i) the amount of the dividend is determined, in whole or in part, by reference to an amount of interest paid or credited, or an obligation to pay or credit interest, under a relevant funding arrangement, or
(ii) it can reasonably be concluded that the particular relevant funding arrangement was entered into or was permitted to remain in effect, because
(b) a specified royalty arrangement, if — at any time at or after the time when the particular debt or other obligation referred to in paragraph (3.1)(a) was entered into — a particular relevant funder, in respect of a particular relevant funding arrangement, is a specified licensee that has an obligation to pay or credit an amount under the specified royalty arrangement, either immediately or in the future and either absolutely or contingently, to a person or partnership, and any of the following conditions is met:
(i) the amount is determined, in whole or in part, by reference to an amount of interest paid or credited, or an obligation to pay or credit interest, under a relevant funding arrangement, or
(ii) it can reasonably be concluded that the particular relevant funding arrangement was entered into or was permitted to remain in effect, because
Marginal note:Back-to-back loan arrangement — character substitution
(3.7) If this subsection applies in respect of a specified royalty arrangement (under which a particular relevant funder is a specified licensee) or shares of the capital stock of a particular relevant funder, then, for the purposes of subsections (3.1) to (3.8),
(a) the specified royalty arrangement or the holding of the shares, as the case may be, is deemed to be a relevant funding arrangement;
(b) the specified licensor or shareholder, as the case may be, in respect of the relevant funding arrangement, is deemed to be a relevant funder, in respect of the relevant funding arrangement;
(c) the conditions in paragraph (3.1)(c) are deemed to be met in respect of the relevant funding arrangement; and
(d) the relevant funder is deemed to be owed, under the relevant funding arrangement and by the particular relevant funder, an amount as or on account of a debt, the outstanding amount of which is determined by the formula
(A – B) × C/D
where
- A
- is the total of all amounts each of which is at the particular time,
(i) an amount outstanding as or on account of a debt or other obligation that is owed to the particular relevant funder under a relevant funding arrangement,
(ii) the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular relevant funder has granted a specified right under a relevant funding arrangement, or
(iii) if neither subparagraph (i) nor (ii) applies at that particular time, nil,
- B
- is the total of all amounts each of which is, at the particular time, in respect of a relevant funding arrangement (other than a relevant funding arrangement deemed under paragraph (a)) and is
(i) an amount outstanding as or on account of a debt or other obligation that is owed by the particular relevant funder under the relevant funding arrangement,
(ii) the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of which the particular relevant funder has been granted a specified right under a relevant funding arrangement, or
(iii) if neither subparagraph (i) nor (ii) applies at that particular time, nil,
- C
- is the fair market value, at the particular time, of
- D
- is the total of all amounts each of which is, in respect of a relevant funding arrangement referred to in the description of C, the amount determined for C at the particular time.
Marginal note:Back-to-back loan arrangement — definitions
(3.8) The following definitions apply in this subsection and subsections (3.1) to (3.7) and (3.81).
- relevant funder
relevant funder, in respect of a relevant funding arrangement, means
(a) if the relevant funding arrangement is described in paragraph (a) of the definition relevant funding arrangement, the immediate funder referred to in paragraph (3.1)(a);
(b) if the relevant funding arrangement is described in paragraph (b) of the definition relevant funding arrangement, the creditor in respect of the debt or other obligation or the grantor of the specified right, as the case may be; or
(c) a person or partnership that does not deal at arm’s length with a person or partnership that is referred to in paragraph (a) or (b) and that deals at arm’s length with the taxpayer. (bailleur de fonds considéré)
- relevant funding arrangement
relevant funding arrangement means
(a) the particular debt or other obligation referred to in paragraph (3.1)(a); and
(b) each debt or other obligation or specified right, owing by or granted to a relevant funder, in respect of a particular relevant funding arrangement, if the debt or other obligation or specified right meets the conditions in subparagraph (3.1)(c)(i) or (ii) in respect of a relevant funding arrangement. (mécanisme de financement considéré)
- specified licensee
specified licensee means
- specified licensor
specified licensor means
- specified right
specified right has the same meaning as in subsection 18(5). (droit déterminé)
- specified royalty arrangement
specified royalty arrangement has the same meaning as in subsection (3.94). (mécanisme de redevance déterminé)
- specified share
specified share means a share of the capital stock of a corporation if, under the terms or conditions of the share, or any agreement or arrangement relating to the share,
(a) the holder of the share may cause the share to be redeemed, acquired or cancelled;
(b) the issuing corporation is, or may be, required to redeem, acquire or cancel the share at a specific time; or
(c) the share is convertible or exchangeable into a share that meets the conditions in paragraph (a) or (b). (action déterminée)
- ultimate funder
ultimate funder means a relevant funder, in respect of a relevant funding arrangement (other than the immediate funder) that either
(a) is not a debtor, or a holder of a specified right, under a relevant funding arrangement; or
(b) is a debtor, or a holder of a specified right, under a relevant funding arrangement, if the amount that would — if the relevant funder were an ultimate funder — be determined for C in the formula in subsection (3.2) is greater than nil. (bailleur de fonds ultime)
Marginal note:Specified shares
(3.81) For the purposes of subsections (3.1) to (3.8),
(a) specified shares of a relevant funder, in respect of a relevant funding arrangement, held at any time by a person or partnership are deemed to be a debt of the relevant funder owing to the person or partnership; and
(b) the amount outstanding at that time as or on account of the debt is deemed to be equal to the fair market value of the specified shares at that time.
Marginal note:Back-to-back arrangement — rents, royalties, similar payments
(3.9) Subsection (3.91) applies at any time in respect of a taxpayer if
(a) the taxpayer pays or credits a particular amount at that time as, on account or in lieu of payment of, or in satisfaction of, rent, royalty or similar payment, in respect of a particular lease, licence or similar agreement, to a non-resident person or a partnership any member of which is a non-resident person (in this subsection and subsections (3.91) to (3.94) referred to as the immediate licensor);
(b) at any time at or after the time when the particular lease, licence or similar agreement was entered into,
(i) a relevant licensor in respect of a particular relevant royalty arrangement has an obligation to pay or credit an amount, either immediately or in the future and either absolutely or contingently, to a person or partnership, in respect of a specified royalty arrangement, and either of the following additional conditions is met:
(A) the amount is determined, in whole or in part, by reference to
(I) an amount paid or credited, or an obligation to pay or credit an amount, in respect of a relevant royalty arrangement, or
(II) one or more of the fair market value of, any revenue, profits, income, or cash flow from, or any other similar criteria in respect of, a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B) it can reasonably be concluded that the particular relevant royalty arrangement was entered into, or was permitted to remain in effect, because
(ii) either the person or partnership
(c) the tax that would be payable under this Part in respect of the particular amount, if the particular amount were paid or credited to an ultimate licensor rather than the immediate licensor, is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.91)) in respect of the particular amount.
Marginal note:Back-to-back arrangement — rents, royalties, similar payments
(3.91) If this subsection applies at any time in respect of a taxpayer, then, for the purposes of paragraph (1)(d), the taxpayer is deemed, at that time, to pay to each ultimate licensor an amount — of the same character as the particular amount referred to in paragraph (3.9)(a) — determined for each particular ultimate licensor by the formula
(A × B/C) × (D – E)/D
where
- A
- is the particular amount referred to in paragraph (3.9)(a);
- B
- is
(a) the portion of the amount referred to in paragraph (3.9)(a) that is demonstrated, to the satisfaction of the Minister, to be reasonably allocable to the particular ultimate licensor, and
(b) if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, one;
- C
- is
(a) the total of all amounts, each of which is the portion of the amount referred to in paragraph (3.9)(a) that is demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each ultimate licensor, and
(b) if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, the number of ultimate licensors;
- D
- is
(a) if an amount is not demonstrated, to the satisfaction of the Minister, to be reasonably allocable to each particular ultimate licensor, the highest rate of tax that would be imposed under this Part on the particular amount referred to in paragraph (3.9)(a) if the particular amount were paid by the taxpayer to any of the ultimate licensors at that time, and
(b) in any other case, the rate of tax that would be imposed under this Part on the particular amount referred to in paragraph (3.9)(a) if the particular amount were paid by the taxpayer to the particular ultimate licensor at that time; and
- E
- is the rate of tax imposed under this Part at that time on the immediate licensor in respect of the particular amount, referred to in paragraph (3.9)(a), paid or credited to the immediate licensor.
Marginal note:Back-to-back arrangement — character substitution
(3.92) Subsection (3.93) applies in respect of
(a) shares of the capital stock of a particular relevant licensor, in respect of a particular relevant royalty arrangement, if — at any time at or after the time when a particular lease, license or similar agreement referred to in paragraph (3.9)(a) was entered into — the particular relevant licensor has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, a dividend on the shares, either immediately or in the future and either absolutely or contingently, to a person or partnership, and
(i) either of the following conditions is met:
(A) the amount of the dividend is determined, in whole or in part, by reference to
(I) an amount of rent, royalty or similar payment paid or credited, or an obligation to pay or credit rent, royalty or similar payment, under a relevant royalty arrangement, or
(II) one or more of the fair market value of, any revenue profits, income or cash flow from, or any other similar criteria in respect of a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B) it can reasonably be concluded that the particular relevant royalty arrangement was entered into or was permitted to remain in effect, because
(ii) either the person or partnership
(b) an amount outstanding as or on account of a debt or other obligation to pay an amount, if — at any time at or after the time when a particular lease, license or similar agreement referred to in paragraph (3.9)(a) was entered into — a particular relevant licensor, in respect of a particular relevant royalty arrangement, has an obligation to pay or credit an amount as, on account or in lieu of payment of, or in satisfaction of, interest under the debt or other obligation, either immediately or in the future and either absolutely or contingently, to a person or partnership, and
(i) either of the following conditions is met:
(A) the amount of the interest is determined, in whole or in part, by reference to
(I) an amount of rent, royalty or similar payment paid or credited, or an obligation to pay or credit rent, royalty or similar payment, under a relevant royalty arrangement, or
(II) one or more of the fair market value of, any revenue profits, income or cash flow from, or any other similar criteria in respect of a particular property, if a right in respect of the property is granted under the particular lease, licence or similar agreement, or
(B) it can reasonably be concluded that the particular relevant royalty arrangement was entered into or was permitted to remain in effect, because
(ii) either the person or partnership
Marginal note:Back-to-back arrangement — character substitution
(3.93) If this subsection applies in respect of a debt or other obligation to pay an amount (under which a particular relevant licensor is a borrower) or shares of the capital stock of a particular relevant licensor, then, for the purposes of subsections (3.9) to (3.94),
(a) the debt or other obligation or the holding of the shares, as the case may be, is deemed to be a relevant royalty arrangement;
(b) the creditor or shareholder, as the case may be, in respect of the relevant royalty arrangement, is deemed to be a relevant licensor, in respect of the relevant royalty arrangement; and
(c) the relevant royalty arrangement is deemed to be a specified royalty arrangement in respect of which the conditions in paragraph (3.9)(b) are met.
Marginal note:Back-to-back arrangement — definitions
(3.94) The following definitions apply in this subsection and subsections (3.9) to (3.93).
- lease, licence or similar agreement
lease, licence or similar agreement means an agreement under which a rent, royalty or similar payment is or could be made. (convention de bail, licence ou autre convention semblable)
- relevant licensor
relevant licensor, in respect of a relevant royalty arrangement, means
(a) if the relevant royalty arrangement is described in paragraph (a) of the definition relevant royalty arrangement, the immediate licensor referred to in paragraph (3.9)(a);
(b) if the relevant royalty arrangement is described in paragraph (b) of the definition relevant royalty arrangement, a person or partnership that is the lessor, the licensor or the grantor of a right similar to a right granted under a lease or licence, the assignor or the seller, as the case may be; or
(c) a person or partnership that does not deal at arm’s length with a relevant licensor referred to in paragraph (a) or (b). (cédant de licence considéré)
- relevant royalty arrangement
relevant royalty arrangement means
(a) the particular lease, licence or similar agreement referred to in paragraph (3.9)(a); and
(b) each specified royalty arrangement that
(i) meets, in respect of a relevant royalty arrangement, the conditions in clause (3.9)(b)(i)(A) or (B), and
(ii) is an arrangement in respect of which the person or partnership referred to in subparagraph (3.9)(b)(ii) meets the conditions in clause (3.9)(b)(ii)(A) or (B). (mécanisme de redevance considéré)
- rent, royalty or similar payment
rent, royalty or similar payment means a rent, royalty or similar payment described in paragraph (1)(d) and, for greater certainty, includes any payment described in subparagraphs (1)(d)(i) to (v) but does not include any payment described in subparagraphs (1)(d)(vi) to (xii). (loyer, redevance ou paiement semblable)
- specified royalty arrangement
specified royalty arrangement means a lease, license or similar agreement, an assignment or an instalment sale. (mécanisme de redevance déterminé)
- ultimate licensor
ultimate licensor means a relevant licensor (other than the immediate licensor), in respect of a relevant royalty arrangement, that is not, under a relevant royalty arrangement,
(2) Subsection (1) applies in respect of amounts paid or credited after 2016.
- Date modified: