Budget Implementation Act, 2018, No. 1 (S.C. 2018, c. 12)
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Assented to 2018-06-21
Budget Implementation Act, 2018, No. 1
S.C. 2018, c. 12
Assented to 2018-06-21
An Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures
RECOMMENDATION
Her Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled “An Act to implement certain provisions of the budget tabled in Parliament on February 27, 2018 and other measures”.
SUMMARY
Part 1 implements certain income tax measures proposed or referenced in the February 27, 2018 budget by
(a) ensuring appropriate tax treatment of amounts received under the Veterans Well-being Act;
(b) exempting from income amounts received under the Memorial Grant for First Responders;
(c) lowering the small business tax rate and making consequential adjustments to the dividend gross-up factor and dividend tax credit;
(d) reducing the business limit for the small business deduction based on passive income and restricting access to dividend refunds on the payment of eligible dividends;
(e) preventing the avoidance of tax through income sprinkling arrangements;
(f) removing the risk score requirement and increasing the level of income that can be deducted for Canadian armed forces personnel and police officers serving on designated international missions;
(g) introducing the Canada Workers Benefit;
(h) expanding the medical expense tax credit to recognize expenses incurred in respect of an animal specially trained to perform tasks for a patient with a severe mental impairment;
(i) indexing the Canada Child Benefit as of July 2018;
(j) extending, for one year, the mineral exploration tax credit for flow-through share investors;
(k) extending, by five years, the ability of a qualifying family member to be the plan holder of an individual’s Registered Disability Savings Plan;
(l) allowing transfers of property from charities to municipalities to be considered as qualifying expenditures for the purposes of reducing revocation tax;
(m) ensuring that appropriate taxpayers are eligible for the Canada Child Benefit and that information related to the Canada Child Benefit can be shared with provinces and territories for certain purposes; and
(n) extending, by five years, eligibility for Class 43.2.
Part 2 implements certain excise measures proposed in the February 27, 2018 budget by
(a) advancing the existing inflationary adjustments for excise duty rates on tobacco products to occur on an annual basis rather than every five years; and
(b) increasing excise duty rates on tobacco products to account for inflation since the last inflationary adjustment in 2014 and by an additional $1 per carton of 200 cigarettes, along with corresponding increases to the excise duty rates on other tobacco products.
Part 3 implements a new federal excise duty framework for cannabis products proposed in the February 27, 2018 budget by
(a) requiring that cannabis cultivators and manufacturers obtain a cannabis licence from the Canada Revenue Agency;
(b) requiring that all cannabis products that are removed from the premises of a cannabis licensee to be entered into the Canadian market for retail sale be affixed with an excise stamp;
(c) imposing excise duties on cannabis products to be paid by cannabis licensees;
(d) providing for administration and enforcement rules related to the excise duty framework;
(e) providing the Governor in Council with authority to provide for an additional excise duty in respect of provinces and territories that enter into a coordinated cannabis taxation agreement with Canada; and
(f) making related amendments to other legislative texts, including ensuring that any sales of cannabis products that would otherwise be considered as basic groceries are subject to the GST/HST in the same way as sales of other types of cannabis products.
Part 4 amends the Pension Act to authorize the Minister of Veterans Affairs to waive, in certain cases, the requirement for an application for an award under that Act.
It also amends the Veterans Well-being Act to, among other things,
(a) replace the earnings loss benefit, career impact allowance, supplementary retirement benefit and retirement income security benefit with the income replacement benefit;
(b) replace the disability award with pain and suffering compensation; and
(c) create additional pain and suffering compensation.
Finally, it makes consequential amendments to other Acts.
Part 5 enacts the Greenhouse Gas Pollution Pricing Act and makes the Fuel Charge Regulations.
Part 1 of that Act sets out the regime for a charge on fossil fuels. The fuel charge regime provides that a charge applies, at rates set out in Schedule 2 to that Act, to fuels that are produced, delivered or used in a listed province, brought into a listed province from another place in Canada, or imported into Canada at a location in a listed province. The fuel charge regime also provides relief from the fuel charge, through rebate and exemption certificate mechanisms, in certain circumstances. The fuel charge regime also sets out the registration requirements for persons that carry out certain activities relating to fuels subject to the charge. Part 1 of that Act also contains administrative provisions and enforcement provisions, including penalties, offences and collection provisions. Part 1 of that Act also sets out a mechanism for distributing revenues from the fuel charge. Part 1 of that Act also provides the Governor in Council with authority to make regulations for purposes of that Part, including the authority to determine which province, territory or area is a listed province for purpose of that Part.
Part 2 of that Act sets out the regime for pricing industrial greenhouse gas emissions. The industrial emissions pricing regime requires the registration of any facility that is located in a province or area that is set out in Part 2 of Schedule 1 to that Act and that either meets criteria specified by regulation or voluntarily joins the regime. The industrial emissions pricing regime requires compliance reporting with respect to any facility that is covered by the regime and the provision of compensation for any amount of a greenhouse gas that the facility emits above the applicable emissions limit during a compliance period. Part 2 of that Act also sets out an information gathering regime, administrative powers, duties and functions, enforcement tools, offences and related penalties, and a mechanism for distributing revenues from the industrial emissions pricing regime. Part 2 of that Act also provides the Governor in Council with the authority to make regulations for the purposes of that Part and the authority to make orders that amend Part 2 of Schedule 1 by adding, deleting or amending the name of a province or the description of an area.
Part 3 of that Act authorizes the Governor in Council to make regulations that provide for the application of provincial laws concerning greenhouse gas emissions to works, undertakings, lands and waters under federal jurisdiction.
Part 4 of that Act requires the Minister of the Environment to prepare an annual report on the administration of the Act and to cause it to be tabled in each House of Parliament.
Part 6 amends several Acts in order to implement various measures.
Division 1 of Part 6 amends the Financial Administration Act to establish the office of the Chief Information Officer of Canada and to provide that the President of the Treasury Board is responsible for the coordination of that Officer’s activities with those of the other deputy heads of the Treasury Board Secretariat. It also amends the Act to ensure Crown corporations with no borrowing authority are able to continue to enter into leases and to specify that leases are not considered to be transactions to borrow money for the purposes of Crown corporations’ statutory borrowing limits.
Division 2 of Part 6 amends the Canada Deposit Insurance Corporation Act in order to modernize and enhance the Canadian deposit insurance framework to ensure it continues to meet its objectives, including financial stability.
Division 3 of Part 6 amends the Federal-Provincial Fiscal Arrangements Act to renew Fiscal Equalization Payments to the provinces and Territorial Formula Financing Payments to the territories for a five-year period beginning on April 1, 2019 and ending on March 31, 2024, and to authorize annual transition payments of $1,270,000 to Yukon and $1,744,000 to the Northwest Territories for that period. It also amends the Act to allow Canada Health Transfer deductions to be reimbursed when provinces and territories have taken the steps necessary to eliminate extra-billing and user fees in the delivery of public health care.
Division 4 of Part 6 amends the Bank of Canada Act to ensure that the Bank of Canada may continue to buy and sell securities issued or guaranteed by the government of the United Kingdom if that country ceases to be a member state of the European Union.
Division 5 of Part 6 amends the Currency Act to expand the objectives of the Exchange Fund Account to include providing a source of liquidity for the government of Canada. It also amends that Act to authorize the payment of funds from the Exchange Fund Account into the Consolidated Revenue Fund.
Division 6 of Part 6 amends the Bank of Canada Act to require the Bank of Canada to make adequate arrangements for the removal from circulation in Canada of its bank notes that are worn or mutilated or that are the subject of an order made under paragraph 9(1)(b) of the Currency Act. It also amends the Currency Act to provide, among other things, that
(a) bank notes are current if they are issued under the authority of the Bank of Canada Act;
(b) the Governor in Council may, by order, call in certain bank notes; and
(c) bank notes that are called in by order are not current.
Division 7 of Part 6 amends the Payment Clearing and Settlement Act in order to implement a framework for resolution of clearing and settlement systems and clearing houses, and to protect information related to oversight, by the Bank of Canada, of clearing and settlement systems.
Division 8 of Part 6 amends the Canadian International Trade Tribunal Act to, among other things,
(a) create the position of Vice-chairperson of the Canadian International Trade Tribunal;
(b) provide that former permanent members of the Tribunal may be re-appointed to one further term as a permanent member; and
(c) clarify the rules concerning the interim replacement of the Chairperson of the Tribunal and provide for the interim replacement of the Vice-chairperson of the Tribunal.
Division 9 of Part 6 amends the Canadian High Arctic Research Station Act to, among other things, provide that the Canadian High Arctic Research Station is to be considered an agent corporation for the purpose of the transfer of the administration of federal real property and federal immovables under the Federal Real Property and Federal Immovables Act. It also provides that the Order entitled Game Declared in Danger of Becoming Extinct is deemed to have continued in force and to have continued to apply in Nunavut, as of April 1, 2014.
Division 10 of Part 6 amends the Canadian Institutes of Health Research Act in order to separate the roles of President of the Canadian Institutes of Health Research and Chairperson of the Governing Council, to merge the responsibility to establish policies and to limit delegation of certain Governing Council powers, duties and functions to its members or committees or to the President.
Division 11 of Part 6 amends the Red Tape Reduction Act to permit an administrative burden imposed by regulations to be offset by the reduction of another administrative burden imposed by another jurisdiction if the reduction is the result of regulatory cooperation agreements.
Division 12 of Part 6 provides for the transfer of certain employees and disclosure of information to the Communications Security Establishment to improve cyber security.
Division 13 of Part 6 amends the Department of Employment and Social Development Act to provide the Minister of Employment and Social Development with legislative authority respecting service delivery to the public and to make related amendments to Parts 4 and 6 of that Act.
Division 14 of Part 6 amends the Employment Insurance Act to modify the treatment of earnings received by claimants while they are in receipt of benefits.
Division 15 of Part 6 amends the Judges Act to authorize the salaries for the following new judges, namely, six judges for the Ontario Superior Court of Justice, one judge for the Saskatchewan Court of Appeal, 39 judges for the unified family courts (as of April 1, 2019), one judge for the Federal Court and a new Associate Chief Justice for the Federal Court. This division also makes consequential amendments to the Federal Courts Act.
Division 16 of Part 6 amends certain Acts governing federal financial institutions and related Acts to, among other things,
(a) extend the scope of activities related to financial services in which federal financial institutions may engage, including activities related to financial technology, as well as modernize certain provisions applicable to information processing and information technology activities;
(b) permit life companies, fraternal benefit societies and insurance holding companies to make long-term investments in permitted infrastructure entities to obtain predictable returns under the Insurance Companies Act;
(c) provide prudentially regulated deposit-taking institutions, such as credit unions, with the ability to use generic bank terms under the Bank Act, subject to disclosure requirements, as well as provide the Superintendent of Financial Institutions with additional enforcement tools under the Bank Act and the Office of the Superintendent of Financial Institutions Act, and clarify existing provisions of the Bank Act; and
(d) modify sunset provisions in certain Acts governing federal financial institutions to extend by five years, after the day on which this Act receives royal assent, the period during which those institutions may carry on business.
Division 17 of Part 6 amends the Western Economic Diversification Act to remove the requirement of the Governor in Council’s approval for the Minister of Western Economic Diversification to enter into an agreement with the government of a province, or with a provincial agency, respecting the exercise of the Minister’s powers and the carrying out of the Minister’s duties and functions.
Division 18 of Part 6 amends the Parliament of Canada Act to give each House of Parliament the power to make regulations related to maternity and parental arrangements for its own members.
Division 19 of Part 6 amends the Canada Pension Plan to, among other things,
(a) eliminate age-based restrictions on the survivor’s pension;
(b) fix the amount of the death benefit at $2,500;
(c) provide a benefit to disabled retirement pension beneficiaries under the age of 65;
(d) protect retirement and survivor’s pension amounts under the additional Canada Pension Plan for individuals who are disabled;
(e) protect benefit amounts under the additional Canada Pension Plan for parents with lower earnings during child-rearing years;
(f) maintain portability between the Canada Pension Plan and the Act respecting the Québec Pension Plan; and
(g) authorize the making of regulations to support the sustainability of the additional Canada Pension Plan.
Division 20 of Part 6 amends the Criminal Code to establish a remediation agreement regime. Under this regime, the prosecutor may negotiate a remediation agreement with an organization that is alleged to have committed an offence of an economic character referred to in the schedule to Part XXII.1 of that Act and the proceedings related to that offence are stayed if the organization complies with the terms of the agreement.
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
Short Title
Marginal note:Short title
1 This Act may be cited as the Budget Implementation Act, 2018, No. 1.
PART 1Amendments to the Income Tax Act and to Related Legislation
R.S., c. 1 (5th Supp.)Income Tax Act
2 (1) Paragraph 6(1)(f.1) of the Income Tax Act is replaced by the following:
Marginal note:Canadian Forces members and veterans amounts
(f.1) the total of all amounts received by the taxpayer in the year on account of
(i) an earnings loss benefit, an income replacement benefit (other than an amount determined under subsection 19.1(1), paragraph 23(1)(b) or subsection 26.1(1) of the Veterans Well-being Act, as modified, where applicable, under Part 5 of that Act), a supplementary retirement benefit or a career impact allowance payable to the taxpayer under Part 2 of the Veterans Well-being Act, or
(ii) an amount payable under any of subsections 99(6), 109(1) and 115(5) and sections 124 to 126 of the Veterans Well-being Act;
(2) Subsection (1) comes into force on April 1, 2019.
3 (1) Paragraph 56(1)(a) of the Act is amended by striking out “or” at the end of subparagraph (vi), by adding “or” at the end of subparagraph (vii) and by adding the following after subparagraph (vii):
(viii) an income replacement benefit payable to the taxpayer under Part 2 of the Veterans Well-being Act, if the amount is determined under subsection 19.1(1), paragraph 23(1)(b) or subsection 26.1(1) of that Act (as modified, where applicable, under Part 5 of that Act);
(2) Subsection (1) comes into force on April 1, 2019.
4 (1) Subparagraph (c)(i) of the definition eligible pension income in subsection 60.03(1) of the Act is replaced by the following:
(i) the total of all amounts received by the individual in the year on account of
(A) a retirement income security benefit payable to the individual under Part 2 of the Veterans Well-being Act, or
(B) an income replacement benefit payable to the individual under Part 2 of the Veterans Well-being Act, if the amount is determined under subsection 19.1(1), paragraph 23(1)(b) or subsection 26.1(1) of that Act (as modified, where applicable, under Part 5 of that Act), and
(2) Subsection (1) comes into force on April 1, 2019.
5 (1) Paragraph 81(1)(d.1) of the Act is replaced by the following:
Marginal note:Canadian Forces members and veterans amounts
(d.1) the total of all amounts received by the taxpayer in the year on account of
(i) a Canadian Forces income support benefit payable to the taxpayer under Part 2 of the Veterans Well-being Act,
(ii) pain and suffering compensation, additional pain and suffering compensation or a critical injury benefit, disability award, death benefit, clothing allowance or detention benefit payable to the taxpayer under Part 3 of the Veterans Well-being Act,
(iii) a family caregiver relief benefit or caregiver recognition benefit payable to the taxpayer under Part 3.1 of the Veterans Well-being Act, or
(iv) an amount payable to the taxpayer under subsection 132(1) of the Veterans Well-being Act;
(2) Subparagraph 81(1)(d.1)(iii) of the Act, as enacted by subsection (1), is replaced by the following:
(iii) a caregiver recognition benefit payable to the taxpayer under Part 3.1 of the Veterans Well-being Act, or
(3) Subsection 81(1) of the Act is amended by adding the following after paragraph (i):
Marginal note:Memorial grant
(j) an amount received under the Memorial Grant Program for First Responders established under the authority of the Department of Public Safety and Emergency Preparedness Act in respect of individuals who die in the course of, or as a result of, their duties or as a result of an occupational illness or psychological impairment;
(4) Subsection (1) comes into force on April 1, 2019.
(5) Subsection (2) applies to the 2020 and subsequent taxation years.
(6) Subsection (3) applies in respect of amounts received after March 2018.
6 (1) Subparagraph 82(1)(b)(i) of the Act is replaced by the following:
(i) the product of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year multiplied by
(A) for the 2018 taxation year, 16%, and
(B) for taxation years after 2018, 15%, and
(2) Subsection (1) applies to the 2018 and subsequent taxation years.
7 (1) Paragraph 87(2)(aa) of the Act is replaced by the following:
Marginal note:Refundable dividend tax on hand
(aa) if the new corporation was a private corporation immediately after the amalgamation, the following rules apply:
(i) for the purpose of computing the eligible refundable dividend tax on hand and non-eligible refundable dividend tax on hand (as defined in subsection 129(4)) of the new corporation at the end of its first taxation year there shall be added to the total determined under those definitions in respect of the new corporation for the year
(A) in respect of the new corporation’s eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the total of all amounts each of which is the portion, if any, of its dividend refund for its last taxation year from its eligible refundable dividend tax on hand determined under subparagraph 129(1)(a)(i) or clause 129(1)(a)(ii)(B), and
(B) in respect of the new corporation’s non-eligible refundable dividend tax on hand, the total of all amounts each of which is the amount, if any, by which the non-eligible refundable dividend tax on hand of a predecessor corporation at the end of its last taxation year exceeds the portion, if any, of its dividend refund for its last taxation year from its non-eligible refundable dividend tax on hand determined under clause 129(1)(a)(ii)(A), and
(ii) no amount shall be added under this paragraph in respect of a predecessor corporation
(A) that was not a private corporation at the end of its last taxation year, or
(B) where subsection 129(1.2) would have applied to deem a dividend paid by the predecessor corporation immediately before the amalgamation not to be a taxable dividend for the purpose of subsection 129(1);
(2) Subject to subsection 20(5), subsection (1) applies to taxation years that begin after 2018.
8 (1) The portion of paragraph 104(21.2)(b) of the Act before subparagraph (i) is replaced by the following:
(b) the beneficiary is, for the purposes of section 120.4 and for the purposes of sections 3, 74.3 and 111 as they apply for the purposes of section 110.6,
(2) Subsection (1) applies to the 2018 and subsequent taxation years.
9 (1) Clauses 110(1)(f)(v)(A) and (B) of the Act are replaced by the following:
(A) the employment income earned by the taxpayer as a member of the Canadian Forces, or as a police officer, while serving on a deployed international operational mission (as determined by the Minister of National Defence or by a person designated by that Minister), and
(B) the employment income that would have been so earned by the taxpayer if the taxpayer had been paid at the maximum rate of pay that applied, from time to time during the mission, to a Lieutenant-Colonel (General Service Officers) of the Canadian Forces,
(2) Subsection 110(1.3) of the Act is repealed.
(3) Subsections (1) and (2) apply to the 2017 and subsequent taxation years.
10 (1) The portion of subsection 117.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Annual adjustment
117.1 (1) The amount of $1,000 referred to in the formula in paragraph 8(1)(s), each of the amounts expressed in dollars in subparagraph 6(1)(b)(v.1), subsection 117(2), the description of B in subsection 118(1), subsection 118(2), paragraph (a) of the description of B in subsection 118(10), subsection 118.01(2), the descriptions of C and F in subsection 118.2(1) and subsections 118.3(1), 122.5(3) and 122.51(1) and (2), the amount of $400,000 referred to in the formula in paragraph 110.6(2)(a), the amounts of $1,355 and $2,335 referred to in the description of A, and the amounts of $12,820 and $17,025 referred to in the description of B, in the formula in subsection 122.7(2), the amount of $700 referred to in the description of C, and the amounts of $24,111 and $36,483 referred to in the description of D, in the formula in subsection 122.7(3), and each of the amounts expressed in dollars in Part I.2 in relation to tax payable under this Part or Part I.2 for a taxation year shall be adjusted so that the amount to be used under those provisions for the year is the total of
(2) Subsection (1) applies to the 2019 and subsequent taxation years, except that the adjustment provided for in subsection 117.1(1) of the Act, as amended by subsection (1), does not apply for the 2019 taxation year in respect of the amounts of $1,355, $2,335, $12,820, $17,025, $700, $24,111 and $36,483.
11 (1) The description of B in subsection 118(2) of the Act is replaced by the following:
- B
- is 15% of the amount, if any, by which the individual’s income for the year would exceed $25,921 if, in computing that income, no amount were included in respect of a gain from a disposition of property to which section 79 applies and no amount were deductible under paragraph 20(1)(ww).
(2) Paragraph (b) of the description of B in subsection 118(3) of the Act is amended by striking out “and” at the end of subparagraph (i) and by replacing subparagraph (ii) with the following:
(ii) the total of all amounts received by the individual in the year on account of a retirement income security benefit under Part 2 of the Veterans Well-being Act, and
(iii) the total of all amounts received by the individual in the year on account of an income replacement benefit payable to the individual under Part 2 of the Veterans Well-being Act, if the amount is determined under subsection 19.1(1), paragraph 23(1)(b) or subsection 26.1(1) of that Act (as modified, where applicable, under Part 5 of that Act).
(3) Subsection 118(4) of the Act is amended by adding the following after paragraph (a.1):
(a.2) a reference to income for a year is to be read as a reference to that income determined as if, in computing that income, no amount were deductible under paragraph 20(1)(ww);
(4) Subsections (1) and (3) apply to the 2018 and subsequent taxation years.
(5) Subsection (2) comes into force on April 1, 2019.
12 (1) The portion of paragraph 118.2(2)(l) of the Act before subparagraph (ii) is replaced by the following:
(l) on behalf of the patient who is blind or profoundly deaf or has severe autism, severe diabetes, severe epilepsy, severe mental impairment or a severe and prolonged impairment that markedly restricts the use of the patient’s arms or legs,
(i) for an animal that is
(A) specially trained to
(I) in the case of severe mental impairment, perform specific tasks (excluding, for greater certainty, the provision of emotional support) that assist the patient in coping with the impairment, and
(II) in all other cases, assist the patient in coping with the impairment, and
(B) provided by a person or organization one of whose main purposes is such training of animals,
(2) Subsection (1) applies in respect of expenses incurred after 2017.
13 (1) The definitions excluded amount and specified individual in subsection 120.4(1) of the Act are replaced by the following:
- excluded amount
excluded amount, in respect of an individual for a taxation year, means an amount that is the individual’s income for the year from, or the individual’s taxable capital gain or profit for the year from the disposition of, a property to the extent that the amount
(a) if the individual has not attained the age of 24 years before the year, is from a property that was acquired by, or for the benefit of, the individual as a consequence of the death of a person who is
(i) a parent of the individual, or
(ii) any person, if the individual is
(A) enrolled as a full-time student during the year at a post-secondary educational institution (as defined in subsection 146.1(1)), or
(B) an individual in respect of whom an amount may be deducted under section 118.3 in computing a taxpayer’s tax payable under this Part for the year;
(b) is from a property acquired by the individual under a transfer described in subsection 160(4);
(c) is a taxable capital gain that arises because of subsection 70(5);
(d) is a taxable capital gain for the year from the disposition by the individual of property that is, at the time of the disposition, qualified farm or fishing property or qualified small business corporation shares (as those terms are defined in subsection 110.6(1)), unless the amount would be deemed to be a dividend under subsection 120.4(4) or (5) if this definition were read without reference to this paragraph;
(e) if the individual has attained the age of 17 years before the year, is
(i) not derived directly or indirectly from a related business in respect of the individual for the year, or
(ii) derived directly or indirectly from an excluded business of the individual for the year;
(f) if the individual has attained the age of 17 years but not the age of 24 years before the year, is
(i) a safe harbour capital return of the individual, or
(ii) a reasonable return in respect of the individual, having regard only to the contributions of arm’s length capital by the individual; or
(g) if the individual has attained the age of 24 years before the year, is
(i) income from, or a taxable capital gain from the disposition of, excluded shares of the individual, or
(ii) a reasonable return in respect of the individual. (montant exclu)
- specified individual
specified individual, for a taxation year, means an individual (other than a trust) who
(a) is resident in Canada
(i) in the case where the individual dies in the year, immediately before the death, and
(ii) in any other case, at the end of the year; and
(b) if the individual has not attained the age of 17 years before the year, has a parent resident in Canada at any time in the year. (particulier déterminé)
(2) Subparagraph (b)(ii) of the definition split income in subsection 120.4(1) of the Act is replaced by the following:
(ii) can reasonably be considered to be income derived directly or indirectly from
(A) one or more related businesses in respect of the individual for the year, or
(B) the rental of property by a particular partnership or trust, if a person who is related to the individual at any time in the year
(I) is actively engaged on a regular basis in the activities of the particular partnership or trust related to the rental of property, or
(II) in the case of a particular partnership, has an interest in the particular partnership directly or indirectly through one or more other partnerships,
(3) Clauses (c)(ii)(C) and (D) of the definition split income in subsection 120.4(1) of the Act are replaced by the following:
(C) to be income derived directly or indirectly from one or more related businesses in respect of the individual for the year, or
(D) to be income derived from the rental of property by a particular partnership or trust, if a person who is related to the individual at any time in the year is actively engaged on a regular basis in the activities of the particular partnership or trust related to the rental of property,
(4) The definition split income in subsection 120.4(1) of the Act is amended by adding the following after paragraph (c):
(d) an amount included in computing the individual’s income for the year to the extent that the amount is in respect of a debt obligation that
(i) is of a corporation (other than a mutual fund corporation or a corporation shares of a class of the capital stock of which are listed on a designated stock exchange), partnership or trust (other than a mutual fund trust), and
(ii) is not
(A) described in paragraph (a) of the definition fully exempt interest in subsection 212(3),
(B) listed or traded on a public market, or
(C) a deposit, standing to the credit of the individual,
(I) within the meaning assigned by the Canada Deposit Insurance Corporation Act, or
(II) with a credit union or a branch in Canada of a bank, and
(e) an amount in respect of a property, to the extent that
(i) the amount
(A) is a taxable capital gain, or a profit, of the individual for the year from the disposition after 2017 of the property, or
(B) is included under subsection 104(13) or 105(2) in computing the individual’s income for the year and can reasonably be considered to be attributable to a taxable capital gain, or a profit, of any person or partnership for the year from the disposition after 2017 of the property, and
(ii) the property is
(A) a share of the capital stock of a corporation (other than a share of a class listed on a designated stock exchange or a share of the capital stock of a mutual fund corporation), or
(B) a property in respect of which the following conditions are met:
(I) the property is
1 an interest in a partnership,
2 an interest as a beneficiary under a trust (other than a mutual fund trust or a trust that is deemed to be in existence by subsection 143(1)), or
3 a debt obligation (other than a debt obligation described in any of clauses (d)(ii)(A) to (C)), and
(II) either
1 in respect of the property an amount is included in the individual’s split income for the year or an earlier taxation year, or
2 all or any part of the fair market value of the property, immediately before the disposition referred to in clause (i)(A) or (B), as the case may be, is derived, directly or indirectly, from a share described in clause (A). (revenu fractionné)
(5) Subsection 120.4(1) of the Act is amended by adding the following in alphabetical order:
- arm’s length capital
arm’s length capital, of a specified individual, means property of the individual if the property, or property for which it is a substitute, was not
(a) acquired as income from, or a taxable capital gain or profit from the disposition of, another property that was derived directly or indirectly from a related business in respect of the specified individual;
(b) borrowed by the specified individual under a loan or other indebtedness; or
(c) transferred, directly or indirectly by any means whatever, to the specified individual from a person who was related to the specified individual (other than as a consequence of the death of a person). (capital indépendant)
- excluded business
excluded business, of a specified individual for a taxation year, means a business if the specified individual is actively engaged on a regular, continuous and substantial basis in the activities of the business in either
(a) the taxation year, except in respect of an amount described in paragraph (e) of the definition split income; or
(b) any five prior taxation years of the specified individual. (entreprise exclue)
- excluded shares
excluded shares, of a specified individual at any time, means shares of the capital stock of a corporation owned by the specified individual if
(a) the following conditions are met:
(i) less than 90% of the business income of the corporation for the last taxation year of the corporation that ends at or before that time (or, if no such taxation year exists, for the taxation year of the corporation that includes that time) was from the provision of services, and
(ii) the corporation is not a professional corporation;
(b) immediately before that time, the specified individual owns shares of the capital stock of the corporation that
(i) give the holders thereof 10% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation, and
(ii) have a fair market value of 10% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the corporation; and
(c) all or substantially all of the income of the corporation for the relevant taxation year in subparagraph (a)(i) is income that is not derived, directly or indirectly, from one or more related businesses in respect of the specified individual other than a business of the corporation. (actions exclues)
- reasonable return
reasonable return, in respect of a specified individual for a taxation year, means a particular amount derived directly or indirectly from a related business in respect of the specified individual that
(a) would, if this subsection were read without reference to subparagraph (f)(ii) or (g)(ii) of the definition excluded amount, be an amount described in the definition split income in respect of the specified individual for the year; and
(b) is reasonable having regard to the following factors relating to the relative contributions of the specified individual, and each source individual in respect of the specified individual, in respect of the related business:
(i) the work they performed in support of the related business,
(ii) the property they contributed, directly or indirectly, in support of the related business,
(iii) the risks they assumed in respect of the related business,
(iv) the total of all amounts that were paid or that became payable, directly or indirectly, by any person or partnership to, or for the benefit of, them in respect of the related business, and
(v) such other factors as may be relevant. (rendement raisonnable)
- related business
related business, in respect of a specified individual for a taxation year, means
(a) a business carried on by
(i) a source individual in respect of the specified individual at any time in the year, or
(ii) a partnership, corporation or trust if a source individual in respect of the specified individual at any time in the year is actively engaged on a regular basis in the activities of the partnership, corporation or trust related to earning income from the business;
(b) a business of a particular partnership, if a source individual in respect of the specified individual at any time in the year has an interest — including directly or indirectly — in the particular partnership; and
(c) a business of a corporation, if the following conditions are met at any time in the year:
(i) a source individual in respect of the specified individual owns
(A) shares of the capital stock of the corporation, or
(B) property that derives, directly or indirectly, all or part of its fair market value from shares of the capital stock of the corporation, and
(ii) it is the case that
0.1A ≤ B + C
where
- A
- is the total fair market value of all of the issued and outstanding shares of the capital stock of the corporation,
- B
- is the total fair market value of property described in clause (i)(A), and
- C
- is the portion of the total fair market value of property described in clause (i)(B) that is derived from shares of the capital stock of the corporation. (entreprise liée)
- safe harbour capital return
safe harbour capital return, of a specified individual for a taxation year, means an amount that does not exceed the amount determined by the formula
A × B
where
- A
- is the rate equal to the highest rate of interest prescribed under paragraph 4301(c) of the Income Tax Regulations in effect for a quarter in the year; and
- B
- is the total of all amounts each of which is determined by the formula
C × D/E
where
- C
- is the fair market value of property contributed by the specified individual in support of a related business at the time it was contributed,
- D
- is the number of days in the year that the property (or property substituted for it) is used in support of the related business and has not directly or indirectly, in any manner whatever, been returned to the specified individual, and
- E
- is the number of days in the year. (rendement exonéré)
- source individual
source individual, in respect of a specified individual for a taxation year, means an individual (other than a trust) who, at any time in the year, is
(a) resident in Canada; and
(b) related to the specified individual. (particulier source)
(6) Section 120.4 of the Act is amended by adding the following after subsection (1):
Marginal note:Additional rules — specified individual
(1.1) For the purpose of applying this section in respect of a specified individual in respect of a taxation year,
(a) an individual is deemed to be actively engaged on a regular, continuous and substantial basis in the activities of a business in a taxation year of the individual if the individual works in the business at least an average of 20 hours per week during the portion of the year in which the business operates;
(b) if an amount would — if this section were read without reference to this paragraph — be split income of a specified individual who has attained the age of 17 years before the year in respect of a property, and that property was acquired by, or for the benefit of, the specified individual as a consequence of the death of another person, then
(i) for the purpose of applying paragraph (b) of the definition reasonable return in subsection (1), to the extent that the particular amount referred to in that paragraph is in respect of the property, then the factors referred to in that paragraph in respect of the other person are to be included for the purpose of determining a reasonable return in respect of the individual,
(ii) for the purposes of this subparagraph and the definition excluded business in subsection (1), if the other person was actively engaged on a regular, substantial and continuous basis in the activities of a business throughout five previous taxation years, then the individual is deemed to have been actively engaged on a regular, substantial and continuous basis in the business throughout those five years, and
(iii) for the purpose of applying paragraph (g) of the definition excluded amount in subsection (1) in respect of that property, the individual is deemed to have attained the age of 24 years before the year if the other person had attained the age of 24 years before the year;
(c) an amount that is a specified individual’s income for a taxation year from, or the specified individual’s taxable capital gain or profit for the year from the disposition of, a property is deemed to be an excluded amount in respect of the specified individual for the taxation year if
(i) the following conditions are met:
(A) the amount would be an excluded amount in respect of the specified individual’s spouse or common-law partner for the year, if the amount were included in computing the spouse or common-law partner’s income for the year, and
(B) the spouse or common law partner has attained the age of 64 years before the year, or
(ii) the amount would have been an excluded amount in respect of an individual who was, immediately before their death, the specified individual’s spouse or common-law partner, if the amount were included in computing the spouse or common-law partner’s income for their last taxation year (determined as if this section applies in respect of that year);
(d) for greater certainty, an amount derived directly or indirectly from a business includes
(i) an amount that
(A) is derived from the provision of property or services to, or in support of, the business, or
(B) arises in connection with the ownership or disposition of an interest in the person or partnership carrying on the business, and
(ii) an amount derived from an amount described in this paragraph; and
(e) for the purposes of this section, an individual is deemed not to be related to their spouse or common-law partner at any time in a year if, at the end of the year, the individual is living separate and apart from their spouse or common-law partner because of a breakdown of their marriage or common-law partnership.
(7) Subsections 120.4(3) to (5) of the Act are replaced by the following:
Marginal note:Tax payable by a specified individual
(3) Notwithstanding any other provision of this Act, if an individual is a specified individual for a taxation year, the individual’s tax payable under this Part for the year shall not be less than the amount by which the amount added under subsection (2) to the individual’s tax payable under this Part for the year exceeds the amount determined by the formula
A + B
where
- A
- is the amount deducted under section 118.3 in computing the individual’s tax payable under this Part for the year; and
- B
- is the total of all amounts each of which is the amount that
(a) may be deducted under section 121 or 126 in computing the individual’s tax payable under this Part for the year, and
(b) can reasonably be considered to be in respect of an amount included in computing the individual’s split income for the year.
Marginal note:Taxable capital gain
(4) If a specified individual who has not attained the age of 17 years before a taxation year would have for the taxation year, if this Act were read without reference to this section, a taxable capital gain (other than an excluded amount) from a disposition of shares (other than shares of a class listed on a designated stock exchange or shares of a mutual fund corporation) that are transferred, either directly or indirectly, in any manner whatever, to a person with whom the specified individual does not deal at arm’s length, then the amount of that taxable capital gain is deemed not to be a taxable capital gain and twice the amount is deemed to be received by the specified individual in the year as a taxable dividend that is not an eligible dividend.
Marginal note:Taxable capital gain of trust
(5) If a specified individual who has not attained the age of 17 years before a the taxation year would be, if this Act were read without reference to this section, required under subsection 104(13) or 105(2) to include an amount in computing the specified individual’s income for the taxation year, then to the extent that the amount can reasonably be considered to be attributable to a taxable capital gain (other than an excluded amount) of a trust from a disposition of shares (other than shares of a class listed on a designated stock exchange or shares of a mutual fund corporation) that are transferred, either directly or indirectly, in any manner whatever, to a person with whom the specified individual does not deal at arm’s length, subsections 104(13) and 105(2) do not apply in respect of the amount and twice the amount is deemed to be received by the specified individual in the year as a taxable dividend that is not an eligible dividend.
(8) Subsections (1) to (7) apply to the 2018 and subsequent taxation years. For the 2018 taxation year, the portion of paragraph (b) of the definition excluded shares in subsection 120.4(1) of the Act before subparagraph (i), as enacted by subsection (5), is to be read as follows:
(b) immediately before that time or the end of 2018, the shares
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