Budget Implementation Act, 2018, No. 1 (S.C. 2018, c. 12)
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Assented to 2018-06-21
PART 1Amendments to the Income Tax Act and to Related Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
14 (1) Paragraph 121(a) of the Act is replaced by the following:
(a) the product of the amount, if any, that is required by subparagraph 82(1)(b)(i) to be included in computing the individual’s income for the year multiplied by
(i) for the 2018 taxation year, 8/11, and
(ii) for taxation years after 2018, 9/13, and
(2) Subsection (1) applies to the 2018 and subsequent taxation years.
15 (1) Paragraph (b) of the definition adjusted income in subsection 122.5(1) of the Act is replaced by the following:
(b) deductible under paragraph 20(1)(ww) or 60(y) or (z). (revenu rajusté)
(2) Subsection (1) applies to the 2018 and subsequent taxation years.
16 (1) Paragraph (b) of the definition adjusted income in section 122.6 of the Act is replaced by the following:
(b) deductible under paragraph 20(1)(ww) or 60(y) or (z); (revenu modifié)
(2) Subsection (1) applies to the 2018 and subsequent taxation years.
17 The portion of subsection 122.61(5) of the Act before paragraph (a) is replaced by the following:
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 2016, the amount to be used under that subsection for the month is the total of
18 (1) The heading of Subdivision A.2 of Division E of Part I of the Act is replaced by the following:
Canada Workers Benefit
(2) Subsection (1) comes into force on January 1, 2019.
19 (1) Paragraph (c) of the definition adjusted net income in subsection 122.7(1) of the Act is replaced by the following:
(c) in computing that income, no amount were deductible under paragraph 20(1)(ww) or 60(y) or (z). (revenu net rajusté)
(2) The descriptions of A and B in subsection 122.7(2) of the Act are replaced by the following:
- A
- is
(a) if the individual had neither an eligible spouse nor an eligible dependant, for the taxation year, the lesser of $1,355 and 26% of the amount, if any, by which the individual’s working income for the taxation year exceeds $3,000, or
(b) if the individual had an eligible spouse or an eligible dependant, for the taxation year, the lesser of $2,335 and 26% of the amount, if any, by which the total of the working incomes of the individual and, if applicable, of the eligible spouse, for the taxation year, exceeds $3,000; and
- B
- is
(a) if the individual had neither an eligible spouse nor an eligible dependant, for the taxation year, 12% of the amount, if any, by which the adjusted net income of the individual for the taxation year exceeds $12,820, or
(b) if the individual had an eligible spouse or an eligible dependant, for the taxation year, 12% of the amount, if any, by which the total of the adjusted net incomes of the individual and, if applicable, of the eligible spouse, for the taxation year, exceeds $17,025.
(3) The descriptions of C and D in subsection 122.7(3) of the Act are replaced by the following:
- C
- is the lesser of $700 and 26% of the amount, if any, by which the individual’s working income for the taxation year exceeds $1,150; and
- D
- is
(a) if the individual had neither an eligible spouse nor an eligible dependant, for the taxation year, 12% of the amount, if any, by which the individual’s adjusted net income for the taxation year exceeds $24,111,
(b) if the individual had an eligible spouse for the taxation year who was not entitled to deduct an amount under subsection 118.3(1) for the taxation year, or had an eligible dependant for the taxation year, 12% of the amount, if any, by which the total of the adjusted net incomes of the individual and, if applicable, of the eligible spouse, for the taxation year, exceeds $36,483, or
(c) if the individual had an eligible spouse for the taxation year who was entitled to deduct an amount under subsection 118.3(1) for the taxation year, 6% of the amount, if any, by which the total of the adjusted net incomes of the individual and of the eligible spouse, for the taxation year, exceeds $36,483.
(4) Subsection (1) applies to the 2018 and subsequent taxation years.
(5) Subsections (2) and (3) come into force on January 1, 2019.
20 (1) Paragraphs 125(1.1)(a) and (b) of the Act are replaced by the following:
(a) that proportion of 17.5% that the number of days in the taxation year that are before 2018 is of the number of days in the taxation year,
(b) that proportion of 18% that the number of days in the taxation year that are in 2018 is of the number of days in the taxation year, and
(c) that proportion of 19% that the number of days in the taxation year that are after 2018 is of the number of days in the taxation year.
(2) Subsection 125(5.1) of the Act 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 taxation year exceeds the greater of
(a) the amount determined by the formula
A × B/$11,250
where
- A
- is the amount that would, but for this subsection, be the corporation’s business limit for the particular taxation year, and
- B
- is the amount determined by the formula
0.225% × (C – $10 million)
where
- C
- is
(i) if, in both the particular taxation year and the preceding taxation year, the corporation is not associated with any corporation, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the preceding taxation year,
(ii) if, in the particular taxation year, the corporation is not associated with any corporation but was associated with one or more corporations in the preceding taxation year, the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation for the particular taxation year, or
(iii) if, in the particular taxation year, the corporation is associated with one or more particular corporations, the total of all amounts each of which is the taxable capital employed in Canada (within the meaning assigned by subsection 181.2(1) or 181.3(1) or section 181.4, as the case may be) of the corporation or of any of the particular corporations for its last taxation year that ended in the preceding calendar year, and
(b) the amount determined by the formula
D/$500,000 × 5(E − $50,000)
where
- D
- is the amount determined for A in paragraph (a), and
- E
- is the total of all amounts each of which is the adjusted aggregate investment income of the corporation, or of any corporation with which it is associated at any time in the particular taxation year, for each taxation year of the corporation, or associated corporation, as the case may be, that ended in the preceding calendar year.
Marginal note:Anti-avoidance
(5.2) A particular corporation and another corporation are deemed to be associated with each other at a particular time for the purposes of paragraph (5.1)(b) if
(a) the particular corporation lends or transfers property at any time, either directly or indirectly, by means of a trust or by any other means whatever, to the other corporation;
(b) the other corporation is, at the particular time, related to the particular corporation but is not associated with it; and
(c) it may reasonably be considered that one of the reasons the loan or transfer was made was to reduce the amount determined for E in paragraph (5.1)(b) in respect of the particular corporation, or of any corporation with which it is associated, for a taxation year.
(3) Subsection 125(7) of the Act is amended by adding the following in alphabetical order:
- active asset
active asset, of a particular corporation at any time, means property that is
(a) used at that time principally in an active business carried on primarily in Canada by the particular corporation or by a Canadian-controlled private corporation that is related to the particular corporation,
(b) a share of the capital stock of another corporation if, at that time,
(i) the other corporation is connected with the particular corporation (within the meaning assigned by subsection 186(4) on the assumption that the other corporation is at that time a payer corporation within the meaning of that subsection), and
(ii) the share would be a qualified small business corporation share (as defined in subsection 110.6(1)) if
(A) the references in that definition to an “individual” were references to the particular corporation, and
(B) that definition were read without reference to “the individual’s spouse or common law partner”, or
(c) an interest in a partnership, if
(i) at that time, the fair market value of the particular corporation’s interest in the partnership is equal to or greater than 10% of the total fair market value of all interests in the partnership,
(ii) throughout the 24–month period ending before that time, more than 50% of the fair market value of the property of the partnership was attributable to property described in this paragraph or in paragraph (a) or (b), and
(iii) at that time, all or substantially all of the fair market value of the property of the partnership was attributable to property described in this paragraph or in paragraph (a) or (b); (bien actif)
- adjusted aggregate investment income
adjusted aggregate investment income, of a corporation (other than a corporation that is deemed not to be a private corporation by subsection 136(1) or 137(7) or section 141.1) for a taxation year, means the amount that would be the aggregate investment income (as defined in subsection 129(4)) of the corporation for the year, if
(a) paragraph (a) of that definition read as follows:
(a) the amount, if any, by which
(i) the eligible portion of the corporation’s taxable capital gains (other than taxable capital gains from the disposition of property that is, at the time of disposition, an active asset of the corporation) for the year
exceeds
(ii) the eligible portion of its allowable capital losses (other than allowable capital losses from the disposition of property that is, at the time of disposition, an active asset of the corporation) for the year, or
(b) subparagraph (b)(iii) of that definition read as follows:
(iii) a dividend from a corporation connected with it (within the meaning assigned by subsection 186(4) on the assumption that the corporation is at that time a payer corporation within the meaning of that subsection), and
(c) paragraph (a) of the definition income or loss in subsection 129(4) read as follows:
(a) includes
(i) the income or loss from a specified investment business carried on by it, and
(ii) amounts in respect of a life insurance policy that are included in computing the corporation’s income for the year, to the extent that the amounts would not otherwise be included in the computation of the corporation’s aggregate investment income, but
and
(d) no amount were deducted under subsection 91(4) by the corporation in computing its income for the year; (revenu de placement total ajusté)
(4) Subsection (1) applies to the 2018 and subsequent taxation years.
(5) Subsections (2) and (3) apply to taxation years that begin after 2018. However, subsections (2) and (3), 7(1), 22(1) to (5), 23(1) and (2) and 29(1) also apply to a taxation year of a corporation that begins before 2019 and ends after 2018 if
(a) the corporation’s preceding taxation year was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and
(b) one of the reasons for the transaction, event or series was to defer the application of subsections (2) and (3) or 22(1) to (5) to the corporation.
21 (1) Paragraph (a) of the definition flow-through mining expenditure in subsection 127(9) of the Act is replaced by the following:
(a) that is a Canadian exploration expense incurred by a corporation after March 2018 and before 2020 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2020) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definition mineral resource in subsection 248(1),
(2) Paragraphs (c) and (d) of the definition flow-through mining expenditure in subsection 127(9) of the Act are replaced by the following:
(c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after March 2018 and before April 2019, and
(d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after March 2018 and before April 2019; (dépense minière déterminée)
(3) Subsections (1) and (2) apply in respect of expenses renounced under a flow-through share agreement entered into after March 2018.
22 (1) Paragraph 129(1)(a) of the Act is replaced by the following:
(a) may, on sending the notice of assessment for the year, refund without application an amount (in this Act referred to as its “dividend refund” for the year) in respect of taxable dividends paid by the corporation on shares of its capital stock in the year, and at a time when it was a private corporation, equal to the total of
(i) in respect of eligible dividends, an amount equal to the lesser of
(A) 38 1/3% of the total of all eligible dividends paid by it in the year, and
(B) its eligible refundable dividend tax on hand at the end of the year, and
(ii) in respect of taxable dividends (other than eligible dividends), an amount equal to the total of
(A) the lesser of
(I) 38 1/3% of the total of all taxable dividends (other than eligible dividends) paid by it in the year, and
(II) its non-eligible refundable dividend tax on hand at the end of the year, and
(B) either
(I) if the amount determined under subclause (A)(I) exceeds the amount determined under subclause (A)(II), the lesser of
1 the amount of the excess, and
2 the amount by which the corporation’s eligible refundable dividend tax on hand at the end of the year exceeds the amount, if any, determined under subparagraph (i) for the year, and
(II) in any other case, nil; and
(2) The portion of subsection 129(1.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Dividends paid to bankrupt controlling corporation
(1.1) In determining the dividend refund for a taxation year ending after 1977 of a particular corporation, no amount may be included under clause (1)(a)(i)(A), subclause (1)(a)(ii)(A)(I) or sub-subclause (1)(a)(ii)(B)(I)1 in respect of a taxable dividend paid to a shareholder that
(3) Subsection 129(3) of the Act is repealed.
(4) Subsection 129(4) of the Act is amended by adding the following in alphabetical order:
- eligible refundable dividend tax on hand
eligible refundable dividend tax on hand, of a particular corporation at the end of a taxation year, means the amount, if any, by which the total of
(a) the total of the taxes payable under Part IV by the particular corporation for the year in respect of
(i) eligible dividends received by the particular corporation in the year from corporations other than corporations with which the particular corporation is connected (in this paragraph, within the meaning assigned by subsection 186(4) on the assumption that the other corporation is at that time a payer corporation within the meaning of that subsection), and
(ii) taxable dividends received by the particular corporation in the year from corporations that are connected with the particular corporation to the extent that such dividends caused a dividend refund to those corporations from their eligible refundable dividend tax on hand, and
(b) where the particular corporation was a private corporation at the end of its preceding taxation year, the particular corporation’s eligible refundable dividend tax on hand at the end of that preceding year
exceeds
(c) the total of all amounts each of which is the portion, if any, of the particular corporation’s dividend refund from its eligible refundable dividend tax on hand determined, for its preceding taxation year, under
(i) subparagraph (1)(a)(i), and
(ii) clause (1)(a)(ii)(B). (impôt en main remboursable au titre de dividendes déterminés)
- non-eligible refundable dividend tax on hand
non-eligible refundable dividend tax on hand, of a corporation at the end of a taxation year, means the amount, if any, by which the total of
(a) if the corporation was a Canadian-controlled private corporation throughout the year, the least of
(i) the amount determined by the formula
A − B
where
- A
- is 30 2/3% of the corporation’s aggregate investment income for the year, and
- B
- is the amount, if any, by which
(A) the amount deducted under subsection 126(1) from the tax for the year otherwise payable by it under this Part
exceeds
(B) 8% of its foreign investment income for the year,
(ii) 30 2/3% of the amount, if any, by which the corporation’s taxable income for the year exceeds the total of
(A) the least of the amounts determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the year,
(B) 100/(38 2/3) of the total of amounts deducted under subsection 126(1) from its tax for the year otherwise payable under this Part, and
(C) the amount determined by multiplying the total of amounts deducted under subsection 126(2) from its tax for the year otherwise payable under this Part, by the relevant factor for the year, and
(iii) the corporation’s tax for the year payable under this Part,
(b) the total of the taxes payable under Part IV by the corporation for the year less the amount determined under paragraph (a) of the definition eligible refundable dividend tax on hand in respect of the corporation for the year, and
(c) if the corporation was a private corporation at the end of its preceding taxation year, the corporation’s non-eligible refundable dividend tax on hand at the end of that preceding year
exceeds
(d) the portion, if any, of the corporation’s dividend refund from its non-eligible refundable dividend tax on hand determined, for its preceding taxation year, under clause (1)(a)(ii)(A). (impôt en main remboursable au titre de dividendes non déterminés)
(5) Section 129 of the Act is amended by adding the following after subsection (4):
Marginal note:2019 transitional RDTOH
(5) The following rules apply to a corporation’s first taxation year in respect of which the definition eligible refundable dividend tax on hand in subsection (4) applies:
(a) if the corporation is a Canadian-controlled private corporation throughout the taxation year and its preceding taxation year and is not a corporation in respect of which an election under subsection 89(11) applies to the taxation year or the preceding taxation year,
(i) for the purpose of applying paragraph (b) of the definition eligible refundable dividend tax on hand in respect of the corporation at the end of the taxation year, the corporation’s eligible refundable dividend tax on hand at the end of its preceding taxation year is deemed to be the amount, if any, that is the lesser of
(A) the amount determined by the formula
A − B
where
- A
- is the corporation’s refundable dividend tax on hand at the end of its preceding taxation year, and
- B
- is the corporation’s dividend refund for its preceding taxation year, and
(B) the amount determined by the formula
(C − D) × E
where
- C
- is the corporation’s general rate income pool at the end of its preceding taxation year,
- D
- is the amount, if any, by which
(I) the total of all amounts each of which is an eligible dividend paid by the corporation in its preceding taxation year
exceeds
(II) the total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year, and
- E
- is 38 1/3%, and
(ii) for the purpose of applying paragraph (c) of the definition non-eligible refundable dividend tax on hand in respect of the corporation at the end of the taxation year, the corporation’s non-eligible refundable dividend tax on hand at the end of its preceding taxation year is deemed to be the amount determined by the formula
A − B
where
- A
- is the amount determined under clause (a)(i)(A) in respect of the corporation at the end of the preceding taxation year, and
- B
- is the amount determined under clause (a)(i)(B) in respect of the corporation at the end of the preceding taxation year; and
(b) in any other case, for the purpose of applying paragraph (b) of the definition eligible refundable dividend tax on hand in respect of the corporation at the end of the taxation year, the corporation’s eligible refundable dividend tax on hand at the end of its preceding taxation year is deemed to be the amount that would be determined for clause (a)(i)(A) if paragraph (a) applied to the corporation in respect of the taxation year.
Marginal note:2019 transitional RDTOH — amalgamations
(5.1) Subsection (5) applies with such modifications as are necessary for the purpose of applying paragraph 87(2)(aa) in respect of a corporation if
(a) the corporation is a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation (within the meaning assigned by subsection 87(1));
(b) the corporation has an amount of refundable dividend tax on hand at the end of its taxation year that ends because of paragraph 87(2)(a); and
(c) the first taxation year of the new corporation (within the meaning assigned by subsection 87(1)) in respect of the amalgamation is one to which the definition eligible refundable dividend tax on hand in subsection (4) applies.
(6) Subject to subsection 20(5), subsections (1) to (5) apply to taxation years that begin after 2018.
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