Budget Implementation Act, 2023, No. 1 (S.C. 2023, c. 26)
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Assented to 2023-06-22
PART 1Amendments to the Income Tax Act and Other Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
62 (1) Subsection 212(13.2) of the Act is replaced by the following:
Marginal note:Application of Part XIII tax — payer subject to Part I
(13.2) For the purposes of this Part, if a particular non-resident person pays or credits an amount (other than an amount to which subsection (13) applies) to another non-resident person or to a partnership (other than a Canadian partnership), the particular non-resident person is deemed to be a person resident in Canada in respect of the portion of the amount that is deductible in computing
(a) the particular non-resident person’s taxable income earned in Canada from a source that is neither a treaty-protected business nor a treaty-protected property; or
(b) the amount on which the particular non-resident person is liable to pay tax under Part I because of section 216.
(2) Subsection 212(13.3) of the Act is replaced by the following:
Marginal note:Application of Part XIII to authorized foreign bank
(13.3) An authorized foreign bank is deemed to be a person resident in Canada for the purposes of
(a) this Part, in respect of any amount paid or credited to or by the bank in respect of its Canadian banking business; and
(b) the application in paragraph (13.1)(b) and subsection (13.2) of the definition Canadian partnership (as defined in subsection 248(1)), in respect of a membership interest in a partnership held by the bank in the course of its Canadian banking business.
(3) Subsections (1) and (2) apply to amounts paid or credited after 2022.
63 (1) Clause (B) of the description of A in subparagraph 212.3(9)(b)(ii) of the Act is replaced by the following:
(B) as a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of the subject corporation or the portion, of a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for shares of the capital stock of the subject corporation, that can reasonably be considered to relate to shares of the capital stock of the subject corporation, or
(2) The description of A in subparagraph 212.3(9)(b)(ii) of the Act, as amended by subsection (1), is replaced by the following:
- A
- is the amount that is equal to the fair market value of property that
(A) the particular corporation demonstrates has been received at the subsequent time by it or by a corporation resident in Canada that was not dealing at arm’s length with the particular corporation at that time (either of which is in this subparagraph referred to as the “recipient corporation”)
(I) as proceeds from the disposition of the acquired shares, or other shares to the extent that the proceeds from the disposition of those other shares can reasonably be considered to relate to the acquired shares or to shares of the capital stock of the subject corporation in respect of which an investment described in paragraph (10)(b) was made,
(II) as a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of the subject corporation or the portion, of a reduction of paid-up capital or dividend in respect of a class of shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for shares of the capital stock of the subject corporation, that can reasonably be considered to relate to shares of the capital stock of the subject corporation, or
(III) if the investment is described in paragraph (10)(c) or (d) or subparagraph (10)(e)(i),
1 as a repayment of or as proceeds from the disposition of the debt obligation or amount owing, or
2 as interest on the debt obligation or amount owing, and
(B) is not received by the recipient corporation
(I) as a result of an investment, made by the recipient corporation, to which subsection (16) or (18) applies, or
(II) as proceeds from a disposition of property to a corporation resident in Canada for which the acquisition is an investment to which subsection (16) or (18) applies, or to a partnership of which such a corporation is a member,
(3) Subsection (1) applies in respect of transactions and events that occur after March 28, 2012.
(4) Subsection (2) applies in respect of transactions and events that occur on or after August 9, 2022.
64 Paragraph 214(3)(g) of the Act is repealed.
65 Paragraph 227(10)(b) of the Act is replaced by the following:
(b) subsection 237.1(7.4) or (7.5), 237.3(8), 237.4(12) or 237.5(5) by a person or partnership,
66 (1) Paragraph (b) of the definition specified Canadian entity in subsection 233.3(1) of the Act is replaced by the following:
(b) a partnership where the total of all amounts, each of which is a share of the partnership’s income or loss for the period of a member that is a non-resident person or a taxpayer referred to in any of subparagraphs (a)(i) to (viii), is less than 90% of the income or loss of the partnership for the period, and, where the income and loss of the partnership are nil for the period, the income of the partnership for the period is deemed to be $1,000,000 for the purpose of this paragraph. (entité canadienne déterminée)
(2) Paragraph (n) of the definition specified foreign property in subsection 233.3(1) of the Act is replaced by the following:
(n) an interest in a trust that is described in paragraph (a) or (b) of the definition exempt trust in subsection 233.2(1), or that would be described in paragraph (b) of that definition if that paragraph were read as follows:
(b) a trust that
(i) is resident in Australia or New Zealand for income tax purposes under the laws of Australia or New Zealand, as the case may be,
(ii) qualifies for a reduced rate of income tax under the income tax laws of its country of residence referred to in subparagraph (i),
(iii) is established principally for the purpose of administering or providing benefits under a superannuation, pension or retirement fund or plan, and
(iv) is maintained primarily for the benefit of individuals that are resident in Australia or New Zealand, as the case may be; or
(3) Subsections (1) and (2) apply to taxation years and fiscal periods that end after August 9, 2022.
67 Paragraph 237(1)(b) of the English version of the Act is replaced by the following:
(b) within 15 days after the individual is requested by the person to provide the individual’s Social Insurance Number,
68 (1) The definition solicitor-client privilege in subsection 237.3(1) of the Act is repealed.
(2) The definition avoidance transaction in subsection 237.3(1) of the Act is replaced by the following:
- avoidance transaction
avoidance transaction means a transaction if it may reasonably be considered that one of the main purposes of the transaction, or of a series of transactions of which the transaction is a part, is to obtain a tax benefit. (opération d’évitement)
(3) Paragraph (a) of the definition contractual protection in subsection 237.3(1) of the Act is replaced by the following:
(a) any form of insurance or other protection, including, without limiting the generality of the foregoing, an indemnity, compensation or a guarantee, that
(i) either immediately or in the future and either absolutely or contingently,
(A) protects a person against a failure of the transaction or series to achieve any tax benefit from the transaction or series, or
(B) pays for or reimburses any expense, fee, tax, interest, penalty or similar amount that may be incurred by a person in the course of a dispute in respect of a tax benefit from the transaction or series, and
(ii) is not
(A) standard professional liability insurance, or
(B) integral to an agreement between persons acting at arm’s length for the sale or transfer of all or part of a business (either directly or through the sale or transfer of one or more corporations, partnerships or trusts) where it is reasonable to consider that the insurance or protection
(I) is intended to ensure that the purchase price paid under the agreement takes into account any liabilities of the business immediately prior to the sale or transfer, and
(II) is obtained primarily for purposes other than to achieve any tax benefit from the transaction or series; and
(4) The portion of the definition reportable transaction in subsection 237.3(1) of the Act before subparagraph (a)(i) is replaced by the following:
- reportable transaction
reportable transaction, at any time, means an avoidance transaction that is entered into by or for the benefit of a person, and each transaction that is part of a series of transactions that includes the avoidance transaction, if at the time any of the following paragraphs applies in respect of the avoidance transaction or series:
(a) an advisor or promoter, or any person who does not deal at arm’s length with the advisor or promoter, has or had an entitlement, either immediately or in the future and either absolutely or contingently, to a fee (other than a fee in relation to a prescribed form required to be filed under subsection 37(11)) that to any extent
(5) The portion of paragraph (b) of the definition reportable transaction in subsection 237.3(1) of the Act before subparagraph (i) is replaced by the following:
(b) an advisor or promoter in respect of the avoidance transaction or series, or any person who does not deal at arm’s length with the advisor or promoter, obtains or obtained confidential protection, and the prohibition on disclosure provided under the confidential protection provides confidentiality in respect of a tax treatment in relation to the avoidance transaction or series,
(6) Subsection 237.3(1) of the Act is amended by adding the following in alphabetical order:
- tax treatment
tax treatment, of a person, means a treatment in respect of a transaction, or series of transactions, that the person uses, or plans to use, in a return of income or an information return (or would use in a return of income or an information return if a return of income or an information return were filed) and includes the person’s decision not to include a particular amount in a return of income or an information return. (traitement fiscal)
(7) Paragraph 237.3(2)(a) of the Act is replaced by the following:
(a) every person for whom a tax benefit results, or for whom a tax benefit is expected to result based on the person’s tax treatment of the reportable transaction, from
(i) the reportable transaction,
(ii) any other reportable transaction that is part of a series of transactions that includes the reportable transaction, or
(iii) a series of transactions that includes the reportable transaction;
(8) Subsections 237.3(4) and (5) of the Act are replaced by the following:
Marginal note:Clerical or secretarial services
(4) For greater certainty, subsection (2) does not apply to a person solely because the person provided clerical services or secretarial services with respect to a reportable transaction.
Marginal note:Time for filing return
(5) An information return required under subsection (2) to be filed with the Minister for a reportable transaction must be filed by
(a) a person described in paragraph (2)(a) or (b) on or before the particular day that is 90 days after the earliest of
(i) the day on which the person becomes contractually obligated to enter into the reportable transaction,
(ii) the day on which the person enters into the reportable transaction, and
(iii) if the person is described in paragraph (2)(a) and a person described in paragraph (2)(b) enters into the reportable transaction for the benefit of the person described in paragraph (2)(a), the day on which the reportable transaction is entered into; and
(b) a person described in paragraph (2)(c) or (d) no later than the earliest particular day described in paragraph (a) for a person described in paragraph (2)(a) or (b) in respect of the reportable transaction.
(9) The portion of subsection 237.3(6) of the Act before paragraph (a) is replaced by the following:
Marginal note:Tax benefits disallowed
(6) At any time, section 245 is to be read without reference to its subsection (4) in respect of any reportable transaction in respect of a person described in paragraph (2)(a) in relation to the reportable transaction if, at that time,
(10) Subsection 237.3(8) of the Act is replaced by the following:
Marginal note:Penalty
(8) Every person who fails to file an information return in respect of a reportable transaction as required under subsection (2) on or before the day required under subsection (5) is liable to a penalty equal to
(a) if the person is described in paragraph (2)(a) or (b),
(i) if the person is a corporation and the carrying value of the corporation’s assets is greater than or equal to $50 million for its last taxation year that ends prior to the day on which the information return is required to be filed under subsection (5), $2,000 multiplied by the number of weeks during which the failure continues, to a maximum amount equal to the greater of
(A) $100,000, and
(B) 25% of the amount of the tax benefit in respect of the reportable transaction, and
(ii) in any other case, $500 multiplied by the number of weeks during which the failure continues, to a maximum amount equal to the greater of
(A) $25,000, and
(B) 25% of the amount of the tax benefit in respect of the reportable transaction; and
(b) if the person is described in paragraph (2)(c) or (d), the total of
(i) the amount of the fees charged by that person in respect of the reportable transaction,
(ii) $10,000, and
(iii) $1,000 multiplied by the number of days during which the failure continues, up to a maximum of $100,000.
Marginal note:Penalty – deeming rule
(8.1) If a person described in both paragraphs (2)(b) and (d) is liable to a penalty under subsection (8) in respect of a reportable transaction, the amount of the penalty is deemed to be equal to the greater of the amounts determined under paragraphs (8)(a) and (b).
Marginal note:Carrying value
(8.2) For the purpose of subparagraph (8)(a)(i), the carrying value of the assets of a corporation is to be determined in accordance with paragraphs 181(3)(a) and (b).
(11) Subsections 237.3(9) and (10) of the Act are repealed.
(12) Subsection 237.3(13) of the Act is replaced by the following:
Marginal note:Application of sections 231 to 231.3
(13) Without restricting the generality of sections 231 to 231.3, even if a return of income has not been filed by a taxpayer under section 150 for a taxation year of the taxpayer in which a transaction occurs that is relevant to the tax benefit referred to in paragraph (2)(a) that results (or is expected to result) from the reportable transaction, sections 231 to 231.3 apply, with such modifications as the circumstances require, for the purpose of permitting the Minister to verify or ascertain any information in respect of the reportable transaction.
(13) Subsection 237.3(17) of the Act is replaced by the following:
Marginal note:Solicitor-client privilege
(17) For greater certainty, this section does not require the disclosure of information if it is reasonable to believe that the information is subject to solicitor-client privilege.
(14) Subsections (1) to (10) and (12) to (13) apply with respect to reportable transactions entered into after this Act receives royal assent. The provisions of the Act repealed by subsection (11) continue to apply in respect of reportable transactions entered into before this Act receives royal assent.
- Date modified: