Archived - Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures

MINISTER OF FINANCE

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October 10, 2014

That it is expedient to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures as follows:

SHORT TITLE

Short title

1. This Act may be cited as the Economic Action Plan 2014 Act, No. 2.

Part 1
Amendments to the Income Tax Act and a Related Text

R.S., c. 1 (5th Supp.)

Income Tax Act

2. (1) Subparagraph (a)(i) of the description of B in subsection 12(10.2) of the Income Tax Act is replaced by the following:

(i) deemed by subsection (10.4) or 104(5.1) or (14.1) (as it read for the taxpayer's 2015 taxation year) to have been paid out of the taxpayer's NISA Fund No. 2 before the particular time, or

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

3. (1) Paragraph 14(1.01)(c) of the Act is replaced by the following:

(c) if the eligible capital property is a qualified farm or fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified farm or fishing property of the taxpayer at that time.

(2) Paragraph 14(1.02)(c) of the Act is replaced by the following:

(3) The portion of subsection 14(1.1) of the Act before paragraph (a) is replaced by the following:

Deemed taxable capital gain

(1.1) For the purposes of section 110.6 and paragraph 3(b) as it applies for the purposes of that section, an amount included under paragraph (1)(b) in computing a taxpayer's income for a particular taxation year from a business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified farm or fishing property to the extent of the lesser of

(4) The descriptions of A and B in paragraph 14(1.1)(b) of the Act are replaced by the following:

A is the amount by which the total of

(i) 3/4 of the total of all amounts each of which is the taxpayer's proceeds from a disposition in a preceding taxation year that began after 1987 and ended before February 28, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer,

(ii) 2/3 of the total of all amounts each of which is the taxpayer's proceeds from a disposition in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, and

(iii) 1/2 of the total of all amounts each of which is the taxpayer's proceeds from a disposition in the particular year or a preceding taxation year that ended after October 17, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property, a qualified fishing property or a qualified farm or fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer

exceeds the total of

(iv) 3/4 of the total of all amounts each of which is

(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a property that was, at the time of disposition, a qualified farm property disposed of by the taxpayer in a preceding taxation year that began after 1987 and ended before February 28, 2000, or

(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer's income and that was made or incurred for the purpose of making a disposition referred to in clause (A),

(v) 2/3 of the total of all amounts each of which is

(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a property that was, at the time of disposition, a qualified farm property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000, or

(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer's income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and

(vi) 1/2 of the total of all amounts each of which is

(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a property that was, at the time of disposition, a qualified farm property, a qualified fishing property or a qualified farm or fishing property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after October 17, 2000, or

B is the total of all amounts each of which is

(i) that portion of an amount deemed by subparagraph (1)(a)(v) (as it applied in respect of the business to fiscal periods that began after 1987 and ended before February 23, 1994) to be a taxable capital gain of the taxpayer that can reasonably be attributed to a disposition of a property that was, at the time of disposition, a qualified farm property of the taxpayer, or

(ii) an amount deemed by this section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of a property that was, at the time of disposition, a qualified farm property, a qualified fishing property or a qualified farm or fishing property of the taxpayer.

(5) Subsection 14(1.2) of the Act is repealed.

(6) Subsections (1) to (5) apply to dispositions and transfers that occur in the 2014 and subsequent taxation years.

4. (1) The portion of subsection 15(2.14) of the Act before paragraph (a) is replaced by the following:

Partnerships

(2.14) For purposes of this subsection, subsection (2.11), section 17.1 and subsection 18(5),

(2) Subsection (1) applies to taxation years that end after March 28, 2012, except that, if an election is made by a taxpayer under subsection 49(3) of the Jobs and Growth Act, 2012, subsection (1) does not apply to taxation years of the taxpayer that end before August 14, 2012.

5. (1) Subsection 17(1) of the Act is replaced by the following:

Amount owing by non-resident

17. (1) If this subsection applies to a corporation resident in Canada in respect of an amount owing to the corporation (in this subsection referred to as the "debt"), the corporation shall include in computing its income for a taxation year the amount determined by the formula

A – B

where

A is the amount of interest that would be included in computing the corporation's income for the year in respect of the debt if interest on the debt were computed at the prescribed rate for the period in the year during which the debt was outstanding; and

B is the total of all amounts each of which is

(a) an amount included in computing the corporation's income for the year as, on account of, in lieu of or in satisfaction of, interest in respect of the debt,

(b) an amount received or receivable by the corporation from a trust that is included in computing the corporation's income for the year or a subsequent taxation year and that can reasonably be attributed to interest on the debt for the period in the year during which the debt was outstanding, or

(c) an amount included in computing the corporation's income for the year or a subsequent taxation year under subsection 91(1) that can reasonably be attributed to interest on an amount owing (in this paragraph referred to as the "original debt") — or if the amount of the original debt exceeds the amount of the debt, a portion of the original debt that is equal to the amount of the debt — for the period in the year during which the debt was outstanding if

(i) without the existence of the original debt, subsection (2) would not have deemed the debt to be owed by the non-resident person referred to in paragraph (1.1)(a),

(ii) the original debt was owed by a non-resident person or a partnership each member of which is a non-resident person, and

(iii) where subsection (11.2) applies to the original debt,

(A) an amount determined under paragraph (11.2)(a) or (b) in respect of the original debt is an amount referred to in paragraph (2)(a), and because of the amount referred to in paragraph (2)(a), the debt is deemed to be owed by the non-resident person referred to in paragraph (1.1)(a), and

(B) the original debt was owing by an intermediate lender to an initial lender or by an intended borrower to an intermediate lender (within the meanings of those terms assigned by subsection (11.2)).

Amount owing by non-resident

(1.1) Subsection (1) applies to a corporation resident in Canada in respect of an amount owing to the corporation if, at any time in a taxation year of the corporation,

(a) a non-resident person owes the amount to the corporation;

(b) the amount has been or remains outstanding for more than a year; and

(c) the amount that would be determined for B in subsection (1), if that subsection applied, for the year in respect of the amount owing is less than the amount of interest that would be included in computing the corporation's income for the year in respect of the amount owing if that interest were computed at a reasonable rate for the period in the year during which the amount was outstanding.

(2) The portion of paragraph 17(2)(b) of the Act before subparagraph (i) is replaced by the following:

(b) it is reasonable to conclude that the amount or a portion of the amount became owing, or was permitted to remain owing, to the particular person or partnership because

(3) The portion of subsection 17(2) of the Act after paragraph (b) is replaced by the following:

the non-resident person is deemed at that time to owe to the corporation an amount equal to the amount, or the portion of the amount, as the case may be, owing to the particular person or partnership.

(4) Subsection (1) applies to taxation years that begin after February 23, 1998.

(5) Subsections (2) and (3) apply to taxation years that begin after July 12, 2013.

6. (1) The portion of subsection 18(5) of the Act before the first definition is replaced by the following:

Definitions

(5) Notwithstanding any other provision of this Act (other than subsection (5.1)), in this subsection and subsections (4) and (5.1) to (6.1),

(2) Paragraph (b) of the definition "outstanding debts to specified non-residents" in subsection 18(5) of the Act is replaced by the following:

(b) an amount outstanding at the particular time as or on account of a debt or other obligation

(i) to pay an amount to

(A) a non-resident insurance corporation to the extent that the obligation was, for the non-resident insurance corporation's taxation year that included the particular time, designated insurance property in respect of an insurance business carried on in Canada through a permanent establishment as defined by regulation, or

(B) an authorized foreign bank, if the bank uses or holds the obligation at the particular time in its Canadian banking business, or

(ii) that is a debt obligation described in subparagraph (ii) of the description of A in paragraph 17.1(1)(b) to the extent that the proceeds of the debt obligation can reasonably be considered to directly or indirectly fund at the particular time, in whole or in part, a pertinent loan or indebtedness (as defined in subsection 212.3(11)) owing to the corporation or another corporation resident in Canada that does not, at the particular time, deal at arm's length with the corporation;

(3) Subsection 18(5) of the Act is amended by adding the following in alphabetical order:

"security interest"

« garantie »

"security interest", in respect of a property, means an interest in, or for civil law a right in, the property that secures payment of an obligation;

"specified right"

« droit déterminé »

"specified right", at any time in respect of a property, means a right to, at that time, mortgage, hypothecate, assign, pledge or in any way encumber the property to secure payment of an obligation — other than the particular debt or other obligation described in paragraph (6)(a) or a debt or other obligation described in subparagraph (6)(d)(ii) — or to use, invest, sell or otherwise dispose of, or in any way alienate, the property unless it is established by the taxpayer that all of the proceeds (net of costs, if any) received, or that would be received, from exercising the right must first be applied to reduce an amount described in subparagraph (6)(d)(i) or (ii);

(4) Subsection 18(6) of the Act is replaced by the following:

Back-to-back loan arrangement

(6) Subsection (6.1) applies at any time in respect of a taxpayer if at that time

(a) the taxpayer has a particular amount outstanding as or on account of a particular debt or other obligation to pay an amount to a person (in this subsection and subsection (6.1) referred to as the "intermediary");

(b) the intermediary is neither

(i) a person resident in Canada with whom the taxpayer does not deal at arm's length, nor

(ii) a person that is, in respect of the taxpayer, described in subparagraph (a)(i) of the definition "outstanding debts to specified non-residents" in subsection (5);

(i) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a particular non-resident person that is, in respect of the taxpayer, described in subparagraph (a)(i) of the definition "outstanding debts to specified non-residents" in subsection (5) that meets any of the following conditions (in this subsection and subsection (6.1) referred to as the "intermediary debt"):

(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 the particular debt or other obligation, or

(B) it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because

(I) all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or

(II) the intermediary anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or

(ii) has a specified right in respect of a particular property that was granted directly or indirectly by a person that is, in respect of the taxpayer, a particular non-resident person described in subparagraph (a)(i) of the definition "outstanding debts to specified non-residents" in subsection (5) and

(A) the existence of the specified right is required under the terms and conditions of the particular debt or other obligation, or

(B) it can reasonably be concluded that all or a portion of the particular amount became owing, or was permitted to remain owing, because

(I) the specified right was granted, or

(II) the intermediary anticipated that the specified right would be granted; and

(d) the total of all amounts — each of which is, in respect of the particular debt or other obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph (c)(ii) — is equal to at least 25% of the total of

(i) the particular amount, and

(ii) the total of all amounts each of which is an amount (other than the particular amount) that the taxpayer, or a person 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 intermediary under the agreement, or an agreement that is connected to the agreement, under which the particular debt or other obligation was entered into if

(A) the intermediary is granted a security interest in respect of a property that is the intermediary debt 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.

Back-to-back loan arrangement

(6.1) If this subsection applies at any time in respect of a taxpayer,

(a) then for the purpose of applying subsections (4) and (5),

(i) the portion of the particular amount, at that time, referred to in paragraph (6)(a) that is equal to the lesser of the following amounts is deemed to be an amount outstanding as or on account of a debt or other obligation to pay an amount to the particular non-resident person referred to in subparagraph (6)(c)(i) or (ii), as the case may be, and not to the intermediary:

(A) the amount outstanding as or on account of the intermediary debt or the fair market value of the particular property referred to in subparagraph (6)(c)(ii), as the case may be, and

(B) the proportion of the particular amount that the amount outstanding or the fair market value, as the case may be, is of the total of all amounts each of which is

(I) an amount outstanding as or on account of an intermediary debt in respect of the particular debt or other obligation, owed to the particular non-resident or any other non-resident person that is, in respect of the taxpayer, described in the definition "outstanding debts to specified non-residents" in subsection (5), or

(II) the fair market value of a particular property referred to in subparagraph (6)(c)(ii) in respect of the particular debt or other obligation, and

(ii) the portion of the interest paid or payable by the taxpayer, in respect of a period throughout which subparagraph (a)(i) applies, on the particular debt or other obligation referred to in paragraph (6)(a) that is equal to the amount determined by the following formula is deemed to be paid or payable by the taxpayer to the particular non-resident, and not to the intermediary, as interest for the period on the amount deemed by subparagraph (a)(i) to be outstanding to the particular non-resident:

A × B/C

where

A is the interest paid or payable,

B is the average of all amounts each of which is an amount that is deemed by subparagraph (a)(i) to be outstanding to the particular non-resident at a time during the period, and

C is the average of all amounts each of which is the particular amount outstanding at a time during the period; and

(b) for the purposes of Part XIII and subject to subsections 214(16) and (17), interest deemed under subparagraph (a)(ii) to be paid or payable to the particular non-resident in respect of a period is, to the extent that the interest is not deductible in computing the income of the taxpayer for the year because of subsection 18(4), deemed to be paid or payable by the taxpayer to the particular non-resident, and not to the intermediary, in respect of the period.

(5) The portion of subsection 18(7) of the Act before paragraph (a) is replaced by the following:

Partnership debts and property

(7) For the purposes of this subsection, paragraph (4)(a), subsections (5) to (6.1) and paragraph 12(1)(l.1), each member of a partnership at any time is deemed at that time

(6) Subsections (1) and (3) to (5) apply to taxation years that begin after 2014.

(7) Subsection (2) applies to taxation years that end after March 28, 2012, except that, if an election is made by a taxpayer under subsection 49(3) of the Jobs and Growth Act, 2012, subsection (2) does not apply to taxation years of the taxpayer that end before August 14, 2012.

7. (1) Paragraph 28(1)(g) of the Act is replaced by the following:

(g) the total of all amounts each of which is an amount deducted for the year under paragraph 20(1)(a), (b) or (uu), subsection 20(16) or 24(1), section 30 or subsection 80.3(2), (4) or (4.1) in respect of the business,

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

8. (1) Paragraph 34.1(1)(a) of the Act is replaced by the following:

(a) an individual (other than a graduated rate estate) carries on a business in a taxation year,

(2) Paragraph 34.1(2)(a) of the Act is replaced by the following:

(a) an individual (other than a graduated rate estate) begins carrying on a business in a taxation year and not earlier than the beginning of the first fiscal period of the business that begins in the year and ends after the end of the year (in this subsection referred to as the "particular period"), and

(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.

9. (1) Subparagraph 38(a.1)(ii) of the Act is replaced by the following:

(ii) the disposition is deemed by section 70 to have occurred and the property is

(A) a security described in subparagraph (i), and

(B) the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer's graduated rate estate to a qualified donee, or

(2) Subparagraph 38(a.2)(ii) of the Act is replaced by the following:

(ii) the disposition is deemed by section 70 to have occurred and the property is

(A) described in subparagraph (i), and

(B) the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer's graduated rate estate to a qualified donee (other than a private foundation);

(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.

10. (1) Subparagraph 39(1)(a)(i.1) of the Act is replaced by the following:

(i.1) an object that the Canadian Cultural Property Export Review Board has determined meets the criteria set out in paragraphs 29(3)(b) and (c) of the Cultural Property Export and Import Act if

(A) the disposition is to an institution or a public authority in Canada that was, at the time of the disposition, designated under subsection 32(2) of that Act either generally or for a specified purpose related to that object, or

(B) the disposition is deemed by section 70 to have occurred and the object is the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer's graduated rate estate to an institution that would be described in clause (A) if the disposition were made at the time the estate makes the gift,

(2) Subparagraph 39(1)(c)(vii) of the Act is replaced by the following:

(vii) in the case of a share to which subparagraph (vi) applies and where the taxpayer is a trust referred to in paragraph 104(4)(a) or (a.4), the total of all amounts each of which is an amount received after 1971 or receivable at the time of the disposition by the settlor (within the meaning assigned by subsection 108(1)) or by the settlor's spouse as a taxable dividend on the share or on any other share in respect of which it is a substituted share, and

(3) Subparagraph 39(1)(c)(vii) of the Act, as enacted by subsection (2), is replaced by the following:

(vii) in the case of a share to which subparagraph (vi) applies and where the taxpayer is a trust for which a day is to be, or has been, determined under paragraph 104(4)(a), or (a.4) by reference to a death or later death, as the case may be, the total of all amounts each of which is an amount received after 1971 or receivable at the time of the disposition, as a taxable dividend on the share or on any other share in respect of which it is a substituted share, by an individual whose death is that death or later death, as the case may be, or a spouse or common-law partner of the individual, and

(4) Subsections (1) and (3) apply to the 2016 and subsequent taxation years.

(5) Subsection (2) applies to the 2014 and 2015 taxation years.

11. (1) Subparagraph 40(1.1)(c)(ii) of the Act is replaced by the following:

(ii) a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer (such a share or an interest having the meaning assigned by subsection 70(10)), or

(2) Paragraph 40(1.1)(c) of the Act is amended by striking out "or" at the end of subparagraph (iii) and by repealing subparagraph (iv).

(3) The portion of subsection 40(3.12) of the Act before paragraph (a) is replaced by the following:

Deemed loss for certain partners

(3.12) If a corporation, an individual (other than a trust) or a graduated rate estate (each of which is referred to in this subsection as the "taxpayer") is a member of a partnership at the end of a fiscal period of the partnership, the taxpayer is deemed to have a loss from the disposition at that time of the member's interest in the partnership equal to the amount that the taxpayer elects in the taxpayer's return of income under this Part for the taxation year that includes that time, not exceeding the lesser of

(4) Subsections (1) and (2) apply to dispositions and transfers that occur in the 2014 and subsequent taxation years.

(5) Subsection (3) applies to the 2016 and subsequent taxation years.

12. (1) Subparagraph 69(1)(b)(ii) of the Act is replaced by the following:

(ii) to any person by way of gift, or

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

13. (1) Paragraph 70(9)(a) of the English version of the Act is replaced by the following:

(a) the property was, before the death of the taxpayer, used principally in a farming or fishing business carried on in Canada in which the taxpayer, the spouse or common-law partner of the taxpayer or a child or parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot);

(2) Paragraph 70(9.1)(c) of the English version of the Act is replaced by the following:

(c) the property is, immediately before the beneficiary's death, land or a depreciable property of a prescribed class of the trust that was used in a farming or fishing business carried on in Canada;

(3) Paragraph 70(9.2)(a) of the Act is replaced by the following:

(a) the property was, immediately before the death of the taxpayer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer;

(4) The portion of subparagraph 70(9.21)(a)(ii) of the Act before clause (A) is replaced by the following:

(ii) where the property is, immediately before the death of the taxpayer, a share of the capital stock of a family farm or fishing corporation of the taxpayer,

(5) The portion of subparagraph 70(9.21)(b)(ii) of the Act before clause (A) is replaced by the following:

(ii) subject to subparagraph (iii), where the property is, immediately before the taxpayer's death, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer,

(6) Paragraph 70(9.3)(a) of the Act is replaced by the following:

(a) the property (or property for which the property was substituted) was transferred to the trust by the settlor and was, immediately before that transfer, a share of the capital stock of a family farm or fishing corporation of the settlor or an interest in a family farm or fishing partnership of the settlor;

(7) Subparagraphs 70(9.3)(c)(i) and (ii) of the Act are replaced by the following:

(i) a share of the capital stock of a Canadian corporation that would, immediately before that beneficiary's death, be a share of the capital stock of a family farm or fishing corporation of the settlor, if the settlor owned the share at that time and paragraph (a) of the definition "share of the capital stock of a family farm or fishing corporation" in subsection (10) were read without the words "in which the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot)", or

(8) Subparagraph 70(9.3)(c)(iii) of the Act is replaced by the following:

(iii) a partnership interest in a partnership that carried on in Canada a farming or fishing business in which it used all or substantially all of the property;

(9) The portion of subparagraph 70(9.31)(a)(ii) of the Act before clause (A) is replaced by the following:

(ii) where the property is, immediately before the beneficiary's death, a share described in subparagraph (9.3)(c)(i),

(10) The portion of subparagraph 70(9.31)(b)(ii) of the Act before clause (A) is replaced by the following:

(ii) subject to subparagraph (iii), where the property is, immediately before the beneficiary's death, a share described in subparagraph (9.3)(c)(i) or a partnership interest described in subparagraph (9.3)(c)(iii),

(11) Subsection 70(9.8) of the Act is replaced by the following:

Leased farm or fishing property

(9.8) For the purposes of subsections (9) and 14(1), paragraph 20(1)(b), subsection 73(3) and paragraph (d) of the definition "qualified farm or fishing property" in subsection 110.6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a farming or fishing business carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a farming or fishing business in Canada, by

(a) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm or fishing corporation of the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual; or

(b) a partnership, a partnership interest in which is an interest in a family farm or fishing partnership of the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual.

(12) The definitions "interest in a family farm partnership", "interest in a family fishing partnership", "share of the capital stock of a family farm corporation" and "share of the capital stock of a family fishing corporation" in subsection 70(10) of the Act are repealed.

(13) The definition "child" in subsection 70(10) of the Act is amended by striking out "and" at the end of paragraph (b) and by adding the following after that paragraph:

(b.1) a person who was a child of the taxpayer immediately before the death of the person's spouse or common-law partner, and

(14) Subsection 70(10) of the Act is amended by adding the following in alphabetical order:

"interest in a family farm or fishing partnership"

« participation dans une société de personnes agricole ou de pêche familiale »

"interest in a family farm or fishing partnership", of an individual at any time, means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to

(a) property that has been used principally in the course of carrying on a farming or fishing business in Canada in which the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot), by

(i) the partnership,

(ii) a corporation, a share of the capital stock of which was a share of the capital stock of a family farm or fishing corporation of the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual,

(iii) a partnership, a partnership interest in which was an interest in a family farm or fishing partnership of the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual, or

(iv) the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual,

(b) shares of the capital stock or indebtedness of one or more corporations of which all or substantially all of the fair market value of the property was attributable to property described in paragraph (d),

(c) partnership interests or indebtedness of one or more partnerships of which all or substantially all of the fair market value of the property was attributable to property described in paragraph (d), or

(d) properties described in any of paragraphs (a) to (c);

"share of the capital stock of a family farm or fishing corporation"

« action du capital-actions d'une société agricole ou de pêche familiale »

"share of the capital stock of a family farm or fishing corporation", of an individual at any time, means a share of the capital stock of a corporation owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to

(i) the corporation,

(iii) a corporation controlled by a corporation described in subparagraph (i) or (ii),

(iv) a partnership, a partnership interest in which was an interest in a family farm or fishing partnership of the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual, or

(v) the individual, the individual's spouse or common-law partner, a child of the individual or a parent of the individual,

(d) properties described in any of paragraphs (a) to (c).

(15) Subsection 70(12) of the Act is replaced by the following:

Value of NISA

(12) For the purpose of the definition "share of the capital stock of a family farm or fishing corporation" in subsection (10), the fair market value of a net income stabilization account is deemed to be nil.

(16) Subsections (1) to (10) and (12) to (15) are deemed to have come into force on January 1, 2014.

(17) Subsection (11) applies to dispositions and transfers that occur in the 2014 and subsequent taxation years.

14. (1) Paragraph 73(3)(a) of the English version of the Act is replaced by the following:

(a) the property was, before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a farming or fishing business carried on in Canada by the taxpayer;

(2) Paragraph 73(3)(c) of the English version of the Act is replaced by the following:

(c) the property has been used principally in a farming or fishing business in which the taxpayer, the taxpayer's spouse or common-law partner, a child of the taxpayer or a parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot).

(3) Paragraph 73(4)(b) of the Act is replaced by the following:

(b) the property was, immediately before the transfer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer (as defined in subsection 70(10)).

(4) The portion of paragraph 73(4.1)(a) of the Act before subparagraph (i) is replaced by the following:

(a) subject to paragraph (c), where the property was, immediately before the transfer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,

(5) Paragraph 73(4.1)(b) of the Act is replaced by the following:

(b) subject to paragraph (c), where the property is, immediately before the transfer, a share of the capital stock of a family farm or fishing corporation of the taxpayer or an interest in a family farm or fishing partnership of the taxpayer, the child is deemed to have acquired the property for an amount equal to the taxpayer's proceeds of disposition in respect of the disposition of the property determined under paragraph (a);

(6) The portion of paragraph 73(4.1)(c) of the Act before subparagraph (i) is replaced by the following:

(c) where the property is, immediately before the transfer, an interest in a family farm or fishing partnership of the taxpayer (other than a partnership interest to which subsection 100(3) applies), the taxpayer receives no consideration in respect of the transfer of the property and the taxpayer elects, in the taxpayer's return of income under this Part for the taxation year which includes the time of the transfer, to have this paragraph apply in respect of the transfer of the property,

(7) Subsections (1) to (6) apply to transfers that occur in the 2014 and subsequent taxation years.

15. (1) Subsection 80.03(8) of the Act is replaced by the following:

Lifetime capital gains exemption

(8) If, as a consequence of the disposition at any time by an individual of a property that is a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual (as defined in subsection 110.6(1)), the individual is deemed by subsection (2) to have a capital gain at that time from the disposition of another property, for the purposes of sections 3, 74.3 and 111, as they apply for the purposes of section 110.6, the other property is deemed to be a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual, as the case may be.

(2) Subsection (1) applies to dispositions that occur in the 2014 and subsequent taxation years.

16. (1) Clause 80.04(6)(a)(ii)(B) of the Act is replaced by the following:

(B) if the debtor is an individual (other than a trust) or a graduated rate estate, the day that is one year after the taxpayer's filing-due date for the year;

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

17. (1) The definition "breeding animals" in subsection 80.3(1) of the Act is replaced by the following:

"breeding animals"

« animaux reproducteurs »

"breeding animals" means deer, elk and other similar grazing ungulates, bovine cattle, bison, goats, sheep and horses that are over 12 months of age and are kept for breeding;

(2) Subsection 80.3(1) of the Act is amended by adding the following in alphabetical order:

"breeding bees"

« abeilles reproductrices »

"breeding bees" means bees that are not used principally to pollinate plants in greenhouses and larvae of those bees;

"breeding bee stock"

« stock d'abeilles reproductrices »

"breeding bee stock", of a taxpayer at any time, means a reasonable estimate of the quantity of a taxpayer's breeding bees held at that time in the course of carrying on a farming business using a unit of measurement that is accepted as an industry standard;

(3) Section 80.3 of the Act is amended by adding the following after subsection (4):

Income deferral

(4.1) If in a taxation year a taxpayer carries on a farming business in a region that is at any time in the year a prescribed drought region or a prescribed region of flood or excessive moisture and the taxpayer's breeding bee stock at the end of the year in respect of the business does not exceed 85% of the taxpayer's breeding bee stock at the beginning of the year in respect of the business, there may be deducted in computing the taxpayer's income from the business for the year the amount that the taxpayer claims, not exceeding the amount, if any, determined by the formula

(A – B) × C

where

A is the amount by which

(a) the total of all amounts included in computing the taxpayer's income from the business for the year in respect of the sale of breeding bees in the year

exceeds

(b) the total of all amounts deducted under paragraph 20(1)(n) in computing the taxpayer's income from the business for the year in respect of an amount referred to in paragraph (a);

B is the total of all amounts deducted in computing the taxpayer's income from the business for the year in respect of the acquisition of breeding bees; and

C is

(a) 30% if the taxpayer's breeding bee stock in respect of the business at the end of the year exceeds 70% of the taxpayer's breeding bee stock in respect of the business at the beginning of the year, and

(b) 90% if the taxpayer's breeding bee stock in respect of the business at the end of the year does not exceed 70% of the taxpayer's breeding bee stock in respect of the business at the beginning of the year.

(4) The portion of subsection 80.3(5) of the Act before paragraph (b) is replaced by the following:

Inclusion of deferred amount

(5) An amount deducted under subsection (4) or (4.1) in computing the income of a taxpayer for a particular taxation year from a farming business carried on in a region prescribed under those subsections may, to the extent that the taxpayer so elects, be included in computing the taxpayer's income from the business for a taxation year ending after the particular taxation year, and is, except to the extent that the amount has been included under this subsection in computing the taxpayer's income from the business for a preceding taxation year after the particular year, deemed to be income of the taxpayer from the business for the taxation year of the taxpayer that is the earliest of

(a) the first taxation year beginning after the end of the period or series of continuous periods, as the case may be, for which the region is prescribed under those subsections,

(5) The portion of subsection 80.3(6) of the Act before paragraph (a) is replaced by the following:

Subsections (2), (4) and (4.1) not applicable

(6) Subsections (2), (4) and (4.1) do not apply to a taxpayer in respect of a farming business for a taxation year

(6) Section 80.3 of the Act is amended by adding the following after subsection (6):

Measuring breeding bee stock

(7) In applying subsection (4.1) in respect of a taxation year, the unit of measurement used for estimating the quantity of a taxpayer's breeding bee stock held in the course of carrying on a farming business at the end of the year is to be the same as that used for the beginning of the year.

(7) Subsections (1) to (6) apply to the 2014 and subsequent taxation years.

18. (1) Paragraph 81(1)(c) of the Act is replaced by the following:

Ship or aircraft of non-residents

(c) the income for the year of a non-resident person earned in Canada from international shipping or from the operation of aircraft in international traffic, if the country in which the person is resident grants substantially similar relief for the year to persons resident in Canada;

(2) Subsection (1) applies to taxation years that begin after July 12, 2013.

19. (1) Section 87 of the Act is amended by adding the following after subsection (8.2):

Anti-avoidance

(8.3) Subsection (8) does not apply in respect of a taxpayer's shares of the capital stock of a predecessor foreign corporation that are exchanged for or become, on a foreign merger, shares of the capital stock of the new foreign corporation or the foreign parent corporation, if

(a) the new foreign corporation is, at the time that is immediately after the foreign merger, a foreign affiliate of the taxpayer;

(b) shares of the capital stock of the new foreign corporation are, at that time, excluded property (as defined in subsection 95(1)) of another foreign affiliate of the taxpayer; and

(c) the foreign merger is part of a transaction or event or a series of transactions or events that includes a disposition of shares of the capital stock of the new foreign corporation, or property substituted for the shares, to

(i) a person (other than a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest (within the meaning assigned by paragraph 95(2)(m)) at the time of the transaction or event or throughout the series, as the case may be) with whom the taxpayer was dealing at arm's length immediately after the transaction, event or series, or

(ii) a partnership a member of which is, immediately after the transaction, event or series, a person described in subparagraph (i).

(2) Subsection (1) applies to foreign mergers that occur after July 12, 2013.

20. (1) Subsection 90(8) of the Act is amended by striking out "and" at the end of paragraph (b), by adding "and" at the end of paragraph (c) and by adding the following after paragraph (c):

(d) subject to subsection (8.1), an upstream deposit owing to an eligible bank affiliate.

(2) Section 90 of the Act is amended by adding the following after subsection (8):

Upstream deposit — eligible bank affiliate

(8.1) For the purposes of this section, if a taxpayer is an eligible Canadian bank and an eligible bank affiliate of the taxpayer is owed, at any time in a particular taxation year of the affiliate or the immediately preceding taxation year, an upstream deposit,

(a) the affiliate is deemed to make a loan to the taxpayer immediately before the end of the particular year equal to the amount determined by the following formula, where all amounts referred to in the formula are to be determined using Canadian currency:

A – B – C

where

A is 90% of the average of all amounts each of which is, in respect of a calendar month that ends in the particular year, the greatest total amount at any time in the month of the upstream deposits owing to the affiliate,

B is the lesser of

(i) the amount, if any, by which the affiliate's excess liquidity for the particular year exceeds the average of all amounts each of which is, in respect of a calendar month that ends in the particular year, the greatest total amount at any time in the month of eligible Canadian indebtedness owing to the affiliate, and

(ii) the amount determined for A, and

C is the amount, if any, by which the amount determined for A for the immediately preceding year exceeds the amount determined for B for the immediately preceding year; and

(b) if the formula in paragraph (a) would, in the absence of section 257, result in a negative amount for the particular year,

(i) the taxpayer is deemed to repay immediately before the end of the particular year — in an amount equal to the absolute value of the negative amount and in the order in which they arose — loans made by the affiliate under paragraph (a) in a prior taxation year and not previously repaid, and

(ii) the repayment is deemed to not be part of a series of loans or other transactions and repayments.

(3) Subsection 90(15) of the Act is amended by adding the following in alphabetical order:

"eligible bank affiliate"

« filiale bancaire admissible »

"eligible bank affiliate" has the same meaning as in subsection 95(2.43).

"eligible Canadian bank"

« banque canadienne admissible »

"eligible Canadian bank" has the same meaning as in subsection 95(2.43).

"eligible Canadian indebtedness"

« dettes canadiennes admissibles »

"eligible Canadian indebtedness" has the same meaning as in subsection 95(2.43).

"excess liquidity"

« liquidités excédentaires »

"excess liquidity" has the same meaning as in subsection 95(2.43).

"upstream deposit"

« dépôt en amont »

"upstream deposit" has the same meaning as in subsection 95(2.43).

(4) Subsections (1) to (3) apply in respect of taxation years of a foreign affiliate of a taxpayer that begin after February 27, 2014.

21. (1) The portion of subsection 93.1(1) of the Act before paragraph (a) is replaced by the following:

Shares held by partnership

93.1 (1) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2) and 20(12), sections 93 and 113, paragraph 128.1(1)(d), (and any regulations made for the purposes of those provisions), section 95 (to the extent that it is applied for the purposes of those provisions), subsection 95(2.2) and section 126, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(2) The portion of subsection 93.1(1) of the Act before paragraph (a), as enacted by subsection (1), is replaced by the following:

Shares held by partnership

93.1 (1) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2), 20(12) and 39(2.1), sections 90, 93 and 113, paragraph 128.1(1)(d), (and any regulations made for the purposes of those provisions), section 95 (to the extent that it is applied for the purposes of those provisions), paragraph 95(2)(g.04), subsection 95(2.2) and section 126, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(3) The portion of subsection 93.1(1) of the Act before paragraph (a), as enacted by subsection (2), is replaced by the following:

Shares held by partnership

93.1 (1) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2), 20(12) and 39(2.1), sections 90, 93 and 113, paragraphs 128.1(1)(c.3) and (d), section 212.3 and subsection 219.1(2), (and any regulations made for the purposes of those provisions), section 95 (to the extent that it is applied for the purposes of those provisions), paragraph 95(2)(g.04), subsection 95(2.2) and section 126, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(4) The portion of subsection 93.1(1) of the Act before paragraph (a), as enacted by subsection (3), is replaced by the following:

Shares held by partnership

93.1 (1) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of a specified provision, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(5) Section 93.1 of the Act is amended by adding the following after subsection (1):

Specified provisions for subsection (1)

(1.1) For the purposes of subsection (1), the specified provisions are

(a) subsections (2), (5), 20(12) and 39(2.1), sections 90, 93, 93.3 and 113, paragraphs 128.1(1)(c.3) and (d), section 212.3, subsection 219.1(2) and section 233.4;

(b) section 95 to the extent that section is applied for the purposes of the provisions referred to in paragraph (a);

(d) paragraph 95(2)(g.04), subsection 95(2.2) and section 126.

(6) Paragraph 93.1(2)(a) of the Act is replaced by the following:

(a) for the purposes of sections 93 and 113 and any regulations made for the purposes of those sections, each member of the partnership (other than another partnership) is deemed to have received the proportion of the partnership dividend that

(i) the fair market value of the member's interest held, directly or indirectly through one or more other partnerships, in the partnership at that time

is of

(ii) the fair market value of all the interests in the partnership held directly by members of the partnership at that time;

(7) Paragraph 93.1(3)(c) of the Act is replaced by the following:

(8) Section 93.1 of the Act is amended by adding the following after subsection (3):

Partnership deemed to be corporation

(4) For the purpose of applying clause 95(2)(a)(ii)(D) in respect of an amount paid or payable by a partnership to a foreign affiliate, of a taxpayer, that is a member of the partnership or to another foreign affiliate of the taxpayer,

(a) if, at any time, all the members (in this subsection referred to as "member affiliates") of the partnership are foreign affiliates of the taxpayer,

(i) the partnership is deemed to be, at that time in respect of the taxpayer and the member affiliates, a non-resident corporation without share capital, and

(ii) all the membership interests in the partnership are deemed to be, at that time, equity interests in the corporation held by the member affiliates; and

(b) if, at any time, all the member affiliates are resident in a particular country and the partnership does not carry on business outside the particular country, the partnership is deemed to be, at that time, resident in the particular country.

Computing FAPI in respect of partnership

(5) For the purpose of applying a relevant provision in respect of a foreign affiliate of a taxpayer resident in Canada, if at any time the taxpayer is a partnership of which a particular corporation resident in Canada, or a foreign affiliate of the particular corporation, is a member and if, based on the relevant assumptions, the particular corporation and the taxpayer would be related, then

(a) a non-resident corporation that is, at that time, a foreign affiliate of the particular corporation is deemed to be, at that time, a foreign affiliate of the taxpayer; and

(b) the taxpayer is deemed to have, at that time, a qualifying interest in respect of that foreign affiliate if the particular corporation has, at that time, a qualifying interest in respect of the non-resident corporation.

Relevant provisions and assumptions

(6) For the purposes of subsection (5),

(a) the relevant provisions are

(i) paragraph (b) of the description of A in the definition "foreign accrual property income" in subsection 95(1),

(ii) in determining whether a property of a foreign affiliate of a taxpayer is excluded property of the affiliate, the description of B in the definition "foreign accrual property income" in subsection 95(1),

(iii) paragraphs 95(2)(a) and (g), and

(iv) subsections 95(2.2) and (2.21); and

(b) the relevant assumptions are that

(i) the partnership is a non-resident corporation having capital stock of a single class divided into 100 issued shares that each have full voting rights, and

(ii) each member of the partnership (other than another partnership) owns, at any time, the proportion of the issued shares of that class that

(A) the fair market value of the member's interest held, directly or indirectly through one or more partnerships, in the partnership at that time

is of

(B) the fair market value of all the interests in the partnership held directly by members of the partnership at that time.

(9) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999.

(10) Subsection (2) is deemed to have come into force on August 20, 2011.

(11) Subsection (3) is deemed to have come into force on March 29, 2012.

(12) Subsections (4) and (5) are deemed to have come into force on July 12, 2013. However, if a taxpayer elects under subsection (15), then in respect of the taxpayer, subsections (4) and (5) are deemed to have come into force on January 1, 2010 and subsection 93.1(1.1) of the Act, as enacted by subsection (5), is to be read

(a) in respect of any time that is after 2009 and before August 20, 2011 as follows:

(1.1) For the purposes of subsection (1), the specified provisions are

(a) subsections (2), (5) and 20(12), sections 93 and 113 and paragraph 128.1(1)(d);

(b) section 95 to the extent that section is applied for the purposes of the provisions referred to in paragraph (a);

(d) subsection 95(2.2) and section 126.

(b) in respect of any time that is after August 19, 2011 and before March 29, 2012 as follows:

(1.1) For the purposes of subsection (1), the specified provisions are

(a) subsections (2), (5), 20(12) and 39(2.1), sections 90, 93 and 113 and paragraph 128.1(1)(d);

(b) section 95 to the extent that section is applied for the purposes of the provisions referred to in paragraph (a);

(d) paragraph 95(2)(g.04), subsection 95(2.2) and section 126.

(1.1) For the purposes of subsection (1), the specified provisions are

(a) subsections (2), (5), 20(12) and 39(2.1), sections 90, 93 and 113, paragraphs 128.1(1)(c.3) and (d), section 212.3 and subsection 219.1(2);

(b) section 95 to the extent that section is applied for the purposes of the provisions referred to in paragraph (a);

(d) paragraph 95(2)(g.04), subsection 95(2.2) and section 126.

(13) Subsection (6) applies to dividends received after November 1999.

(14) Subsection (7) and subsection 93.1(4) of the Act, as enacted by subsection (8), apply in respect of taxation years of a foreign affiliate of a taxpayer that end after July 12, 2013.

(15) Subsections 93.1(5) and (6) of the Act, as enacted by subsection (8), apply in respect of taxation years of foreign affiliates of a taxpayer that end after July 12, 2013. However, if the taxpayer elects in writing under this subsection in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the day that an information return referred to in subsection 229(1) of the Income Tax Regulations is required (or would be required if the taxpayer were a Canadian partnership), pursuant to subsections 229(5) and (6) of the Income Tax Regulations, to be filed in respect of the fiscal period of the taxpayer that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then subsections 93.1(5) and (6) of the Act, as enacted by subsection (8), are deemed to have come into force on January 1, 2010.

22. (1) The Act is amended by adding the following after section 93.1:

Definitions

93.2 (1) The definitions in this subsection apply in this section.

"equity interest"

« participation »

"equity interest", in a non-resident corporation without share capital, means any right, whether absolute or contingent, conferred by the non-resident corporation to receive, either immediately or in the future, an amount that can reasonably be regarded as all or any part of the capital, revenue or income of the non-resident corporation, but does not include a right as creditor.

"non-resident corporation without share capital"

« société non-résidente sans capital-actions »

"non-resident corporation without share capital" means a non-resident corporation that, determined without reference to this section, does not have capital divided into shares.

Non-resident corporation without share capital

(2) For the purposes of this Act,

(a) equity interests in a non-resident corporation without share capital that have identical rights and obligations, determined without reference to proportionate differences in all of those rights and obligations, are deemed to be shares of a separate class of the capital stock of the corporation;

(b) the corporation is deemed to have 100 issued and outstanding shares of each class of its capital stock;

(c) each person or partnership that holds, at any time, an equity interest in a particular class of the capital stock of the corporation is deemed to own, at that time, that number of shares of the particular class that is equal to the proportion of 100 that

(i) the fair market value, at that time, of all the equity interests of the particular class held by the person or partnership

is of

(ii) the fair market value, at that time, of all the equity interests of the particular class; and

(d) shares of a particular class of the capital stock of the corporation are deemed to have rights and obligations that are the same as those of the corresponding equity interests.

Non-resident corporation without share capital

(3) For the purposes of section 51, subsection 85.1(3), section 86 and paragraph 95(2)(c),

(a) subject to paragraph (b), if at any time a taxpayer resident in Canada or a foreign affiliate of the taxpayer (in this subsection referred to as the "vendor") disposes of capital property that is shares of the capital stock of a foreign affiliate of the taxpayer, or a debt obligation owing to the taxpayer by the affiliate, to — or exchanges the shares or debt for shares of the capital stock of — a non-resident corporation without share capital, that is immediately after that time a foreign affiliate of the taxpayer, in a manner that increases the fair market value of a class of shares of the capital stock of the non-resident corporation, the non-resident corporation is deemed to have issued, and the vendor is deemed to have received, new shares of the class as consideration in respect of the disposition or exchange; and

(b) if the taxpayer elects under this paragraph and files the election in writing with the Minister on or before its filing-due date for the taxation year that includes the day on which the disposition or exchange occurs, paragraph (a) does not apply to the disposition or exchange.

Definition of "Australian trust"

93.3 (1) In this section, "Australian trust", at any time, means a trust in respect of which the following apply at that time:

(a) in the absence of subsection (3), the trust would be described in paragraph (h) of the definition "exempt foreign trust" in subsection 94(1);

(b) the trust is resident in Australia;

(d) the liability of each beneficiary under the trust is limited by the operation of any law governing the trust.

Conditions for subsection (3)

(2) Subsection (3) applies at any time to a taxpayer resident in Canada in respect of a trust if

(a) a non-resident corporation is at that time beneficially interested in the trust;

(b) the non-resident corporation is at that time a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest;

(d) the total fair market value at that time of all fixed interests (in this section as defined in subsection 94(1)) of a class in the trust held by the non-resident corporation, or persons or partnerships that do not deal at arm's length with the non-resident corporation, is at least 10% of the total fair market value at that time of all fixed interests of the class; and

(e) unless the non-resident corporation first acquires a beneficial interest in the trust at that time, immediately before that time (referred to in this paragraph as the "preceding time") subsection (3) applied

(i) to the taxpayer in respect of the trust, or

(ii) to a corporation resident in Canada, that at the preceding time did not deal at arm's length with the taxpayer, in respect of the trust.

Australian trusts

(3) If this subsection applies at any time to a taxpayer resident in Canada in respect of a trust, the following rules apply at that time for the specified purposes:

(a) the trust is deemed to be a non-resident corporation that is resident in Australia and not to be a trust;

(b) each particular class of fixed interests in the trust is deemed to be a separate class of 100 issued shares, of the capital stock of the non-resident corporation, that have the same attributes as the interests of the particular class;

(c) each beneficiary under the trust is deemed to hold the number of shares of each separate class described in paragraph (b) equal to the proportion of 100 that the fair market value at that time of that beneficiary's fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class;

(d) the non-resident corporation is deemed to be controlled by the taxpayer resident in Canada — a foreign affiliate of which is referred to in paragraph (2)(b) and is beneficially interested in the trust — that has the greatest equity percentage in the non-resident corporation;

(e) a particular foreign affiliate of the taxpayer in which the taxpayer has a direct equity percentage (as defined in subsection 95(4)) at a particular time, and that is not a controlled foreign affiliate of the taxpayer at that time, is deemed to be a controlled foreign affiliate of the taxpayer at that time if, at that time,

(i) the particular affiliate has an equity percentage (as defined in subsection 95(4)) in the foreign affiliate referred to in paragraph (2)(b), or

(ii) the particular affiliate is the foreign affiliate referred to in paragraph (2)(b); and

(f) section 94.2 does not apply to the taxpayer in respect of the trust.

Specified purposes

(4) For the purposes of subsection (3), the specified purposes are

(a) the determination, in respect of an interest in an Australian trust, of the Canadian tax results (as defined in subsection 261(1)) of the taxpayer resident in Canada referred to in subsection (3) for a taxation year in respect of shares of the capital stock of a foreign affiliate of the taxpayer;

(b) the filing obligations of the taxpayer under section 233.4; and

(c) if the taxpayer is a corporation resident in Canada, the application of section 212.3 in respect of an investment (as defined in subsection 212.3(10)) by the taxpayer.

Mergers

(5) For the purposes of this section,

(a) if there has been an amalgamation to which subsection 87(1) applies, the new corporation referred to in that subsection is deemed to be the same corporation as, and a continuation of, each predecessor corporation referred to in that subsection; and

(b) if there has been a winding-up to which subsection 88(1) applies, the parent referred to in that subsection is deemed to be the same corporation as, and a continuation of, the subsidiary referred to in that subsection.

(2) Section 93.2 of the Act, as enacted by subsection (1), applies in respect of taxation years of non-resident corporations that end after 1994 except that

(a) if a taxpayer elects in writing under this subsection and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then section 93.2 of the Act, as enacted by subsection (1), applies, in respect of the taxpayer, in respect of taxation years of non-resident corporations that end after July 12, 2013;

(b) in respect of dispositions that occur before July 12, 2013, section 93.2 of the Act, as enacted by subsection (1), is to be read without reference to its subsection (3); and

(c) in respect of dispositions that occur after July 11, 2013 and before the day on which a ways and means motion to implement this section is tabled in Parliament, the reference in paragraph 93.2(3)(b), as enacted by subsection (1), to the taxpayer's "filing-due date" is to be read as the filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent.

(3) Section 93.3 of the Act, as enacted by subsection (1), is deemed to have come into force on July 12, 2013. However, if a corporation resident in Canada and each other corporation resident in Canada that, at any time after 2005 and before July 12, 2013, was both related to the corporation and had a foreign affiliate (determined as if the reference in paragraph (b) of the definition "equity percentage" in subsection 95(4) of the Act to "any corporation" were a reference to "any corporation other than a corporation resident in Canada") that was beneficially interested in an Australian trust (as defined in subsection 93.3(1) of the Act, as enacted by subsection (1)), jointly elect in writing under this subsection and file the election with the Minister of National Revenue on or before the day that is one year after the day on which this Act receives royal assent, then in respect of each corporation that has elected under this subsection, section 93.3 of the Act, as enacted by subsection (1),

(a) is deemed to have come into force on January 1, 2006; and

(b) before July 12, 2013 is to be read as if it contained the following after subsection (5):

(6) For the purpose of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of this section, if, based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, then each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(a) the fair market value of the member's interest in the partnership at that time

is of

(b) the fair market value of all members' interests in the partnership at that time.

23. (1) The definitions "connected contributor" and "resident contributor" in subsection 94(1) of the Act are replaced by the following:

"connected contributor"

« contribuant rattaché »

"connected contributor", to a trust at a particular time, means a contributor to the trust at the particular time, other than a person all of whose contributions to the trust made at or before the particular time were made at a non-resident time of the person.

"resident contributor"

« contribuant résident »

"resident contributor", to a trust at any time, means a person that is, at that time, resident in Canada and a contributor to the trust, but — if the trust was created before 1960 by a person who was non-resident when the trust was created — does not include an individual (other than a trust) who has not, after 1959, made a contribution to the trust.

(2) Paragraph 94(4)(b) of the Act is replaced by the following:

(b) subsections (8.1) and (8.2), paragraph (14)(a), subsections 70(6) and 73(1), the definition "Canadian partnership" in subsection 102(1), paragraph 107.4(1)(c), the definition "qualified disability trust" in subsection 122(3) and paragraph (a) of the definition "mutual fund trust" in subsection 132(6);

(3) Subparagraph 94(11)(b)(ii) of the Act is replaced by the following:

(ii) would be deemed to be resident in Canada immediately before that time because of paragraph (3)(a) if this section, as it read in its application to the 2013 taxation year, were read without reference to paragraph (a) of the definition "connected contributor" in subsection (1) and paragraph (a) of the definition "resident contributor" in that subsection,

(4) Subsections (1) and (3) apply to taxation years that end after February 10, 2014, except that those subsections do not apply in respect of a trust to taxation years that end before 2015 if the following conditions are satisfied:

(a) no contributions are made to the trust after February 10, 2014 and before 2015; and

(b) if the trust were to have a particular taxation year that ended after 2013 and before February 11, 2014,

(i) the trust would be non-resident for the purpose of computing its income for the particular year, and

(ii) if the definitions "connected contributor" and "resident contributor" in subsection 94(1) of the Act were read for the particular year without reference to their paragraphs (a), the trust would be resident in Canada for the purpose of computing its income for the particular year.

(5) Subsection (2) applies to the 2016 and subsequent taxation years.

24. (1) The portion of subsection 94.2(1) of the Act before paragraph (a) is replaced by the following:

Investments in non-resident commercial trusts

94.2 (1) Subsection (2) applies to a beneficiary under a trust, and to any particular person of which any such beneficiary is a controlled foreign affiliate, at any time if

(2) Subsection (1) applies to taxation years that end after February 10, 2014, except that it does not apply in respect of a trust to taxation years that end before 2015 if the following conditions are satisfied:

(a) no contributions are made to the trust after February 10, 2014 and before 2015; and

(b) if the trust were to have a particular taxation year that ended after 2013 and before February 11, 2014,

(i) the trust would be non-resident for the purpose of computing its income for the particular year, and

(ii) if the definitions "connected contributor" and "resident contributor"in subsection 94(1) of the Act were read for the particular year without reference to their paragraphs (a), the trust would be resident in Canada for the purpose of computing its income for the particular year.

25. (1) The definition "foreign accrual tax" in subsection 95(1) of the Act is replaced by the following:

"foreign accrual tax"

« impôt étranger accumulé »

"foreign accrual tax" applicable to any amount included under subsection 91(1) in computing a taxpayer's income for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1),

(a) the portion of any income or profits tax that may reasonably be regarded as applicable to that amount and that is paid by

(i) the particular affiliate,

(ii) another foreign affiliate (in paragraph (b) referred to as the "shareholder affiliate") of the taxpayer where

(A) the other affiliate has an equity percentage in the particular affiliate,

(B) the income or profits tax is paid to a country other than Canada, and

(iii) another foreign affiliate of the taxpayer in respect of a dividend received, directly or indirectly, from the particular affiliate, if that other affiliate has an equity percentage in the particular affiliate, and

(b) any amount prescribed in respect of the particular affiliate or the shareholder affiliate, as the case may be, to be foreign accrual tax applicable to that amount;

(2) The definition "non-qualifying country" in subsection 95(1) of the Act is replaced by the following:

"non-qualifying country"

« pays non admissible »

"non-qualifying country", at any time, means a country or other jurisdiction

(a) with which Canada neither has a tax treaty at that time nor has, before that time, signed an agreement that will, on coming into effect, be a tax treaty,

(a.1) for which, if the time is after February 2014, the Convention on Mutual Administrative Assistance in Tax Matters — concluded at Strasbourg on January 25, 1988, as amended from time to time by a protocol, or other international instrument, as ratified by Canada — is at that time not in force and does not have effect,

(b) with which Canada does not have a comprehensive tax information exchange agreement that is in force and has effect at that time, and

(i) begun negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction), or

(ii) sought, by written invitation, to enter into negotiations for a comprehensive tax information exchange agreement (unless that time is before 2014 and Canada was, on March 19, 2007, in the course of negotiating a comprehensive tax information exchange agreement with that jurisdiction);

(3) Paragraph (a) of the description of H in the definition "foreign accrual property income" in subsection 95(1) of the Act is replaced by the following:

(a) if the affiliate was a member of a partnership at the end of the fiscal period of the partnership that ended in the year and the partnership received a dividend at a particular time in that fiscal period from a corporation that would be, if the reference in subsection 93.1(1) to "corporation resident in Canada" were a reference to "taxpayer resident in Canada", a foreign affiliate of the taxpayer for the purposes of sections 93 and 113 at that particular time, then the portion of the amount of that dividend that is included in the value determined for A in respect of the affiliate for the year and that would be, if the reference in subsection 93.1(2) to "corporation resident in Canada" were a reference to "taxpayer resident in Canada", deemed by paragraph 93.1(2)(a) to have been received by the affiliate for the purposes of sections 93 and 113, and

(4) Section 95 of the Act is amended by adding the following after subsection (1):

British Virgin Islands

(1.1) For the purposes of paragraph (b) of the definition "non-qualifying country" in subsection (1), the British Overseas Territory of the British Virgin Islands is deemed to have a comprehensive tax information exchange agreement with Canada that is in force and has effect after 2013 and before March 11, 2014.

(5) Subparagraph 95(2)(a)(i) of the Act is replaced by the following:

(i) the income or loss

(A) is derived by the particular foreign affiliate from activities of the particular foreign affiliate, or of a particular partnership of which the particular foreign affiliate is a member, to the extent that the activities occur while the particular affiliate is a qualifying member of the particular partnership that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by

(I) another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year,

(II) a life insurance corporation that is resident in Canada throughout the year and that is

1. the taxpayer,

2. a person who controls the taxpayer,

3. a person controlled by the taxpayer, or

4. a person controlled by a person who controls the taxpayer,

(III) the particular foreign affiliate or a partnership of which the particular foreign affiliate is a member, to the extent that the activities occur while the particular affiliate is a qualifying member of the partnership, or

(IV) a partnership of which another foreign affiliate of the taxpayer, in respect of which the taxpayer has a qualifying interest throughout the year, is a member, to the extent that the activities occur while the other affiliate is a qualifying member of the partnership, and

(B) if any of subclauses (A)(I), (II) and (IV) applies, would be included in computing the amount prescribed to be the earnings or loss, from an active business carried on in a country other than Canada, of

(I) that other foreign affiliate referred to in subclause (A)(I) or (IV), if the income were earned by it, or

(II) the life insurance corporation referred to in subclause (A)(II), if that life insurance corporation were a foreign affiliate of the taxpayer and the income were earned by it,

(6) Clause 95(2)(a)(ii)(D) of the Act is amended by adding "and" at the end of subclause (III) and by replacing subclauses (IV) and (V) with the following:

(IV) in respect of each of the second affiliate and the third affiliate, for each of their taxation years (each of which is referred to in this subclause as a "relevant taxation year") that end in the year, either

1. that affiliate is subject to income taxation in a country other than Canada in that relevant taxation year, or

2. the members or shareholders of that affiliate (which, for the purposes of this sub-subclause, includes a person that has, directly or indirectly, an interest, or for civil law a right, in a share of the capital stock of, or in an equity interest in, the affiliate) at the end of that relevant taxation year are subject to income taxation in a country other than Canada on, in aggregate, all or substantially all of the income of that affiliate for that relevant taxation year in their taxation years in which that relevant taxation year ends,

(7) The portion of subparagraph 95(2)(a.1)(ii) of the English version of the Act before clause (A) is replaced by the following:

(ii) the property was not

(8) Subparagraph 95(2)(a.1)(ii) of the Act is amended by striking out "nor" at the end of clause (A), by adding "or" at the end of clause (B) and by adding the following after clause (B):

(C) an indebtedness, or a lease obligation, of a person resident in Canada or in respect of a business carried on in Canada, that was purchased and sold by the affiliate on its own account,

(9) The portion of paragraph 95(2)(a.1) of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

unless more than 90% of the gross revenue of the affiliate for the year from the sale of property is derived from the sale of such property (other than a property described in subparagraph (ii) the cost of which to any person is a cost referred to in subparagraph (i) or a property the income from the sale of which is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) to persons with whom the affiliate deals at arm's length (which, for this purpose, includes a sale of property to a non-resident corporation with which the affiliate does not deal at arm's length for sale to persons with whom the affiliate deals at arm's length) and, where this paragraph applies to include income of the affiliate from the sale of property in the income of the affiliate from a business other than an active business,

(10) Subsection 95(2) of the Act is amended by adding the following after paragraph (a.2):

(a.21) for the purposes of paragraph (a.2), one or more risks insured by a foreign affiliate of a taxpayer that, if this Act were read without reference to this paragraph, would not be risks in respect of a person, property or business described in any of subparagraphs (a.2)(i) to (iii) (in this paragraph referred to as the "foreign policy pool") are deemed to be risks in respect of a person resident in Canada if

(i) the affiliate, or a person or partnership that does not deal at arm's length with the affiliate, enters into one or more agreements or arrangements in respect of the foreign policy pool,

(ii) the affiliate's risk of loss or opportunity for gain or profit in respect of the foreign policy pool, in combination with its risk of loss or opportunity for gain or profit in respect of the agreements or arrangements, can reasonably be considered to be — or could reasonably be considered to be if the affiliate had entered into the agreements or arrangements entered into by the person or partnership — determined, in whole or in part, by reference to one or more criteria in respect of one or more risks insured by another person or partnership (in this paragraph referred to as the "tracked policy pool"), which criteria are

(A) the fair market value of the tracked policy pool,

(B) the revenue, income, loss or cash flow from the tracked policy pool, or

(iii) 10% or more of the tracked policy pool consists of risks in respect of a person, property or business described in any of subparagraphs (a.2)(i) to (iii);

(a.22) if the conditions in paragraph (a.21) are satisfied in respect of a foreign affiliate of a taxpayer, or a foreign affiliate of another taxpayer if that other taxpayer does not deal at arm's length with the taxpayer, and a particular foreign affiliate of the taxpayer, or a partnership of which the particular affiliate is a member, has entered into one or more agreements or arrangements described in that paragraph,

(i) activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate to the extent that those activities can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph (a.21)(ii), and

(ii) any income of the particular affiliate from the business (including income that pertains to or is incident to the business) is deemed to be income from a business other than an active business;

(11) The portion of paragraph 95(2)(a.3) of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

unless more than 90% of the gross revenue of the affiliate derived directly or indirectly from indebtedness and lease obligations (other than excluded revenue or revenue that is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) was derived directly or indirectly from indebtedness and lease obligations of non-resident persons with whom the affiliate deals at arm's length and, where this paragraph applies to include income of the affiliate for the year in the income of the affiliate from a business other than an active business,

(12) The portion of clause 95(2)(b)(ii)(B) of the Act before subclause (I) is replaced by the following:

(B) a relevant person who does not deal at arm's length with

(13) Subparagraph 95(2)(l)(iv) of the Act is amended by striking out "or" at the end of clause (B), by adding "or" at the end of clause (C) and by adding the following after clause (C):

(D) a partnership each member of which is a corporation described in any of clauses (A) to (C);

(14) The portion of paragraph 95(2)(n) of the Act before subparagraph (i) is replaced by the following:

(n) in applying paragraphs (a) and (g), paragraph (b) of the description of A in the formula in the definition "foreign accrual property income" in subsection (1), subsections (2.2), (2.21) and 93.1(5) and paragraph (d) of the definition "exempt earnings", and paragraph (c) of the definition "exempt loss", in subsection 5907(1) of the Income Tax Regulations, a non-resident corporation is deemed to be, at any time, a foreign affiliate of a particular corporation resident in Canada, and a foreign affiliate of the particular corporation in respect of which the particular corporation has a qualifying interest, if at that time

(15) Subparagraph 95(2)(u)(i) of the Act, as it read immediately before it was repealed by subsection 70(21) of the Technical Tax Amendments Act, 2012, is replaced by the following :

(i) the entity is deemed to be a member of the other partnership for the purposes of

(A) subparagraph (ii),

(B) applying the reference, in paragraph (a), to "a member" of a partnership,

(D) paragraphs (b) and (c) of the definition "investment business" in subsection (1),

(E) the definition "taxable Canadian business" in subsection (1), and

(F) subsection 93.1(2), and

(16) Paragraph 95(2)(u) of the Act, as amended by subsection (15), is repealed.

(17) Section 95 of the Act is amended by adding the following after subsection (2.1):

Rule for definition "investment business"

(2.11) A taxpayer or a foreign affiliate of the taxpayer, as the case may be, is deemed not to have established that the conditions in subparagraph (a)(i) of the definition "investment business" in subsection (1) have been satisfied throughout a period in a particular taxation year of the affiliate unless

(a) throughout the period the taxpayer is

(i) a particular corporation resident in Canada

(A) that is a bank listed in Schedule I to the Bank Act, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities that is a registered securities dealer, the business activities of which are subject to the supervision of a regulating authority such as the Superintendent of Financial Institutions, a similar regulating authority of a province or an authority of, or approved by, a province to regulate traders or dealers in securities or commodities, and

(B) that is not a corporation the fair market value of any share of the capital stock of which is determined primarily by reference to one or more of the fair market value of, any revenue, income or cash flow from, any profits or gains from the disposition of, or any other similar criteria in respect of, property the fair market value of which is less than 90% of the fair market value of all of the property of the corporation,

(ii) a corporation resident in Canada

(A) of which

(I) the particular corporation described in subparagraph (i) is a subsidiary controlled corporation, or

(II) a corporation described in this subparagraph is a subsidiary wholly-owned corporation, and

(iii) a corporation resident in Canada each of the shares of the capital stock of which is owned by a corporation that is described in this subparagraph or in subparagraph (i) or (ii), or

(iv) a partnership

(A) each member of which is a corporation described in any of subparagraphs (i) to (iii), or another partnership described in this subparagraph, or

(B) in respect of which the following conditions are satisfied:

(I) the partnership is a registered securities dealer, the business activities of which are subject to the supervision of a regulating authority described in clause (a)(i)(A), and

(II) the share of the total income or loss of the partnership of a majority-interest partner of the partnership that is either a corporation resident in Canada or a Canadian partnership — together with the share of each corporation resident in Canada that is affiliated with the majority-interest partner — is equal to all or substantially all of the total income or loss of the partnership; and

(b) either

(i) throughout the period the particular corporation described in subparagraph (a)(i) has, or is deemed for certain purposes to have, $2 billion or more of equity

(A) if the particular corporation is a bank, under the Bank Act,

(B) if the particular corporation is a trust company, under the Trust and Loan Companies Act, or

(ii) more than 50% of the total of all amounts each of which is an amount of taxable capital employed in Canada (within the meaning assigned by Part I.3) of the taxpayer — or of a corporation resident in Canada that is affiliated with the taxpayer — for the taxation year of the taxpayer or of the affiliated corporation, as the case may be, that ends in the particular year is attributable to a business carried on in Canada, the activities of which are subject to the supervision of a regulating authority such as the Superintendent of Financial Institutions, a similar regulating authority of a province or an authority of, or approved by, a province to regulate traders or dealers in securities or commodities.

(18) Section 95 of the Act is amended by adding the following after subsection (2.3):

Application of paragraphs (2)(a.1) and (a.3)

(2.31) Paragraphs (2)(a.1) and (a.3) do not apply to a controlled foreign affiliate (for the purposes of section 17) of an eligible Canadian bank (as defined in subsection (2.43)) in respect of activities carried out to earn income from a property, other than a specified property of the affiliate, if

(a) the affiliate sells the property, or performs services as an agent in relation to a purchase or sale of the property, and it is reasonable to conclude that the cost to any person of the property is relevant in computing the income from

(i) a business carried on by the bank or a person resident in Canada with whom the bank does not deal at arm's length, or

(ii) a business carried on in Canada by a non-resident person with whom the bank does not deal at arm's length;

(b) the property has a readily available fair market value and

(i) is listed on a recognized stock exchange,

(ii) would be a mark-to-market property (as defined in subsection 142.2(1)) of the bank if it were owned by the bank, or

(iii) is a debt obligation owing by the bank that would be a mark-to-market property (as defined in subsection 142.2(1)) of the affiliate if

(A) the affiliate were the taxpayer referred to in that definition, and

(B) the definition "specified debt obligation" in subsection 142.2(1) were read without reference to its paragraph (d);

(c) the purchase and sale of the property by the affiliate, or services performed by the affiliate as agent in respect of the purchase or sale, are made

(i) on terms and conditions that are substantially the same as the terms and conditions of similar purchases or sales of, or services performed in respect of the purchase or sale of, such property by persons dealing at arm's length,

(ii) in the course of a business

(A) that regularly includes trading or dealing in securities principally with persons with whom the affiliate deals at arm's length, and

(B) that is principally carried on through a permanent establishment in a country other than Canada, and

(iii) for the purpose of enabling the purchase or sale of the property by a particular person who deals at arm's length with the affiliate and the bank; and

(d) the affiliate is a foreign bank or a trader or dealer in securities and the activities of the business are regulated

(i) under the laws of the country under whose laws the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued, and under the laws of each country in which the business is carried on through a permanent establishment in that country,

(ii) under the laws of the country (other than Canada) in which the business is principally carried on, or

(iii) if the affiliate is related to a corporation, under the laws of the country under whose laws that related corporation is governed and any of exists, was (unless that related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all those countries are members of the European Union.

Defintion of "specified property"

(2.32) For the purposes of subsection (2.31), "specified property", of a foreign affiliate, means a property that is owned by the affiliate for more than 10 days and that is

(a) a share of the capital stock of a corporation resident in Canada;

(b) a property traded on a stock exchange located in Canada and not traded on a stock exchange located in the jurisdiction in which the affiliate is resident; or

(i) of a corporation resident in Canada,

(ii) of a trust or partnership, units of which are traded on a stock exchange located in Canada, or

(iii) of, or guaranteed by, the Government of Canada, the government of a province, an agent of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada.

(19) The portion of subsection 95(2.4) of the French version of the Act before subparagraph (a)(i) is replaced by the following:

Application de l'alinéa (2)a.3)

(2.4) L'alinéa (2)a.3) ne s'applique pas à une société étrangère affiliée d'un contribuable pour ce qui est du revenu qu'elle tire directement ou indirectement de dettes, dans la mesure où, à la fois :

a) elle a tiré ce revenu dans le cours des activités d'une entreprise menée principalement avec des personnes avec lesquelles elle n'a aucun lien de dépendance et qu'elle exploite à titre de banque étrangère, de société de fiducie, de caisse de crédit, de compagnie d'assurance ou de négociateur ou courtier en valeurs mobilières ou en marchandises, dont les activités sont régies par les lois des pays ci-après, selon le cas :

(20) Paragraph 95(2.4)(b) of the Act is replaced by the following:

(b) all the following conditions are satisfied:

(i) the income is derived by the affiliate from trading or dealing in the indebtedness (which, for this purpose, consists of income from the actual trading or dealing in the indebtedness and interest earned by the affiliate during a short term holding period on indebtedness acquired by it for the purpose of the trading or dealing) directly or indirectly with persons (in this subsection referred to as "regular customers") that

(A) deal at arm's length with the affiliate, and

(B) are resident, or carry on business through a permanent establishment, in a country other than Canada,

(ii) the affiliate has a substantial market presence in the country, and

(iii) one or more persons that deal at arm's length with the affiliate and are resident, or carry on business through a permanent establishment, in the country

(A) carry on a business

(I) that competes in the country with the business of the affiliate, and

(II) the activities of which are regulated under the laws of the country or, where the country is a member of the European Union, any country that is a member of the European Union, in the same manner as are the activities of the business of the affiliate, and

(B) have a substantial market presence in the country,

(21) Section 95 of the Act is amended by adding the following after subsection (2.42):

Definitions — subsections (2.43) to (2.45)

(2.43) The following definitions apply in this subsection and subsections (2.44) and (2.45).

"Canadian indebtedness"

« dettes canadiennes »

"Canadian indebtedness" means indebtedness (other than upstream deposits) owed by persons resident in Canada or in respect of businesses carried on in Canada.

"eligible bank affiliate"

« filiale bancaire admissible »

"eligible bank affiliate", of an eligible Canadian bank at any time, means a foreign bank that, at that time, is a controlled foreign affiliate (for the purposes of section 17) of the eligible Canadian bank and is described in subparagraph (a)(i) of the definition "investment business" in subsection (1).

"eligible Canadian bank"

« banque canadienne admissible »

"eligible Canadian bank" means a bank listed in Schedule I to the Bank Act.

"eligible Canadian indebtedness"

« dettes canadiennes admissibles »

"eligible Canadian indebtedness", owing to an eligible bank affiliate of an eligible Canadian bank, means bonds, debentures, notes or similar obligations of the Government of Canada, the government of a province, an agent of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada, that are owing to the affiliate, other than property in respect of which paragraph (2)(a.3) does not apply because of subsection (2.31).

"eligible currency hedge"

« couverture de change admissible »

"eligible currency hedge", of an eligible bank affiliate of an eligible Canadian bank, means an agreement that provides for the purchase, sale or exchange of currency and that

(a) can reasonably be considered to have been made by the affiliate to reduce its risk of fluctuations in the value of currency with respect to eligible Canadian indebtedness and upstream deposits owing to the affiliate; and

(b) cannot reasonably be considered to have been made by the affiliate to reduce its risk with respect to property other than eligible Canadian indebtedness and upstream deposits owing to the affiliate.

"excess liquidity"

« liquidités excédentaires »

"excess liquidity", of an eligible bank affiliate of an eligible Canadian bank for a taxation year of the affiliate, means the amount, if any, by which

(a) the average of all amounts each of which is, in respect of a month that ends in the 12-month period that begins 60 days prior to the beginning of the year — or, if the affiliate was formed after the beginning of the period, in respect of a month that ends in the year — the amount of the affiliate's relationship deposits for the month, expressed in the affiliate's calculating currency for the year unless the context requires otherwise,

exceeds

(b) the average of all amounts each of which is, in respect of a month that ends in the period — or, if the affiliate was formed after the beginning of the period, in respect of a month that ends in the year — the amount of the affiliate's organic assets for the month, expressed in the affiliate's calculating currency for the year unless the context requires otherwise.

"organic assets"

« actif organique »

"organic assets", of an eligible bank affiliate of an eligible Canadian bank for a month, means the total of all amounts in respect of the affiliate each of which is

(a) included in the amounts reported as loans in the assets section of the consolidated monthly balance sheet accepted by the Superintendent of Financial Institutions that is filed for the month by the bank, or another corporation resident in Canada that is related to the bank at the end of the month, or

(b) an amount owing to the affiliate by a person that is related to the affiliate (other than an amount described in paragraph (a))

but does not include the amount of an eligible Canadian indebtedness or upstream deposit owing to the affiliate.

"qualifying indebtedness"

« dettes déterminées »

"qualifying indebtedness", owing to an eligible bank affiliate of an eligible Canadian bank, means an upstream deposit owing to, or an eligible Canadian indebtedness of, the affiliate, to the extent that it can reasonably be considered that

(a) the upstream deposit or the acquisition of eligible Canadian indebtedness, as the case may be, is funded by

(i) property transferred or lent by a person other than the bank or a person resident in Canada that was not, at the time of the transfer or loan, dealing at arm's length with the bank,

(ii) a repayment of all or part of an upstream deposit owing to the affiliate, or

(iii) the purchase of eligible Canadian indebtedness by the bank or a person resident in Canada that was not, at the time of the transfer or loan, dealing at arm's length with the bank; and

(b) the proceeds of the upstream deposit or the proceeds received by the vendor of the eligible Canadian indebtedness, as the case may be, are used for a purpose other than to fund a transfer or loan of property by the bank — or another person resident in Canada that was not, at the time of the transfer or loan, dealing at arm's length with the bank — to the affiliate or another foreign affiliate of the bank or of the other person.

"relationship deposits"

« dépôts apparentés »

"relationship deposits", of an eligible bank affiliate of an eligible Canadian bank for a month, means the total of all amounts included in the amounts reported as demand and notice deposits, and fixed-term deposits in the liabilities section of the consolidated monthly balance sheet accepted by the Superintendent of Financial Institutions that is filed for the month by the bank, or another corporation resident in Canada that is related to the bank at the end of the month, that are deposits (other than of a temporary nature) of the affiliate made by a person who at the end of the month

(a) deals at arm's length with the affiliate; and

(b) is not resident in Canada.

"total specified indebtedness"

« dettes désignées totales »

"total specified indebtedness", owing to an eligible bank affiliate of an eligible Canadian bank for a taxation year of the affiliate, means the average of all amounts each of which is, in respect of a month that ends in the year, the greatest total amount at any time in the month that is the total of all amounts each of which is

(a) the amount of an upstream deposit owing to the affiliate;

(b) the amount of an eligible Canadian indebtedness owing to the affiliate; or

"upstream deposit"

« dépôt en amont »

"upstream deposit", owing to an eligible bank affiliate of an eligible Canadian bank, means indebtedness owing by the bank to the affiliate.

FAPI adjustment — eligible bank affiliate

(2.44) If a non-resident corporation (in this subsection referred to as the "affiliate") is, throughout a taxation year of the affiliate, an eligible bank affiliate of an eligible Canadian bank, and the bank elects in writing under this subsection, in respect of the affiliate for the year, and files the election with the Minister on or before the filing-due date of the bank for the particular taxation year of the bank in which the year ends,

(a) there is to be deducted in computing the amount determined for A in the definition "foreign accrual property income" in subsection (1) in respect of the affiliate for the year, the lesser of

(i) the amount determined, without reference to this paragraph, for A in that definition in respect of the affiliate for the year, and

(ii) the amount determined by the following formula, where each amount referred to in the formula is to be determined using Canadian currency:

A – B – C – D

where

A is the total of all amounts each of which is the affiliate's income for the year that is from a qualifying indebtedness owing to, or an eligible currency hedge of, the affiliate and that would, in the absence of this subsection, be included in computing the income of the affiliate from a business other than an active business of the affiliate,

B is the total of all amounts each of which is the affiliate's loss for the year that is from a qualifying indebtedness owing to, or an eligible currency hedge of, the affiliate and that would, in the absence of this subsection, be deducted in computing the income of the affiliate from a business other than an active business of the affiliate,

C is the total of all amounts each of which is the amount, if any, by which an amount included in computing the amount determined for A or B in respect of an upstream deposit exceeds the amount that would be the affiliate's income, or is less than the amount that would be the affiliate's loss, as the case may be, for the year from the upstream deposit if the interest received or receivable by the affiliate in respect of the upstream deposit were computed at an interest rate equal to the lesser of

(A) the rate of interest in respect of the upstream deposit, and

(B) the benchmark rate of interest, acceptable to the Minister, that is

(I) if the upstream deposit is denominated in a qualifying currency (as defined in subsection 261(1)), the average, for the year, of a daily interbank offered rate for loans denominated in that currency with a term to maturity of three months, or

(II) in any other case, the average, for the year, of a daily rate for Canadian dollar denominated bankers' acceptances with a term to maturity of three months, and

D is the amount determined by the formula

E × F/G

where

E is the amount, if any, by which the amount determined for A exceeds the total of the amounts determined for B and C,

F is the amount, if any, by which the total specified indebtedness owing to the affiliate for the year exceeds the affiliate's excess liquidity for the year, and

G is the total specified indebtedness owing to the affiliate for the year; and

(b) there is to be included, in computing the income of the affiliate from an active business for the year, an amount equal to the proportion of the amount computed under the formula in subparagraph (a)(ii), computed as if each amount referred to in that formula were determined using the affiliate's calculating currency, that the amount that is required to be deducted under paragraph (a) for the year is of the amount described in subparagraph (a)(ii).

Investment business and excluded property

(2.45) If an election is made under subsection (2.44) in respect of an eligible bank affiliate of an eligible Canadian bank for a taxation year of the affiliate,

(a) for the purposes of the definition "investment business" in subsection (1), the bank, and any other person resident in Canada that does not deal at arm's length with the bank, are deemed to deal at arm's length with the affiliate in respect of the making of upstream deposits, and acquisitions of Canadian indebtedness from the bank or the other person, by the affiliate in the course of a business carried on by the affiliate in the year if the affiliate's excess liquidity for the year is at least 90% of the total specified indebtedness owing to the affiliate for the year; and

(b) for the purposes of paragraph (b) of the definition "excluded property" in subsection (1),

(i) the fair market value of each upstream deposit and Canadian indebtedness owing to, and eligible currency hedge of, the affiliate is deemed to be nil,

(ii) at any particular time, the lesser of the following amounts is deemed to be the fair market value of a property of the affiliate that is excluded property at that particular time:

(A) the total of all amounts each of which is the fair market value of an upstream deposit or Canadian indebtedness owing to, or an eligible currency hedge of, the affiliate, and

(B) the amount, if any, by which

(I) the affiliate's relationship deposits for the calendar month that is two months prior to the particular time (or if the affiliate was formed less than two months prior to the particular time, for the calendar month that includes the particular time)

exceeds

(II) the amount of the affiliate's organic assets for the calendar month that is two months prior to the particular time (or if the affiliate was formed less than two months prior to the particular time, for the calendar month that includes the particular time), and

(iii) the amount, if any, by which the amount in clause (ii)(A) exceeds the amount in subparagraph (ii) is deemed to be the fair market value of a property of the eligible bank affiliate that is not excluded property at that time.

(22) Paragraph (b) of the definition "excluded income" and "excluded revenue" in subsection 95(2.5) of the Act is replaced by the following:

(b) derived directly or indirectly from a lease obligation of a person (other than the taxpayer or a person that does not deal at arm's length with the taxpayer) resident in Canada relating to property used by the person in the course of carrying on a business through a permanent establishment outside Canada,

(23) The definition "excluded income" and "excluded revenue" in subsection 95(2.5) of the Act is amended by striking out "or" at the end of paragraph (b), by adding "or" at the end of paragraph (c) and by adding the following after paragraph (c):

(d) included in computing the affiliate's income or loss from an active business for the year because of subparagraph (2)(a)(ii);

(24) The definition "specified deposit" in subsection 95(2.5) of the Act is replaced by the following:

"specified deposit"

« dépôt déterminé »

"specified deposit", of a foreign affiliate of a taxpayer, means a deposit of the affiliate made with a permanent establishment in a country other than Canada of a prescribed financial institution resident in Canada if the income from the deposit is income of the affiliate for the year that would, in the absence of paragraph (2)(a.3), be income from an active business carried on by the affiliate in a country other than Canada, other than a business the principal purpose of which is to derive income from property (including any interest, dividends, rents, royalties or similar returns, or any substitutes for any of those) or profits from the disposition of investment property.

(25) Section 95 of the Act is amended by adding the following after subsection (3):

Application of paragraph (2)(b) — eligible Canadian bank

(3.01) Paragraph (2)(b) does not apply to a controlled foreign affiliate (for the purposes of section 17) of an eligible Canadian bank (as defined in subsection (2.43)) in respect of services performed in connection with the purchase or sale of a property described in paragraph (2.31)(b) if

(a) the services have been performed by the affiliate

(i) under terms and conditions that are substantially the same as the terms and conditions that would have been made between persons who deal at arm's length with each other,

(ii) in the course of a business

(A) that regularly includes trading or dealing in securities principally with persons with whom the affiliate deals at arm's length, and

(B) that is principally carried on through a permanent establishment in a country other than Canada, and

(iii) for the purpose of enabling the acquisition or disposition of the property by a person who, at the time of the acquisition or disposition, deals at arm's length with the affiliate and the eligible Canadian bank; and

(b) the affiliate is a foreign bank or a trader or dealer in securities and the activities of the business are regulated

(ii) under the laws of the country (other than Canada) in which the business is principally carried on, or

(26) Section 95 of the Act is amended by adding the following after subsection (3.01):

Rules for clause (2)(b)(ii)(B)

(3.02) For the purposes of clause (2)(b)(ii)(B),

(a) a relevant person is

(i) a person resident in Canada, or

(ii) a non-resident person if the non-resident person performs the services referred to in subparagraph (2)(b)(ii) in the course of a business (other than a treaty-protected business) carried on in Canada; and

(b) any portion of a business carried on by a non-resident person that is carried on in Canada is deemed to be a business that is separate from any other portion of the business carried on by the person.

(27) Section 95 of the Act is amended by adding the following after subsection (3.1):

Contract manufacturing

(3.2) For the purposes of clause (2)(a.1)(ii)(A), property of a particular foreign affiliate of a taxpayer is deemed to have been manufactured by the particular affiliate in a particular country if the property is

(a) developed and designed by the particular affiliate in the particular country in the course of an active business carried on by the particular affiliate in the particular country; and

(b) manufactured, produced or processed outside the particular country by another foreign affiliate of the taxpayer, during a period throughout which the taxpayer has a qualifying interest in the other affiliate,

(i) under a contract between the particular affiliate and the other affiliate, and

(ii) in accordance with specifications provided by the particular affiliate.

(28) Subsection (1) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after 2010.

(29) Subsections (2) and (4) are deemed to have come into force on January 1, 2014.

(30) Subsection (3) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after 2006.

(31) Subsection (5) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after July 12, 2013. However, if the taxpayer elects in writing under this subsection in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent,

(a) subsection (5) applies in respect of taxation years of all foreign affiliates of the taxpayer that end after 2007; and

(b) subparagraph 95(2)(a)(i) of the Act, as enacted by subsection (5), is to be read as follows in respect of taxation years of foreign affiliates of the taxpayer that end after 2007 and begin before 2009:

(i) the income or loss

(A) is derived by the particular foreign affiliate from activities of the particular foreign affiliate, or of a particular partnership of which the particular foreign affiliate is a member, to the extent that the activities occur while the particular affiliate is a qualifying member of the particular partnership, that can reasonably be considered to be directly related to active business activities carried on in a country other than Canada by

(I) another corporation

1. that is a non-resident corporation to which the particular foreign affiliate and the taxpayer are related throughout the year, or

2. that is another foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout the year,

(II) a life insurance corporation that is resident in Canada throughout the year and that is

1. the taxpayer,

2. a person who controls the taxpayer,

3. a person controlled by the taxpayer, or

4. a person controlled by a person who controls the taxpayer,

(I) that other foreign affiliate referred to in sub-subclause (A)(I)2 or subclause (A)(IV), if the income were earned by it, or

(II) the non-resident corporation referred to in sub-subclause (A)(I)1 or the life insurance corporation referred to in subclause (A)(II), if that non-resident corporation or that life insurance corporation were a foreign affiliate of the taxpayer and the income were earned by it,

(32) Subsection (6) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after July 12, 2013.

(33) Subsections (7) to (9), (11), (18) to (21), (24) and (25) apply in respect of taxation years of a foreign affiliate of a taxpayer that begin after October 2012.

(34) Subsections (12) and (26) apply in respect of taxation years of a foreign affiliate of a taxpayer that begin after July 12, 2013. However, if a taxpayer elects in writing under this subsection in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then subsections (12) and (26) apply in respect of taxation years of all foreign affiliates of the taxpayer that begin after February 27, 2004.

(35) Subsection (10) applies to taxation years of a taxpayer that begin after February 10, 2014.

(36) Subsections (13) and (17) apply to taxation years of a taxpayer that begin after 2014.

(37) Subsection (14) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after July 12, 2013. However, if a taxpayer elects under subsection 21(15), subsection (14) applies in respect of taxation years of all foreign affiliates of the taxpayer that end after 2010.

(38) Subsection (15) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after 1999. However, if a taxpayer has not elected under paragraph 70(29)(b) of the Technical Tax Amendments Act, 2012, then subparagraph 95(2)(u)(i) of the Act, as enacted by subsection (15), is to be read as follows in respect of taxation years of the foreign affiliate that end after 1999 and begin before December 21, 2002:

(i) the entity is deemed to be a member of the other partnership for the purposes of

(A) subparagraph (ii),

(B) applying the reference, in paragraph (a), to "a member" of a partnership,

(D) paragraphs (b) and (c) of the definition "investment business" in subsection (1), and

(E) subsection 93.1(2), and

(39) Subsection (16) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after August 19, 2011.

(40) Subsection (22) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after July 12, 2013. However, if a taxpayer elects in writing under this subsection in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then subsection (22) applies in respect of taxation years of foreign affiliates of the taxpayer,

(a) if the taxpayer has elected under subsection 73(17) of the Income Tax Amendments Act, 2000, that begin after 1994; or

(b) in any other case, that begin after 1999.

(41) Subsection (23) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after February 27, 2004.

(42) Subsection (27) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after 2008.

26. (1) Subsection 104(5.1) of the Act is replaced by the following:

NISA Fund No. 2

(5.1) Every trust that holds an interest in a NISA Fund No. 2 that was transferred to it in circumstances to which paragraph 70(6.1)(b) applied is deemed, at the end of the day on which the spouse or common-law partner referred to in that paragraph dies, to have been paid an amount out of the fund equal to the balance at the end of that day in the fund so transferred.

(2) Paragraph 104(6)(a.3) of the Act is replaced by the following:

(a.3) in the case of a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, such part of its income for the year as became payable in the year to a beneficiary;

(3) Paragraph 104(6)(b) of the Act is replaced by the following:

(b) in any other case, the amount that the trust claims not exceeding the amount, if any, determined by the formula

A – B

where

A is the part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary, and

B is

(i) if the trust is a trust for which a day is to be determined under paragraph (4)(a) or (a.4) by reference to a death or later death, as the case may be, that has not occurred before the end of the year, the part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary (other than an individual whose death is that death or later death, as the case may be), and

(ii) if the trust is a SIFT trust for the year, the amount, if any, by which

(A) the amount determined for A for the trust for the year

exceeds

(B) the amount, if any, by which the amount determined for A for the trust for the year exceeds its non-portfolio earnings for the year.

(4) Section 104 of the Act is amended by adding the following after subsection (7.01):

Limitation — amount claimed as gift

(7.02) No deduction may be made under subsection (6) in computing the income for a taxation year of an estate that arose on and as a consequence of an individual's death in respect of a payment to the extent that the payment is a gift in respect of which an amount is deducted under section 118.1 for any taxation year in computing the individual's tax payable under this Part.

(5) Section 104 of the Act is amended by adding the following after subsection (13.2):

Invalid designation

(13.3) Any designation made under subsection (13.1) or (13.2) by a trust in its return of income under this Part for a taxation year is invalid if the trust's taxable income for the year, determined without reference to this subsection, is greater than nil.

Death of beneficiary — spousal and similar trusts

(13.4) If an individual's death occurs on a day in a particular taxation year of a trust and the death is the death or later death, as the case may be, referred to in paragraph (4)(a), (a.1) or (a.4) in respect of the trust,

(a) the particular year is deemed to end at the end of that day, a new taxation year of the trust is deemed to begin immediately after that day and, for the purpose of determining the trust's fiscal period after the new taxation year began, the trust is deemed not to have established a fiscal period before the new taxation year began;

(b) the trust's income (determined without reference to subsections (6) and (12)) for the particular year is, notwithstanding subsection (24), deemed

(i) to have become payable in the year to the individual, and

(ii) not

(A) to have become payable to another beneficiary, or

(B) to be included under subsection 105(2) in computing the individual's income; and

(i) the references in paragraphs 150(1)(c) and (a) of the definition "balance-due day" in subsection 248(1) to "year" are to be read as "calendar year in which the year ends", and

(ii) the reference in subsection 204(2) of the Income Tax Regulations to "end of the taxation year" is to be read as "end of the calendar year in which the taxation year ends".

(6) Subsections 104(14.01) to (14.1) of the Act are repealed.

(7) The portion of subsection 104(16) of the Act before paragraph (a) is replaced by the following:

SIFT deemed dividend

(16) If an amount (in this subsection and section 122 referred to as the trust's "non-deductible distributions amount" for the taxation year) is determined under subparagraph (ii) of the description of B in paragraph (6)(b) in respect of a SIFT trust for a taxation year

(8) The portion of clause 104(21.2)(b)(ii)(A) of the Act before the formula is replaced by the following:

(A) from a disposition of a capital property that is qualified farm or fishing property (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula

(9) Subparagraph 104(21.2)(b)(ii) of the Act is amended by adding "and" before clause (B), by striking out "and" before clause (C) and by repealing clause (C).

(10) The description of C in subparagraph 104(21.2)(b)(ii) of the Act is replaced by the following:

C is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust's capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties or qualified farm or fishing properties of the trust,

(11) The descriptions of E to I in subparagraph 104(21.2)(b)(ii) of the Act are replaced by the following:

E is the total of the amounts determined for C and F for the designation year in respect of the beneficiary, and

F is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust's capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified small business corporation shares of the trust, other than qualified farm property, qualified fishing property or qualified farm or fishing property,

(12) Subsections 104(21.21) to (21.24) of the Act are repealed.

(13) The portion of subsection 104(23) of the Act before paragraph (c) is replaced by the following:

Deceased beneficiary of graduated rate estate

(23) In the case of a trust that is a graduated rate estate,

(14) Subsection 104(23) of the Act is amended by adding "and" at the end of paragraph (c), by striking out "and" at the end of paragraph (d) and by repealing paragraph (e).

(15) The portion of subsection 104(27) of the Act before paragraph (a) is replaced by the following:

Pension benefits

(27) If a trust, in a taxation year in which it is resident in Canada and is the graduated rate estate of an individual, receives a superannuation or pension benefit or a benefit out of or under a foreign retirement arrangement and designates, in its return of income for the year under this Part, an amount in respect of a beneficiary under the trust equal to the portion (in this subsection referred to as the "beneficiary's share") of the benefit that

(16) Subparagraph 104(27)(c)(ii) of the Act is replaced by the following:

(ii) the beneficiary was a spouse or common-law partner of the individual,

(17) Subparagraph 104(27)(d)(i) of the Act is replaced by the following:

(i) is a single amount (as defined in subsection 147.1(1)), other than an amount that relates to an actuarial surplus, paid by a registered pension plan to the trust as a consequence of the individual's death and the individual was, at the time of death, a spouse or common-law partner of the beneficiary, or

(18) Paragraph 104(27)(e) of the Act is replaced by the following:

(e) where the benefit is a single amount (as defined in subsection 147.1(1)) paid by a registered pension plan to the trust as a consequence of the individual's death,

(i) if the beneficiary was, immediately before the death, a child or grandchild of the individual who, because of mental or physical infirmity, was financially dependent on the individual for support, the beneficiary's share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary's income for the particular year as a payment described in clause 60(l)(v)(B.01), and

(ii) if the beneficiary was, at the time of the death, under 18 years of age and a child or grandchild of the individual, the beneficiary's share of the benefit (other than any portion of it that relates to an actuarial surplus) is deemed, for the purposes of paragraph 60(l), to be an amount from a registered pension plan included in computing the beneficiary's income for the particular year as a payment described in subclause 60(l)(v)(B.1)(II).

(19) Paragraphs 104(27.1)(a) and (b) of the Act are replaced by the following:

(a) a trust, in a taxation year (in this subsection referred to as the "trust year") in which it is resident in Canada and is the graduated rate estate of an individual, receives an amount from a deferred profit sharing plan as a consequence of the individual's death,

(b) the individual was an employee of an employer who participated in the plan on behalf of the individual, and

(20) Paragraph 104(27.1)(e) of the Act is replaced by the following:

(e) can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that was included under subsection (13) in computing the income for a particular taxation year of a beneficiary under the trust who was, at the time of the death, the individual's spouse or common-law partner, and

(21) Subsection 104(28) of the Act is replaced by the following:

Death benefit

(28) If the graduated rate estate of an individual receives an amount on or after the individual's death in recognition of the individual's service in an office or employment, the portion of the amount that can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be paid or payable at any time to a beneficiary under the estate is deemed

(a) to be an amount received by the beneficiary at that time on or after the death in recognition of the individual's service in an office or employment; and

(b) except for purposes of this subsection, not to have been received by the estate.

(22) Subsections (1) to (3), (5) to (7) and (13) to (21) apply to the 2016 and subsequent taxation years.

(23) Subsection (4) applies to taxation years that end after August 28, 2014.

(24) Subsections (8) to (12) apply to dispositions that occur in the 2014 and subsequent taxation years.

27. (1) Paragraph 107.4(1)(j) of the Act is replaced by the following:

(j) if the contributor is an amateur athlete trust, a cemetery care trust, an employee life and health trust, an employee trust, a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described in paragraph 149(1)(o.4) or a trust governed by an eligible funeral arrangement, an employees profit sharing plan, a registered disability savings plan, a registered education savings plan, a registered supplementary unemployment benefit plan or a TFSA, the particular trust is the same type of trust.

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

28. (1) The definitions "qualified farm property", "qualified fishing property" and "qualified small business corporation share" in subsection 108(1) of the Act are repealed.

(2) Paragraph (c) of the definition "trust" in subsection 108(1) of the Act is replaced by the following:

(c) a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization,

(3) The portion of paragraph 108(7)(b) of the Act before subparagraph (i) is replaced by the following:

(b) if all the beneficial interests in a particular trust acquired by way of the transfer, assignment or other disposition of property to the particular trust were acquired by

(4) Subsection (1) applies to dispositions that occur in the 2014 and subsequent taxation years.

(5) Subsections (2) and (3) apply to the 2016 and subsequent taxation years.

29. (1) The portion of paragraph 110.1(1)(a) of the Act before the formula is replaced by the following:

Charitable gifts

(a) the total of all amounts each of which is the eligible amount of a gift (other than a gift described in paragraph (c) or (d)) made by the corporation in the year or in any of the five preceding taxation years to a qualified donee, not exceeding the lesser of the corporation's income for the year and the amount determined by the formula

(2) Paragraph 110.1(1)(b) of the Act is repealed.

(3) The portion of subparagraph 110.1(1)(d)(iii) of the Act before clause (A) is replaced by the following:

(iii) the gift was made by the corporation in the year or in any of the 10 preceding taxation years to a qualified donee that is

(4) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.

(5) Subsection (3) applies to gifts made after February 10, 2014.

30. (1) The definitions "interest in a family farm partnership", "interest in a family fishing partnership", "qualified farm property", "qualified fishing property", "share of the capital stock of a family farm corporation" and "share of the capital stock of a family fishing corporation" in subsection 110.6(1) of the Act are repealed.

(2) Paragraph (b) of the description of A in the definition "annual gains limit" in subsection 110.6(1) of the Act is replaced by the following:

(b) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties, qualified farm or fishing properties and qualified small business corporation shares, and

(3) Subsection 110.6(1) is amended by adding the following in alphabetical order:

"interest in a family farm or fishing partnership"

« participation dans une société de personnes agricole ou de pêche familiale »

"interest in a family farm or fishing partnership", of an individual (other than a trust that is not a personal trust) at any time, means a partnership interest owned by the individual at that time if

(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property of the partnership was attributable to

(i) property that was used principally in the course of carrying on a farming or fishing business in Canada in which the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C) was actively engaged on a regular and continuous basis, by

(A) the partnership,

(B) the individual,

(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(E) a corporation, a share of the capital stock of which was a share of the capital stock of a family farm or fishing corporation of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(F) a partnership, a partnership interest in which was an interest in a family farm or fishing partnership of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(ii) shares of the capital stock or indebtedness of one or more corporations of which all or substantially all of the fair market value of the property was attributable to properties described in subparagraph (iv),

(iii) a partnership interest in or indebtedness of one or more partnerships of which all or substantially all of the fair market value of the property was attributable to properties described in subparagraph (iv), or

(iv) properties described in any of subparagraphs (i) to (iii), and

(b) at that time, all or substantially all of the fair market value of the property of the partnership was attributable to property described in subparagraph (a)(iv);

"qualified farm or fishing property"

« bien agricole ou de pêche admissible »

"qualified farm or fishing property", of an individual (other than a trust that is not a personal trust) at any time, means a property that is owned at that time by the individual, the spouse or common-law partner of the individual or a partnership, an interest in which is an interest in a family farm or fishing partnership of the individual or the individual's spouse or common-law partner and that is

(a) real or immovable property or a fishing vessel that was used in the course of carrying on a farming or fishing business in Canada by,

(i) the individual,

(ii) if the individual is a personal trust, a beneficiary of the trust that is entitled to receive directly from the trust any income or capital of the trust,

(iii) a spouse, common-law partner, child or parent of an individual referred to in subparagraph (i) or (ii),

(iv) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm or fishing corporation of an individual referred to in any of subparagraphs (i) to (iii), or

(v) a partnership, an interest in which is an interest in a family farm or fishing partnership of an individual referred to in any of subparagraphs (i) to (iii),

(b) a share of the capital stock of a family farm or fishing corporation of the individual or the individual's spouse or common-law partner,

(c) an interest in a family farm or fishing partnership of the individual or the individual's spouse or common-law partner, or

(d) an eligible capital property (which is deemed to include capital property to which paragraph 70(5.1)(b) or 73(3.1)(f) applies) used by a person or partnership referred to in any of subparagraphs (a)(i) to (v), or by a personal trust from which the individual acquired the property, in the course of carrying on a farming or fishing business in Canada;

"share of the capital stock of a family farm or fishing corporation"

« action du capital-actions d'une société agricole ou de pêche familiale »

"share of the capital stock of a family farm or fishing corporation", of an individual (other than a trust that is not a personal trust) at any time, means a share of the capital stock of a corporation owned by the individual at that time if

(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

(i) property that was used principally in the course of carrying on a farming or fishing business in Canada in which the individual, a beneficiary referred to in clause (C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), was actively engaged on a regular and continuous basis, by

(A) the corporation,

(B) the individual,

(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(E) another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm or fishing corporation of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(F) a partnership, an interest in which was an interest in a family farm or fishing partnership of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary,

(ii) shares of the capital stock or indebtedness of one or more corporations of which all or substantially all of the fair market value of the property was attributable to property described in subparagraph (iv),

(iv) properties described in any of subparagraphs (i) to (iii), and

(b) at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph (a)(iv).

(4) Subsections 110.6(1.1) and (1.2) of the Act are replaced by the following:

Value of NISA

(1.1) For the purposes of the definitions "qualified small business corporation share" and "share of the capital stock of a family farm or fishing corporation" in subsection (1), the fair market value of a net income stabilization account is deemed to be nil.

(5) The portion of subsection 110.6(1.3) of the Act before paragraph (c) is replaced by the following:

Farming or fishing property — conditions

(1.3) For the purpose of applying the definition "qualified farm or fishing property", in subsection (1), of an individual, at any time, a property owned at that time by the individual, the spouse or common-law partner of the individual, or a partnership, an interest in which is an interest in a family farm or fishing partnership of the individual or of the individual's spouse or common-law partner, will not be considered to have been used in the course of carrying on a farming or fishing business in Canada, unless

(a) the following apply in respect of the property or property for which the property was substituted (in this paragraph referred to as "the property"),

(i) the property was owned throughout the period of at least 24 months immediately preceding that time by one or more of

(A) the individual, or a spouse, common-law partner, child or parent of the individual,

(B) a partnership, an interest in which is an interest in a family farm or fishing partnership of the individual or of the individual's spouse or common-law partner,

(C) if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or

(D) a personal trust from which the individual or a child or parent of the individual acquired the property, and

(ii) either

(A) in at least two years while the property was owned by one or more persons or partnerships referred to in subparagraph (i),

(I) the gross revenue of a person (in this subclause referred to as the "operator") referred to in subparagraph (i) from the farming or fishing business referred to in subclause (II) for the period during which the property was owned by a person or partnership described in subparagraph (i) exceeded the income of the operator from all other sources for that period, and

(II) the property was used principally in a farming or fishing business carried on in Canada in which an individual referred to in subparagraph (i), or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or

(B) throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in subparagraph (i), the property was used by a corporation referred to in subparagraph (a)(iv) of the definition "qualified farm or fishing property" in subsection (1) or by a partnership referred to in subparagraph (a)(v) of that definition in a farming or fishing business in which an individual referred to in any of subparagraphs (a)(i) to (iii) of that definition was actively engaged on a regular and continuous basis; or

(6) Paragraph 110.6(1.3)(c) of the Act is replaced by the following:

(c) if the property or property for which the property was substituted was last acquired by the individual or partnership before June 18, 1987 or after June 17, 1987 under an agreement in writing entered into before that date,

(i) in the year the property was disposed of by the individual, the property was used principally in the course of carrying on the business of farming in Canada by

(A) the individual, or a spouse, common-law partner, child or parent of the individual,

(B) a beneficiary referred to in subparagraph (a)(ii) of the definition "qualified farm or fishing property" in subsection (1) or a spouse, common-law partner, child or parent of that beneficiary,

(C) a corporation referred to in subparagraph (a)(iv) of the definition "qualified farm or fishing property" in subsection (1),

(D) a partnership referred to in subparagraph (a)(v) of the definition "qualified farm or fishing property" in subsection (1), or

(E) a personal trust from which the individual acquired the property, or

(ii) in at least five years during which the property was owned by a person described in any of clauses (A) to (E), the property was used principally in the course of carrying on the business of farming in Canada by

(A) the individual, or a spouse, common-law partner, child or parent of the individual,

(B) a beneficiary referred to in subparagraph (a)(ii) of the definition "qualified farm or fishing property" in subsection (1) or a spouse, common-law partner, child or parent of that beneficiary,

(C) a corporation referred to in subparagraph (a)(iv) of the definition "qualified farm or fishing property" in subsection (1),

(D) a partnership referred to in subparagraph (a)(v) of the definition "qualified farm or fishing property" in subsection (1), or

(E) a personal trust from which the individual acquired the property.

(7) The portion of subsection 110.6(2) of the Act before paragraph (a) is replaced by the following:

Capital gains deduction — qualified farm or fishing property

(2) In computing the taxable income for a taxation year of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of qualified farm or fishing property in the year or a preceding taxation year (or who disposed of before 2014 property that was qualified farm property or qualified fishing property at the time of disposition), there may be deducted such amount as the individual may claim not exceeding the least of

(8) Paragraph 110.6(2)(d) of the Act is replaced by the following:

(d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties or qualified farm or fishing properties.

(9) Paragraph 110.6(2.1)(d) of the Act is replaced by the following:

(d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) (to the extent that that amount is not included in computing the amount determined under paragraph (2)(d) in respect of the individual) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified small business corporation shares of the individual.

(10) Subsections 110.6(2.2) to (4) of the Act are replaced by the following:

Maximum capital gains deduction

(4) Notwithstanding subsections (2) and (2.1), the total amount that may be deducted under this section in computing an individual's income for a taxation year shall not exceed the amount determined by the formula in paragraph (2)(a) in respect of the individual for the year.

(11) The portion of subsection 110.6(5) of the Act before paragraph (a) is replaced by the following:

Deemed resident in Canada

(5) For the purposes of subsections (2) and (2.1), an individual is deemed to have been resident in Canada throughout a particular taxation year if

(12) The portion of subsection 110.6(6) of the Act before paragraph (a) is replaced by the following:

Failure to report capital gain

(6) Notwithstanding subsections (2) and (2.1), no amount may be deducted under this section in respect of a capital gain of an individual for a particular taxation year in computing the individual's taxable income for the particular taxation year or any subsequent year, if

(13) The portion of subsection 110.6(7) of the Act before paragraph (a) is replaced by the following:

Deduction not permitted

(7) Notwithstanding subsections (2) and (2.1), no amount may be deducted under this section in computing an individual's taxable income for a taxation year in respect of a capital gain of the individual for the taxation year if the capital gain is from a disposition of property which disposition is part of a series of transactions or events

(14) Subsection 110.6(8) of the Act is replaced by the following:

Deduction not permitted

(8) Notwithstanding subsections (2) and (2.1), if an individual has a capital gain for a taxation year from the disposition of a property and it can reasonably be concluded, having regard to all the circumstances, that a significant part of the capital gain is attributable to the fact that dividends were not paid on a share (other than a prescribed share) or that dividends paid on such a share in the taxation year or in any preceding taxation year were less than 90% of the average annual rate of return on that share for that year, no amount in respect of that capital gain shall be deducted under this section in computing the individual's taxable income for the year.

(15) Paragraph 110.6(12)(b) of the Act is replaced by the following:

(b) the amount, if any, that would be determined in respect of the trust for that year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm or fishing properties, qualified small business corporation shares, qualified farm properties or qualified fishing properties, and

(16) Subsection 110.6(12) of the Act, as amended by subsection (15), is repealed.

(17) The portion of subsection 110.6(15) of the Act before paragraph (a) is replaced by the following:

Value of assets of corporations

(15) For the purposes of the definitions "qualified small business corporation share" and "share of the capital stock of a family farm or fishing corporation" in subsection (1), the definition "share of the capital stock of a family farm or fishing corporation" in subsection 70(10) and the definition "small business corporation" in subsection 248(1),

(18) The portion of subparagraph 110.6(15)(a)(ii) of the Act before clause (A) is replaced by the following:

(ii) the total fair market value of assets — other than assets described in any of subparagraphs (c)(i) to (iii) of the definition "qualified small business corporation share" in subsection (1), any of subparagraphs (a)(i) to (iii) of the definition "share of the capital stock of a family farm or fishing corporation" in subsection (1) or any of paragraphs (a) to (c) of the definition "small business corporation" in subsection 248(1), as the case may be — of any of those corporations that are

(19) The portion of paragraph 110.6(15)(b) of the Act after subparagraph (ii) is replaced by the following:

except that this paragraph applies only in determining whether a share of the capital stock of another corporation with which the particular corporation is connected is a qualified small business corporation share or a share of the capital stock of a family farm or fishing corporation and in determining whether the other corporation is a small business corporation.

(20) The portion of subsection 110.6(31) of the Act before the formula is replaced by the following:

Reserve limit

(31) If an amount is included in an individual's income for a particular taxation year because of subparagraph 40(1)(a)(ii) in respect of a disposition of property in a preceding taxation year that, at the time of the disposition, is qualified farm or fishing property, a qualified small business corporation share, qualified farm property or qualified fishing property, the total of all amounts deductible by the individual for the particular year under this section is reduced by the amount, if any, determined by the formula

(21) Subsections (1) to (15) and (17) to (20) apply to dispositions and transfers that occur in the 2014 and subsequent taxation years.

(22) Subsection (16) applies to the 2016 and subsequent taxation years.

31. (1) The portion of subparagraph 112(3.2)(a)(iii) of the Act before clause (A) is replaced by the following:

(iii) if the trust is an individual's graduated rate estate, the share was acquired as a consequence of the individual's death and the disposition occurs during the trust's first taxation year, 1/2 of the lesser of

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

32. (1) The portion of the description of B in subsection 118.03(2) of the Act before the formula is replaced by the following:

B is the total of all amounts each of which is, in respect of a qualifying child of the individual for the taxation year, the lesser of $1,000 and the amount determined by the formula

(2) Section 118.03 of the Act is repealed.

(3) Subsection (1) applies to the 2014 taxation year.

(4) Subsection (2) applies to the 2015 and subsequent taxation years.

33. (1) The definition "qualifying child" in subsection 118.031(1) of the Act is replaced by the following:

"qualifying child"

« enfant admissible »

"qualifying child" of an individual has the meaning assigned by subsection 122.8(1).

(2) Subsection (1) applies to the 2015 and subsequent taxation years.

34. (1) The definition "total Crown gifts" in subsection 118.1(1) of the Act is repealed.

(2) The definition "total charitable gifts" in subsection 118.1(1) of the Act is replaced by the following:

"total charitable gifts"

« total des dons de bienfaisance »

"total charitable gifts", of an individual for a particular taxation year, means the total of all amounts each of which is the eligible amount — to the extent it is not otherwise included in determining an amount that is deducted under this section in computing any individual's tax payable under this Part for any taxation year — of a gift (other than a gift any part of the eligible amount of which is included in the total cultural gifts or the total ecological gifts of any individual for any taxation year) that is made

(a) to a qualified donee,

(b) in a taxation year that is not a year for which an amount is deducted under subsection 110(2) in computing the individual's taxable income, and

(i) not a trust,

(A) by the individual, or the individual's spouse or common-law partner, in the particular year or any of the five preceding taxation years,

(B) by the individual in the year in which the individual dies if the particular year is the taxation year that precedes the taxation year in which the individual dies, or

(C) by the individual's graduated rate estate if subsection (5.1) applies to the gift and the particular year is the taxation year in which the individual dies or the preceding taxation year, or

(ii) a trust

(A) by the trust in the particular year or any of the five preceding taxation years, or

(B) by the trust if the trust is a graduated rate estate, subsection (5.1) applies to the gift and the particular year is the taxation year in which the gift is made or a preceding taxation year of the estate;

(3) The portion of the definition "total cultural gifts" in subsection 118.1(1) of the Act before paragraph (a) is replaced by the following:

"total cultural gifts"

« total des dons de biens culturels »

"total cultural gifts", of an individual for a particular taxation year, means the total of all amounts each of which is the eligible amount — to the extent it is not otherwise included in determining an amount that is deducted under this section in computing any individual's tax payable under this Part for any taxation year — of a gift

(4) The definition "total cultural gifts" in subsection 118.1(1) of the Act is amended by striking out "and" at the end of paragraph (a) and by replacing the portion after that paragraph with the following:

(b) that is made to an institution or a public authority in Canada that is, at the time the gift is made, designated under subsection 32(2) of the Cultural Property Export and Import Act either generally or for a specified purpose related to that object, and

(i) if the individual is not a trust,

(A) by the individual, or the individual's spouse or common-law partner, in the particular year or any of the five preceding taxation years,

(B) by the individual in the year in which the individual dies if the particular year is the taxation year that precedes the taxation year in which the individual dies, or

(C) by the individual's graduated rate estate if subsection (5.1) applies to the gift and the particular year is the taxation year in which the individual dies or the preceding taxation year, or

(ii) if the individual is a trust,

(A) by the trust in the particular year or any of the five preceding taxation years, or

(5) The portion of paragraph (c) of the definition "total ecological gifts" in subsection 118.1(1) of the Act before subparagraph (i) is replaced by the following:

(c) the gift was made by the individual in the year or in any of the 10 preceding taxation years to a qualified donee that is

(6) The definition "total ecological gifts" in subsection 118.1(1) of the Act, as amended by subsection (5), is replaced by the following:

"total ecological gifts"

« total des dons de biens écosensibles »

"total ecological gifts", of an individual for a particular taxation year, means the total of all amounts each of which is the eligible amount — to the extent it is not otherwise included in determining an amount that is deducted under this section in computing any individual's tax payable under this Part for any taxation year — of a gift (other than a gift any part of the eligible amount of which is included in the total cultural gifts of any individual for any taxation year)

(a) of land (including a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude)

(i) the fair market value of which is certified by the Minister of the Environment, and

(ii) that is certified by that Minister, or by a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is, in the opinion of that Minister or the designated person, important to the preservation of Canada's environmental heritage,

(b) that is made to a qualified donee that is

(i) Her Majesty in right of Canada or of a province, a municipality in Canada or a municipal or public body performing a function of government in Canada, or

(ii) a registered charity one of the main purposes of which is, in the opinion of that Minister, the conservation and protection of Canada's environmental heritage, and that is approved by that Minister or the designated person in respect of the gift, and

(i) if the individual is not a trust,

(A) by the individual, or the individual's spouse or common-law partner, in the particular year or any of the five preceding taxation years,

(B) by the individual in the year in which the individual dies if the particular year is the taxation year that precedes the taxation year in which the individual dies, or

(C) by the individual's graduated rate estate if subsection (5.1) applies to the gift and the particular year is the taxation year in which the individual dies or the preceding taxation year, or

(ii) if the individual is a trust,

(A) by the trust in the particular year or any of the 10 preceding taxation years, or

(7) Paragraph (b) of the definition "total gifts" in subsection 118.1(1) of the Act is repealed.

(8) The portion of subsection 118.1(2) of the Act before paragraph (a) is replaced by the following:

Proof of gift

(2) An eligible amount of a gift is not to be included in the total charitable gifts, total cultural gifts or total ecological gifts of an individual unless the making of the gift is evidenced by filing with the Minister

(9) Subsection 118.1(2.1) of the Act is replaced by the following:

Ordering of gifts

(2.1) For the purpose of determining an individual's total charitable gifts, total cultural gifts and total ecological gifts for a taxation year, no amount in respect of a gift described in any of the definitions of those expressions and made in a particular taxation year is to be considered to have been included in determining an amount that was deducted under this section in computing the individual's tax payable under this Part for a taxation year until amounts in respect of such gifts made in taxation years preceding the particular year that can be so considered are so considered.

(10) Subsections 118.1(4) to (5.3) are replaced by the following:

Gifts — deaths before 2016

(4) If an individual dies before 2016 and any of this subsection and subsections (5), (5.2), (5.3), (7) and (7.1) (as they read for the taxation year in which the death occurred) applied to deem the individual to have made a gift at a time before the death, then for the purposes of this section the gift is deemed not to have been made by any other taxpayer or at any other time.

Gifts — deaths after 2015

(4.1) Subsection (5) applies to a gift if an estate arises on and as a consequence of the death after 2015 of an individual and the gift is

(a) made by the individual by the individual's will;

(b) deemed by subsection (5.2) to have been made in respect of the death; or

Gifts — deaths after 2015

(5) If this subsection applies to a gift, then for the purposes of the Act (other than subsections (4.1) and (5.2)) the gift is deemed to be made

(a) by the estate referred to in subsection (4.1) and not by any other taxpayer; and

(b) subject to subsection (13), at the time that the property that is the subject of the gift is transferred to the donee and not at any other time.

Gifts by graduated rate estate

(5.1) This subsection applies to a gift made by the graduated rate estate of an individual if the individual's death occurs after 2015 and either

(a) the gift is deemed by subsection (5.2) to have been made in respect of the death, or

(b) the subject of the gift is property that was acquired by the estate on and as a consequence of the death or is property that was substituted for that property.

Deemed gifts — eligible transfers

(5.2) For the purposes of this section, money or a negotiable instrument transferred to a qualified donee is deemed to be property that is the subject of a gift, in respect of an individual's death, made to the qualified donee, if the death occurs after 2015 and the transfer is

(a) a transfer — other than a transfer the amount of which is not included in computing the income of the individual or the individual's estate for any taxation year but would have been included in computing the income of the individual or the estate for a taxation year if the transfer had been made to the individual's legal representative for the estate's benefit and this Act were read without reference to subsection 70(3) — made

(i) as a consequence of the death,

(ii) solely because of the obligations under a life insurance policy under which, immediately before the death, the individual's life was insured, and the individual's consent would have been required to change the recipient of the transfer, and

(iii) from an insurer to a person that is the qualified donee and that was, immediately before the death, neither a policyholder under the policy nor an assignee of the individual's interest under the policy; or

(b) a transfer made

(i) as a consequence of the death,

(ii) solely because of the qualified donee's interest or, for civil law a right, as a beneficiary under an arrangement (other than an arrangement of which a licensed annuities provider is the issuer or carrier)

(A) that is a registered retirement savings plan or registered retirement income fund or that was, immediately before the death, a TFSA, and

(B) under which the individual was, immediately before the death, the annuitant or holder, and

(iii) from the arrangement to the qualified donee.

(11) Subparagraphs 118.1(5.4)(a)(i) and (ii) of the Act are replaced by the following:

(i) makes a gift at any time of capital property to a qualified donee, or

(ii) who is non-resident, makes a gift at any time of real or immovable property situated in Canada to a prescribed donee who provides an undertaking, in a form satisfactory to the Minister, to the effect that the property will be held for use in the public interest; and

(12) Subsections 118.1(7) and (7.1) of the Act are replaced by the following:

Gift of art

(7) Subsection (7.1) applies to a gift made by an individual if the gift is described in the definition "total charitable gifts" or "total cultural gifts" in subsection (1) and the property that is the subject of the gift is a work of art that

(a) was created by the individual and is in the individual's inventory;

(b) was acquired by the individual under circumstances where subsection 70(3) applies; or

(c) if the individual is an estate that arose on and as a consequence of the death of a particular individual who created the work of art, was in the particular individual's inventory immediately before the death.

Gift of art

(7.1) If this subsection applies to a gift made by an individual, the following rules apply:

(a) in the case of a gift described in the definition "total cultural gifts" in subsection (1),

(i) if at the time the gift is made the fair market value of the work of art that is the subject of the gift exceeds its cost amount to the individual, the individual is deemed to receive at that time proceeds of disposition in respect of the work of art equal to the greater of its cost amount to the individual at that time and the amount of the advantage, if any, in respect of the gift, and

(ii) if the individual is the graduated rate estate of a particular individual who created the work of art that is the subject of the gift and at the time immediately before the particular individual's death the fair market value of the work of art exceeds its cost amount to the particular individual, the particular individual is deemed to receive at that time proceeds of disposition in respect of the work of art equal to the cost amount to the particular individual at that time and the estate is deemed to have acquired the work of art at a cost equal to those proceeds; and

(b) in the case of a gift described in the definition "total charitable gifts" in subsection (1),

(i) if at the time the gift is made the fair market value of the work of art that is the subject of the gift exceeds its cost amount to the individual, then the amount designated in the individual's return of income under section 150 for the taxation year that includes that time is deemed to be

(A) the individual's proceeds of disposition in respect of the work of art, and

(B) the fair market value of the work of art for the purposes of subsection 248(31),

(ii) a designation under subparagraph (i) is of no effect to the extent that the amount designated

(A) exceeds the fair market value of the work of art otherwise determined, or

(B) is less than the greater of the amount of the advantage, if any, in respect of the gift, and the cost amount to the individual of the work of art,

(iii) if the individual is the graduated rate estate of a particular individual who created the work of art that is the subject of the gift and at the time immediately before the particular individual's death the fair market value of the work of art exceeds its cost amount to the particular individual,

(A) the amount designated in the particular individual's return of income under section 150 for the taxation year that includes that time is deemed to be the value of the work of art at the time of the death, and

(B) the estate is deemed to have acquired the work of art at a cost equal to that value, and

(iv) a designation under subparagraph (iii) is of no effect to the extent that the amount designated

(A) exceeds the fair market value of the work of art otherwise determined, or

(B) is less than the cost amount to the particular individual of the work of art.

(13) Subsection 118.1(10.1) of the Act is replaced by the following:

Determination of fair market value

(10.1) For the purposes of this section, subparagraph 69(1)(b)(ii), subsection 70(5) and sections 110.1 and 207.31, if at any time the Canadian Cultural Property Export Review Board or the Minister of the Environment determines or redetermines an amount to be the fair market value of a property that is the subject of a gift described in paragraph 110.1(1)(a), or in the definition "total charitable gifts" in subsection (1), made by a taxpayer within the two-year period that begins at that time, an amount equal to the last amount so determined or redetermined within the period is deemed to be the fair market value of the gift at the time the gift was made and, subject to subsections (6), (7.1) and 110.1(3), to be the taxpayer's proceeds of disposition of the gift.

(14) The portion of subsection 118.1(13) of the Act before paragraph (a) is replaced by the following:

Non-qualifying securities

(13) For the purposes of this section (other than this subsection), if at any particular time an individual makes a gift (including a gift that, but for this subsection, would be deemed by subsection (5) to be made at the particular time) of a non-qualifying security of the individual and the gift is not an excepted gift,

(15) Paragraphs 118.1(13)(b) and (c) of the Act are replaced by the following:

(b) if the security ceases to be a non-qualifying security of the individual at a subsequent time that is within 60 months after the particular time and the donee has not disposed of the security at or before the subsequent time, the individual is deemed to have made a gift to the donee of property at the subsequent time and the fair market value of that property is deemed to be the lesser of the fair market value of the security at the subsequent time and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual's total charitable gifts for a taxation year;

(c) if the security is disposed of by the donee within 60 months after the particular time and paragraph (b) does not apply to the security, the individual is deemed to have made a gift to the donee of property at the time of the disposition and the fair market value of that property is deemed to be the lesser of the fair market value of any consideration (other than a non-qualifying security of any person) received by the donee for the disposition and the fair market value of the security at the particular time that would, if this Act were read without reference to this subsection, have been included in calculating the individual's total charitable gifts for a taxation year; and

(16) Subsection 118.1(21) of the Act is replaced by the following:

Options

(21) Subject to subsections (23) and (24), if an individual has granted an option to a qualified donee in a taxation year, no amount in respect of the option is to be included in computing the total charitable gifts, total cultural gifts or total ecological gifts in respect of any taxpayer for any taxation year.

(17) Subsections (1) to (4) and (6) to (16) apply to the 2016 and subsequent taxation years.

(18) Subsection (5) applies to gifts made after February 10, 2014.

35. (1) The description of B in section 118.62 of the Act is replaced by the following:

B is the total of all amounts (other than any amount paid on account of or in satisfaction of a judgement) each of which is an amount of interest paid in the year (or in any of the five preceding taxation years that are after 1997, to the extent that it was not included in computing a deduction under this section for any other taxation year) by the individual or a person related to the individual on a loan made to, or other amount owing by, the individual under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act or a law of a province governing the granting of financial assistance to students at the post-secondary school level.

(2) Subsection (1) comes into force, or is deemed to have come into force, on the day on which Division 30 of Part 6 of the Economic Action Plan 2014 Act, No. 1 comes into force.

36. (1) Section 118.92 of the Act is replaced by the following:

Ordering of credits

118.92 In computing an individual's tax payable under this Part, the following provisions shall be applied in the following order: subsections 118(1) and (2), section 118.7, subsections 118(3) and (10) and sections 118.01, 118.02, 118.031, 118.04, 118.05, 118.06, 118.07, 118.3, 118.61, 118.5, 118.6, 118.9, 118.8, 118.2, 118.1, 118.62 and 121.

(2) Subsection (1) applies to the 2015 and subsequent taxation years.

37. (1) 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

(A) from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

(I) a person who is related to the individual at any time in the year,

(II) a corporation of which a person who is related to the individual is a specified shareholder at any time in the year, or

(III) a professional corporation of which a person related to the individual is a shareholder at any time in the year, or

(B) from a business of, or 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 earning income from a business or 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, or

(2) The portion of paragraph (c) of the definition "split income" in subsection 120.4(1) of the Act before subparagraph (i) is replaced by the following:

(c) a portion of an amount included because of the application of subsection 104(13) or 105(2) in respect of a trust (other than a mutual fund trust or a trust that is deemed to be in existence by subsection 143(1)) in computing the individual's income for the year, to the extent that the portion

(3) Subparagraph (c)(ii) of the definition "split income" in subsection 120.4(1) of the Act is amended by striking out "or" at the end of clause (B), by adding "or" at the end of clause (C) and by adding the following after clause (C):

(D) to be income derived from a business of, or 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 earning income from a business or the rental of property.

(4) Subsections (1) to (3) apply to the 2014 and subsequent taxation years.

38. (1) The portion of subsection 122(1) of the Act before paragraph (a) is replaced by the following:

Tax payable by trust

122. (1) Notwithstanding section 117, the tax payable under this Part for a taxation year by a trust (other than a graduated rate estate or qualified disability trust) is the total of

(2) Subsection 122(1) of the Act is amended by striking out "and" at the end of paragraph (a), by adding "and" at the end of paragraph (b) and by adding the following after paragraph (b):

A – B

where

A is the amount that would be determined for B for the year if

(i) the rate of tax payable under this Part by the trust for each taxation year referred to in the description of B were 29%, and

(ii) the trust's taxable income for a particular taxation year referred to in the description of B were reduced by the total of

(A) the amount, if any, that was paid or distributed in satisfaction of all or part of an individual's interest as a beneficiary under the trust if

(I) the individual was an electing beneficiary of the trust for the particular year,

(II) the payment or distribution can reasonably be considered to be made out of that taxable income, and

(III) the payment or distribution was made in a taxation year referred to in the description of B,

(B) the amount that is the portion of the tax payable under this Part by the trust for the particular year that can reasonably be considered to relate to the amount determined under clause (A), and

(C) the amount that is the portion of the tax payable, under the law of the province in which the trust is resident for the particular year, that can reasonably be considered to relate to the amount determined under clause (A), and

B is the total of all amounts each of which is the amount of tax payable under this Part by the trust for a taxation year that precedes the year if that preceding taxation year is

(i) the later of

(A) the first taxation year for which the trust was a qualified disability trust, and

(B) the last taxation year, if any, for which subsection (2) applied to the trust, or

(ii) a taxation year that ends after the taxation year described in subparagraph (i).

(3) Subsections 122(1.1) and (2) of the Act are replaced by the following:

Credits available to trusts

(1.1) No deduction may be made under this subdivision (other than section 118.1, 120.2 or 121) in computing the tax payable by a trust for a taxation year.

Qualified disability trust — application of (1)(c)

(2) This subsection applies to a trust for a particular taxation year if the trust was a qualified disability trust for a preceding taxation year and

(a) none of the beneficiaries under the trust at the end of the particular year was an electing beneficiary of the trust for a preceding year;

(b) the particular year ended immediately before the trust ceased to be resident in Canada; or

(c) an amount is paid or distributed in the particular year to a beneficiary under the trust in satisfaction of all or part of the beneficiary's interest in the trust unless

(i) the beneficiary is an electing beneficiary of the trust for the particular year or a preceding year,

(ii) the amount is deducted under paragraph 104(6)(b) in computing the trust's income for the particular year, or

(iii) the amount is paid or distributed in satisfaction of a right to enforce payment of an amount that was deducted under paragraph 104(6)(b) in computing the trust's income for a preceding year.

(4) Subsection 122(3) of the Act is amended by adding the following in alphabetical order:

"beneficiary"

« bénéficiaire »

"beneficiary", under a trust, includes a person beneficially interested in the trust.

"electing beneficiary"

« bénéficiaire optant »

"electing beneficiary", for a taxation year of a qualified disability trust, means a beneficiary under the trust that for the year

(a) makes an election described in clause (a)(iii)(A) of the definition "qualified disability trust" in this subsection; and

(b) is described in paragraph (b) of that definition.

"qualified disability trust"

« fiducie admissible pour personne handicapée »

"qualified disability trust", for a taxation year (in this definition referred to as the "trust year"), means a trust, if

(a) the trust

(i) is, at the end of the trust year, a testamentary trust that arose on and as a consequence of a particular individual's death,

(ii) is resident in Canada for the trust year, and

(iii) includes in its return of income under this Part for the trust year

(A) an election, made jointly with one or more beneficiaries under the trust in prescribed form, to be a qualified disability trust for the trust year, and

(B) the Social Insurance Number of each of those beneficiaries;

(b) each of those beneficiaries is an individual, named as a beneficiary by the particular individual in the instrument under which the trust was created,

(i) in respect of whom paragraphs 118.3(1)(a) to (b) apply for the individual's taxation year (in this definition referred to as the "beneficiary year") in which the trust year ends, and

(ii) who does not jointly elect with any other trust, for a taxation year of the other trust that ends in the beneficiary year, to be a qualified disability trust; and

(5) Subsections (1) to (4) apply to the 2016 and subsequent taxation years.

39. (1) The Act is amended by adding the following after section 122.71:

Subdivision a.3

Child Fitness Tax Credit

Definitions

122.8 (1) The following definitions apply in this section.

"eligible fitness expense"

« dépense admissible pour activités physiques »

"eligible fitness expense" in respect of a qualifying child of an individual for a taxation year means the amount of a fee paid to a qualifying entity (other than an amount paid to a person that is, at the time the amount is paid, the individual's spouse or common-law partner or another individual who is under 18 years of age) to the extent that the fee is attributable to the cost of registration or membership of the qualifying child in a prescribed program of physical activity and, for the purposes of this section, that cost

(a) includes the cost to the qualifying entity of the program in respect of its administration, instruction, rental of required facilities, and uniforms and equipment that are not available to be acquired by a participant in the program for an amount less than their fair market value at the time, if any, they are so acquired; and

(b) does not include

(i) the cost of accommodation, travel, food or beverages, or

(ii) any amount deductible under section 63 in computing any person's income for any taxation year.

"qualifying child"

« enfant admissible »

"qualifying child" of an individual for a taxation year means a child of the individual who is, at the beginning of the year,

(a) under 16 years of age; or

(b) in the case where an amount is deductible under section 118.3 in computing any person's tax payable under this Part for the year in respect of that child, under 18 years of age.

"qualifying entity"

« entité admissible »

"qualifying entity" means a person or partnership that offers one or more prescribed programs of physical activity.

"return of income"

« déclaration de revenu »

"return of income" filed by an individual for a taxation year means a return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) that is required to be filed for the year or that would be required to be filed if the individual had tax payable under this Part for the year.

Deemed overpayment

(2) An individual who files a return of income for a taxation year and who makes a claim under this subsection is deemed to have paid, at the end of the year, on account of tax payable under this Part for the year, an amount equal to the amount determined by the formula

A × B

where

A is the appropriate percentage for the year; and

B is the total of all amounts each of which is, in respect of a qualifying child of the individual for the year, the lesser of $1,000 and the amount determined by the formula

C – D

where

C is the total of all amounts each of which is an amount paid in the year by the individual, or by the individual's spouse or common law partner, that is an eligible fitness expense in respect of the qualifying child of the individual, and

D is the total of all amounts that any person is or was entitled to receive, each of which relates to an amount included in computing the value of C in respect of the qualifying child that is the amount of a reimbursement, allowance or any other form of assistance (other than an amount that is included in computing the income for any taxation year of that person and that is not deductible in computing the taxable income of that person).

Child with disability

(3) An individual who files a return of income for a taxation year and who makes a claim under this subsection is deemed to have paid, in respect of a qualifying child of the individual, at the end of the year, on account of tax payable under this Part for the year, an amount equal to $500 multiplied by the appropriate percentage for the year, if

(a) the amount referred to in the description of B in subsection (2) is $100 or more; and

(b) an amount is deductible in respect of the qualifying child under section 118.3 in computing any person's tax payable under this Part for the year.

Apportionment of overpayment

(4) If more than one individual is entitled to make a claim under this section for a taxation year in respect of a qualifying child, the total of all amounts deemed to have been paid shall not exceed the maximum amount that could be deemed to have been paid for the year by any one of those individuals in respect of that qualifying child if that individual were the only individual entitled to claim an amount for the year under this section in respect of that qualifying child. If the individuals cannot agree as to what portion of the maximum amount each can so claim, the Minister may fix the portions.

Effect of bankruptcy

(5) For the purposes of this subdivision, if an individual becomes bankrupt in a particular calendar year, notwithstanding subsection 128(2), any reference to the taxation year of the individual (other than in this subsection) is deemed to be a reference to the particular calendar year.

Part-year residents

(6) If an individual is resident in Canada throughout part of a taxation year and is non-resident throughout another part of the year, the total of the amounts that are deemed to be paid by the individual under subsection (2) and (3) for the year cannot exceed the lesser of

(a) the total of

(i) the amounts deemed to be paid under those subsections that can reasonably be considered as wholly applicable to the period or periods in the year throughout which the individual is not resident in Canada, computed as though that period or those periods were the whole taxation year, and

(ii) the amounts deemed to be paid under those subsections that can reasonably be considered as wholly applicable to the period or periods in the year throughout which the individual is resident in Canada, computed as though that period or those periods were the whole taxation year, and

(b) the total of the amounts that would have been deemed to have been paid under those subsections for the year had the individual been resident in Canada throughout the year.

Non-residents

(7) Subsections (2) and (3) do not apply in respect of a taxation year of an individual if the individual is, at no time in the year, resident in Canada, unless all or substantially all the individual's income for the year is included in computing the individual's taxable income earned in Canada for the year.

(2) Subsection (1) applies to the 2015 and subsequent taxation years.

40. (1) The Act is amended by adding the following before section 125.3:

Part XIII tax — eligible bank affiliate

125.21 There may be deducted in computing the tax payable under this Part for a taxation year by a particular corporation that is throughout the year an eligible Canadian bank (as defined in subsection 95(2.43)) the total of all amounts, each of which is the amount, if any, by which

(a) an amount paid under paragraph 212(1)(b) in respect of interest paid or credited in the year by the particular corporation in respect of an upstream deposit (as defined in subsection 95(2.43)) owing to a non-resident corporation that is, throughout the year, an eligible bank affiliate (as defined in subsection 95(2.43)) of the particular corporation

exceeds

(b) the total of all amounts each of which is a portion of the amount described in paragraph (a) that is available to the non-resident corporation or any other person or partnership at any time as a credit or reduction of, or deduction from, any amount otherwise payable to the government of a country other than Canada, or a political subdivision of that country, having regard to all available provisions of the laws of that country, or political subdivision, as the case may be, any tax treaty with that country and any other agreements entered into by that country or political subdivision.

(2) Subsection (1) applies in respect of taxation years that begin after October 2012.

41. (1) The definition "investor" in subsection 125.4(1) of the Act is repealed.

(2) The definitions "assistance" and "salary or wages" in subsection 125.4(1) of the Act are replaced by the following:

"assistance"

« montant d'aide »

"assistance" means an amount, other than a prescribed amount or an amount deemed under subsection (3) to have been paid, that would be included under paragraph 12(1)(x) in computing a taxpayer's income for any taxation year if that paragraph were read without reference to

(a) subparagraphs 12(1)(x)(v) to (viii), if the amount were received

(i) from a person or partnership described in subparagraph 12(1)(x)(ii), or

(ii) in circumstances where clause 12(1)(x)(i)(C) applies; and

(b) subparagraphs 12(1)(x)(v) to (vii), in any other case.

"salary or wages"

« traitement ou salaire »

"salary or wages" does not include an amount

(a) described in section 7;

(b) determined by reference to profits or revenues; or

(c) paid to a person in respect of services rendered by the person at a time when the person was non-resident, unless the person was at that time a Canadian citizen.

(3) The definition "Canadian film or video production certificate" in subsection 125.4(1) of the Act is replaced by the following:

"Canadian film or video production certificate"

« certificat de production cinématographique ou magnétoscopique canadienne »

"Canadian film or video production certificate" means a certificate issued in respect of a production by the Minister of Canadian Heritage certifying that the production is a Canadian film or video production in respect of which that Minister is satisfied that, except where the production is a treaty co-production (as defined in subsection 1106(3) of the Income Tax Regulations), an acceptable share of revenues from the exploitation of the production in non-Canadian markets is, under the terms of any agreement, retained by

(a) a qualified corporation that owns or owned an interest in, or for civil law a right in, the production;

(b) a prescribed taxable Canadian corporation related to the qualified corporation; or

(4) The portion of the definition "labour expenditure" in subsection 125.4(1) of the Act before subparagraph (b)(i) is replaced by the following:

"labour expenditure"

« dépense de main-d'oeuvre »

"labour expenditure", of a corporation for a taxation year in respect of a Canadian film or video production, means, in the case of a corporation that is not a qualified corporation for the taxation year, nil, and in the case of a corporation that is a qualified corporation for the taxation year, subject to subsection (2), the total of the following amounts to the extent that they are reasonable in the circumstances and included in the cost to, or in the case of depreciable property the capital cost to, the corporation, or any other person or partnership, of the production:

(a) the salary or wages directly attributable to the production that are incurred after 1994 and in the taxation year, or the preceding taxation year, by the corporation for the stages of production of the property, from the production commencement time to the end of the post-production stage, and paid by it in the taxation year or within 60 days after the end of the taxation year (other than amounts incurred in that preceding taxation year that were paid within 60 days after the end of that preceding taxation year),

(b) that portion of the remuneration (other than salary or wages and other than remuneration that relates to services rendered in the preceding taxation year and that was paid within 60 days after the end of that preceding taxation year) that is directly attributable to the production of property, that relates to services rendered after 1994 and in the taxation year, or that preceding taxation year, to the corporation for the stages of production, from the production commencement time to the end of the post-production stage, and that is paid by it in the taxation year or within 60 days after the end of the taxation year to

(5) The portion of the definition "qualified labour expenditure" in subsection 125.4(1) of the Act before paragraph (a) is replaced by the following:

"qualified labour expenditure"

« dépense de main-d'oeuvre admissible »

"qualified labour expenditure", of a corporation for a taxation year in respect of a Canadian film or video production, means the lesser of

(6) The portion of the description of A in paragraph (b) of the definition "qualified labour expenditure" in subsection 125.4(1) of the Act before subparagraph (ii) is replaced by the following:

A is 60% of the amount by which

(i) the total of all amounts each of which is an expenditure by the corporation in respect of the production that is included in the cost to, or in the case of depreciable property the capital cost to, the corporation or any other person or partnership of the production at the end of the taxation year,

exceeds

(7) Subsection 125.4(1) of the Act is amended by adding the following in alphabetical order:

"production commencement time"

« début de la production »

"production commencement time", in respect of a Canadian film or video production, means the earlier of

(a) the time at which principal photography of the production begins, and

(b) the latest of

(i) the time at which a qualified corporation that has an interest in, or for civil law a right in, the production, or the parent of the corporation, first makes an expenditure for salary or wages or other remuneration for activities, of scriptwriters, that are directly attributable to the development by the corporation of script material of the production,

(ii) the time at which the corporation or the parent of the corporation acquires a property, on which the production is based, that is a published literary work, screenplay, play, personal history or all or part of the script material of the production, and

(iii) two years before the date on which principal photography of the production begins.

"script material"

« texte »

"script material", in respect of a production, means written material describing the story on which the production is based and, for greater certainty, includes a draft script, an original story, a screen story, a narration, a television production concept, an outline or a scene-by-scene schematic, synopsis or treatment.

(8) The portion of subsection 125.4(2) of the Act before paragraph (b) is replaced by the following:

Rules governing labour expenditures of corporation

(2) For the purposes of the definitions "labour expenditure" and "qualified labour expenditure" in subsection (1),

(a) remuneration does not include remuneration

(i) determined by reference to profits or revenues, or

(ii) in respect of services rendered by a person at a time when the person was non-resident, unless the person was at that time a Canadian citizen;

(9) Subsection 125.4(2) of the Act is amended by striking out "and" at the end of paragraph (b), by adding "and" at the end of paragraph (c) and by adding the following after paragraph (c):

(d) an expenditure incurred in respect of a film or video production by a qualified corporation (in this paragraph referred to as the "co-producer") in respect of goods supplied or services rendered by another qualified corporation to the co-producer in respect of the production is not a labour expenditure to the co-producer or, for the purpose of applying this section to the co-producer, a cost or capital cost of the production.

(10) Subsection 125.4(4) of the Act is replaced by the following:

Exception

(4) This section does not apply to a Canadian film or video production if the production — or an interest in a person or partnership that has, directly or indirectly, an interest in, or for civil law a right in, the production — is a tax shelter investment for the purpose of section 143.2.

(11) Subsection 125.4(6) of the Act is replaced by the following:

Revocation of certificate

(6) If an omission or incorrect statement was made for the purpose of obtaining a Canadian film or video production certificate in respect of a production, or if the production is not a Canadian film or video production,

(a) the Minister of Canadian Heritage may

(i) revoke the certificate, or

(ii) if the certificate was issued in respect of productions included in an episodic television series, revoke the certificate in respect of one or more episodes in the series;

(b) for greater certainty, for the purposes of this section, the expenditures and cost of production in respect of productions included in an episodic television series that relate to an episode in the series in respect of which a certificate has been revoked are not attributable to a Canadian film or video production; and

(12) Section 125.4 of the Act is amended by adding the following after subsection (6):

Guidelines

(7) The Minister of Canadian Heritage shall issue guidelines respecting the circumstances under which the conditions in the definition "Canadian film or video production certificate" in subsection (1) are satisfied. For greater certainty, those guidelines are not statutory instruments as defined in the Statutory Instruments Act.

(13) Subsections (1) and (10) apply

(a) to taxation years that end after November 14, 2003; and

(b) in respect of a film or video production in respect of which a corporation has, in a return of income filed before November 14, 2003, claimed an amount under subsection 125.4(3) of the Act in respect of a labour expenditure incurred after 1997.

(14) Subsections (2) and (4) to (9) apply

(a) to film or video productions for which the production commencement time of the corporation (or, if there is more than one qualified corporation in respect of the production, of all such corporations) is on or after November 14, 2003; and

(b) to a corporation in respect of a film or video production for which the production commencement time of any corporation is before November 14, 2003

(i) if the earliest labour expenditure of the corporation (or, if there is more than one qualified corporation in respect of the production, of all those corporations) in respect of the production is made after 2003, or

(ii) if the corporation elects (or, if there is more than one qualified corporation in respect of the production, all those corporations jointly elect), in writing, and the election is filed with the Minister of National Revenue on or before the earliest filing-due date of any qualified corporation in respect of the production for that corporation's taxation year that includes the day on which this Act receives royal assent, and the earliest labour expenditure of all such qualified corporations in respect of the production is made

(A) after the last taxation year of any such corporation that ended before November 14, 2003, or

(B) if the first taxation year of all such corporations includes November 14, 2003, in that taxation year.

(15) The earliest labour expenditure referred to in subsection (14) is to be determined under the provisions of subsections 125.4(1) and (2) of the Act that would apply if subsections (2) and (4) to (9) had not been enacted.

(16) Subsection (3) applies in respect of film or video productions in respect of which certificates are issued by the Minister of Canadian Heritage after December 20, 2002, except that, in respect of those film or video productions in respect of which certificates are issued by the Minister of Canadian Heritage before 2004, the definition "Canadian film or video production certificate" in subsection 125.4(1) of the Act, as enacted by subsection (3), is to be read as follows:

"Canadian film or video production certificate" means a certificate issued in respect of a production by the Minister of Canadian Heritage

(a) certifying that the production is a Canadian film or video production in respect of which that Minister is satisfied that, except where the production is a treaty co-production (as defined in subsection 1106(3) of the Income Tax Regulations), an acceptable share of revenues from the exploitation of the production in non-Canadian markets is, under the terms of any agreement, retained by

(i) a qualified corporation that owns or owned an interest in, or for civil law a right in, the production,

(ii) a prescribed taxable Canadian corporation related to the qualified corporation, or

(iii) any combination of corporations described in subparagraph (i) or (ii); and

(b) estimating amounts relevant for the purpose of determining the amount deemed under subsection (3) to have been paid in respect of the production.

(17) Subsection (11) is deemed to have come into force on November 15, 2003.

(18) Subsection (12) applies in respect of film or video productions in respect of which certificates are issued by the Minister of Canadian Heritage after December 20, 2002.

42. (1) Subsection 127(7) of the Act is replaced by the following:

Investment tax credit of certain trusts

(7) If, in a particular taxation year of a taxpayer who is a beneficiary under a trust that is a graduated rate estate or that is deemed to be in existence by section 143, an amount is determined in respect of the trust under paragraph (a), (a.1), (a.4), (a.5), (b) or (e.1) of the definition "investment tax credit" in subsection (9) for its taxation year that ends in that particular taxation year, the trust may, in its return of income for its taxation year that ends in that particular taxation year, designate the portion of that amount that can, having regard to all the circumstances including the terms and conditions of the trust, reasonably be considered to be attributable to the taxpayer and was not designated by the trust in respect of any other beneficiary of the trust, and that portion is to be added in computing the investment tax credit of the taxpayer at the end of that particular taxation year and is to be deducted in computing the investment tax credit of the trust at the end of its taxation year that ends in that particular taxation year.

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

43. (1) The description of C in section 127.51 of the Act is replaced by the following:

C is

(a) $40,000, in the case of an individual (other than a trust) or a graduated rate estate; and

(b) nil, in any other case; and

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

44. (1) Subparagraph 127.52(1)(h)(i) of the Act is replaced by the following:

(i) the amounts deducted under any of subsections 110(2), 110.6(2), (2.1) and (12) and 110.7(1),

(2) Subparagraph 127.52(1)(h)(i) of the Act, as enacted by subsection (1), is replaced by the following:

(i) the amounts deducted under any of subsections 110(2), 110.6(2) and (2.1) and 110.7(1),

(3) Subsection (1) applies to amounts deducted in respect of the 2014 and subsequent taxation years.

(4) Subsection (2) applies to amounts deducted in respect of the 2016 and subsequent taxation years.

45. (1) Section 127.53 of the Act is repealed.

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

46. (1) Subparagraph 128.1(1)(b)(iv) of the Act is replaced by the following:

(iv) an excluded right or interest of the taxpayer, other than an interest described in paragraph (k) of the definition "excluded right or interest" in subsection (10),

(2) Paragraph (k) of the definition "excluded right or interest" in subsection 128.1(10) of the Act is replaced by the following:

(k) an interest of the individual in a non-resident testamentary trust that is an estate that arose on and as a consequence of a death if

(i) the interest was never acquired for consideration, and

(ii) the estate has been in existence for no more than 36 months; or

(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.

47. (1) The portion of paragraph 138.1(1)(a) of the Act before subparagraph (i) is replaced by the following:

(a) a trust (in this section referred to as the "related segregated fund trust") is deemed to be created at the time that is the later of

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

48. (1) The portion of paragraph 143(1)(a) of the Act before subparagraph (i) is replaced by the following:

(a) a trust is deemed to be created on the day that is the later of

(2) The portion of subsection 143(2) of the Act before paragraph (a) is replaced by the following:

Election in respect of income

(2) If the trust referred to in subsection (1) in respect of a congregation so elects in respect of a taxation year in writing filed with the Minister on or before the trust's filing-due date for the year and all the congregation's participating members are specified in the election in accordance with subsection (5), the following rules apply:

(3) The portion of subsection 143(3.1) of the Act before paragraph (a) is replaced by the following:

Election in respect of gifts

(3.1) For the purposes of section 118.1, if the eligible amount of a gift made in a taxation year by a trust referred to in subsection (1) in respect of a congregation would, but for this subsection, be included in the total charitable gifts, total cultural gifts or total ecological gifts of the trust for the year and the trust so elects in its return of income under this Part for the year,

(4) The definition "total Crown gifts" in subsection 143(4) of the Act is repealed.

(5) The portion of subsection 143(5) of the Act before paragraph (a) is replaced by the following:

Specification of family members

(5) For the purpose of applying subsection (2) to a particular election by the trust referred to in subsection (1) in respect of a congregation for a particular taxation year,

(6) Subsections (1) to (5) apply to the 2016 and subsequent taxation years.

49. (1) The portion of paragraph 143.1(1.2)(a) of the Act before subparagraph (i) is replaced by the following:

(a) a trust (in this section referred to as the "amateur athlete trust") is deemed

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

50. (1) The portion of paragraph (a) of the definition "earned income" in subsection 146(1) of the Act before subparagraph (i) is replaced by the following:

(a) the taxpayer's income (other than an amount described in paragraph 12(1)(z)) for a period in the year throughout which the taxpayer was resident in Canada from

(2) The definition "earned income" in subsection 146(1) of the Act is amended by adding the following after paragraph (b.1):

(b.2) the taxpayer's qualifying performance income (as defined in subsection 143.1(1)) that is deemed by paragraph 143.1(1.2)(c) to be income of an amateur athlete trust for the year,

(3) The portion of paragraph (c) of the definition "earned income" in subsection 146(1) of the Act before subparagraph (i) is replaced by the following:

(c) the taxpayer's income (other than an amount described in paragraph 12(1)(z)) for a period in the year throughout which the taxpayer was not resident in Canada from

(4) Subsections (1) to (3) apply to an individual's 2014 and subsequent taxation years, except that if an individual elects in writing under this subsection in respect of the individual's 2011, 2012 or 2013 taxation year and the election is filed with the Minister of National Revenue before March 3, 2015, subsections (1) to (3) apply to the individual's taxation year in respect of which the election is filed and subsequent taxation years.

51. (1) Subsection 146.1(11) of the Act is repealed.

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

52. (1) Subsection 148(2) of the Act is amended by striking out "and" at the end of paragraph (c), by adding "and" at the end of paragraph (d) and by adding the following after paragraph (d):

(e) if, in respect of a life insurance policy issued after 2016 that is an exempt policy, a benefit on death (as defined in subsection 1401(3) of the Income Tax Regulations) under a coverage (as defined in subsection 1401(3) of the Income Tax Regulations) under the policy is paid at any time, the payment results in the termination of the coverage but not the policy and the amount of the fund value benefit (as defined in subsection 1401(3) of the Income Tax Regulations) paid in respect of the coverage at that time exceeds the amount determined in respect of the coverage under subclause (A)(I) of the description of B in subparagraph 306(4)(a)(iii) of the Income Tax Regulations on the policy anniversary (as defined in section 310 of the Income Tax Regulations) that is on, or that first follows, the date of the death of an individual whose life is insured under the coverage, then a policyholder with an interest in the policy that gives rise to an entitlement (of the policyholder, beneficiary or assignee, as the case may be) to receive all or a portion of that excess, is deemed, at that time, to dispose of a part of the interest and to be entitled to receive proceeds of the disposition equal to that excess or portion, as the case may be.

(2) Subsection 148(4) of the Act is replaced by the following:

Partial surrender — ACB prorated

(4) If a taxpayer disposes (other than because of paragraph (2)(a) or as described in paragraph (b) of the definition "disposition" in subsection (9)) of a part of the taxpayer's interest in a life insurance policy (other than an annuity contract) last acquired after December 1, 1982 or an annuity contract, the adjusted cost basis to the taxpayer, immediately before the disposition, of the part is the amount determined by the formula

A × B/C

where

A is the adjusted cost basis to the taxpayer of the taxpayer's interest immediately before the disposition,

B is the proceeds of the disposition, and

C is

(a) if the policy is a policy (other than an annuity contract) issued after 2016, the amount determined by the formula

D – E

where

D is the interest's cash surrender value immediately before the disposition, and

E is the total of all amounts each of which is an amount payable, immediately before the disposition, by the taxpayer in respect of a policy loan in respect of the policy, and

(b) in any other case, the accumulating fund with respect to the taxpayer's interest, as determined in prescribed manner, immediately before the disposition.

Repayment of policy loan on partial surrender

(4.01) For the purposes of the definition "adjusted cost basis" in subsection (9) and paragraph 60(s), a particular amount is deemed to be a repayment made at a particular time by a taxpayer in respect of a policy loan in respect of a life insurance policy if

(a) the policy is issued after 2016;

(b) the taxpayer disposes of a part of the taxpayer's interest in the policy immediately after the particular time;

(c) paragraph (a) of the definition "proceeds of the disposition" in subsection (9) applies to determine the proceeds of the disposition of the interest;

(d) the particular amount is not

(i) otherwise a repayment by the taxpayer in respect of the policy loan, and

(ii) described in subparagraph (i) of the description of C in the definition "adjusted cost basis" in subsection (9); and

(e) the amount payable by the taxpayer in respect of the policy loan is reduced by the particular amount as a consequence of the disposition.

(3) The portion of the definition "adjusted cost basis" in subsection 148(9) of the Act before the description of A is replaced by the following:

"adjusted cost basis"

« coût de base rajusté »

"adjusted cost basis", at any time to a policyholder of the policyholder's interest in a life insurance policy, means the amount determined by the formula

(A + B + C + D + E + F + G + G.1) – (H + I + J + K + L + M + N + O)

where

(4) The description of E in the definition "adjusted cost basis" in subsection 148(9) of the Act is replaced by the following:

E is the total of all amounts each of which is an amount that is in respect of the repayment, before that time and after March 31, 1978, of a policy loan and that does not exceed the amount determined by the formula,

E.1 – E.2

where

E.1 is the total of

(a) the proceeds of the disposition, if any, in respect of the loan,

(b) if the policy is issued after 2016 (and, in the case where the particular time at which the policy is issued is determined under subsection (11), the repayment is at or after the particular time), the portion of the loan applied, immediately after the loan, to pay a premium under the policy as provided for under the terms and conditions of the policy (except to the extent that the portion is described in subparagraph (i) of the description of C in the definition "proceeds of the disposition" in this subsection), and

(c) the amount, if any, described in the description of J in this definition (but not including any payment of interest) in respect of the loan, and

E.2 is the total all amounts each of which is an amount in respect of a repayment, of the loan, referred to in clause (2)(a)(ii)(B) or deductible under paragraph 60(s) of this Act or paragraph 20(1)(hh) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952 (as it applied in taxation years before 1985),

(5) The description of G.1 in the definition "adjusted cost basis" in subsection 148(9) of the Act is replaced by the following:

G.1 is, in the case of an interest in a life insurance policy (other than an annuity contract) to which subsection (8.2) applied before that time, the total of all amounts each of which is a mortality gain, as defined by regulation and determined by the issuer of the policy in accordance with the regulations, in respect of the interest immediately before the end of the calendar year that ended in a taxation year that began before that time,

(6) The definition "adjusted cost basis" in subsection 148(9) of the Act is amended by striking out "and" at the end of the description of K and by adding the following after the description of L:

M is, in the case of a policy that is issued after 2016 and is not an annuity contract, the total of all amounts each of which is a premium paid by or on behalf of the policyholder, or a cost of insurance charge incurred by the policyholder, before that time (and, in the case where the particular time at which the policy is issued is determined under subsection (11), at or after the particular time), to the extent that the premium or charge is in respect of a benefit under the policy other than a benefit on death (as defined in subsection 1401(3) of the Income Tax Regulations),

N is, in the case of a policy that is issued after 2016 and is not an annuity contract, the total of all amounts each of which is the policyholder's interest in an amount paid — to the extent that the cash surrender value of the policy, if any, or the fund value of the policy (as defined in subsection 1401(3) of the Income Tax Regulations), if any, is reduced by the amount paid — before that time (and, in the case where the particular time at which the policy is issued is determined under subsection (11), at or after the particular time) that

(a) is a benefit on death (as defined in subsection 1401(3) of the Income Tax Regulations), or a disability benefit, under the policy, and

(b) does not result in the termination of a coverage (as defined in subsection 1401(3) of the Income Tax Regulations) under the policy,

O is, in the case of a policy that is issued after 2016 and is not an annuity contract, the total of all amounts each of which is — if a benefit on death (as defined in subsection 1401(3) of the Income Tax Regulations) under a coverage (as defined in subsection 1401(3) of the Income Tax Regulations) under the policy is paid before that time (and, in the case where the particular time at which the policy is issued is determined under subsection (11), at or after the particular time) and the payment results in the termination of the coverage — the amount, if any, determined with respect to the coverage by the formula

[P × (Q + R + S)/T] – U

where

P is the adjusted cost basis of the policyholder's interest immediately before the termination,

Q is the amount of the fund value benefit (as defined in subsection 1401(3) of the Income Tax Regulations) under the policy paid in respect of the coverage on the termination,

R is the amount that would be the present value, determined for the purposes of section 307 of the Income Tax Regulations, on the last policy anniversary (as defined in section 310 of the Income Tax Regulations) on or before the termination, of the fund value of the coverage (as defined in subsection 1401(3) of the Income Tax Regulations) if the fund value of the coverage on that policy anniversary were equal to the fund value of the coverage on the termination,

S is the amount that would be determined, on that policy anniversary, for paragraph (a) of the description of C in the definition "net premium reserve" in subsection 1401(3) of the Income Tax Regulations in respect of the coverage, if the benefit on death under the coverage, and the fund value of the coverage, on that policy anniversary were equal to the benefit on death under the coverage and the fund value of the coverage, as the case may be, on the termination,

T is the amount that would be, on that policy anniversary, the net premium reserve (as defined in subsection 1401(3) of the Income Tax Regulations) in respect of the policy for the purposes of section 307 of the Income Tax Regulations, if the fund value benefit under the policy, the benefit on death under each coverage and the fund value of each coverage on that policy anniversary were equal to the fund value benefit, the benefit on death under each coverage and the fund value of each coverage, as the case may be, under the policy on the termination, and

U is the amount, if any, determined under subsection (4) in respect of a disposition before that time of the interest because of paragraph (2)(e) in respect of the payment in respect of the fund value benefit under the policy paid in respect of the coverage on the termination;

(7) Paragraph (c) of the definition "premium" in subsection 148(9) of the Act is replaced by the following:

(c) the portion of any amount paid under the policy with respect to an accidental death benefit, a disability benefit, an additional risk as a result of insuring a substandard life, an additional risk in respect of the conversion of a term policy into another policy after the end of the year, an additional risk under a settlement option, or an additional risk under a guaranteed insurability benefit, if

(i) in the case of an annuity contract, a policy issued before 2017 or in respect of which the particular time at which the policy is issued is determined under subsection (11), where the interest in the policy was last acquired after December 1, 1982, the payment is made after May 31, 1985 and, if the particular time at which the policy is issued is determined under subsection (11), before the particular time, or

(ii) in the case where the taxpayer's interest in the policy was last acquired before December 2, 1982,

(A) subsection 12.2(9) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, applies to the interest,

(B) the particular time at which the policy is issued is determined under subsection (11), and

(C) the payment is made in the period that starts at the later of May 31, 1985 and the first time at which that subsection 12.2(9) applies in respect of the interest and that ends at the particular time;

(8) Subparagraph (i) of the description of C in paragraph (a) of the definition "proceeds of the disposition" in subsection 148(9) of the Act is replaced by the following:

(i) an amount by which the amount payable in respect of a policy loan in respect of the policy is reduced as a consequence of the disposition, except that if the policy is issued after 2016 and the disposition is of a part of the interest (and, in the case where the particular time at which the policy is issued is determined under subsection (11), the disposition occurs at or after the particular time), only to the extent that the amount represents the portion of the loan applied, immediately after the loan, to pay a premium under the policy, as provided for under the terms and conditions of the policy,

(9) Section 148 of the Act is amended by adding the following after subsection (10):

Loss of grandfathering

(11) For the purposes of determining at and after a particular time whether a life insurance policy (other than an annuity contract) issued before 2017 is treated as issued after 2016 under this section (other than this subsection) and sections 306 (other than subsection (9)), 307, 308, 310, 1401 and 1403 of the Income Tax Regulations (except as they apply for the purposes of subsection 211.1(3)), the policy is deemed to be a policy issued at the particular time if the particular time is the first time after 2016 at which life insurance — in respect of a life, or two or more lives jointly insured, and in respect of which a particular schedule of premium or cost of insurance rates applies — is

(a) converted (other than only because of a change in premium or cost of insurance rates) into another type of life insurance; or

(b) if the insurance (other than insurance paid for with policy dividends or that is reinstated) is medically underwritten after 2016 (other than to obtain a reduction in the premium or cost of insurance rates under the policy), added to the policy.

53. (1) The portion of subsection 149(5) of the Act before paragraph (a) is replaced by the following:

Exception — investment income of certain clubs

(5) Notwithstanding subsections (1) and (2), where a club, society or association was for any period, a club, society or association described in paragraph (1)(l) the main purpose of which was to provide dining, recreational or sporting facilities for its members (in this subsection referred to as the "club"), a trust is deemed to have been created on the later of the commencement of the period and the end of 1971 and to have continued in existence throughout the period, and, throughout that period, the following rules apply:

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

54. (1) Subparagraph (a)(iii) of the definition "exempt shares" in subsection 149.1(1) of the Act is replaced by the following:

(iii) on or after March 19, 2007, under the terms of a trust created before March 19, 2007, and not amended on or after March 19, 2007,

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

55. (1) Paragraph 152(1)(b) of the Act is replaced by the following:

(b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(2) or (3), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year.

(2) The portion of subsection 152(4.2) of the Act before paragraph (a) is replaced by the following:

Reassessment with taxpayer's consent

(4.2) Notwithstanding subsections (4), (4.1) and (5), for the purpose of determining — at any time after the end of the normal reassessment period, of a taxpayer who is an individual (other than a trust) or a graduated rate estate, in respect of a taxation year — the amount of any refund to which the taxpayer is entitled at that time for the year, or a reduction of an amount payable under this Part by the taxpayer for the year, the Minister may, if the taxpayer makes an application for that determination on or before the day that is 10 calendar years after the end of that taxation year,

(3) Paragraph 152(4.2)(b) of the Act is replaced by the following:

(b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(2) or (3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer's liability under this Part for the year.

(4) Subsections (1) and (3) apply to the 2015 and subsequent taxation years.

(5) Subsection (2) applies to the 2016 and subsequent taxation years.

56. (1) Subsection 156.1(2) of the Act is amended by striking out "or" at the end of paragraph (a), by adding "or" at the end of paragraph (b) and by adding the following after paragraph (b):

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

57. (1) Section 160 of the Act is amended by adding the following after subsection (1.3):

Joint liability — spousal and similar trusts

(1.4) If subsection 104(13.4) deems an amount to have become payable in a taxation year of a trust to an individual, the individual and the trust are jointly and severally, or solidarily, liable for the tax payable by the individual under this Part for the individual's taxation year that includes the day on which the individual dies to the extent that that tax payable is greater than it would have been if the amount were not included in computing the individual's income under this Part for the taxation year.

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

58. (1) The portion of subsection 161(2.2) of the Act before paragraph (a) is replaced by the following:

Contra interest

(2.2) Notwithstanding subsections (1) and (2), the total amount of interest payable by a taxpayer (other than a graduated rate estate) under those subsections, for the period that begins on the first day of the taxation year for which a part or instalment of tax is payable and ends on the taxpayer's balance-due day for the year, in respect of the taxpayer's tax or instalments of tax payable for the year shall not exceed the amount, if any, by which

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

59. (1) Subsection 163(2) of the Act is amended by adding the following after paragraph (c.3):

(c.4) the amount, if any, by which

(i) the total of all amounts each of which is an amount that would be deemed by subsections 122.8(2) or (3) to have been paid on account of the person's tax payable under this Part for the year if that amount were calculated by reference to the person's claim for the year under those subsections

exceeds

(ii) the total of all amounts each of which is the amount that the person is entitled to claim for the year under subsections 122.8(2) or (3),

(2) Subsection (1) applies to the 2015 and subsequent taxation years.

60. (1) Paragraph 164(1.5)(a) of the Act is replaced by the following:

(a) if the taxpayer is an individual (other than a trust) or a graduated rate estate for the year and the taxpayer's return of income under this Part for the year was filed on or before the day that is 10 calendar years after the end of the year;

(2) The portion of subsection 164(6) of the Act before paragraph (a) is replaced by the following:

Disposition by legal representative of deceased

(6) If in the course of administering the graduated rate estate of a taxpayer, the taxpayer's legal representative has, within the first taxation year of the estate,

(3) The portion of subsection 164(6.1) of the Act before paragraph (a) is replaced by the following:

Realization of deceased employees' options

(6.1) Notwithstanding any other provision of this Act, if a right to acquire securities (as defined in subsection 7(7)) under an agreement in respect of which a benefit was deemed by paragraph 7(1)(e) to have been received by a taxpayer (in this subsection referred to as "the right") is exercised or disposed of by the taxpayer's legal representative within the first taxation year of the graduated rate estate of the taxpayer and the representative so elects in prescribed manner and on or before a prescribed day,

(4) Subsections (1) to (3) apply to the 2016 and subsequent taxation years.

61. (1) The portion of paragraph 165(1)(a) of the Act before subparagraph (i) is replaced by the following:

(a) if the assessment is in respect of the taxpayer for a taxation year and the taxpayer is an individual (other than a trust) or a graduated rate estate for the year, on or before the later of

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

62. (1) Paragraph 207.6(1)(a) of the Act is replaced by the following:

(a) a trust is deemed to be created on the day that the arrangement is established;

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

63. (1) Paragraph (b) of the definition "designated beneficiary" in subsection 210(1) of the Act is repealed.

(2) The portion of paragraph (d) of the definition "designated beneficiary" in subsection 210(1) of the Act before subparagraph (i) is replaced by the following:

(d) another trust (in this paragraph referred to as the "other trust") that is not a graduated rate estate, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time

(3) Subparagraph (d)(ii) of the definition "designated beneficiary" in subsection 210(1) of the Act is repealed.

(4) Clause (d)(iii)(A) of the definition "designated beneficiary" in subsection 210(1) of the Act is replaced by the following:

(A) a graduated rate estate,

(5) Subparagraph (e)(iii) of the definition "designated beneficiary" in subsection 210(1) of the Act is repealed.

(6) Paragraph 210(2)(a) of the Act is replaced by the following:

(a) a graduated rate estate;

(7) Subsections (2), (4) and (6) apply to the 2016 and subsequent taxation years.

64. (1) Section 212 of the Act is amended by adding the following after subsection (3):

Back-to-back loan arrangement

(3.1) Subsections (3.2) and (3.3) apply at any time in respect of a taxpayer if

(a) the taxpayer pays or credits a particular amount at that time 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 referred to as the "intermediary");

(b) the intermediary is not

(i) a person resident in Canada that does not deal at arm's length with the taxpayer, or

(ii) a partnership each member of which is a person described in subparagraph (i);

(c) at any time in the period during which the interest accrued (in subsections (3.2) and (3.3) referred to as the "relevant period"), the intermediary, or a person or partnership that does not deal at arm's length with the intermediary,

(i) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a non-resident person that meets any of the following conditions (in this subsection and subsection (3.2) referred to as the "intermediary debt"):

(B) it can reasonably be concluded that all or a portion of the particular debt or other obligation became owing, or was permitted to remain owing, because

(I) all or a portion of the debt or other obligation was entered into or was permitted to remain outstanding, or

(II) the intermediary anticipated that all or a portion of the debt or other obligation would become owing or remain outstanding, or

(ii) has a specified right (as defined in subsection 18(5)) in respect of a particular property that was granted directly or indirectly by a non-resident person and

(A) the existence of the specified right is required under the terms and conditions of the particular debt or other obligation, or

(B) it can reasonably be concluded that all or a portion of the particular debt or other obligation became owing, or was permitted to remain owing, because

(I) the specified right was granted, or

(II) the intermediary anticipated that the specified right would be granted;

(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 the non-resident person rather than the intermediary, 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) the total of all amounts — each of which is, in respect of the particular debt or other obligation, an amount outstanding as or on account of an intermediary debt or the fair market value of a particular property described in subparagraph (c)(ii) — 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 intermediary 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 intermediary is granted a security interest (as defined in subsection 18(5)) in respect of a property that is the intermediary debt 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.

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 a non-resident person referred to in subparagraph (3.1)(c)(i) or (ii), the amount of which is determined 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 average of all amounts each of which is the lesser of

(i) the amount of the particular debt or other obligation referred to in paragraph (3.1)(a) outstanding at a particular time in the relevant period; and

(ii) the total of all amounts each of which is at that particular time

(A) an amount outstanding as or on account of an intermediary debt, in respect of the particular debt or other obligation, that is owed to the non-resident person,

(B) the fair market value of a particular property referred to in subparagraph (3.1)(c)(ii) in respect of the particular debt or other obligation, or

C 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;

D is the portion, if any, of the particular amount deemed by subsection 214(16) to have been paid by the taxpayer as a dividend;

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 non-resident person at that time; and

F is the rate of tax (determined without reference to subsection 214(16)) imposed under this Part on the intermediary in respect of all or the portion of the particular amount paid or credited to the intermediary.

Back-to-back loan arrangement

(3.3) If subsection (3.2) applies at any time to deem a taxpayer to pay interest at that time to more than one non-resident person referred to in subparagraph (3.1)(c)(i) or (ii) in respect of a particular debt or other obligation and the total of all amounts determined (without reference to this subsection) for B in subsection (3.2) in respect of the particular debt or other obligation exceeds 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, then the taxpayer may reduce the amount determined for B in respect of one or more of the non-resident persons by one or more amounts designated by the taxpayer, as is reasonable in the circumstances, the total of which designated amounts shall not be greater than that excess.

(2) Subsection (1) applies to amounts paid or credited after 2014.

65. (1) Paragraph 212.3(1)(b) of the Act is replaced by the following:

(b) the CRIC is immediately after the investment time, or becomes after the investment time and as part of a transaction or event or series of transactions or events that includes the making of the investment, controlled by a non-resident corporation (in this section referred to as the "parent"), and any of the following conditions is satisfied:

(i) if, at the investment time, the parent owned all shares of the capital stock of the CRIC that are owned — determined without reference to paragraph 212.3(25)(b) in the case of partnerships referred to in this subparagraph and as if all rights referred to in paragraph 251(5)(b), of the parent, each person that does not deal at arm's length with the parent and all of those partnerships, were immediate and absolute and the parent and each of the other persons and partnerships had exercised those rights at the investment time — by the parent, persons that are not dealing at arm's length with the parent and partnerships of which the parent or a non-resident person that is not dealing at arm's length with the parent is a member (other than a limited partner within the meaning assigned by subsection 96(2.4)), the parent would own shares of the capital stock of the CRIC that

(A) give the holders of those shares 25% or more of all of the votes that could be cast at any annual meeting of the shareholders in respect of all shares of the capital stock of the CRIC, or

(B) have a fair market value of 25% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the CRIC,

(ii) the investment is an acquisition of shares of the capital stock of a subject corporation by a CRIC to which this subparagraph applies because of subsection (19), or

(iii) under an arrangement entered into in connection with the investment, a person or partnership, other than the CRIC or a person related to the CRIC, has in any material respect the risk of loss or opportunity for gain or profit in respect of a property that can reasonably be considered to relate to the investment; and

(2) Paragraph 212.3(2)(a) of the Act is replaced by the following:

(a) for the purposes of this Part and subject to subsections (3) and (7), the CRIC is deemed to have paid to the parent, and the parent is deemed to have received from the CRIC, at the dividend time, a dividend equal to the total of all amounts each of which is the portion of the fair market value at the investment time of any property (not including shares of the capital stock of the CRIC) transferred, any obligation assumed or incurred, or any benefit otherwise conferred, by the CRIC, or of any property transferred to the CRIC which transfer results in the reduction of an amount owing to the CRIC, that can reasonably be considered to relate to the investment; and

(3) Subsections 212.3(3) and (4) of the Act are replaced by the following:

Dividend substitution election

(3) If a CRIC (or a CRIC and a corporation that is a qualifying substitute corporation in respect of the CRIC at the dividend time) and the parent (or the parent and another non-resident corporation that at the dividend time does not deal at arm's length with the parent) jointly elect in writing under this subsection in respect of an investment, and the election is filed with the Minister on or before the filing-due date of the CRIC for its taxation year that includes the dividend time, then the dividend that would, in the absence of this subsection, be deemed under paragraph (2)(a) to have been paid by the CRIC to the parent and received by the parent from the CRIC is deemed to have instead been

(a) paid by the CRIC or the qualifying substitute corporation, as agreed on in the election; and

(b) paid to, and received by, the parent or the other non-resident corporation, as agreed on in the election.

Definitions

(4) The following definitions apply in this section.

"cross-border class"

« catégorie transfrontalière »

"cross-border class", in respect of an investment, means a class of shares of the capital stock of a CRIC or qualifying substitute corporation if, immediately after the dividend time in respect of the investment,

(a) the parent, or a non-resident corporation that does not deal at arm's length with the parent, owns at least one share of the class; and

(b) no more than 30% of the issued and outstanding shares of the class are owned by one or more persons resident in Canada that do not deal at arm's length with the parent.

"dividend time"

« moment du dividende »

"dividend time", in respect of an investment, means

(a) if the CRIC is controlled by the parent at the investment time, the investment time; or

(b) in any other case, the earlier of

(i) the first time, after the investment time, at which the CRIC is controlled by the parent, and

(ii) the day that is one year after the day that includes the investment time.

"qualifying substitute corporation"

« société de substitution admissible »

"qualifying substitute corporation", at any time in respect of a CRIC, means a corporation resident in Canada

(a) that is, at that time, controlled by the parent or by a non-resident corporation that does not deal at arm's length with the parent;

(b) that has, at that time, an equity percentage (as defined in subsection 95(4)) in the CRIC; and

(c) shares of the capital stock of which are, at that time, owned by the parent or another non-resident corporation with which the parent does not, at that time, deal at arm's length.

(4) Section 212.3 of the Act is amended by adding the following after subsection (5):

Sequential investments — paragraph (10)(f)

(5.1) In the case of an investment (in this subsection referred to as the "second investment") in a subject corporation by a CRIC described in paragraph (10)(f), the total referred to in paragraph (2)(a) in respect of the second investment is to be reduced by the total referred to in paragraph (2)(a) in respect of a prior investment (in this subsection referred to as the "first investment") in the subject corporation by another corporation resident in Canada if

(a) the first investment is an investment that is described in paragraph (10)(a) or (b) and to which paragraph (2)(a) applies;

(b) immediately after the investment time in respect of the first investment, the other corporation is not controlled by the parent; and

(c) the other corporation becomes, after the time that is immediately after the investment time in respect of the first investment and as part of a transaction or event or series of transactions or events that includes the making of the first investment, controlled by the parent because of the second investment.

(5) Subsection 212.3(6) of the Act is repealed.

(6) Section 212.3 of the Act is amended by adding the following before subsection (7):

Anti-avoidance rule — cross-border class

(6) A particular class of shares of the capital stock of a CRIC or a qualifying substitute corporation that, in the absence of this subsection, would be a cross-border class in respect of an investment is deemed not to be a cross-border class in respect of the investment if

(a) a particular corporation resident in Canada that does not deal at arm's length with the parent

(i) acquires shares of the particular class (or shares that are substituted for those shares) as part of a transaction or event or series of transactions or events that includes the investment, or

(ii) owns shares of the particular class (or shares that are substituted for those shares) and, as part of a transaction or event or series of transactions or events that includes the investment,

(A) the paid-up capital in respect of the particular class is increased otherwise than as a result of an acquisition described in subparagraph (i), and

(B) the increase in paid-up capital in respect of the particular class can reasonably be considered to be connected to funding provided to the particular corporation or another corporation resident in Canada (other than the corporation that issued the particular class) by the parent or a non-resident person that does not deal at arm's length with the parent, unless

(I) the funding results in an increase, equal to the amount funded, in the paid-up capital of shares of a class of the capital stock of the particular corporation, or the other corporation, that is a cross-border class in respect of the investment, and

(II) the increase referred to in subclause (I) occurred at or before the time of the increase to the paid-up capital in respect of the particular class; and

(b) it can reasonably be considered that one of the main reasons for the acquisition or for the funding, as the case may be, was to increase the amount of a deduction required under paragraph (7)(b) or (c) in computing the paid-up capital in respect of shares of the particular class held by the particular corporation.

(7) Subsection 212.3(7) of the Act is replaced by the following:

Reduction of deemed dividend

(7) If paragraph (2)(a) applies to an investment in a subject corporation made by a CRIC,

(a) where the CRIC demonstrates — in respect of one or more classes of shares of the capital stock of the CRIC, or of a qualifying substitute corporation, all the issued and outstanding shares of which are owned, immediately after the dividend time in respect of the investment, by persons that deal at arm's length with the CRIC — that an amount of paid-up capital in respect of each of the classes arose as a consequence of one or more transfers of property, directly or indirectly, to the CRIC and that all of the property transferred was used by the CRIC to make, in whole or in part, the investment (or, in the case of an investment described in paragraph (10)(f), the direct acquisition referred to in that paragraph), then

(i) the amount, determined without reference to this subsection, of the dividend deemed under paragraph (2)(a) to have been paid and received, is reduced by the lesser of

(A) that amount, and

(B) the total of all amounts of paid-up capital so demonstrated by the CRIC, and

(ii) in computing the paid-up capital in respect of each class described in this paragraph, at any time after the dividend time, there is to be deducted an amount equal to the portion of the amount determined under subparagraph (i) that can reasonably be considered to relate to that class;

(b) where the amount, determined without reference to this paragraph, of the dividend deemed under paragraph (2)(a) to have been paid and received is equal to or greater than the total of all amounts each of which is an amount of paid-up capital immediately after the dividend time, determined without reference to this paragraph, of a cross-border class in respect of the investment, then

(i) the amount of the dividend is reduced by the total referred to in this paragraph, and

(ii) in computing, at any time after the dividend time, the paid-up capital in respect of each cross-border class in respect of the investment, there is to be deducted an amount equal to the paid-up capital in respect of that class immediately after the dividend time, determined without reference to this paragraph;

(i) the amount, determined without reference to this paragraph, of the dividend is reduced to nil,

(ii) in computing, at any time after the dividend time, the paid-up capital in respect of a particular cross-border class in respect of the investment, there is to be deducted the amount, if any, that when added to the total of all amounts that are deducted under this paragraph in computing the paid-up capital of other cross-border classes, results in the greatest total reduction because of this paragraph, immediately after the dividend time, of the paid-up capital in respect of shares of cross-border classes that are owned by the parent or another non-resident corporation with which the parent does not, at the dividend time, deal at arm's length,

(iii) if the proportion of the shares of a particular class owned, in aggregate, by the parent and non-resident corporations that do not deal at arm's length with the parent is equal to the proportion so owned of one or more other cross-border classes (in this subparagraph all those classes, together with the particular class, referred to as the "relevant classes"), then the proportion that the reduction under subparagraph (ii) to the paid-up capital in respect of the particular class is of the paid-up capital, determined immediately after the dividend time and without reference to this paragraph, in respect of that class is to be equal to the proportion that the total reduction under subparagraph (ii) to the paid-up capital in respect of all the relevant classes is of the total paid-up capital, determined immediately after the dividend time and without reference to this paragraph, of all the relevant classes, and

(iv) the total of all amounts each of which is an amount to be deducted under subparagraph (ii) in computing the paid-up capital of a cross-border class is to be equal to the amount by which the dividend is reduced under subparagraph (i); and

(d) if the amount of the dividend is reduced because of any of subparagraphs (a)(i), (b)(i) and (c)(i),

(i) the CRIC shall file with the Minister in prescribed manner a form containing prescribed information and the amounts of the paid-up capital, determined immediately after the dividend time and without reference to this subsection, of each class of shares that is described in paragraph (a) or that is a cross-border class in respect of the investment, the paid-up capital of the shares of each of those classes that are owned by the parent or another non-resident corporation that does not, at the dividend time, deal at arm's length with the parent, and the reduction under any of subparagraphs (a)(ii), (b)(ii) and (c)(ii) in respect of each of those classes, and

(ii) if the form is not filed on or before the CRIC's filing-due date for its taxation year that includes the dividend time, the CRIC is deemed to have paid to the parent, and the parent is deemed to have received from the CRIC, on the filing-due date, a dividend equal to the total of all amounts each of which is the amount of a reduction because of any of subparagraphs (a)(i), (b)(i) and (c)(i).

(8) Subparagraph 212.3(8)(a)(ii) of the Act is replaced by the following:

(ii) the total that would be determined under subparagraph (i) if this Act were read without reference to paragraph (2)(b) and subsections (7) and (9), and

(9) Subparagraph 212.3(8)(b)(i) of the Act is replaced by the following:

(i) the total of all amounts required by paragraph (2)(b) or subsection (7) to be deducted in computing the paid-up capital in respect of the class before that time

(10) Subsection 212.3(9) of the Act is replaced by the following:

Paid-up capital reinstatement

(9) If, in respect of an investment in a subject corporation made by a CRIC that is described in any of paragraphs (10)(a) to (f), an amount is deducted under paragraph (2)(b) or subsection (7) in computing the paid-up capital in respect of a class of shares of the capital stock of a particular corporation and, at a time subsequent to the investment time, there is a reduction of paid-up capital referred to in subparagraph (b)(i) or a receipt of property referred to in the description of A in subparagraph (b)(ii), then the paid-up capital in respect of the class is to be increased, immediately before the subsequent time, by the lesser of

(a) the amount, if any, by which

(i) the total of all amounts deducted, before the subsequent time, under paragraph (2)(b) or subsection (7), in respect of the investment, in computing the paid-up capital in respect of the class

exceeds

(ii) the total of all amounts added under this subsection, in respect of the investment, to the paid-up capital in respect of the class before the time that is immediately before the subsequent time, and

(b) an amount that

(i) if the investment is described in paragraph (10)(a), (b) or (f), the paid-up capital in respect of the class is reduced at the subsequent time as part of or because of a distribution of property by the particular corporation and the property (in this paragraph referred to as the "distributed shares") is shares of the capital stock of the subject corporation or 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, is equal to the amount determined by the formula

A/B

where

A is

(A) if the investment is described in paragraph (10)(b), the portion of the fair market value, immediately before the subsequent time, of the distributed shares that can reasonably be considered to relate to the contribution of capital that is the investment, and

(B) if the investment is described in paragraph (10)(a) or (f), the lesser of

(I) the portion of the fair market value, immediately before the subsequent time, of the distributed shares that can reasonably be considered to relate to the shares (in this paragraph referred to as the "acquired shares") of the capital stock of the subject corporation that were acquired on the investment (other than any portion described in clause (A)), and

(II) the proportion of the amount determined under subparagraph (a)(i) that the amount determined under subclause (I) is of the fair market value, immediately before the subsequent time, of the acquired shares, or the portion of the fair market value of shares that were substituted for the acquired shares that can reasonably be considered to relate to the acquired shares, and

B is

(A) if the particular corporation is, immediately after the dividend time, a qualifying substitute corporation in respect of the CRIC, the particular corporation's equity percentage (as defined in subsection 95(4)) in the CRIC immediately after the dividend time, and

(B) in any other case, 100%, and

(ii) in any other case, is equal to the amount determined by the formula

A × B/C

where

A is the amount that is equal to the fair market value of property that 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 (in this subparagraph referred to as the "recipient corporation")

(A) 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, other than

(I) the fair market value of shares of the capital stock of another foreign affiliate of the taxpayer acquired by the recipient corporation as consideration for the disposition and as an investment to which subsection (16) or (18) applies, and

(II) proceeds from a disposition of shares to a corporation resident in Canada for which the acquisition of the shares is an investment to which subsection (16) or (18) applies,

(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 the subject shares, or

(I) as a repayment of or as proceeds from the disposition of the debt obligation or amount owing, other than

1. if the debt obligation or amount owing was acquired by another foreign affiliate of the taxpayer, the portion of the fair market value of property received by the particular corporation as a result of an investment by the particular corporation that is described in paragraphs (10)(a) to (f) to which subsection (16) or (18) applies, or

2. as proceeds from a disposition to a corporation resident in Canada and that is affiliated with the particular corporation, and where subsection (16) or (18) applies to the other corporation in respect of its acquisition, or

(II) as interest on the debt obligation or amount owing,

B is the amount determined under paragraph (a) in respect of the class, and

C is the total of all amounts each of which is an amount determined under paragraph (a) in respect of all classes of shares of the capital stock of the particular corporation or of any corporation that does not deal at arm's length with the particular corporation.

Exchange of debt obligation for shares

(9.1) For the purposes of subsection (9), if at any time a debt obligation that relates to a particular investment described in paragraph (10)(c) or (d) or subparagraph (10)(e)(i) is exchanged for shares of a subject corporation and as part of the exchange there is an acquisition of shares described in subparagraph (18)(b)(i) or paragraph 18(d), then all amounts, in respect of the particular investment, deducted under paragraph (2)(b) or subsection (7) from, or added under subsection (9) to, the paid-up capital in respect of a class of shares before that time are deemed to have been deducted or added, as the case may be, in respect of the acquisition of the shares and not the particular investment.

Continuity for paid-up capital reinstatement

(9.2) If at any particular time shares (in this subsection referred to as the "new shares") of a class of the capital stock of a corporation resident in Canada are acquired, in a transaction to which any of sections 51, 85, 85.1, 86 and 87 apply, in exchange for a share (in this subsection referred to as the "old share") of a class of the capital stock of a particular corporation that is either the corporation or another corporation resident in Canada, then for the purposes of subsections (8) and (9),

(a) if the corporation that issues the new shares is not the particular corporation, it is deemed to be the same corporation as, and a continuation of, the particular corporation;

(b) the new shares are deemed to be the same share, and of the same class of the capital stock of the particular corporation, as the old share; and

(c) if the old share remains outstanding after the exchange, it is deemed to be a share of a different class of the capital stock of the particular corporation.

(11) Paragraph 212.3(10)(c) of the Act is amended by striking out "or" at the end of subparagraph (i), by adding "or" at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) because a dividend has been declared, but not yet paid, by the subject corporation;

(12) Subsection 212.3(15) of the Act is replaced by the following:

Control

(15) For the purposes of this section and paragraph 128.1(1)(c.3),

(a) a CRIC or a taxpayer to which paragraph 128.1(1)(c.3) applies (in this paragraph referred to as the "specific corporation"), that would, in the absence of this subsection, be controlled at any time

(i) by more than one non-resident corporation is deemed not to be controlled at that time by any such non-resident that controls at that time another non-resident corporation that controls at that time the specific corporation, unless the application of this paragraph would otherwise result in no non-resident corporation controlling the specific corporation, and

(ii) by a particular non-resident corporation is deemed not to be controlled at that time by the particular corporation if the particular corporation is controlled at that time by another corporation that is at that time

(A) resident in Canada, and

(B) not controlled by any non-resident person; and

(b) if at any time a corporation would not, in the absence of this subsection, be controlled by any non-resident corporation, and a related group (determined without reference to paragraph 251(5)(b)), each member of which is a non-resident corporation, is in a position to control the corporation, the corporation is deemed to be controlled at that time by

(i) the member of the group that has the greatest direct equity percentage (within the meaning assigned by subsection 95(4)) in the corporation at that time, or

(ii) where no member of the group has a direct equity percentage in the corporation that is greater than that of every other member, the member determined by the corporation or, if the corporation does not make a determination, by the Minister.

(13) The portion of paragraph 212.3(16)(b) of the Act before subparagraph (i) is replaced by the following:

(b) officers of the CRIC, or of a corporation resident in Canada that did not, at the investment time, deal at arm's length with the CRIC, had and exercised the principal decision-making authority in respect of the making of the investment and a majority of those officers were, at the investment time, persons each of whom was resident, and working principally,

(14) Paragraph 212.3(16)(c) of the Act is replaced by the following:

(i) officers of the CRIC, or of a corporation resident in Canada that does not deal at arm's length with the CRIC, will have and exercise the ongoing principal decision-making authority in respect of the investment,

(ii) a majority of those officers will be persons each of whom will be resident, and working principally, in Canada or in a country in which a connected affiliate is resident, and

(iii) the performance evaluation and compensation of the officers of the CRIC, or of the corporation resident in Canada that does not deal at arm's length with the CRIC, who are resident, and work principally, in Canada, or in a country in which a connected affiliate is resident, will be based on the results of operations of the subject corporation to a greater extent than will be the performance evaluation and compensation of any officer of a non-resident corporation (other than the subject corporation, a corporation controlled by the subject corporation or a connected affiliate) that does not deal at arm's length with the CRIC.

(15) Subsection 212.3(17) of the Act is replaced by the following:

Dual officers

(17) For the purposes of paragraphs (16)(b) and (c), any person who is an officer of the CRIC, or of a corporation resident in Canada that does not deal at arm's length with the CRIC, and of a non-resident corporation that does not, at the investment time, deal at arm's length with the CRIC (other than the subject corporation, a subject subsidiary corporation or a connected affiliate) is deemed to not be resident, and to not work principally, in a country in which a connected affiliate is resident.

(16) The portion of subsection 212.3(18) of the Act before paragraph (b) is replaced by the following:

Exception — corporate reorganizations

(18) Subject to subsections (18.1) to (20), subsection (2) does not apply to an investment in a subject corporation made by a CRIC if

(a) the investment is described in paragraph (10)(a) or (d) and is an acquisition of shares of the capital stock, or a debt obligation, of the subject corporation

(i) from a corporation resident in Canada (in this paragraph referred to as the "disposing corporation") to which the CRIC is, immediately before the investment time, related (determined without reference to paragraph 251(5)(b)), and

(A) each shareholder of the disposing corporation immediately before the investment time is

(I) either the CRIC or a corporation resident in Canada that is, immediately before the investment time, related to the parent, and

(II) at no time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm's length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

(B) the disposing corporation is, at no time that is in the period and that is before the investment time, dealing at arm's length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

(ii) on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a "predecessor corporation") to form the CRIC if

(A) all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)), and

(B) either

(I) none of the predecessor corporations are, at any time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, dealing at arm's length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent, or

(II) if the condition in subclause (I) is not satisfied in respect of a predecessor corporation, each shareholder of that predecessor immediately before the investment time is

1. either the CRIC or a corporation resident in Canada that is, immediately before the investment time, related to the parent, and

2. at no time that is in the period and that is before the investment time, dealing at arm's length (determined without reference to paragraph 251(5)(b)) with the parent or a non-resident corporation that participates in the series and is, at any time that is in the period and that is before the investment time, related to the parent;

(17) Paragraph 212.3(18)(b) 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) as a result of a disposition of the shares by the CRIC to a partnership and to which subsection 97(2) applies;

(18) Paragraph 212.3(18)(c) of the Act is replaced by the following:

(c) the investment is an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada

(i) from a corporation (in this paragraph referred to as the "disposing corporation") to which the CRIC is, immediately before the investment time, related (determined without reference to paragraph 251(5)(b)), and

(A) each shareholder of the disposing corporation immediately before the investment time is

(I) either the CRIC or a corporation resident in Canada that, immediately before the invementment time, is related to the parent, and

(ii) on an amalgamation described in subsection 87(1) of two or more corporations (each of which is in this subparagraph referred to as a "predecessor corporation") to form the CRIC, or a corporation of which the CRIC is a shareholder, if

(A) all of the predecessor corporations are, immediately before the amalgamation, related to each other (determined without reference to paragraph 251(5)(b)), and

(B) either

(II) if the condition in subclause (I) is not satisfied in respect of a predecessor corporation, each shareholder of that predecessor immediately before the investment time is

1. either the CRIC or a corporation resident in Canada that, immediately before the investment time, is related to the parent, and

(iii) in an exchange to which subsection 51(1) applies,

(iv) in the course of a reorganization of the capital of the other corporation to which subsection 86(1) applies,

(v) to the extent that an investment (other than one described in paragraph (10)(f)) is made in the subject corporation by the other corporation, or by a particular corporation resident in Canada to which the CRIC and the other corporation are related at the investment time, using property transferred, directly or indirectly, by the CRIC to the other corporation or the particular corporation, as the case may be, if the two investments

(A) occur within 90 days of each other, and

(B) are part of the same series of transactions or events, or

(vi) as a result of a disposition of the shares by the CRIC to a partnership and to which subsection 97(2) applies; or

(19) Paragraph 212.3(18)(d) of the Act is replaced by the following:

(d) the investment is an acquisition of shares of the capital stock of the subject corporation that is described in paragraph (10)(a), or an indirect acquisition referred to in paragraph (10)(f) that results from a direct acquisition of shares of the capital stock of another corporation resident in Canada, if

(i) the shares are acquired by the CRIC in exchange for a bond, debenture or note, and

(ii) subsection 51(1) would apply to the exchange if the terms of the bond, debenture or note conferred on the holder the right to make the exchange.

(20) Section 212.3 of the Act is amended by adding the following after subsection (18):

Exchange — pertinent loan or indebtedness

(18.1) Subsection (18) does not apply to an investment that is an acquisition of property if the property can reasonably be considered to have been received by the CRIC as repayment in whole or in part, or in settlement, of a pertinent loan or indebtedness.

(21) The portion of subsection 212.3(19) of the Act before paragraph (a) is replaced by the following:

Preferred shares

(19) Subparagraph (1)(b)(ii) applies, and subsection (16) and paragraphs (18)(b) and (d) do not apply, to an acquisition of shares of the capital stock of a subject corporation by a CRIC if, having regard to all the terms and conditions of the shares and any agreement in respect of the shares, the shares cannot reasonably be considered to fully participate in the profits of the subject corporation and any appreciation in the value of the subject corporation, unless the subject corporation would be a subsidiary wholly-owned corporation of the CRIC throughout the period during which the series of transactions or events that includes the acquisition occurs if the CRIC owned all of the shares of the capital stock of the subject corporation that are owned by any of

(22) Paragraph 212.3(22)(a) of the Act is amended by striking out "and" at the end of subparagraph (i) and by adding the following after subparagraph (ii):

(iii) each shareholder of the new corporation is deemed not to acquire indirectly any shares as a result of the amalgamation; and

(23) Subsection 212.3(23) of the Act is replaced by the following:

Indirect investment

(23) Subsection (2) applies to an investment in a subject corporation made by a CRIC to which, in the absence of this subsection, subsection (2) would not apply because of subsection (16) or (24), to the extent that one or more properties received by the subject corporation from the CRIC as a result of the investment, or property substituted for any such property, may reasonably be considered to have been used by the subject corporation, directly or indirectly as part of a series of transactions or events that includes the making of the investment, in a transaction or event to which subsection (2) would have applied if the CRIC had entered into the transaction, or participated in the event, as the case may be, instead of the subject corporation.

(24) Paragraphs 212.3(24)(a) to (c) of the Act are replaced by the following:

(a) all the properties received by the subject corporation from the CRIC as a result of the investment were used, at a particular time that is within 30 days after the investment time and at all times after the particular time, by the subject corporation

(i) to derive income from activities that can reasonably be considered to be directly related to active business activities carried on by a particular corporation and all of the income is income from an active business because of subparagraph 95(2)(a)(i), or

(ii) to make a loan or acquire a property, all or substantially all of the income from which is, or would be, if there were income from the loan or property, derived from amounts paid or payable, directly or indirectly, to the subject corporation by a particular corporation and is, or would be, income from an active business because of subparagraph 95(2)(a)(ii);

(b) the particular corporation was, at the particular time, a controlled foreign affiliate of the CRIC for the purposes of section 17; and

(c) the particular corporation is, throughout the period that begins at the investment time and during which the series of transactions or events that includes the activities of, or the making of the loan or acquisition of property by, the subject corporation occurs, a corporation in which an investment made by the CRIC would not be subject to subsection (2) because of subsection (16).

(25) Subject to subsections (26) and (27), subsections (1) to (5), (7) to (18) and (21) to (24) apply in respect of transactions and events that occur after March 28, 2012, except that

(a) an election referred to in subsection 212.3(3) of the Act, as enacted by subsection (3), is deemed to have been filed on a timely basis if the election is filed on or before the filing-due date of the electing CRIC for its taxation year that includes the day on which this Act receives royal assent;

(b) in respect of transactions and events that occur before August 29, 2014, subsection 212.3(4) of the Act, as enacted by subsection (3), is to be read without reference to paragraph (b) of the definition "cross-border class";

(c) a form referred to in paragraph 212.3(7)(d) of the Act, as enacted by subsection (7), is deemed to have been filed by the CRIC referred to in that paragraph on a timely basis if the form is filed on or before the day that is the later of the CRIC's filing-due date for its taxation year that includes the day on which this Act receives royal assent and one year after the day on which this Act receives royal assent;

(d) in respect of transactions and events that occur before August 29, 2014, the reference to "on the filing-due date" in subparagraph 212.3(7)(d)(ii), as enacted by subsection (7), is to be read as a reference to the time that is the later of the filing-due date for the CRIC's taxation year that includes the day on which this Act receives royal assent and one year after the day on which this Act receives royal assent;

(e) in respect of transactions and events that occur before August 16, 2013

(i) subparagraph 212.3(9)(b)(ii) of the Act, as enacted by subsection (10), is to be read without reference to subclause (A)(I) in the description of A,

(ii) subsection 212.3(15) of the Act, as enacted by subsection (12), is to be read without reference to paragraph (b), and

(iii) the portion of subsection 212.3(18) of the Act before paragraph (a), as enacted by subsection (16), is to be read as follows:

(18) Subject to subsections (19) and (20), subsection (2) does not apply to an investment in a subject corporation made by a CRIC if

(f) in respect of transactions and events that occur before August 29, 2014

(i) clause 212.3(18)(a)(i)(B) of the Act, as enacted by subsection (16), is to be read as follows:

(ii) subclause 212.3(18)(a)(ii)(B)(I) of the Act, as enacted by subsection (16), is to be read as follows:

(I) none of the predecessor corporations deal at arm's length (determined without reference to paragraph 251(5)(b)) with another predecessor corporation at any time that is in the period during which the series of transactions or events that includes the making of the investment occurs and that is before the investment time, or

(iii) clause 212.3(18)(c)(i)(B) of the Act, as enacted by subsection (18), is to be read as follows:

(B) the disposing corporation is, at no time that is in the period and that is before the investment time, dealing at arm's length (determined without reference to paragraph 251(5)(b)) with the CRIC,

(iv) subclause 212.3(18)(c)(ii)(B)(I) of the Act, as enacted by subsection (18), is to be read as follows:

(26) If an election is made under subsection 49(3) of the Jobs and Growth Act, 2012, section 212.3 of the Income Tax Act applies in the manner set out in that subsection in respect of transactions and events that occur after March 28, 2012 and before August 14, 2012.

(27) If a taxpayer elects in writing under this subsection and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for its taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, then, in respect of transactions and events that occur before August 16, 2013, subsection 212.3(9) of the Act, as enacted by subsection (10), is to be read as follows:

(9) If, in respect of an investment in a subject corporation made by a CRIC that is described in any of paragraphs (10)(a) to (f), an amount is required by paragraph (2)(b) or subsection (7) to be deducted in computing the paid-up capital in respect of a class of shares of the capital stock of a particular corporation, and the paid-up capital in respect of the class is reduced at a time subsequent to the investment time, then the paid-up capital in respect of the class is to be increased, immediately before the subsequent time, by the least of

(a) the amount by which the paid-up capital of the class is reduced at the subsequent time,

(b) the amount, if any, by which

(i) the total of all amounts each of which is required, before the subsequent time, by paragraph (2)(b) or subsection (7) to be deducted, in respect of the investment, in computing the paid-up capital in respect of the class

exceeds

(ii) the total of all amounts required under this subsection to be added, in respect of the investment, to the paid-up capital of the class before the subsequent time, and

(i) if the paid-up capital of the class is reduced at the subsequent time as part of or because of a distribution of property by the particular corporation and the property is shares of the capital stock of the subject corporation (in this paragraph referred to as the "subject shares") or shares of the capital stock of a foreign affiliate of the particular corporation that were substituted for the subject shares, is equal to the fair market value of the subject shares, or the portion of the fair market value of the substituted shares that may reasonably be considered to relate to the subject shares, as the case may be, at the subsequent time,

(ii) is equal to the fair market value of property that the particular corporation demonstrates it has received directly or indirectly after the investment time and no more than 180 days before the subsequent time

(A) as proceeds from the disposition of the subject shares, or as the portion of the proceeds from the disposition of the substituted shares that may reasonably be considered to relate to the subject shares,

(B) as a dividend or qualifying return of capital, within the meaning assigned by subsection 90(3), in respect of a class of subject shares, or the portion of a dividend or reduction of paid-up capital in respect of a class of substituted shares that may reasonably be considered to relate to the subject shares, or

(I) as a repayment of or as proceeds from the disposition of the debt obligation, or amount owing, in connection with the investment, or

(II) as interest on the debt obligation or amount owing, or

(iii) if neither subparagraph (i) nor (ii) applies, is equal to nil.

(28) Subsection (6) applies in respect of transactions and events that occur after August 28, 2014.

(29) Subsections (19) and (20) apply in respect of transactions and events that occur after August 15, 2013.

66. (1) Paragraph 219.1(3)(b) of the Act is replaced by the following:

(b) an amount is required by paragraph 212.3(2)(b) or subsection 212.3(7) to be deducted in computing the paid-up capital in respect of a class of shares of the capital stock of the corporation because of an investment in a subject corporation made by a CRIC that is described in any of paragraphs 212.3(10)(a) to (f);

(2) Paragraph 219.1(4)(a) of the Act is replaced by the following:

(a) the total of all amounts each of which is an amount by which the paid-up capital of a class of shares of the capital stock of the corporation was required by paragraph 212.3(2)(b) or subsection 212.3(7) to be reduced in respect of an investment in a subject corporation made by the CRIC that is described in any of paragraphs 212.3(10)(a) to (f), and

(3) Paragraph 219.1(4)(b) of the Act is amended by striking out "or" at the end of subparagraph (i), by adding "or" at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) the fair market value of a debt obligation, other than a pertinent loan or indebtedness (as defined in subsection 212.3(11)), of a subject corporation that is owned by the corporation immediately before the emigration time.

(4) Subsections (1) to (3) apply to corporations that cease to be resident in Canada after March 28, 2012.

67. (1) Paragraph 220(4.51)(a) of the Act is replaced by the following:

(a) the total amount of those taxes that would be payable for the year by a trust resident in Canada (other than a graduated rate estate or a qualified disability trust as defined in subsection 122(3)) the taxable income of which for the year is $50,000, and

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

68. (1) Section 227 of the Act is amended by adding the following after subsection (6.1):

Foreign affiliate dumping — late-filed form

(6.2) If, in respect of an investment described in subsection 212.3(10), a corporation is deemed by subparagraph 212.3(7)(d)(ii) to pay a dividend and the corporation subsequently complies with the requirements of subparagraph 212.3(7)(d)(i) in respect of the investment,

(a) subject to paragraph (b), the Minister shall, on written application made on a particular day that is, or is no more than two years after, the day on which the form described in subparagraph 212.3(7)(d)(i) is filed, pay to the corporation an amount equal to the lesser of

(i) the total of all amounts, if any, paid to the Receiver General, on or prior to the particular day, on behalf of a person and in respect of the liability of the person to pay an amount under Part XIII in respect of the dividend, and

(ii) the amount that the person was liable to pay in respect of the dividend under Part XIII;

(b) where the corporation or the person is or is about to become liable to make a payment to Her Majesty in right of Canada, the Minister may apply the amount otherwise payable under paragraph (a) to that liability and notify the corporation, and, if applicable, the person, of that action; and

(c) for the purposes of this Part (other than subparagraph (a)(i)), if the amount described in subparagraph (a)(ii) exceeds the amount described in subparagraph (a)(i), the corporation is deemed to pay that excess to the Receiver General on the day on which the form described in subparagraph 212.3(7)(d)(i) is filed.

(2) Paragraph 227(8.5)(b) of the Act is replaced by the following:

(b) an amount deemed by subparagraph 212.3(7)(d)(ii) or subsection 247(12) to have been paid as a dividend by the corporation.

(3) Subsections (1) and (2) apply in respect of transactions and events that occur after March 28, 2012.

69. (1) Subparagraph 233.4(1)(c)(i) of the Act is replaced by the following:

(i) 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 not resident in Canada or that is a taxpayer all of whose taxable income for the year in which the period ends is exempt from tax under Part I, 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 determining a member's share of the partnership's income for the purpose of this subparagraph, and

(2) Subsection 233.4(2) of the Act is amended by striking out "and" at the end of paragraph (b), by adding "and" at the end of paragraph (c) and by adding the following after paragraph (c):

(d) if the taxpayer is a member of one or more partnerships described in subparagraph (1)(c)(i) of which a non-resident corporation or trust is a foreign affiliate, and the taxpayer does not have any direct or indirect interest (determined without reference to subsection 93.1(1)) in the non-resident corporation or trust other than through its interest in the partnerships, then the non-resident corporation or trust is deemed not to be a foreign affiliate of the taxpayer.

(3) Subsections (1) and (2) apply in respect of taxation years that end after July 11, 2013.

70. (1) Section 241 of the Act is amended by adding the following after subsection (3.2):

Information may be communicated

(3.3) The Minister of Canadian Heritage may communicate or otherwise make available to the public, in any manner that that Minister considers appropriate, the following taxpayer information in respect of a Canadian film or video production certificate (as defined under subsection 125.4(1)) that has been issued or revoked:

(a) the title of the production for which the Canadian film or video production certificate was issued;

(b) the name of the taxpayer to whom the Canadian film or video production certificate was issued;

(d) the names of the individuals in respect of whom and places in respect of which that Minister has allotted points in respect of the production in accordance with regulations made for the purpose of section 125.4;

(e) the total number of points so allotted; and

(f) any revocation of the Canadian film or video production certificate.

(2) Paragraph 241(4)(d) of the Act is amended by striking out "or" at the end of subparagraph (xiv) and by adding the following after subparagraph (xv):

(xvi) to a person employed or engaged in the service of an office or agency, of the Government of Canada or of a province, whose mandate includes the provision of assistance (as defined in subsection 125.4(1) or 125.5(1)) in respect of film or video productions or film or video production services, solely for the purpose of the administration or enforcement of the program under which the assistance is offered, or

(xvii) to an official of the Canadian Radio-television and Telecommunications Commission, solely for the purpose of the administration or enforcement of a regulatory function of that Commission;

71. (1) Subparagraph (f)(vi) of the definition "disposition" in subsection 248(1) of the Act is replaced by the following:

(vi) if the transferor is an amateur athlete trust, a cemetery care trust, an employee trust, a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, a related segregated fund trust (in this paragraph having the meaning assigned by section 138.1), a trust described in paragraph 149(1)(o.4) or a trust governed by an eligible funeral arrangement, an employees profit sharing plan, a registered disability savings plan, a registered education savings plan, a registered supplementary unemployment benefit plan or a TFSA, the transferee is the same type of trust, and

(2) The portion of the definition "international traffic" in subsection 248(1) of the Act before paragraph (a) is replaced by the following:

"international traffic"

« transport international »

"international traffic" means, in respect of a person or partnership carrying on the business of transporting passengers or goods, a voyage made in the course of that business if the principal purpose of the voyage is to transport passengers or goods

(3) Paragraph (a) of the definition "personal trust" in subsection 248(1) of the Act is replaced by the following:

(a) a graduated rate estate, or

(4) The portion of paragraph (b) of the definition "personal trust" in subsection 248(1) of the Act before subparagraph (i) is replaced by the following:

(b) a trust in which no beneficial interest was acquired for consideration payable directly or indirectly to

(5) Subparagraph (e)(i) of the definition "taxable Canadian property" in subsection 248(1) of the Act is amended by striking out "and" at the end of clause (A) and by adding the following after clause (B):

(C) partnerships in which the taxpayer or a person referred to in clause (B) holds a membership interest directly or indirectly through one or more partnerships, and

(6) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

"graduated rate estate"

« succession assujettie à l'imposition à taux progressifs »

"graduated rate estate", of an individual at any time, means the estate that arose on and as a consequence of the individual's death if

(a) that time is no more than 36 months after the death,

(b) the estate is at that time a testamentary trust,

(c) the individual's Social Insurance Number (or if the individual had not, before the death, been assigned a Social Insurance Number, such other information as is acceptable to the Minister) is provided in the estate's return of income under Part I for the taxation year that includes that time and for each of its earlier taxation years that ended after 2015,

(d) the estate designates itself as the graduated rate estate of the individual in its return of income under Part I for its first taxation year that ends after 2015, and

(e) no other estate designates itself as the graduated rate estate of the individual in a return of income under Part I for a taxation year that ends after 2015;

"international shipping"

« transport maritime international »

"international shipping" means the operation of a ship owned or leased by a person or partnership (in this definition referred to as the "operator") that is used, either directly or as part of a pooling arrangement, primarily in transporting passengers or goods in international traffic — determined as if, except where paragraph (c) of the definition "international traffic" in this subsection applies, any port or other place on the Great Lakes or St. Lawrence River is in Canada — including the chartering of the ship, provided that one or more persons related to the operator (if the operator and each such person is a corporation), or persons or partnerships affiliated with the operator (in any other case), has complete possession, control and command of the ship, and any activity incident to or pertaining to the operation of the ship, but does not include

(a) the offshore storing or processing of goods,

(b) fishing,

(d) salvaging,

(e) towing,

(f) tug-boating,

(g) offshore oil and gas activities (other than the transportation of oil and gas), including exploration and drilling activities,

(h) dredging, or

(i) leasing a ship by a lessor to a lessee that has complete possession, control and command of the ship, unless the lessor or a corporation, trust or partnership affiliated with the lessor has an eligible interest (as defined in subsection 250(6.04)) in the lessee;

(7) The portion of subsection 248(25.1) of the Act before paragraph (a) is replaced by the following:

Trust-to-trust transfers

(25.1) If, at any time, a particular trust transfers property to another trust (other than a trust governed by a registered retirement savings plan or by a registered retirement income fund) in circumstances to which paragraph (f) of the definition "disposition" in subsection (1) applies, without affecting the personal liabilities under this Act of the trustees of either trust or the application of subsection 104(5.8),

(8) Section 248 of the Act is amended by adding the following after subsection (28):

Farming or fishing business

(29) For the purposes of subsection 40(1.1) and sections 70, 73 and 110.6, if at any time a person or partnership carries on a farming business and a fishing business, a property used at that time principally in a combination of the activities of the farming business and the fishing business is deemed to be used at that time principally in the course of carrying on a farming or fishing business.

(9) Subsections (1), (3), (4) and (7) apply to the 2016 and subsequent taxation years.

(10) Subsection (2) and the definition "international shipping" in subsection 248(1) of the Act, as enacted by subsection (6), apply to taxation years that begin after July 12, 2013.

(11) Subsection (5) applies in determining after July 11, 2013 whether a property is taxable Canadian property of a taxpayer.

(12) The definition "graduated rate estate" in subsection 248(1) of the Act, as enacted by subsection (6), comes into force on December 31, 2015.

(13) Subsection (8) applies in respect of property disposed of, or transferred, in the 2014 and subsequent taxation years.

72. (1) Paragraphs 249(1)(b) and (c) of the Act are replaced by the following:

(b) in the case of a graduated rate estate, the period for which the accounts of the estate are made up for purposes of assessment under this Act; and

(2) Section 249 of the Act is amended by adding the following after subsection (4):

Trust transition from graduated rate estate

(4.1) For a particular trust that is a testamentary trust,

(a) its taxation year that otherwise includes a particular time is deemed to end immediately before the particular time if

(i) the particular trust is an estate and the particular time is the first time after 2015 at which the estate is not a graduated rate estate, or

(ii) the particular trust is not an estate and the particular time is immediately after 2015; and

(b) if the particular trust exists at the particular time,

(i) a new taxation year of the particular trust is deemed to begin at the particular time, and

(ii) for the purpose of determining the particular trust's fiscal period after the particular time, the particular trust is deemed not to have established a fiscal period before that time.

(3) Subsection 249(5) of the Act is replaced by the following:

Graduated rate estate

(5) The period for which the accounts of a graduated rate estate are made up for the purposes of an assessment under this Act may not exceed 12 months, and no change in the time when that period ends may be made for the purposes of this Act without the concurrence of the Minister.

(4) Subsection 249(6) of the Act is repealed.

(5) Subsections (1) and (3) apply to the 2016 and subsequent taxation years.

(6) Subsection (2) comes into force or is deemed to have come into force on December 31, 2015.

(7) Subsection (4) applies to transactions and events that occur after 2015.

73. (1) The portion of paragraph 249.1(1)(b) of the Act before clause (ii)(B) is replaced by the following:

(b) in the case of

(i) an individual (other than an individual to whom section 149 or 149.1 applies or a trust),

(i.1) a trust (other than a mutual fund trust if the fiscal period is one to which paragraph 132.11(1)(c) applies or a graduated rate estate),

(ii) a partnership of which

(A) an individual (other than an individual to whom section 149 or 149.1 applies or a graduated rate estate),

(2) Subparagraph 249.1(4)(c)(ii) of the Act is replaced by the following:

(ii) who is a member of a partnership no member of which is a graduated rate estate,

(3) Paragraph 249.1(4)(d) of the Act is replaced by the following:

(d) in the case of an individual who is a member of a partnership a member of which is a graduated rate estate, an election in prescribed form to have paragraph (1)(b) not apply is filed with the Minister by the individual on or before the earliest of the filing-due dates of the members of the partnership for a taxation year that includes the first day of the first fiscal period of the business that begins after 1994.

(4) Clause 249.1(6)(b)(i)(B) of the Act is replaced by the following:

(B) who is a member of a partnership no member of which is a graduated rate estate,

(5) Subparagraph 249.1(6)(b)(ii) of the Act is replaced by the following:

(ii) in the case of an individual who is a member of a partnership a member of which is a graduated rate estate, by the individual on or before the earliest of the filing-due dates of the members of the partnership for a taxation year that includes the first day of the first fiscal period of the business that begins after the beginning of the particular year.

(6) Subsections (1) to (5) apply to the 2016 and subsequent taxation years.

74. (1) The portion of subsection 250(6) of the Act before paragraph (c) is replaced by the following:

Residence of international shipping corporation

(6) For the purposes of this Act, a corporation that was incorporated or otherwise formed under the laws of a country other than Canada or of a state, province or other political subdivision of such a country is deemed to be resident in that country throughout a taxation year and not to be resident in Canada at any time in the year, if

(a) the corporation

(i) has international shipping as its principal business in the year, or

(ii) holds eligible interests in one or more eligible entities throughout the year and at no time in the year is the total of the cost amounts to it of all those eligible interests and of all debts owing to it by an eligible entity in which an eligible interest is held by it, by a person related to it or by a partnership affiliated with it less than 50% of the total of the cost amounts to it of all its property;

(b) all or substantially all the corporation's gross revenue for the year consists of any one or more of

(i) gross revenue from international shipping,

(ii) gross revenue from an eligible interest held by it in an eligible entity, and

(iii) interest on a debt owing by an eligible entity in which an eligible interest is held by it, by a person related to it or by a partnership affiliated with it; and

(2) Section 250 of the Act is amended by adding the following after subsection (6):

Partner's gross revenue

(6.01) For the purposes of paragraph (6)(b), an amount of profit allocated from a partnership to a member of the partnership for a taxation year is deemed to be gross revenue of the member from member's interest in the partnership for the year.

Service providers

(6.02) Subsection (6.03) applies to a corporation, trust or partnership (in this subsection and subsection (6.03) referred to as the "relevant entity") for a taxation year if

(a) the relevant entity does not satisfy the condition in subparagraph (6)(a)(i), determined without reference to subsection (6.03);

(b) all or substantially all the gross revenue of the relevant entity for the year consists of any one or more of;

(i) gross revenue from the provision of services to one or more eligible entities, other than services described in any of paragraphs (a) to (h) of the definition "international shipping" in subsection 248(1),

(ii) gross revenue from international shipping,

(iii) gross revenue from an eligible interest held by it in an eligible entity, and

(iv) interest on a debt owing by an eligible entity in which an eligible interest is held by it or a person related to it;

(c) either the relevant entity is a subsidiary wholly-owned corporation (as defined in subsection 87(1.4)) of the eligible entity referred to in paragraph (b) or an eligible interest in each eligible entity referred to in paragraph (b) is held throughout the year by

(i) the relevant entity,

(ii) one or more persons related to the relevant entity (if the relevant entity and each such person is a corporation), or persons or partnerships affiliated with the relevant entity (in any other case), or

(iii) any combination of the relevant entity and persons or partnerships described in subparagraph (ii); and

(d) all or substantially all the shares of the capital stock of, or interests in, the relevant entity are held, directly or indirectly through one or more subsidiary wholly-owned corporations (as defined in subsection 87(1.4)), throughout the year by one or more corporations, trusts or partnerships that would be eligible entities if they did not own shares of, or interests in, the relevant entity.

Service providers

(6.03) If this subsection applies for a taxation year, then for the purposes of subsection (6) and paragraph 81(1)(c),

(a) the relevant entity is deemed to have international shipping as its principal business in the year; and

(b) the gross revenue described in subparagraph (6.02)(b)(i) is deemed to be gross revenue from international shipping.

Definitions

(6.04) The following definitions apply in this subsection and subsections (6) to (6.03).

"eligible entity"

« entité admissible »

"eligible entity", for a taxation year, means

(a) a corporation that is deemed by subsection (6) to be resident in a country other than Canada for the year; or

(b) a partnership or trust, if

(i) it satisfies the conditions in subparagraph (6)(a)(i) or (ii), and

(ii) all or substantially all its gross revenue for the year consists of any combination of amounts described in any of subparagraphs (6)(b)(i) to (iii).

"eligible interest"

« participation admissible »

"eligible interest" means

(a) in respect of a corporation, shares of the capital stock of the corporation that

(i) give the holders of those shares not less than 25% of the votes that could be cast at an annual meeting of the shareholders of the corporation, and

(ii) have a fair market value that is not less than 25% of the fair market value of all the issued and outstanding shares of the capital stock of the corporation;

(b) in respect of a trust, an interest as a beneficiary (as defined in subsection 108(1)) under the trust with a fair market value that is not less than 25% of the fair market value of all the interests of all beneficiaries under the trust; and

(c) in respect of a partnership, an interest as a member of the partnership with a fair market value that is not less than 25% of the fair market value of all the membership interests in the partnership.

Holdings in eligible entities

(6.05) For the purpose of determining whether a person or partnership (in this subsection referred to as the "holder") holds an eligible interest in an eligible entity in subsections (6) to (6.04), the holder is deemed to hold all of the shares or interests, as the case may be, in the eligible entity held by

(a) the holder;

(b) if the holder is a corporation,

(i) each corporation related to the holder, and

(ii) each person, other than a corporation, or partnership that is affiliated with the holder; and

(3) Subsections (1) and (2) apply to taxation years that begin after July 12, 2013.

75. (1) Subparagraphs 256(1.2)(f)(i) to (iii) of the Act are replaced by the following:

(ii) where a beneficiary's share of the accumulating income or capital therefrom depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, those shares are deemed to be owned at that time by the beneficiary,

(iii) in any case where subparagraph (ii) does not apply, a beneficiary is deemed at that time to own the proportion of those shares that the fair market value of the beneficial interest in the trust of the beneficiary is of the fair market value of all beneficial interests in the trust, and

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

76. (1) Paragraph 261(3)(b) of the Act is replaced by the following:

(b) the taxpayer has elected that subsection (5) apply to the taxpayer and has filed that election with the Minister in prescribed form and manner on or before the day that is 60 days after the first day of the particular taxation year;

(2) Subparagraph 261(6)(a)(iii) of the Act is replaced by the following:

(iii) begins on or after the first day of the particular taxpayer's first functional currency year;

(3) Clause 261(6.1)(a)(i)(C) of the Act is replaced by the following:

(4) Clause 261(11)(b)(i)(A) of the Act is replaced by the following:

(A) the total of the taxes payable by the taxpayer under Parts I, VI, VI.1 and XIII.1 for the particular taxation year, as determined in the taxpayer's elected functional currency

(5) The portion of paragraph 261(11)(c) of the Act before subparagraph (i) is replaced by the following:

(c) for the purposes of determining any amount (other than tax) that is payable by the taxpayer under Part I, VI, VI.1 or XIII.1 for the particular taxation year, the taxpayer's tax payable under the Part for the particular taxation year is deemed to be equal to the total of

(6) Paragraph 261(11)(d) of the Act is replaced by the following:

(d) amounts of tax that are payable under this Act (except under Parts I, VI, VI.1 and XIII.1) by the taxpayer for the particular taxation year are to be determined by converting those amounts, as determined in the taxpayer's elected functional currency, to Canadian currency using the relevant spot rate for the day on which those amounts are due;

(7) Section 261 of the Act is amended by adding the following after subsection (17):

Amalgamation — deemed application of subsection (5)

(17.1) Notwithstanding subsection (3), if each predecessor corporation in respect of an amalgamation (within the meaning assigned by subsection 87(1)) has the same elected functional currency for its last taxation year, then, unless a predecessor corporation has filed a notice of revocation under subsection (4) on or before the day that is six months before the end of its last taxation year,

(a) the new corporation formed as a result of the amalgamation is deemed to have made an election under paragraph (3)(b) and to have filed that election on the first day of its first taxation year; and

(b) that elected functional currency is deemed to be the new corporation's functional currency for its first taxation year.

(8) Subsections (1) to (3) apply to taxation years that begin after July 12, 2013.

(9) Subsections (4) to (6) apply to taxation years that begin after December 13, 2007.

(10) Subsection (7) applies in respect of amalgamations that occur after July 12, 2013.

C.R.C., c. 945

Income Tax Regulations

77. (1) Subsection 102(6) of the Income Tax Regulations and the heading before it are replaced by the following:

(6) Despite subsection (1), no amount shall be deducted or withheld in the year by an employer from an amount determined in accordance with subparagraph 110(1)(f)(iii), (iv) or (v) of the Act.

(2) Subsection (1) applies to amounts paid on or after July 12, 2013.

78. Subsection 300(2) of the Regulations is replaced by the following:

(2) For the purposes of this section, if the continuance of the annuity payments under a contract depends in whole or in part on the survival of an individual,

(a) the total of the payments expected to be made under the contract is

(i) in the case of a contract that provides for equal payments and does not provide for a guaranteed period of payment, to be equal to the product obtained by multiplying the total of the annuity payments expected to be received throughout a year under the contract by the complete expectations of life determined

(A) using the table of mortality known as the 1971 Individual Annuity Mortality Table as published in Volume XXIII of the Transactions of the Society of Actuaries, if the annuity rates in respect of the contract were fixed and determined before 2017, and

(I) annuity payments under the contract commenced before 2017, or

(II) on December 31, 2016, the contract would be a prescribed annuity contract if paragraph 304(1)(c) were read without reference to its subparagraph (i) and the contract cannot be terminated other than on the death of an individual on whose life payments under the contract are contingent, and

(B) in any other case, using the table of mortality known as the Annuity 2000 Basic Table as published in the Transactions of Society of Actuaries, 1995–96 Reports, and

(ii) in any other case, to be calculated in accordance with subparagraph (i) with such modifications as the circumstances may require;

(b) the age of the individual on any particular date as of which a calculation is being made is

(i) if the life insured was determined by the insurer that issued the contract to be a substandard life at the time the contract was issued and the Annuity 2000 Basic Table as published in the Transactions of Society of Actuaries, 1995–96 Reports applies to determine the total of the payments expected to be made under the contract, the age that is equal to the total of the age used for the purpose of determining the annuity rate under the policy at the date of issue of the contract and the number determined by subtracting the calendar year in which the contract was issued from the calendar year in which the particular date occurs, and

(ii) in any other case, determined by subtracting the calendar year of the individual's birth from the calendar year in which the particular date occurs; and

(c) if, in the event of the death of the individual before the annual payments total a stated sum, the contract provides that the unpaid balance of the stated sum is to be paid in a lump sum or instalments, then for the purpose of determining the expected term of the contract, the contract is deemed to provide for the continuance of the payments under the contract for a minimum term certain equal to the nearest whole number of years required to complete the payment of the stated sum.

79. (1) Clause 304(1)(c)(iii)(A) of the Regulations is replaced by the following:

(A) is

(I) an individual other than a trust,

(II) a trust described in paragraph 104(4)(a) of the Act (in this paragraph referred to as a "specified trust"),

(III) a trust that is a qualified disability trust (as defined in subsection 122(3) of the Act) for the taxation year in which the annuity is issued, or

(IV) if the annuity is issued before 2016, a trust that is a testamentary trust at the time the annuity is issued,

(2) Subsubclauses 304(1)(c)(iv)(B)(II)2 and 3 of the Regulations are replaced by the following:

2. in the case of a qualified disability trust, for the life of an individual who is an electing beneficiary (as defined in subsection 122(3) of the Act) of the trust for the taxation year in which the annuity is issued,

3. in the case of a trust (other than a qualified disability trust or specified trust) where the annuity is issued before October 24, 2012, for the life of an individual who is entitled to receive income from the trust, and

4. in the case of a trust (other than a qualified disability trust or specified trust) where the annuity is issued after October 23, 2012, for the life of an individual who was entitled when the contract was first held to receive all of the trust's income that is from an amount received by the trust on or before the individual's death as a payment under the annuity,

(3) Subclause 304(1)(c)(iv)(C)(III) of the Regulations is replaced by the following:

(III) if the holder is a qualified disability trust, an individual who is an electing beneficiary of the trust for the taxation year in which the annuity is issued, and

(IV) if the holder is a trust (other than a qualified disability trust or specified trust) and the annuity is issued before 2016, the individual who was the youngest beneficiary under the trust when the contract was first held,

(4) Subclause 304(1)(c)(iv)(E)(IV) of the Regulations is replaced by the following:

(IV) if the holder is a trust, other than a specified trust, and the contract is first held after October 2011, on the earlier of

1. the time at which the trust ceases to be a testamentary trust, and

2. the death of the individual referred to in subclause (B)(II) or (C)(III) or (IV), as the case may be, in respect of the trust, and

(5) Subsections (1) to (4) apply to the 2016 and subsequent taxation years.

80. (1) Paragraph 306(1)(b) of the Regulations is replaced by the following:

(b) assuming that the terms and conditions of the policy do not change from those in effect on the last policy anniversary of the policy at or before that time and, where necessary, making reasonable assumptions about all other factors (including, in the case of a participating life insurance policy within the meaning assigned by subsection 138(12) of the Act, the assumption that the amounts of dividends paid will be as shown in the dividend scale),

(i) if the policy is issued before 2017, it is reasonable to expect that the condition in paragraph (a) will be met on each policy anniversary of the policy on which the policy could remain in force after that time and before the endowment date of the exemption test policies issued in respect of the policy, and

(ii) if the policy is issued after 2016, it is reasonable to expect — without reference to any automatic adjustments under the policy that may be made after that time to ensure that the policy is an exempt policy and, where applicable, making projections using the most recent values that are used to calculate the accumulating fund in respect of the policy or in respect of each exemption test policy issued in respect of a coverage under the policy, as the case may be — that the condition in paragraph (a) will be met on the policy's next policy anniversary;

(2) Subsections 306(3) and (4) of the Regulations are replaced by the following:

(3) For the purposes of this section and section 307,

(a) in the case of a life insurance policy issued before 2017 or at a particular time determined under subsection 148(11) of the Act, a separate exemption test policy is deemed, subject to subsection (7), to be issued in respect of the life insurance policy

(i) on the date of issue of the life insurance policy, and

(ii) on each policy anniversary (that ends before the particular time, if any, determined under subsection 148(11) of the Act in respect of the policy) of the life insurance policy on which

(A) the amount of the benefit on death under the life insurance policy

exceeds

(B) 108% of the amount of the benefit on death under the life insurance policy on the later of the life insurance policy's date of issue and the date of the life insurance policy's preceding policy anniversary, if any; and

(b) in the case of a life insurance policy issued after 2016 (including, for greater certainty, at a particular time determined under subsection 148(11) of the Act in respect of the policy), a separate exemption test policy is deemed, subject to subsection (7), to be issued in respect of each coverage under the life insurance policy

(i) unless the particular time when the policy is issued is determined under subsection 148(11) of the Act and the coverage was issued before the particular time, on the date of

(A) issue of the life insurance policy, if the coverage is issued before the first policy anniversary of the life insurance policy,

(B) issue of the coverage, if the coverage is issued on a policy anniversary of the life insurance policy, or

(C) the life insurance policy's preceding policy anniversary, if the coverage is issued on any date that is after the policy's first policy anniversary and that is not a policy anniversary,

(ii) on each policy anniversary of the life insurance policy (except that, if a particular time when the policy is issued has been determined under subsection 148(11) of the Act, only on a policy anniversary that ends at or after the particular time) on which

(A) the amount of the benefit on death under the coverage on that policy anniversary

exceeds

(B) 108% of the amount of the benefit on death under the coverage, on the later of the coverage's date of issue and the date of the life insurance policy's preceding policy anniversary (or, if there is no preceding policy anniversary, the coverage's date of issue), and

(iii) on each policy anniversary of the life insurance policy except that, if a particular time when the policy is issued has been determined under subsection 148(11) of the Act, only on a policy anniversary that ends at or after the particular time — except to the extent that another exemption test policy has been issued on that date under this subparagraph in respect of a coverage under the life insurance policy — on which

(A) the amount by which the fund value benefit under the life insurance policy on that policy anniversary exceeds the fund value benefit under the life insurance policy on the life insurance policy's preceding policy anniversary (or, if there is no preceding policy anniversary, the date of issue of the policy)

exceeds

(B) the amount by which

(I) 8% of the amount of the benefit on death under the life insurance policy on the life insurance policy's preceding policy anniversary (or, if there is no preceding policy anniversary, the date of issue of the policy)

exceeds

(II) the total of all amounts each of which is, in respect of a coverage under the policy, the lesser of

1. the amount by which the amount of the benefit on death under the coverage on that policy anniversary exceeds the amount of the benefit on death under the coverage on the later of the coverage's date of issue and the date of the life insurance policy's preceding policy anniversary (or, if there is no preceding policy anniversary, the coverage's date of issue), and

2. 8% of the amount of the benefit on death under the coverage on the later of the coverage's date of issue and the date of the life insurance policy's preceding policy anniversary (or, if there is no preceding policy anniversary, the coverage's date of issue).

(4) Subject to subsection (10), for the purpose of determining whether the condition in paragraph (1)(a) is met on a policy anniversary of a life insurance policy, each exemption test policy issued in respect of the life insurance policy, or in respect of a coverage under the life insurance policy, is deemed

(a) to have a benefit on death that is uniform throughout the term of the exemption test policy and that, subject to subsection (5), is equal to

(i) if the date on which the exemption test policy is issued is determined by subparagraph (3)(a)(i), the amount by which the amount on that policy anniversary of the benefit on death under the life insurance policy exceeds the total of all amounts each of which is the amount, if any, on that policy anniversary of the benefit on death under another exemption test policy issued on or before that policy anniversary in respect of the life insurance policy,

(ii) if the date on which the exemption test policy is issued is determined by subparagraph (3)(a)(ii), the amount of the excess referred to in that subparagraph on that date in respect of the life insurance policy,

(iii) if the date on which the exemption test policy is issued is determined by subparagraph (3)(b)(i), the amount determined by the formula

A + B – C

where

A is the amount on that policy anniversary of the benefit on death under the coverage,

B is

(A) if the benefit on death under the life insurance policy includes a fund value benefit on that policy anniversary, the portion of the fund value benefit on that policy anniversary that is equal to the lesser of

(I) the maximum amount of the fund value benefit that could be payable on that policy anniversary if no other coverage were offered under the life insurance policy and the life insurance policy were an exempt policy, and

(II) the amount by which the fund value benefit on that policy anniversary exceeds the total of all amounts each of which is the portion of the fund value benefit allocated to other coverages under the life insurance policy, and

(B) in any other case, nil, and

C is the total of all amounts each of which is the amount, if any, on that policy anniversary of the benefit on death under another exemption test policy issued on or before that policy anniversary in respect of the coverage,

(iv) if the date on which the exemption test policy is issued is determined by subparagraph (3)(b)(ii), the amount of the excess referred to in that subparagraph on that date in respect of the coverage, and

(v) if the date on which the exemption test policy is issued is determined by subparagraph (3)(b)(iii), the lesser of

(A) the amount by which the amount determined under clause (3)(b)(iii)(A) exceeds the amount determined under clause (3)(b)(iii)(B) on that date in respect of the coverage, and

(B) the amount determined in respect of the coverage under subclause (A)(I) of the description of B in subparagraph (iii) on that date; and

(b) to pay the amount of its benefit on death on the earlier of

(i) if the life insurance policy

(A) is issued before 2017, the date of death of the individual whose life is insured under the life insurance policy, or

(B) is issued after 2016,

(I) if two or more lives are jointly insured under the coverage, the date at which the benefit would be payable as a result of the death of any of the lives, and

(II) in any other case, the date of death of the individual whose life is insured under the coverage, and

(ii) the exemption test policy's endowment date.

(5) Subject to subsection (10), for the purpose of determining the amount of a benefit on death under an exemption test policy,

(a) if the exemption test policy is issued in respect of a life insurance policy issued before 2017 and at any time the amount of a benefit on death under the life insurance policy is reduced, a particular amount that is equal to the reduction is to be applied at that time to reduce the amount of the benefit on death under each exemption test policy issued before that time in respect of the life insurance policy (other than the exemption test policy the date of issue of which is determined under subparagraph (3)(a)(i)) in the order in which the dates of their issuance are proximate to that time, by an amount equal to the lesser of

(i) the portion, if any, of the particular amount not applied to reduce the benefit on death under one or more other such exemption test policies, and

(ii) the amount, immediately before that time, of the benefit on death under the relevant exemption test policy; and

(b) if the exemption test policy is issued in respect of a coverage under a life insurance policy issued after 2016 and at any time there is a particular reduction in the amount of a benefit on death under the coverage, or the portion, if any, of the fund value benefit referred to in clause (A) of the description of B in subparagraph (4)(a)(iii) in respect of the coverage, the amount of the benefit on death under each exemption test policy issued before that time in respect of the coverage (other than the exemption test policy the date of issue of which is determined under subparagraph (3)(b)(i)) is reduced at that time by an amount equal to the least of

(i) the particular reduction,

(ii) the amount, immediately before that time, of the benefit on death under the relevant exemption test policy, and

(iii) the portion, if any, of the particular reduction not applied to reduce the benefit on death under one or more other such exemption test policies issued on or after the date of issue of the relevant exemption test policy.

(6) Subsection (7) applies at any time in respect of a life insurance policy if

(a) that time is on its tenth or a later policy anniversary;

(b) the accumulating fund (computed without regard to any amount payable in respect of a policy loan) in respect of the policy at that time exceeds 250% of the accumulating fund (computed without regard to any amount payable in respect of a policy loan) in respect of the policy on its third preceding policy anniversary; and

(i) the accumulating fund (computed without regard to any amount payable in respect of a policy loan) in respect of the policy at that time exceeds the total of all amounts each of which is

(A) if the policy is issued before 2017, 3/20 of the accumulating fund, at that time, in respect of an exemption test policy issued in respect of the policy, and

(B) if the policy is issued after 2016, 3/8 of the accumulating fund, at that time, in respect of an exemption test policy issued in respect of a coverage under the policy, and

(ii) subsection (7) did not apply on any of the policy's six preceding policy anniversaries.

(7) If this subsection applies at any time in respect of a life insurance policy, each exemption test policy issued before that time in respect of the life insurance policy is at and after that time deemed to be issued (except for purposes of this subsection, paragraph (4)(a) and subsection (5))

(a) on the later of

(i) the date of the third preceding policy anniversary described in paragraph (6)(b) in respect of the policy, and

(ii) the date on which it was deemed by subsection (3) to be issued (determined immediately before that time); and

(b) not at any other time.

(8) A life insurance policy that would, in the absence of this subsection, cease (other than by reason of its conversion into an annuity contract) on a policy anniversary of the policy to be an exempt policy is deemed to be an exempt policy on that policy anniversary if

(a) had that policy anniversary occurred on the particular day that is 60 days after that policy anniversary, the policy would have been an exempt policy on the particular day; or

(b) the person whose life is insured under the policy dies on that policy anniversary or within 60 days after that policy anniversary.

(9) A life insurance policy (other than an annuity contract or deposit administration fund policy) issued before December 2, 1982 is deemed to be an exempt policy at all times from the date of its issue until the first time after December 1, 1982 at which

(a) a prescribed premium is paid by a taxpayer in respect of an interest, last acquired before December 2, 1982, in the policy; or

(b) an interest in the policy is acquired by a taxpayer from the person who held the interest continuously since December 1, 1982.

(10) If a particular time when a life insurance policy is issued has been determined under subsection 148(11) of the Act, in applying subsections (4) and (5) at or after the particular time to an exemption test policy issued before the particular time in respect of the policy,

(a) subparagraphs (4)(a)(iii) and (iv), and not subparagraph (4)(a)(i) or (ii), apply to the exemption test policy; and

(b) for greater certainty, paragraph (5)(b), and not paragraph (5)(a), applies to the exemption test policy.

81. (1) The portion of subsection 307(1) of the Regulations before paragraph (b) is replaced by the following:

307. (1) For the purposes of this Part and sections 12.2 and 148 of the Act, "accumulating fund", at any particular time, means

(a) in respect of a taxpayer's interest in an annuity contract (other than a contract issued by a life insurer), the amount that is the greater of

(i) the amount, if any, by which the cash surrender value of the taxpayer's interest at that time exceeds the amount payable, if any, in respect of a loan outstanding at that time made under the contract in respect of the interest, and

(ii) the amount, if any, by which

(A) the present value at that time of future payments to be made out of the contract in respect of the taxpayer's interest

exceeds

(B) the total of

(I) the present value at that time of future premiums to be paid under the contract in respect of the taxpayer's interest, and

(II) the amount payable, if any, in respect of a loan outstanding at that time, made under the contract in respect of the taxpayer's interest;

(2) The portion of subsection 307(1) of the Regulations after subparagraph (b)(ii) is replaced by the following:

is multiplied by

(iii) the taxpayer's proportionate interest in the policy; and

(i) if the particular time is during the exemption test policy's pay period, the amount determined by the formula

A × B/C

where

A is the amount that would be determined under subparagraph (ii) in respect of the exemption test policy

(A) if the exemption test policy's pay period is determined by subparagraph (b)(i) or (ii) of the definition "pay period" in section 310, on the first policy anniversary that is on or after the day on which the individual whose life is insured would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy, and

(B) in any other case, on the exemption test policy's policy anniversary represented by the adjectival form of the number of years in its pay period,

B is the number of years since the exemption test policy was issued, and

C is the number of years in the exemption test policy's pay period,

(ii) if the particular time is after the exemption test policy's pay period and before its endowment date, the amount that is the present value at the particular time of the future benefit on death under the exemption test policy, and

(iii) if the particular time is on or after the exemption test policy's endowment date and the relevant life insurance policy is issued after 2016, the amount that is the benefit on death under the exemption test policy at the particular time.

(3) The portion of subsection 307(2) of the Regulations before subparagraph (a)(i) is replaced by the following:

(2) For the purposes of subsection (1), when computing the accumulating fund in respect of

(a) an interest described in paragraph (1)(a), the amounts determined under clauses (1)(a)(ii)(A) and (B) are to be computed using,

(4) Subparagraphs 307(2)(a)(i) and (ii) of the French version of the Regulations are replaced by the following:

(i) dans les cas où le taux d'intérêt relatif à une période qu'a utilisé l'émetteur au moment de l'émission du contrat pour en déterminer les modalités est inférieur à tout autre taux utilisé à cette fin pour une période subséquente, être calculées selon le taux simple qui, s'il avait été appliqué à chaque période, aurait donné les mêmes modalités,

(ii) dans les autres cas, être calculées selon les taux qu'a utilisés l'émetteur au moment de l'émission du contrat pour en déterminer les modalités;

(5) Paragraph 307(2)(b) of the Regulations is replaced by the following:

(b) an interest described in paragraph (1)(b) in respect of a life insurance policy issued before 2017 or an annuity contract, if an interest rate used for a period by a life insurer in computing the relevant amounts in paragraph 1403(1)(a) or (b) is determined under paragraph 1403(1)(c), (d) or (e), as the case may be, and that rate is less than an interest rate so determined for a subsequent period, the single rate that could, if it applied for each period, have been used in determining the premiums for the policy is to be used;

(6) The portion of paragraph 307(2)(c) of the Regulations before subparagraph (i) is replaced by the following:

(7) The portion of subsection 307(2) of the Regulations after clause (c)(ii)(A) is replaced by the following:

(B) where, in respect of the life insurance policy, the particular period over which the amount determined under clause (B) of the description of A in subparagraph 1401(1)(c)(ii) does not extend to the exemption test policy's endowment date, the weighted arithmetic mean of the interest rates used to determine the amount is to be used for the period that is after the particular period and before that date,

(iii) notwithstanding subparagraphs (i) and (ii), no rate of interest used for the purpose of determining the accumulating fund in respect of an exemption test policy issued in respect of the life insurance policy is to be less than

(A) if the life insurance policy is issued after April 1985, 4% per annum, and

(B) if the life insurance policy is issued before May 1985, 3% per annum, and

(iv) each amount of a benefit on death is to be determined net of any portion in respect of the benefit on death of the exemption test policy related to a segregated fund; and

(d) an exemption test policy issued in respect of a coverage under a life insurance policy issued after 2016,

(i) the rates of interest and mortality used and the age of the individual whose life is insured under the coverage are to be the same as those used in computing amounts under paragraph 1401(1)(c) in respect of the policy, and

(ii) each amount of a benefit on death is to be determined net of any portion in respect of the benefit on death of the exemption test policy related to a segregated fund.

(8) Subsections 307(3) and (4) of the Regulations are repealed.

(9) Subsection 307(5) of the Regulations is amended by adding "and" at the end of paragraph (a), by striking out "and" at the end of paragraph (b) and by repealing paragraph (c).

82. Subsections 308(1) and (1.1) of the Regulations are replaced by the following:

308. (1) For the purposes of subparagraph 20(1)(e.2)(ii) and paragraph (a) of the description of L in the definition "adjusted cost basis" in subsection 148(9) of the Act, the net cost of pure insurance for a year in respect of a taxpayer's interest in a life insurance policy is

(a) if, determined at the end of the year, the policy was issued before 2017, the amount determined by the formula

A × (B – C)

where

A is the probability, computed on the basis of the rates of mortality under the 1969–75 mortality tables of the Canadian Institute of Actuaries published in Volume XVI of the Proceedings of the Canadian Institute of Actuaries, or on the basis described in subsection (1.1), that an individual who has the same relevant characteristics as the individual whose life is insured will die in the year,

B is the benefit on death in respect of the interest at the end of the year, and

C is the accumulating fund (determined without regard to any amount payable in respect of the policy loan) in respect of the interest at the end of the year or the interest's cash surrender value at the end of the year, depending on the method regularly followed by the life insurer in computing amounts under this subsection; and

(b) if, determined at the end of the year, the policy was issued after 2016, the total of all amounts each of which is an amount determined in respect of a coverage in respect of the interest by the formula

A × (B – C)

where

A is the probability, computed on the basis of the rates of mortality determined in accordance with paragraph 1401(4)(b), or on the basis described in subsection (1.2), that an individual whose life is insured under the coverage will die in the year,

B is the benefit on death under the coverage in respect of the interest at the end of the year, and

C is the amount determined by the formula

D + E

where

D is the portion, in respect of the coverage in respect of the interest, of the amount that would be the present value, determined for the purposes of section 307, on the last policy anniversary that is on or before the last day of the year, of the fund value of the coverage if the fund value of the coverage were equal to the fund value of the coverage at the end of the year, and

E is the portion, in respect of the coverage in respect of the interest, of the amount that would be determined, on that policy anniversary, for paragraph (a) of the description of C in the definition "net premium reserve" in subsection 1401(3) in respect of the coverage, if the benefit on death under the coverage, and the fund value of the coverage, on that policy anniversary were equal to the benefit on death under the coverage and the fund value of the coverage, respectively, at the end of the year.

(1.1) If premiums for a life insurance policy do not depend directly on smoking or sex classification, the probability referred to in paragraph (1)(a) may be determined using rates of mortality otherwise determined, provided that for each age for the policy, the expected value of the aggregate net cost of pure insurance, calculated using those rates of mortality, is equal to the expected value of the aggregate net cost of pure insurance, calculated using the rates of mortality under the 1969–75 mortality tables of the Canadian Institute of Actuaries published in Volume XVI of the Proceedings of the Canadian Institute of Actuaries.

(1.2) If premiums or costs of insurance charges for a coverage under a life insurance policy do not depend directly on smoking or sex classification, the probability referred to in paragraph (1)(b) may be determined using rates of mortality otherwise determined, provided that for each age for the coverage, the expected value of the aggregate net cost of pure insurance, calculated using those rates of mortality, is equal to the expected value of the aggregate net cost of pure insurance, calculated using the rates of mortality that would be calculated under paragraph (1)(b) in respect of the coverage using the mortality tables described in paragraph 1401(4)(b).

83. (1) The definition "benefit on death" in section 310 of the Regulations is replaced by the following:

"benefit on death"

« prestation de décès »

"benefit on death" has the same meaning as in subsection 1401(3).

(2) Section 310 of the Regulations is amended by adding the following in alphabetical order:

"adjusted purchase price"

« prix d'achat rajusté »

"adjusted purchase price", of a taxpayer's interest in an annuity contract at any time, means, subject to subsections 300(3) and (4), the amount that would be determined at that time in respect of the interest under the definition "adjusted cost basis" in subsection 148(9) of the Act if the formula in that definition were read without reference to K.

"coverage"

« protection »

"coverage", under a life insurance policy,

(a) for the purposes of section 306, means all life insurance (other than a fund value benefit) under the policy in respect of a specific life, or two or more specific lives jointly insured; and

(b) for the purposes of sections 307 and 308, has the same meaning as in subsection 1401(3).

"endowment date"

« date d'échéance »

"endowment date", of an exemption test policy, means

(a) where the exemption test policy is issued in respect of a life insurance policy issued before 2017, the later of

(i) 10 years after the date of issue of the life insurance policy, and

(ii) the first policy anniversary that is on or after the day on which the individual whose life is insured under the life insurance policy would, if the individual survived, attain the age of 85 years, as defined under the terms of the policy; and

(b) where the exemption test policy is issued in respect of a coverage under a life insurance policy issued after 2016,

(i) if two or more lives are jointly insured under the coverage, the date that would be determined under subparagraph (ii) using the equivalent single age, determined on the coverage's date of issue and in accordance with accepted actuarial principles and practices, that reasonably approximates the mortality rates of those lives, and

(ii) in any other case, the later of

(A) the earlier of

(I) 15 years after the date of issue of the exemption test policy, and

(II) the first policy anniversary that is on or after the day on which the individual whose life is insured under the coverage would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy, and

(B) the first policy anniversary that is on or after the day on which the individual whose life is insured under the coverage would, if the individual survived, attain the age of 90 years, as defined under the terms of the policy.

"fund value benefit"

« bénéfice au titre de la valeur du fonds »

"fund value benefit" has the same meaning as in subsection 1401(3).

"fund value of a coverage"

« valeur du fonds d'une protection »

"fund value of a coverage" has the same meaning as in subsection 1401(3).

"pay period"

« période de paiement »

"pay period", of an exemption test policy, means

(a) where the exemption test policy is issued in respect of a life insurance policy issued before 2017,

(i) if on the date of issue of the exemption test policy, the individual whose life is insured has attained the age of 66 years, as defined under the terms of the policy, but not the age of 75 years, as defined under the terms of the policy, the period that starts on that date and that ends after the number of years obtained when the number of years by which the age of the individual exceeds 65 years, as defined under the terms of the policy, is subtracted from 20,

(ii) if on the date of issue of the exemption test policy, the individual whose life is insured has attained the age of 75 years, as defined under the terms of the policy, the 10-year period that starts on that date, and

(iii) in any other case, the 20-year period that starts on the date of issue of the exemption test policy; and

(b) where the exemption test policy is issued in respect of a coverage under a life insurance policy issued after 2016,

(i) subject to subparagraph (ii), if the individual whose life is insured under the coverage would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy, within the eight-year period that starts on the date of issue of the exemption test policy, the period that starts on that date and that ends on the first policy anniversary that is on or after the day on which the individual would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy,

(ii) if two or more lives are jointly insured under the coverage and an individual of an age equal to the equivalent single age on the date of the issue of the coverage would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy, within the eight-year period that starts on the date of issue of the exemption test policy, the period that starts on that date and that ends on the first policy anniversary that is on or after the day on which the individual would, if the individual survived, attain the age of 105 years, as defined under the terms of the policy, and

(iii) in any other case, the eight-year period that starts on the date of issue of the exemption test policy.

84. (1) Subsection 1104(13) of the Regulations is amended by adding the following in alphabetical order:

"producer gas"

« gaz de gazéification »

"producer gas" means fuel the composition of which, excluding its water content, is all or substantially all non-condensable gases that is generated primarily from eligible waste fuel using a thermo-chemical conversion process and that is not generated using any fuels other than eligible waste fuel or fossil fuel.

(2) Paragraph 1104(17)(a) of the Regulations is replaced by the following:

(a) the property is included in Class 43.1 because of its subparagraph (c)(i) or is described in any of subparagraphs (d)(viii), (ix), (xi), (xiii), (xiv) and (xvi) of Class 43.1 and paragraph (a) of Class 43.2; and

(3) Subsection (1) is deemed to have come into force on February 11, 2014.

(4) Subsection (2) applies to property acquired after February 10, 2014.

85. (1) The portion of subsection 1401(1) of the Regulations before subparagraph (c.1)(i) is replaced by the following:

1401. (1) For the purposes of applying section 307 and subsection 211.1(3) of the Act at any time, the amounts determined under this subsection are,

(a) in respect of a deposit administration fund policy, the total of the insurer's liabilities under the policy calculated in the manner that

(i) if the insurer is required to file an annual report with its relevant authority for a period that includes that time, is required to be used in preparing that report, and

(ii) in any other case, is required to be used in preparing its annual financial statements for the period that includes that time;

(b) in respect of a group term life insurance policy that provides insurance for a period not exceeding 12 months, the unearned portion of the premium paid by the policyholder for the policy at that time determined by apportioning the premium paid by the policyholder equally over the period to which that premium pertains;

(i) the amount determined by the formula

A – B

where

A is

(A) if the policy is issued after 2016 and is not an annuity contract, the cash surrender value of the policy at that time determined without reference to surrender charges, and

(B) in any other case, the cash surrender value of the policy at that time, and

B is the total of all amounts each of which is an amount payable at that time in respect of a policy loan in respect of the policy, and

(ii) the amount determined by the formula

A – (B + C)

where

A is

(A) if the policy is issued after 2016 and is not an annuity contract, the net premium reserve in respect of the policy at that time, and

(B) in any other case, the present value at that time of the future benefits provided by the policy,

B is

(A) if the policy is issued after 2016 and is not an annuity contract, nil, and

(B) in any other case, the present value at that time of any future modified net premiums in respect of the policy, and

C is the total of all amounts each of which is an amount payable at that time in respect of a policy loan in respect of the policy;

(c.1) in respect of a group life insurance policy, the amount (other than an amount in respect of which a deduction may be claimed by the insurer under subsection 140(1) of the Act because of subparagraph 138(3)(a)(v) of the Act in computing the insurer's income for its taxation year that includes that time) in respect of a dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy that will be used by the insurer to reduce or eliminate a future adverse claims experience under the policy or that will be paid or unconditionally credited to the policyholder by the insurer or applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the insurer, which is the least of

(2) Subparagraphs 1401(1)(c.1)(ii) and (iii) of the Regulations are replaced by the following:

(ii) 25% of the amount of the premium payable under the terms of the policy for the 12-month period ending at that time, and

(iii) the amount of the reserve or liability in respect of such a dividend, refund of premiums or refund of premium deposits that

(A) if the insurer is required to file an annual report with its relevant authority for a period that includes that time, is used in preparing that report, and

(B) in any other case, is used in preparing its annual financial statements for the period that includes that time; and

(3) Subparagraph 1401(1)(d)(iv) of the Regulations is replaced by the following:

(iv) an additional risk in respect of the conversion of a term policy or the conversion of the benefits under a group policy into another policy after that time,

(4) Subparagraph 1401(1)(d)(ix) of the Regulations is replaced by the following:

(ix) a benefit, risk or guarantee in respect of which an amount has been claimed under any other paragraph of this subsection by the insurer as a deduction in computing its income for its taxation year that includes that time,

(5) Subparagraph 1401(1)(d)(xi) of the Regulations is replaced by the following:

(xi) the reserve in respect of the benefit, risk or guarantee that

(A) if the insurer is required to file an annual report with its relevant authority for a period that includes that time, is used in preparing that report, and

(B) in any other case, is used in preparing its annual financial statements for the period that includes that time.

(6) Section 1401 of the Regulations is amended by adding the following after subsection (2):

(3) The following definitions apply in this section.

"benefit on death"

« prestation de décès »

"benefit on death" includes the amount of an endowment benefit but does not include

(a) any additional amount payable as a result of accidental death; and

(b) where interest, if any, on an amount held on deposit by an insurer is included in computing the income of a policyholder for a taxation year, the amount held on deposit and interest on the deposit.

"coverage"

« protection »

"coverage", under a life insurance policy, means each life insurance (other than a fund value benefit) under the policy in respect of a specific life, or two or more specific lives jointly insured, and in respect of which a particular schedule of premium or cost of insurance rates applies. For greater certainty, each such insurance is a separate coverage.

"fund value benefit"

« bénéfice au titre de la valeur du fonds »

"fund value benefit", under a life insurance policy at any time, means a benefit under the policy the amount of which is the amount by which the fund value of the policy at that time exceeds the total of all amounts each of which is a fund value of a coverage under the policy at that time.

"fund value of a coverage"

« valeur du fonds d'une protection »

"fund value of a coverage", under a life insurance policy at any time, means the total of all amounts each of which is the amount at that time of an investment account in respect of the policy that reduces the net amount at risk as determined for the purpose of calculating the cost of insurance charges for the coverage during the period over which those charges are incurred or would be incurred if they were to apply until the termination of the coverage.

"fund value of a policy"

« valeur du fonds d'une police »

"fund value of a policy", at any time, means the total of all amounts each of which is the amount at that time of an investment account in respect of the policy and, for greater certainty,

(a) includes, where interest, if any, on an amount held on deposit by an insurer is not included in computing the income of a policyholder for a taxation year, the amount held on deposit and interest on the deposit; and

(b) excludes, where interest, if any, on an amount held on deposit by an insurer is included in computing the income of a policyholder for a taxation year, the amount held on deposit and interest on the deposit.

"future benefits to be provided"

« prestations futures à verser »

"future benefits to be provided", in respect of a coverage under a life insurance policy at any time, means

(a) if there is a fund value of the coverage at that time, each benefit on death that would be payable under the coverage at a particular time after that time determined as if the amount of the benefit were equal to the amount by which the benefit on death at that time exceeds the fund value of the coverage at that time; and

(b) in any other case, each benefit on death payable under the coverage at a particular time after that time.

"future net premiums or cost of insurance charges"

« frais d'assurance ou primes nets futurs »

"future net premiums or cost of insurance charges", in respect of a coverage at any time, means

(a) for the purposes of paragraph (a) of the description of C in the definition "net premium reserve" in this subsection, each amount determined by the formula

A × B/C

where

A is future premiums or cost of insurance charges in respect of the coverage at that time,

B is the present value at the date of issue of the coverage of future benefits to be provided in respect of the coverage on that date, and

C is the present value at the date of issue of the coverage of future premiums or cost of insurance charges in respect of the coverage on that date; and

(b) for the purposes of paragraph (b) of the description of C in the definition "net premium reserve" in this subsection,

(i) each amount determined by the formula

A × (B + C)/(D + E)

where

A is future premiums or cost of insurance charges in respect of the coverage at that time,

B is the present value at the date of issue of the coverage of future benefits to be provided in respect of the coverage on the particular day that is one year after that date and, if the coverage has a fund value on that date, determined as if the fund value of the coverage were nil on that date,

C is the present value at the date of issue of the coverage of future benefits to be provided in respect of the coverage on the particular day that is two years after that date and, if the coverage has a fund value on that date, determined as if the fund value of the coverage were nil on that date,

D is the present value at the date of issue of the coverage of future premiums or cost of insurance charges in respect of the coverage on the particular day that is one year after that date and, if the coverage has a fund value on that date, determined as if the fund value of the coverage were nil on that date, and

E is the present value at the date of issue of the coverage of future premiums or cost of insurance charges in respect of the coverage on the particular day that is two years after that date and, if the coverage has a fund value on that date, determined as if the fund value of the coverage were nil on that date, and

(ii) notwithstanding subparagraph (i), in respect of the second year of the coverage, the amount determined by the formula

(A + B)/2

where

A is the amount determined under subparagraph (i), and

B is the amount of a one-year term insurance premium or cost of insurance charge that would be payable in respect of the coverage if the benefit on death were equal to the amount by which the benefit on death at the end of the first year of the coverage exceeds the fund value of the coverage, if any, at the end of the first year of the coverage.

"future premiums or cost of insurance charges"

« frais d'assurance ou primes futurs »

"future premiums or cost of insurance charges", in respect of a coverage at any time, means

(a) if there is a fund value of the coverage at that time, each cost of insurance charge in respect of the coverage that would be incurred at a particular time after that time determined as if the net amount at risk under the coverage after that time were equal to the amount by which the benefit on death under the coverage at that time exceeds the fund value of the coverage at that time; and

(b) in any other case, each premium in respect of the coverage that is fixed and determined on the date of issue of the coverage that will become payable, or each cost of insurance charge in respect of the coverage that will be incurred, as the case may be, at a particular time after that time.

"interpolation time"

« moment d'interpolation »

"interpolation time", of a coverage, means the time that is the earlier of

(a) the time that is eight years after the date of issue of the coverage; and

(b) the first time at which no premiums are payable or cost of insurance charges are incurred, as the case may be, in respect of the coverage.

"net premium reserve"

« provision pour primes nettes »

"net premium reserve", in respect of a life insurance policy at any time, means the amount determined by the formula

A + B + C

where

A is the total of all amounts, if any, each of which is the present value at that time of the fund value of a coverage under the policy at that time;

B is the amount, if any, of the fund value benefit under the policy at that time; and

C is

(a) in applying paragraph (1)(c) for the purposes of section 307, the total of all amounts each of which is, in respect of a coverage under the policy,

(i) if that time is at or after the interpolation time of the coverage, the amount determined by the formula

D – E

where

D is the present value at that time of future benefits to be provided in respect of the coverage at that time, and

E is the present value at that time of future net premiums or cost of insurance charges in respect of the coverage at that time, and

(ii) if that time is before the interpolation time of the coverage, the amount determined by the formula

F/G × (H – I)

where

F is the number of years that the coverage has been in effect as of that time,

G is the number of years that the coverage would have been in effect if that time were the interpolation time,

H is the present value at the interpolation time of future benefits to be provided in respect of the coverage at the interpolation time and, if the coverage has a fund value at that time, determined as if the amount of the benefit on death under the coverage at the interpolation time were equal to the amount by which the benefit on death at that time exceeds the fund value of the coverage at that time, and

I is the present value at the interpolation time of future net premiums or cost of insurance charges in respect of the coverage at the interpolation time and, if the coverage has a fund value at that time, determined as if the net amount at risk under the coverage after the interpolation time were equal to the amount by which the benefit on death at that time exceeds the fund value of the coverage at that time, and

(b) in applying paragraph (1)(c) for the purposes of subsection 211.1(3) of the Act, the total of all amounts each of which is, in respect of a coverage under the policy, the amount determined by the formula

J – K

where

J is the present value at that time of future benefits to be provided in respect of the coverage at that time, and

K is the present value at that time of future net premiums or cost of insurance charges in respect of the coverage at that time.

"policy anniversary"

« anniversaire de la police »

"policy anniversary" has the same meaning as in section 310.

(4) In applying paragraph (1)(c) for the purposes of section 307 in respect of a life insurance policy (other than an annuity contract) issued after 2016, the following rules apply:

(a) in computing present values

(i) an annual interest rate of 3.5% is to be used, and

(ii) mortality rates are to be used;

(b) in determining the mortality rates that apply to a life insured under a coverage under the policy,

(i) if a single life is insured under the coverage,

(A) the age that is to be used is the age of the life insured at the time at which the coverage was issued, or that which is attained on the birthday of the life insured nearest to the time at which the coverage was issued, depending on the method used by the insurer that issued the policy in determining the premium or cost of insurance rates in respect of the life insured,

(B) if the life insured was determined by the insurer that issued the policy to be a standard life at the time the coverage was issued, the Proposed CIA Mortality Tables, 1986–1992 included in the May 17, 1995 Canadian Institute of Actuaries Memorandum, extended to include select mortality rates from age 81 to age 90 developed using the methodology used by the Canadian Institute of Actuaries to derive select mortality rates from age 71 to age 80, applicable for an individual who has the same relevant characteristics as the life insured, are to be used, and

(C) if the life insured was determined by the insurer that issued the policy to be a substandard life at the time the coverage was issued, the mortality rates that apply are to be equal to, depending on the method used by the insurer for the purpose of determining the premium or cost of insurance rates in respect of the coverage,

(I) the lesser of one and the product of the rating attributed to the life by the insurer and the mortality rates that would be determined under clause (B) if the life were not a substandard life, or

(II) the mortality rates that would have been determined under clause (B) had the life insured been a standard life and the age of the life insured been the age used by the life insurer for the purpose of determining the premium or cost of insurance rates in respect of the coverage, and

(ii) if two or more lives are jointly insured under the coverage, the mortality rates to be used are those determined by applying the methodology used by the insurer that issued the policy to estimate the mortality rates of the lives jointly insured for the purpose of determining the premium or cost of insurance rates in respect of the coverage to the Proposed CIA Mortality Tables, 1986–1992 included in the May 17, 1995 Canadian Institute of Actuaries Memorandum, extended to include select mortality rates from age 81 to age 90 developed using the methodology used by the Canadian Institute of Actuaries to derive select mortality rates from age 71 to age 80; and

(c) in determining the net premium reserve in respect of the policy, the present value of future net premiums or cost of insurance charges is to be calculated as if a premium or cost of insurance charge payable or incurred on a policy anniversary were payable or incurred, as the case may be, one day after the policy anniversary.

(5) In applying paragraph (1)(c) for the purposes of subsection 211.1(3) of the Act in respect of a life insurance policy (other than an annuity contract)

(a) if the policy is issued after 2016,

(i) the rates of interest, mortality and lapses described in subsection 1403(1) are to be used in computing present values, determined as if

(A) subsections 1403(2) to (8) did not apply, and

(B) the reference to "premiums for the policy" in paragraph 1403(1)(e) were read as a reference to "premiums or cost of insurance charges in respect of a coverage under the policy",

(ii) subparagraph (1)(c)(i) is to be read without reference to "determined without reference to surrender charges", and

(iii) in determining the net premium reserve in respect of the policy, the present value of future net premiums or cost of insurance charges is to be calculated as if a premium or cost of insurance charge payable or incurred on a policy anniversary were payable or incurred, as the case may be, one day after the policy anniversary; and

(b) if the policy is issued before 2017 and at a particular time after 2016 life insurance — in respect of a life, or two or more lives jointly insured, and in respect of which a particular schedule of premium or cost of insurance rates applies — is converted (other than only because of a change in premium or cost of insurance rates) into another type of life insurance under the policy or is added to the policy, then that insurance is deemed to be a separate life insurance policy issued at the particular time unless

(i) the insurance is part of a rider deemed by subsection 211(2) of the Act to be a separate life insurance policy issued at the particular time, or

(ii) in the case of insurance added to the policy,

(A) the insurance is medically underwritten

(I) to obtain a reduction in the premium or cost of insurance rates under the policy, or

(II) before 2017, or

(B) the insurance is paid for with policy dividends or is reinstated.

86. The portion of subsection 1403(1) of the Regulations before paragraph (a) is replaced by the following:

1403. (1) Subject to subsections (2) and (3), for the purposes of applying paragraph 1401(1)(c) in respect of a life insurance policy issued before 2017 or an annuity contract, a modified net premium and an amount determined by paragraph 1401(1)(c) are to be computed

87. (1) Subparagraph (a)(iii) of the definition "earnings" in subsection 5907(1) of the Regulations is replaced by the following:

(iii) in any other case, the amount that would be the income from the active business for the year under Part I of the Act if the business were carried on in Canada, the affiliate were resident in Canada and the Act were read without reference to subsections 18(4), 80(3) to (12), (15) and (17) and 80.01(5) to (11) and sections 80.02 to 80.04,

(2) Paragraph (b) of the definition "earnings" in subsection 5907(1) of the Regulations is replaced by the following:

(b) in any other case, the total of all amounts each of which is an amount of income that would be required under paragraph 95(2)(a) or subsection 95(2.44) of the Act to be included in computing the affiliate's income or loss from an active business for the year if that income were computed taking into account the rules in subsection (2.03); (gains)

(3) The portion of paragraph (a) of the definition "exempt earnings" in subsection 5907(1) of the Regulations after subparagraph (iii) is repealed.

(4) Clause (d)(ii)(A) of the definition "exempt earnings" in subsection 5907(1) of the Regulations is replaced by the following:

(A) income that is required to be included in computing the particular affiliate's income or loss from an active business for the year under subparagraph 95(2)(a)(i) of the Act and that would

(I) if earned by the other foreign affiliate referred to in subclause 95(2)(a)(i)(A)(I) or (IV) of the Act, be included in computing the exempt earnings or exempt loss of the other foreign affiliate for a taxation year,

(II) if earned by the life insurance corporation referred to in subclause 95(2)(a)(i)(A)(II) of the Act and based on the assumptions contained in subclause 95(2)(a)(i)(B)(II) of the Act, be included in computing the exempt earnings or exempt loss of the life insurance corporation for a taxation year, or

(III) if earned from the active business activities carried on by the particular affiliate, or the partnership referred to in subclause 95(2)(a)(i)(A)(III) of the Act, be included in computing the exempt earnings or exempt loss of the particular affiliate for a taxation year,

(5) Subclause (d)(ii)(E)(I) of the definition "exempt earnings" in subsection 5907(1) of the Regulations is replaced by the following:

(I) the second and third affiliates referred to in subclause 95(2)(a)(ii)(D)(IV) of the Act are each resident in a designated treaty country throughout their relevant taxation years (within the meaning assigned by that subclause), and

(6) Subparagraph (d)(ii) of the definition "exempt earnings" in subsection 5907(1) of the Regulations is amended by striking out "or" at the end of clause (H) and by adding the following after clause (I):

(J) an amount that is required to be included in computing the particular affiliate's income from an active business for the year under subsection 95(2.44) of the Act if the amount is in respect of income that would, in the absence of paragraph 95(2)(a.3) of the Act, be income from an active business carried on by the particular affiliate in a designated treaty country, or

(7) Subparagraph (vi) of the description of A in the definition "exempt surplus" in subsection 5907(1) of the Regulations is replaced by the following:

(vi) an amount added to the exempt surplus of the subject affiliate or deducted from its exempt deficit in the period and before the particular time under subsection (1.092), (1.1) or (1.2),

(8) Subparagraph (vi) of the description of B in the definition "exempt surplus" in subsection 5907(1) of the Regulations is replaced by the following:

(vi) an amount, in the period and before the particular time, deducted from the exempt surplus of the subject affiliate or added to its exempt deficit under subsection (1.092), (1.1) or (1.2); (surplus exonéré)

(9) Subparagraph (v) of the description of A in the definition "hybrid surplus" in subsection 5907(1) of the Regulations is replaced by the following:

(v) an amount added to the hybrid surplus of the subject affiliate or deducted from its hybrid deficit in the period and before the particular time under subsection (1.092), (1.1) or (1.2), and

(10) Subparagraph (vii) of the description of B in the definition "hybrid surplus" in subsection 5907(1) of the Regulations is replaced by the following:

(vii) an amount deducted from the hybrid surplus of the subject affiliate or added to its hybrid deficit in the period and before the particular time under subsection (1.092), (1.1) or (1.2); (surplus hybride)

(11) Subparagraph (iv) of the description of A in the definition "hybrid underlying tax" in subsection 5907(1) of the Regulations is replaced by the following:

(iv) the amount by which the subject affiliate's hybrid underlying tax is required to be increased in the period and before the particular time under subsection (1.092), (1.1) or (1.2),

(12) Subparagraph (iv) of the description of B in the definition "hybrid underlying tax" in subsection 5907(1) of the Regulations is replaced by the following:

(iv) the amount by which the subject affiliate's hybrid underlying tax is required to be decreased in the period and before the particular time under subsection (1.092), (1.1) or (1.2); (montant intrinsèque d'impôt hybride)

(13) Subparagraph (iv) of the description of A in the definition "taxable surplus" in subsection 5907(1) of the Regulations is replaced by the following:

(iv) an amount added to the taxable surplus of the subject affiliate or deducted from its taxable deficit in the period and before the particular time under subsection (1.092), (1.1) or (1.2),

(14) Subparagraph (vi) of the description of B in the definition "taxable surplus" in subsection 5907(1) of the Regulations is replaced by the following:

(vi) an amount, in the period and before the particular time, deducted from the taxable surplus of the subject affiliate or added to its taxable deficit under subsection (1.092), (1.1) or (1.2); (surplus imposable)

(15) Subparagraph (v) of the description of A in the definition "underlying foreign tax" in subsection 5907(1) of the Regulations is replaced by the following:

(v) the amount by which the subject affiliate's underlying foreign tax is required to be increased in the period and before the particular time under subsection (1.092), (1.1) or (1.2),

(16) Subparagraph (iv) of the description of B in the definition "underlying foreign tax" in subsection 5907(1) of the Regulations is replaced by the following:

(iv) the amount by which the subject affiliate's underlying foreign tax is required to be decreased in the period and before the particular time under subsection (1.092), (1.1) or (1.2); (montant intrinsèque d'impôt étranger)

(17) The portion of subsection 5907(1.03) of the Regulations before paragraph (a) is replaced by the following:

(1.03) For the purposes of the description of A in the definition "underlying foreign tax" in subsection (1), income or profits tax paid in respect of the taxable earnings of a particular foreign affiliate of a particular corporation or in respect of a dividend received by the particular affiliate from another foreign affiliate of the particular corporation, and amounts by which the underlying foreign tax of the particular affiliate or any other foreign affiliate of the particular corporation is required under any of subsections (1.092), (1.1) and (1.2) to be increased, is not to include any income or profits tax paid, or amounts by which the underlying foreign tax would otherwise be so required to be increased, as the case may be, in respect of the foreign accrual property income of the particular affiliate for a taxation year of the particular affiliate if, at any time in the year, a specified owner in respect of the particular corporation is considered,

(18) Section 5907 of the Regulations is amended by adding the following after subsection (1.09):

(1.091) Subsection (1.092) applies in respect of income or profits tax paid by, or refunded to, a foreign affiliate (in this subsection and subsection (1.092) referred to as the "shareholder affiliate") of a taxpayer for a taxation year of the shareholder affiliate in respect of its income or profits, or loss, as the case may be, and the income or profits, or loss, as the case may be, of another foreign affiliate (in this subsection and subsection (1.092) referred to as the "transparent affiliate") of the taxpayer if

(a) the shareholder affiliate has an equity percentage in the transparent affiliate;

(b) the income or profits tax is paid to, or refunded by, a government of a country other than Canada; and

(c) under the income tax laws of the country referred to in paragraph (b), the shareholder affiliate, and not the transparent affiliate, is liable for that tax payable to, or entitled to that refund from, a government of that country for that year (otherwise than solely because the shareholder affiliate is part of a group of corporations that determines its liabilities for income or profits tax payable to the government of that country on a consolidated or combined basis).

(1.092) If this subsection applies in respect of income or profits tax paid by, or refunded to, a shareholder affiliate for a taxation year

(a) in respect of the shareholder affiliate,

(i) any such income or profits tax paid by the shareholder affiliate for the year is deemed not to have been paid and any such refund to the shareholder affiliate of income or profits tax otherwise payable by it for the year is deemed not to have been made,

(ii) any such income or profits tax that would have been payable by the shareholder affiliate for the year if the shareholder affiliate had no other taxation year and had not been liable for income or profits tax in respect of income or profits of the transparent affiliate is deemed to have been paid for the year,

(iii) to the extent that

(A) any such income or profits tax that would otherwise have been payable by the shareholder affiliate for the year on behalf of the shareholder affiliate and the transparent affiliate is reduced because of any loss of the shareholder affiliate for the year or any previous taxation year, the amount of such reduction is deemed to have been received by the shareholder affiliate as a refund for the year of the loss of income or profits tax in respect of the loss, and

(B) the shareholder affiliate receives, in respect of a loss of the shareholder affiliate for the year or a subsequent taxation year, a refund of income or profits tax otherwise payable for the year by the shareholder affiliate on behalf of the shareholder affiliate and the transparent affiliate, the amount of such refund is deemed to have been received by the shareholder affiliate as a refund for the year of the loss of income or profits tax in respect of the loss,

(iv) any such income or profits tax that would have been payable by the transparent affiliate for the year if the transparent affiliate had no other taxation year, had no income or profits other than those that are included in computing the income or profits of the shareholder affiliate under the income tax laws referred to in paragraph (1.091)(c) and had been liable, and no other person had been liable, for income or profits tax in respect of income or profits of the transparent affiliate is, at the end of the year,

(A) to the extent that such income or profits tax would otherwise have reduced the net earnings included in the exempt earnings of the transparent affiliate, to be deducted from the exempt surplus or added to the exempt deficit, as the case may be, of the shareholder affiliate,

(B) to the extent that such income or profits tax would otherwise have reduced the hybrid surplus or increased the hybrid deficit of the transparent affiliate,

(I) to be deducted from the hybrid surplus or added to the hybrid deficit, as the case may be, of the shareholder affiliate, and

(II) to be added to the hybrid underlying tax of the shareholder affiliate, and

(C) to the extent that such income or profits tax would otherwise have reduced the net earnings included in the taxable earnings of the transparent affiliate,

(I) to be deducted from the taxable surplus or added to the taxable deficit, as the case may be, of the shareholder affiliate, and

(II) to be added to the underlying foreign tax of the shareholder affiliate, and

(v) to the extent that the income or profits tax that would otherwise have been payable by the shareholder affiliate for the year on behalf of the shareholder affiliate and the transparent affiliate is reduced because of a loss of the transparent affiliate for the year or a previous taxation year, or to the extent that the shareholder affiliate receives, in respect of a loss of the transparent affiliate for the year or a subsequent taxation year, a refund of income or profits tax otherwise payable for the year by the shareholder affiliate on behalf of the shareholder affiliate and the transparent affiliate, the amount of such reduction or refund, as the case may be, is, at the end of the year of the loss,

(A) to the extent that such loss reduces the exempt surplus or increases the exempt deficit of the transparent affiliate, to be added to the exempt surplus or deducted from the exempt deficit, as the case may be, of the shareholder affiliate,

(B) to the extent that such loss reduces the hybrid surplus or increases the hybrid deficit of the transparent affiliate,

(I) to be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the shareholder affiliate, and

(II) to be deducted from the hybrid underlying tax of the shareholder affiliate, and

(C) to the extent that such loss reduces the taxable surplus or increases the taxable deficit of the transparent affiliate,

(I) to be added to the taxable surplus or deducted from the taxable deficit, as the case may be, of the shareholder affiliate, and

(II) to be deducted from the underlying foreign tax of the shareholder affiliate;

(b) where, because of the shareholder affiliate being responsible for paying, or claiming a refund of, income or profits tax for the year on behalf of the shareholder affiliate and the transparent affiliate,

(i) an amount is paid to the shareholder affiliate by the transparent affiliate in respect of the income or profits tax that would have been payable by the transparent affiliate for the year had it been liable, and no other person had been liable, for income or profits tax in respect of income or profits of the transparent affiliate,

(A) in respect of the transparent affiliate, the amount so paid is deemed to be a payment of such income or profits tax for the year, and

(B) in respect of the shareholder affiliate,

(I) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the exempt surplus or deducted from the exempt deficit of the transparent affiliate is, at the end of the year, to be added to the exempt surplus or deducted from the exempt deficit, as the case may be, of the shareholder affiliate,

(II) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the hybrid surplus or deducted from the hybrid deficit of the transparent affiliate is, at the end of the year, to be added to the hybrid surplus or deducted from the hybrid deficit, as the case may be, of the shareholder affiliate and deducted from the hybrid underlying tax of the shareholder affiliate, and

(III) such portion of the amount so paid as may reasonably be regarded as relating to an amount included in the taxable surplus or deducted from the taxable deficit of the transparent affiliate is, at the end of the year, to be added to the taxable surplus or deducted from the taxable deficit, as the case may be, of the shareholder affiliate and be deducted from the underlying foreign tax of the shareholder affiliate, or

(ii) an amount is paid by the shareholder affiliate to the transparent affiliate in respect of a reduction or refund, because of a loss or a tax credit of the transparent affiliate for a taxation year, of the income or profits tax that would otherwise have been payable by the shareholder affiliate for the year on behalf of the shareholder affiliate and the transparent affiliate,

(A) in respect of the shareholder affiliate,

(I) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the exempt surplus or included in the exempt deficit of the transparent affiliate is, at the end of the year to which the loss or the tax credit relates, to be deducted from the exempt surplus or added to the exempt deficit, as the case may be, of the shareholder affiliate,

(II) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the hybrid surplus or included in the hybrid deficit of the transparent affiliate is, at the end of the year of the loss, to be deducted from the hybrid surplus or added to the hybrid deficit, as the case may be, of the shareholder affiliate and added to the hybrid underlying tax of the shareholder affiliate, and

(III) the portion of the amount so paid that can reasonably be regarded as relating to an amount deducted from the taxable surplus or included in the taxable deficit of the transparent affiliate is, at the end of the year to which the loss or the tax credit relates, to be deducted from the taxable surplus or added to the taxable deficit, as the case may be, of the shareholder affiliate and be added to the underlying foreign tax of the shareholder affiliate, and

(B) in respect of the transparent affiliate, the amount is deemed to be a refund to the transparent affiliate, for the year to which the loss or the tax credit relates, of income or profits tax in respect of the loss or the tax credit; and

(c) for the purposes of paragraph (b), any amount paid by a particular transparent affiliate in respect of the shareholder affiliate to another transparent affiliate in respect of the shareholder affiliate in respect of any income or profits tax that would have been payable by the particular transparent affiliate for the year had it been liable, and no other person had been liable, for income or profits tax in respect of income or profits of the transparent affiliate is deemed to have been paid in respect of such tax by the particular transparent affiliate to the shareholder affiliate and to have been paid in respect of such tax by the shareholder affiliate to the other transparent affiliate.

(19) The portion of subsection 5907(1.1) of the Regulations before paragraph (a) is replaced by the following:

(1.1) For the purposes of this Part, if, under, the income tax laws of a country other than Canada, a group (in this subsection referred to as the "consolidated group") of two or more foreign affiliates of a corporation resident in Canada determine their liabilities for income or profits tax payable to the government of that country for a taxation year on a consolidated or combined basis and one of the affiliates (in this subsection referred to as the "primary affiliate") is responsible for paying, or claiming a refund of, such tax on behalf of itself and the other affiliates (in this subsection referred to as the "secondary affiliates") that are members of the consolidated group, the following rules apply:

(20) Section 5907 of the Regulations is amended by adding the following after subsection (1.1):

(1.11) For the purposes of subsection (1.1), a non-resident corporation is deemed to be, at any time, a foreign affiliate of a particular corporation resident in Canada if at that time the non-resident corporation is a foreign affiliate of another corporation that is resident in Canada and is related (otherwise than because of a right referred to in paragraph 251(5)(b) of the Act) to the particular corporation.

(21) Section 5907 of the Regulations is amended by adding the following after subsection (1.11):

(1.12) Subsection (1.13) applies in respect of a particular foreign affiliate of a corporation resident in Canada that is a secondary affiliate (within the meaning assigned by subsection (1.1)) and in respect of a foreign affiliate of the corporation that is the primary affiliate (within the meaning assigned by subsection (1.1)) in respect of the particular affiliate if

(a) the particular affiliate has an equity percentage in another foreign affiliate (in this subsection and subsection (1.13) referred to as the "transparent affiliate");

(b) under the income tax laws of the country referred to in subsection (1.1), if the particular affiliate were not a member of a consolidated group, the particular affiliate, and not the transparent affiliate, would be liable for any tax payable to, or entitled to any refund from, a government of that country for that year in respect of the income or profits, or loss, as the case may be, for the year of the transparent affiliate; and

(c) the primary affiliate pays income or profits tax, or receives a refund, in respect of the income or profits, or loss, as the case may be, for the year of the transparent affiliate.

(1.13) If this subsection applies, then in respect of the particular foreign affiliate and the primary affiliate referred to in subsection (1.12)

(a) for the purposes of applying subparagraphs (1.1)(a)(iv) and (1.1)(b)(i), where any income or profits tax that would otherwise be payable by the particular affiliate for the year, if the particular affiliate had no other taxation year and were not a member of the consolidated group referred to in subsection (1.1), is increased because of income or profits of the transparent affiliate referred to in paragraph (1.12)(a),

(i) to the extent that the income or profits increases the net earnings included in the exempt earnings of the transparent affiliate,

(A) the amount of any such increase is deemed to have been included in the exempt surplus, or deducted from the exempt deficit, as the case may be, of the particular affiliate, and

(B) any such income or profits tax that would have been payable by the particular affiliate in respect of the income or profits is deemed to be income or profits tax that would otherwise have reduced the net earnings that are included in the exempt earnings of the particular affiliate,

(ii) to the extent that the income or profits increases the hybrid surplus or reduces the hybrid deficit of the transparent affiliate,

(A) the amount of the increase or reduction is deemed to have been included in the hybrid surplus, or deducted from the hybrid deficit, as the case may be, of the particular affiliate, and

(B) any such income or profits tax that would have been payable by the particular affiliate in respect of the income or profits is deemed to be income or profits tax that would otherwise have reduced the hybrid surplus or increased the hybrid deficit, as the case may be, of the particular affiliate, and

(iii) to the extent that the income or profits increases the net earnings included in the taxable earnings of the transparent affiliate,

(A) the amount of any such increase is deemed to have been included in the taxable surplus, or deducted from the taxable deficit, as the case may be, of the particular affiliate, and

(b) for the purpose of applying subparagraphs (1.1)(a)(v) and (1.1)(b)(ii), to the extent that the income or profits tax that would otherwise have been payable by the primary affiliate for the year on behalf of the consolidated group is reduced because of a loss, for the year or a previous taxation year, of the transparent affiliate referred to in paragraph (1.12)(a), or to the extent that the primary affiliate receives, in respect of a loss of the transparent affiliate for the year or a subsequent taxation year, a refund of income or profits tax otherwise payable for the year by the primary affiliate on behalf of the consolidated group,

(i) such loss is deemed to be a loss of the particular affiliate,

(ii) to the extent that such loss reduces the exempt surplus or increases the exempt deficit of the transparent affiliate, such loss is deemed to reduce the exempt surplus or increase the exempt deficit, as the case may be, of the particular affiliate,

(iii) to the extent that such loss reduces the hybrid surplus or increases the hybrid deficit of the transparent affiliate, such loss is deemed to reduce the hybrid surplus or increase the hybrid deficit, as the case may be, of the particular affiliate, and

(iv) to the extent that such loss reduces the taxable surplus or increases the taxable deficit of the transparent affiliate, such loss is deemed to reduce the taxable surplus or increase the taxable deficit, as the case may be, of the particular affiliate.

(22) Section 5907 of the Regulations is amended by adding the following after subsection (1.2):

(1.21) Subsection (1.22) applies if

(a) a foreign affiliate of the taxpayer (in this subsection and subsection (1.22) referred to as the "shareholder affiliate") has an equity percentage in another foreign affiliate (in this subsection and subsection (1.22) referred to as the "transparent affiliate"); and

(b) under the income tax laws of the country in which the shareholder affiliate is resident, the shareholder affiliate, and not the transparent affiliate, is liable for any tax payable to, or entitled to any refund from, a government of that country for that year in respect of the income or profits, or loss, as the case may be, for the year of the transparent affiliate.

(1.22) If this subsection applies, for the purpose of applying subsection (1.2), any loss of the transparent affiliate, to the extent that the loss is deducted in computing the income, profits or loss of the shareholder affiliate under an income tax law referred to in paragraph (1.21)(b),

(a) is deemed to be a loss of the shareholder affiliate; and

(b) is deemed to

(i) reduce the exempt surplus, or increase the exempt deficit, as the case may be, of the shareholder affiliate to the extent that it reduces the exempt surplus or increases the exempt deficit of the transparent affiliate,

(ii) reduce the hybrid surplus or increase the hybrid deficit, as the case may be, of the shareholder affiliate to the extent that it reduces the hybrid surplus or increases the hybrid deficit of the transparent affiliate, and

(iii) reduce the taxable surplus or increase the taxable deficit, as the case may be, of the shareholder affiliate to the extent that it reduces the taxable surplus or increases the taxable deficit of the transparent affiliate.

(23) Paragraphs 5907(1.3)(a) and (b) of the Regulations are replaced by the following:

(a) if under the income tax laws of the country in which the particular affiliate or a shareholder affiliate of the particular affiliate, as the case may be, referred to in that paragraph is resident, the particular affiliate, or shareholder affiliate, and one or more other corporations, each of which is resident in that country, determine their liabilities for income or profits tax payable to the government of that country for a taxation year on a consolidated or combined basis, then any amount paid by the particular affiliate, or shareholder affiliate, to any of those other corporations to the extent that the amount paid may reasonably be regarded as being in respect of income or profits tax that would otherwise have been payable by the particular affiliate, or shareholder affiliate, in respect of a particular amount that is included under subsection 91(1) of the Act in computing the taxpayer's income for a taxation year of the taxpayer in respect of the particular affiliate, if the tax liability of the particular affiliate, or shareholder affiliate, and those other corporations had not been determined on a consolidated or combined basis, is prescribed to be foreign accrual tax applicable to the particular amount; and

(b) if, under the income tax laws of the country in which the particular affiliate or a shareholder affiliate of the particular affiliate, as the case may be, referred to in that paragraph is resident, the particular affiliate, or shareholder affiliate, deducts, in computing its income or profits subject to tax in that country for a taxation year, an amount in respect of a loss of another corporation (referred to in this paragraph and paragraph (1.6)(a) as the "loss transferor") resident in that country (referred to in this paragraph and paragraph (1.6)(a) as the "transferred loss"), then any amount paid by the particular affiliate, or shareholder affiliate, to the loss transferor to the extent that the amount paid may reasonably be regarded as being in respect of income or profits tax that would otherwise have been payable by the particular affiliate, or shareholder affiliate, in respect of a particular amount that is included under subsection 91(1) of the Act in computing the taxpayer's income for a taxation year of the taxpayer in respect of the particular affiliate, if the tax liability of the particular affiliate, or shareholder affiliate, had been determined without deducting the transferred loss, is prescribed to be foreign accrual tax applicable to the particular amount.

(24) Subsections 5907(1.5) and (1.6) of the Regulations are replaced by the following:

(1.5) If subsection (1.4) applied to reduce an amount that would, in the absence of subsection (1.4), be prescribed by subsection (1.3) to be foreign accrual tax applicable to an amount (referred to in this subsection as the "FAPI amount") included under subsection 91(1) of the Act in computing the taxpayer's income for a taxation year (referred to in subsection (1.6) as the "FAPI year") of the taxpayer in respect of the particular affiliate referred to in paragraph (1.3)(a) or (b), then an amount equal to that reduction is, for the purposes of paragraph (b) of the definition "foreign accrual tax" in subsection 95(1) of the Act, prescribed to be foreign accrual tax applicable to the FAPI amount in the taxpayer's taxation year that includes the last day of the designated taxation year, if any, of the particular affiliate or the shareholder affiliate referred to in paragraph (1.3)(a) or (b), as the case may be.

(1.6) For the purposes of subsection (1.5), the designated taxation year of the particular affiliate or the shareholder affiliate, as the case may be, is a particular taxation year of the particular affiliate, or the shareholder affiliate, if

(a) in the particular year, or in the taxation year of the particular affiliate or shareholder affiliate (referred to in this paragraph as the "PATY") ending in the FAPI year and one or more taxation years of the particular affiliate (or shareholder affiliate) each of which follows the PATY and the latest of which is the particular year, all losses of the particular affiliate (or shareholder affiliate) and the other corporations referred to in paragraph (1.3)(a) — or of the particular affiliate, the loss transferor and each corporation that would have been permitted to deduct the transferred loss against its income under the income tax laws referred to in paragraph (1.3)(b) if the transferred loss had not been deducted by the particular affiliate and if the corporation had taxable income for its taxation years ending in the FAPI year in excess of the transferred loss — for their taxation years ending in the FAPI year would, on the assumption that the particular affiliate (or shareholder affiliate) and each of those other corporations had no foreign accrual property income for any taxation year, reasonably be considered to have been fully deducted (under the tax laws referred to in paragraph (1.3)(a) or (b)) against income (as determined under those tax laws) of the particular affiliate (or shareholder affiliate) or those other corporations;

(b) the taxpayer demonstrates that no other losses of the particular affiliate (or shareholder affiliate) or those other corporations for any taxation year were, or could reasonably have been, deducted under those tax laws against that income; and

(c) the last day of the particular year occurs in one of the five taxation years of the taxpayer that immediately follow the FAPI year.

(25) Subsection (1) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after July 12, 2013. However,

(a) if a taxpayer elects in writing under this paragraph in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, subsection (1) applies in respect of taxation years of all foreign affiliates of the taxpayer that begin either after 1994 or after December 20, 2002, depending on which is specified by the taxpayer in the election;

(b) if a taxpayer elects in writing under this paragraph in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, the amounts of exempt surplus, exempt deficit, taxable surplus, taxable deficit, underlying foreign tax and, if applicable, hybrid surplus, hybrid deficit and hybrid underlying tax, of all foreign affiliates of the taxpayer for applicable taxation years of the affiliates in which those amounts are relevant are to be determined as if subsection (1) applied in respect of taxation years of all foreign affiliates of the taxpayer that end after 1975; and

(i) if the taxpayer has not elected under paragraph (a), taxation years of all foreign affiliates of the taxpayer that begin after July 12, 2013, and

(ii) if the taxpayer has elected under paragraph (a), taxation years of all foreign affiliates of the taxpayer that begin either after 1994 or after December 20, 2002, depending on which is specified in the election made under that paragraph.

(26) Subsections (2) and (6) apply in respect of taxation years of a foreign affiliate of a taxpayer that begin after October 2012.

(27) Subsection (3) applies in respect of dispositions after 2012.

(28) Subsection (4) applies in respect of taxation years of a foreign affiliate of a taxpayer that begin after July 12, 2013. However, if the taxpayer elects under subsection 25(31),

(a) subsection (4) applies in respect of taxation years of all foreign affiliates of the taxpayer that end after 2007; and

(b) clause (d)(ii)(A) of the definition "exempt earnings" in subsection 5907(1) of the Regulations, as enacted by subsection (4), is to be read as follows in respect of taxation years of foreign affiliates of the taxpayer that end after 2007 and begin before 2009:

(A) income that is required to be included in computing the particular affiliate's income or loss from an active business for the year under subparagraph 95(2)(a)(i) of the Act and that would

(I) if earned by the non-resident corporation referred to in sub-subclause 95(2)(a)(i)(A)(I)1 of the Act and based on the assumptions contained in subclause 95(2)(a)(i)(B)(II) of the Act, be included in computing the exempt earnings or exempt loss of the non-resident corporation for a taxation year,

(II) if earned by the other foreign affiliate referred to in sub-subclause 95(2)(a)(i)(A)(I)2 or subclause 95(2)(a)(i)(A)(IV) of the Act, be included in computing the exempt earnings or exempt loss of the other foreign affiliate for a taxation year,

(III) if earned by the life insurance corporation referred to in subclause 95(2)(a)(i)(A)(II) of the Act and based on the assumptions contained in subclause 95(2)(a)(i)(B)(II) of the Act, be included in computing the exempt earnings or exempt loss of the life insurance corporation for a taxation year, or

(IV) if earned from the active business activities carried on by the particular affiliate, or the partnership referred to in subclause 95(2)(a)(i)(A)(III) of the Act, be included in computing the exempt earnings or exempt loss of the particular affiliate for a taxation year,

(29) Subsection (5) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after July 12, 2013.

(30) Subsections (7), (8), (13) to (16), (18) and (21) to (24) apply in respect of taxation years of a foreign affiliate of a taxpayer that end after 2010. However, if a taxpayer elects in writing under this subsection in respect of all its foreign affiliates and files the election with the Minister of National Revenue on or before the day that is the later of the taxpayer's filing-due date for the taxpayer's taxation year that includes the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, those subsections apply in respect of taxation years of all foreign affiliates of the taxpayer that end on or after July 12, 2013.

(31) Subsections (9) to (12) are deemed to have come into force on August 20, 2011. However, if a taxpayer elects under subsection (30), subsections (9) to (12) are instead deemed to have come into force, in respect of the taxpayer, on July 12, 2013.

(32) Subsection (17) applies to income or profits tax paid, amounts referred to in subsections 5907(1.1) and (1.2) of the Regulations and amounts referred to in subsection 5907(1.092) of the Regulations, as enacted by subsection (18), in respect of the income of a foreign affiliate of a corporation for taxation years of the foreign affiliate that end in taxation years of the corporation that end after March 4, 2010. However,

(a) if the taxpayer does not elect under subsection (30), for taxation years of the corporation that end before October 25, 2012, the portion of subsection 5907(1.03) of the Regulations before paragraph (a), as enacted by subsection (17), is to be read as follows:

(1.03) For the purposes of the description of A in the definition "underlying foreign tax" in subsection (1), income or profits tax paid in respect of the taxable earnings of a particular foreign affiliate of a corporation or in respect of a dividend received by the particular affiliate from another foreign affiliate of the corporation, and amounts by which the underlying foreign tax of the particular affiliate, or any other foreign affiliate of the corporation, is required under any of subsections (1.092), (1.1) and (1.2) to be increased, is not to include any income or profits tax paid, or amounts by which the underlying foreign tax would otherwise be so required to be increased, as the case may be, in respect of the foreign accrual property income of the particular affiliate that is earned during a period in which

(b) if the taxpayer elects under subsection (30), subsection (17) instead applies to income or profits tax paid, amounts referred to in subsections 5907(1.1) and (1.2) of the Regulations and amounts referred to in subsection 5907(1.092) of the Regulations, as enacted by subsection (18), in respect of the income of a foreign affiliate of a corporation for taxation years of the foreign affiliate that end in taxation years of the corporation that end on or after July 12, 2013.

(33) Subsections (19) and (20) apply in respect of taxation years of a foreign affiliate of a taxpayer that end after 2003.

88. (1) Clause (c)(i)(A) of Class 43.1 of Schedule II to the Regulations is replaced by the following:

(A) is used by the taxpayer, or by a lessee of the taxpayer, to generate electrical energy, or both electrical and heat energy, using only fuel that is eligible waste fuel, fossil fuel, producer gas, spent pulping liquor or any combination of those fuels, and

(2) Subparagraph (d)(ix) of Class 43.1 of Schedule II to the Regulations is replaced by the following:

(ix) equipment used by the taxpayer, or by a lessee of the taxpayer, for the sole purpose of generating heat energy, primarily from the consumption of eligible waste fuel, producer gas or a combination of those fuels and not using any fuel other than eligible waste fuel, fossil fuel or producer gas, including such equipment that consists of fuel handling equipment used to upgrade the combustible portion of the fuel and control, feedwater and condensate systems, and other ancillary equipment, but not including equipment used for the purpose of producing heat energy to operate electrical generating equipment, buildings or other structures, heat rejection equipment (such as condensers and cooling water systems), fuel storage facilities, other fuel handling equipment and property otherwise included in Class 10 or 17,

(3) Subparagraph (d)(xiv) of Class 43.1 of Schedule II to the Regulations is replaced by the following:

(xiv) property that is used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of generating electricity using kinetic energy of flowing water or wave or tidal energy (otherwise than by diverting or impeding the natural flow of the water or by using physical barriers or dam-like structures), including support structures, control, conditioning and battery storage equipment, submerged cables and transmission equipment, but not including buildings, distribution equipment, auxiliary electricity generating equipment, property otherwise included in Class 10 and property that would be included in Class 17 if that class were read without reference to its subparagraph (a.1)(i),

(4) Paragraph (d) of Class 43.1 of Schedule II to the Regulations is amended by replacing "and" with "or" at the end of subparagraph (xv) and by adding the following after that subparagraph:

(xvi) equipment used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of generating producer gas (other than producer gas that is to be converted into liquid biofuels or chemicals), including related piping (including fans and compressors), air separation equipment, storage equipment, equipment used for drying or shredding eligible waste fuel, ash-handling equipment, equipment used to upgrade the producer gas into biomethane and equipment used to remove non-combustibles and contaminants from the producer gas, but not including buildings or other structures, heat rejection equipment (such as condensers and cooling water systems), equipment used to convert producer gas into liquid biofuels or chemicals and property otherwise included in Class 10 or 17, and

(5) Subsections (1) to (4) apply to property acquired after February 10, 2014 that has not been used or acquired for use before February 11, 2014.

89. Any assessment of a taxpayer's tax, interest and penalties payable under the Act for any taxation year that ends before the day on which this Act receives royal assent that would, in the absence of this section, be precluded because of the time references in subsection 152(4) of the Act is to be made to the extent necessary to take into account sections 5, 21 and 22, subsections 25(1), (3), (5), (12), (14) to (16), (22), (23), (26) to (28), (30) to (32), (34) and (37) to (42), sections 76 and 77 and subsections 87(1), (3) to (5), (7) to (25) and (27) to (33).

90. (1) The definition "qualifying child" in subsection 9400(1) of the Regulations is replaced by the following:

"qualifying child" has the meaning assigned by subsection 122.8(1) of the Act. ("enfant admissible")

(2) The portion of subsection 9400(2) of the Regulations before paragraph (a) is replaced by the following:

(2) For the purpose of the definition "eligible fitness expense" in subsection 122.8(1) of the Act, a prescribed program of physical activity is

(3) The portion of subsection 9400(3) of the Regulations before paragraph (a) is replaced by the following:

(3) For the purpose of the definition "eligible fitness expense" in subsection 122.8(1) of the Act, a prescribed program of physical activity is that portion of a program, which program does not meet the requirements of paragraph (2)(c) and is not part of a school's curriculum, of a duration of eight or more consecutive weeks, offered to children by an organization in circumstances where a participant in the program may select amongst a variety of activities

(4) Subsection 9400(4) of the Regulations is replaced by the following:

(4) For the purpose of the definition "eligible fitness expense" in subsection 122.8(1) of the Act, a prescribed program of physical activity is that portion of a membership in an organization, which membership does not meet the requirements of paragraph (2)(d) and is not part of a school's curriculum, of a duration of eight or more consecutive weeks that is the percentage of all the activities offered to children by the organization that are activities that include a significant amount of physical activity.

(5) Subsections (1) to (4) apply to the 2015 and subsequent taxation years.

Part 2
Amendments to the Excise Tax Act (GST/HST Measures) and a Related Text

R.S., c. E-15

Excise Tax Act

2012, c. 31, s. 74(2)

91. (1) The definition "participating employer" in subsection 123(1) of the Excise Tax Act is replaced by the following:

"participating employer"

« employeur participant »

"participating employer" of a pension plan means

(a) in the case of a registered pension plan, an employer that has made, or is required to make, contributions to the pension plan in respect of the employer's employees or former employees, or payments under the pension plan to the employer's employees or former employees, and includes an employer prescribed for the purposes of the definition "participating employer" in subsection 147.1(1) of the Income Tax Act, and

(b) in the case of a pooled registered pension plan, an employer that

(i) has made, or is required to make, contributions to the pension plan in respect of all or a class of its employees or former employees, or

(ii) has remitted, or is required to remit, to the PRPP administrator of the pension plan contributions made by members (as defined in subsection 147.5(1) of the Income Tax Act) of the pension plan under a contract with the PRPP administrator in respect of all or a class of its employees;

1990, c. 45, s. 12(1)

(2) The definition "substantial renovation" in subsection 123(1) of the Act is replaced by the following:

"substantial renovation"

« rénovations majeures »

"substantial renovation" of a residential complex means the renovation or alteration of the whole or that part of a building, as described in whichever of paragraphs (a) to (e) of the definition "residential complex" is applicable to the residential complex, in which one or more residential units are located to such an extent that all or substantially all of the building or part, as the case may be, other than the foundation, external walls, interior supporting walls, floors, roof, staircases and, in the case of that part of a building described in paragraph (b) of that definition, the common areas and other appurtenances, that existed immediately before the renovation or alteration was begun has been removed or replaced if, after completion of the renovation or alteration, the building or part, as the case may be, is, or forms part of, a residential complex;

1990, c. 45, s. 12(1)

(3) Paragraph (a) of the definition "builder" in subsection 123(1) of the Act is amended by adding "and" at the end of subparagraph (i) and by repealing subparagraph (ii).

2012, c. 31, s. 74(2)

(4) The portion of the definition "pension plan" in subsection 123(1) of the Act before paragraph (c) is replaced by the following:

"pension plan"

« régime de pension »

"pension plan" means a registered pension plan or a pooled registered pension plan

(a) that governs a person that is a trust or that is deemed to be a trust for the purposes of the Income Tax Act,

(b) in respect of which a corporation

(i) is incorporated and operated either

(A) solely for the administration of the plan, or

(B) for the administration of the plan and for no other purpose other than acting as trustee of, or administering, a trust governed by a retirement compensation arrangement (as defined in subsection 248(1) of the Income Tax Act), where the terms of the arrangement provide for benefits only in respect of individuals who are provided with benefits under the plan,

(ii) in the case of a registered pension plan, is accepted by the Minister, under subparagraph 149(1)(o.1)(ii) of the Income Tax Act, as a funding medium for the purpose of the registration of the plan under that Act, and

(iii) in the case of a pooled registered pension plan, is a corporation

(A) that is described in paragraph 149(1)(o.2) of the Income Tax Act, and

(B) all of the shares, and rights to acquire shares, of the capital stock of which are owned, at all times since the date on which it was incorporated, by the plan, or

(5) Subsection 123(1) of the Act is amended by adding the following in alphabetical order:

"pooled registered pension plan"

« régime de pension agréé collectif »

"pooled registered pension plan" has the same meaning as in paragraph 149(5)(a);

"PRPP administrator"

« administrateur de RPAC »

"PRPP administrator" of a pooled registered pension plan has the meaning assigned by the definition "administrator" in subsection 147.5(1) of the Income Tax Act;

"registered pension plan"

« régime de pension agréé »

"registered pension plan" has the same meaning as in paragraph 149(5)(a);

(6) Subsections (1), (4) and (5) are deemed to have come into force on December 14, 2012.

(7) Subsections (2) and (3) apply in respect of

(a) any supply by way of sale of a residential complex made after April 8, 2014;

(b) any supply by way of sale (other than a taxable supply deemed to have been made under section 191 of the Act) of a residential complex made by a person on or before April 8, 2014 if

(i) the supply would have been a taxable supply had the definitions "substantial renovation" and "builder" in subsection 123(1) of the Act, as amended by subsections (2) and (3), applied in respect of the supply, and

(ii) an amount as or on account of tax in respect of the supply was charged, collected or remitted under Part IX of the Act on or before that day; and

(c) any taxable supply of a residential complex that would have been deemed under section 191 of the Act to have been made by a person at a particular time on or before April 8, 2014 if the definitions "substantial renovation" and "builder" in subsection 123(1) of the Act, as amended by subsections (2) and (3), had applied at that time, provided that the person has reported an amount as or on account of tax, as a result of the person applying section 191 of the Act in respect of the complex, in the person's return under Division V of Part IX of the Act

(i) for any reporting period the return for which is filed on or before April 8, 2014 or is required under that Division to be filed on or before a day that is on or before April 8, 2014, or

(ii) for any reporting period that begins on or before April 8, 2014 the return for which

(A) is required under that Division to be filed on or before a particular day that is after April 8, 2014, and

(B) is filed on or before the particular day referred to in clause (A).

(8) For the purposes of Part IX of the Act, if a person

(a) makes, at a particular time that is after April 8, 2014, a supply by way of sale of a residential complex that is a taxable supply, but that would not be a taxable supply if the definitions "substantial renovation" and "builder" in subsection 123(1) of the Act applied as they read before this Act receives royal assent, and

(b) has not claimed or deducted an amount (in this subsection referred to as an "unclaimed credit") in respect of property or a service in determining the net tax for any reporting period of the person the return for which is filed on or before April 8, 2014 or is required under Division V of Part IX of the Act to be filed on or before a day that is on or before April 8, 2014 and

(i) the property or service, in a particular reporting period that ends on or before April 8, 2014,

(A) was acquired, imported or brought into a participating province for consumption or use in making the taxable supply, or

(B) was, in relation to the complex, acquired, imported or brought into a participating province and would have been acquired, imported or brought into the participating province for consumption or use in making the taxable supply if the definitions "substantial renovation" and "builder" in subsection 123(1) of the Act were read as amended by subsections (2) and (3), and

(ii) the unclaimed credit is, or would be if the definitions "substantial renovation" and "builder" in subsection 123(1) of the Act were read as amended by subsections (2) and (3), an input tax credit of the person,

the unclaimed credit of the person is deemed to be an input tax credit of the person for the reporting period of the person that includes April 8, 2014 and not to be an input tax credit of the person for any other reporting period.

92. (1) Paragraph 149(5)(a) of the Act is amended by adding the following after subparagraph (i):

(i.1) a pooled registered pension plan,

(2) Subsection (1) applies in respect of any taxation year of a person that ends on or after December 14, 2012.

93. (1) The definition "excluded activity" in subsection 172.1(1) of the Act is amended by striking out "or" at the end of paragraph (d) and by adding the following after that paragraph:

(d.1) if the pension plan is a pooled registered pension plan, compliance by a participating employer of the pension plan as a PRPP administrator of the pension plan with requirements under the Pooled Registered Pension Plans Act or a similar law of a province, provided the activity is undertaken exclusively for the purpose of making a taxable supply of a service to a pension entity of the pension plan that is to be made

(i) for consideration that is not less than the fair market value of the service, and

(ii) at a time when no election under subsection 157(2) made jointly by the participating employer and the pension entity is in effect; or

(2) Subsection (1) applies in respect of any fiscal year of a person ending on or after December 14, 2012.

1997, c. 10, s. 38(1)

94. (1) Paragraph 191.1(2)(e) of the Act is replaced by the following:

(e) the amount determined by the formula

A + B + C + D

where

A is the total of all amounts each of which is an amount determined by the formula

E × (F/G)

where

E is an amount of tax, calculated at a particular rate, that was payable under subsection 165(1) or section 212, 218 or 218.01 by the builder in respect of an acquisition of real property that forms part of the complex or addition or in respect of an acquisition or importation of an improvement to real property that forms part of the complex or addition,

F is the rate set out in subsection 165(1) at the time referred to in paragraph (a), and

G is the particular rate,

B is the total of all amounts each of which is an amount determined by the formula

H × (I/J)

where

H is an amount (other than an amount referred to in the description of E) that would have been payable as tax, calculated at a particular rate, under subsection 165(1) or section 212, 218 or 218.01 by the builder in respect of an acquisition or importation of an improvement to real property that forms part of the complex or addition but for the fact that the improvement was acquired or imported for consumption, use or supply exclusively in the course of commercial activities of the builder,

I is the rate set out in subsection 165(1) at the time referred to in paragraph (a), and

J is the particular rate,

C is

(i) if the complex or addition is situated in a participating province, the total of all amounts each of which is an amount determined by the formula

K × (L/M)

where

K is an amount of tax, calculated at a particular rate, that was payable under subsection 165(2), 212.1(2) or 218.1(1) or Division IV.1 by the builder in respect of an acquisition of real property that forms part of the complex or addition or in respect of an acquisition, importation or bringing into the participating province of an improvement to real property that forms part of the complex or addition,

L is the tax rate for the participating province at the time referred to in paragraph (a), and

M is the particular rate, and

(ii) in any other case, zero, and

D is

(i) if the complex or addition is situated in a participating province, the total of all amounts each of which is an amount determined by the formula

N × (O/P)

where

N is an amount (other than an amount referred to in the description of K) that would have been payable as tax, calculated at a particular rate, under subsection 165(2), 212.1(2) or 218.1(1) or Division IV.1 by the builder in respect of an acquisition, importation or bringing into the participating province of an improvement to real property that forms part of the complex or addition but for the fact that the improvement was acquired, imported or brought into the participating province for consumption, use or supply exclusively in the course of commercial activities of the builder,

O is the tax rate for the participating province at the time referred to in paragraph (a), and

P is the particular rate, and

(ii) in any other case, zero.

(2) Subsection (1) applies in respect of any supply of a residential complex, or of an addition to a residential complex, deemed under any of subsections 191(1) to (4) of the Act to have been made on or after April 1, 2013 except that, if the construction or last substantial renovation of the complex or addition began on or before April 8, 2014, the amount determined under paragraph 191.1(2)(e) of the Act in respect of the supply is equal to the lesser of the amount determined under that paragraph as amended by subsection (1) and the amount that would be determined under that paragraph if subsection (1) had not come into force.

(3) If, in assessing the net tax of a person under section 296 of the Act for a reporting period of the person, an amount was taken into consideration as tax deemed to have been collected under any of subsections 191(1) to (4) of the Act in respect of a supply of a residential complex or of an addition to a residential complex and by reason of the application of paragraph 191.1(2)(e), as amended by subsection (1), the amount or part of the amount is not deemed, under whichever of subsections 191(1) to (4) of the Act is applicable, to have been collected as tax in respect of the supply, the person is entitled until the day that is one year after the day on which this Act receives royal assent to request in writing that the Minister of National Revenue make an assessment, reassessment or additional assessment for the purpose of taking into account that the amount or the part of the amount, as the case may be, is not deemed to have been collected by the person as tax and, on receipt of the request, the Minister must with all due dispatch

(a) consider the request; and

(b) under section 296 of the Act, assess, reassess or make an additional assessment of the net tax of the person for any reporting period of the person and of any interest, penalty or other obligation of the person, but only to the extent that the assessment, reassessment or additional assessment may reasonably be regarded as relating to the amount or the part of the amount, as the case may be.

95. (1) Section 259 of the Act is amended by adding the following after subsection (4.1):

Rebate for health care facility

(4.11) Despite subsections (3), (4) and (4.1), if a person (other than a person that is a qualifying non-profit organization or a selected public service body described in any of paragraphs (a) to (d) of the definition "selected public service body" in subsection (1)) is a charity for the purposes of this section only because the person is a non-profit organization that operates, otherwise than for profit, one or more health care facilities within the meaning of paragraph (c) of the definition of that expression in section 1 of Part II of Schedule V, no amount in respect of property or a service is to be included in determining a rebate to be paid under this section to the person in respect of the property or service except to the extent to which the person intended, at the relevant time, to consume, use or supply the property or service

(a) in the course of activities engaged in by the person in the course of operating those health care facilities; or

(b) if the person is designated to be a municipality for the purposes of this section in respect of activities specified in the designation, in the course of those activities.

Extent of consumption, use or supply — relevant time

(4.12) Where reference is made to a relevant time in subsection (4.11) for the purposes of determining the extent to which a person intended to consume, use or supply property or a service in the course of certain activities in relation to an amount in respect of the property or service, the relevant time is

(a) in the case of an amount of tax in respect of a supply made to, or an importation or bringing into a participating province by, the person at any time, that time;

(b) in the case of an amount deemed to have been paid or collected at any time by the person, that time;

(c) in the case of an amount required to be added under subsection 129(7) in determining the person's net tax as a result of a branch or division of the person becoming a small supplier division at any time, that time; and

(d) in the case of an amount required to be added under paragraph 171(4)(b) in determining the person's net tax as a result of the person ceasing, at any time, to be a registrant, that time.

(2) Subsection (1) applies for the purposes of determining a rebate under section 259 of the Act for which an application is filed on or after April 8, 2004.

2010, c. 12, s. 75(2)

96. (1) The definition "pension contribution" in subsection 261.01(1) of the Act is repealed.

2010, c. 12, s. 75(2)

(2) The definition "pension rebate amount" in subsection 261.01(1) of the Act is replaced by the following:

"pension rebate amount"

« montant de remboursement de pension »

"pension rebate amount" of a pension entity of a pension plan for a claim period of the pension entity means the amount determined by the formula

A × B

where

A is

(a) if the pension plan is a registered pension plan, 33%,

(b) if the pension plan is a pooled registered pension plan and either employer contributions or employee PRPP contributions were made to the pension plan in the particular calendar year that is the last calendar year ending on or before the last day of the claim period, the amount (expressed as a percentage) determined by the formula

33% × (C/D)

where

C is the total of all amounts, each of which is determined for an employer that made employer contributions to the pension plan in the particular calendar year by the formula

C₁ + C₂

where

C₁ is the total of all amounts, each of which is an employer contribution made by the employer to the pension plan in the particular calendar year, and

C₂ is the total of all amounts, each of which is an employee PRPP contribution made by an employee of the employer to the pension plan in the particular calendar year, and

D is the total of all amounts contributed to the pension plan in the particular calendar year,

(c) if the pension plan is a pooled registered pension plan, neither employer contributions nor employee PRPP contributions were made to the pension plan in the particular calendar year that is the last calendar year ending on or before the last day of the claim period and it is reasonable to expect that employer contributions will be made to the pension plan in a following calendar year, the amount (expressed as a percentage) determined for the first calendar year in which employer contributions are reasonably expected to be made to the pension plan following the particular calendar year by the formula

33% × (E/F)

where

E is the total of all amounts, each of which is determined for an employer reasonably expected to make employer contributions to the pension plan in that first calendar year by the formula

E₁ + E₂

where

E₁ is the total of all amounts, each of which is an employer contribution reasonably expected to be made by the employer to the pension plan in that first calendar year, and

E₂ is the total of all amounts, each of which is an employee PRPP contribution reasonably expected to be made by an employee of the employer to the pension plan in that first calendar year, and

F is the total of all amounts reasonably expected to be contributed to the pension plan in that first calendar year, or

(d) if the pension plan is a pooled registered pension plan and paragraphs (b) and (c) do not apply, 0%; and

B is the total of all amounts, each of which is an eligible amount of the pension entity for the claim period.

2010, c. 12, s. 75(2)

(3) Paragraph (a) of the definition "qualifying employer" in subsection 261.01(1) of the Act is replaced by the following:

(a) if employer contributions were made to the pension plan in the immediately preceding calendar year, made employer contributions to the pension plan in that year; and

2010, c. 12, s. 75(2)

(4) Paragraphs (a) and (b) of the definition "qualifying pension entity" in subsection 261.01(1) of the Act are replaced by the following:

(a) listed financial institutions made 10% or more of the total employer contributions to the pension plan in the last preceding calendar year in which employer contributions were made to the pension plan; or

(b) it can reasonably be expected that listed financial institutions will make 10% or more of the total employer contributions to the pension plan in the next calendar year in which employer contributions will be required to be made to the pension plan.

(5) Subsection 261.01(1) of the Act is amended by adding the following in alphabetical order:

"employee PRPP contribution"

« cotisation RPAC de salarié »

"employee PRPP contribution" means a contribution by an employee of an employer to a pooled registered pension plan that

(a) may be deducted by the employee under paragraph 60(i) of the Income Tax Act in computing their income; and

(b) is remitted by the employer to the PRPP administrator of the plan under a contract with the PRPP administrator in respect of all or a class of the employees of the employer.

"employer contribution"

« cotisation d'employeur »

"employer contribution" means a contribution by an employer to a pension plan that may be deducted by the employer under paragraph 20(1)(q) of the Income Tax Act in computing its income.

2010, c. 12, s. 75(3)

(6) Subparagraph (i) of the description of C in paragraph 261.01(6)(a) of the Act is replaced by the following:

(i) in the case where employer contributions were made to the pension plan in the calendar year that immediately precedes the calendar year that includes the last day of the claim period (in this paragraph referred to as the "preceding calendar year"), the amount determined by the formula

D/E

where

D is the total of all amounts, each of which is

(A) an employer contribution made by the qualifying employer to the pension plan in the preceding calendar year, or

(B) an employee PRPP contribution made by an employee of the qualifying employer to the pension plan in the preceding calendar year, if the qualifying employer made employer contributions to the pension plan in the preceding calendar year, and

E is the total of all amounts, each of which is

(A) if the pension plan is a registered pension plan, an employer contribution made to the pension plan in the preceding calendar year, or

(B) if the pension plan is a pooled registered pension plan, an amount contributed to the pension plan in the preceding calendar year,

2010, c. 12, s. 75(3)

(7) Paragraph (a) of the description of C in subsection 261.01(9) of the Act is replaced by the following:

(a) in the case where employer contributions were made to the pension plan in the calendar year (in this subsection referred to as the "preceding calendar year") that immediately precedes the calendar year that includes the last day of the claim period, the amount determined by the formula

E/F

where

E is the total of all amounts, each of which is

(A) an employer contribution made by the qualifying employer to the pension plan in the preceding calendar year, or

F is the total of all amounts, each of which is

(A) if the pension plan is a registered pension plan, an employer contribution made to the pension plan in the preceding calendar year, or

(B) if the pension plan is a pooled registered pension plan, an amount contributed to the pension plan in the preceding calendar year,

(8) Subsections (1) to (5) are deemed to have come into force on December 14, 2012.

(9) Subsections (6) and (7) apply in respect of any claim period of a person ending on or after December 14, 2012.

97. (1) Part V of Schedule VI to the Act is amended by adding the following after section 6.2:

6.3 A supply made to a non-resident person that is not registered under Subdivision d of Division V of Part IX of the Act of

(a) a service of refining a metal to produce a precious metal; or

(b) an assaying, gem removal or similar service supplied in conjunction with the service referred to in paragraph (a).

(2) Subsection (1) applies to

(a) any supply made after April 8, 2014; and

(b) any supply made on or before that day if the supplier did not, on or before that day, charge or collect an amount as or on account of tax under Part IX of the Act in respect of the supply.

(3) If, in determining the net tax of a person as reported in a return under Division V of Part IX of the Act filed on or before April 8, 2014 for a reporting period that ended after 2010, an amount was taken into account by the person as tax that became collectible by the person in respect of a supply and, by reason of the application of subsection (1), no tax was collectible by the person in respect of the supply, then

(a) for the purposes of section 261 of the Act, the amount is deemed to have been paid by the person; and

(b) subsections 261(2) and (3) of the Act do not apply to a rebate under section 261 of the Act in respect of the amount if the person files an application for the rebate before the later of the day that is one year after the day on which this Act receives royal assent and the day that is two years after the day on which the return was filed.

SOR/2001-171

Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

98. (1) Paragraph (a) of the definition "manager" in subsection 1(1) of the Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations is replaced by the following:

(a) in the case of a pension entity of a registered pension plan, the administrator, as defined in subsection 147.1(1) of the Income Tax Act, of the pension plan;

(a.1) in the case of a pension entity of a pooled registered pension plan, the PRPP administrator of the pension plan; and

(2) Subsection (1) is deemed to have come into force on December 14, 2012.

Part 3

2002, c. 22

Excise Act, 2001

99. (1) Section 181 of the Excise Act, 2001 is replaced by the following:

Refund of duty — destroyed tobacco products

181. (1) The Minister may refund to a tobacco licensee the duty paid on a tobacco product that is re-worked or destroyed by the tobacco licensee in accordance with section 41 if the licensee applies for the refund within two years after the tobacco product is re-worked or destroyed.

Refund of inventory tax — destroyed domestic cigarettes

(2) The Minister may refund to a tobacco licensee the tax imposed and payable under Part 3.1 on taxed cigarettes, as defined in section 58.1, if

(a) the licensee provides evidence satisfactory to the Minister that the cigarettes were manufactured in Canada, that they were re-worked or destroyed by the licensee in accordance with section 41 and that either

(i) the cigarettes were taxed cigarettes of the licensee and the tax was paid by the licensee, or

(ii) the cigarettes were taxed cigarettes of a particular person that is not the licensee, the tax was paid by that particular person and an amount equal to the tax was paid by the licensee to that particular person on account of that tax; and

(b) the licensee applies for the refund within two years after the taxed cigarettes are re-worked or destroyed.

Refund of inventory tax — destroyed imported cigarettes

(3) The Minister may refund to a particular person the tax imposed and payable under Part 3.1 on taxed cigarettes, as defined in section 58.1, if

(a) the particular person provides evidence satisfactory to the Minister that the cigarettes were imported by the particular person, that they were destroyed by the particular person in accordance with the Customs Act or the Customs Tariff and that either

(i) the cigarettes were taxed cigarettes of the particular person and the tax was paid by the particular person, or

(ii) the cigarettes were taxed cigarettes of another person that is not the particular person, the tax was paid by the other person and an amount equal to the tax was paid by the particular person to the other person on account of that tax; and

(b) the particular person applies for the refund within two years after the taxed cigarettes are destroyed.

(2) The portion of subsection 181(3) of the Act before paragraph (a), as enacted by subsection (1), is replaced by the following:

Refund of inventory tax — destroyed imported cigarettes

(3) The Minister may refund to a particular person the tax imposed and payable under Part 3.1 on taxed cigarettes, as defined in section 58.1, other than cigarettes in respect of which duty has been imposed under section 53, if

(3) Subsection (1) is deemed to have come into force on February 12, 2014.

(4) Subsection (2) comes into force on December 1, 2019.

2007, c. 18, s. 110(1)

100. (1) Section 181.1 of the Act is replaced by the following:

Refund of duty — destroyed imported tobacco

181.1 (1) The Minister may refund to a duty free shop licensee the duty under section 53 that was paid on imported manufactured tobacco that is destroyed by the licensee in accordance with the Customs Act if the licensee applies for the refund within two years after the tobacco is destroyed.

Refund of inventory tax — destroyed imported cigarettes

(2) The Minister may refund to a duty free shop licensee the tax imposed and payable under Part 3.1 on taxed cigarettes, as defined in section 58.1, of the licensee in respect of which duty has been imposed under section 53 if

(a) the licensee provides evidence satisfactory to the Minister that

(i) the cigarettes were taxed cigarettes of the licensee and the tax was paid by the licensee, and

(ii) the cigarettes were destroyed by the licensee in accordance with the Customs Act; and

(b) the licensee applies for the refund within two years after the cigarettes are destroyed.

(2) Subsection (1) comes into force on December 1, 2019.

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Archived - Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures

This page has been archived on the Web

Part 1
Amendments to the Income Tax Act and a Related Text

Income Tax Act

Income Tax Regulations

Part 2
Amendments to the Excise Tax Act (GST/HST Measures) and a Related Text

Excise Tax Act

Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

Part 3

Excise Act, 2001

Thank you for your help!

Archived - Notice of Ways and Means Motion to implement certain provisions of the budget tabled in Parliament on February 11, 2014 and other measures

This page has been archived on the Web

Part 1Amendments to the Income Tax Act and a Related Text

Income Tax Act

Income Tax Regulations

Part 2Amendments to the Excise Tax Act (GST/HST Measures) and a Related Text

Excise Tax Act

Selected Listed Financial Institutions Attribution Method (GST/HST) Regulations

Part 3

Excise Act, 2001

Thank you for your help!

Part 1
Amendments to the Income Tax Act and a Related Text

Part 2
Amendments to the Excise Tax Act (GST/HST Measures) and a Related Text