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Archived - Explanatory Notes Relating to the Income Tax Act, Excise Tax Act, Excise Act, 2001 and Related Legislation

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Published by
The Honourable Joe Oliver, P.C., M.P.
Minister of Finance

March 2014

Preface

These explanatory notes describe proposed amendments to the Income Tax Act, Excise Tax Act, Excise Act, 2001 and related legislation. These explanatory notes describe these proposed amendments, clause by clause, for the assistance of Members of Parliament, taxpayers and their professional advisors.

The Honourable Joe Oliver, P.C., M.P.
Minister of Finance

These notes are intended for information purposes only and should not be construed as an official interpretation of the provisions they describe.

Table of Contents
Clause in Legislation Section  Amended Topic
Part 1 – Amendments to the Income Tax Act, the Financial Administration Act and Related Regulations
Income Tax Act
2 56 Tax Informant Program          
3 60 Tax Informant Program          
4 81 Payments for Volunteer Services           
5 110.1 Deduction for Gifts
6 118.01 Adoption Expense Tax Credit
7 118.06 Volunteer Firefighter Tax Credit            
8 118.07 Search and Rescue Volunteers Tax Credit             
9 118.1 Definitions             
10 118.2 Medical Expense Tax Credit  
11 118.3 Credit for Mental or Physical Impairment              
12 118.61 Unused Tuition, Textbook and Education Tax Credits           
13 118.8 Transfer of Unused Credits to Spouse or Common-Law Partner          
14 118.81 Tuition, Textbook and Education Tax Credits Transferred     
15 118.92 Ordering of Credits
16 118.94 Tax Payable by Non-Resident (Credits Restricted)
17 122.5 GST/HST Credit    
18 127 Investment Tax Credit            
19 127.531 Basic Minimum Tax Credit Determined 
20 128 Where Individual Bankrupt    
21 149.1 Qualified Donees   
22 152 Assessment            
23 153 Withholding           
24 204.81 Transitional Rules  
25 204.85 Amalgamations and Mergers 
26 212 Tax on Canadian Income of Non-Resident            
27 238 Offences and Punishment      
28 241 Where Taxpayer Information May be Disclosed    
29 Part XV.1 Reporting of Electronic Funds Transfer 
30 248 Definitions             
Financial Administration Act
31 162 Tabling of List – Legislative Proposals  
Income Tax Regulations
32 103 Non-Periodic Payments         
33 108 Remittances to Receiver General            
34 202 Payments to Non-Residents   
35 6708 Provincial Wind-Up Rules for LSVCCs – Ontario
36 8517 Underfunded Pension            
37 9000 Prescribed Persons 
Canada Pension Plan Regulations
38 8 Remittances to Receiver General            
Insurable Earnings and Collection of Premiums Regulations    
39 4 Remittances to Receiver General            
Part 2 – Amendments to the Excise Tax Act (GST/HST Measures)
Excise Tax Act      
40 156 Election for Closely Related Persons     
41 178.8 Import Arrangements – Effects of Agreement       
42 179 Drop Shipments - Certificates
43 180.01 Restriction on Recovery         
44 225 Restriction – Net Tax             
45 225.1 Restriction – Net Tax             
46 232 Credit or Debit Notes             
47 241 Registration            
48 VII/b.3 Electronic Funds Transfer      
49 273.3 Electronic Funds Transfer      
50 295 Where Confidential Information May be Disclosed               
51 300.1 Tax Deemed Not Assessed    
52 V/II/1 Practitioner             
53 V/II/7 Acupuncture and Naturopathic Services
54 V/II/14 Service of Designing a Training Plan     
55 V/II/15 Service of Designing a Training Plan     
56 V/V.1/1 Charity Parking      
57 V/V.1/5 Supplies All or Substantially All for No Consideration         
58 V/V.1/7 Hospital Parking    
59 V/VI/1 Definitions             
60 V/VI/25.1 Hospital Parking    
61 VI/II/9.1 Electronic Eyewear 
Part 3 – Amendments to the Excise Act, 2001, the Excise Tax Act (other than GST/HST Measures) and the Air Travellers Security Charge Act
Excise Act, 2001
62 42 Imposition              
63 43 Additional Duty on Cigars     
64 43.1 Inflationary Adjustments        
65 53 Special Duty on Imported Manufactured Tobacco Delivered to Duty Free Shop          
66 54 Special Duty on Traveller's Tobacco     
67 56 Imposition              
68 Part 3.1 Heading "CIGARETTE INVENTORY TAX"     
69 58.1 Definitions             
70 58.2-58.4 Imposition of Tax   
71 58.5 Returns   
72 58.6 Payment 
73 180.1 Refund   
74 207.1 Electronic Funds Transfer      
75 211 Provision of Confidential Information   
76 216 Punishment – Section 32        
77 236 Diversion of Black Stock Tobacco         
78 240 Contravention of Subsection 50(5)        
79 Sch. 1 Rates of Duty on Tobacco Products       
80 Sch. 2 Additional Duty on Cigars     
81 Sch. 3 Rates of Special Duty on Certain Manufactured Tobacco      
82 Sch. 1-3 Application of Interest            
Excise Tax Act    
83 68.16 Presumption           
84 79.03 Interest and Penalty amounts of $25 or Less          
85 95.2 Administrative Penalty           
86 97 Offences 
87 98.2 Electronic Funds Transfer      
88 102 Destroying Records and Making False Entries      
89 108 Offence of Evasion
Air Traveller Security Charge Act      
90 37.1 Electronic Funds Transfer      

Part 1
Amendments to the Income Tax Act, the Financial Administration Act and Related Regulations

Income Tax Act

Clause 2

Tax Informant Program

ITA
56(1)(z.4)

Subsection 56(1) of the Income Tax Act (the Act) describes certain amounts that are required to be included in computing the income of a taxpayer for a taxation year.

New paragraph 56(1)(z.4) provides for the inclusion in computing a taxpayer's income for a taxation year of amounts received by the taxpayer if

This amendment ensures that amounts received by a taxpayer under the CRA's Offshore Tax Informant Program (OTIP), or a similar program, will be included in computing the taxpayer's income.

This amendment comes into force on Royal Assent.

Clause 3

Tax Informant Program

ITA
60(z.1)

Section 60 of the Act provides for various deductions in computing income.

New paragraph 60(z.1) provides a deduction in computing a taxpayer's income for a taxation year in respect of repayments of amounts that were included in computing the taxpayer's income for the taxation year or a preceding taxation year because of new paragraph 56(1)(z.4). These are repayments of amounts received by a taxpayer where

This amendment provides that the repayment of amounts that are received by a taxpayer under the CRA's Offshore Tax Informant Program (OTIP), or a similar program, will be deductible in computing the taxpayer's income.

This amendment comes into force on Royal Assent.

Clause 4

Payments for Volunteer Services

ITA
81(4)

Subsection 81(4) of the Act provides an exemption from income for the first $1,000 of amounts received by an individual from a government, municipality or public authority for the performance, as a volunteer, of the individual's duties as an ambulance technician, a firefighter or a person who assists in the search or rescue of individuals or in other emergency situations. If an individual claims the Volunteer Firefighter Tax Credit for a taxation year under section 118.06, no amount of the individual's income in respect of duties as a volunteer firefighter is exempt under subsection 81(4).

Subsection 81(4) is amended to provide that if an individual claims for a taxation year either the Search and Rescue Volunteer Tax Credit under new section 118.07 or the Volunteer Firefighter Tax Credit, the individual may not claim an exemption under subsection 81(4) for the year.

This amendment applies to the 2014 and subsequent taxation years.

Clause 5

Deduction for Gifts

ITA
110.1(1)(d)

Paragraph 110.1(1)(d) of the Act provides for the deduction in computing a corporation's taxable income of the eligible amount of an ecological gift made by the corporation. 

An ecological gift is a gift 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) that is certified by the Minister of the Environment, or a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is important to the preservation of Canada's environmental heritage. The gift must be made to certain specified donees. A deduction is available in the taxation year that the gift is made or in any of the five subsequent taxation years.

Paragraph 110.1(1)(d) is amended to extend the five-year carryforward period to ten years.

This amendment applies to gifts made after February 10, 2014.

Clause 6

Adoption Expense Tax Credit

ITA
118.01(2)

Subsection 118.01(2) of the Act provides for the calculation of the adoption expense tax credit in respect of the adoption of an eligible child. The credit is determined by applying the appropriate percentage (15% for the 2014 taxation year) to the lesser of $10,000 (indexed for inflation) and the amount obtained when reimbursements and other forms of assistance (other than an amount that is included in computing the individual's income and that is not deductible in computing the individual's taxable income) that any individual is or was entitled to receive in respect of an eligible adoption expense is subtracted from the amount of eligible adoption expenses incurred in respect of an eligible child.

The calculation of the credit is amended to increase the maximum amount of eligible expenses per child to $15,000, applicable to the 2014 taxation year. Without this amendment, the maximum amount of eligible expenses per child would be $11,774 for the 2014 taxation year.

The new maximum amount is indexed for inflation for taxation years after 2014.

Clause 7

Volunteer Firefighter Tax Credit

ITA
118.06

Subsection 118.06(2) of the Act allows an individual to claim the Volunteer Firefighter Tax Credit for a taxation year if the individual has performed at least 200 hours of eligible volunteer firefighting services in the year for one or more fire departments. This subsection is amended concurrently with the introduction of the Search and Rescue Volunteers Tax Credit in new section 118.07, to provide that an individual may claim the Volunteer Firefighter Tax Credit if the individual has performed eligible volunteer firefighting services in the year and has performed at least 200 hours in total in the year of

The Minister of National Revenue may require the individual to provide the certificates of performance of eligible volunteer firefighting services and eligible search and rescue volunteer services for the year. Eligible volunteer firefighting services must be certified by a fire chief or a delegated official of each fire department at which the individual provided, attesting to the number of hours of eligible volunteer firefighting services performed by the individual for the particular fire department. For more information on eligible search and rescue volunteer services, see the commentary on section 118.07.  

This amendment applies to the 2014 and subsequent taxation years.

Clause 8

Search and Rescue Volunteers Tax Credit

ITA
118.07

New subsection 118.07(1) of the Act defines "eligible search and rescue organization" and "eligible search and rescue volunteer services" for the purposes of the new Search and Rescue Volunteer Tax Credit in subsection 118.07(2).

An "eligible search and rescue organization" is an organization that is a member of the Search and Rescue Volunteer Association of Canada, the Civil Air Search and Rescue Association or the Canadian Coast Guard Auxiliary; or whose status as a search and rescue organization is recognized by a provincial, municipal or public authority.

"Eligible search and rescue volunteer services" are services, other than eligible volunteer firefighting services (defined in subsection 118.06), provided by an individual in the individual's capacity as a volunteer to an eligible search and rescue organization that consist primarily of responding to and being on call for search and rescue and related emergency calls, attending meetings held by the organization and participating in required training related to search and rescue services. Eligible search and rescue services do not include services provided to an organization if the individual provides search and rescue services to the organization otherwise than as a volunteer.

New subsection 118.07(2) provides for the calculation of the non-refundable Search and Rescue Volunteers Tax Credit for a taxation year. A credit may be claimed if the individual has performed eligible search and rescue volunteer services in the year and has performed at least 200 hours in total in the year of

The credit is determined by applying the appropriate percentage for the taxation year to $3,000. An individual may not deduct an amount for the Search and Rescue Volunteers Tax Credit for a taxation year if for that year the individual has deducted an amount for the Volunteers Firefighter Tax Credit.

New subsection 118.07(3) provides that the Minister of National Revenue may require the individual to provide the certificates of performance of eligible volunteer firefighting services and eligible search and rescue volunteer services for the year. Eligible search and rescue volunteer services must be certified by the team president, or other individual who ho fulfils a similar role, of each eligible search and rescue organization to which the individual provided eligible search and rescue volunteer services for the year, attesting to the number of hours of eligible search and rescue volunteer services performed in the year by the individual for the particular organization. For more information on eligible volunteer firefighting services, see the commentary on section 118.06.

This amendment applies to the 2014 and subsequent taxation years.

Clause 9

Definitions

ITA
118.1(1)

"total ecological gifts"

Subsection 118.1(1) of the Act provides a definition of the term "total ecological gifts". This definition applies for the purpose of the tax credit, based on the eligible amount of a gift, that is available to individuals under subsection 118.1(3).

An ecological gift is a gift 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) that is certified by the Minister of the Environment, or a person designated by that Minister, to be ecologically sensitive land, the conservation and protection of which is important to the preservation of Canada's environmental heritage. The gift must be made to certain specified donees. A tax credit is available in the taxation year that the gift is made or in any of the five subsequent taxation years.  

The definition "total ecological gifts" is amended to extend the five-year carryforward period to ten years.

This amendment applies to gifts made after February 10, 2014.

Clause 10

Medical Expense Tax Credit

ITA
118.2(2)(l) & (l.92)

Subsection 118.2(2) of the Act sets out the expenses that may be included in computing an individual's medical expense tax credit.

Paragraph 118.2(2)(l)  allows the cost of acquiring a dog to qualify for the medical expense tax credit if the dog is acquired to assist a person who is blind or profoundly deaf, has severe autism or epilepsy, or has a severe and prolonged impairment that markedly restricts the use of the person's arms or legs. The cost of care and maintenance of the dog also qualifies. The scope of this provision is expanded so that it also applies to the costs associated with dogs that assist individuals who suffer from severe diabetes.

This amendment applies to expenses incurred after 2013.

New paragraph 118.2(2)(l.92) adds to the list of eligible medical expenses remuneration paid for the design of an individualized therapy plan. Such remuneration is eligible for the medical expense tax credit if

This amendment applies to expenses incurred after 2013.

Clause 11

Credit for Mental or Physical Impairment

ITA
118.3(2)

Subsection 118.3(2) of the Act provides criteria for determining the entitlement of a supporting individual of a disabled person to claim the disabled person's unused disability tax credit. The French version of subsection 118.3(2) and the English version of paragraph 118.3(2)(d) are amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 12

Unused Tuition, Textbook and Education Tax Credits

ITA
118.61(1)

Subsection 118.61(1) of the Act provides a formula for the calculation of a student's unused tuition and education tax credits that may be carried forward to future taxation years. The description of C of that formula requires that any unused tuition, textbook and education tax credits be claimed in advance of certain personal credits. The description of C in subsection 118.61(1) is amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Deduction of Carryforward

ITA
118.61(2)

Subsection 118.61(2) of the Act determines the amount of the carryforward of unused tuition and education tax credits that can be claimed in the current taxation year. Paragraph 118.61(2)(b) is amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteers Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 13

Transfer of Unused Credits to Spouse or Common-Law Partner

ITA
118.8

Subsection 118.8 of the Act provides a formula that governs the amount of certain unused personal income tax credits that can be transferred to a taxpayer from a spouse or common-law partner. Paragraph (a) and subparagraph (b)(ii) of the description of C in the formula are amended to add references to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 14

Tuition, Textbook and Education Tax Credits Transferred

ITA
118.81

Paragraph 118.81(a) of the Act provides a formula for the calculation of the maximum amount of tuition, textbook and education tax credits that may be transferred by a student to the student's spouse or common law partner or to a parent or grandparent. The description of B in the formula is amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 15

Ordering of Credits

ITA
118.92

Section 118.92 of the Act provides that the tax credits allowed in computing an individual's tax payable for a taxation year are to be applied in a specific order. This section is amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 16

Tax Payable by Non-Resident (Credits Restricted)

ITA
118.94

Section 118.94 of the Act provides rules with respect to non-refundable tax credits available to individuals who, at any time in a taxation year, did not reside in Canada. Subject to a special rule in section 217, such individuals are allowed to claim certain non-refundable credits for a taxation year only if all or substantially all of their income for the taxation year is included in computing their taxable income earned in Canada. This section is amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 17

GST/HST Credit

ITA
122.5

Subsection 122.5(3) of the Act provides for the calculation of the Goods and Services Tax/Harmonized Sales Tax (GST/HST) Credit.  To receive the GST/HST Credit for a taxation year, subsection 122.5(3) provides that an eligible individual must file a return of income for the year and apply for the credit. Subsection 122.5(3) is amended to remove the requirement that an individual apply for the credit.

The amount of the GST/HST Credit depends on an eligible individual's family circumstances. Where an individual has a cohabiting spouse or common-law partner (a "qualified relation") at the beginning of a month, only one of them may be an eligible for a GST/HST Credit for that month. If both claim to be eligible individuals, the Minister of National Revenue designates which of them will be eligible. Subsection 122.5(5) is amended consequential to the removal from subsection 122.5(3) of the requirement to apply for the GST/HST Credit, such that an individual will no longer make a claim for the credit in their return of income. Where two individuals are qualified relations of each other and would otherwise be eligible individuals in relation to a month, the Minister will designate which of them is the eligible individual for that month.

These amendments apply for the 2014 and subsequent taxation years.

Clause 18

Investment Tax Credit

ITA
127

Section 127 of the Act permits deductions in computing tax payable in respect of logging taxes, political contributions and the investment tax credit (ITC).

Definitions

ITA
127(9)

Subsection 127(9) of the Act provides various definitions relevant for the purpose of calculating the ITC of a taxpayer.

"flow-through mining expenditure"

The definition "flow-through mining expenditure" in subsection 127(9) defines the expenses (eligible expenses) that qualify for the 15% ITC in respect of specified surface "grass-roots" mineral exploration. Under the existing definition, the credit is available only in respect of eligible expenses renounced under a flow-through share agreement made after March 2013 and before April 2014.

The definition is amended to include eligible expenses incurred by a corporation after March 2014 and before 2016, where the expenses are incurred under a flow-through share agreement entered into after March 2014 and before April 2015.

Clause 19

Basic Minimum Tax Credit Determined

ITA
127.531(a)

An individual's basic minimum tax credit, which is deductible in computing alternative minimum tax, is determined under section 127.531 of the Act. Paragraph 127.531(a) is amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 20

Where Individual Bankrupt

ITA
128(2)(e)

Subsection 128(2) of the Act contains a number of special rules that apply in cases of personal bankruptcy. Clause 128(2)(e)(iii)(A) is amended to add a reference to new section 118.07, consequential on the introduction of the Search and Rescue Volunteer Tax Credit.

This amendment applies to the 2014 and subsequent taxation years.

Clause 21

Qualified Donees

ITA
149.1

Section 149.1 of the Act provides the rules that must be met for charities to obtain and keep registered status. A registered charity is exempt from tax on its taxable income and can issue receipts which entitle its donors to claim tax relief for their donations.

Revocation of Registration of a Registered Charity

ITA
149.1(4.1)

Subsection 149.1(4.1) of the Act allows the Minister of National Revenue to revoke the registration of a charity in certain circumstances.

New paragraph 149.1(4.1)(f) is added to provide the Minister of National Revenue with authority to revoke the registration of a registered charity if it accepts a gift from a foreign state as defined in the State Immunity Act (including, per that definition, an agency of the foreign state) that is set out on the list referred to in subsection 6.1(2) of that Act. The Governor in Council may, by order, include a foreign state on the list if, on the recommendation of the Minister of Foreign Affairs made after consulting with the Minister of Public Safety and Emergency Preparedness, the Governor in Council is satisfied that there are reasonable grounds to believe that the foreign state supported or supports terrorism. At the time of the introduction of this paragraph in Parliament, those states were the Islamic Republic of Iran and the Syrian Arab Republic.

This amendment applies in respect of gifts accepted after February 10, 2014.

Revocation of Registration of a Canadian Amateur Athletic Association

ITA
149.1(4.2)

Subsection 149.1(4.2) of the Act allows the Minister of National Revenue to revoke the registration of a Canadian amateur athletic association in certain circumstances.

New paragraph 149.1(4.2)(d) is added to provide the Minister of National Revenue with the authority to revoke the registration of a registered Canadian amateur athletic association if it accepts a gift from a foreign state as defined in the State Immunity Act (including, per that definition, an agency of the foreign state) that is set out on the list referred to in subsection 6.1(2) of that Act. The Governor in Council may, by order, include a foreign state on the list if, on the recommendation of the Minister of Foreign Affairs made after consulting with the Minister of Public Safety and Emergency Preparedness, the Governor in Council is satisfied that there are reasonable grounds to believe that the foreign state supported or supports terrorism. At the time of the introduction of this paragraph in Parliament, those states were the Islamic Republic of Iran and the Syrian Arab Republic.

This amendment applies in respect of gifts accepted after February 10, 2014.

Refusal to Register

ITA
149.1(25)

Subsection 149.1(25) provides that the Minister of National Revenue may refuse to register a charity or Canadian amateur athletic association if the application is made by an ineligible individual, as defined in subsection 149.1(1), or an ineligible individual controls or manages the charity or association, directly or indirectly in any manner whatever, or is a director, trustee, officer or like official of the charity or association.

Subsection 149.1(25) is expanded to provide the Minister of National Revenue with the authority to refuse to register a charity or Canadian amateur athletic association that has accepted a gift from a foreign state as defined in the State Immunity Act (including, per that definition, an agency of the foreign state) that is set out on the list referred to in subsection 6.1(2) of that Act. The Governor in Council may, by order, include a foreign state on the list if, on the recommendation of the Minister of Foreign Affairs made after consulting with the Minister of Public Safety and Emergency Preparedness, the Governor in Council is satisfied that there are reasonable grounds to believe that the foreign state supported or supports terrorism. At the time of the introduction of this subsection in Parliament, those states were the Islamic Republic of Iran and the Syrian Arab Republic.

This amendment applies in respect of gifts accepted after February 10, 2014.

Clause 22

Assessment

ITA
152

Section 152 contains rules relating to assessments and reassessments of tax, interest and penalties payable by a taxpayer and to determinations and redeterminations of income, losses and other amounts.

Provisions Applicable

ITA
152(1.2)

Subsection 152(1.2) of the Act generally provides for the application of paragraphs 56(1)(l) and 60(o) and Divisions I and J of Part I of the Act as they relate to assessments and to various determinations and redeterminations made under Part I of the Act. Exceptions are made as to how certain provisions in the Act apply to certain of those determinations and redeterminations.

Subsection 152(1.2) applies to a determination by the Minister of National Revenue of eligibility for and the amount of a GST/HST Credit under section 122.5. New paragraph 152(1.2)(d) is added consequential to the amendment to subsection 122.5(3) to remove the requirement that an individual apply for the GST/HST Credit in their return of income. Paragraph 152(1.2)(d) provides that where the Minister determines the amount deemed by subsection 122.5(3) to have been paid by an individual for a taxation year to be nil, the Minister is not required to send the individual a notice of determination unless the individual requests a notice of determination from the Minister.

This amendment applies for the 2014 and subsequent taxation years.

Tax Deemed Not Assessed

ITA
152(10)

Subsection 152(10) of the Act provides that an amount of tax for which adequate security is accepted by the Minister of National Revenue under subsection 220(4.5) or (4.6) is not be treated as an amount assessed under the Act, for the period during which such security is accepted, for the purpose of any agreement entered into by the federal government under section 7 of the Federal-Provincial Fiscal Arrangements Act.

This subsection is amended to also provide that certain other amounts assessed are not to be treated as amounts assessed under the Act until they are collected by the Minister, for the purpose of any agreement entered into by the federal government under section 7 of the Federal-Provincial Fiscal Arrangements Act. This subsection will apply to an amount assessed where information relevant to the assessment was provided to the Canada Revenue Agency (CRA) under a contract entered into by a person under a program administered by the CRA to obtain information relating to tax non-compliance.

As a consequence, if information relevant to the assessment of an amount is provided to the CRA under the CRA's Offshore Tax Informant Program (OTIP), or a similar program, then the amount will not be treated as an amount assessed for the purpose of an agreement entered into by the federal government under section 7 of the Federal-Provincial Fiscal Arrangements Act until the amount has been collected.

This amendment comes into force on Royal Assent.

Clause 23

Withholding

ITA
153(1)(s)

Subsection 153(1) of the Act requires the withholding of tax from certain payments described in the subsection.

Paragraph 153(1)(s) is amended by adding reference to paragraph 56(1)(z.4) in order to authorize the withholding of tax on an amount paid to a taxpayer under a contract to provide information to the Canada Revenue Agency (CRA) that was entered into under a program administered by the CRA to obtain information relating to tax non-compliance. This amendment ensures that appropriate withholding will apply to amounts paid out under the CRA's Offshore Tax Informant Program (OTIP) or a similar program.

This amendment comes into force on Royal Assent.

Clause 24

Transitional Rules

ITA
204.81(8.3)

Subsection 204.81(8.3) of the Act provides rules for provincially registered labour-sponsored venture capital corporations (LSVCCs) that are also federally registered LSVCCs to, under certain conditions, revoke their federal registration without penalty, where a province has decided to discontinue its venture capital tax credit program.

Subsection 204.81(8.3) provides that if a provincially registered LSVCC informs the Minister of National Revenue of its intention to revoke its registration and meets all the requirements under the particular province's wind up rules, the following rules apply:

Subsection 204.81(8.4) provides that the relieving rules available to an LSVCC under subsection 204.81(8.3) are only available if the LSVCC meets further conditions.

The first condition is that, of the corporation's outstanding shares issued over the last eight years that were eligible for the labour-sponsored venture capital tax credit, less than 20% were issued in the last two years. The second condition is that the LSVCC revoke its registration within three years of providing notice of its intention to revoke its registration.

Subsection 204.81(8.3) is amended to extend its application to any federally registered LSVCC where the conditions set out in subsection 204.81(8.4) are met.

These amendments come into force on November 27, 2013.

Clause 25

Amalgamations and Mergers

ITA
204.85(3)(d)

Subsection 204.85(3) of the Act applies, for the purposes of section 127.4 and Parts X.3 and XII.5 of the Act, where there is an amalgamation or merger of corporations at least one of which is a federally-registered labour-sponsored venture capital corporation (LSVCC) or a revoked corporation.

Under paragraph 204.85(3)(d), the Minister of National Revenue is deemed to have registered the new corporation for the purposes of Part X.3 unless:

Where paragraph 204.85(3)(d) does not apply, the new corporation

Consequential on the introduction of transitional rules to allow any federally registered LSVCC to revoke its registration without penalty, paragraph 204.85(3)(d) is amended to introduce a new condition in order for a new corporation to be deemed under paragraph 204.85(3)(d) to have been registered.

New subparagraph 204.85(3)(d)(vi) provides that paragraph 204.85(3)(d) does not deem a new corporation to have been registered for the purposes of Part X.3 if, immediately before the amalgamation or merger, one or more of the predecessor corporations is a corporation that has given notification under subsection 204.81(8.3) and one or more of the predecessor corporations is a registered LSVCC that has not given notification under that subsection.

Therefore, if a corporation that has given notification under subsection 204.81(8.3) that it intends to revoke its registration amalgamates or merges with a registered LSVCC that has not provided such notification under subsection 204.81(8.3), both corporations will be considered to have discontinued their venture capital business immediately before the time the corporations amalgamate or merge. In such a case, any predecessor corporation that is a registered LSVCC that has not given notification under subsection 204.81(8.3) will be subject to the tax in section 204.841.

This amendment comes into force on November 27, 2013.

Clause 26

Tax on Canadian Income of Non-Resident

ITA

212(1)

Section 212 of the Act imposes a tax, commonly referred to as a "non-resident withholding tax", on certain payments made by residents of Canada to non-residents.

New paragraph 212(1)(x) imposes withholding tax on the payment of an amount received by a non-resident under a contract to provide information to the Canada Revenue Agency (CRA) that was entered into under a program administered by the CRA to obtain information relating to tax non-compliance. This amendment ensures that non-resident withholding tax will apply to amounts paid out under the CRA's Offshore Tax Informant Program (OTIP), or a similar program, to a non-resident.

This amendment comes into force on Royal Assent.

Clause 27

Offences and Punishment

ITA
238(1)

Subsection 238(1) of the Act makes it an offence for a person to fail to comply with a number of provisions in the Act and the Income Tax Regulations. This subsection is amended, consequential on the introduction of the new reporting regime in respect of electronic funds transfers in Part XV.1 of the Act, to make it an offence to fail to comply with new section 244.7 of the Act, which sets out the record keeping requirements for Part XV.1.

This subsection is also amended, consequential on the introduction of Part XVIII of the Act, which requires reporting by financial institutions of financial accounts held by U.S. citizens and residents, and certain entities. Part XVIII adopts by reference definitions and procedures described in the Agreement between the Government of Canada and the Government of the United States of America to Improve International Tax Compliance through Enhanced Exchange of Information under the Convention between Canada and the United States of America with Respect to Taxes on Income and on Capital. Amended subsection 238(1) provides that it is an offence to fail to comply with new section 267 of the Act, which sets out the record keeping requirements for Part XVIII.

These amendments come into force on Royal Assent.

Clause 28

Where Taxpayer Information May be Disclosed

ITA
241

Section 241 of the Act prohibits the use or communication of taxpayer information except as otherwise permitted in that section or in certain other provisions in the Act. Subsection 241(4) nevertheless authorizes a government official to communicate taxpayer information in very limited circumstances.

ITA
241(4)(d)

New subparagraph 241(4)(d)(xv) is added to allow taxpayer information to be provided to an official of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) solely for the purpose of allowing FINTRAC to evaluate the usefulness of information provided by FINTRAC to the Canada Revenue Agency (CRA) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Providing this information to FINTRAC may allow FINTRAC to improve the quality of the information provided by FINTRAC to the CRA.

This amendment comes into force on Royal Assent.

ITA
241(4)(r)

Paragraph 241(4)(a) permits an official to provide taxpayer information to any person solely for the purpose of administering or enforcing any of the Acts referred to in that paragraph, including the Income Tax Act. That paragraph provides general authority for the CRA to provide information to others to the extent necessary to carry out the CRA's mandate to verify taxpayers' declarations.

New paragraph 241(4)(r) allows certain taxpayer information to be communicated to a person who has entered into a contract to provide information to the CRA under a program administered by the CRA to obtain information relating to tax non-compliance. The only taxpayer information that may be communicated to the person under the paragraph is information that informs the person of any amount they may be entitled to under the contract and the status of their claim under the contract. The introduction of paragraph 241(4)(r) does not affect the authority to provide taxpayer information under paragraph 241(4)(a).

The introduction of paragraph 241(4)(r) will allow certain information necessary for the operation of the CRA's Offshore Tax Informant Program (OTIP), or a similar program, to be provided to a person who has entered into a contract to provide information to the CRA under the program.

This amendment comes into force on Royal Assent.

ITA
241(4)(s)

New paragraph 241(4)(s) is added to allow taxpayer information, that can reasonably be considered to be relevant to a determination of whether a reporting entity (defined in section 244.1) has complied with a duty or obligation under Part XV.1 of the Act, to be provided to an official of the Financial Transactions and Reports Analysis Centre of Canada, solely for the purpose of ensuring compliance with Part 1 of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. The paragraph will not allow the sharing of information that directly or indirectly reveals the identity of a client, as defined in section 244.1. This amendment is consequential on the introduction of the new reporting regime in respect of electronic funds transfers in Part XV.1.

This amendment comes into force on Royal Assent.

Serious Offences

ITA
241(9.5)

Taxpayer information may be shared with law enforcement authorities in very limited circumstances. For example, officials of the Canada Revenue Agency (CRA) may share taxpayer information with the police when those officials are seeking information from the police that is relevant to the CRA's administration or enforcement of the Act. Information sharing with appropriate persons is also permitted where the taxpayer information relates to an imminent danger of death or physical injury to any individual.

The Act requires taxpayers to report certain information to the CRA (e.g., in annual income tax returns). The Act also allows the CRA to demand information from taxpayers, and inspect their books and records and other documents, for the purposes of administration and enforcement of the Act. The CRA is not generally permitted to use this authority for other purposes, such as to assist law enforcement authorities in the course of criminal investigations. 

However, there are occasions when CRA officials, in the course of their ordinary duties, become aware of information that a reasonable person would believe is evidence of the commission of a crime. Section 241 currently prevents the CRA from, on its own initiative, communicating such evidence to law enforcement authorities.

New subsection 241(9.5) responds to the 14 October 2010 recommendation of the Council of Fiscal Affairs of the Organisation for Economic Co-operation and Development (OECD) that member countries, in accordance with their legal systems, establish an effective legal and administrative framework and provide guidance to facilitate reporting by tax authorities of suspicions of serious crimes arising out of the performance of their duties, to the appropriate domestic law enforcement authorities. More specifically, subsection 241(9.5) permits a government official to provide taxpayer information to a law enforcement officer (e.g., a police officer) of an appropriate police organization (domestic or foreign) when the official has reasonable grounds to believe that the information will afford evidence of a listed offence. This provision does not provide the CRA with a mandate to use the information-collection authorities in the Act to conduct, or assist in the conduct of, criminal investigations. Nor does it permit the sharing of information on the basis of mere suspicion of the commission of a criminal offence.

New clauses 241(9.5)(a)(i)(A), (B) and (C) relate to bribery and the corruption of government officials. New clause 241(9.5)(a)(i)(D) and subparagraphs 241(9.5)(a)(ii) and (iii) reflect legislation enacted in the Safe Streets and Communities Act, S.C. 2012, c.1, to restrict the imposition of conditional sentences for serious crimes.

The administration of these new measures will be closely controlled within the CRA.

This amendment comes into force on Royal Assent.

Clause 29

Reporting of Electronic Funds Transfer

ITA
Part XV.1

New Part XV.1 of the Act is added to require certain financial entities to report to the Minister of National Revenue certain electronic transfers of funds of $10,000 or more into or out of Canada. Penalties of general application in Part I of the Act, for non-compliance with reporting requirements for information returns and for the failure to comply with a duty or obligation imposed under the Act or the Income Tax Regulations, apply in respect of the requirements under Part XV.1.

Subject to rules of application described in the commentary for the definitions "casino" and "money services business" and for subsection 244.2(5), Part XV.1 comes into force on January 1, 2015.

Definitions

ITA
244.1

New section 244.1 of the Act defines certain terms for the purposes of Part XV.1 of the Act.

"cash"

The definition "cash" provides a list of financial instruments considered to be cash for the purposes of Part XV.1. Financial instruments meeting the definition "cash" are funds, a term defined in this section.

"casino"

Subject to the amendment described below, a "casino" is, generally, an entity authorized by any of paragraphs 207(1)(a) to (g) of the Criminal Code to do business and that conducts its business in a permanent establishment where, generally, there is a slot machine, or roulette or card games are carried on. An entity meeting the definition "casino" is a reporting entity, as defined in this section, and is subject to the requirements in sections 244.2 and 244.3 of the Act to report certain electronic transfers of funds into or out of Canada.

It is proposed that this definition be amended effective from a date to be set by Order in Council. As of that date, a "casino" will include the government of a province authorized by paragraph 207(1)(a) of the Criminal Code to

The proposed definition will also include an organization that is authorized, in accordance with paragraph 207(1)(b) of the Criminal Code, to conduct and manage a lottery scheme that includes games of roulette or card games in a permanent establishment that is held out to be a casino, unless the organization is a registered charity and the lottery scheme is conducted or managed for a period of not more than two consecutive days at a time.

The proposed definition will also include the board of a fair or exhibition, or the operator of a concession leased by that board, that is authorized by paragraph 207(1)(c) of the Criminal Code to conduct and manage a lottery scheme that includes games of roulette or cards in a permanent establishment.

"client"

A "client" of a reporting entity is an entity that requests the reporting entity to send or receive an electronic funds transfer, and includes any entity on whose behalf the entity that makes the request is acting.

"credit union central"

The definition "credit union central" provides a list of entities that are considered a credit union central. An entity meeting the definition "credit union central" is a reporting entity, as defined in this section, and is subject to the requirement in section 244.2 to report certain electronic transfers of funds into or out of Canada.

"electronic funds transfer"

An "electronic funds transfer" is the transmission of instructions for an international transfer of funds through any electronic, magnetic or optical device, telephone instrument or computer. A transfer of funds within Canada is not an electronic funds transfer for the purposes of Part XV.1. Under section 244.2, reporting entities must report certain electronic funds transfers to the Minister of National Revenue.

"entity"

An "entity" means an individual, a body corporate, a partnership, a fund or an unincorporated association or organization.

"funds"

The definition "funds" provides a list of the financial instruments considered to be funds for purposes of Part XV.1 of the Act.

"money services business"

Subject to the amendment described below, a "money services business" means an entity engaged in one of the business activities listed in the definition. An entity meeting the definition "money services business" is a reporting entity, as defined in this section, and is subject to the requirement in section 244.2 to report certain electronic transfers of funds into or out of Canada.

It is proposed that this definition be amended effective from a date to be set by Order in Council. As of that date, a "money services business" will mean an entity that has a place of business in Canada and is engaged in the business of providing at least one of the services listed in the definition. It also means an entity that does not have a place of business in Canada and that is engaged in one of the business activities listed in the definition that is directed at entities in Canada and that provides those services to their customers in Canada.

"reporting entity"

The definition "reporting entity" provides a list of those entities (which are, generally, financial intermediaries) that are subject to the requirement in section 244.2 to report certain electronic transfers of funds into or out of Canada.

Electronic Funds Transfer

ITA
244.2

New subsection 244.2(1) of the Act requires every reporting entity that sends out of Canada, or receives from outside Canada, an electronic funds transfer of $10,000 or more to file an information return with the Minister of National Revenue.

New subsection 244.2(2) clarifies that, subject to subsection 244.2(3), a reporting entity is not required to file an information return with the Minister of National Revenue relating to an electronic funds transfer if the reporting entity has sent or received the electronic funds transfer to or from an entity in Canada, even if the final recipient or initial sender, as the case may be, is located outside Canada.

New paragraph 244.2(3)(a) provides that subsection 244.2(1) applies to a reporting entity that, at the request of a client (as defined in section 244.1), orders another reporting entity to send an electronic funds transfer out of Canada, unless the entity provides the other reporting entity with the client's name and address.

New paragraph 244.2(3)(b) provides that subsection 244.2(1) applies to a reporting entity if the entity receives an electronic funds transfer for a beneficiary in Canada from another reporting entity in circumstances where the initial sender is outside Canada, unless the transfer contains the beneficiary's name and address.

New subsection 244.2(4) provides that if, in respect of an electronic funds transfer, a reporting entity is acting as an agent of or is otherwise authorized by a second reporting entity, then the requirement in subsection 244.2(1) to report the transfer applies to the second reporting entity.

New subsection 244.2(5) will provide that subsection 244.2(1) does not apply to require reporting by a money services business that does not have a place of business in Canada in respect of services provided to entities outside of Canada. This subsection will apply as of a date to be set by Order in Council.

Casino

ITA
244.3

New section 244.3 of the Act provides that a casino is subject to the requirement in section 244.2 to file an information return if an international electronic funds transfer of $10,000 or more is made in the establishment of the casino during the course of a business temporarily conducted by a registered charity for a period of two consecutive days or less under the supervision of the casino.

Single Transaction

ITA
244.4

New subsection 244.4(1) of the Act provides a 24-hour rule to determine whether multiple funds transfers are to be considered a single transaction for the purposes of Part XV.1. Accordingly, a single transaction includes the sending or receiving within a 24-hour period of two or more international electronic funds transfers of less than $10,000 that together total $10,000 or more, if the transfers are conducted by, or on behalf of, the same entity.

New subsection 244.4(2) provides an exception to subsection 244.4(1). The 24-hour rule does not apply in respect of an electronic funds transfer sent to two or more beneficiaries if the transfer is sent at the request of certain entities listed in paragraphs 244.4(2)(a) to(e).

Foreign Currency

ITA
244.5

Every reporting entity that carries out an electronic funds transfer in a foreign currency must convert the amount of the transfer into Canadian dollars in order to determine whether the transfer is reportable to the Minister of National Revenue. Under new section 244.5 of the Act, reporting entities are required to convert the amount of a transfer using the official conversion rate of the Bank of Canada in effect at the time of the transfer. If the Bank of Canada rate is not available, the entity may convert the amount using the exchange rate the entity would use in the normal course of business at the time of the transfer.

Filing a Return

ITA
244.6

New section 244.6 of the Act provides that every reporting entity that is required to file an information return under Part XV.1 shall file the return no later than five working days after the date of the electronic funds transfer. The return is to be filed electronically if the reporting entity has the technical capabilities to do so.

Record Keeping

ITA
244.7

New subsection 244.7(1) of the Act requires every reporting entity to maintain adequate records. Such records must be kept as will enable the Minister of National Revenue to determine whether the reporting entity has complied with its duties and obligations under Part XV.1. New subsection 244.7(2) allows records to be retained in machine-readable, or electronic, format if a paper copy can be readily produced from it. New subsection 244.7(3) requires that records in respect of an electronic funds transfer be retained for five years from the date of the transfer.

Clause 30

Definitions

ITA
248(1)

Subsection 248(1) of the Act provides a number of definitions that apply for the purposes of the Act.

"credit union"

The definition "credit union", which has the meaning assigned by subsection 137(6), is amended consequential on the introduction of the new reporting regime in respect of electronic funds transfers in Part XV.1 of the Act, to provide that this definition does not apply for the purposes of Part XV.1.

This amendment comes into force on January 1, 2015.

Non-Application of Subsection 248(35)

ITA
248(37)

Subsection 248(37) of the Act provides exceptions to the application of subsection 248(35). In general, subsection 248(35) deems the fair market value of certain donated property to be the lesser of the actual fair market value of the property and its cost to the donor. This is relevant in, among other things, determining the eligible amount of a gift under subsection 248(31). By virtue of paragraph 248(35)(a), subsection 248(35) applies to donated property acquired by the donor as part of a gifting arrangement that is a tax shelter.

Subsection 248(37) excepts donated property from subsection 248(35) if it is an ecological gift, inventory, real property situated in Canada, a publicly-traded security or, under paragraph 248(37)(c), cultural property the value of which is certified by the Cultural Property Export Review Board.

Paragraph 248(37)(c) is amended to provide that the exception in subsection 248(37) will not apply to certified cultural property that was acquired by the donor as part of a gifting arrangement that is a tax shelter.

This amendment applies to gifts made after February 10, 2014.

Financial Administration Act

Clause 31

Tabling of List – Legislative Proposals

FAA

162

New section 162 of the Financial Administration Act requires the Minister of Finance to table in the House of Commons, on or before its fifth sitting day after October 31 of each year, a list of every specific legislative proposal that the government has, since the last general election and before the beginning of the previous fiscal year, publicly announced its intention to implement and that has not yet been enacted, or made, in substantially the same form as the proposal or in a form that reflects consultations and deliberations relating to the proposal.

This requirement applies with respect to specific legislative proposals to amend:

This list will not include a specific legislative proposal that has been publicly withdrawn or an announcement of a general intention to develop a specific legislative proposal. Comfort letters issued by the Department of Finance do not constitute specific legislative proposals publicly announced by the government and will not be included in the lists that are tabled in the House of Commons. The Minister will not be required to table if there are no specific legislative proposals that qualify for inclusion on the list.

For example, a government elected in October 2015 would be required to table a list on or before the fifth sitting day of the House of Commons after October 31, 2017. This list would set out any specific legislative proposals that the government has publicly announced since the election and before April 1, 2016 (and that have not been implemented or withdrawn). The government would table another list on or before the fifth sitting day of the House of Commons after October 31, 2018. This list would set out specific legislative proposals announced by the government since the election and before April 1, 2017 (and that have not been implemented or withdrawn). 

New section 162 comes into force on Royal Assent.

Income Tax Regulations

Clause 32

Non-Periodic Payments

ITR

103(9)

Part I of the Income Tax Regulations (the Regulations) provides rules concerning the amounts to be withheld on account of tax by a person paying an amount.

Subsection 103(9) of the Regulations is added to prescribe the amounts to be withheld in respect of amounts received by a person resident in Canada under a contract to provide information to the Canada Revenue Agency (CRA) that was entered into under a program administered by the CRA to obtain information relating to tax non-compliance. The withholding rate is 30% where a payment is made to a resident of Quebec and 50% where a payment is made to a Canadian resident who is not a resident of Quebec. This amendment ensures that appropriate withholding will apply to amounts paid out under the CRA's Offshore Tax Informant Program (OTIP), or a similar program, to residents of Canada.

This amendment comes into force on Royal Assent.

Clause 33

Remittances to Receiver General

ITR
108(1.1), (1.11) & (1.2)

The rules for the remittance to the Receiver General of source deductions by employers and other payers of remuneration are set out in section 108 of the Regulations. The frequency with which remittances are required to be made in a particular calendar year depends on the level of average monthly withholdings of the remitter for the second calendar year preceding the particular year. Monthly withholdings include withholdings on account of income tax, Canada Pension Plan contributions and employment insurance premiums.

Subsection 108(1.1) of the Regulations is amended to increase the threshold level of average monthly withholdings

Subsection 108(1.11) of the Regulations permits remitters to elect to instead base their remittances on their average monthly withholdings for the calendar year immediately preceding the particular year. This subsection is amended to increase the preceding year's threshold level of average monthly withholdings

The same changes are also made to section 8 of the Canada Pension Plan Regulations and section 4 of the Insurable Earnings and Collection of Premiums Regulations.

These amendments apply to amounts deducted or withheld after 2014.

Subparagraph 108(1.2)(a)(iii) of the Regulations is amended to remove the reference to the Unemployment Insurance Act, which has been repealed.

This amendment applies on Royal Assent.

Clause 34

Payments to Non-Residents

ITR
202(2)

Part II of the Regulations provides rules setting out the various circumstances under which an information return is required to be prepared in connection with payments to non-residents.

Paragraph 202(2)(m) of the Regulations is amended to provide that any person resident in Canada who has paid or credited an amount to a person not resident in Canada, under a contract to provide information to the Canada Revenue Agency (CRA) that was entered into under a program administered by the CRA to obtain information relating to tax non-compliance, must file an information return reporting the amount. This amendment provides that an information return is required with respect to any amount paid out under the CRA's Offshore Tax Informant Program (OTIP), or a similar program, to a non-resident.

This amendment comes into force on Royal Assent.

Clause 35

Provincial Wind-Up Rules for LSVCCs – Ontario

ITR
6708

Section 6708 of the Regulations sets out provincial wind-up rules that are prescribed for the purposes of paragraph 204.8(2)(b) and subsection 204.81(8.3) of the Act. Section 6708 is amended to remove the reference to subsection 204.81(8.3), consequential on the extension of the transitional rules for labour-sponsored venture capital corporations (LSVCCs) in subsection 204.81(8.3) to any federally registered LSVCC. For further information, see the commentary on subsection 204.81(8.3).

This amendment comes into force on November 27, 2013.

Clause 36

Underfunded Pension

ITR

8517(3.01)

Subsection 147.3(4) of the Act permits a tax-free transfer of a single amount on behalf of an individual from a defined benefit (DB) provision of a registered pension plan (RPP) to a registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or money purchase provision of an RPP, in lieu of the individual's entitlement to benefits payable from the DB provision. Paragraph 147.3(4)(c) requires that the amount not exceed a prescribed amount. Section 8517 of the Regulations contains the rules for determining the prescribed amount for this purpose.

Subsection 8517(1) sets out the basic rule for determining the prescribed amount limit, which is generally the result obtained by multiplying the lifetime retirement benefits commuted in connection with the transfer by the present value factor that corresponds to the individual's age at the time of the transfer. 

Subsections 8517(3) to (3.02) provide a modified pension transfer limit calculation that generally allows a larger portion of a commutation payment from an underfunded DB RPP to be transferred to other retirement savings vehicles (noted above) in cases of employer insolvency. New subsection 8517(3.001) allows this modified pension transfer limit calculation to apply in additional circumstances.

In particular, the modified pension transfer limit will also generally be available for pension members in cases where plan assets are insufficient to pay the benefits provided under the DB provisions as registered if certain conditions are met. One condition is that the Minister of National Revenue has approved the application of subsection 8517(3.01) (the modified pension transfer limit) in respect of the transfer. In addition, if the plan is not an individual pension plan, then the reduction in the lifetime retirement benefits paid or payable to the plan member must be approved under the relevant pension benefits standards legislation. If the plan is an individual pension plan, then the transfer payment must be the last payment to the plan member from the plan and all remaining property held in connection with the plan must be paid out of the plan within 90 days of the transfer.

Subsection 8517(3.01) is amended to add a reference to new paragraph 8517(3.001)(b). As well, the subsection is amended to replace "shall" with "is to". This change is stylistic and does not change the operation of the rule. 

These amendments apply in respect of commutation payments made after 2012.

Clause 37

Prescribed Persons

ITR
9000

The definition "financial institution" in subsection 142.2(1) of the Act excludes, under paragraph (e) of the definition, a prescribed person or partnership. Section 9000 of the Regulations prescribes for this purpose certain related segregated fund trusts (as defined in paragraph 138.1(1)(a) of the Act).

Section 9000 is amended to prescribe the Business Development Bank of Canada and BDC Capital Inc. under paragraphs 9000(a) and (b), respectively. The existing prescription of certain related segregated fund trusts is maintained under paragraph 9000(c). As well, the heading before section 9000 is amended to refer to a "prescribed person" rather than a "prescribed trust".

This amendment applies to taxation years that end after November 29, 2013.

Canada Pension Plan Regulations

Clause 38

Remittances to Receiver General

CPPR

8(1.1) & (1.11)

Subsection 8(1.1) of the Canada Pension Plan Regulations prescribes the frequency with which remittances of Canada Pension Plan contributions are required to be made to the Receiver General in a particular calendar year. The frequency depends on the level of average monthly withholdings of the remitter for the second calendar year preceding the particular year. Subsection 8(1.11) permits remitters to elect to instead base their remittances on their average monthly withholdings for the calendar year immediately preceding the particular year.

Subsections 8(1.1) and 8(1.11) are amended to increase the threshold levels at which employers are required to remit contributions. These amendments are made concurrently with amendments to subsections 108(1.1) and (1.11) of the Income Tax Regulations and to subsections 4(2) and (3) of the Insurable Earnings and Collection of Premiums Regulations. For more information, see the commentary on subsections 108(1.1) and (1.11) of the Income Tax Regulations.

These amendments apply to amounts deducted or withheld after 2014.

Insurable Earnings and Collection of Premiums Regulations

Clause 39

Remittances to Receiver General

IECPR

4

Subsection 4(2) of the Insurable Earnings and Collection of Premiums Regulations prescribes the frequency with which remittances of employment insurance premiums are required to be made to the Receiver General in a particular calendar year. The frequency depends on the level of average monthly withholdings of the remitter for the second calendar year preceding the particular year. Subsection 4(3) permits remitters to elect to instead base their remittances on their average monthly withholdings for the calendar year immediately preceding the particular year.

Subsections 4(2) and 4(3) are amended to increase the threshold levels at which employers are required to remit premiums. These amendments are made concurrently with amendments to subsections 108(1.1) and (1.11) of the Income Tax Regulations and to subsections 8(1.1) and 8(1.11) of the Canada Pension Plan Regulations. For more information, see the commentary on subsections 108(1.1) and (1.11) of the Income Tax Regulations.

These amendments apply to amounts deducted or withheld after 2014.

Part 2
Amendments to the Excise Tax Act (GST/HST Measures)

Excise Tax Act

Clause 40

Election for Closely Related Persons

ETA
156

Section 156 of the Excise Tax Act (the Act) allows certain members of a qualifying group of corporations and/or Canadian partnerships (as those terms are defined in subsection 156(1)) – resident in Canada and engaged exclusively in commercial activities – to elect under subsection 156(2) to treat certain supplies between them as having been made for nil consideration. The effect is that electing members need not account for otherwise fully recoverable tax on the supplies.

Subclause 40(1)

Definition "qualifying member"

ETA
156(1)

Subsection 156(1) provides definitions that apply for the purposes of section 156. Subsection 156(1) is amended to modify the definition "qualifying member".

Existing definition "qualifying member" means a registrant (as defined in subsection 123(1) of the Act) that is a corporation resident in Canada or a Canadian partnership and that meets the conditions contained in paragraphs (a) to (c) of the definition. Currently, paragraph (c) of the definition requires that the registrant meets the condition that all or substantially all of its property (other than financial instruments) was last manufactured, produced, acquired or imported for consumption, use or supply exclusively in the course of its commercial activities or, if it has no property (other than financial instruments), all or substantially all of its supplies are taxable supplies.

Paragraph (c) of the definition "qualifying member" is amended to exclude, in addition to financial instruments, property of nominal value (e.g., a pencil) from the property that can be considered for the purposes of determining if a registrant meets the property condition of the paragraph as described above.

Paragraph (c) is also amended to add new subparagraph (iii), which allows a registrant that has no property (other than financial instruments or property of nominal value) and that has not made taxable supplies to satisfy the requirement of paragraph (c) if it is reasonable to expect that the registrant will meet all of the following conditions:

Where it is anticipated that the registrant will be merged, amalgamated or wound up within the next twelve months and section 271 or 272 of the Act applies to the merger, amalgamation or wind-up and where it is reasonable to expect that the corporation resulting from the merger or amalgamation – or the parent in the case of a wind-up – will meet the three above conditions throughout the remainder of the twelve months, the registrant would still be regarded as having met those three conditions for the purposes of this definition.

These amendments come into force on January 1, 2015.

Subclause 40(2)

Election for nil consideration

ETA
156(2)

Existing subsection 156(2) allows certain members (defined as "specified members" in subsection 156(1)) of a qualifying group to elect to treat certain taxable supplies between them as having been made for no consideration. Subsection 156(2) is amended to provide that, in order for two specified members of a closely related group to treat taxable supplies made between them as having been made for no consideration, one of the specified members must, at any time after 2014, file with the Minister of National Revenue an election made jointly by the two specified members. New paragraph 156(4)(b) provides the requirements that the specified members must meet to validly file the election.

This amendment applies to any supply made after 2014.

Subclause 40(3)

Elections filed before 2015

ETA
156(2.01)

New subsection 156(2.01) contains a deeming rule for the purposes of this section. It provides that if an election under subsection 156(2) between two specified members of a qualifying group has been filed before January 1, 2015, that election is deemed never to have been filed. As a result, if two specified members have made an election under subsection 156(2) and prior to January 1, 2015 filed that election with the Minister of National Revenue, one of the two specified members must again  file the election after 2014 in order for the election to apply to taxable supplies made between the specified members after 2014.

This amendment comes into force on January 1, 2015.

Subclause 40(4)

Form of election and revocation

ETA
156(4)

Existing subsection 156(4) provides the requirements that two specified members of a qualifying group must meet to either make a valid election under subsection 156(2) or a valid revocation of an election made under subsection 156(2). Currently, the election or the revocation of an election is required to be made in prescribed form containing prescribed information and to specify the effective date of the election or revocation, as the case may be.

Subsection 156(4) is amended to specify that, in order for such an election or revocation to be valid, the election or the revocation must also be filed with the Minister of National Revenue in prescribed manner on or before

This amendment applies in respect of an election or a revocation the effective date of which is after 2014 and in respect of an election that is in effect on January 1, 2015. However, in the case of an election under subsection 156(2) that is also in effect before 2015 – and in the case of a revocation of an election made under subsection 156(2) that is in effect before 2015 where that revocation is to become effective before 2016 – new paragraph 156(4)(b) is to be read as instead requiring that the particular election, or the revocation of the particular election, as the case may be, must be filed with the Minister after 2014 and before January 1, 2016 or any later day that the Minister may allow.

Subclause 40(5)

Joint and several liability

ETA
156(5)

New subsection 156(5) introduces a joint and several liability provision with respect to an election made under subsection 156(2).  Subsection 156(5) provides that, where two specified members of a qualifying group jointly make an election under subsection 156(2), a joint and several, or solidary (for civil law purposes), liability is created under certain conditions. The liability is for all obligations under Part IX of the Act that result upon, or as a consequence of, a failure to account for or pay as and when required under Part IX an amount of net tax of either specified member.

The liability is created if two conditions are satisfied. The first condition is that the failure is in respect of net tax that is attributable to a particular supply made at any time between the two specified members. The second condition is that one of the two following situations exists. The first situation is that an election under subsection 156(2) made jointly by the two specified members is in effect at the time the particular supply is made or had ceased to be in effect before the time the particular supply was made but the two specified members conducted themselves as if the election were in effect at the time the particular supply is made. The second situation is that no valid election had been made jointly by the two specified members but they claim that they have made an election under subsection 156(2) before the time the particular supply was made and they are conducting themselves as if an election under subsection 156(2) made jointly by them were in effect at that time.

This amendment applies to supplies made after 2014.

Clause 41

Import Arrangements – Effects of Agreement

ETA
178.8(7)(c)(ii)

Existing section 178.8 of the Act addresses circumstances in which a person (referred to as the "constructive importer") is the recipient of a supply made outside Canada of goods that are imported into Canada for that person's consumption, use or re-supply and that are not supplied by that person outside Canada before their release, but is not the person by or on whose behalf the goods are accounted for under the Customs Act at the time of their importation.

By virtue of subsection 178.8(7), if the person (referred to as the "specified importer") who is identified as the importer of the goods for the purposes of the Customs Act when the goods were accounted for under that Act and the constructive importer so agree under subsection 178.8(5), the specified importer may claim any rebate, abatement or refund of tax that may be available as a result of the application of subsection 215.1(2) or (3) or 216(6) or (7) of the Act, but only if the specified importer issues to the constructive importer a "tax adjustment note" indicating the amount of the rebate, abatement or refund. The consequences for the constructive importer who receives a tax adjustment note are similar to those that result from a person receiving a credit note issued under section 232 of the Act by a supplier in respect of a domestic supply.

For instance, subparagraph 178.8(7)(c)(ii) provides that if the constructive importer receives a tax adjustment note indicating the amount of a rebate, abatement or refund, the amount of the rebate, abatement or refund shall be added in determining the net tax of the constructive importer for the reporting period in which the tax adjustment note is received, to the extent that the amount has been included in determining an input tax credit claimed by the constructive importer in a return filed for that or a preceding reporting period of the constructive importer.

A person is not entitled to claim an input tax credit in a reporting period in respect of an amount of tax for which the person receives a tax adjustment note before the end of that reporting period.

Consequently, subparagraph 178.8(7)(c)(ii) is amended to remove the superfluous reference to input tax credits claimed in a return filed for the reporting period in which a tax adjustment note is issued.

This amendment applies to goods imported on or after October 3, 2003 and to goods imported before that day that were not accounted for under section 32 of the Customs Act before that day.

Clause 42

Drop Shipments - Certificates

ETA
179(2)

The drop-shipment rules in section 179 of the Act allow an unregistered non-resident person to acquire in Canada goods, or services in respect of goods, on a tax-free basis, provided the goods are ultimately exported or are retained in Canada exclusively for consumption, use or supply in the course of a commercial activity of a registrant. Subsection 179(2) provides for a system of certificates for use in drop-shipment transactions. Among other things, a drop shipment certificate must indicate the GST/HST registration number of the consignee that is providing the certificate.

Paragraph 179(2)(c) is amended to replace the reference to the registration number assigned under subsection 241(1) of the Act with a reference to the registration number assigned under section 241. This amendment is consequential to the addition of the authority to register and assign a GST/HST registration number under new subsection 241(1.5).

This amendment comes into force on Royal Assent.

Clause 43

Restriction on Recovery

ETA
180.01

New section 180.01 of the Act applies in situations where a particular person is deemed under paragraph 180(d) of the Act to have paid an amount of tax equal to the amount of tax referred to in paragraph 180(b) that has been paid by a non-resident person. In this case, section 180.01 prevents subsection 232(3) of the Act from applying in respect of the tax paid by the non-resident person. Section 180.01 also prevents any portion of the tax paid by the non-resident person from being rebated, refunded or remitted to the non-resident person, or otherwise being recovered by the non-resident person, under this or any other Act of Parliament.

This amendment is deemed to have come into force on January 17, 2014.

Clause 44

Restriction – Net Tax

ETA
225(3.1)

Existing subsection 225(3.1) of the Act provides that an amount otherwise qualifying in a particular period as an input tax credit may not be claimed by a person in its net tax calculation if, before the end of the period, the amount was refunded or remitted to the person under this or any other Act of Parliament.

For greater certainty, subsection 225(3.1) is amended to clarify that a person cannot reduce its net tax by any amount included in an adjustment, refund or credit for which a credit note referred to in subsection 232(3) of the Act has been received by the person, or a debit note referred to in that subsection has been issued by the person or by any amount that has otherwise been rebated, refunded or remitted to the person, or has otherwise been recovered by the person, under this or any other Act of Parliament.

This amendment is deemed to have come into force on April 23, 1996.

Clause 45

Restriction – Net Tax

ETA
225.1(4.1)

Existing subsection 225.1(4.1) of the Act provides that an amount otherwise qualifying in a particular period as an input tax credit may not be claimed by a charity in its net tax calculation if, before the end of the period, the amount was refunded or remitted to the charity under this or any other Act of Parliament.

For greater certainty, subsection 225.1(4.1) is amended to clarify that a charity cannot reduce its net tax by any amount included in an adjustment, refund or credit for which a credit note referred to in subsection 232(3) of the Act has been received by the charity, or a debit note referred to in that subsection has been issued by the charity or by any amount that has otherwise been rebated, refunded or remitted to the charity, or has otherwise been recovered by the charity, under this or any other Act of Parliament.

This amendment applies for the purpose of determining the net tax of a charity for reporting periods beginning after 1996.

Clause 46

Credit or Debit Notes

ETA
232(3)(c)

Existing section 232 of the Act sets out the rules relating to refunds or adjustments of tax. For instance, existing paragraph 232(3)(a) of the Act requires a supplier to issue a credit note to the recipient of a supply, unless the recipient issues a debit note, where the supplier makes an adjustment, refund or credit of tax in respect of the supply to the recipient. If the tax adjusted, refunded or credited has already been remitted by the supplier as part of the supplier's net tax for the reporting period or a preceding reporting period, the supplier is allowed under paragraph 232(3)(b), if all other conditions under Part IX of the Act are met, to deduct the tax amount so adjusted, refunded or credited in determining the net tax of the supplier for the reporting period in which the credit note is issued or the debit note is received. Conversely, under paragraph 232(3)(c), the recipient is to add the tax amount so adjusted, refunded or credited in determining the net tax of the recipient for the reporting period in which the credit note is received, or the debit note is issued, by the recipient to the extent the tax amount in question had been included in determining an input tax credit claimed by the recipient in a return filed for the reporting period or a preceding reporting period.

A person is not entitled to claim an input tax credit in a reporting period in respect of an amount of tax for which the person receives a credit note, or issues a debit note, before the end of that reporting period. Consequently, subparagraph 232(3)(c) is amended to remove the superfluous reference to input tax credits claimed in the reporting period in which a credit or debit note is issued.

This amendment is deemed to have come into force on April 23, 1996.

Clause 47

Registration

ETA
241

Existing section 241 of the Act provides authority for the Minister of National Revenue to register a person applying for registration for GST/HST purposes.

Section 241 is amended to add new subsections 241(1.3), (1.4) and (1.5). These amendments set out the rules to allow registration by the Minister of a person who has failed to apply for registration as and when required.

The amendments to section 241 come into force on Royal Assent.

Notice of Intent

ETA
241(1.3)

New subsection 241(1.3) provides that, if the Minister of National Revenue has reason to believe that a person that is not registered for GST/HST purposes is required to be registered, the Minister may send a notice in writing (a "notice of intent") to the person that the Minister proposes to register the person.

Representations to Minister

ETA
241(1.4)

New subsection 241(1.4) provides that, upon receipt of a notice of intent, a person must apply for registration or establish to the satisfaction of the Minister of National Revenue that the person is not required to be registered for GST/HST purposes.

Registration by Minister

ETA
241(1.5)

New subsection 241(1.5) provides that if, after 60 days after the day on which a notice of intent was sent by the Minister of National Revenue to a person, the person has not applied for registration and the Minister is not satisfied that the person is not required to be registered for GST/HST purposes, the Minister may register the person. Upon doing so, the Minister must assign a registration number to the person and notify the person in writing of the registration number and the effective date of the registration, which effective date is not to be earlier than 60 days after the particular day on which a notice of intent was sent by the Minister to the person.

Clause 48

Electronic Funds Transfer

ETA
Heading for Subdivision b.3 of Division VII

This heading is changed to remove the reference to "financial institutions" as a consequence of the addition of a new section 273.3 of the Act, which relates to information returns filed under new Part XV.1 of the Income Tax Act by certain financial entities that are not necessarily financial institutions for the purposes of Part IX of the Act.

This amendment comes into force on January 1, 2015.

Clause 49

Electronic Funds Transfer

ETA
273.3

New section 273.3 of the Act provides, for greater certainty, that information obtained under Part XV.1 of the Income Tax Act (ITA) by the Minister of National Revenue may be used for the purposes of Part IX of the Act.  New Part XV.1 of the ITA requires certain financial entities to report international electronic funds transfers of $10,000 or more to the Minister.

Section 273.3 comes into force on January 1, 2015, the same day that Part XV.1 of the ITA comes into force.

Clause 50

Where Confidential Information May be Disclosed

ETA
295

Existing section 295 of the Act prohibits the use or communication of confidential information except as otherwise permitted in that section. Subsection 295(5) nevertheless authorizes a government official to communicate confidential information in very limited circumstances.

Subclause 50(1)

Disclosure of Confidential Information

ETA
295(5)(d)

New subparagraph 295(5)(d)(viii) is added to allow confidential information to be provided to an official of the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) solely for the purpose of allowing FINTRAC to evaluate the usefulness of information provided by FINTRAC to the Canada Revenue Agency (CRA) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Providing this information to FINTRAC may allow FINTRAC to improve the quality of the information provided by FINTRAC to the CRA.

This amendment comes into force on Royal Assent.

Subclause 50(2)

Disclosure of Confidential Information

ETA
295(5)(o)

Paragraph 295(5)(a) permits an official to provide confidential information to any person solely for the purpose of administering or enforcing the Act. That paragraph provides general authority for the Canada Revenue Agency (CRA) to provide information to others to the extent necessary to carry out the CRA's mandate to verify a person's tax liability under the Act.

New paragraph 295(5)(o) allows certain confidential information to be communicated to a person who has entered into a contract to provide information to the CRA under a program administered by the CRA to obtain information relating to tax non-compliance. The only confidential information that may be communicated to the person is information that informs the person of any amount they may be entitled to under the contract and the status of their claim under the contract. The introduction of paragraph 295(5)(o) does not affect the authority to provide confidential information under paragraph 295(5)(a).

The introduction of paragraph 295(5)(o) will allow certain information necessary for the operation of the CRA's Offshore Tax Informant Program (OTIP), or a similar program, to be provided to a person who has entered into a contract to provide information to the CRA under the program.

This amendment comes into force on Royal Assent.

Subclause 50(3)

Serious Offences

ETA
295(5.04)

Confidential information may be shared with law enforcement authorities in very limited circumstances. For example, officials of the Canada Revenue Agency (CRA) may share confidential information with the police when those officials are seeking information from the police that is relevant to the CRA's administration or enforcement of the GST/HST. Information sharing with appropriate persons is also permitted where the information relates to an imminent danger of death or physical injury to any individual.

Part IX of the Act requires businesses and other persons to report certain information to the CRA (e.g., in GST/HST returns). Part IX also allows the CRA to demand information, and inspect books and records and other documents, for the purposes of the administration and enforcement of the GST/HST. The CRA is not generally permitted to use this authority for other purposes, such as to assist law enforcement authorities in the course of criminal investigations.

However, there are occasions when CRA officials, in the course of their ordinary duties, become aware of information that a reasonable person would believe is evidence of the commission of a crime. Section 295 currently prevents the CRA from, on its own initiative, communicating such evidence to law enforcement authorities.

New subsection 295(5.04) responds to the 14 October 2010 recommendation of the Council of Fiscal Affairs of the Organisation for Economic Co-operation and Development (OECD) that member countries, in accordance with their legal systems, establish an effective legal and administrative framework and provide guidance to facilitate reporting by tax authorities of suspicions of serious crimes arising out of the performance of their duties, to the appropriate domestic law enforcement authorities. More specifically, subsection 295(5.04) permits a government official to provide confidential information to a law enforcement officer (e.g., a police officer) of an appropriate police organization (domestic or foreign) when the official has reasonable grounds to believe that the information will afford evidence of a listed offence. This provision does not provide the CRA with a mandate to use the information-collection authorities in Part IX to conduct, or assist in the conduct of, criminal investigations. Nor does it permit the sharing of information on the basis of mere suspicion of the commission of a criminal offence.

New clauses 295(5.04)(a)(i)(A), (B) and (C) relate to bribery and the corruption of government officials. New clause 295(5.04)(a)(i)(D) and subparagraphs 295(5.04)(a)(ii) and (iii) reflect legislation enacted in the Safe Streets and Communities Act, S.C. 2012, c.1,to restrict the imposition of conditional sentences for serious crimes.

The administration of these new measures will be closely controlled within the CRA.

This amendment comes into force on Royal Assent.

Clause 51

Tax Deemed Not Assessed

ETA
300.1

New section 300.1 of the Act provides that certain amounts that are assessed are not to be treated as an amount payable or remittable under Part IX of the Act as a result of an assessment until the amount is collected by the Minister of National Revenue for the purpose of any agreement entered into by the federal government under section 8.3 of the Federal-Provincial Fiscal Arrangements Act (e.g., Comprehensive Integrated Tax Coordination Agreements entered into between the federal and provincial governments in respect of sales tax harmonization). This will apply to amounts assessed if information relevant to the assessment was provided to the Canada Revenue Agency (CRA) under a contract entered into by a person under a program administered by the CRA to obtain information relating to tax non-compliance.

As a consequence, if information relevant to the assessment of an amount is provided to the CRA under the CRA's Offshore Tax Informant Program (OTIP), or a similar program, then the amount will not be treated as an amount payable or remittable as the result of an assessment for the purpose of an agreement entered into by the federal government under section 8.3 of the Federal-Provincial Fiscal Arrangements Act until the amount has been collected.

This amendment comes into force on Royal Assent.

Clause 52

Practitioner

ETA
Sch. V, Pt. II, section 1

The definition "practitioner" in section 1 of Part II of Schedule V to the Act lists the types of health care professionals who are not required to charge tax in respect of their supplies of health care services itemized in sections 7 and 7.1 of Part II of Schedule V.

The definition "practitioner" is amended to add those persons practising the profession of acupuncture or naturopathy as a naturopathic doctor to the list.

The amendment applies to supplies made after February 11, 2014.

Clause 53

Acupuncture and Naturopathic Services

ETA
Sch. V, Pt. II, section 7

Existing section 7 of Part II of Schedule V to the Act lists the services of health care practitioners whose supplies are exempt in all provinces from the GST/HST even when made in a province that does not cover the services under its own provincial health care plan.

The amendment adds acupuncture services (under new paragraph (l)) and naturopathic services (under new paragraph (m)) to the list of exempt health care services if the service is rendered to an individual by a practitioner of the service. The professions of acupuncture and naturopathy as a naturopathic doctor satisfy the policy criteria for GST/HST exemption since each of them is regulated as a health profession in at least five provinces.

The amendment applies to supplies made after February 11, 2014.

Clause 54

Service of Designing a Training Plan

ETA
Sch. V, Pt. II, section 14

Existing section 14 of Part II of Schedule V to the Act has the effect of exempting supplies of training services that are specially designed to assist individuals with a disorder or disability in coping with the effects of the disorder or disability or to alleviate or eliminate those effects. In order to qualify for the exemption, the training must be given to the individual with the disorder or disability or to another individual who provides personal care or supervision for such an individual otherwise than in a professional capacity and the supply of the training service must meet one of the conditions listed in subparagraphs 14(b)(i) to (iii).

Section 14 is amended to expand the exemption to include supplies of services of designing training plans for training that is specially designed to assist individuals with a disorder or disability in coping with the effects of the disorder or disability or to alleviate or eliminate those effects. The amendments also provide that the supplies of services of designing training plans must meet one of the conditions listed in subparagraphs 14(b)(i) to (iii) to qualify for exemption, as is currently the case for the supplies of training services.

The amendments apply to supplies made after February 11, 2014.

Clause 55

Service of Designing a Training Plan

ETA
Sch. V, Pt. II, section 15

Existing section 15 of Part II of Schedule V to the Act excludes from the term "training service", for the purposes of section 14, any training that is similar to training offered to the general public.

Consequential to the amendments to section 14 to exempt supplies of services of designing training plans for specially-designed training, section 15 is amended to provide that supplies of services of designing training plans are not exempt under section 14 if the training is similar to training offered to the general public.

The amendment applies to supplies made after February 11, 2014.

Clause 56

Charity Parking

ETA
Sch. V, Pt. V.1, section 1

Section 1 of Part V.1 of Schedule V to the Act exempts all supplies of property and services made by a charity that is not a public institution as defined in subsection 123(1) of the Act, except those supplies listed in paragraphs (a) to (n). Public institutions are public colleges, universities, school authorities, hospital authorities and local authorities determined to be a municipality for all purposes of Part IX of the Act that are also a registered charity or registered Canadian amateur athletic association within the meaning of the Income Tax Act.

Section 1 is amended by adding new paragraph (o) to exclude from exemption supplies of parking spaces when the three conditions in each of subparagraphs 1(o)(i) to (iii) are met.

New subparagraph 1(o)(i) provides as the first condition for exclusion from exemption that the supply of a parking space be made for consideration, by way of lease, licence or similar arrangement and in the course of a business carried on by the charity that makes the supply. For example, a supply of a parking space by a charity would continue to be exempt under section 1 if it is a supply that is not made in the course of a business of the charity.

New subparagraph 1(o)(ii) provides the second condition for exclusion of a supply of a parking space from exemption, which is based upon the expected use of the specified parking area in relation to the supply of the parking space. The new term "specified parking area" in relation to the supply of a parking space is defined in section 1 of Part VI of Schedule V to the Act. In order for this second condition to be met, it must be reasonable to expect, at the time when the supply of the parking space is made, that the specified parking area in relation to the supply of the parking space will be used, during the calendar year in which the supply is made, primarily by individuals who are accessing property of, or facilities or establishments operated by, persons that are a municipality, a school authority, a hospital authority, a university or a public college. For example, this condition would be met if it is reasonable to expect when a supply of a parking space is made that the specified parking area in relation to the supply of the parking space will be used primarily during the calendar year by students, faculty or other individuals accessing a university campus or either a university or a public college campus.

New subparagraph 1(o)(iii) provides the third condition for exclusion from exemption which can be met in any of the three ways described in new clauses 1(o)(iii)(A) to (C).

Under new clause 1(o)(iii)(A), this third condition can be met if the charity that makes the supply of a parking space is expected under its governing documents to use a significant part of its income or assets for the benefit of any particular municipality, school authority, hospital authority, university or public college, or several of them, in relation to which the reasonable expectation for use of parking spaces condition in new subparagraph 1(o)(ii) is met. For example, this condition would be met if it is reasonable to expect when a supply of a parking space is made by a charity that the specified parking area in relation to the supply of the parking space will be used primarily during the calendar year by patients, staff or other individuals accessing a public hospital operated by a hospital authority and under the charity's bylaws it can be expected that a significant part of the charity's income or assets will be used for the benefit of the hospital or the hospital authority.

Under new clause 1(o)(iii)(B), the third condition for exclusion from exemption can be met if the charity that makes the supply of a parking space and a particular entity that is a municipality, school authority, hospital authority, university or public college in relation to which the reasonable expectation for use of parking spaces condition in new subparagraph 1(o)(ii) is met have entered into one or more agreements in respect of the use of the parking spaces by the individuals who are accessing a property of, or a facility or establishment operated by, the particular entity. For example, this condition would be met if it is reasonable to expect when a supply of a parking space is made that the specified parking area in relation to the supply of the parking space will be used primarily during the calendar year by students, staff, and other individuals accessing a public college facility and a charity that makes the supply and the public college have entered into an agreement, with each other or other entities, reserving some of the parking spaces for use by employees who work at the public college.

Under new clause 1(o)(iii)(C), this third condition can also be met for a supply of a parking space by a charity if a particular municipality, school authority, hospital authority, university or public college in relation to which the reasonable expectation for use of parking spaces condition in new subparagraph 1(o)(ii) is met performs any function or activity in respect of supplies by the charity of parking spaces in the specified parking area in relation to the supply of the parking space (e.g., snow removal or deduction of fees for parking at the specified parking area from employee wages).

This amendment applies to any supply made after March 21, 2013.

A special rule is provided in respect of supplies of parking spaces made after March 21, 2013 (the day on which Economic Action Plan 2013 was tabled) and on or before January 24, 2014. In particular, a supply of a parking space made after March 21, 2013 and on or before January 24, 2014 is only excluded from exemption under section 1 of Part V.1 of Schedule V if the supply is both included under new paragraph 1(o) of Part V.1 and meets the conditions set out in paragraphs (a) and (b) of subclause 56(2). The conditions in those paragraphs (a) and (b) are similar to new subparagraphs 1(o)(ii) and (iii) respectively, but apply on the basis of parking spaces situated at a particular property instead of parking spaces in a specified parking area.

A supply of a parking space that is excluded from exemption under section 1 may still be an exempt supply if the supply meets the conditions for exemption set out in new section 7 of Part V.1 of Schedule V to the Act, which provides an exemption for certain supplies of hospital parking made by a charity.

Clause 57

Supplies All or Substantially All for No Consideration

ETA
Sch. V, Pt. V.1, section 5

Section 5 of Part V.1 of Schedule V to the Act exempts supplies by a charity that is not a public institution as defined in subsection 123(1) of the Act of property or services if all or substantially all of the charity's supplies of the property or service are made for no consideration. Such supplies are not considered to be made in the course of a commercial activity. The supply of blood and blood derivatives is excluded from the exemption as these supplies are zero-rated under Part I of Schedule VI to the Act.

Section 5 of Part V.1 of Schedule V is amended to also expressly exclude from exemption supplies of parking spaces if the supply of a parking space is made for consideration, by way of lease, licence or similar arrangement and in the course of a business carried on by the charity.

The amendment clarifies that section 5 of Part V.1 of Schedule V does not apply to supplies of commercial paid parking by a charity even if the charity provides a significant amount of parking at no charge.

This amendment applies to any supply made after March 21, 2013.

Clause 58

Hospital Parking

ETA
Sch. V, Pt. V.1, section 7

New section 7 of Part V.1 of Schedule V to the Act exempts the supply (other than by way of sale) made by a charity of a parking space for hospital parking when the three conditions in each of paragraphs 7(a) to (c) are met. The new definition "specified parking area" in relation to a supply of a parking space in section 1 of Part VI of Schedule V to the Act applies for purposes of references to this term in new section 7.

New paragraph 7(a) provides the first condition for exemption which can be met in either of the two ways described in new subparagraphs 7(a)(i) and (ii).

Under new subparagraph 7(a)(i), this first condition can be met if all of the parking spaces in the specified parking area in relation to the supply of the parking space are reserved for use by individuals who are accessing a public hospital. A supply of a parking space that allows use of any vacant parking space in a parking lot where all of the parking spaces in the parking lot are reserved for individuals accessing a public hospital is an example of a supply that would meet this first condition for exemption by reason of new subparagraph 7(a)(i).

Under new subparagraph 7(a)(ii), the first condition can also be met based upon the expected use of the parking spaces in the specified parking area in relation to the supply of the parking space. In order for the first condition to be met by reason of this subparagraph, it must be reasonable to expect, at the time when the supply of the parking space is made, that these parking spaces will be used, during the calendar year in which the supply is made, primarily by individuals who are accessing a public hospital. For example, this first condition for exemption would be met by reason of new subparagraph 7(a)(ii) for a supply that allows use of any vacant parking space in the parking lot that is the specified parking area in relation to the supply if the parking spaces in that parking lot can, at the time when the supply is made, reasonably be expected to be used, during the calendar year in which the supply is made, primarily by patients, staff and visitors accessing a public hospital.

New paragraph 7(b) provides the second condition for exemption which is that none of the circumstances set out in new subparagraphs 7(b)(i) to (iii) apply to the supply. A supply of a parking space would not meet this second condition for exemption by reason of new subparagraph 7(b)(i) if all or substantially all of the parking spaces in the specified parking area in relation to the supply are reserved for use other than by individuals accessing a public hospital otherwise than in professional capacity. For example, a supply of a parking space would not meet this condition for exemption if all or substantially all of the parking spaces in the specified parking area in relation to the supply were reserved for the use of students attending a university or staff of a public hospital.

A supply of a parking space would not meet the second condition for exemption by reason of new subparagraph 7(b)(ii) if the supply of the parking space, or the consideration for the supply, is conditional on the parking space being used by a person other than an individual accessing a public hospital otherwise than in a professional capacity. For example, a supply of a parking space by way of sale of a parking pass that can be obtained only by university students, or that is available at a reduced consideration if for use of hospital employees but at full price if for use of hospital patients, would not meet the second condition for exemption.

A supply of a parking space would not meet the second condition for exemption by reason of new subparagraph 7(b)(iii) if the agreement for the supply is entered into in advance, the period over which parking spaces can be accessed under the supply is more than twenty-four hours and the access to the specified parking area in relation to the supply is to be used by a person other than an individual accessing a public hospital otherwise than in a professional capacity. For example, a supply of a parking pass to allow a family member of a public hospital patient to access a parking lot over a period of one month while visiting the patient would meet the second condition for exemption whereas a supply of the same pass to allow a nurse to access the parking lot while working at the public hospital would not.

New paragraph 7(c) provides the third condition for exemption, which is that no election made by the supplier of the parking space under section 211 of the Act is in effect, in respect of the property on which the parking space is situated, at the time tax would become payable under Part IX of the Act in respect of the supply if it were a taxable supply.

This amendment applies to any supply made after March 21, 2013.

A special transitional relieving measure applies if an amount was collected by a charity as or on account of tax and applicable to a supply of a parking space made after March 21, 2013 and on or before January 24, 2014 and if the supply is exempt by reason of new section 7 of Part V.1 of Schedule V. Under the relieving measure, the amount is deemed not to have been collected as or on account of tax for purposes of determining the net tax of the charity. This deeming rule has the effect of relieving the charity from the obligation to remit the amount or, if the amount has been remitted, allowing the charity to recover the amount as a refund under section 261 of the Act.

A further special rule applies if an amount is subject to the deeming rule discussed above and that amount has been taken into account in assessing the net tax of a charity under section 296 of the Act. In these circumstances, the amount could not be refunded to the charity under section 261 of the Act. The special rule allows the charity to request in writing, within one year after the enactment of new section 7 of Part V.1 of Schedule V, that the Minister of National Revenue assess, reassess, or make an additional assessment of, the net tax to take into account the effect of the deeming rule and, if a request is made, provides for an assessment, reassessment or additional assessment to be made.

Clause 59

Definitions

ETA
Sch. V, Pt. VI, section 1

Section 1 of Part VI of Schedule V to the Act sets out definitions of terms used throughout the Part.

"specified parking area"

The definition "specified parking area" in relation to a supply of a parking space is added to section 1 of Part VI of Schedule V. This new definition applies for the purposes of new section 25.1 of Part VI of Schedule V to the Act and new paragraph 1(o) and new section 7 of Part V.1 of that Schedule. These provisions require a determination of whether certain conditions are met for the specified parking area in relation to a supply of a parking space.

The specified parking area in relation to a supply of a parking space means all of those parking spaces that could be chosen for use in parking under the agreement for the supply of the parking space if all of those parking spaces were vacant and not reserved for any specific users. For example, if under the supply of a parking space an individual parker can use any of the parking spaces in a parking lot that are vacant, then all of the spaces in that parking lot would be the specified parking area in relation to the supply. If in the previous example, half of the parking spaces in the lot were reserved for use by staff of a public hospital and half for hospital patient parking, all of the parking spaces in the lot would be included in the specified parking area in relation to the supply of the parking space even if the individual parker were a hospital patient and could therefore only use those spaces reserved for patients.

This amendment is deemed to have come into force on March 21, 2013.

Clause 60

Hospital Parking

ETA
Sch. V, Pt. VI, section 25.1

New section 25.1 of Part VI of Schedule V to the Act exempts the supply (other than by way or sale) made by a public sector body of a parking space for hospital parking when the three conditions in each of paragraphs 25.1(a) to (c) are met. The new definition "specified parking area" in relation to a supply of a parking space in section 1 of Part VI of Schedule V to the Act applies for purposes of references to this term in new section 25.1.

New paragraph 25.1(a) provides the first condition for exemption which can be met in either of the two ways described in new subparagraphs 25.1(a)(i) and (ii).

Under new subparagraph 25.1(a)(i), this first condition can be met if all of parking spaces in the specified parking area in relation to the supply of the parking space are reserved for use by individuals who are accessing a public hospital. A supply of a parking space that allows use of any vacant parking space in a parking lot where all of the parking spaces in the parking lot are reserved for individuals accessing a public hospital is an example of a supply that would meet this first condition for exemption by reason of new subparagraph 25.1(a)(i).

Under new subparagraph 25.1(a)(ii), the way the first condition can be met is based upon the expected use of the parking spaces in the specified parking area in relation to the supply of the parking space. In order for the first condition to be met by reason of this subparagraph, it must be reasonable to expect, at the time when the supply of the parking space is made, that these parking spaces will be used, during the calendar year in which the supply is made, primarily by individuals who are accessing a public hospital. For example, this first condition for exemption would be met by reason of new subparagraph 25.1(a)(ii) for a supply that allows use of any vacant parking space in the parking lot that is the specified parking area in relation to the supply if the parking spaces in that parking lot can, at the time when the supply is made, reasonably be expected to be used, during the calendar year in which the supply is made, primarily by patients, staff and visitors accessing a public hospital.

New paragraph 25.1(b) provides the second condition for exemption which is that none of the circumstances set out in new subparagraphs 25.1(b)(i) to (iii) apply to the supply. A supply of a parking space would not meet this second condition for exemption by reason of new subparagraph 25.1(b)(i) if all or substantially all of the parking spaces in the specified parking area in relation to the supply are reserved for use other than by individuals accessing a public hospital otherwise than in a professional capacity. For example, a supply of a parking space would not meet this condition for exemption if all or substantially all of the parking spaces in the specified parking area in relation to the supply were reserved for the use of students attending a university or staff of a public hospital.

A supply of a parking space would not meet the second condition for exemption by reason of new subparagraph 25.1(b)(ii) if the supply of the parking space, or the consideration for the supply, is conditional on the parking space being used by a person other than an individual accessing a public hospital otherwise than in a professional capacity. For example, a supply of a parking space by way of sale of a parking pass that can be obtained only by university students, or that is available at a reduced consideration if for use of hospital employees but at full price if for use of hospital patients, would not meet the second condition for exemption.

A supply of a parking space would not meet the second condition for exemption by reason of new subparagraph 25.1(b)(iii) if the agreement for the supply is entered into in advance, the period over which parking spaces can be accessed under the supply is more than twenty-four hours and the access to the specified parking area in relation to the supply is to be used by a person other than an individual accessing a public hospital otherwise than in a professional capacity. For example, a supply of a parking pass to allow a family member of a public hospital patient to access a parking lot over a period of one month while visiting the patient would meet the second condition for exemption whereas a supply of the same pass to allow a nurse to access the parking lot while working at the public hospital would not.

New paragraph 25.1(c) provides the third condition for exemption which is that no election made by the supplier of the parking space under section 211 of the Act is in effect, in respect of the property on which the parking space is situated, at the time tax would become payable under Part IX of the Act in respect of the supply if it were a taxable supply.

This amendment applies to any supply made after January 24, 2014.

Clause 61

Electronic Eyewear

ETA
Sch. VI, Pt. II, section 9.1

New section 9.1 of Part II of Schedule VI to the Act has the effect of zero-rating supplies of eyewear that is specially designed to treat or correct a defect of vision by electronic means, if the eyewear is supplied on the written order of a person that is entitled under the laws of a province to practise the profession of medicine or optometry for the treatment or correction of a defect of vision of a consumer who is named in the order.

This amendment applies to supplies made after February 11, 2014.

Part 3
Amendments to the Excise Act, 2001, the Excise Tax Act (other than GST/HST Measures) and the Air Travellers Security Charge Act

Excise Act, 2001

Clause 62

Imposition

EA, 2001
42(1)

Duty is imposed under section 42 of the Excise Act, 2001 (the Act) on all domestically produced and imported tobacco products and on imported raw leaf tobacco, at the rates set out in Schedule 1 to the Act.

The French version of subsection 42(1) is amended by replacing the term "figurant" by the term "prévus" for clarification purposes.

This amendment is deemed to have come into force on February 12, 2014.

Clause 63

Additional Duty on Cigars

EA, 2001
43

Section 43 of the Act imposes an additional duty on cigars, at the rates set out in Schedule 2 to the Act.

The French version of section 43 is amended by replacing the term "figurant" by the term "prévus" for clarification purposes.

This amendment is deemed to have come into force on February 12, 2014.

Clause 64

Inflationary Adjustments

EA, 2001
43.1

New section 43.1 sets out the manner in which the rates of duty on tobacco products will be adjusted according to the Consumer Price Index for Canada going forward.

New subsection 43.1(1) defines an "inflationary adjusted year" to be 2019 and every fifth year after that year.

New subsection 43.1(2) provides that each of the rates of duty on tobacco products set out in sections 1 to 4 of Schedule 1 and paragraph (a) of Schedule 2 to the Act will be adjusted on December 1 of each inflationary adjusted year. The rates of duty will be adjusted according to the Consumer Price Index for Canada. The adjusted rate of duty applicable on a tobacco product will be equal to the greater of the result obtained by the formula accounting for inflation and the rate of duty applicable to the product on November 30 of the particular inflationary adjusted year.

New subsection 43.1(3) provides that each adjusted rate determined under subsection 43.1(2) will be rounded to the nearest one-hundred-thousandth or, if the adjusted rate is equidistant from two consecutive one-hundred-thousandths, to the higher one-hundred-thousandth.

New subsection 43.1(4) provides averaging and rounding rules for the Consumer Price Index for Canada, as published under the authority of the Statistics Act, to be used in determining adjusted rates under subsection 43.1(2).

This amendment is deemed to have come into force on February 12, 2014.

Clause 65

Special Duty on Imported Manufactured Tobacco Delivered to Duty Free Shop

EA, 2001
53(1)

Section 53 imposes a special duty on imported unstamped manufactured tobacco that is delivered to a duty free shop, at the rates set out in section 1 of Schedule 3 to the Act.

The French version of subsection 53(1) is amended by replacing the term "figurant" by the term "prévus" for clarification purposes.

This amendment is deemed to have come into force on February 12, 2014.

Clause 66

Special Duty on Traveller's Tobacco

EA, 2001
54(2)

Section 54 imposes a special duty on unstamped manufactured tobacco imported by a returning resident of Canada for the resident's personal use in quantities that are within the travellers' allowances specified in Chapter 98 of the Schedule to the Customs Tariff, at the rates set out in section 2 of Schedule 3 to the Act.

The French version of subsection 54(2) is amended by replacing the term "figurant" by the term "prévus" for clarification purposes.

This amendment is deemed to have come into force on February 12, 2014.

Clause 67

Imposition

EA, 2001
56(1)(a) and (b)

This section imposes a special duty on exports of tobacco products, at the rates set out in section 3 or 4 of Schedule 3 to the Act, as the case may be.

The French version of paragraphs 56(1)(a) and (b) are amended by replacing the term "figurant" by the term "prévus" for clarification purposes.

This amendment is deemed to have come into force on February 12, 2014.

Clause 68

Heading "CIGARETTE INVENTORY TAX"

EA, 2001
Heading for Part 3.1

The heading before section 58.1 of the Act is replaced, consequential to amendments to Part 3.1 of the Act.

This amendment is deemed to have come into force on February 12, 2014.

Clause 69

Definitions

EA, 2001
58.1

Section 58.1 defines terms used in Part 3.1 of the Act regarding the cigarette inventory tax.

Subclause 69(1)

Definitions

EA, 2001
58.1

The definitions "loose tobacco", "taxed tobacco", and "unit" are repealed, consequential to amendments to section 58.2 which imposes a tax on taxed cigarettes held in inventory at the beginning of February 12, 2014 or December 1 of an inflationary adjusted year, as the case may be.

This amendment is deemed to have come into force on February 12, 2014.

Subclause 69(2)

Definitions

EA, 2001
58.1

The definitions "adjustment day", "inflationary adjusted year" and "taxed cigarettes" are added to section 58.1, consequential to amendments made to section 58.2.

"Adjustment day" is defined as February 12, 2014 or December 1 of an inflationary adjusted year, as the case may be.

"Inflationary adjusted year" has the same meaning as in new subsection 43.1(1).

"Taxed cigarettes" defines the cigarettes that are subject to the cigarette inventory tax for the February 12, 2014 adjustment day. The definition includes all cigarettes that were held for resale in the domestic market at the end of February 11, 2014, and in respect of which excise duty had been imposed before February 12, 2014, at the rate set out in paragraph 1(b) of Schedule 1 to the Act, as that provision read on February 11, 2014. Cigarettes that are held in vending machines or relieved from the duty on cigarettes for domestic sale under the Act are excluded from the definition.

This amendment is consistent with amendments to section 58.2 which imposes a tax on taxed cigarettes held in inventory at the beginning of February 12, 2014.

This amendment is deemed to have come into force on February 12, 2014.

Subclause 69(3)

Definitions

EA, 2001
58.1

"Taxed cigarettes" defines the cigarettes that are subject to the cigarette inventory tax for an inflationary adjusted year. The definition includes all cigarettes that were held for resale in the domestic market or at domestic duty free shops at the beginning of December 1 of an inflationary adjusted year, and in respect of which duty under section 42 or 53 had been imposed on November 30 of the inflationary adjusted year, at the rate applicable on that day. Cigarettes that are held in vending machines or relieved from the duty on cigarettes for domestic sale under the Act are excluded from the definition.

This amendment is consistent with amendments to section 58.2 which imposes a tax on taxed cigarettes held in inventory at the beginning of December 1 of an inflationary adjusted year.

This amendment comes into force on November 30, 2019.

Clause 70

Imposition of Tax

EA, 2001
58.2 to 58.4

Sections 58.2 to 58.4 impose a tax on taxed cigarettes held in inventory and outline certain rules pertaining to that tax.

Imposition of Tax

EA, 2001
58.2

Subsection 58.2(1) is added to impose a tax on inventories of taxed cigarettes held at the beginning of February 12, 2014 at a rate equivalent to the increase in the domestic excise duty rate on cigarettes.

As well, subsection 58.2(2) is added to impose a tax on inventories of taxed cigarettes held at the beginning of December 1 of an inflationary adjusted year at a rate equivalent to the increase of that year in the duty on cigarettes imposed under section 42 or 53, as the case may be, and as determined by formulas. New subsection 58.2(3) provides that the amount determined under the formulas in subsection (2) be rounded to the nearest one-hundred-thousandth or, if the adjusted rate is equidistant from two consecutive one-hundred-thousandths, to the higher one-hundred-thousandth.

This inventory tax ensures that the excise duty increases are applied in a consistent manner to all taxed cigarettes at different trade levels.

This amendment is deemed to have come into force on February 12, 2014.

Exemption for Small Retail Inventory

EA, 2001
58.3

Section 58.3 is amended to provide that the cigarette inventory tax in respect of the inventory of all taxed cigarettes of a person that is held at the beginning of an adjustment day at a separate retail establishment of the person is not payable if that retail establishment holds inventory of 30,000 or fewer cigarettes.

This amendment is deemed to have come into force on February 12, 2014.

Taking of Inventory

EA, 2001
58.4

Section 58.4 is amended to require every person liable to pay tax under Part 3.1 to determine that person's inventory of all taxed cigarettes held at the beginning of an adjustment day.

This amendment is deemed to have come into force on February 12, 2014.

Clause 71

Returns

EA, 2001
58.5

Section 58.5 is amended to require every person liable to pay tax under Part 3.1 to file a return by April 30, 2014, in the case of the February 12, 2014 adjustment day, and in any other case, January 31 following the adjustment day. This amendment is consistent with amendments to section 58.2 which imposes a cigarette inventory tax on taxed cigarettes held in inventory at the beginning of February 12, 2014 or at the beginning of December 1 of an inflationary adjusted year, as the case may be.

This amendment is deemed to have come into force on February 12, 2014.

Clause 72

Payment

EA, 2001
58.6

Section 58.6 sets out the general rules on the payment of the tax. Subsection 58.6(1) is amended to require every person liable for the tax under Part 3.1 to pay the total amount owing to the Receiver General by April 30, 2014, in the case of the February 12, 2014 adjustment day and in any other case, January 31 following the adjustment day. This amendment is consistent with amendments to section 58.2 which imposes a cigarette inventory tax on taxed cigarettes held in inventory at the beginning of February 12, 2014 or at the beginning of December 1 of an inflationary adjusted year, as the case may be.

This amendment is deemed to have come into force on February 12, 2014.

Clause 73

Refund

EA, 2001
180.1

Section 180.1 provides a refund for imported black stock tobacco on which the general domestic duties have been paid and that were subsequently made available through duty free markets. The refund mechanism set out in section 180.1 allows the compensation of the difference between the general domestic rate and the "duty free" rate in specific circumstances.

Subclause 73(1)

Refund – Imported Black Stock Tobacco

EA, 2001
180.1

Section 180.1 is amended, consequential to the elimination of the preferential excise duty treatment of tobacco products available through duty free markets effective February 12, 2014. A refund continues to be available to a person who has imported manufactured tobacco if satisfactory evidence is provided that duty was imposed on the tobacco under section 42 at a rate set out in paragraph 1(b), 2(b) or 3(b) of Schedule 1 to the Act (i.e., the general domestic rates) as those provisions read on February 11, 2014, and paid, and that the tobacco was black stock delivered or exported for delivery to a duty free shop, to a customs bonded warehouse or as ships' stores before February 12, 2014. The person must apply for the refund within two years after the tobacco was imported.

This amendment comes into force on February 12, 2014.

Subclause 73(2)

Repeal – Refund

EA, 2001
180.1

Section 180.1 is repealed, consequential to the elimination of the preferential excise duty treatment of tobacco products available through duty free markets effective February 12, 2014. Since applicants have two years to claim a refund under section 180.1, the eligible timeframe to claim the refund will have lapsed at the time of the repeal.

This amendment comes into force on February 12, 2016.

Clause 74

Electronic Funds Transfer

EA, 2001
207.1

New section 207.1 provides, for greater certainty, that information obtained under Part XV.1 of the Income Tax Act (ITA) by the Minister of National Revenue may be used for the purposes of the Act. New Part XV.1 of the ITA requires certain financial entities to report international electronic funds transfers of $10,000 or more to the Minister of National Revenue.

New section 207.1 comes into force on January 1, 2015, the same day that new Part XV.1 of the ITA comes into force.

Clause 75

Provision of Confidential Information

EA, 2001
211

Section 211 of the Act prohibits officials and other persons from using or communicating confidential information obtained in the course of administering the Act unless they are specifically authorized to do so by one of the exceptions found in that section.

Subclause 75(1)

Disclosure of Personal Information

EA, 2001
211(6)(e)(viii)

Subsection 211(6) of the Act sets out circumstances in which, and the purpose for which, confidential information may be disclosed. Paragraph 211(6)(e) allows an official to provide confidential information in specific circumstances. New subparagraph 211(6)(e)(viii) is added to allow confidential information to be provided to an official of the Financial Transactions and Reports Analysis Centre of Canada solely for the purpose of allowing FINTRAC to evaluate the usefulness of information provided by FINTRAC to the Canada Revenue Agency (CRA) under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. Providing this information to FINTRAC may allow FINTRAC to improve the quality of the information provided by FINTRAC to the CRA.

This amendment comes into force on Royal Assent.

Subclause 75(2)

Disclosure of Personal Information

EA, 2001
211(6)(n)

Subsection 211(6) of the Act sets out circumstances in which, and the purpose for which, confidential information may be disclosed. Paragraph 211(6)(a) permits an official to provide confidential information to any person solely for the purpose of administering or enforcing the Act. That paragraph provides general authority for the CRA to provide information to others to the extent necessary to carry out the CRA's mandate.

New paragraph 211(6)(n) allows certain confidential information to be communicated to a person who has entered into a contract to provide information to the CRA under a program administered by the CRA to obtain information relating to tax non-compliance. The only confidential information that may be communicated to the person under this paragraph is information that informs the person of any amount they may be entitled to under the contract and the status of their claim under the contract. The introduction of paragraph 211(6)(n) does not affect the authority to provide confidential information under paragraph 211(6)(a).

The introduction of paragraph 211(6)(n) will allow certain information necessary for the operation of the CRA's Offshore Tax Informant Program, or a similar program, to be provided to a person who has entered into a contract to provide information to the CRA under the program.

This amendment comes into force on Royal Assent.

Subclause 75(3)

Serious Offences

EA, 2001
211(6.4)

Confidential information may be shared with law enforcement authorities in very limited circumstances. For example, officials of the CRA may share confidential information with the police when those officials are seeking information from the police that is relevant to the CRA's administration or enforcement of the Act. Information sharing with appropriate persons is also permitted where the confidential information may reasonably be regarded as necessary solely for a purpose relating to the life, health or safety of an individual or to the environment in Canada or any other country.

The Act requires licensees and other persons to report certain information to the CRA (e.g., tobacco licensees filing excise duty returns). The Act also allows the CRA to demand information from such persons, and inspect their books and records and other documents, for the purposes of administration and enforcement of the Act. The CRA is not generally permitted to use this authority for other purposes, such as to assist law enforcement authorities in the course of criminal investigations.

However, there are occasions when CRA officials, in the course of their ordinary duties, become aware of information that a reasonable person would believe is evidence of the commission of a crime. Section 211 generally prevents the CRA from, on its own initiative, communicating such evidence to law enforcement authorities.

New subsection 211(6.4) responds to the 14 October 2010 recommendation of the Council of Fiscal Affairs of the Organisation for Economic Co-operation and Development (OECD) that member countries, in accordance with their legal systems, establish an effective legal and administrative framework and provide guidance to facilitate reporting by tax authorities of suspicions of serious crimes arising out of the performance of their duties, to the appropriate domestic law enforcement authorities. More specifically, new subsection 211(6.4) permits a government official to provide confidential information to a law enforcement officer (e.g., a police officer) of an appropriate police organization (domestic or foreign) when the official has reasonable grounds to believe that the information will afford evidence of a listed offence. This provision does not provide the CRA with a mandate to use the information-collection authorities in the Act to conduct, or assist in the conduct of, criminal investigations. Nor does it permit the sharing of information on the basis of mere suspicion of the commission of a criminal offence.

New clauses 211(6.4)(a)(i)(A), (B) and (C) relate to bribery and the corruption of government officials. New clause 211(6.4)(a)(i)(D) and subparagraphs 211(6.4)(a)(ii) and (iii) reflect legislation enacted in the Safe Streets and Communities Act, S.C. 2012, c.1, to restrict the imposition of conditional sentences for serious crimes.

The administration of these new measures will be closely controlled within the CRA.

This amendment comes into force on Royal Assent.

Clause 76

Punishment – Section 32

EA, 2001
216

Section 216 currently makes it an offence for a person to possess, offer to sell or sell, other than in accordance with section 32, tobacco products that are not stamped. A person convicted of selling, offering to sell or possessing contraband tobacco products is liable to a fine determined under subsections 216(2) and (3), or to imprisonment, or to both. The minimum and maximum amounts of the fine are typically a function of the rate of duty applicable on a tobacco product.

Subclause 76(1)

Minimum Amount

EA, 2001
216(2)(a)(i) to (iv)

The amounts in subparagraphs 216(2)(a)(i) to (iv) that are used to determine the minimum amount of the fine for cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks, and cigars are increased, consequential to the increases in the rates of duty on these tobacco products set out in Schedules 1 and 2 to the Act.

This amendment comes into force on Royal Assent.

Subclause 76(2)

Minimum Amount

EA, 2001
216(2)(a)(i) to (iv)

The amounts in subparagraphs 216(2)(a)(i) to (iv) that are used to determine the minimum amount of the fine for cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks, and cigars will be expressed as a function of the rates set out in Schedules 1 and 2 to the Act, to reflect the future inflationary adjustments in these rates. This amendment is consistent with new section 43.1 and the amendments to Schedules 1 and 2 to the Act.

This amendment comes into force on December 1, 2019.

Subclause 76(3)

Maximum Amount

EA, 2001
216(3)(a)(i) to (iv)

The amounts in subparagraphs 216(3)(a)(i) to (iv) that are used to determine the maximum amount of the fine for cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks, and cigars are increased, consequential to the increases in the rates of duty on these tobacco products set out in Schedules 1 and 2 to the Act.

This amendment comes into force on Royal Assent.

Subclause 76(4)

Maximum Amount

EA, 2001
216(3)(a)(i) to (iv)

The amounts in subparagraphs 216(3)(a)(i) to (iv) that are used to determine the maximum amount of the fine for cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks, and cigars will be expressed as a function of the rates set out in Schedules 1 and 2 to the Act, to reflect the future inflationary adjustments in these rates. This amendment is consistent with new section 43.1 and the amendments to Schedules 1 and 2 to the Act.

This amendment comes into force on December 1, 2019.

Clause 77

Diversion of Black Stock Tobacco

EA, 2001
236

Section 236 currently imposes a penalty on licensees in relation to the diversion of black stock tobacco imposed at the "duty free" rate.

This section is repealed, consequential to amendments to Schedule 1 to the Act, which eliminate the preferential excise duty treatment of tobacco products available through duty free markets.

This amendment is deemed to have come into force on February 12, 2014.

Clause 78

Contravention of Subsection 50(5)

EA, 2001
240(a) to (c)

Section 240 imposes a penalty on a tobacco licensee who removes from the licensee's excise warehouse for export in a calendar year unstamped manufactured tobacco in excess of the 1.5% limit on exports established in subsection 50(5). The penalty is based on the rates of duty on tobacco products.

Subclause 78(1)

Penalty – Contravention of Subsection 50(5)

EA, 2001
240(a) to (c)

The amounts in paragraphs 240(a) to (c) are amended, consequential to the increases in the rates of duty on tobacco products set out in Schedule 1 to the Act.

This amendment comes into force on Royal Assent.

Subclause 78(2)

Penalty – Contravention of Subsection 50(5)

EA, 2001
240(a) to (c)

The amounts in paragraphs 240(a) to (c) are amended to be expressed as a function of the rates set out in Schedule 1 and in section 4 of Schedule 3 to the Act, consequential to the increases in the rates of duty on tobacco products set out in Schedule 1 to the Act. This amendment is also consistent with the introduction of new section 43.1.

This amendment comes into force on December 1, 2019.

Clause 79

Rates of Duty on Tobacco Products

EA, 2001
Sch. 1

Schedule 1 to the Act specifies the rates of duty imposed under section 42 on Canadian-produced or imported tobacco products.

Subclause 79(1)

Rates of Duty on Tobacco Products

EA, 2001
Sch. 1, sections 1 to 4

Sections 1 to 4 set out the rates for cigarettes, tobacco sticks, manufactured tobacco other than cigarettes and tobacco sticks, and cigars. These sections are amended to increase the rates on these tobacco products to:

These sections are also amended to be consistent with the introduction of new section 43.1 which provides that the rates of duty will be adjusted each inflationary adjusted year to account for inflation, starting in 2019. References to sections 43.1 and 58.2 are added after the heading "Schedule 1".

These amendments are deemed to have come into force on February 12, 2014.

Subclause 79(2)

References

The references after the heading "Schedule 1" are amended to add references to subsections 216(2) and (3) and section 240.

This amendment comes into force on December 1, 2019.

Clause 80

Additional Duty on Cigars

EA, 2001

Sch. 2

Schedule 2 to the Act sets out the rates of additional duty on cigars imposed under section 43.

Subclause 80(1)

Additional Duty on Cigars

EA, 2001

Sch. 2, paragraphs (a) and (b)

The additional duty on cigars is the greater of the specific rate set out in paragraph (a) of Schedule 2 and the ad valorem rate set out in paragraph (b) of Schedule 2. The specific rate is increased to $0.08226 per cigar. The ad valorem rate is increased to 82 per cent of the sale price in the case of Canadian-manufactured cigars, and 82 per cent of the duty-paid value in the case of imported cigars.

These paragraphs are also amended to be consistent with the introduction of new section 43.1 which provides that the rates of duty will be adjusted each inflationary adjusted year to account for inflation, starting in 2019. A reference to section 43.1 is added after the heading "Schedule 2".

These amendments are deemed to have come into force on February 12, 2014.

Subclause 80(2)

References

The references after the heading "Schedule 2" are amended to add references to subsections 216(2) and (3).

This amendment comes into force on December 1, 2019.

Clause 81

Rates of Special Duty on Certain Manufactured Tobacco

EA, 2001

Sch. 3

Schedule 3 to the Act sets out the rates of special duty imposed under sections 53, 54 and 56. Section 1 sets out the rates of special duty imposed under section 53 on imported manufactured tobacco (i.e., imported cigarettes, tobacco sticks and manufactured tobacco other than cigarettes and tobacco sticks) delivered to a duty free shop. Section 2 sets out the rates of special duty imposed under section 54 on traveller's tobacco (e.g., cigarettes, tobacco sticks and manufactured tobacco other than cigarettes and tobacco sticks imported into Canada as part of a personal exemption under the Customs Tariff). Section 3 sets out the rates of special duty imposed under section 56 on Canadian tobacco products that are exported up to the 1.5% threshold.

Subclause 81(1)

Rates of Special Duty on Certain Manufactured Tobacco

EA, 2001

Sch. 3, sections 1 to 3

Sections 1 to 3 of Schedule 3 to the Act are amended to eliminate the preferential duty treatment of tobacco products available through duty free markets. Specifically, the rates contained in sections 1 to 3 of Schedule 3 are amended to be a function of the rates on the same tobacco products in Schedule 1 to the Act. A reference to section 58.2 is added after the heading "Schedule 1".

This amendment is deemed to have come into force on February 12, 2014.

Subclause 81(2)

References

The references after the heading "Schedule 3" are amended to add a reference to section 240.

This amendment comes into force on December 1, 2019.

Clause 82

Application of Interest

EA, 2001
Sch. 1 to 3

This clause provides that, for the purposes of applying the provisions of the Customs Act that provide for the payment of, or liability to pay interest in respect of any amount, that amount is to be determined, and interest is to be computed on it, as though paragraphs 1(a), 2(a), 3(a) and 4(a) of Schedule 1 of the Act, as amended by section 79, subparagraphs (a)(i) and (b)(i) of Schedule 2 of the Act, as amended by section 80, and section 81 had come into force on February 12, 2014.

This amendment comes into force on Royal Assent.

Excise Tax Act

Clause 83

Presumption

ETA
68.16(3)

Subsection 68.16(3) of the Excise Tax Act (the Act) deems certain payments that may be made to a manufacturer, producer, wholesaler, jobber or other dealer under paragraph 68.16(1)(i) or (2)(e) to have been made to a purchaser for the purposes of certain provisions of the non-GST/HST portion of the Act.

Subsection 68.16(3) is amended to add a reference to new paragraph 97.1(1)(b) and to remove the reference to section 102, consequential to the introduction of paragraph 97.1(1)(b) and the repeal of section 102.

This amendment comes into force on the day after the day on which Royal Assent is received.

Clause 84

Interest and Penalty Amounts of $25 or Less

ETA
79.03(4)

Subsection 79.03(4) of the Act provides that if a person pays an amount not less than the total of all amounts, other than interest and penalty under subsection 7(1.1) or 68.5(9.1) or section 95.1, payable under the non-GST/HST portion of the Act at that time for a reporting period of the person and the total amount of interest and penalty payable by the person under that portion of the Act for that reporting period is not more than $25, the Minister of National Revenue may cancel the interest and penalty.

Subsection 79.03(4) is amended by adding a reference to the penalty imposed under new section 95.2.

This amendment comes into force on the day after the day on which Royal Assent is received.

Clause 85

Administrative Penalty

ETA
95.2

New section 95.2 provides for an administrative penalty for the making of false statements or omissions in an excise tax return under the non-GST/HST portion of the Act.

False Statements or Omissions

ETA
95.2(1)

New subsection 95.2(1) is added to impose a penalty on a person for knowingly, or under circumstances amounting to gross negligence, making or being a party to the making of a false statement or omission in a return relating to a reporting period of the person. The penalty is equal to the greater of $250 and 25% of the total of the amounts by which any tax payable was reduced, and any refunds, rebates or any other amounts payable to the person were increased, as a result of the false statement or omission. New subsection 95.2(1) is consistent with the similar provision in the GST/HST portion of the Act (section 285).

New subsection 95.2(1) applies to excise tax returns filed by a person after the day on which Royal Assent is received.

Burden of Proof in Respect of Penalties

ETA
95.2(2)

New subsection 95.2(2) provides that if, in an appeal under the Act, a penalty assessed by the Minister of National Revenue under new section 95.2 is at issue, the burden of establishing the facts justifying the assessment of the penalty is on the Minister.

New subsection 95.2(2) applies to excise tax returns filed by a person after the day on which Royal Assent is received.

Clause 86

Offences

ETA
97 and 97.1

Currently, subsection 97(2) provides for a criminal offence related to the making of a false statement in an excise tax return. However, the legislation does not provide for the possibility of prosecution by indictment, or for imprisonment unless the taxpayer defaults on the payment of a fine. Amendments are made to add for these possibilities and therefore to ensure that the offences under the non-GST/HST portion of the Act are consistent with GST/HST offences.

Failing to File Return

ETA
97

Subsection 97(1) is renumbered as section 97 and subsection 97(2) is repealed, consequential to the introduction of section 97.1.

This amendment comes into force on the day after the day on which Royal Assent is received.

Offences for False Statements

ETA
97.1(1)

New subsection 97.1(1) is added and provides that every person commits an offence who:

(a) makes, or participates in, assents to or acquiesces in the making of, a false or deceptive statement in a return filed or made as required by or under the Act or regulations made under the Act,

(b) disposes of a record in any way or who makes, or assents to or acquiesces in the making of, a false statement or omission in a record in order to avoid paying or remitting tax or to receive a refund, rebate or other amount to which the person is not entitled under the Act,

(c) wilfully, in any manner, evades or attempts to evade compliance or payment or remittance of tax or any other amount imposed under the Act,

(d) wilfully, in any manner, obtains or attempts to obtain a refund, rebate or other amount to which the person is not entitled under the Act, or

(e) conspires with any person to commit any of the foregoing.

This amendment comes into force on the day after the day on which Royal Assent is received.

Prosecution on Summary Conviction

ETA
97.1(2)

New subsection 97.1(2) provides that every person who commits an offence under new subsection 97.1(1) is, on conviction, and in addition to any penalty otherwise provided, liable to a fine of not less than 50% and not more than 200% of the tax sought to be evaded or the refund, rebate or other amount sought to be gained. If the amount cannot be ascertained, a fine of not less than $1,000 and not more than $25,000 is imposed. The fine may be accompanied by imprisonment for a term not exceeding two years.

This amendment comes into force on the day after the day on which Royal Assent is received.

Prosecution on Indictment

ETA
97.1(3)

New subsection 97.1(3) provides that the Attorney General of Canada may proceed by indictment for offences described in new subsection 97.1(1). The result, on conviction, and in addition to any penalty otherwise provided, is a fine of not less than 100% and not more 200% of the tax sought to be evaded or the refund, rebate or other amount sought to be gained. If the amount cannot be ascertained, a fine of not less than $2,000 and not more than $25,000 is imposed. The fine may be accompanied by imprisonment for a term not exceeding five years.

New subsection 97.1(3) comes into force on the day after the day on which Royal Assent is received.

Penalty on Conviction

ETA
97.1(4)

New subsection 97.1(4) provides that if a person is convicted of an offence under new subsection 97.1(2) or (3), the person is not liable to pay a penalty under any of subsection 79(5) or section 95.1, 95.2 or 109 of the Act or under a regulation made under the Act for the same contravention that led to the conviction. This general rule will not apply, however, if a notice of assessment in respect of the penalty was issued before the information or complaint giving rise to the conviction was laid or made.

New subsection 97.1(4) comes into force on the day after the day on which Royal Assent is received.

Stay of Appeal

ETA
97.1(5)

New subsection 97.1(5) allows the Minister of National Revenue to stay an appeal under the non-GST/HST portion of the Act pending the determination of a prosecution under new section 97.1 if substantially the same facts are an issue in both instances.

New subsection 97.1(5) comes into force on the day after the day on which Royal Assent is received.

Clause 87

Electronic Funds Transfer

ETA
98.2

New section 98.2 provides, for greater certainty, that information obtained under Part XV.1 of the Income Tax Act (ITA) by the Minister of National Revenue may be used for the purposes of the non-GST/HST portion of the Act. New Part XV.1 of the ITA requires certain financial entities to report international electronic funds transfers of $10,000 or more to the Minister of National Revenue.

New section 98.2 comes into force on January 1, 2015, the same day that new Part XV.1 of the ITA comes into force.

Clause 88

Destroying Records and Making False Entries

ETA
102

Section 102 makes it an offence to destroy records kept in respect of any period pursuant to subsection 98(1) to evade paying a tax or otherwise to evade compliance with the non-GST/HST portion of the Act, or to make false entries in records kept in respect of any period pursuant to subsection 98(1).

Section 102 is repealed, consequential to the introduction of new paragraph 97.1(1)(b).

This amendment comes into force on the day after the day on which Royal Assent is received.

Clause 89

Offence of Evasion

ETA
108

Section 108 makes it an offence to wilfully attempt, in any manner, to evade or defeat any tax imposed by the non-GST/HST portion of the Act.

Section 108 is repealed, consequential to the introduction of new paragraph 97.1(1)(c).

This amendment comes into force on the day after the day on which Royal Assent is received.

Air Travellers Security Charge Act

Clause 90

Electronic Funds Transfer

ATSCA
37.1

New section 37.1 provides, for greater certainty, that information obtained under Part XV.1 of the Income Tax Act (ITA) by the Minister of National Revenue may be used for the purposes of the Air Travellers Security Charge Act. New Part XV.1 of the ITA requires certain financial entities to report international electronic funds transfers of $10,000 or more to the Minister of National Revenue.

New section 37.1 comes into force on January 1, 2015, the same day that new Part XV.1 of the ITA comes into force.

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