Draft Legislation Relating to the Excise Tax Act
1 (1) The definition financial instrument in subsection 123(1) of the Excise Tax Act is amended by adding the following after paragraph (f):
(f.1) a virtual payment instrument,
(2) Subsection 123(1) of the Act is amended by adding the following in alphabetical order:
virtual payment instrument means property that is a digital representation of value, that functions as a medium of exchange and that only exists at a digital address of a publicly distributed ledger, other than property that
(a) confers a right, whether immediate or future and whether absolute or contingent, to be exchanged or redeemed for money or specific property or services or to be converted into money or specific property or services,
(b) is primarily for use within, or as part of, a gaming platform, an affinity or rewards program or a similar platform or program, or
(c) is prescribed property; (effet de paiement virtuel)
(3) Subsections (1) and (2) are deemed to have come into force on the day after Announcement Date.
2 (1) Section 179 of the Act is amended by adding the following after subsection (7):
Fungible property
(7.1) For the purposes of this section, substitute tangible personal property is deemed to be the original tangible personal property if
(a) one of the following conditions is met:
(i) a registrant acquires physical possession of the original tangible personal property for the purpose of making a supply of a service of manufacturing or producing tangible personal property (in this subparagraph referred to as the "manufactured property") and the substitute tangible personal property is used or consumed by being
(A) incorporated or transformed into, attached to, or combined or assembled with, the manufactured property in the manufacture or production of the manufactured property, or
(B) directly consumed or expended in the manufacture or production of the manufactured property,
(ii) the following conditions are met:
(A) a registrant acquires physical possession of the original tangible personal property for the purpose of making a supply of a commercial service in respect of that property,
(B) if the commercial service is not a storage service, a service identical to the commercial service is performed in respect of the substitute tangible personal property,
(C) the registrant causes physical possession of the substitute tangible personal property to be transferred to another person under the agreement for the supply, and
(D) if the substitute property is a continuous transmission commodity, the substitute tangible personal property is not being transferred to the other person by means of a wire, pipeline or other conduit , or
(iii) a registrant acquires physical possession of the original tangible personal property for the purpose of making a supply of a commercial service in respect of tangible personal property (in this subparagraph referred to as the "serviced property") that is neither the original tangible personal property nor the substitute tangible personal property and the substitute tangible personal property is used or consumed by being
(A) incorporated into, attached to, or combined or assembled with, the serviced property in the provision of the commercial service, or
(B) directly consumed or expended in the provision of the commercial service; and
(b) the properties of the original tangible personal property are essentially identical to the properties of the substitute tangible personal property and the original tangible personal property and the substitute tangible personal property
(i) are of the same class or kind of property,
(ii) are in the same measure and state, and
(iii) are interchangeable for commercial purposes.
(2) Subsection (1) applies in respect of any supply of a service made after Announcement Date and in respect of any supply of a service made on or before that day if the supplier did not, on or before that day, charge, collect or remit any amount as or on account of tax under Part IX of the Act in respect of the supply.
3 (1) Paragraph 186(1)(b) of the Act is replaced by the following:
(b) at the time that tax in respect of the acquisition, importation or bringing in becomes payable, or is paid without having become payable, by the parent, all or substantially all of the property of the other corporation is property that was last manufactured, produced, acquired or imported by the other corporation for consumption, use or supply by the other corporation exclusively in the course of its commercial activities,
(2) Subsection 186(1) of the Act, as amended by subsection (1), is replaced by the following:
Definition of unit
186 (0.1) In this section, unit means, in respect of a corporation, a share of the capital stock of the corporation.
Operating corporation
(0.2) For the purposes of this section, a particular corporation is at a particular time an operating corporation of another corporation if at the particular time the particular corporation is related to the other corporation and all or substantially all of the property of the particular corporation is property that was last manufactured, produced, acquired or imported by the particular corporation for consumption, use or supply by the particular corporation exclusively in the course of its commercial activities.
Input tax credit
(1) Unless subsection (2) applies, if at a particular time a registrant (in this subsection referred to as the "parent") that is a corporation resident in Canada acquires, imports or brings into a participating province a particular property or service and if at the particular time a particular corporation is an operating corporation of the parent, the parent is deemed, for the purpose of determining an input tax credit of the parent, to have acquired or imported the particular property or service or brought it into the participating province, as the case may be, for use in the course of commercial activities of the parent to the extent that
(a) the parent acquired or imported the particular property or service or brought it into the participating province, as the case may be, for the purpose of
(i) selling or otherwise disposing of, purchasing or otherwise obtaining, or holding units or indebtedness of the particular corporation by the parent, or
(ii) redeeming, issuing or converting or otherwise modifying units or indebtedness of the particular corporation by the particular corporation;
(b) the parent acquired or imported the particular property or service or brought it into the participating province, as the case may be, for the purpose of issuing or selling units or indebtedness of the parent, the parent transfers to the particular corporation the proceeds from the issuance or sale by lending money to the particular corporation or by purchasing or otherwise obtaining from the particular corporation units or indebtedness of the particular corporation, and the proceeds that are transferred to the particular corporation are for use in the course of its commercial activities; or
(c) if at the particular time all or substantially all of the property of the parent is property that was manufactured, produced, acquired or imported by the parent for consumption, use or supply exclusively in the course of its commercial activities, property that is units or indebtedness of operating corporations of the parent or a combination of such property, the parent acquired or imported the particular property or service or brought it into the participating province, as the case may be, for the purpose of carrying on, engaging in or conducting an activity of the parent other than
(i) an activity that is primarily in respect of units or indebtedness of a person that is neither the parent nor an operating corporation of the parent, or
(ii) an activity that is carried on, engaged in or conducted in the course of making an exempt supply by the parent unless the activity is a financial service that is
(A) the lending or borrowing of units or indebtedness of an operating corporation of the parent,
(B) the issue, granting, allotment, acceptance, endorsement, renewal, processing, variation, transfer of ownership or repayment of units or indebtedness of the parent or an operating corporation of the parent,
(C) the provision, variation, release or receipt of a guarantee, acceptance or indemnity in respect of units or indebtedness of the parent or an operating corporation of the parent,
(D) the payment or receipt of money as dividends (other than patronage dividends), interest, principal, benefits, or similar receipt or payment of money in respect of units or indebtedness of the parent or an operating corporation of the parent, or
(E) the underwriting of units or indebtedness of an operating corporation of the parent.
(3) Subsections 186(0.1) and (0.2) of the Act, as enacted by subsection (2), are replaced by the following:
Definition of unit
186 (0.1) In this section, unit means
(a) in respect of a corporation, a share of the capital stock of the corporation;
(b) in respect of a partnership, an interest of a person in the partnership; and
(c) in respect of a trust, a unit of the trust.
Operating corporations
(0.2) For the purposes of this section, a particular corporation is at a particular time an operating corporation of another person that is a corporation, partnership or trust if, at the particular time, all or substantially all of the property of the particular corporation is property that was last manufactured, produced, acquired or imported by the particular corporation for consumption, use or supply by the particular corporation exclusively in the course of its commercial activities and
(a) if the other person is a corporation or a trust, the particular corporation is, at the particular time, related to the other person; or
(b) if the other person is a partnership, the particular corporation is, at the particular time, controlled by
(i) the other person,
(ii) a corporation that is controlled by the other person,
(iii) a corporation that is related to a corporation referred to in subparagraph (ii), or
(iv) a combination of persons described in subparagraphs (i) to (iii).
(4) The portion of subsection 186(1) of the Act before paragraph (a), as enacted by subsection (2), is replaced by the following:
Input tax credit
(1) Unless subsection (2) applies, if at a particular time a registrant (in this subsection referred to as the "parent") that is resident in Canada and that is a corporation, partnership or trust acquires, imports or brings into a participating province a particular property or service and if at the particular time a particular corporation is an operating corporation of the parent, the parent is deemed, for the purpose of determining an input tax credit of the parent, to have acquired or imported the particular property or service or brought it into the participating province, as the case may be, for use in the course of commercial activities of the parent to the extent that
(5) Paragraph 186(2)(b) of the Act is replaced by the following:
(b) throughout the period beginning when the performance of the particular service began or when the purchaser acquired, imported or brought into the participating province, as the case may be, the particular property and ending at the later of the times referred to in paragraph (c), all or substantially all of the property of the other corporation was property that was last manufactured, produced, acquired or imported for consumption, use or supply exclusively in the course of commercial activities,
(6) Subsection 186(3) of the Act is replaced by the following:
Shares, etc., held by corporation
(3) If at any time all or substantially all of the property of a particular corporation is property that was last manufactured, produced, acquired or imported by it for consumption, use or supply exclusively in the course of its commercial activities, all shares of the capital stock of the particular corporation owned by, and all indebtedness of the particular corporation owed to, any other corporation that is related to the particular corporation are, for the purposes of this section, deemed to be, at that time, property that was acquired by the other corporation for use exclusively in the course of its commercial activities.
(7) Subsection 186(3) of the Act, as enacted by subsection (6), is replaced by the following:
Shares, etc., held by corporation
(3) If at a particular time a particular corporation is an operating corporation of another corporation, all units of the particular corporation owned by, and all indebtedness of the particular corporation owed to, the other corporation is, for the purposes of this section, deemed to be, at the particular time, property that was acquired by the other corporation for use exclusively in the course of its commercial activities.
(8) Subsections (1) and (6) apply in respect of any property or service acquired, imported or brought into a participating province before July 28, 2018 if tax became payable or was paid without having become payable in respect of the acquisition, importation or bringing into the participating province.
(9) Subsections (2) and (7) apply in respect of any property or service acquired, imported or brought into a participating province after July 27, 2018.
(10) Subsection 186(0.1) of the Act, as enacted by subsection (3), is deemed to have come into force on the day after Announcement Date.
(11) Subsection 186(0.2) of the Act, as enacted by subsection (3), and subsection (4) apply in respect of any property or service acquired, imported or brought into a participating province after Announcement Date.
(12) Subsection (5) applies to any acquisition, importation or bringing into a participating province of property or a service in respect of which tax is payable or is paid without having become payable.
4 (1) Paragraph 240(3)(d) of the French version of the Act is replaced by the following:
d) elle est une personne morale résidant au Canada qui est propriétaire d'actions du capital-actions, ou détentrice de créances, d'une autre personne morale qui lui est liée, ou qui acquiert, ou projette d'acquérir, la totalité ou la presque totalité des actions du capital-actions d'une autre personne morale, émises et en circulation et comportant plein droit de vote en toutes circonstances si la totalité ou la presque totalité des biens de l'autre personne morale sont, pour l'application de l'article 186, des biens que cette dernière a fabriqués, produits, acquis ou importés la dernière fois pour consommation, utilisation ou fourniture exclusive dans le cadre de ses activités commerciales;
(2) The portion of paragraph 240(3)(d) of the English version of the Act after subparagraph (ii) is replaced by the following:
if all or substantially all of the property of the other corporation is, for the purposes of section 186, property that was last manufactured, produced, acquired or imported by the other corporation for consumption, use or supply exclusively in the course of its commercial activities;
(3) Paragraph 240(3)(d), as amended by subsection (2), of the Act is replaced by the following:
(d) is resident in Canada and is
(i) a particular corporation, partnership or trust that owns units (as defined in subsection 186(0.1)) or holds indebtedness of a corporation that is, for the purposes of section 186, an operating corporation of the particular corporation, partnership or trust, or
(ii) a particular corporation that is acquiring, or proposes to acquire, all or substantially all of the issued and outstanding shares of the capital stock of another corporation, having full voting rights under all circumstances, if all or substantially all of the property of the other corporation is, for the purposes of section 186, property that was last manufactured, produced, acquired or imported by the other corporation for consumption, use or supply exclusively in the course of its commercial activities,
(4) Subsections (1) and (2) apply in respect of any application for registration for the purposes of Part IX of the Act made on or before Announcement Date.
(5) Subsection (3) is deemed to have come into force on the day after Announcement Date.
5 (1) The definition freight transportation service in subsection 1(1) of Part VII of Schedule VI to the Excise Tax Act is amended by deleting "and" at the end of paragraph (a) and by adding the following after that paragraph:
(a.1) a service of driving an automotive vehicle designed or adapted to be used on highways and streets for the purpose of delivering the vehicle to a destination, and
(2) The portion of the definition freight transportation service in subsection 1(1) of Part VII of Schedule VI to the English version of the Act before paragraph (a) is replaced by the following:
freight transportation service means a particular service of transporting tangible personal property including
(3) The portion of the definition freight transportation service in subsection 1(1) of Part VII of Schedule VI to the English version of the Act after paragraph (b) is replaced by the following:
but not including a service provided by the supplier of a passenger transportation service of transporting an individual's baggage in connection with the passenger transportation service;
(4) Subsections (1) to (3) are deemed to have come into force on the day after Announcement Date but also apply in respect of any supply made on or before that day if the supplier did not, on or before that day, charge, collect or remit any amount as or on account of tax under Part IX of the Act in respect of the supply.
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