Budget Implementation Act, 2018, No. 2 (S.C. 2018, c. 27)
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Assented to 2018-12-13
PART 1Amendments to the Income Tax Act and to Other Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
21 (1) Subsection 212.1(1) of the Act is replaced by the following:
Marginal note:Non-arm’s length sales of shares by non-residents
212.1 (1) Subsection (1.1) applies if a non-resident person disposes of shares (in this section referred to as the “subject shares”) of any class of the capital stock of a corporation resident in Canada (in this section referred to as the “subject corporation”) to another corporation resident in Canada (in this section referred to as the “purchaser corporation”) with which the non-resident person does not (otherwise than because of a right referred to in paragraph 251(5)(b)) deal at arm’s length and, immediately after the disposition, the subject corporation is connected (within the meaning that would be assigned by subsection 186(4) if the references in that subsection to “payer corporation” and “particular corporation” were read as “subject corporation” and “purchaser corporation”, respectively, and if section 186 were read without reference to its subsection (6)) with the purchaser corporation.
(2) The portion of paragraph 212.1(1.1)(a) of the Act before subparagraph (i) is replaced by the following:
(a) the amount, if any, by which the fair market value of any consideration (other than any share of the capital stock of the purchaser corporation) received by the non-resident person referred to in subsection (1) from the purchaser corporation for the subject shares exceeds the paid-up capital in respect of the subject shares immediately before the disposition shall, for the purposes of this Act, be deemed to be a dividend
(3) Subsection 212.1(1.2) of the Act is replaced by the following:
Marginal note:Deemed consideration
(1.2) For the purposes of subsections (1) and (1.1), if, in the absence of this subsection, no consideration would be received by the non-resident person referred to in subsection (1) from the purchaser corporation for the subject shares, the non-resident person is deemed to receive consideration other than shares of the capital stock of the purchaser corporation from the purchaser corporation for the subject shares, the fair market value of which is equal to the amount, if any, by which the fair market value of the subject shares disposed of by the non-resident person exceeds the amount of any increase because of the disposition in the fair market value of the shares of the capital stock of the purchaser corporation.
(4) The portion of paragraph 212.1(3)(a) of the Act before subparagraph (i) is replaced by the following:
(a) a non-resident person shall, for greater certainty, be deemed not to deal at arm’s length with a purchaser corporation at the time of a disposition described in subsection (1) if the non-resident person was,
(5) Paragraph 212.1(3)(b) of the Act is replaced by the following:
(b) for the purposes of determining whether or not a non-resident person referred to in paragraph (a) was a member of a group of less than six persons that controlled a corporation at any time, any shares of the capital stock of that corporation owned at that time by any of the following persons shall be deemed to be owned at that time by the non-resident person and not by the person who actually owned the shares at that time:
(i) the non-resident person’s child (within the meaning assigned by subsection 70(10)), who is under 18 years of age, or the non-resident person’s spouse or common-law partner,
(ii) a trust of which the non-resident person, a person described in subparagraph (i) or a corporation described in subparagraph (iii) is a beneficiary,
(iii) a corporation controlled by the non-resident person, a person described in subparagraph (i), a trust described in subparagraph (ii) or any combination thereof, and
(iv) a partnership of which the non-resident person or a person described in one of subparagraphs (i) to (iii) is a majority-interest partner or a member of a majority-interest group of partners (as defined in subsection 251.1(3));
(6) Subsection 212.1(3) of the Act is amended by adding “and” at the end of paragraph (d) and by repealing paragraph (e).
(7) The portion of paragraph 212.1(4)(b) of the Act before subparagraph (ii) is replaced by the following:
(b) it is not the case that, at the time of the disposition, or as part of a transaction or event or series of transactions or events that includes the disposition, a non-resident person
(i) holds, directly or indirectly, shares of the capital stock of the purchaser corporation, and
(8) Section 212.1 of the Act is amended by adding the following after subsection (4):
Marginal note:Tiered trusts and partnerships
(5) For the purposes of this section and paragraph (k) of the definition proceeds of disposition in section 54, a person or partnership that is, at any time, a beneficiary under a trust (other than a trust that is the non-resident person referred to in subsection (1)), or a member of a partnership (such trust or partnership referred to in this subsection as the “particular conduit”), that is a beneficiary under a trust or member of a partnership (such trust or partnership referred to in this subsection as the “other conduit”) is deemed
(a) to be a beneficiary under or member of, as the case may be, the other conduit; and
(b) to hold the interest in the other conduit that is held by the particular conduit in the proportion expressed by the formula
A/B
where
- A
- is the portion of the fair market value, at that time, of the person or partnership’s interest in the particular conduit that is attributable to the interest in the other conduit held by the particular conduit, and
- B
- is the total fair market value, at that time, of all direct interests (determined without reference to this subsection) in the other conduit.
Marginal note:Trusts and partnerships look-through rule
(6) The following rules apply for the following purposes:
(a) for the purposes of this subsection and subsections (1) and (1.1), if at any time an interest (in this paragraph referred to as the “pertinent interest”) in a trust or a partnership (each referred to in this subsection as a “conduit”) is disposed of by a person or partnership with an interest as a beneficiary under the conduit or that is a member of the conduit (each referred to in this subsection as a “holder”), as the case may be, to a purchaser and any portion of the fair market value of the pertinent interest is attributable to shares of the capital stock of a corporation resident in Canada held, directly or indirectly (unless all of the shares are held indirectly through one or more non-resident corporations), by the conduit (in this paragraph referred to as the “shares held by the conduit”), then
(i) the holder is deemed, on a class-by-class basis, to have disposed, at that time, of the shares held by the conduit to the purchaser, and the purchaser is deemed to have acquired the shares, in the proportion expressed by the formula
A/B
where
- A
- is the portion of the fair market value, at that time, of the pertinent interest that is attributable to the shares held by the conduit, and
- B
- is the total fair market value, at that time, of the shares held by the conduit, and
(ii) the holder is deemed to have received from the purchaser and the purchaser is deemed to have paid to the holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula
A × B/C
where
- A
- is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is received by the holder from the purchaser for the pertinent interest,
- B
- is the amount determined for A in subparagraph (i), and
- C
- is the total fair market value of the pertinent interest;
(b) for the purposes of subsections (1) and (1.1) and paragraph (c), if at any time a conduit (other than a non-resident trust) disposes of shares of the capital stock of a corporation resident in Canada to a purchaser, then
(i) each holder of an interest in the conduit is deemed, on a class-by-class basis, to have disposed, at that time, of the shares to the purchaser in the proportion expressed by the formula
A/B
where
- A
- is the fair market value, at that time, of the holder’s interest in the conduit, and
- B
- is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit, and
(ii) each holder of an interest in the conduit is deemed to have received from the purchaser and the purchaser is deemed to have paid to each such holder, as consideration for the shares deemed to have been disposed of in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula
A × B/C
where
- A
- is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is received by the conduit from the purchaser for the shares,
- B
- is the amount determined for A in subparagraph (i), and
- C
- is the amount determined for B in subparagraph (i);
(c) for the purposes of subsections (1) and (1.1), if at any time a conduit acquires shares of the capital stock of a corporation resident in Canada from a vendor, then
(i) each holder of an interest in the conduit is deemed to have acquired, at that time, the shares from the vendor, on a class-by-class basis, in the proportion expressed by the formula
A/B
where
- A
- is the fair market value, at that time, of the holder’s interest in the conduit, and
- B
- is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit, and
(ii) each holder of an interest in the conduit is deemed to have paid to the vendor and the vendor is deemed to have received from each such holder, as consideration for the shares deemed to have been acquired in subparagraph (i), consideration (other than any share of the capital stock of the purchaser corporation) in an amount determined by the formula
A × B/C
where
- A
- is the fair market value of the consideration (other than any share of the capital stock of the purchaser corporation) that is paid by the conduit to the vendor for the shares,
- B
- is the amount determined for A in subparagraph (i), and
- C
- is the amount determined for B in subparagraph (i); and
(d) for the purpose of determining whether the subject corporation is connected with the purchaser corporation for the purposes of subsection (1) at any time, if at that time a conduit owns shares of the capital stock of the subject corporation, each holder of an interest in the conduit is deemed to own, at that time, the shares of each class of the capital stock of the subject corporation that are owned by the conduit the number of which is determined by the formula
A × B/C
where
- A
- is the total number of shares of the class of the capital stock of the subject corporation that are owned by the conduit at that time,
- B
- is the fair market value, at that time, of the holder’s interest in the conduit, and
- C
- is the total fair market value, at that time, of all direct interests (determined without reference to subsection (5)) in the conduit.
Marginal note:Avoidance of subsections (5) and (6)
(7) The amounts determined for A and B in paragraph (5)(b), for A and B in subparagraph (6)(c)(i) and for B and C in paragraph (6)(d) are, in respect of an interest as a beneficiary under a trust held by a person or partnership, deemed to be equal to one if
(a) the person or partnership’s share of the accumulating income or capital of the trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power; and
(b) it can reasonably be considered that one of the reasons for the discretionary power is to avoid or limit the application of subsection (1.1).
(9) Subsections (1) to (8) apply in respect of dispositions that occur after February 26, 2018.
22 The portion of section 231 of the Act before the first definition is replaced by the following:
Marginal note:Definitions
231 In sections 231.1 to 231.8,
23 The portion of subsection 231.6(7) of the Act before paragraph (a) is replaced by the following:
Marginal note:Time period not to count
(7) The period of time between the day on which an application for review of a requirement is made pursuant to subsection (4) and the day on which the application is finally disposed of shall not be counted in the computation of
24 The Act is amended by adding the following after section 231.7:
Marginal note:Time period not to count
231.8 The following periods of time shall not be counted in the computation of the period of time within which an assessment may be made for a taxation year of a taxpayer under subsection 152(4):
(a) where the taxpayer is served a notice of a requirement under subsection 231.2(1), the period of time between the day on which an application for judicial review in respect of the requirement is made and the day on which the application is finally disposed of; and
(b) where an application is commenced by the Minister under subsection 231.7(1) to order the taxpayer to provide any access, assistance, information or document, the period of time between the day on which the taxpayer files a notice of appearance, or otherwise opposes the application, and the day on which the application is finally disposed of.
25 (1) Subsection 233.4(4) of the Act is replaced by the following:
Marginal note:Returns respecting foreign affiliates
(4) A reporting entity for a taxation year or fiscal period shall file with the Minister for the year or period a return in prescribed form in respect of each foreign affiliate of the entity in the year or period within 12 months after the end of the year or period.
(2) Subsection 233.4(4) of the Act is replaced by the following:
Marginal note:Returns respecting foreign affiliates
(4) A reporting entity for a taxation year or fiscal period shall file with the Minister for the year or period a return in prescribed form in respect of each foreign affiliate of the entity in the year or period within 10 months after the end of the year or period.
(3) Subsection (1) applies to taxation years of a taxpayer, and fiscal periods of a partnership, that begin in 2020.
(4) Subsection (2) applies to taxation years of a taxpayer, and fiscal periods of a partnership, that begin after 2020.
26 Paragraph 241(4)(e) of the Act is amended by striking out “or” at the end of subparagraph (xi), by adding “or” at the end of subparagraph (xii) and by adding the following after subparagraph (xii):
(xiii) an order made under the Mutual Legal Assistance in Criminal Matters Act to gather or send information, for the purposes of an investigation or prosecution relating to an act or omission that, if it had occurred in Canada, would constitute an offence for which an order could be obtained under subsection 462.48(3) of the Criminal Code, in response to a request made pursuant to
(A) an administrative arrangement entered into under section 6 of the Mutual Legal Assistance in Criminal Matters Act, or
(B) a bilateral agreement for mutual legal assistance in criminal matters to which Canada is a party;
27 (1) The definition SLA compensation payment in subsection 260(1) of the Act is replaced by the following:
- SLA compensation payment
SLA compensation payment means an amount paid pursuant to
(a) a securities lending arrangement as compensation for an underlying payment; or
(b) a specified securities lending arrangement as compensation for an underlying payment, including, if the property transferred or lent is described in subparagraph (a)(ii) of the definition specified securities lending arrangement, as compensation for a taxable dividend paid on a share described in subparagraph (a)(i) of that definition; (paiement compensatoire (MPVM))
(2) Subsection 260(1) of the Act is amended by adding the following in alphabetical order:
- specified securities lending arrangement
specified securities lending arrangement means an arrangement, other than a securities lending arrangement, under which
(a) a particular person (referred to in this definition as a “transferor”) transfers or lends at any particular time a property to another person (referred to in this definition as a “transferee”) and the property is
(i) a particular share described in paragraph (a) of the definition qualified security, or
(ii) a property in respect of which the following conditions are met:
(A) the property is
(I) an interest in a partnership, or
(II) an interest as a beneficiary under a trust, and
(B) all or any part of the fair market value of the property, immediately before the particular time, is derived, directly or indirectly, from a share described in subparagraph (i),
(b) it may reasonably be expected, at the particular time, that the transferee — or a person that does not deal at arm’s length with, or is affiliated with, the transferee — will transfer or return after the particular time to the transferor — or a person that does not deal at arm’s length with, or is affiliated with, the transferor (referred to in this definition as a “substitute transferor”) — a property that is identical or substantially identical to the property so transferred or lent, and
(c) the transferor’s (together with any substitute transferor’s) risk of loss or opportunity for gain or profit with respect to the particular property is not changed in any material respect; (mécanisme de prêt de valeurs mobilières déterminé)
(3) The portion of subsection 260(5) of the Act before paragraph (a) is replaced by the following:
Marginal note:Where subsection (5.1) applies
(5) Subsection (5.1) applies to a taxpayer for a taxation year in respect of a particular amount (other than an amount received as proceeds of disposition or an amount received by a person under an arrangement where it may reasonably be considered that one of the main reasons for the person entering into the arrangement was to enable the person to receive an SLA compensation payment pursuant to a securities lending arrangement, or a dealer compensation payment, that would be deductible in computing the taxable income, or not included in computing the income, for any taxation year of the person) received by the taxpayer in the taxation year
(4) Paragraph 260(6)(a) of the Act is replaced by the following:
(a) if the taxpayer is a registered securities dealer and the particular amount is deemed by subsection (5.1) to have been received as a taxable dividend, no more than 2/3 of the particular amount (unless, for greater certainty, the particular amount is an amount for which a deduction in computing income may be claimed under subsection (6.1) by the taxpayer); or
(5) The portion of subsection 260(6.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Deductible amount
(6.1) There may be deducted in computing a corporation’s income under Part I from a business or property for a taxation year an amount equal to the lesser of
(6) Subsections (1) to (5) apply in respect of amounts paid or payable, or received or receivable, as compensation for dividends after February 26, 2018. However, subsections (1) to (5) do not apply in respect of amounts paid or payable, or received or receivable, as compensation for dividends after February 26, 2018 and before October 2018, if they are pursuant to a written arrangement entered into before February 27, 2018.
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