Sales Tax Amendments Act, 2006 (S.C. 2007, c. 18)
Full Document:
Assented to 2007-06-22
Marginal note:2000, c. 30, s. 25(1)
6. (1) The definitions “qualifying group” and “specified member” in subsection 156(1) of the Act are replaced by the following:
“qualifying group”
« groupe admissible »
“qualifying group” means
(a) a group of corporations, each member of which is closely related, within the meaning assigned by section 128, to each other member of the group; or
(b) a group of Canadian partnerships, or of Canadian partnerships and corporations, each member of which is closely related, within the meaning of this section, to each other member of the group.
“specified member”
« membre déterminé »
“specified member” of a qualifying group means
(a) a qualifying member of the group; or
(b) a temporary member of the group during the course of the reorganization referred to in paragraph (f) of the definition “temporary member”.
(2) Subsection 156(1) of the Act is amended by adding the following in alphabetical order:
“distribution”
« attribution »
“distribution” has the meaning assigned by subsection 55(1) of the Income Tax Act.
“qualifying member”
« membre admissible »
“qualifying member” of a qualifying group means a registrant that is a corporation resident in Canada or a Canadian partnership and that meets the following conditions:
(a) the registrant is a member of the group;
(b) the registrant is not a party to an election under subsection 150(1); and
(c) the registrant last manufactured, produced, acquired or imported all or substantially all of its property (other than financial instruments) for consumption, use or supply exclusively in the course of commercial activities of the registrant or, if the registrant has no property (other than financial instruments), all or substantially all of the supplies made by the registrant are taxable supplies.
“temporary member”
« membre temporaire »
“temporary member” of a qualifying group means a corporation
(a) that is a registrant;
(b) that is resident in Canada;
(c) that is a member of the qualifying group;
(d) that is not a qualifying member of the qualifying group;
(e) that is not a party to an election under subsection 150(1);
(f) that receives a supply of property made in contemplation of a distribution made in the course of a reorganization described in subparagraph 55(3)(b)(i) of the Income Tax Act from the distributing corporation referred to in that subparagraph that is a qualifying member of the qualifying group;
(g) that, before receiving the supply, does not carry on any business or have any property (other than financial instruments); and
(h) the shares of which are transferred on the distribution.
Marginal note:2000, c. 30, s. 25(1)
(3) The portion of subsection 156(1.1) of the Act before subparagraph (a)(i) is replaced by the following:
Marginal note:Closely related persons
(1.1) For the purposes of this section, a particular Canadian partnership and another person that is a Canadian partnership or a corporation are closely related to each other at any time if, at that time,
(a) in the case where the other person is a Canadian partnership,
Marginal note:2000, c. 30, s. 25(1)
(4) Clause 156(1.1)(a)(i)(B) of the Act is replaced by the following:
(B) a corporation, or a Canadian partnership, that is a member of a qualifying group of which the particular partnership is a member, or
Marginal note:2000, c. 30, s. 25(1)
(5) Clause 156(1.1)(a)(ii)(A) of the Act is replaced by the following:
(A) owns at least 90% of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the capital stock of a corporation that is a member of a qualifying group of which the other person is a member, or
Marginal note:2000, c. 30, s. 25(1)
(6) The portion of paragraph 156(1.1)(b) of the English version of the Act before subparagraph (i) is replaced by the following:
(b) in the case where the other person is a corporation,
Marginal note:2000, c. 30, s. 25(1)
(7) Clause 156(1.1)(b)(i)(B) of the Act is replaced by the following:
(B) a corporation, or a Canadian partnership, that is a member of a qualifying group of which the particular partnership is a member, or
Marginal note:2000, c. 30, s. 25(1)
(8) The portion of subparagraph 156(1.1)(b)(ii) of the Act before clause (A) is replaced by the following:
(ii) not less than 90% of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the capital stock of a corporation are owned by
Marginal note:2000, c. 30, s. 25(1)
(9) Clause 156(1.1)(b)(iii)(B) of the Act is replaced by the following:
(B) a corporation, or a Canadian partnership, that is a member of a qualifying group of which the other person is a member, or
Marginal note:2000, c. 30, s. 25(1)
(10) Subsection 156(1.2) of the Act is replaced by the following:
Marginal note:Persons closely related to the same person
(1.2) If, under subsection (1.1), two persons are closely related to the same corporation or partnership, or would be so related if each member of that partnership were resident in Canada, the two persons are closely related to each other for the purposes of this section.
Marginal note:2000, c. 30, s. 25(1)
(11) Subsection 156(2) of the Act is replaced by the following:
Marginal note:Election for nil consideration
(2) For the purposes of this Part, if a specified member of a qualifying group elects jointly with another specified member of the group, every taxable supply made between them at a time when the election is in effect is deemed to have been made for no consideration.
Marginal note:Non-application
(2.1) Subsection (2) does not apply to
(a) a supply by way of sale of real property;
(b) a supply of property, or of a service, that is not acquired by the recipient for consumption, use or supply exclusively in the course of commercial activities of the recipient; or
(c) a supply that is not a supply of property made in contemplation of a distribution made in the course of a reorganization described in subparagraph 55(3)(b)(i) of the Income Tax Act, if the recipient of the supply is a temporary member.
(12) Subsections (1) to (10) are deemed to have come into force on November 17, 2005.
(13) Subsection (11) applies to any supply made after November 16, 2005.
7. (1) Section 165 of the Act, as it read immediately before April 1, 1997, is amended by adding the following after subsection (3.1):
Marginal note:Supply of right to use device
(3.2) For the purpose of subsection (3.1), a supply of a right to use a device described in that subsection is deemed to be a supply of a service rendered through the operation of the device.
(2) Subsection 165(3.2) of the Act, as enacted by subsection (1), is repealed.
(3) Subsection 165(3.2) of the Act, as enacted by subsection (1), applies to supplies made after April 23, 1996.
(4) Subsection (2) is deemed to have come into force on April 1, 1997.
8. (1) Section 165.1 of the Act is amended by adding the following after subsection (2):
Marginal note:Supply of right to use device
(3) For the purpose of subsection (2), a supply of a right to use a device described in that subsection is deemed to be a supply of a service rendered through the operation of the device.
(2) Subsection (1) is deemed to have come into force on April 1, 1997.
9. (1) The Act is amended by adding the following after section 167.1:
Marginal note:Definitions
167.11 (1) The following definitions apply in this section.
“authorized foreign bank”
« banque étrangère autorisée »
“authorized foreign bank” has the meaning assigned by section 2 of the Bank Act.
“foreign bank branch”
« succursale de banque étrangère »
“foreign bank branch” means a branch as defined in paragraph (b) of the definition “branch” in section 2 of the Bank Act.
“qualifying supply”
« fourniture admissible »
“qualifying supply” means a supply of property or a service that is made in Canada under an agreement for the supply (other than an agreement between a supplier that is a registrant and a recipient that is not a registrant at the time the agreement is entered into) and
(a) that is made by a corporation resident in Canada related to the recipient;
(b) that is made after June 27, 1999, and before
(i) if the Superintendent makes an order under subsection 534(1) of the Bank Act in respect of the recipient after the particular day on which the Act enacting this section receives royal assent but before the day that is one year after the particular day, the day that is one year after the day on which the Superintendent makes the order, and
(ii) in any other case, the day that is one year after the particular day referred to in subparagraph (i); and
(c) that is received by a recipient that
(i) is a non-resident person,
(ii) is, or has filed an application with the Superintendent for an order under subsection 524(1) of the Bank Act to become, an authorized foreign bank, and
(iii) acquired the property or service for consumption, use or supply by the recipient for the purpose of the establishment and commencement of business in Canada by the recipient as an authorized foreign bank at a foreign bank branch of the authorized foreign bank.
Marginal note:Supply of assets
(2) For the purposes of this Part, if a supplier and a recipient of a qualifying supply make a joint election in accordance with subsection (7) in respect of the qualifying supply,
(a) the supplier is deemed to have made, and the recipient is deemed to have received, a separate supply of each property and service that is supplied under the agreement for the qualifying supply for consideration equal to that part of the consideration for the qualifying supply that can reasonably be attributed to that property or service;
(b) any part of the consideration for the qualifying supply attributed to goodwill is deemed to be attributed to a taxable supply of intangible personal property unless section 167.1 applies to the qualifying supply; and
(c) subsections (3) to (6) apply to the supply of each property and service that is supplied under the agreement for the qualifying supply.
Marginal note:Effect of election
(3) For the purposes of this Part, if a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply made at any time,
(a) no tax is payable in respect of a supply of any property or service made under the agreement for the qualifying supply other than
(i) a taxable supply of a service that is to be rendered by the supplier,
(ii) a taxable supply of a service unless paragraph 167(1)(a) applies to the qualifying supply,
(iii) a taxable supply of property by way of lease, licence or similar arrangement,
(iv) if the recipient is not a registrant, a taxable supply by way of sale of real property,
(v) a taxable supply of property or a service, if the property or service was previously supplied under an agreement for a qualifying supply and, by reason of this subsection, no tax was payable in respect of that previous supply of property or service, and
(vi) a taxable supply of intangible personal property (other than capital property) if the percentage determined by the following formula is greater than 10%:
A - B
where
- A
- is the extent (expressed as a percentage of the total use of the property by the supplier) to which the supplier used the property in commercial activities immediately before that time, and
- B
- is the extent (expressed as a percentage of the total use of the property by the recipient) to which the recipient used the property in commercial activities immediately after that time;
(b) if, in the absence of this subsection, tax would have been payable by the recipient in respect of a supply of property made under the agreement for the qualifying supply, the property was capital property of the supplier and the property is being acquired by the recipient for use as capital property of the recipient, the recipient is deemed to have so acquired the property for use exclusively in the course of commercial activities of the recipient;
(c) if, despite this subsection, tax would not have been payable by the recipient in respect of a supply of property made under the agreement for the qualifying supply, the property was capital property of the supplier and the property is being acquired by the recipient for use as capital property of the recipient, the recipient is deemed to have so acquired the property for use exclusively in activities of the recipient that are not commercial activities; and
(d) if the recipient acquires under the agreement for the qualifying supply property of the supplier that was used by the supplier immediately before that time otherwise than as capital property of the supplier and, in the absence of this paragraph, tax would have been payable by the recipient in respect of the supply of the property, the recipient is deemed to have acquired the property for consumption, use or supply in the course of commercial activities and otherwise than as capital property of the recipient.
Marginal note:Basic tax content
(4) For the purposes of this Part, if a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply and, under the agreement for the qualifying supply, the supplier makes a supply of property that is, immediately before the time the qualifying supply is made, capital property of the supplier and, by reason of subsection (3), no tax is payable in respect of the supply of the property, the basic tax content of the property of the recipient at any time shall be determined by applying the following rules:
(a) if the last acquisition of the property by the recipient is the acquisition by the recipient at the time the qualifying supply is made, any reference in paragraphs (a) and (b) of the definition “basic tax content” in subsection 123(1) to the last acquisition or importation of the property by the person shall be read as a reference to the last acquisition or importation of the property by the supplier and not the acquisition by the recipient at the time the qualifying supply is made;
(b) if the last supply to the recipient of the property is the supply to the recipient at the time the qualifying supply is made, the reference in paragraph (a) of the definition “basic tax content” in subsection 123(1) to the last supply of the property to the person shall be read as a reference to the last supply of the property to the supplier and not the supply to the recipient at the time the qualifying supply is made; and
(c) if, at any particular time on or after the last acquisition or importation of the property by the supplier and before the time the qualifying supply is made, the property is acquired, imported or brought into a participating province or an improvement to the property is acquired, imported or brought into a participating province, any reference in paragraphs (a) and (b) of the definition “basic tax content” in subsection 123(1) to
(i) any acquisition, importation or bringing into a participating province of the property at that particular time or any acquisition, importation or bringing into a participating province of an improvement to the property at that particular time (in this paragraph referred to as the “actions”) by the person shall be read as a reference to actions by the supplier and not actions by the recipient,
(ii) any tax that was payable, that would have been or would have become payable, that became payable or that had been payable by the person in respect of those actions at that particular time shall be read as a reference to tax that was payable, that would have been or would have become payable, that became payable or that had been payable by the supplier and not by the recipient,
(iii) the person in respect of those actions at that particular time, or in respect of a particular status of the person at that particular time, shall be read as a reference to the supplier and not to the recipient,
(iv) any tax that the person was exempt from paying in respect of those actions at that particular time shall be read as a reference to tax that the supplier, and not the recipient, was exempt from paying,
(v) the person’s percentage for a participating province determined for the purposes of subsection 225.2(2) for the person’s taxation year that includes the time that an amount of tax became payable, or would have become payable by the person while the person was a selected listed financial institution, shall be read as a reference to the supplier’s percentage for a participating province determined for the purposes of subsection 225.2(2) for the supplier’s taxation year that includes the time that an amount of tax became payable, or would have become payable while the supplier was a selected listed financial institution, and
(vi) all amounts that the person was, or would have been, entitled to recover by way of rebate, refund, remission or otherwise in respect of those actions at that particular time shall be read as a reference to all amounts that the supplier, and not the recipient, was, or would have been, entitled to recover by way of rebate, refund, remission or otherwise in respect of those actions.
Marginal note:Adjustment to net tax
(5) For the purposes of this Part, if a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply made before November 17, 2005 under an agreement for the qualifying supply and tax is paid by the recipient in respect of property or a service supplied under the agreement for the qualifying supply despite no tax being payable in respect of that supply as a result of subsection (3), the tax is deemed, except for the purposes of subsection (4) and despite subsection (3), to have been payable by the recipient in respect of the supply of the property or service and, in determining the net tax for the particular reporting period of the recipient in which the election is filed with the Minister, the recipient may deduct in determining the net tax of the recipient for the particular reporting period the total of all amounts each of which is an amount determined by the formula
A - B
where
- A
- is the amount of tax paid, despite no tax being payable as a result of subsection (3), by the recipient in respect of the supply of the property or service made under the agreement for the qualifying supply; and
- B
- is the total of
(a) all amounts each of which is an input tax credit that the recipient was entitled to claim in respect of the property or service supplied under the agreement for the qualifying supply,
(b) all amounts each of which is an amount (other than an amount determined under this subsection) that may be deducted by the recipient under this Part in determining the net tax of the recipient for a reporting period in respect of the property or service supplied under the agreement for the qualifying supply, and
(c) all amounts (other than amounts referred to in paragraphs (a) and (b)) in respect of the tax paid that may be otherwise recovered by way of rebate, refund, remission or otherwise by the recipient in respect of the property or service supplied under the agreement for the qualifying supply.
Marginal note:Limitation period where election
(6) If a supplier and a recipient make a joint election referred to in subsection (2) in respect of a qualifying supply, section 298 applies to any assessment, reassessment or additional assessment of an amount payable by the recipient in respect of a supply of property or a service made under the agreement for the qualifying supply, but the Minister has until the day that is four years after the later of the day on which the election under subsection (2) is filed with the Minister and the day on which the qualifying supply is made, to make any assessment, reassessment or additional assessment solely for the purpose of taking into account any tax, net tax or any other amount payable by the recipient or remittable by the supplier in respect of a supply of property or a service made under the agreement for the qualifying supply.
Marginal note:Validity of election
(7) A joint election referred to in subsection (2) made by a supplier and a recipient in respect of a qualifying supply is valid only if
(a) the recipient files the election with the Minister in prescribed form containing prescribed information not later than the particular day that is the latest of
(i) if the recipient is
(A) a registrant at the time the qualifying supply is made, the day on or before which the return under Division V is required to be filed for the recipient’s reporting period in which tax would, in the absence of this section, have become payable in respect of the supply of property or service made under the agreement for the qualifying supply, or
(B) not a registrant at the time the qualifying supply is made, the day that is one month after the end of the recipient’s reporting period in which tax would, in the absence of this section, have become payable in respect of the supply of property or service made under the agreement for the qualifying supply,
(ii) the day that is one year after the day on which the Act enacting this section receives royal assent, and
(iii) the day that the Minister may determine on application of the recipient;
(b) the qualifying supply is made on or before the day that is one year after the day on which the recipient received for the first time a qualifying supply in respect of which an election under subsection (2) has been made; and
(c) on or before the day on which the election referred to in subsection (2) is filed in respect of the qualifying supply, the recipient has not made an election under subsection 167(1.1) in respect of the qualifying supply.
(2) Subsection (1) is deemed to have come into force on June 28, 1999.
- Date modified: