Economic Action Plan 2013 Act, No. 2 (S.C. 2013, c. 40)
Full Document:
Assented to 2013-12-12
74. (1) The portion of subsection 207.01(1) of the Act before the first definition is replaced by the following:
Marginal note:Definitions
207.01 (1) The following definitions and the definitions in subsections 146(1) (other than the definition “benefit”), 146.2(1) and 146.3(1) apply in this Part and Part XLIX of the Income Tax Regulations.
(2) The definition “specified non-qualified investment income” in subsection 207.01(1) of the Act is replaced by the following:
“specified non-qualified investment income”
« revenu de placement non admissible déterminé »
“specified non-qualified investment income”, in respect of a registered plan and its controlling individual, means income (determined without reference to paragraph 82(1)(b)), or a capital gain, that is reasonably attributable, directly or indirectly, to an amount in respect of which tax was payable under Part I by a trust governed by the registered plan or by any other registered plan of the controlling individual.
(3) Paragraph (a) of the definition “advantage” in subsection 207.01(1) of the Act is amended by striking out “and” at the end of subparagraph (iii), by adding “and” at the end of subparagraph (iv) and by adding the following after subparagraph (iv):
(v) a benefit provided under an incentive program that is — in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly — offered to a broad class of persons, if it is reasonable to conclude that none of the main purposes of the program is to enable a person or partnership to benefit from the exemption from tax under Part I of any amount in respect of the plan;
(4) Clause (b)(i)(A) of the definition “advantage” in subsection 207.01(1) of the Act is replaced by the following:
(A) would not have occurred in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly, and
(5) The portion of paragraph (c) of the definition “advantage” in subsection 207.01(1) of the Act before subparagraph (i) is replaced by the following:
(c) a benefit that is income (determined without reference to paragraph 82(1)(b)), or a capital gain, that is reasonably attributable, directly or indirectly, to
(6) Paragraph (c) of the definition “exempt contribution” in subsection 207.01(1) of the Act is replaced by the following:
(c) the survivor designates, in prescribed form filed in prescribed manner within 30 days after the day on which the contribution is made (or at any later time that is acceptable to the Minister), the contribution in relation to the survivor payment; and
(7) The portion of the definition “prohibited investment” in subsection 207.01(1) of the Act before paragraph (a) is replaced by the following:
“prohibited investment”
« placement interdit »
“prohibited investment”, at any time for a trust governed by a registered plan, means property (other than excluded property for the trust) that is at that time
(8) Subparagraph (b)(ii) of the definition “prohibited investment” in subsection 207.01(1) of the Act is replaced by the following:
(ii) a person or partnership that does not deal at arm’s length with the controlling individual;
(9) The portion of the definition “RRSP strip” in subsection 207.01(1) of the Act before paragraph (a) is replaced by the following:
“RRSP strip”
« sommme découlant d’un dépouillement de REER »
“RRSP strip”, in respect of a RRIF or RRSP, means the amount of a reduction in the fair market value of property held in connection with the RRIF or RRSP, if the value is reduced as part of a transaction or event or a series of transactions or events one of the main purposes of which is to enable the controlling individual of the RRIF or RRSP, or a person who does not deal at arm’s length with the controlling individual, to obtain a benefit in respect of property held in connection with the RRIF or RRSP or to obtain a benefit as a result of the reduction, but does not include an amount that is
(10) The definition “RRSP strip” in subsection 207.01(1) of the Act is amended by adding “or” at the end of paragraph (b), by striking out “or” at the end of paragraph (c) and by repealing paragraph (d).
(11) Paragraph (c) of the definition “swap transaction” in subsection 207.01(1) of the Act is replaced by the following:
(c) a transfer of a prohibited investment or a non-qualified investment from the registered plan for consideration, in circumstances where the controlling individual is entitled to a refund under subsection 207.04(4) on the transfer;
(12) The definition “swap transaction” in subsection 207.01(1) of the Act is amended by adding the following after paragraph (d):
(e) a transfer of a prohibited investment from the registered plan for consideration, if subsection (13) applies in respect of all or part of the consideration received by the registered plan;
(f) a transfer of property from the registered plan in consideration for the issuance of a debt obligation that is an excluded property for the trust governed by the registered plan; or
(g) a payment into the registered plan that is a payment of, or in satisfaction of, the principal amount of, or interest on, a debt obligation that is an excluded property for the trust governed by the registered plan.
(13) The descriptions of A and B in the definition “transitional prohibited investment benefit” in subsection 207.01(1) of the Act are replaced by the following:
- A
- is the total of all amounts each of which is income (determined without reference to paragraph 82(1)(b)) earned, or a capital gain realized, in the taxation year by a trust governed by a RRIF or RRSP of the controlling individual that
(a) is reasonably attributable, directly or indirectly, to a property that is a prohibited investment, and a transitional prohibited property, for the trust, and
(b) in the case of income, is earned after March 22, 2011 and, in the case of a capital gain, accrues after March 22, 2011; and
- B
- is the total of all amounts each of which is a capital loss (determined without reference to subparagraph 40(2)(g)(i) and subsection 40(3.4)) realized in the taxation year by a trust governed by a RRIF or RRSP of the controlling individual that
(a) is reasonably attributable, directly or indirectly, to a property that is a prohibited investment, and a transitional prohibited property, for the trust, and
(b) accrues after March 22, 2011.
(14) Subsection 207.01(1) of the Act is amended by adding the following in alphabetical order:
“equity”
« droit sur l’actif »
“equity”, of a corporation, trust or partnership, means
(a) in the case of a corporation, a share of the capital stock of the corporation;
(b) in the case of a trust, an income or capital interest in the trust; and
(c) in the case of a partnership, an interest as a member of the partnership.
“excluded property”
« bien exclu »
“excluded property”, at any time for a trust governed by a registered plan, means
(a) property described in paragraph 4900(1)(j.1) of the Income Tax Regulations;
(b) an equity of a mutual fund corporation, mutual fund trust or registered investment if
(i) either
(A) the equity is equity of a mutual fund corporation or mutual fund trust that derives all or substantially all its value from one or more mutual funds that are subject to, and substantially comply with, the requirements of National Instrument 81–102 Mutual Funds, as amended from time to time, of the Canadian Securities Administrators, or
(B) the corporation, trust or registered investment follows a reasonable policy of investment diversification,
(ii) the time is
(A) during the 24-month period that begins on the day on which the first taxation year of the corporation, trust or registered investment begins,
(B) during the 24-month period that ends on the day on which the last taxation year of the corporation, trust or registered investment ends, or
(C) where the equity is a share of the capital stock of a mutual fund corporation and the share derives all or substantially all its value from a particular mutual fund,
(I) during the 24-month period that begins on the day on which the particular mutual fund is established, or
(II) during the 24-month period that ends on the day on which the particular mutual fund is terminated,
(iii) it is reasonable to conclude that none of the main purposes of the structure of the corporation, trust or registered investment, or of the terms and conditions of the equity, is to accommodate transactions or events that could affect the fair market value of the property held by the trust governed by the registered plan in a manner that would not occur in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly, and
(iv) it is reasonable to conclude that none of the main purposes of the incorporation, establishment or operation of the corporation, trust or registered investment, or of the particular mutual fund, is to benefit from this paragraph; or
(c) equity of a corporation, partnership or trust (in this paragraph referred to as the “investment entity”) if at that time
(i) the fair market value of the equity (in this paragraph referred to as the “arm’s length equity”) of the investment entity that is owned by persons who deal at arm’s length with the controlling individual of the registered plan is at least 90% of the fair market value of all the equity of the investment entity,
(ii) the total fair market value of the arm’s length equity and the debt of the investment entity that is owned by persons who deal at arm’s length with the controlling individual is at least 90% of the total fair market value of all the equity and debt of the investment entity,
(iii) the controlling individual, either alone or together with persons with whom the controlling individual does not deal at arm’s length, does not have the right to cast at least 10% of the votes, if any, that could be cast regarding the governance of the investment entity,
(iv) the specific terms and conditions of each share or unit of equity of the investment entity held by the trust governed by the registered plan are the same as, or substantially similar to, the terms and conditions of particular equity that is included in the arm’s length equity,
(v) the fair market value of the particular equity referred to in subparagraph (iv) is equal to at least 10% of the total fair market value of all equity of the investment entity having the specific terms and conditions referred to in subparagraph (iv) or terms and conditions that are substantially similar to those terms and conditions,
(vi) the controlling individual deals at arm’s length with the investment entity, and
(vii) it is reasonable to conclude that none of the main purposes of the structure of the investment entity, or of the terms and conditions of the equity, is to accommodate transactions or events that could affect the fair market value of the property held by the trust governed by the registered plan in a manner that would not occur in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly.
“transitional prohibited property”
« bien interdit transitoire »
“transitional prohibited property”, at any time, for a particular trust governed by a RRIF or RRSP of a controlling individual, means a property that is held by the particular trust at that time, that was held on March 22, 2011 by a trust governed by a RRIF or RRSP of the controlling individual and that was a prohibited investment for that trust on March 23, 2011.
(15) Paragraph 207.01(4)(a) of the Act is replaced by the following:
(a) in the case of a corporation, the individual would, at that time, be a specified shareholder of the corporation if the references in the portion of the definition “specified shareholder” in subsection 248(1) before paragraph (a) to “in a taxation year” and “at any time in the year” were read as “at any time” and “at that time”, respectively;
(16) Section 207.01 of the Act is amended by adding the following after subsection (5):
Marginal note:Deemed disposition and reacquisition of investments
(6) If, at any time, a property held by a trust governed by a registered plan becomes, or ceases to be, a prohibited investment or non-qualified investment for the trust, the trust is deemed to have disposed of the property immediately before that time for proceeds of disposition equal to the fair market value of the property at that time and to have reacquired the property at that time at a cost equal to that fair market value.
Marginal note:Adjusted cost base
(7) For the purpose of computing the adjusted cost base to a trust governed by a RRIF or RRSP of a property that is a transitional prohibited property for the trust, the cost to the trust of the property until the property is disposed of by the trust is deemed to be equal to the fair market value of the property at the end of March 22, 2011.
Marginal note:Prohibited investment status
(8) Subsection (9) applies in respect of a property if
(a) the property would, in the absence of subsection (9), have ceased at any time (in this subsection and subsection (9) referred to as the “relevant time”) to be a prohibited investment for a trust governed by a RRIF or RRSP of a controlling individual;
(b) the property is a transitional prohibited property for the trust immediately before the relevant time;
(c) the controlling individual elected under subsection 207.05(4); and
(d) the controlling individual elects in prescribed form that subsection (9) apply in respect of the property and the election is filed with the Minister on or before the day that is 90 days after the end of the taxation year of the controlling individual that includes the relevant time.
Marginal note:Prohibited investment status
(9) If this subsection applies in respect of a property, the property is deemed to be a prohibited investment at and after the relevant time for every trust governed by a RRIF or RRSP of the controlling individual referred to in paragraph (8)(a).
Marginal note:Breakdown of marriage or common-law partnership
(10) Subsection (11) applies in respect of a property if
(a) the property is transferred at any time (in this subsection and subsection (11) referred to as the “transfer time”) by a trust (in this subsection and subsection (11) referred to as the “transferor trust”) governed by a RRIF or RRSP of a controlling individual (in this subsection and subsection (11) referred to as the “transferor”) under paragraph 146(16)(b) or subsection 146.3(14) to a trust (in subsection (11) referred to as the “recipient trust”) governed by a RRIF or RRSP of which the spouse or common-law partner or former spouse or common-law partner (in this subsection and subsection (11) referred to as the “recipient”) of the transferor is the controlling individual;
(b) the property is a prohibited investment, and a transitional prohibited property, for the transferor trust immediately before the transfer time;
(c) the transferor elected under subsection 207.05(4); and
(d) the transferor and the recipient jointly elect in prescribed form that subsection (11) apply in respect of the property and the election
(i) is filed with the Minister on or before the day that is 90 days after the end of the taxation year of the transferor that includes the transfer time; and
(ii) designates an amount (in subsection (11) referred to as the “designated amount”) in respect of the property that
(A) is not less than the adjusted cost base to the transferor trust of the property immediately before the transfer time, and
(B) does not exceed the greater of the amount determined under clause (A) and the fair market value of the property at the transfer time.
Marginal note:Breakdown of marriage or common-law partnership
(11) If this subsection applies in respect of a property,
(a) the property is deemed to be, at and after the transfer time, a property that was held on March 22, 2011 by a trust governed by a RRIF or RRSP of the recipient and that was a prohibited investment for the trust on March 23, 2011;
(b) where the property would, in the absence of this paragraph, not be a prohibited investment for the recipient trust immediately after the transfer time, the property is deemed to be a prohibited investment at and after the transfer time for every trust governed by a RRIF or RRSP of the recipient;
(c) the recipient is deemed to have elected under subsection 207.05(4); and
(d) notwithstanding any other provision of this Act, the designated amount is deemed to be
(i) the proceeds of disposition to the transferor trust from the transfer described in paragraph (10)(a), and
(ii) the cost of the property to a trust governed by a RRIF or RRSP of the recipient until the property is disposed of by the trust.
Marginal note:Exchange of property
(12) Subsection (13) applies in respect of a property other than money if
(a) the property is acquired at any time (in this subsection and subsection (13) referred to as the “exchange time”) by a trust (in this section and subsection (13) referred to as the “exchanging trust”) governed by a RRIF or RRSP of a controlling individual in exchange for another property (in this subsection referred to as the “exchanged property”) in a transaction to which any of section 51, subsection 85(1) and sections 85.1, 86 and 87 apply;
(b) the exchanged property is a prohibited investment, and a transitional prohibited property, for the exchanging trust immediately before the exchange time;
(c) the property is, or would be, if subsection 4900(14) of the Income Tax Regulations were read without reference to its paragraph (b), a qualified investment for the exchanging trust immediately after the exchange time; and
(d) the controlling individual elected under subsection 207.05(4).
Marginal note:Exchange of property
(13) If this subsection applies in respect of a property,
(a) other than for the purposes of subsection (7), the property is deemed to be, at and after the exchange time, a property that was held on March 22, 2011 by a trust governed by a RRIF or RRSP of the controlling individual referred to in subsection (12) and that was a prohibited investment for the trust on March 23, 2011; and
(b) where the property would, in the absence of this paragraph, not be a prohibited investment for the exchanging trust immediately after the exchange time, the property is deemed to be a prohibited investment at and after the exchange time for every trust governed by a RRIF or RRSP of the controlling individual.
(17) Subsections (1) to (6), (9), (10), (13), (14) and (16) are deemed to have come into force on March 23, 2011, except that an election referred to in paragraph 207.01(8)(d) or (10)(d) of the Act, as enacted by subsection (16), is deemed to have been filed with the Minister of National Revenue on a timely basis if it is filed with the Minister on or before the day that is 90 days after the day on which this Act receives royal assent.
(18) Subsections (7) and (8) apply after March 22, 2011 in respect of investments acquired at any time.
(19) Subsections (11) and (12) are deemed to have come into force on July 1, 2011, except that they do not apply in relation to a swap transaction undertaken before 2022 to remove a property from a RRIF or RRSP if it is reasonable to conclude that tax would be payable under Part XI.01 of the Act if
(a) that Part were read without reference to subsection 207.05(4) of the Act; and
(b) the property were retained in the RRIF or RRSP.
(20) Subsection (15) is deemed to have come into force on January 1, 2009.
- Date modified: