Budget Implementation Act, 2016, No. 1 (S.C. 2016, c. 7)
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Assented to 2016-06-22
PART 1Amendments to the Income Tax Act and to Related Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
39 Subparagraphs (a)(i) to (iii) of the definition repayment period in subsection 146.02(1) of the Act are replaced by the following:
(i) at the beginning of the third calendar year within the participation period if, in each of the second and third calendar years within the participation period,
(A) for calendar years before 2017, the person would not be entitled to claim an amount under subsection 118.6(2) (as it read in the year) in respect of at least three months in the year, if that subsection were read without reference to paragraph (b) of the description of B in that subsection, and
(B) for calendar years after 2016, the person would not be a qualifying student (as defined in subsection 118.6(1)) in respect of at least three months in the year, if that definition were read without reference to its subparagraph (a)(ii),
(ii) at the beginning of the fourth calendar year within the participation period if, in each of the third and fourth calendar years within the participation period,
(A) for calendar years before 2017, the person would not be entitled to claim an amount under subsection 118.6(2) (as it read in the year) in respect of at least three months in the year, if that subsection were read without reference to paragraph (b) of the description of B in that subsection, and
(B) for calendar years after 2016, the person would not be a qualifying student (as defined in subsection 118.6(1)) in respect of at least three months in the year, if that definition were read without reference to its subparagraph (a)(ii),
(iii) at the beginning of the fifth calendar year within the participation period if, in each of the fourth and fifth calendar years within the participation period,
(A) for calendar years before 2017, the person would not be entitled to claim an amount under subsection 118.6(2) (as it read in the year) in respect of at least three months in the year, if that subsection were read without reference to paragraph (b) of the description of B in that subsection, and
(B) for calendar years after 2016, the person would not be a qualifying student (as defined in subsection 118.6(1)) in respect of at least three months in the year, if that definition were read without reference to its subparagraph (a)(ii), and
40 (1) Section 149.1 of the Act is amended by adding the following after subsection (10):
Marginal note:Partnership look-through rule
(11) For the purposes of this section and sections 149.2 and 188.1, each member of a partnership at any time is deemed at that time to own the portion of each property of the partnership equal to the proportion that the fair market value of the member’s interest in the partnership at that time is of the fair market value of all interests in the partnership at that time.
(2) Subsection (1) is deemed to have come into force on April 21, 2015.
41 (1) Paragraph 152(1)(b) of the Act is replaced by the following:
(b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(2) or (3), 122.9(2), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year.
(2) Paragraph 152(1)(b) of the Act, as enacted by subsection (1), is replaced by the following:
(b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.9(2), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year.
(3) Paragraph 152(4.2)(b) of the Act is replaced by the following:
(b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(2) or (3), 122.9(2), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer’s liability under this Part for the year.
(4) Paragraph 152(4.2)(b) of the Act, as enacted by subsection (3), is replaced by the following:
(b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.9(2), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer’s liability under this Part for the year.
(5) Subsections (1) and (3) apply to the 2016 taxation year.
(6) Subsections (2) and (4) apply to the 2017 and subsequent taxation years.
42 (1) Paragraph 153(1)(a) of the Act is replaced by the following:
(a) salary, wages or other remuneration, other than
(i) amounts described in subsection 212(5.1), and
(ii) amounts paid at any time by an employer to an employee if, at that time, the employer is a qualifying non-resident employer and the employee is a qualifying non-resident employee,
(2) Subsection 153(1.3) of the Act is replaced by the following:
Marginal note:Reduction not permitted
(1.3) A joint election made or expected to be made under section 60.03 is not to be considered a basis on which the Minister may determine a lesser amount under subsection (1.1).
(3) Subsection 153(6) of the Act is replaced by the following:
Marginal note:Definitions
(6) The following definitions apply in this section.
- designated financial institution
designated financial institution means a corporation that
(a) is a bank, other than an authorized foreign bank that is subject to the restrictions and requirements referred to in subsection 524(2) of the Bank Act;
(b) is authorized under the laws of Canada or a province to carry on the business of offering its services as a trustee to the public; or
(c) is authorized under the laws of Canada or a province to accept deposits from the public and carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or of hypothecs on immovables. (institution financière désignée)
- qualifying non-resident employee
qualifying non-resident employee, at any time in respect of a payment referred to in paragraph (1)(a), means an employee who
(a) is, at that time, resident in a country with which Canada has a tax treaty;
(b) is not liable to tax under this Part in respect of the payment because of that treaty; and
(c) works in Canada for less than 45 days in the calendar year that includes that time or is present in Canada for less than 90 days in any 12-month period that includes that time. (employé non-résident admissible)
- qualifying non-resident employer
qualifying non-resident employer, at any time, means an employer
(a) that at that time
(i) in the case of an employer that is not a partnership,
(A) is a resident of a country with which Canada has a tax treaty, or
(B) is a corporation that does not satisfy the condition in clause (A), but would be a resident of a country with which Canada has a tax treaty if the corporation were treated, for the purpose of income taxation in that country, as a body corporate, and
(ii) in the case of an employer that is a partnership, is a partnership in respect of which the total of all amounts, each of which is a share of the partnership’s income or loss for the fiscal period that includes that time of a member that, at that time, is a resident of a country with which Canada has a tax treaty (or is a corporation that satisfies the condition in clause (i)(B)), is not less than 90% of the income or loss of the partnership for the period (for the purposes of this subparagraph, where the income and loss of the partnership are nil for the period, the income of the partnership for the period is deemed to be $1,000,000); and
(b) that is at that time certified by the Minister under subsection (7). (employeur non-résident admissible)
Marginal note:Certification by Minister
(7) The Minister may
(a) certify an employer for a specified period of time if the employer has applied in prescribed form containing prescribed information and the Minister is satisfied that the employer
(i) meets the conditions in paragraph (a) of the definition qualifying non-resident employer in subsection (6), and
(ii) meets the conditions established by the Minister; and
(b) revoke an employer’s certification if the Minister is no longer satisfied that the employer meets the conditions referred to in subparagraph (a)(i) or (ii).
(4) Subsections (1) and (3) apply in respect of payments made after 2015.
(5) Subsection (2) applies to the 2016 and subsequent taxation years.
43 (1) Subsection 163(1) of the Act is replaced by the following:
Marginal note:Repeated failure to report income
163 (1) Every person is liable to a penalty who
(a) fails to report an amount, equal to or greater than $500, required to be included in computing the person’s income in a return filed under section 150 for a taxation year (in this subsection and subsection (1.1) referred to as the unreported amount);
(b) had failed to report an amount, equal to or greater than $500, required to be included in computing the person’s income in any return filed under section 150 for any of the three preceding taxation years; and
(c) is not liable to a penalty under subsection (2) in respect of the unreported amount.
Marginal note:Amount of penalty
(1.1) The amount of the penalty to which the person is liable under subsection (1) is equal to the lesser of
(a) 10% of the unreported amount, and
(b) the amount determined by the formula
0.5 × (A – B)
where
- A
- is the total of the amounts that would be determined under paragraphs (2)(a) to (g) if subsection (2) applied in respect of the unreported amount, and
- B
- is any amount deducted or withheld under subsection 153(1) that may reasonably be considered to be in respect of the unreported amount.
(2) Paragraph 163(2)(c.4) of the Act is repealed.
(3) Subsection 163(2) of the Act is amended by adding the following after paragraph (c.4):
(c.5) the amount, if any, by which
(i) the total of all amounts each of which is an amount that would be deemed by subsection 122.9(2) to have been paid on account of the person’s tax payable under this Part for the year if that amount were calculated by reference to the person’s claim for the year under the subsection
exceeds
(ii) the total of all amounts each of which is the amount that the person is entitled to claim for the year under subsection 122.9(2),
(4) Subsection (1) applies to taxation years that begin after 2014.
(5) Subsection (2) comes into force on January 1, 2017.
(6) Subsection (3) applies to the 2016 and subsequent taxation years.
44 (1) Paragraphs (b) and (c) of the definition labour-sponsored funds tax credit in subsection 211.7(1) of the Act are replaced by the following:
(b) in any other case, the amount that would be determined under subsection 127.4(6) in respect of the share if this Act were read without reference to its paragraphs (b) and (d). (crédit d’impôt relatif à un fonds de travailleurs)
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
45 (1) Subparagraph 217(5)(a)(i) of the Act is replaced by the following:
(i) such of the amounts that would have been deductible under any of section 118.2, subsections 118.3(2) and (3) and sections 118.8 and 118.9 in computing the person’s tax payable under Part I for the year if the person had been resident in Canada throughout the year, as can reasonably be considered wholly applicable, and
(2) Subsection (1) applies to the 2017 and subsequent taxation years.
46 (1) Section 227 of the Act is amended by adding the following after subsection (8.5):
Marginal note:No penalty — qualifying non-resident employers
(8.6) Subsection (8) does not apply to a qualifying non-resident employer (as defined in subsection 153(6)) in respect of a payment made to an employee if, after reasonable inquiry, the employer had no reason to believe at the time of the payment that the employee was not a qualifying non-resident employee (as defined in subsection 153(6)).
(2) Subsection (1) applies in respect of payments made after 2015.
47 (1) Paragraph 241(4)(d) of the Act is amended by striking out “or” at the end of subparagraph (xvi), by adding “or” at the end of subparagraph (xvii) and by adding the following after subparagraph (xvii):
(xviii) to an official of the Canada Revenue Agency solely for the purpose of the collection of amounts owing to Her Majesty in right of Canada or of a province under the Government Employees Compensation Act, the Canada Labour Code, the Merchant Seamen Compensation Act, the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Postal Services Continuation Act, 1997, the Wage Earner Protection Program Act, the Apprentice Loans Act or a law of a province governing the granting of financial assistance to students at the post-secondary school level;
(2) Subsection 241(4) of the Act is amended by striking out “or” at the end of paragraph (r), by adding “or’’ at the end of paragraph (s) and by adding the following after paragraph (s):
(t) provide taxpayer information to an official solely for the purpose of enabling the Chief Actuary of the Office of the Superintendent of Financial Institutions to conduct actuarial reviews of pension plans established under the Old Age Security Act as required by the Public Pensions Reporting Act.
48 (1) The definition dividend rental arrangement in subsection 248(1) of the Act is replaced by the following:
- dividend rental arrangement
dividend rental arrangement, of a person or a partnership (each of which is referred to in this definition as the person), means
(a) any arrangement entered into by the person where it can reasonably be considered that
(i) the main reason for the person entering into the arrangement was to enable the person to receive a dividend on a share of the capital stock of a corporation, other than a dividend on a prescribed share or on a share described in paragraph (e) of the definition term preferred share in this subsection or an amount deemed by subsection 15(3) to be received as a dividend on a share of the capital stock of a corporation, and
(ii) under the arrangement someone other than that person bears the risk of loss or enjoys the opportunity for gain or profit with respect to the share in any material respect,
(b) for greater certainty, any arrangement under which
(i) a corporation at any time receives on a particular share a taxable dividend that would, if this Act were read without reference to subsection 112(2.3), be deductible in computing its taxable income or taxable income earned in Canada for the taxation year that includes that time, and
(ii) the corporation or a partnership of which the corporation is a member is obligated to pay to another person or partnership an amount
(A) that is compensation for
(I) the dividend described in subparagraph (i),
(II) a dividend on a share that is identical to the particular share, or
(III) a dividend on a share that, during the term of the arrangement, can reasonably be expected to provide to a holder of the share the same or substantially the same proportionate risk of loss or opportunity for gain as the particular share, and
(B) that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person or partnership, as the case may be, as a taxable dividend,
(c) any synthetic equity arrangement, in respect of a DRA share of the person, and
(d) one or more agreements or arrangements (other than agreements or arrangements described in paragraph (c)) entered into by the person, the connected person referred to in paragraph (a) of the definition synthetic equity arrangement or, for greater certainty, by any combination of the person and connected persons, if
(i) the agreements or arrangements have the effect, or would have the effect if each agreement or arrangement entered into by a connected person were entered into by the person, of eliminating all or substantially all of the person’s risk of loss and opportunity for gain or profit in respect of a DRA share of the person,
(ii) as part of a series of transactions that includes these agreements or arrangements, a tax-indifferent investor, or a group of tax-indifferent investors each member of which is affiliated with every other member, obtains all or substantially all of the risk of loss and opportunity for gain or profit in respect of the DRA share or an identical share (as defined in subsection 112(10)), and
(iii) it is reasonable to conclude that one of the purposes of the series of transactions is to obtain the result described in subparagraph (ii); (mécanisme de transfert de dividendes)
(2) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:
- DRA share
DRA share, of a person or partnership, means a share
(a) that is owned by the person or partnership,
(b) in respect of which the person or partnership is deemed to have received a dividend under subsection 260(5.1) and is provided with all or substantially all of the risk of loss and opportunity for gain or profit under an agreement or arrangement,
(c) that is held by a trust under which the person or partnership is a beneficiary and in respect of which the person or partnership is deemed to have received a dividend as a result of a designation by the trust under subsection 104(19),
(d) in respect of which the person or partnership is deemed to have received a dividend under subsection 82(2), or
(e) in any other case, in respect of which the person or partnership is (or would be in the absence of subsection 112(2.3)) entitled to a deduction under subsection 112(1) in respect of dividends received on the share; (action de mécanisme de transfert de dividendes ou AMTD)
- recognized derivatives exchange
recognized derivatives exchange means a person or partnership recognized or registered under the securities laws of a province to carry on the business of providing the facilities necessary for the trading of options, swaps, futures contracts or other financial contracts or instruments whose market price, value, delivery obligations, payment obligations or settlement obligations are derived from, referenced to or based on an underlying interest; (bourse reconnue en instruments financiers dérivés)
- specified mutual fund trust
specified mutual fund trust, at any time, means a mutual fund trust other than a mutual fund trust for which it can reasonably be considered, having regard to all the circumstances, including the terms and conditions of the units of the trust, that the total of all amounts each of which is the fair market value, at that time, of a unit issued by the trust and held by a person exempt from tax under section 149 is all or substantially all of the total of all amounts each of which is the fair market value, at that time, of a unit issued by the trust; (fiducie de fonds commun de placement déterminée)
- specified synthetic equity arrangement
specified synthetic equity arrangement, in respect of a DRA share of a person or partnership, means one or more agreements or other arrangements that
(a) have the effect of providing to a person or partnership all or any portion of the risk of loss or opportunity for gain or profit in respect of the DRA share and, for greater certainty, opportunity for gain or profit includes rights to, benefits from and distributions on a share, and
(b) can reasonably be considered to have been entered into in connection with a synthetic equity arrangement, in respect of the DRA share, or in connection with another specified synthetic equity arrangement, in respect of the DRA share; (arrangement de capitaux propres synthétiques déterminé)
- synthetic equity arrangement
synthetic equity arrangement in respect of a DRA share of a person or partnership (referred to in this definition as the particular person),
(a) means one or more agreements or other arrangements that
(i) are entered into by the particular person, by a person or partnership that does not deal at arm’s length with, or is affiliated with, the particular person (referred to in this definition as a connected person) or, for greater certainty, by any combination of the particular person and connected persons, with one or more persons or partnerships (referred to in this definition as a counterparty and in subsection 112(2.32) as a counterparty or an affiliated counterparty as appropriate),
(ii) have the effect, or would have the effect, if each agreement entered into by a connected person were entered into by the particular person, of providing all or substantially all of the risk of loss and opportunity for gain or profit in respect of the DRA share to a counterparty or a group of counterparties each member of which is affiliated with every other member and, for greater certainty, opportunity for gain or profit includes rights to, benefits from and distributions on a share, and
(iii) if entered into by a connected person, can reasonably be considered to have been entered into with the knowledge, or where there ought to have been the knowledge, that the effect described in subparagraph (ii) would result, and
(b) does not include
(i) an agreement that is traded on a recognized derivatives exchange unless it can reasonably be considered that, at the time the agreement is entered into,
(A) the particular person or the connected person, as the case may be, knows or ought to know that the agreement is part of a series of transactions that has the effect of providing all or substantially all of the risk of loss and opportunity for gain or profit in respect of the DRA share to a tax-indifferent investor, or a group of tax-indifferent investors each member of which is affiliated with every other member, or
(B) one of the main reasons for entering into the agreement is to obtain the benefit of a deduction in respect of a payment, or a reduction of an amount that would otherwise have been included in income, under the agreement, that corresponds to an expected or actual dividend in respect of a DRA share,
(ii) one or more agreements or other arrangements that, but for this subparagraph, would be a synthetic equity arrangement, in respect of a share owned by the particular person (in this subparagraph referred to as the synthetic short position), if
(A) the particular person has entered into one or more other agreements or other arrangements (other than, for greater certainty, an agreement under which the share is acquired or an agreement or arrangement under which the particular person receives a deemed dividend and is provided with all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share) that have the effect of providing all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share to the particular person (in this subparagraph referred to as the synthetic long position),
(B) the synthetic short position has the effect of offsetting all amounts included or deducted in computing the income of the particular person with respect to the synthetic long position, and
(C) the synthetic short position was entered into for the purpose of obtaining the effect referred to in clause (B), and
(iii) an agreement to purchase the shares of a corporation, or a purchase agreement that is part of a series of agreements to purchase the shares of a corporation, under which a counterparty or a group of counterparties each member of which is affiliated with every other member acquires control of the corporation that has issued the shares being purchased, unless the main reason for establishing, incorporating or operating the corporation is to have this subparagraph apply; (arrangement de capitaux propres synthétiques)
- synthetic equity arrangement chain
synthetic equity arrangement chain, in respect of a share owned by a person or partnership, means a synthetic equity arrangement — or a synthetic equity arrangement in combination with one or more specified synthetic equity arrangements — where
(a) no party to the synthetic equity arrangement or a specified synthetic equity arrangement, if any, is a tax-indifferent investor, and
(b) each other party to these agreements or arrangements is affiliated with the person or partnership; (chaîne d’arrangements de capitaux propres synthétiques)
- tax-indifferent investor
tax-indifferent investor, at any time, means a person or partnership that is at that time
(a) a person exempt from tax under section 149,
(b) a non-resident person, other than a person to which all amounts paid or credited under a synthetic equity arrangement or a specified synthetic equity arrangement may reasonably be attributed to the business carried on by the person in Canada through a permanent establishment (as defined by regulation) in Canada,
(c) a trust resident in Canada (other than a specified mutual fund trust) if any of the interests as a beneficiary under the trust is not a fixed interest (as defined in subsection 251.2(1)) in the trust (in this definition referred to as a discretionary trust),
(d) a partnership more than 10% of the fair market value of all interests in which can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraphs (a) to (c), or
(e) a trust resident in Canada (other than a specified mutual fund trust or a discretionary trust) if more than 10% of the fair market value of all interests as beneficiaries under the trust can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraph (a) or (c); (investisseur indifférent relativement à l’impôt)
(3) Section 248 of the Act is amended by adding the following after subsection (41):
Marginal note:Synthetic equity arrangements — disaggregation
(42) For the purposes of the definition synthetic equity arrangement in subsection (1), paragraphs (c) and (d) of the definition dividend rental arrangement in subsection (1) and subsections 112(2.31), (2.32) and (10), an arrangement that reflects the fair market value of more than one type of identical share (as defined in subsection 112(10)) is considered to be a separate arrangement with respect to each type of identical share the value of which the arrangement reflects.
(4) Subsection (1) applies to
(a) dividends that are paid or become payable after April 2017; and
(b) dividends that are paid or become payable at any time after October 2015 and before May 2017 on a share if
(i) there is a synthetic equity arrangement, or one or more agreements or arrangements described by paragraph (d) of the definition dividend rental arrangement in subsection 248(1) of the Act, as enacted by subsection (1), in respect of the share at that time, and
(ii) after April 21, 2015 and before that time, all or any part of the synthetic equity arrangement, or the agreements or arrangements, referred to in subparagraph (i) — including an option, swap, futures contract, forward contract or other financial or commodity contract or instrument as well as a right or obligation under the terms of such a contract or instrument — that contributes or could contribute to the effect of providing all or substantially all of the risk of loss and opportunity for gain or profit, in respect of the share, to one or more persons or partnerships is
(A) entered into, acquired, extended or renewed after April 21, 2015, or
(B) in the case of a right to increase the notional amount under an agreement that is or is part of the synthetic equity arrangement, is exercised or acquired after April 21, 2015.
(5) Subsections (2) and (3) are deemed to have come into force on April 22, 2015.
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