Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)
Full Document:
Assented to 2013-06-26
8. (1) The portion of subsection 94.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Offshore investment fund property
94.1 (1) If in a taxation year a taxpayer holds or has an interest in property (referred to in this section as an “offshore investment fund property”)
(2) Subparagraph 94.1(1)(f)(ii) of the Act is replaced by the following:
(ii) 1/12 of the total of
(A) the prescribed rate of interest for the period that includes that month, and
(B) two per cent
(3) The definition “non-resident entity” in subsection 94.1(2) of the Act is replaced by the following:
“non-resident entity”
« entité non-résidente »
“non-resident entity” at any time means
(a) a corporation that is at that time non-resident,
(b) a partnership, organization, fund or entity that is at that time non-resident or is not at that time situated in Canada, or
(c) an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition “exempt foreign trust” in subsection 94(1)).
(4) Subsections (1) to (3) apply to taxation years that end after March 4, 2010. Subsections (1) and (3) also apply to each taxation year of a beneficiary under a trust that ends before March 5, 2010 if subsection 94(1) of the Act, as enacted by section 7, applies to the trust for a taxation year of the trust that ends in that earlier taxation year of the beneficiary.
(5) Subsection (6) applies to a taxpayer for each taxation year that ends in the period that begins on January 1, 2001 and ends on March 4, 2010 (referred to in this subsection and subsections (7), (8) and (10) as the “relevant period”), if
(a) in the return of income for the year the taxpayer has, in respect of one or more participating interests held by the taxpayer during the relevant period, in this subsection and subsections (6) to (10) having the meaning of “participating interest” as set out in the provisions of sections 94.1 to 94.4 of the Act contained in section 18 of Bill C-10 of the second session of the 39th Parliament as passed by the House of Commons on October 29, 2007, included or deducted an amount (referred to in this subsection and subsections (6) to (8) and (10) as the “reported inclusion” or “reported deduction” as the case may be) under those provisions in computing income for the year; and
(b) the taxpayer files a prescribed form on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act receives royal assent
(i) identifying each participating interest of the taxpayer for which a reported inclusion or reported deduction described in paragraph (a) has been included, or deducted, in computing the taxpayer’s income for a taxation year ending in the relevant period, and
(ii) providing sufficient detail of each of those participating interests, including any reported inclusions, reported deductions, and any taxable capital gains or allowable capital losses realized on the participating interests described in subparagraph (i).
(6) If this subsection applies to a taxpayer for a taxation year,
(a) the taxpayer’s reported inclusion and any taxable capital gains for the year in respect of a participating interest is deemed to be the amount required to be included under the Act in computing the taxpayer’s income for that year in respect of that participating interest; and
(b) the taxpayer’s reported deduction and any allowable capital loss for the year in respect of a participating interest is deemed to be the amount deductible under the Act in computing the taxpayer’s income, or the allowable capital loss, respectively, for that year in respect of that participating interest.
(7) If subsection (6) applies to a taxpayer for one or more taxation years, in computing the taxpayer’s income for the first taxation year that ends after the relevant period, there may be deducted the amount that does not exceed the amount, if any, determined by the formula
(A – B) – (C – D)
where
- A
- is the total of all amounts each of which is a reported inclusion for a year in respect of a participating interest, or a taxable capital gain for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a);
- B
- is the total of all amounts each of which is a reported deduction for a year in respect of a participating interest, or an allowable capital loss for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a);
- C
- is the total of all amounts each of which is
(a) an amount that would be required to be included under the provisions of the Act, read without reference to this Act, in the taxpayer’s income for a taxation year that ends in the relevant period in respect of a property that is a participating interest of the taxpayer described in paragraph (5)(a), or
(b) a taxable capital gain computed without reference to this Act for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a); and
- D
- is the total of all amounts each of which is an allowable capital loss computed without reference to this Act for a taxation year that ends in the relevant period from the disposition of a participating interest of the taxpayer described in paragraph (5)(a).
(8) Subsection (9) applies to a taxpayer in respect of a participating interest described in paragraph (5)(a) for the first taxation year that ends after the relevant period if
(a) at the start of the year the taxpayer holds the participating interest;
(b) the total of all amounts each of which is a reported deduction for a year in respect of the participating interest exceeds the total of all amounts each of which is a reported inclusion for a year in respect of the participating interest; and
(c) the amount determined for B in applying the formula in subsection (7) in computing the taxpayer’s income for that year exceeds the amount, if any, that is the amount determined for A in so applying that formula.
(9) If this subsection applies to a taxpayer in respect of a participating interest for a taxation year, in computing the adjusted cost base to the taxpayer of the participating interest at any time after the start of the taxation year, there is to be deducted an amount equal to the excess determined in respect of the participating interest under paragraph (8)(b).
(10) Notwithstanding subsection 152(4) of the Act, the Minister of National Revenue may reassess tax, interest or penalties payable under Part I of the Act by the taxpayer, in respect of each of the taxpayer’s participating interests for each of the taxpayer’s taxation years that ends in the relevant period to give effect to the application of the Act as read in respect of each of those years without regard to this Part if
(a) subsection (6) does not apply to the taxpayer;
(b) the taxpayer has a reported inclusion or a reported deduction in respect of those participating interests for one or more of those years; and
(c) at any time that is on or before the day that is 365 days after the day on which this Act receives royal assent, the taxpayer files with the Minister of National Revenue a prescribed form amending, as necessary, each of the returns for those taxation years.
9. (1) The Act is amended by adding the following after section 94.1:
Marginal note:Investments in non-resident commercial trusts
94.2 (1) Subsection (2) applies to a beneficiary under a trust, and to any particular person (other than an individual described in paragraph (a) of the definition “connected contributor” in subsection 94(1)) of which any such beneficiary is a controlled foreign affiliate, at any time if
(a) the trust is at that time an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition “exempt foreign trust” in subsection 94(1));
(b) either
(i) the total fair market value at that time of all fixed interests of a particular class in the trust held by the beneficiary, persons or partnerships not dealing at arm’s length with the beneficiary, or persons or partnerships that acquired their interests in the trust in exchange for consideration given to the trust by the beneficiary, is at least 10% of the total fair market value at that time of all fixed interests of the particular class, or
(ii) the beneficiary or the particular person has at or before that time contributed restricted property to the trust; and
(c) the beneficiary is at that time a
(i) resident beneficiary,
(ii) mutual fund,
(iii) controlled foreign affiliate of the particular person, or
(iv) partnership of which a person described in any of subparagraphs (i) to (iii) is a member.
Marginal note:Deemed corporation
(2) If this subsection applies at any time to a beneficiary under, or a particular person in respect of, a trust, then for the purposes of applying this section, subsections 91(1) to (4), paragraph 94.1(1)(a) and sections 95 and 233.4 to the beneficiary under, and, if applicable, to the particular person in respect of, the trust
(a) the trust is deemed to be at that time a non-resident corporation
(i) controlled by each of the beneficiary and the particular person, and
(ii) having, for each particular class of fixed interests in the trust, a separate class of capital stock of 100 issued shares that have the same attributes as the interests of the particular class; and
(b) each beneficiary under the trust is deemed to hold at that time the number of shares of each separate class described in subparagraph (a)(ii) equal to the proportion of 100 that the fair market value at that time of that beneficiary’s fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class.
Marginal note:Relief from double tax
(3) For the purposes of applying subsection 91(1) to the beneficiary, and, if applicable, to the particular person, to whom subsection (2) applies
(a) there may be deducted in computing the foreign accrual property income of the trust referred to in paragraph (2)(a) (in this subsection referred to as the “entity”) for a particular taxation year of the entity the amount that would, in the absence of this paragraph, be the portion of the entity’s foreign accrual property income that would reasonably be considered to have been if this Part were applicable to all beneficiaries of the entity, included under subsection 104(13) in computing the income of any beneficiary of the entity for the taxation year in which the particular taxation year of the entity ends; and
(b) subsection 5904(2) of the Income Tax Regulations is to be read without reference to its paragraph (a) in determining the distribution entitlement of all the shares of a class of the capital stock of the entity at the end of the particular taxation year.
Marginal note:Request for information
(4) If the Minister sends a written request, served personally or by registered mail, to a taxpayer requesting additional information for the purpose of enabling the Minister to determine the fair market value of interests in a trust for the purpose of determining the application of subsections (1) to (3) for a taxation year to the taxpayer, and information that may reasonably be considered to be sufficient to make the determination is not received by the Minister within 120 days (or within any longer period that is acceptable to the Minister) after the Minister sends the request, then in applying this section for the taxation year to the taxpayer the fair market value of those interests is deemed to be the fair market value as reasonably determined by the Minister based on the information received by the Minister within 120 days (or within any longer period that is acceptable to the Minister) after the Minister sends the request and any other information the Minister considers reasonable.
(2) Subsection (1) applies to taxation years that end after March 4, 2010, except that
(a) for taxation years that end before October 24, 2012, paragraph 94.2(1)(c) of the Act, as enacted by subsection (1), is to be read as follows:
(c) the beneficiary is at that time a resident beneficiary or a mutual fund.
(b) if subsection 94(1) of the Act, as enacted by section 7, applies to a trust for a taxation year that ends before March 5, 2010, then section 94.2 of the Act, as enacted by subsection (1), applies to each beneficiary under the trust, and to each person of which a beneficiary under the trust is a controlled foreign affiliate, for a taxation year of the beneficiary or person in which the earlier taxation year of the trust ends and, for those earlier taxation years, that section is to be read as follows:
94.2 Where,
(a) at any time in a taxation year of a trust that is an exempt foreign trust (other than a trust described in any of paragraphs (a) to (g) of the definition “exempt foreign trust” in subsection 94(1)), a person beneficially interested in the trust (referred to in this section as a “beneficiary”) was
(i) a person resident in Canada,
(ii) a corporation or trust with which a person resident in Canada was not dealing at arm’s length, or
(iii) a controlled foreign affiliate of a person resident in Canada, and
(b) at any time in or before the trust’s taxation year,
(i) the trust, or a non-resident corporation that would, if the trust were resident in Canada, be a controlled foreign affiliate of the trust, has, other than by virtue of the repayment of a loan, acquired property, directly or indirectly in any manner whatever, from
(A) a particular person who
(I) was the beneficiary referred to in paragraph (a), was related to that beneficiary or was the uncle, aunt, nephew or niece of that beneficiary,
(II) was resident in Canada at any time in the 18-month period before the end of that year or, in the case of a person who has ceased to exist, was resident in Canada at any time in the 18-month period before the person ceased to exist, and
(III) in the case of an individual, had before the end of that year been resident in Canada for a period of, or periods the total of which is, more than 60 months, or
(B) a trust or corporation that acquired the property, directly or indirectly in any manner whatever, from a particular person described in clause (A) with whom it was not dealing at arm’s length
and the trust was not
(C) an inter vivos trust created at any time before 1960 by a person who at that time was a non-resident person,
(D) a testamentary trust that arose as a consequence of the death of an individual before 1976, or
(E) governed by a foreign retirement arrangement, or
(ii) all or any part of the interest of the beneficiary in the trust was acquired directly or indirectly by the beneficiary by way of
(A) purchase,
(B) gift, bequest or inheritance from a person referred to in clause (i)(A) or (B), or
(C) the exercise of a power of appointment by a person referred to in clause (i)(A) or (B),
the following rules apply for that taxation year of the trust:
(c) for the purposes of subsections 91(1) to (4) and sections 95 and 233.4,
(i) the trust shall, with respect to any beneficiary under the trust whose beneficial interest in the trust has a fair market value that is not less than 10% of the aggregate fair market value of all beneficial interests in the trust, be deemed to be a non-resident corporation that is controlled by the beneficiary,
(ii) the trust shall be deemed to be a non-resident corporation having a capital stock of a single class divided into 100 issued shares, and
(iii) each beneficiary under the trust shall be deemed to own at any time the number of the issued shares that is equal to the proportion of 100 that
(A) the fair market value at that time of the beneficiary’s beneficial interest in the trust
is of
(B) the fair market value at that time of all beneficial interests in the trust, and
(d) in computing the foreign accrual property income of the trust for that taxation year, there may be deducted such portion of the amount that would, but for this paragraph, be the foreign accrual property income of the trust as may reasonably be considered as having been included in computing a beneficiary’s income under subsection 104(13) for a taxation year in which that taxation year of the trust ends.
- Date modified: