Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)
Full Document:
Assented to 2013-06-26
226. (1) Subparagraph 91(4)(a)(ii) of the Act is replaced by the following:
(ii) the taxpayer’s relevant tax factor for the year, and
(2) Section 91 of the Act is amended by adding the following after subsection (4):
Marginal note:Denial of foreign accrual tax
(4.1) For the purposes of the definition “foreign accrual tax” in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year of the taxpayer in respect of a particular foreign affiliate of the taxpayer is not to include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if, at any time in the taxation year (referred to in this subsection as the “affiliate year”) of the particular affiliate that ends in the taxation year of the taxpayer,
(a) a specified owner in respect of the taxpayer is considered,
(i) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular corporation — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to own less than all of the shares of the capital stock of the particular corporation that are considered to be owned by the specified owner for the purposes of this Act, or
(ii) under the income tax laws (referred to in subsections (4.5) and (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of a particular partnership — that is, at any time in the affiliate year, a pertinent person or partnership in respect of the particular affiliate — is subject to income taxation, to have a lesser direct or indirect share of the income of the particular partnership than the specified owner is considered to have for the purposes of this Act; or
(b) where the taxpayer is a partnership, the direct or indirect share of the income of the partnership of any member of the partnership that is, at any time in the affiliate year, a person resident in Canada or a foreign affiliate of such a person is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country other than Canada under the laws of which any income of the partnership is subject to income taxation, less than the member’s direct or indirect share of that income for the purposes of this Act.
Marginal note:Specified owner
(4.2) For the purposes of subsections (4.1) and (4.5), a “specified owner”, at any time, in respect of a taxpayer means the taxpayer or a person or partnership that is, at that time,
(a) a partnership of which the taxpayer is a member;
(b) a foreign affiliate of the taxpayer;
(c) a partnership a member of which is a foreign affiliate of the taxpayer; or
(d) a person or partnership referred to in any of subparagraphs (4.4)(a)(i) to (iii).
Marginal note:Pertinent person or partnership
(4.3) For the purposes of this subsection and subsection (4.1), a “pertinent person or partnership”, at any time, in respect of a particular foreign affiliate of a taxpayer means the particular affiliate or a person or partnership that is, at that time,
(a) another foreign affiliate of the taxpayer
(i) in which the particular affiliate has an equity percentage, or
(ii) that has an equity percentage in the particular affiliate;
(b) a partnership a member of which is at that time a pertinent person or partnership in respect of the particular affiliate under this subsection; or
(c) a person or partnership referred to in any of subparagraphs (4.4)(b)(i) to (iii).
Marginal note:Series of transactions
(4.4) For the purposes of subsections (4.2) and (4.3), if, as part of a series of transactions or events that includes the earning of the foreign accrual property income that gave rise to the particular amount referred to in subsection (4.1), a foreign affiliate (referred to in this subsection as the “funding affiliate”) of the taxpayer or of a person (referred to in this subsection as the “related person”) resident in Canada that is related to the taxpayer, or a partnership (referred to in this subsection as the “funding partnership”) of which such an affiliate is a member, directly or indirectly provided funding to the particular affiliate, or a partnership of which the particular affiliate is a member, otherwise than by way of loans or other indebtedness that are subject to terms or conditions made or imposed, in respect of the loans or other indebtedness, that do not differ from those that would be made or imposed between persons dealing at arm’s length or by way of an acquisition of shares of the capital stock of any corporation, then
(a) if the funding affiliate is, or the funding partnership has a member that is, a foreign affiliate of the related person, the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be specified owners in respect of the taxpayer:
(i) the related person,
(ii) each foreign affiliate of the related person, and
(iii) each partnership a member of which is a person referred to in subparagraph (i) or (ii); and
(b) the following persons and partnerships are deemed, at all times during which the foreign accrual property income is earned by the particular affiliate, to be pertinent persons or partnerships in respect of the particular affiliate:
(i) the funding affiliate or the funding partnership,
(ii) a non-resident corporation
(A) in which the funding affiliate has an equity percentage, or
(B) that has an equity percentage in the funding affiliate, and
(iii) a partnership a member of which is a person or partnership referred to in subparagraph (i) or (ii).
Marginal note:Exception — hybrid entities
(4.5) For the purposes of subparagraph (4.1)(a)(i), a specified owner in respect of the taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a corporation that are considered to be owned for the purposes of this Act solely because the specified owner is not treated as a corporation under the relevant foreign tax law.
Marginal note:Exceptions — partnerships
(4.6) For the purposes of subparagraph (4.1)(a)(ii) and paragraph (4.1)(b), a member of a partnership is not to be considered to have a lesser direct or indirect share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:
(a) a difference between the relevant foreign tax law and this Act in the manner of
(i) computing the income of the partnership, or
(ii) allocating the income of the partnership because of the admission to, or withdrawal from, the partnership of any of its members;
(b) the treatment of the partnership as a corporation under the relevant foreign tax law; or
(c) the fact that the member is not treated as a corporation under the relevant foreign tax law.
Marginal note:Deemed ownership
(4.7) For the purposes of subsection (4.1), if a specified owner owns, for the purposes of this Act, shares of the capital stock of a corporation and the dividends, or similar amounts, in respect of those shares are treated under the income tax laws of any country other than Canada under the laws of which any income of the corporation is subject to income taxation as interest or another form of deductible payment, the specified owner is deemed to be considered, under those tax laws, to own less than all of the shares of the capital stock of the corporation that are considered to be owned by the specified owner for the purposes of this Act.
(3) Subsection (1) applies to the 2002 and subsequent taxation years.
(4) Subsection (2) applies in respect of the computation of foreign accrual tax applicable to an amount included in computing a taxpayer’s income under subsection 91(1) of the Act, for a taxation year of the taxpayer that ends after March 4, 2010, in respect of a foreign affiliate of the taxpayer. However, for taxation years of the taxpayer that end on or before October 24, 2012,
(a) subsection 91(4.1) of the Act, as enacted by subsection (2), is to be read as follows:
(4.1) For the purposes of the definition “foreign accrual tax” in subsection 95(1), foreign accrual tax applicable to a particular amount included in computing a taxpayer’s income under subsection (1) for a taxation year in respect of a particular foreign affiliate of the taxpayer shall not include the amount that would, in the absence of this subsection, be foreign accrual tax applicable to the particular amount if the particular amount is earned during a period in which
(a) if the taxpayer is a partnership, the share of the income of any member of the partnership that is a person resident in Canada is, under the income tax laws (referred to in subsection (4.6) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the partnership is subject to income taxation, less than its share of the income for the purposes of this Act; or
(b) in any other case, the taxpayer is considered, under the income tax laws (referred to in subsection (4.5) as the “relevant foreign tax law”) of any country, other than Canada, under the laws of which the income of the particular affiliate is subject to income taxation, to own less than all of the shares of the capital stock of the particular affiliate, of another foreign affiliate of the taxpayer in which the particular affiliate has an equity percentage, or of another foreign affiliate of the taxpayer that has an equity percentage in the particular affiliate, that are considered to be owned by the taxpayer for the purposes of this Act.
(b) subsection 91(4.5) of the Act, as enacted by subsection (2), is to be read as follows:
(4.5) For the purposes of paragraph (4.1)(b), a taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a foreign affiliate of the taxpayer that are considered to be owned by the taxpayer for the purposes of this Act solely because the taxpayer or the foreign affiliate is not treated as a corporation under the relevant foreign tax law.
(c) the portion of subsection 91(4.6) of the Act before paragraph (a), as enacted by subsection (2), is to be read as follows:
(4.6) For the purposes of paragraph (4.1)(a), a member of a partnership is not to be considered to have a lesser share of the income of the partnership under the relevant foreign tax law than for the purposes of this Act solely because of one or more of the following:
(d) section 91 of the Act is to be read without reference to its subsections (4.2) to (4.4) and (4.7), as enacted by subsection (2).
227. (1) The definition “relevant tax factor” in subsection 95(1) of the Act is replaced by the following:
“relevant tax factor”
« facteur fiscal approprié »
“relevant tax factor”, of a person or partnership for a taxation year, means
(a) in the case of a corporation, or of a partnership all the members of which, other than non-resident persons, are corporations, the quotient obtained by the formula
1/(A – B)
where
- A
- is the percentage set out in paragraph 123(1)(a), and
- B
- is
(i) in the case of a corporation, the percentage that is the corporation’s general rate reduction percentage (as defined by section 123.4) for the taxation year, and
(ii) in the case of a partnership, the percentage that would be determined under subparagraph (i) in respect of the partnership if the partnership were a corporation whose taxation year is the partnership’s fiscal period, and
(b) in any other case, 2.2;
(2) The portion of the definition “foreign accrual tax” in subsection 95(1) of the Act before paragraph (a) is replaced by the following:
“foreign accrual tax”
« impôt étranger accumulé »
“foreign accrual tax” applicable to any amount included in computing a taxpayer’s income under subsection 91(1) for a taxation year in respect of a particular foreign affiliate of the taxpayer means, subject to subsection 91(4.1),
(3) Subsection (1) applies to the 2002 and subsequent taxation years.
(4) Subsection (2) applies to taxation years of a taxpayer that end after March 4, 2010.
- Date modified: