Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)
Full Document:
Assented to 2013-06-26
365. (1) The definition “qualified security” in subsection 260(1) of the Act is amended by striking out “or” at the end of paragraph (c), by adding “or” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) a qualified trust unit;
(2) Paragraph (a) of the definition “securities lending arrangement” in subsection 260(1) of the Act is replaced by the following:
(a) a person (in this section referred to as the “lender”) transfers or lends at any particular time a qualified security to another person (in this section referred to as the “borrower”),
(3) Paragraph (c) of the definition “securities lending arrangement” in subsection 260(1) of the Act is replaced by the following:
(c) the borrower is obligated to pay to the lender amounts equal to and as compensation for all amounts, if any, paid on the security that would have been received by the borrower if the borrower had held the security throughout the period that begins after the particular time and that ends at the time an identical security is transferred or returned to the lender,
(4) The definition “securities lending arrangement” in subsection 260(1) of the Act is amended by adding “and” at the end of paragraph (d) and by adding the following after paragraph (d):
(e) if the lender and the borrower do not deal with each other at arm’s length, it is intended that neither the arrangement nor any series of securities lending arrangements, loans or other transactions of which the arrangement is a part be in effect for more than 270 days,
(5) Subsection 260(1) of the Act is amended by adding the following in alphabetical order:
“dealer compensation payment”
« paiement compensatoire (courtier) »
“dealer compensation payment” means an amount received by a taxpayer as compensation, for an underlying payment,
(a) from a registered securities dealer resident in Canada who paid the amount in the ordinary course of a business of trading in securities, or
(b) in the ordinary course of the taxpayer’s business of trading in securities, where the taxpayer is a registered securities dealer resident in Canada;
“qualified trust unit”
« unité de fiducie déterminée »
“qualified trust unit” means an interest, as a beneficiary under a trust, that is listed on a stock exchange;
“security distribution”
« paiement de titre »
“security distribution” means an amount that is
(a) an underlying payment, or
(b) an SLA compensation payment, or a dealer compensation payment, that is deemed by subsection (5.1) to be an amount received as an amount described by any of paragraphs (5.1)(a) to (c);
“SLA compensation payment”
« paiement compensatoire (MPVM) »
“SLA compensation payment” means an amount paid pursuant to a securities lending arrangement as compensation for an underlying payment;
“underlying payment”
« paiement sous-jacent »
“underlying payment” means an amount paid on a qualified security by the issuer of the security.
(6) The portion of subsection 260(1.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Eligible dividend
(1.1) This subsection applies to an amount if the amount is received by a person who is resident in Canada, the amount is deemed under subsection (5.1) to be a taxable dividend, and the amount is either
(7) Subsections 260(5) and (6) of the Act are replaced by the following:
Marginal note:Where subsection (5.1) applies
(5) Subsection (5.1) applies to a taxpayer for a taxation year in respect of a particular amount (other than an amount received as proceeds of disposition or an amount received by a person under an arrangement where it may reasonably be considered that one of the main reasons for the person entering into the arrangement was to enable the person to receive an SLA compensation payment or a dealer compensation payment that would be deductible in computing the taxable income, or not included in computing the income, for any taxation year of the person) received by the taxpayer in the taxation year
(a) as an SLA compensation payment,
(i) from a person resident in Canada, or
(ii) from a non-resident person who paid the particular amount in the course of carrying on business in Canada through a permanent establishment as defined by regulation; or
(b) as a dealer compensation payment.
Marginal note:Deemed character of compensation payments
(5.1) If this subsection applies in respect of a particular amount received by a taxpayer in a taxation year as an SLA compensation payment or as a dealer compensation payment, the particular amount is deemed, to the extent of the underlying payment to which the amount relates, to have been received by the taxpayer in the taxation year as,
(a) where the underlying payment is a taxable dividend paid on a share of the capital stock of a public corporation (other than an underlying payment to which paragraph (b) applies), a taxable dividend on the share and, if subsection (1.1) applies to the particular amount, an eligible dividend on the share;
(b) where the underlying payment is paid by a trust on a qualified trust unit issued by the trust,
(i) an amount of the trust’s income that was, to the extent that subsection 104(13) applied to the underlying payment,
(A) paid by the trust to the taxpayer as a beneficiary under the trust, and
(B) designated by the trust in respect of the taxpayer to the extent of a valid designation, if any, by the trust under this Act in respect of the recipient of the underlying payment, and
(ii) to the extent that the underlying payment is a distribution of a property from the trust, a distribution of that property from the trust; or
(c) in any other case, interest.
Marginal note:Deductibility
(6) In computing the income of a taxpayer under Part I from a business or property for a taxation year, there may be deducted a particular amount, paid by the taxpayer in the year as an SLA compensation payment or as a dealer compensation payment, that is equal to
(a) if the taxpayer is a registered securities dealer and the particular amount is deemed by subsection (5.1) to have been received as a taxable dividend, no more than 2/3 of the particular amount; or
(b) if the particular amount is in respect of an amount other than an amount that is, or is deemed by subsection (5.1) to have been, received as a taxable dividend,
(i) where the taxpayer disposes of the borrowed security and includes the gain or loss, if any, from the disposition in computing its income from a business, the particular amount, or
(ii) in any other case, the lesser of
(A) the particular amount, and
(B) the amount, if any, in respect of the security distribution to which the SLA compensation payment or dealer compensation payment relates that is included in computing the income, and not deducted in computing the taxable income, for any taxation year of the taxpayer or of any person to whom the taxpayer is related.
(8) Paragraph 260(6.1)(a) of the Act is replaced by the following:
(a) the total of all amounts each of which is an amount that the corporation becomes obligated in the taxation year to pay to another person under an arrangement described in paragraph (b) of the definition “dividend rental arrangement” in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and
(9) Subsections 260(7) and (8) of the Act are replaced by the following:
Marginal note:Dividend refund
(7) For the purpose of section 129, if a corporation pays an amount for which no deduction in computing the corporation’s income may be claimed under subsection (6.1) and subsection (5.1) deems the amount to have been received by another person as a taxable dividend,
(a) the corporation is deemed to have paid the amount as a taxable dividend, where the corporation is not a registered securities dealer; and
(b) the corporation is deemed to have paid 1/3 of the amount as a taxable dividend, where the corporation is a registered securities dealer.
Marginal note:Non-resident withholding tax
(8) For the purpose of Part XIII, any amount paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender
(a) as an SLA compensation payment is, subject to paragraph (b) or (c), deemed to be a payment of interest made by the borrower to the lender;
(b) as an SLA compensation payment in respect of a security that is a qualified trust unit, is deemed, to the extent of the amount of the underlying payment to which the SLA compensation payment relates, to be an amount paid by the trust and having the same character and composition as the underlying payment;
(c) as an SLA compensation payment, if the security is not a qualified trust unit and throughout the term of the securities lending arrangement, the borrower has provided the lender under the arrangement with money in an amount of, or securities described in paragraph (c) of the definition “qualified security” in subsection (1) that have a fair market value of, not less than 95% of the fair market value of the security and the borrower is entitled to enjoy, directly or indirectly, the benefits of all or substantially all income derived from, and opportunity for gain with respect of, the money or securities,
(i) is, to the extent of the amount of the interest or dividend paid in respect of the security, deemed to be a payment made by the borrower to the lender of interest or a dividend, as the case may be, payable on the security, and
(ii) is, to the extent of the amount of the interest, if any, paid in respect of the security, deemed to have been payable on a security described in paragraph (a) of the definition “fully exempt interest” in subsection 212(3) if the security is described in paragraph (c) of the definition “qualified security” in subsection (1); and
(d) as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security is deemed to be a payment of interest made by the borrower to the lender.
Marginal note:Deemed fee for borrowed security
(8.1) For the purpose of paragraph (8)(d), if under a securities lending arrangement the borrower has at any time provided the lender with money, either as collateral or consideration for the security, and the borrower does not, under the arrangement, pay or credit a reasonable amount to the lender as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security, the borrower is deemed to have, at the time that an identical security is or can reasonably be expected to be transferred or returned to the lender, paid to the lender under the arrangement an amount as a fee for the use of the security equal to the amount, if any, by which
(a) the interest on the money computed at the prescribed rates in effect during the term of the arrangement
exceeds
(b) the amount, if any, by which any amount that the lender pays or credits to the borrower under the arrangement exceeds the amount of the money.
Marginal note:Effect for tax treaties
(8.2) In applying subsection (8), any amount, paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender, that is deemed by paragraph (8)(a), (b) or (d) to be a payment of interest, is deemed for the purposes of any tax treaty not to be payable on or in respect of the security.
(10) Subsection 260(10) of the Act is renumbered as subsection 260(9.1).
(11) Section 260 of the Act is amended by adding the following in numerical order:
Marginal note:Partnerships
(10) For the purpose of this section,
(a) a person includes a partnership; and
(b) a partnership is deemed to be a registered securities dealer if each member of the partnership is a registered securities dealer.
Marginal note:Corporate members of partnerships
(11) A corporation that is, in a taxation year, a member of a partnership is deemed
(a) for the purpose of applying subsection (5) in respect of the taxation year,
(i) to receive its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and
(ii) in respect of the receipt of its specified proportion of that amount, to be the same person as the partnership;
(b) for the purpose of applying paragraph (6.1)(a) in respect of the taxation year, to become obligated to pay its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of the amount the partnership becomes, in that fiscal period, obligated to pay to another person under the arrangement described in that paragraph; and
(c) for the purpose of applying section 129 in respect of the taxation year, to have paid
(i) if the partnership is not a registered securities dealer, the corporation’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation), and
(ii) if the partnership is a registered securities dealer, 1/3 of the corporation’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation).
Marginal note:Individual members of partnerships
(12) An individual that is, in a taxation year, a member of a partnership is deemed
(a) for the purpose of applying subsection (5) in respect of the taxation year,
(i) to receive the individual’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and
(ii) in respect of the receipt of the individual’s specified proportion of that amount, to be the same person as the partnership; and
(b) for the purpose of subsection 82(1), to have paid the individual’s specified proportion, for each fiscal period of the partnership that ends in the year, of each amount paid by the partnership in that fiscal period that is deemed by subsection (5.1) to have been received by another person as a taxable dividend.
(12) Subsections (1), (3), (5), (7) and (9) apply to arrangements made after 2001, except that,
(a) the definition “qualified trust unit” in subsection 260(1) of the Act, as enacted by subsection (5), is to be read,
(i) in its application to arrangements made before October 24, 2012, as follows:
- “qualified trust unit”
“qualified trust unit” means a unit of a mutual fund trust that is listed on a stock exchange;
and
(ii) before December 14, 2007 as though the reference to “stock exchange” in the read-as text in subparagraph (i) were a reference to “prescribed stock exchange”;
(b) if the parties to an arrangement jointly so elect in writing and file the election with the Minister of National Revenue within 90 days after the day on which this Act receives royal assent, subsection 260(5.1) of the Act, as enacted by subsection (7), is to be read, in its application to SLA compensation payments or dealer compensation payments received under the arrangement before February 28, 2004, without reference to paragraph 260(5.1)(b) or (c), or to both of those paragraphs, as specified by the parties in the election;
(c) for amounts received as compensation for dividends paid before 2006, paragraph 260(5.1)(a) of the Act, as enacted by subsection (7), is to be read without reference to “and, if subsection (1.1) applies to the amount, an eligible dividend on the share from the corporation”; and
(d) before 2008, subparagraph 260(8)(c)(ii) of the Act, as enacted by subsection (9), is to be read as follows:
(ii) is, to the extent of the amount of the interest, if any, paid in respect of the security, deemed
(A) for the purpose of subparagraph 212(1)(b)(vii) to have been payable by the issuer of the security, and
(B) to have been payable on a security that is a security described in subparagraph 212(1)(b)(ii) where the security is a security described in paragraph (c) of the definition “qualified security” in subsection (1); and
(13) Subsections (2) and (4) apply to arrangements made after 2002.
(14) Subsection (6) applies to amounts received as compensation for dividends paid after 2005.
(15) Subsection (8) applies to
(a) arrangements made after December 20, 2002;
(b) an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 358(34)(b), except that, in its application to an arrangement made before 2002, the reference to “subsection (5.1)” in paragraph 260(6.1)(a) of the Act, as enacted by subsection (8), is to be read as a reference to “subsection (5)”; and
(c) an arrangement, other than an arrangement to which paragraph (b) applies, made after 2001 and before December 21, 2002, except that, in its application before December 21, 2002, paragraph 260(6.1)(a) of the Act, as enacted by subsection (8), is to be read as follows:
(a) the amount that the corporation is obligated to pay to another person under an arrangement described in paragraphs (c) and (d) of the definition “dividend rental arrangement” in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and
(16) Subsection (10) is deemed to have come into force on January 1, 2008.
(17) Subsection (11) applies to
(a) arrangements made after December 20, 2002; and
(b) an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 358(34)(b), except that, in its application to an arrangement made before 2002, the reference to “subsection (5.1)” in paragraph 260(12)(b) of the Act, as enacted by subsection (11), is to be read as a reference to “subsection (5)”.
- Date modified: