Fall Economic Statement Implementation Act, 2023 (S.C. 2024, c. 15)
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Assented to 2024-06-20
PART 1Amendments to the Income Tax Act and to Other Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
22 (1) Paragraph 92(1)(a) of the Act is replaced by the following:
(a) there shall be added in respect of that share any amount included in respect of that share under subsection 91(1) or (3) in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been required to have been so included in computing the taxpayer’s income but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952), except that, if the amount so included is greater than it otherwise would have been because of the application of clause 95(2)(f.11)(ii)(D), the amount added under this paragraph shall be the amount that would have been so included in the absence of that clause; and
(2) Subsection (1) applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer beginning on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer that begins before, and ends after, October 1, 2023 if
(a) any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and
(b) it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)(l.2) of the Act, as enacted by subsection 2(1), or the application of section 18.2 or 18.21 of the Act, as enacted by subsection 7(1), to the taxpayer.
23 (1) The portion of subsection 94.2(2) of the Act before paragraph (a) is replaced by the following:
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, section 18.2, subsections 91(1) to (4), paragraph 94.1(1)(a), section 95, the definition restricted interest and financing expense in subsection 111(8) and section 233.4 to the beneficiary under, and, if applicable, to the particular person in respect of, the trust
(2) Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year that begins before, and ends after, October 1, 2023 if
(a) any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and
(b) it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)(l.2) of the Act, as enacted by subsection 2(1), or the application of section 18.2 or 18.21 of the Act, as enacted by subsection 7(1), to the taxpayer.
24 (1) Paragraph (b) of the description of A in the definition foreign accrual property income in subsection 95(1) of the Act is replaced by the following:
(b) a dividend from another foreign affiliate of the taxpayer, except for any portion of the dividend that would be deemed under subsection 113(5) not to be a dividend received by the affiliate on a share of the capital stock of the other affiliate for the purposes of section 113, if the affiliate were a corporation resident in Canada,
(2) Paragraph (a) of the description of H in the definition foreign accrual property income in subsection 95(1) of the Act is replaced by the following:
(a) if the affiliate was a member of a partnership at the end of the fiscal period of the partnership that ended in the year and the partnership received a dividend at a particular time in that fiscal period from a corporation that would be, if the reference in subsection 93.1(1) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, a foreign affiliate of the taxpayer for the purposes of sections 93 and 113 at that particular time, then the portion of the amount of that dividend that
(i) is included in the value determined for A in respect of the affiliate for the year and that would be, if the reference in subsection 93.1(2) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, deemed by paragraph 93.1(2)(a) to have been received by the affiliate for the purposes of sections 93 and 113, and
(ii) would not be deemed under subsection 113(5) not to be a dividend received by the affiliate on a share of the capital stock of the other affiliate for the purposes of section 113, if the affiliate were a corporation resident in Canada, and
(3) Clause 95(2)(f.11)(ii)(A) of the Act is replaced by the following:
(A) this Act is to be read without reference to subsections 12.7(3), 17(1), 18(4) and 18.4(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,
(4) Clause 95(2)(f.11)(ii)(A) of the Act, as enacted by subsection (3), is replaced by the following:
(A) this Act is to be read without reference to subsections 12.7(3), 17(1), 18(4), 18.2(2) and 18.4(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,
(5) Clause 95(2)(f.11)(ii)(A) of the Act, as enacted by subsection (4), is replaced by the following:
(A) this Act is to be read without reference to subsections 17(1), 18(4), 18.2(2) and 18.4(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,
(6) Subparagraph 95(2)(f.11)(ii) of the Act is amended by striking out “and” at the end of clause (B) and by adding the following after clause (C):
(D) if the foreign affiliate is a controlled foreign affiliate of the taxpayer at the end of the taxation year, and the taxpayer is not an excluded entity (as defined in subsection 18.2(1)) for its taxation year (referred to in this clause as the “taxpayer year”) in which the taxation year ends,
(I) notwithstanding any other provision of this Act, no deduction shall be made in respect of any amount that is included in the affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year, to the extent of the proportion of that amount that is determined by the first formula in subsection 18.2(2) in respect of the taxpayer for the taxpayer year, and
(II) an amount is to be included, in determining the amount described in subparagraph (f)(ii) for the taxation year, that is equal to the amount that would be included under paragraph 12(1)(l.2) in determining the amount described in subparagraph (f)(ii) for the taxation year if
1 clause (A) were read without regard to its reference to subsection 18.2(2), and
2 the proportion that applied for the purposes of subparagraph (ii) of the description of B in paragraph 12(1)(l.2) were the proportion that is determined by the first formula in subsection 18.2(2) in respect of the taxpayer for the taxpayer year, and
(E) notwithstanding any other provision of this Act, no deduction shall be made in respect of one or more amounts (each referred to in this clause as an “elected amount”) if
(I) the elected amount would, in the absence of this clause, clause (D) and subsection 18.2(19),
1 be included in the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year, and
2 be deductible in determining the amount described in subparagraph (f)(ii),
(II) the total of the elected amounts is equal to the lesser of the following amounts (determined without regard to this clause, clause (D) and subsection 18.2(19)):
1 the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) for the taxation year, and
2 the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year,
(III) the taxpayer files with the Minister, in respect of the elected amounts, an election in writing in prescribed manner under this clause,
(IV) the election specifies
1 each of the elected amounts,
2 the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) (determined without regard to this clause and subsection 18.2(19)) for the taxation year,
3 the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.2(1)) for the taxation year,
4 the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) (determined without regard to this clause, clause (D) and subsection 18.2(19)) for the taxation year, and
5 the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) or foreign accrual property income, as the case may be, for the taxation year, and
(V) the election is filed on or before the filing-due date of the taxpayer for its taxation year in which the taxation year ends;
(7) Subparagraph 95(2)(f.11)(ii) of the Act, as amended by subsection (6), is amended by striking out “and” at the end of clause (D), by adding “and” at the end of clause (E) and by adding the following after clause (E):
(F) the following rules apply for the purposes of applying subsection 12.7(3) and the related provisions of section 18.4 in respect of a payment of which the foreign affiliate, or a partnership of which the foreign affiliate is a member, is a recipient:
(I) the definitions in subsection 18.4(1) apply for the purposes of this clause,
(II) subsection 12.7(3) is deemed not to apply in respect of the payment if
1 the foreign affiliate’s income or loss derived from the payment is included under subparagraph (a)(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year, or
2 in the case of a payment that subsection 18.4(9) deems to be made to the foreign affiliate or the partnership by a particular entity in respect of a notional interest expense on a particular debt, any income or loss that were derived by the foreign affiliate from the payment would, based on the relevant assumptions in respect of the payment, be included under subparagraph (a)(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year,
(III) for the purposes of sub-subclause (II)2, the relevant assumptions in respect of the payment are
1 the payment is an amount of interest paid by the particular entity to the foreign affiliate or the partnership, as the case may be, under a legal obligation to pay interest on the particular debt in the taxation year of the foreign affiliate or the partnership in which an amount in respect of the payment would, in the absence of subclause (II), be included under subsection 12.7(3) in the income of the foreign affiliate or partnership, and
2 any amount that is deductible, in respect of the notional interest expense, is an amount deductible in respect of an expenditure for which the payment was made, and
(IV) the definition Canadian ordinary income in subsection 18.4(1) is to be read as if
1 its subparagraph (a)(ii) read as follows:
“(ii) the amount is described in paragraph (b) or (c) of the description of A in the definition foreign accrual property income in subsection 95(1), or”, and
2 the description of D in its paragraph (b) read as follows:
“D is the total of all amounts, each of which is an amount, in respect of the payment, that is included in the description of H in the definition foreign accrual property income in subsection 95(1) in computing the foreign accrual property income of a member of the partnership for a taxation year; or”;
(8) Subsections (1) and (2) apply in respect of any dividend received on or after July 1, 2024.
(9) Subsection (3) applies in respect of payments arising on or after July 1, 2022.
(10) Subsections (4) and (6) apply in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer beginning on or after October 1, 2023. However, subsections (4) and (6) also apply in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer that begins before, and ends after, October 1, 2023 if
(a) any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and
(b) it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)(l.2) of the Act, as enacted by subsection 2(1), or the application of section 18.2 or 18.21 of the Act, as enacted by subsection 7(1), to the taxpayer.
(11) Subsections (5) and (7) apply in respect of payments arising on or after July 1, 2024.
25 (1) Subparagraph 96(2.1)(b)(ii) of the Act is replaced by the following:
(ii) the amount required by subsection 127(8) or 127.44(11) in respect of the partnership to be added in computing the investment tax credit or the CCUS tax credit (as defined in subsection 127.44(1)) of the taxpayer for the taxation year,
(2) Subparagraph 96(2.1)(b)(ii) of the Act, as enacted by subsection (1), is replaced by the following:
(ii) the amount required by subsections 127(8), 127.44(11) or 127.45(8) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.44(1)) or the clean technology investment tax credit (as defined in subsection 127.45(1)) of the taxpayer for the taxation year,
(3) The portion of subsection 96(2.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:At-risk amount
(2.2) For the purposes of this section and sections 111, 127, 127.44 and 127.47, the at-risk amount of a taxpayer, in respect of a partnership of which the taxpayer is a limited partner, at any particular time is the amount, if any, by which the total of
(4) The portion of subsection 96(2.2) of the Act before paragraph (a), as enacted by subsection (3), is replaced by the following:
Marginal note:At-risk amount
(2.2) For the purposes of this section and sections 111, 127, 127.44, 127.45 and 127.47, the at-risk amount of a taxpayer, in respect of a partnership of which the taxpayer is a limited partner, at any particular time is the amount, if any, by which the total of
(5) The portion of subsection 96(2.4) of the Act before paragraph (a) is replaced by the following:
Marginal note:Limited partner
(2.4) For the purposes of this section and sections 111, 127, 127.44 and 127.47 a taxpayer who is a member of a partnership at a particular time is a limited partner of the partnership at that time if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection (2.5)) at that time and if, at that time or within three years after that time,
(6) The portion of subsection 96(2.4) of the Act before paragraph (a), as enacted by subsection (5), is replaced by the following:
Marginal note:Limited partner
(2.4) For the purposes of this section and sections 111, 127, 127.44, 127.45 and 127.47 a taxpayer who is a member of a partnership at a particular time is a limited partner of the partnership at that time if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection (2.5)) at that time and if, at that time or within three years after that time,
(7) The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Agreement or election of partnership members
(3) If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 10.1(1), 13(4), (4.2) and (16), the definition excluded interest in subsection 18.2(1), subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04, subsections 86.1(2), 88(3.1), (3.3) and (3.5) and 90(3), the definition relevant cost base in subsection 95(4) and subsections 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,
(8) Subsections (1), (3) and (5) are deemed to have come into force on January 1, 2022.
(9) Subsections (2), (4) and (6) are deemed to have come into force on March 28, 2023.
(10) Subsection (7) applies in respect of taxation years that begin on or after October 1, 2023.
- Date modified: