Income Tax Act
Marginal note:Definitions
261 (1) The following definitions apply in this section.
- Canadian currency year
Canadian currency year of a taxpayer means a taxation year that precedes the first functional currency year of the taxpayer. (année de déclaration en monnaie canadienne)
- Canadian tax results
Canadian tax results of a taxpayer for a taxation year means
(a) the amount of the income, taxable income or taxable income earned in Canada of the taxpayer for the taxation year;
(b) the amount (other than an amount payable on behalf of another person under subsection 153(1) or section 215) of tax or other amount payable under this Act by the taxpayer in respect of the taxation year;
(c) the amount (other than an amount refundable on behalf of another person in respect of amounts payable on behalf of that person under subsection 153(1) or section 215) of tax or other amount refundable under this Act to the taxpayer in respect of the taxation year; and
(d) any amount that is relevant in determining the amounts described in respect of the taxpayer under paragraphs (a) to (c). (résultats fiscaux canadiens)
- elected functional currency
elected functional currency of a taxpayer means the currency of a country other than Canada that was the functional currency of the taxpayer for its first taxation year in respect of which it made an election under paragraph (3)(b). (monnaie fonctionnelle choisie)
- functional currency
functional currency of a taxpayer for a taxation year means the currency of a country other than Canada if that currency is, throughout the taxation year,
(a) a qualifying currency; and
(b) the primary currency in which the taxpayer maintains its records and books of account for financial reporting purposes. (monnaie fonctionnelle)
- functional currency year
functional currency year of a taxpayer means a taxation year in respect of which subsection (5) applies to the taxpayer. (année de déclaration en monnaie fonctionnelle)
- pre-reversion debt
pre-reversion debt of a taxpayer means a debt obligation of the taxpayer that was issued by the taxpayer before the beginning of the taxpayer’s first reversionary year. (créance pré-rétablissement)
- pre-transition debt
pre-transition debt of a taxpayer means a debt obligation of the taxpayer that was issued by the taxpayer before the beginning of the taxpayer’s first functional currency year. (créance pré-transition)
- qualifying currency
qualifying currency at any time means each of
(a) the currency of the United States of America;
(b) the currency of the European Monetary Union;
(c) the currency of the United Kingdom;
(d) the currency of Australia; and
(e) a prescribed currency. (monnaie admissible)
- relevant spot rate
relevant spot rate, for a particular day, means, in respect of a conversion of an amount from a particular currency to another currency,
(a) if the particular currency or the other currency is Canadian currency, the rate quoted by the Bank of Canada on the particular day (or, if the Bank of Canada ordinarily quotes such a rate, but there is no such rate quoted for the particular day, the closest preceding day for which such a rate is quoted) for the exchange of the particular currency for the other currency, or, in applying paragraphs (2)(b) and (5)(c), another rate of exchange that is acceptable to the Minister; and
(b) if neither the particular currency nor the other currency is Canadian currency, the rate — calculated by reference to the rates quoted by the Bank of Canada on the particular day (or, if the Bank of Canada ordinarily quotes such rates, but either of such rates is not quoted for the particular day, the closest preceding day for which both such rates are quoted) for the exchange of Canadian currency for each of those currencies — for the exchange of the particular currency for the other currency, or, in applying paragraphs (2)(b) and (5)(c), another rate of exchange that is acceptable to the Minister. (taux de change au comptant)
- reversionary year
reversionary year of a taxpayer means a taxation year that begins after the last functional currency year of the taxpayer. (année de rétablissement)
- tax reporting currency
tax reporting currency of a taxpayer for a taxation year, and at any time in the taxation year, means the currency in which the taxpayer’s Canadian tax results for the taxation year are to be determined. (monnaie de déclaration)
Marginal note:Canadian currency requirement
(2) In determining the Canadian tax results of a taxpayer for a particular taxation year,
(a) subject to this section, other than this subsection, Canadian currency is to be used; and
(b) subject to this section, other than this subsection, subsections 20(14.2) and 79(7) and paragraphs 80(2)(k) and 142.7(8)(b), if a particular amount that is relevant in computing those Canadian tax results is expressed in a currency other than Canadian currency, the particular amount is to be converted to an amount expressed in Canadian currency using the relevant spot rate for the day on which the particular amount arose.
Marginal note:Application of subsection (5)
(3) Subsection (5) applies to a taxpayer in respect of a particular taxation year if
(a) the taxpayer is, throughout the particular taxation year, a corporation (other than an investment corporation, a mortgage investment corporation or a mutual fund corporation) resident in Canada;
(b) the taxpayer has elected that subsection (5) apply to the taxpayer and has filed that election with the Minister in prescribed form and manner on or before the day that is 60 days after the first day of the particular taxation year;
(c) there is a functional currency of the taxpayer for the first taxation year of the taxpayer in respect of which subsection (5) would, if this subsection were read without reference to this paragraph, apply;
(d) the taxpayer has not filed another election under paragraph (b); and
(e) a revocation by the taxpayer under subsection (4) does not apply to the particular taxation year.
Marginal note:Revocation of election
(4) A taxpayer may revoke its election under paragraph (3)(b) by filing, on a day that is in a functional currency year of the taxpayer (other than its first functional currency year), a notice of revocation in prescribed form and manner. The revocation applies to each taxation year of the taxpayer that begins on or after the day that is six months after that day.
Marginal note:Functional currency tax reporting
(5) If this subsection applies to a taxpayer in respect of a particular taxation year,
(a) the taxpayer’s Canadian tax results for the particular taxation year are to be determined using the taxpayer’s elected functional currency;
(b) unless the context otherwise requires, each reference in this Act or the regulations to an amount (other than in respect of a penalty or fine) that is described as a particular number of Canadian dollars is to be read, in respect of the taxpayer and the particular taxation year, as a reference to that amount expressed in the taxpayer’s elected functional currency using the relevant spot rate for the first day of the particular taxation year;
(c) subject to paragraph (9)(b), subsection (15), subsections 20(14.2) and 79(7) and paragraphs 80(2)(k) and 142.7(8)(b), if a particular amount that is relevant in computing the taxpayer’s Canadian tax results for the particular taxation year is expressed in a currency other than the taxpayer’s elected functional currency, the particular amount is to be converted to an amount expressed in the taxpayer’s elected functional currency using the relevant spot rate for the day on which the particular amount arose;
(d) the definition exchange rate in subsection 111(8) is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as follows:
exchange rate at any time in respect of a particular currency other than the taxpayer’s elected functional currency means the relevant spot rate, for the day that includes that time, in respect of the conversion of an amount from the particular currency to the taxpayer’s elected functional currency, or a rate of exchange acceptable to the Minister;
(e) except in applying paragraph 95(2)(f.15) in respect of a taxation year, of a foreign affiliate of the taxpayer, that is a functional currency year of the foreign affiliate within the meaning of subsection (6.1), each reference in subsection 39(2) to “Canadian currency” is to be read, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, as a reference to “the taxpayer’s elected functional currency”;
(f) each reference in
(i) section 76.1, subsections 20(14.2) and 79(7), paragraph 80(2)(k), subsections 80.01(11), 80.1(8), 93(2.01) to (2.31), 142.4(1) and 142.7(8) and the definition amortized cost in subsection 248(1), and subparagraph 231(6)(a)(iv) of the Income Tax Regulations, to “Canadian currency” is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as “the taxpayer’s elected functional currency”, and
(ii) subparagraph 94.1(1)(b)(vii), the definition foreign currency debt in subsection 111(8), subsection 142.4(1), and the definition amortized cost in subsection 248(1) to “currency of a country other than Canada” is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as a reference to “currency other than the taxpayer’s elected functional currency”;
(g) the definition foreign currency in subsection 248(1) is, in respect of the taxpayer and the taxation year, and with such modifications as the context requires, to be read as follows:
foreign currency in respect of a taxpayer, at any time in a taxation year, means a currency other than the taxpayer’s elected functional currency;
(h) where a taxation year, of a foreign affiliate of the taxpayer, is a functional currency year of the foreign affiliate within the meaning of subsection (6.1),
(i) the references in section 95 (other than paragraph 95(2)(f.15)) and the references in regulations made for the purposes of section 95 or 113 to
(A) “Canadian currency” are to be read, in respect of the foreign affiliate and the taxation year, and with such modifications as the context requires, as references to “the taxpayer’s elected functional currency”, and
(B) “currency of a country other than Canada” are to be read, in respect of the foreign affiliate and the taxation year, and with such modifications as the context requires, as references to “currency other than the taxpayer’s elected functional currency”, and
(ii) the reference in paragraph 95(2)(f.13) to “the rate of exchange quoted by the Bank of Canada on” is to be read, in respect of the foreign affiliate and the taxation year, and with such modifications as the context requires, as a reference to “the relevant spot rate for”.
Marginal note:Partnerships
(6) For the purposes of computing the Canadian tax results of a particular taxpayer for each taxation year that is a functional currency year or a reversionary year of the particular taxpayer, this section is to be applied as if each partnership of which the particular taxpayer is a member at any time in the taxation year were a taxpayer that
(a) had as its first functional currency year its first fiscal period, if any, that
(i) is a fiscal period at any time during which the particular taxpayer is a member of the partnership,
(ii) begins after December 13, 2007, and
(iii) begins on or after the first day of the particular taxpayer’s first functional currency year;
(b) had as its last Canadian currency year its last fiscal period, if any, that ends before its first functional currency year;
(c) had as its first reversionary year its first fiscal period, if any, that begins after the particular taxpayer’s last functional currency year;
(d) is subject to subsection (5) for each of its fiscal periods that is, or begins after, its first functional currency year and that ends before its first reversionary year;
(e) had as its elected functional currency in respect of each fiscal period described in paragraph (d) the elected functional currency of the particular taxpayer; and
(f) had as its last functional currency year its last fiscal period, if any, that ends before its first reversionary year.
Marginal note:Foreign affiliates
(6.1) For the purposes of computing the foreign accrual property income of a foreign affiliate of a particular taxpayer, in respect of the particular taxpayer, for each taxation year that is a functional currency year or a reversionary year of the particular taxpayer, this section is to be applied as if
(a) the foreign affiliate were a taxpayer that
(i) had, as its first functional currency year, its first taxation year that
(A) is a taxation year at any time during which the foreign affiliate is a foreign affiliate of the particular taxpayer,
(B) begins after December 13, 2007, and
(C) begins on or after the first day of the particular taxpayer’s first functional currency year,
(ii) had as its last Canadian currency year its last taxation year, if any, that ends before its first functional currency year,
(iii) had as its first reversionary year its first taxation year, if any, that begins after the particular taxpayer’s last functional currency year,
(iv) is subject to subsection (5) for each of its taxation years that is, or begins after, its first functional currency year and that ends before its first reversionary year,
(v) had as its elected functional currency in respect of each taxation year described in subparagraph (iv) the elected functional currency of the particular taxpayer, and
(vi) had as its last functional currency year its last taxation year, if any, that ends before its first reversionary year; and
(b) the Canadian tax results of the foreign affiliate for each taxation year that is a functional currency year or a reversionary year of the foreign affiliate, within the meaning of paragraph (a), were its foreign accrual property income, in respect of the particular taxpayer, for that taxation year and any amount that is relevant in determining such foreign accrual property income.
Marginal note:Converting Canadian currency amounts
(7) In applying this Act to a taxpayer for a particular functional currency year of the taxpayer, the following amounts are to be converted from Canadian currency to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year:
(a) each particular amount that
(i) is, or is relevant to the determination of, an amount that may be deducted under subsection 37(1) or 66(4), variable F or F.1 in the definition foreign accrual property income in subsection 95(1), section 110.1 or 111 or subsection 126(2), 127(5), 129(1), 181.1(4) or 190.1(3), in the particular functional currency year, and
(ii) was determined for a Canadian currency year of the taxpayer;
(b) the cost to the taxpayer of a property that was acquired by the taxpayer in a Canadian currency year of the taxpayer;
(c) an amount that was required by section 53 to be added or deducted in computing, at any time in a Canadian currency year of the taxpayer, the adjusted cost base to the taxpayer of a capital property that was acquired by the taxpayer in such a year;
(d) an amount that
(i) is in respect of the taxpayer’s undepreciated capital cost of depreciable property of a prescribed class, cumulative Canadian exploration expense (as defined in subsection 66.1(6)), cumulative Canadian development expense (as defined in subsection 66.2(5)), cumulative foreign resource expense in respect of a country other than Canada (as defined in subsection 66.21(1)) or cumulative Canadian oil and gas property expense (as defined in subsection 66.4(5)) (each of which is referred to in this paragraph as a pool amount), and
(ii) was added to or deducted from a pool amount of the taxpayer in respect of a Canadian currency year of the taxpayer;
(e) an amount that has been deducted or claimed as a reserve in computing the income of the taxpayer for its last Canadian currency year;
(f) an outlay or expense referred to in subsection 18(9) that was made or incurred by the taxpayer in respect of a Canadian currency year of the taxpayer, and any amount that was deducted in respect of the outlay or expense in computing the income of the taxpayer for such a year;
(g) an amount that was added or deducted in computing the taxpayer’s paid-up capital in respect of a class of shares of its capital stock in a Canadian currency year of the taxpayer; and
(h) any amount (other than an amount referred to in any of paragraphs (a) to (g) or any of subsections (6), (6.1) and (8)) determined under the provisions of this Act in or in respect of a Canadian currency year of the taxpayer that is relevant in determining the Canadian tax results of the taxpayer for the particular functional currency year.
Marginal note:Converting pre-transition debts
(8) In determining, at any time in a particular functional currency year of a taxpayer, the amount for which a pre-transition debt of the taxpayer (other than a pre-transition debt denominated in the taxpayer’s elected functional currency) was issued and its principal amount at the beginning of the taxpayer’s first functional currency year,
(a) where the pre-transition debt is denominated in Canadian currency, those amounts are to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year; and
(b) where the pre-transition debt is denominated in a currency (referred to in this paragraph as the “debt currency”) that is neither Canadian currency nor the taxpayer’s elected functional currency, those amounts are to be converted from the debt currency to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year.
Marginal note:Pre-transition debts
(9) A pre-transition debt of a taxpayer that is denominated in a currency other than the taxpayer’s elected functional currency is deemed to have been issued immediately before the taxpayer’s first functional currency year for the purposes of
(a) determining the amount of the taxpayer’s income, gain or loss, for a functional currency year of the taxpayer (other than an amount that subsection (10) deems to arise), that is attributable to a fluctuation in the value of a currency; and
(b) applying paragraph 80(2)(k) in respect of a functional currency year of the taxpayer.
Marginal note:Deferred amounts relating to pre-transition debts
(10) If a taxpayer has, at any time in a taxation year that is a functional currency year or a reversionary year of the taxpayer, made a particular payment on account of the principal amount of a pre-transition debt of the taxpayer:
(a) where the taxpayer would have made a gain — or, if the pre-transition debt was not on account of capital, would have had income — (referred to in this paragraph as the “hypothetical gain or income”) attributable to a fluctuation in the value of a currency if the pre-transition debt had been settled by the taxpayer’s having paid, immediately before the end of its last Canadian currency year, an amount equal to the principal amount (expressed in the currency in which the pre-transition debt is denominated, which currency is referred to in this subsection as the “debt currency”) at that time, the taxpayer is deemed to make a gain or to have income, as the case may be, for the taxation year equal to the amount determined by the formula
A × B/C
where
- A
- is
(i) if the taxation year is a functional currency year of the taxpayer, the amount of the hypothetical gain or income converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year, and
(ii) if the taxation year is a reversionary year of the taxpayer, the amount determined under subparagraph (i) converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year,
- B
- is the amount of the particular payment (expressed in the debt currency), and
- C
- is the principal amount of the pre-transition debt at the beginning of the taxpayer’s first functional currency year (expressed in the debt currency); and
(b) where the taxpayer would have sustained a loss — or, if the pre-transition debt was not on account of capital, would have had a loss — (referred to in this paragraph as the “hypothetical loss”) attributable to a fluctuation in the value of a currency if the pre-transition debt had been settled by the taxpayer’s having paid, immediately before the end of its last Canadian currency year, an amount equal to the principal amount (expressed in the debt currency) at that time, the taxpayer is deemed to sustain or to have a loss in respect of the particular payment for the taxation year equal to the amount that would be determined by the formula in paragraph (a) if the reference in the description of A in that paragraph to “hypothetical gain or income” were read as a reference to “hypothetical loss”.
Marginal note:Debt parking — foreign exchange
(10.1) For the purposes of determining a taxpayer’s gain under subsection (10), if at a particular time a pre-transition debt of the taxpayer (referred to in this subsection as the debtor) that is denominated in a currency other than Canadian currency becomes a parked obligation (within the meaning assigned by subsection 39(2.02)), the debtor is deemed to have made, at that time, a particular payment on account of the principal amount of the debt equal to
(a) if the debt has become a parked obligation at that particular time as a result of its acquisition by the holder of the debt, the portion of the amount paid by the holder to acquire the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time; and
(b) in any other case, the portion of the fair market value of the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time.
Marginal note:Determination of amounts payable
(11) Notwithstanding subsections (5) and (7), for the purposes of applying this Act in respect of a functional currency year (referred to in this subsection as the “particular taxation year”) of a taxpayer,
(a) for the purposes of determining the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a),
(i) the estimated amounts, each of which is described in subparagraph 157(1)(a)(i) or (1.1)(a)(i), that are payable by the taxpayer for the particular taxation year are to be determined by converting those amounts, as determined in the taxpayer’s elected functional currency, to Canadian currency using the relevant spot rate for the day on which those amounts are due,
(ii) the taxpayer’s first instalment base (within the meaning assigned by subsection 157(4)) for the particular taxation year is to be determined
(A) if the particular taxation year is the taxpayer’s first functional currency year, without reference to this section, and
(B) in any other case, as if the taxes payable by the taxpayer for the taxpayer’s functional currency year (referred to in this paragraph as the “first base year”) immediately preceding the particular taxation year were the total of
(I) the total of the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a), as determined with reference to this subparagraph or subparagraph (i) or (iii), as the case may be, in respect of the first base year, and
(II) the amount, if any, of the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b), as determined under paragraph (b), in respect of the first base year, and
(iii) the taxpayer’s second instalment base (within the meaning assigned by subsection 157(4)) for the particular taxation year is to be determined
(A) if the particular taxation year is the taxpayer’s first functional currency year or its taxation year that immediately follows its first functional currency year, without reference to this section, and
(B) in any other case, as if the taxes payable by the taxpayer for the taxpayer’s functional currency year (referred to in this subparagraph as the “second base year”) immediately preceding the first base year were the total of
(I) the total of the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a), as determined with reference to this subparagraph or subparagraph (i) or (ii), as the case may be, in respect of the second base year, and
(II) the amount, if any, of the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b), as determined under paragraph (b), in respect of the second base year;
(b) the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b) for the particular taxation year is the amount, if any, determined by
(i) computing the amount, if any, by which
(A) the total of the taxes payable by the taxpayer under Parts I, VI, VI.1 and XIII.1 for the particular taxation year, as determined in the taxpayer’s elected functional currency
exceeds
(B) the total of all amounts each of which is the amount determined by converting the amount of a payment obligation — determined by paragraph 157(1)(a) or (1.1)(a), as the case may be, with reference to subparagraph (a)(i), (ii) or (iii), as the case may be — of the taxpayer in respect of the particular taxation year to the taxpayer’s elected functional currency using the relevant spot rate for the day on which the payment obligation was due, and
(ii) converting the amount, if any, determined by subparagraph (i) to Canadian currency using the relevant spot rate for the taxpayer’s balance-due day for the partic-ular taxation year;
(c) for the purposes of determining any amount (other than tax) that is payable by the taxpayer under Part I, VI, VI.1 or XIII.1 for the particular taxation year, the taxpayer’s tax payable under the Part for the particular taxation year is deemed to be equal to the total of
(i) the total of the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a), in respect of the Part, as determined with reference to subparagraph (a)(i), (ii) or (iii), as the case may be, in respect of the particular taxation year, and
(ii) the amount, if any, of the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b), in respect of the Part, as determined under paragraph (b), in respect of the particular taxation year;
(d) amounts of tax that are payable under this Act (except under Parts I, VI, VI.1 and XIII.1) by the taxpayer for the particular taxation year are to be determined by converting those amounts, as determined in the taxpayer’s elected functional currency, to Canadian currency using the relevant spot rate for the day on which those amounts are due;
(e) if a particular amount that is determined in the taxpayer’s elected functional currency is deemed to be paid at any time on account of an amount payable by the taxpayer under this Act for the particular taxation year, the particular amount is to be converted to Canadian currency using the relevant spot rate for the day that includes that time;
(f) the following amounts are to be determined in the taxpayer’s elected functional currency and converted to Canadian currency using the relevant spot rate for the taxpayer’s balance-due day for the particular taxation year:
(i) amounts described in paragraph 163(1)(a) in respect of the particular taxation year, and
(ii) the amount of the taxpayer’s taxable capital employed in Canada, for the purpose of applying section 235; and
(g) for greater certainty, all amounts payable by the taxpayer under this Act in respect of the particular taxation year are to be paid in Canadian currency.
Marginal note:Application of subsections (7) and (8) to reversionary years
(12) In applying this Act to a reversionary year of a taxpayer, subsections (7) and (8) are to be read as if the references in those subsections to
(a) “Canadian currency” were references to “the taxpayer’s elected functional currency”;
(b) “Canadian currency year” were references to “functional currency year”;
(c) “functional currency year” were references to “reversionary year”;
(d) “first functional currency year” were references to “first reversionary year”;
(e) “last Canadian currency year” were references to “last functional currency year”;
(f) “pre-transition debt” were references to “pre-reversion debt”; and
(g) “the taxpayer’s elected functional currency” were references to “Canadian currency”.
Marginal note:Pre-reversion debts
(13) A pre-reversion debt of a taxpayer that is denominated in a currency other than Canadian currency is deemed to have been issued immediately before the taxpayer’s first reversionary year for the purposes of
(a) determining the amount of the taxpayer’s income, gain or loss, for a reversionary year of the taxpayer (other than an amount that subsection (14) deems to arise), that is attributable to a fluctuation in the value of a currency; and
(b) applying paragraph 80(2)(k) in respect of a reversionary year of the taxpayer.
Marginal note:Deferred amounts relating to pre-reversion debts
(14) If a taxpayer has, at any time in a reversionary year of the taxpayer, made a particular payment on account of the principal amount of a pre-reversion debt of the taxpayer:
(a) where the taxpayer would have made a gain — or, if the pre-reversion debt was not on account of capital, would have had income — (referred to in this paragraph as the “hypothetical gain or income”) attributable to a fluctuation in the value of a currency if the pre-reversion debt had been settled by the taxpayer’s having paid, immediately before the end of its last functional currency year, an amount equal to the principal amount (expressed in the currency in which the pre-reversion debt is denominated, which currency is referred to in this subsection as the “debt currency”) at that time, the taxpayer is deemed to make a gain or to have income, as the case may be, for the reversionary year equal to the amount determined by the formula
A × B/C
where
- A
- is the amount of the hypothetical gain or income converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year,
- B
- is the amount of the particular payment (expressed in the debt currency), and
- C
- is the principal amount of the pre-reversion debt at the beginning of the taxpayer’s first reversionary year (expressed in the debt currency); and
(b) where the taxpayer would have sustained a loss — or, if the pre-reversion debt was not on account of capital, would have had a loss — (referred to in this paragraph as the “hypothetical loss”) attributable to a fluctuation in the value of a currency if the pre-reversion debt had been settled by the taxpayer’s having paid, immediately before the end of its last functional currency year, an amount equal to the principal amount (expressed in the debt currency) at that time, the taxpayer is deemed to sustain or to have a loss in respect of the particular payment for the reversionary year equal to the amount that would be determined by the formula in paragraph (a) if the reference in the description of A in that paragraph to “hypothetical gain or income” were read as a reference to “hypothetical loss”.
Marginal note:Debt parking — foreign exchange
(14.1) For the purposes of determining a taxpayer’s gain under subsection (14), if at a particular time a pre-reversion debt of the taxpayer (referred to in this subsection as the debtor) that is denominated in a currency other than the taxpayer’s elected functional currency becomes a parked obligation (within the meaning assigned by subsection 39(2.02)), the debtor is deemed to have made, at that time, a particular payment on account of the principal amount of the debt equal to
(a) if the debt has become a parked obligation at that particular time as a result of its acquisition by the holder of the debt, the portion of the amount paid by the holder to acquire the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time; and
(b) in any other case, the portion of the fair market value of the debt that can reasonably be considered to relate to the principal amount of the debt at the particular time.
Marginal note:Amounts carried back
(15) For the purposes of determining the amount that may be deducted, in respect of a particular amount that arises in a taxation year (referred to in this subsection as the “later year”) of a taxpayer, under section 111 or subsection 126(2), 127(5), 181.1(4) or 190.1(3) in computing the taxpayer’s Canadian tax results for a taxation year (referred to in this subsection as the “current year”) that ended before the later year, and for the purposes of determining the amount by which the amount included under subsection 91(1) for the current year is reduced because of a reduction referred to in paragraph 152(6.1)(b) in respect of the later year,
(a) if the later year is a functional currency year of the taxpayer and the current year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer’s elected functional currency) are to be converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year:
(i) the particular amount, and
(ii) any amount so deducted in computing the taxpayer’s Canadian tax results for another functional currency year of the taxpayer;
(b) if the later year is a reversionary year of the taxpayer and the current year is a functional currency year of the taxpayer,
(i) the following amounts (expressed in Canadian currency) are to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year:
(A) the particular amount, and
(B) any amount so deducted in computing the taxpayer’s Canadian tax results for another reversionary year of the taxpayer, and
(ii) any amount (expressed in Canadian currency) so deducted in computing the taxpayer’s Canadian tax results for a Canadian currency year of the taxpayer is to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year;
(c) if the later year is a reversionary year of the taxpayer and the current year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer’s elected functional currency) are to be converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year:
(i) the amount that would be determined under clause (b)(i)(A) in respect of the particular amount if the current year were a functional currency year of the taxpayer, and
(ii) any amount so deducted in computing the taxpayer’s Canadian tax results for a functional currency year of the taxpayer; and
(d) in any other case, this subsection does not apply.
Marginal note:Windings-up
(16) If a winding-up described in subsection 88(1) commences at any time (referred to in this subsection as the “commencement time”) and the parent and the subsidiary referred to in that subsection would, in the absence of this subsection, have different tax reporting currencies at the commencement time, the following rules apply for the purposes of determining the subsidiary’s Canadian tax results for its taxation years that end after the commencement time:
(a) where the subsidiary’s tax reporting currency is Canadian currency,
(i) notwithstanding subsection (3), subsection (5) is deemed to apply to the subsidiary in respect of its taxation year that includes the commencement time and each of its subsequent taxation years, if any,
(ii) the subsidiary is deemed to have as its elected functional currency the parent’s tax reporting currency, and
(iii) if the subsidiary’s taxation year that includes the commencement time would, in the absence of this subsection, be a reversionary year of the subsidiary, this section is to be read with any modifications that the circumstances require; and
(b) where the subsidiary’s tax reporting currency is not Canadian currency,
(i) the subsidiary is deemed to have filed, at the time that is six months and one day before the beginning of its taxation year that includes the commencement time, in prescribed form and manner, a notice of revocation described in subsection (4), and
(ii) if the parent’s tax reporting currency is not Canadian currency,
(A) the subsidiary’s first reversionary year is deemed to have ended at the particular time that is immediately after the time at which it began,
(B) a new taxation year of the subsidiary is deemed to have begun immediately after the particular time,
(C) notwithstanding subsection (3), subsection (5) is deemed to apply to the subsidiary in respect of its taxation year that includes the commencement time and each of its subsequent taxation years, if any, and
(D) the subsidiary is deemed to have as its elected functional currency the parent’s tax reporting currency.
Marginal note:Amalgamations
(17) If a predecessor corporation and the new corporation, in respect of an amalgamation within the meaning of subsection 87(1), have different tax reporting currencies for their last and first taxation years, respectively, paragraphs (16)(a) and (b) apply, for the purposes of determining the predecessor corporation’s Canadian tax results for its last taxation year, as if the tax reporting currencies referred to in those paragraphs were the tax reporting currencies referred to in this subsection and as if the references in those paragraphs to
(a) “subsidiary” were references to “predecessor corporation”;
(b) “parent” were references to “new corporation”; and
(c) “taxation year that includes the commencement time” were references to “last taxation year”.
Marginal note:Amalgamation — deemed application of subsection (5)
(17.1) Notwithstanding subsection (3), if each predecessor corporation in respect of an amalgamation (within the meaning assigned by subsection 87(1)) has the same elected functional currency for its last taxation year, then, unless a predecessor corporation has filed a notice of revocation under subsection (4) on or before the day that is six months before the end of its last taxation year,
(a) the new corporation formed as a result of the amalgamation is deemed to have made an election under paragraph (3)(b) and to have filed that election on the first day of its first taxation year; and
(b) that elected functional currency is deemed to be the new corporation’s functional currency for its first taxation year.
Marginal note:Anti-avoidance
(18) The Canadian tax results of a corporation for any one or more taxation years shall be determined using a particular currency if
(a) at any time (referred to in this subsection as the “transfer time”) one or more properties are directly or indirectly transferred
(i) by the corporation to another corporation (referred to in this subsection as the “transferor” and the “transferee”, respectively), or
(ii) by another corporation to the corporation (referred to in this subsection as the “transferor” and the “transferee”, respectively);
(b) the transferor and the transferee are related at the transfer time or become related in the course of a series of transactions or events that includes the transfer;
(c) the transfer time
(i) is, or would in the absence of subsections (16) and (17) be, in a functional currency year of the transferor and the transferor and the transferee have, or would in the absence of those subsections have, different tax reporting currencies at the transfer time, or
(ii) is, or would in the absence of those subsections be, in a reversionary year of the transferor and is not in a reversionary year of the transferee;
(d) it can reasonably be considered that one of the main purposes of the transfer or of any portion of a series of transactions or events that includes the transfer is to change, or to enable the changing of, the currency in which the Canadian tax results in respect of the property, or property substituted for it, for a taxation year would otherwise be determined; and
(e) the Minister directs that those Canadian tax results be determined in the particular currency.
Marginal note:Mergers
(19) For the purposes of subsection (18), if one corporate entity (referred to in this subsection as the “new corporation”) is formed at a particular time by the amalgamation or other merger of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”),
(a) the predecessor corporation is deemed to have transferred to the new corporation at the time (referred to in this subsection as the “merger transfer time”) that is immediately before the particular time each property that was held at the merger transfer time by the predecessor corporation and at the particular time by the new corporation;
(b) the new corporation is deemed to exist, and to be related to the predecessor corporation, at the merger transfer time; and
(c) the new corporation is deemed to have as its tax reporting currency at the merger transfer time its tax reporting currency at the particular time.
Marginal note:Application of subsection (21)
(20) Subsection (21) applies in determining a taxpayer’s income, gain or loss for a taxation year in respect of a transaction (referred to in this subsection and subsection (21) as a “specified transaction”) if
(a) the specified transaction was entered into, directly or indirectly, at any time by the taxpayer and a corporation (referred to in this subsection as the “related corporation”) to which the taxpayer is at that time related;
(b) the taxpayer and the related corporation had different tax reporting currencies at any time during the period (referred to in this subsection as the “accrual period”) in which the income, gain or loss accrued; and
(c) it would, in the absence of this subsection and subsection (21), be reasonable to consider that a fluctuation at any time in the accrual period in the value of the taxpayer’s tax reporting currency relative to the value of the related corporation’s tax reporting currency
(i) increased the taxpayer’s loss in respect of the specified transaction,
(ii) reduced the taxpayer’s income or gain in respect of the specified transaction, or
(iii) caused the taxpayer to have a loss, instead of income or a gain, in respect of the specified transaction.
Marginal note:Income, gain or loss determinations
(21) If this subsection applies, each fluctuation in value referred to in paragraph (20)(c) is, for the purposes of determining the taxpayer’s income, gain or loss in respect of the specified transaction and notwithstanding any other provision of this Act, deemed not to have occurred.
Marginal note:Partnership transactions
(22) For the purposes of this subsection and subsections (18) to (21),
(a) if a property is directly or indirectly transferred to or by a partnership, the property is deemed to have been transferred to or by (as the case may be) each member of the partnership; and
(b) if a partnership is a party to a transaction, each member of the partnership is deemed to be that party to that transaction.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- 2007, c. 35, s. 67
- 2009, c. 2, s. 80
- 2013, c. 34, ss. 38, 77
- 2014, c. 39, s. 77
- 2016, c. 12, s. 69
- 2017, c. 33, s. 81
- Date modified: