Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)
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Assented to 2013-06-26
PART 3AMENDMENTS IN RESPECT OF FOREIGN AFFILIATES: REORGANIZATIONS AND DISTRIBUTIONS AND OTHER TECHNICAL AMENDMENTS
R.S., c. 1 (5th Supp.)Income Tax Act
71. (1) The portion of subsection 96(3) of the Act before paragraph (a), as enacted by subsection 228(5), 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 13(4), (4.2) and (16) and 14(1.01), (1.02) and (6), section 15.2, 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,
(2) Subsection (1) applies to agreements, designations and elections made or executed after August 19, 2011.
72. (1) Subsection 113(1) of the Act is amended by adding the following after paragraph (a):
(a.1) an amount equal to the total of
(i) one-half of the portion of the dividend that is prescribed to have been paid out of the hybrid surplus, as defined by regulation (in this Part referred to as “hybrid surplus”), of the affiliate, and
(ii) the lesser of
(A) the total of
(I) the product obtained when the foreign tax prescribed to be applicable to the portion of the dividend referred to in subparagraph (i) is multiplied by the amount by which
1. the corporation’s relevant tax factor for the year
exceeds
2. one-half, and
(II) the product obtained when
1. the non-business-income tax paid by the corporation applicable to the portion of the dividend referred to in subparagraph (i)
is multiplied by
2. the corporation’s relevant tax factor for the year, and
(B) the amount determined under subparagraph (i),
(2) Subparagraph 113(2)(b)(iii.1) of the Act is replaced by the following:
(iii.1) the total of all amounts received by the corporation on the share after the end of its 1975 taxation year and before the particular time
(A) on a reduction, before August 20, 2011, of the paid-up capital of the foreign affiliate in respect of the share, or
(B) on a reduction, after August 19, 2011, of the paid-up capital of the foreign affiliate in respect of the share that is a qualifying return of capital (within the meaning assigned by subsection 90(3)) in respect of the share, and
(3) Subsection (1) applies in respect of dividends received after August 19, 2011.
(4) Subsection (2) is deemed to have come into force on August 20, 2011.
73. (1) Subparagraphs 128.1(1)(d)(i) and (ii) of the Act are replaced by the following:
(i) the affiliate is deemed to have been a controlled foreign affiliate of the other taxpayer immediately before the particular time, and
(ii) the prescribed amount is to be included in the foreign accrual property income of the affiliate for its taxation year that ends immediately before the particular time.
(2) Subsection (1) applies to taxation years that begin after 2006.
74. (1) Paragraph 152(6.1)(b) of the Act, as enacted by Part 2, is replaced by the following:
(b) the amount included in computing the taxpayer’s income for the particular year under subsection 91(1) is subsequently reduced because of a reduction in the foreign accrual property income of a foreign affiliate of the taxpayer for a taxation year (referred to in this paragraph as the “claim year”) of the affiliate that ends in the particular year, if
(i) the reduction is
(A) attributable to a foreign accrual property loss (within the meaning assigned by subsection 5903(3) of the Income Tax Regulations) of the affiliate for a taxation year of the affiliate that ends in a subsequent taxation year of the taxpayer, and
(B) included in the description of F in the definition “foreign accrual property income” in subsection 95(1) in respect of the affiliate for the claim year, or
(ii) the reduction is
(A) attributable to a foreign accrual capital loss (within the meaning assigned by subsection 5903.1(3) of the Income Tax Regulations) of the affiliate for a taxation year of the affiliate that ends in a subsequent taxation year of the taxpayer, and
(B) included in the description of F.1 in the definition “foreign accrual property income” in subsection 95(1) in respect of the affiliate for the claim year, and
(2) Subsection (1) applies to taxation years that end after August 19, 2011.
75. (1) The portion of subsection 186(1) of the French version of the Act before subparagraph (b)(i) is replaced by the following:
Marginal note:Impôt sur les dividendes imposables déterminés
186. (1) Toute société qui est une société privée ou une société assujettie au cours d’une année d’imposition est tenue de payer, au plus tard à la date d’exigibilité du solde qui lui est applicable pour l’année, un impôt pour l’année en vertu de la présente partie égal à l’excédent éventuel du total des montants suivants :
a) le tiers de l’ensemble des dividendes imposables déterminés qu’elle a reçus au cours de l’année de sociétés autres que des sociétés payantes auxquelles elle est rattachée,
b) les montants représentant chacun un montant au titre d’un dividende imposable déterminé qu’elle a reçu au cours de l’année d’une société privée ou d’une société assujettie qui était une société payante à laquelle elle était rattachée, égal au produit de la multiplication du remboursement au titre de dividendes, au sens de l’alinéa 129(1)a), de la société payante pour son année d’imposition au cours de laquelle elle a versé le dividende par le rapport entre :
(2) The portion of subsection 186(1.1) of the French version of the Act before paragraph (a) is replaced by the following:
Marginal note:Réduction d’impôt
(1.1) Malgré le paragraphe (1), l’impôt payable par ailleurs en vertu de la présente partie par une société pour une année d’imposition est réduit de celui des montants ci-après qui est applicable si elle reçoit au cours de l’année un dividende imposable déterminé qui est inclus dans un montant sur lequel l’impôt prévu à la partie IV.1 est payable par elle pour l’année :
(3) The definition dividende déterminé in subsection 186(3) of the French version of the Act is repealed.
(4) The definition “assessable dividend” in subsection 186(3) of the English version of the Act is replaced by the following:
“assessable dividend”
« dividende imposable déterminé »
“assessable dividend” means an amount received by a corporation at a time when it is a private corporation or a subject corporation as, on account of, in lieu of payment of or in satisfaction of, a taxable dividend from a corporation, to the extent of the amount in respect of the dividend that is deductible under section 112, paragraph 113(1)(a), (a.1), (b) or (d) or subsection 113(2) in computing the recipient corporation’s taxable income for the year.
(5) Subsection 186(3) of the French version of the Act is amended by adding the following in alphabetical order:
« dividende imposable déterminé »
“assessable dividend”
dividende imposable déterminé Somme reçue par une société, à un moment où elle est une société privée ou une société assujettie, au titre ou en paiement intégral ou partiel d’un dividende imposable d’une société, jusqu’à concurrence de la somme relative au dividende qui est déductible en application de l’article 112, des alinéas 113(1)a), a.1), b) ou d) ou du paragraphe 113(2) dans le calcul du revenu imposable pour l’année de la société qui a reçu le dividende.
(6) Subsections (1) to (5) are deemed to have come into force on August 20, 2011.
76. (1) Subsection 258(4) of the Act is replaced by the following:
Marginal note:Exception
(4) Subsection (3) does not apply to a dividend described in paragraph (3)(a)
(a) if the share on which the dividend was paid was not acquired in the ordinary course of the business carried on by the corporation; or
(b) to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the corporation.
(2) Section 258 of the Act is amended by adding the following after subsection (5):
Marginal note:Exception
(6) Subsection (5) does not apply to a dividend described in that subsection to the extent that the dividend would be described by subparagraph 53(2)(b)(ii) if the corporation not resident in Canada were not a foreign affiliate of the recipient.
(3) Subsections (1) and (2) apply to dividends paid after August 19, 2011.
77. (1) Paragraph 261(5)(e) of the Act is replaced by the following:
(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”;
(2) Subparagraph 261(5)(f)(i) of the Act is replaced by the following:
(i) section 76.1, subsection 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
(3) Subparagraph 261(7)(a)(i) of the Act is replaced by the following:
(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
(4) Subsection (1) applies in respect of gains made and losses sustained in taxation years that begin after August 19, 2011.
(5) Subsection (2) applies in respect of taxation years that begin after December 13, 2007.
(6) Subsection (3) is deemed to have come into force on August 20, 2011.
C.R.C., c. 945Income Tax Regulations
78. (1) Subsection 5900(1) of the Income Tax Regulations is amended by adding the following after paragraph (a):
(a.1) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the portion of the dividend paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the dividend received that
(i) the portion of the whole dividend paid by the affiliate on the shares of that class at that time that was deemed by section 5901 to have been paid out of the affiliate’s hybrid surplus in respect of the corporation
is of
(ii) the whole dividend paid by the affiliate on the shares of that class at that time;
(2) Subsection 5900(1) of the Regulations is amended by striking out “and” at the end of paragraph (c) and by adding the following after paragraph (c):
(c.1) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the foreign tax applicable to the portion of the dividend prescribed to have been paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the hybrid underlying tax applicable, in respect of the corporation, to the whole dividend paid by the affiliate on the shares of that class at that time that
(i) the amount of the dividend received by the corporation or the affiliate, as the case may be, on that share at that time
is of
(ii) the whole dividend paid by the affiliate on the shares of that class at that time; and
(3) Subsections (1) and (2) apply to dividends received after August 19, 2011.
79. (1) Subsections 5901(1) and (2) of the Regulations are replaced by the following:
5901. (1) Subject to subsection (1.1), if at any time in its taxation year a foreign affiliate of a corporation resident in Canada has paid a whole dividend on the shares of any class of its capital stock, for the purposes of this Part
(a) the portion of the whole dividend deemed to have been paid out of the affiliate’s exempt surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount of the whole dividend, and
(ii) the amount, if any, by which the exempt surplus exceeds the total of
(A) the affiliate’s hybrid deficit, if any, in respect of the corporation at that time, and
(B) the affiliate’s taxable deficit, if any, in respect of the corporation at that time;
(a.1) the portion of the whole dividend deemed to have been paid out of the affiliate’s hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the portion determined under paragraph (a), and
(ii) the amount, if any, by which the hybrid surplus exceeds
(A) if the affiliate has an exempt deficit and a taxable deficit, in respect of the corporation at that time, the total of the exempt deficit and the taxable deficit,
(B) if the affiliate has an exempt deficit and no taxable deficit, in respect of the corporation at that time, the amount of the exempt deficit, and
(C) if the affiliate has a taxable deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the taxable deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time;
(b) the portion of the whole dividend deemed to have been paid out of the affiliate’s taxable surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the total of the portions determined under paragraphs (a) and (a.1), and
(ii) the amount, if any, by which the taxable surplus exceeds
(A) if the affiliate has an exempt deficit and a hybrid deficit, in respect of the corporation at that time, the total of the exempt deficit and the hybrid deficit,
(B) if the affiliate has an exempt deficit and no hybrid deficit, in respect of the corporation at that time, the amount, if any, by which the exempt deficit exceeds the affiliate’s hybrid surplus in respect of the corporation at that time, and
(C) if the affiliate has a hybrid deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the hybrid deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time; and
(c) the portion of the whole dividend deemed to have been paid out of the affiliate’s pre-acquisition surplus in respect of the corporation at that time is the amount, if any, by which the whole dividend exceeds the total of the portions determined under paragraphs (a) to (b).
(1.1) If the corporation resident in Canada that is referred to in subsection (1) elects in writing under this subsection in respect of the whole dividend referred to in subsection (1) and files the election with the Minister on or before the corporation’s filing-due date for its taxation year that includes the day the whole dividend was paid, subsection (1) applies in respect of the whole dividend as if its paragraphs (a.1) and (b) read as follows:
(a.1) the portion of the whole dividend deemed to have been paid out of the affiliate’s taxable surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the portion determined under paragraph (a), and
(ii) the amount, if any, by which the taxable surplus exceeds
(A) if the affiliate has an exempt deficit and a hybrid deficit, in respect of the corporation at that time, the total of the exempt deficit and the hybrid deficit,
(B) if the affiliate has an exempt deficit and no hybrid deficit, in respect of the corporation at that time, the amount of the exempt deficit, and
(C) if the affiliate has a hybrid deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the hybrid deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time;
(b) the portion of the whole dividend deemed to have been paid out of the affiliate’s hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of
(i) the amount, if any, by which the amount of the whole dividend exceeds the total of the portions determined under paragraphs (a) and (a.1),
(ii) the amount, if any, by which the hybrid surplus exceeds
(A) if the affiliate has an exempt deficit and a taxable deficit, in respect of the corporation at that time, the total of the exempt deficit and the taxable deficit,
(B) if the affiliate has an exempt deficit and no taxable deficit, in respect of the corporation at that time, the amount, if any, by which the exempt deficit exceeds the affiliate’s taxable surplus in respect of the corporation at that time, and
(C) if the affiliate has a taxable deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the taxable deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time; and
(2) Notwithstanding subsection (1),
(a) if a foreign affiliate of a corporation resident in Canada pays a whole dividend (other than a whole dividend referred to in subsection 5902(1)) at any particular time in its taxation year that is more than 90 days after the commencement of that year or at any particular time in its 1972 taxation year that is before January 1, 1972, the portion of the whole dividend that would, in the absence of this paragraph, be deemed to have been paid out of the affiliate’s pre-acquisition surplus in respect of the corporation (otherwise than because of an election under paragraph (b)) is instead deemed to have been paid out of the exempt surplus, hybrid surplus and taxable surplus of the affiliate in respect of the corporation to the extent that it would have been deemed to have been so paid if, immediately after the end of that year, that portion were paid as a separate whole dividend before any whole dividend paid after the particular time and after any whole dividend paid before the particular time by the affiliate, and for the purposes of determining the exempt deficit, exempt surplus, hybrid deficit, hybrid surplus, hybrid underlying tax, taxable deficit, taxable surplus and underlying foreign tax of the affiliate in respect of the corporation at any time, that portion is deemed to have been paid as a separate whole dividend immediately following the end of the year and not to have been paid at the particular time; and
(b) a whole dividend referred to in subsection (1) that is paid at any time by a foreign affiliate of a corporation resident in Canada and that would, in the absence of this paragraph, be deemed under subsection (1) to have been, in whole or in part, paid out of the exempt surplus, hybrid surplus or taxable surplus of the affiliate in respect of the corporation is instead deemed to have been paid out of the pre-acquisition surplus of the affiliate in respect of the corporation if
(i) the corporation, and each other corporation, if any, of which the affiliate would, at that time, be a foreign affiliate if paragraph (b) of the definition “equity percentage” in subsection 95(4) of the Act were read as if the reference in that paragraph to “any corporation” were a reference to “any corporation other than a corporation resident in Canada” and that is, at that time, related to the corporation,
(A) where there is no such other corporation, elects in writing under this subparagraph and files the election with the Minister on or before the filing-due date for its taxation year in which the whole dividend is paid, and
(B) in any other case, jointly elect in writing under this subparagraph and file the election with the Minister on or before the earliest of the filing-due dates for their taxation years in which the whole dividend is paid,
(ii) no shareholder of the affiliate is, at that time, a partnership a member of which is
(A) a corporation that would, in the absence of this subparagraph, be eligible to elect under subparagraph (i), or
(B) a foreign affiliate of such a corporation, and
(iii) no particular person or particular partnership — in respect of which the affiliate would, at that time, be a foreign affiliate if paragraph (b) of the definition “equity percentage” in subsection 95(4) of the Act were read in the manner required by subparagraph (i) — has elected under subsection 90(3) of the Act in respect of the distribution that is the whole dividend where
(A) in the case of a particular person, the particular person is, or is at that time related to, the corporation, or
(B) in the case of a particular partnership, a member of the particular partnership is, or is at that time related to, the corporation.
(2.1) Subsection (2.2) applies if, in respect of a whole dividend paid by a foreign affiliate of a corporation resident in Canada,
(a) the corporation determined not to make an election under subparagraph (2)(b)(i) in respect of the whole dividend before the filing-due date specified in the relevant clause of that subparagraph;
(b) the corporation demonstrates that the determination was made using reasonable efforts; and
(c) the corporation, whether jointly with one or more other corporations or otherwise, files such an election on or before the day that is 10 years after that filing-due date.
(2.2) If this subsection applies and, in the opinion of the Minister, the circumstances are such that it would be just and equitable to permit an election referred to in subsection (2.1) to be filed after the filing-due date specified in the relevant clause of subparagraph (2)(b)(i), that election is deemed to have been filed on that filing-due date.
(2) Subsection (1) applies to dividends paid after August 19, 2011 by a foreign affiliate of a corporation. However,
(a) if the corporation and each other corporation (the corporation and those other corporations together referred to in this paragraph as the “elector corporations”), if any, of which the affiliate would be a foreign affiliate if paragraph (b) of the definition “equity percentage” in subsection 95(4) of the Act were read as if the reference in that paragraph to “any corporation” were a reference to “any corporation other than a corporation resident in Canada” and that is related to the corporation jointly elect in writing under this paragraph in respect of all of their respective foreign affiliates and file the election with the Minister of National Revenue on or before the day that is the later of the earliest of the filing-due dates for their taxation years that include the day on which this Act receives royal assent and the day that is one year after the day on which this Act receives royal assent, subsections 5901(2) to (2.2) of the Regulations, as enacted by subsection (1), apply to dividends paid after December 20, 2002 by all the respective foreign affiliates of the elector corporations, except that, for such dividends paid on or before August 19, 2011,
(i) paragraph 5901(2)(a) of the Regulations, as enacted by subsection (1), is to be read as follows:
(a) if a foreign affiliate of a corporation resident in Canada pays a whole dividend (other than a whole dividend referred to in subsection 5902(1)) at any particular time in its taxation year that is more than 90 days after the commencement of that year or at any particular time in its 1972 taxation year that is before January 1, 1972, the portion of the whole dividend that would, in the absence of this paragraph, be deemed to have been paid out of the affiliate’s pre-acquisition surplus in respect of the corporation (otherwise than because of an election under paragraph (b)) is instead deemed to have been paid out of the exempt surplus and taxable surplus of the affiliate in respect of the corporation to the extent that it would have been deemed to have been so paid if, immediately after the end of that year, that portion were paid as a separate whole dividend before any whole dividend paid after the particular time and after any whole dividend paid before the particular time by the affiliate, and for the purposes of determining the exempt deficit, exempt surplus, taxable deficit, taxable surplus and underlying foreign tax of the affiliate in respect of the corporation at any time, that portion is deemed to have been paid as a separate whole dividend immediately following the end of the year and not to have been paid at the particular time, and
(ii) the portion of paragraph 5901(2)(b) of the Regulations, as enacted by subsection (1), before subparagraph (i) is to be read as follows:
(b) a whole dividend referred to in subsection (1) that is paid at any time by a foreign affiliate of a corporation resident in Canada and that would, in the absence of this paragraph, be deemed under subsection (1) to have been, in whole or in part, paid out of the exempt surplus or taxable surplus of the affiliate in respect of the corporation is instead deemed to have been paid out of the pre-acquisition surplus of the affiliate in respect of the corporation if
(iii) paragraph 5901(2)(b) of the Regulations, as enacted by subsection (1), is to be read without reference to its subparagraph (iii);
(b) any election referred to in subparagraph 5901(2)(b)(i) of the Regulations, as enacted by subsection (1), that would otherwise be required to be filed with the Minister of National Revenue before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been filed with the Minister on a timely basis if it is filed with the Minister within 365 days after the day on which this Act receives royal assent; and
(c) any determination referred to in paragraph 5901(2.1)(a) of the Regulations, as enacted by subsection (1), that would otherwise be required to be made before the day that is 120 days after the day on which this Act receives royal assent is deemed to have been made on a timely basis if it is made within 365 days after the day on which this Act receives royal assent.
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