Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)

• Published date: 17 September 2013
• Section: Part III - Acts of Parliament
• Gazette Issue: 3 - [object Object]

S.C. 2013, c. 34

Assented to 2013-06-26

An Act to amend the Income Tax Act, the Excise Tax Act, the Federal-Provincial Fiscal Arrangements Act, the First Nations Goods and Services Tax Act and related legislation

SUMMARY

Part 1 of this enactment implements, in accordance with proposals announced in the March 4, 2010 Budget and released for comment on August 27, 2010, amendments to the provisions of the Income Tax Act governing the taxation of non-resident trusts and their beneficiaries and of Canadian taxpayers who hold interests in offshore investment fund property.

Parts 2 and 3 implement various technical amendments in respect of the Income Tax Act and the Income Tax Regulations relating to the taxation of Canadian multinational corporations with foreign affiliates. The amendments in Part 2 are based on draft proposals released on December 18, 2009. Among other things, Part 2 includes the amendments to the foreign affiliate surplus rules in the Income Tax Regulations that are consequential to the foreign affiliate changes to the Income Tax Act announced in the March 19, 2007 Budget. The amendments in Part 3 are based on draft proposals released on August 19, 2011. Among other things, Part 3 includes revisions to the measures proposed in a package of draft legislation released on February 27, 2004 dealing primarily with reorganizations of, and distributions from, foreign affiliates.

Part 4 deals with provisions of the Income Tax Act that are not amended in Parts 1, 2, 3 or 5 in which the following private law concepts are used: right and interest, real and personal property, life estate and remainder interest, tangible and intangible property and joint and several liability. It enacts amendments, released for comments on July 16, 2010, to ensure that those provisions are bijural, in other words, that they reflect both the common law and the civil law in both linguistic versions. Similar amendments are made in Parts 1, 2, 3 and 5 to ensure that any provision of the Act enacted or amended by those Parts are also bijural.

Part 5 implements a number of income tax measures proposed in the March 4, 2010 Budget and released for comment on May 7, 2010 and August 27, 2010. Most notably, it enacts amendments

(a) relating to specified leasing property;

(b) to provide that conversions of specified investment flow-through (SIFT) trusts and partnerships into corporations are subject to the same loss utilization restrictions as are transactions between corporations;

(c) to prevent foreign tax credit generators; and

(d) implementing a regime for information reporting of tax avoidance transactions.

Part 5 also implements certain income tax measures that were previously announced. Most notably, it enacts amendments announced

(a) on January 27, 2009, relating to the Apprenticeship Completion Grant;

(b) on May 3, 2010, to clarify that computers continue to be eligible for the Atlantic investment tax credit;

(c) on July 16, 2010, relating to technical changes to the Income Tax Act which include amendments relating to the income tax treatment of restrictive covenants;

(d) on August 27, 2010, relating to the introduction of the Fairness for the Self-Employed Act;

(e) on November 5, 2010 and October 31, 2011, relating to technical changes to the Income Tax Act;

(f) on December 16, 2010, relating to changes to the income tax rules concerning real estate investment trusts; and

(g) on March 16, 2011, relating to the deductibility of contingent amounts, withholding tax applicable to certain interest payments made to non-residents, and certain life insurance corporation reserves.

Finally, Part 5 implements certain further technical income tax measures. Most notably, it enacts amendments relating to

(a) labour-sponsored venture capital corporations;

(b) the allocation of income of airline corporations; and

(c) the tax treatment of shares owned by short-term residents.

Part 6 amends the Excise Tax Act to implement technical and housekeeping amendments that include relieving the goods and services tax and the harmonized sales tax on the administrative service of collecting and distributing the levy on blank media imposed under the Copyright Act announced on October 31, 2011.

Part 7 amends the Federal-Provincial Fiscal Arrangements Act to clarify, for greater certainty, the authority of the Minister of Finance and of the Minister of National Revenue to amend administration agreements if the change in question is explicitly contemplated by the language of the agreement and to confirm any amendments that may have been made to those agreements. Part 7 also amends the Federal-Provincial Fiscal Arrangements Act and the First Nations Goods and Services Tax Act to enable the First Nations goods and services tax, imposed under a tax administration agreement between the federal government and an Aboriginal government, to be administered through a provincial administration system, if the province also administers the federal goods and services tax.

Part 8 contains coordinating amendments in respect of those provisions of the Income Tax Act that are amended by this Act and also by the Jobs and Growth Act, 2012 or that need coordination with the Pooled Registered Pension Plans Act.

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

SHORT TITLE

Marginal note:Short title

1. This Act may be cited as the Technical Tax Amendments Act, 2012.

PART 1AMENDMENTS IN RESPECT OF OFFSHORE INVESTMENT FUND PROPERTY AND NON-RESIDENT TRUSTS R.S., c. 1 (5th Supp.)Income Tax Act

• 2. (1) Paragraph 12(1)(k) of the Income Tax Act is replaced by the following:

  • Marginal note:Foreign corporations, trusts and investment entities

    (k) any amount required by subdivision i to be included in computing the taxpayer’s income for the year;

• (2) Subsection (1) applies to taxation years that end after 2006.

• 3. (1) Paragraph 51(1)(a) of the French version of the Act is replaced by the following:

  • a) sauf pour l’application des paragraphes 20(21) et 44.1(6) et (7) et de l’alinéa 94(2)m), l’échange est réputé ne pas constituer une disposition du bien convertible;

• (2) Paragraph 51(1)(c) of the English version of the Act is replaced by the following:

  • (c) except for the purposes of subsections 20(21) and 44.1(6) and (7) and paragraph 94(2)(m), the exchange is deemed not to be a disposition of the convertible property,

• (3) Subsections (1) and (2) apply to taxation years of a taxpayer that begin after 1999, except that, for any taxation year of the taxpayer that ends before 2007 in respect of which subsection 94(1) of the Act, as enacted by section 7, does not apply to the taxpayer,

  • (a) paragraph 51(1)(a) of the French version of the Act, as enacted by subsection (1), is to be read without reference to “et de l’alinéa 94(2)m)”; and

  • (b) paragraph 51(1)(c) of the English version of the Act, as enacted by subsection (2), is to be read without reference to “and paragraph 94(2)(m)”.

• 4. (1) Paragraph 53(1)(d.1) of the Act is replaced by the following:

  • (d.1) if the property is a capital interest in a trust, any amount included under subsection 91(1) or (3) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been required to have been included under those subsections 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) in respect of that interest;

• (2) Paragraph 53(2)(b.1) of the Act is replaced by the following:

  • (b.1) if the property is a capital interest in a trust, any amount deducted by the taxpayer by reason of subsection 91(2) or (4) in computing the taxpayer’s income for a taxation year that ends at or before that time (or that would have been so deductible by the taxpayer 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) in respect of that interest;

• (3) Subsections (1) and (2) apply to taxation years that end after 2006. Subsections (1) and (2) also apply in computing the adjusted cost base to a taxpayer of a capital interest in a trust for an earlier taxation year if subsection 94(1) of the Act, as enacted by section 7, applies to the trust for a taxation year that ends in that earlier taxation year of the taxpayer.

• (4) In computing the adjusted cost base of a capital interest in a trust disposed of on or before August 27, 2010, paragraph 53(1)(d.1) of the Act, as enacted by subsection (1), is to be read as follows:

  • (d.1) if the property is a capital interest in a trust, any amount required to be included under subsection 91(1) or (3) in computing the taxpayer’s income for a taxation year that ends before that time (or that would have been required to have been included under those subsections 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) in respect of that interest;

• 5. (1) Subsection 75(3) of the Act is amended by striking out “or” at the end of paragraph (c.1) and by adding the following after paragraph (c.1):

  • (c.2) by a trust if the person from whom the trust acquired the property is, in respect of the trust, an electing contributor as defined in subsection 94(1);

  • (c.3) by a trust that is non-resident, but would be resident in Canada for the purpose of computing its income for the year if the definition “resident contributor” in subsection 94(1) were read without reference to its paragraph (a); or

• (2) Paragraph 75(3)(c.2) of the Act, as enacted by subsection (1), applies to taxation years that end after March 4, 2010.

• (3) Paragraph 75(3)(c.3) of the Act, as enacted by subsection (1), applies to taxation years that begin after 2000 except that, for taxation years that end before 2007, it is to be read as follows:

  • (c.3) by a trust that is non-resident, but would be resident in Canada for the purpose of computing its income...