Annex 4 - Tax Measures: Notices of Ways and Means Motions

Notice of Ways and Means Motion to Amend the Income Tax Act

That it is expedient to amend the Income Tax Act to provide among other things:

Registered Disability Savings Plans

(1) That the provisions of the Act relating to registered disability savings plans be modified in accordance with the proposals described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Mineral Exploration Tax Credit for Flow-Through Share Investors

(2) That, for expenses renounced under a flow-through share agreement entered into after March 2012,

(a) paragraph (a) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act be replaced with the following:

(a) that is a Canadian exploration expense incurred by a corporation after March 2012 and before 2014 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2014) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definition “mineral resource” in subsection 248(1),

and

(b) paragraphs (c) and (d) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act be replaced with the following:

(c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after March 2012 and before April 2013, and

(d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after March 2012 and before April 2013.

Eligible Dividends – Split-Dividend Designation and Late Designation

(3) That, for dividends paid on or after Budget Day, the Act be amended by

(a) replacing paragraph (a) of the definition “eligible dividend” in subsection 89(1) with the following:

(a) the amount that is equal to the portion of a taxable dividend that is received by a person resident in Canada, paid after 2005 by a corporation resident in Canada and designated, as provided under subsection (14), to be an eligible dividend, and

(b) replacing subsection 89(14) with the following:

Dividend designation

(14) A corporation designates a particular portion of a dividend it pays at any time to be an eligible dividend by notifying in writing at that time each person or partnership to whom it pays all or any part of the dividend that the particular portion of the dividend is an eligible dividend.

and

(c) adding the following after subsection 89(14):

Late designation

(14.1) Where, in the opinion of the Minister, the circumstances of a case are such that it would be just and equitable to permit a designation under subsection (14) to be made before the day that is three years after the day on which the designation was required to be made under that subsection, the designation is deemed to have been made on the day the designation was required to be made.

Group Sickness or Accident Insurance Plans

(4) That, for the 2013 taxation year, subsection 6(1) of the Act be amended by adding the following after paragraph (e):

(e.1) the total of

(i) all amounts (or the portions of those amounts) contributed by the taxpayer’s employer on or after Budget Day and before 2013 that are attributable to the taxpayer’s  coverage after 2012 under a group sickness or accident insurance plan, except to the extent that the contributions (or portions of those contributions) are attributable to benefits under the plan that, if received by the taxpayer, would be included in the taxpayer’s income under paragraph (f) in the year the benefits are received if that paragraph were read without regard to its subparagraph (v), and

(ii) all amounts contributed in 2013 in respect of the taxpayer by the taxpayer’s employer to a group sickness or accident insurance plan, except to the extent that the contributions are attributable to benefits under the plan that, if received by the taxpayer, would be included in the taxpayer’s income under paragraph (f) in the year the benefits are received if that paragraph were read without regard to its subparagraph (v).

(5) That, for the 2014 and subsequent taxation years, paragraph 6(1)(e.1) of the Act be replaced with the following:

(e.1) the total of all amounts contributed in the year in respect of the taxpayer by the taxpayer’s employer to a group sickness or accident insurance plan, except to the extent that the contributions are attributable to benefits under the plan that, if received by the taxpayer, would be included in the taxpayer’s income under paragraph (f) in the year the benefits are received if that paragraph were read without regard to its subparagraph (v).

Retirement Compensation Arrangements

(6) That, in respect of retirement compensation arrangements, the Act be amended by adding

(a) definitions “advantage”, “prohibited investment”, “significant interest” and “swap transaction”, similar to the existing definitions in Part XI.01 of the Act, with such modifications as the circumstances require;

(b) a definition “RCA strip”, similar to the existing definition “RRSP strip” in Part XI.01 of the Act, with such modifications as the circumstances require; and

(c) a definition “specified beneficiary” that refers to an individual who has an interest or right in respect of a retirement compensation arrangement and who has a significant interest in an employer in respect of the arrangement.

(7) That the Act be amended to require a custodian of a retirement compensation arrangement to pay a tax equal to 50 per cent of the fair market value of a prohibited investment acquired or held by the arrangement, similar to the existing tax in section 207.04 of the Act, with such modifications as the circumstances require.

(8) That the Act be amended to require a custodian of a retirement compensation arrangement to pay a tax equal to the fair market value of any advantage obtained by a specified beneficiary of the arrangement or a person who does not deal at arm’s length with the specified beneficiary, similar to the existing tax in section 207.05 of the Act, with such modifications as the circumstances require.

(9) That the Act be amended to provide that a specified beneficiary of a retirement compensation arrangement that participates in acquiring or holding a prohibited investment, or in extending an advantage, in respect of the arrangement be jointly and severally, or solidarily, liable, to the extent of their participation, for the tax payable in relation to the prohibited investment or the advantage.

(10) That,

(a) subject to subparagraphs (b) and (c), paragraphs (6) and (9) apply on and after Budget Day;

(b) paragraph (7) apply in respect of investments acquired, or that become prohibited investments, on or after Budget Day; and

(c) paragraph (8) apply to advantages extended, received or receivable on or after Budget Day, other than an advantage that relates to property acquired, or transactions occurring, before Budget Day

(i) if the advantage is obtained by a specified beneficiary of the retirement compensation arrangement (or a person who does not deal at arm’s length with the specified beneficiary) and the amount of the advantage is included in computing the income of the specified beneficiary, or

(ii) if the advantage is obtained by a retirement compensation arrangement and the amount of the advantage is distributed from the arrangement and included in computing the income of a beneficiary or an employer in respect of the arrangement.

(11) That, in respect of refundable tax on contributions made to a retirement compensation arrangement on or after Budget Day, section 207.5 of the Act be amended so that the election in subsection 207.5(2) is available only in circumstances where

(a) a decline in value of property of the retirement compensation arrangement is not reasonably attributable to a prohibited investment or an advantage, or

(b) the Minister of National Revenue is satisfied that it is just and equitable to accept the election having regard to all the circumstances (including the extent to which tax has been paid under another provision of the Act).

Employees Profit Sharing Plans

(12) That, for the 2012 and subsequent taxation years, subsection 8(1) of the Act be amended by adding the following after paragraph (o.1):

(o.2) an amount that is an excess EPSP amount (as defined in subsection 207.8(1)) of the taxpayer for the year, except to the extent that the taxpayer’s tax for the year under subsection 207.8(2) in respect of the excess EPSP amount is waived or cancelled.

(13) That, in respect of payments made on or after Budget Day to a trust governed by an employees profit sharing plan, the Act be amended by adding the following after Part XI.3:

Part XI.4 – Tax on Excess EPSP Amounts

Excess EPSP amount

207.8(1) In this Part, “excess EPSP amount”, of a specified employee for a taxation year in respect of an employer, means the amount determined by the formula

A – (20% x B)

where

A   is the portion of the total of all amounts paid by the employer of the specified employee (or by a corporation with which the employer does not deal at arm’s length) to a trust governed by an employees profit sharing plan that is allocated for the year to the specified employee; and

B   is the specified employee’s total income for the year from employment with the employer computed without reference to paragraph 6(1)(d) and sections 7 and 8.

Tax payable

(2) If a specified employee has an excess EPSP amount for a taxation year, the specified employee shall pay, for the year, a tax equal to the amount determined by the formula

(A+B) x C

where

A   is 29%;

B   is

(i) if the specified employee is resident in the Province of Quebec at the end of the year, 0%,

(ii) if the specified employee is resident in a province other than Quebec at the end of the year, the highest provincial personal income tax rate that applies for the year to a resident of the province, or

(iii) in any other case, 14%; and

C is the total of all excess EPSP amounts of the specified employee for the year.

Waiver or cancellation

(3) If a specified employee would otherwise be liable to pay a tax under subsection (2), the Minister may waive or cancel all or part of the liability if the Minister considers it just and equitable to do so having regard to all the circumstances.

(14) That paragraphs (12) and (13) not apply in respect of payments made before 2013 to a trust governed by an employees profit sharing plan pursuant to a legal obligation arising under a written agreement or arrangement entered into before Budget Day. 

Salary of the Governor General of Canada

(15) That, for the 2013 and subsequent taxation years, paragraph 81(1)(n) of the Act be replaced with the following:

(n) income from the office of Governor General of Canada, other than salary under the Governor General’s Act.

Life Insurance Policy Exemption Test

(16) That the provisions of the Act, and the Income Tax Regulations, with respect to life insurance policies be modified in accordance with the proposals related to the life insurance policy exemption test described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Corporate Mineral Exploration and Development Tax Credit

(17) That, for expenditures incurred on or after Budget Day, subsection 127(9) of the Act be amended by

(a) replacing paragraph (a.3) of the definition “investment tax credit” with the following:

(a.3) where the taxpayer is a taxable Canadian corporation, the total of

(i) the specified percentage of the taxpayer’s pre-production mining expenditure described in subparagraph (a)(i) of the definition “pre-production mining expenditure”, and

(ii) the specified percentage of the taxpayer’s pre-production mining expenditure described in subparagraph (a)(ii) of the definition “pre-production mining expenditure”,

(b) replacing paragraph (a) of the definition “pre-production mining expenditure” with the following:

(a) would be an expense

(i) described in paragraph (f) of the definition “Canadian exploration expense” in subsection 66.1(6) if the expression “mineral resource” in that paragraph were defined to mean a mineral deposit from which the principal mineral to be extracted is diamond, a base or precious metal deposit, or a mineral deposit from which the principal mineral to be extracted is an industrial mineral that, when refined, results in a base or precious metal, or

(ii) described in paragraph (g), and not described in paragraph (f), of the definition “Canadian exploration expense” in subsection 66.1(6) if the expression “mineral resource” in that paragraph were defined to mean a mineral deposit from which the principal mineral to be extracted is diamond, a base or precious metal deposit, or a mineral deposit from which the principal mineral to be extracted is an industrial mineral that, when refined, results in a base or precious metal, and

and

(c) deleting “and” at the end of paragraph (i) and by replacing paragraph (j) of the definition “specified percentage” with the following:

(j) in respect of a pre-production mining expenditure of the taxpayer described in subparagraph (a)(i) of the definition “pre-production mining expenditure” that is incurred

(i) before 2013, 10%,

(ii) in 2013, 5%, and

(iii) after 2013, 0%, and

(k) in respect of a pre-production mining expenditure of the taxpayer described in subparagraph (a)(ii) of the definition “pre-production mining expenditure” that is incurred

(i) before 2014, 10%,

(ii) after 2013 and before 2016, 10% if the expenditure is incurred

(A) under a written agreement entered into by the taxpayer before Budget Day, or

(B) as part of the development of a new mine and

(I) the construction of the mine was started by, or on behalf of, the taxpayer before Budget Day (and for this purpose construction does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), or

(II) the engineering and design work for the construction of the mine, as evidenced in writing, was started by, or on behalf of, the taxpayer before Budget Day (and for this purpose engineering and design work does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), and

(iii) in any other case,

(A) in 2014, 7%,

(B) in 2015, 4%, and

(C) after 2015, 0%.

Atlantic Investment Tax Credit – Oil and Gas and Mining Activities

(18) That, in respect of property acquired on or after Budget Day, subsection 127(9) of the Act be amended by

(a) replacing the portion of the definition “qualified property” before paragraph (a) with the following:

“qualified property”, of a taxpayer, means property (other than a qualified resource property) that is

(b) replacing subparagraphs (c)(iv) to (xiii) of the definition “qualified property” with the following:

(iv) storing grain, or

(v) harvesting peat,

(c) replacing the reference to “subparagraphs (c)(i) to (xiii)” in paragraph (d) of the definition “qualified property” with “subparagraphs (c)(i) to (v)”,

(d) adding the following after paragraph (a) of the definition “specified percentage”:

(a.1) in respect of a qualified resource property acquired by a taxpayer primarily for use in the Province of Nova Scotia, New Brunswick, Prince Edward Island or Newfoundland and Labrador, the Gaspé Peninsula or the prescribed offshore region and that is acquired

(i) on or after Budget Day and before 2014, 10%,

(ii) after 2013 and before 2017, 10% if the property

(A) is acquired by the taxpayer under a written agreement of purchase and sale entered into by the taxpayer before Budget Day, or

(B) is acquired as part of a project phase and

(I) the construction of the phase was started by, or on behalf of, the taxpayer before Budget Day (and for this purpose construction does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), or

(II) the engineering and design work for the construction of the phase, as evidenced in writing, was started by, or on behalf of, the taxpayer before Budget Day (and for this purpose engineering and design work does not include obtaining permits or regulatory approvals, conducting environmental assessments, community consultations or impact benefit studies, and similar activities), and

(iii) in any other case,

(A) in 2014 and 2015, 5%, and

(B) after 2015, 0%,

and

(e) adding the following definitions in alphabetical order:

“project phase” means a phase of a project of a taxpayer that is a discrete expansion in the extraction, processing or production capacity of the project beyond a capacity level that was attained before Budget Day and which expansion in capacity was the taxpayer’s demonstrated intention immediately before Budget Day;

“qualified resource property”, of a taxpayer, means property that is a prescribed building or prescribed machinery and equipment, that is acquired by the taxpayer on or after Budget Day, that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer and that is

(a) to be used by the taxpayer in Canada primarily for the purpose of any of the activities referred to in subparagraphs (c)(iv) to (xi) of the definition “qualified property” as that definition read immediately before Budget Day, or

(b) to be leased by the taxpayer to a lessee (other than a person exempt from tax under this Part because of section 149) that can reasonably be expected to use the property in Canada primarily for the purpose of any of the activities referred to in subparagraphs (c)(iv) to (xi) of the definition “qualified property” as that definition read immediately before Budget Day, but this paragraph does not apply to prescribed machinery and equipment unless use of the property by the first person to whom it was leased begins on or after Budget Day and

(i) the property is leased in the ordinary course of carrying on a business in Canada by a corporation whose principal business is leasing property, lending money, purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services, or any combination of these activities,

(ii) the property is manufactured and leased in the ordinary course of carrying on a business in Canada by a corporation whose principal business is manufacturing property that it sells or leases, or

(iii) the property is leased in the ordinary course of carrying on business in Canada by a corporation whose principal business is selling or servicing property of that type.

Atlantic Investment Tax Credit – Electricity Generation Equipment

(19) That, in respect of property acquired on or after Budget Day,

(a) the definition “qualified property” in subsection 127(9) of the Act be amended by

(i) deleting “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):

(b.1) prescribed energy generation and conservation property acquired by the taxpayer on or after Budget Day,

and

(ii) replacing the portion of paragraph (c.1) before subparagraph (i) with the following:

(c.1) property (other than prescribed energy generation and conservation property) to be used by the taxpayer in Canada primarily for the purpose of producing or processing electrical energy or steam in a prescribed area, where

and

(b) that for the purposes of the definition “qualified property” in subsection 127(9) of the Act, prescribed energy generation and conservation property be depreciable property (other than property that is a prescribed building or prescribed machinery and equipment) of the taxpayer included in Class 43.1, 43.2 or 48 or in Class 17 because of subparagraph (a.1)(i) of that Class, of Schedule II to the Income Tax Regulations.

Scientific Research and Experimental Development Program

(20) That,

(a) for taxation years that end after 2013, the reference to “20%” in paragraph (a.1) of the definition “investment tax credit” in subsection 127(9) of the Act be replaced with “15%”, except that for taxation years that include January 1, 2014, it shall be read as a reference to the percentage that is the total of

(i) 20% multiplied by the proportion that the number of days that are in the taxation year and before 2014 is of the number of days in the taxation year, and

(ii) 15% multiplied by the proportion that the number of days that are in the taxation year and after 2013 is of the number of days in the taxation year;

(b) for taxation years that end after 2013, the reference to “15%” in subsection 127(10.1) of the Act be replaced with “20%”, except that for taxation years that include January 1, 2014, it shall be read as a reference to the percentage that is the total of

(i) 15% multiplied by the proportion that the number of days that are in the taxation year and before 2014 is of the number of days in the taxation year, and

(ii) 20% multiplied by the proportion that the number of days that are in the taxation year and after 2013 is of the number of days in the taxation year;

(c) for expenditures incurred after 2012, subparagraph (a)(ii) of the definition “qualified expenditure” in subsection 127(9) of the Act be amended to include only 80% of an expenditure that

(i) would otherwise be included under that subparagraph,

(ii) is for scientific research and experimental development performed for or on behalf of the taxpayer by another person or partnership with whom the taxpayer deals at arm’s length, and

(iii) has been reduced to exclude any amount of a capital nature incurred by the other person or partnership in the performance of the scientific research and experimental development;

(d) the percentage at which the prescribed proxy amount, for a taxation year, referred to in paragraph (b) of the definition “qualified expenditure” in subsection 127(9) of the Act is calculated be, for taxation years that end after 2012, the percentage that is the total of

(i) 65% multiplied by the proportion that the number of days that are in the taxation year and before 2013 is of the number of days in the taxation year,

(ii) 60% multiplied by the proportion that the number of days that are in the taxation year and in 2013 is of the number of days in the taxation year, and

(iii) 55% multiplied by the proportion that the number of days that are in the taxation year and after 2013 is of the number of days in the taxation year;

and

(e) for expenditures made by a taxpayer after 2013,

(i) section 37 of the Act be amended to exclude an expenditure in respect of the use or the right to use property that would, if it were acquired by the taxpayer, be capital property of the taxpayer,

(ii) paragraph 37(1)(b) of the Act be repealed,

(iii) subparagraphs (a)(i) and (iii) of the definition “qualified expenditure” in subsection 127(9) of the Act be repealed, and

(iv) section 127 of the Act be amended to exclude from the SR&ED qualified expenditure pool an expenditure in respect of the use or the right to use property that would, if it were acquired by the taxpayer, be capital property of the taxpayer.

(21) That such other amendments to the Act be made as are necessary to give effect to the proposals relating to scientific research and experimental development described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Tax Avoidance Through the Use of Partnerships

(22) That paragraph 88(1)(d) of the Act be amended by deleting “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(ii.1) for the purpose of calculating the amount in subparagraph (ii) in respect of an interest of the subsidiary in a partnership, the fair market value of the interest at the time the parent last acquired control of the subsidiary is deemed to be the amount determined by the formula

A – B

where

A   is the fair market value of the interest at that time, and

B   is the portion of the amount by which the fair market value of the interest at that time exceeds its cost amount as may reasonably be regarded as being attributable at that time to the total of all amounts each of which is 

(A) in the case of a depreciable property held directly by the partnership or held indirectly by the partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of the property exceeds its cost amount,

(B) in the case of a Canadian or foreign resource property held directly by the partnership or held indirectly by the partnership through one or more other partnerships, the fair market value (determined without reference to liabilities) of the property, or

(C) in the case of a property that is neither a capital property or resource property and that is held directly by the partnership or held indirectly by the partnership through one or more other partnerships, the amount by which the fair market value (determined without reference to liabilities) of the property exceeds its cost amount, and

(23) That paragraph (22) apply to amalgamations that occur and windings-up that begin on or after Budget Day, other than – where a taxable Canadian corporation (referred to in this paragraph as the “parent corporation”) that has acquired control of another taxable Canadian corporation (referred to in this paragraph as the “subsidiary corporation”) – an amalgamation of the parent corporation and the subsidiary corporation that occurs before 2013, or a winding-up of the subsidiary corporation into the parent corporation that begins before 2013, if

(a) the parent corporation acquired control of the subsidiary corporation before Budget Day, or was obligated as evidenced in writing before Budget Day to acquire control of the subsidiary (except that the parent corporation shall not be considered to be obligated if, as a result of amendments to the Act, it may be excused from the obligation to acquire control), and

(b) the parent corporation had the intention as evidenced in writing before Budget Day to amalgamate with, or wind up, the subsidiary corporation.

(24) That section 100 of the Act be amended by

(a) replacing the portion of subsection 100(1) before paragraph (a) with the following:

Disposition – partnership to tax-exempt or non-resident

100(1) If, as part of a transaction or event or series of transactions or events, a taxpayer disposes of an interest in a partnership and that interest is acquired by a person exempt from tax under section 149 or by a non-resident person, notwithstanding paragraph 38(a), the taxpayer’s taxable capital gain for a taxation year from the disposition of the interest is deemed to be

and

(b) adding the following after subsection 100(1):

Exception – non-resident person

(1.1) Subsection (1) does not apply to a taxpayer’s disposition of an interest in a partnership to a non-resident person if the partnership, immediately before and immediately after the acquisition of the interest by the non-resident person, uses all the property of the partnership in carrying on business through a permanent establishment in Canada.

(25) That paragraph (24) apply to dispositions of an interest in a partnership made by a taxpayer on or after Budget Day, other than an arm’s length disposition by the taxpayer before 2013 if the taxpayer is obligated to dispose of the interest pursuant to a written agreement entered into by the taxpayer before Budget Day. A taxpayer shall not be considered to be obligated if, as a result of amendments to the Act, the taxpayer may be excused from the obligation.

(26) That such other amendments to the Act be made as are necessary to give effect to the proposals relating to the avoidance of tax through the use of partnerships that hold income assets described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Partnership Waivers

(27) That, effective on Royal Assent to the enacting legislation, section 152 of the Act be amended by adding the following after subsection (1.8):

Waiver of determination limitation period

(1.9) A waiver in respect of the period during which the Minister may make a determination under subsection (1.4) in respect of a partnership for a fiscal period may be made by one member of the partnership if that member is

(a) designated for that purpose in the information return made under section 229 of the Income Tax Regulations for the fiscal period; or

(b) otherwise expressly authorized by the partnership to so act.

Transfer Pricing Secondary Adjustments

(28) That, for transactions that occur on or after Budget Day, section 247 of the Act be amended by adding the following after subsection (11):

Deemed dividends to non-residents

(12) For the purposes of Part XIII, if a particular corporation would have a transfer pricing capital adjustment or a transfer pricing income adjustment, for a taxation year, if the particular corporation, or a partnership of which the particular corporation is a member, had undertaken no transactions or series of transactions other than those in which a particular non-resident person that does not deal at arm’s length with the particular corporation (other than a corporation that was a controlled foreign affiliate, as defined in subsection 17(15), of the particular corporation throughout the period during which the transaction or series of transactions occurred) was a participant,

(a) a dividend is deemed to have been paid by the particular corporation and received by the particular non-resident person at the end of that taxation year; and

(b) the amount of the dividend is the amount, if any, by which

(i) the amount that would be the portion of the total of the particular corporation’s transfer pricing capital adjustment, and transfer pricing income adjustment, for the taxation year that could reasonably be considered to relate to the particular non-resident person if

(A) the only transactions or series of transactions undertaken by the particular corporation were those in which the particular non-resident person was a participant, and

(B) the definition “transfer pricing capital adjustment” in subsection (1) were read without reference to the references therein to “1/2 of” and “3/4 of”

exceeds

(ii) the amount that would be the portion of the total of the particular corporation’s transfer pricing capital setoff adjustment, and transfer pricing income setoff adjustment, for the taxation year that could reasonably be considered to relate to the particular non-resident person if

(A) the only transactions or series of transactions undertaken by the particular corporation were those in which the particular non-resident person was a participant, and

(B) the definition “transfer pricing capital adjustment” in subsection (1) were read without reference to the references therein to “1/2 of” and “3/4 of”.

Repatriation

(13) Where a dividend is deemed by paragraph (12)(a) to have been paid by a corporation and received by a non-resident person, and an amount has been paid, with the concurrence of the Minister, by the non-resident person to the corporation, the amount of the dividend may be reduced to the amount that the Minister considers appropriate, having regard to all the circumstances, including the amount of the dividend and the amount of the payment.

Repatriation – interest

(14) Where the amount of a dividend has been reduced because of the application of subsection (13), interest on the amount of the dividend (calculated without reference to subsection (13)) payable in respect of insufficient payments of tax under Part XIII on the amount of the dividend so calculated shall remain payable for the period that begins at the time the dividend was deemed by subsection (12) to have been paid and that ends at the time at which the payer of the dividend received the amount referred to in subsection (13) from a non-resident person in respect of the dividend. 

Repatriation – interest

(15) Where the amount of a dividend has been reduced because of the application of subsection (13), the amount of interest payable by a taxpayer because of subsection (14) may be reduced to the amount that the Minister considers appropriate, having regard to all the circumstances, including whether the country in which the non-resident person described in subsection (13) is resident provides reciprocal treatment.

Non-application of ss. 15, 56(2) and 246

(16) Section 15, subsection 56(2) and section 246 do not apply in respect of an amount in respect of which a dividend is deemed by paragraph (12)(a) to have been paid by a corporation and received by a non-resident person.

Thin Capitalization – Debt-to-Equity Ratio

(29) That, for taxation years that begin after 2012, the reference to “two” in subparagraph 18(4)(a)(ii) of the Act be replaced with “1.5”.

Thin Capitalization – Partnerships

(30) That, for taxation years that begin on or after Budget Day,

(a) in determining whether the debt-to-equity ratio of a corporation resident in Canada exceeds the debt-to-equity ratio set out in subsection 18(4) of the Act, each member of a partnership be deemed to owe that member’s specified proportion, within the meaning proposed to be assigned by subsection 248(1) of the Act as set out in Department of Finance news release 2010-068 (dated July 16, 2010), of the debts owed by the partnership; and

(b) there be included in computing the income of the corporation an amount equal to the interest on the portion of the debts owing by the partnership to specified non-residents, that are allocated to the corporation under subparagraph (a), that exceeds the debt-to-equity ratio set out in subsection 18(4) of the Act.

Thin Capitalization – Disallowed Interest Treated as a Dividend

(31) That, for taxation years that end on or after Budget Day,

(a) for the purposes of Part XIII of the Act, interest paid or credited, by a corporation resident in Canada or by a partnership of which the corporation is directly or indirectly a member (referred to in this paragraph as the “payer”), in a taxation year of the corporation to a non-resident person be deemed to have been paid by the corporation as a dividend and, except for this paragraph, not to have been paid or credited by the payer as interest to the extent that

(i) the interest is not deductible to the corporation because of the application of subsection 18(4) of the Act, or

(ii) an amount in respect of the interest is included in computing the income of the corporation because of the application of any measure giving effect to subparagraph (30)(b);

(b) for the purposes of this paragraph, interest that is payable at a time that is in the taxation year referred to in subparagraph (a) but that has not been paid or credited in that taxation year be deemed to have been paid immediately before the end of that taxation year and not at any other time;

(c) for the purpose of determining the time at which a deemed dividend, that arises because of the application of subparagraph (a) to a taxation year, is considered to have been paid to a particular specified non-resident, the corporation may designate, on or before the corporation’s filing-due date for the taxation year, which amounts paid or credited in the taxation year as interest to the particular specified non-resident are to be recharacterized as dividends; and

(d) where the taxation year includes Budget Day, the amount of each dividend deemed by subparagraph (a) to have been paid in the taxation year be the proportion of the amount of the dividend otherwise determined that the number of days that are in the taxation year that are on or after Budget Day is of the number of days that are in the taxation year.

Thin Capitalization – Foreign Affiliate Loans

(32) That, for taxation years that end on or after Budget Day,

(a) an amount of interest, the deductibility of which by a corporation resident in Canada would otherwise be denied because of the application of subsection 18(4) of the Act, shall not be denied to the extent of any portion of the interest that is included in computing the income of the corporation in respect of the foreign accrual property income of a controlled foreign affiliate of the corporation (net of any amount deductible in respect of that portion of the interest because of the application of subsection 91(4) of the Act); and

(b) an amount in respect of interest, that would otherwise be required to be included in computing the income of a corporation resident in Canada because of the application of subparagraph (30)(b), shall not be included to the extent of any portion of the interest that is included in computing the income of the corporation in respect of the foreign accrual property income of a controlled foreign affiliate of the corporation (net of any amount deductible in respect of that portion of the interest because of the application of subsection 91(4) of the Act).

Foreign Affiliate Dumping

(33) That, for contributed surplus that arises on or after Budget Day,

(a) clause 18(4)(a)(ii)(B) of the Act be replaced with the following:

(B) the average of all amounts each of which is the corporation’s contributed surplus (other than any portion of such contributed surplus that arose from a transaction or event in respect of which subsection 212.3(2) applied) at the beginning of a calendar month that ends in the year, to the extent that it was contributed by a specified non-resident shareholder of the corporation, and

(b) paragraphs 84(1)(c.1) and (c.2) of the Act be replaced with the following:

(c.1) where the corporation is an insurance corporation, any action by which it converts contributed surplus related to its insurance business (other than any portion of such contributed surplus that arose from a transaction or event in respect of which subsection 212.3(2) applied) into paid-up capital in respect of the shares of its capital stock,

(c.2) where the corporation is a bank, any action by which it converts any of its contributed surplus that arose on the issuance of shares of its capital stock (other than any portion of such contributed surplus that arose from a transaction or event in respect of which subsection 212.3(2) applied) into paid-up capital in respect of shares of its capital stock, or

(c) subparagraphs 84(1)(c.3)(i) and (ii) of the Act be replaced with the following:

(i) on the issuance of shares of that class or shares of another class for which the shares of that class were substituted (other than an issuance to which section 51, 66.3, 84.1, 85, 85.1, 86 or 87, subsection 192(4.1), 194(4.1) or section 212.1 applied, or an issuance in respect of which subsection 212.3(2) applied),

(ii) on the acquisition of property by the corporation (other than an acquisition in respect of which subsection 212.3(2) applied) from a person who at the time of the acquisition held any of the issued shares of that class or shares of another class for which shares of that class were substituted for no consideration or for consideration that did not include shares of the capital stock of the corporation, or

(34) That, effective Budget Day, references to paragraph 128.1(1)(c.3) and section 212.3 of the Act be added to subparagraph (b)(iii) of the definition “paid-up capital” in subsection 89(1) of the Act.

(35) That, effective Budget Day, the portion of subsection 93.1(1) of the Act before paragraph (a), as proposed in Department of Finance news release 2011-070 (dated August 19, 2011), be replaced with the following:

Shares held by a partnership

93.1(1) For the purposes of determining whether a non-resident corporation is a foreign affiliate of a corporation resident in Canada for the purposes of subsections (2) and 20(12), sections 90, 93 and 113, paragraphs 128.1(1)(c.3) and (d) and section 212.3, (and any regulations made for the purposes of those provisions), section 95 (to the extent that it is applied for the purposes of those provisions) and section 126, where based on the assumptions contained in paragraph 96(1)(c), at any time shares of a class of the capital stock of a corporation are owned by a partnership or are deemed under this subsection to be owned by a partnership, each member of the partnership is deemed to own at that time the number of those shares that is equal to the proportion of all those shares that

(36) That, effective Budget Day, subsection 93.1(3) of the Act, as proposed in Department of Finance news release 2011-070 (dated August 19, 2011), be amended by deleting “and” at the end of paragraph (b), by adding “and” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) section 212.3.

(37) That, in respect of taxpayers that become resident in Canada on or after Budget Day, subsection 128.1(1) of the Act be amended by adding the following after paragraph (c.2):

(c.3) if the taxpayer is a corporation that was, at the time (referred to in this paragraph as the “prior time”) that is immediately before the particular time, controlled by a particular non-resident corporation and the taxpayer owned at the prior time one or more shares of another non-resident corporation that, immediately after the particular time, was – or that became, as part of a transaction or event or series of transactions or events that includes the taxpayer having become resident in Canada – a foreign affiliate of the taxpayer, then

(i) in computing the paid-up capital at or after the particular time of any particular class of shares of the capital stock of the taxpayer, there is to be deducted that proportion of the amount that is the lesser of the paid-up capital in respect of all of the shares of the capital stock of the taxpayer at the particular time, computed without reference to this paragraph, and the fair market value, at the particular time, of the shares owned by the taxpayer of the foreign affiliate that the paid-up capital, as so computed, in respect of the shares of the particular class is of the paid-up capital, as so computed, in respect of all of the issued shares of the capital stock of the taxpayer, and

(ii) for the purposes of Part XIII, the taxpayer is deemed, immediately after the particular time, to have paid to the particular non-resident, and the particular non-resident is deemed, immediately after the particular time, to have received from the taxpayer, a dividend equal to the amount, if any, by which the fair market value, at the particular time, of the shares owned by the taxpayer of the foreign affiliate exceeds the paid-up capital in respect of all of the shares of the capital stock of the taxpayer, computed without reference to this paragraph.

(38) That, in respect of transactions or events that occur on or after Budget Day, the Act be amended by adding the following after section 212.2:

Foreign affiliate dumping – conditions for application

212.3(1) Subsection (2) applies to an investment in a non-resident corporation (referred to in this section as the “subject corporation”) that is made, at any time, by a corporation resident in Canada (referred to in this section as the “CRIC”) if

(a) the subject corporation is, immediately after that time, or becomes, as part of a transaction or event or series of transactions or events that includes the investment, a foreign affiliate of the CRIC;

(b) the CRIC is at that time controlled by another non-resident corporation (referred to in this section as the “parent”); and

(c) the investment may not reasonably be considered to have been made by the CRIC, instead of being made or retained by the parent or another non-resident person that does not deal at arm’s length with the parent, primarily for bona fide purposes other than to obtain a tax benefit (as defined in subsection 245(1)).

Foreign affiliate dumping – consequences

(2) If this subsection applies to an investment in a subject corporation,

(a) for the purposes of this Part, the CRIC is deemed to have paid to the parent at the time the investment was made, and the parent is deemed to have received from the CRIC at that time, a dividend equal to the total of all amounts each of which is the fair market value, at that time, of any property (not including, for greater certainty, shares of the capital stock of the CRIC) transferred, or obligation assumed or incurred, by the CRIC in respect of the investment; and

(b) in computing the paid-up capital at any time on or after Budget Day of any class of shares of the capital stock of the CRIC, there is to be deducted the amount of any increase, because of the investment, in the paid-up capital in respect of the shares of the class, computed without reference to this section.

Investment in subject corporation

(3) For the purposes of this section, an investment made in a subject corporation by a CRIC means any of

(a) an acquisition of shares of the capital stock of the subject corporation by the CRIC;

(b) a contribution of capital to the subject corporation by the CRIC;

(c) a transaction under which an amount became owing by the subject corporation to the CRIC, other than an amount owing that arises in the ordinary course of the business of the CRIC and that is repaid within a commercially reasonable period;

(d) an acquisition of a debt obligation of the subject corporation by the CRIC from another person, other than, if the acquisition was made in the ordinary course of the business of the CRIC, an acquisition from a person with which the CRIC dealt, at the time of the acquisition, at arm’s length; 

(e) an acquisition by the CRIC of an option in respect of, or an interest in, or for civil law a right in, shares of the capital stock, or a debt obligation, of the subject corporation; and

(f) any transaction or event that is similar in effect to any of the transactions described in paragraphs (a) to (e).

Multiple controllers

(4) For the purposes of this section and paragraph 128.1(1)(c.3), a CRIC that is controlled by more than one non-resident corporation is deemed not to be controlled by any such non-resident that controls another non-resident corporation that controls the CRIC, unless the application of this subsection would otherwise result in no non-resident corporation controlling the CRIC.

Bona fide purpose – primary factors

(5) In determining whether paragraph (1)(c) applies, the following factors are to be given primary consideration:

(a) whether the business activities carried on by the subject corporation and any other corporation in which the subject corporation has, at the time referred to in subsection (1), an equity percentage (as defined in subsection 95(4)) are at that time, and are expected to remain, more closely connected to the business activities carried on by the CRIC (or by a corporation resident in Canada that is a subsidiary wholly-owned corporation of the CRIC or that is a corporation of which the CRIC is a subsidiary wholly-owned corporation) than to the business activities carried on by any non-resident corporation (other than the subject corporation or any corporation in which the subject corporation has such an equity percentage) with which the CRIC, at that time, does not deal at arm’s length;

(b) whether the terms or conditions of any shares of the subject corporation that are owned by the CRIC at that time, or any agreement in respect of the shares or their issue, are such that the CRIC does not fully participate in the profits of the subject corporation or any appreciation in the value of the subject corporation (for greater certainty, the fact that the shares owned by the CRIC do fully participate in the profits of the subject corporation and any appreciation in the value of the subject corporation is not a relevant factor);

(c) whether the investment was made at the direction or request of a non-resident corporation with which the CRIC was not, at that time, dealing at arm’s length;

(d) whether, in the case of an investment described in paragraph (3)(a), (d), (e) or (f), negotiations with the vendor in respect of the investment were initiated by senior officers of the CRIC who were resident in, and worked principally in, Canada or, if the vendor initiated the transaction, the vendor’s principal point of contact was an officer of the CRIC who was resident in, and worked principally in, Canada;

(e) whether senior officers of the CRIC who were resident in, and worked principally in, Canada had and exercised the principal decision-making authority in respect of the making of the investment, and have and exercise the principal decision making authority in respect of the investment;

(f) whether the performance evaluation or compensation of senior officers of the CRIC who are resident in, and work principally in, Canada is connected to the results of operations of the subject corporation to a greater extent than the performance evaluation or compensation of any senior officers of a non-resident corporation (other than the subject corporation or a corporation controlled by the subject corporation) that does not deal at arm’s length with the CRIC is so connected; and

(g) whether senior officers of the subject corporation report to, and are functionally accountable to, senior officers of the CRIC who are resident in, and work principally in, Canada to a greater extent than to any senior officers of any non-resident corporation (other than the subject corporation) that does not deal at arm’s length with the CRIC.

Indirect investment

(6) A particular investment by a CRIC in a subject corporation that would, in the absence of this subsection, be excluded from the application of subsection (2) because of paragraph (1)(c) is not to be so excluded to the extent that one or more properties, if any, received by the subject corporation from the CRIC as a result of the particular investment, or property substituted for any such property, may reasonably be considered to have been used by the subject corporation, directly or indirectly as part of a transaction or event or series of transactions or events that includes the particular investment, to make another investment in a non-resident corporation that would, if the other investment had been made by the CRIC, have been subject to subsection (2).

Partnerships

(7) For the purposes of this section, paragraph 128.1(1)(c.3) and subsection 219.1(2)

(a) any transaction entered into by a partnership is deemed to have been entered into by each member of the partnership in proportion to the fair market value of the member’s direct or indirect interest in the partnership;

(b) property that would, in the absence of this paragraph, be owned by a partnership is deemed to be owned by each member of the partnership in proportion to the fair market value of the member’s direct or indirect interest in the partnership; and

(c) amounts that would, in the absence of this paragraph, be owing by a partnership are deemed to be owed by each member of the partnership in proportion to the fair market value of the member’s direct or indirect interest in the partnership.

(39) That paragraph (38) not apply to a transaction that occurs before 2013 between persons that deal at arm’s length and that are obligated to complete the transaction pursuant to the terms of an agreement in writing between the persons that was entered into before Budget Day. A person will be considered not to be obligated to complete a transaction if the person may be excused from completing the transaction as a result of amendments to the Act.

(40) That, in respect of taxpayers that cease to be resident in Canada on or after Budget Day, section 219.1 of the Act be renumbered as subsection 219.1(1) and that section 219.1 be amended by adding the following after that subsection (1):

Foreign affiliate dumping – corporate emigration

(2) For the purposes of paragraph (1)(b), if any shareholder of the corporation referred to in that paragraph (referred to in this subsection as the “emigrating corporation”) is, at the time the emigrating corporation ceases to be resident in Canada, a corporation resident in Canada that is controlled, at that time, by a non-resident corporation, the amount that would, in the absence of this subsection, be the paid-up capital in respect of all of the issued and outstanding shares of each class of the capital stock of the emigrating corporation immediately before that time is deemed to be nil.

Overseas Employment Tax Credit

(41) That, for the 2013 and subsequent taxation years, section 122.3 of the Act be amended by

(a) replacing the reference to “$80,000” in paragraph 122.3(1)(c) with “the specified amount for the year”;

(b) replacing the reference to “80%” in paragraph 122.3(1)(d) with “the specified percentage for the year”; and

(c) adding the following after subsection 122.3(1):

Specified amount

(1.01) For the purposes of paragraph (1)(c), the specified amount for a taxation year of an individual is

(a) for the 2013 to 2015 taxation years, determined by the following formula:

[$80,000 x A/(A + B)] + [C x B/(A + B)]

where

A   is the individual’s income described in paragraph (1)(d) for the taxation year that is earned in connection with a contract that was committed to in writing before Budget Day by a specified employer of the individual,

B   is the individual’s income described in paragraph (1)(d) for the taxation year, other than income included in the description of A, and

C   is

(i) for the 2013 taxation year, $60,000,

(ii) for the 2014 taxation year, $40,000, and

(iii) for the 2015 taxation year, $20,000, and

(b) for the 2016 and subsequent taxation years, nil.

Specified percentage

(1.02) For the purposes of paragraph (1)(d), the specified percentage for a taxation year of an individual is

(a) for the 2013 to 2015 taxation years, determined by the following formula:

[80% x A/(A + B)] + [C x B/(A + B)]

where

A   is the value of A in subsection (1.01),

B   is the value of B in subsection (1.01), and

C   is

(i) for the 2013 taxation year, 60%,

(ii) for the 2014 taxation year, 40%, and

(iii) for the 2015 taxation year, 20%, and

(b) for the 2016 and subsequent taxation years, 0%.

Gifts to Foreign Charitable Organizations

(42) That, for applications made by a foreign organization on or after the later of January 1, 2013 and the date of Royal Assent to the enacting legislation,

(a) subparagraph (a)(v) of the definition “qualified donee” in subsection 149.1(1) of the Act be replaced with the following:

(v) a foreign organization designated under subsection 149.1(26),

and

(b) section 149.1 of the Act be amended by adding the following after subsection 149.1(25):

Designated foreign charitable organizations

(26) For the purposes of the definition “qualified donee” in subsection (1),

(a) the Minister may designate, in consultation with the Minister of Finance, a foreign organization for a 24-month period that includes the time at which Her Majesty in right of Canada has made a gift to the foreign organization, if

(i) the foreign organization is a charitable organization that is not resident in Canada,

(ii) the Minister is satisfied that the foreign organization is

(A) carrying on relief activities in response to a disaster,

(B) providing urgent humanitarian aid, or

(C) carrying on activities in the national interest of Canada, and

(iii) the foreign organization has applied to the Minister for designation under this subsection; and

(b) a foreign organization designated under paragraph (a) is deemed to have been registered by the Minister at the beginning of the 24-month period.

Charities – Enhancing Transparency and Accountability

(43) That, effective on Royal Assent to the enacting legislation,

(a) the definition “charitable purposes” in subsection 149.1(1) of the Act be replaced with the following:

“charitable purposes” includes the disbursement of funds to a qualified donee, other than a gift the making of which is a political activity;

(b) subsection 149.1(1) of the Act be amended by adding the following definition in alphabetical order:

“political activity” includes the making of a gift to a qualified donee if it can reasonably be considered that a purpose of the gift is to support the political activities of the qualified donee;

(c) paragraphs 149.1(6)(b) and (c) of the Act be replaced with the following:

(b) it disburses income to qualified donees, other than income disbursed by way of a gift the making of which is a political activity, if the total amount of income of the charitable organization that is disbursed to qualified donees in a taxation year does not exceed 50% of its income for the year; or

(c) it disburses income to a registered charity that the Minister has designated in writing as a charity associated with it, other than income disbursed by way of a gift the making of which is a political activity.

(d) subsection 149.1(10) of the Act be replaced with the following:

Deemed charitable activity

(10) An amount paid by a charitable organization to a qualified donee that is not paid out of the income of the charitable organization is deemed to be a devotion of a resource of the charitable organization to a charitable activity carried on by it, unless the amount paid is a gift the making of which is a political activity.

(e) subsection 188.2(2) of the Act be amended by deleting “or” at the end of paragraph (c) and by adding the following after paragraph (d):

(e) in the case of a registered charity that is a charitable foundation, if the foundation devotes resources to political activities that are not considered under subsection 149.1(6.1) to be devoted to charitable purposes;

(f) in the case of a registered charity that is a charitable organization, if the organization devotes resources to political activities that are not considered under subsection 149.1(6.2) to be devoted to charitable activities; or

(g) in the case of a registered Canadian amateur athletic association, if the association devotes resources to political activities that are not considered under subsection 149.1(6.201) to be devoted to its exclusive purpose and exclusive function.

(f) section 188.2 of the Act be amended by adding the following after subsection (2):

Suspension – failure to report

(2.1) If a registered charity or a registered Canadian amateur athletic association fails to report information that is required to be included in a return filed under subsection 149.1(14), the Minister may give notice by registered mail to the charity or association that its authority to issue an official receipt referred to in Part XXXV of the Income Tax Regulations is suspended from the day that is seven days after the day on which the notice is mailed until such time as the Minister notifies the charity or association, as the case may be, that the Minister has received the required information in prescribed form.

(g) the portion of subsection 188.2(3) of the Act before paragraph (a) be replaced with the following:

Effect of suspension

(3) If the Minister has issued a notice to a qualified donee under subsection (1), (2) or (2.1), subject to subsection (4),

and

(h) subsection 188.2(4) of the Act be replaced with the following:

Application for postponement

(4) If a notice of objection to a suspension under subsection (1), (2) or (2.1) has been filed by a qualified donee, the qualified donee may file an application to the Tax Court of Canada for a postponement of that portion of the period of suspension that has not elapsed until the time determined by the Court.

Tax Shelter Administrative Changes

(44) That, effective on Royal Assent to the enacting legislation, paragraph 227(10)(b) of the Act be replaced with the following:

(b) subsection 237.1(7.4) or (7.5) by a person or partnership, 

(45) That, for applications for identification numbers made

(a) before Budget Day, subsection 237.1(4) of the Act be replaced with the following:

Sales prohibited

(4) A person may, at any time, whether as a principal or an agent, sell or issue, or accept consideration in respect of, a tax shelter only if

(a) the Minister has issued before that time an identification number for the tax shelter; and

(b) the time is before 2014.

and

(b) on or after Budget Day, paragraph 237.1(4)(b) of the Act, as enacted in accordance with paragraph (a), be replaced with the following:

(b) the time is during the calendar year designated by the Minister as being applicable to the number.

(46) That, in respect of applications for identification numbers made, sales or issuances of tax shelters made and consideration in respect of tax shelters accepted, after Royal Assent to the enacting legislation, paragraph 237.1(7.4)(b) of the Act be replaced with the following:

(b) 25% of the greater of

(i) the total of all amounts each of which is the consideration received or receivable from a person in respect of the tax shelter before the correct information is filed with the Minister or the identification number is issued, as the case may be, and

(ii) the total of all amounts each of which is an amount stated or represented to be the value of property that a particular person who acquires or otherwise invests in the tax shelter could donate to a qualified donee, if the tax shelter is a gifting arrangement and consideration has been received or is receivable from the particular person in respect of the tax shelter before the correct information is filed with the Minister or the identification number is issued, as the case may be.

(47) That, in respect of demands to file an information return that are made and in respect of failures to report an amount in an information return filed, after Royal Assent to the enacting legislation, section 237.1 of the Act be amended by adding the following after subsection (7.4):

Penalty

(7.5) Every person who is required under subsection (7) to file an information return and who fails to comply with a demand under section 233 to file the return or to report in the return information required under paragraph (7)(a) or (b), is liable to a penalty equal to 25% of the greater of

(a) the total of all amounts each of which is the consideration received or receivable by the person in respect of the tax shelter from a particular person in respect of whom information required under paragraph (7)(a) or (b) had not been reported at or before the time the demand was issued or the return was filed, as the case may be; and

(b) if the tax shelter is a gifting arrangement, the total of all amounts each of which is an amount stated or represented to be the value of property that the particular person could donate to a qualified donee.

Notice of Ways and Means Motion to Amend the Excise Tax Act

That it is expedient to amend the Excise Tax Act as follows:

GST/HST Health Measures

1. (1) Part II of Schedule V to the Excise Tax Act is amended by adding the following after section 7.2:

7.3 A supply of a service (other than a service described in section 4 of Part I of Schedule VI) rendered in the practice of the profession of pharmacy by a particular individual who is entitled under the laws of a province to practise that profession if the service is rendered within a pharmacist-patient relationship between the particular individual and another individual and is provided for the promotion of the health of the other individual or for the prevention or treatment of a disease, disorder or dysfunction of the other individual.

(2) Subsection (1) applies to any supply made after Budget Day.

2. (1) Section 10 of Part II of Schedule V to the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after that paragraph:

(c) a person that is entitled under the laws of a province to practise the profession of pharmacy and is authorized under the laws of the province to order such a service, if the order is made within a pharmacist-patient relationship.

(2) Subsection (1) applies to any supply made after Budget Day.

3. (1) Paragraph 2(e) of Part I of Schedule VI to the Act is amended by adding the following after subparagraph (vi):

(vi.1) Isosorbide-5-mononitrate,

(2) Subsection (1) applies to any supply made

(a) after Budget Day; or

(b) on or before Budget Day if no amount was charged, collected or remitted on or before that day as or on account of tax under Part IX of the Act in respect of the supply.

4. (1) The definition “medical practitioner” in section 1 of Part II of Schedule VI to the Act is repealed.

(2) Section 1 of Part II of Schedule VI to the Act is amended by adding the following in alphabetical order:

“specified professional” means

(a) a person that is entitled under the laws of a province to practise the profession of medicine, physiotherapy or occupational therapy, or

(b) a registered nurse.

(3) Subsections (1) and (2) apply to any supply made after Budget Day.

5. (1) Sections 3 and 4 of Part II of Schedule VI to the Act are replaced by the following:

3. A supply of a heart-monitoring device if the device is supplied on the written order of a specified professional for use by a consumer with heart disease who is named in the order.

4. A supply of a hospital bed, if the bed is supplied to the operator of a health care facility (as defined in section 1 of Part II of Schedule V) or on the written order of a specified professional for use by an incapacitated individual named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

6. (1) Section 5.1 of Part II of Schedule VI to the Act is replaced by the following:

5.1 A supply of an aerosol chamber or a metered dose inhaler for use in the treatment of asthma if the chamber or inhaler is supplied on the written order of a specified professional for use by a consumer named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

7. (1) Section 7 of Part II of Schedule VI to the Act is replaced
by the following:

7. A supply of a device that is designed to convert sound to light signals if the device is supplied on the written order of a specified professional for use by a consumer with a hearing impairment who is named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

8. (1) Section 9 of Part II of Schedule VI to the Act is replaced
by the following:

9. A supply of eyeglasses or contact lenses if the eyeglasses or contact lenses are, or are to be, supplied under the authority of a prescription prepared, or an assessment record produced, by a person for the treatment or correction of a defect of vision of a consumer named in the prescription or assessment record and the person is entitled under the laws of the province in which the person practises to prescribe eyeglasses or contact lenses, or to produce an assessment record to be used for the dispensing of eyeglasses or contact lenses, for such purpose.

(2) Subsection (1) applies to any supply made

(a) after Budget Day; or

(b) on or before Budget Day if no amount was charged, collected or remitted on or before that day as or on account of tax under Part IX of the Act in respect of the supply.

9. (1) Section 14.1 of Part II of Schedule VI to the Act is replaced by the following:

14.1 A supply of a chair that is specially designed for use by an individual with a disability if the chair is supplied on the written order of a specified professional for use by a consumer named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

10. (1) Sections 21.1 and 21.2 of Part II of Schedule VI to the Act are replaced by the following:

21.1 A supply of an extremity pump, intermittent pressure pump or similar device for use in the treatment of lymphedema if the pump or device is supplied on the written order of a specified professional for use by a consumer named in the order.

21.2 A supply of a catheter for subcutaneous injections if the catheter is supplied on the written order of a specified professional for use by a consumer named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

11. (1) Section 23 of Part II of Schedule VI to the Act is replaced by the following:

23. A supply of an orthotic or orthopaedic device that is made to order for an individual or is supplied on the written order of a specified professional for use by a consumer named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

12. (1) Section 24.1 of Part II of Schedule VI to the Act is replaced by the following:

24.1 A supply of footwear that is specially designed for use by an individual who has a crippled or deformed foot or other similar disability, if the footwear is supplied on the written order of a specified professional.

(2) Subsection (1) applies to any supply made after Budget Day.

13. (1) Part II of Schedule VI to the Act is amended by adding the following after section 29:

29.1 A supply of

(a) a blood coagulation monitor or meter specially designed for use by an individual requiring blood coagulation monitoring or metering; or

(b) blood coagulation testing strips or reagents compatible with a blood coagulation monitor or meter referred to in paragraph (a).

(2) Subsection (1) applies to any supply made after Budget Day.

14. (1) Section 30 of Part II of Schedule VI to the Act is replaced by the following:

30. A supply of any article that is specially designed for the use of blind individuals if the article is supplied for use by a blind individual to or by the Canadian National Institute for the Blind or any other bona fide institution or association for blind individuals or on the order or certificate of a specified professional.

(2) Subsection (1) applies to any supply made after Budget Day.

15. (1) Sections 35 and 36 of Part II of Schedule VI to the Act are replaced by the following:

35. A supply of a graduated compression stocking, an anti-embolic stocking or similar article if the stocking or article is supplied on the written order of a specified professional for use by a consumer named in the order.

36. A supply of clothing that is specially designed for use by an individual with a disability if the clothing is supplied on the written order of a specified professional for use by a consumer named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

16. (1) Section 41 of Part II of Schedule VI to the Act is replaced by the following:

41. A supply of a device that is specially designed for neuromuscular stimulation therapy or standing therapy, if supplied on the written order of a specified professional for use by a consumer with paralysis or a severe mobility impairment who is named in the order.

(2) Subsection (1) applies to any supply made after Budget Day.

GST Rebate for Books to be Given Away for Free by Prescribed Literacy Organizations

17. (1) Subsection 259.1(1) of the Act is amended by adding the following in alphabetical order:

“specified property”

“specified property” means

(a) a printed book or an update of such a book;

(b) an audio recording all or substantially all of which is a spoken reading of a printed book; or

(c) a bound or unbound printed version of scripture of any religion.

(2) Subsection 259.1(2) of the Act is replaced by the following:

Rebate for printed books, etc.

(2) The Minister must, subject to subsection (3), pay a rebate to a person that is, on the last day of a claim period of the person or of the person’s fiscal year that includes that claim period, a specified person equal to the amount of tax under subsection 165(1) or section 212 that became payable in the claim period by the person in respect of the acquisition or importation of specified property if

(a) in the case of a specified person described in paragraph (f) of the definition “specified person”, the person acquires or imports the specified property otherwise than for the purpose of supply by way of sale for consideration; and

(b) in any other case, the person acquires or imports the specified property otherwise than for the purpose of supply by way of sale.

(3) Subsections (1) and (2) apply to acquisitions and importations of property in respect of which tax becomes payable after Budget Day.

Tax Relief for Foreign-Based Rental Vehicles Temporarily Imported by Canadian Residents

18. (1) Subsections 212.1(2) to (4) of the Act are replaced by the following:

Tax in participating province

(2) Subject to this Part, every person that is liable under the Customs Act to pay duty on imported goods, or would be so liable if the goods were subject to duty, shall pay to Her Majesty in right of Canada, in addition to the tax imposed by section 212, a tax on the goods calculated at the tax rate for a participating province on the value of the goods if

(a) the goods are prescribed goods imported at a place in the participating province; or

(b) the goods are not prescribed for the purposes of paragraph (a) and the person is resident in the participating province.

Exception

(3) Paragraph (2)(b) does not apply to goods that are accounted for as commercial goods under section 32 of the Customs Act, specified motor vehicles or a mobile home or a floating home that has been used or occupied in Canada by any individual.

Application in offshore areas

(4) Paragraph (2)(b) does not apply to goods imported by or on behalf of a person that is resident in the Nova Scotia offshore area or the Newfoundland offshore area unless the goods are imported for consumption, use or supply in the course of an offshore activity or the person is also resident in a participating province that is not an offshore area.

(2) Subsection (1) applies to goods imported on or after June 1, 2012.

19. (1) Section 261.2 of the Act is replaced by the following:

Rebate in respect of goods imported at a place in a province

261.2 If a person that is resident in a particular participating province pays tax under subsection 212.1(2) in respect of property described in paragraph (b) of that subsection that the person imports at a place in another province for consumption or use exclusively in any province (other than the particular participating province) and if prescribed conditions are satisfied, the Minister shall, subject to section 261.4, pay a rebate to the person equal to the amount determined in prescribed manner.

(2) Subsection (1) applies to property imported on or after June 1, 2012.

20. (1) Schedule I to the Act is amended by adding the following before section 6:

1. The following definitions apply in this Schedule.

“commercial goods” has the same meaning as in subsection 212.1(1) of the Act.

“qualifying vehicle” means a vehicle (other than a racing car described in heading No. 87.03 of the List of Tariff Provisions set out in the schedule to the Customs Tariff) registered under the laws of a foreign jurisdiction relating to the registration of motor vehicles that

(a) is described in any of heading No. 87.02, subheading Nos. 8703.21 to 8703.90, 8704.21, 8704.31, 8704.90 and 8711.20 to 8711.90 and tariff item Nos. 8716.39.30 and 8716.39.90 of that List;

(b) is described in subheading No. 8704.22 or 8704.32 of that List and has a gross vehicle weight rating (as defined in subsection 2(1) of the Motor Vehicle Safety Regulations) not exceeding 10 tonnes; or

(c) is described in tariff item No. 8716.10.00 of that List and is a vehicle for camping.

(2) Subsection (1) comes into force, or is deemed to have come into force, on June 1, 2012.

21. (1) Section 8 of Schedule I to the Act is amended by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) that is included as permanently installed equipment in an automobile, station wagon, van or truck if the automobile, station wagon, van or truck

(i) is a qualifying vehicle,

(ii) is imported temporarily by an individual resident in Canada and not accounted for as a commercial good under section 32 of the Customs Act,

(iii) was last supplied in the course of a vehicle rental business to the individual by way of lease, licence or similar arrangement under which continuous possession or use of the automobile, station wagon, van or truck is provided for a period of less than 180 days, and

(iv) is exported within 30 days after the importation.

(2) Subsection (1) applies to any air conditioner that is included as permanently installed equipment in an automobile, station wagon, van or truck imported into Canada on or after June 1, 2012.

22. (1) The portion of section 10 of Schedule I to the Act before paragraph (a) is replaced by the following:

10. Section 6 does not apply to an automobile described in that section that is

(2) Paragraphs 10(a) to (c) of Schedule I to the French version of the Act are replaced by the following:

(3) Section 10 of Schedule I to the Act is replaced by striking out “or” at the end of paragraph (b), by adding “or” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) a qualifying vehicle if the automobile

(i) is imported temporarily by an individual resident in Canada and not accounted for as a commercial good under section 32 of the Customs Act,

(ii) was last supplied in the course of a vehicle rental business to the individual by way of lease, licence or similar arrangement under which continuous possession or use of the automobile is provided for a period of less than 180 days, and

(iii) is exported within 30 days after the importation.

(4) Subsections (1) and (2) come into force, or are deemed to have come into force, on June 1, 2012.

(5) Subsection (3) applies to any automobile imported into Canada on or after June 1, 2012.

Consistent Application of the Green Levy on Fuel-Inefficient Vehicles

23. Section 1 of Schedule I to the Act is amended by adding the following in alphabetical order:

“qualifying data” means fuel consumption data, in respect of automobiles described in the portion of subsection 6(1) before paragraph (a), that is

(a) if the fuel consumption data under the EnerGuide mark is based on a test method composed of two test — but not five test — cycles, data published by the Government of Canada under the EnerGuide mark in respect of those automobiles; or

(b) in any other case, data in respect of those automobiles based on a test method composed of only two test cycles and published by the Government of Canada, as specified by the Minister of National Revenue, on the basis of information adjusted and provided by the Minister of Natural Resources.

24. The descriptions of A and B in subsection 6(2) of Schedule I to the Act are replaced by the following:

A is the city fuel consumption rating (based on the number of litres of fuel, other than E85, per 100 kilometres) for automobiles of the same model with the same attributes as the automobile, as determined by reference to qualifying data, or, if no rating can be so determined that would apply to the automobile, by reference to the best available data, which may include the city fuel consumption rating for the most similar model and attributes; and

B is the highway fuel consumption rating (based on the number of litres of fuel, other than E85, per 100 kilometres) for automobiles of the same model with the same attributes as the automobile, as determined by reference to qualifying data, or, if no rating can be so determined that would apply to the automobile, by reference to the best available data, which may include the highway fuel consumption rating for the most similar model and attributes.

Notice of Ways and Means Motion to Amend the Customs Tariff

That it is expedient to amend the Customs Tariff to provide among other things:

  1. That the List of Tariff Provisions set out in the schedule to the Customs Tariff be amended to delete the reference to “Oils and preparations thereof, having a viscosity of 7.44 mm²/sec. or more at 37.8°C” in the Description of Goods of tariff item No. 2710.19.91 in order for these oils and preparations thereof to be classified under tariff item 2710.19.99 that provides for a Most-Favoured-Nation Tariff rate of customs duty of “Free”.

  2. That the List of Tariff Provisions set out in the schedule to the Customs Tariff be amended to delete the reference to “Oils and preparations thereof, having a viscosity of 7.44 mm²/sec. or more at 37.8°C” in the Description of Goods of tariff item No. 2710.20.10 in order for these oils and preparations thereof to be classified under tariff item 2710.20.90 that provides for a Most-Favoured-Nation Tariff rate of customs duty of “Free”.

  3. That the Description of Goods of tariff item No. 9804.10.00 in the List of Tariff Provisions set out in the schedule to the Customs Tariff be amended by replacing the reference to “four hundred dollars” with a reference to “eight hundred dollars”.

  4. That the Description of Goods of tariff item No. 9804.20.00 in the List of Tariff Provisions set out in the schedule to the Customs Tariff be amended by replacing the reference to “seven hundred and fifty dollars” with a reference to “eight hundred dollars”.

  5. That the Description of Goods of tariff item No. 9804.40.00 in the List of Tariff Provisions set out in the schedule to the Customs Tariff be amended by replacing the reference to “fifty dollars” with a reference to “two hundred dollars”.

  6. That any enactment founded on sections 1 and 2 be deemed to have come into force on March 30, 2012.

  7. That any enactment founded on sections 3 to 5 be deemed to have come into force on June 1, 2012.

Tax Measures: Draft Amendments to Various GST/HST Regulations

Doubling GST/HST Streamlined Accounting Thresholds

Regulations Amending the Streamlined Accounting (GST/HST) Regulations

1. (1) Paragraph 16(1)(b) of the Streamlined Accounting (GST/HST) Regulations is replaced by the following:

(b) the total threshold amount for the reporting period does not exceed $400,000, and

(2) Paragraphs 16(2)(b) and (c) of the Regulations are replaced by the following:

(b) the fiscal year of the registrant immediately before the first fiscal year of the registrant that is a reporting period of the registrant for which the total threshold amount exceeds $400,000,

(c) the first fiscal quarter of the registrant that includes a reporting period of the registrant for which the total threshold amount exceeds $400,000, and

(3) Subsections (1) and (2) apply for the purpose of determining the net tax of a registrant for reporting periods beginning after 2012.

2. (1) Paragraphs 21.2(1)(a) to (d) of the Regulations are replaced by the following:

(a) the threshold amount for the fiscal year of the registrant that includes the reporting period does not exceed $1,000,000;

(b) if the fiscal quarter of the registrant that includes the reporting period is not the first fiscal quarter in the fiscal year, the threshold amount for the fiscal quarter does not exceed $1,000,000;

(c) the purchase threshold for the fiscal year does not exceed $4,000,000;

(d) if the registrant is a public service body, it is reasonable to expect at the beginning of the reporting period that the purchase threshold for the registrant’s next fiscal year will not exceed $4,000,000; and

(2) Paragraphs 21.2(2)(a) to (d) of the Regulations are replaced by the following:

(a) if the threshold amount for the second or third fiscal quarter in a fiscal year of the registrant exceeds $1,000,000, the end of the first fiscal quarter in that fiscal year for which the threshold amount exceeds $1,000,000,

(b) if the threshold amount for a fiscal year of the registrant exceeds $1,000,000, the end of the first fiscal quarter in that fiscal year,

(c) if the registrant is not a public service body and the purchase threshold of the registrant for a particular day exceeds $4,000,000, the end of the immediately preceding day,

(d) if the registrant is a public service body and the purchase threshold for a fiscal year of the registrant exceeds $4,000,000, the end of the first fiscal quarter in that fiscal year, and

(3) Subsections (1) and (2) apply for the purpose of determining the net tax of a registrant for reporting periods beginning after 2012.

Regulations Amending the Public Service Body Rebate (GST/HST) Regulations

3. (1) Paragraphs 7(1)(a) to (d) of the Public Service Body Rebate (GST/HST) Regulations are replaced by the following:

(a) the threshold amount for the person’s fiscal year that includes the claim period does not exceed $1,000,000;

(b) if the person’s fiscal quarter that includes the claim period is not the first fiscal quarter in the fiscal year, the threshold amount for the fiscal quarter does not exceed $1,000,000;

(c) the purchase threshold for the fiscal year does not exceed $4,000,000; and

(d) it is reasonable to expect at the beginning of the claim period that the purchase threshold for the person’s next fiscal year will not exceed $4,000,000.

(2) Paragraphs 7(2)(a) to (c) of the Regulations are replaced by the following:

(a) if the threshold amount for a fiscal year of the person exceeds $1,000,000, the end of the first fiscal quarter in that fiscal year,

(b) if the threshold amount for the second or third fiscal quarter in a fiscal year of the person exceeds $1,000,000, the end of the first fiscal quarter in that year for which the threshold amount exceeds $1,000,000, and

(c) if the purchase threshold for a fiscal year of the person exceeds $4,000,000, the end of the first fiscal quarter in that fiscal year.

(3) Subsections (1) and (2) apply for the purpose of determining rebates under section 259 of the Act in respect of claim periods beginning after 2012.

Tax Relief for Foreign-Based Rental Vehicles Temporarily Imported by Canadian Residents

Regulations Amending the New Harmonized Value-added Tax System Regulations, No. 2

4. (1) The New Harmonized Value-added Tax System Regulations, No. 2 are amended by adding the following after section 6:

Division 1.1

Tax on Importation of Goods

Prescribed goods — paragraph 212.1(2)(a)

6.1 For the purpose of paragraph 212.1(2)(a) of the Act, goods the value of which is determined for the purposes of Division III of Part IX of the Act under section 15 of the Value of Imported Goods (GST/HST) Regulations are prescribed.

(2) Subsection (1) applies to goods imported on or after June 1, 2012.

Regulations Amending the Non-Taxable Imported Goods (GST/HST) Regulations

5. (1) Section 2 of the Non-Taxable Imported Goods (GST/HST) Regulations is amended by adding the following in alphabetical order:

“qualifying vehicle” means a vehicle (other than a racing car described in heading No. 87.03 of the List of Tariff Provisions set out in the schedule to the Customs Tariff) registered under the laws of a foreign jurisdiction relating to the registration of motor vehicles that

(a) is described in any of heading No. 87.02, subheading Nos. 8703.21 to 8703.90, 8704.21, 8704.31, 8704.90 and 8711.20 to 8711.90 and tariff item Nos. 8716.39.30 and 8716.39.90 of that List,

(b) is described in subheading No. 8704.22 or 8704.32 of that List and has a gross vehicle weight rating (as defined in subsection 2(1) of the Motor Vehicle Safety Regulations) not exceeding 10 tonnes, or

(c) is described in tariff item No. 8716.10.00 of that List and is a vehicle for camping. (véhicule admissible)

(2) Subsection (1) comes into force, or is deemed to have come into force, on June 1, 2012.

6. (1) Section 3 of the Regulations is amended by striking out “and” at the end of paragraph (k), by adding “and” at the end of paragraph (l) and by adding the following after paragraph (l):

(m) a qualifying vehicle that is imported temporarily by an individual resident in Canada and not accounted for as a commercial good (as defined in subsection 212.1(1) of the Act) under section 32 of the Customs Act if

(i) the qualifying vehicle was last supplied in the course of a vehicle rental business to the individual by way of lease, licence or similar arrangement under which continuous possession or use of the qualifying vehicle is provided for a period of less than 180 days,

(ii) immediately before the importation, the individual was outside Canada for an uninterrupted period of at least 48 hours, and

(iii) the qualifying vehicle is exported within 30 days after the importation.

(2) Subsection (1) applies to qualifying vehicles imported on or after June 1, 2012.

Regulations Amending the Value of Imported Goods (GST/HST) Regulations

7. (1) Subsection 2(1) of the Value of Imported Goods (GST/HST) Regulations is amended by adding the following in alphabetical order:

“qualifying vehicle” has the same meaning as in section 2 of the Non-Taxable Imported Goods (GST/HST) Regulations; (véhicule admissible)

(2) Subsection (1) comes into force, or is deemed to have come into force, on June 1, 2012.

8. (1) Subsection 2(2) of the Regulations is replaced by the following:

(2) For the purposes of these Regulations, the number of months or weeks in a period is the number of months or weeks, as the case may be, included, in whole or in part, in the period, the first day of the first such month or week, as the case may be, being the first day of the period.

(2) Subsection (1) comes into force, or is deemed to have come into force, on June 1, 2012.

9. (1) The Regulations are amended by adding the following after section 14:

15. For the purpose of subsection 215(2) of the Act, the value of a qualifying vehicle that is imported temporarily by an individual resident in Canada, not accounted for as a commercial good (as defined in subsection 212.1(1) of the Act) under section 32 of the Customs Act and exported within 30 days after the importation and that was last supplied in the course of a vehicle rental business to the individual by way of lease, licence or similar arrangement under which continuous possession or use of the qualifying vehicle is provided for a period of less than 180 days is determined by the formula

(A × B) + C

where

A   is

(a) if the qualifying vehicle is described in any of subheading Nos. 8703.21 to 8703.90 and 8711.20 to 8711.90 of the List of Tariff Provisions set out in the schedule to the Customs Tariff,

(i) in the case of a truck, sport utility vehicle, minivan or van, $300,

(ii) in the case of a motorhome or similar vehicle, $1,000, and

(iii) in any other case, $200, and

(b) in any other case, $300;

B   is the number of weeks during which the qualifying vehicle remains in Canada; and

C   is the remaining duties payable in respect of the qualifying vehicle.

(2) Subsection (1) applies to qualifying vehicles imported on or after June 1, 2012.