Annex 2 - Notices of Ways and Means Motions and Draft Amendments to Various GST/HST Regulations

NOTICE OF WAYS AND MEANS MOTION TO AMEND THE INCOME TAX ACT AND OTHER TAX LEGISLATION

That it is expedient to amend the Income Tax Act and other tax legislation as follows:

Adoption Expense Tax Credit

1. (1) Paragraph (a) of the description of B in subsection 118.01(2) of the Income Tax Act is replaced by the following:

(a) $15,000, and

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

(3) Subsection 117.1(1) of the Act does not apply in respect of subsection 118.01(2) of the Act for the 2014 taxation year.

Medical Expense Tax Credit

2. (1) The portion of paragraph 118.2(2)(l) of the Act before subparagraph (i) is replaced by the following:

(l) on behalf of the patient who is blind or profoundly deaf or has severe autism, severe diabetes, severe epilepsy or a severe and prolonged impairment that markedly restricts the use of the patient's arms or legs,

(2) Subsection 118.2(2) of the Act is amended by adding the following after paragraph (l.91):

(l.92) as remuneration for the design of an individualized therapy plan for the patient because of the patient's severe and prolonged impairment, if

(i) because of the patient's impairment, an amount would be, if this Act were read without reference to paragraph 118.3(1)(c), deductible under section 118.3 in computing a taxpayer's tax payable under this Part for the taxation year in which the remuneration is paid,

(ii) the plan is required to access public funding for specialized therapy or is prescribed by

(A) a medical doctor or a psychologist, in the case of mental impairment, or

(B) a medical doctor or an occupational therapist, in the case of a physical impairment,

(iii) the therapy set out in the plan is prescribed by, and, if undertaken, administered under the general supervision of,

(A) a medical doctor or a psychologist, in the case of mental impairment, or

(B) a medical doctor or an occupational therapist, in the case of a physical impairment, and

(iv) the payment is made to a person ordinarily engaged in a business that includes the design of such plans for individuals who are not related to the payee;

(3) Subsections (1) and (2) apply in respect of expenses incurred after 2013.

Search and Rescue Volunteers Tax Credit

3. (1) Subsection 81(4) of the Act is amended by replacing the portion after subparagraph (b)(ii) with the following:

there shall not be included in computing the individual's income derived from the performance of those duties the lesser of $1,000 and the total of those amounts, unless the individual makes a claim under section 118.06 or 118.07 for the year.

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

4. (1) Subsections 118.06(1) and (2) of the Act are replaced by the following:

118.06 (1) In this section and section 118.07, "eligible volunteer firefighting services" means services provided by an individual in the individual's capacity as a volunteer firefighter to a fire department that consist primarily of responding to and being on call for firefighting and related emergency calls, attending meetings held by the fire department and participating in required training related to the prevention or suppression of fires, but does not include services provided to a particular fire department if the individual provides firefighting services to the department otherwise than as a volunteer.

(2) For the purpose of computing the tax payable under this Part for a taxation year by an individual, there may be deducted the amount determined by multiplying $3,000 by the appropriate percentage for the taxation year if the individual

(a) performs in the year not less than 200 hours of service each of which is an hour of

(i) eligible volunteer firefighting service for a fire department, or

(ii) eligible search and rescue volunteer service for an eligible search and rescue organization; and

(b) provides the certificates referred to in subsections (3) and 118.07(3) as and when requested by the Minister.

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

5. (1) The Act is amended by adding the following after section 118.06:

118.07 (1) The following definitions apply in this section and section 118.06.

"eligible search and rescue organization" means a search and rescue organization

(a) that is a member of the Search and Rescue Volunteer Association of Canada, the Civil Air Search and Rescue Association, or the Canadian Coast Guard Auxiliary; or

(b) whose status as a search and rescue organization is recognized by a provincial, municipal or public authority.

"eligible search and rescue volunteer services" means services, other than eligible volunteer firefighting services, provided by an individual in the individual's capacity as a volunteer to an eligible search and rescue organization that consist primarily of responding to and being on call for search and rescue and related emergency calls, attending meetings held by the organization and participating in required training related to search and rescue services, but does not include services provided to an organization if the individual provides search and rescue services to the organization otherwise than as a volunteer.

(a) performs in the year not less than 200 hours of service each of which is an hour of

(i) eligible search and rescue volunteer service for an eligible search and rescue organization, or

(ii) eligible volunteer firefighting services for a fire department;

(b) provides the certificates referred to in subsections (3) and 118.06(3) as and when requested by the Minister; and

(3) If the Minister so demands, an individual making a claim under this section in respect of a taxation year shall provide to the Minister a written certificate from the team president, or other individual who fulfils a similar role, of each eligible search and rescue organization to which the individual provided eligible search and rescue volunteer services for the year, attesting to the number of hours of eligible search and rescue volunteer services performed in the year by the individual for the particular organization.

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

6. (1) Paragraph 118.3(2)(d), the description of C in subsection 118.61(1), paragraph 118.61(2)(b), paragraph (a) and subparagraph (b)(ii) of the description of C in section 118.8, the description of B in paragraph 118.81(a), sections 118.92 and 118.94, paragraph 127.531(a) and clause 128(2)(e)(iii)(A) of the Act are amended to add references to section 118.07.

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

Extension of the Mineral Exploration Tax Credit for Flow-Through Share Investors

7. (1) Paragraph (a) of the definition "flow-through mining expenditure" in subsection 127(9) of the Act is replaced by the following:

(a) that is a Canadian exploration expense incurred by a corporation after March 2014 and before 2016 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2016) 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),

(2) Paragraphs (c) and (d) of the definition "flow-through mining expenditure" in subsection 127(9) of the Act are replaced by 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 2014 and before April 2015, 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 2014 and before April 2015;

(3) Subsections (1) and (2) apply to expenses renounced under a flow-through share agreement entered into after March 2014.

Farming and Fishing Businesses

8. (1) Section 248 of the Act is amended by adding the following after subsection (28):

(29) For the purposes of this Act, if at any time a person or partnership carries on a farming business and a fishing business,

(a) a property used at that time principally in a combination of the activities of the farming business and the fishing business is deemed to be used at that time

(i) principally in the course of carrying on the farming business, and

(ii) principally in the course of carrying on the fishing business; and

(b) in the case of a corporation or partnership,

(i) a property used at that time principally in the course of carrying on the farming business is deemed to also be used at that time principally in the course of carrying on the fishing business, and

(ii) a property used at that time principally in the course of carrying on the fishing business is deemed to also be used at that time principally in the course of carrying on the farming business.

(2) Subsection (1) applies to dispositions and transfers of property that occur after 2013.

Tax Deferral for Farmers

9. (1) The definition "breeding animals" in subsection 80.3(1) of the Act is replaced by the following:

"breeding animals" means deer, elk and other similar grazing ungulates, bovine cattle, bison, goats, sheep, and horses, that are over 12 months of age and are kept for breeding;

(2) Subsection 80.3(1) of the Act is amended by adding the following in alphabetical order:

"breeding bees" means bees that are not used principally to pollinate plants in greenhouses and larvae of such bees;

"breeding bee stock", of a taxpayer at any time, means a reasonable estimate of the quantity of a taxpayer's breeding bees held at that time in the course of carrying on a farming business using a unit of measurement that is accepted as an industry standard;

(3) Section 80.3 of the Act is amended by adding the following after subsection (4):

(4.1) If in a taxation year a taxpayer carries on a farming business in a region that is at any time in the year a prescribed drought region or a prescribed region of flood or excessive moisture and the taxpayer's breeding bee stock at the end of the year in respect of the business does not exceed 85% of the taxpayer's breeding bee stock at the beginning of the year in respect of the business, there may be deducted in computing the taxpayer's income from the business for the year the amount that the taxpayer claims, not exceeding the amount, if any, determined by the formula

(A – B) × C

where

A is the amount by which

(a) the total of all amounts included in computing the taxpayer's income for the year from the business in respect of the sale of breeding bees in the year

exceeds

(b) the total of all amounts deducted under paragraph 20(1)(n) in computing the taxpayer's income from the business for the year in respect of an amount referred to in paragraph (a) of this description;

B is the total of all amounts deducted in computing the taxpayer's income from the business for the year in respect of the acquisition of breeding bees; and

C is

(a) 30% where the taxpayer's breeding bee stock in respect of the business at the end of the year exceeds 70% of the taxpayer's breeding bee stock in respect of the business at the beginning of the year, and

(b) 90% where the taxpayer's breeding bee stock in respect of the business at the end of the year does not exceed 70% of the taxpayer's breeding bee stock in respect of the business at the beginning of the year.

(4) The portion of subsection 80.3(5) of the Act before paragraph (b) is replaced by the following:

(5) An amount deducted under subsection (4) or (4.1) in computing the income of a taxpayer for a particular taxation year from a farming business carried on in a region prescribed under those subsections may, to the extent that the taxpayer so elects, be included in computing the taxpayer's income from the business for a taxation year ending after the particular taxation year, and is, except to the extent that the amount has been included under this subsection in computing the taxpayer's income from the business for a preceding taxation year after the particular year, deemed to be income of the taxpayer from the business for the taxation year of the taxpayer that is the earliest of

(a) the first taxation year beginning after the end of the period or series of continuous periods, as the case may be, for which the region is prescribed under those subsections,

(5) The portion of subsection 80.3(6) of the Act before paragraph (a) is replaced by the following:

(6) Subsections (2), (4) and (4.1) do not apply to a taxpayer in respect of a farming business for a taxation year

(6) Section 80.3 of the Act is amended by adding the following after subsection (6):

(7) In applying subsection (4.1) in respect of a taxation year, the unit of measurement used for estimating the quantity of a taxpayer's breeding bee stock held in the course of carrying on a farming business at the end of the year is to be the same as that used for the beginning of the year.

(7) Subsections (1) to (6) apply to the 2014 and subsequent taxation years.

Amateur Athlete Trusts

10. The Act is modified in accordance with the proposals relating to Amateur Athlete Trusts described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

GST/HST Credit Administration

11. (1) The portion of subsection 122.5(3) of the Act before the formula is replaced by the following:

(3) An eligible individual in relation to a month specified for a taxation year who files a return of income for the taxation year is deemed to have paid during the specified month on account of their tax payable under this Part for the taxation year an amount equal to ¼ of the amount, if any, determined by the formula

(2) Subsection 122.5(5) of the Act is replaced by the following:

(5) If an individual is a qualified relation of another individual in relation to a month specified for a taxation year and both those individuals would be, but for this subsection, eligible individuals in relation to the specified month, only the individual that the Minister designates is the eligible individual in relation to the specified month.

(3) Subsections (1) and (2) apply to the 2014 and subsequent taxation years.

12. (1) Subsection 152(1.2) of the Act is amended by striking out "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) where the Minister determines the amount deemed by subsection 122.5(3) to have been paid by an individual for a taxation year to be nil, subsection (2) does not apply to the determination unless the individual requests a notice of determination from the Minister.

(2) Subsection (1) applies to the 2014 and subsequent taxation years.

Tax on Split Income

13. (1) Subparagraph (b)(ii) of the definition "split income" in section 120.4 of the Act is replaced by the following:

(ii) can reasonably be considered to be income derived

(A) from the provision of property or services by a partnership or trust to, or in support of, a business carried on by

(I) a person who is related to the individual at any time in the year,

(II) a corporation of which a person who is related to the individual is a specified shareholder at any time in the year, or

(III) a professional corporation of which a person related to the individual is a shareholder at any time in the year, or

(B) from a source that is a business or from the rental of property, if a person who is related to the individual at any time in the year

(I) is actively engaged on a regular basis in the activity of the partnership, in respect of which paragraph 96(1)(f) applies, of earning income from a business or the rental of property, or

(II) has an interest in the partnership directly or indirectly through another partnership, or

(2) Subparagraph (c)(ii) of the definition "split income" in section 120.4 of the Act is amended by striking out "or" at the end of clause (B), by adding "or" at the end of clause (C) and by adding the following after clause (C):

(D) to be income derived from a source that is a business or from the rental of property, if a person who is related to the individual at any time in the year is actively engaged on a regular basis in the activity of the trust of earning income from a business or the rental of property.

(3) Subsections (1) and (2) apply to the 2014 and subsequent taxation years.

Graduated Rate Taxation of Trusts and Estates

14. (1) Clause 80.04(6)(a)(ii)(B) of the Act is replaced by the following:

(B) if the debtor is an individual (other than a trust) or a graduated rate estate, the day that is one year after the taxpayer's filing-due date for the year;

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

15. (1) Subsection 104(23) of the Act is amended by adding "and" at the end of paragraph (c), by striking out "and" at the end of paragraph (d) and by repealing paragraph (e).

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

16. (1) The portion of subsection 122(1) of the Act before paragraph (a) is replaced by the following:

122. (1) Notwithstanding section 117, the tax payable under this Part for a taxation year by a trust (other than a graduated rate estate) is the total of

(2) Subsection 122(2) of the Act is repealed.

(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.

17. (1) Subsection 127(7) of the Act is replaced by the following:

(7) If, in a particular taxation year of a taxpayer who is a beneficiary under a trust that is a graduated rate estate or that is deemed to be in existence by section 143, an amount is determined in respect of the trust under paragraph (a), (a.1), (a.4), (a.5), (b) or (e.1) of the definition "investment tax credit" in subsection (9) for its taxation year that ends in that particular taxation year, the trust may, in its return of income for its taxation year that ends in that particular taxation year, designate the portion of that amount that can, having regard to all the circumstances including the terms and conditions of the trust, reasonably be considered to be attributable to the taxpayer and was not designated by the trust in respect of any other beneficiary of the trust, and that portion is to be added in computing the investment tax credit of the taxpayer at the end of that particular taxation year and is to be deducted in computing the investment tax credit of the trust at the end of its taxation year that ends in that particular taxation year.

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

18. (1) The description of C in section 127.51 of the Act is replaced by the following:

C is

(a) $40,000, in the case of an individual (other than a trust) or a graduated rate estate; and

(b) nil, in any other case; and

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

19. (1) Section 127.53 of the Act is repealed.

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

20. (1) The portion of subsection 152(4.2) of the Act before paragraph (a) is replaced by the following:

(4.2) Notwithstanding subsections (4), (4.1) and (5), for the purpose of determining, at any time after the end of the normal reassessment period of a taxpayer who is an individual (other than a trust) or a graduated rate estate in respect of a taxation year, the amount of any refund to which the taxpayer is entitled at that time for the year, or a reduction of an amount payable under this Part by the taxpayer for the year, the Minister may, if the taxpayer makes an application for that determination on or before the day that is ten calendar years after the end of that taxation year,

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

21. (1) Paragraph 164(1.5)(a) of the Act is replaced by the following:

(a) if the taxpayer is an individual (other than a trust) or a graduated rate estate for the year and the taxpayer's return of income under this Part for the year was filed on or before the day that is ten calendar years after the end of the taxation year;

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

22. (1) The portion of paragraph 165(1)(a) of the Act before subparagraph (i) is replaced by the following:

(a) where the assessment is in respect of the taxpayer for a taxation year and the taxpayer is an individual (other than a trust) or a graduated rate estate for the year, on or before the later of

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

23. (1) The portion of paragraph (d) of the definition "designated beneficiary" in subsection 210(1) of the Act before subparagraph (i) is replaced by the following:

(d) another trust (referred to in this paragraph as the "other trust") that is not a graduated rate estate, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time

(2) Clause (d)(iii)(A) of the definition "designated beneficiary" in subsection 210(1) of the Act is replaced by the following:

(A) a graduated rate estate,

(3) Paragraph 210(2)(a) of the Act is replaced by the following:

(a) a graduated rate estate;

(4) Subsections (1) to (3) apply to the 2016 and subsequent taxation years.

24. (1) Paragraph (a) of the definition "personal trust" in subsection 248(1) of the Act is replaced by the following:

(a) a graduated rate estate, or

(2) The portion of paragraph (b) of the definition "personal trust" in subsection 248(1) of the Act before subparagraph (i) is replaced by the following:

(b) a trust in which no capital interest or income interest was acquired for consideration payable directly or indirectly to

(3) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

"graduated rate estate", at any time, means an estate that arose on and as a consequence of a death, if that time is no more than 36 months after the death and at that time the estate is a testamentary trust;

(4) The portion of subsection 248(25.1) of the Act before paragraph (a) is replaced by the following:

(25.1) If, at any time, a particular trust transfers property to another trust (other than a trust governed by a registered retirement savings plan or by a registered retirement income fund) in circumstances to which paragraph (f) of the definition "disposition" in subsection (1) applies, without affecting the personal liabilities under this Act of the trustees of either trust or the application of subsection 104(5.8),

(5) Subsections (1), (2) and (4) apply to the 2016 and subsequent taxation years.

(6) Subsection (3) comes into force on December 31, 2015.

25. (1) Paragraphs 249(1)(b) and (c) of the Act are replaced by the following:

(b) in the case of a graduated rate estate, the period for which the accounts of the estate are made up for purposes of assessment under this Act; and

(2) Section 249 of the Act is amended by adding the following after subsection (4):

(4.1) For a particular trust that is created by will or that is an estate that arose on and as a consequence of a death,

(a) its taxation year that otherwise includes a particular time is deemed to end immediately before the particular time if

(i) in the case of a trust created by will, the particular time is the first time after 2015, or

(ii) in the case of an estate, the particular time is the first time after 2015 at which the estate is not a graduated rate estate;

(b) a new taxation year of the particular trust is deemed to begin at the particular time; and

(c) for the purpose of determining the particular trust's fiscal period after the particular time, it is deemed not to have established a fiscal period before that time.

(3) Subsection (1) applies to the 2016 and subsequent taxation years.

(4) Subsection (2) comes into force on December 31, 2015.

26. (1) The portion of paragraph 249.1(1)(b) of the Act before clause (ii)(B) is replaced by the following:

(b) in the case of

(i) an individual (other than an individual to whom section 149 or 149.1 applies or a trust),

(i.1) a trust (other than a mutual fund trust if the fiscal period is one to which paragraph 132.11(1)(c) applies or a graduated rate estate),

(ii) a partnership of which

(A) an individual (other than an individual to whom section 149 or 149.1 applies or a graduated rate estate),

(2) Subsection (1) applies to the 2016 and subsequent taxation years.

27. The Act and the Income Tax Regulations are further modified to make such amendments as are necessary to give effect to the proposals relating to Graduated Rate Taxation of Trusts and Estates described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Non-Resident Trusts

28. (1) The definition "connected contributor" in subsection 94(1) of the Act is replaced by the following:

"connected contributor", to a trust at a particular time, means a contributor to the trust at the particular time, other than a person all of whose contributions to the trust made at or before the particular time were made at a non-resident time of the person.

(2) The definition "resident contributor" in subsection 94(1) of the Act is replaced by the following:

"resident contributor", to a trust at any time, means a person that is, at that time, resident in Canada and a contributor to the trust, but – if the trust is an inter vivos trust that was created before 1960 by a person who was non-resident when the trust was created – does not include an individual (other than a trust) who has not, after 1959, made a contribution to the trust.

(3) Subparagraph 94(11)(b)(ii) of the Act is replaced by the following:

(ii) would be deemed to be resident in Canada immediately before that time because of paragraph (3)(a) if this section, as it read in its application to 2013 taxation years, were read without reference to paragraph (a) of the definition "connected contributor" in subsection (1) and paragraph (a) of the definition "resident contributor" in that subsection,

(4) Subsections (1) to (3) apply to taxation years that end on or after Budget Day, except that those subsections do not apply in respect of a trust to taxation years that end before 2015 if the following conditions are satisfied:

(a) no contributions are made to the trust on or after Budget Day and before 2015; and

(b) if the trust were to have a particular taxation year that ended after 2013 and before Budget Day,

(i) the trust would be non-resident for the purpose of computing its income for the particular year, and

(ii) if the definitions "resident contributor" and "connected contributor" in subsection 94(1) of the Act were read for the particular year without reference to their paragraphs (a), the trust would be resident in Canada for the purpose of computing its income for the particular year.

29. (1) The portion of subsection 94.2(1) of the Act before paragraph (a) is replaced by the following:

94.2 (1) Subsection (2) applies to a beneficiary under a trust, and to any particular person of which any such beneficiary is a controlled foreign affiliate, at any time if

(2) Subsection (1) applies to taxation years that end on or after Budget Day, except that it does not apply in respect of a trust to taxation years that end before 2015 if the following conditions are satisfied:

(a) no contributions are made to the trust on or after Budget Day and before 2015; and

(b) if the trust were to have a particular taxation year that ended after 2013 and before Budget Day,

(i) the trust would be non-resident for the purpose of computing its income for the particular year, and

Donations of Ecologically Sensitive Land

30. (1) The portion of subparagraph 110.1(1)(d)(iii) of the Act before clause (A) is replaced by the following:

(iii) the gift was made by the corporation in the year or in any of the ten preceding taxation years to

(2) Subsection (1) applies to gifts made on or after Budget Day.

31. (1) The portion of paragraph (c) of the definition "total ecological gifts" in subsection 118.1(1) of the Act before subparagraph (i) is replaced by the following:

(2) Subsection (1) applies to gifts made on or after Budget Day.

Estate Donations

32. Subparagraphs 38(a.1)(ii) and (a.2)(ii) and 39(1)(a)(i.1) and section 118.1 of the Act are modified in accordance with the proposals relating to Estate Donations described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Donations of Certified Cultural Property

33. (1) Paragraph 248(37)(c) of the Act is replaced by the following:

(c) of an object referred to in subparagraph 39(1)(a)(i.1), other than an object acquired under a gifting arrangement (as defined in subsection 237.1(1)) that is a tax shelter;

(2) Subsection (1) applies to gifts made on or after Budget Day.

State Supporters of Terrorism

34. (1) Subsection 149.1(4.1) of the Act is amended by striking out "and" at the end of paragraph (d), by adding "and" at the end of paragraph (e) and by adding the following after paragraph (e):

(f) of a registered charity, if it accepts a gift from a foreign state, as defined in section 2 of the State Immunity Act, that is set out on the list referred to in subsection 6.1(2) of that Act.

(2) Subsection 149.1(4.2) of 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) if the association accepts a gift from a foreign state, as defined in section 2 of the State Immunity Act, that is set out on the list referred to in subsection 6.1(2) of that Act.

(3) Subsection 149.1(25) of 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 paragraph (b):

(c) the charity or association has accepted a gift from a foreign state, as defined in section 2 of the State Immunity Act, that is set out on the list referred to in subsection 6.1(2) of that Act.

(4) Subsections (1) to (3) apply in respect of gifts accepted on or after Budget Day.

Captive Insurance

35. (1) Subsection 95(2) of the Act is amended by adding the following after paragraph (a.2):

(a.21) for the purposes of paragraph (a.2), one or more risks insured by a foreign affiliate of a taxpayer (in this paragraph referred to as the "foreign policy pool") that, if this Act were read without reference to this paragraph, would not be risks in respect of a person, property or business described in any of subparagraphs (a.2)(i) to (iii) are deemed to be risks in respect of a person resident in Canada if

(i) the affiliate, or a person or partnership that does not deal at arm's length with the affiliate, enters into one or more agreements or arrangements in respect of the foreign policy pool,

(ii) as a result of those agreements or arrangements, the affiliate's risk of loss or opportunity for gain or profit in respect of the foreign policy pool, in combination with its risk of loss or opportunity for gain in respect of the agreements or arrangements, can reasonably be considered to be — or could reasonably be considered to be if the affiliate had entered into the agreements or arrangements entered into by the person or partnership — determined, in whole or in part, by reference to one or more criteria in respect of one or more risks insured by another person or partnership (in this paragraph referred to as the "tracked policy pool"), which criteria are:

(A) the fair market value of the tracked policy pool,

(B) the revenue, income, loss or cash flow from the tracked policy pool, or

(iii) 10% or more of the tracked policy pool is comprised of risks in respect of a person, property or business described in any of subparagraphs (a.2)(i) to (iii);

(a.22) if the conditions in paragraph (a.21) are satisfied in respect of a foreign affiliate of a taxpayer, or a foreign affiliate of another taxpayer with which the taxpayer does not deal at arm's length, and a particular foreign affiliate of the taxpayer, or a partnership of which the particular affiliate is a member, has entered into one or more agreements or arrangements described in that paragraph,

(i) activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate to the extent that those activities can reasonably be considered to be performed for the purpose of obtaining the result described in subparagraph (a.21)(ii), and

(ii) any income of the particular affiliate from the business (including income that pertains to or is incident to the business) is deemed to be income from a business other than an active business;

(2) Subsection (1) applies to taxation years of a taxpayer that begin on or after Budget Day.

Offshore Regulated Banks

36. (1) Section 95 of the Act is amended by adding the following after subsection (2.1):

(2.11) For the purposes of the definition "investment business" in subsection (1), a taxpayer or a foreign affiliate of the taxpayer, as the case may be, is deemed not to have established that the conditions in subparagraph (a)(i) of that definition have been satisfied unless

(a) the taxpayer is

(i) a particular corporation that is a bank listed in Schedule I to the Bank Act, a trust company, a credit union, an insurance corporation or a trader or dealer in securities or commodities resident in Canada, the business activities of which are subject by law to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province,

(ii) a subsidiary wholly-owned corporation of a particular corporation described in subparagraph (i), or

(iii) a corporation of which a particular corporation described in subparagraph (i) is a subsidiary wholly-owned corporation and that is subject by law to the supervision of the same regulating authority as the particular corporation; and

(b) either

(i) the particular corporation described in subparagraph (a)(i) is a bank, trust company or insurance corporation that has, or is deemed for certain purposes to have, $2 billion or more of equity

(A) in the case of a bank, under the Bank Act,

(B) in the case of a trust company, under the Trust and Loan Companies Act, or

(ii) more than 50% of the total of all amounts each of which is an amount of taxable capital employed in Canada (within the meaning assigned by Part I.3) of the taxpayer — or a corporation resident in Canada that is related to the taxpayer — for the year is attributable to a business carried on in Canada, the activities of which are subject to the supervision of a regulating authority such as the Superintendent of Financial Institutions or a similar authority of a province.

(2) Subsection (1) applies to taxation years of a taxpayer that begin after 2014.

Back-to-Back Loans

37. (1) The portion of subsection 18(5) of the Act before the definition "beneficiary" is replaced by the following:

(5) Notwithstanding any other provision of this Act (other than subsection (5.1)), in this subsection and subsections (4) to (6.1)

(2) Subsection 18(6) of the Act is replaced by the following:

(6) Subsection (6.1) applies at any time in respect of a taxpayer if at that time

(a) the taxpayer has a particular amount outstanding as or on account of a particular debt or other obligation to pay an amount to a person or partnership (in this subsection and subsection (6.1) referred to as the "intermediary");

(b) as part of a transaction, or series of transactions or events, that includes the taxpayer becoming obligated to pay the particular amount, the intermediary, or a person or partnership that does not deal at arm's length with the intermediary,

(i) has an interest in, or for civil law any right in, property that secures payment of the particular amount which interest or right was provided directly or indirectly by a non-resident person described in subparagraph (a)(i) of the definition "outstanding debts to specified non-residents" in subsection (5), or

(ii) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a non-resident person described in subparagraph (a)(i) of the definition "outstanding debts to specified non-residents" in subsection (5)

(A) for which recourse is limited, either immediately or in the future and either absolutely or contingently, to the particular debt or other obligation, or

(B) that was entered into on condition that the particular debt or other obligation also be entered into; and

(c) the intermediary is not a person described in subparagraph (a)(i) of the definition "outstanding debts to specified non-residents" in subsection (5).

(6.1) If this subsection applies at any time in respect of a taxpayer, then for the purposes of applying subsections (4) and (5),

(a) the portion of the particular amount, at that time, referred to in paragraph (6)(a) that is equal to the lesser of the following amounts is deemed to be an amount outstanding as or on account of a debt or other obligation to pay an amount to a specified non-resident shareholder or a specified non-resident beneficiary, as the case may be, of the taxpayer and not to the intermediary:

(i) the total of all amounts each of which is at that time

(A) if the condition described in subparagraph (6)(b)(i) is satisfied, the fair market value of a property described in that subparagraph, and

(B) if either of the conditions described in subparagraph (6)(b)(ii) are satisfied, an amount outstanding described in that subparagraph, and

(ii) the particular amount; and

(b) the proportion of the interest paid or payable by the taxpayer, in respect of a period throughout which paragraph (a) applies, on the particular debt or obligation referred to in paragraph (6)(a) that the average of all amounts, each of which is an amount that is deemed by paragraph (a) to be outstanding at a time during the period is of the average of all amounts each of which is the particular amount outstanding at a time during the period is deemed to be paid or payable by the taxpayer for the period on the amount that is deemed by paragraph (a) to be outstanding.

(3) The portion of subsection 18(7) of the Act before paragraph (a) is replaced by the following:

(7) For the purposes of this subsection, paragraph (4)(a), subsections (5) to (6.1), and paragraph 12(1)(l.1), each member of a partnership at any time is deemed at that time

(4) Subsections (1) to (3) apply to taxation years that begin after 2014.

38. (1) Section 212 of the Act is amended by adding the following after subsection (3):

(3.1) Subsections (3.2) and (3.3) apply at any time in respect of a taxpayer if

(a) the taxpayer pays or credits a particular amount at that time on account or in lieu of payment of, or in satisfaction of, interest in respect of a particular debt or other obligation to pay an amount to a person or partnership (in this subsection referred to as the "intermediary");

(b) at any time in the period during which the interest accrued (in subsections (3.2) and (3.3) referred to as the "relevant period"), as part of a transaction, or series of transactions or events, that includes the taxpayer becoming obligated to pay an amount in respect of the particular debt or other obligation, the intermediary, or any person or partnership that does not deal at arm's length with the intermediary,

(i) has an interest in, or for civil law any right in, property that secures payment of the particular debt or other obligation which interest or right was provided directly or indirectly by a non-resident person, or

(ii) has an amount outstanding as or on account of a debt or other obligation to pay an amount to a non-resident person

(A) for which recourse is limited, either immediately or in the future and either absolutely or contingently, to the particular debt or other obligation, or

(B) that was entered into on condition that the particular debt or other obligation also be entered into; and

(c) if the particular amount were paid or credited to the non-resident person rather than the intermediary, the tax that would be payable under this Part is greater than the tax payable under this Part (determined without reference to this subsection and subsection (3.2)) in respect of the particular amount.

(3.2) If this subsection applies at any time in respect of a taxpayer, for the purposes of paragraph (1)(b), the taxpayer is deemed, at that time, to pay interest to a non-resident person referred to in paragraph (3.1)(b) the amount of which is determined by the formula

A × B/C × (D – E)/D

where

A is the particular amount referred to in paragraph (3.1)(a);

B is the average of all amounts each of which is the lesser of

(i) the amount of the particular debt or other obligation referred to in paragraph (3.1)(a) outstanding at a particular time in the relevant period; and

(ii) the total of all amounts each of which is at that particular time

(A) if, in respect of the non-resident person, the condition in subparagraph (3.1)(b)(i) is satisfied at that particular time, the fair market value of the property described in that subparagraph,

(B) if, in respect of the non-resident person, the condition in clause (3.1)(b)(ii)(A) or (B) is satisfied at that particular time, the amount outstanding described in subparagraph (3.1)(b)(ii), and

C is the average of all amounts each of which is the amount of the particular debt or other obligation outstanding at a time in the relevant period;

D is the rate of tax that would be imposed under this Part on the particular amount if the particular amount were paid by the taxpayer to the non-resident person; and

E is the rate of tax imposed under this Part on the particular amount.

(3.3) If subsection (3.2) applies to deem a taxpayer to pay interest to more than one non-resident person referred to in paragraph (3.1)(b) in respect of a particular debt or other obligation and the total of all amounts determined (without reference to this subsection) for B in the formula in subsection (3.2) in respect of the particular debt or other obligation exceeds the average of all amounts each of which is the amount of the particular debt or other obligation outstanding at a time in the relevant period, then the taxpayer may reduce the amount determined for B in respect of one or more non-resident persons by one or more amounts designated by the taxpayer, as is reasonable in the circumstances, provided that the total of all the designated amounts is not more than that excess.

(2) Subsection (1) applies to amounts paid or credited after 2014.

NOTICE OF WAYS AND MEANS MOTION TO AMEND THE EXCISE TAX ACT

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

Improving the Application of the GST/HST to the Health Care Sector

1. (1) The portion of the definition "practitioner" in section 1 of Part II of Schedule V to the Excise Tax Act before paragraph (b) is replaced by the following:

"practitioner", in respect of a supply of optometric, chiropractic, physiotherapy, chiropodic, podiatric, osteopathic, audiological, speech-language pathology, occupational therapy, psychological, midwifery, dietetic, acupuncture or naturopathic services, means a person who

(a) practises the profession of optometry, chiropractic, physiotherapy, chiropody, podiatry, osteopathy, audiology, speech-language pathology, occupational therapy, psychology, midwifery, dietetics, acupuncture or naturopathy as a naturopathic doctor, as the case may be,

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

2. (1) Section 7 of Part II of Schedule V to the Act is amended by striking out "and" at the end of paragraph (j) and by adding the following after paragraph (k):

(l) acupuncture services; and

(m) naturopathic services.

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

3. (1) The portion of section 14 of Part II of Schedule V to the Act before paragraph (b) is replaced by the following:

14. A supply (other than a zero-rated supply or a prescribed supply) of a training service, or of a service of designing a training plan, if

(a) the training is specially designed to assist individuals with a disorder or disability in coping with the effects of the disorder or disability or to alleviate or eliminate those effects and is given or, in the case of a service of designing a training plan, is to be given to a particular individual with the disorder or disability or to another individual who provides personal care or supervision to the particular individual otherwise than in a professional capacity; and

(2) Subparagraphs 14(b)(i) and (ii) of Part II of Schedule V to the Act are replaced by the following:

(i) a person acting in the capacity of a practitioner, medical practitioner, social worker or registered nurse, and in the course of a professional-client relationship between the person and the particular individual, has certified in writing that the training is or, in the case of a service of designing a training plan, will be an appropriate means to assist the particular individual in coping with the effects of the disorder or disability or to alleviate or eliminate those effects,

(ii) a prescribed person, or a member of a prescribed class of persons, has, subject to prescribed circumstances or conditions, certified in writing that the training is or, in the case of a service of designing a training plan, will be an appropriate means to assist the particular individual in coping with the effects of the disorder or disability or to alleviate or eliminate those effects, or

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

4. (1) The portion of section 15 of Part II of Schedule V to the Act before paragraph (a) is replaced by the following:

15. A training service or a service of designing a training plan is not included in section 14 if the training is similar to training ordinarily given to individuals who

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

5. (1) Part II of Schedule VI to the Act is amended by adding the following after section 9:

9.1 A supply of eyewear that is specially designed to treat or correct a defect of vision by electronic means, if the eyewear is supplied on the written order of a person that is entitled under the laws of a province to practise the profession of medicine or optometry for the treatment or correction of a defect of vision of a consumer who is named in the order.

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

GST/HST Election for Closely Related Persons

6. (1) Paragraph (c) of the definition "qualifying member" in subsection 156(1) of the Act is replaced by the following:

(i) the registrant has property (other than financial instruments and property having a nominal value) and has last manufactured, produced, acquired or imported all or substantially all of its property (other than financial instruments and property having a nominal value) for consumption, use or supply exclusively in the course of commercial activities of the registrant,

(ii) the registrant has no property (other than financial instruments and property having a nominal value) and has made supplies and all or substantially all of the supplies made by the registrant are taxable supplies, or

(iii) the registrant has no property (other than financial instruments and property having a nominal value) and has not made taxable supplies and it is reasonable to expect that

(A) the registrant will be making supplies throughout the next twelve months,

(B) all or substantially all of these supplies will be taxable supplies, and

(C) all or substantially all of the property (other than financial instruments and property having a nominal value) to be manufactured, produced, acquired or imported by the registrant within the next twelve months will be for consumption, use or supply exclusively in the course of commercial activities of the registrant.

(2) Subsection 156(2) of the Act is replaced by the following:

(2) For the purposes of this Part, if at any time after 2014 a person that is a specified member of a qualifying group files an election made jointly by the person and another specified member of the group, every taxable supply made between the person and the other specified member at a time when the election is in effect is deemed to have been made for no consideration.

(3) Section 156 of the Act is amended by adding the following after subsection (2):

(2.01) For the purposes of this section, if an election made under this section has been filed by any person before January 1, 2015, the election is deemed never to have been filed.

(4) Subsection 156(4) of the Act is replaced by the following:

(4) An election under subsection (2) made jointly by a particular specified member of a qualifying group and another specified member of the group and a revocation of the election by those specified members shall

(a) be made in prescribed form containing prescribed information and specify the day (in this subsection referred to as the "effective day") on which the election or revocation is to become effective; and

(b) be filed with the Minister in prescribed manner on or before

(i) the particular day that is the earlier of

(A) the day on or before which the particular specified member must file a return under Division V for the reporting period of the particular specified member that includes the effective day, and

(B) the day on or before which the other specified member must file a return under Division V for the reporting period of the other specified member that includes the effective day, or

(ii) any day after the particular day that the Minister may allow.

(5) Section 156 of the Act is amended by adding the following after subsection (4):

(5) A particular person and another person are jointly and severally, or solidarily, liable for all obligations under this Part that result upon, or as a consequence of, a failure to account for or pay as and when required under this Part an amount of net tax of the particular person or of the other person if that tax is attributable to a supply made at any time between the particular person and the other person and if

(a) an election under subsection (2) made jointly by the particular person and the other person

(i) is in effect at that time, or

(ii) ceased to be in effect before that time but the particular person and the other person are conducting themselves as if the election were in effect at that time; or

(b) the particular person and the other person purport to have jointly made an election under subsection (2) before that time and are conducting themselves as if an election under subsection (2) made jointly by the particular person and the other person were in effect at that time.

(6) Subsections (1) and (3) come into force on January 1, 2015.

(7) Subsection (2) applies to any supply made after 2014.

(8) Subsection (4) applies in respect of an election or a revocation the effective date of which is after 2014 and in respect of an election that is in effect on January 1, 2015, except that for an election that is in effect before 2015, and for a revocation of that election that is to become effective before 2016, paragraph 156(4)(b) of the Act, as enacted by subsection (4), is to be read as follows:

(b) be filed with the Minister in prescribed manner after 2014 and before January 1, 2016 or any later day that the Minister may allow.

(9) Subsection (5) applies in respect of supplies made after 2014.

Strengthening Compliance with GST/HST Registration

7. Subparagraph 179(2)(c)(i) of the Act is replaced by the following:

(i) states the consignee's name and registration number assigned under section 241, and

8. Section 241 of the Act is amended by adding the following after subsection (1.2):

(1.3) If the Minister has reason to believe that a person that is not registered under this Subdivision is required to be registered for the purposes of this Part and has failed to apply for registration under this Subdivision as and when required, the Minister may send a notice in writing (in this section referred to as a "notice of intent") to the person that the Minister proposes to register the person under subsection (1.5).

(1.4) Upon receipt of a notice of intent, a person must apply for registration under this Subdivision or establish to the satisfaction of the Minister that the person is not required to be registered for the purposes of this Part.

(1.5) If, after 60 days after the particular day on which a notice of intent was sent by the Minister to a person, the person has not applied for registration under this Subdivision and the Minister is not satisfied that the person is not required to be registered for the purposes of this Part, the Minister may register the person and, upon doing so, must assign a registration number to the person and notify the person in writing of the registration number and the effective date of the registration, which effective date is not to be earlier than 60 days after the particular day.

NOTICE OF WAYS AND MEANS MOTION TO AMEND THE EXCISE ACT, 2001 AND THE EXCISE TAX ACT

That it is expedient to amend the Excise Act, 2001 and the Excise Tax Act as follows:

Tobacco Taxation

1. (1) The portion of subsection 42(1) of the French version of the Excise Act, 2001 before paragraph (a) is replaced by the following:

42. (1) Un droit sur les produits du tabac fabriqués au Canada ou importés et sur le tabac en feuilles importé est imposé aux taux prévus à l'annexe 1 et est exigible :

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

2. (1) The portion of section 43 of the French version of the Act before paragraph (a) is replaced by the following:

43. Est imposé aux taux prévus à l'annexe 2, en plus du droit imposé en vertu de l'article 42, un droit sur les cigares qui sont fabriqués et vendus au Canada ou importés. Ce droit est exigible :

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

3. (1) The Act is amended by adding the following after section 43:

43.1 (1) In this section, "inflationary adjusted year" means 2019 and every fifth year after that year.

(2) Each rate of duty set out in sections 1 to 4 of Schedule 1 and paragraph (a) of Schedule 2 in respect of a tobacco product is to be adjusted on December 1 of a particular inflationary adjusted year so that the rate be equal to the greater of

(a) the rate determined by the formula

A × B

where

A is the rate of duty applicable to the tobacco product on November 30 of the particular inflationary adjusted year, and

B is the amount determined by the formula in subparagraph (i) or (ii), rounded to the nearest one-thousandth, or, if the amount is equidistant from two consecutive one-thousandths, rounded to the higher one-thousandth,

(i) if the particular inflationary adjusted year is 2019,

C/D

where

C is the Consumer Price Index for the 12 month period ending on September 30, 2019, and

D is the Consumer Price Index for the 12 month period that ended on September 30, 2013,

(ii) for any other particular inflationary adjusted year,

E/F

where

E is the Consumer Price Index for the 12 month period ending on September 30 of the particular inflationary adjusted year, and

F is the Consumer Price Index for the 12 month period ending on September 30 of the inflationary adjusted year that precedes the particular inflationary adjusted year; and

(b) the rate of duty referred to in the description of A in paragraph (a).

(3) The adjusted rate determined under subsection (2) is to be rounded to the nearest one-hundred-thousandth or, if the adjusted rate is equidistant from two consecutive one-hundred-thousandths, to the higher one-hundred-thousandth.

(4) In this section, the Consumer Price Index for any 12 month period is the result arrived at by

(a) aggregating the Consumer Price Index for Canada, as published by Statistics Canada under the authority of the Statistics Act, for each month in that period;

(b) dividing the aggregate obtained under paragraph (a) by twelve; and

(c) rounding the result obtained under paragraph (b) to the nearest one-thousandth or, if the result obtained is equidistant from two consecutive one-thousandths, to the higher one-thousandth.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

4. (1) Subsection 53(1) of the French version of the Act is replaced by the following:

53. (1) Un droit spécial est imposé, aux taux prévus à l'article 1 de l'annexe 3, sur le tabac fabriqué importé qui est livré à une boutique hors taxes et qui n'est pas estampillé.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

5. (1) Subsection 54(2) of the French version of the Act is replaced by the following:

(2) Un droit spécial est imposé, aux taux prévus à l'article 2 de l'annexe 3, sur le tabac du voyageur au moment de son importation.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

6. (1) Paragraphs 56(1)(a) and (b) of the French version of the Act are replaced by the following:

a) si l'exportation est effectuée conformément à l'alinéa 50(4)a) par le titulaire de licence de tabac qui a fabriqué les produits, les taux prévus à l'article 3 de l'annexe 3;

b) sinon, les taux prévus à l'article 4 de l'annexe 3.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

7. (1) The headings before section 58.1 of the Act are replaced by the following:

PART 3.1

CIGARETTE INVENTORY TAX

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

8. (1) The definitions "loose tobacco", "taxed tobacco" and "unit" in section 58.1 of the Act are repealed.

(2) Section 58.1 of the Act is amended by adding the following in alphabetical order:

"adjustment day" means

(a) the day after Budget Day; or

(b) in the case of an inflationary adjusted year, December 1 of that year.

"inflationary adjusted year" has the same meaning as in subsection 43.1(1).

"taxed cigarettes" of a person means cigarettes in respect of which duty has been imposed under section 42 before the day after Budget Day at the rate set out in paragraph 1(b) of Schedule 1, as that provision read on Budget Day, and that, at the beginning of the day after Budget Day,

(a) were owned by that person for sale in the ordinary course of a business of the person;

(b) were not held in a vending machine; and

(3) The portion of the definition "taxed cigarettes" in section 58.1 of the Act before paragraph (a), as enacted by subsection (2), is replaced by the following:

"taxed cigarettes" of a person means cigarettes in respect of which duty has been imposed under section 42 or 53 at the rate applicable on the day before an adjustment day other than the day after Budget Day, and that, at the beginning of the adjustment day,

(4) Subsections (1) and (2) are deemed to have come into force on the day after Budget Day.

(5) Subsection (3) comes into force on November 30, 2019.

9. (1) Sections 58.2 to 58.4 of the Act are replaced by the following:

58.2 (1) Subject to section 58.3, every person shall pay to Her Majesty a tax on all taxed cigarettes of the person held at the beginning of the day after Budget Day at the rate of $0.02015 per cigarette.

(2) Subject to section 58.3, every person shall pay to Her Majesty a tax on all taxed cigarettes of the person held at the beginning of December 1 of an inflationary adjusted year at a rate per cigarette equal to

(a) in the case of cigarettes in respect of which duty has been imposed under section 42, the amount determined by the formula

(A – B)/5

where

A is the rate of duty applicable under paragraph 1(b) of Schedule 1 for each five cigarettes on December 1 of the inflationary adjusted year, and

B is the rate of duty applicable under section 1 of Schedule 1 for each five cigarettes on November 30 of the inflationary adjusted year; and

(b) in the case of cigarettes in respect of which duty has been imposed under section 53, the amount determined by the formula

C – D

where

C is the rate of duty applicable under paragraph 1(a) of Schedule 3 per cigarette on December 1 of the inflationary adjusted year, and

D is the rate of duty applicable under paragraph 1(a) of Schedule 3 per cigarette on November 30 of the inflationary adjusted year.

(3) The amount determined under paragraph (2)(a) or (b) is to be rounded to the nearest one-hundred-thousandth or, if the amount is equidistant from two consecutive one-hundred-thousandths, to the higher one-hundred-thousandth.

58.3 Tax under this Part in respect of the inventory of all taxed cigarettes of a person that is held at the beginning of an adjustment day at a separate retail establishment of the person is not payable if that retail establishment holds inventory of 30,000 or fewer cigarettes.

58.4 Every person liable to pay tax under this Part shall, for the purposes of this Part, determine that person's inventory of all taxed cigarettes held at the beginning of an adjustment day.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

10. (1) Subsection 58.5(1) of the Act is replaced by the following:

58.5 (1) Every person liable to pay tax under this Part shall file a return with the Minister in the prescribed form and manner on or before,

(a) in the case of the tax imposed under subsection 58.2(1), April 30, 2014; or

(b) in any other case, the last day of the month following December of an inflationary adjusted year.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

11. (1) Subsection 58.6(1) of the Act is replaced by the following:

58.6 (1) Every person shall pay to the Receiver General the total tax payable by the person under this Part on or before

(a) in the case of the tax imposed under subsection 58.2(1), April 30, 2014; or

(b) in any other case, the last day of the month following December of an inflationary adjusted year.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

12. (1) Section 180.1 of the Act is replaced by the following:

180.1 (1) The Minister may refund to a person who has imported manufactured tobacco an amount determined in accordance with subsection (2) in respect of the tobacco if

(a) the person provides evidence satisfactory to the Minister that

(i) duty was imposed on the tobacco under section 42 at a rate set out in paragraph 1(b), 2(b) or 3(b) of Schedule 1, as those paragraphs read on Budget Day, and paid, and

(ii) the tobacco was black stock

(A) that was delivered to a duty free shop or customs bonded warehouse, or to a person for use as ships' stores in accordance with the Ships' Stores Regulations, before the day after Budget Day, or

(B) that was exported before the day after Budget Day for delivery to a foreign duty free shop or as foreign ships' stores; and

(b) the person applies to the Minister for the refund within two years after the tobacco was imported.

(2) The amount of the refund is equal to the amount by which

(a) the duty referred to in subparagraph (1)(a)(i)

exceeds

(b) the duty that would have been imposed under section 42 on the tobacco if the applicable rate of duty had been the rate set out in paragraph 1(a), 2(a) or 3(a) of Schedule 1, as those paragraphs read on Budget Day.

(2) Section 180.1 of the Act is repealed.

(3) Subsection (1) is deemed to have come into force on the day after Budget Day.

(4) Subsection (2) comes into force two years after Budget Day.

13. (1) Paragraph 216(2)(a) of the Act is replaced by the following:

(a) the total of

(i) $0.21 multiplied by the number of cigarettes to which the offence relates,

(ii) $0.21 multiplied by the number of tobacco sticks to which the offence relates,

(iii) $0.26 multiplied by the number of grams of manufactured tobacco other than cigarettes or tobacco sticks to which the offence relates, and

(iv) $0.41 multiplied by the number of cigars to which the offence relates, and

(2) Paragraph 216(2)(a) of the Act, as enacted by subsection (1), is replaced by the following:

(a) the total of

(i) in the case of cigarettes, the number of cigarettes to which the offence relates multiplied by the amount, rounded to the nearest one-hundredth, or, if the amount is equidistant from two consecutive one-hundredths, rounded to the higher one-hundredth, determined by the formula

(A/5) × 2

where

A is the rate of duty applicable under section 1 of Schedule 1 for each five cigarettes at the time the offence was committed,

(ii) in the case of tobacco sticks, the number of tobacco sticks to which the offence relates multiplied by the amount, rounded to the nearest one-hundredth, or, if the amount is equidistant from two consecutive one-hundredths, rounded to the higher one-hundredth, determined by the formula

B × 2

where

B is the rate of duty applicable under section 2 of Schedule 1 per tobacco stick at the time the offence was committed,

(iii) in the case of manufactured tobacco other than cigarettes or tobacco sticks, the number of grams of manufactured tobacco to which the offence relates multiplied by the amount, rounded to the nearest one-hundredth, or, if the amount is equidistant from two consecutive one-hundredths, rounded to the higher one-hundredth, determined by the formula

(C/50) × 2

where

C is the rate of duty applicable under section 3 of Schedule 1 per 50 grams at the time the offence was committed, and

(iv) in the case of cigars, the number of cigars to which the offence relates multiplied by the amount, rounded to the nearest one-hundredth, or, if the amount is equidistant from two consecutive one-hundredths, rounded to the higher one-hundredth, determined by the formula

D × 5

where

D is the rate of duty applicable under paragraph (a) of Schedule 2 per cigar at the time the offence was committed, and

(3) Paragraph 216(3)(a) of the Act is replaced by the following:

(a) the total of

(i) $0.32 multiplied by the number of cigarettes to which the offence relates,

(ii) $0.32 multiplied by the number of tobacco sticks to which the offence relates,

(iii) $0.39 multiplied by the number of grams of manufactured tobacco other than cigarettes or tobacco sticks to which the offence relates, and

(iv) $0.82 multiplied by the number of cigars to which the offence relates, and

(4) Paragraph 216(3)(a) of the Act, as enacted by subsection (3), is replaced by the following:

(a) the total of

(A/5) × 3

where

A is the rate of duty applicable under section 1 of Schedule 1 for each five cigarettes at the time the offence was committed,

B × 3

where

B is the rate of duty applicable under section 2 of Schedule 1 per tobacco stick at the time the offence was committed,

(C/50) × 3

where

C is the rate of duty applicable under section 3 of Schedule 1 per 50 grams at the time the offence was committed, and

D × 10

where

D is the rate of duty applicable under paragraph (a) of Schedule 2 per cigar that applied at the time the offence was committed, and

(5) Subsections (2) and (4) come into force on December 1, 2019.

14. (1) Section 236 of the Act is repealed.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

15. (1) Paragraphs 240(a) to (c) of the Act are replaced by the following:

(a) $0.40 per cigarette that was removed in contravention of that subsection,

(b) $0.40 per tobacco stick that was removed in contravention of that subsection, and

(c) $502.19 per kilogram of manufactured tobacco, other than cigarettes and tobacco sticks, that was removed in contravention of that subsection.

(2) Paragraphs 240(a) to (c) of the Act, as enacted by subsection (1), are replaced by the following:

(a) in the case of cigarettes, the number of cigarettes that were removed in contravention of that subsection multiplied by the amount, rounded to the nearest one-hundredth, or, if the amount is equidistant from two consecutive one-hundredths, rounded to the higher one-hundredth, determined by the formula

(A/5 + B) × 2

where

A is the rate of duty set out in section 1 of Schedule 1 that applied at the time the cigarettes were removed, and

B is the rate of duty set out in paragraph 4(a) of Schedule 3 that applied at the time the cigarettes were removed,

(b) in the case of tobacco sticks, the number of tobacco sticks that were removed in contravention of that subsection multiplied by the amount, rounded to the nearest one-hundredth, or, if the amount is equidistant from two consecutive one-hundredths, rounded to the higher one-hundredth, determined by the formula

(C + D) × 2

where

C is the rate of duty set out in section 2 of Schedule 1 that applied at the time the tobacco sticks were removed, and

D is the rate of duty set out in paragraph 4(b) of Schedule 3 that applied at the time the tobacco sticks were removed, and

(c) in the case of manufactured tobacco other than cigarettes and tobacco sticks, the number of kilograms of manufactured tobacco that were removed in contravention of that subsection multiplied by the amount, rounded to the nearest one-hundredth, or, if the amount is equidistant from two consecutive one-hundredths, rounded to the higher one-hundredth, determined by the formula

(E + F) × 40

where

E is the rate of duty set out in section 3 of Schedule 1 that applied at the time the manufactured tobacco was removed, and

F is the rate of duty set out in paragraph 4(c) of Schedule 3 that applied at the time the manufactured tobacco was removed.

(3) Subsection (2) comes into force on December 1, 2019.

16. (1) The portion of Schedule 1 to the Act before section 5 is replaced by the following:

SCHEDULE 1

(Sections 42 and 43.1)

RATES OF DUTY ON TOBACCO PRODUCTS

1. Cigarettes: for each five cigarettes or fraction of five cigarettes contained in any package,

(a) $0.52575; or

(b) if the rate referred to in paragraph (a) has been adjusted under subsection 43.1(2), the adjusted rate.

2. Tobacco sticks: per stick,

(a) $0.10515; or

(b) if the rate referred to in paragraph (a) has been adjusted under subsection 43.1(2), the adjusted rate.

3. Manufactured tobacco other than cigarettes and tobacco sticks: per 50 grams or fraction of 50 grams contained in any package,

(a) $6.57188; or

(b) if the rate referred to in paragraph (a) has been adjusted under subsection 43.1(2), the adjusted rate.

4. Cigars: per 1,000 cigars,

(a) $22.88559; or

(b) if the rate referred to in paragraph (a) has been adjusted under subsection 43.1(2), the adjusted rate.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

17. (1) Schedule 2 to the Act is replaced by the following:

SCHEDULE 2

(Sections 43 and 43.1)

ADDITIONAL DUTY ON CIGARS

Cigars: per cigar, the greater of

(a) either

(i) $0.08226, or

(ii) if the rate referred to in subparagraph (i) has been adjusted under subsection 43.1(2), the adjusted rate; and

(b) the amount obtained by multiplying the sale price, in the case of cigars manufactured in Canada, or the duty-paid value, in the case of imported cigars, by the following the percentage:

(i) if the rate referred to in subparagraph (a)(i) has not been adjusted under subsection 43.1(2), 82%, or

(ii) if the rate referred to in subparagraph (a)(i) has been adjusted under subsection 43.1(2), the amount, rounded to the nearest whole number, or, if the amount is equidistant from two consecutive whole numbers, to the higher whole number, expressed as a percentage, determined by the formula

A × 1000

where

A is the adjusted rate referred to in subparagraph (a)(ii), as if that rate were not expressed in dollars.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

18. (1) Sections 1 to 3 of Schedule 3 to the Act are replaced by the following:

1. Special duty on imported manufactured tobacco:

(a) in dollars per cigarette, the rate determined by the formula, rounded to the nearest one-hundred-thousandth, or, if the rate is equidistant from two consecutive one-hundred-thousandths, to the higher one-hundred-thousandth,

A/5

where

A is the rate of duty applicable under section 1 of Schedule 1 for each five cigarettes;

(b) in dollars per tobacco stick, the rate of duty applicable under section 2 of Schedule 1 per tobacco stick; and

(c) in dollars per 50 grams, or fraction of 50 grams, contained in any package of manufactured tobacco other than cigarettes or tobacco sticks, the rate of duty applicable under section 3 of Schedule 1 per 50 grams.

2. Special duty on traveller's tobacco:

A/5

where

A is the rate of duty applicable under section 1 of Schedule 1 for each five cigarettes;

(b) in dollars per tobacco stick, the rate of duty applicable under section 2 of Schedule 1 per tobacco stick; and

3. Special duty on unstamped tobacco products:

A/5

where

A is the rate of duty applicable under section 1 of Schedule 1 for each five cigarettes;

(b) in dollars per tobacco stick, the rate of duty applicable under section 2 of Schedule 1 per tobacco stick; and

(c) in dollars per kilogram of tobacco products other than cigarettes or tobacco sticks, the rate determined by the formula, rounded to the nearest one-hundred-thousandth, or, if the rate is equidistant from two consecutive one-hundred-thousandths, to the higher one-hundred-thousandth,

A x 20

where

A is the rate of duty applicable under section 3 of Schedule 1 per 50 grams of manufactured tobacco.

(2) Subsection (1) is deemed to have come into force on the day after Budget Day.

19. For the purposes of applying the provisions of the Customs Act that provide for the payment of, or the liability to pay, interest in respect of any amount, the amount is to be determined and interest is to be computed on it as though paragraphs 1(a), 2(a), 3(a) and 4(a) of Schedule 1 of the Excise Act, 2001, as enacted by section 16, subparagraphs (a)(i) and (b)(i) of Schedule 2 of that Act, as enacted by section 17, and section 18 had come into force on the day after Budget Day.

Standardizing Sanctions Related to False Statements in Excise Tax Returns

20. (1) Subsection 68.16(3) of the Excise Tax Act is replaced by the following:

(3) Any payment made to a person referred to in paragraph (1)(i) or (2)(e) shall, for the purposes of subsection (4), paragraph 97.1(1)(b) and sections 98 to 101, be deemed to have been made to the purchaser.

(2) Subsection (1) comes into force on the day after the day on which the enacting legislation receives royal assent.

21. (1) Subsection 79.03(4) of the Act is replaced by the following:

(4) If, at any time, a person pays an amount not less than the total of all amounts, other than interest and penalty under subsection 7(1.1) or 68.5(9.1) or section 95.1 or 95.2, owing at that time to Her Majesty in right of Canada under this Act for a reporting period of the person and the total amount of interest and penalty payable by the person under this Act for that reporting period is not more than $25.00, the Minister may cancel the interest and penalty.

(2) Subsection (1) comes into force on the day after the day on which the enacting legislation receives royal assent.

22. (1) The Act is amended by adding the following after section 95.1:

95.2 (1) Every person who knowingly, or under circumstances amounting to gross negligence, makes or participates in, assents to or acquiesces in the making of, a false statement or omission in a return, application, form, certificate, statement, invoice, answer or report (each of which is in this section referred to as a "return") made in respect of a reporting period is liable to a penalty of the greater of $250 and 25% of the total of

(a) if the false statement or omission is relevant to the determination of an amount of tax payable by the person, the amount, if any, by which

(i) that tax payable

exceeds

(ii) the amount that would be the tax payable by the person if the tax were determined on the basis of the information provided in the return, and

(b) if the false statement or omission is relevant to the determination of a refund, rebate or any other amount payable to the person (each of which is in this section referred to as a "rebate") under this Act, the amount, if any, by which

(i) the amount that would be the rebate payable to the person if the rebate were determined on the basis of the information provided in the return

exceeds

(ii) the amount of the rebate payable to the person.

(2) If, in an appeal under this Act, a penalty assessed by the Minister under this section is in issue, the burden of establishing the facts justifying the assessment of the penalty is on the Minister.

(3) This section does not apply to Part I.

(2) Subsection (1) applies to any return filed by a person after the day on which the enacting legislation receives royal assent.

23. (1) Section 97 of the Act is replaced by the following:

97. Every person required, by or pursuant to any Part except Part I, to file a return, who fails to file the return within the time it is required to be filed, is guilty of an offence and liable to a fine of not less than ten dollars and not more than one hundred dollars.

97.1 (1) Every person commits an offence who

(a) makes, or participates in, assents to or acquiesces in the making of, a false or deceptive statement in a return, application, form, certificate, statement, invoice, answer or report filed or made as required by or under this Act or the regulations made under this Act,

(b) for the purpose of evading payment or remittance of any tax under this Act, or obtaining a refund, rebate or other amount to which the person is not entitled under this Act,

(i) destroys, alters, mutilates, conceals or otherwise disposes of any records of a person, or

(ii) makes, or assents to or acquiesces in the making of, a false or deceptive entry, or omits, or assents to or acquiesces in the omission, to enter a material particular in the records of a person,

(c) wilfully, in any manner, evades or attempts to evade compliance with this Act or payment or remittance of tax or any other amount imposed under this Act,

(d) wilfully, in any manner, obtains or attempts to obtain a refund, rebate or other amount to which the person is not entitled under this Act, or

(e) conspires with any person to commit an offence described in any of paragraphs (a) to (d).

(2) Every person who commits an offence under subsection (1) is guilty of an offence punishable on summary conviction and, in addition to any penalty otherwise provided, is liable to

(a) a fine of not less than 50%, and not more than 200%, of the amount of the tax that was sought to be evaded, or of the refund, rebate or other amount sought, or, where the amount that was sought to be evaded cannot be ascertained, a fine of not less than $1,000 and not more than $25,000, or

(b) both a fine referred to in paragraph (a) and imprisonment for a term not exceeding two years.

(3) Every person who is charged with an offence described in subsection (1) may, at the election of the Attorney General of Canada, be prosecuted on indictment and, if convicted, is, in addition to any penalty otherwise provided, liable to

(a) a fine of not less than 100%, and not more than 200%, of the amount of the tax that was sought to be evaded, or of the refund, rebate or other amount sought, or, where the amount that was sought to be evaded cannot be ascertained, a fine of not less than $2,000 and not more than $25,000, or

(b) both a fine referred to in paragraph (a) and imprisonment for a term not exceeding five years.

(4) A person that is convicted of an offence under subsection (2) or (3) is not liable to pay a penalty imposed under any of subsection 79(5) or sections 95.1, 95.2 or 109 or under a regulation made under this Act for the same evasion or attempt unless a notice of assessment for that penalty was issued before the information or complaint giving rise to the conviction was laid or made.

(5) If, in any appeal under this Act, substantially the same facts are at issue as those that are at issue in a prosecution under this section, the Minister may file a stay of proceedings with the Federal Court, or may file a request for a postponement or adjournment with the Tribunal, as the case may be, and, on doing so, the proceedings before the Federal Court are stayed, or the proceedings before the Tribunal are postponed or adjourned, as the case may be, pending final determination of the outcome of the prosecution.

(6) This section does not apply to Part I.

(2) Subsection (1) comes into force on the day after the day on which the enacting legislation receives royal assent.

24. (1) Section 102 of the Act is repealed.

(2) Subsection (1) comes into force on the day after the day on which the enacting legislation receives royal assent.

25. (1) Section 108 of the Act is repealed.

(2) Subsection (1) comes into force on the day after the day on which the enacting legislation receives royal assent.

NOTICE OF WAYS AND MEANS MOTION TO AMEND THE CUSTOMS TARIFF

That it is expedient to amend the Customs Tariff as follows:

1. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.20.11 with a Most-Favoured-Nation Tariff rate of customs duty and, where necessary, the applicable preferential tariff rates of customs duty of "Free", for "Drilling platforms (including jack-ups and semi-submersibles) used in drilling activity for exploration, delineation or development of offshore projects" currently classified in tariff item No. 8905.20.10 which is being revoked.

2. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.20.19 to maintain current rates of customs duty on "Drilling platforms" currently classified in tariff item No. 8905.20.10 except for "Drilling platforms (including jack-ups and semi-submersibles) used in drilling activity for exploration, delineation or development of offshore projects".

3. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.90.11 with a Most-Favoured-Nation Tariff rate of customs duty and, where necessary, the applicable preferential tariff rates of customs duty of "Free", for "Drill-ships used in drilling activity for exploration, delineation or development of offshore projects" currently classified in tariff item No. 8905.90.10 which is being revoked.

4. The List of Tariff Provisions set out in the schedule to the Customs Tariff is amended to add tariff item No. 8905.90.19 to maintain current rates of customs duty on "drill-ships, drilling barges and floating drilling rigs" currently classified in tariff item No. 8905.90.10 except for "Drill-ships used in drilling activity for exploration, delineation or development of offshore projects".

5. Any enactment founded on sections 1 to 4 be deemed to have come into force on May 5, 2014.

DRAFT AMENDMENTS TO VARIOUS GST/HST REGULATIONS

Strengthening Compliance with GST/HST Registration

Regulations Amending the Publications Supplied by a Registrant (GST/HST) Regulations

1. The definition "registration number" in section 2 of the Publications Supplied by a Registrant (GST/HST) Regulations is replaced by the following:

"registration number" means a registration number assigned under section 241 of the Act. (numéro d'inscription)

Regulations Amending the Credit Note and Debit Note Information (GST/HST) Regulations

2. Paragraph 3(b) of the Credit Note and Debit Note Information (GST/HST) Regulations is replaced by the following:

(b) the name of the supplier or an intermediary in respect of the supply, or the name under which the supplier or the intermediary does business, and the registration number assigned under section 241 of the Act to the supplier or the intermediary, as the case may be;

Regulations Amending the Input Tax Credit Information (GST/HST) Regulations

3. Subparagraph 3(b)(i) of the Input Tax Credit Information (GST/HST) Regulations is replaced by the following:

(i) the name of the supplier or the intermediary in respect of the supply, or the name under which the supplier or the intermediary does business, and the registration number assigned under section 241 of the Act to the supplier or the intermediary, as the case may be,

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