Notice of Ways and Means Motions
Notice of Ways and Means Motion to Amend the Excise Tax Act
That it is expedient to amend the Excise Tax Act as follows:
Health Measures
1 (1) Section 1 of Part V.1 of Schedule V to the Excise Tax Act is amended by striking out "or" at the end of paragraph (n), by adding "or" at the end of paragraph (o) and by adding the following after paragraph (o):
(p) a service rendered to an individual for the purpose of enhancing or otherwise altering the individual's physical appearance and not for medical or reconstructive purposes or a right entitling a person to the service.
(2) Subsection (1) applies to any supply made after Budget Day.
2 (1) Section 21 of Part II of Schedule VI to the Act is replaced by the following:
21 A supply of an insulin infusion pump, an insulin syringe, an insulin pen or an insulin pen needle.
(2) Subsection (1) applies to
(a) any supply made after Budget Day; and
(b) any supply made on or before Budget Day unless, on or before that day, an amount was charged, collected or remitted as or on account of tax under Part IX of the Act in respect of the supply.
3 (1) Part II of Schedule VI to the Act is amended by adding the following after section 25:
25.1 A supply of an intermittent urinary catheter 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.
Exported Call Centre Services
4 (1) Part V of Schedule VI to the Act is amended by adding the following after section 23:
23.1 A supply made to a non-resident person that is not registered under Subdivision d of Division V of Part IX of the Act of a service of rendering to individuals technical or customer support by means of telecommunications if the non-resident person is not a consumer of the service and it can reasonably be expected at the time the supply is made that the technical or customer support is to be rendered primarily to individuals who are outside Canada at the time the support is rendered, but not including a supply of
(a) an advisory, consulting or professional service; or
(b) a service of acting as an agent of the non-resident person or of arranging for, procuring or soliciting orders for supplies by or to the non-resident person.
(2) Subsection (1) applies to
(a) any supply made after Budget Day; and
(b) any supply made on or before that day if the supplier did not, on or before that day, charge, collect or remit an amount as or on account of tax under Part IX of the Act in respect of the supply.
GST/HST on Donations to Charities
5 (1) The Act is amended by adding the following after section 163:
Donation — value of consideration
164 For the purposes of this Part, if a charity or a public institution makes a taxable supply of property or service to another person, if the value of the property or service is included in determining the amount of the advantage in respect of a gift by the other person to the charity or public institution under subsection 248(32) of the Income Tax Act and if a receipt referred to in subsection 110.1(2) or 118.1(2) of that Act may be issued, or could be issued if the other person were an individual, in respect of part of the consideration for the supply, then the value of the consideration for the supply is deemed to be equal to the fair market value of the property or service at the time the supply is made.
(2) Subsection (1) applies to any supply made after Budget Day. It also applies to any taxable supply, other than a supply to which subsection (3) applies, made by a person on or before that day but after December 20, 2002 if, on or before Budget Day, the person
(a) did not charge, collect or remit an amount as or on account of tax under Part IX of the Act in respect of the supply; or
(b) charged an amount as or on account of tax under Part IX of the Act that is less than the amount of tax that would have been payable under that Part in respect of the supply in the absence of section 164 of the Act, as enacted by subsection (1).
(3) For the purposes of Part IX of the Act (other than sections 232 and 261 of the Act, section 5 of Part V.1 of Schedule V to the Act and section 10 of Part VI of Schedule V to the Act), a taxable supply of property or service made by a charity or a public institution to another person after December 20, 2002 but on or before Budget Day is deemed to have been made for no consideration if
(a) the value of the property or service is included in determining the amount of the advantage in respect of a gift by the other person to the charity or public institution under subsection 248(32) of the Income Tax Act;
(b) a receipt referred to in subsection 110.1(2) or 118.1(2) of the Income Tax Act may be issued, or could be issued if the other person were an individual, in respect of part of the consideration for the supply;
(c) the fair market value of the property or service at the time the supply is made is less than $500; and
(d) on or before Budget Day, the charity or public institution
(i) did not, charge, collect or remit an amount as or on account of tax under Part IX of the Excise Tax Act in respect of the supply, or
(ii) charged an amount as or on account of tax under Part IX of the Act that is less than the amount of tax that would have been payable under that Part in respect of the supply in the absence of section 164 of the Act, as enacted by subsection (1).
De Minimis Financial Institutions
6 (1) Section 149 of the Act is amended by adding the following after subsection (4.01):
Exclusion of interest
(4.02) In determining a total under paragraph (1)(c) for a person (in this subsection and subsection (4.03) referred to as the "depositor"), interest from another person in respect of a deposit of money received or held by the other person in the usual course of its deposit-taking business is not to be included if
(a) the other person is
(i) a bank,
(ii) a credit union,
(iii) a corporation authorized under the laws of Canada or a province to carry on the business of offering to the public its services as a trustee, or
(iv) a corporation authorized under the laws of Canada or a province to accept deposits from the public and that carries on the business of lending money on the security of real property or investing in indebtedness on the security of mortgages or hypothecs on real property; and
(b) the other person is obligated, or may by the demand of the depositor become obligated, to repay the money on or before the particular day that is 364 days after the day on which the deposit of money is made.
Repayment obligation — special cases
(4.03) For the purpose of paragraph (4.02)(b), in determining whether the other person is obligated, or may by the demand of the depositor become obligated, to repay the money on or before the particular day that is 364 days after the day on which the deposit of money is made, the following rules apply:
(a) if the other person is obligated to repay the money to the depositor on a fixed day and also is or may become obligated to repay the money on an earlier day by virtue of a right of withdrawal, reinvestment or other right afforded to the depositor by the terms under which the money was solicited or received or is held, then only the obligation to repay on the fixed day is to be considered, whether or not the right is exercised; and
(b) if the other person is obligated to repay the money to the depositor on a fixed day and also is or may become obligated to repay the money on a later day by virtue of a right afforded to any person to extend the term of the deposit at a rate or rates of interest determined at the time the money was solicited or received, then only the obligation to repay on the later day is to be considered, whether or not the right is exercised.
(2) Subsection (1) applies
(a) for the purpose of determining if a person is a financial institution throughout the person's taxation years that begin on or after Budget Day; and
(b) for the purpose of determining if a person is a reporting institution under section 273.2 of the Act throughout the person's fiscal year that begins before Budget Day and that ends on or after that day.
Application of GST/HST to Cross-Border Reinsurance
7 (1) The description of B in the definition external charge in section 217 of the Act is replaced by the following:
B is the total of all amounts, each of which is included in the amount determined under the description of A and is
(a) a permitted deduction for the specified year or a preceding specified year of the qualifying taxpayer, other than a returned commission included in paragraph (b), or
(b) if a particular amount, included in the amount determined under the description of A, is any part of the value of the consideration for a supply made to the qualifying taxpayer of a financial service that includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance in respect of one or more particular insurance policies issued by the qualifying taxpayer, an amount (in this description referred to as a "returned commission") included in the particular amount that
(i) is attributable to expenses incurred exclusively in Canada by the qualifying taxpayer to issue and administer the particular insurance policies,
(ii) is returned to the qualifying taxpayer as a ceding commission in respect of the particular insurance policies, and
(iii) is required to be included under the Income Tax Act in computing the qualifying taxpayer's income for the specified year or for another specified year of the qualifying taxpayer, or would be so required to be included if the conditions set out in subparagraphs (a)(i) to (iii) of the description of A applied to the qualifying taxpayer.
(2) Paragraph (a) of the definition loading in section 217 of the Act is replaced by the following:
(a) if the financial service includes the issuance, renewal, variation or transfer of ownership of an insurance policy but not of any other qualifying instrument, the total of
(i) the estimate of the net premium of the insurance policy, and
(ii) if the insurance policy is a policy of reinsurance, the margin for risk transfer of the insurance policy;
(3) The description of A in paragraph (c) of the definition loading in section 217 of the Act is replaced by the following:
A is the total of
(i) the estimate of the net premium of the insurance policy, and
(ii) if the insurance policy is a policy of reinsurance, the margin for risk transfer of the insurance policy, and
(4) Paragraph (k) of the definition permitted deduction in section 217 of the Act is replaced by the following:
(k) consideration (other than interest referred to in paragraph (g), dividends referred to in paragraph (h) or consideration referred to in paragraph (k.1)) for a specified non-arm's length supply made to the qualifying taxpayer less the total of all amounts, each of which is a part of the value of the consideration and is loading;
(k.1) consideration (other than interest referred to in paragraph (g) or dividends referred to in paragraph (h)) for a specified non-arm's length supply made to the qualifying taxpayer of a financial service of issuing, renewing, varying or transferring the ownership of a policy of reinsurance, issued by an insurer to the qualifying taxpayer, in respect of one or more particular insurance policies issued by the qualifying taxpayer, if
(i) the policy of reinsurance is in accordance with all applicable guidelines with respect to sound reinsurance practices and procedures, as amended from time to time, that are issued by the Superintendent or a provincial regulatory authority having powers similar to those of the Superintendent,
(ii) the qualifying taxpayer pays to the insurer, or to persons related to the insurer (each of which is referred to in this paragraph as an "affiliate"), amounts (each of which is referred to in this paragraph as a "fee") under one or more agreements in writing, each of which is not the policy of reinsurance and is between the qualifying taxpayer and the insurer or an affiliate,
(iii) the fees include 99% or more of the total of all amounts, each of which
(A) is payable to the insurer or to an affiliate for property acquired, manufactured or produced, or for a service acquired or performed, in whole or in part outside Canada in respect of the policy of reinsurance, and
(B) does not represent
(I) the estimate of the net premium of the policy of reinsurance,
(II) the margin for risk transfer of the policy of reinsurance, or
(III) expenses incurred exclusively in Canada by the qualifying taxpayer to issue and administer the particular insurance policies,
(iv) each fee paid by the qualifying taxpayer to the insurer or an affiliate
(A) is commensurate with the arm's length transfer price, as defined in subsection 247(1) of the Income Tax Act, for the provision of the property and services to which the fee relates, and
(B) is allowed as a deduction, an allowance or an allocation for a reserve under the Income Tax Act in computing the qualifying taxpayer's income for a specified year, or would be so allowed if the conditions set out in subparagraphs (a)(i) to (iii) of the description of A in the definition qualifying consideration applied to the qualifying taxpayer, and
(v) the qualifying taxpayer pays or remits any amount that is payable or remittable under this Part by the qualifying taxpayer in respect of each fee paid by the qualifying taxpayer to the insurer or an affiliate;
(5) Paragraph (a) of the description of B in the definition qualifying consideration in section 217 of the Act is replaced by the following:
(a) an amount that is a permitted deduction for the specified year or a preceding specified year of the qualifying taxpayer, other than an amount that is included in paragraph (b) or that is a returned commission included in paragraph (c),
(6) The description of B in the definition qualifying consideration in section 217 of the Act is amended by adding "or" at the end of paragraph (b) and by adding the following after paragraph (b):
(c) if a particular amount, included in the amount determined under the description of A, is any part of the value of the consideration for a supply made to the qualifying taxpayer of a financial service that includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance in respect of one or more particular insurance policies issued by the qualifying taxpayer, an amount (in this description referred to as a "returned commission") included in the particular amount that
(i) is attributable to expenses incurred exclusively in Canada by the qualifying taxpayer to issue and administer the particular insurance policies,
(ii) is returned to the qualifying taxpayer as a ceding commission in respect of the particular insurance policies, and
(iii) is required to be included under the Income Tax Act in computing the qualifying taxpayer's income for the specified year or for another specified year of the qualifying taxpayer, or would be so required to be included if the conditions set out in subparagraphs (a)(i) to (iii) of the description of A applied to the qualifying taxpayer.
(7) Section 217 of the Act is amended by adding the following in alphabetical order:
ceding commission means an amount that is paid to a particular insurer by another insurer under an agreement for the supply of a financial service that includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance issued by the other insurer in respect of one or more particular insurance policies issued by the particular insurer and that compensates the particular insurer for property acquired, manufactured or produced, and for services acquired or performed, exclusively in Canada by the particular insurer in order to issue and administer the particular insurance policies.
margin for risk transfer means an amount payable to a particular insurer by another insurer under an agreement for the supply of a financial service, which includes the issuance, renewal, variation or transfer of ownership of a policy of reinsurance issued by the particular insurer, that exclusively represents compensation for the assumption, by the particular insurer, of the risk of potential future claims under particular insurance policies issued by the other insurer and that is in addition to the estimate of the net premium of the policy of reinsurance.
(8) Subsections (1) to (7) apply to any specified year of a person that ends after November 16, 2005, except that for purposes of applying the definition permitted deduction in section 217 of the Act, as amended by subsection (4), in respect of an amount of consideration for a specified non-arm's length supply that became due, or was paid without having become due, on or before that day, paragraph (k) of that definition is to be read without reference to the words "less the total of all amounts, each of which is a part of the value of the consideration and is loading".
(9) If, in assessing under section 296 of the Act tax payable by a person under Division IV of Part IX of the Act for a particular specified year of the person, an amount was taken into consideration as an external charge or as qualifying consideration for the particular specified year and as a result of the application of the definitions ceding commission, external charge, loading, margin for risk transfer, permitted deduction and qualifying consideration in section 217 of the Act, as amended by subsections (1) to (7), the amount or part of the amount is not qualifying consideration for any specified year of the person and is not an external charge for any specified year of the person for which an election under subsection 217.2(1) of the Act is in effect, the person is entitled until the day that is one year after the day on which the legislation enacting subsections (1) to (7) receives royal assent to request in writing that the Minister of National Revenue make an assessment, reassessment or additional assessment for the purpose of taking into account that the amount or the part of the amount, as the case may be, is not, if an election under subsection 217.2(1) of the Act is in effect for the particular specified year, an external charge for the particular specified year or, in any other case, qualifying consideration for the particular specified year and, on receipt of the request, the Minister must with all due dispatch
(a) consider the request; and
(b) under section 296 of the Act assess, reassess or make an additional assessment of the tax payable by the person under Division IV of Part IX of the Act for any specified year of the person, and of any interest, penalty or other obligation of the person, solely for the purpose of taking into account that the amount or the part of the amount, as the case may be, is not, if an election under subsection 217.2(1) of the Act is in effect for the particular specified year, an external charge for the particular specified year or, in any other case, qualifying consideration for the particular specified year.
8 (1) Subparagraph 217.1(4)(b)(ii) of the Act is replaced by the following:
(ii) a permitted deduction of the qualifying taxpayer for the specified year or a preceding specified year of the qualifying taxpayer, other than a permitted deduction of the qualifying taxpayer that is included under paragraph (a) of the description of B in the formula in the definition external charge in section 217 in calculating an external charge of the qualifying taxpayer for the specified year or a preceding specified year of the qualifying taxpayer,
(2) Subsection (1) applies to any specified year of a person that ends after November 16, 2005.
Closely Related Test
9 (1) The portion of the definition qualifying subsidiary before paragraph (a) in subsection 123(1) of the English version of the Act is replaced by the following:
qualifying subsidiary of a particular corporation means another corporation in respect of which the particular corporation holds qualifying voting control and owns not less than 90% of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the capital stock of the other corporation, and includes
(2) Paragraph (a) of the definition filiale déterminée in subsection 123(1) of the French version of the Act is replaced by the following:
a) la personne morale relativement à laquelle la personne morale donnée détient le contrôle admissible des voix et est propriétaire d'au moins 90 % de la valeur et du nombre des actions, émises et en circulation et comportant plein droit de vote en toutes circonstances, du capital-actions de la personne morale;
(3) Subsections (1) and (2) apply as of the day that is one year after Budget Day. They also apply as of the day after Budget Day
(a) in respect of an election under subsection 150(1) or 156(2) of the Act that is to become effective on a day that is after Budget Day but before the day that is one year after Budget Day, unless the election is filed on or before Budget Day; and
(b) for the purpose of applying paragraphs 4(3)(b) and (c) of the Financial Services and Financial Institutions (GST/HST) Regulations in respect of a supply of a service if the agreement for the supply is entered into after Budget Day but before the day that is one year after Budget Day and it is not the case that all or substantially all of the service will be performed before the day that is one year after Budget Day.
10 (1) The portion of paragraph 128(1)(a) of the Act before subparagraph (i) is replaced by the following:
(a) qualifying voting control in respect of the other corporation is held by, and not less than 90% of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the capital stock of the other corporation are owned by,
(2) Section 128 of the Act is amended by adding the following after subsection (1):
Qualifying voting control
(1.1) For the purposes of this Part, a person or a group of persons holds qualifying voting control in respect of a corporation at any time if at that time
(a) the person, or the members of the group collectively, as the case may be, own shares of the corporation to which are attached not less than 90% of the shareholder votes that may be cast in respect of each matter, other than a matter
(i) for which a statute of a country, or of a state, province, or other political subdivision of a country, that applies to the corporation provides, in respect of the vote of the shareholders of the corporation on the matter, that
(A) any shareholder of the corporation has voting rights that are different from the voting rights that the shareholder would otherwise have under the letters patent, instrument of continuance or other constating instrument by which the corporation was incorporated or continued, including any amendment to, or restatement of, the constating instrument, or
(B) holders of a class or series of shares of the corporation are entitled to vote separately as a class or series, or
(ii) that is a prescribed matter or a matter that meets prescribed conditions or arises in prescribed circumstances; or
(b) the person or group, as the case may be, is a prescribed person or group in relation to the corporation.
(3) Section 128 of the Act is amended by adding the following after subsection (3):
Voting right controlled by another person
(4) For purposes of subsection (1.1), a particular person is deemed not to own a share at a particular time if
(a) another person has a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently, to control the voting rights attached to the share, unless the right is not exercisable at the particular time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual; and
(b) the other person is not closely related to the particular person at the particular time.
(4) Subsection (1) applies as of the day that is one year after Budget Day. It also applies as of the day after Budget Day
(a) in respect of an election under subsection 150(1) or 156(2) of the Act that is to become effective on a day that is after Budget Day but before the day that is one year after Budget Day, unless the election is filed on or before Budget Day; and
(b) for the purpose of applying paragraphs 4(3)(b) and (c) of the Financial Services and Financial Institutions (GST/HST) Regulations in respect of a supply of a service if the agreement for the supply is entered into after Budget Day but before the day that is one year after Budget Day and it is not the case that all or substantially all of the service will be performed before the day that is one year after Budget Day.
(5) Subsections (2) and (3) are deemed to have come into force on the day after Budget Day.
11 (1) Clause 156(1.1)(a)(ii)(A) of the Act is replaced by the following:
(A) both holds qualifying voting control in respect of a corporation that is a member of a qualifying group of which the other person is a member and owns at least 90% of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the capital stock of the corporation, or
(2) The portion of subparagraph 156(1.1)(b)(i) of the Act before clause (A) is replaced by the following:
(i) qualifying voting control in respect of the other person is held by, and not less than 90% of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the capital stock of the other person are owned by,
(3) Clauses 156(1.1)(b)(i)(A) to (C) of the French version of the Act are replaced by the following:
(A) la société de personnes donnée,
(B) une personne morale, ou une société de personnes canadienne, qui est membre d'un groupe admissible dont la société de personnes donnée est membre,
(C) plusieurs des personnes morales ou sociétés de personnes visées aux divisions (A) et (B),
(4) The portion of subparagraph 156(1.1)(b)(ii) of the Act before clause (A) is replaced by the following:
(ii) qualifying voting control in respect of a corporation is held by, and not less than 90% of the value and number of the issued and outstanding shares, having full voting rights under all circumstances, of the capital stock of the corporation are owned by,
(5) Clauses 156(1.1)(b)(ii)(A) and (B) of the French version of the Act are replaced by the following:
(A) l'autre personne, si la personne morale est membre d'un groupe admissible dont la société de personnes donnée est membre,
(B) la société de personnes donnée, si la personne morale est membre d'un groupe admissible dont l'autre personne est membre,
(6) Subsections (1) to (5) apply as of the day that is one year after Budget Day. They also apply as of the day after Budget Day in respect of an election under subsection 156(2) of the Act that is to become effective on a day that is after Budget Day but before the day that is one year after Budget Day, unless the election is filed on or before Budget Day.
12 If a supply is made between a person and a corporation that have jointly made an election under subsection 150(1) of the Act, if the election is in effect on Budget Day and on the day on which the agreement for the supply is entered into and if the agreement is entered into after Budget Day but before the day that is one year after Budget Day, then paragraph 150(2)(b) of the Act is to be read as follows in respect of the supply:
(b) an imported taxable supply, as defined in section 217;
(b.1) a supply made between a person and a corporation if
(i) the supply is
(A) a supply of a service and it is not the case that all or substantially all of the service will be performed before the day that is one year after Budget Day, or
(B) a supply of property by way of lease, licence, or similar arrangement and it is not the case that all or substantially all of the property will be delivered or made available to the recipient of the supply before the day that is one year after Budget Day, and
(ii) the person and the corporation
(A) are not members of the same closely related group at any time that is after the day on which the agreement for the supply is entered into but that is before the day that is one year after Budget Day, or
(B) are not members of the same closely related group on the day that is one year after Budget Day; or
Eligible Capital Property
13 (1) The definition capital property in subsection 123(1) of the Act is replaced by the following:
capital property, in respect of a person, means property that is, or would be if the person were a taxpayer under the Income Tax Act, capital property of the person within the meaning of that Act, other than property described in Class 12, 14, 14.1 or 44 of Schedule II to the Income Tax Regulations;
(2) Subsection (1) comes into force on January 1, 2017.