Notice of Ways and Means Motions

THE PDF VERSION 2016 1.90 MB

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

Canada Child Benefit

1 The heading "Canada Child Tax Benefit" before section 122.6 of the Act is replaced by the following:

Canada Child Benefit

2 (1) Paragraph (e) of the definition eligible individual in section 122.6 of the Act is amended by striking out "or" at the end of subparagraph (ii), by adding "or" at the end of subparagraph (iv) and by adding the following after that subparagraph:

(v) is an Indian within the meaning of the Indian Act,

(2) Subsection (1) comes into force on July 1, 2016.

3 (1) Subsection 122.61(1) of the Act is replaced by the following:

Deemed overpayment

122.61 (1) If a person and, if the Minister so demands, the person's cohabiting spouse or common-law partner at the end of a taxation year have filed a return of income for the year, an overpayment on account of the person's liability under this Part for the year is deemed to have arisen during a month in relation to which the year is the base taxation year, equal to the amount determined by the formula

1/12(A + C + M)

where

A is the amount determined by the formula

E – Q – R

where

E is the total of

(a) the product obtained by multiplying $6,400 by the number of qualified dependants in respect of whom the person was an eligible individual at the beginning of the month who have not reached the age of six years at the beginning of the month, and

(b) the product obtained by multiplying $5,400 by the number of qualified dependants, other than those qualified dependants referred to in paragraph (a), in respect of whom the person was an eligible individual at the beginning of the month, and

Q is

(a) if the person's adjusted income for the year is less than or equal to $30,000, nil,

(b) if the person's adjusted income for the year is greater than $30,000 but less than or equal to $65,000, and if the person is, at the beginning of the month, an eligible individual in respect of

(i) only one qualified dependant, 7% of the person's adjusted income for the year in excess of $30,000,

(ii) only two qualified dependants, 13.5% of the person's adjusted income for the year in excess of $30,000,

(iii) only three qualified dependants, 19% of the person's adjusted income for the year in excess of $30,000, or

(iv) more than three qualified dependants, 23% of the person's adjusted income for the year in excess of $30,000, and

(c) if the person's adjusted income for the year is greater than $65,000, and if the person is, at the beginning of the month, an eligible individual in respect of

(i) only one qualified dependant, the total of $2,450 and 3.2% of the person's adjusted income for the year in excess of $65,000,

(ii) only two qualified dependants, the total of $4,725 and 5.7% of the person's adjusted income for the year in excess of $65,000,

(iii) only three qualified dependants, the total of $6,650 and 8% of the person's adjusted income for the year in excess of $65,000, or

(iv) more than three qualified dependants, the total of $8,050 and 9.5% of the person's adjusted income for the year in excess of $65,000;

R is the amount determined for the description of C;

C is the amount determined by the formula

F – (G × H)

where

F is, if the person is, at the beginning of the month, an eligible individual in respect of

(a) only one qualified dependant, $2,308, and

(b) two or more qualified dependants, the total of

(i) $2,308 for the first qualified dependant,

(ii) $2,042 for the second qualified dependant, and

(iii) $1,943 for each of the third and subsequent qualified dependants,

G is the amount determined by the formula

J – [K – (L/0.122)]

where

J is the person's adjusted income for the year,

K is $45,282, and

L is the amount referred to in paragraph (a) of the description of F, and

H is

(a) if the person is an eligible individual in respect of only one qualified dependant, 12.2%, and

(b) if the person is an eligible individual in respect of two or more qualified dependants, the fraction (expressed as a percentage rounded to the nearest one-tenth of one per cent) of which

(i) the numerator is the total that would be determined under the description of F in respect of the eligible individual if that description were applied without reference to the fourth and subsequent qualified dependants in respect of whom the person is an eligible individual, and

(ii) the denominator is the amount referred to in paragraph (a) of the description of F, divided by 0.122; and

M is the amount determined by the formula

N – O

where

N is the product obtained by multiplying $2,730 by the number of qualified dependants in respect of whom both

(a) an amount may be deducted under section 118.3 for the taxation year that includes the month, and

(b) the person is an eligible individual at the beginning of the month, and

O is

(a) if the person's adjusted income for the year is less than or equal to $65,000, nil, and

(b) if the person's adjusted income for the year is greater than $65,000,

(i) where the person is an eligible individual in respect of only one qualified dependant described in N, 3.2% of the person's adjusted income for the year in excess of $65,000, and

(ii) where the person is an eligible individual in respect of two or more qualified dependants described in N, 5.7% of the person's adjusted income for the year in excess of $65,000.

(2) The first formula in subsection 122.61(1) of the Act, as enacted by subsection (1), is replaced by the following:

1/12(A + M)

(3) The formula in the description of A in subsection 122.61(1) of the Act, as enacted by subsection (1), is replaced by the following:

E − Q

(4) The descriptions of R and C in subsection 122.61(1) of the Act, as enacted by subsection (1), are repealed.

(5) Subsection 122.61(5) of the Act is repealed.

(6) Subsection 122.61(7) of the Act is repealed.

(7) Subsections (1), (5) and (6) come into force on July 1, 2016.

(8) Subsections (2) to (4) come into force on July 1, 2017.

4 (1) Subsection 122.62(2) of the Act is replaced by the following

Extension for notices

(2) The Minister may, on or before the day that is 10 years after the beginning of the month referred to in subsection (1), extend the time for filing a notice under subsection (1).

(2) Subsection (1) comes into force on July 1, 2016.

5 (1) Section 122.63 of the Act is repealed.

(2) The Act is amended by adding the following after section 122.62:

Agreement

122.63 (1) The Minister of Finance may enter into an agreement with the government of a province whereby the amounts determined under the description of E in subsection 122.61(1) with respect to persons resident in the province shall, for the purpose of calculating overpayments deemed to arise under that subsection, be replaced by amounts determined in accordance with the agreement.

Agreement

(2) The amounts determined under the description of E in subsection 122.61(1) for a base taxation year because of any agreement entered into with a province and referred to in subsection (1) shall be based on the age of qualified dependants of eligible individuals, or on the number of such qualified dependants, or both, and shall result in an amount in respect of a qualified dependant that is not less, in respect of that qualified dependant, than 85% of the amount that would otherwise be determined under that paragraph in respect of that qualified dependant for that year.

Agreement

(3) Any agreement entered into with a province and referred to in subsection (1) shall provide that, where the operation of the agreement results in a total of all amounts, each of which is an amount deemed under subsection 122.61(1) to be an overpayment on account of the liability under this Part for a taxation year of a person subject to the agreement, that exceeds 101% of the total of such overpayments that would have otherwise been deemed to have arisen under subsection 122.61(1), the excess shall be reimbursed by the government of the province to the Government of Canada.

(3) Subsection (1) comes into force on July 1, 2016.

(4) Subsection (2) comes into force on July 1, 2017.

Income Splitting Credit

6 (1) Section 118.92 of the Act is replaced by the following:

Ordering of credits

118.92 In computing an individual's tax payable under this Part, the following provisions shall be applied in the following order: subsections 118(1) and (2), section 118.7, subsections 118(3) and (10) and sections 118.01, 118.02, 118.031, 118.04, 118.041, 118.05, 118.06, 118.07, 118.3, 118.61, 118.5, 118.6, 118.9, 118.8, 118.2, 118.1, 118.62 and 121.

(2) Subsection (1) applies to the 2016 taxation year.

7 (1) Section 119.1 of the Act is repealed.

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

8 (1) Clause 128(2)(e)(iii)(A) of the Act is replaced by the following:

(A) under any of sections 118 to 118.07, 118.2, 118.3, 118.5, 118.6, 118.8 and 118.9,

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

9 (1) Subsection 153(1.3) of the Act is replaced by the following:

Reduction not permitted

(1.3) A joint election made or expected to be made under section 60.03 is not to be considered a basis on which the Minister may determine a lesser amount under subsection (1.1).

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

Northern Residents Deductions

10 (1) Clauses 110.7(1)(b)(ii)(A) and (B) of the Act are replaced by the following:

(A) $11.00 multiplied by the number of days in the year included in the qualifying period in which the taxpayer resided in the particular area, and

(B) $11.00 multiplied by the number of days in the year included in that portion of the qualifying period throughout which the taxpayer maintained and resided in a self-contained domestic establishment in the particular area (except any day included in computing a deduction claimed under this paragraph by another person who resided on that day in the establishment).

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

Labour-Sponsored Venture Capital Corporations Tax Credit

11 (1) Paragraph 127.4(5)(a) of the Act is replaced by the following:

(a) the amount determined by the formula

0.15 × A + 0.05 × B

where

A is the lesser of

(i) $5,000, and

(ii) the total of all amounts each of which is the net cost of the original acquisition of shares of a prescribed labour-sponsored venture capital corporation (other than a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation), and

B is the lesser of

(i) the amount if any by which $5,000 exceeds the amount determined for subparagraph (ii) in the description of A, and

(ii) the total of all amounts each of which is the net cost of the original acquisition of shares of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation, and

(2) Paragraph 127.4(5)(a) of the Act, as enacted by subsection (1), is replaced by the following:

(a) $750, and

(3) Paragraphs 127.4(6)(a) and (a.1) of the Act are replaced by the following:

(a) 15% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if the share is a share of a prescribed labour-sponsored venture capital corporation (other than a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation),

(a.1) 5% of the net cost to the individual (or to a qualifying trust for the individual in respect of the share) for the original acquisition of the share by the individual or by the trust, if

(i) the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is 2016, and

(ii) the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,

(a.2) nil, if

(i) the taxation year for which a claim is made under subsection (2) in respect of the original acquisition is after 2016, and

(ii) the share is a share of a corporation that is a prescribed labour-sponsored venture capital corporation solely because it is a registered labour-sponsored venture capital corporation,

(4) Subsection (1) applies to the 2016 taxation year.

(5) Subsection (2) applies to the 2017 and subsequent taxation years.

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

12 (1) Paragraphs (b) and (c) of the definition labour-sponsored funds tax credit in subsection 211.7(1) of the Act are replaced by the following:

(b) in any other case, the amount that would be determined under subsection 127.4(6) in respect of the share if this Act were read without reference to its paragraphs (b) and (d).

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

13 Subsections 59(1), (4), (6) and (7) of Economic Action Plan 2013 Act, No. 2. are repealed.

14 (1) Section 6701.1 of the Income Tax Regulations is repealed.

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

Teacher and Early Childhood Educator School Supply Tax Credit

15 (1) The Act is amended by adding the following after section 122.8:

Subdivision A.4

School Supplies Tax Credit

Definitions

122.9(1) The following definitions apply in this section.

eligible educator, in respect of a taxation year, means an individual who, at any time during the taxation year,

(a) is employed in Canada as a teacher or an early childhood educator at

(i) an elementary or secondary school, or

(ii) a regulated child care facility; and

(b) holds a valid and recognized (in the province or territory in which the individual is employed)

(i) teaching certificate, licence, permit or diploma, or

(ii) certificate or diploma in early childhood education.

eligible supplies expense, of an eligible educator for a taxation year, means an amount (other than any amount deducted in computing any person's income for any taxation year or any amount otherwise included in computing a deduction from any person's tax payable under this Act for any taxation year) paid by the eligible educator in the taxation year for teaching supplies to the extent that

(a) the teaching supplies were

(i) purchased by the eligible educator for the purpose of teaching or facilitating students' learning, and

(ii) directly consumed or used in an elementary or secondary school or in a regulated child care facility in the performance of the duties of the eligible educator's employment; and

(b) the eligible educator is not entitled to receive a reimbursement, allowance or any other form of assistance (other than an amount that is included in computing the income for any taxation year of the eligible educator and that is not deductible in computing the taxable income of the eligible educator) in respect of the amount paid.

return of income filed by an eligible educator for a taxation year means a return of income (other than a return of income filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) that is required to be filed for the year or that would be required to be filed if the individual had tax payable under this Part for the year.

teaching supplies means

(a) consumable supplies; and

(b) prescribed durable goods.

Deemed overpayment

(2) An eligible educator who files a return of income for a taxation year and who makes a claim under this subsection is deemed to have paid, at the end of the year, on account of tax payable under this Part for the year, an amount equal to the amount determined by the formula

A × B

where

A is the appropriate percentage for the year; and

B is the least of

(a) $1,000;

(b) the total of all amounts each of which is an eligible supplies expense of the eligible educator for the year; and

(c) if the eligible educator fails to provide the certificate referred to in subsection (3) in respect of the year, as and when requested by the Minister, nil.

Certificate

(3) If the Minister so demands, an eligible educator making a claim under this section in respect of a taxation year shall provide to the Minister a written certificate from their employer, or a delegated official of the employer, attesting to the eligible supplies expenses of the eligible educator for the year.

Effect of bankruptcy

(4) For the purposes of this subdivision, if an eligible educator becomes bankrupt in a particular calendar year, notwithstanding subsection 128(2), any reference to the taxation year of the eligible educator (other than in this subsection) is deemed to be a reference to the particular calendar year.

Part-year residents

(5) If an eligible educator is resident in Canada throughout part of a taxation year and is non-resident throughout another part of the year, the total of the amounts that are deemed to be paid by the eligible educator under subsection (2) for the year cannot exceed the lesser of

(a) the total of

(i) the amounts deemed to be paid under subsection (2) that can reasonably be considered as wholly applicable to the period or periods in the year throughout which the eligible educator is not resident in Canada, computed as though that period or those periods were the whole taxation year, and

(ii) the amounts deemed to be paid under subsection (2) that can reasonably be considered as wholly applicable to the period or periods in the year throughout which the eligible educator is resident in Canada, computed as though that period or those periods were the whole taxation year, and

(b) the total of the amounts that would have been deemed to have been paid under subsection (2) for the year had the eligible educator been resident in Canada throughout the year.

Non-residents

(6) Subsection (2) does not apply in respect of a taxation year of an eligible educator if the eligible educator is, at no time in the year, resident in Canada, unless all or substantially all the eligible educator's income for the year is included in computing the eligible educator's taxable income earned in Canada for the year.

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

16 (1) Paragraph 152(1)(b) of the Act is replaced by the following:

(b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(2) or (3), 122.9(2), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year.

(2) Paragraph 152(4.2)(b) of the Act is replaced by the following:

(b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.8(2) or (3), 122.9(2), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer's liability under this Part for the year.

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

17 (1) Subsection 163(2) of the Act is amended by adding the following after paragraph (c.4):

(c.5) the amount, if any, by which

(i) the total of all amounts each of which is an amount that would be deemed by subsection 122.9(2) to have been paid on account of the person's tax payable under this Part for the year if that amount were calculated by reference to the person's claim for the year under the subsection

exceeds

(ii) the total of all amounts each of which is the amount that the person is entitled to claim for the year under subsection 122.9(2),

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

18 (1) The Income Tax Regulations are amended by adding the following after Part XCV:

PART XCVI

School Supplies Tax Credit

Prescribed durable goods

9600 For the purpose of the definition teaching supplies in subsection 122.9(1) of the Act, the following are prescribed durable goods:

(a) books;

(b) games and puzzles;

(d) educational support software.

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

Ontario Electricity Support Program

19 (1) Subsection 81(1) of the Act is amended by adding the following after paragraph (g.5):

Ontario Electricity Support Program

(g.6) an amount of rate assistance received under section 79.2 of the Ontario Energy Board Act 1998, S.O. 1998, c.15, Sch B, as amended from time to time;

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

Mineral Exploration Tax Credit for Flow-Through Share Investors

20 (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 2016 and before 2018 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2018) 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 2016 and before April 2017, 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 2016 and before April 2017;

(3) Subsections (1) and (2) apply to expenses renounced under a flow-through share agreement entered into after March 2016.

Education and Textbook Tax Credits

21 (1) Subparagraph 56(3)(a)(i) of the Act is replaced by the following:

(i) in an educational program in respect of which the taxpayer is a qualifying student (as defined in subsection 118.6(1)) in the taxation year, in the immediately preceding taxation year or in the following taxation year, or

(2) Paragraph 56(3.1)(b) of the Act is replaced by the following:

(b) if an award is received in connection with an educational program in respect of which the taxpayer is a qualifying student because of subparagraph (a)(ii) of the definition qualifying student in subsection 118.6(1) in the taxation year, in the immediately preceding taxation year or in the following taxation year (in this paragraph referred to as the "claim year"), the amount included under subparagraph (1)(n)(i) in computing the taxpayer's income for the taxation year in respect of the award may not exceed the amount that is the total of amounts, each of which is the cost of materials related to the program or a fee paid to a designated educational institution in respect of the program, as defined in subsection 118.6(1), in respect of the claim year.

(3) Subsection (1) applies to the 2017 and subsequent taxation years, and

(a) for the 2016 taxation year, a taxpayer will be considered to be entitled to deduct an amount under subsection 118.6(2) of the Act in respect of an educational program for the immediately following taxation year if the taxpayer is a qualifying student (as defined in subsection 118.6(1) of the Act) in respect of the educational program in that year; and

(b) for the 2017 taxation year, a taxpayer will be considered to be a qualifying student in respect of an educational program in the immediately preceding taxation year if the taxpayer was entitled to deduct an amount under subsection 118.6(2) of the Act in respect of the educational program for that year.

(4) Subsection (2) applies to the 2017 and subsequent taxation years, and

(a) for the 2016 taxation year, a taxpayer will be considered to be entitled to deduct an amount by reason of paragraph (b) of the description of B in subsection 118.6(2) of the Act in respect of an educational program for the immediately following taxation year if the taxpayer is a qualifying student in respect of the educational program because of subparagraph (a)(ii) of the definition qualifying student in subsection 118.6(1) of the Act for that year; and

(b) for the 2017 taxation year, a taxpayer will be considered to be a qualifying student in respect of an educational program because of subparagraph (a)(ii) of the definition qualifying student in subsection 118.6(1) of the Act in the immediately preceding taxation year if the taxpayer was entitled to deduct an amount by reason of paragraph (b) of the description of B in subsection 118.6(2) of the Act in respect of the educational program for that year.

22 (1) Subsection 118.6(1) of the Act is amended by adding the following in alphabetical order:

qualifying student , for a month in a taxation year, means an individual who,

(a) in the month,

(i) is enrolled in a qualifying educational program as a full-time student at a designated educational institution, or

(ii) is not described in subparagraph (i) and is enrolled at a designated educational institution in a specified educational program that provides that each student in the program spend not less than 12 hours in the month on courses in the program,

(b) if requested by the Minister, proves the enrolment by filing with the Minister a certificate in prescribed form issued by the designated educational institution and containing prescribed information, and

(c) in the case of an individual who is enrolled in a program at a designated educational institution described in subparagraph (a)(ii) of the definition designated educational institution,

(i) has attained the age of 16 years before the end of the year, and

(ii) is enrolled in the program to obtain skills for, or improve the individual's skills in, an occupation;

(2) Subsections 118.6(2) and (2.1) of the Act are repealed.

(3) The portion of subsection 118.6(3) of the Act before paragraph (a) is replaced by the following:

Students eligible for the disability tax credit

(3) For the purposes of subparagraph (a)(i) of the definition qualifying student in subsection (1), the reference to "full-time student" is to be read as "student" if

(4) Subsections (1) to (3) apply to the 2017 and subsequent taxation years.

23 (1) The description of B in subsection 118.61(1) of the Act is replaced by the following:

B is the total of all amounts each of which may be deducted under section 118.5 in computing the individual's tax payable under this Part for the year;

(2) The description of E in subsection 118.61(1) of the Act is replaced by the following:

E is the tuition tax credit transferred for the year by the individual to the individual's spouse, common-law partner, parent or grandparent.

(3) The portion of subsection 118.61(4) of the Act before the formula is replaced by the following:

Change of appropriate percentage

(4) For the purpose of determining the amount that may be deducted under subsection (2) in computing an individual's tax payable for a taxation year, in circumstances where the appropriate percentage for the taxation year is different from the appropriate percentage for the preceding taxation year, the individual's unused tuition, textbook and education tax credits at the end of the preceding taxation year is deemed to be the amount determined by the formula

(4) Subsections (1) to (3) apply to the 2017 and subsequent taxation years.

24 (1) The description of A in section 118.8 of the Act is replaced by the following:

A is the tuition tax credit transferred for the year by the spouse or common-law partner to the individual;

(2) Subparagraph (b)(i) of the description of C in section 118.8 of the Act is replaced by the following:

(i) the total of all amounts that may be deducted under section 118.5 in computing the spouse's or common-law partner's tax payable under this Part for the year, and

(3) Subsections (1) and (2) apply to the 2017 and subsequent taxation years.

25 (1) The portion of section 118.81 of the Act before paragraph (a) is replaced by the following:

Tuition tax credit transferred

118.81 In this subdivision, the tuition tax credit transferred for a taxation year by a person to an individual is the lesser of

(2) Subparagraph (i) of the description of A in paragraph 118.81(a) of the Act is replaced by the following:

(i) the total of all amounts that may be deducted under section 118.5 in computing the person's tax payable under this Part for the year, and

(3) Subsections (1) and (2) apply to the 2017 and subsequent taxation years.

26 (1) Section 118.9 of the Act is replaced by the following:

Transfer to parent or grandparent

118.9 If for a taxation year a parent or grandparent of an individual (other than an individual in respect of whom the individual's spouse or common-law partner deducts an amount under section 118 or 118.8 for the year) is the only person designated in writing by the individual for the year for the purpose of this section, there may be deducted in computing the tax payable under this Part for the year by the parent or grandparent, as the case may be, the tuition tax credit transferred for the year by the individual to the parent or grandparent, as the case may be.

(2) Subsection (1) applies to the 2017 and subsequent taxation years.

27 (1) Subparagraph 118.91(b)(i) of the Act is replaced by the following:

(i) such of the deductions permitted under subsections 118(3) and (10) and sections 118.01 to 118.2, 118.5, 118.62 and 118.7 as can reasonably be considered wholly applicable to the period or periods in the year throughout which the individual is resident in Canada, computed as though that period or those periods were the whole taxation year, and

(2) Subsection (1) applies to the 2017 and subsequent taxation years.

28 (1) Section 118.94 of the Act is replaced by the following:

Tax payable by non-residents (credits restricted)

118.94 Sections 118 to 118.07 and 118.2, subsections 118.3(2) and (3) and sections 118.8 and 118.9 do not apply for the purpose of computing the tax payable under this Part for a taxation year by an individual who at no time in the year is resident in Canada unless all or substantially all the individual's income for the year is included in computing the individual's taxable income earned in Canada for the year.

(2) Subsection (1) applies to the 2017 and subsequent taxation years.

29 (1) Paragraph 118.95(a) of the Act is replaced by the following:

(a) such of the deductions as the individual is entitled to under any of subsections 118(3) and (10) and sections 118.01 to 118.2, 118.5, 118.62 and 118.7, as can reasonably be considered wholly applicable to the taxation year, and

(2) Subsection (1) applies to the 2017 and subsequent taxation years.

30 (1) Clause 128(2)(e)(iii)(A) of the Act is replaced by the following:

(A) under any of sections 118 to 118.07, 118.2, 118.3, 118.5, 118.8 and 118.9,

(2) Subsection (1) applies to the 2017 and subsequent taxation years.

31 Subparagraphs (a)(i) to (iii) of the definition repayment period in subsection 146.02(1) of the Act are replaced by the following:

(i) at the beginning of the third calendar year within the participation period if, in each of the second and third calendar years within the participation period,

(A) for calendar years before 2017, the person would not be entitled to claim an amount under subsection 118.6(2) (as it read in the year) in respect of at least three months in the year, if that subsection were read without reference to paragraph (b) of the description of B in that subsection, and

(B) for calendar years after 2016, the person would not be a qualifying student (as defined in subsection 118.6(1)) in respect of at least three months in the year, if that definition were read without reference to its subparagraph (a)(ii),

(ii) at the beginning of the fourth calendar year within the participation period if, in each of the third and fourth calendar years within the participation period,

(iii) at the beginning of the fifth calendar year within the participation period if, in each of the fourth and fifth calendar years within the participation period,

32 (1) Paragraph (b) of the definition qualifying educational program in subsection 118.6(1) of the Act is replaced by the following:

(b) a benefit, if any, received by the student because of a loan made to the student in accordance with the requirements of the Canada Student Loans Act, Apprentice Loans Act or An Act respecting financial assistance for education expenses, R.S.Q., c. A-13.3, or because of financial assistance given to the student in accordance with the requirements of the Canada Student Financial Assistance Act, or

(2) Subsection (1) is deemed to have come into force on January 2, 2015.

Children's Fitness and Arts Tax Credits

33 (1) The portion of the description of B in subsection 118.031(2) of the Act before the formula in that description is replaced by the following:

B is the total of all amounts each of which is, in respect of a qualifying child of the individual for the taxation year, the lesser of $250 and the amount determined by the formula

(2) Section 118.031 of the Act, as amended by subsection (1), is repealed.

(3) Subsection (1) applies to the 2016 taxation year.

(4) Subsection (2) comes into force on January 1, 2017.

34 (1) Section 118.92 of the Act is replaced by the following:

Ordering of credits

118.92 In computing an individual's tax payable under this Part, the following provisions shall be applied in the following order: subsections 118(1) and (2), section 118.7, subsections 118(3) and (10) and sections 118.01, 118.02, 118.04, 118.041, 118.05, 118.06, 118.07, 118.3, 118.61, 118.5, 118.9, 118.8, 118.2, 118.1, 118.62 and 121.

(2) Subsection (1) applies to the 2017 and subsequent taxation years.

35 (1) The portion of the description of B in subsection 122.8(2) of the Act before the formula in that description is replaced by the following:

B is the total of all amounts each of which is, in respect of a qualifying child of the individual for the year, the lesser of $500 and the amount determined by the formula

(2) Subdivision a.3 of Division E of Part I of the Act, as amended by subsection (1), is repealed.

(3) Subsection (1) applies to the 2016 taxation year.

(4) Subsection (2) comes into force on January 1, 2017.

36 (1) Paragraph 152(1)(b) of the Act is replaced by the following:

(b) the amount of tax, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.9(2), 125.4(3), 125.5(3), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year.

(2) Paragraph 152(4.2)(b) of the Act is replaced by the following:

(b) redetermine the amount, if any, deemed by subsection 120(2) or (2.2), 122.5(3), 122.51(2), 122.7(2) or (3), 122.9(2), 127.1(1), 127.41(3) or 210.2(3) or (4) to be paid on account of the taxpayer's tax payable under this Part for the year or deemed by subsection 122.61(1) to be an overpayment on account of the taxpayer's liability under this Part for the year.

(3) Subsections (1) and (2) apply to the 2017 and subsequent taxation years.

37 (1) Paragraph 163(2)(c.4) of the Act is repealed.

(2) Subsection (1) comes into force on January 1, 2017.

38 (1) Part XCIV of the Income Tax Regulations is repealed.

(2) Subsection (1) comes into force on January 1, 2017.

Top Marginal Income Tax Rate — Consequential Amendments

39 (1) Paragraph (b) of the definition relevant tax factor in subsection 95(1) of the Act is replaced by the following:

(b) in any other case, 1.9;

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

40 (1) The descriptions of C and D in subsection 118.1(3) of the Act are replaced by the following:

C is the highest individual percentage for the year;

D is

(a) in the case of a trust (other than a graduated rate estate or a qualified disability trust as defined in subsection 122(3)), the amount, if any, by which its total gifts for the year exceeds $200, and

(b) in any other case, the lesser of

(i) the amount, if any, by which the individual's total gifts for the year exceeds $200, and

(ii) the amount, if any, by which the individual's amount taxable for the year for the purposes of subsection 117(2) exceeds the first dollar amount for the year referred to in paragraph 117(2)(e);

E is 29%; and

F is the amount, if any, by which the individual's total gifts for the year exceeds the total of $200 and the amount determined for D.

(2) Subsection (1) applies to the 2016 and subsequent taxation years and, for the purpose of calculating the amount determined for D, as enacted by subsection (1), an individual's total gifts for the year are determined without reference to gifts made before the 2016 taxation year.

41 (1) Subparagraph (i) of the description of A in paragraph 122(1)(c) of the Act is replaced by the following:

(i) the rate of tax payable under this Part by the trust for each taxation year referred to in the description of B were the highest individual percentage for the taxation year, and

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

42 (1) The Act is amended by adding the following after section 123.4:

Tax on personal services business income

123.5 There shall be added to the tax otherwise payable under this Part for each taxation year by a corporation an amount equal to 5% of the corporation's taxable income for the year from a personal services business.

(2) Subsection (1) applies to taxation years that end after 2015 except that, for taxation years that end after 2015 and begin before 2016, the reference to 5% in section 123.5 of the Act, as enacted by subsection (1), is to be read as a reference to the percentage determined by the formula

5% (A/B)

where

A is the number of days in the taxation year that are after 2015; and

B is the total number of days in the taxation year.

43 (1) Clauses 132(1)(a)(i)(A) and (B) of the Act are replaced by the following:

(A) 16.5% of the total of the trust's capital gains redemptions for the year, and

(B) the positive or negative amount, if any, that the Minister determines to be reasonable in the circumstances, after giving consideration to the percentages applicable in determining the trust's capital gains refunds for the year or any previous taxation year and the percentages applicable in determining the trust's refundable capital gains tax on hand at the end of the year, and

(2) The description of C in the definition capital gains redemptions in subsection 132(4) of the Act is replaced by the following:

C is 100/16.5 of the trust's refundable capital gains tax on hand at the end of the year,

(3) Paragraphs (a) and (b) of the description of A in the definition refundable capital gains tax on hand in subsection 132(4) of the Act are replaced by the following:

(a) the highest individual percentage for the year multiplied by its taxable income for the year,

(b) the highest individual percentage for the year multiplied by its taxed capital gains for the year, and

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

(5) Subsection (3) applies to the 2016 and subsequent taxation years and, in respect of previous years prior to 2016, the references to "the highest individual percentage for the year" are to be read as "29%".

44 (1) Paragraph 143.1(3)(c) of the Act is replaced by the following:

(c) if the trust is liable to pay tax under Part XII.2 in respect of the particular year, 60% of the fair market value of all property held by it at that time, and

(2) Paragraph 143.1(4)(a) of the Act is replaced by the following:

(a) if the trust is liable to pay tax under Part XII.2 in respect of the year, 60% of the fair market value of all property held by it at that time; and

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

45 (1) The description of A in subsection 207.8(2) of the Act is replaced by the following:

A is the highest individual percentage for the year;

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

46 (1) The portion of subsection 210.2(1) of the Act before paragraph (a) is replaced by the following:

Tax on income of trust

210.2 (1) Subject to section 210.3, if a trust deducts an amount under paragraph 104(6)(b) in computing its income under Part I for a taxation year, the trust shall pay a tax under this Part in respect of the year equal to 40% of the least of

(2) Paragraph 210.2(1)(c) of the Act is replaced by the following:

(3) The portion of subsection 210.2(2) of the Act before paragraph (a) is replaced by the following:

Amateur athlete trusts

(2) Notwithstanding subsection 210(2), a trust shall pay a tax under this Part in respect of a particular taxation year of the trust equal to 2/3 of the amount that is required by subsection 143.1(2) to be included in computing the income under Part I for a taxation year of a beneficiary under the trust, if

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

Taxation of Switch Fund Shares

47 The Act is modified to give effect to the proposals relating to Taxation of Switch Fund Shares described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Sales of Linked Notes

48 (1) Section 20 of the Act is amended by adding the following after subsection (14.1):

Sales of linked notes

(14.2) For the purposes of subsection (14), the amount determined by the following formula is deemed to be interest that accrued on an assigned or otherwise transferred debt obligation — that is, at any time, described in paragraph 7000(1)(d) of the Income Tax Regulations — to which the transferee has become entitled to for a period commencing before the time of the transfer and ending at that particular time that is not payable until after that particular time:

A − (B + C)

where

A is the price for which the debt obligation was assigned or otherwise transferred at the particular time,

B is the amount by which the price (despite section 261, converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) for which the debt obligation was issued exceeds the portion, if any, of the principal amount of the debt obligation (despite section 261, converted to Canadian currency using the exchange rate prevailing at the particular time, if the debt obligation is denominated in a foreign currency) that was repaid by the issuer on or before the particular time, and

C is the portion of the amount, if any, by which the amount determined for A exceeds the amount determined for B, that is reasonably attributable to an increase in the value of fixed rate interest payments to be received under the debt obligation because of a decrease in market interest rates (for debt obligations denominated in the currency of the debt obligation) from the time of issue of the debt obligation to the particular time.

(2) Subsection (1) applies to transfers occurring after September 2016.

49 (1) The definition security in subsection 230(1) of the Income Tax Regulations is amended by adding the following after paragraph (c):

(c.1) a debt obligation that is, at any time, described in paragraph 7000(1)(d);

(2) Subsection (1) comes into force on October 1, 2016.

Emissions Trading Regimes

50 The Act is modified to give effect to the proposals relating to Emissions Trading Regimes described in the Budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Small Business Tax Rate

51 (1) Subparagraph 82(1)(b)(i) of the Act is replaced by the following:

(i) the product of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year multiplied by 17%, and

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

52 (1) Paragraph 121(a) of the Act is replaced by the following:

(a) the product of the amount, if any, that is required by subparagraph 82(1)(b)(i) to be included in computing the individual's income for the year multiplied by 21/29; and

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

53 (1) Subsection 125(1.1) of the Act is amended by adding "and" at the end of paragraph (a) and by replacing paragraphs (b) to (e) with the following:

(b) that proportion of 17.5% that the number of days in the taxation year that are after 2015 is of the number of days in the taxation year.

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

Multiplication of the Small Business Deduction

54 (1) Subparagraphs 125(1)(a)(i) and (ii) of the Act are replaced by the following:

(i) the total of all amounts each of which is the amount of income of the corporation for the year from an active business carried on in Canada, other than an amount that is

(A) described in paragraph (a) of the description of A in the definition specified partnership income in subsection (7) for the year,

(B) described in subparagraph (a)(i) of the definition specified corporate income in subsection (7) for the year, or

(C) paid or payable to the corporation by another corporation with which it is associated, that is deemed by subsection 129(6) to be income for the year from an active business carried on by the corporation in circumstances where the associated corporation is not a Canadian-controlled private corporation or is a Canadian-controlled private corporation that has made an election under subsection 256(2) in respect of its taxation year in which the amount was paid or payable,

(ii) the specified partnership income of the corporation for the year, and

(ii.1) the specified corporate income of the corporation for the year

(2) Section 125 of the Act is amended by adding the following after subsection (3):

Reduction — business limit

(3.1) The business limit for the year of a corporation under subsection (2) or (3) is reduced by the total of all amounts each of which is the portion, if any, of the business limit that the corporation assigns to another corporation under subsection (3.2).

Assignment

(3.2) For the purpose of this section, a Canadian-controlled private corporation (in this subsection referred to as the "first corporation") may assign all or any portion of its business limit under subsection (2) or (3) for a taxation year of the first corporation to another Canadian-controlled private corporation (in this subsection referred to as the "second corporation") for a taxation year of the second corporation if

(a) the second corporation has income, for its taxation year, described in subparagraph (a)(i) of the definition specified corporate income in subsection (7) from the provision of services or property to the first corporation;

(b) the first corporation's taxation year ends in the second corporation's taxation year;

(d) a prescribed form is filed with the Minister by

(i) the first corporation in its return of income for its taxation year, and

(ii) the second corporation in its return of income for its taxation year.

(3) The description of A in the definition "specified partnership income" in subsection 125(7) is replaced by the following:

A is the total of all amounts each of which is an amount in respect of a partnership of which the corporation was a member, or a designated member, in the year equal to the lesser of

(a) the total of all amounts each of which is an amount in respect of an active business carried on in Canada by the corporation as a member, or a designated member, of the partnership determined by the formula

G – H

where

G is the total of all amounts each of which is

(i) the corporation's share of the income (determined in accordance with subdivision j of Division B) of the partnership for a fiscal period of the business that ends in the year,

(ii) income of the corporation for the year from the provision (directly or indirectly, in any manner whatever) of services or property to the partnership, or

(iii) an amount included in the corporation's income for the year in respect of the business under any of subsections 34.2(2), (3) and (12), and

H is the total of all amounts deducted in computing the corporation's income for the year from the business (other than amounts that were deducted in computing the income of the partnership from the business or the income of the corporation described under subparagraph (ii) of the description of G) or in respect of the business under subsection 34.2(4) or (11), and

(b) an amount equal to

(i) if the corporation was a member of the partnership, the corporation's specified partnership business limit for the year, and

(ii) if the corporation was a designated member of the partnership, the total of all amounts assigned to it under subsection (8) for the year and, where no such amounts have been assigned, nil, and

(4) Paragraph (b) of the description of B in the definition specified partnership income in subsection 125(7) of the Act is replaced by the following:

(b) the total of all amounts each of which is an amount in respect of a partnership of which the corporation was a member, or a designated member, in the year equal to the amount determined by the formula

N – O

where

N is the amount determined in respect of the partnership for the year under paragraph (a) of the description of A, and

O is the amount determined in respect of the partnership for the year

(i) if the corporation was a member of the partnership, under subparagraph (b)(i) of the description of A, and

(ii) if the corporation was a designated member of the partnership, under subparagraph (b)(ii) of the description of A;

(5) Subsection 125(7) of the Act is amended by adding the following in alphabetical order:

designated member, of a particular partnership in a taxation year, means a Canadian-controlled private corporation that provides (directly or indirectly, in any manner whatever) services or property to the particular partnership at any time in the corporation's taxation year where, at any time in the year,

(a) the corporation is not a member of the particular partnership; and

(b) either

(i) one of its shareholders holds a direct or indirect interest in the particular partnership, or

(ii) if subparagraph (i) does not apply,

(A) the corporation does not deal at arm's length with a person that holds a direct or indirect interest in the particular partnership, and

(B) it is not the case that all or substantially all of the corporation's income for the year from an active business is from providing services or property to

(I) persons with which the corporation deals at arm's length, or

(II) partnerships (other than the particular partnership) with which the corporation deals at arm's length, other than a partnership in which a person that does not deal at arm's length with the corporation holds a direct or indirect interest;

specified corporate income, of a corporation for a taxation year, means the lesser of

(a) the lesser of

(i) the total of all amounts each of which is income from an active business of the corporation for the year from the provision of services or property to a private corporation (directly or indirectly, in any manner whatever) if

(A) at any time in the year, the corporation (or one of its shareholders) or a person who does not deal at arm's length with the corporation (or one of its shareholders) holds a direct or indirect interest in the private corporation, and

(B) it is not the case that all or substantially all of the corporation's income for the year from an active business is from the provision of services or property to

(I) persons (other than the private corporation) with which the corporation deals at arm's length, or

(II) partnerships with which the corporation deals at arm's length, other than a partnership in which a person that does not deal at arm's length with the corporation holds a direct or indirect interest, and

(ii) the total of all amounts each of which is the portion, if any, of the business limit of a private corporation described in subparagraph (i) for a taxation year that the private corporation assigns to the corporation under subsection (3.2), and

(b) an amount that the Minister determines to be reasonable in the circumstances;

specified partnership business limit, of a person for a taxation year, at any particular time, means the amount determined by the formula

(K/L) × M – T

where

K is the total of all amounts each of which is the person's share of the income (determined in accordance with subdivision j of Division B) of a partnership of which the person was a member for a fiscal period ending in the year from an active business carried on in Canada,

L is the total of all amounts each of which is the income of the partnership for a fiscal period referred to in paragraph (a) of the description of A in the definition specified partnership income in this subsection from an active business carried on in Canada, and

M is the lesser of

(a) the amount of the business limit indicated in subsection (2) for a corporation that is not associated in a taxation year with one or more other Canadian-controlled private corporations, and

(b) the product obtained by the formula

(Q/R) × S

where

Q is the amount referred to in paragraph (a) of the description of M,

R is 365, and

S is the total of all amounts each of which is the number of days in the fiscal period of the partnership that ends in the year, and

T is the total of all amounts each of which is an amount, if any, that the person assigns under subsection (8);

(6) Section 125 of the Act is amended by adding the following after subsection (7):

Assignment — specified partnership business limit

(8) For the purpose of the definition specified partnership income in subsection (7), a person that is a member of a partnership in a taxation year may assign to a designated member of the partnership — for a taxation year of the designated member — all or any portion of the person's specified partnership business limit (determined without reference to this assignment) in respect of the person's taxation year if

(a) the person is described in paragraph (b) of the definition designated member in subsection (7) in respect of the designated member in the designated member's taxation year;

(b) the specified partnership business limit of the person is in respect of a fiscal period of the partnership that ends in the designated member's taxation year; and

(i) the designated member in its return of income for the designated member's taxation year, and

(ii) the person in its return of income for the person's taxation year.

Anti-avoidance

(9) If a corporation provides services or property to a person or partnership that holds a direct or indirect interest in a particular partnership or corporation and one of the reasons for the provision of the services or property to the person or partnership, instead of to the particular partnership or corporation, is to avoid the application of subparagraph (1)(a)(ii) or (ii.1) in respect of the income from the provision of the services or property, no amount in respect of the corporation's income from the provision of the services or property is to be included in the total amount determined under paragraph (1)(a).

(7) Subsections (1) to (6) apply to taxation years that begin on or after Budget Day, except that a person who is entitled to make an assignment under subsection 125(3.2) of the Act, as enacted by subsection (2), or under subsection 125(8) of the Act, as enacted by subsection (6), can make such an assignment in respect of the person's taxation year that begins before and ends on or after Budget Day if the assignment is made to another person for their taxation year that begins on or after Budget Day.

Avoidance of the Business Limit and Taxable Capital Limit

55 (1) Subsection of the 256(2) of the Act is replaced by the following:

Corporations associated through a third corporation

(2) For the purposes of

(a) this Act, subject to paragraph (b), two corporations are deemed to be associated with each other at a particular time if

(i) they would, but for this subsection, not be associated with each other at the particular time, and

(ii) each corporation is associated with, or is deemed by this subsection to be associated with, the same corporation (in this subsection referred to as the "third corporation") at the particular time; and

(b) section 125,

(i) if the third corporation is not a Canadian-controlled private corporation at the particular time, the two corporations are deemed not to be associated with each other at the particular time, and

(ii) if the third corporation is a Canadian-controlled private corporation that elects in prescribed form to apply this subparagraph in its taxation year that includes the particular time, the two corporations are deemed not to be associated with each other at the particular time and the business limit of the third corporation for its taxation year that includes the particular time is deemed to be nil.

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

Life Insurance Policies

56 The portion of subparagraph 53(1)(e)(iii) of the Act after clause (A) is replaced by the following:

exceeds the total of all amounts each of which is

(B) the adjusted cost basis (as defined in subsection 148(9)), immediately before the death, of

(I) if the death occurs before Budget Day, the policy to the partnership, and

(II) if the death occurs on or after Budget Day, a policyholder's interest in the policy, or

(C) the amount by which the fair market value of consideration given in respect of a disposition of an interest in the policy exceeds the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition if

(I) the death occurs on or after Budget Day, and

(II) the disposition was before Budget Day,

57 (1) Subparagraph (d)(iii) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:

(iii) the adjusted cost basis (as defined in subsection 148(9)), immediately before the death, of

(A) if the death occurs before Budget Day, the policy to the corporation, and

(B) if the death occurs on or after Budget Day, a policyholder's interest in the policy,

(2) Paragraph (d) of the definition capital dividend account in subsection 89(1) of the Act is amended by adding "or" at the end of subparagraph (iv) and by adding the following after that subparagraph:

(v) if the death occurs on or after Budget Day, an interest in the policy was disposed of before Budget Day and subsection 148(7) applied to the disposition, the total of

(A) the amount, if any, by which the fair market value of consideration given in respect of the disposition exceeds the total of

(I) the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition, and

(II) the amount of any reduction in the paid-up capital of any class of the capital stock of a corporation because of the application of paragraphs 148(7)(c) and (f) resulting from the disposition, and

(B) if the paid-up capital in respect of a class of shares of the capital stock of a corporation was increased before Budget Day as described in subparagraph 148(7)(f)(iii) in respect of the disposition, the amount, if any, by which the total reduction in the paid-up capital in respect of that class — not exceeding the amount of that increase — after that increase and before Budget Day (except to the extent that the amount of the reduction was deemed by subsection 84(4) or (4.1) to be a dividend received by a taxpayer) exceeds the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition,

(3) Subparagraph (b)(iii) of the definition paid-up capital in subsection 89(1) of the Act is replaced by the following:

(iii) where the particular time is after March 31, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act except subsections 51(3) and 66.3(2) and (4), sections 84.1 and 84.2, subsections 85(2.1), 85.1(2.1) and (8), 86(2.1), 87(3) and (9), paragraph 128.1(1)(c.3), subsections 128.1(2) and (3), section 135.2, subsections 138(11.7), 139.1(6) and (7), 148(7), 192(4.1) and 194(4.1) and sections 212.1 and 212.3,

58 Subsection 148(7) of the Act is replaced by the following:

Disposition at non-arm's length and similar cases

(7) If an interest of a policyholder in a life insurance policy is, at any time (referred to in this subsection as the "disposition time"), disposed of (other than a disposition under paragraph (2)(b)) by way of a gift, by distribution from a corporation, by operation of law only, or in any manner whatever to any person with whom the policyholder was not dealing at arm's length,

(a) the policyholder is deemed to become entitled to receive, at the disposition time, proceeds of the disposition equal to the total of

(i) the value of the interest at the disposition time, and

(ii) an amount equal to

(A) if the disposition time is before Budget Day, nil, and

(B) if the disposition time is on or after Budget Day, the amount, if any, by which the fair market value at the disposition time of the consideration given for the interest exceeds the value of the interest at the disposition time;

(b) the person that acquires the interest because of the disposition is deemed to acquire it, at the disposition time, at a cost equal to the total determined under paragraph (a) in respect of the disposition;

(c) in computing the paid-up capital in respect of each class of shares of the capital stock of a corporation at any time at or after the disposition time there shall be deducted the amount determined by the formula

(A − B) × C/A

where

A is the increase, if any, as a result of the disposition, in the paid-up capital in respect of all the shares of the capital stock of the corporation,

B is the total determined under paragraph (a) in respect of the disposition, and

C is the increase, if any, as a result of the disposition, in the paid-up capital in respect of the class of shares, computed without reference to this paragraph as it applies to the disposition;

(d) any contribution of capital to a corporation or partnership in connection with the disposition is deemed, to the extent that it exceeds the amount determined under subparagraph (a)(i) in respect of the disposition, not to result in a contribution of capital for the purpose of applying paragraphs 53(1)(c) and (e) at or after the disposition time;

(e) any contributed surplus of a corporation that arose in connection with the disposition is deemed, to the extent that it exceeds the amount determined under subparagraph (a)(i) in respect of the disposition, not to be contributed surplus for the purpose of applying subsection 84(1) at or after the disposition time; and

(f) if the disposition time is before Budget Day,

(i) paragraphs (c) to (e) and subparagraphs (ii) to (iv) apply in respect of the disposition only if at least one person whose life was insured under the policy before Budget Day is alive on Budget Day,

(ii) in applying paragraphs (c) to (e) in respect of the disposition, a reference in those paragraphs to "disposition time" is to be read as "the start of Budget Day",

(iii) if at any time ("the conversion time") before Budget Day the paid-up capital of a class of shares of the capital stock of a corporation was increased, the increase occurred as a result of any action by which the corporation converted any of its contributed surplus into paid-up capital in respect of the class of shares, the contributed surplus arose in connection with the disposition, and subsection 84(1) did not apply to deem the corporation to pay a dividend at the conversion time in respect of the increase, in computing the paid-up capital in respect of that class of shares on or after Budget Day, there shall be deducted the amount determined by the formula

(A − B × A/D) × C/A

where

A is the increase, if any, as a result of the conversion, in the paid-up capital in respect of all the shares of the capital stock of the corporation, computed without reference to this paragraph as it applies to the disposition,

B is the amount determined under subparagraph (a)(i) in respect of the disposition,

C is the increase, if any, as a result of the conversion, in the paid-up capital in respect of the class of shares, computed without reference to this paragraph as it applies to the disposition, and

D is the total amount of the corporation's contributed surplus that arose in connection with the disposition, and

(iv) in computing the paid-up capital in respect of each class of shares of the capital stock of a corporation on or after Budget Day, there shall be added the amount, if any, determined by the formula

A + B + C

where

A is the amount, in respect of that class, determined by the formula in paragraph (c) in respect of the disposition at the start of Budget Day,

B is the amount, in respect of that class, determined by subparagraph (iii) in respect of the disposition at the start of Budget Day, and

C is the paid-up capital in respect of that class immediately before the start of Budget Day.

59 The Act and Income Tax Regulations are further modified to make such amendments as are necessary to give effect to the proposals relating to Life Insurance Policies described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Debt-Parking to Avoid Foreign Exchange Gains

60 The Act is modified to give effect to the proposals relating to Debt-Parking to Avoid Foreign Exchange Gains described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

Valuation for Derivatives

61 (1) Section 10 of the Act is amended by adding the following after subsection (14):

Derivatives

(15) For the purposes of this section, property of a taxpayer that is a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement, or any similar agreement is deemed not to be inventory of the taxpayer.

(2) Subsection (1) applies to agreements entered into on or after Budget Day.

62 (1) Subsection 18(1) of the Act is amended by striking out "and" at the end of paragraph (v), by adding "and" at the end of paragraph (w) and by adding the following after that paragraph:

Derivatives — lower of cost and market

(x) any reduction in a taxation year in the value of a property if

(i) the method used by the taxpayer to value the property at the end of the year for purposes of computing the taxpayer's profit from a business or property is the cost at which the taxpayer acquired it or its fair market value at the end of the year, whichever is lower,

(ii) the property is described in subsection 10(15), and

(iii) the property is not disposed of by the taxpayer in the year.

(2) Subsection (1) applies to agreements entered into on or after Budget Day.

Eligible Capital Property

63 (1) Subsection 13(34) of the Act is replaced by the following:

Goodwill

(34) Where a taxpayer carries on a particular business,

(a) there is deemed to be a single goodwill property in respect of the particular business;

(b) if at any time the taxpayer acquires goodwill as part of an acquisition of all or a part of another business that is carried on, after the acquisition, as part of the particular business — or is deemed by subsection (35) to acquire goodwill in respect of the particular business — the cost of the goodwill is added at that time to the cost of the goodwill property in respect of the particular business;

(c) if at any time the taxpayer disposes of goodwill as part of the disposition of part of the particular business, receives proceeds of disposition a portion of which is attributable to goodwill and continues to carry on the particular business or is deemed by subsection (36) to dispose of goodwill in respect of the particular business,

(i) the taxpayer is deemed to dispose at that time of a portion of the goodwill property in respect of the particular business having a cost equal to the lesser of the cost of the goodwill property in respect of the particular business otherwise determined and the portion of the proceeds attributable to goodwill, and

(ii) the cost of the goodwill property in respect of the particular business is reduced at that time by the amount determined under subparagraph (i); and

(d) if paragraph (c) applies to more than one disposition of goodwill at the same time, that paragraph and subsection (38) apply as if each disposition had occurred separately in the order designated by the taxpayer or, if the taxpayer does not designate an order, in the order designated by the Minister.

Outlays not relating to property

(35) If at any time a taxpayer makes or incurs an outlay or expense on account of capital for the purpose of gaining or producing income from a business carried on by the taxpayer, the taxpayer is deemed to acquire at that time goodwill in respect of the business with a cost equal to the amount of the outlay or expense if no portion of the amount is

(a) the cost, or any part of the cost, of a property;

(b) deductible in computing the taxpayer's income from the business (determined without reference to this subsection);

(c) not deductible in computing the taxpayer's income from the business because of any provision of this Act (other than paragraph 18(1)(b)) or the Income Tax Regulations;

(d) paid or payable to a creditor of the taxpayer as, on account of or in lieu of payment of, any debt, or on account of the redemption, cancellation or purchase of any bond or debenture; or

(e) where the taxpayer is a corporation, partnership or trust, paid or payable to a person as a shareholder, partner or beneficiary, as the case may be, of the taxpayer.

Receipts not relating to property

(36) If at any time a taxpayer has or may become entitled to receive an amount (in this subsection referred to as the "receipt") on account of capital in respect of a business that is or was carried on by the taxpayer, the taxpayer is deemed to dispose, at that time, of goodwill in respect of the business for proceeds of disposition equal to the amount by which the receipt exceeds the total of all outlays or expenses that were made or incurred by the taxpayer for the purpose of obtaining the receipt and that were not otherwise deductible in computing the taxpayer's income, if the following conditions are satisfied (determined without reference to this subsection):

(a) the receipt is not included in computing the taxpayer's income, or deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts for the year or a preceding taxation year;

(b) the receipt does not reduce the cost or capital cost of a property or the amount of an outlay or expense; and

Class 14.1 — transitional rules

(37) If a taxpayer has incurred an eligible capital expenditure in respect of a business before January 1, 2017 and carries on the business on that day,

(a) at the beginning of that day, the total capital cost of all property of the taxpayer included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of the business, each of which was an eligible capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is deemed to be the amount determined by the formula

4/3 x (A + B – C)

where

A is the amount that is the cumulative eligible capital in respect of the business at the beginning of that day,

B is the amount determined for F in the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day) in respect of the business at the beginning of that day, and

C is the amount by which the total of all amounts determined, in respect of the business, for E or F in the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day), exceeds the total of all amounts determined for A to D.1 in that definition in respect of the business at the beginning of that day, including any adjustment required by subparagraph (d)(i);

(b) at the beginning of that day, the capital cost of each property of the taxpayer included in the class in respect of the business, each of which was an eligible capital property of the taxpayer immediately before that day or is the goodwill property in respect of the business, is to be determined as follows:

(i) the taxpayer shall designate the order in which the capital cost of each property that is not the goodwill property is determined and, if the taxpayer does not designate an order, the Minister may designate the order,

(ii) the capital cost of a particular property that is not the goodwill property in respect of the business is deemed to be the lesser of the eligible capital expenditure of the taxpayer in respect of the particular property and the amount by which the total capital cost of the class determined under paragraph (a) exceeds the total of all amounts each of which is an amount deemed by this subparagraph to be the capital cost of a property that is determined in advance of the determination of the capital cost of the particular property, and

(iii) the capital cost of the goodwill property is deemed to be the amount by which the total capital cost of the class exceeds the total of all amounts each of which is an amount deemed by subparagraph (ii) to be the capital cost of a property;

(c) an amount is deemed to have been allowed to the taxpayer in respect of property of the class under regulations made under paragraph 20(1)(a) in computing the taxpayer's income for taxation years ending before that day equal to the amount by which

(i) the total of the total capital cost of the class and the amount determined for C in paragraph (a)

exceeds

(ii) the amount determined for A in paragraph (a);

(d) if no taxation year of the taxpayer ends immediately before that day and the taxpayer would have had a particular amount included, because of paragraph 14(1)(b) (as that paragraph applied immediately before that day), in computing the taxpayer's income from the business for the particular taxation year that includes that day if the particular year had ended immediately before that day,

(i) for the purposes of the formula in paragraph (a), 3/2 of the particular amount is to be included in computing the amount for B of the definition cumulative eligible capital in subsection 14(5) (as that subsection applied immediately before that day),

(ii) the taxpayer is deemed to dispose of a capital property in respect of the business immediately before that day for proceeds of disposition equal to twice the particular amount,

(iii) if the taxpayer elects in writing to have this subparagraph apply and files that election with the Minister on or before the filing-due date for the particular year, subparagraph (ii) does not apply and an amount equal to the particular amount is to be included in computing the taxpayer's income from the business for the particular year,

(iv) if, on or after that day and in the particular year, the taxpayer acquires a property included in the class in respect of the business, or is deemed by subsection (35) to acquire goodwill in respect of the business, and the taxpayer elects in writing to have this subparagraph apply and files that election with the Minister on or before the filing-due date for the particular year,

(A) for the purposes of subparagraphs (ii) and (iii), the particular amount is to be reduced by the lesser of the particular amount otherwise determined and 1/2 of the capital cost of the property or goodwill acquired (determined without reference to clause (B)), and

(B) the capital cost of the property or goodwill acquired, as the case may be, is to be reduced by twice the amount by which the particular amount is reduced under clause (A), and

(v) if, in the particular year and before that day, the taxpayer disposed of a qualified farm or fishing property (as defined in subsection 110.6(1)) that was an eligible capital property of the taxpayer, the capital property disposed of under subparagraph (ii), if any, is deemed to be a qualified farm or fishing property to the extent of the lesser of

(A) the proceeds of disposition of the capital property, and

(B) the amount by which the proceeds of disposition of the qualified farm or fishing property exceed its cost.

Class 14.1 — transitional rule

(38) If at any time a taxpayer disposes of a particular property included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business and none of subsections 24(2), 70(5.1), 73(3.1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.4(3) apply to the disposition, then for the purpose of determining the undepreciated capital cost of the class, the taxpayer is deemed to have acquired a property of the class immediately before that time with a capital cost equal to the least of 1/4 of the proceeds of disposition of the particular property, 1/4 of the capital cost of the particular property and

(a) if the particular property is not goodwill and is acquired before January 1, 2017 by the taxpayer, 1/4 of the capital cost of the particular property;

(b) if the particular property is not goodwill, is acquired on or after that day by the taxpayer and subsection (39) deems an amount to have been allowed under paragraph 20(1)(a) in respect of the taxpayer's acquisition of the particular property, that amount;

(c) if the particular property (other than a property to which paragraph (b) applies) is not goodwill and is acquired on or after that day by the taxpayer — in circumstances under which any of subsections 24(2), 70(5.1), 73(3.1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.4(3) apply — from a person or partnership that would have been deemed under this subsection to have acquired a property if none of those subsections had applied, the capital cost of the property that would have been deemed under this subsection to have been acquired by the person or partnership;

(d) if the particular property is goodwill, the amount by which

(i) the total of all amounts each of which is

(A) 1/4 of the amount determined under subparagraph (37)(b)(iii) in respect of the business,

(B) if goodwill is acquired on or after that day by the taxpayer and subsection (39) deems an amount to have been allowed under paragraph 20(1)(a) in respect of the taxpayer's acquisition of the goodwill, that amount, or

(C) if goodwill is acquired (other than an acquisition in respect of which clause (B) applies) on or after that day by the taxpayer — in circumstances under which any of subsections 24(2), 70(5.1), 73(3.1), 85(1), 88(1), 98(3) and (5), 107(2) and 107.4(3) apply — from a person or partnership that would have been deemed under this subsection to have acquired a property if none of those subsections had applied, the capital cost of the property that would have been deemed under this subsection to have been acquired by the person or partnership

exceeds

(ii) the total of all amounts each of which is the capital cost of a property deemed by this subsection to have been acquired by the taxpayer at or before that time in respect of another disposition of goodwill in respect of the business; and

(e) in any other case, nil.

Class 14.1 — transitional rule

(39) If at any time a taxpayer acquires a particular property included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business, the acquisition of the particular property is part of a transaction or series of transactions or events that includes a disposition (in this subsection referred to as the "prior disposition") at or before that time of the particular property, or a similar property, by the taxpayer or a person or partnership that does not deal at arm's length with the taxpayer and subsection (38) applies in respect of the prior disposition, then for the purpose of determining the undepreciated capital cost of the class, an amount is deemed to have been allowed under paragraph 20(1)(a) to the taxpayer in respect of the particular property in computing the taxpayer's income for taxation years ending before the acquisition equal to the lesser of the capital cost of the property deemed by subsection (38) to be acquired in respect of the prior disposition and 1/4 of the capital cost of the particular property.

Class 14.1 — transitional rule

(40) For the purposes of subsections (37) to (39) and subsections 40(13) to (16), cumulative eligible capital, eligible capital expenditure, eligible capital property and exempt gains balance have the meanings that would be assigned to those expressions if the Act read as it did immediately before 2017.

(2) Subsection (1) comes into force on January 1, 2017.

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

(2) Subsection (1) comes into force on January 1, 2017.

65 (1) Paragraph 20(1)(b) of the Act is replaced by the following:

(b) the lesser of

(i) the portion of the amount (that is not otherwise deductible in computing the income of the taxpayer) that is an expense incurred in the year for the incorporation of a corporation, and

(ii) $3,000 less the total of all amounts each of which is an amount deducted by another taxpayer in respect of the incorporation of the corporation;

(2) Subsection (1) comes into force on January 1, 2017 and applies in respect of expenses incurred after 2016.

66 (1) Subparagraph 39(1)(a)(i) of the Act is repealed.

(2) Subsection (1) comes into force on January 1, 2017.

67 (1) Section 40 of the Act is amended by adding the following after subsection (12):

Class 14.1 — transitional rules

(13) Subsection (14) applies in respect of a disposition by a taxpayer of a property that is included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business of the taxpayer if

(a) the property was an eligible capital property of the taxpayer immediately before January 1, 2017;

(b) the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before that day is greater than nil;

(d) no amount is included in the taxpayer's income for a taxation year because of paragraph 13(37)(d).

Class 14.1 — transitional rules

(14) If this subsection applies in respect of a disposition at any time by a taxpayer of a property, the taxpayer's capital gain from the disposition is to be reduced by such amount as the taxpayer claims, not exceeding the amount by which

(a) 2/3 of the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before 2017

exceeds

(b) the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.

Class 14.1 — transitional rules

(15) Subsection (16) applies in respect of a disposition by an individual of a property that is included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business of the individual if

(a) the property was an eligible capital property of the individual immediately before January 1, 2017; and

(b) the individual's exempt gains balance in respect of the business is greater than nil for the taxation year that includes that day.

Class 14.1 — transitional rules

(16) If this subsection applies in respect of a disposition at any time by an individual of a property, the individual's capital gain from the disposition is to be reduced by such amount as the individual claims, not exceeding the amount by which

(a) twice the amount of the individual's exempt gains balance in respect of the business for the taxation year that includes January 1, 2017

exceeds the total of

(b) if paragraph 13(37)(d) applies in respect of the business for the individual's taxation year that includes January 1, 2017, the amount determined for D in paragraph 14(1)(b) for the purposes of paragraph 13(37)(d), and

(c) the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.

(2) Subsection (1) comes into force on January 1, 2017.

68 (1) The definition eligible capital property in section 54 of the Act is repealed.

(2) Subsection (1) comes into force on January 1, 2017.

69 (1) The definitions adjustment time, cumulative eligible capital, eligible capital amount, eligible capital expenditure and eligible capital property in subsection 248(1) of the Act are repealed.

(2) The definition property in subsection 248(1) of the Act is amended by striking out "and" at the end of paragraph (c), by adding "and" at the end of paragraph (d) and by adding the following after paragraph (d):

(e) the goodwill of a business;

(3) Subsections (1) and (2) come into force on January 1, 2017.

70 (1) Paragraph 1100(1)(a) of the Income Tax Regulations is amended by adding the following after subparagraph (xii)

(xii.1) of Class 14.1, 5 per cent,

(2) Subsection 1100(1) of the Regulations is amended by adding the following after paragraph (c):

Additional allowances — Class 14.1

(c.1) for a taxation year that ends before 2027, such additional amount as the taxpayer may claim in respect of property of Class 14.1 of Schedule II not exceeding

(i) 2% of the particular amount by which the undepreciated capital cost of the class at the beginning of 2017 exceeds the total of all amounts each of which is

(A) the amount of a deduction taken under paragraph 20(1)(a) of the Act in respect of the class for a preceding taxation year, and

(B) equal to three times the amount of the capital cost of a property deemed by subsection 13(38) of the Act to be acquired by the taxpayer in the year or a preceding year, and

(ii) the amount determined by the formula

A − B

where

A is the least of

(A) $ 500,

(B) the particular amount determined under subparagraph (i), and

(C) the undepreciated capital cost of the class to the taxpayer as of the end of the year (before making any deduction under paragraph 20(1)(a) of the Act in respect of the class for the year), and

B is the total of all amounts deductible for the year under paragraph 20(1)(a) of the Act in respect of the class because of subparagraph (i) or (a)(xii.1);

(3) Subsections (1) and (2) come into force on January 1, 2017.

71 (1) Schedule II of the Income Tax Regulations is amended by adding the following after Class 14:

Class 14.1

(5 per cent)

Property of a taxpayer that, in respect of a business of the taxpayer,

(a) is goodwill;

(b) was eligible capital property of the taxpayer immediately before January 1, 2017 and is owned by the taxpayer at the beginning of that day; or

(i) property that is tangible or corporeal property,

(ii) property that is not acquired for the purpose of gaining or producing income from business,

(iii) property in respect of which any amount is deductible (otherwise than as a result of being included in this class) in computing the taxpayer's income from the business,

(iv) property in respect of which any amount is not deductible in computing the taxpayer's income from the business because of any provision of the Act (other than paragraph 18(1)(b)) or these Regulations,

(v) an interest in a trust,

(vi) an interest in a partnership,

(vii) a share, bond, debenture, mortgage, hypothecary claim, note, bill or other similar property, or

(viii) property that is an interest in, or for civil law a right in, or a right to acquire, a property described in any of subparagraphs (i) to (vii).

(2) Subsection (1) comes into force on January 1, 2017.

72 The Act is further amended by making other consequential amendments as a result of sections 63 to 71.

Cross-Border Surplus Stripping

73 (1) Paragraph (k) of the definition proceeds of disposition in section 54 of the Act is replaced by the following:

(k) any amount that would otherwise be proceeds of disposition of property of a taxpayer to the extent that the amount is deemed by subsection 84.1(1), 212.1(1.1) or 212.2(2) to be a dividend paid to the taxpayer;

(2) Subsection (1) applies in respect of dispositions that occur on or after Budget Day.

74 (1) Section 212.1 of the Act is amended by replacing subsection (1) with the following:

Non-arm's length sales of shares by non-residents

212.1 (1) Subsection (1.1) applies if a non-resident person or designated partnership (in this subsection and subsections (1.1) and (1.2) referred to as the "non-resident person") disposes of shares (in this section referred to as the "subject shares") of any class of the capital stock of a corporation resident in Canada (in this section referred to as the "subject corporation") to another corporation resident in Canada (in this section referred to as the "purchaser corporation") with which the non-resident person does not (otherwise than because of a right referred to in paragraph 251(5)(b)) deal at arm's length and, immediately after the disposition, the subject corporation is connected (within the meaning that would be assigned by subsection 186(4) if the references in that subsection to "payer corporation" and "particular corporation" were read as "subject corporation" and "purchaser corporation", respectively) with the purchaser corporation.

Non-arm's length sales of shares by non-residents

(1.1) If this subsection applies,

(a) the amount, if any, by which the fair market value of any consideration (other than any share of the capital stock of the purchaser corporation) received by the non-resident person from the purchaser corporation for the subject shares exceeds the paid-up capital in respect of the subject shares immediately before the disposition shall, for the purposes of this Act, be deemed to be a dividend paid at the time of the disposition by the purchaser corporation to the non-resident person and received at that time by the non-resident person from the purchaser corporation; and

(b) in computing the paid-up capital at any particular time after March 31, 1977 of any particular class of shares of the capital stock of the purchaser corporation, there shall be deducted that proportion of the amount, if any, by which the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of all of the shares of the capital stock of the purchaser corporation exceeds the amount, if any, by which

(i) the paid-up capital in respect of the subject shares immediately before the disposition

exceeds

(ii) the fair market value of the consideration described in paragraph (a),

that the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of the particular class of shares is of the increase, if any, by virtue of the disposition, in the paid-up capital, computed without reference to this section as it applies to the disposition, in respect of all of the issued shares of the capital stock of the purchaser corporation.

Deemed consideration

(1.2) For the purposes of subsections (1) and (1.1), if, in the absence of this subsection, no consideration would be received by the non-resident person from the purchaser corporation for the subject shares, the non-resident person is deemed to receive consideration other than shares of the capital stock of the purchaser corporation from the purchaser corporation for the subject shares, the fair market value of which is equal to the amount, if any, by which the fair market value of the subject shares disposed of by the non-resident person exceeds the amount of any increase because of the disposition in the fair market value of the shares of the capital stock of the purchaser corporation.

(2) Subparagraph 212.1(2)(a)(ii) of the Act is replaced by the following:

(ii) the total that would be determined under subparagraph (i) if this Act were read without reference to paragraph (1.1)(b), and

(3) Paragraph 212.1(2)(b) of the Act is replaced by the following:

(b) the total of all amounts each of which is an amount required by paragraph (1.1)(b) to be deducted in computing the paid-up capital in respect of the particular class of shares after March 31, 1977 and before the particular time.

(4) The portion of paragraph 212.1(3)(a) of the Act before subparagraph (i) is replaced by the following:

(a) a non-resident person or designated partnership shall, for greater certainty, be deemed not to deal at arm's length with a purchaser corporation at the time of a disposition described in subsection (1) if the non-resident person or designated partnership was,

(5) The portion of paragraph 212.1(3)(b) of the Act before subparagraph (i) is replaced by the following:

(b) for the purposes of determining whether or not a particular non-resident person or designated partnership (in this paragraph referred to as the "taxpayer") referred to in paragraph (a) was a member of a group of less than 6 persons that controlled a corporation at any time, any shares of the capital stock of that corporation owned at that time by

(6) Subsection 212.1(4) of the Act is replaced by the following:

Where section does not apply

(4) Notwithstanding subsection (1), subsection (1.1) does not apply in respect of a disposition by a non-resident corporation of shares of a subject corporation to a purchaser corporation if

(a) immediately before the disposition, the purchaser corporation controlled the non-resident corporation; and

(b) it is not the case that, at the time of the disposition, or as part of a transaction or event or series of transactions or events that includes the disposition, a non-resident person or designated partnership

(i) owns, directly or indirectly, shares of the capital stock of the purchaser corporation, and

(ii) does not deal at arm's length with the purchaser corporation.

(7) Subsections (1) to (6) apply in respect of dispositions that occur on or after Budget Day.

75 (1) Paragraph 212.2(1)(b) of the Act is replaced by the following:

(b) subsection 212.1(1.1) does not apply in respect of the disposition;

(2) Subsection (1) applies in respect of dispositions that occur on or after Budget Day.

Extension of the Back-to-Back Rules

76 The Act is modified to give effect to the proposals relating to Extension of the Back-to-Back Rules described in the budget documents tabled by the Minister of Finance in the House of Commons on Budget Day.

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Date modified:: 2016-03-22

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Notice of Ways and Means Motions

Notice Of Ways and Means Motion to Amend The Income Tax Act and Other Tax Legislation