Government Bill (House of Commons) C-59 (44-1) - Royal Assent - Fall Economic Statement Implementation Act, 2023 - Parliament of Canada (2024)

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    ENGLISH
  • RECOMMENDATION
  • RECOMMENDATION
  • SUMMARY
  • SUMMARY
  • TABLE OF PROVISIONS
  • TABLE OF PROVISIONS
  • Short Title
  • Short Title
  • PART 1 Amendments to the Income Tax Act and to Other Legislation
  • PART 1 Amendments to the Income Tax Act and to Other Legislation
  • Income Tax Act
  • Income Tax Act
  • Excise Tax Act
  • Excise Tax Act
  • Excise Act, 2001
  • Excise Act, 2001
  • Income Tax Regulations
  • Income Tax Regulations
  • PART 2 Digital Services Tax Act
  • PART 2 Digital Services Tax Act
  • Enactment of Act
  • Enactment of Act
  • Making of Regulations
  • Making of Regulations
  • Consequential Amendments
  • Consequential Amendments
  • Access to Information Act
  • Access to Information Act
  • Bankruptcy and Insolvency Act
  • Bankruptcy and Insolvency Act
  • Criminal Code
  • Criminal Code
  • Excise Tax Act
  • Excise Tax Act
  • Export Development Act
  • Export Development Act
  • Financial Administration Act
  • Financial Administration Act
  • Tax Court of Canada Act
  • Tax Court of Canada Act
  • Customs Act
  • Customs Act
  • Income Tax Act
  • Income Tax Act
  • Canada Revenue Agency Act
  • Canada Revenue Agency Act
  • Air Travellers Security Charge Act
  • Air Travellers Security Charge Act
  • Excise Act, 2001
  • Excise Act, 2001
  • Underused Housing Tax Act
  • Underused Housing Tax Act
  • Select Luxury Items Tax Act
  • Select Luxury Items Tax Act
  • PART 3 Amendments to the Excise Tax Act and to Related Legislation
  • PART 3 Amendments to the Excise Tax Act and to Related Legislation
  • Excise Tax Act
  • Excise Tax Act
  • Financial Services and Financial Institutions (GST/HST) Regulations
  • Financial Services and Financial Institutions (GST/HST) Regulations
  • Joint Venture (GST/HST) Regulations
  • Joint Venture (GST/HST) Regulations
  • Input Tax Credit Information (GST/HST) Regulations
  • Input Tax Credit Information (GST/HST) Regulations
  • Coordinating Amendments
  • Coordinating Amendments
  • PART 4 Amendments to the Excise Act, 2001 and to Related Legislation
  • PART 4 Amendments to the Excise Act, 2001 and to Related Legislation
  • Excise Act, 2001
  • Excise Act, 2001
  • Returning Persons Exemption Regulations
  • Returning Persons Exemption Regulations
  • Regulations Respecting Excise Licences and Registrations
  • Regulations Respecting Excise Licences and Registrations
  • Stamping and Marking of Tobacco, Cannabis and Vaping Products Regulations
  • Stamping and Marking of Tobacco, Cannabis and Vaping Products Regulations
  • PART 5 Various Measures
  • PART 5 Various Measures
  • DIVISION 1 Federal Financial Institutions
  • DIVISION 1 Federal Financial Institutions
  • SUBDIVISION A Information Technology Activities
  • SUBDIVISION A Information Technology Activities
  • SUBDIVISION B Virtual Meetings
  • SUBDIVISION B Virtual Meetings
  • DIVISION 2 Leave Related to Pregnancy Loss and Bereavement Leave
  • DIVISION 2 Leave Related to Pregnancy Loss and Bereavement Leave
  • Canada Labour Code
  • Canada Labour Code
  • An Act to amend the Criminal Code and the Canada Labour Code
  • An Act to amend the Criminal Code and the Canada Labour Code
  • Transitional Provision
  • Transitional Provision
  • Coordinating Amendments
  • Coordinating Amendments
  • Coming into Force
  • Coming into Force
  • DIVISION 3 Canada Water Agency Act
  • DIVISION 3 Canada Water Agency Act
  • Enactment of Act
  • Enactment of Act
  • Consequential Amendments
  • Consequential Amendments
  • Coming into Force
  • Coming into Force
  • DIVISION 4 Tobacco and Vaping Products Act
  • DIVISION 4 Tobacco and Vaping Products Act
  • DIVISION 5 Canadian Payments Act
  • DIVISION 5 Canadian Payments Act
  • Amendments to the Act
  • Amendments to the Act
  • Coming into Force
  • Coming into Force
  • DIVISION 6 Measures Related to Competition
  • DIVISION 6 Measures Related to Competition
  • Competition Act
  • Competition Act
  • Competition Tribunal Act
  • Competition Tribunal Act
  • Transitional Provisions
  • Transitional Provisions
  • Consequential Amendment to An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage ...
  • Consequential Amendment to An Act to promote the efficiency and adaptability of the Canadian economy by regulating certain activities that discourage ...
  • Coordinating Amendment
  • Coordinating Amendment
  • Coming into Force
  • Coming into Force
  • DIVISION 7 Public Post-Secondary Educational Institutions
  • DIVISION 7 Public Post-Secondary Educational Institutions
  • Bankruptcy and Insolvency Act
  • Bankruptcy and Insolvency Act
  • Companies’ Creditors Arrangement Act
  • Companies’ Creditors Arrangement Act
  • Transitional Provisions
  • Transitional Provisions
  • Coming into Force
  • Coming into Force
  • DIVISION 8 Money Laundering, Terrorist Financing, Sanctions Evasion and Other Measures
  • DIVISION 8 Money Laundering, Terrorist Financing, Sanctions Evasion and Other Measures
  • SUBDIVISION A Proceeds of Crime (Money Laundering) and Terrorist Financing Act
  • SUBDIVISION A Proceeds of Crime (Money Laundering) and Terrorist Financing Act
  • SUBDIVISION B Criminal Code
  • SUBDIVISION B Criminal Code
  • DIVISION 9 Federal-Provincial Fiscal Arrangements Act
  • DIVISION 9 Federal-Provincial Fiscal Arrangements Act
  • Amendment to the Act
  • Amendment to the Act
  • Coming into Force
  • Coming into Force
  • DIVISION 10 Public Sector Pension Investment Board Act
  • DIVISION 10 Public Sector Pension Investment Board Act
  • DIVISION 11 Department of Housing, Infrastructure and Communities Act
  • DIVISION 11 Department of Housing, Infrastructure and Communities Act
  • Enactment of Act
  • Enactment of Act
  • Transitional Provisions
  • Transitional Provisions
  • Consequential Amendments
  • Consequential Amendments
  • Repeal
  • Repeal
  • Coming into Force
  • Coming into Force
  • DIVISION 12 Measures Related to Placement or Arrival of Children
  • DIVISION 12 Measures Related to Placement or Arrival of Children
  • Employment Insurance Act
  • Employment Insurance Act
  • Canada Labour Code
  • Canada Labour Code
  • Coming into Force
  • Coming into Force

First Session, Forty-fourth Parliament,

70-71 Elizabeth II – 1-2 Charles III, 2021-2022-2023-2024

STATUTES OF CANADA 2024

ASSENTED TO

June 20, 2024

BILL C-59

RECOMMENDATION

Her Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circ*mstances, in the manner and for the purposes set out in a measure entitled “An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023”.

SUMMARY

Part 1 implements certain measures in respect of the Income Tax Act and the Income Tax Regulations by

(a)limiting the deductibility of net interest and financing expenses by certain corporations and trusts, consistent with certain Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations;

(b)implementing hybrid mismatch rules consistent with the Organisation for Economic Co-operation and Development and the Group of Twenty Base Erosion and Profit Shifting project recommendations regarding cross-border tax avoidance structures that exploit differences in the income tax laws of two or more countries to produce “deduction/non-inclusion mismatches”;

(c)allowing expenditures incurred in the exploration and development of all lithium to qualify as Canadian exploration expenses and Canadian development expenses;

(d)ensuring that only genuine intergenerational business transfers are excluded from the anti-surplus stripping rule in section 84.‍1 of the Income Tax Act;

(e)denying the dividend received deduction for dividends received by Canadian financial institutions on certain shares that are held as mark-to-market property;

(f)increasing the rate of the rural supplement for Climate Action Incentive payments (CAIP) from 10% to 20% for the 2023 and subsequent taxation years as well as referencing the 2016 census data for the purposes of the CAIP rural supplement eligibility for the 2023 and 2024 taxation years;

(g)providing a refundable investment tax credit to qualifying businesses for eligible carbon capture, utilization and storage equipment;

(h)providing a refundable investment tax credit to qualifying businesses for eligible clean technology equipment;

(i)introducing, under certain circ*mstances, labour requirements in relation to the new refundable investment tax credits for eligible carbon capture, utilization and storage equipment as well as eligible clean technology equipment;

(j)removing the requirement that credit unions derive no more than 10% of their revenue from sources other than certain specified sources;

(k)permitting a qualifying family member to acquire rights as successor of a holder of a Registered Disability Savings Plan following the death of that plan’s last remaining holder who was also a qualifying family member;

(l)implementing consequential changes of a technical nature to facilitate the operation of the existing rules for First Home Savings Accounts;

(m)introducing a tax of 2% on the net value of equity repurchases by certain Canadian corporations, trusts and partnerships whose equity is listed on a designated stock exchange;

(n)exempting certain fees from the refundable tax applicable to contributions under retirement compensation arrangements;

(o)introducing a technical amendment to the provision that authorizes the sharing of taxpayer information for the purposes of the Canadian Dental Care Plan;

(p)implementing a number of amendments to the general anti-avoidance rule (GAAR) as well as introducing a new penalty applicable to transactions subject to the GAAR and extending the normal reassessment period for the GAAR by three years in certain circ*mstances;

(q)facilitating the creation of employee ownership trusts;

(r)introducing specific anti-avoidance rules in relation to corporations referred to as substantive CCPCs; and

(s)extending the phase-out by three years, and expanding the eligible activities, in relation to the reduced tax rates for certain zero-emission technology manufacturers.

It also makes related and consequential amendments to the Excise Tax Act and the Excise Act, 2001.

Part 2 enacts the Digital Services Tax Act and its regulations. That Act provides for the implementation of an annual tax of 3% on certain types of digital services revenue earned by businesses that meet certain revenue thresholds. It sets out rules for the purposes of establishing liability for the tax and also sets out applicable reporting and filing requirements. To promote compliance with its provisions, that Act includes modern administration and enforcement provisions generally aligned with those found in other taxation statutes. Finally, this Part also makes related and consequential amendments to other texts to ensure proper implementation of the tax and cohesive and efficient administration by the Canada Revenue Agency.

Part 3 implements certain Goods and Services Tax/Harmonized Sales Tax (GST/HST) measures by

(a)ensuring that an interest in a corporation that does not have its capital divided into shares is treated as a financial instrument for GST/HST purposes;

(b)ensuring that interest and dividend income from a closely related partnership is not included in the determination of whether a person is a de minimis financial institution for GST/HST purposes;

(c)ensuring that an election related to supplies made within a closely related group of persons that includes a financial institution may not be revoked on a retroactive basis without the permission of the Minister of National Revenue;

(d)making technical amendments to an election that allows electing members of a closely related group to treat certain supplies made between them as having been made for nil consideration;

(e)ensuring that certain supplies between the members of a closely related group are not inadvertently taxed under the imported taxable supply rules that apply to financial institutions;

(f)raising the income threshold for the requirement to file an information return by certain financial institutions;

(g)allowing up to seven years to assess the net tax adjustments owing by certain financial institutions in respect of the imported taxable supply rules;

(h)expanding the GST/HST exemption for services rendered to individuals by certain health care practitioners to include professional services rendered by psychotherapists and counselling therapists;

(i)providing relief in relation to the GST/HST treatment of payment card clearing services;

(j)allowing the joint venture election to be made in respect of the operation of a pipeline, rail terminal or truck terminal that is used for the transportation of oil, natural gas or related products;

(k)raising the input tax credit (ITC) documentation thresholds from $30 to $100 and from $150 to $500 and allowing billing agents to be treated as intermediaries for the purposes of the ITC information rules; and

(l)extending the 100% GST rebate in respect of new purpose-built rental housing to certain cooperative housing corporations.

It also implements an excise tax measure by creating a joint election mechanism to specify who is eligible to claim a rebate of excise tax for goods purchased by provinces for their own use.

Part 4 implements certain excise measures by

(a)allowing vaping product licensees to import packaged vaping products for stamping by the licensee and entry into the Canadian duty-paid market as of January 1, 2024;

(b)permitting all cannabis licensees to elect to remit excise duties on a quarterly rather than a monthly basis, starting from the quarter that began on April 1, 2023;

(c)amending the marking requirements for vaping products to ensure that the volume of the vaping substance is marked on the package;

(d)requiring that a person importing vaping products must be at least 18 years old; and

(e)introducing administrative penalties for certain infractions related to the vaping taxation framework.

Part 5 enacts and amends several Acts in order to implement various measures.

Subdivision A of Division 1 of Part 5 amends Subdivision A of Division 16 of Part 6 of the Budget Implementation Act, 2018, No. 1 to clarify the scope of certain non-financial activities in which federal ‚financial institutions may engage and to remove certain discrepancies between the English and French versions of that Act.

Subdivision B of Division 1 of Part 5 amends the Trust and Loan Companies Act, the Bank Act and the Insurance Companies Act to, among other things, permit federal financial institutions governed by those Acts to hold certain meetings by virtual means without having to obtain a court order and to permit voting during those meetings by virtual means.

Division 2 of Part 5 amends the Canada Labour Code to, among other things, provide a leave of absence of three days in the event of a pregnancy loss and modify certain provisions related to bereavement leave.

Division 3 of Part 5 enacts the Canada Water Agency Act. That Act establishes the Canada Water Agency, whose role is to assist the Minister of the Environment in exercising or performing that Minister’s powers, duties and functions in relation to fresh water. The Division also makes consequential amendments to other Acts.

Division 4 of Part 5 amends the Tobacco and Vaping Products Act to, among other things,

(a)authorize the making of regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers for the purpose of recovering the costs incurred by His Majesty in right of Canada in relation to the carrying out of the purpose of that Act;

(b)provide for related administration and enforcement measures; and

(c)require information relating to the fees or charges to be made available to the public.

Division 5 of Part 5 amends the Canadian Payments Act to, among other things, provide that additional persons are entitled to be members of the Canadian Payments Association and clarify the composition of that Association’s Stakeholder Advisory Council.

Division 6 of Part 5 amends the Competition Act to, among other things,

(a)modernize the merger review regime, including by modifying certain notification rules, clarifying that Act’s application to labour markets, allowing the Competition Tribunal to consider the effect of changes in market share and the likelihood of coordination between competitors following a merger, extending the limitation period for mergers that were not the subject of a notification to the Commissioner of Competition and placing a temporary restraint on the completion of certain mergers until the Tribunal has disposed of any application for an interim order;

(b)improve the effectiveness of the provisions that address anti-competitive conduct, including by allowing the Commissioner to review the effects of past agreements and arrangements, ensuring that an order related to a refusal to deal may address a refusal to supply a means of diagnosis or repair and ensuring that representations of a product’s benefits for protecting or restoring the environment must be supported by adequate and proper tests and that representations of a business or business activity for protecting or restoring the environment must be supported by adequate and proper substantiation;

(c)strengthen the enforcement framework, including by creating new remedial orders, such as administrative monetary penalties, with respect to those collaborations that harm competition, by creating a civilly enforceable procedure to address non-compliance with certain provisions of that Act and by broadening the classes of persons who may bring private cases before the Tribunal and providing for the availability of monetary payments as a remedy in those cases; and

(d)provide for new procedures, such as the certification of agreements or arrangements related to protecting the environment and a remedial process for reprisal actions.

The Division also amends the Competition Tribunal Act to prevent the Competition Tribunal from awarding costs against His Majesty in right of Canada, except in specified circ*mstances.

Finally, the Division makes a consequential amendment to one other Act.

Division 7 of Part 5 amends the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act to exclude from their application prescribed public post-secondary educational institutions.

Subdivision A of Division 8 of Part 5 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to, among other things,

(a)provide that, if a person or entity referred to in section 5 of that Act has reasonable grounds to suspect possible sanctions evasion, the relevant information is reported to the Financial Transactions and Reports Analysis Centre of Canada;

(b)add reporting requirements for persons and entities providing certain services in respect of private automatic banking machines;

(c)require declarations respecting money laundering, the financing of terrorist activities and sanctions evasion to be made in relation to the importation and exportation of goods; and

(d)authorize the Financial Transactions and Reports Analysis Centre of Canada to disclose designated information to the Department of the Environment and the Department of Fisheries and Oceans, subject to certain conditions.

It also amends the Budget Implementation Act, 2023, No. 1 in relation to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and makes consequential amendments to other Acts and a regulation.

Subdivision B of Division 8 of Part 5 amends the Criminal Code to, among other things,

(a)in certain circ*mstances, provide that a court may infer the knowledge or belief or recklessness required in relation to the offence of laundering proceeds of crime and specify that it is not necessary for the prosecutor to prove that the accused knew, believed they knew or was reckless as to the specific nature of the designated offence;

(b)remove, in the context of the special warrants and restraint order in relation to proceeds of crime, the requirement for the Attorney General to give an undertaking, as well as permit a judge to attach conditions to a special warrant for search and seizure of property that is proceeds of crime; and

(c)modify certain provisions relating to the production order for financial data to include elements specific to accounts associated with digital assets.

It also makes consequential amendments to the Seized Property Management Act and the Forfeited Property Sharing Regulations.

Division 9 of Part 5 retroactively amends section 42 of the Federal-Provincial Fiscal Arrangements Act to specify the payments about which information must be published on a Government of Canada website, as well as the information that must be published.

Division 10 of Part 5 amends the Public Sector Pension Investment Board Act to increase the number of directors in the Public Sector Pension Investment Board, as well as to provide for consultation with the portion of the National Joint Council of the Public Service of Canada that represents employees when certain candidates are included on the list for proposed appointment as directors.

Division 11 of Part 5 enacts the Department of Housing, Infrastructure and Communities Act, which establishes the Department of Housing, Infrastructure and Communities, confers on the Minister of Infrastructure and Communities various responsibilities relating to public infrastructure and confers on the Minister of Housing various responsibilities relating to housing and the reduction and prevention of homelessness. The Division also makes consequential amendments to other Acts and repeals the Canada Strategic Infrastructure Fund Act.

Division 12 of Part 5 amends the Employment Insurance Act to, among other things, create a benefit of 15 weeks for claimants who are carrying out responsibilities related to

(a)the placement with the claimant of one or more children for the purpose of adoption; or

(b)the arrival of one or more new-born children of the claimant into the claimant’s care, in the case where the person who will be giving or gave birth to the child or children is not, or is not intended to be, a parent of the child or children.

The Division also amends the Canada Labour Code to create a leave of absence of up to 16 weeks for an employee to carry out such responsibilities.

Available on the House of Commons website at the following address:

www.ourcommons.ca

TABLE OF PROVISIONS

An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023

Short Title

1

Fall Economic Statement Implementation Act, 2023

PART 1

Amendments to the Income Tax Act and to Other Legislation

2

PART 2

Digital Services Tax Act

96

Enactment of Act

An Act respecting a digital services tax

Short Title

1

Digital Services Tax Act

PART 1

Interpretation and Application

2

Definitions

3

Negative or undefined results

4

Determination of revenue

5

Short fiscal year — global revenue threshold

6

Continuity of consolidated group

7

Mergers

8

Arm’s length

9

His Majesty

PART 2

Liability for Tax

10

Tax payable

PART 3

Canadian Digital Services Revenue

11

Definitions

12

Basic rule

DIVISION A 

Canadian Online Marketplace Services Revenue

13

Definition of online marketplace services revenue

14

Canadian online marketplace services revenue

DIVISION B 

Canadian Online Advertising Services Revenue

15

Definition of online advertising services revenue

16

Canadian online advertising services revenue

DIVISION C 

Canadian Social Media Services Revenue

17

Definition of social media services revenue

18

Canadian social media services revenue

DIVISION D 

Canadian User Data Revenue

19

Definition of user data revenue

20

Canadian user data revenue

DIVISION E 

Rules Relating to Determination of Canadian Digital Services Revenue

21

Revenue of new constituent entities

22

Attribution of activity

PART 4

Taxable Canadian Digital Services Revenue

23

Definitions

24

Determination

PART 5

Miscellaneous

DIVISION A 

Trustees and Receivers

25

Definitions

26

Trustee as agent or mandatary

27

Tax payable for bankruptcy

28

Filing and payment

29

Tax payable for receivership

30

Filing and payment

31

Non-calendar year periods

32

Certificates for receivers

DIVISION B 

Partnerships

33

Partnerships

DIVISION C 

Anti-avoidance

34

Definitions

35

Series of transactions

PART 6

General Provisions, Administration and Enforcement

36

Definitions

DIVISION A 

Duties of Minister

37

Minister’s duty

38

Staff

39

Administration of oaths

40

Waiving the filing of documents

DIVISION B 

Registration

41

Requirement to register

42

Application to register

43

De-registration

44

Notice of intent

DIVISION C 

Returns

45

Requirement to file return

46

Election — designated entity

47

Extension of time

48

Demand for return

DIVISION D 

Payments

49

Payments

50

Manner and form of payments

51

Assessment of another constituent entity

52

Definition of transaction

53

Payment in Canadian dollars

54

Definition of electronic payment

55

Small amounts owing by a person

DIVISION E 

Interest

56

Compound interest

57

Waiving or cancelling interest

DIVISION F 

Administrative Charge under Financial Administration Act

58

Dishonoured instruments

DIVISION G 

Refunds

59

Statutory recovery rights

60

Refund — payment in error

61

Restriction — application to other debts

62

Restriction — unfulfilled filing requirements

63

Restriction — trustees

64

Overpayment of refund or interest

DIVISION H 

Records and Information

65

Keeping records

66

Requirement to provide information or records

DIVISION I 

Assessments

67

Assessment

68

Notice of assessment

69

Payment by Minister on assessment

70

Limitation period for assessments

71

Assessment deemed valid and binding

DIVISION J 

Objections to Assessment

72

Objections to assessment

73

Extension of time by Minister

DIVISION K 

Appeal

74

Extension of time by Tax Court of Canada

75

Appeal to Tax Court of Canada

76

Extension of time to appeal

77

Limitation on appeals

78

Institution of appeals

79

Disposition of appeal

80

References to Tax Court of Canada

81

Reference of common questions to Tax Court

82

Payment by the Minister on appeal

DIVISION L 

Penalties

83

Failure to register when required

84

Failure to file return when required

85

Failure to provide information

86

Unreasonable appeal

87

Definitions

88

General penalty

89

Payment of penalties

90

Waiving or cancelling penalties

DIVISION M 

Offences and Punishment

91

Failure to file or comply

92

Offences for false or deceptive statement

93

Failure to pay tax

94

Offence — confidential information

95

General offence

96

Defence of due diligence

97

Compliance orders

98

Officers of corporations, etc.

99

Power to decrease punishment

100

Information or complaint

DIVISION N 

Inspections

101

Authorized person

102

Compliance order

103

Search warrants

104

Definition of foreign-based information or record

105

Inquiry

106

Copies

107

Compliance

DIVISION O 

Confidentiality of Information

108

Definitions

DIVISION P 

Collection

109

Definitions

110

Collection restrictions

111

Security

112

Certificates

113

Garnishment

114

Recovery by deduction or set-off

115

Acquisition of debtor’s property

116

Money seized from debtor

117

Seizure if failure to pay

118

Person leaving Canada

119

Authorization to proceed without delay

DIVISION Q 

Evidence and Procedure

120

Service

121

Timing of receipt

122

Proof of sending or service by mail

PART 7

Regulations

123

Regulations

124

Positive or negative amount — regulations

125

Incorporation by reference — limitation removed

126

Certificates and registrations not statutory instruments

Making of Regulations

97

Making

Digital Services Tax Regulations

Interpretation

1

Definitions

Prescribed Rates of Interest

2

Interest to be paid to the Receiver General

Prescribed Thresholds

3

Global revenue threshold

4

In-scope revenue threshold

5

Registration threshold

Prescribed Rate of Tax

6

Rate

Prescribed Deduction

7

Deduction amount

PART 3

Amendments to the Excise Tax Act and to Related Legislation

129

PART 4

Amendments to the Excise Act, 2001 and to Related Legislation

145

PART 5

Various Measures

DIVISION 1

Federal Financial Institutions

168

DIVISION 2

Leave Related to Pregnancy Loss and Bereavement Leave

197

DIVISION 3

Canada Water Agency Act

209

Enactment of Act

An Act respecting the Canada Water Agency

Short Title

1

Canada Water Agency Act

Definitions

2

Definitions

Canada Water Agency

3

Establishment

4

Head office

5

Minister to preside

6

Delegation to Agency

President

7

Appointment

8

Chief executive officer

9

Remuneration

General Provisions

10

Officers and employees

11

Other government services and facilities

12

Provision of services and facilities

13

Committees

Transitional Provisions

14

Definitions

15

Position

16

Appropriations

17

Transfer of powers, duties and functions

18

Clarification

DIVISION 4

Tobacco and Vaping Products Act

217

DIVISION 5

Canadian Payments Act

219

DIVISION 6

Measures Related to Competition

231

DIVISION 7

Public Post-Secondary Educational Institutions

273

DIVISION 8

Money Laundering, Terrorist Financing, Sanctions Evasion and Other Measures

278

DIVISION 9

Federal-Provincial Fiscal Arrangements Act

318

DIVISION 10

Public Sector Pension Investment Board Act

320

DIVISION 11

Department of Housing, Infrastructure and Communities Act

323

Enactment of Act

An Act to establish the Department of Housing, Infrastructure and Communities

Short Title

1

Department of Housing, Infrastructure and Communities Act

Definition

2

Definition of Department

Department of Housing, Infrastructure and Communities

3

Department established

4

Deputy Minister

Minister of Infrastructure and Communities

5

Minister of Infrastructure and Communities

6

Powers, duties and functions

Minister of Housing

7

Appointment

8

Powers, duties and functions

9

Use of departmental services and facilities

Provisions Applicable to Both Ministers

10

No Minister appointed

11

General duties and powers

12

Committees

DIVISION 12

Measures Related to Placement or Arrival of Children

342

70-71 Elizabeth II – 1-2 Charles III

CHAPTER 15

An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023

[Assented to 20th June, 2024]

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

Short Title

Short title

1This Act may be cited as the Fall Economic Statement Implementation Act, 2023.

PART 1

Amendments to the Income Tax Act and to Other Legislation

R.‍S.‍, c. 1 (5th Supp.‍)

Income Tax Act

2(1)Subsection 12(1) of the Income Tax Act is amended by adding the following after paragraph (l.‍1):

  • Partnership — interest and financing expenses add back

    (l.‍2)the amount determined by the formula

    A × B

    where

    A
    is the total of all amounts each of which is an amount determined under paragraph (h) of the description of A in the definition interest and financing expenses in subsection 18.‍2(1) in respect of the taxpayer for the taxation year, and
    B
    is

    (i)if the taxpayer is an excluded entity for the year (as defined in subsection 18.‍2(1)), nil, and

    (ii)in any other case, the proportion determined under the first formula in subsection 18.‍2(2) in respect of the taxpayer for the year;

(2)Paragraph 12(1)‍(n.‍3) of the Act is replaced by the following:

  • Retirement compensation arrangement

    (n.‍3)the total of all amounts received by the taxpayer in the year in the course of a business out of or under a retirement compensation arrangement (including amounts received in respect of the arrangement under subsection 207.‍71(3)) to which the taxpayer, another person who carried on a business that was acquired by the taxpayer, or any person with whom the taxpayer or that other person does not deal at arm’s length, has contributed an amount that was deductible under paragraph 20(1)‍(r) in computing the contributor’s income for a taxation year;

(3)Paragraph 12(1)‍(t) of the Act is replaced by the following:

  • Investment tax credit

    (t)the amount deducted under subsection 127(5) or (6) or 127.‍44(3) in respect of a property acquired or an expenditure made in a preceding taxation year in computing the taxpayer’s tax payable for a preceding taxation year to the extent that it was not included in computing the taxpayer’s income for a preceding taxation year under this paragraph or is not included in an amount determined under paragraph 13(7.‍1)‍(e) or 37(1)‍(e), subparagraph 53(2)‍(c)‍(vi), (c)‍(vi.‍1) or (h)‍(ii) or for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.‍1(6);

(4)Paragraph 12(1)‍(t) of the Act, as enacted by subsection (3), is replaced by the following:

  • Investment tax credit

    (t)the amount deducted under subsection 127(5) or (6), 127.‍44(3) or 127.‍45(6) in respect of a property acquired or an expenditure made in a preceding taxation year in computing the taxpayer’s tax payable for a preceding taxation year to the extent that it was not included in computing the taxpayer’s income for a preceding taxation year under this paragraph or is not included in an amount determined under paragraph 13(7.‍1)‍(e) or 37(1)‍(e), subparagraph 53(2)‍(c)‍(vi) to (c)‍(vi.‍2) or (h)‍(ii) or for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.‍1(6);

(5)Subsection 12(2.‍02) of the Act is replaced by the following:

Source of income
(2.‍02)For the purposes of this Act, if a particular amount is included in computing the income of a taxpayer for a taxation year because of paragraph (1)‍(l.‍1) or (l.‍2) and the particular amount is in respect of another amount that is deductible by a partnership in computing its income from a particular source or from sources in a particular place, the particular amount is deemed to be from the particular source or from sources in the particular place, as the case may be.

(6)The definition investment contract in subsection 12(11) of the Act is amended by adding the following after paragraph (d.‍1):

  • (d.‍2)a FHSA,

(7)Subsections (1) and (5) apply in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsections (1) and (5) also apply in respect of a taxation year of a taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection (1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

(8)Subsection (2) applies to the 2024 and subsequent taxation years.

(9)Subsection (3) is deemed to have come into force on January 1, 2022.

(10)Subsection (4) is deemed to have come into force on March 28, 2023.

(11)Subsection (6) is deemed to have come into force on April 1, 2023.

3(1)The Act is amended by adding the following after section 12.‍6:

Hybrid mismatch arrangements — definitions
12.‍7(1)The definitions in subsection 18.‍4(1) apply in this section.
Secondary rule — conditions for application
(2)Subsection (3) applies in respect of a payment of which a taxpayer is a recipient if
  • (a)the payment arises under a hybrid mismatch arrangement; and

  • (b)there is a foreign deduction component of the hybrid mismatch arrangement.

Secondary rule — consequences
(3)Subject to subsection 18.‍4(5), if this subsection applies in respect of a payment of which a taxpayer is a recipient, an amount equal to the hybrid mismatch amount in respect of the payment shall be
  • (a)included in computing the taxpayer’s income from the same source as the payment; and

  • (b)included in computing the taxpayer’s income for the last taxation year of the taxpayer that begins at or before the end of the first foreign taxation year of any entity in which an amount in respect of the payment, in the absence of any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible in computing relevant foreign income or profits of the entity.

(2)Subsection (1) applies in respect of payments arising on or after July 1, 2022, except that subsection 12.‍7(3) of the Act, as enacted by subsection (1), does not apply to the portion of a payment that

  • (a)arises because of subsection 18.‍4(9) of the Act, as enacted by subsection 8(1); and

  • (b)relates to the portion of a notional interest expense that is computed in respect of a period of time that precedes January 1, 2023.

4(1)The portion of subsection 13(7.‍1) of the Act before paragraph (a) is replaced by the following:

Deemed capital cost of certain property
(7.‍1)For the purposes of this Act, where section 80 applied to reduce the capital cost to a taxpayer of a depreciable property or a taxpayer deducted an amount under subsection 127(5) or (6) or 127.‍44(3) in respect of a depreciable property or received or is entitled to receive assistance from a government, municipality or other public authority in respect of, or for the acquisition of, depreciable property, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance other than

(2)The portion of subsection 13(7.‍1) of the Act before paragraph (a), as enacted by subsection (1), is replaced by the following:

Deemed capital cost of certain property
(7.‍1)For the purposes of this Act, where section 80 applied to reduce the capital cost to a taxpayer of a depreciable property or a taxpayer deducted an amount under subsection 127(5) or (6), 127.‍44(3) or 127.‍45(6) in respect of a depreciable property or received or is entitled to receive assistance from a government, municipality or other public authority in respect of, or for the acquisition of, depreciable property, whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance other than

(3)Paragraph 13(7.‍1)‍(e) of the Act is replaced by the following:

  • (e)where the property was acquired in a taxation year ending before the particular time, all amounts deducted under subsection 127(5) or (6) or 127.‍44(3) by the taxpayer for a taxation year ending before the particular time,

(4)Paragraph 13(7.‍1)‍(e) of the Act, as enacted by subsection (3), is replaced by the following:

  • (e)where the property was acquired in a taxation year ending before the particular time, all amounts deducted under subsection 127(5) or (6), 127.‍44(3) or 127.‍45(6) by the taxpayer for a taxation year ending before the particular time,

(5)Section 13 of the Act is amended by adding the following after subsection (7.‍5):

Capital expenditures — Classes 59 and 60
(7.‍6)If a taxpayer has incurred an expenditure on account of capital, and the amount of the expenditure would have been included in the taxpayer’s undepreciated capital cost of property included in Class 59 or 60 of Schedule II to the Income Tax Regulations if the taxpayer had acquired a property as a result of the expenditure, then the taxpayer is deemed to have acquired a property, included in Class 59 or 60, as the case may be, at a cost equal to the amount of the expenditure, at the time that the expenditure is incurred.

(6)The description of I in the definition undepreciated capital cost in subsection 13(21) of the Act is replaced by the following:

I
is the total of all amounts deducted under subsection 127(5) or (6) or 127.‍44(3), in respect of a depreciable property of the class of the taxpayer, in computing the taxpayer’s tax payable for a taxation year ending before that time and subsequent to the disposition of that property by the taxpayer,

(7)The description of I in the definition undepreciated capital cost in subsection 13(21) of the Act, as enacted by subsection (6), is replaced by the following:

I
is the total of all amounts deducted under subsection 127(5) or (6), 127.‍44(3) or 127.‍45(6), in respect of a depreciable property of the class of the taxpayer, in computing the taxpayer’s tax payable for a taxation year ending before that time and subsequent to the disposition of that property by the taxpayer,

(8)The portion of paragraph 13(24)‍(a) of the Act before subparagraph (i) is replaced by the following:

  • (a)subject to paragraph (b), for the purposes of the description of A in the definition undepreciated capital cost in subsection (21) and of sections 127, 127.‍1 and 127.‍44, the property is deemed

(9)The portion of paragraph 13(24)‍(a) of the Act before subparagraph (i), as enacted by subsection (8), is replaced by the following:

  • (a)subject to paragraph (b), for the purposes of the description of A in the definition undepreciated capital cost in subsection (21) and of sections 127, 127.‍1, 127.‍44 and 127.‍45, the property is deemed

(10)Subsections (1), (3), (5), (6) and (8) are deemed to have come into force on January 1, 2022.

(11)Subsections (2), (4), (7) and (9) are deemed to have come into force on March 28, 2023.

5(1)Section 15 of the Act is amended by adding the following after subsection (2.‍5):

When s. 15(2) not to apply — employee ownership trusts
(2.‍51)Subsection (2) does not apply to a loan made or a debt that arose in respect of a qualifying business transfer if
  • (a)immediately following the qualifying business transfer,

    • (i)the lender or creditor is a qualifying business, and

    • (ii)the borrower is the employee ownership trust that controls the qualifying business described in subparagraph (i);

  • (b)the sole purpose of the loan or the debt is to facilitate the qualifying business transfer; and

  • (c)at the time the loan was made or the debt incurred, bona fide arrangements were made for repayment of the loan or debt within 15 years of the qualifying business transfer.

(2)Subsection (1) applies in respect of transactions that occur on or after January 1, 2024.

6(1)The portion of subsection 18(4) of the Act before paragraph (a) is replaced by the following:

Limitation on deduction of interest
(4)Notwithstanding any other provision of this Act (other than subsection (8)), in computing the income for a taxation year of a corporation or a trust from a business (other than the Canadian banking business of an authorized foreign bank) or property, no deduction shall be made in respect of that proportion of any amount that would, in the absence of this subsection and section 18.‍2, be deductible in computing that income in respect of interest paid or payable by it on outstanding debts to specified non-residents that

(2)Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

7(1)The Act is amended by adding the following after section 18.‍1:

Definitions
18.‍2(1)The following definitions apply in this section and section 18.‍21.

absorbed capacity of a taxpayer for a taxation year means the lesser of

  • (a)the taxpayer’s cumulative unused excess capacity for the year, determined as if the taxpayer’s absorbed capacity for the year were nil, and

  • (b)the amount determined by the formula

    A − (B + C)

    where

    A
    is the taxpayer’s interest and financing expenses for the year,
    B
    is

    (i)if subsection 18.‍21(2) applies in respect of the taxpayer for the year, the amount determined in respect of the taxpayer for the year under that subsection, and

    (ii)in any other case, the amount determined by the formula

    D × E

    where

    D
    is the taxpayer’s ratio of permissible expenses for the year, and
    E
    is the taxpayer’s adjusted taxable income for the year, and
    C
    is the taxpayer’s interest and financing revenues for the year.‍ (capacité absorbée)

adjusted taxable income of a taxpayer for a taxation year means the amount determined by the formula

A + B − C

where

A
is the positive or negative amount determined by the formula

D − E

where

D
is

(a)if the taxpayer is non-resident, the taxpayer’s taxable income earned in Canada for the year (determined without regard to subsection (2) and paragraphs 12(1)‍(l.‍2) and 111(1)‍(a.‍1)), and

(b)in any other case, the taxpayer’s taxable income for the year (determined without regard to subsection (2), paragraphs 12(1)‍(l.‍2) and 111(1)‍(a.‍1) and clause 95(2)‍(f.‍11)‍(ii)‍(D)), and

E
is the total of

(a)the taxpayer’s non-capital loss for the year (determined without regard to subsection (2), paragraphs 12(1)‍(l.‍2) and 111(1)‍(a.‍1) and clause 95(2)‍(f.‍11)‍(ii)‍(D)), and

(b)the total of all amounts each of which is, in respect of a corporation that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the year — or a controlled foreign affiliate of a partnership, of which the taxpayer or a controlled foreign affiliate of the taxpayer is a member, at the end of an affiliate taxation year ending in a fiscal period of the partnership — an amount determined by the formula

T × U ÷ V

where

T
is the lesser of

(i)the affiliate’s foreign accrual property loss (determined without regard to clause 95(2)‍(f.‍11)‍(ii)‍(D)) for the affiliate taxation year, and

(ii)the amount by which the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year exceeds the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year,

U
is the amount that is included in the taxpayer’s interest and financing expenses for the year in respect of the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, and
V
is the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year;
B
is the total of all amounts (subject to paragraph (k), other than an amount that can reasonably be considered to be in respect of exempt interest and financing expenses) each of which is

(a)the taxpayer’s interest and financing expenses for the year,

(b)an amount deducted by the taxpayer in computing its income for the year under paragraph 20(1)‍(a) or 59.‍1(a) or subsection 66(4), 66.‍1(2) or (3), 66.‍2(2), 66.‍21(4), 66.‍4(2) or 66.‍7(1), (2), (2.‍3), (3), (4) or (5), other than any portion of that amount that is described in subparagraph (c)‍(ii) of the description of A in the definition interest and financing expenses,

(c)an amount deducted by the taxpayer in computing its income for the year under subsection 20(16), other than any portion of that amount that is described in paragraph (d) of the description of A in the definition interest and financing expenses,

(d)in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formula

F × G − H

where

F
is the total of all amounts, each of which is an amount deducted by the partnership under paragraph 20(1)‍(a) or subsection 20(16) in computing its income or loss from the source, or the source in a particular place, for the fiscal period, other than any portion of that amount that is described in subparagraph (c)‍(ii) of the description of A in the definition interest and financing expenses,
G
is the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”, and
H
is the portion of an amount referred to in the description of F that can reasonably be considered to not be deductible in computing the taxpayer’s income for the year, or to not be included in computing the taxpayer’s non-capital loss for the year, because of subsection 96(2.‍1),

(e)the portion of an amount deducted under paragraph 111(1)‍(e) for the year, in respect of a partnership of which the taxpayer is a member, that can reasonably be considered to be attributable to an amount referred to in the description of H in paragraph (d) in respect of a fiscal period of the partnership ending in a preceding taxation year of the taxpayer,

(f)an amount deducted by the taxpayer under paragraph 110(1)‍(k) in computing its taxable income for the year,

(g)an amount deducted by the taxpayer under subsection 104(6) in computing its income for the year, except to the extent of any portion of the amount that has been designated under subsection 104(19) for the year,

(h)an amount determined by the formula

I × J ÷ K

where

I
is the amount deducted by the taxpayer under paragraph 111(1)‍(a) in computing its taxable income for the year, in respect of the taxpayer’s non-capital loss (other than a specified pre-regime loss of the taxpayer in respect of the year) for another taxation year (referred to in this paragraph as the “taxpayer loss year”),
J
is the lesser of

(i)the non-capital loss for the taxpayer loss year, and

(ii)the amount determined by the formula

W − X − Y

where

W
is the total of all amounts, each of which is an amount that is

(A)the interest and financing expenses of the taxpayer for the taxpayer loss year, determined without regard to any amount or portion of an amount that is not deductible because of subsection (2) or clause 95(2)‍(f.‍11)‍(ii)‍(D),

(B)described in any of paragraphs (b) to (g) or (j) to (m) of the description of B for the taxpayer loss year, or

(C)deducted by the taxpayer under paragraph 111(1)‍(a.‍1) in computing its taxable income for the taxpayer loss year,

X
is the total of all amounts, each of which is an amount

(A)described in any of paragraphs (a) to (f), (h) or (j) of the description of C for the taxpayer loss year, or

(B)included in the income of the taxpayer for the taxpayer loss year by reason of paragraph 12(1)‍(l.‍2), and

Y
is the total of all amounts, each of which is an amount determined by the formula

Z × Z.‍1 ÷ Z.‍2

where

Z
is the lesser of

(A)the foreign accrual property loss, for an affiliate taxation year, of a corporation (referred to throughout the description of Y as the “affiliate”) that, at the end of the affiliate taxation year, is a controlled foreign affiliate of the taxpayer, or is a controlled foreign affiliate of a partnership of which the taxpayer or a controlled foreign affiliate of the taxpayer is a member at any time, and

(B)the amount by which the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year (determined without regard to any amount or portion of an amount that is not deductible because of clause 95(2)‍(f.‍11)‍(ii)‍(D)) exceeds the total of all amounts, each of which is

(I)the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year, or

(II)an amount included under subclause 95(2)‍(f.‍11)‍(ii)‍(D)‍(II) in respect of the affiliate for the affiliate taxation year,

Z.‍1
is the amount that is included in the taxpayer’s interest and financing expenses for the taxpayer loss year in respect of the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, and
Z.‍2
is the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, and
K
is the non-capital loss for the taxpayer loss year,

(i)25% of the amount deducted, in respect of a specified pre-regime loss of the taxpayer in respect of the year, by the taxpayer under paragraph 111(1)‍(a) in computing its taxable income for the year,

(j)in respect of a corporation (referred to in this paragraph as the “affiliate”) that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the year — or that is a controlled foreign affiliate of a partnership, of which the taxpayer or a controlled foreign affiliate of the taxpayer is a member at any time, at the end of an affiliate taxation year ending in a fiscal period of the partnership — the additional amount that would be included in the taxpayer’s income, either under subsection 91(1) or because an amount would be included in the income of a partnership under that subsection, in respect of the affiliate’s foreign accrual property income for the affiliate taxation year, if the affiliate’s foreign accrual property income for the affiliate taxation year were increased by the amount determined by the formula

L × M ÷ N

where

L
is the amount that, in computing the foreign accrual property income of the affiliate for the affiliate taxation year, is the prescribed amount for the description of F in the definition foreign accrual property income in subsection 95(1), in respect of a foreign accrual property loss of the affiliate for another affiliate taxation year (referred to in this paragraph as the “affiliate loss year”),
M
is the lesser of

(i)the affiliate’s foreign accrual property loss for the affiliate loss year, and

(ii)the amount by which the affiliate’s relevant affiliate interest and financing expenses for the affiliate loss year (determined without regard to any amount or portion of an amount that is not deductible because of clause 95(2)‍(f.‍11)‍(ii)‍(D)) exceeds the total of all amounts, each of which is

(A)the affiliate’s relevant affiliate interest and financing revenues for the affiliate loss year, or

(B)an amount included under subclause 95(2)‍(f.‍11)‍(ii)‍(D)‍(II) in respect of the affiliate for the affiliate loss year, and

N
is the affiliate’s foreign accrual property loss for the affiliate loss year,

(k)the amount that would be the taxpayer’s loss for the year, or that would be the taxpayer’s share of the loss of a partnership of which the taxpayer is a member, if the taxpayer or partnership had no income or loss other than a loss that can reasonably be considered to be incurred by the taxpayer or the partnership in respect of activities funded by a borrowing (within the meaning of the definition exempt interest and financing expenses) that results in exempt interest and financing expenses of the taxpayer or the partnership,

(l)an amount deducted under subsection 127(5) or (6), 127.‍44(3) or 127.‍45(6) in respect of a property acquired in a preceding taxation year in computing the taxpayer’s tax payable for a preceding taxation year to the extent that it

(i)is included in an amount determined under paragraph 13(7.‍1)‍(e) or subparagraph 53(2)‍(c)‍(vi) to (vi.‍2) or (h)‍(ii) or for I in the definition undepreciated capital cost in subsection 13(21), and

(ii)was not included

(A)in computing the taxpayer’s income for the year or a preceding taxation year, and

(B)under this paragraph in calculating the taxpayer’s adjusted taxable income for a preceding taxation year, or

(m)an amount described in clause 12(1)‍(x)‍(i)‍(C) or subparagraph 12(1)‍(x)‍(ii) that is received by the taxpayer in the year to the extent that it

(i)reduces the cost or capital cost of a property,

(ii)is not included in computing the income of the taxpayer for the year under paragraph 12(1)‍(x), and

(iii)would be included in computing the income of the taxpayer for the year under paragraph 12(1)‍(x) if that paragraph were read without reference to its subparagraphs (vi) and (vii); and

C
is the total of all amounts each of which is

(a)the taxpayer’s interest and financing revenues for the year,

(b)an amount included under subsection 13(1) in computing the taxpayer’s income for the year,

(c)in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formula

O × P

where

O
is an amount that is included by the partnership under subsection 13(1) in computing its income or loss from the source, or the source in a particular place, for the fiscal period, and
P
is the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”,

(d)an amount included under subsection 59(1) or (3.‍2) or paragraph 59.‍1(b) in computing the taxpayer’s income for the year,

(e)in the case of a corporation

(i)100/28 of the total of the amounts that would be deductible by it under subsection 126(1) from its tax for the year otherwise payable under this Part if those amounts were determined without reference to sections 123.‍3 and 123.‍4, or

(ii)the amount determined by multiplying the total of the amounts that would be deductible by it under subsection 126(2) from its tax for the year otherwise payable under this Part, if those amounts were determined without reference to section 123.‍4, by the relevant factor for the year,

(f)in the case of a trust, the amount determined by the formula

Q × (1 ÷ (R × S))

where

Q
is the total of the amounts deductible by it under subsection 126(1) or (2) from its tax for the year otherwise payable under this Part for the year,
R
is the percentage (expressed as a decimal fraction) referred to in paragraph 122(1)‍(a) in respect of the year, and
S
is 1 plus the percentage (expressed as a decimal fraction) referred to in subsection 120(1) in respect of the year,

(g)an amount included under section 110.‍5 in computing the taxpayer’s taxable income for the year,

(h)an amount included under subsection 104(13) in computing the taxpayer’s income for the year, except to the extent of any portion of the amount that

(i)has been designated under subsection 104(19) for the year, or

(ii)gives rise to a deduction under paragraph 94.‍2(3)‍(a) in computing the foreign accrual property income for an affiliate taxation year of an entity that is a controlled foreign affiliate of the taxpayer at the end of the affiliate taxation year,

(i)an amount of the taxpayer’s taxable income for the year that is not, because of an Act of Parliament, subject to tax under this Part, or

(j)the amount that would be the taxpayer’s income for the year, or that would be the taxpayer’s share of the income of a partnership of which the taxpayer is a member, if the taxpayer or partnership had no income or loss other than income that can reasonably be considered to be earned by the taxpayer or the partnership in respect of activities funded by a borrowing (within the meaning of the definition exempt interest and financing expenses) that results in exempt interest and financing expenses of the taxpayer or the partnership.‍ (revenu imposable rajusté)

affiliate taxation year of a controlled foreign affiliate means the period for which the accounts of the affiliate have been ordinarily made up, but no such period may exceed 53 weeks.‍ (année d’imposition de la société affiliée)

cumulative unused excess capacity of a taxpayer for a particular taxation year means the total of all amounts each of which is

  • (a)the excess capacity of the taxpayer for the particular year, or

  • (b)the excess capacity of the taxpayer for any of the three immediately preceding taxation years, if the taxpayer’s excess capacity for each of those years is determined according to the following rules:

    • (i)if the taxpayer has an amount of transferred capacity for any taxation year (referred to in this definition as the “transfer year”) preceding the particular year,

      • (A)there are to be reductions to the taxpayer’s excess capacity for the transfer year and the three taxation years immediately preceding the transfer year (each referred to in this subparagraph as a “relevant year”) in a total amount equal to the total of all amounts each of which is an amount of transferred capacity of the taxpayer for the transfer year (referred to in this definition as the “total transferred capacity amount”), and

      • (B)the amount by which the taxpayer’s excess capacity for a particular relevant year is to be reduced is equal to the lesser of

        • (I)the taxpayer’s excess capacity for the particular relevant year, determined taking into consideration any reductions to that excess capacity under

          • 1this subparagraph, in respect of amounts of transferred capacity for years preceding the transfer year, and

          • 2subparagraph (ii), in respect of amounts of absorbed capacity for the transfer year and any years preceding the transfer year, and

        • (II)the amount, if any, by which the total transferred capacity amount for the transfer year exceeds the reductions, under this subparagraph in respect of that total transferred capacity amount, to the taxpayer’s excess capacity for any relevant years preceding the particular relevant year, and

    • (ii)if the taxpayer has an amount of absorbed capacity for a taxation year (referred to in this definition as the “absorbed capacity year”),

      • (A)there are to be reductions to the taxpayer’s excess capacity for the three taxation years immediately preceding the absorbed capacity year (each referred to in this subparagraph as a “relevant year”) in a total amount equal to the amount of absorbed capacity for the absorbed capacity year, and

      • (B)the amount by which the taxpayer’s excess capacity for a particular relevant year is to be reduced is equal to the lesser of

        • (I)the taxpayer’s excess capacity for the particular relevant year, determined taking into account any reductions to that excess capacity under

          • 1subparagraph (i), in respect of amounts of transferred capacity for years preceding the absorbed capacity year, and

          • 2this subparagraph, in respect of amounts of absorbed capacity for years preceding the absorbed capacity year, and

        • (II)the amount, if any, by which the amount of absorbed capacity for the absorbed capacity year exceeds the reductions under this subparagraph in respect of that amount of absorbed capacity to the taxpayer’s excess capacity for the relevant years preceding the particular relevant year.‍ (capacité excédentaire cumulative inutilisée)

eligible group entity, in respect of a taxpayer resident in Canada, at any time, means a corporation, or a trust, resident in Canada

  • (a)that is, at that time, related (other than because of a right referred to in paragraph 251(5)‍(b)) to the taxpayer;

  • (b)that would, at that time, be affiliated with the taxpayer if section 251.‍1 were read without reference to the definition controlled in subsection 251.‍1(3);

  • (c)that is a trust in respect of which the taxpayer’s interest in the trust is not a fixed interest (as defined in subsection 94(1)); or

  • (d)that is a beneficiary of the taxpayer, if the taxpayer is a trust, whose interest in the taxpayer is not a fixed interest (as defined in subsection 94(1)) (other than a beneficiary that is a registered charity, or a non-profit organization, with whom the taxpayer deals at arm’s length).‍ (entité admissible du groupe)

excess capacity of a taxpayer for a taxation year means

  • (a)if subsection 18.‍21(2) applies in respect of the taxpayer for the year, nil; and

  • (b)in any other case, the amount determined by the formula

    A − B − C

    where

    A
    is the amount determined by the formula

    D × E + F

    where

    D
    is the ratio of permissible expenses of the taxpayer for the year,
    E
    is the adjusted taxable income of the taxpayer for the year, and
    F
    is the amount determined by the formula

    G − H × I

    where

    G
    is the interest and financing revenues of the taxpayer for the year,
    H
    is the ratio of permissible expenses of the taxpayer for the year, and
    I
    is the lesser of

    (i)the amount by which the interest and financing revenues of the taxpayer for the year exceed the interest and financing expenses of the taxpayer for the year, and

    (ii)either

    (A)if the adjusted taxable income of the taxpayer for the year would, in the absence of section 257, be a negative amount, the absolute value of the negative amount, or

    (B)in any other case, nil,

    B
    is the interest and financing expenses of the taxpayer for the year, and
    C
    is the amount deductible by the taxpayer under paragraph 111(1)‍(a.‍1) in the year.‍ (capacité excédentaire)

excluded entity for a particular taxation year means

  • (a)a corporation that is throughout the particular year a Canadian-controlled private corporation in respect of which the amount determined for C in paragraph 125(5.‍1)‍(a) for the year is less than $50,000,000;

  • (b)a particular taxpayer resident in Canada, if $1,000,000 is not less than the amount determined by the formula

    A − B

    where

    A
    is the total of all amounts, each of which is the interest and financing expenses or the exempt interest and financing expenses of

    (i)the particular taxpayer for the particular taxation year, or

    (ii)another taxpayer resident in Canada for a taxation year (referred to in this subparagraph as the “relevant taxation year”) ending in the particular taxation year, if the other taxpayer is an eligible group entity in respect of the particular taxpayer at the end of the relevant taxation year, and

    B
    is the amount that would be determined for A if

    (i)the reference in the description of A to “the interest and financing expenses or the exempt interest and financing expenses” were read as a reference to “the interest and financing revenues”, and

    (ii)the interest and financing revenues of a financial institution group entity were excluded; or

  • (c)a taxpayer resident in Canada if

    • (i)all or substantially all of the businesses, if any, and all or substantially all of the undertakings and activities of

      • (A)the taxpayer are, throughout the particular year, carried on in Canada, and

      • (B)each eligible group entity in respect of the taxpayer are, throughout the eligible group entity’s taxation year that ends in the particular year, carried on in Canada,

    • (ii)throughout the year, it is the case that

      A ≥ B

      where

      A
      is $5,000,000, and
      B
      is the greater of

      (A)the total of all amounts, each of which is the amount at which the shares of the capital stock of a foreign affiliate of the taxpayer, a foreign affiliate of an eligible group entity in respect of the taxpayer or a foreign affiliate of a partnership of which the taxpayer or an eligible group entity in respect of the taxpayer is a member, would be valued for the purpose of the balance sheet of the taxpayer or the eligible group entity if that balance sheet were prepared in accordance with generally accepted accounting principles used in Canada, other than any amount or portion of an amount that is already included under this clause because the value of the shares of the capital stock of a particular foreign affiliate reflects the value of shares of the capital stock of another foreign affiliate that is owned, directly or indirectly, by the particular foreign affiliate, or

      (B)the total of all amounts, each of which is the amount that can reasonably be considered to be the proportionate share, of the taxpayer or an eligible group entity in respect of the taxpayer, of the fair market value of all property of a foreign affiliate of the taxpayer, a foreign affiliate of an eligible group entity in respect of the taxpayer or a foreign affiliate of a partnership of which the taxpayer or an eligible group entity in respect of the taxpayer is a member, other than a property that is shares of the capital stock of another corporation that is a foreign affiliate of the taxpayer, a foreign affiliate of an eligible group entity in respect of the taxpayer or a foreign affiliate of a partnership of which the taxpayer or an eligible group entity in respect of the taxpayer is a member,

    • (iii)no person or partnership is, at any time in the particular year,

      • (A)a specified shareholder or a specified beneficiary (as those terms are defined in subsection 18(5)) of the taxpayer, or of any eligible group entity in respect of the taxpayer, that is not resident in Canada, or

      • (B)a partnership more than 50% of the fair market value of all interests in which can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by non-resident persons, if the property of the partnership includes,

        • (I)if the taxpayer or the eligible group entity in respect of the taxpayer is a corporation, shares, or a right to acquire shares, of the capital stock of the taxpayer or an eligible group entity in respect of the taxpayer that, either alone or together with shares, or rights to acquire shares, held by persons or partnerships with whom the partnership does not deal at arm’s length,

          • 1provide 25% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation, or

          • 2have 25% or more of the fair market value of all capital stock in the corporation, or

        • (II)if the taxpayer or the eligible group entity in respect of the taxpayer is a trust, an interest, or a right to acquire an interest, as a beneficiary in the taxpayer or an eligible group entity in respect of the taxpayer that, either alone or together with interests, or rights to acquire interests, held by persons or partnerships with whom the partnership does not deal at arm’s length, has 25% or more of the fair market value of all interests as a beneficiary in the trust, and

    • (iv)all or substantially all of the interest and financing expenses of the taxpayer and of each eligible group entity in respect of the taxpayer for the particular year are paid or payable to persons or partnerships that are not, at any time in the particular year, tax-indifferent persons or partnerships that do not deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer.‍ (entité exclue)

excluded interest, for a taxation year or fiscal period, means an amount of interest or a lease financing amount, if

  • (a)the amount is paid in, or payable in or in respect of, the year or period by a corporation or partnership (in this definition referred to as the “payer”) to another corporation or partnership (in this definition referred to as the “payee”) in respect of a debt or a lease in respect of a particular property;

  • (b)throughout the period during which the amount accrued (in this definition referred to as the “relevant period”)

    • (i)if the amount is interest, the debt is owed by the payer to the payee, or

    • (ii)if the amount is a lease financing amount, the lease is between the payer and payee;

  • (c)where the payer is not a financial institution group entity, the payee is not a financial institution group entity;

  • (d)throughout the relevant period and at the time of payment

    • (i)each of the payer and payee is

      • (A)a taxable Canadian corporation, or

      • (B)a partnership, no member of which is a natural person, a trust or a corporation that is not a taxable Canadian corporation, and

    • (ii)one of the following conditions is met:

      • (A)if the payee is a partnership, all the members of the payee (other than another partnership) are eligible group entities in respect of

        • (I)if the payer is a partnership, each member of the payer (other than another partnership), and

        • (II)in any other case, the payer, or

      • (B)if the payee is not a partnership, the payee is an eligible group entity in respect of

        • (I)if the payer is a partnership, each member of the payer (other than another partnership), and

        • (II)in any other case, the payer; and

  • (e)the payer — or, if the payer is a partnership, each member of the payer — and the payee — or, if the payee is a partnership, each member of the payee — file with the Minister, in respect of the year or period of both the payer and the payee, a joint election in writing in prescribed manner under this paragraph that

    • (i)specifies

      • (A)the amount of the interest or lease financing amount,

      • (B)if the amount is interest, the amounts outstanding, at the beginning and end of the relevant period, as or on account of the debt in respect of which this paragraph applies, and

      • (C)if the amount is a lease financing amount, the fair market value of the particular property at the time the lease began, and

    • (ii)is filed on or before the earliest of the filing-due date of

      • (A)the payer for its year,

      • (B)the payee for its year, and

      • (C)if the payer or the payee is a partnership, any member of the payer or payee for the member’s taxation year that includes the end of the fiscal period of the payer or the payee, as the case may be.‍ (intérêts exclus)

excluded lease for a taxation year of a taxpayer means a lease

  • (a)to which the rules in subsection 16.‍1(1) apply;

  • (b)that would not be considered to be a lease for a term of more than one year for purposes of paragraph (b) of the definition specified leasing property in subsection 1100(1.‍11) of the Income Tax Regulations; or

  • (c)that is in respect of property

    • (i)that would not be considered, at the time the lease was entered into, to have a fair market value in excess of $25,000 for purposes of paragraph (c) of that definition, or

    • (ii)that would be considered, at all times in the taxation year, exempt property for purposes of subsection 1100(1.‍13) of the Income Tax Regulations.‍ (bail exclu)

exempt interest and financing expenses of a taxpayer for a taxation year means the total of all amounts, each of which would, if the description of A in the definition interest and financing expenses were read without reference to “exempt interest and financing expenses”, be included in interest and financing expenses of the taxpayer for that year, and that is incurred in respect of a borrowing or other financing (referred to in this definition as the “borrowing”), if 

  • (a)the taxpayer or a partnership of which the taxpayer is a member entered into an agreement with a public sector authority to design, build and finance — or to design, build, finance, maintain and operate — property that the public sector authority, or another public sector authority, owns or has a leasehold interest in or right to acquire;

  • (b)the borrowing was entered into in respect of the agreement;

  • (c)it can reasonably be considered that all or substantially all of the amount is directly or indirectly borne by a public sector authority referred to in paragraph (a); and

  • (d)the amount was paid or payable to

    • (i)a person that deals at arm’s length with the taxpayer or the partnership of which the taxpayer is a member, or

    • (ii)a particular person that does not deal at arm’s length with the taxpayer or the partnership of which the taxpayer is a member if it may reasonably be considered that all or substantially all of the amount paid or payable to the particular person was paid or payable by the particular person to one or more persons that deal at arm’s length with the taxpayer or the partnership of which the taxpayer is a member.‍ (dépenses d’intérêts et de financement exonérées)

financial holding corporation, for a taxation year, means a corporation (other than a corporation described in any of paragraphs (a) to (f) of the definition financial institution group entity) if, throughout the year,

  • (a)the fair market value of the capital stock of the corporation is primarily attributable to any combination of shares or indebtedness of one or more entities described in any of paragraphs (a) to (f) of the definition financial institution group entity that are controlled by the corporation; or

  • (b)the corporation is incorporated under the Insurance Companies Act and shares of the capital stock of the corporation are listed on a designated stock exchange.‍ (société de portefeuille financière)

financial institution group entity means a taxpayer that at any time in a taxation year is

  • (a)a bank;

  • (b)a credit union;

  • (c)an insurance corporation;

  • (d)an entity authorized under the laws of Canada or a province to carry on the business of offering its services as a trustee to the public;

  • (e)an entity whose principal business consists of one or more of

    • (i)the lending of money to persons with whom the entity deals at arm’s length,

    • (ii)the purchasing of debt obligations issued by persons with whom the entity deals at arm’s length, or

    • (iii)activities which principally give rise to amounts described in paragraphs (a) to (d) of the description of A in the definition interest and financing revenues and are principally conducted with persons with whom the entity deals at arm’s length;

  • (f)a particular entity that is an eligible group entity in respect of an entity described in any of paragraphs (a) to (e), if the particular entity, or a partnership of which the particular entity is a member and from which the particular entity primarily derives its income,

    • (i)is authorized under provincial securities laws to engage in, and primarily engages in, the business of

      • (A)dealing in securities, or

      • (B)providing portfolio management, investment advice, fund administration or fund management; or

    • (ii)primarily engages in the business of providing portfolio management, investment advice, fund administration or fund management, including any services connected to those activities, in respect of real estate; or

  • (g)a particular entity (other than a financial holding corporation) that is an eligible group entity in respect of any entity described in any of paragraphs (a) to (f) if all or substantially all of the activities of the particular entity are ancillary to the activities or business carried on by one or more entities described in paragraphs (a) to (f) that are eligible group entities in respect of the particular entity.‍ (entité du groupe d’institutions financières)

fixed interest commercial trust at any time means a trust resident in Canada, if at that time

  • (a)the only beneficiaries that may for any reason receive, at or after that time and directly from the trust, any of the income or capital of the trust are beneficiaries that hold fixed interests (as defined in subsection 94(1)) in the trust; and

  • (b)any of the conditions set out in clauses (h)‍(ii)‍(A) to (C) in the definition exempt foreign trust in subsection 94(1) is met.‍ (fiducie commerciale à participation fixe)

foreign accrual property loss of a foreign affiliate for an affiliate taxation year has the meaning assigned by subsection 5903(3) of the Income Tax Regulations.‍ (perte étrangère accumulée, relative à des biens)

interest and financing expenses of a taxpayer for a particular taxation year means the amount determined by the formula

A − B

where

A
is the total of all amounts (other than an amount that is included in exempt interest and financing expenses), each of which is

(a)an amount that

(i)is paid in, or payable in or in respect of, a year as, on account of, in lieu of payment of or in satisfaction of, interest (other than excluded interest for the particular year or an amount that is deemed to be interest under subsection 137(4.‍1)),

(ii)would, in the absence of this section, be deductible (other than under a provision referred to in subparagraph (c)‍(i)) by the taxpayer in computing its income for the particular year, and

(iii)is not described in any other paragraph in this definition,

(b)an amount that, in the absence of this section and on the assumption that it is not deductible under another provision of this Act (other than any of the provisions referred to in subparagraph (c)‍(i)), would be deductible in computing the taxpayer’s income for the particular year under any of subparagraphs 20(1)‍(e)‍(ii) to (ii.‍2) and paragraphs 20(1)‍(e.‍1) to (f),

(c)the portion of an amount, if

(i)the amount, in the absence of this section, would be deductible in computing the taxpayer’s income for the particular year and is claimed by the taxpayer under paragraph 20(1)‍(a) or subsection 66(4), 66.‍1(2) or (3), 66.‍2(2), 66.‍21(4), 66.‍4(2) or 66.‍7(1), (2), (2.‍3), (3), (4) or (5), and

(ii)the portion can reasonably be considered to be attributable to an amount paid or payable on or after February 4, 2022 that either

(A)is described in subparagraph (a)‍(i), or

(B)would otherwise have been deductible in a taxation year under a provision referred to in paragraph (b), but for the application of another provision of this Act,

(d)the portion of an amount that would, in the absence of this section, be deductible in computing the taxpayer’s income for the particular year under subsection 20(16), to the extent that the portion can reasonably be considered to be described in subparagraph (c)‍(ii),

(e)an amount that is paid or payable by the taxpayer in a year or that is a loss or a capital loss of the taxpayer for a year, as the case may be, under or as a result of an agreement or arrangement, if

(i)the amount would, in the absence of this section

(A)be deductible (other than under subparagraph 20(1)‍(e)‍(i)) in computing the taxpayer’s income for the particular year, or

(B)in the case of a capital loss, reduce the amount determined under paragraph 3(b) in respect of the taxpayer or be deductible in computing the taxpayer’s taxable income for the particular year (except to the extent it has already been included under this paragraph for a previous year),

(ii)the agreement or arrangement is entered into as or in relation to a borrowing or other financing that the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer enters into, whether currently or in the future, and absolutely or contingently, and

(iii)the amount can reasonably be considered to increase (or be part of) the cost of funding with respect to the borrowing or other financing (including as a result of any hedge of the cost of funding or of the borrowing or other financing) of the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer;

(f)a particular amount that

(i)is in respect of an agreement or arrangement that gives rise to, or can reasonably be expected to give rise to, an amount that

(A)is included in computing a taxpayer’s interest and financing expenses for a taxation year under paragraph (e), or

(B)reduces the taxpayer’s interest and financing expenses for a taxation year under the description of B,

(ii)would, in the absence of this section, be deductible by the taxpayer in computing its income for the particular year,

(iii)is not deductible under any of the provisions listed in paragraph (b), and

(iv)is an expense or fee payable under the agreement or arrangement or an expense that is incurred in contemplation of, in the course of entering into or in relation to, the agreement or arrangement,

(g)a lease financing amount (other than in respect of an excluded lease for the particular year) that

(i)would, in the absence of this section, be deductible by the taxpayer in computing its income for the particular year, and

(ii)is not excluded interest for the particular year,

(h)in respect of the income or loss of a partnership, for a fiscal period that ends in the particular year, from any source or from sources in a particular place, an amount determined by the formula

C × D − E − F

where

C
is the total of all amounts, each of which is an amount that

(i)is deductible by the partnership in computing its income or loss from the source, or the source in a particular place, for a fiscal period, and that would be described in any of paragraphs (a) to (g) if the references to the taxpayer were read as references to the partnership, or

(ii)would be included under paragraph (j) in determining the interest and financing expenses of the partnership for the purposes of determining its income or loss from the source, or the source in a particular place, for the fiscal period, if the partnership were a taxpayer for the purposes of this section,

D
is the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”,
E
is the amount, if any, included in computing the taxpayer’s income under paragraph 12(1)‍(l.‍1) in respect of the amount referred to in the description of C, and
F
is the portion of an amount determined for C that can reasonably be considered to not be deductible in computing the taxpayer’s income for the particular year, and to not be included in computing the taxpayer’s non-capital loss for the particular year, because of subsection 96(2.‍1),

(i)the portion of an amount that, in the absence of this section, would be deductible in computing the taxpayer’s taxable income for the particular year and is claimed by the taxpayer under paragraph 111(1)‍(e) in respect of a partnership of which the taxpayer is a member that can reasonably be considered to be attributable to an amount referred to in the description of F in paragraph (h) in respect of a fiscal period of the partnership ending in another taxation year of the taxpayer, or

(j)in respect of a corporation that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the particular year, an amount determined by the formula

G × H

where

G
is the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year, and
H
is the taxpayer’s specified participating percentage in respect of the affiliate for the affiliate taxation year; and
B
is the total of all amounts, each of which is

(a)an amount received or receivable (other than as a dividend or in respect of exempt interest and financing expenses) by the taxpayer in a year, or a gain of the taxpayer for a year, as the case may be, under or as a result of an agreement or arrangement to the extent that

(i)the amount is included in computing the taxpayer’s income for the particular year,

(ii)the agreement or arrangement is entered into

(A)as a borrowing or other financing of the taxpayer or of a person or partnership that does not deal at arm’s length with the taxpayer, or

(B)in relation to a borrowing or other financing of the taxpayer or of a person or partnership that does not deal at arm’s length with the taxpayer to hedge the cost of funding or the borrowing or other financing,

(iii)the amount can reasonably be considered to reduce the cost of funding with respect to the borrowing or other financing of the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer, and

(iv)the amount cannot reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part because

(A)an amount is deductible under any of subsections 20(11) to (12.‍1) and 126(1) and (2), and

(B)an amount is deductible in respect of income or profits tax paid to a country other than Canada that

(I)can reasonably be considered to have been paid in respect of the amount, and

(II)is not a tax substantially similar to tax under subsection 212(1), or

(b)in respect of the income or loss of a partnership, for a fiscal period that ends in the particular year, from any source or from sources in a particular place, an amount determined by the formula

I × J

where

I
is an amount that would be described in paragraph (a) if

(i)the references to the taxpayer in that paragraph were read as references to the partnership, and

(ii)the reference in subparagraph (a)‍(i) to “the taxpayer’s income for the particular year” were read as “the partnership’s income or loss from the source, or the source in a particular place, for a fiscal period”, and

J
is the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”.‍ (dépenses d’intérêts et de financement)

interest and financing revenues of a taxpayer for a taxation year means the amount determined by the formula

A − B

where

A
is the total of all amounts (other than any amount included under the description of B in the definition interest and financing expenses), each of which is

(a)an amount received or receivable as, on account of, in lieu of payment or in satisfaction of, interest (other than excluded interest for the year, an amount that is deemed to be interest under subsection 137(4.‍1) or any amount described in any other paragraph in this definition) that is included in computing the taxpayer’s income for the year,

(b)an amount that is included in computing the taxpayer’s income for the year because of subsection 12(9) or section 17.‍1 (other than any amount described in any other paragraph in this definition),

(c)a fee or similar amount in respect of a guarantee, or similar credit support, provided by the taxpayer for the payment of any amount on a debt obligation owing by another person or partnership that is included in computing the taxpayer’s income for the year (other than any amount described in any other paragraph in this definition),

(d)an amount received or receivable (other than as a dividend) by the taxpayer, or a gain of the taxpayer, as the case may be, under or as a result of an agreement or arrangement, if

(i)the amount is included in computing the taxpayer’s income for the year,

(ii)the agreement or arrangement is entered into as or in relation to a loan or other financing owing to or provided by the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer, and

(iii)the amount can reasonably be considered to increase (or be part of) the return of the taxpayer or a person or partnership that does not deal at arm’s length with the taxpayer with respect to the loan or other financing (including as a result of any hedge of the return or of the loan or other financing),

(e)a lease financing amount (other than in respect of a lease that would be an excluded lease for the year, if the definition excluded lease were read without regard to its paragraph (a)) that

(i)is included in computing the taxpayer’s income for the year, and

(ii)is not excluded interest for the year,

(f)in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formula

C × D

where

C
is the total of all amounts, each of which is an amount that

(i)is included by the partnership in computing its income or loss from the source, or the source in a particular place, for a fiscal period and that would be described in paragraphs (a) to (e) if the references to the taxpayer were read as references to the partnership, or

(ii)would be included under paragraph (g) in determining the interest and financing revenues of the partnership for the purposes of determining its income or loss from the source, or the source in a particular place, for the fiscal period, if the partnership were a taxpayer for the purposes of this section, and

D
is the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”, or

(g)in respect of a corporation that is a controlled foreign affiliate of the taxpayer at the end of an affiliate taxation year ending in the year, an amount determined by the formula

E × F − G

where

E
is the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year,
F
is the taxpayer’s specified participating percentage in respect of the affiliate for the affiliate taxation year, and
G
is an amount (other than any portion of the amount that is in respect of income tax paid under subsection 212(1)) that is deducted under subsection 91(4) in computing the taxpayer’s income for any taxation year in respect of foreign accrual tax (as defined in subsection 95(1)) applicable to an amount that is included in the taxpayer’s income under subsection 91(1) in respect of the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year, and
B
is the total of all amounts, each of which is

(a)an amount paid or payable by the taxpayer, or a loss or a capital loss of the taxpayer, as the case may be, under or as a result of an agreement or arrangement, to the extent that

(i)the amount

(A)is deductible in computing the taxpayer’s income for the year, or

(B)in the case of a capital loss, reduces the amount determined under paragraph 3(b) in respect of the taxpayer or is deductible in computing the taxpayer’s taxable income for the year (except to the extent it has already been taken into account in determining an amount under this paragraph for a previous year),

(ii)the agreement or arrangement is entered into

(A)as a loan or other financing owing to or provided by the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, or

(B)in relation to a loan or other financing owing to or provided by the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, to hedge the cost of funding or the borrowing or other financing, and

(iii)the amount can reasonably be considered to reduce the return of the taxpayer, or a person or partnership that does not deal at arm’s length with the taxpayer, in respect of the loan or other financing;

(b)in respect of the income or loss of a partnership, for a fiscal period that ends in the year, from any source or from sources in a particular place, an amount determined by the formula

H × I

where

H
is an amount that would be described in paragraph (a) if

(i)the references to the taxpayer in that paragraph were read as references to the partnership, and

(ii)the reference in subparagraph (a)‍(i) to “the taxpayer’s income for the year” were read as “the partnership’s income or loss from the source, or the source in a particular place, for a fiscal period”, and

I
is the taxpayer’s specified proportion, if the references in the definition specified proportion in subsection 248(1) to “total income or loss” were read as “income or loss from the source, or the source in a particular place”,

(c)the portion of any amount included under the description of A (referred to in this paragraph as the “subject amount”) that can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part because an amount is deductible

(i)under any of subsections 20(11) to (12.‍1) and 126(1) and (2), and

(ii)in respect of income or profits tax paid to a country other than Canada that

(A)can reasonably be considered to have been paid in respect of the subject amount, and

(B)is not a tax substantially similar to tax under subsection 212(1),

(d)the portion of any amount included under A that is not, because of an Act of Parliament, subject to tax under this Part.‍ (revenus d’intérêts et de financement)

lease financing amount means an amount that is the portion of a particular payment in respect of a particular lease entered into by a taxpayer that would be considered to be on account of interest if

  • (a)the lessee had received a loan at the time the particular lease began and in a principal amount equal to the fair market value at that time of the property that is the subject of the particular lease;

  • (b)interest had been charged on the principal amount of the loan outstanding from time to time at the rate — determined in accordance with section 4302 of the Income Tax Regulations — in effect at the time described in paragraph (a), compounded semi-annually not in advance; and

  • (c)the particular payment was a blended payment of principal and interest, calculated in accordance with paragraph (b), on the loan applied firstly on account of interest on principal, secondly on account of interest on unpaid interest and thirdly on account of principal.‍ (montant du crédit-bail)

public sector authority means His Majesty in right of Canada, His Majesty in right of a province, an entity referred to in any of paragraphs 149(1)‍(c) to (d.‍6), a hospital authority (as defined in subsection 123(1) of the Excise Tax Act) or a registered charity that is a public college, school authority or university (each as defined in subsection 123(1) of the Excise Tax Act).‍ (administration du secteur public)

ratio of permissible expenses of a taxpayer for a taxation year means the percentage that is

  • (a)if the taxpayer’s taxation year begins on or after October 1, 2023, and before January 1, 2024, 40%, other than for the purpose of determining the taxpayer’s cumulative unused excess capacity for any taxation year that begins on or after January 1, 2024; and

  • (b)if the taxpayer’s taxation year begins on or after January 1, 2024, and for the purposes referred to in paragraph (a) for which 40% is not the applicable percentage, 30%.‍ (ratio des dépenses admissibles)

received capacity means an amount of received capacity of a transferee for a taxation year as determined under subsection (4).‍ (capacité reçue)

relevant affiliate interest and financing expenses of a controlled foreign affiliate of a taxpayer (determined as though the definition taxpayer in this subsection did not include the words “or a partnership”) for an affiliate taxation year means, subject to subsection (19), the total of all amounts (other than an amount that is deductible in computing any income or loss of the affiliate that is included in computing the affiliate’s income or loss from an active business because of paragraph 95(2)‍(a) or an amount that is described in clause 95(2)‍(a)‍(ii)‍(D) and treated as nil for the purposes of determining an amount for A or D in the definition foreign accrual property income in subsection 95(1)), each of which would be the affiliate’s interest and financing expenses (determined without regard to paragraph (j) of the description of A in the definition interest and financing expenses) for the affiliate taxation year for the purposes of determining, in respect of the taxpayer for the affiliate taxation year, each amount referred to in subparagraph 95(2)‍(f)‍(i) or (ii), if

  • (a)the references in the definition interest and financing expenses to “in the absence of this section” were read as references to “in the absence of clause 95(2)‍(f.‍11)‍(ii)‍(D)”; and

  • (b)clause 95(2)‍(f.‍11)‍(ii)‍(A) were read without regard to the reference to subsection 18.‍2(2).‍ (dépenses d’intérêts et de financement de la société affiliée pertinentes)

relevant affiliate interest and financing revenues of a controlled foreign affiliate of a taxpayer (determined as though the definition taxpayer in this subsection did not include the words “or a partnership”) for an affiliate taxation year means, subject to subsection (19), the total of all amounts (other than an amount included in computing the affiliate’s income or loss from an active business under paragraph 95(2)‍(a) or (2.‍44)‍(b)), each of which would be the affiliate’s interest and financing revenues (determined without regard to paragraph (g) of the description of A in the definition interest and financing revenues) for the affiliate taxation year for the purposes of determining, in respect of the taxpayer for the affiliate taxation year, each amount referred to in subparagraph 95(2)‍(f)‍(i) or (ii), if clause 95(2)‍(f.‍11)‍(ii)‍(A) were read without regard to the reference to subsection 18.‍2(2).‍ (revenus d’intérêts et de financement de la société affiliée pertinents)

relevant inter-affiliate interest, of a controlled foreign affiliate of a taxpayer for an affiliate taxation year, means an amount of interest to the extent that the amount

  • (a)is paid or payable by the affiliate to, or received or receivable by the affiliate from, a controlled foreign affiliate (in this definition referred to as the “other affiliate”) of

    • (i)the taxpayer, or

    • (ii)a taxpayer that is an eligible group entity in respect of the taxpayer; and

  • (b)would, in the absence of subsection (19), be included in

    • (i)if the amount is paid or payable by the affiliate, the affiliate’s relevant affiliate interest and financing expenses for the affiliate taxation year and the other affiliate’s relevant affiliate interest and financing revenues for an affiliate taxation year, or

    • (ii)if the amount is received or receivable by the affiliate, the affiliate’s relevant affiliate interest and financing revenues for the affiliate taxation year and the other affiliate’s relevant affiliate interest and financing expenses for an affiliate taxation year.‍ (intérêts pertinents entre sociétés affiliées)

special purpose loss corporation, for a taxation year, means a particular corporation that 

  • (a)is an eligible group entity in respect of a financial holding corporation to which the particular corporation has interest paid or payable in the year;

  • (b)is formed or exists solely for the purpose of generating a loss of the particular corporation; and

  • (c)would, in the absence of this section, have a loss for the year that is, or will be, utilized by a financial institution group entity that is an eligible group entity in respect of the particular corporation.‍ (société à usage déterminé ayant subi des pertes)

specified participating percentage of a taxpayer, in respect of a controlled foreign affiliate of the taxpayer for an affiliate taxation year, means the percentage that would be the taxpayer’s aggregate participating percentage (as defined in subsection 91(1.‍3)), determined without regard to clause 95(2)‍(f.‍11)‍(ii)‍(D), in respect of the affiliate for the affiliate taxation year, if the definition participating percentage in subsection 95(1) were read without reference to

  • (a)its paragraph (a); and

  • (b)the portion of its paragraph (b) before its subparagraph (b)‍(i).‍ (pourcentage de participation déterminé)

specified pre-regime loss of a taxpayer, in respect of a taxation year, means the taxpayer’s non-capital loss for a preceding taxation year, if

tax-indifferent means a person or partnership that is

  • (a)a person exempt from tax under section 149;

  • (b)a non-resident person;

  • (c)a partnership more than 50% of the fair market value of all interests in which can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraph (a) or (b); or

  • (d)a trust resident in Canada if more than 50% of the fair market value of all interests as beneficiaries under the trust can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of persons described in paragraph (a) or (b).‍ (indifférent relativement à l’impôt)

taxpayer has the meaning assigned by subsection 248(1), but does not include a natural person or a partnership.‍ (contribuable)

transaction includes an arrangement or event.‍ (opération)

transferred capacity means an amount of transferred capacity of a transferor for a taxation year as determined under subsection (4).‍ (capacité transférée)

Excessive interest and financing expenses limitation
(2)Notwithstanding any other provision of this Act, in computing the income for a taxation year of a taxpayer (other than an excluded entity for the year) from a business or property or the taxable income of the taxpayer for the year, no deduction shall be made — and in determining the amount under paragraph 3(b) in respect of the taxpayer for the year, no reduction shall be made — in respect of any amount that is described in any of paragraphs (a) to (g) and (i) of the description of A in the definition interest and financing expenses in subsection (1) that would, in the absence of this section, be deductible in computing that income or taxable income — or would reduce that amount determined under paragraph 3(b) — to the extent of the proportion of that amount that is determined by the formula

(A − (B + C + D + E)) ÷ F

where

A
is the taxpayer’s interest and financing expenses for the year;
B
is

(a)if subsection 18.‍21(2) applies in respect of the taxpayer for the year, the amount determined in respect of the taxpayer for the year under that subsection, and

(b)in any other case, the amount determined by the formula

G × H

where

G
is the taxpayer’s ratio of permissible expenses for the year, and
H
is the taxpayer’s adjusted taxable income for the year;
C
is the taxpayer’s interest and financing revenues for the year;
D
is the amount by which the total of all amounts each of which is an amount of received capacity of the taxpayer for the year, as determined under subsection (4), exceeds the total amount deductible under paragraph 111(1)‍(a.‍1) for the year;
E
is the amount of the taxpayer’s absorbed capacity for the year; and
F
is

(a)if no amount is included in the taxpayer’s interest and financing expenses for the year under paragraph (j) of the description of A of that definition, or under paragraph (h) of the description of A of that definition in respect of a controlled foreign affiliate of a partnership of which the taxpayer is a member, the amount determined for A in that definition for the taxpayer for the year, or

(b)in any other case, the amount that would be determined for A in the definition interest and financing expenses in subsection (1) for the taxpayer for the year if the reference to “the affiliate’s interest and financing expenses” in the definition relevant affiliate interest and financing expenses were read as a reference to “an amount determined for A in the definition interest and financing expenses for the affiliate”.

Amount deemed deducted
(3)All or any portion, of a particular amount described in paragraph (c) or (d) of the description of A in the definition interest and financing expenses in subsection (1), that would, in the absence of subsection (2), have been deducted in computing the income of a taxpayer for a taxation year but that is not deductible because of subsection (2), is deemed to have been deductible and to have been deducted in the year for purposes of determining, in respect of any taxpayer at any time, such of the following amounts to which the particular amount relates:
  • (a)the total depreciation (as defined in subsection 13(21)) allowed for property of a prescribed class;

  • (b)the amount the taxpayer may deduct under subsection 66(4);

  • (c)the cumulative Canadian exploration expense (as defined in subsection 66.‍1(6));

  • (d)the cumulative Canadian development expense (as defined in subsection 66.‍2(5));

  • (e)the cumulative foreign resource expense (as defined in subsection 66.‍21(1)) in respect of a country;

  • (f)the cumulative Canadian oil and gas property expense (as defined in subsection 66.‍4(5)); and

  • (g)the amount the taxpayer may deduct under subsections 66.‍7(1), (2) or (2.‍3) to (5).

Transfer of cumulative unused excess capacity
(4)For the purposes of this section, a taxpayer and another taxpayer (referred to in this section as the “transferor” and the “transferee”, respectively) may jointly elect in prescribed form to designate an amount equal to all or a portion of the transferor’s cumulative unused excess capacity, and that amount is an amount of transferred capacity of the transferor for a taxation year and an amount of received capacity of the transferee for a taxation year, if
  • (a)the taxation year of the transferor ends in the taxation year of the transferee;

  • (b)each of the transferor and the transferee is

    • (i)a taxable Canadian corporation or a fixed interest commercial trust throughout its taxation year, and

    • (ii)an eligible group entity in respect of the other at the end of its taxation year;

  • (c)where the transferor is a financial institution group entity or a financial holding corporation for its taxation year, the transferee is, for its taxation year,

    • (i)a financial institution group entity,

    • (ii)a financial holding corporation, or

    • (iii)a special purpose loss corporation;

  • (d)the election or amended election

    • (i)specifies the amount of the transferred capacity, and

    • (ii)is filed with the Minister by the transferor

      • (A)on or before the later of the filing-due date of

        • (I)the transferor for its taxation year, and

        • (II)the transferee for its taxation year, or

      • (B)on or before the day that is 90 days after the day of sending of

        • (I)a notice of assessment of tax payable under this Part by the transferor or the transferee for their respective taxation years, or

        • (II)a notification that no tax is payable under this Part by the transferor or the transferee for their respective taxation years;

  • (e)the total of all amounts each of which would, if this subsection were read without reference to this paragraph, be an amount of transferred capacity of the transferor for its taxation year in respect of any transferee, does not exceed the transferor’s cumulative unused excess capacity for the year;

  • (f)if the transferee is a financial holding corporation and the transferor is a financial institution group entity, it is the case that

    A ≥ B

    where

    A
    is the total of all amounts, each of which is an amount that is included in computing the income of the financial holding corporation for its taxation year in respect of excluded interest, the payer of which is, for the taxation year of the payer in which the interest is payable,

    (i)a financial institution group entity, or

    (ii)a special purpose loss corporation, if the amount gives rise to a loss of the special purpose loss corporation that is, or will be, utilized solely by a financial institution group entity, and

    B
    is the total of all amounts, each of which would, in the absence of this paragraph, be an amount that is both

    (i)received capacity of the financial holding corporation for its taxation year, and

    (ii)transferred capacity of a financial institution group entity for one of its taxation years;

  • (g)if the transferee is a special purpose loss corporation and the transferor is a financial institution group entity, it is the case that

    C ≥ D

    where

    C
    is the total of all amounts, each of which is an amount that

    (i)would, in the absence of this section, be deductible in computing the income of the special purpose loss corporation for its taxation year,

    (ii)is paid or payable to a financial holding corporation,

    (iii)meets the conditions set out in paragraphs (a) to (d) of the definition excluded interest, and

    (iv)would, in the absence of this section, give rise to a loss that is, or will be, utilized solely by a financial institution group entity, and

    D
    is the total of all amounts, each of which would, in the absence of this paragraph, be an amount that is both

    (i)received capacity of the special purpose loss corporation for its taxation year, and

    (ii)transferred capacity of a financial institution group entity for one of its taxation years;

  • (h)an amended election has not been filed in accordance with this section;

  • (i)where the election is an amended election,

    • (i)the following conditions are met:

      • (A)in the absence of any assessment, the condition set out in paragraph (e) would be met in respect of a prior election under this subsection made by the transferor and transferee for their respective taxation years, and

      • (B)subsection (9) does not apply to a tax benefit in respect of a prior election for the taxation year of the transferor or transferee, or

    • (ii)the Minister grants permission to amend the prior election under subsection (5); and

  • (j)the transferee files an information return in accordance with subsection (6) for the calendar year in which the transferee’s taxation year ends.

Late or amended election
(5)The Minister may extend the time for making an election, or grant permission to amend an election, under subsection (4) if
  • (a)the transferor and the transferee demonstrate to the satisfaction of the Minister that

    • (i)the transferor, the transferee and each other eligible group entity in respect of the transferor and transferee made reasonable efforts to determine all amounts that may reasonably be considered relevant in making the election, and

    • (ii)the election or amended election, as the case may be, is filed as soon as circ*mstances permit; and

  • (b)in the opinion of the Minister, the circ*mstances are such that it would be just and equitable to permit the election to be made or amended.

Summary — cumulative unused excess capacity transfers
(6)If one or more elections are filed under subsection (4), in which amounts are designated as received capacity of a particular transferee for a taxation year ending in a calendar year, the particular transferee shall file with the Minister for the calendar year an information return in prescribed form within six months after the end of the calendar year in respect of
  • (a)each such election; and

  • (b)each election filed under subsection (4) for a taxation year ending in the calendar year, by any other transferee that is an eligible group entity in respect of the particular transferee at the end of the other transferee’s taxation year.

Summary — filing by designated filer
(7)For the purposes of this section, if any taxpayer is required to file an information return for a calendar year under subsection (6), the taxpayer is deemed to have filed the information return if
  • (a)an information return under subsection (6) is filed for the calendar year by any other taxpayer (in this subsection referred to as the “designated filer” in respect of the taxpayer for the year) that is an eligible group entity in respect of the taxpayer at the end of the taxpayer’s taxation year ending in the calendar year; and

  • (b)the taxpayer jointly elects, with each other transferee described in paragraph (6)‍(b), to designate under this paragraph the designated filer to be a designated filer in respect of the taxpayer and each other transferee for the calendar year.

Assessment
(8)If an election or an amended election has been made under subsection (4), the Minister shall, notwithstanding subsections 152(4) and (5), assess or reassess the tax, interest or penalties payable under this Act by any taxpayer for any relevant taxation year as is necessary to give effect to the election or amended election.
Anti-avoidance — group status
(9)If, at any time, a particular taxpayer is, becomes or ceases to be an eligible group entity, in respect of another taxpayer, a financial institution group entity or a financial holding corporation and it may reasonably be considered, having regard to all the circ*mstances, that one of the main purposes of the particular taxpayer being, becoming or ceasing to be an eligible group entity, in respect of the other taxpayer, a financial institution group entity or a financial holding corporation is to enable any taxpayer to obtain a tax benefit (within the meaning of subsection 245(1)), the particular taxpayer is deemed not to be, to have become, or to remain, as the case may be, an eligible group entity, in respect of the other taxpayer, a financial institution group entity or a financial holding corporation, as the case may be, at that time.
Benefits conferred
(10)For the purposes of this Part, if a transferor and a transferee file an election (including an amended election) under subsection (4), no benefit is considered to have been conferred on the transferee as a consequence of the election.
Consideration for election
(11)For the purposes of this Part, if property is acquired at any time by a transferor as consideration for filing an election or amended election with a transferee under subsection (4)
  • (a)where the property was owned by the transferee immediately before that time,

    • (i)the transferee is deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and

    • (ii)no amount may be deducted in computing the transferee’s income as a consequence of the transfer of the property, except any amount arising as a consequence of subparagraph (i);

  • (b)the cost at which the property was acquired by the transferor at that time is deemed to be equal to the fair market value of the property at that time; and

  • (c)the transferor is not required to add an amount in computing income solely because of the acquisition at that time of the property.

Partnerships
(12)For the purposes of this section,
  • (a)a person or partnership that is (or is deemed by this paragraph to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership; and

  • (b)a person’s share of the income or loss of a partnership includes the person’s direct or indirect, through one or more other partnerships, share of that income or loss.

Anti-avoidance — interest and financing revenues and expenses
(13)A particular amount that would, in the absence of this subsection, be included under the description of A in the definition interest and financing revenues, or the description of B in the definition interest and financing expenses, in computing the income or loss of a taxpayer for a taxation year, must not be so included, if
  • (a)an amount in respect of the particular amount is deductible in computing the foreign accrual property income of a corporation that is a foreign affiliate, but not a controlled foreign affiliate, of the taxpayer or of a person or partnership that does not deal at arm’s length with the taxpayer;

  • (b)the particular amount is received or receivable, directly or indirectly and in whole or in part, by the taxpayer, or a partnership of which it is a member, from

    • (i)a person that does not deal at arm’s length with the taxpayer and that is

      • (A)an excluded entity,

      • (B)a natural person, or

      • (C)if the taxpayer is not a financial institution group entity or a financial holding corporation, a financial institution group entity or a financial holding corporation, or

    • (ii)a partnership of which a person described in subparagraph (i) is a member; or

  • (c)one of the main purposes of a transaction or series of transactions is to include the particular amount under the description of A in the definition interest and financing revenues, or the description of B in the definition interest and financing expenses, in computing the income or loss of the taxpayer for a taxation year and

    • (i)the transaction or series results in an amount that

      • (A)is not included in the description of B in the definition interest and financing revenues, or the description of A in the definition interest and financing expenses, in computing the income or loss of the taxpayer, or of a person not dealing at arm’s length with the taxpayer, for a taxation year, and

      • (B)is deductible in computing the income of loss for a taxation year of the taxpayer or a person or partnership not dealing at arm’s length with the taxpayer, or

    • (ii)it can reasonably be considered that, in the absence of the transaction or series, the particular amount or an amount for which the particular amount was substituted

      • (A)would have been included in computing the income or loss for a taxation year (other than as a dividend) of the taxpayer, or a person or partnership not dealing at arm’s length with the taxpayer, and

      • (B)would not have been included under the description of A in the definition interest and financing revenues, or the description of B in the definition interest and financing expenses, in computing the income or loss of the taxpayer or a person not dealing at arm’s length with the taxpayer.

Anti-avoidance — excluded entity
(14)For the purposes of subparagraph (c)‍(iv) of the definition excluded entity, a person or partnership is deemed to be tax-indifferent and not to deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer throughout a taxation year of the taxpayer if
  • (a)any portion of the interest and financing expenses of the taxpayer for the year is paid or payable by the taxpayer or any eligible group entity in respect of the taxpayer to the person or partnership as part of a transaction or series of transactions; and

  • (b)it can reasonably be considered that one of the main purposes of the transaction or series is to avoid that portion of the interest and financing expenses being paid or payable to a person or partnership that is tax-indifferent and does not deal at arm’s length with the taxpayer or any eligible group entity in respect of the taxpayer.

Deemed eligible group entities
(15)If two taxpayers are eligible group entities in respect of a third taxpayer, they are deemed to be eligible group entities in respect of each other.
Eligible group entities — related
(16)For the purposes of paragraph (a) of the definition eligible group entity in subsection (1)
  • (a)despite subsection 104(1), a reference to a person that is a trust does not include a reference to the trustee or other persons that own or control the trust property; and

  • (b)a corporation or a trust is deemed not to be related to a taxpayer where the corporation or trust would, but for this paragraph, be related to the taxpayer solely because the taxpayer is controlled by His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)‍(c) to (d.‍6).

Eligible group entities — affiliated
(17)For the purposes of paragraph (b) of the definition eligible group entity in subsection (1), a corporation or a trust is deemed not to be affiliated with a taxpayer where that corporation or trust would, but for this subsection, be affiliated with the taxpayer solely because
  • (a)the taxpayer is controlled by His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)‍(c) to (d.‍6); or

  • (b)if the corporation or trust is a registered charity or a non-profit organization with whom the taxpayer deals at arm’s length, the corporation or trust is a majority-interest beneficiary (within the meaning of subsection 251.‍1(3)) of the taxpayer.

Filing requirement
(18)Each taxpayer shall file with its return of income for the taxation year a prescribed form containing prescribed information for the purpose of determining the deductibility of its interest and financing expenses and determining its exempt interest and financing expenses.
Relevant inter-affiliate interest
(19)If an amount is paid or payable by a controlled foreign affiliate (referred to in this subsection as the “payer affiliate”) of a taxpayer and received or receivable by a controlled foreign affiliate (referred to in this subsection as the “recipient affiliate”) of the taxpayer, or a taxpayer that is an eligible group entity in respect of the taxpayer, and the amount is relevant inter-affiliate interest of the payer affiliate for an affiliate taxation year (referred to in this subsection as the “payer affiliate year”) and of the recipient affiliate for an affiliate taxation year (referred to in this subsection as the “recipient affiliate year”),
  • (a)the amount included, in respect of the relevant inter-affiliate interest, in the payer affiliate’s relevant affiliate interest and financing expenses for the payer affiliate year is the lesser of

    • (i)the relevant inter-affiliate interest, and

    • (ii)the amount determined by the formula

      A + B

      where

      A
      is the amount determined by the formula

      (C − D) × E ÷ C

      where

      C
      is the total of all amounts, each of which would — if the relevant inter-affiliate interest were not paid or payable — be, in respect of the payer affiliate for the payer affiliate year, the specified participating percentage of

      (A)the taxpayer, or

      (B)another taxpayer that is an eligible group entity in respect of the taxpayer, and

      D
      is the total of all amounts, each of which is, in respect of the recipient affiliate for the recipient affiliate year, the specified participating percentage of

      (A)the taxpayer, or

      (B)another taxpayer that is an eligible group entity in respect of the taxpayer, and

      E
      is the relevant inter-affiliate interest, and
      B
      is the lesser of

      (A)the relevant inter-affiliate interest, and

      (B)the amount determined by the formula

      (F − G) × H ÷ I

      where

      F
      is the payer affiliate’s relevant affiliate interest and financing revenues for the payer affiliate year,
      G
      is the amount that would be the payer affiliate’s relevant affiliate interest and financing expenses for the payer affiliate year if the payer affiliate had no relevant inter-affiliate interest for the payer affiliate year,
      H
      is the amount determined for E, and
      I
      is the total of all amounts, each of which is an amount of relevant inter-affiliate interest of the payer affiliate for the payer affiliate year that would, in the absence of this paragraph, be included in the payer affiliate’s relevant affiliate interest and financing expenses; and
  • (b)the amount included, in respect of the relevant inter-affiliate interest, in the recipient affiliate’s relevant affiliate interest and financing revenues for the recipient affiliate year is the lesser of

    • (i)the amount referred to in E, and

    • (ii)the amount determined by the formula

      J × K ÷ L

      where

      J
      is the amount determined for B,
      K
      is the amount determined for C, and
      L
      is the amount determined for D.
Group ratio — definitions
18.‍21(1)The following definitions apply in this section.

acceptable accounting standards means International Financial Reporting Standards and the generally accepted accounting principles of

  • (a)Canada;

  • (b)Australia;

  • (c)Brazil;

  • (d)member states of the European Union;

  • (e)member states of the European Economic Area;

  • (f)Hong Kong (China);

  • (g)Japan;

  • (h)Mexico;

  • (i)New Zealand;

  • (j)the People’s Republic of China;

  • (k)the Republic of India;

  • (l)the Republic of Korea;

  • (m)Singapore;

  • (n)Switzerland;

  • (o)the United Kingdom; and

  • (p)the United States.‍ (principes comptables acceptables)

consolidated financial statements means financial statements prepared in accordance with a relevant acceptable accounting standard in which the assets, liabilities, income, expenses and cash flows of two or more entities are presented as those of a single economic entity and, for greater certainty, the financial statements include the notes to the financial statements.‍ (états financiers consolidés)

consolidated group means two or more entities, other than an equity-accounted entity but including an ultimate parent, (each such entity referred to in this section as a “member of the consolidated group”) in respect of which consolidated financial statements are required to be prepared for financial reporting purposes or would be so required if the entities were subject to International Financial Reporting Standards.‍ (groupe consolidé)

equity-accounted entity means an entity the net income or loss of which is included in the consolidated financial statements of a consolidated group under the equity method of accounting.‍ (entité comptabilisée à la valeur de consolidation)

equity interest means

  • (a)a share of the capital stock of a corporation;

  • (b)an interest as a beneficiary under a trust;

  • (c)an interest as a member of a partnership; or

  • (d)any similar interest in respect of any entity.‍ (participation au capital)

fair value amount means any amount reflected in the net income or net loss reported in the consolidated financial statements of a consolidated group for a relevant period where

  • (a)the carrying value of any asset or liability of the consolidated group is measured using the fair value method of accounting; and

  • (b)the amount reflects a change in the carrying value of the asset or liability during the relevant period and is included in either the description of C or H in the definition group adjusted net book income.‍ (montant de la juste valeur)

group adjusted net book income, of a consolidated group for a relevant period, means the amount determined by the formula

A − B

where

A
is the amount determined by the formula

C + D + E + F + G

where

C
is the amount, if any, of net income reported in the consolidated financial statements of the group for the period,
D
is the amount, if any, of income tax expense reported in those statements,
E
is the amount that would be the specified interest expense of the group for the period if the definition specified interest expense were read without reference to paragraph (b) of the description of A,
F
is the total of all amounts used in determining the amounts reported in those statements each of which is the amount of

(a)a depreciation or amortization expense in respect of an asset,

(b)a charge in respect of the impairment or write-off of an asset referred to in paragraph (a),

(c)a loss on the disposal of an asset referred to in paragraph (a),

(d)if an election is made under subsection (4) and the net fair value amount for the period is negative, the absolute value of the net fair value amount, and

(e)an expense, charge, deduction or loss that is similar to any of those referred to in paragraphs (a) to (d), and

G
is the total of all amounts referred to in the description of D or F that are included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that net income or loss; and
B
is the amount determined by the formula

H + I + J + K + L + M + N

where

H
is the amount, if any, of net loss reported in those statements,
I
is the amount, if any, of income tax recoverable reported in those statements,
J
is the specified interest income of the group for the period,
K
if an election is made under subsection (4) and the net fair value amount for the period is positive, the net fair value amount,
L
is the total of all amounts used in determining the amounts reported in those statements each of which is the amount of a gain on the disposal of an asset referred to in paragraph (a) of the description of F, to the extent that the sale proceeds do not exceed the original cost of the asset,
M
is the total of all amounts referred to in the descriptions of I, K and L that is included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that net income or loss, and
N
is the total of all amounts, each of which is the portion of net income reported in those statements that can reasonably be considered to be earned by a borrower (within the meaning of the definition exempt interest and financing expenses in subsection 18.‍2(1)) in respect of a borrowing (within the meaning of the definition exempt interest and financing expenses in subsection 18.‍2(1)) that results in exempt interest and financing expenses of the borrower.‍ (bénéfice net comptable rajusté du groupe)

group net interest expense, of a consolidated group for a relevant period, means the amount determined by the formula

A − B

where

A
is the amount determined by the formula

C − D

where

C
is the specified interest expense of the group for the period, and
D
is the specified interest income of the group for the period; and
B
is the total of all amounts each of which is an amount determined, in respect of a specified non-member of the group, by the formula

E − F

where

E
is the portion of the amount of the specified interest expense of the group for the period that is paid or payable to the specified non-member, and
F
is the portion of the amount of the specified interest income of the group for the period that is received or receivable from the specified non-member.‍ (dépenses nettes d’intérêts du groupe)

group ratio, of a consolidated group for a relevant period, means

  • (a)except where paragraph (b) applies, the percentage determined by the formula

    1.‍1 × A ÷ B

    where

    A
    is the group net interest expense of the consolidated group for the relevant period, and
    B
    is the group adjusted net book income of the consolidated group for the relevant period; and
  • (b)if the group adjusted net book income of the consolidated group for the relevant period is nil, nil.‍ (ratio de groupe)

net fair value amount means the positive or negative amount that is the total of all amounts, each of which is a positive or negative fair value amount in the consolidated financial statements of the consolidated group for a relevant period.‍ (montant de la juste valeur net)

relevant period means a period in respect of which the consolidated financial statements of a consolidated group are presented.‍ (période pertinente)

specified interest expense, of a consolidated group for a relevant period, means the amount determined by the formula

A − B

where

A
is the total of all amounts (other than amounts that are included in exempt interest and financing expenses), each of which is

(a)an amount of interest expense used in determining the amounts reported in the consolidated financial statements of the consolidated group for the relevant period,

(b)an amount of capitalized interest used in determining the amounts reported in those statements,

(c)the amount of a guarantee fee, standby charge, arrangement fee or similar fee paid or payable that is used in determining the amounts reported in those statements and that is not included in paragraph (a) or (b), or

(d)an amount referred to in any of paragraphs (a) to (c) that is included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that net income or loss; and

B
is the total of all amounts each of which is the amount of a dividend included in the determination of an amount referred to in any of paragraphs (a) to (d) of the description of A.‍ (dépenses d’intérêts déterminées)

specified interest income, of a consolidated group for a relevant period, means the amount determined by the formula

A − B

where

A
is the total of all amounts, each of which is

(a)an amount of interest income used in determining the amounts reported in the consolidated financial statements of the consolidated group for the relevant period,

(b)the amount of a guarantee fee, standby charge, arrangement fee or similar fee received or receivable that is used in determining the amounts reported in those statements and that is not included in paragraph (a), or

(c)an amount referred to in paragraph (a) or (b) that is included in the determination of the net income or loss of an equity-accounted entity, to the extent of the consolidated group’s share of that income or loss; and

B
is the total of all amounts each of which is the amount of a dividend included in the determination of an amount referred to in any of paragraphs (a) to (c) of the description of A.‍ (revenus d’intérêts déterminés)

specified non-member, of a consolidated group for a relevant period, means a particular person or partnership that is not a member of the consolidated group and that, at any time in the period,

  • (a)does not deal at arm’s length with a member of the group;

  • (b)alone or together with persons or partnerships with whom the particular person or partnership does not deal at arm’s length owns, or has the right to acquire, one or more equity interests in a member of the group that

    • (i)provide 25% or more of the votes that could be cast at an annual meeting of the shareholders of the member, if the member is a corporation, or

    • (ii)have 25% or more of the fair market value of all equity interests in the member; or

  • (c)is a person or partnership in respect of which a member of the group — alone or together with persons or partnerships with whom the member does not deal at arm’s length — owns, or has the right to acquire, one or more equity interests in the particular person or partnership that

    • (i)provide 25% or more of the votes that could be cast at an annual meeting of the shareholders of the particular person, if the particular person is a corporation, or

    • (ii)have 25% or more of the fair market value of all equity interests in the particular person or partnership.‍ (non-membre déterminé)

ultimate parent means a particular entity if

  • (a)the particular entity is not His Majesty in right of Canada, His Majesty in right of a province or an entity referred to in any of paragraphs 149(1)‍(c) to (d.‍6);

  • (b)it holds directly or indirectly an interest in one or more other entities in respect of which it is required to prepare consolidated financial statements for financial reporting purposes, or would be so required if it was subject to International Financial Reporting Standards; and 

  • (c)no entity (other than an entity described in paragraph (a)) holds, directly or indirectly, in the particular entity an interest that is described in paragraph (b).‍ (mère ultime)

Allocated group ratio amount
(2)A taxpayer and each corporation or trust that is, throughout the relevant period, an eligible group entity in respect of that taxpayer and a member of the same consolidated group as the taxpayer (the taxpayer and each of the corporations or trusts being referred to in this subsection and subsection (4) as a “Canadian group member”) may, if the taxpayer is a taxpayer described in subsection (7), elect, and otherwise jointly elect in respect of their taxation years ending in the relevant period (each referred to in this subsection and subsection (4) as a “relevant taxation year”) to allocate amounts in respect of each relevant taxation year and the amount allocated to a member for a relevant taxation year is the amount determined in respect of that member for that relevant taxation year for the purposes of this section and subsection 18.‍2(2), if
  • (a)the consolidated financial statements of the consolidated group for the relevant period are audited financial statements;

  • (b)the election or amended election

    • (i)specifies the amount allocated to each Canadian group member for each relevant taxation year, and

    • (ii)is filed with the Minister by the taxpayer or a Canadian group member of the taxpayer on or before

      • (A)the latest filing-due date of a Canadian group member for a relevant taxation year, or

      • (B)the day that is 90 days after the sending of

        • (I)a notice of assessment of tax payable under this Part by a Canadian group member for a relevant taxation year, or

        • (II)a notification that no tax is payable under this Part by a Canadian group member for a relevant taxation year;

  • (c)the total of all amounts, each of which is an amount allocated to a Canadian group member for a relevant taxation year, does not exceed the least of

    • (i)the total of all amounts in respect of a member each of which is determined by the formula

      A × B

      where

      A
      is the group ratio of the consolidated group for the relevant period, and
      B
      is the adjusted taxable income of the member for each relevant taxation year,
    • (ii)the group net interest expense of the consolidated group in respect of the relevant period, and

    • (iii)the total of all amounts, each of which would, in the absence of section 257, be the adjusted taxable income of a member for each relevant taxation year;

  • (d)an amended election has not been filed in accordance with this section; and

  • (e)where the election is an amended election,

    • (i)the following conditions are met:

      • (A)in the absence of any assessment, the condition set out in paragraph (c) would be met in respect of a prior election under this subsection made by the Canadian group members for a relevant taxation year under this subsection, and

      • (B)subsection 18.‍2(9) does not apply to a tax benefit in respect of a prior election for the relevant period, or

    • (ii)the Minister grants permission to amend the prior election under subsection (3).

Late or amended election
(3)The Minister may extend the time for making an election or grant permission to amend or revoke an election under subsection (2) if
  • (a)the Canadian group members demonstrate to the satisfaction of the Minister that

    • (i)they made reasonable efforts to determine all amounts that may reasonably be considered relevant in making the election, and

    • (ii)the election or amended election, as the case may be, is filed as soon as circ*mstances permit; and

  • (b)in the opinion of the Minister, the circ*mstances are such that it would be just and equitable to permit the election to be made, amended or revoked.

Fair value adjustments — election
(4)For the purposes of calculating group adjusted net book income, the following rules apply:
  • (a)no amounts may be included in paragraph (d) of the description of F or in the description of K in the definition group adjusted net book income for any relevant period unless the Canadian group members jointly elect, for the first relevant taxation year in respect of which the Canadian group members jointly elect under subsection (2), to include net fair value amounts in calculating group adjusted net book income for the relevant period in which the first relevant taxation year ends;

  • (b)if an election to include net fair value amounts in the calculation is not made in the first relevant taxation year, each Canadian group member is deemed not to have so elected in that taxation year and any subsequent taxation year; and

  • (c)if an election to include net fair value amounts in the calculation is made in the first relevant taxation year, each Canadian group member is deemed to have so elected in that taxation year and any subsequent taxation year.

Assessment
(5)If an election or amended election has been made under subsection (2), the Minister shall, notwithstanding subsections 152(4) and (5), assess or reassess the tax, interest or penalties payable under this Act by any taxpayer for any relevant taxation year as is necessary to give effect to the election or amended election.
Use of accounting terms
(6)For the purposes of the definitions consolidated financial statements, consolidated group, equity-accounted entity, fair value amount, group adjusted net book income, specified interest expense, specified interest income and ultimate parent in subsection (1), a term that is not defined under this Act has the meaning assigned to the term for financial reporting purposes under the relevant acceptable accounting standards.
Single member group
(7)For the purposes of this section, if a taxpayer resident in Canada is not a member of a consolidated group for a relevant period,
  • (a)the taxpayer is deemed to be an eligible group entity in respect of itself;

  • (b)the taxpayer is deemed to be

    • (i)a member of a consolidated group that comprises only itself, and

    • (ii)the ultimate parent of the group; and

  • (c)the taxpayer’s financial statements are deemed to be consolidated financial statements.

Anti-avoidance — specified non-member
(8)A particular person or partnership that is not a member of a consolidated group for a relevant period is deemed to be a specified non-member in respect of the group for the period if a portion of the amount of the specified interest expense of the group is paid or payable by a member of the group to the particular person or partnership as part of a transaction or series of transactions where it can reasonably be considered that one of the main purposes of the transaction or series is to avoid the inclusion of that portion in the determination of the amount for E in the definition group net interest expense in subsection (1).

(2)Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023, except that

  • (a)sections 18.‍2 and 18.‍21 of the Act, as enacted by subsection (1), also apply in respect of a taxation year of a taxpayer that begins before, and ends after, October 1, 2023 if

    • (i)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series, and

    • (ii)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection (1), or the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), to the taxpayer or to increase an amount of excess capacity of any taxpayer determined under paragraphs (c) and (d);

  • (b)paragraph (a) of the definition ratio of permissible expenses in subsection 18.‍2(1) of the Act, as enacted by subsection (1), is to be read, in respect of a taxpayer, as if its reference to “40%” were a reference to “30%” if

    • (i)any taxation year of the taxpayer that begins after 2022 but before 2024 is, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series, and

    • (ii)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph (b) of that definition to the taxpayer;

  • (c)for the purpose of determining the cumulative unused excess capacity of a taxpayer that is a corporation or a fixed interest commercial trust for a particular taxation year, the taxpayer’s excess capacity for each of the three taxation years (in this paragraph and paragraph (d), each referred to as a “pre-regime year”) immediately preceding the first taxation year of the taxpayer in respect of which subsection (1) applies (in this paragraph and paragraph (d) referred to as the “first regime year” of the taxpayer) is deemed to be nil unless

    • (i)the taxpayer and each corporation or fixed interest commercial trust that is an eligible group entity in respect of the taxpayer at the end of the first regime year (in this subsection referred to as an “eligible pre-regime group entity”) jointly elect in prescribed form to have paragraph (d) apply in respect of the taxpayer,

    • (ii)the election or amended election is filed with the Minister by the taxpayer or by an eligible pre-regime group entity of the taxpayer on or before the earliest filing-due date for the first regime year of the taxpayer or of any eligible pre-regime group entity of the taxpayer, and

    • (iii)in the election the taxpayer and the eligible pre-regime group entities

      • (A)allocate to the taxpayer or eligible pre-regime group entities in respect of the taxpayer, for the purpose of determining the taxpayer’s cumulative unused excess capacity for the particular taxation year and any other taxation year in which the taxpayer’s ratio of permissible expenses is the same as in the particular year, one or more portions of the group net excess capacity (as defined in subparagraph (d)‍(vi)) for the pre-regime years that is determined for that purpose, and

      • (B)set out, for the taxpayer and each eligible pre-regime group entity, the excess interest (as defined in subparagraph (d)‍(ii)) for each pre-regime year, the excess capacity otherwise determined (as defined in subparagraph (d)‍(iii)) for each pre-regime year and the net excess capacity (as defined in subparagraph (d)‍(v)) for the pre-regime years; and

  • (d)if the conditions set out in subparagraphs (c)‍(i) to (iii) are satisfied, for the purpose of determining the taxpayer’s cumulative unused excess capacity for a particular taxation year and any other taxation year in which the taxpayer’s ratio of permissible expenses is the same as in the particular year, the taxpayer’s excess capacity for a pre-regime year (other than for the purposes of this paragraph) is determined in accordance with the following rules:

    • (i)for the purposes of this paragraph, the determination of whether a corporation or a fixed interest commercial trust is an eligible pre-regime group entity in respect of the taxpayer is to be made at the end of the taxpayer’s first regime year,

    • (ii)the excess interest, of the taxpayer or an eligible pre-regime group entity in respect of the taxpayer, for a pre-regime year, means the amount that would be determined for the pre-regime year under paragraph (b) of the definition absorbed capacity in subsection 18.‍2(1) of the Act, as enacted by subsection (1),

    • (iii)the excess capacity otherwise determined means the amount that would be the excess capacity of the taxpayer or an eligible pre-regime group entity in respect of the taxpayer for a pre-regime year, if that amount were determined under the definition excess capacity in subsection 18.‍2(1) of the Act, as enacted by subsection (1),

    • (iv)for the purposes of this paragraph, if the taxpayer or an eligible pre-regime group entity in respect of the taxpayer was subject to a loss restriction event at the beginning of any of its pre-regime years, its excess capacity otherwise determined and its excess interest for any pre-regime year that precedes that year are deemed to be nil,

    • (v)the net excess capacity of a taxpayer for its pre-regime years means the amount, if any, by which the total of all amounts each of which is the excess capacity otherwise determined of the taxpayer for a pre-regime year exceeds the total of all amounts each of which is the excess interest of the taxpayer for a pre-regime year,

    • (vi)the group net excess capacity for the pre-regime years means the amount, if any, by which the total of all amounts each of which is the excess capacity otherwise determined of the taxpayer or an eligible pre-regime group entity in respect of the taxpayer (other than a taxpayer or eligible pre-regime group entity that is, at any time in a pre-regime year, a financial institution group entity or a person exempt from tax under Part I of the Act) for a pre-regime year exceeds the total of all amounts each of which is the excess interest of the taxpayer or an eligible pre-regime group entity (other than a taxpayer or eligible pre-regime group entity that is, at any time in a pre-regime year, a financial institution group entity or a person exempt from tax under Part I of the Act) for a pre-regime year,

    • (vii)for the purposes of determining the excess capacity otherwise determined or the excess interest of the taxpayer or an eligible pre-regime group entity for a pre-regime year, the net excess capacity of the taxpayer or an eligible pre-regime group entity for its pre-regime years and the group net excess capacity for pre-regime years,

      • (A)the ratio of permissible expenses is the same as the taxpayer’s ratio of permissible expenses for the particular year, and

      • (B)if it is the case that, in respect of a pre-regime year, the conditions set out in subsection 18.‍21(2) of the Act, as enacted by subsection (1), would be met in respect of the taxpayer and each eligible pre-regime group entity that is a member of the same consolidated group in respect of the year — if the reference in subsection 18.‍21(2) to the “filing–due date of a Canadian group member for the year” were read as a reference to the “filing-due date of any Canadian group member for its first regime year” — then subsection 18.‍21(2) of the Act, as enacted by subsection (1), applies in respect of the taxpayer and each such eligible pre-regime group entity for the pre-regime year,

    • (viii)the taxpayer’s excess capacity for a pre-regime year is deemed to be

      • (A)if the taxpayer’s net excess capacity for its pre-regime years is not a positive amount, nil, and

      • (B)in any other case, the lesser of

        • (I)the taxpayer’s excess capacity otherwise determined for the pre-regime year, and

        • (II)the portion, if any, of the group net excess capacity allocated to the taxpayer for the year in the joint election under paragraph (c), and

    • (ix)notwithstanding subparagraph (viii), the taxpayer’s excess capacity for each pre-regime year is deemed to be nil if

      • (A)the total of all amounts each of which is a portion of the group net excess capacity that is allocated to the taxpayer or an eligible pre-regime group entity in respect of the taxpayer for a pre-regime year in the joint election under paragraph (c) is greater than the group net excess capacity, or

      • (B)the total of all amounts each of which is a portion of the group net excess capacity that is allocated to the taxpayer for a pre-regime year under the joint election is greater than the taxpayer’s net excess capacity for its pre-regime years;

  • (e)an amended election is deemed to be filed in accordance with subparagraph (c)‍(ii) if

    • (i)as a result of an assessment or reassessment, the amount of excess interest or excess capacity otherwise determined of the taxpayer, or any eligible pre-regime group entity (other than a financial institution group entity or a person exempt from tax under Part I of the Act) in respect of the taxpayer, is different from the amount reported by the taxpayer or eligible group entity in a prior election under this subsection,

    • (ii)in the absence of the assessment or reassessment, the taxpayer’s excess capacity for each pre-regime year would not be deemed to be nil under subparagraph (d)‍(ix) based on a prior election, and

    • (iii)the amended election is filed within 90 days of the reassessment;

  • (f)if an election or amended election has been made under paragraph (c), the Minister shall, despite subsections 152(4) and (5) of the Act, assess or reassess the tax, interest or penalties payable under the Act by any taxpayer for any relevant taxation year as is necessary to give effect to the election or amended election; and

  • (g)despite paragraphs (c) and (e), the Minister may accept an election or amended election if

    • (i)the taxpayer and the eligible pre-regime group entities in respect of the taxpayer demonstrate to the satisfaction of the Minister that

      • (A)they made reasonable efforts to determine all amounts that may reasonably be considered relevant in making the election or amended election, and

      • (B)the election or amended election, as the case may be, is filed as soon as circ*mstances permit, and

    • (ii)in the opinion of the Minister, the circ*mstances are such that it would be just and equitable to permit the election to be made or amended.

8(1)The Act is amended by adding the following after section 18.‍3:

Hybrid mismatch arrangements — definitions
18.‍4(1)The following definitions apply in this section and paragraph 20(1)‍(yy).

Canadian ordinary income, of a taxpayer for a taxation year in respect of a payment, means an amount that is

  • (a)if the taxpayer is not a partnership, included in respect of the payment in computing, in the case of a taxpayer resident in Canada, the income of the taxpayer for the purposes of this Part — or, in the case of a taxpayer that is a non-resident person, the taxable income earned in Canada of the taxpayer — for the year, except to the extent that

    • (i)the amount is included in the Canadian ordinary income of any taxpayer under paragraph (b) or (c),

    • (ii)the taxpayer is entitled to a deduction under section 112 or 113 in respect of the payment, or

    • (iii)the amount can otherwise reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from tax under this Part by reason of any exemption, exclusion, deduction, credit (other than a credit for a tax substantially similar to tax under Part XIII) or other form of relief under this Act that

      • (A)applies specifically in respect of all or a portion of the amount and not in computing income generally, or

      • (B)arises in respect of the payment;

  • (b)if the taxpayer is a partnership, determined by the formula

    A × B ÷ C − D

    where

    A
    is an amount that is included in respect of the payment in computing the income or loss of the partnership from any source, or from sources in a particular place, for the year, except to the extent that the amount

    (i)is included in the Canadian ordinary income of any taxpayer under paragraph (c), or

    (ii)can reasonably be considered to be excluded, reduced, offset or otherwise sheltered by any reason described in subparagraph (a)‍(iii),

    B
    is the total of all amounts, each of which is, in respect of the partnership’s income or loss from that source or the sources in the particular place for the year,

    (i)the share of a member of the partnership that is a person resident in Canada, or

    (ii)the share of a member of the partnership that is a non-resident person to the extent it is included in computing the non-resident person’s taxable income earned in Canada,

    C
    is the income or loss of the partnership from the source, or the sources in the particular place, for the year, and
    D
    is the total of all amounts, each of which is an amount deductible, in respect of the payment, by a member of the partnership under section 112 or 113; or
  • (c)determined by the formula

    E × F

    where

    E
    is the amount determined by the formula

    G × H

    where

    G
    is an amount that is included in respect of the payment in computing the foreign accrual property income of a controlled foreign affiliate of the taxpayer for a taxation year (as defined in subsection 95(1)) of the affiliate ending in the year, except to the extent the amount can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered for any reason described in subparagraph (a)‍(iii), and
    H
    is the aggregate participating percentage (as defined in subsection 91(1.‍3)) of the taxpayer in respect of the affiliate for the taxation year of the affiliate, and
    F
    is

    (i)if the taxpayer is a partnership, the amount determined by the formula

    I ÷ E

    where

    I
    is the total of all amounts each of which is a share of the amount determined for E of a member of the partnership that is a person resident in Canada, and

    (ii)in any other case, 1.‍ (revenu ordinaire canadien)

controlled foreign company tax regime means a set of provisions under the tax laws of a particular country other than Canada under which a direct or indirect shareholder of an entity that is located in a country other than the particular country is subject to current taxation in respect of its share of all or part of the income earned by the entity, irrespective of whether that income is distributed currently to the shareholder.‍ (régime fiscal des sociétés étrangères contrôlées)

deductible, in relation to an amount in respect of a payment, in computing relevant foreign income or profits, includes any relief that arises in respect of the payment and is equivalent in effect to a deduction, including 

  • (a)an exemption or exclusion in computing the relevant foreign income or profits; and

  • (b)a refund of, or credit that can be applied to reduce or offset, income or profits tax paid or payable to a government of a country other than Canada in respect of the relevant foreign income or profits.‍ (déductible)

entity has the same meaning as in subsection 95(1).‍ (entité)

equity interest means any of the following:  

  • (a)a share of the capital stock of a corporation;

  • (b)an interest as a beneficiary under a trust;

  • (c)an interest as a member of a partnership; or

  • (d)any similar interest in respect of any entity.‍ (participation au capital)

equity or financing return means a payment that can reasonably be considered to be in respect of, or determined by reference to,

  • (a)revenue, profit, cash flow, commodity price or any other similar criterion;

  • (b)dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, or income or capital paid or payable to any member of a partnership or beneficiary under a trust, or any other distribution in respect of any entity; or

  • (c)an amount that is, or is on account of, in lieu of payment of or in satisfaction of, interest, or that is otherwise compensation for the use of money.‍ (rendement financier ou de capitaux propres)

exempt dealer compensation payment means a payment that

  • (a)is a dealer compensation payment (as defined in subsection 260(1));

  • (b)is received by a registered securities dealer resident in Canada, as compensation for a taxable dividend paid on a share of the capital stock of a public corporation, from a non-resident corporation (referred to in this definition as the “affiliate”) that, at the time the payment is received,

    • (i)is a controlled foreign affiliate of

      • (A)the registered securities dealer, or

      • (B)another taxpayer that does not deal at arm’s length with the registered securities dealer,

    • (ii)has a substantial market presence in a particular country other than Canada,

    • (iii)makes the payment in the ordinary course of a business of trading in securities, if

      • (A)the business is carried on by the affiliate as a foreign bank (as defined in subsection 95(1)), a trust company, a credit union, an insurance corporation or a trader or dealer in securities,

      • (B)the activities of the business are regulated under the laws of

        • (I)the particular country,

        • (II)another country under the laws of which the affiliate is governed and any of exists, was (unless the affiliate was continued in any jurisdiction) formed or organized, or was last continued and of each country in which the business is carried on through a permanent establishment, or

        • (III)if the affiliate is related to a corporation, another country under the laws of which the related corporation is governed and any of exists, was (unless the related corporation was continued in any jurisdiction) formed or organized, or was last continued, if those regulating laws are recognized under the laws of the country in which the business is principally carried on and all of those countries are members of the European Union, and

    • (iv)conducts the business, directly or indirectly,

      • (A)principally with persons that

        • (I)deal at arm’s length with the affiliate, and

        • (II)are resident, or carry on business through a permanent establishment, in the particular country, and

      • (B)in competition with other entities that

        • (I)deal at arm’s length with the affiliate, and

        • (II)have a substantial market presence in the particular country; and

  • (c)does not arise under, or in connection with, a structured arrangement.‍ (paiement compensatoire (courtier) exonéré)

financial instrument means 

  • (a)a debt;

  • (b)an equity interest or any right that may reasonably be considered to replicate a right to participate in profits or gain of any entity; or

  • (c)any other arrangement that gives rise to an equity or financing return.‍ (instrument financier)

foreign expense restriction rule means a provision under the tax laws of a country other than Canada that can reasonably be considered to

  • (a)have an effect, or be intended to have an effect, that is substantially similar to that of subsection 18(4); or

  • (b)have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part,

    • (i)any of the recommendations set out in Limiting Base Erosion Involving Interest Deductions and Other Financial Payments, Action 4 2016 Update, published by the Organisation for Economic Co-operation and Development, or

    • (ii)the Global Anti-Base Erosion Model Rules set out in Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two), published by the Organisation for Economic Co-operation and Development.‍ (règle étrangère de restriction des dépenses)

foreign hybrid mismatch rule means a provision, under the tax laws of a country other than Canada, that can reasonably be considered to

  • (a)have an effect that is substantially similar to that of a provision under this section, section 12.‍7 or subsection 113(5); or

  • (b)have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 2015 Final Report published by the Organisation for Economic Co-operation and Development, as amended from time to time.‍ (règle étrangère d’asymétrie hybride)

foreign ordinary income, of an entity for a foreign taxation year in respect of a payment, means an amount that is determined by the formula

A − B − C − D − E − F

where

A
is an amount (referred to in this definition as the “relevant amount”) that is included in respect of the payment in computing relevant foreign income or profits of the entity for the year (other than income or profits in respect of which the entity is subject to a tax substantially similar to tax under Part XIII, or a tax under a controlled foreign company tax regime or a specified minimum tax regime) because the entity is a recipient of the payment or has a direct or indirect equity interest in a recipient of the payment;
B
is

(a)if the relevant amount is included in computing relevant foreign income or profits in respect of which the entity is subject to an income or profits tax that is charged at a nil rate, the relevant amount, or

(b)in any other case, nil;

C
is any portion of the relevant amount that is included in computing relevant foreign income or profits of the entity for the year because of any foreign hybrid mismatch rule (other than any rule that is substantially similar in effect to subsection 113(5));
D
is any portion of the relevant amount that can reasonably be considered to be excluded, reduced, offset or otherwise effectively sheltered from income or profits tax by reason of any exemption, exclusion, deduction, credit (other than a credit for tax payable under Part XIII) or other form of relief that

(a)applies specifically in respect of all or a portion of the relevant amount and not in computing the entity’s relevant foreign income or profits in general, or

(b)arises in respect of the payment;

E
is the amount determined by the formula

(A − C − D) × G ÷ H

where

G
is the total of all amounts, each of which is an amount that

(i)meets the following conditions:

(A)is repaid or repayable in respect of income or profits tax paid or payable by the entity to the government of a country other than Canada in respect of the relevant foreign income or profits for the year, and

(B)is not repaid or repayable because a loss is used to reduce or offset the relevant foreign income or profits for the year, or

(ii)is paid or payable in respect of a credit that can reasonably be considered to reduce or offset, directly or indirectly, the income or profits tax referred to in clause (i)‍(A), and

H
is the total amount of the income or profits tax referred to in clause (i)‍(A) of the description of G; and
F
is the amount determined by the formula

(A − C − D − E) × (1 − I ÷ J)

where

I
is the rate at which the income or profits tax referred to in clause (i)‍(A) in the description of G is charged in respect of the relevant amount, and
J
is the highest rate at which an income or profits tax imposed by the government of the country is charged in respect of an amount of income in respect of a financial instrument.‍ (revenu ordinaire étranger)

foreign taxation year of an entity means the period for which the accounts of the entity have been ordinarily made up for the purpose of computing relevant foreign income or profits of the entity, but no such period may exceed 53 weeks.‍ (année d’imposition étrangère)

hybrid mismatch amount, in respect of a payment, means

  • (a)if the payment arises under a hybrid financial instrument arrangement, the amount of the hybrid financial instrument mismatch in respect of the payment;

  • (b)if the payment arises under a hybrid transfer arrangement, the amount of the hybrid transfer mismatch in respect of the payment; or

  • (c)if the payment arises under a substitute payment arrangement, the amount of the substitute payment mismatch in respect of the payment.‍ (montant de l’asymétrie hybride)

hybrid mismatch arrangement under which a payment arises means

  • (a)a hybrid financial instrument arrangement under which the payment arises;

  • (b)a hybrid transfer arrangement under which the payment arises; or 

  • (c)a substitute payment arrangement under which the payment arises.‍ (dispositif hybride)

payer of a payment includes any entity that has an obligation to pay, credit or confer, either immediately or in the future and either absolutely or contingently, the payment to an entity.‍ (payeur)

payment includes any amount or benefit that any entity has an obligation to pay, credit or confer, either immediately or in the future and either absolutely or contingently, to an entity.‍ (paiement)

recipient of a payment includes any entity that has an entitlement to be paid, credited or conferred, either immediately or in the future and either absolutely or contingently, the payment by an entity.‍ (bénéficiaire)

relevant foreign income or profits of an entity means income or profits in respect of which the entity is subject to an income or profits tax that is imposed by the government of a country other than Canada.‍ (revenus ou bénéfices étrangers pertinents)

specified entity, in respect of another entity at any time, means a particular entity if, taking into consideration the rules in subsection (17),  

  • (a)the particular entity at that time, either alone or together with entities with whom the particular entity does not deal at arm’s length, owns directly or indirectly equity interests in the other entity that

    • (i)provide 25% or more of the votes that could be cast at an annual meeting of the shareholders, if the other entity is a corporation, or

    • (ii)have 25% or more of the fair market value of all equity interests in the other entity;

  • (b)the condition in paragraph (a) would be satisfied if the references in that paragraph to “particular entity” were read as references to “other entity” and the references to “other entity” were read as references to “particular entity”; or

  • (c)a third entity at that time, either alone or together with entities with which the third entity does not deal at arm’s length, owns directly or indirectly equity interests in the particular entity and the other entity that, in respect of each of the particular entity and the other entity,

    • (i)provide 25% or more of the votes that could be cast at an annual meeting of the shareholders, if the particular entity or the other entity, as the case may be, is a corporation, or

    • (ii)have 25% or more of the fair market value of all equity interests in the particular entity or the other entity, as the case may be.‍ (entité déterminée)

specified minimum tax regime means

  • (a)any provisions in respect of global intangible low-taxed income (as defined in section 951A of the Internal Revenue Code of 1986 of the United States, as amended from time to time);

  • (b)any provisions under the tax laws of a country that can reasonably be considered to have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, the Global Anti-Base Erosion Model Rules set out in Tax Challenges Arising from the Digitalisation of the Economy – Global Anti-Base Erosion Model Rules (Pillar Two), published by the Organisation for Economic Co-operation and Development; or

  • (c)any provisions under the tax laws of a country that can reasonably be considered to have been enacted or otherwise brought into effect by the country with the intention of implementing, in whole or in part, a Qualified Domestic Minimum Top-up Tax (as defined in the model rules referred to in paragraph (b)).‍ (régime fiscal minimum déterminé)

structured arrangement means any transaction, or series of transactions, if 

  • (a)the transaction or series includes a payment that gives rise to a deduction/non-inclusion mismatch; and

  • (b)it can reasonably be considered, having regard to all the facts and circ*mstances, including the terms or conditions of the transaction or series, that

    • (i)portion of any economic benefit arising from the deduction/non-inclusion mismatch is reflected in the pricing of the transaction or series, or

    • (ii)the transaction or series was otherwise designed to, directly or indirectly, give rise to the deduction/non-inclusion mismatch.‍ (dispositif structuré)

transaction includes an arrangement or event.‍ (opération)

Interpretation
(2)This section, section 12.‍7 and subsection 113(5), as well as related provisions of the Act and the Income Tax Regulations, relate to the implementation of Neutralising the Effects of Hybrid Mismatch Arrangements, Action 2 2015 Final Report published by the Organisation for Economic Co-operation and Development and, unless the context otherwise requires, are to be interpreted consistently with that report, as amended from time to time.
Primary rule — conditions for application
(3)Subsection (4) applies in respect of a payment if
  • (a)in the absence of this section and subsection 18(4), an amount would be deductible, in respect of the payment, in computing a taxpayer’s income from a business or property for a taxation year; and

  • (b)that amount is the deduction component of a hybrid mismatch arrangement under which the payment arises.

Primary rule — consequences
(4)If this subsection applies in respect of a payment, notwithstanding any other provision of this Act, in computing a taxpayer’s income from a business or property for a taxation year, no deduction shall be made in respect of the payment to the extent of the hybrid mismatch amount in respect of the payment.
Structured arrangements — exception
(5)If subsection (4) or 12.‍7(3) would, in the absence of this subsection, apply in respect of a payment in computing a taxpayer’s income from a business or property for a taxation year, that subsection does not apply in respect of the payment if
  • (a)there would be no hybrid mismatch arrangement in respect of the payment if the payment did not arise under, or in connection with, a structured arrangement;

  • (b)at the time that the taxpayer entered into, or acquired an interest in any part of a transaction that is, or is part of, the structured arrangement, it was not reasonable to expect that any of the following entities were aware of the deduction/non-inclusion mismatch arising from the payment:

    • (i)the taxpayer,

    • (ii)an entity with which the taxpayer does not deal at arm’s length, or

    • (iii)a specified entity in respect of the taxpayer; and

  • (c)none of the entities described in subparagraphs (b)‍(i) to (iii) shared in the value of any economic benefit resulting from the deduction/non-inclusion mismatch.

Deduction/non-inclusion mismatch — conditions
(6)For the purposes of this section and section 12.‍7, a payment gives rise to a deduction/non-inclusion mismatch if
  • (a)the following condition is met:

    A > B

    where

    A
    is the total of all amounts, each of which would, in the absence of this section and subsection 18(4), be deductible in respect of the payment, in computing the income of a taxpayer from a business or property under this Part for a taxation year (referred to in this paragraph as the “relevant year”), and
    B
    is the total of all amounts each of which, in respect of the payment,

    (i)can reasonably be expected to be — and actually is — foreign ordinary income of an entity for a foreign taxation year that begins on or before the day that is 12 months after the end of the relevant year, or

    (ii)is Canadian ordinary income of a taxpayer for a taxation year that begins on or before the day that is 12 months after the end of the relevant year; or

  • (b)the following condition is met:

    C > D

    where

    C
    is the total of all amounts, each of which, in the absence of any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible, in respect of the payment, in computing relevant foreign income or profits of an entity for a foreign taxation year (referred to in this paragraph as the “relevant foreign year”), and
    D
    is the total of all amounts, each of which, in respect of the payment,

    (i)would, in the absence of section 12.‍7, be Canadian ordinary income of a taxpayer for a taxation year that begins on or before the day that is 12 months after the end of the relevant foreign year, or

    (ii)can reasonably be expected to be — and actually is — foreign ordinary income of another entity for a foreign taxation year that begins on or before the day that is 12 months after the end of the relevant foreign year.

Deduction/non-inclusion mismatch — application
(7)For the purposes of this section and section 12.‍7, if a payment gives rise to a deduction/non-inclusion mismatch,
  • (a)the amount, if any, determined for A in paragraph (6)‍(a) in respect of the payment is the deduction component of the deduction/non-inclusion mismatch;

  • (b)the amount, if any, determined for C in paragraph (6)‍(b) in respect of the payment is the foreign deduction component of the deduction/non-inclusion mismatch; and

  • (c)the amount of the deduction/non-inclusion mismatch arising from the payment is determined by the formula

    A − B

    where

    A
    is

    (i)if paragraph (6)‍(a) applies in respect of the payment, the deduction component of the deduction/non-inclusion mismatch, or

    (ii)if paragraph (6)‍(b) applies in respect of the payment, the foreign deduction component of the deduction/non-inclusion mismatch, and

    B
    is

    (i)if subparagraph (i) of the description of A applies,

    (A)where the amount determined for B in paragraph (6)‍(a) in respect of the payment is equal to 10% or less of the amount determined for A, nil, and

    (B)in any other case, the amount determined for B in paragraph (6)‍(a) in respect of the payment, or

    (ii)if subparagraph (ii) of the description of A applies,

    (A)where the amount determined for D in paragraph (6)‍(b) in respect of the payment is equal to 10% or less of the amount determined for A, nil, and

    (B)in any other case, the amount determined for D in paragraph (6)‍(b) in respect of the payment.

No double counting
(8)Any amount that has already been included, directly or indirectly, in computing foreign ordinary income or Canadian ordinary income of a particular entity in respect of a payment shall not be included, directly or indirectly, in computing foreign ordinary income or Canadian ordinary income of the particular entity or any other entity in respect of the payment.
Notional interest expense — deemed payment
(9)For the purposes of this section (other than this subsection) and section 12.‍7, if, in the absence of any foreign expense restriction rule, an amount (referred to in this subsection as the “deductible amount”) would be, or can reasonably be expected to be, deductible in respect of a notional interest expense on a debt in computing the relevant foreign income or profits of an entity for a foreign taxation year
  • (a)the entity is deemed to make a payment in the year under the debt to the creditor in respect of the debt, in an amount equal to the deductible amount, and the creditor is deemed to be a recipient of the payment;

  • (b)the deductible amount is deemed to be in respect of the payment;

  • (c)any amount that is foreign ordinary income or Canadian ordinary income of the creditor in respect of notional interest income on the debt, that is calculated in respect of the same time period as the notional interest expense, is deemed to arise in respect of the payment; and

  • (d)any deduction/non-inclusion mismatch arising from the payment is deemed to satisfy the condition in paragraph (10)‍(d).

Hybrid financial instrument arrangement — conditions
(10)For the purposes of this section and section 12.‍7, a payment arises under a hybrid financial instrument arrangement if
  • (a)the payment (other than a payment described in paragraphs (14)‍(a) to (d)) arises under, or in connection with, a financial instrument;

  • (b)any of the following conditions is satisfied:

    • (i)a payer of the payment does not deal at arm’s length with, or is a specified entity in respect of, a recipient of the payment, or

    • (ii)the payment arises under, or in connection with, a structured arrangement;

  • (c)the payment gives rise to a deduction/non-inclusion mismatch; and

  • (d)it can reasonably be considered that the deduction/non-inclusion mismatch

    • (i)arises in whole or in part because of a difference in the treatment of the financial instrument — or of one or more transactions, either alone or together, where the transaction or transactions are part of a transaction or series of transactions that includes the payment or relates to the financial instrument — for tax purposes under the laws of more than one country that is attributable to the terms or conditions of the financial instrument or transaction or transactions, or

    • (ii)would arise in whole or in part because of a difference described in subparagraph (i), if any other reason for the deduction/non-inclusion mismatch were disregarded.

Hybrid financial instrument arrangement — amount
(11)For the purposes of this section and section 12.‍7, if a payment arises under a hybrid financial instrument arrangement,
  • (a)the amount of the hybrid financial instrument mismatch, in respect of the payment, is the portion of the amount of the deduction/non-inclusion mismatch arising from the payment that meets the condition in subparagraph (10)‍(d)‍(i) or (ii);

  • (b)the deduction component, if any, of the deduction/non-inclusion mismatch is the deduction component of the hybrid financial instrument arrangement in respect of the payment; and

  • (c)the foreign deduction component, if any, of the deduction/non-inclusion mismatch is the foreign deduction component of the hybrid financial instrument arrangement in respect of the payment.

Hybrid transfer arrangement — conditions
(12)For the purposes of this section and section 12.‍7, a payment (other than an exempt dealer compensation payment) arises under a hybrid transfer arrangement if
  • (a)the payment arises under, or in connection with,

    • (i)a transaction or series of transactions (referred to in this subsection as the “transfer arrangement”) that includes a loan or a disposition or other transfer by an entity to another entity (referred to in this subsection as the “transferor” and “transferee”, respectively) of all or a portion of a financial instrument (referred to in this subsection as the “transferred instrument”), or

    • (ii)the transferred instrument;

  • (b)any of the following conditions is satisfied:

    • (i)at any time during the transfer arrangement

      • (A)a payer of the payment does not deal at arm’s length with, or is a specified entity in respect of, a recipient of the payment, or

      • (B)the transferor does not deal at arm’s length with, or is a specified entity in respect of, the transferee, or

    • (ii)the payment arises under, or in connection with, a structured arrangement;

  • (c)the payment gives rise to a deduction/non-inclusion mismatch; and

  • (d)it can reasonably be considered that the deduction/non-inclusion mismatch arises (or would arise, if any reason for the mismatch other than the reasons described in subparagraphs (i) and (ii) were disregarded), in whole or in part, because

    • (i)if the payment arises as compensation for a particular payment under the transferred instrument,

      • (A)the tax laws of one country treat all or a portion of the payment as though it has the same character as, or represents, the particular payment, in determining the tax consequences to an entity that is a recipient of the payment but not of the particular payment, and

      • (B)the tax laws of another country treat all or a portion of the payment as a deductible expense of another entity, or

    • (ii)in any other case,

      • (A)the tax laws of one country treat one or more transactions included in the transfer arrangement, either alone or together, as or as equivalent to a borrowing or other indebtedness, or treat all or a portion of the payment as arising under, or in connection with, a borrowing or other indebtedness, and the tax laws of another country do not treat the transaction or transactions, or the payment, as the case may be, in that manner, or

      • (B)the tax laws of one country treat the payment, or any other payment arising under, or in connection with, the transfer arrangement or transferred instrument, as though the payment or other payment, as the case may be, was derived by one entity and the tax laws of another country treat the payment or other payment, as the case may be, as though it was derived by another entity, because of a difference in how the countries treat one or more transactions included in the transfer arrangement, either alone or together.

Hybrid transfer arrangement — amount
(13)For the purposes of this section and section 12.‍7, if a payment arises under a hybrid transfer arrangement,
  • (a)the amount of the hybrid transfer mismatch, in respect of the payment, is the portion of the amount of the deduction/non-inclusion mismatch arising from the payment that meets a condition in subparagraph (12)‍(d)‍(i) or (ii);

  • (b)the deduction component, if any, of the deduction/non-inclusion mismatch is the deduction component of the hybrid transfer arrangement in respect of the payment; and

  • (c)the foreign deduction component, if any, of the deduction/non-inclusion mismatch is the foreign deduction component of the hybrid transfer arrangement in respect of the payment.

Substitute payment arrangement — conditions
(14)For the purposes of this section and section 12.‍7, a payment arises under a substitute payment arrangement if
  • (a)the payment arises under, or in connection with, an arrangement under which all or a portion of a financial instrument is loaned or disposed of or otherwise transferred by an entity to another entity (referred to in this subsection as the “transferor” and “transferee”, respectively);

  • (b)the transferee, or an entity that does not deal at arm’s length with the transferee, is a payer of the payment;

  • (c)the transferor, or an entity that does not deal at arm’s length with the transferor, is a recipient of the payment;

  • (d)all or a portion of the payment can reasonably be considered to represent or otherwise reflect, or be determined by reference to

    • (i)another payment (referred to in this subsection and subsection (15) as the “underlying return”) that arises under, or in connection with, the financial instrument, or

    • (ii)revenue, profit, cash flow, commodity price or any other similar criterion;

  • (e)any of the following conditions is satisfied:

    • (i)at any time during that series of transactions that includes the arrangement,

      • (A)a payer of the payment does not deal at arm’s length with, or is a specified entity in respect of, a recipient of the payment, or

      • (B)the transferor does not deal at arm’s length with, or is a specified entity in respect of, the transferee, or

    • (ii)the payment arises under, or in connection with, a structured arrangement;

  • (f)the payment

    • (i)would give rise to a deduction/non-inclusion mismatch if any Canadian ordinary income of a taxpayer for a taxation year and any foreign ordinary income of an entity for a foreign taxation year, in respect of the payment, were limited to the portion of those amounts that can reasonably be considered to relate to the portion of the payment that is described in paragraph (d), or

    • (ii)if the condition in subparagraph (i) is not met, would meet the condition in that subparagraph if any amount that, in the absence of this section, subsection 18(4) or any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible by the transferee in respect of the underlying return were instead considered to be deductible in respect of the payment, to the extent that the amount

      • (A)would be — or would reasonably be expected to be — deductible by the transferee in computing its income from a business or property for a taxation year or its relevant foreign income or profits for a foreign taxation year, as the case may be, and

      • (B)would be — or would reasonably be expected to be — so deductible because the underlying return accrued (or is considered to accrue) for a period before the transfer;

  • (g)one of the following conditions is satisfied:

    • (i)the transferee or an entity that does not deal at arm’s length with the transferee is a recipient of the underlying return — or, if subparagraph (d)‍(ii) applies, a distribution under the financial instrument — and the amount of the underlying return or the distribution, as the case may be, exceeds the total of all amounts, in respect of the underlying return or the distribution, as the case may be, each of which can reasonably be expected to be — and actually is — foreign ordinary income for a foreign taxation year or Canadian ordinary income for a taxation year, as the case may be, of the recipient,

    • (ii)the condition in subparagraph (i) would be satisfied if the transferee were the recipient of the underlying return, or, if subparagraph (d)‍(ii) applies, a distribution under the financial instrument, or

    • (iii)if the transferor were the recipient of the underlying return, or, if subparagraph (d)‍(ii) applies, a distribution under the financial instrument,

      • (A)an amount in respect of the underlying return or distribution, as the case may be, would reasonably be expected to be foreign ordinary income for a foreign taxation year or Canadian ordinary income for a taxation year, as the case may be, of the transferor,

      • (B)the underlying return or distribution, as the case may be, would arise under a hybrid mismatch arrangement, or

      • (C)a foreign hybrid mismatch rule would reasonably be expected to apply in respect of the underlying return or distribution, as the case may be; and

  • (h)one of the following entities is not resident in Canada:

    • (i)the transferor,

    • (ii)the transferee,

    • (iii)a recipient of the payment,

    • (iv)a payer of the payment,

    • (v)the issuer of the financial instrument,

    • (vi)a recipient of the underlying return, and

    • (vii)if an entity described in any of subparagraphs (i) to (vi) is a partnership, a member of that entity.

Substitute payment arrangement — amount
(15)For the purposes of this section and section 12.‍7, if a payment arises under a substitute payment arrangement,
  • (a)the amount of the substitute payment mismatch, in respect of the payment, is the lesser of

    • (i)the amount of the deduction/non-inclusion mismatch arising from the payment,

      • (A)if the condition in subparagraph (14)‍(f)‍(i) applies, determined based on the assumption in that subparagraph, or

      • (B)if the condition in subparagraph (14)‍(f)‍(ii) applies, determined based on the assumption in that subparagraph, and

    • (ii)the amount of the payment, or the portion of the payment, as the case may be, described in paragraph (14)‍(d);

  • (b)the deduction component, if any, of the deduction/non-inclusion mismatch is the deduction component of the substitute payment arrangement in respect of the payment;

  • (c)the foreign deduction component, if any, of the deduction/non-inclusion mismatch is the foreign deduction component of the substitute payment arrangement in respect of the payment; and

  • (d)if the condition in subparagraph (14)‍(f)‍(ii) is met in respect of the payment, any amount that, in the absence of this section, subsection 18(4) or any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible by the transferee in respect of the underlying return that meets the conditions in clauses (14)‍(f)‍(ii)‍(A) and (B) is deemed to be deductible by the transferee in respect of the payment for the purposes of applying subsections (3) and (4) and section 12.‍7.

Substituted instruments
(16)For the purposes of this section and section 12.‍7, any financial instrument that is substituted for a particular financial instrument is deemed to be the particular financial instrument.
Specified entity — deeming rules
(17)For the purposes of the definition specified entity in subsection (1), the following rules apply:
  • (a)in determining the equity interests owned, directly or indirectly, by any entity (in this paragraph referred to as the “first entity”) in any other entity at any time,

    • (i)the rights of the first entity, and any entities with which it does not deal at arm’s length, that are rights referred to in the portion of the definition specified shareholder in subsection 18(5) after paragraph (b) of that definition or in paragraph (a) or (b) of the definition specified beneficiary in that subsection, or that are similar rights in respect of partnerships or any other entity, are deemed to be immediate and absolute and to have been exercised at that time, and

    • (ii)paragraph (c) of the definition specified beneficiary in subsection 18(5) is deemed to apply at that time and the references in that definition to “particular person” are to be read as references to “first entity”; and

  • (b)notwithstanding paragraph (a), a particular entity is deemed not to be a specified entity in respect of another entity at any time if

    • (i)the particular entity would, but for this paragraph, be a specified entity in respect of the other entity at that time,

    • (ii)there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular entity will cease to be a specified entity in respect of the other entity, and

    • (iii)the purpose for which the particular entity became a specified entity was the safeguarding of rights or interests of the particular entity or an entity with which the particular entity is not dealing at arm’s length in respect of any indebtedness owing at any time to the particular entity or an entity with which the particular entity is not dealing at arm’s length.

Tiered partnerships
(18)For the purposes of this section and section 12.‍7, a person or partnership that is a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership, and the person or partnership is deemed to have, directly, rights to the income or capital of the other partnership to the extent of the person or partnership’s direct and indirect rights to that income or capital.
Multiple recipients
(19)For the purposes of this section and section 12.‍7, if there would, in the absence of this subsection, be multiple recipients of a particular payment, each portion of the particular payment that arises to each recipient is deemed to be a separate payment.
Anti-avoidance
(20)The tax consequences (as defined in subsection 245(1)) to a person shall be determined in order to deny a tax benefit (as defined in subsection 245(1)) to the extent necessary to eliminate any deduction/non-inclusion mismatch, or other outcome that is substantially similar to a deduction/non-inclusion mismatch, arising from a payment if
  • (a)it can reasonably be considered that one of the main purposes of a transaction or series of transactions that includes the payment is to avoid or limit the application of subsection (4), 12.‍7(3) or 113(5) in respect of the payment; and

  • (b)any of the following conditions is met:

    • (i)the payment is a dividend and an amount would be — or would reasonably be expected to be — deductible in respect of the payment in computing relevant foreign income or profits of an entity for a foreign taxation year,

    • (ii)the mismatch or other outcome arises in whole or in part because of a difference in tax treatment of any transaction or series of transactions under the laws of more than one country that is attributable to the terms or conditions of the transaction or one or more transactions included in the series, or

    • (iii)the mismatch or other outcome would arise in whole or in part because of a difference described in subparagraph (ii), if any other reason for the mismatch or other outcome were disregarded.

Filing Requirement
(21)Each taxpayer shall file with its return of income for a taxation year a prescribed form containing prescribed information if, in computing the taxpayer’s income for the taxation year,
  • (a)an amount is not deductible in respect of a payment because of subsection (4); or

  • (b)subsection 12.‍7(3) includes an amount in respect of a payment.

(2)Paragraph (a) of the definition foreign expense restriction rule in subsection 18.‍4(1) of the Act, as enacted by subsection (1), is replaced by the following:
  • (a)have an effect, or be intended to have an effect, that is substantially similar to subsection 18(4) or 18.‍2(2); or

(3)Paragraph 18.‍4(3)‍(a) of the Act, as enacted by subsection (1), is replaced by the following:
  • (a)in the absence of this section and subsections 18(4) and 18.‍2(2), an amount would be deductible, in respect of the payment, in computing a taxpayer’s income from a business or property for a taxation year; and

(4)The description of A in paragraph 18.‍4(6)‍(a) of the Act, as enacted by subsection (1), is replaced by the following:
A
is the total of all amounts, each of which would, in the absence of this section and subsections 18(4) and 18.‍2(2), be deductible in respect of the payment, in computing the income of a taxpayer from a business or property under this Part for a taxation year (referred to in this paragraph as the “relevant year”), and
(5)The portion of subparagraph 18.‍4(14)‍(f)‍(ii) of the Act before clause (A), as enacted by subsection (1), is replaced by the following:
  • (ii)if the condition in subparagraph (i) is not met, would meet the condition in that subparagraph if any amount that, in the absence of this section, subsections 18(4) and 18.‍2(2) or any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible by the transferee in respect of the underlying return were instead considered to be deductible in respect of the payment, to the extent that the amount

(6)Paragraph 18.‍4(15)‍(d) of the Act, as enacted by subsection (1), is replaced by the following:
  • (d)if the condition in subparagraph (14)‍(f)‍(ii) is met in respect of the payment, any amount that, in the absence of this section, subsections 18(4) and 18.‍2(2) or any foreign expense restriction rule, would be — or would reasonably be expected to be — deductible by the transferee in respect of the underlying return that meets the conditions in clauses 14(f)‍(ii)‍(A) and (B) is deemed to be deductible by the transferee in respect of the payment for the purposes of applying subsections (3) and (4) and section 12.‍7.

(7)Subsection (1) applies in respect of payments arising on or after July 1, 2022, except that subsection 18.‍4(21) of the Act, as enacted by subsection (1), does not apply in respect of a payment that arises before July 1, 2023.

(8)Subsections (2) to (6) apply in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsections (2) to (6) also apply in respect of a taxation year of a taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

9(1)Subsection 20(1) of the Act is amended by striking out “and” at the end of paragraph (ww), by adding “and” at the end of paragraph (xx) and by adding the following after paragraph (xx):

  • Adjustment for hybrid mismatch

    (yy)if subsection 18.‍4(4) has applied to deny a taxpayer a deduction, for the year or a preceding taxation year, for all or a portion of an amount in respect of a payment arising under a hybrid mismatch arrangement, and the taxpayer demonstrates that an amount is foreign ordinary income of an entity in respect of the payment (other than any amount of foreign ordinary income already taken into account in determining the amount of the deduction that was previously denied or a deduction under this paragraph) for a foreign taxation year that ends on or before the day that is 12 months after the end of the year,

  • (i)the lesser of

    • (A)the amount by which the deduction that was denied exceeds the total of all amounts already deducted under this paragraph in respect of the payment for the year or any previous year, and

    • (B)the amount of the foreign ordinary income, and

  • (ii)the amount that is deductible under this paragraph is deemed to be deductible in respect of the payment.

(2)Subsection (1) applies in respect of payments arising on or after July 1, 2022.

10(1)The portion of subparagraph 40(1)‍(a)‍(iii) of the Act before clause (A) is replaced by the following:

  • (iii)subject to subsections (1.‍1) to (1.‍3), such amount as the taxpayer may claim

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

Reserve — intergenerational business transfers
(1.‍2)In computing the amount that a taxpayer may claim under subparagraph (1)‍(a)‍(iii) on a disposition of shares of the capital stock of a corporation resident in Canada to another corporation, that subparagraph is to be read as if the references to “1/5” and “4” were references to “1/10” and “9” respectively, if the conditions set out in subsection 84.‍1(2.‍31) or (2.‍32) are satisfied in respect of the disposition.
Reserve — dispositions to employee ownership trusts
(1.‍3)In computing the amount that a taxpayer may claim under subparagraph (1)‍(a)‍(iii) in computing the taxpayer’s gain from the disposition of a share of the capital stock of a qualifying business, that subparagraph is to be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively, if the shares of the qualifying business were disposed of by the taxpayer to an employee ownership trust, or to a Canadian-controlled private corporation that is controlled and wholly-owned by an employee ownership trust, pursuant to a qualifying business transfer.

(3)Subsections (1) and (2) apply in respect of transactions that occur on or after January 1, 2024.

11(1)Subparagraph 53(1)‍(e)‍(xiii) of the Act is replaced by the following:

  • (xiii)any amount required by subsection 127(30) or section 211.‍92 to be added to the taxpayer’s tax otherwise payable under this Part for a taxation year that ended before that time in respect of the interest in the partnership;

(2)Subparagraph 53(1)‍(e)‍(xiii) of the Act, as amended by subsection (1), is replaced by the following:

  • (xiii)any amount required by subsection 127(30) or 127.‍45(17) or section 211.‍92 to be added to the taxpayer’s tax otherwise payable under this Part for a taxation year that ended before that time in respect of the interest in the partnership;

(3)Paragraph 53(2)‍(c) of the Act is amended by adding the following after subparagraph (vi):
  • (vi.‍1)an amount equal to that portion of all amounts of a CCUS tax credit deducted under subsection 127.‍44(3) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the tax credit of the taxpayer because of subsection 127.‍44(11),

(4)Paragraph 53(2)‍(c) of the Act, as amended by subsection (3), is amended by adding the following after subparagraph (vi.‍1):
  • (vi.‍2)an amount equal to that portion of all amounts of a clean technology investment tax credit deducted under subsection 127.‍45(6) in computing the tax otherwise payable by the taxpayer under this Part for the taxpayer’s taxation years ending before that time that may reasonably be attributed to amounts added in computing the tax credit of the taxpayer because of subsection 127.‍45(8),

(5)Subsections (1) and (3) are deemed to have come into force on January 1, 2022.

(6)Subsections (2) and (4) are deemed to have come into force on March 28, 2023.

12(1)Paragraphs (f.‍1) and (g) of the definition principal-business corporation in subsection 66(15) of the Act are replaced by the following:

  • (f.‍1)the production or marketing of calcium chloride, gypsum, kaolin, lithium, sodium chloride or potash,

  • (g)the manufacturing of products, where the manufacturing involves the processing of calcium chloride, gypsum, kaolin, lithium, sodium chloride or potash,

(2)Section 66 of the Act is amended by adding the following after subsection (20):

Lithium brine well
(21)For the purposes of paragraph (f) of the definition Canadian exploration expense in subsection 66.‍1(6) and paragraphs (c.‍2) and (d) of the definition Canadian development expense in subsection 66.‍2(5),
  • (a)a mine includes a well for the extraction of material from a lithium brine deposit;

  • (b)all wells of a taxpayer for the extraction of material from one or more lithium brine deposits, the material produced from which is sent to the same plant for processing, are deemed to be one mine of the taxpayer; and

  • (c)all wells of a taxpayer for the extraction of material from one or more lithium brine deposits that the Minister, in consultation with the Minister of Natural Resources, determines constitute one project, are deemed to be one mine of the taxpayer.

(3)Subsections (1) and (2) are deemed to have come into force on March 28, 2023.

13(1)Paragraphs (c.‍2) and (d) of the definition Canadian development expense in subsection 66.‍2(5) of the Act are replaced by the following:

  • (c.‍2)any expense, or portion of any expense, that is not a Canadian exploration expense, incurred by the taxpayer after March 20, 2013 for the purpose of bringing a new mine in a mineral resource in Canada, other than a bituminous sands deposit or an oil shale deposit, into production in reasonable commercial quantities and incurred before the new mine comes into production in such quantities, including an expense for clearing, removing overburden, stripping, sinking a mine shaft, constructing an adit or other underground entry or drilling a well for the extraction of lithium from brines,

  • (d)any expense (other than an amount included in the capital cost of depreciable property) incurred by the taxpayer after 1987

    • (i)in sinking or excavating a mine shaft, main haulage way or similar underground work designed for continuing use, for a mine in a mineral resource in Canada built or excavated after the mine came into production,

    • (ii)in extending any such shaft, haulage way or work referred to in subparagraph (i), or

    • (iii)in drilling or completing a well for the extraction of lithium from brines in Canada after the mine came into production,

(2)Subsection (1) applies in respect of expenses incurred on or after March 28, 2023.

14(1)Subclause 66.‍8(1)‍(a)‍(ii)‍(B)‍(I) of the Act is replaced by the following:

  • (I)the total of all amounts required by subsections 127(8) and 127.‍44(11) in respect of the partnership to be added in computing the investment tax credit or the CCUS tax credit (as defined in subsection 127.‍44(1)) of the taxpayer in respect of the fiscal period, and

(2)Subclause 66.‍8(1)‍(a)‍(ii)‍(B)‍(I) of the Act, as amended by subsection (1), is replaced by the following:

  • (I)the total of all amounts required by subsections 127(8), 127.‍44(11) and 127.‍45(8) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.‍44(1)) or the clean technology investment tax credit (as defined in subsection 127.‍45(1)) of the taxpayer in respect of the fiscal period, and

(3)Subsection (1) is deemed to have come into force on January 1, 2022.

(4)Subsection (2) is deemed to have come into force on March 28, 2023.

15(1)The portion of the definition commercial debt obligation in subsection 80(1) of the Act after paragraph (b) is replaced by the following:

an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Act were read without reference to paragraph 18(1)‍(g), subsections 18(2), (3.‍1) and (4) and 18.‍2(2) and section 21; (créance commerciale)

(2)Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023.

16(1)Subsection 80.‍4(3) of the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):

  • (c)that satisfies the conditions set out in subsection 15(2.‍51) and is repaid within 15 years after the qualifying business transfer referred to in that subsection.

(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2024.

17(1)Paragraph 84.‍1(2)‍(e) of the Act is replaced by the following:

  • (e)notwithstanding any other paragraph in this subsection, if this paragraph applies because of subsection (2.‍31) or (2.‍32) to a disposition of subject shares by a taxpayer to a purchaser corporation, the taxpayer and the purchaser corporation are deemed to deal with each other at arm’s length at the time of the disposition of the subject shares.

(2)Subsection 84.‍1(2.‍3) of the Act is replaced by the following:

Rules for subsections (2.‍31) and (2.‍32)
(2.‍3)For the purposes of this subsection and subsections (2.‍31) and (2.‍32),
  • (a)a child of a taxpayer has the same meaning as in subsection 70(10) and also includes

    • (i)a niece or nephew of the taxpayer,

    • (ii)a niece or nephew of the taxpayer’s spouse or common-law partner,

    • (iii)a spouse or common-law partner of a niece or nephew referred to in subparagraph (i) or (ii), and

    • (iv)a child of a niece or nephew referred to in subparagraph (i) or (ii);

  • (b)in applying subparagraphs (2.‍31)‍(c)‍(iii) and (2.‍32)‍(c)‍(iii), if the relevant group entity is a partnership,

    • (i)the partnership is deemed to be a corporation (in this paragraph referred to as the “deemed corporation”),

    • (ii)the deemed corporation is deemed to have a capital stock of a single class of shares, with a total of 100 issued and outstanding shares,

    • (iii)each member (in this paragraph referred to as a “deemed shareholder”) of the partnership is deemed to be a shareholder of the deemed corporation,

    • (iv)each deemed shareholder of the deemed corporation is deemed to hold a number of shares in the capital stock of the deemed corporation determined by the formula

      A × 100

      where

      A
      is equal to
      • (A)the deemed shareholder’s specified proportion for the last fiscal period of the deemed corporation, or

      • (B)if the deemed shareholder does not have a specified proportion described in clause (A), the proportion that is the fair market value of the deemed shareholder’s interest in the deemed corporation at that time relative to the fair market value of all interests in the deemed corporation at that time, and

    • (v)the deemed corporation’s fiscal period is deemed to be its taxation year;

  • (c)own, directly or indirectly, in respect of a property, means

    • (i)direct ownership of the property, and

    • (ii)an ownership interest or, for civil law, a right in the shares of a corporation, an interest in a partnership or an interest in a trust that has a direct or indirect interest or, for civil law, a right, in the property, except that for the purposes of paragraphs (2.‍31)‍(d) and (e) and (2.‍32)‍(d) and (e), this subparagraph does not apply as a look-through rule for an interest, or for civil law, a right in non-voting preferred shares or debt of

      • (A)the purchaser corporation (within the meaning of subsections (2.‍31) and (2.‍32)),

      • (B)the subject corporation (within the meaning of subsections (2.‍31) and (2.‍32)), or

      • (C)any relevant group entity (within the meaning of subsections (2.‍31) and (2.‍32));

  • (d)if a person or partnership’s share of the accumulating income or capital of a trust in respect of which the person or partnership has an interest as a beneficiary depends on the exercise by a person (in this paragraph referred to as a “trustee”) of, or the failure by any trustee to exercise, a discretionary power, that trustee is deemed to have fully exercised the power, or to have failed to exercise the power, as the case may be;

  • (e)if one or more children referred to in

    • (i)subparagraph (2.‍31)‍(f)‍(i) have disposed of, or caused the disposition of, all of the shares in the capital stock of the purchaser corporation, the subject corporation or all relevant group entities to an arm’s length person or group of persons, the conditions set out in paragraphs (2.‍31)‍(f) and (g) are deemed to be met as of the time of the disposition, provided that all equity interests in all relevant businesses owned, directly or indirectly, by each child referred to in subparagraph (2.‍31)‍(f)‍(i) are included in the disposition, or

    • (ii)subparagraph (2.‍32)‍(g)‍(i) have disposed of, or caused the disposition of, all of the shares in the capital stock of the purchaser corporation, the subject corporation or all relevant group entities to an arm’s length person or group of persons, the conditions set out in paragraphs (2.‍32)‍(g) and (h) are deemed to be met as of the time of the disposition, provided that all equity interests in all relevant businesses owned, directly or indirectly, by each child referred to in subparagraph (2.‍32)‍(g)‍(i) are included in the disposition; and

  • (f)if one or more children referred to in

    • (i)subparagraph (2.‍31)‍(f)‍(i) have disposed of, or caused the disposition of, any of the shares in the capital stock of the purchaser corporation, the subject corporation or a relevant group entity to another child or group of children of the taxpayer (in this paragraph referred to as the “new child” or the “new children”), the conditions set out in paragraphs (2.‍31)‍(f) and (g) are deemed

      • (A)to be met as of the time of the disposition, and

      • (B)to continue to apply to the new child (or the new children) and any other member of the group of children that controls the subject corporation and the purchaser corporation at the time of the disposition, or

    • (ii)subparagraph (2.‍32)‍(g)‍(i) have disposed of, or caused the disposition of, any of the shares in the capital stock of the purchaser corporation, the subject corporation, or a relevant group entity to another child or group of children of the taxpayer (in this paragraph referred to as the “new child” or the “new children”), the conditions set out in paragraphs (2.‍32)‍(g) and (h) are deemed

      • (A)to be met as of the time of the disposition, and

      • (B)to continue to apply to the new child (or the new children) and any other member of the group of children that controls the subject corporation and the purchaser corporation at the time of the disposition;

  • (g)if a child, or each of the children, referred to in

    • (i)subparagraph (2.‍31)‍(f)‍(ii) has died or has, after the disposition of the subject shares, suffered one or more severe and prolonged impairments in physical or mental functions, the conditions set out in paragraphs (2.‍31)‍(f) and (g) are deemed to be met as of the time of the death or mental or physical impairment, or

    • (ii)subparagraph (2.‍32)‍(g)‍(ii) has died or has, after the disposition of the subject shares, suffered one or more severe and prolonged impairments in physical or mental functions, the conditions set out in paragraphs (2.‍32)‍(g) and (h) are deemed to be met as of the time of the death or mental or physical impairment;

  • (h)if a business of a subject corporation or a relevant group entity has ceased to be carried on due to the disposition of all of the assets that were used to carry on the business in order to satisfy debts owed to creditors of the corporation or of the entity, the conditions set out in respect of the business in subparagraphs (2.‍31)‍(f)‍(ii) and (iii) and (2.‍31)‍(g)‍(i) or (2.‍32)‍(g)‍(ii) and (iii) and (2.‍32)‍(h)‍(i), as applicable, are deemed to be met as of the time of the disposition; and

  • (i)in applying paragraphs (2.‍31)‍(g) and (2.‍32)‍(h), management refers to the direction or supervision of business activities but does not include the provision of advice.

Immediate intergenerational business transfer
(2.‍31)Paragraph (2)‍(e) applies at the time of a disposition of subject shares (in this subsection referred to as the “disposition time”) by a taxpayer to a purchaser corporation if the following conditions are met:
  • (a)the taxpayer has not previously, at any time after 2023, sought an exception to the application of subsection (1) under paragraph (2)‍(e) in respect of a disposition of shares that, at that time, derived their value from an active business that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)‍(iii);

  • (b)at the disposition time,

    • (i)the taxpayer is an individual (other than a trust),

    • (ii)the purchaser corporation is controlled by one or more children (within the meaning of paragraph (2.‍3)‍(a), in this subsection referred to as the “child” or “children”) of the taxpayer, each of whom is 18 years of age or older, and

    • (iii)the subject shares are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.‍6(1));

  • (c)at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — control, directly or indirectly in any manner whatever,

    • (i)the subject corporation,

    • (ii)the purchaser corporation, or

    • (iii)any other person or partnership (in this subsection referred to as a “relevant group entity”) that carries on, at the disposition time, an active business (referred to in this subsection as a “relevant business”) that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)‍(iii);

  • (d)at all times after the disposition time, the taxpayer does not – either alone or together with a spouse or common law partner of the taxpayer – own, directly or indirectly,

    • (i)50% or more of any class of shares, other than shares of a specified class as defined in subsection 256(1.‍1) (in this subsection referred to as “non-voting preferred shares”), of the capital stock of the subject corporation or of the purchaser corporation, or

    • (ii)50% or more of any class of equity interest (other than non-voting preferred shares) in any relevant group entity;

  • (e)within 36 months after the disposition time and at all times thereafter, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,

    • (i)any shares, other than non-voting preferred shares of the capital stock of the subject corporation or of the purchaser corporation, or

    • (ii)any equity interest (other than non-voting preferred shares) in any relevant group entity;

  • (f)subject to subsection (2.‍3), from the disposition time until 36 months after that time,

    • (i)the child or group of children, as the case may be, controls the purchaser corporation,

    • (ii)the child, or at least one member of the group of children, as the case may be, is actively engaged on a regular, continuous and substantial basis (within the meaning of paragraph 120.‍4(1.‍1)‍(a)) in a relevant business of the subject corporation or a relevant group entity, and

    • (iii)each relevant business of the subject corporation and any relevant group entity is carried on as an active business;

  • (g)subject to subsection (2.‍3), within 36 months after the disposition time or such greater period as is reasonable in the circ*mstances, the taxpayer and a spouse or common-law partner of the taxpayer take reasonable steps to

    • (i)transfer management of each relevant business of the subject corporation and any relevant group entity to the child or at least one member of the group of children referred to in subparagraph (f)‍(ii), and

    • (ii)permanently cease to manage each relevant business of the subject corporation and any relevant group entity; and

  • (h)the taxpayer and the child, or the taxpayer and each member of the group of children, as the case may be,

    • (i)jointly elect, in prescribed form, for paragraph (2)‍(e) to apply in respect of the disposition of the subject shares, and

    • (ii)file the election with the Minister on or before the taxpayer’s filing-due date for the taxation year that includes the disposition time.

Gradual intergenerational business transfer
(2.‍32)Paragraph (2)‍(e) applies at the time of a disposition of subject shares (referred to in this subsection as the “disposition time”) by a taxpayer to a purchaser corporation if the following conditions are met:
  • (a)the taxpayer has not previously, at any time after 2023, sought an exception to the application of subsection (1) pursuant to paragraph (2)‍(e) in respect of a disposition of shares that, at that time, derived their value from an active business that is relevant to the determination of whether the subject shares satisfy the condition set out in subparagraph (b)‍(iii);

  • (b)at the disposition time,

    • (i)the taxpayer is an individual (other than a trust),

    • (ii)the purchaser corporation is controlled by one or more children (within the meaning of paragraph (2.‍3)‍(a), and referred to in this subsection as the “child” or “children”) of the taxpayer, each of whom is 18 years of age or older, and

    • (iii)the subject shares are qualified small business corporation shares or shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.‍6(1));

  • (c)at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — control

    • (i)the subject corporation,

    • (ii)the purchaser corporation, or

    • (iii)any person or partnership (referred to in this subsection as a “relevant group entity”) that carries on, at the disposition time, an active business (referred to in this subsection as a “relevant business”) that is relevant to the determination of whether the subject shares satisfy the condition in subparagraph (b)‍(iii);

  • (d)at all times after the disposition time, the taxpayer does not — either alone or together with a spouse or common-law partner of the taxpayer — own, directly or indirectly,

    • (i)50% or more of any class of shares, other than shares of a specified class as defined in subsection 256(1.‍1) (in this subsection referred to as “non-voting preferred shares”), of the capital stock of the subject corporation or of the purchaser corporation, or

    • (ii)50% or more of any class of equity interest (other than non-voting preferred shares) in any relevant group entity;

  • (e)within 36 months after the disposition time and at all times thereafter, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,

    • (i)any shares, other than non-voting preferred shares of the capital stock of the subject corporation or of the purchaser corporation, or

    • (ii)any equity interest (other than non-voting preferred shares) in any relevant group entity;

  • (f)within 10 years after the disposition time (referred to in this subsection as the “final sale time”) and at all times after the final sale time, the taxpayer and a spouse or common-law partner of the taxpayer do not own, directly or indirectly,

    • (i)in the case of a disposition of subject shares that are, at the disposition time, shares of the capital stock of a family farm or fishing corporation (as those terms are defined in subsection 110.‍6(1)), interests (including any debt or equity interest) in any of the subject corporation, the purchaser corporation, and any relevant group entity with a fair market value that exceeds 50% of the fair market value of all the interests that were owned, directly or indirectly, by the taxpayer and a spouse or common-law partner of the taxpayer immediately before the disposition time, or

    • (ii)in the case of a disposition of subject shares that are, at the disposition time, qualified small business corporation shares as those terms are defined in subsection 110.‍6(1) (other than subject shares described in subparagraph (i)), interests (including any debt or equity interest) in any of the subject corporation, the purchaser corporation and any relevant group entity with a fair market value that exceeds 30% of the fair market value of all the interests that were owned, directly or indirectly, by the taxpayer and a spouse or common-law partner of the taxpayer immediately before the disposition time;

  • (g)subject to subsection (2.‍3), from the disposition time until the later of 60 months after the disposition time and the final sale time,

    • (i)the child or group of children, as the case may be, controls the purchaser corporation,

    • (ii)the child, or at least one member of the group of children, as the case may be, is actively engaged on a regular, continuous and substantial basis (within the meaning of paragraph 120.‍4(1.‍1)‍(a)) in a relevant business of the subject corporation or a relevant group entity, and

    • (iii)any relevant business of the subject corporation and any relevant group entity is carried on as an active business;

  • (h)subject to subsection (2.‍3), within 60 months of the disposition time or such greater period as is reasonable in the circ*mstances, the taxpayer and a spouse or common-law partner of the taxpayer take reasonable steps to

    • (i)transfer management of each relevant business of the subject corporation and any relevant group entity to the child or at least one member of the group of children referred to in subparagraph (g)‍(ii), and

    • (ii)permanently cease to manage each relevant business of the subject corporation and any relevant group entity; and

  • (i)the taxpayer and the child, or the taxpayer and each member of the group of children, as the case may be,

    • (i)jointly elect, in prescribed form, for paragraph (2)‍(e) to apply in respect of the disposition of the subject shares, and

    • (ii)file the election with the Minister on or before the taxpayer’s filing-due date for the taxation year that includes the disposition time.

(3)Subsections (1) and (2) apply to dispositions of shares that occur on or after January 1, 2024.

18(1)Paragraph 87(2)‍(j.‍6) of the Act is replaced by the following:

  • Continuing corporation

    (j.‍6)for the purposes of paragraphs 12(1)‍(t) and (x), subsections 12(2.‍2) and 13(7.‍1), (7.‍4) and (24), paragraphs 13(27)‍(b) and (28)‍(c), subsections 13(29) and 18(9.‍1), paragraphs 20(1)‍(e), (e.‍1), (v) and (hh), sections 20.‍1 and 32, paragraph 37(1)‍(c), subsection 39(13), subparagraphs 53(2)‍(c)‍(vi) and (h)‍(ii), paragraph 53(2)‍(s), subsections 53(2.‍1), 66(11.‍4), 66.‍7(11), 84.‍1(2.‍31) and (2.‍32) and 127(10.‍2), section 139.‍1, subsection 152(4.‍3), the determination of D in the definition undepreciated capital cost in subsection 13(21) and the determination of L in the definition cumulative Canadian exploration expense in subsection 66.‍1(6), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(2)Subsection 87(2) of the Act is amended by adding the following after paragraph (qq):

  • Certain investment tax credits

    (qq.‍1)for the purposes of section 127.‍44 and Part XII.‍7, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(3)Paragraph 87(2)‍(qq.‍1) of the Act, as enacted by subsection (2), is replaced by the following:

  • Certain investment tax credits

    (qq.‍1)for the purposes of sections 127.‍44 and 127.‍45 and Part XII.‍7, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(4)Paragraph 87(2.‍1)‍(a) of the Act is replaced by the following:

  • (a)determining the new corporation’s non-capital loss, net capital loss, restricted farm loss, farm loss, limited partnership loss or restricted interest and financing expense, as the case may be, for any taxation year,

(5)Subsection 87(2.‍1) of the Act is amended by adding the following after paragraph (a):

  • (a.‍1)determining, for any taxation year, the new corporation’s absorbed capacity, excess capacity and transferred capacity in determining its cumulative unused excess capacity for a taxation year, and

(6)Paragraph 87(2.‍1)‍(b) of the Act is replaced by the following:

  • (b)determining the extent to which subsections 111(3) to (5.‍4) and paragraph 149(10)‍(c) apply to restrict the deductibility by the new corporation of any non-capital loss, net capital loss, restricted farm loss, farm loss, limited partnership loss or restricted interest and financing expense, as the case may be,

(7)Paragraph 87(2.‍1)‍(d) of the Act is replaced by the following:

  • (d)the income of the new corporation (other than as a result of an amount of interest and financing expenses being deductible by the new corporation because of paragraph (a.‍1)) or any of its predecessors, or

(8)Subsection 87 of the Act is amended by adding the following after subsection (2.‍11):

Adjusted taxable income — non-capital losses
(2.‍12)Where there has been an amalgamation of two or more corporations, for the purpose of determining the amount for paragraph (h) in the description of B in the definition adjusted taxable income in subsection 18.‍2(1) in respect of an amount deducted by the new corporation under paragraph 111(1)‍(a) in computing its taxable income for a taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, a particular predecessor corporation if it may reasonably be considered that
  • (a)the amount deducted is in respect of all or any portion of a non-capital loss for another taxation year; and

  • (b)the non-capital loss or the portion of the non-capital loss, as the case may be, is a non-capital loss of the particular predecessor corporation for the other taxation year.

(9)Subsection (1) comes into force or is deemed to have come into force on January 1, 2024.

(10)Subsection (2) is deemed to have come into force on January 1, 2022.

(11)Subsection (3) is deemed to have come into force on March 28, 2022.

(12)Subsections (4) and (6) apply in respect of amalgamations that occur on or after October 1, 2023.

(13)Subsections (5), (7) and (8) apply in respect of amalgamations that occur in any taxation year.

19(1)Subsection 88(1) of the Act is amended by adding the following after paragraph (e.‍3):

  • (e.‍31)for the purposes of section 127.‍44 and Part XII.‍7 at the end of any particular taxation year ending after the subsidiary was wound up, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary;

(2)Paragraph 88(1)‍(e.‍31) of the Act, as enacted by subsection (1), is replaced by the following:

  • (e.‍31)for the purposes of sections 127.‍44 and 127.‍45 and Part XII.‍7 at the end of any particular taxation year ending after the subsidiary was wound up, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary;

(3)The portion of subsection 88(1.‍1) of the Act before paragraph (a) is replaced by the following:

Non-capital losses, etc.‍, of subsidiary
(1.‍1)Where a Canadian corporation (in this subsection and subsection (1.‍11) referred to as the “subsidiary”) has been wound up and not less than 90% of the issued shares of each class of the capital stock of the subsidiary were, immediately before the winding-up, owned by another Canadian corporation (in this subsection and subsection (1.‍11) referred to as the “parent”) and all the shares of the subsidiary that were not owned by the parent immediately before the winding-up were owned at that time by a person or persons with whom the parent was dealing at arm’s length, for the purpose of computing the taxable income of the parent under this Part and the tax payable under Part IV by the parent for any taxation year commencing after the commencement of the winding-up, such portion of any non-capital loss, restricted farm loss, farm loss or limited partnership loss of the subsidiary as may reasonably be regarded as its loss from carrying on a particular business (in this subsection referred to as the “subsidiary’s loss business”) and any other portion of any non-capital loss or limited partnership loss of the subsidiary as may reasonably be regarded as being derived from any other source or being in respect of a claim made under section 110.‍5 for any particular taxation year of the subsidiary (in this subsection referred to as the “subsidiary’s loss year”), and the portion of the restricted interest and financing expense of the subsidiary for any particular taxation year of the subsidiary (in this subsection referred to as the “subsidiary’s expense year”) that may reasonably be regarded as an expense or loss incurred by the subsidiary in the course of carrying on a particular business (in this subsection referred to as the “subsidiary’s expense business”) and any other portion of the restricted interest and financing expense of the subsidiary that may reasonably be regarded as being incurred in respect of any other source, to the extent that it

(4)The portion of subsection 88(1.‍1) of the Act after paragraph (b) and before paragraph (c) is replaced by the following:

shall, for the purposes of this subsection, paragraphs 111(1)‍(a), (a.‍1), (c), (d) and (e), subsection 111(3) and Part IV,

(5)Subsection 88(1.‍1) of the Act is amended by striking out “and” at the end of paragraph (d) and by adding the following after paragraph (d.‍1):

  • (d.‍2)in the case of the portion of any restricted interest and financing expense of the subsidiary that may reasonably be regarded as being incurred in carrying on the subsidiary’s expense business, be deemed, for the taxation year of the parent in which the subsidiary’s expense year ended, to be a restricted interest and financing expense of the parent from carrying on the subsidiary’s expense business that was not deductible by the parent in computing its taxable income for any taxation year that commenced before the commencement of the winding-up, and

  • (d.‍3)in the case of any other portion of any restricted interest and financing expense of the subsidiary that may reasonably be regarded as being incurred in respect of any other source, be deemed, for the taxation year of the parent in which the subsidiary’s expense year ended, to be a restricted interest and financing expense of the parent that was incurred in respect of that other source and that was not deductible by the parent in computing its taxable income for any taxation year that commenced before the commencement of the winding-up,

(6)The portion of paragraph 88(1.‍1)‍(e) of the Act before subparagraph (i) is replaced by the following:

  • (e)if control of the parent has been acquired by a person or group of persons at any time after the commencement of the winding-up, or control of the subsidiary has been acquired by a person or group of persons at any time whatever, no amount in respect of the subsidiary’s non-capital loss, farm loss or restricted interest and financing expense for a taxation year ending before that time is deductible in computing the taxable income of the parent for a particular taxation year ending after that time, except that such portion of the subsidiary’s non-capital loss or farm loss as may reasonably be regarded as its loss from carrying on a business, or restricted interest and financing expense as may reasonably be regarded as being the subsidiary’s expense or loss incurred in the course of carrying on a business and, where a business was carried on by the subsidiary in that year, such portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)‍(k) in computing its taxable income for the year, is deductible only

(7)The portion of paragraph 88(1.‍1)‍(e) of the Act after subparagraph (ii) is replaced by the following:

  • and for the purpose of this paragraph, where this subsection applied to the winding-up of another corporation in respect of which the subsidiary was the parent and this paragraph applied in respect of losses and restricted interest and financing expenses of that other corporation, the subsidiary shall be deemed to be the same corporation as, and a continuation of, that other corporation with respect to those losses and restricted interest and financing expenses,

(8)Subsection 88(1.‍1) of the Act is amended by adding “and” at the end of paragraph (f) and by adding the following after that paragraph:

  • (g)any portion of a restricted interest and financing expense of the subsidiary that would otherwise be deemed by paragraph (d.‍2) or (d.‍3) to be a restricted interest and financing expense of the parent for a particular taxation year beginning after the commencement of the winding-up shall be deemed, for the purpose of computing the parent’s taxable income for taxation years beginning after the commencement of the winding-up, to be a restricted interest and financing expense of the parent for its immediately preceding taxation year and not for the particular year, where the parent so elects in its return of income under this Part for the particular year.

(9)Section 88 of the Act is amended by adding the following after subsection (1.‍1):

Cumulative unused excess capacity of subsidiary
(1.‍11)If a subsidiary has been wound up in the circ*mstances described in subsection (1.‍1), for the purpose of computing the cumulative unused excess capacity of the parent for any taxation year of the parent that commenced after the commencement of the winding up, the absorbed capacity, the excess capacity and any transferred capacity, of the subsidiary for any particular taxation year are deemed to be an amount of absorbed capacity, an amount of excess capacity and an amount of transferred capacity, respectively, of the parent for the taxation year of the parent in which the subsidiary’s particular taxation year ended.
Adjusted taxable income — non-capital losses of subsidiary
(1.‍12)If paragraph (1.‍1)‍(c), (d) or (d.‍1) deems a particular portion of a non-capital loss for a taxation year (referred to in this paragraph as the “subsidiary loss year”) of a subsidiary that has been wound up to be the parent’s non-capital loss for a taxation year (referred to in this paragraph as the “parent loss year”) and the parent deducts an amount in respect of the parent’s non-capital loss under paragraph 111(1)‍(a) in computing taxable income for a particular taxation year, for the purpose of determining the amount included under paragraph (h) of the description of B in the definition adjusted taxable income in subsection 18.‍2(1) in respect of the parent’s non-capital loss in computing the parent’s adjusted taxable income for the particular taxation year, any amount of the subsidiary for the subsidiary loss year that is referred to in the description of W or X in the definition adjusted taxable income in subsection 18.‍2(1) and that relates to the source from which the particular portion is derived (and any amount deemed by this subsection to be an amount of the subsidiary for the subsidiary loss year relating to the source) is deemed to be an amount of the parent relating to the source for the parent loss year.

(10)Paragraph 88(2)‍(c) of the Act is replaced by the following:

  • (c)for the purpose of computing the income of the corporation for its taxation year that includes the particular time, paragraph 12(1)‍(t) shall be read as follows:

    • 12(1)‍(t)the amount deducted under subsection 127(5) or (6) or 127.‍44(3) in computing the taxpayer’s tax payable for the year or a preceding taxation year to the extent that it was not included under this paragraph in computing the taxpayer’s income for a preceding taxation year or is not included in an amount determined under paragraph 13(7.‍1)‍(e) or 37(1)‍(e) or subparagraph 53(2)‍(c)‍(vi), (c)‍(vi.‍1) or (h)‍(ii) or the amount determined for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.‍1(6);”.

(11)Paragraph 88(2)‍(c) of the Act, as amended by subsection (10), is replaced by the following:

  • (c)for the purpose of computing the income of the corporation for its taxation year that includes the particular time, paragraph 12(1)‍(t) shall be read as follows:

    • 12(1)‍(t)the amount deducted under subsection 127(5) or (6), 127.‍44(3) or 127.‍45(6) in computing the taxpayer’s tax payable for the year or a preceding taxation year to the extent that it was not included under this paragraph in computing the taxpayer’s income for a preceding taxation year or is not included in an amount determined under paragraph 13(7.‍1)‍(e) or 37(1)‍(e) or subparagraph 53(2)‍(c)‍(vi) to (c)‍(vi.‍2) or (h)‍(ii) or the amount determined for I in the definition undepreciated capital cost in subsection 13(21) or L in the definition cumulative Canadian exploration expense in subsection 66.‍1(6);”.

(12)Subsections (1) and (10) are deemed to have come into force on January 1, 2022.

(13)Subsections (2) and (11) are deemed to have come into force on March 28, 2023.

(14)Subsections (3) to (8) apply in respect of windings-up that begin on or after October 1, 2023.

(15)Subsection (9) applies in respect of windings-up that begin in any taxation year.

20(1)Paragraph (a) of the description of D in the definition low rate income pool in subsection 89(1) of the Act is replaced by the following:

  • (a)if the non-CCPC was a substantive CCPC at any time in its preceding taxation year or would, but for paragraph (d) of the definition Canadian-controlled private corporation in subsection 125(7), be a Canadian-controlled private corporation in its preceding taxation year, 80% of its aggregate investment income for its preceding taxation year, and

(2)The description of G in the definition low rate income pool in subsection 89(1) of the Act is replaced by the following:

G
is the total of all amounts each of which is a taxable dividend (other than an eligible dividend, a capital gains dividend within the meaning assigned by subsection 130.‍1(4) or 131(1) or a taxable dividend deductible by the non-CCPC under subsection 130.‍1(1) in computing its income for the particular taxation year or for its preceding taxation year) that became payable by the non-CCPC

(a)in the particular taxation year but before the particular time, or

(b)in the preceding taxation year, but only to the extent of the lesser of

(i)the amount included under the description of D in the particular taxation year, and

(ii)the portion of the taxable dividend that did not reduce the non-CCPC’s low rate income pool in the preceding taxation year, and

(3)Subsections (1) and (2) apply to taxation years that begin on or after April 7, 2022.

21(1)The portion of subsection 91(1.‍2) of the Act before paragraph (a) is replaced by the following:

Deemed year-end
(1.‍2)If this subsection applies at a particular time in respect of a foreign affiliate of a particular taxpayer resident in Canada, then for the purposes of this section, sections 18.‍2 and 92 and clause 95(2)‍(f.‍11)‍(ii)‍(D),

(2)Subsection (1) applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer beginning on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

22(1)Paragraph 92(1)‍(a) of the Act is replaced by the following:

  • (a)there shall be added in respect of that share any amount included in respect of that share under subsection 91(1) or (3) in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been required to have been so included in computing the taxpayer’s income but for subsection 56(4.‍1) and sections 74.‍1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952), except that, if the amount so included is greater than it otherwise would have been because of the application of clause 95(2)‍(f.‍11)‍(ii)‍(D), the amount added under this paragraph shall be the amount that would have been so included in the absence of that clause; and

(2)Subsection (1) applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer beginning on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

23(1)The portion of subsection 94.‍2(2) of the Act before paragraph (a) is replaced by the following:

Deemed corporation
(2)If this subsection applies at any time to a beneficiary under, or a particular person in respect of, a trust, then for the purposes of applying this section, section 18.‍2, subsections 91(1) to (4), paragraph 94.‍1(1)‍(a), section 95, the definition restricted interest and financing expense in subsection 111(8) and section 233.‍4 to the beneficiary under, and, if applicable, to the particular person in respect of, the trust

(2)Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

24(1)Paragraph (b) of the description of A in the definition foreign accrual property income in subsection 95(1) of the Act is replaced by the following:

(b)a dividend from another foreign affiliate of the taxpayer, except for any portion of the dividend that would be deemed under subsection 113(5) not to be a dividend received by the affiliate on a share of the capital stock of the other affiliate for the purposes of section 113, if the affiliate were a corporation resident in Canada,

(2)Paragraph (a) of the description of H in the definition foreign accrual property income in subsection 95(1) of the Act is replaced by the following:

(a)if the affiliate was a member of a partnership at the end of the fiscal period of the partnership that ended in the year and the partnership received a dividend at a particular time in that fiscal period from a corporation that would be, if the reference in subsection 93.‍1(1) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, a foreign affiliate of the taxpayer for the purposes of sections 93 and 113 at that particular time, then the portion of the amount of that dividend that

(i)is included in the value determined for A in respect of the affiliate for the year and that would be, if the reference in subsection 93.‍1(2) to “corporation resident in Canada” were a reference to “taxpayer resident in Canada”, deemed by paragraph 93.‍1(2)‍(a) to have been received by the affiliate for the purposes of sections 93 and 113, and

(ii)would not be deemed under subsection 113(5) not to be a dividend received by the affiliate on a share of the capital stock of the other affiliate for the purposes of section 113, if the affiliate were a corporation resident in Canada, and

(3)Clause 95(2)‍(f.‍11)‍(ii)‍(A) of the Act is replaced by the following:

  • (A)this Act is to be read without reference to subsections 12.‍7(3), 17(1), 18(4) and 18.‍4(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,

(4)Clause 95(2)‍(f.‍11)‍(ii)‍(A) of the Act, as enacted by subsection (3), is replaced by the following:

  • (A)this Act is to be read without reference to subsections 12.‍7(3), 17(1), 18(4), 18.‍2(2) and 18.‍4(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,

(5)Clause 95(2)‍(f.‍11)‍(ii)‍(A) of the Act, as enacted by subsection (4), is replaced by the following:

  • (A)this Act is to be read without reference to subsections 17(1), 18(4), 18.‍2(2) and 18.‍4(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,

(6)Subparagraph 95(2)‍(f.‍11)‍(ii) of the Act is amended by striking out “and” at the end of clause (B) and by adding the following after clause (C):

  • (D)if the foreign affiliate is a controlled foreign affiliate of the taxpayer at the end of the taxation year, and the taxpayer is not an excluded entity (as defined in subsection 18.‍2(1)) for its taxation year (referred to in this clause as the “taxpayer year”) in which the taxation year ends,

    • (I)notwithstanding any other provision of this Act, no deduction shall be made in respect of any amount that is included in the affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.‍2(1)) for the taxation year, to the extent of the proportion of that amount that is determined by the first formula in subsection 18.‍2(2) in respect of the taxpayer for the taxpayer year, and

    • (II)an amount is to be included, in determining the amount described in subparagraph (f)‍(ii) for the taxation year, that is equal to the amount that would be included under paragraph 12(1)‍(l.‍2) in determining the amount described in subparagraph (f)‍(ii) for the taxation year if

      • 1clause (A) were read without regard to its reference to subsection 18.‍2(2), and

      • 2the proportion that applied for the purposes of subparagraph (ii) of the description of B in paragraph 12(1)‍(l.‍2) were the proportion that is determined by the first formula in subsection 18.‍2(2) in respect of the taxpayer for the taxpayer year, and

  • (E)notwithstanding any other provision of this Act, no deduction shall be made in respect of one or more amounts (each referred to in this clause as an “elected amount”) if

    • (I)the elected amount would, in the absence of this clause, clause (D) and subsection 18.‍2(19),

      • 1be included in the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.‍2(1)) for the taxation year, and

      • 2be deductible in determining the amount described in subparagraph (f)‍(ii),

    • (II)the total of the elected amounts is equal to the lesser of the following amounts (determined without regard to this clause, clause (D) and subsection 18.‍2(19)):

      • 1the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) for the taxation year, and

      • 2the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.‍2(1)) for the taxation year,

    • (III)the taxpayer files with the Minister, in respect of the elected amounts, an election in writing in prescribed manner under this clause,

    • (IV)the election specifies

      • 1each of the elected amounts,

      • 2the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.‍2(1)) (determined without regard to this clause and subsection 18.‍2(19)) for the taxation year,

      • 3the foreign affiliate’s relevant affiliate interest and financing expenses (as defined in subsection 18.‍2(1)) for the taxation year,

      • 4the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) (determined without regard to this clause, clause (D) and subsection 18.‍2(19)) for the taxation year, and

      • 5the foreign affiliate’s foreign accrual property loss (as defined in subsection 5903(3) of the Income Tax Regulations) or foreign accrual property income, as the case may be, for the taxation year, and

    • (V)the election is filed on or before the filing-due date of the taxpayer for its taxation year in which the taxation year ends;

(7)Subparagraph 95(2)‍(f.‍11)‍(ii) of the Act, as amended by subsection (6), is amended by striking out “and” at the end of clause (D), by adding “and” at the end of clause (E) and by adding the following after clause (E):

  • (F)the following rules apply for the purposes of applying subsection 12.‍7(3) and the related provisions of section 18.‍4 in respect of a payment of which the foreign affiliate, or a partnership of which the foreign affiliate is a member, is a recipient:

    • (I)the definitions in subsection 18.‍4(1) apply for the purposes of this clause,

    • (II)subsection 12.‍7(3) is deemed not to apply in respect of the payment if

      • 1the foreign affiliate’s income or loss derived from the payment is included under subparagraph (a)‍(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year, or

      • 2in the case of a payment that subsection 18.‍4(9) deems to be made to the foreign affiliate or the partnership by a particular entity in respect of a notional interest expense on a particular debt, any income or loss that were derived by the foreign affiliate from the payment would, based on the relevant assumptions in respect of the payment, be included under subparagraph (a)‍(ii) in computing the foreign affiliate’s income or loss from an active business for a taxation year,

    • (III)for the purposes of sub-subclause (II)2, the relevant assumptions in respect of the payment are

      • 1the payment is an amount of interest paid by the particular entity to the foreign affiliate or the partnership, as the case may be, under a legal obligation to pay interest on the particular debt in the taxation year of the foreign affiliate or the partnership in which an amount in respect of the payment would, in the absence of subclause (II), be included under subsection 12.‍7(3) in the income of the foreign affiliate or partnership, and

      • 2any amount that is deductible, in respect of the notional interest expense, is an amount deductible in respect of an expenditure for which the payment was made, and

    • (IV)the definition Canadian ordinary income in subsection 18.‍4(1) is to be read as if

      • 1its subparagraph (a)‍(ii) read as follows:

        • “(ii)the amount is described in paragraph (b) or (c) of the description of A in the definition foreign accrual property income in subsection 95(1), or”, and

      • 2the description of D in its paragraph (b) read as follows:

        “Dis the total of all amounts, each of which is an amount, in respect of the payment, that is included in the description of H in the definition foreign accrual property income in subsection 95(1) in computing the foreign accrual property income of a member of the partnership for a taxation year; or”;

(8)Subsections (1) and (2) apply in respect of any dividend received on or after July 1, 2024.

(9)Subsection (3) applies in respect of payments arising on or after July 1, 2022.

(10)Subsections (4) and (6) apply in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer beginning on or after October 1, 2023. However, subsections (4) and (6) also apply in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

(11)Subsections (5) and (7) apply in respect of payments arising on or after July 1, 2024.

25(1)Subparagraph 96(2.‍1)‍(b)‍(ii) of the Act is replaced by the following:

  • (ii)the amount required by subsection 127(8) or 127.‍44(11) in respect of the partnership to be added in computing the investment tax credit or the CCUS tax credit (as defined in subsection 127.‍44(1)) of the taxpayer for the taxation year,

(2)Subparagraph 96(2.‍1)‍(b)‍(ii) of the Act, as enacted by subsection (1), is replaced by the following:

  • (ii)the amount required by subsections 127(8), 127.‍44(11) or 127.‍45(8) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.‍44(1)) or the clean technology investment tax credit (as defined in subsection 127.‍45(1)) of the taxpayer for the taxation year,

(3)The portion of subsection 96(2.‍2) of the Act before paragraph (a) is replaced by the following:

At-risk amount
(2.‍2)For the purposes of this section and sections 111, 127, 127.‍44 and 127.‍47, the at-risk amount of a taxpayer, in respect of a partnership of which the taxpayer is a limited partner, at any particular time is the amount, if any, by which the total of

(4)The portion of subsection 96(2.‍2) of the Act before paragraph (a), as enacted by subsection (3), is replaced by the following:

At-risk amount
(2.‍2)For the purposes of this section and sections 111, 127, 127.‍44, 127.‍45 and 127.‍47, the at-risk amount of a taxpayer, in respect of a partnership of which the taxpayer is a limited partner, at any particular time is the amount, if any, by which the total of

(5)The portion of subsection 96(2.‍4) of the Act before paragraph (a) is replaced by the following:

Limited partner
(2.‍4)For the purposes of this section and sections 111, 127, 127.‍44 and 127.‍47 a taxpayer who is a member of a partnership at a particular time is a limited partner of the partnership at that time if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection (2.‍5)) at that time and if, at that time or within three years after that time,

(6)The portion of subsection 96(2.‍4) of the Act before paragraph (a), as enacted by subsection (5), is replaced by the following:

Limited partner
(2.‍4)For the purposes of this section and sections 111, 127, 127.‍44, 127.‍45 and 127.‍47 a taxpayer who is a member of a partnership at a particular time is a limited partner of the partnership at that time if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection (2.‍5)) at that time and if, at that time or within three years after that time,

(7)The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:

Agreement or election of partnership members
(3)If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 10.‍1(1), 13(4), (4.‍2) and (16), the definition excluded interest in subsection 18.‍2(1), subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)‍(a)‍(ii)‍(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.‍04, subsections 86.‍1(2), 88(3.‍1), (3.‍3) and (3.‍5) and 90(3), the definition relevant cost base in subsection 95(4) and subsections 97(2), 139.‍1(16) and (17) and 249.‍1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,

(8)Subsections (1), (3) and (5) are deemed to have come into force on January 1, 2022.

(9)Subsections (2), (4) and (6) are deemed to have come into force on March 28, 2023.

(10)Subsection (7) applies in respect of taxation years that begin on or after October 1, 2023.

26(1)Paragraph (a.‍1) of the definition trust in subsection 108(1) of the Act is replaced by the following:

  • (a.‍1)a trust (other than a trust described in paragraph (a), (d) or (h), a trust to which subsection 7(2) or (6) applies or a trust prescribed for the purpose of subsection 107(2)) all or substantially all of the property of which is held for the purpose of providing benefits to individuals each of whom is provided with benefits in respect of, or because of, an office or employment or former office or employment of any individual,

(2)The definition trust in subsection 108(1) of the Act is amended by striking out “or” at the end of paragraph (f), by adding “or” at the end of paragraph (g) and by adding the following after paragraph (g):

  • (h)an employee ownership trust.

(3)Subsections (1) and (2) apply in respect of transactions that occur on or after January 1, 2024.

27(1)Subsection 111(1) of the Act is amended by adding the following after paragraph (a):

  • Restricted interest and financing expenses

    (a.‍1)restricted interest and financing expenses for taxation years preceding the year, but no amount is deductible for the year in respect of restricted interest and financing expenses except to the extent of the amount determined by the formula

    A + B

    where

    A
    is the amount that would be the taxpayer’s excess capacity for the year if the amount determined for C in paragraph (b) of the definition excess capacity in subsection 18.‍2(1) were nil, and
    B
    is the total of all amounts, each of which is an amount of received capacity (as defined in subsection 18.‍2(1)) of the taxpayer for the year;

(2)Clause 111(1)‍(e)‍(ii)‍(A) of the Act is replaced by the following:

  • (A)the amount required by subsection 127(8) or 127.‍44(11) in respect of the partnership to be added in computing the investment tax credit or the CCUS tax credit (as defined in subsection 127.‍44(1)) of the taxpayer for the taxation year,

(3)Clause 111(1)‍(e)‍(ii)‍(A) of the Act, as enacted by subsection (2), is replaced by the following:

  • (A)the amount required by subsections 127(8), 127.‍44(11) or 127.‍45(8) in respect of the partnership to be added in computing the investment tax credit, the CCUS tax credit (as defined in subsection 127.‍44(1)) or the clean technology investment tax credit (as defined in subsection 127.‍45(1)) of the taxpayer for the taxation year,

(4)The portion of subsection 111(3) of the Act before subparagraph (a)‍(i.‍1) is replaced by the following:

Limitation on deductibility
(3)For the purposes of subsection (1),
  • (a)an amount in respect of a non-capital loss, restricted interest and financing expense, restricted farm loss, farm loss or limited partnership loss, as the case may be, for a taxation year is deductible, and an amount in respect of a net capital loss for a taxation year may be claimed, in computing the taxable income of a taxpayer for a particular taxation year only to the extent that it exceeds the total of

    • (i)amounts deducted under this section in respect of that non-capital loss, restricted interest and financing expense, restricted farm loss, farm loss or limited partnership loss in computing taxable income (or, in the case of a restricted interest and financing expense, in computing a non-capital loss) for taxation years preceding the particular taxation year,

(5)Paragraph 111(3)‍(a) of the Act is amended by striking out “and” at the end of subparagraph (i.‍1) and by adding the following after subparagraph (ii):

  • (iii)amounts claimed in respect of that limited partnership loss in computing taxable income for taxation years preceding the particular taxation year to the extent that subsection 18.‍2(2) denied a deduction in respect of those amounts for the preceding taxation year; and

(6)The portion of paragraph 111(3)‍(b) of the Act before subparagraph (i) is replaced by the following:

  • (b)no amount is deductible in respect of a non-capital loss, restricted interest and financing expense, net capital loss, restricted farm loss, farm loss or limited partnership loss, as the case may be, for a taxation year until

(7)Paragraph 111(3)‍(b) of the Act is amended by adding the following after subparagraph (i):

  • (i.‍1)in the case of a restricted interest and financing expense, the restricted interest and financing expenses,

(8)The portion of subsection 111(5) of the Act before subparagraph (a)‍(i) is replaced by the following:

Loss restriction event — certain losses and expenses
(5)If at any time a taxpayer is subject to a loss restriction event,
  • (a)no amount in respect of the taxpayer’s non-capital loss, restricted interest and financing expense or farm loss for a taxation year that ended before that time is deductible by the taxpayer for a taxation year that ends after that time, except that the portion of the taxpayer’s non-capital loss, restricted interest and financing expense or farm loss, as the case may be, for a taxation year that ended before that time as may reasonably be regarded as the taxpayer’s loss from carrying on a business or the taxpayer’s expense or loss incurred in the course of carrying on a business, as the case may be, and, if a business was carried on by the taxpayer in that year, the portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)‍(k) in computing the taxpayer’s taxable income for that year is deductible by the taxpayer for a particular taxation year that ends after that time

(9)Section 111 of the Act is amended by adding the following after subsection (5):

Loss restriction event – cumulative unused excess capacity
(5.‍01)If at any time a particular taxpayer is subject to a loss restriction event, the cumulative unused excess capacity of any taxpayer for any taxation year that ends after that time shall be determined without regard to any absorbed capacity, excess capacity or transferred capacity of the particular taxpayer for any taxation year that ended before that time.

(10)Paragraph (b) of the description of E in the definition non-capital loss in subsection 111(8) of the Act is replaced by the following:

(b)an amount deducted under paragraph (1)‍(a.‍1) or (b) or section 110.‍6, or deductible under any of paragraphs 110(1)‍(d) to (d.‍3), (f), (g) and (k), section 112 and subsections 113(1) and 138(6), in computing the taxpayer’s taxable income for the year, or

(11)Subsection 111(8) of the Act is amended by adding the following in alphabetical order:

restricted interest and financing expense of a taxpayer for a taxation year means the amount determined by the formula

A + B + C

where

A
is the total of all amounts each of which is the portion of an amount that is not deductible in computing the income for the taxation year of the taxpayer from a business or property, or the taxable income of the taxpayer for the year, or does not reduce the amount determined under paragraph 3(b) in respect of the taxpayer for the year, because of subsection 18.‍2(2),
B
is the amount determined under paragraph 12(1)‍(l.‍2) in respect of the taxpayer for the taxation year, and
C
is the total of all amounts, each of which is an amount determined by the formula

D × E

where

D
is the portion of an amount that is not deductible because of subclause 95(2)‍(f.‍11)‍(ii)‍(D)‍(I), or an amount that is included because of subclause 95(2)‍(f.‍11)‍(ii)‍(D)‍(II), in determining, in respect of the taxpayer for an affiliate taxation year (as defined in subsection 18.‍2(1)) of a controlled foreign affiliate of the taxpayer ending in the taxation year, an amount of the affiliate that is described in subparagraph 95(2)‍(f)‍(ii), and
E
is the taxpayer’s specified participating percentage (as defined in subsection 18.‍2(1)) in respect of the affiliate for the affiliate taxation year; (dépense d’intérêts et de financement restreinte)

(12)The portion of subsection 111(9) of the Act before paragraph (a) is replaced by the following:

Exception
(9)In this section, a taxpayer’s non-capital loss, restricted interest and financing expense, net capital loss, restricted farm loss, farm loss and limited partnership loss for a taxation year during which the taxpayer was not resident in Canada shall be determined as if

(13)Subsections (1) and (4) to (12) apply in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsections (1) to (10) also apply in respect of a taxation year of a taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

(14)Subsection (2) is deemed to have come into force on January 1, 2022.

(15)Subsection (3) is deemed to have come into force on March 28, 2023.

28(1)Section 112 of the Act is amended by adding the following after subsection (2):

Mark-to-market property
(2.‍01)No deduction may be made under subsection (1) or (2) or 138(6) in computing the taxable income of a corporation for a taxation year in respect of a dividend received on a share if
  • (a)the corporation is a financial institution at any time in the year; and

  • (b)the share

    • (i)is a mark-to-market property of the corporation for the year, or

    • (ii)would be a mark-to-market property of the corporation for the year if the share was held at any time in the year by the corporation.

Tracking property and preferred shares
(2.‍02)For the purpose of paragraph (2.‍01)‍(b),
  • (a)a share (other than a share of a financial institution) is deemed to be a mark-to-market property of the corporation for the year if the share

    • (i)is a tracking property of the corporation at any time in the year, or

    • (ii)would be a tracking property of the corporation if the share was held at any time in the year by the corporation; and

  • (b)a taxable preferred share is deemed not to be a mark-to-market property of the corporation for the year unless the share would be described in subparagraph (a)‍(i) or (ii) if paragraph (a) were read without reference to “(other than a share of a financial institution)”.

(2.‍03)Subsection (2.‍01) does not apply to a dividend received by an insurance corporation in a taxation year that is
  • (a)either

    • (i)received on a share (other than a share described in subparagraph (2.‍02)‍(a)‍(i)) held by the corporation in connection with an insurance contract entered into, issued or acquired in the ordinary course of an insurance business of the corporation, or

    • (ii)deemed to be received by the corporation as a result of a designation by a mutual fund trust under subsection 104(19) in respect of a unit of the trust that is held by the corporation in connection with an insurance contract entered into, issued or acquired in the ordinary course of an insurance business of the corporation; and

  • (b)identified in the corporation’s return of income under this Part for the year.

(2)Paragraph 112(6)‍(c) of the Act is replaced by the following:

  • (c)financial institution, mark-to-market property and tracking property have the same meaning as in subsection 142.‍2(1).

(3)Subsections (1) and (2) apply in respect of dividends received after 2023.

29(1)Subsection 113(3) of the Act is amended by adding the following definitions in alphabetical order:

deductible, in relation to an amount in respect of a payment, in computing relevant foreign income or profits, has the same meaning as in subsection 18.‍4(1).‍ (déductible)

entity has the same meaning as in subsection 95(1).‍ (entité)

equity interest has the same meaning as in subsection 18.‍4(1).‍ (participation au capital)

foreign expense restriction rule has the same meaning as in subsection 18.‍4(1).‍ (régle étrangère de restriction des dépenses)

foreign hybrid mismatch rule has the same meaning as in subsection 18.‍4(1).‍ (règle étrangère d’asymétrie hybride)

foreign taxation year of an entity has the same meaning as in subsection 18.‍4(1).‍ (année d’imposition étrangère)

relevant foreign income or profits of an entity for a foreign taxation year has the same meaning as in subsection 18.‍4(1).‍ (revenus ou bénéfices étrangers pertinents)

(2)Section 113 of the Act is amended by adding the following after subsection (4):

Deduction restriction
(5)Any amount that, in the absence of this subsection, would be a dividend received by a corporation resident in Canada on a share owned by it of the capital stock of a foreign affiliate of the corporation is deemed, for the purposes of this section (other than this subsection), not to be a dividend received by the corporation on a share of the capital stock of the affiliate to the extent of the total of all amounts, each of which, in respect of the dividend,
  • (a)is an amount that is or can reasonably be expected to be deductible in computing

    • (i)relevant foreign income or profits, for a foreign taxation year, of

      • (A)the affiliate, or

      • (B)another entity (other than the corporation) because that entity has a direct or indirect equity interest in the affiliate, or

    • (ii)income or profits of the affiliate that are taken into account in determining relevant foreign income or profits of another entity for a foreign taxation year; or

  • (b)would, in the absence of any foreign hybrid mismatch rule or foreign expense restriction rule, be described in paragraph (a).

Deduction for foreign taxes
(6)If, for the purposes of this section (other than subsection (5)), all or any portion of a particular amount is deemed by subsection (5) not to be a dividend received by a corporation on a share of the capital stock of a foreign affiliate in a taxation year of the corporation, there may be deducted from the corporation’s income for the taxation year for the purpose of computing its taxable income for the year an amount equal to the lesser of
  • (a)the particular amount or portion of the particular amount, as the case may be, and

  • (b)the amount determined by the formula

    A × B

    where

    A
    is the non-business-income tax paid by the corporation applicable to the particular amount or portion of the particular amount, as the case may be, and
    B
    is the corporation’s relevant tax factor for the year.
Filing Requirement
(7)Each corporation shall file with its return of income for a taxation year a prescribed form containing prescribed information if subsection (5) deems an amount not to be a dividend received by the corporation on a share of the capital stock of a foreign affiliate.

(3)Subsections (1) and (2) apply in respect of any dividend received by a corporation resident in Canada on a share owned by the corporation of the capital stock of a foreign affiliate of the corporation on or after July 1, 2022, except that subsection 113(7) of the Act, as enacted by subsection (2), does not apply in respect of any dividend received before July 1, 2023.

30(1)Subsection 122.‍8(1) of the Act is amended by adding the following in alphabetical order:

relevant census means

  • (a)for the 2023 and 2024 taxation years, the 2016 census published by Statistics Canada; and

  • (b)in any other case, the last census published by Statistics Canada before the taxation year.‍ (recensem*nt pertinent)

(2)Paragraph (a) of the description of E in subsection 122.‍8(4) of the Act is replaced by the following:

  • (a)1.‍2, if there is a census metropolitan area, as determined in the relevant census, in the relevant province and the individual does not reside in a census metropolitan area at the beginning of the specified month, and

(3)Subsections (1) and (2) apply to the 2023 and subsequent taxation years.

31(1)The portion of section 123.‍3 of the Act before paragraph (a) is replaced by the following:

Refundable tax — CCPC or substantive CCPC
123.‍3There shall be added to the tax otherwise payable under this Part for each taxation year by a corporation that is a Canadian-controlled private corporation throughout the year — or a substantive CCPC at any time in the year — an amount equal to 102/3% of the lesser of

(2)Subsection (1) applies to taxation years that end on or after April 7, 2022.

32(1)The portion of paragraph (b) of the definition full rate taxable income in subsection 123.‍4(1) of the Act before subparagraph (i) is replaced by the following:

  • (b)if the corporation is a Canadian-controlled private corporation throughout the year or a substantive CCPC at any time in the year, the amount by which that portion of the corporation’s taxable income for the year that is subject to tax under subsection 123(1) exceeds the total of

(2)Subsection (1) applies to taxation years that end on or after April 7, 2022.

33(1)The description of A in subsection 125.‍2(2) of the Act is replaced by the following:

A
is

(a)0.‍075, if the taxation year begins after 2021 and before 2032,

(b)0.‍05625, if the taxation year begins after 2031 and before 2033,

(c)0.‍0375, if the taxation year begins after 2032 and before 2034,

(d)0.‍01875, if the taxation year begins after 2033 and before 2035, and

(e)nil, in any other case;

(2)The description of C in subsection 125.‍2(2) of the Act is replaced by the following:

C
is

(a)0.‍045, if the taxation year begins after 2021 and before 2032,

(b)0.‍03375, if the taxation year begins after 2031 and before 2033,

(c)0.‍0225, if the taxation year begins after 2032 and before 2034,

(d)0.‍01125, if the taxation year begins after 2033 and before 2035, and

(e)nil, in any other case; and

34(1)Paragraph 127(8.‍1)‍(b) of the Act is replaced by the following:

  • (b)the taxpayer’s at-risk amount in respect of the partnership, less the total of all amounts required by a clean economy allocation provision (as defined in subsection 127.‍47(1)) to be added in computing a clean economy tax credit (as defined in subsection 127.‍47(1)) of the taxpayer at the end of that fiscal period.

(2)The definition government assistance in subsection 127(9) of the Act is replaced by the following:

government assistance means assistance from a government, municipality or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, other than as a deduction under subsection (5) or (6) or a deemed payment on account of tax payable under subsection 127.‍44(2); (aide gouvernementale)

(3)The definition government assistance in subsection 127(9) of the Act, as amended by subsection (2), is replaced by the following:

government assistance means assistance from a government, municipality or other public authority whether as a grant, subsidy, forgivable loan, deduction from tax, investment allowance or as any other form of assistance, other than as a deduction under subsection (5) or (6) or a deemed payment on account of tax payable under subsection 127.‍44(2) or 127.‍45(2); (aide gouvernementale)

(4)The definition non-government assistance in subsection 127(9) of the Act is replaced by the following:

non-government assistance means an amount (other than an amount received directly from a government, municipality or other public authority) that would be included in income under paragraph 12(1)‍(x) if that paragraph were read without reference to subparagraphs 12(1)‍(x)‍(v) to (vii); (aide non gouvernementale)

(5)Subsections (1) and (2) are deemed to have come into force on January 1, 2022.

(6)Subsection (3) is deemed to have come into force on March 28, 2023.

35(1)The Act is amended by adding the following after section 127.‍43:

Definitions
127.‍44(1)The following definitions apply in this section, Part XII.‍7 and in Schedule II to the Income Tax Regulations.

captured carbon means captured carbon dioxide that

  • (a)would otherwise be released into the atmosphere; or

  • (b)is captured directly from the ambient air.‍ (carbone capté)

CCUS process means the process of carbon capture, utilization and storage that includes the

  • (a)capture of carbon dioxide

    • (i)that would otherwise be released into the atmosphere, or

    • (ii)directly from the ambient air; and

  • (b)storage or use of the captured carbon.‍ (processus de CUSC)

CCUS project means a project that is intended to support a CCUS process by

  • (a)capturing carbon dioxide

    • (i)that would otherwise be released into the atmosphere, or

    • (ii)directly from the ambient air;

  • (b)transporting captured carbon; or

  • (c)storing or using captured carbon.‍ (projet de CUSC)

CCUS tax credit means an amount deemed under subsection (2) to have been paid by a taxpayer on account of its tax payable under this Part for the year.‍ (crédit d’impôt pour le CUSC)

dedicated geological storage, in respect of a CCUS project, means a geological formation that is located in a jurisdiction that was a designated jurisdiction at the time that the first qualified CCUS expenditure was made in respect of the project and that is, at the time a relevant expenditure is incurred,

  • (a)capable of permanently storing captured carbon;

  • (b)authorized and regulated for the storage of captured carbon under the laws of the designated jurisdiction; and

  • (c)a formation in which no captured carbon is used for enhanced oil recovery.‍ (stockage géologique dédié)

designated jurisdiction means

  • (a)the provinces of British Columbia, Saskatchewan and Alberta; and

  • (b)any other jurisdiction within Canada (including the exclusive economic zone of Canada) or the United States for which a designation by the Minister of the Environment under subsection (13) is in effect.‍ (juridiction désignée)

dual-use equipment means equipment that is part of a CCUS project of a taxpayer and that is described in any of the following paragraphs (and, in the case of property acquired before the first day of commercial operations of the CCUS project, is verified by the Minister of Natural Resources as being described in any of the following paragraphs):

  • (a)equipment that is not used for natural gas processing or acid gas injection, and that

    • (i)generates electrical energy, heat energy or a combination of electrical and heat energy, if more than 50% of either the electrical energy or heat energy that is expected to be produced over the total CCUS project review period, based on the most recent project plan, is expected (not including equipment that supports the qualified CCUS project indirectly by way of an electrical utility grid) to directly support

      • (A)a qualified CCUS project, unless the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a qualified CCUS project, or

      • (B)hydrogen production from electrolysis or natural gas as long as emissions are abated by a qualified CCUS project, unless the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a qualified CCUS project,

    • (ii)delivers, collects, recovers, treats or recirculates water, or a combination of any of those activities, in support of a qualified CCUS project,

    • (iii)is transmission equipment that directly transmits electrical energy from a system described in subparagraph (a)‍(i) to a qualified CCUS project and more than 50% of the electrical energy to be transmitted by the equipment over the total CCUS project review period, based on the most recent project plan, is expected to support the qualified CCUS project or hydrogen production from electrolysis or natural gas as long as emissions are abated by a qualified CCUS project, or

    • (iv)is distribution equipment that distributes electrical or heat energy;

  • (b)equipment that is physically and functionally integrated with the equipment described in paragraph (a) (for greater certainty, excluding construction equipment, furniture, office equipment and vehicles) and that is ancillary equipment used solely to support the functioning of equipment described in paragraph (a) within a CCUS process as part of

    • (i)an electrical system,

    • (ii)a fuel supply system,

    • (iii)a liquid delivery and distribution system,

    • (iv)a cooling system,

    • (v)a process material storage and handling and distribution system,

    • (vi)a process venting system,

    • (vii)a process waste management system, or

    • (viii)a utility air or nitrogen distribution system;

  • (c)equipment that is

    • (i)used as part of a control, monitoring or safety system solely to support the equipment described in paragraphs (a) or (b),

    • (ii)a building or other structure all or substantially all of which is used, or to be used, for the installation or operation of equipment described in paragraph (a), (b) or subparagraph (i), or

    • (iii)used solely to convert another property that would not otherwise be described in paragraph (a) or (b) or subparagraphs (i) and (ii) if the conversion causes the other property to satisfy the description in the paragraphs (a) or (b) or subparagraphs (i) or (ii); or

  • (d)equipment used solely to refurbish property described in paragraphs (a) or (b) or subparagraphs (c)‍(i) and (ii) that is part of the CCUS project of the taxpayer.‍ (matériel à double usage)

eligible use means

  • (a)the storage of captured carbon in dedicated geological storage; or

  • (b)the use of captured carbon in producing concrete in Canada or the United States using a qualified concrete storage process.‍ (utilisation admissible)

first day of commercial operations means the day that is 120 days after the day on which captured carbon dioxide is first delivered to a carbon transportation, carbon storage or carbon use system for the purpose of storage or use on an ongoing operational basis.‍ (premier jour des activités commerciales)

ineligible use means

  • (a)the emission of captured carbon into the atmosphere, other than

    • (i)for the purposes of system integrity or safety, or

    • (ii)incidental emission made in the ordinary course of operations;

  • (b)the storage or use of captured carbon for enhanced oil recovery; and

  • (c)any other storage or use that is not an eligible use.‍ (utilisation non admissible)

non-government assistance has the same meaning as in subsection 127(9).‍ (aide non gouvernementale)

preliminary CCUS work activity means an activity that is preliminary to the acquisition, construction, fabrication or installation by or on behalf of a taxpayer of property described in Class 57 or 58 in Schedule II to the Income Tax Regulations in respect of the taxpayer’s CCUS project including, but not limited to, a preliminary activity that is

  • (a)obtaining permits or regulatory approvals;

  • (b)performing front-end design or engineering work, including front-end engineering design studies (or equivalent studies as determined by the Minister of Natural Resources) but excluding detailed design or engineering work in relation to specific property included in Class 57 or Class 58;

  • (c)conducting feasibility studies or pre-feasibility studies (or equivalent studies as determined by the Minister of Natural Resources);

  • (d)conducting environmental assessments; or

  • (e)clearing or excavating land.‍ (travaux préliminaires de CUSC)

projected eligible use percentage, in respect of a CCUS project, for a period is the amount, expressed as a percentage, determined by the formula

A ÷ B

where

A
is the quantity of captured carbon that the CCUS project is expected, based on the project’s most recent project plan, to support for storage or use in eligible use during the period; and
B
is the total quantity of captured carbon that the CCUS project is expected, based on the project’s most recent project plan, to support for storage or use in both eligible use and ineligible use during the period.‍ (pourcentage d’utilisation admissible prévu)

project plan means a plan for a CCUS project that

  • (a)reflects a front-end engineering design study (or an equivalent study as determined by the Minister of Natural Resources) for the CCUS project;

  • (b)describes the quantity of captured carbon that the CCUS project is expected to support for storage or use in each calendar year over its total CCUS project review period, in

    • (i)eligible use, and

    • (ii)ineligible use;

  • (c)contains information required in guidelines published by the Minister of Natural Resources; and

  • (d)is filed with the Minister of Natural Resources, in the form and manner determined by that Minister, before the project’s first day of commercial operations.  (plan de projet)

qualified carbon capture expenditure of a taxpayer for a taxation year means an amount that is the portion of an expenditure incurred by the taxpayer to acquire a property in the year, in respect of a qualified CCUS project of the taxpayer, determined by the formula

A × (B + C + D + E) × F

where

A
is, in respect of property acquired by the taxpayer in the year (other than property situated outside of Canada),

(a)the capital cost of property described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in)

(i)paragraph (a) of Class 57 in Schedule II to the Income Tax Regulations, or

(ii)any of paragraphs (d) to (g) of Class 57 in Schedule II to the Income Tax Regulations in relation to equipment described in paragraph (a) of that Class, or

(b)the proportion of the capital cost of dual-use equipment that,

(i)if the equipment is described in subparagraph (a)‍(i) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the amount of energy expected to be produced for use in a qualified CCUS project over the project’s total CCUS project review period is of the total amount of energy expected to be produced by the equipment in that period (determined without regard to energy produced and consumed by the equipment in the process of producing energy), based on the project’s most recent project plan,

(ii)if the equipment is described in subparagraph (a)‍(ii) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the mass of water expected to be returned from a qualified CCUS project over the project’s total CCUS project review period is of the total mass of water expected to be returned to the equipment in that period, based on the project’s most recent project plan,

(iii)if the equipment is described in subparagraph (a)‍(iii) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the amount of electrical energy expected to be transmitted by the equipment for use in a qualified CCUS project over the total CCUS project review period is of the total amount of electrical energy expected to be transmitted by the equipment in that period (determined without regard to electrical energy consumed by the equipment in the process of transmission), based on the project’s most recent project plan, and

(iv)if the equipment is described in subparagraph (a)‍(iv) of the definition dual-use equipment in this subsection, or is acquired in relation to such equipment, the amount of electrical or heat energy expected to be distributed by the equipment (or if it is distribution equipment that expands the capacity of existing equipment, the electrical or heat energy expected to be distributed by the existing and new equipment) for use in a qualified CCUS project over the total CCUS project review period is of the total amount of electrical or heat energy expected to be distributed by the equipment (or the existing and new equipment) in that period (determined without regard to energy consumed by the equipment in the process of distribution), based on the project’s most recent project plan;

B
is

(a)if the time of the expenditure is after the first project period, nil, or

(b)in any other case, the projected eligible use percentage for the first project period;

C
is

(a)if the time of the expenditure is after the second project period, nil, or

(b)in any other case, the projected eligible use percentage for the second project period;

D
is

(a)if the time of the expenditure is after the third project period, nil, or

(b)in any other case, the projected eligible use percentage for the third project period;

E
is the projected eligible use percentage for the fourth project period; and
F
is

(a)if the time of the expenditure is before the second project period, 0.‍25,

(b)if the time of the expenditure is during the second project period, 0.‍33,

(c)if the time of the expenditure is during the third project period, 0.‍5, and

(d)if the time of the expenditure is during the fourth project period, 1.‍ (dépense admissible pour le captage du carbone)

qualified carbon storage expenditure of a taxpayer for a taxation year means an amount that is the capital cost incurred by the taxpayer to acquire in the year, in respect of a qualified CCUS project of the taxpayer, a property (other than property situated outside of Canada) that is

  • (a)expected, based on the qualified CCUS project’s most recent project plan before the time the expenditure is incurred, to support storage of captured carbon solely in a manner described in paragraph (a) of the definition of eligible use; and

  • (b)described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in)

    • (i)paragraph (c) of Class 57 in Schedule II to the Income Tax Regulations, or

    • (ii)any of paragraphs (d) to (g) of Class 57 in Schedule II to the Income Tax Regulations in relation to equipment described in paragraph (c) of that Class.‍ (dépense admissible pour le stockage du carbone)

qualified carbon transportation expenditure of a taxpayer for a taxation year means an amount that is the portion of an expenditure incurred by the taxpayer to acquire a property in the year in respect of a qualified CCUS project of the taxpayer, determined by the formula

A × (B + C + D + E) × F

where

A
is, in respect of property acquired by the taxpayer in the year (other than property situated outside of Canada), the capital cost of property described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in)

(a)paragraph (b) of Class 57 in Schedule II to the Income Tax Regulations, or

(b)any of paragraphs (d) to (g) of Class 57 in Schedule II to the Income Tax Regulations in relation to equipment described in paragraph (b) of that Class;

B
is

(a)if the time of the expenditure is after the first project period, nil, or

(b)in any other case, the projected eligible use percentage for the first project period;

C
is

(a)if the time of the expenditure is after the second project period, nil, or

(b)in any other case, the projected eligible use percentage for the second project period;

D
is

(a)if the time of the expenditure is after the third project period, nil, or

(b)in any other case, the projected eligible use percentage for the third project period;

E
is the projected eligible use percentage for the fourth project period; and
F
is

(a)if the time of the expenditure is before the second project period, 0.‍25,

(b)if the time of the expenditure is during the second project period, 0.‍33,

(c)if the time of the expenditure is during the third project period, 0.‍5, and

(d)if the time of the expenditure is during the fourth project period, 1.‍ (dépense admissible pour le transport du carbone)

qualified carbon use expenditure of a taxpayer for a taxation year means an amount that is the capital cost incurred by the taxpayer to acquire in the year, in respect of a qualified CCUS project of the taxpayer, a property (other than property situated outside of Canada) that is

  • (a)described in (and, in the case of property acquired before the first day of commercial operations of the project, verified by the Minister of Natural Resources as being property described in) any of paragraphs (a) to (e) of Class 58 in Schedule II to the Income Tax Regulations; and

  • (b)expected, based on the qualified CCUS project’s most recent project plan before the time the expenditure is incurred, to support storage or use of captured carbon solely in a manner described in paragraph (b) of the definition of eligible use.‍ (dépense admissible pour l’utilisation du carbone)

qualified CCUS expenditure means a

  • (a)qualified carbon capture expenditure;

  • (b)qualified carbon transportation expenditure;

  • (c)qualified carbon storage expenditure; or

  • (d)qualified carbon use expenditure.   (dépense de CUSC admissible)

qualified CCUS project means a CCUS project of a taxpayer that meets the following conditions:

  • (a)it is expected, based on the project’s most recent project plan, to support the capture of carbon dioxide in Canada for a period that is at least equal to the total CCUS project review period for the project;

  • (b)an initial project evaluation has been issued by the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources, in respect of the project;

  • (c)based on the most recent project plan for the project, its projected eligible use percentage equals or exceeds 10% in each of the following periods:

    • (i)if the first project period begins after September of a calendar year, the period beginning on the first day of commercial operations and ending on December 31 of the following calendar year, and

    • (ii)each calendar year of the project’s total CCUS project review period, other than a period that includes a year referred to in subparagraph (i); and

  • (d)it is not a project that is

    • (i)operated to service a unit (as defined under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations) for which the commissioning date (as defined under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations) was on or before April 7, 2022, and

    • (ii)undertaken for the purpose of complying with emission standards that apply, or will apply, under the Reduction of Carbon Dioxide Emissions from Coal-fired Generation of Electricity Regulations.‍ (projet de CUSC admissible)

qualified concrete storage process means a process evaluated against the ISO 14034:2016 standard Environmental management — Environmental technology verification for which a validation statement confirming that at least 60% of the captured carbon that is injected into concrete is expected to be mineralized and permanently stored in the concrete has been issued by a professional or organization that

  • (a)is accredited as a verification body, under ISO 14034:2016, Environmental management – Environmental technology verification and ISO/IEC 17020:2012, Conformity assessment — Requirements for the operation of various types of bodies performing inspection, by the Standards Council of Canada, the ANSI National Accreditation Board (U.‍S.‍) or any other accreditation organization that is a member of the International Accreditation Forum; and

  • (b)meets the requirements of a third-party inspection body described in ISO/IEC 17020:2012, Conformity assessment — Requirements for the operation of various types of bodies performing inspection.‍ (processus de stockage dans le béton admissible)

qualifying taxpayer means a taxable Canadian corporation.‍ (contribuable admissible)

specified percentage means, in respect of a

  • (a)qualified carbon capture expenditure if incurred to capture carbon

    • (i)directly from ambient air

      • (A)after 2021 and before 2031, 60%,

      • (B)after 2030 and before 2041, 30%, or

      • (C)after 2040, 0%, or

    • (ii)other than directly from ambient air

      • (A)after 2021 and before 2031, 50%,

      • (B)after 2030 and before 2041, 25%, or

      • (C)after 2040, 0%; and

  • (b)qualified carbon transportation expenditure, qualified carbon storage expenditure or qualified carbon use expenditure if incurred

    • (i)after 2021 and before 2031, 37 1/2%,

    • (ii)after 2030 and before 2041, 18 3/4%, or

    • (iii)after 2040, 0%.‍ (pourcentage déterminé)

total CCUS project review period, in respect of a CCUS project, means the period beginning on the first day of commercial operations of the project and ending on the last day of the fourth project period.‍ (période totale d’examen du projet de CUSC)

Tax credit
(2)Where a qualifying taxpayer files a prescribed form containing prescribed information on or before its filing-due date for a taxation year, the taxpayer is deemed to have paid on its balance-due day for the year an amount on account of its tax payable under this Part for the year equal to the total of
  • (a)the amount, if any, by which the taxpayer’s cumulative CCUS development tax credit for the year exceeds its cumulative CCUS development tax credit for the immediately preceding taxation year, and

  • (b)the taxpayer’s CCUS refurbishment tax credit for the year.

Deemed deduction
(3)For the purposes of this section, paragraph 12(1)‍(t), subsection 13(7.‍1), the description of I in the definition undepreciated capital cost in subsection 13(21), subsection 53(2), section 127.‍45 and Part XII.‍7, the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer’s tax otherwise payable under this Part for the year.
Cumulative CCUS development tax credit
(4)For the purposes of this Act, a taxpayer’s cumulative CCUS development tax credit for a taxation year is the total of all amounts, each of which is, in respect of an expenditure incurred for a qualified CCUS project of the taxpayer before the first day of commercial operations of the CCUS project
  • (a)a qualified CCUS expenditure incurred in the year or a previous taxation year by the taxpayer multiplied by the applicable specified percentage; or

  • (b)an amount required because of subsection (11) to be added in computing the taxpayer’s cumulative CCUS development tax credit at the end of the year or a previous year.

CCUS refurbishment tax credit
(5)For the purposes of this Act, a CCUS refurbishment tax credit of a taxpayer for a taxation year is the total of all amounts, each of which is, in respect of an expenditure incurred for a qualified CCUS project of the taxpayer in the year and during the total CCUS project review period
  • (a)a qualified CCUS expenditure incurred in the year by the taxpayer multiplied by the applicable specified percentage; or

  • (b)an amount required because of subsection (11) to be added in computing the taxpayer’s CCUS refurbishment tax credit at the end of the year.

Changes to project or eligible use
(6)A taxpayer with a qualified CCUS project shall file, within 90 days after the occurrence of either of the events described in paragraph (a) or (b), a revised project plan for the project with the Minister of Natural Resources, in the form and manner determined by the Minister of Natural Resources if, before the first day of commercial operations of the project,
  • (a)the Minister of Natural Resources determines that there has been a material change to the project and requests that the taxpayer file a revised project plan for the project; or

  • (b)there has been a reduction (as compared to the most recent project plan for the project) of more than five percentage points in the projected eligible use percentage in respect of the project during any project period.

Revised project evaluation
(7)If a taxpayer files a revised project plan in accordance with subsection (6), the Minister of Natural Resources shall issue a revised project evaluation with all due dispatch.
Qualified CCUS project determination
(8)For the purposes of this section and Part XII.‍7,
  • (a)the Minister may, in consultation with the Minister of Natural Resources, determine that one or more CCUS projects is one project or multiple projects

    • (i)at any time before an initial project evaluation of a CCUS project has been issued by the Minister of Natural Resources, or

    • (ii)if the Minister of Natural Resources has requested the filing of a revised project plan for the project, after the revised project plan has been submitted, but before a revised project evaluation has been issued by the Minister of Natural Resources in respect of the revised project plan,

  • (b)any determination under paragraph (a) is deemed to result in the CCUS project or CCUS projects, as the case may be, being one project or multiple projects, as the case may be;

  • (c)for each project determined under paragraph (a), a project plan shall be filed by a taxpayer with the Minister of Natural Resources (in the form and manner determined by the Minister of Natural Resources) on or before the day that is 180 days after the determination is made; and

  • (d)the Minister of Natural Resources may request from a taxpayer all reasonable documentation and information necessary for the Minister of Natural Resources to fulfill a responsibility under this section, including final detailed engineering designs, and may refuse to verify an expenditure or issue an initial project evaluation or a revised project evaluation under this section if such documentation or information is not provided by the taxpayer on or before the day that is 180 days after it was requested.

Special rules — adjustments
(9)For the purposes of this section and Part XII.‍7,
  • (a)the capital cost to a taxpayer of a property of Class 57 or 58 in Schedule II to the Income Tax Regulations shall be

    • (i)determined without reference to subsections 13(7.‍1) and (7.‍4), and

    • (ii)reduced by the amount of any non-government assistance that, at the time of the filing of the taxpayer’s return of income under this Part for the taxation year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive in respect of the property;

  • (b)the amount of a qualified CCUS expenditure of a taxpayer in a taxation year in respect of a CCUS project shall not include

    • (i)any amount in respect of an expenditure incurred by the taxpayer before 2022 or after 2040,

    • (ii)any amount in respect of any expenditure incurred

      • (A)to acquire property that has been used for any purpose by any person or partnership before it was acquired by the taxpayer,

      • (B)for which a tax credit was previously deducted under this section, by any person in respect of the property to which the expenditure relates (other than an expenditure for repair or replacement of that property), or

      • (C)for which an investment tax credit is claimed under section 127 or a clean technology investment tax credit is claimed under section 127.‍45,

    • (iii)any amount in respect of an expenditure incurred for a preliminary CCUS work activity,

    • (iv)any amount that has, by virtue of section 21, been added to the cost of a property,

    • (v)an expenditure that is incurred by a taxpayer on or after the first day of commercial operations of the CCUS project to the extent that the total of all such amounts exceeds 10% of the total of all qualified CCUS expenditures incurred by the taxpayer before the first day of commercial operations of the CCUS project, or

    • (vi)except where subsection 211.‍92(11) applies, an expenditure incurred by a taxpayer to acquire a property that is disposed of, or exported from Canada, by the taxpayer in the same taxation year as it was acquired;

  • (c)except for the purposes of subparagraph (b)‍(i), and subject to subsection (12), if a taxpayer has acquired property outside Canada, the expenditure is deemed to have been incurred, and the property acquired, at the time it is imported into Canada;

  • (d)subsections 127(11.‍6) to (11.‍8) apply in this section in respect of an expenditure or cost to a taxpayer except that

    • (i)the reference in subsection 127(11.‍6) to subsection 127(11.‍5) shall be read as a reference to section 127.‍44,

    • (ii)the reference in subsection 127(11.‍6) to subsection 127(26) shall be read as a reference to subsection 127.‍44(12), and

    • (iii)the term “qualified expenditure” is to be read as “qualified CCUS expenditure”;

  • (e)if an expenditure of a taxpayer would be a qualified CCUS expenditure, except that the expenditure is incurred in a different taxation year from the year in which the related property is acquired, the expenditure is deemed to be incurred, and the property is deemed to be acquired, in the later of the two years;

  • (f)for the purposes of determining whether a process is a CCUS process, whether a property is described in Class 57 or 58 of Schedule II to the Income Tax Regulations or whether a property is dual-use equipment, the technical guide published by the Department of Natural Resources shall apply conclusively with respect to engineering and scientific matters;

  • (g)if the taxpayer has failed to file a revised project plan required to be filed under subsection (6) by the deadline in that subsection,

    • (i)subject to subparagraph (ii), a taxpayer’s projected eligible use percentage for a CCUS project is deemed to be nil for the total CCUS project review period until such time as the taxpayer has filed the revised project plan, and

    • (ii)once the taxpayer has filed the revised project plan, subparagraph (i) is deemed never to have applied.

Repayment of assistance
(10)If a taxpayer has, in a particular taxation year, repaid (or has not received and can no longer reasonably be expected to receive) an amount of non-government assistance that was applied to reduce the capital cost of a property under subparagraph (9)‍(a)‍(ii) for a preceding taxation year, the amount repaid (or no longer expected to be received) shall be added to the capital cost to the taxpayer of a property acquired for the purpose of determining the taxpayer’s qualified CCUS expenditure (under the relevant paragraph of that definition) for the particular year.
Partnerships
(11)Subject to section 127.‍47, if, in a particular taxation year of a qualifying taxpayer who is a member of a partnership, an amount would be determined under subsection (2) in respect of the partnership, for its taxation year that ends in the particular year, if the partnership were a taxable Canadian corporation and its fiscal period were its taxation year, the portion of that amount that can reasonably be considered to be the taxpayer’s share thereof shall be added in computing the tax credit of the taxpayer under subsection (2) at the end of the particular year.
Unpaid amounts
(12)For the purposes of this section, a taxpayer’s expenditure that is unpaid on the day that is 180 days after the end of the taxation year in which the expenditure is otherwise incurred is deemed
  • (a)not to have been incurred in the year; and

  • (b)to be incurred at the time it is paid.

Designation of jurisdiction
(13)For the purposes of this section and Part XII.‍7, the following rules apply in relation to the definition designated jurisdiction in subsection (1):
  • (a)if the Minister of the Environment determines that a jurisdiction within Canada or the United States has sufficient environmental laws and enforcement governing the permanent storage of captured carbon

    • (i)the Minister of the Environment may designate the jurisdiction for the purposes of this section and Part XII.‍7,

    • (ii)the designation under subparagraph (i) shall specify the time at and after which it is in effect, which time may, for greater certainty, precede the time at which the designation is made, and

    • (iii)the Minister of the Environment shall publish on a website maintained by the Government of Canada the designation referred to in subparagraph (i); and

  • (b)the provinces of British Columbia, Saskatchewan and Alberta are deemed to have been designated by the Minister of the Environment in accordance with this subsection.

Revocation of designation
(14)If a jurisdiction makes significant changes to its environmental laws or enforcement governing the permanent storage of captured carbon, and the Minister of the Environment determines that as a result of those changes a jurisdiction designated pursuant to subsection (13) has ceased to have sufficient environmental laws or enforcement governing the permanent storage of captured carbon, the following rules apply:
  • (a)the Minister of the Environment may revoke the designation of the jurisdiction designated under subsection (13);

  • (b)the revocation under paragraph (a) shall specify the time at and after which it is in effect, which time shall not begin sooner than 30 days after the revocation is made; and

  • (c)the Minister of the Environment shall publish on a website maintained by the Government of Canada the revocation referred to in paragraph (a).

Purpose
(15)The purpose of this section and Part XII.‍7 is to encourage the investment of capital in the development and operation of carbon capture, transportation, utilization and storage capacity in Canada.
Tax shelter investment
(16)Subsections (2) and (3) do not apply in respect of a CCUS project if a property used in the project — or an interest in a person or partnership that has, directly or indirectly, an interest in, or for civil law, a right in, a property used in the project — is a tax shelter investment for the purpose of section 143.‍2.
Late filing
(17)The Minister may accept the late filing by a qualifying taxpayer of the prescribed form referred to in subsection (2) until one year after the filing-due date referred to in subsection (2), but no payment by the taxpayer is deemed to arise under that subsection until the form has been filed with the Minister.

(2)Subsection (1) is deemed to have come into force on January 1, 2022, except that, before March 28, 2023, subsection 127.‍44(3) of the Act, as enacted by subsection (1), is to be read without reference to section 127.‍45 and clause 127.‍44(9)‍(b)‍(ii)‍(C) of the Act, as enacted by subsection (1), is to be read without the words “or a clean technology investment tax credit is claimed under section 127.‍45”.

36(1)The Act is amended by adding the following after section 127.‍44, as enacted by subsection 35(1):
Definitions

127.‍45(1)The following definitions apply in this section.

clean technology investment tax credit of a qualifying taxpayer for a taxation year means

  • (a)the total of all amounts each of which is the specified percentage of the capital cost to the taxpayer of clean technology property acquired by the taxpayer in the year; and

  • (b)the total of amounts required by subsection (8) to be added in computing the taxpayer’s clean technology investment tax credit at the end of the year.‍ (crédit d’impôt à l’investissem*nt dans les technologies propres)

clean technology property means property

  • (a)situated in Canada (including property described in subparagraph (d)‍(v) or (xiv) of Class 43.‍1 in Schedule II to the Income Tax Regulations that is installed in the exclusive economic zone of Canada) and intended for use exclusively in Canada;

  • (b)that has not been used, or acquired for use or lease, for any purpose whatever before it was acquired by the taxpayer;

  • (c)that, if it is to be leased by the taxpayer to another person or partnership, is

    • (i)leased to a qualifying taxpayer or a partnership all the members of which are taxable Canadian corporations, and

    • (ii)leased in the ordinary course of carrying on a business in Canada by the taxpayer whose principal business is selling or servicing property of that type, or whose principal business is leasing property, lending money, purchasing conditional sales contracts, accounts receivable, bills of sale, chattel mortgages or hypothecary claims on movables, bills of exchange or other obligations representing all or part of the sale price of merchandise or services, or any combination thereof; and

  • (d)that is

    • (i)equipment used to generate electricity from solar, wind and water energy that is described in subparagraph (d)‍(ii), (iii.‍1), (v), (vi) or (xiv) of Class 43.‍1 in Schedule II to the Income Tax Regulations,

    • (ii)stationary electricity storage equipment that is described in subparagraph (d)‍(xviii) or (xix) of Class 43.‍1 in Schedule II to the Income Tax Regulations, but excluding equipment that uses any fossil fuel in operation,

    • (iii)active solar heating equipment, air-source heat pumps and ground-source heat pumps that are described in subparagraph (d)‍(i) of Class 43.‍1 in Schedule II to the Income Tax Regulations,

    • (iv)a non-road zero-emission vehicle described in Class 56 in Schedule II to the Income Tax Regulations and charging or refuelling equipment described in subparagraph (d)‍(xxi) of Class 43.‍1 in Schedule II to the Income Tax Regulations or subparagraph (b)‍(ii) of Class 43.‍2 in Schedule II to the Income Tax Regulations that in each case is used primarily for such vehicles,

    • (v)equipment used exclusively for the purpose of generating electrical energy or heat energy, or a combination of electrical energy and heat energy, solely from geothermal energy, that is described in subparagraph (d)‍(vii) of Class 43.‍1 in Schedule II to the Income Tax Regulations, but excluding any equipment that is part of a system that extracts fossil fuel for sale,

    • (vi)concentrated solar energy equipment, or

    • (vii)a small modular nuclear reactor.‍ (bien de technologie propre)

concentrated solar energy equipment means equipment, other than excluded equipment, used all or substantially all to generate heat or electricity, or a combination of heat and electricity, exclusively from concentrated sunlight, including

  • (a)reflectors and related solar tracking systems;

  • (b)thermal receivers;

  • (c)thermal energy storage equipment;

  • (d)electrical generating equipment;

  • (e)heat transfer fluid systems;

  • (f)electrical energy storage equipment;

  • (g)transmission equipment;

  • (h)equipment for the distribution of heat energy;

  • (i)structures whose sole function is to support or house concentrated solar energy equipment; and

  • (j)ancillary instrumentation and controls including weather monitoring systems.‍ (matériel d’énergie solaire concentrée)

excluded equipment means 

  • (a)auxiliary heating or electrical generating equipment that uses any fossil fuel;

  • (b)buildings or structures other than those structures described in paragraph (i) of the definition of concentrated solar energy equipment;

  • (c)distribution equipment;

  • (d)property included in Class 10 in Schedule II to the Income Tax Regulations; and

  • (e)property that would be included in Class 17 in Schedule II to the Income Tax Regulations if that Class were read without reference to its paragraph (a.‍1).‍ (matériel non admissible)

government assistance has the meaning assigned by subsection 127(9).‍ (aide gouvernementale)

non-clean technology use means a use of a particular property at a particular time that would, if the property were acquired at that time, result in the property ceasing to be a clean technology property, determined without reference to paragraph (b) of the definition clean technology property in this subsection.‍ (utilisation non concernée par la technologie propre)

non-government assistance has the meaning assigned by subsection 127(9).‍ (aide non gouvernementale)

qualifying taxpayer means a taxable Canadian corporation or a mutual fund trust that is a real estate investment trust (as defined in subsection 122.‍1(1)).‍ (contribuable admissible)

small modular nuclear reactor means equipment that is used all or substantially all to generate electrical energy or heat energy, or a combination of electrical energy and heat energy, from nuclear fission — including reactors, reactor vessels, reactor control rods, moderators, cooling systems, control systems, nuclear fission fuel handling equipment, containment structures, electrical generating equipment and equipment for the distribution of heat energy — that

  • (a)is part of a system that has a gross rated generating capacity not exceeding 300 megawatts electric, or an energy balance equivalent gross rated generating capacity of electricity or heat equivalent of 1,000 megawatts thermal;

  • (b)is part of a system all or substantially all of which is comprised of modules that are factory-assembled and transported pre-built to the installation site; and

  • (c)is not

    • (i)nuclear fission fuel,

    • (ii)equipment for nuclear waste disposal and nuclear waste disposal sites,

    • (iii)transmission equipment,

    • (iv)distribution equipment,

    • (v)property included in Class 10 in Schedule II to the Income Tax Regulations, or

    • (vi)property that would be included in Class 17 in Schedule II to the Income Tax Regulations if that Class were read without reference to its paragraph (a.‍1).‍ (petit réacteur modulaire nucléaire)

specified percentage means, in respect of a clean technology property of the taxpayer that is acquired

  • (a)before March 28, 2023, determined without reference to subsection (4), nil;

  • (b)on or after March 28, 2023 and before January 1, 2034, 30%;

  • (c)after December 31, 2033 and before January 1, 2035, 15%; and

  • (d)after December 31, 2034, nil.‍ (pourcentage déterminé)

Clean technology investment tax credit

(2)If a qualifying taxpayer files with its return of income for a taxation year a prescribed form containing prescribed information, the taxpayer is deemed to have paid on its balance-due day for the year an amount on account of the taxpayer’s tax payable under this Part for the year equal to the taxpayer’s clean technology investment tax credit for the year.

Time limit for application

(3)A payment on account of tax payable shall not be deemed to be paid under subsection (2) if the taxpayer does not file with the Minister a prescribed form containing prescribed information in respect of the amount on or before the day that is one year after the taxpayer’s filing-due date for the year.

Time of acquisition

(4)For the purpose of this section, clean technology property is deemed not to have been acquired by a taxpayer before the property is considered to have become available for use by the taxpayer, determined without reference to paragraphs 13(27)‍(c) and (28)‍(d).

Special rules — adjustments

(5)For the purpose of the definition clean technology investment tax credit in subsection (1), the capital cost of clean technology property shall

  • (a)not include any amount in respect of a capital property

    • (i)for which an amount was previously deducted under this section by any person,

    • (ii)in respect of which a CCUS tax credit was deducted under section 127.‍44 by any person, or

    • (iii)that has, by virtue of section 21, been added to the cost of a property;

  • (b)be determined without reference to subsections 13(7.‍1) and (7.‍4), less the amount of any government assistance or non-government assistance that can reasonably be considered to be in respect of the property and that, at the time of the filing of the taxpayer’s return of income under this Part for the taxation year in which the property was acquired by the taxpayer or partnership, the taxpayer or partnership has received, is entitled to receive or can reasonably be expected to receive; and

  • (c)be determined with reference to subsections 127(11.‍6) to (11.‍8) in respect of an expenditure or cost to a taxpayer except that

    • (i)the reference in subsection 127(11.‍6) to subsection 127(11.‍5) is to be read as a reference to section 127.‍45,

    • (ii)the reference in subsection 127(11.‍6) to subsection 127(26) is to be read as a reference to subsection 127.‍45(9), and

    • (iii)the term “qualified expenditure” is to be read as an expenditure eligible to be added to the capital cost of a clean technology property.

Deemed deduction

(6)For the purposes of this section, paragraph 12(1)‍(t), subsection 13(7.‍1), the description of I in the definition undepreciated capital cost in subsection 13(21) and subsection 53(2), the amount deemed under subsection (2) to have been paid by a taxpayer for a taxation year is deemed to have been deducted from the taxpayer’s tax otherwise payable under this Part for the year.

Repayment of assistance

(7)Where a taxpayer has, in a particular taxation year, repaid (or has not received and can no longer reasonably be expected to receive) an amount of government assistance or non-government assistance that was applied to reduce the cost of a property under paragraph (5)‍(b) for a preceding taxation year, the amount repaid (or no longer expected to be received) is to be added to the cost to the taxpayer of a property acquired in the particular year for the purpose of determining the taxpayer’s clean technology investment tax credit for the year.

Partnerships

(8)Subject to section 127.‍47, where, in a particular taxation year of a taxpayer who is a member of a partnership, an amount would be determined under subsection (2) in respect of the partnership, for its taxation year that ends in the particular year, if the partnership were a taxable Canadian corporation and its fiscal period were its taxation year, the portion of that amount that can reasonably be considered to be the taxpayer’s share thereof shall be added in computing the clean technology investment tax credit of the taxpayer at the end of the particular year.

Unpaid amounts

(9)For the purposes of this section, where any part of the capital cost of a taxpayer’s clean technology property is unpaid on the day that is 180 days after the end of the taxation year in which a deduction in respect of a clean technology investment tax credit would otherwise be available in respect of the property, such amount is to be

  • (a)excluded from the capital cost of such property in the year; and

  • (b)added to the capital cost of such property at the time it is paid.

Tax shelter investment

(10)Subsection (2) does not apply if a clean technology property — or an interest in a person or partnership that has, directly or indirectly, an interest in, or for civil law, a right in, such property — is a tax shelter investment for the purpose of section 143.‍2.

Recapture — conditions for application

(11)Subsection (12) applies in a taxation year if

  • (a)a taxpayer acquired a clean technology property in the year or any of the preceding 10 calendar years;

  • (b)the taxpayer became entitled to a clean technology investment tax credit in respect of the capital cost, or a portion of the capital cost, of the particular property; and

  • (c)in the year, the particular property (or another property that incorporates the particular property) is converted to a non-clean technology use, is exported from Canada or is disposed of without having been previously exported or converted to a non-clean technology use.

Recapture of credit

(12)If this subsection applies, there shall be added to the taxpayer’s tax otherwise payable under this Part for the year the lesser of

  • (a)the amount of the taxpayer’s clean technology investment tax credit in respect of the particular property, and

  • (b)the amount determined by the formula

    A × (B ÷ C)

    where

    A
    is the amount of the taxpayer’s clean technology investment tax credit in respect of the particular property,
    B
    is

    (i)in the case where the particular property is disposed of to a person who deals at arm’s length with the taxpayer, the proceeds of disposition of the property, or

    (ii)in the case where the particular property is disposed of to a person who does not deal at arm’s length with the taxpayer, is converted to a non-clean technology use or is exported from Canada, the fair market value of the property, and

    C
    is the capital cost of the particular property on which the clean technology investment tax credit was deducted.
Certain non-arm’s length transfers

(13)Subsections (11) and (12) do not apply to a taxpayer that is a taxable Canadian corporation (in this subsection referred to as the “transferor”) that disposes of a property to another taxable Canadian corporation (in this subsection referred to as the “purchaser”) related to the transferor if the purchaser acquired the property in circ*mstances where the property would be clean technology property to the purchaser but for paragraph (b) of that definition.

Certain non-arm’s length transfers — recapture deferred

(14)If subsection (13) applies, subsection 127(34) applies with such modifications as the circ*mstances require, including that the reference to subsection 127(33) be read as a reference to subsection 127.‍45(13).

Recapture event reporting requirement

(15)If subsection (11) or (13) applies to a taxpayer for a particular year, the taxpayer shall notify the Minister in prescribed form and manner on or before the taxpayer’s filing-due date for the year.

Recapture of credit for partnerships

(16)Subsection (17) applies in a fiscal period of a partnership if

  • (a)the partnership acquired a particular clean technology property in the fiscal period or in any of the 10 preceding calendar years;

  • (b)the cost, or a portion of the cost, of the particular property is included in an amount, a percentage of which can reasonably be considered to have been included in computing the amount determined under subsection (8) in respect of the partnership at the end of a fiscal period; and

  • (c)in the fiscal period, the particular property (or another property that incorporates the particular property) is converted to a non-clean technology use, is exported from Canada or is disposed of without having been previously exported or converted to a non-clean technology use.

Addition to tax

(17)If this subsection applies to a fiscal period of a partnership, where a taxpayer is a member of the partnership during the fiscal period, there shall be added to the taxpayer’s tax otherwise payable under this Part for the taxpayer’s taxation year in which the fiscal period ends the amount that can reasonably be considered to be the taxpayer’s share of the amount, if any, equal to the lesser of

  • (a)the amount that can reasonably be considered to have been included in respect of the particular property in computing the amount determined under subsection (8) in respect of the partnership, and

  • (b)the percentage described in paragraph (16)‍(b) of

    • (i)where the particular property (or the other property) is disposed of to a person who deals at arm’s length with the partnership, the proceeds of disposition of the property, and

    • (ii)in any other case, the fair market value of the particular property (or the other property) at the time of the conversion, export or disposition.

Information return — partnerships

(18)If subsections (16) and (17) apply with respect to the property of a partnership for a particular fiscal period, the partnership shall notify the Minister in prescribed form and manner on or before the day when a return is required by section 229 of the Income Tax Regulations to be filed in respect of the period.

Clean technology investment tax credit — purpose

(19)The purpose of this section is to encourage the investment of capital in the adoption and operation of clean technology property in Canada.

Authority of the Minister of Natural Resources

(20)For the purpose of determining whether a property is a clean technology property, any technical guide, published by the Department of Natural Resources and as amended from time to time, is to apply conclusively with respect to engineering and scientific matters.

(2)Subsection (1) is deemed to have come into force on March 28, 2023.

37(1)The Act is amended by adding the following after section 127.‍45, as enacted by subsection 36(1):
Definitions

127.‍46(1)The following definitions apply in this section.

apprenticeship requirements means the requirements set out in subsection (5).‍ (exigences à l’égard d’apprentis)

benefits means vacation, pension, health and welfare benefits required to be provided by employers to or for employees under an eligible collective agreement.‍ (avantages sociaux)

covered worker means an individual (other than a trust)

  • (a)who is engaged in the preparation or installation of specified property at a designated work site as an employee of an incentive claimant or of another person or partnership;

  • (b)whose work or duties in respect of the designated work site are primarily manual or physical in nature; and

  • (c)who is not

    • (i)an administrative, clerical or executive employee, or

    • (ii)a business visitor to Canada as described in section 187 of the Immigration and Refugee Protection Regulations.‍ (travailleur visé)

designated work site in a taxation year of an incentive claimant means a work site where specified property of an incentive claimant is located during the year and includes the site of a CCUS project (as defined in section 127.‍44) of the incentive claimant.‍ (chantier désigné)

eligible collective agreement means

  • (a)in Quebec,

    • (i)a collective agreement negotiated in accordance with applicable provincial law, or

    • (ii)a prescribed agreement; and

  • (b)in any other case,

    • (i)the most recent multi-employer collective bargaining agreement negotiated with a trade union that is an affiliate of Canada’s Building Trades Unions for a given trade in a region or province,

    • (ii)a project labour agreement established with a trade union in accordance with applicable provincial law that covers the work associated with the investments eligible for specified tax credits and that provides for wages and benefits for covered workers in a given trade that are at least equal to the regular wages (without taking into account overtime) and benefits provided for covered workers in an agreement described in subparagraph (i), or

    • (iii)a prescribed agreement.‍ (convention collective admissible) 

incentive claimant means a person that, or a partnership at least one member of which, plans to claim or has claimed a specified tax credit for a taxation year.‍ (demandeur d’incitatif)

installation taxation year, in respect of a specified tax credit, means a taxation year during which preparation or installation of specified property occurs.‍ (année d’imposition de l’installation)

prevailing wage requirements means the requirements set out in subsection (3).‍ (exigences relatives au salaire prévalant)

Red Seal trade means, for a province using the Red Seal Program for a particular trade, the relevant Red Seal trade managed by the Canadian Council of Directors of Apprenticeship and, in any other case, an equivalent provincially registered trade.‍ (métier désigné Sceau rouge)

Red Seal worker means a covered worker whose duties are, or are equivalent to, those duties normally performed by workers in a Red Seal trade.‍ (travailleur Sceau rouge)

reduced tax credit rate means the regular tax credit rate minus 10 percentage points.‍ (taux du crédit d’impôt réduit)

regular tax credit rate means the specified percentage (as defined in subsections 127.‍44(1) and 127.‍45(1), as the case may be).‍ (taux du crédit d’impôt régulier)

specified property means property all or a portion of the cost of which qualifies for a specified tax credit.‍ (bien déterminé)

specified tax credit means the CCUS tax credit under section 127.‍44 and the clean technology investment tax credit under section 127.‍45.‍ (crédit d’impôt déterminé)

Reduced or regular rate

(2)Despite sections 127.‍44 and 127.‍45, the applicable rate for each specified tax credit of an incentive claimant is the reduced tax credit rate unless the incentive claimant elects in prescribed form and manner to meet the prevailing wage requirements under subsection (3) and the apprenticeship requirements under subsection (5) for each installation taxation year in respect of the specified tax credit.

Prevailing wage requirements

(3)For the purposes of this section, the prevailing wage requirements for an incentive claimant for an installation taxation year are

  • (a)if prescribed circ*mstances exist, prescribed conditions; and

  • (b)in any other case, the following conditions:

    • (i)each covered worker at a designated work site of an incentive claimant must be compensated for their work on the preparation or installation of specified property

      • (A)in accordance with the terms of an eligible collective agreement that applies to the worker, or

      • (B)in an amount that is at least equal to the amount of the regular wages (without taking into account overtime) and benefits as specified in the eligible collective agreement that most closely aligns with the covered worker’s experience level, tasks and location, calculated on a per-hour or similar basis;

    • (ii)the incentive claimant attests, in prescribed form and manner, that it has met the prevailing wage requirement in subparagraph (i) for its own employees who are covered workers, if any, and that it has taken reasonable steps to ensure that any covered workers employed by any other person or partnership at the designated work site are compensated in accordance with subparagraph (i); and

    • (iii)it has communicated, either in a poster or notice, in a manner readily visible to and accessible by covered workers at the designated work site or by electronic means, a notice confirming that the work site is a work site subject to prevailing wage requirements in relation to covered workers, including a plain language explanation of what that means for workers and information regarding how to report failures to pay prevailing wages to the Minister.

Indexation of prevailing wages

(4)Where an eligible collective agreement that is used to calculate the prevailing wage requirement under subparagraph (3)‍(b)‍(i) is expired, then the amounts of wages and benefits stipulated in the agreement shall be adjusted by the average Consumer Price Index in the manner set out in section 117.‍1 for each calendar year that begins after the expiration of the eligible collective agreement.

Apprenticeship requirements

(5)For the purposes of this section, the apprenticeship requirements for an incentive claimant for an installation taxation year are that

  • (a)subject to paragraph (b), the incentive claimant makes reasonable efforts to ensure that apprentices registered in a Red Seal trade work at least 10% of the total hours that are worked during the year by Red Seal workers at a designated work site of the incentive claimant on the preparation or installation of specified property;

  • (b)if an applicable law or collective agreement that specifies a maximum ratio of apprentices to journeypersons, or otherwise restricts the number of apprentices employed at a designated work site, prevents the condition in paragraph (a) from being met, the incentive claimant makes reasonable efforts to ensure that the highest possible percentage of the total labour hours, performed during the year by Red Seal workers on the preparation or installation of specified property, is performed by apprentices registered in a Red Seal trade while respecting the applicable labour law or collective agreement; and

  • (c)the incentive claimant attests in prescribed form and manner that it has met the apprenticeship requirements in paragraph (a) or (b) in respect of covered workers at the designated work site.

Addition to tax — wage requirement

(6)Unless subsection (9) applies, if an incentive claimant claims a specified tax credit at a regular tax credit rate in a taxation year but does not meet the prevailing wage requirements in respect of a covered worker for one or more days in an installation taxation year in respect of that specified tax credit, there shall be added to the tax payable under this Part for the installation taxation year by the incentive claimant an amount equal to $20 for each day in the installation taxation year on which the covered worker was not paid the prevailing wage.

Addition to tax — apprenticeship requirement

(7)Unless subsection (9) applies, if an incentive claimant claims a specified tax credit at a regular tax credit rate in a taxation year in respect of a designated work site, but less than 10% of the total hours that are worked during an installation taxation year in respect of that specified tax credit at the designated work site on the preparation or installation of specified property are worked by apprentices registered in a Red Seal trade, there shall be added to the tax payable under this Part for the installation taxation year by the incentive claimant the amount determined by the formula

$50 × (A − B)

where

A
is the total number of hours of labour required to be performed by apprentices registered in a Red Seal trade for the installation taxation year at the designated work site of the incentive claimant as described in paragraph (5)‍(a) or (b), as applicable, in each case read without reference to the words “the incentive claimant makes reasonable efforts to ensure that”; and
B
is the total number of actual hours of labour performed by apprentices registered in a Red Seal trade for the installation taxation year at the designated work site of the incentive claimant on the preparation or installation of specified property plus any other hours of labour for which the incentive claimant has met the apprenticeship requirements in paragraph (5)‍(a) or (b), as applicable.
Indexation

(8)The dollar amounts in subsections (6) and (7) shall be adjusted for inflation in each calendar year commencing after 2023 in the manner set out in section 117.‍1.

Gross negligence

(9)If an incentive claimant has claimed a specified tax credit at the regular tax credit rate in a taxation year (referred to in this subsection as the “claim year”) but has failed to meet the prevailing wage requirements or the apprenticeship requirements for an installation taxation year in respect of that specified tax credit and the Minister determines that the incentive claimant knowingly or in circ*mstances amounting to gross negligence failed to meet those requirements, then

  • (a)the incentive claimant is not entitled to the regular tax credit rate, and is entitled to not more than the reduced tax credit rate, for the specified tax credit; and

  • (b)the incentive claimant is liable to a penalty for the claim year equal to the amount determined by the formula

    50% × (A − B)

    where

    A
    is the amount of the specified tax credit claimed by the incentive claimant at the regular tax credit rate for the claim year, and
    B
    is the amount that the incentive claimant would have been entitled to claim as a specified tax credit at the reduced tax credit rate for the claim year.
CCUS refurbishment credit

(10)Subsection (9) does not apply in respect of a CCUS refurbishment tax credit.

Corrective measures — prevailing wage requirement

(11)Unless subsection (9) applies, if an incentive claimant receives a notification from the Minister specifying that the incentive claimant did not meet the prevailing wage requirements for a designated work site for a taxation year, the incentive claimant may within one year after receipt of the notification, or such longer period as is acceptable to the Minister, cause each covered worker to be paid the top-up amount determined under subsection (12).

Top-up amount

(12)For each covered worker in respect of an incentive claimant, the top-up amount referred to in subsection (11) for a taxation year shall equal or exceed the amount determined by the formula

A − B + C

where

A
is the amount that the covered worker would have received or benefited from, in respect of the worker’s employment at the designated work site during the taxation year, had the covered worker been paid in accordance with the prevailing wage requirements in paragraph (3)‍(a) or subparagraph (3)‍(b)‍(i), as applicable;
B
is the amount that the worker actually received or benefited from, in respect of the worker’s employment at the designated work site during the taxation year; and
C
is interest on the difference between the description of A and the description of B, calculated from the beginning of the taxation year to the time of payment at the prescribed rate specified in paragraph 4301(a) of the Income Tax Regulations.
Top-up payment not made

(13)For any covered worker in respect of whom a top-up amount is not paid under subsection (11), the incentive claimant shall pay to the Receiver General, as a penalty under this Act, 120% of the amount determined by the formula in subsection (12).

Tax treatment of top-up amount

(14)A top-up amount that is paid to a covered worker

  • (a)is deemed to be

    • (i)salary and wages of the worker for the year in which it is received, and

    • (ii)deductible in computing income by the payor for the year in which it is paid; and

  • (b)does not qualify for any specified tax credit.

Exception

(15)This section does not apply to a specified tax credit claimed for the acquisition of off-road zero emission vehicles or to the acquisition and installation of low carbon heat equipment.

Deemed reasonable efforts

(16)For the purposes of this section, an incentive claimant is deemed to have satisfied the requirement in paragraph (5)‍(a) or (b), as the case may be, in respect of hours of labour at a designated work site for an installation taxation year if the following conditions are met:

  • (a)at least every four months, the incentive claimant

    • (i)posts a bona fide job advertisem*nt, seeking sufficient apprentices to perform those hours of labour in respect of the designated work site, that

      • (A)includes a commitment to facilitate participation of apprentices in a Red Seal trade program and a statement that the job opportunity is open to both existing employees and new hires, and

      • (B)is open and readily accessible on the Job Bank website of the Government of Canada and at least two other websites either

        • (I)on a continuous basis throughout the year, or

        • (II)for at least 30 days from the time of posting,

    • (ii)communicates with a trade union (which, if the designated work site is in Quebec, is a trade union recognized under applicable provincial law and, if the designated work site is outside of Quebec, is an affiliate of Canada’s Building Trades Unions) and at least one secondary school or post-secondary educational institution for the purpose of facilitating the hiring of the apprentice positions described in the job advertisem*nt, and

    • (iii)receives from the trade union confirmation in writing that the trade union has provided as many apprentices as reasonably possible for work at the designated work site during the installation year, unless the trade union fails to respond within five business days of a request;

  • (b)the incentive claimant reviews and duly considers all applications received in response to the advertisem*nt for apprenticeship opportunities that are offered directly by the incentive claimant and takes reasonable steps to ensure that other applications are reviewed and duly considered; and

  • (c)the incentive claimant attests in prescribed form and manner that it has complied with paragraphs (a) and (b).

Partnerships

(17)If subsection (6), (7), (9) or (13) applies to an incentive claimant that is a partnership

  • (a)any member of the partnership may elect to pay the amount of the relevant tax or penalty liability on behalf of the partnership;

  • (b)if no election has been made under paragraph (a), the portion of the relevant tax or penalty liability that can reasonably be considered to be each member’s share thereof is payable by each member; and

  • (c)each member of the partnership is jointly and severally, or for civil law, solidarily, liable for any portion of the amount of the relevant tax or penalty liability that is not paid in accordance with paragraph (a) or allocated to and payable by a member under paragraph (b).

(2)Subsection (1) applies in respect of specified property prepared or installed on or after November 28, 2023.

38(1)The Act is amended by adding the following after section 127.‍46, as enacted by subsection 37(1):

Definitions
127.‍47(1)The following definitions apply in this section.

at-risk amount has the meaning assigned by subsection 96(2.‍2).‍ (fraction à risques)

clean economy allocation provision means

  • (a)subsection 127.‍44(11); or

  • (b)subsection 127.‍45(8).‍ (disposition d’allocation pour l’économie propre)

clean economy expenditure means

  • (a)a qualified CCUS expenditure as determined under section 127.‍44; or

  • (b)the capital cost of clean technology property as determined under section 127.‍45.‍ (dépense pour l’économie propre)

clean economy provision means

  • (a)this section;

  • (b)section 127.‍44 and Part XII.‍7;

  • (c)section 127.‍45; or

  • (d)section 127.‍46.‍ (disposition pour l’économie propre)

clean economy tax credit means

  • (a)a CCUS tax credit (as defined in subsection 127.‍44(1)); or

  • (b)a clean technology investment tax credit (as defined in subsection 127.‍45(1)).‍ (crédit d’impôt pour l’économie propre)

limited partner has the meaning assigned by subsection 96(2.‍4) if that subsection were read without reference to “if the member’s partnership interest is not an exempt interest (within the meaning assigned by subsection (2.‍5)) at that time and”.‍ (commanditaire)

Credits in unreasonable proportions
(2)If the members of a partnership agree to share the amount of a clean economy tax credit of the partnership and the share of any member of that amount is not reasonable in the circ*mstances having regard to the capital invested in or work performed for the partnership by the members of the partnership or such other factors as may be relevant, that share shall, notwithstanding any agreement, be deemed to be the amount that is reasonable in the circ*mstances.
Limited partners
(3)Notwithstanding subsection (2), if a taxpayer is a limited partner of a partnership at the end of a fiscal period of the partnership, the total of all clean economy tax credits allocated to the taxpayer by the partnership in respect of that fiscal period shall not exceed the taxpayer’s at-risk amount in respect of the partnership at the end of that fiscal period.
Apportionment rule
(4)The amount required by any clean economy allocation provision to be added in computing a particular clean economy tax credit of a taxpayer in respect of a partnership for the taxation year in which the partnership’s fiscal period ends is deemed to be the portion of the amount otherwise determined under this section in respect of the taxpayer that is reasonably attributable to each particular clean economy tax credit.
Assistance received by member of partnership
(5)For the purposes of computing a clean economy tax credit, if, at a particular time, a taxpayer that is a member of a partnership has received, is entitled to receive or can reasonably be expected to receive government assistance or non-government assistance (as defined in subsection 127(9)), the amount of that assistance that may reasonably be considered to be in respect of a clean economy expenditure of the partnership shall be deemed to have been received at that time by the partnership as government assistance or non-government assistance, as the case may be, in respect of the expenditure.
Credit received by member of partnership
(6)For the purposes of subsection 13(7.‍1), if, pursuant to an allocation from a partnership under a clean economy allocation provision, an amount is added in computing a clean economy tax credit of a taxpayer at the end of the taxpayer’s taxation year, the amount shall be deemed to have been received by the partnership at the end of its fiscal period in respect of which the allocation was made as assistance from a government for the acquisition of depreciable property.
Tiered partnerships
(7)For the purposes of each clean economy provision, a person or partnership that is (or is deemed by this subsection to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership.

(2)Subsection (1) is deemed to have come into force on January 1, 2022, except that

  • (a)before March 28, 2023, the definitions clean economy allocation provision, clean economy expenditure, clean economy provision and clean economy tax credit in subsection 127.‍47(1) of the Act, as enacted by subsection (1), are to be read as follows:

    clean economy allocation provision means subsection 127.‍44(11).‍ (disposition d’allocation pour l’économie propre)

    clean economy expenditure means a qualified CCUS expenditure as determined under section 127.‍44.‍ (dépense pour l’économie propre)

    clean economy provision means

    • (a)this section; or

    • (b)section 127.‍44 and Part XII.‍7.‍ (disposition pour l’économie propre)

    clean economy tax credit means a CCUS tax credit (as defined in subsection 127.‍44(1)).‍ (crédit d’impôt pour l’économie propre)

  • (b)for the period that begins on March 28, 2023 and ends on November 27, 2023, the definition clean economy provision in subsection 127.‍47(1) of the Act, as enacted by subsection (1), is to be read as follows:

    clean economy provision means

    • (a)this section;

    • (b)section 127.‍44 and Part XII.‍7; or

    • (c)section 127.‍45.‍ (disposition pour l’économie propre)

39(1)Subsection 128(2) of the Act is amended by adding the following after paragraph (d.‍2):

  • (d.‍3)where, by reason of paragraph (d), a taxation year of the individual is not a calendar year,

    • (i)for the purposes of the application of subsection 146.‍6(1) and the definition excess FHSA amount in subsection 207.‍01(1) to each taxation year ending in the calendar year, references to “taxation year” are to be read as references to “calendar year”, and

    • (ii)for the purposes of the application of subsection 146.‍6(5) to each taxation year ending in the calendar year, the description of A in paragraph 146.‍6(5)‍(a) is to be read as follows:

      “A
      is the total of all amounts each of which is the taxpayer’s annual FHSA limit for the calendar year that includes the taxation year and each preceding calendar year, and”

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

40(1)Paragraph 129(1)‍(b) of the Act is replaced by the following:

  • (b)shall, with all due dispatch, make the dividend refund after sending the notice of assessment if an application for it has been made in writing by the corporation within the period within which the Minister would be allowed

    • (i)under subsection 152(4) to assess tax payable under this Part by the corporation for the year if that subsection were read without reference to paragraph 152(4)‍(a), or

    • (ii)under subsection 152(4.‍31) to assess tax payable under Part IV by the corporation for the year if the Minister has assessed the corporation’s tax payable under that Part for the year under subsection 152(4.‍31).

(2)The definition eligible portion in subsection 129(4) of the Act is replaced by the following:

eligible portion of a corporation’s taxable capital gains or allowable capital losses for a taxation year is the total of all amounts each of which is the portion of a taxable capital gain or an allowable capital loss, as the case may be, of the corporation for the year from a disposition of a property that, except where the property was a designated property (within the meaning assigned by subsection 89(1)), cannot reasonably be regarded as having accrued while the property, or a property for which it was substituted, was property of a corporation other than a Canadian-controlled private corporation, a substantive CCPC, an investment corporation, a mortgage investment corporation or a mutual fund corporation.‍  (fraction admissible)

(3)The portion of paragraph (a) of the definition non-eligible refundable dividend tax on hand in subsection 129(4) of the Act before subparagraph (i) is replaced by the following:

  • (a)if the corporation was a Canadian-controlled private corporation throughout the year or a substantive CCPC at any time in the year, the least of

(4)Subsections (1) to (3) apply to taxation years that end on or after April 7, 2022.

41(1)Paragraph 135.‍2(4)‍(f) and the portion of paragraph 135.‍2(4)‍(g) of the Act before subparagraph (ii) are replaced by the following:

  • (f)any security (in this paragraph and paragraph (g), as defined in subsection 122.‍1(1)) of the trust that is held by a trust governed by a deferred profit sharing plan, FHSA, RDSP, RESP, RRIF, RRSP or TFSA (referred to in this paragraph and paragraph (g) as the “registered plan trust”) is deemed not to be a qualified investment for the registered plan trust;

  • (g)if a registered plan trust governed by a TFSA or FHSA acquires at any time a security of the trust, Part XI.‍01 applies in respect of the security as though the acquisition is an advantage

    • (i)in relation to the TFSA or the FHSA, as the case may be, that is extended at that time to the controlling individual of the registered plan trust, and

(2)Subsection (1) is deemed to have come into force on August 4, 2023.

42(1)Paragraph (a) of the definition credit union in subsection 137(6) of the Act is replaced by the following:

  • (a)it is

    • (i)a federal credit union, or

    • (ii)a provider of financial services that is organized on cooperative principles and incorporated by or under an Act of the legislature of a province,

(2)Subparagraph (b)‍(i) of the definition credit union in subsection 137(6) of the Act is replaced by the following:

  • (i)incorporated as credit unions or cooperative credit societies, each of which is described in paragraph (a), or all or substantially all of the members of which were credit unions, cooperatives or a combination of those entities,

(3)Paragraph (b) of the definition member in subsection 137(6) of the Act is replaced by the following:

  • (b)a registered retirement savings plan, a registered retirement income fund, a TFSA, a FHSA or a registered education savings plan, the annuitant, holder or subscriber under which is a person described in paragraph (a).‍ (membre)

(4)Subsections (1) and (2) are deemed to have come into force on January 1, 2016.

(5)Subsection (3) is deemed to have come into force on April 1, 2023.

43(1)Paragraph (b) of the definition excluded premium in subsection 146.‍01(1) of the Act is replaced by the following:
  • (b)was an amount transferred directly from a FHSA, registered retirement savings plan, registered pension plan, registered retirement income fund or deferred profit sharing plan,

(2)Subsection (1) is deemed to have come into force on November 28, 2023.

44(1)Paragraph (c) of the definition excluded premium in subsection 146.‍02(1) of the Act is replaced by the following:

  • (c)was an amount transferred directly from a FHSA, registered retirement savings plan, registered pension plan, registered retirement income fund or deferred profit sharing plan; or

(2)Subsection (1) is deemed to have come into force on November 28, 2023.

45(1)The portion of paragraph (c) of the definition qualifying person in subsection 146.‍4(1) of the Act before subparagraph (ii) is replaced by the following:

  • (c)an individual who is a qualifying family member in relation to the beneficiary if

    • (i)at or before that time, the beneficiary has attained the age of majority and, other than for the purposes of paragraph (4)‍(b.‍1), is not a beneficiary under a disability savings plan,

(2)The portion of subsection 146.‍4(1.‍5) of the Act before paragraph (a) is replaced by the following:

Beneficiary replacing holder
(1.‍5)Any holder of a disability savings plan who was a qualifying person in relation to the beneficiary under the plan at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definition qualifying person in subsection (1), or who was a successor holder because of paragraph (4)‍(b.‍1), ceases to be a holder of the plan and the beneficiary becomes the holder of the plan if

(3)The portion of subsection 146.‍4(1.‍6) of the Act before paragraph (a) is replaced by the following:

Entity replacing holder
(1.‍6)If an entity described in subparagraph (a)‍(ii) or (iii) of the definition qualifying person in subsection (1) is appointed in respect of a beneficiary of a disability savings plan and a holder of the plan was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of that definition, or was a successor holder because of paragraph (4)‍(b.‍1),

(4)Subsection 146.‍4(1.‍7) of the Act is replaced by the following:

Rules applicable in case of dispute
(1.‍7)If a dispute arises as a result of an issuer’s acceptance of a qualifying family member who was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definition qualifying person in subsection (1), or who was a successor holder because of paragraph (4)‍(b.‍1), as a holder of a disability savings plan, from the time the dispute arises until the time that the dispute is resolved or an entity becomes the holder of the plan under subsection (1.‍5) or (1.‍6), the holder of the plan shall use their best efforts to avoid any reduction in the fair market value of the property held by the plan trust, having regard to the reasonable needs of the beneficiary under the plan.

(5)Subparagraph 146.‍4(4)‍(b)‍(iv) of the Act is replaced by the following:

  • (iv)a qualifying person (other than a person described in paragraph (c) of the definition qualifying person in subsection (1)) in relation to the beneficiary at the time the rights are acquired, or

(6)Subsection 146.‍4(4) of the Act is amended by adding the following after paragraph (b):

  • (b.‍1)before 2027, as a consequence of the death of a qualifying family member who was the remaining holder of the plan immediately before death, the plan may allow one qualifying family member — in respect of which the conditions set out in paragraph (c) of the definition qualifying person in subsection (1) are met — to acquire rights as a successor of the holder of the plan;

(7)The portion of paragraph 146.‍4(13)‍(e) of the Act before subparagraph (i) is replaced by the following:

  • (e)if the issuer enters into the plan with a qualifying family member who was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definition qualifying person in subsection (1), or who was a successor holder because of paragraph (4)‍(b.‍1),

(8)Subsection 146.‍4(14) of the Act is replaced by the following:

Issuer’s liability
(14)If, after reasonable inquiry, an issuer of a disability savings plan is of the opinion that an individual’s contractual competence to enter into a disability savings plan is in doubt, no action lies against the issuer for
  • (a)entering into a plan, under which the individual is the beneficiary, with a qualifying family member who was a qualifying person in relation to the beneficiary at the time the plan (or another registered disability savings plan of the beneficiary) was entered into solely because of paragraph (c) of the definition qualifying person in subsection (1); or

  • (b)allowing a qualifying family member to acquire rights as a successor of the holder of the plan under paragraph (4)‍(b.‍1).

46(1)The definition survivor in subsection 146.‍6(1) of the Act is replaced by the following:

survivor of a holder means another individual who is, immediately before the holder’s death, a spouse or common-law partner of the holder.‍‍ (survivant)

(2)The definition bénéficiaire in subsection 146.‍6(1) of the French version of the Act is replaced by the following:

bénéficiaire Relativement à un CELIAPP, s’entend d’un particulier (y compris une succession) ou d’un donataire reconnu qui a droit à une distribution du CELIAPP après le décès du titulaire du CELIAPP.‍ (beneficiary)

(3)Paragraph (b) of the definition annual FHSA limit in subsection 146.‍6(1) of the Act is replaced by the following:

  • (b)the amount determined by the formula

    $8,000 + D − (E − F)

    where

    D
    is the amount of the FHSA carryforward for the taxation year,
    E
    is the taxpayer’s net RRSP-to-FHSA transfer amount at the end of the taxation year, and
    F
    is the total of all amounts, each of which is an amount determined in respect of each preceding taxation year that is

    (i)if the taxpayer had not started their maximum participation period in the year, nil, or

    (ii)in any other case, the lesser of

    (A)the amount determined by the formula

    G − H

    where

    G
    is the amount determined for E in the year, and
    H
    is the amount determined for F in the year, and

    (B)$8,000 plus the amount of the FHSA carryforward for the year, and

(4)The description of B in paragraph (b) of the definition FHSA carryforward in subsection 146.‍6(1) of the Act is replaced by the following:

B
is the amount determined in paragraph (a) of the definition annual FHSA limit for the preceding taxation year plus the total of all contributions made to a FHSA in the preceding taxation year by the taxpayer after the taxpayer’s first qualifying withdrawal from a FHSA, and

(5)Subsection 146.‍6(1) of the Act is amended by adding the following in alphabetical order:

net RRSP-to-FHSA transfer amount of a holder at a particular time means the amount by which‍

  • (a)the total of all amounts transferred under paragraph 146(16)‍(a.‍2), at or before that time, to a FHSA of the holder

exceeds

  • (b)the total of all amounts designated by the holder under paragraph (a) of the definition designated amount in subsection 207.‍01(1) at or before that time.‍ (montant net de transfert de REER à CELIAPP)

(6)Section 146.‍6 of the Act is amended by adding the following after subsection (3):

Amount credited to a deposit
(3.‍1)An amount that is credited or added to a deposit that is a FHSA as interest or other income in respect of the FHSA is deemed not to be received by the holder of the FHSA or any other person solely because of that crediting or adding.

(7)Subparagraph 146.‍6(5)‍(b)‍(ii) of the Act is replaced by the following:

  • (ii)the taxpayer’s net RRSP-to-FHSA transfer amount as at the end of the year.

(8)The descriptions of A and B in paragraph 146.‍6(7)‍(c) of the Act are replaced by the following:

A
is the amount that is the total fair market value, immediately before the particular time, of all property held by a FHSA under which the last holder of the transferor FHSA is the last holder, and
B
is the excess FHSA amount (as defined in subsection 207.‍‍01(1)) of the last holder of the transferor FHSA immediately before the particular time.

(9)Paragraphs 146.‍6(13)‍(a) and (b) of the Act are replaced by the following:

  • (a)the survivor is a qualifying individual at that time and

    • (i)no contributions or transfers are made to the FHSA by the survivor after that time,

    • (ii)no qualifying withdrawals are made from the FHSA after that time, and

    • (iii)the balance of the FHSA is transferred to a RRSP or RRIF of the survivor or distributed to the survivor in accordance with subsection (14), by the end of the year following the year of death; or

  • (b)the survivor is not a qualifying individual at that time, in which case the balance of the FHSA is to be transferred to a FHSA, RRSP or RRIF of the survivor, or distributed to the survivor in accordance with subsection (14), by the end of the year following the year of death.

(10)Paragraph 146.‍6(15)‍(a) of the Act is replaced by the following:

  • (a)if a payment is made from the estate to a FHSA, RRSP or RRIF of the survivor, the payment is deemed to be a transfer from the FHSA to the extent that it is so designated jointly by the legal representative and the survivor in prescribed form filed with the Minister;

(11)Paragraphs 146.‍6(17)‍(a) to (c) of the Act are replaced by the following:

  • (a)subsections (3) and (3.‍1) do not apply in respect of that arrangement after the particular time;

  • (b)if the taxpayer who was the last holder under the arrangement is not deceased at the particular time, an amount equal to the fair market value of all the property of the arrangement, determined at that time, is deemed for the purposes of subsection 146.‍6(6) to be received at that time by the taxpayer out of or under the FHSA;

  • (c)if the last holder is deceased at the particular time, the proportion of the fair market value of all the property of the arrangement that a beneficiary is entitled to, determined at that time, is deemed for the purposes of subsection 146.‍6(14) to be distributed at that time from the FHSA to the beneficiary;

  • (d)if the arrangement governs a trust,

    • (i)the trust is deemed to have disposed, immediately before the particular time, of each property held by the trust for proceeds equal to the property’s fair market value immediately before the particular time,

    • (ii)the trust is deemed to have acquired, at the particular time, each such property at a cost equal to that fair market value,

    • (iii)the trust’s last taxation year that began before the particular time is deemed to have ended immediately before the particular time, and

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

  • (e)if the arrangement is a deposit or contract,

    • (i)the arrangement is deemed to have been disposed of immediately before the particular time for proceeds equal to its fair market value immediately before the particular time,

    • (ii)if the arrangement is an annuity contract, the contract is deemed to be a separate annuity contract issued and effected at the particular time otherwise than pursuant to or as a FHSA, and

    • (iii)each person who has an interest or, for civil law, a right in the separate annuity contract or deposit, as the case may be, at the particular time is deemed to acquire the interest at the particular time at a cost equal to its fair market value at the particular time.

(12)Subsections (1) to (11) are deemed to have come into force on April 1, 2023.

47(1)Paragraph 152(1)‍(b) of the Act is replaced by the following:

  • (b)the amount of tax, if any, deemed by any of subsections 120(2) or (2.‍2), 122.‍5(3) to (3.‍003), 122.‍51(2), 122.‍7(2) or (3), 122.‍72(1), 122.‍8(4), 122.‍9(2), 122.‍91(1), 125.‍4(3), 125.‍5(3), 125.‍6(2) or (2.‍1), 127.‍1(1), 127.‍41(3), 127.‍44(2) 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(1)‍(b) of the Act, as enacted by subsection (1), is replaced by the following:

  • (b)the amount of tax, if any, deemed by any of subsections 120(2) or (2.‍2), 122.‍5(3) to (3.‍003), 122.‍51(2), 122.‍7(2) or (3), 122.‍72(1), 122.‍8(4), 122.‍9(2), 122.‍91(1), 125.‍4(3), 125.‍5(3), 125.‍6(2) or (2.‍1), 127.‍1(1), 127.‍41(3), 127.‍44(2), 127.‍45(2) or 210.‍2(3) or (4) to be paid on account of the taxpayer’s tax payable under this Part for the year.

(3)The portion of subsection 152(3.‍1) of the Act before paragraph (a) is replaced by the following:

Definition of normal reassessment period
(3.‍1)For the purposes of subsections (4), (4.‍01), (4.‍2), (4.‍3), (4.‍31), (5) and (9), the normal reassessment period for a taxpayer in respect of a taxation year is
(4)Paragraph 152(4)‍(b) of the Act is amended by striking out “or” at the end of subparagraph (vi), by adding “or” at the end of subparagraph (vii) and by adding the following after subparagraph (vii):
  • (viii)is made to give effect to the application of section 245 in respect of a transaction, unless the transaction was disclosed by the taxpayer to the Minister in accordance with section 237.‍3 or 237.‍4;

(5)Subsection 152(4) of the Act is amended by adding the following after paragraph (b.‍7):

  • (b.‍8)a prescribed form that is required to be filed under subsection 18.‍2(18) is not filed as and when required, and the assessment, reassessment or additional assessment is

    • (i)made before the day that is

      • (A)in the case of a taxpayer described in paragraph (3.‍1)‍(a), four years after the day on which the prescribed form containing the prescribed information is filed, and

      • (B)in any other case, three years after the day on which the prescribed form containing the prescribed information is filed, and

    • (ii)in respect of the application of paragraph 12(1)‍(l.‍2), subsection 18.‍2(2), clause 95(2)‍(f.‍11)‍(ii)‍(D) or (E) or paragraph 111(1)‍(a.‍1);

(6)Subsection 152(4) of the Act is amended by adding the following after paragraph (b.‍8), as enacted by subsection (5):

  • (b.‍9)the assessment, reassessment or additional assessment

    • (i)is made before the day that is three years after the end of the normal reassessment period for the taxpayer in respect of the year and made in respect of a disposition, in the year, of shares of the capital stock of a corporation resident in Canada in respect of which the taxpayer filed an election under paragraph 84.‍1(2.‍31)‍(h), or

    • (ii)is made before the day that is 10 years after the end of the normal reassessment period for the taxpayer in respect of the year and made in respect of a disposition, in the year, of shares of the capital stock of a corporation resident in Canada in respect of which the taxpayer filed an election under paragraph 84.‍1(2.‍32)‍(i);

(7)Subsection 152(4) of the Act is amended by adding the following after paragraph (b.‍9), as enacted by subsection (6):

  • (b.‍10)a prescribed form that is required to be filed by the taxpayer, or a partnership of which the taxpayer is a member, under subsection 127.‍45(15) or (18) is not filed as and when required, and the assessment, reassessment or additional assessment is made in relation to transactions or events described in subsections 127.‍45(11) to (14) or (16) and (17) before the day that is

    • (i)in the case of a taxpayer described in paragraph (3.‍1)‍(a), four years after the day on which the form is filed, and

    • (ii)in any other case, three years after the day on which the form is filed;

(8)Paragraph 152(4.‍01)‍(b) of the Act is amended by striking out “or” at the end of subparagraph (ix) and by adding the following after subparagraph (x):

  • (xi)the transaction referred to in subparagraph (4)‍(b)‍(viii), or

  • (xii)the transactions or events referred to in paragraph (4)‍(b.‍10);

(9)Section 152 of the Act is amended by adding the following after subsection (4.‍3):

Consequential assessment of Part IV tax
(4.‍31)Notwithstanding subsections (4), (4.‍1) and (5), if a taxpayer in a taxation year receives a taxable dividend from a corporation that, as a result of having paid the dividend, is entitled to a dividend refund, the Minister may, within one year after the expiration of the normal reassessment period for the taxpayer in respect of the year, assess or reassess the tax, interest or penalties payable under Part IV by the taxpayer in respect of the taxable dividend.

(10)Subsection (1) is deemed to have come into force on January 1, 2022.

(11)Subsection (2) is deemed to have come into force on March 28, 2023.

(12)Subsections (3) and (9) apply to assessments or reassessments of taxpayers for taxation years that end on or after April 7, 2022.

(13)Subsection (4) applies to transactions that occur on or after January 1, 2024.

(14)Subsection (5) applies in respect of taxation years that begin on or after October 1, 2023.

(15)Subsection (6) comes into force or is deemed to have come into force on January 1, 2024.

(16)Subparagraph 152(4.‍01)‍(b)‍(xi) of the Act, as enacted by subsection (8), applies to transactions that occur on or after January 1, 2024.

48(1)Paragraph 153(1)‍(v) of the Act is replaced by the following:

  • (v)a payment out of or under a FHSA, if the amount is required by section 146.‍6 to be included in computing a taxpayer’s income

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

49(1)Paragraph 157(3)‍(e) of the Act is replaced by the following:

  • (e)1/12 of the total of the amounts each of which is deemed by subsection 125.‍4(3), 125.‍5(3), 125.‍6(2) or (2.‍1), 127.‍1(1), 127.‍41(3) or 127.‍44(2) to have been paid on account of the corporation’s tax payable under this Part for the year.

(2)Paragraph 157(3)‍(e) of the Act, as enacted by subsection (1), is replaced by the following:

  • (e)1/12 of the total of the amounts each of which is deemed by subsection 125.‍4(3), 125.‍5(3), 125.‍6(2) or (2.‍1), 127.‍1(1), 127.‍41(3), 127.‍44(2) or 127.‍45(2) to have been paid on account of the corporation’s tax payable under this Part for the year.

(3)Paragraph 157(3.‍1)‍(c) of the Act is replaced by the following:

  • (c)1/4 of the total of the amounts each of which is deemed by subsection 125.‍4(3), 125.‍5(3), 125.‍6(2) or (2.‍1), 127.‍1(1), 127.‍41(3) or 127.‍44(2) to have been paid on account of the corporation’s tax payable under this Part for the taxation year.

(4)Paragraph 157(3.‍1)‍(c) of the Act, as enacted by subsection (3), is replaced by the following:

  • (c)1/4 of the total of the amounts each of which is deemed by subsection 125.‍4(3), 125.‍5(3), 125.‍6(2) or (2.‍1), 127.‍1(1), 127.‍41(3), 127.‍44(2) or 127.‍45(2) to have been paid on account of the corporation’s tax payable under this Part for the taxation year.

(5)Subsections (1) and (3) are deemed to have come into force on January 1, 2022.

(6)Subsections (2) and (4) are deemed to have come into force on March 28, 2023.

50(1)Section 160 of the Act is amended by adding the following after subsection (1.‍4):

Joint liability — intergenerational business transfer
(1.‍5)If a taxpayer and one or more other taxpayers have jointly elected under
  • (a)paragraph 84.‍1(2.‍31)‍(h) in respect of a disposition of shares of the capital stock of a corporation resident in Canada, they are jointly and severally, or solidarily, liable for the tax payable by the taxpayer under this Part to the extent that the tax payable by the taxpayer is greater than it would have been if the disposition had satisfied the conditions of subsection 84.‍1(2.‍31); or

  • (b)paragraph 84.‍1(2.‍32)‍(i) in respect of a disposition of shares of the capital stock of a corporation resident in Canada, they are jointly and severally, or solidarily, liable for the tax payable by the taxpayer under this Part to the extent that the tax payable by the taxpayer is greater than it would have been if the disposition had satisfied the conditions of subsection 84.‍1(2.‍32).

(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2024.

51(1)Subsection 160.‍2(2.‍3) of the Act is repealed.

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

52(1)Subsection 163(2) of the Act is amended by adding the following after paragraph (d):

  • (d.‍1)the amount, if any, by which

    • (i)the amount that would be deemed by subsection 127.‍44(2) to be paid for the year by the person if that amount were calculated by reference to the information provided in the return or form filed for the year under that subsection

  • exceeds

    • (ii)the amount that is deemed by subsection 127.‍44(2) to be paid for the year by the person,

(2)Paragraph 163(2)‍(d.‍1) of the Act, as enacted by subsection (1), is replaced by the following:

  • (d.‍1)the amount, if any, by which

    • (i)the amount that would be deemed by subsection 127.‍44(2) or 127.‍45(2), as the case may be, to be paid for the year by the person if that amount were calculated by reference to the information provided in the return or form filed for the year under that subsection

  • exceeds

    • (ii)the amount that is deemed by subsection 127.‍44(2) or 127.‍45(2), as the case may be, to be paid for the year by the person,

(3)Subsection (1) is deemed to have come into force on January 1, 2022.

(4)Subsection (2) is deemed to have come into force on March 28, 2023.

53(1)The Act is amended by adding the following after section 183.‍2:

PART II.‍2

Tax on Repurchases of Equity

Definitions

183.‍3(1)The following definitions apply in this Part.

covered entity for a taxation year, means an entity that is a corporation, trust or partnership if at any time in the taxation year

  • (a)equity of the entity is listed on a designated stock exchange; and

  • (b)the entity is

    • (i)a corporation resident in Canada (other than a mutual fund corporation),

    • (ii)a trust that

      • (A)is a real estate investment trust (as defined in subsection 122.‍1(1)),

      • (B)is a SIFT trust, or

      • (C)would be a SIFT trust (other than a mutual fund trust that has one or more classes of units in continuous distribution) if

        • (I)each reference in paragraph (a) of the definition non-portfolio property in subsection 122.‍1(1) to “subject entity” were read as “corporation, partnership or trust” and paragraph (c) of that definition were read without reference to the words “in Canada”,

        • (II)paragraph (a) of the definition Canadian real, immovable or resource property in subsection 248(1) were read without reference to the words “situated in Canada”, and

        • (III)the definitions timber resource property in subsection 13(21) and Canadian resource property in subsection 66(15) were read without references to the words “in Canada”, or

    • (iii)a partnership that

      • (A)is a SIFT partnership, or

      • (B)would be a SIFT partnership if

        • (I)each reference in paragraph (a) of the definition non-portfolio property in subsection 122.‍1(1) to “subject entity” were read as “corporation, partnership or trust” and paragraph (c) of that definition were read without reference to the words “in Canada”,

        • (II)paragraph (a) of the definition Canadian real, immovable or resource property in subsection 248(1) were read without reference to the words “situated in Canada”, and

        • (III)the definitions timber resource property in subsection 13(21) and Canadian resource property in subsection 66(15) were read without references to the words “in Canada”.‍ (entité visée)

equity of an entity, means, if the entity is

  • (a)a corporation, a share of the capital stock of the corporation;

  • (b)a trust, an income or capital interest in the trust; and

  • (c)a partnership, an interest as a member of the partnership.‍ (capitaux propres)

qualifying issuance means any portion of an issuance that is made

  • (a)in exchange for

    • (i)cash,

    • (ii)a bond, debenture, note or other security (other than equity) of the covered entity that was issued solely for cash consideration, the terms of which confer on the holder the right to make the exchange, or

    • (iii)any combination of properties described in subparagraph (i) or (ii);

  • (b)to an employee of the covered entity (or an entity related to the covered entity) in the course of the employee’s employment; or

  • (c)to a person or partnership, with which the covered entity deals at arm’s length and is not affiliated, in exchange for property used in the covered entity’s active business.‍ (émission admissible)

reorganization transaction means a redemption, acquisition or cancellation of equity by a covered entity that is made

  • (a)on an exchange of equity by a holder for consideration that includes equity (other than substantive debt) of

    • (i)the covered entity,

    • (ii)another entity that is related to the covered entity immediately before the exchange and is a covered entity immediately after the exchange, or

    • (iii)another covered entity that controls the covered entity (or an amalgamated successor entity of the covered entity) immediately after the exchange;

  • (b)on an amalgamation of the covered entity with one or more other predecessor corporations to which subsection 87(1) applies if a holder of that equity, immediately before the amalgamation, receives consideration that includes equity (other than substantive debt) of the new corporation (within the meaning of subsection 87(1)) for the disposition of their equity on the amalgamation;

  • (c)on a winding-up of the covered entity during which all or substantially all of the property owned by the covered entity is distributed to the equity holders of the covered entity;

  • (d)in the course of a reorganization to which paragraph 55(3)‍(a) or (b) applies;

  • (e)on a qualifying disposition (as defined in subsection 107.‍4(1));

  • (f)on a qualifying exchange (as defined in subsection 132.‍2(1));

  • (g)at the demand of a holder in accordance with the conditions referred to in paragraph 108(2)‍(a), included in the issued units of the trust, for an amount that does not exceed the fair market value of the equity at the time of the redemption, acquisition or cancellation; or

  • (h)pursuant to the exercise of a statutory right of dissent by a holder of the equity.‍ (opération de réorganisation)

specified affiliate at any time, of a covered entity, means a corporation, trust or partnership (in this definition referred to as an “affiliate”) where, at that time,

  • (a)if the affiliate is a corporation, the covered entity

    • (i)controls the corporation, or

    • (ii)has a direct or indirect interest in the equity of the corporation having a fair market value equal to more than 50% of the fair market value of the total equity of the corporation;

  • (b)if the affiliate is a trust, the covered entity

    • (i)is a majority-interest beneficiary (as defined in subsection 251.‍1(3)) of the trust, or

    • (ii)has a direct or indirect interest in the equity of the trust having a fair market value equal to more than 50% of the fair market value of the total equity of the trust; and

  • (c)if the affiliate is a partnership, the covered entity

    • (i)is a majority-interest partner of the partnership, or

    • (ii)has a direct or indirect interest in the equity of the partnership having a fair market value equal to more than 50% of the fair market value of the total equity of the partnership.‍ (entité affiliée déterminée)

substantive debt of a covered entity means equity that, in accordance with its terms

  • (a)is not convertible or exchangeable other than for

    • (i)equity that if issued would be substantive debt of the same covered entity,

    • (ii)a bond, debenture or note of the covered entity, the fair market value of which does not exceed the total of the amounts referred to in subparagraphs (d)‍(i) to (iv), or

    • (iii)equity that would be issued only after the occurrence of a trigger event pursuant to a non-viability contingent capital provision included in the terms of the equity to satisfy regulatory capital requirements applicable to the covered entity;

  • (b)is non-voting in respect of the election of the board of directors, the trustees or the general partner (as applicable) of the covered entity, except in the event of a failure or default under the terms or conditions of the equity;

  • (c)requires the amount of any dividend or other distribution payable to be calculated

    • (i)as a fixed amount, or

    • (ii)by reference to a percentage of an amount equal to the fair market value of the consideration for which the equity was issued if the percentage is

      • (A)fixed, or

      • (B)determined by reference to a market interest rate (including a Government of Canada Treasury Bill) plus a fixed amount, if any; and

  • (d)entitles any holder of the equity to receive, on the redemption, cancellation or acquisition of the equity by the covered entity or by a person or partnership with whom the covered entity does not deal at arm’s length or is affiliated, an amount that does not exceed the total of the following amounts:

    • (i)the fair market value of the consideration for which the equity was issued,

    • (ii)any unpaid distributions or dividends on the equity that are payable to the holder,

    • (iii)any premium that is payable to the holder solely due to the early redemption, cancellation or acquisition of the equity, and

    • (iv)any other amount in respect of an amount described in subparagraphs (i) to (iii) that is attributable to an increase in the value of a currency other than Canadian currency relative to Canadian currency.‍ (dette substantielle)

Tax payable

(2)Each person or partnership that is a covered entity for a taxation year shall pay a tax for the taxation year equal to the amount determined by the formula

0.‍02 × (A + B − C)

where

A
is the total fair market value of equity (other than substantive debt) of the covered entity that is redeemed, acquired or cancelled in the taxation year by the covered entity, other than equity that is

(a)redeemed, acquired or cancelled in a reorganization transaction, or

(b)acquired from a specified affiliate, if that equity was previously deemed by subsection (5) to have been acquired by the covered entity and was previously included in the description of A;

B
is

(a)if equity of a covered entity (other than substantive debt) is redeemed, acquired or cancelled in the taxation year pursuant to a reorganization transaction described in paragraph (a) or (b) of that definition and any portion of the consideration received by a holder for the equity is not equity consideration described in paragraph (a) or (b) of the definition reorganization transaction, the amount determined by the formula

D − E

where

D
is the total fair market value of the equity of the covered entity (other than substantive debt) that is redeemed, acquired or cancelled in a reorganization transaction described in this paragraph; and
E
is the total fair market value of any equity consideration described in paragraph (a) or (b) of the definition reorganization transaction that is received by a holder as consideration for the equity that is redeemed, acquired or cancelled in a reorganization transaction described in this paragraph; and

(b)in any other case, nil; and

C
is the total fair market value of equity (other than substantive debt) of the covered entity that is

(a)issued in a qualifying issuance in the taxation year, or

(b)disposed of in the taxation year by a specified affiliate of the covered entity (except a disposition to the covered entity or another specified affiliate of the covered entity), if that equity was previously deemed by subsection (5) to have been acquired by the covered entity and was previously included in the description of A.

Tax payable — anti-avoidance

(3)Equity that is redeemed, acquired or cancelled, or that is issued by a covered entity, as part of a transaction (as defined in subsection 245(1)) or series of transactions shall be included in the description of A or B or excluded from the description of C in subsection (2) (as the case may be) if it is reasonable to consider that the primary purpose of the transaction or series is to cause a decrease in the amount referred to in the description of A or B in that subsection or an increase in the amount referred to in the description of C in that subsection.

De minimis rule

(4)Despite subsection (2), if the total of the amounts determined for A and B in subsection (2) for a taxation year is less than $1,000,000 (prorated based upon the number of days in the taxation year if the taxation year is less than 365 days), no tax is payable under this Part for the taxation year.

Similar transactions

(5)For the purposes of subsection (2), if a specified affiliate of a covered entity acquires equity of the covered entity, the equity is deemed to be acquired by the covered entity unless the specified affiliate is

  • (a)a registered securities dealer that

    • (i)acquires the equity in the capacity of an agent in the ordinary course of business, and

    • (ii)disposes of the equity, other than to the covered entity or another specified affiliate of the covered entity, within a reasonable period of time that is consistent with the holding of equity in the ordinary course of business;

  • (b)a trust established for the benefit of employees and former employees of the covered entity (or of a specified affiliate of the covered entity) that satisfies the following conditions

    • (i)the trust is an employee benefit plan, and

    • (ii)the terms of the trust provide that any equity of the covered entity acquired or held by the trust cannot be transferred to, or otherwise be available for the benefit of, the covered entity or any specified affiliate of the covered entity;

  • (c)a trust governed by an employees profit sharing plan; or

  • (d)a trust governed by a deferred profit sharing plan.

Similar transactions — anti-avoidance

(6)If it is reasonable to consider that one of the main purposes of a transaction (as defined in subsection 245(1)) or series of transactions is to cause a person or partnership to acquire equity of a covered entity to avoid the tax otherwise payable under this Part, the person or partnership shall be deemed to be a specified affiliate of the covered entity from the time that the transaction or series commenced until immediately after the time the transaction or series ends.

Return

183.‍4(1)If a covered entity redeems, acquires or cancels equity of the entity in a taxation year,

  • (a)if the entity is a corporation, on or before the day it is required to file its return of income under Part I for the year, the corporation shall file with the Minister a return for the year under this Part in prescribed form;

  • (b)if the entity is a trust, within 90 days after the end of the taxation year, the trustee of the trust shall file with the Minister a return for the year under this Part in prescribed form; and

  • (c)if the entity is a partnership, a member of the partnership that has authority to act for the partnership shall file with the Minister a return for the year under this Part in prescribed form on or before the earlier of

    • (i)the day that is five months after the end of the taxation year, and

    • (ii)March 31 in the calendar year immediately following the calendar year in which the taxation year ended.

Payment

(2)Every covered entity that is liable to pay tax under this Part for a taxation year, shall

  • (a)if the entity is a corporation or trust, pay its tax payable under this Part for the year to the Receiver General on or before its balance-due day for the year; and

  • (b)if the entity is a partnership, pay its tax payable under this Part for the year to the Receiver General on or before the day which the partnership is required to file a return for the year under paragraph (1)‍(c).

Provisions applicable to Part

(3)Subsections 150(2) and (3), sections 152, 158 and 159, subsections 160.‍1(1) and 161(1) and (11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circ*mstances require.

(2)Subsection (1) applies to transactions that occur after 2023.

54(1)Subparagraph (a)‍(iii) of the description of I in subsection 204.‍2(1.‍2) of the Act is replaced by the following:

(iii)an amount transferred to the plan on behalf of the individual in accordance with any of subsections 146(16), 146.‍6(7), 147(19), 147.‍3(1) and (4) to (7) and 147.‍5(21) or in circ*mstances to which subsection 146(21) applies,

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

55(1)The definition excess FHSA amount in subsection 207.‍01(1) of the Act is replaced by the following:

excess FHSA amount of an individual at a particular time in a taxation year means

  • (a)the amount determined by the formula

    A + B + C − D − E − F

    where

    A
    is

    (i)nil, if the individual had not started their maximum participation period in the preceding taxation year, and

    (ii)the individual’s excess FHSA amount determined at the end of the immediately preceding taxation year, in any other case;

    B
    is the total of all amounts each of which is a contribution made to a FHSA by the individual in the taxation year at or before the particular time;
    C
    is the total of all amounts transferred in the taxation year under paragraph 146(16)‍(a.‍2), at or before the particular time, to a FHSA under which the individual is the holder;
    D
    is the lesser of

    (i)$8,000 plus an amount that would have been the individual’s FHSA carryforward for the taxation year if each amount that was included in that individual’s income under subsection 146.‍6(6) and could have been, immediately prior to the time it was received, a designated amount, had been designated by the individual as a designated amount, and

    (ii)the amount determined by the formula

    $40,000 − G

    where

    G
    is the total of all amounts that were deducted, could have been deducted or would have been deductible by the individual under subsection 146.‍6(5) in respect of all preceding taxation years if

    (A)no amounts were transferred under paragraph 146(16)‍(a.‍2) to a FHSA of the individual, and

    (B)notwithstanding clause (A), an amount had been contributed by the individual to a FHSA in each preceding taxation year that is the amount by which the individual’s net RRSP-to-FHSA transfer amount at the end of that year exceeds the individual’s net RRSP-to-FHSA transfer amount at the start of that year;

    E
    is the total of all amounts each of which is a designated amount in respect of a transfer or withdrawal made by the individual in the taxation year before the particular time or an amount required to be included in computing the income of the individual under subsection 146.‍6(6) in the taxation year before the particular time; and
    F
    is the total of all amounts, each of which is the portion of an amount required to be included in computing the income of the individual under subsection 146.‍6(6) in any preceding taxation year, to the extent that it did not reduce what otherwise would have been the individual’s excess FHSA amount in any preceding taxation year; or
  • (b)where the Minister determines that the formula in paragraph (a) does not yield an appropriate result having regard to the circ*mstances of the individual, a lower amount that, in the Minister’s opinion, is appropriate in the circ*mstances.‍ (excédent de CELIAPP)

(2)Paragraph (a) of the definition designated amount in subsection 207.‍01(1) of the Act is replaced by the following:

  • (a)a transfer in accordance with subparagraph 146.‍‍6(7)‍(b)‍(ii), to the extent that it does not exceed the total of all amounts transferred under paragraph 146(16)‍(a.‍‍2) to a FHSA under which the individual is the holder on or before the date of the designation less the total of all amounts previously designated under this paragraph; or

(3)Paragraph (b) of the definition swap transaction in subsection 207.‍01(1) of the Act is amended by striking out “or” at the end of subparagraph (ii), by adding “or” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

  • (iv)an amount transferred in accordance with paragraph 146(16)‍(a.‍2) or to which subsection 146.‍6(7) applies;

(4)Subparagraph (d)‍(i) of the definition swap transaction in subsection 207.‍01(1) of the Act is replaced by the following:

  • (i)both registered plans are RRIFs or RRSPs,

(5)Paragraph (d) of the definition swap transaction in subsection 207.‍01(1) of the Act is amended by striking out “or” at the end of subparagraph (iii), by adding “or” at the end of subparagraph (iv) and by adding the following after subparagraph (iv):

  • (v)both registered plans are FHSAs;

(6)Subsections (1) to (3) are deemed to have come into force on April 1, 2023.

(7)Subsections (4) and (5) are deemed to have come into force on August 4, 2023.

56(1)Paragraph (a) of the definition refundable tax in subsection 207.‍5(1) of the Act is replaced by the following:

  • (a)50% of all contributions (other than an excluded contribution made on or after March 28, 2023) made under the arrangement while it was a retirement compensation arrangement and before the end of the year, and

(2)Subsection 207.‍5(1) of the Act is amended by adding the following in alphabetical order:

excluded contribution means an amount paid or payable under a specified arrangement to obtain or renew a letter of credit or surety bond issued by a financial institution for the purposes of securing future retirement benefit payments out of or under the arrangement; (cotisation exclue)

specified arrangement means a retirement compensation arrangement of which the primary purpose is to provide annual or more frequent periodic retirement benefit payments that are paid

  • (a)as supplemental benefits provided out of or under

    • (i)a registered pension plan,

    • (ii)a registered retirement savings plan,

    • (iii)a deferred profit sharing plan,

    • (iv)a pooled registered pension plan, or

    • (v)any combination of plans described in subparagraphs (i) to (iv), or

  • (b)under an arrangement that would, in the absence of subsection 147.‍1(8) and section 8504 of the Income Tax Regulations, substantially comply with the prescribed conditions for registration for a registered pension plan under section 8501 of those Regulations; (convention déterminée)

(3)Subsections (1) and (2) are deemed to have come into force on March 28, 2023.

57(1)The Act is amended by adding the following after section 207.‍7:

Definitions
207.‍71(1)The following definitions apply in this section.

eligible employer means an employer that paid an amount, or that has a predecessor employer (as defined in subsection 8500(1) of the Income Tax Regulations) that paid an amount, before March 28, 2023, under a specified arrangement that is an excluded contribution.‍ (employeur admissible)

specified refundable tax of a specified arrangement at the end of a taxation year means the amount, if any, determined by the formula

A − B

where

A
is the amount elected under paragraph (2)‍(c); and
B
is the total of all amounts, if any, each of which is a refund as determined under subsection (3), in respect of a preceding taxation year.‍ (impôt remboursable déterminé)
Election
(2)Subsection (3) applies to a specified arrangement if
  • (a)an eligible employer, or the custodian of the arrangement, paid a refundable tax under this Part with respect to an excluded contribution made under the arrangement before March 28, 2023;

  • (b)the eligible employer files an election with the Minister in prescribed form and manner; and

  • (c)the election includes an elected amount that does not exceed the total amount of refundable tax paid with respect to excluded contributions made under the arrangement before March 28, 2023.

Amount of refund
(3)If this subsection applies to a specified arrangement, the Minister may refund to the eligible employer, or to the custodian of the arrangement, an amount claimed on the return for a taxation year described in subsection 207.‍7(3), not exceeding the lesser of
  • (a)50% of all retirement benefits paid in the taxation year directly by the eligible employer for the benefit of beneficiaries whose retirement benefits were secured under the specified arrangement with a letter of credit or surety bond issued by a financial institution, and

  • (b)the specified refundable tax of the specified arrangement at the end of the taxation year.

Refundable tax definition
(4)If an eligible employer claims a refund under subsection (3) for a taxation year, paragraph (c) of the definition refundable tax in subsection 207.‍5(1) is to be read as follows:
  • (c)the total of

  • (i)50% of all amounts paid as distributions to one or more persons (including amounts that are required by paragraph 12(1)‍(n.‍3) to be included in computing the recipient’s income) under the arrangement while it was a retirement compensation arrangement and before the end of the year, other than a distribution paid where it is established, by subsequent events or otherwise, that the distribution was paid as part of a series of payments and refunds of contributions under the arrangement, and

  • (ii)all amounts determined under subsection 207.‍71(3) in respect of the specified arrangement for the year and a preceding year;

(2)Subsection (1) applies to the 2024 and subsequent taxation years.

58(1)The Act is amended by adding the following after section 211.‍91:
PART XII.‍7

Carbon Capture, Utilization and Storage

Definitions

211.‍92(1)The following definitions apply in this Part and in section 127.‍44.

actual eligible use percentage, in respect of a CCUS project, for a period means the amount, expressed as a percentage, determined by the formula

A ÷ B

where

A
is the quantity of captured carbon that the CCUS project supported for storage or use in eligible use during the period, and
B
is the total quantity of captured carbon that the CCUS project supported for storage or use in both eligible use and ineligible use during the period.‍ (pourcentage réel d’utilisation admissible)

exempt corporation at any time, means a corporation that does not have an ownership interest, whether directly or indirectly, in a qualified CCUS project in respect of which $20 million or more of qualified CCUS expenditures are expected to be incurred (based on the most recent project evaluation issued by the Minister of Natural Resources for the project).‍ (société exonérée)

first project period, in respect of a CCUS project, means the period that begins on the first day of commercial operations — or, if the project has not yet commenced operations, the day on which, according to the most recent project plan, operations are expected to begin — and ends

  • (a)if that day is before October of a calendar year, on December 31 of the calendar year that includes the fourth anniversary of that day; or

  • (b)if that day is after September of a calendar year, on December 31 of the calendar year that includes the fifth anniversary of that day.‍ (première période du projet)

first recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the first project period.‍ (première année d’imposition de recouvrement)

fourth project period, in respect of a CCUS project, means the five calendar years following the end of the third project period.‍ (quatrième période du projet)

fourth recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the fourth project period.‍ (quatrième année d’imposition de recouvrement)

knowledge sharing CCUS project means a qualified CCUS project that

  • (a)is expected to incur qualified CCUS expenditures of $250 million or more based on the most recent project evaluation issued by the Minister of Natural Resources for the project; or

  • (b)has incurred $250 million or more of qualified CCUS expenditures before the first day of commercial operations of the project.‍ (projet de CUSC requérant l’échange de connaissances)

knowledge sharing report, in respect of a CCUS project, means

  • (a)an annual operations knowledge sharing report containing the information described by the Minister of Natural Resources in the CCUS-ITC Technical Guidance Document as published by the Minister of Natural Resources and amended from time to time, in the form annexed to the CCUS-ITC Technical Guidance Document; and

  • (b)the construction and completion knowledge sharing report containing the information described in the CCUS-ITC Technical Guidance Document referred to in paragraph (a).‍ (rapport sur l’échange de connaissances)

knowledge sharing taxpayer means a taxpayer that claimed a CCUS tax credit for a taxation year ending before the project start-up date of a knowledge sharing CCUS project.‍ (contribuable échangeant des connaissances)

project period, in respect of a CCUS project, means any of the first project period, the second project period, the third project period and the fourth project period.‍ (période de projet)

project start-up date means the day that is 120 days before the first day of commercial operations.‍ (jour du début du projet)

recovery taxation year, in respect of a CCUS project, means any of the first recovery taxation year, the second recovery taxation year, the third recovery taxation year and the fourth recovery taxation year.‍ (année d’imposition de recouvrement)

relevant project period means

  • (a)in respect of the first recovery taxation year, the first project period;

  • (b)in respect of the second recovery taxation year, the second project period;

  • (c)in respect of the third recovery taxation year, the third project period; and

  • (d)in respect of the fourth recovery taxation year, the fourth project period.‍ (période de projet pertinente)

reporting-due day means

  • (a)in respect of an annual climate risk disclosure report, the day that is nine months after the day on which the reporting taxation year for the report ends;

  • (b)in respect of an annual operations knowledge sharing report,

    • (i)if the report is the first such report,

      • (A)where the project start-up date is before October 1 in a calendar year, June 30 of the following calendar year, and

      • (B)where the project start-up date is after September 30 in a calendar year, June 30 of the second calendar year after the calendar year which includes the the project start-up date, and

    • (ii)if the report is not the first report, each June 30 of the first four calendar years immediately following the calendar year which includes the June 30 referred to in subparagraph (i); and

  • (c)in respect of the construction and completion knowledge sharing report, the last day of the sixth month beginning after the project start-up date.‍ (date d’échéance du rapport)

reporting period means

  • (a)in respect of the construction and completion knowledge sharing report, the period that begins on the first day an expenditure for a CCUS project is incurred and ends on the project start-up date of the knowledge sharing CCUS project; and

  • (b)in respect of an annual operations knowledge sharing report, each period that begins on the project start-up date and ends on the last day of the calendar year ending immediately before the reporting-due day for the annual operations knowledge sharing report.‍ (période de déclaration)

reporting taxation year means

  • (a)the first taxation year of a taxpayer in which a CCUS tax credit was deducted, in respect of a CCUS project of the taxpayer; and

  • (b)each taxation year that

    • (i)begins after a taxation year referred to in paragraph (a), and

    • (ii)ends before the twenty-first calendar year after the end of the taxation year which includes the first day of commercial operations of the CCUS project.‍ (année d’imposition de la déclaration)

second project period, in respect of a CCUS project, means the five calendar years following the end of the first project period.‍ (deuxième période du projet)

second recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the second project period.‍ (deuxième année d’imposition de recouvrement)

third project period, in respect of a CCUS project, means the five calendar years following the end of the second project period.‍ (troisième période du projet)

third recovery taxation year, in respect of a project period of a CCUS project, means the taxation year that includes the last day of the third project period.‍ (troisième année d’imposition de recouvrement)

Recovery of development tax credit

(2)A taxpayer shall pay a tax under this Part, for a particular taxation year that includes the first day of commercial operations of a CCUS project, or for any preceding year, equal to the amount, if any, by which the taxpayer’s cumulative CCUS development tax credit for the immediately preceding taxation year exceeds its cumulative CCUS development tax credit for the particular taxation year.

Acceleration of recovery tax

(3)If the actual eligible use percentage for a CCUS project for any period described in subparagraph (c)‍(i) or (ii) of the definition qualified CCUS project in subsection 127.‍44(1) is less than 10%, then for the purposes of applying subsections (4) and (5)

  • (a)the actual eligible use percentage of the project for the relevant project period to which the period relates, and for each subsequent project period, is deemed to be nil;

  • (b)the relevant project period for the particular recovery taxation year is deemed to include each subsequent project period; and

  • (c)those subsections do not apply to a subsequent recovery taxation year in respect of the project.

Development credits recovery amount

(4)If the projected eligible use percentage of a CCUS project for the relevant project period in respect of a particular recovery taxation year exceeds the actual eligible use percentage of the CCUS project for that period by more than five percentage points, there shall be added to the tax otherwise payable under this Part for the particular recovery taxation year by a taxpayer that deducted a CCUS tax credit in respect of the CCUS project an amount equal to the amount determined by the formula

A − B − C

where

A
is the amount of the taxpayer’s cumulative CCUS development tax credit for the taxation year that includes the first day of commercial operations;
B
is the amount that would be determined for A if the projected eligible use percentage for the relevant project period were equal to its actual eligible use percentage; and
C
is the total of all amounts, each of which is an amount previously paid by the taxpayer as a tax under this Part in respect of the disposition or export of a property in relation to the project because of subsection (9), to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

Refurbishment credits recovery amount

(5)If the projected eligible use percentage of a CCUS project for the relevant project period in respect of a particular recovery taxation year exceeds the actual eligible use percentage of the CCUS project for that period by more than five percentage points, there shall be added to the tax otherwise payable under this Part for the particular recovery taxation year by a taxpayer that deducted a CCUS tax credit in respect of the CCUS project, an amount equal to the amount determined by the formula

A − B − C

where

A
is the total of all amounts, each of which is the amount that is the taxpayer’s CCUS refurbishment tax credit under subsection 127.‍44(5) for the year or a previous taxation year;
B
is the amount that would be determined for A if the projected eligible use percentage for the relevant project period were equal to its actual eligible use percentage; and
C
is the total of all amounts, each of which is an amount previously paid by the taxpayer as a tax under this Part in respect of the disposition or export of a property in relation to the project because of subsection (10), to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

Extraordinary eligible use reduction

(6)For the purposes of determining a taxpayer’s liability for tax under this Part for a taxation year, subsection (7) applies if

  • (a)the actual eligible use percentage for a qualified CCUS project during a project period is significantly reduced due to extraordinary circ*mstances, for bona fide reasons outside the control of the taxpayer and each person or partnership that does not deal at arm’s length with the taxpayer;

  • (b)the taxpayer requests in writing, on or before the taxpayer’s filing-due date for the year, that the Minister consider the potential application of this subsection and subsection (7); and

  • (c)the Minister is satisfied that the taxpayer has taken all reasonable steps to attempt to rectify the extraordinary circ*mstances, and that it is appropriate, having regard to all the circ*mstances, to apply this subsection and subsection (7).

Effect of extraordinary circ*mstances

(7)If the conditions set out in subsection (6) are met for a taxation year,

  • (a)if the qualified CCUS project’s operations are affected by extraordinary circ*mstances for all or substantially all of the project period, then no amount is payable by the taxpayer for the year under subsections (3) to (5) in respect of the project; and

  • (b)in any other case, the portion of the project period during which the project’s operations are affected by the extraordinary circ*mstances shall be disregarded for the purpose of calculating the actual eligible use percentage for the project period.

Shutdown

(8)For the purposes of determining a taxpayer’s liability for tax under this Part for a recovery taxation year, if a qualified CCUS project is inoperative for all or a portion of a relevant project period,

  • (a)if the project is inoperative for all or substantially all of the period, then no amount is payable by the taxpayer for the year under subsections (3) to (5) in respect of the project; and

  • (b)in any other case, the portion of the project period during which the project is inoperative shall be disregarded for the purpose of calculating the actual eligible use percentage for the project period.

Development property disposition

(9)Except where subsection (11) applies, if at any time in a particular taxation year a taxpayer disposes of or exports from Canada a property for which the taxpayer’s qualified CCUS expenditure resulted in the determination of a cumulative CCUS development tax credit for a previous taxation year, or would so result for the particular year but for this subsection, the following rules apply:

  • (a)if the time is before the total CCUS project review period of the CCUS project to which the expenditure relates, the expenditure is deemed not to be a qualified CCUS expenditure in respect of the CCUS project for the purpose of determining the taxpayer’s cumulative CCUS development tax credit for the particular year and any subsequent taxation years; and

  • (b)if the time is during the total CCUS project review period of the CCUS project to which the expenditure relates, there shall be added to the tax otherwise payable by the taxpayer under this Part for the year the amount determined by the formula

    A × B × C ÷ D − E

    where

    A
    is the qualified CCUS expenditure in respect of the property as determined for the taxation year that includes the first day of commercial operations,
    B
    is the appropriate specified percentage,
    C
    is the amount, not exceeding the amount determined for D, equal to

    (i)if the property is disposed of to a person who deals at arm’s length with the taxpayer, the proceeds of disposition of the property, or

    (ii)if the property is disposed of to a person who does not deal at arm’s length with the taxpayer, or is exported from Canada but not disposed of, the fair market value of the property at that time,

    D
    is the taxpayer’s capital cost of the property, and
    E
    is the total of all amounts, each of which can reasonably be considered to be the portion of any amount previously paid by the taxpayer because of subsection (4) in respect of the property, to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

Refurbishment property disposition

(10)Except where subsection (11) applies, if at any time in a particular taxation year during the total project review period of a CCUS project a taxpayer disposes of or removes from Canada a property for which the taxpayer’s qualified CCUS expenditure resulted in the determination of a CCUS refurbishment tax credit for the year or a previous taxation year, then there shall be added to the tax otherwise payable by the taxpayer under this Part for the year the amount determined by the formula

A × B × C ÷ D − E

where

A
is the qualified CCUS expenditure in respect of the property;
B
is the appropriate specified percentage;
C
is the amount, not exceeding the amount determined for D, equal to

(a)if the property is disposed of to a person who deals at arm’s length with the taxpayer, the proceeds of disposition of the property, or

(b)if the property is disposed of to a person who does not deal at arm’s length with the taxpayer, or is exported from Canada, the fair market value of the property;

D
is the taxpayer’s capital cost of the property; and
E
is the total of all amounts, each of which can reasonably be considered to be the portion of any amount previously paid by the taxpayer because of subsection (5) in respect of the property, to the extent that the amount did not reduce the tax payable by the taxpayer under this subsection in a preceding taxation year.

Election — CCUS project sale

(11)If at any time a qualifying taxpayer (referred to in this subsection as the “vendor”) disposes of all or substantially all of its property that is part of a qualified CCUS project of the taxpayer to another taxable Canadian corporation (referred to in this subsection as the “purchaser”) and the vendor and the purchaser jointly elect in prescribed form to have this subsection apply, the following rules apply:

  • (a)the purchaser is deemed to have made the qualifying expenditures of the vendor at the times incurred by the vendor;

  • (b)the provisions of this Act that applied to the vendor in respect of the property that are relevant to the application of the Act in respect of the property after that time are deemed to have applied to the purchaser and, for greater certainty, the purchaser is deemed to have claimed the tax credits determined under section 127.‍44 that could have been claimed by the vendor, before that time, in respect of the CCUS project;

  • (c)any project plans that were prepared or filed by the vendor in respect of the CCUS project before that time are deemed to have been filed by the purchaser;

  • (d)the purchaser is or will be liable for amounts in respect of the property for which the vendor would be liable under this Part in respect of actions, transactions or events that occur after that time as if the vendor had undertaken them or otherwise participated in them; and

  • (e)subsections (9) and (10) do not apply to the vendor in respect of the disposition of property to the purchaser.

Partnerships

(12)Subject to section 127.‍47, if subsection 127.‍44(11) has at any time applied to add an amount in computing the CCUS tax credit of a member of the partnership, then for the purposes of this Part, subsections (2) to (11) shall apply to determine amounts in respect of the partnership as if the partnership were a taxable Canadian corporation, its fiscal period were its taxation year and it had deducted all of the CCUS tax credits that were previously added in computing the CCUS tax credit of any member of the partnership under subsection 127.‍44(2) because of the application of subsection 127.‍44(11) in respect of its partnership interest.

Member’s share of tax

(13)Unless subsection (14) applies, if, in a taxation year, a taxpayer is a member of a partnership, the amount that can reasonably be considered to be the taxpayer’s share of any amount of tax determined because of subsection (12) in respect of the partnership for its fiscal period ending in the taxation year shall be added to the taxpayer’s tax otherwise payable under this Part for the taxation year.

Election by member to pay tax

(14)A taxable Canadian corporation that is a member of a partnership during a fiscal period of the partnership may elect, in prescribed form and manner, to add to its tax payable under this Part for its taxation year that includes the end of the fiscal period the total amount of tax determined for that fiscal period because of subsection (12) in respect of the partnership.

Joint, several and solidary liability

(15)Each member of a partnership is jointly and severally, or for civil law, solidarily, liable for any portion of the amount of tax — determined because of subsection (12) in respect of the partnership for a taxation year — that is not added to the tax payable

  • (a)of a member of the partnership under subsection (13); or

  • (b)of a taxable Canadian corporation because of subsection (14) and paid by the corporation by its filing-due date for the year.

Reporting requirements

211.‍93(1)A taxpayer shall

  • (a)if the taxpayer is a knowledge sharing taxpayer, submit in respect of each reporting period a knowledge sharing report to the Minister of Natural Resources on or before the reporting-due day for the report; and

  • (b)if the taxpayer is a corporation that is not an exempt corporation, on or before the reporting-due day for each reporting taxation year, make available to the public, in prescribed manner, a climate risk disclosure report for the year that

    • (i)describes the climate-related risks and opportunities for the corporation based on the following thematic areas:

      • (A)the corporation’s governance in respect of climate-related risks and opportunities,

      • (B)the actual and potential impacts of climate-related risks and opportunities on the corporation’s businesses, strategy and financial planning, if such information is material,

      • (C)the processes used by the corporation to identify, assess and manage climate related risks, and

      • (D)the metrics and targets used by the corporation to assess and manage relevant climate-related risks and opportunities, and

    • (ii)explains how the corporation’s governance, strategies, policies and practices contribute to achieving Canada’s

      • (A)commitments under the Paris Agreement made on December 12, 2015, and

      • (B)goal of net-zero emissions by 2050.

Publication

(2)For the purposes of subsection (1), a climate risk disclosure report is deemed to have been made public in a prescribed manner if the report includes the date it was published and is made publicly available by, or on behalf of, the corporation on the website of the corporation or a related person for a period of at least three years after the reporting-due day.

Shared filing

(3)If a person is required by subsection (1) to submit a knowledge sharing report in respect of a knowledge sharing CCUS project, the submission with full and accurate disclosure by any such person of the report is deemed to have been made by each person to whom subsection (1) applies in respect of the report.

Penalty — non-compliance with reporting requirements

(4)Every knowledge sharing taxpayer that fails to provide the knowledge sharing report required under paragraph (1)‍(a) in respect of a reporting period is liable to a penalty in the amount of $2 million payable the day after the reporting-due day.

Failure to disclose

(5)Every taxpayer that fails to make available the climate risk disclosure report as required under paragraph (1)‍(b) in respect of a reporting taxation year is liable to a penalty in the amount that is the lesser of

  • (a)4% of the total of all amounts, each of which is the amount of a CCUS tax credit of the corporation in respect of each taxation year that ended before the reporting-due day for the reporting taxation year, and

  • (b)$1 million.

Report disclosure

(6)The Department of Natural Resources shall publish on a website, maintained by the Government of Canada, each knowledge sharing report referred to in subsection (1) as soon as practicable after a taxpayer has submitted the report.

Eligible use reporting

(7)If a CCUS tax credit was deducted for a taxation year by a taxpayer in respect of a CCUS project that began commercial operations in the year or a prior taxation year, the actual eligible use percentage for a relevant project period in respect of the CCUS project is deemed to be nil until the taxpayer has filed in prescribed form, with each of its returns of income for taxation years that include any part of the relevant project period, a report stating

  • (a)the actual amount of carbon captured, during the calendar year ending in the taxation year, for storage or use in eligible use; and

  • (b)the total quantity of captured carbon during that calendar year that supported storage or use in both eligible use and ineligible use.

Administration

211.‍94Subsection 150(2) and (3), sections 152, 158, 159 and 161 to 167 and Division J of Part I apply to this Part, with such modification as the circ*mstances require, except that, in the application of subsection 161(1) to an amount of tax payable under section 211.‍92, the balance-due day of a taxpayer in respect of a recovery taxation year is deemed to be the balance-due day of the taxation year for the related CCUS tax credit under subsection 127.‍44(2).

Records and books

211.‍95Every person required by section 230 to keep records and books of account on behalf of a taxpayer shall retain all records and books of account referred to in that section as are necessary to verify information regarding CCUS tax credits of the taxpayer under section 127.‍44 or amounts payable by the taxpayer under this Part, in respect of a CCUS project, until the end of the later of

  • (a)the period referred to in paragraph 230(4)‍(b), and

  • (b)26 years after the end of the taxpayer’s last taxation year for which an amount was deemed to have been paid under subsection 127.‍44(2) by reason of its paragraph (a).

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

59(1)The portion of subsection 214(17) of the Act before paragraph (a) is replaced by the following:

Deemed interest payments
(17)For the purposes of subsections (16) and (18),

(2)Section 214 of the Act is amended by adding the following after subsection (17):

Hybrid mismatch arrangements — deemed dividend
(18)For the purposes of this Part, an amount paid or credited as interest by a corporation resident in Canada in a taxation year of the corporation to a non-resident person is deemed to have been paid by the corporation as a dividend, and not to have been paid or credited by the corporation as interest, to the extent that an amount in respect of the interest is not deductible in computing the income of the corporation for the year because of subsection 18.‍4(4).

(3)Subsections (1) and (2) apply in respect of payments arising on or after July 1, 2022.

60(1)Subsection 216(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 definitions eligible group entity, excluded entity and fixed interest commercial trust in subsection 18.‍2(1) and section 18.‍21 do not apply in computing the non-resident person’s income.

(2)Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023.

61(1)Subsection 220(2.‍2) of the Act is replaced by the following:
Exception

(2.‍2)Subsection (2.‍1) does not apply in respect of a prescribed form, receipt or document, or prescribed information, that is filed with the Minister on or after the day specified, in respect of the form, receipt, document or information, in subsection 37(11), paragraph (m) of the definition investment tax credit in subsection 127(9) or subsection 127.‍44(17).

(2)Subsection 220(2.‍2) of the Act, as enacted by subsection (1), is replaced by the following:
Exception

(2.‍2)Subsection (2.‍1) does not apply in respect of a prescribed form, receipt or document, or prescribed information, that is filed with the Minister on or after the day specified, in respect of the form, receipt, document or information, in subsection 37(11), paragraph (m) of the definition investment tax credit in subsection 127(9), subsection 127.‍44(17) or 127.‍45(3).

(3)Subsection (1) is deemed to have come into force on January 1, 2022.

(4)Subsection (2) is deemed to have come into force on March 28, 2023.

62Subsection 225.‍1(1.‍1) of the Act is amended by striking out “and” at the end of paragraph (b) and by adding the following after that paragraph:

  • (b.‍1)in the case of an amount payable under any of subsections 211.‍92(2) to (5), in respect of the day on which the notice of assessment is sent,

    • (i)for one-fifth of the amount, one year after that day,

    • (ii)for two-fifths of the amount, two years after that day,

    • (iii)for three-fifths of the amount, three years after that day,

    • (iv)for four-fifths of the amount, four years after that day, and

    • (v)for the entire amount, five years after that day; and

63(1)Section 227 of the Act is amended by adding the following after subsection (6.‍2):

Hybrid mismatch adjustment
(6.‍3)If, in respect of a payment (as defined in subsection 18.‍4(1)) arising under or in connection with a hybrid mismatch arrangement (as defined in that subsection), an amount was paid to the Receiver General under Part XIII on behalf of a person because an amount was deemed to have been paid by a corporation to the person as a dividend under subsection 214(18) and a deduction is allowed in respect of the payment or a portion of it, as the case may be, under paragraph 20(1)‍(yy),
  • (a)subject to paragraph (b), the Minister shall, on written application made no later than two years after the day on which the assessment is made in respect of the application of paragraph 20(1)‍(yy), pay to the person the amount determined by the formula

    A − B

    where

    A
    is the lesser of

    (i)the total of all amounts, if any, paid to the Receiver General on or prior to the day the written application was made on behalf of the person and in respect of the liability of the person to pay an amount under Part XIII in respect of the payment or the portion of it, as the case may be, and

    (ii)the amount that would be payable to the Receiver General under Part XIII if an amount equal to the amount deductible under paragraph 20(1)‍(yy) were paid by the corporation to the person as a dividend described in paragraph 212(2)‍(a) at the end of the taxation year in which the amount is deductible under paragraph 20(1)‍(yy), and

    B
    is the amount that would be payable to the Receiver General under Part XIII (if this Act were read without reference to subsection 214(18)) if an amount equal to the amount deductible under paragraph 20(1)‍(yy) had been paid or credited as interest by the corporation to the person at the end of the taxation year in which the amount is deductible under paragraph 20(1)‍(yy); and
  • (b)if the person is or is about to become liable to make a payment to His Majesty in right of Canada, the Minister may apply the amount otherwise payable under paragraph (a) to that liability and notify the person of that action.

(2)Subsection 227(7.‍1) of the Act is replaced by the following:

Application for determination
(7.‍1)Where, on application under subsection (6.‍1) or (6.‍3) by or on behalf of a person to the Minister in respect of an amount paid under Part XIII to the Receiver General, the Minister is not satisfied that the person is entitled to the amount claimed, the Minister shall, at the person’s request, determine, with all due dispatch, the amount, if any, payable under subsection (6.‍1) or (6.‍3), as the case may be, to the person and shall send a notice of determination to the person, and sections 150 to 163, subsections 164(1) and 164(1.‍4) to 164(7), sections 164.‍1 to 167 and Division J of Part I apply with such modifications as the circ*mstances require.

(3)Subsections (1) and (2) apply in respect of payments arising on or after July 1, 2022.

64(1)Section 237.‍3 of the Act is amended by adding the following after subsection (12):
Optional disclosure — GAAR

(12.‍1)If subsection (2) does not apply to a taxpayer in respect of a transaction or series of transactions of which the transaction is a part, the taxpayer may file an information return in prescribed form and containing prescribed information in respect of the transaction or series on or before the taxpayer’s filing-due date for the taxation year in which the transaction occurs.

Late filing — GAAR

(12.‍2)Despite subsection (12.‍1), a taxpayer may file the information return referred to in subsection (12.‍1) up to one year after the deadline referred to in that subsection, in which case

  • (a)for the purpose of applying subparagraphs 152(4)‍(b)‍(viii) and (4.‍01)‍(b)‍(xi) to the transaction referred to in subsection (12.‍1), the reference to “3 years” in paragraph 152(4)‍(b) is to be read as “1 year”; and

  • (b)for the purpose of applying subsection 245(5.‍1) to the transaction, the information return is deemed to have been filed within the time required by this section.

(2)Subsection (1) applies to transactions that occur on or after January 1, 2024.

65(1)Subparagraph 241(4)‍(d)‍(vi.‍1) of the Act is replaced by the following:

  • (vi.‍1)to an official of the Department of Natural Resources solely for the purposes of determining whether

    • (A)property is prescribed energy conservation property (as defined in Part LXXXII of the Income Tax Regulations) or whether an outlay or expense is a Canadian renewable and conservation expense (as defined in section 66.‍1),

    • (B)a process is a CCUS process (as defined in section 127.‍44), whether property is dual-use equipment (as defined in section 127.‍44), whether a project is a qualified CCUS project (as defined in section 127.‍44) or whether a property is described in Class 57 or 58 of Schedule II to the Income Tax Regulations,

    • (C)a property is a clean technology property (as defined in section 127.‍45), and

    • (D)a cost is a ZETM cost of capital or a ZETM cost of labour (as defined in section 125.‍2) and activities are qualified zero-emission technology manufacturing activities (as defined in Part LII of the Income Tax Regulations),

(2)Clause 241(4)‍(d)‍(xx.‍1)‍(A) of the Act is replaced by the following:

  • (A)the Department of Employment and Social Development, the Department of Health or the Department of Public Works and Government Services, solely for the purpose of the administration or enforcement of the Canadian Dental Care Plan established under the authority of the Department of Health Act in respect of dental service for individuals, or

66(1)Section 245 of the Act is amended by adding the following before subsection (1):

Preamble
245(0.‍1)This section of the Act contains the general anti-avoidance rule, which
  • (a)applies to deny the tax benefit of avoidance transactions that result directly or indirectly either in a misuse of provisions of the Act (or any of the enactments listed in subparagraphs (4)‍(a)‍(ii) to (v)) or an abuse having regard to those provisions read as a whole, while not preventing taxpayers from obtaining tax benefits contemplated by Parliament; and

  • (b)strikes a balance between

    • (i)the Government of Canada’s responsibility to protect the tax base and the fairness of the tax system, and

    • (ii)taxpayers’ need for certainty in planning their affairs.

(2)Subsection 245(3) of the Act is replaced by the following:

Avoidance transaction
(3)Unless it may reasonably be considered that obtaining the tax benefit is not one of the main purposes for undertaking or arranging a transaction, the transaction is an avoidance transaction if the transaction
  • (a)but for this section, would result, directly or indirectly, in a tax benefit; or

  • (b)is part of a series of transactions, which series, but for this section, would result, directly or indirectly, in a tax benefit.

(3)Section 245 of the Act is amended by adding the following after subsection (4):

Economic substance — effect
(4.‍1)If an avoidance transaction — or a series of transactions that includes the avoidance transaction — is significantly lacking in economic substance, this is an important consideration that tends to indicate that the transaction results in a misuse under paragraph (4)‍(a) or an abuse under paragraph (4)‍(b).
Economic substance — meaning
(4.‍2)Factors that establish that a transaction or series of transactions is significantly lacking in economic substance may include, but are not limited to, any of the following:
  • (a)all or substantially all of the opportunity for gain or profit and risk of loss of the taxpayer — taken together with those of all non-arm’s length taxpayers (other than those non-arm’s length taxpayers who can reasonably be considered, having regard to the circ*mstances viewed as a whole, to have economic interests that are largely adverse from those of the taxpayer) — remains unchanged, including because of

    • (i)a circular flow of funds,

    • (ii)offsetting financial positions,

    • (iii)the timing between steps in a series, or

    • (iv)the use of an accommodation party;

  • (b)it is reasonable to conclude that, at the time the transaction or series was entered into, the expected value of the tax benefit exceeded the expected non-tax economic return (which excludes both the tax benefit and any tax advantages connected to another jurisdiction); and

  • (c)it is reasonable to conclude that the entire, or almost entire, purpose for undertaking or arranging the transaction or series was to obtain the tax benefit.

(4)Section 245 of the Act is amended by adding the following after subsection (5):

Penalty
(5.‍1)If subsection (2) applies to determine the tax consequences to a person for a taxation year in respect of a transaction that was not disclosed by the person to the Minister in accordance with section 237.‍3 or 237.‍4, the person is liable to a penalty for the taxation year equal to the amount determined by the formula

(A + B) × 25% − C

where

A
is the amount by which the tax payable by the person under this Act for the year exceeds the amount that would have been payable by the person under this Act for the year if subsection (2) had not applied in respect of the transaction;
B
is the amount by which the total of all amounts, each of which is an amount that would have been deemed to be paid on account of the person’s tax payable under Part I for the year if subsection (2) had not applied in respect of the transaction, exceeds the total of all amounts that are deemed to be paid on account of the person’s tax payable under Part I for the year; and
C
is the amount of any penalty payable by the person under subsection 163(2), to the extent that the amount is in respect of the transaction or a series that includes the transaction and did not reduce the penalty payable by the person under this subsection in a preceding taxation year.
Penalty — exception
(5.‍2)Subsection (5.‍1) does not apply to a person in respect of a transaction if the person demonstrates that, at the time that the transaction was entered into, it was reasonable for the person to have concluded that subsection (2) would not apply to the transaction in reliance on the transaction or a series that includes the transaction being identical or almost identical to a transaction or series that was the subject of
  • (a)published administrative guidance or statements made by the Minister or another relevant governmental authority; or

  • (b)one or more court decisions.

Provisions applicable
(5.‍3)Sections 152, 158, 159, 160.‍1, 164 to 167 and Division J of Part I apply to subsection (5.‍1) with such modifications as the circ*mstances require.

(5)Subsections (2) and (3) apply to transactions that occur on or after January 1, 2024.

(6)Subsection (4) applies to transactions that occur on or after the later of January 1, 2024 and the day on which this Act receives royal assent.

67(1)Subparagraph (f)‍(vi) of the definition disposition in subsection 248(1) of the Act is replaced by the following:

  • (vi)if the transferor is an amateur athlete trust, a cemetery care trust, an employee trust, a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, a related segregated fund trust (in this paragraph having the meaning assigned by section 138.‍1), a trust described in paragraph 149(1)‍(o.‍4) or a trust governed by an eligible funeral arrangement, an employees profit sharing plan, a FHSA, a registered disability savings plan, a registered education savings plan, a registered supplementary unemployment benefit plan or a TFSA, the transferee is the same type of trust, and

(2)The definition employee benefit plan in subsection 248(1) of the Act is amended by adding the following after paragraph (b):

  • (b.‍1)an employee ownership trust,

(3)The portion of the definition employee trust in subsection 248(1) of the Act before paragraph (a) is replaced by the following:

employee trust means an arrangement (other than an employee ownership trust, an employees profit sharing plan, a deferred profit sharing plan or a plan referred to in subsection 147(15) as a “revoked plan”) established after 1979

(4)Subparagraph (d)‍(ii) of the definition mineral resource in subsection 248(1) of the Act is replaced by the following:

  • (ii)the principal mineral extracted is ammonite gemstone, calcium chloride, diamond, gypsum, halite, kaolin, lithium or sylvite, or

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

substantive CCPC means a private corporation (other than a Canadian-controlled private corporation) that

  • (a)is controlled, directly or indirectly in any manner whatever, by one or more individuals resident in Canada, or

  • (b)would, if each share of the capital stock of a corporation that is owned by a Canadian resident individual were owned by a particular individual, be controlled by the particular individual; (SPCC en substance)

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

absorbed capacity has the same meaning as in subsection 18.‍2(1); (capacité absorbée)

cumulative unused excess capacity has the same meaning as in subsection 18.‍2(1); (capacité excédentaire cumulative inutilisée)

excess capacity has the same meaning as in subsection 18.‍2(1); (capacité excédentaire)

interest and financing expenses has the same meaning as in subsection 18.‍2(1), except for the purposes of the definition economic profit in subsection 126(7); (dépenses d’intérêts et de financement)

interest and financing revenues has the same meaning as in subsection 18.‍2(1); (revenus d’intérêts et de financement)

restricted interest and financing expense has the same meaning as in subsection 111(8); (dépense d’intérêts et de financement restreinte)

transferred capacity has the same meaning as in subsection 18.‍2(1); (capacité transférée)

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

distribution equipment has the same meaning as in subsection 1104(13) of the Income Tax Regulations; (matériel de distribution)

fossil fuel has the same meaning as in subsection 1104(13) of the Income Tax Regulations; (combustible fossile)

transmission equipment has the same meaning as in subsection 1104(13) of the Income Tax Regulations; (matériel de transmission)

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

employee ownership trust means an irrevocable trust that, at all relevant times, satisfies the following conditions:

  • (a)the trust is resident in Canada (determined without reference to subsection 94(3)), 

  • (b)the trust is exclusively for the benefit of all individuals each of whom

    • (i)is either

      • (A)an employee of one or more qualifying businesses controlled by the trust (other than an employee who has not completed an applicable probationary period, which may not exceed 12 months), or

      • (B)if the trust permits, an individual (or the estate of an individual) who is a former employee (other than a former employee who did not complete an applicable probationary period, of up to 12 months, during their employment) of one or more qualifying businesses controlled by the trust and who was an employee of the qualifying business while the trust controlled the qualifying business,

    • (ii)does not own, directly or indirectly (other than through an interest in the trust), shares of a class of the capital stock of a qualifying business controlled by the trust, the value of which is equal to or greater than 10% of the fair market value of the class,

    • (iii)does not own, directly or indirectly, together with any person or partnership that is related to or affiliated with the individual, shares of a class of the capital stock of a qualifying business controlled by the trust, the value of which is equal to or greater than 50% of the fair market value of the class, and

    • (iv)immediately before the time of a qualifying business transfer to the trust, did not own, directly or indirectly, together with any person or partnership that is related to or affiliated with the individual, shares of the capital stock or indebtedness of the qualifying business, the value of which is equal to or greater than 50% of the fair market value of the shares of the capital stock and indebtedness of the qualifying business,

  • (c)the capital and income interests of each beneficiary described in clause (b)‍(i)‍(A) or (B) are determined in the same manner as the other beneficiaries described in those clauses, as applicable, based solely on any combination of the following criteria:

    • (i)the total hours of employment service provided by the beneficiary to the qualifying business in respect of a particular time period,

    • (ii)the total salary, wages and other remuneration paid or payable to the beneficiary by the qualifying business in respect of a particular time period, not exceeding, for any calendar year in the particular time period, twice the first dollar amount referred to in paragraph 117(2)‍(e), as adjusted by section 117.‍1, for the year (prorated based upon the number of days of the calendar year in the particular time period), and

    • (iii)the total period of employment service the beneficiary has provided to the qualifying business since a particular time,

  • (d)the trustees are prohibited from exercising their discretion to act in the interest of one beneficiary (or group of beneficiaries) to the prejudice of another beneficiary (or group of beneficiaries),

  • (e)each trustee of the trust is either a corporation resident in Canada that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as a trustee or an individual (other than a trust),

  • (f)each trustee has an equal vote in the conduct of the affairs of the trust,

  • (g)at least one-third of the trustees must be beneficiaries described in clause (b)‍(i)‍(A),

  • (h)if any trustee is appointed (other than by an election within the last five years by the beneficiaries described in clause (b)‍(i)‍(A)), at least 60% of all trustees must be persons that deal at arm’s length with each person who has, directly or indirectly in any manner whatever, as part of a transaction or event or series of transactions or events, sold shares of a qualifying business to the trust (or to any person or partnership affiliated with the trust) prior to or in connection with the trust acquiring control of the qualifying business,

  • (i)more than 50% of the beneficiaries of the trust described in clause (b)‍(i)‍(A) must approve each of the following transactions or events prior to their occurrence:

    • (i)any transaction or event or series of transactions or events that causes at least 25% of the beneficiaries to lose their status as beneficiaries under clause (b)‍(i)‍(A) (unless the change in status is in respect of a termination of employment for cause), and

    • (ii)a winding-up, amalgamation or merger of a qualifying business (other than in the course of a transaction or event or a series of transactions or events that involves only persons or partnerships that are affiliated with the qualifying business), and

  • (j)all or substantially all the fair market value of the property of the trust is attributable to shares of the capital stock of one or more qualifying businesses that the trust controls; (fiducie collective des employés)

qualifying business, at a particular time, means a corporation controlled by a trust

  • (a)that is a Canadian-controlled private corporation,

  • (b)not more than 40% of the directors of which consist of individuals that, immediately before the time that the trust acquired control of the corporation, owned, directly or indirectly, together with any person or partnership that is related to or affiliated with the director, 50% or more of the fair market value of the shares of the capital stock or indebtedness of the corporation, and

  • (c)that deals at arm’s length and is not affiliated with any person or partnership that owned, directly or indirectly, 50% or more of the fair market value of the shares of the capital stock or indebtedness of the corporation immediately before the time the trust acquired control of the corporation; (entreprise admissible)

qualifying business transfer means a disposition by a taxpayer of shares of the capital stock of a corporation (in this definition referred to as the “subject corporation”) to a trust, or to a Canadian-controlled private corporation (in this definition referred to as the “purchaser corporation”) that is controlled and wholly-owned by a trust, if 

  • (a)immediately before the disposition, all or substantially all the fair market value of the assets of the subject corporation is attributable to assets (other than an interest in a partnership) that are used principally in an active business (referred to in this definition as the “business”) carried on by the subject corporation or a corporation that is controlled and wholly-owned by the subject corporation,

  • (b)at the time of the disposition,

    • (i)the taxpayer deals at arm’s length with the trust and any purchaser corporation,

    • (ii)the trust acquires control of the subject corporation, and

    • (iii)the trust is an employee ownership trust, the beneficiaries of which are employed in the business, and

  • (c)at all times after the disposition,

    • (i)the taxpayer deals at arm’s length with the subject corporation, the trust and any purchaser corporation, and

    • (ii)the taxpayer does not retain any right or influence that, if exercised, would allow the taxpayer (whether alone or together with any person or partnership that is related to or affiliated with the taxpayer) to control, directly or indirectly in any manner whatever, the subject corporation, the trust, or any purchaser corporation; (transfert admissible d’entreprise)

(9)Paragraph 248(3.‍2)‍(d) of the Act is replaced by the following:

  • (d)presented as an arrangement in respect of which the corporation is to take action for the arrangement to become a FHSA, a registered disability savings plan, a registered education savings plan, a registered retirement income fund, a registered retirement savings plan or a TFSA.

(10)Section 248 of the Act is amended by adding the following after subsection (42):

Substantive CCPC — anti-avoidance
(43)For the purposes of this Act, if it is reasonable to consider that one of the purposes of any transaction (as defined in subsection 245(1)), or series of transactions, is to cause a corporation that is resident in Canada (other than a Canadian-controlled private corporation or a corporation that is, in absence of this subsection, a substantive CCPC) to avoid tax otherwise payable under section 123.‍3 on the corporation’s aggregate investment income, the corporation is deemed to be a substantive CCPC from the time that the transaction or series of transactions commenced until the earliest time at which the corporation
  • (a)becomes a Canadian-controlled private corporation;

  • (b)is subject to a loss restriction event; or

  • (c)ceases to be resident in Canada.

(11)Subsections (1) and (9) are deemed to have come into force on April 1, 2023.

(12)Subsections (2), (3) and (8) come into force or are deemed to have come into force on January 1, 2024.

(13)Subsection (4) is deemed to have come into force on March 28, 2023 and, for greater certainty, subsection (4) does not apply in respect of expenses incurred before March 28, 2023.

(14)Subsections (5) and (10) apply to

  • (a)taxation years of a corporation that begin on or after April 7, 2022, if

    • (i)the corporation’s first taxation year that ends on or after April 7, 2022 ends due to a loss restriction event caused by a sale of all or substantially all of the shares of a corporation to a purchaser before 2023,

    • (ii)the purchaser deals at arm’s length (determined without reference to a right referred to in paragraph 251(5)‍(b) of the Act) with the corporation immediately prior to the loss restriction event, and

    • (iii)the sale occurs pursuant to a written purchase and sale agreement entered into before April 7, 2022; and

  • (b)taxation years that end on or after April 7, 2022, in any other case.

(15)Subsection (6) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsection (6) also applies in respect of a taxation year that begins before, and ends after October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

(16)Subsection (7) is deemed to have come into force on March 28, 2023.

68(1)Subsection 256(7) of the Act is amended by striking out “and” at the end of paragraph (h), by adding “and” at the end of paragraph (i), and by adding the following after paragraph (i):

  • (j)if an employee ownership trust controls a qualifying business, control of the qualifying business is deemed not to be acquired solely because of a change in the trustee having ownership or control of the trust’s property if the trust remains an employee ownership trust immediately after the change of trustee.

(2)Subsection (1) comes into force or is deemed to have come into force on January 1, 2024.

69(1)The definition specified provision in subsection 256.‍1(1) of the Act is replaced by the following:

specified provision means any of subsections 10(10) and 13(24), paragraph 37(1)‍(h), subsections 66(11.‍4) and (11.‍5), 66.‍7(10) and (11), 69(11) and 111(4), (5), (5.‍01), (5.‍1) and (5.‍3), paragraphs (j) and (k) of the definition investment tax credit in subsection 127(9), subsections 181.‍1(7) and 190.‍1(6) and any provision of similar effect.  (dispositions déterminées)

(2)Subsection (1) applies in respect of taxation years of a taxpayer that begin on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

70(1)Section 260 of the Act is amended by adding the following after subsection (6.‍2):

Subsections 112(2.‍01) and (2.‍3) — ordering
(6.‍3)For the purposes of paragraphs (6.‍1)‍(b) and (6.‍2)‍(b), the amount of any dividends received by a corporation in respect of which no amount was deductible because of subsection 112(2.‍3) includes an amount that was not deductible under both subsections 112(2.‍01) and (2.‍3).

(2)Subsection (1) applies in respect of dividends received after 2023.

R.‍S.‍, c. E-15

Excise Tax Act

71Clause 295(5)‍(d)‍(xi.‍1)‍(A) of the Excise Tax Act is replaced by the following:

  • (A)the Department of Employment and Social Development, the Department of Health or the Department of Public Works and Government Services, solely for the purpose of the administration or enforcement of the Canadian Dental Care Plan established under the authority of the Department of Health Act in respect of dental service for individuals, or

2002, c. 22

Excise Act, 2001

72Clause 211(6)‍(e)‍(xii.‍1)‍(A) of the Excise Act, 2001 is replaced by the following:

  • (A)the Department of Employment and Social Development, the Department of Health or the Department of Public Works and Government Services, solely for the purpose of the administration or enforcement of the Canadian Dental Care Plan established under the authority of the Department of Health Act in respect of dental service for individuals, or

C.‍R.‍C.‍, c. 945

Income Tax Regulations

73(1)Paragraph 103(7)‍(a) of the Income Tax Regulations is amended by striking out “or” at the end of subparagraph (ii) and by adding the following after subparagraph (iii):

  • (iv)a contribution that is an excluded contribution (as defined in subsection 207.‍5(1) of the Act); or

(2)Subsection (1) is deemed to have come into force on March 28, 2023.

74(1)Subsection 204(3) of the Regulations is amended by striking out “or” at the end of paragraph (f), by adding “or” at the end of paragraph (g) and by adding the following after paragraph (g):

  • (h)governed by a FHSA.

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

75(1)Subsection 205(3) of the Regulations is amended by deleting the following:

First Home Savings Account (FHSA) Annual Information Return

(2)Subsection 205(3) of the Regulations is amended by adding the following in alphabetical order:

First Home Savings Account Statement

T4FHSA

(3)Subsections (1) and (2) are deemed to have come into force on April 1, 2023.

76(1)Subsection 205.‍1(1) of the Regulations is amended by deleting the following:

First Home Savings Account (FHSA) Annual Information Return

(2)Subsection 205.‍‍1(1) of the Regulations is amended by adding the following in alphabetical order:

First Home Savings Account Statement

T4FHSA

(3)Subsections (1) and (2) are deemed to have come into force on April 1, 2023.

77(1)The portion of subsection 209(5) of the Regulations before paragraph (a) is replaced by the following:

(5)A person may provide a Statement of Remuneration Paid (T4) information return, a Tuition and Enrolment Certificate, a First Home Savings Account Statement (T4FHSA) information return, a Statement of Pension, Retirement, Annuity, and Other Income (T4A) information return or a Statement of Investment Income (T5) information return, as required under subsection (1), as a single document in an electronic format (instead of the two copies required under subsection (1)) to the taxpayer to whom the return relates, on or before the date on which the return is to be filed with the Minister, unless

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

78(1)Paragraph 304(1)‍(a) of the Regulations is replaced by the following:

  • (a)an annuity contract that is, or is issued pursuant to, an arrangement described in any of paragraphs 148(1)‍(a) to (b.‍4) and (d) of the Act;

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

79(1)Paragraph 1100(1)‍(a) of the Regulations is amended by striking out “and” at the end of subparagraph (xli) and by adding the following after subparagraph (xlii):

  • (xliii)of Class 57, 8 per cent,

  • (xliv)of Class 58, 20 per cent,

  • (xlv)of Class 59, 100 per cent, and

  • (xlvi)of Class 60, 30 per cent,

(2)Paragraph (a) of the description of A in subsection 1100(2) of the Regulations is replaced by the following:

  • (a)if the property is not included in paragraph (1)‍(v) or in any of Classes 12, 13, 14, 15, 43.‍1, 43.‍2, 53, 54, 55, 56, 59 or in Class 43 in the circ*mstances described in paragraph (d),

(3)Subsections (1) and (2) apply to property acquired after 2021.

80(1)The definition governing plan in subsection 4901(2) of the Regulations is replaced by the following:

governing plan means a deferred profit sharing plan or a revoked plan, a FHSA, a registered disability savings plan, a registered education savings plan, a registered retirement income fund, a registered retirement savings plan or a TFSA; (régime d’encadrement)

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

81(1)Clause (a)‍(i)‍(I) of the definition qualified zero-emission technology manufacturing activities in section 5202 of the Regulations is replaced by the following:

  • (I)equipment that is a component of property included in clauses (A) to (H) or (L) to (O), if such equipment is purpose-built or designed exclusively to form an integral part of that property,

(2)Subparagraph (a)‍(i) of the definition qualified zero-emission technology manufacturing activities in section 5202 of the Regulations is amended by striking out “and” at the end of clause (J), by striking out “and” at the end of clause (K) and by adding the following after clause (K):

  • (L)nuclear energy equipment,

  • (M)heavy water used for nuclear energy generation,

  • (N)nuclear fuels used for nuclear energy generation, and

  • (O)nuclear fuel rods, and

(3)Subsections (1) and (2) apply to taxation years that begin after 2023.

82(1)The portion of subsection 5903(5) of the Regulations before paragraph (a) is replaced by the following:

(5)For the purposes of this section, section 5903.‍1 and section 18.‍2 of the Act,

(2)Subsection (1) applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer beginning on or after October 1, 2023. However, subsection (1) also applies in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

83(1)Subparagraph (a)‍(iii) of the definition earnings in subsection 5907(1) of the Regulations is replaced by the following:

  • (iii)in any other case, the amount that would be the income from the active business for the year under Part I of the Act if the business were carried on in Canada, the affiliate were resident in Canada and the Act were read without reference to subsections 12.‍7(3), 18(4), 18.‍4(4), 80(3) to (12), (15) and (17) and 80.‍01(5) to (11) and sections 80.‍02 to 80.‍04,

(2)Subparagraph (a)‍(iii) of the definition earnings in subsection 5907(1) of the Regulations, as enacted by subsection (1), is replaced by the following:

  • (iii)in any other case, the amount that would be the income from the active business for the year under Part I of the Act if the business were carried on in Canada, the affiliate were resident in Canada and the Act were read without reference to subsections 12.‍7(3), 18(4), 18.‍2(2), 18.‍4(4), 80(3) to (12), (15) and (17) and 80.‍01(5) to (11) and sections 80.‍02 to 80.‍04,

(3)Subparagraph (iii) of the description of A in the definition exempt surplus in subsection 5907(1) of the Regulations is replaced by the following:

  • (iii)the portion of any dividend received in the period and before the particular time by the subject affiliate from another foreign affiliate of the corporation (including, for greater certainty, any dividend deemed by subsection 5905(7) to have been received by the subject affiliate) that

    • (A)was prescribed by paragraph 5900(1)‍(a) to have been paid out of the payer affiliate’s exempt surplus in respect of the corporation,

    • (B)does not give rise to the application of subsection 12.‍7(3) in computing the foreign accrual property income of a foreign affiliate of a taxpayer, and

    • (C)would not be deemed under subsection 113(5) of the Act not to be a dividend received by the subject affiliate on a share of the capital stock of the payer affiliate for the purposes of section 113 of the Act, if the subject affiliate were a corporation resident in Canada,

(4)Subparagraph (iv) of the description of A in the definition hybrid surplus in subsection 5907(1) of the Regulations is replaced by the following:

  • (iv)the portion of any dividend received in the period and before the particular time by the subject affiliate from another foreign affiliate of the corporation (including, for greater certainty, any dividend deemed under subsection 5905(7) to have been received by the subject affiliate) that

    • (A)was prescribed under paragraph 5900(1)‍(a.‍1) to have been paid out of the payer affiliate’s hybrid surplus in respect of the corporation,

    • (B)does not give rise to the application of subsection 12.‍7(3) in computing the foreign accrual property income of a foreign affiliate of a taxpayer, and

    • (C)would not be deemed under subsection 113(5) of the Act not to be a dividend received by the subject affiliate on a share of the capital stock of the payer affiliate for the purposes of section 113 of the Act, if the subject affiliate were a corporation resident in Canada, or

(5)Paragraph (b) of the definition net earnings in subsection 5907(1) of the Regulations is replaced by the following:

  • (b)in respect of foreign accrual property income is the amount that would be its foreign accrual property income for the year, if the formula in the definition foreign accrual property income in subsection 95(1) of the Act were read without reference to F and F.‍1 in that formula and the amount determined for E in that formula were the amount determined under paragraph (a) of the description of E in that formula and the Act were read without regard to its clause 95(2)‍(f.‍11)‍(ii)‍(D), minus the portion of any income or profits tax paid to the government of a country for the year by the affiliate that can reasonably be regarded as tax in respect of that income,

(6)Subclause (b)‍(i)‍(A)‍(I) of the definition net loss in subsection 5907(1) of the Regulations is replaced by the following:

  • (I)the amount that would be determined for D in the formula in the definition foreign accrual property income in subsection 95(1) of the Act for the year, if the Act were read without regard to its clauses 95(2)‍(f.‍11)‍(ii)‍(D) and (E),

(7)Subparagraph (iii) of the description of A in the definition taxable surplus in subsection 5907(1) of the Regulations is replaced by the following:

  • (iii)the portion of any dividend received in the period and before the particular time by the subject affiliate from another foreign affiliate of the corporation (including, for greater certainty, any dividend deemed by subsection 5905(7) to have been received by the subject affiliate) that

    • (A)was prescribed by paragraph 5900(1)‍(b) to have been paid out of the payer affiliate’s taxable surplus in respect of the corporation,

    • (B)does not give rise to the application of subsection 12.‍7(3) in computing the foreign accrual property income of a foreign affiliate of a taxpayer, and

    • (C)would not be deemed under subsection 113(5) of the Act not to be a dividend received by the subject affiliate on a share of the capital stock of the payer affiliate for the purposes of section 113 of the Act, if the subject affiliate were a corporation resident in Canada,

(8)Subsection (1) applies in respect of payments arising on or after July 1, 2022.

(9)Subsections (2), (5) and (6) apply in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer beginning on or after October 1, 2023. However, subsections (2), (5) and (6) also apply in respect of a taxation year of a foreign affiliate of a taxpayer that ends in a taxation year of the taxpayer that begins before, and ends after, October 1, 2023 if

  • (a)any of the taxpayer’s three immediately preceding taxation years was, because of a transaction or event or a series of transactions or events, shorter than it would have been in the absence of that transaction, event or series; and

  • (b)it can reasonably be considered that one of the purposes of the transaction, event or series was to defer the application of paragraph 12(1)‍(l.‍2) of the Act, as enacted by subsection 2(1), or the application of section 18.‍2 or 18.‍21 of the Act, as enacted by subsection 7(1), to the taxpayer.

(10)Subsections (3), (4) and (7) apply in respect of any dividend received on or after July 1, 2024.

84(1)Section 9005 of the Regulations is amended by striking out “and” at the end of paragraph (n), by adding “and” at the end of paragraph (o) and by adding the following after paragraph (o):

  • (p)a FHSA.

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

85(1)Section 9006 of the Regulations is amended by striking out “and” at the end of paragraph (j), by adding “and” at the end of paragraph (k) and by adding the following after paragraph (k):

  • (l)a FHSA.

(2)Subsection (1) is deemed to have come into force on April 1, 2023.

86(1)The portion of Class 8 in Schedule II to the Regulations after the heading “(20 per cent)” and before paragraph (a) is replaced by the following:

Property not included in Class 1, 2, 7, 9, 11, 17, 30, 57 or 58 that is

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

87(1)The portion of Class 17 in Schedule II to the Regulations after the heading “(8 per cent)” and before paragraph (a) is replaced by the following:

Property that would otherwise be included in another class in this Schedule (other than property included in Class 57 or 58) that is

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

88(1)The portion of Class 41 in Schedule II to the Regulations after the heading “Class 41” and before paragraph (a) is replaced by the following:

Property (other than property included in Class 41.‍1, 41.‍2, 57 or 58)

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

89(1)The portion of Class 41.‍1 in Schedule II to the Regulations after the heading “Class 41.‍1” and before paragraph (a) is replaced by the following:

Oil sands property (other than specified oil sands property or property included in Class 57 or 58) that

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

90(1)The portion of Class 41.‍2 in Schedule II to the Regulations after the heading “Class 41.‍2” and before paragraph (a) is replaced by the following:

Property, other than specified oil sands property, eligible mine development property or property included in Class 57 or 58,

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

91(1)The portion of Class 43 in Schedule II to the Regulations after the heading “Class 43” and before paragraph (a) is replaced by the following:

Property acquired after February 25, 1992 (other than property included in Class 57 or 58) that

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

92(1)The portion of clause (d)‍(xviii)‍(A) of Class 43.‍1 in Schedule II to the Regulations before subclause (I) is replaced by the following:

(A)is used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of storing and discharging electrical energy

(2)Subclause (d)‍(xviii)‍(B)‍(I) of Class 43.‍1 in Schedule II to the Regulations is replaced by the following:

(I)the electrical energy to be stored and discharged is generated from other property that is described in paragraph (c) or in any other subparagraph of this paragraph, or

(3)The portion of subparagraph (d)‍(xix) of Class 43.‍1 in Schedule II to the Regulations before clause (A) is replaced by the following:

(xix)a pumped hydroelectric energy storage installation all or substantially all of the use of which by the taxpayer, or by a lessee of the taxpayer, is to store and discharge electrical energy including reversing turbines, transmission equipment, dams, reservoirs and related structures, and that meets the condition in either subclause (d)‍(xviii)‍(B)‍(I) or (II) in this Class, but not including

(4)Subparagraph (e)‍(i) of Class 43.‍1 in Schedule II to the Regulations is replaced by the following:

(i)is situated in Canada, including property described in subparagraph (d)‍(v) or (d)‍(xiv) that is installed in the exclusive economic zone of Canada,

93(1)The portion of Class 49 in Schedule II to the Regulations after the heading “Class 49” and before paragraph (a) is replaced by the following:

Property (other than property included in Class 57 or 58) that is a pipeline, including control and monitoring devices, valves and other equipment ancillary to the pipeline, that

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

94(1)The portion of Class 53 in Schedule II to the Regulations after the heading “Class 53” and before paragraph (a) is replaced by the following:

Property acquired after 2015 and before 2026 (other than property included in Class 57 or 58) that is not included in Class 29, but that would otherwise be included in that class if

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

95(1)Schedule II to the Regulations is amended by adding the following after Class 56:

CLASS 57

Property that is part of a CCUS project of a taxpayer and that is

(a)equipment that is not expected to be used for hydrogen production, natural gas processing or acid gas injection and that

(i)is not oxygen production equipment and is to be used solely for capturing carbon dioxide

(A)that would otherwise be released into the atmosphere, or

(B)directly from the ambient air,

(ii)prepares or compresses captured carbon for transportation,

(iii)generates or distributes electrical energy, heat energy or a combination of electrical and heat energy, that directly and solely supports a qualified CCUS project, unless the equipment uses fossil fuels and emits carbon dioxide that is not subject to capture by a qualified CCUS project, and for greater certainty, not including equipment that supports the qualified CCUS project indirectly by way of an electrical utility grid or distribution equipment that expands the capacity of existing distribution equipment that supports the qualified CCUS project,

(iv)is transmission equipment that solely supports a qualified CCUS project by directly transmitting electrical energy from electrical generation equipment described in subparagraph (a)‍(iii) to the qualified CCUS project, or

(v)delivers, collects, recovers, treats or recirculates water, or a combination of any of those activities, that solely supports a qualified CCUS project;

(b)equipment that is to be used solely for transportation of captured carbon, including equipment used for the transportation system safety and integrity;

(c)equipment that is to be used solely for storage of captured carbon in a geological formation, including equipment used for the storage system safety and integrity, but not including equipment used for enhanced oil recovery;

(d)property that is physically and functionally integrated with the equipment described in any of paragraphs (a) to (c) (for greater certainty, excluding construction equipment, furniture, office equipment and vehicles) and that is ancillary equipment used solely to support the functioning of equipment described in any of paragraphs (a) to (c) within a CCUS process as part of

(i)an electrical system,

(ii)a fuel supply system,

(iii)a liquid delivery and distribution system,

(iv)a cooling system,

(v)a process material storage and handling and distribution system,

(vi)a process venting system,

(vii)a process waste management system, or

(viii)a utility air or nitrogen distribution system;

(e)equipment used for system safety and integrity or as part of a control or monitoring system solely to support the equipment described in any of paragraphs (a) to (d); or

(f)a building or other structure all or substantially all of which is used, or to be used, for the installation or operation of equipment described in any of paragraphs (a) to (e); or

(g)property that is used solely to

(i)convert another property that would not otherwise be described in any of paragraphs (a) to (f) if the conversion causes the other property to satisfy the description in any of paragraphs (a) to (f), or

(ii)refurbish property described in any of paragraphs (a) to (f) that is part of a CCUS project of the taxpayer.

CLASS 58

Property that is part of a CCUS project of a taxpayer, and that is

(a)equipment to be used solely for using captured carbon in industrial production (including for enhanced oil recovery);

(b)property that is physically and functionally integrated with the equipment described in paragraph (a) (for greater certainty, excluding construction equipment, furniture, office equipment and vehicles) and that is ancillary equipment used solely to support the functioning of equipment described in paragraph (a) within a CCUS process as part of

(i)an electrical system,

(ii)a fuel supply system,

(iii)a liquid delivery and distribution system,

(iv)a cooling system,

(v)a process material storage and handling and distribution system,

(vi)a process venting system,

(vii)a process waste management system, or

(viii)a utility air or nitrogen distribution system;

(c)equipment used as part of a control, monitoring or safety system solely to support the equipment described in paragraph (a) or (b);

(d)a building or other structure all or substantially all of which is used, or to be used, for the installation or operation of equipment described in any of paragraphs (a) to (c); or

(e)property that is used solely to

(i)convert another property that would not otherwise be described in any of paragraphs (a) to (d) if the conversion causes the other property to satisfy the description in any of paragraphs (a) to (d), or

(ii)refurbish property described in any of paragraphs (a) to (d) that is part of a CCUS project of the taxpayer.

CLASS 59

Intangible property (including property deemed to have been acquired under subsection 13(7.‍6) of the Act) that is not included in any other class and that is

(a)acquired for the purpose of determining the existence, location, extent or quality of a geological formation to permanently store captured carbon (other than for enhanced oil recovery) in Canada, including property acquired as a result of undertaking environmental studies or community consultations (including studies or consultations that are undertaken to obtain a right, licence or privilege for the purpose of determining the existence, location, extent or quality of a geological formation to permanently store captured carbon (other than for enhanced oil recovery)); and

(b)not acquired for the purpose of drilling or completing an oil or gas well or in building a temporary access road to, or preparing a site in respect of, any such well.

CLASS 60

Intangible property (including property deemed to have been acquired under subsection 13(7.‍6) of the Act) not included in any other class that is

(a)acquired for the purposes of

(i)drilling or converting a well in Canada for the permanent storage of captured carbon (other than for enhanced oil recovery),

(ii)drilling or completing a well for the permanent storage of captured carbon (other than for enhanced oil recovery) in Canada, building a temporary access road to the well or preparing a site in respect of the well, or

(iii)drilling or converting a well in Canada for the purposes of monitoring pressure changes or other phenomena in a geological formation in which captured carbon is permanently stored (other than for enhanced oil recovery); or

(b)a right, licence or privilege

(i)for the purposes of determining the existence, location, extent or quality of a geological formation to permanently store captured carbon (other than for enhanced oil recovery), or

(ii)to permanently store captured carbon in dedicated geological storage.

(2)Subsection (1) is deemed to have come into force on January 1, 2022.

PART 2

Digital Services Tax Act

Enactment of Act

Enactment

96(1)The Digital Services Tax Act is enacted as follows:

An Act respecting a digital services tax
Short Title

Short title

1This Act may be cited as the Digital Services Tax Act.

PART 1

Interpretation and Application

Definitions

2The following definitions apply in this Act.

acceptable accounting principles means

  • (a)International Financial Reporting Standards; and

  • (b)other country-specific generally accepted accounting principles relevant for corporations that are traded on a public securities exchange outside Canada and that require two or more entities to prepare consolidated financial statements in a manner similar to International Financial Reporting Standards.‍ (principes comptables acceptables)

assessment means an assessment or a reassessment under this Act.‍ (cotisation)

bankrupt has the same meaning as in section 2 of the Bankruptcy and Insolvency Act.‍ (failli)

Canadian digital services revenue means a taxpayer’s Canadian digital services revenue determined in accordance with Part 3.‍ (revenu canadien de services numériques)

consolidated financial statements means financial statements in which the assets, liabilities, income, expenses and cash flows of the members of a group are presented as those of a single economic entity.‍ (états financiers consolidés)

consolidated group means an ultimate parent entity and one or more other entities that are required to prepare consolidated financial statements for financial reporting purposes under acceptable accounting principles, or would be so required if equity interests in the ultimate parent entity were traded on a public securities exchange, the trading on which requires the use of acceptable accounting principles.‍ (groupe consolidé)

constituent entity, of a consolidated group, means

  • (a)any entity of the group that

    • (i)is included in the consolidated financial statements of the group prepared in accordance with acceptable accounting principles, or

    • (ii)if the group is not required to prepare consolidated financial statements, or the statements are not prepared in accordance with acceptable accounting principles, would be required to be included in the consolidated financial statements of the group if equity interests in the ultimate parent entity of the group were traded on a public securities exchange, the trading on which requires the use of acceptable accounting principles; and

  • (b)any entity that is excluded from the group’s consolidated financial statements solely because of size or materiality or on the grounds that it is held for sale.‍ (entité constitutive)

digital content means

  • (a)a digitally encoded text, video, image or sound recording;

  • (b)computer software; or

  • (c)any other thing that is digitally encoded and electronically transmittable.

It does not include a financial instrument.‍ (contenu numérique)

digital interface means a website, application or other electronic medium through which data or digital content is collected, viewed, consumed, delivered or interacted with.‍ (interface numérique)

entity means a person other than an individual.‍ (entité)

financial instrument means

  • (a)a security that is

    • (i)a share of the capital stock of a corporation,

    • (ii)an income or capital interest in a trust,

    • (iii)a note, bond, debenture or other evidence of indebtedness, or

    • (iv)an interest in a partnership;

  • (b)money and a money market instrument that is a cheque, bill, certificate of deposit or derivative;

  • (c)property that is a digital representation of value that functions as a medium of exchange and that only exists at a digital address of a publicly distributed ledger, other than property that

    • (i)confers a right, whether immediate or future and whether absolute or contingent, to exchange or redeem the property for specific property or services or to convert the property into specific property or services,

    • (ii)is primarily for use within, or as part of, a gaming platform, an affinity or rewards program or a similar platform or program, or

    • (iii)is property prescribed by regulation;

  • (d)an insurance contract;

  • (e)an annuity contract;

  • (f)a precious metal;

  • (g)a commodity;

  • (h)an interest rate swap, currency swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap or other similar agreement;

  • (i)a guarantee, acceptance or indemnity in respect of anything described in paragraph (a), (f), (g) or (h);

  • (j)any interest or right (including a futures or forward contract or option) in a future supply of anything described in any of paragraphs (a) to (i); and

  • (k)any other property prescribed by regulation.‍ (effet financier)

first year of application means the calendar year that includes the day on which this Act comes into force or a subsequent calendar year, if any, prescribed by regulation in respect of a taxpayer.‍ (première année d’application)

fiscal year means

  • (a)in the case of a taxpayer, an accounting period with respect to which the taxpayer prepares its financial statements; and

  • (b)in the case of a consolidated group, an accounting period with respect to which the ultimate parent entity of the group prepares its financial statements.‍ (exercice)

global revenue threshold means an amount prescribed by regulation.‍ (seuil de revenu global)

in-scope revenue threshold means an amount prescribed by regulation.‍ (seuil de revenu dans le champ d’application)

Minister means the Minister of National Revenue.‍ (ministre)

online marketplace means a digital interface that allows users to interact with other users and facilitates the supply of property or services, including digital content, between those users, but does not include a digital interface

  • (a)that has a single supplier of such property or services; or

  • (b)the main purpose of which is to

    • (i)provide payment services by facilitating the electronic transfer of funds,

    • (ii)make advances, grant credit or lend money, or

    • (iii)facilitate the supply of financial instruments.‍ (marché en ligne)

online search engine means a digital interface that allows users to search the Web for digital content of multiple unrelated websites.‍ (moteur de recherche en ligne)

online targeted advertisem*nt means an advertisem*nt — including, for greater certainty, any content that is prominently placed for the purpose of promotion — that

  • (a)consists of digital content;

  • (b)is placed on, or transmitted through, a digital interface; and

  • (c)is targeted at users based on any part of the user data associated with the users.‍ (publicité en ligne ciblée)

person includes an individual, a trust, a partnership, a corporation and any other body of persons or organization of any kind.‍ (personne)

prescribed means

  • (a)in the case of a form or the manner of filing a form, authorized by the Minister;

  • (b)in the case of the information to be given on or with a form, specified by the Minister;

  • (c)in the case of the manner of making or filing an election, authorized by the Minister; and

  • (d)in any other case, prescribed by regulation or determined in accordance with rules prescribed by regulation.‍ (Version anglaise seulement)

property means any property, whether real or personal, movable or immovable, tangible or intangible or corporeal or incorporeal, and includes a right or interest of any kind, a share, a chose in action and, for greater certainty, money.‍ (bien)

regulation means a regulation made under this Act.‍ (règlement)

social media platform means a digital interface the main purpose of which is to allow users to find and interact with other users or with digital content generated by other users.‍ (plateforme de médias sociaux)

supply means the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition.‍ (fourniture)

taxable Canadian digital services revenue means a taxpayer’s taxable Canadian digital services revenue determined in accordance with Part 4.‍ (revenu canadien de services numériques imposable)

taxpayer means an entity, whether or not the entity is liable to pay tax under this Act, that is not a corporation, commission or association all of the shares, or the capital, of which is held, directly or indirectly, by one or more persons each of whom is His Majesty in right of Canada or a province.‍ (contribuable)

total consolidated group revenue, of a consolidated group for a fiscal year, means the revenue reported in the group’s consolidated financial statements for the year or, if the statements are not prepared in accordance with acceptable accounting principles or no statements are prepared, the revenue that would be reported if the statements were prepared in accordance with International Financial Reporting Standards.‍ However, total consolidated group revenue does not include the revenue of any entity that is not a taxpayer.‍ (revenu consolidé total du groupe)

ultimate parent entity means an entity in respect of which the following conditions are met: 

  • (a)the entity holds directly or indirectly a sufficient interest in one or more other entities so that it is required to prepare consolidated financial statements under acceptable accounting principles or would be so required if the equity interests in the entity were traded on a public securities exchange, the trading on which requires the use of acceptable accounting principles; and

  • (b)no other entity holds, directly or indirectly, an interest, as described in paragraph (a), in the entity.‍ (entité mère ultime)

user means any individual (other than an individual acting in the course of an entity’s business) or entity (including an individual acting in the course of the entity’s business) that interacts (directly or indirectly in any manner whatever) with a digital interface, but does not include

  • (a)the person that operates the digital interface;

  • (b)if an entity operates the digital interface and the entity is a constituent entity of a consolidated group, another constituent entity of the group; or

  • (c)an employee of an individual or entity described in paragraph (a) or (b) acting in the course of the individual’s or entity’s business.‍ (utilisateur)

user data means representations, in any form, of information or concepts generated by, or collected from, a user’s interaction (directly or indirectly in any manner whatever) with a digital interface.‍ (données d’utilisateurs)

Negative or undefined results

3An amount or number that is required under this Act to be determined in accordance with an algebraic formula is deemed to be nil if

  • (a)the amount or number so determined would, in the absence of this section, be a negative amount or number; or

  • (b)the result of the formula would be mathematically undefined.

Determination of revenue

4(1)For the purposes of this Act, revenue of a taxpayer is to be determined in accordance with the acceptable accounting principles used in the preparation of the financial statements of the taxpayer or, if the statements are not prepared in accordance with acceptable accounting principles or no statements are prepared, in accordance with

  • (a)in the case of a taxpayer that is a constituent entity of a consolidated group,

    • (i)the acceptable accounting principles, if any, used in the preparation of the consolidated financial statements of the group, or

    • (ii)International Financial Reporting Standards; and

  • (b)in any other case, International Financial Reporting Standards.

Currency of revenue — conversion

(2)For the purposes of Part 2, if total revenue or total consolidated group revenue is expressed in a particular currency other than the currency in which the global revenue threshold is denominated, the amount is to be converted from the particular currency to that other currency using a rate of exchange that is acceptable to the Minister.

Currency of revenue — Canadian dollar conversion

(3)For the purposes of Part 3, if an amount of revenue is expressed in a currency other than Canadian dollars, the amount is to be converted from that currency to Canadian dollars using a rate of exchange that is acceptable to the Minister.

Short fiscal year — global revenue threshold

5For the purposes of this Act, if a fiscal year is shorter than 12 months, a reference to the “global revenue threshold” in respect of the fiscal year is to be read as a reference to the amount determined by the formula

A × B ÷ 365

where

A
is the global revenue threshold; and
B
is the number of days in the fiscal year.

Continuity of consolidated group

6For the purposes of this Act, a consolidated group, at any time, is the same consolidated group at another time if at both times, and all times between those times, the ultimate parent entity of the group is the same.

Mergers

7If, in a calendar year, there is a merger or combination of two or more corporations (referred to in this section as the “predecessor corporations”) to form one corporate entity (referred to in this section as the “new corporation”),

  • (a)for the purposes of this Act, subject to paragraphs (b) and (c), the new corporation is deemed to be a separate person from each of the predecessor corporations;

  • (b)for the purposes of Part 6, the new corporation is deemed to be the same corporation as and a continuation of each predecessor corporation; and

  • (c)for the purposes of section 6,

    • (i)if only one of the predecessor corporations is an ultimate parent entity of a consolidated group, the new corporation is deemed to be the same corporation as the ultimate parent entity, and

    • (ii)if two or more of the predecessor corporations are each an ultimate parent entity of a consolidated group, the new corporation is deemed to be the same corporation as the ultimate parent entity of the consolidated group that had the greatest amount of total consolidated group revenue for a fiscal year of the group that ended in the immediately preceding calendar year.

Arm’s length

8(1)For the purposes of this Act,

  • (a)related persons are deemed not to deal with each other at arm’s length; and

  • (b)it is a question of fact whether persons not related to each other are, at any time, dealing with each other at arm’s length.

Related persons

(2)For the purposes of this Act, persons are related to each other if they are related persons within the meaning of subsection 6(2) of the Excise Act, 2001.

His Majesty

9This Act is binding on His Majesty in right of Canada or a province.

PART 2

Liability for Tax

Tax payable

10(1)Every taxpayer must pay a tax in respect of a particular calendar year (other than the first year of application) equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the particular calendar year if

  • (a)the taxpayer

    • (i)had total revenue equal to or greater than the global revenue threshold during a fiscal year of the taxpayer that ended in the immediately preceding calendar year,

    • (ii)was, at any time in the immediately preceding calendar year, a constituent entity of a consolidated group that had total consolidated group revenue equal to or greater than the global revenue threshold during a fiscal year of the group that ended in that immediately preceding calendar year, or

    • (iii)is, at any time in the particular calendar year, a constituent entity of a consolidated group that had total consolidated group revenue equal to or greater than the global revenue threshold during a fiscal year of the group that ended in the immediately preceding calendar year; and

  • (b)at least one of the following conditions is met:

    • (i)the Canadian digital services revenue of the taxpayer for the particular calendar year is greater than the in-scope revenue threshold, and

    • (ii)in respect of any consolidated group of which the taxpayer is a constituent entity at any time in the particular calendar year, the total of all amounts — each of which is the Canadian digital services revenue for the particular calendar year of an entity that is a constituent entity of the group at any time in the particular calendar year — is greater than the in-scope revenue threshold.

Tax payable for first year of application

(2)A taxpayer must pay, in respect of the first year of application, a tax equal to the amount determined by the formula

A + B

where

A
is

(a)3% of the taxpayer’s taxable Canadian digital services revenue for the first year of application, if the taxpayer satisfies the conditions set out in paragraphs (1)‍(a) and (b) in respect of that year, and

(b)nil, in any other case; and

B
is

(a)the amount determined by multiplying the rate prescribed by regulation in respect of the taxpayer by the total of all amounts each of which is the taxpayer’s taxable Canadian digital services revenue for a calendar year

(i)for which the taxpayer satisfies the conditions set out in paragraphs (1)‍(a) and (b), and

(ii)that is after 2021 and before the first year of application, and

(b)nil, if no calendar year meets the conditions set out in subparagraphs (a)‍(i) and (ii).

PART 3

Canadian Digital Services Revenue

Definitions

11The following definitions apply in this Part.

user located in Canada, at any time, means a user in respect of which it is reasonable to conclude — based on the taxpayer’s user data associated with the user (including any of the billing, delivery or shipping address, or the phone number area code, most recently provided by the user, global navigation satellite systems data and Internet Protocol address data) — that the user is 

  • (a)located in Canada at that time, in the case of

    • (i)online advertising services revenue that is in respect of an online targeted advertisem*nt for which the targeting is based on the real-time location of users, and

    • (ii)user data revenue that is based on the real-time location of users; and

  • (b)normally located in Canada at that time, in any other case.‍ (utilisateur situé au Canada)

user located outside Canada, at any time, means a user (other than a user located in Canada) in respect of which it is reasonable to conclude — based on the taxpayer’s user data associated with the user (including any of the billing, delivery or shipping address, or the phone number area code, most recently provided by the user, global navigation satellite systems data and Internet Protocol address data) — that the user is 

  • (a)located outside Canada at that time, in the case of

    • (i)online advertising services revenue that is in respect of an online targeted advertisem*nt for which the targeting is based on the real-time location of users, and

    • (ii)user data revenue that is based on the real-time location of users; and

  • (b)normally located outside Canada at that time, in any other case.‍ (utilisateur situé à l’extérieur du Canada)

user of determinable location, at any time, means a user that is, at that time, a user located in Canada or a user located outside Canada.‍ (utilisateur dont l’emplacement est déterminable)

Basic rule

12(1)A taxpayer’s Canadian digital services revenue for a calendar year is the amount determined by the formula

A + B + C + D

where

A
is the taxpayer’s Canadian online marketplace services revenue for the calendar year as determined in accordance with Division A of this Part;
B
is the taxpayer’s Canadian online advertising services revenue for the calendar year as determined in accordance with Division B of this Part;
C
is the taxpayer’s Canadian social media services revenue for the calendar year as determined in accordance with Division C of this Part; and
D
is the taxpayer’s Canadian user data revenue for the calendar year as determined in accordance with Division D of this Part.

Election

(2)Despite subsection (1), a taxpayer may elect in respect of a particular calendar year that is before the first year of application (by making an election on or before June 30 of the calendar year following the first year of application in the form and manner, and containing the information, prescribed by the Minister) that subsection (1) not to apply in respect of the particular calendar year, and that the taxpayer’s Canadian digital services revenue for the particular calendar year to be determined by the formula

A ÷ B × C

where

A
is the taxpayer’s Canadian digital services revenue for the first year of application;
B
is the taxpayer’s total revenue for the first year of application; and
C
is the taxpayer’s total revenue for the particular calendar year.

Election — restriction

(3)A taxpayer is not permitted to elect under subsection (2) in respect of a particular calendar year after 2022 if the taxpayer did not make an election under subsection (2) for a calendar year after 2021 that precedes the particular calendar year and for which the conditions set out in paragraphs 10(1)‍(a) and (b) are met.

DIVISION A 

Canadian Online Marketplace Services Revenue

Definition of online marketplace services revenue

13(1)In this Part and Part 5 and subject to subsection (2) and Division E, online marketplace services revenue, of a taxpayer, means revenue earned by the taxpayer in respect of an online marketplace of the taxpayer (or of another constituent entity of a consolidated group of which the taxpayer is, at the time the revenue is earned, a constituent entity) from

  • (a)the provision of access to, or the use of, the online marketplace;

  • (b)commissions and other fees for the facilitation of a supply between users of the online marketplace and for services ancillary to the supply;

  • (c)the provision of premium services, preferential listing services and other optional enhancements to the basic function, or changes to the standard commercial terms, of the services provided in respect of the online marketplace; and

  • (d)sources prescribed by regulation.

Interpretation — revenue exclusion

(2)For the purpose of the definition online marketplace services revenue in subsection (1), revenue earned by a taxpayer in respect of an online marketplace does not include revenue

  • (a)from the provision of storage or shipping services, to the extent that the revenue reflects a reasonable rate of remuneration for the service;

  • (b)earned from a constituent entity of a consolidated group if, at the time the revenue is earned, the taxpayer is a constituent entity of the group; or

  • (c)from sources prescribed by regulation.

Canadian online marketplace services revenue

14A taxpayer’s Canadian online marketplace services revenue for a calendar year is the amount determined by the formula

A + B + C

where

A
is the total of all amounts each of which is an amount of online marketplace services revenue of the taxpayer for the calendar year that is in respect of a supply, between users of an online marketplace, of a service

(a)physically performed and received in Canada,

(b)in respect of real property situated in Canada, or

(c)in respect of tangible personal property that is normally situated in Canada and that is situated in Canada at the time the service is performed;

B
is the total of all amounts each of which is an amount, in respect of a supply between users of an online marketplace (other than a supply that would be a supply described in paragraph (a) of the description of A if the reference to “Canada” were read as a reference to “the same country”, paragraph (b) of the description of A if the reference to “Canada” were read as a reference to “any country” or paragraph (c) of the description of A if the first reference to “Canada” were read as a reference to “any country” and the second reference to “Canada” were read as a reference to “that country”), determined by the formula

D × E ÷ 2

where

D
is the taxpayer’s online marketplace services revenue for the calendar year that is in respect of the supply, and
E
is

(a)2, if each of the supplier and the purchaser in respect of the supply is, at the time of the supply, a user located in Canada,

(b)1, if only the supplier or only the purchaser in respect of the supply is, at the time of the supply, a user located in Canada, and

(c)nil, in any other case; and

C
is the total of all amounts each of which is an amount, in respect of an online marketplace, determined by the formula

F × G ÷ H

where

F
is the taxpayer’s online marketplace services revenue (other than revenue that is in respect of a supply between users) for the calendar year that is in respect of the online marketplace,
G
is the total number of relevant users in respect of supplies between users of the online marketplace during the calendar year (or, in the case of a taxpayer to which section 21 applies, during the in-scope period of the taxpayer), where the number of relevant users in respect of any supply is

(a)2, if each of the supplier and the purchaser in respect of the supply is, at the time of the supply, a user located in Canada,

(b)1, if only the supplier or only the purchaser in respect of the supply is, at the time of the supply, a user located in Canada, and

(c)nil, in any other case, and

H
is the total number of relevant users in respect of supplies between users of the online marketplace during the calendar year (or, in the case of a taxpayer to which section 21 applies, during the in-scope period of the taxpayer), where the number of relevant users in respect of any supply is

(a)2, if each of the supplier and the purchaser in respect of the supply is, at the time of the supply, a user of determinable location,

(b)1, if only the supplier or only the purchaser in respect of the supply is, at the time of the supply, a user of determinable location, and

(c)nil, in any other case.

DIVISION B 

Canadian Online Advertising Services Revenue

Definition of online advertising services revenue

15(1)In this Part and Part 5 and subject to subsection (2) and Division E, online advertising services revenue, of a taxpayer, means revenue earned by the taxpayer from

  • (a)the facilitation through a digital interface of the delivery of an online targeted advertisem*nt;

  • (b)the supply of digital space for an online targeted advertisem*nt; and

  • (c)sources prescribed by regulation in respect of online targeted advertisem*nts.

Interpretation — revenue exclusion

(2)For the purpose of the definition online advertising services revenue in subsection (1), revenue earned by a taxpayer does not include revenue

  • (a)described in any of paragraphs 13(1)‍(a) to (d);

  • (b)in respect of an online targeted advertisem*nt to the extent of any payment made by the taxpayer (or by another constituent entity of a consolidated group, if at the time the revenue is earned, the taxpayer is a constituent entity of the group) to another entity if the payment

    • (i)is in respect of the online targeted advertisem*nt, and

    • (ii)would be online advertising services revenue of the other entity, if this section were read without reference to this paragraph or to section 21;

  • (c)earned from a constituent entity of a consolidated group if, at the time the revenue is earned, the taxpayer is a constituent entity of the group; or

  • (d)from sources prescribed by regulation.

Canadian online advertising services revenue

16A taxpayer’s Canadian online advertising services revenue for a calendar year is the amount determined by the formula

A + B

where

A
is the total of all amounts each of which is an amount of online advertising services revenue of the taxpayer for the calendar year that is directly attributable to an instance of a display of an online targeted advertisem*nt to a user, or an instance of a user’s interaction with an online targeted advertisem*nt, if the user is a user located in Canada at the time of the display or interaction; and
B
is the total of all amounts each of which is an amount in respect of an online targeted advertisem*nt (other than an advertisem*nt for which revenue of the taxpayer is directly attributable to an instance of a display of the advertisem*nt to a user or directly attributable to an instance of a user’s interaction with the advertisem*nt, if the user is a user of determinable location at the time of the display or interaction) determined by the formula

C × D ÷ E

where

C
is the taxpayer’s online advertising services revenue for the calendar year that is in respect of the online targeted advertisem*nt,
D
is the number of times during the calendar year (or, in the case of a taxpayer to which section 21 applies, during the in-scope period of the taxpayer) that the online targeted advertisem*nt is displayed to a user that is, at the time of display, a user located in Canada, and
E
is the number of times during the calendar year (or, in the case of a taxpayer to which section 21 applies, during the in-scope period of the taxpayer) that the online targeted advertisem*nt is displayed to a user that is, at the time of display, a user of determinable location.

DIVISION C 

Canadian Social Media Services Revenue

Definition of social media services revenue

17(1)In this Part and Part 5 and subject to subsection (2) and Division E, social media services revenue, of a taxpayer, means revenue earned by the taxpayer in respect of a social media platform of the taxpayer (or of another constituent entity of a consolidated group of which the taxpayer is, at the time the revenue is earned, a constituent entity) from

  • (a)the provision of access to, or the use of, the social media platform;

  • (b)the provision of premium services and other optional enhancements to the basic function, or changes to the standard commercial terms, of the services provided in respect of the social media platform;

  • (c)the facilitation of an interaction between users, or between a user and digital content generated by other users, on the social media platform; and

  • (d)sources prescribed by regulation.

Interpretation — revenue exclusion

(2)For the purpose of the definition social media services revenue in subsection (1), revenue earned by a taxpayer in respect of a social media platform does not include revenue

  • (a)described in any of paragraphs 13(1)‍(a) to (d) and 15(1)‍(a) to (c);

  • (b)from the provision of private communication services comprised of any combination of video calling, voice calling, email or instant messaging, if the sole purpose of the platform is to provide those services;

  • (c)earned from a constituent entity of a consolidated group if, at the time the revenue is earned, the taxpayer is a constituent entity of the group; or

  • (d)from sources prescribed by regulation.

Canadian social media services revenue

18A taxpayer’s Canadian social media services revenue for a calendar year is the total of all amounts each of which is an amount, in respect of a social media platform, determined by the formula

A × B ÷ C

where

A
is the taxpayer’s social media services revenue for the calendar year that is in respect of the social media platform;
B
is the total number of social media accounts on the social media platform that are accessed at any time during the calendar year (or, in the case of a taxpayer to which section 21 applies, during the in-scope period of the taxpayer) by a user that is, at that time, a user located in Canada; and
C
is the total number of social media accounts on the social media platform that are accessed at any time during the calendar year (or, in the case of a taxpayer to which section 21 applies, during the in-scope period of the taxpayer) by a user that is, at that time, a user of determinable location.

DIVISION D 

Canadian User Data Revenue

Definition of user data revenue

19(1)In this Part and Part 5 and subject to subsection (2) and Division E, user data revenue, of a taxpayer, means revenue earned by the taxpayer in respect of user data collected from a user by the taxpayer (or collected from a user by another constituent entity of a consolidated group of which the taxpayer is, at the time the taxpayer obtains access to the data, a constituent entity) from

  • (a)if the user data is collected from an online marketplace, a social media platform or an online search engine,

    • (i)the sale of the user data, or

    • (ii)the granting of access to the user data; and

  • (b)sources prescribed by regulation.

Interpretation — revenue exclusion

(2)For the purpose of the definition user data revenue in subsection (1), revenue earned by a taxpayer in respect of user data does not include revenue

  • (a)described in any of paragraphs 13(1)‍(a) to (d), 15(1)‍(a) to (c) and 17(1)‍(a) to (d);

  • (b)earned from a constituent entity of a consolidated group if, at the time the revenue is earned, the taxpayer is a constituent entity of the group; or

  • (c)from sources prescribed by regulation.

Canadian user data revenue

20A taxpayer’s Canadian user data revenue for a calendar year is the amount determined by the formula

A + B

where

A
is the total of all amounts each of which is an amount of the taxpayer’s user data revenue for the calendar year that is in respect of the user data of a single user that is, at the time the user data is collected, a user located in Canada; and
B
is the total of all amounts each of which is an amount, in respect of a set of user data of multiple users, determined by the formula

C × D ÷ E

where

C
is the taxpayer’s user data revenue (other than revenue that is in respect of the user data of a single user that is, at the time the user data is collected, a user of determinable location) for the calendar year that is in respect of the set of user data,
D
is the number of users to which the set of user data relates that are, at the time the user data is collected, a user located in Canada, and
E
is the number of users to which the set of user data relates that are, at the time the user data is collected, a user of determinable location.

DIVISION E 

Rules Relating to Determination of Canadian Digital Services Revenue

Revenue of new constituent entities

21(1)If a taxpayer meets the condition set out in subparagraph 10(1)‍(a)‍(iii) for a particular calendar year, and does not meet at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) for the particular calendar year, then online marketplace services revenue, online advertising services revenue, social media services revenue and user data revenue of the taxpayer for the particular calendar year do not include revenue earned by the taxpayer before the first moment in the particular calendar year when the taxpayer becomes a constituent entity of a consolidated group described in subparagraph 10(1)‍(a)‍(iii).

Definition of in-scope period

(2)If subsection (1) applies to a taxpayer for a particular calendar year, in this Part and in the definition relevant time in Part 4, the in-scope period, of the taxpayer, means the period during the particular calendar year beginning at the first moment in the particular calendar year when the taxpayer becomes a constituent entity of a consolidated group described in subparagraph 10(1)‍(a)‍(iii) and ending on December 31.

Attribution of activity

22Revenue of a particular constituent entity of a consolidated group is deemed to be Canadian digital services revenue of the particular entity if the revenue

  • (a)is in respect of the provision of a service, or the selling or granting of access to user data, by another constituent entity of the group; and

  • (b)would be Canadian digital services revenue of that other entity if the revenue were earned by the other entity.

PART 4

Taxable Canadian Digital Services Revenue

Definitions

23The following definitions apply in this Part.

deduction amount means an amount prescribed by regulation.‍ (montant de la déduction)

relevant interval, of a taxpayer in a calendar year, means any period from one relevant time of the taxpayer in the year to the next relevant time of the taxpayer in the year.‍ (intervalle pertinent)

relevant time, of a particular taxpayer in a calendar year, means   

  • (a)the first moment of

    • (i)the in-scope period of the particular taxpayer if section 21 applies to the particular taxpayer for the calendar year, or

    • (ii)January 1 in any other case;

  • (b)the last moment of December 31;

  • (c)any time between the time referred to in paragraph (a) and the time referred to in paragraph (b) at which the particular taxpayer becomes, or ceases to be, a constituent entity of a consolidated group; and

  • (d)any time between the time referred to in paragraph (a) and the time referred to in paragraph (b) at which

    • (i)the particular taxpayer is a constituent entity of a consolidated group, and

    • (ii)any other taxpayer becomes, or ceases to be, a constituent entity of the group.‍ (moment pertinent)

Determination

24A particular taxpayer’s taxable Canadian digital services revenue for a calendar year is the amount determined by the formula

A – B

where

A
is the particular taxpayer’s Canadian digital services revenue for the calendar year; and
B
is

(a)if the particular taxpayer is not, at any time in the calendar year, a constituent entity of a consolidated group, the deduction amount, and

(b)in any other case, the total of all amounts each of which is an amount in respect of a relevant interval of the particular taxpayer in the calendar year determined by the formula

C × (D ÷ 365) × (E ÷ F)

where

C
is the deduction amount,
D
is the number of days in the relevant interval,
E
is the particular taxpayer’s Canadian digital services revenue for the calendar year, and
F
is

(i)if the particular taxpayer is a constituent entity of a consolidated group during the relevant interval, the total of all amounts each of which is the Canadian digital services revenue for the calendar year of a taxpayer that is a constituent entity of the consolidated group during the relevant interval (or, if the particular taxpayer does not determine all those amounts, nil), and

(ii)in any other case, the amount determined for E.

PART 5

Miscellaneous

DIVISION A 

Trustees and Receivers

Definitions

25The following definitions apply in this Division.

bankruptcy day, of a taxpayer, means a day on which a trustee becomes the trustee in bankruptcy of the taxpayer.‍ (jour de la faillite)

bankruptcy period, of a taxpayer in respect of a bankruptcy day of the taxpayer, means the period during a calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) beginning on the day after the bankruptcy day and ending on the earlier of the day on which the discharge of the trustee is granted under the Bankruptcy and Insolvency Act and December 31.‍ (période de faillite)

bankrupt year, of a taxpayer in respect of a bankruptcy day of the taxpayer, means any calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) between the calendar year in which the bankruptcy day occurs and the calendar year in which the discharge of the trustee is granted under the Bankruptcy and Insolvency Act.‍ (année de faillite)

business includes a part of a business.‍ (entreprise)

pre-bankruptcy period, of a taxpayer in respect of a bankruptcy day of the taxpayer, means the period during a calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) beginning on January 1 and ending on the bankruptcy day.‍ (période de pré-faillite)

pre-cease period, of a taxpayer in respect of a receivership day of the taxpayer, means the period during a particular calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) after the year in which the receivership day occurs beginning on January 1 of the particular calendar year and ending on the day on which the receiver ceases to act as receiver of the taxpayer.‍ (période antérieure à la cessation)

pre-discharge period, of a taxpayer in respect of a bankruptcy day of the taxpayer, means the period during a particular calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) after the year in which the bankruptcy day occurs beginning on January 1 of the particular calendar year and ending on the day on which the discharge of the trustee is granted under the Bankruptcy and Insolvency Act.‍ (période antérieure à la libération)

pre-receivership period, of a taxpayer in respect of a receivership day of the taxpayer, means the period during a calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) beginning on January 1 and ending on the receivership day.‍ (période antérieure à la mise sous séquestre)

receiver means a person that

  • (a)under the authority of a debenture, bond or other debt security, of a court order or of an Act of Parliament or of the legislature of a province, is empowered to operate or manage a business or a property of another person;

  • (b)is appointed by a trustee under a trust deed in respect of a debt security to exercise the authority of the trustee to manage or operate a business or a property of the debtor under the debt security;

  • (c)is appointed by a bank or an authorized foreign bank, as those terms are defined in section 2 of the Bank Act, to act as an agent or mandatary of the bank in the exercise of the authority of the bank under subsection 426(3) of that Act in respect of property of another person; or

  • (d)is appointed as a liquidator to liquidate the assets of a corporation or to wind up the affairs of a corporation.

It includes a person that is appointed to exercise the authority of a creditor under a debenture, bond or other debt security to operate or manage a business or a property of another person, but, if a person is appointed to exercise the authority of a creditor under a debenture, bond or other debt security to operate or manage a business or a property of another person, it does not include that creditor.‍ (séquestre)

receivership day, of a taxpayer, means the earliest day on which a receiver

  • (a)is vested with authority to manage, operate, liquidate or wind up any business or property or to manage and care for the affairs and assets of the taxpayer; and

  • (b)is in possession of or controls and manages the affairs and assets of the taxpayer.‍ (jour de mise sous séquestre)

receivership period, of a taxpayer in respect of a receivership day of the taxpayer, means the period during a calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) beginning on the day after the receivership day and ending on the earlier of the day on which the receiver ceases to act as receiver of the taxpayer and December 31.‍ (période de mise sous séquestre)

relevant assets of a receiver means the part of the properties, businesses, affairs or assets of a person to which the receiver’s authority relates.‍ (actif pertinent)

year in receivership, of a taxpayer in respect of a receivership day of the taxpayer, means any calendar year (for which the taxpayer satisfies at least one of the conditions set out in subparagraphs 10(1)‍(a)‍(i) and (ii) and satisfies the condition set out in paragraph 10(1)‍(b)) between the calendar year in which the receivership day occurs and the calendar year in which the receiver ceases to act as receiver of the taxpayer.‍ (année sous séquestre)

Trustee as agent or mandatary

26If a taxpayer has become a bankrupt and a trustee becomes the trustee in bankruptcy of the taxpayer, the trustee is deemed to be the agent or mandatary of the bankrupt for all purposes of this Act and any revenue of the trustee from carrying on the business of the bankrupt is deemed to be revenue of the bankrupt and not of the trustee.

Tax payable for bankruptcy

27(1)If during a particular calendar year there is a bankruptcy day of a taxpayer,

  • (a)section 10 does not apply in respect of the particular calendar year, any bankrupt year or a calendar year during which the pre-discharge period, if any, occurs;

  • (b)the taxpayer must pay a tax in respect of the pre-bankruptcy period equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the pre-bankruptcy period determined in accordance with section 31;

  • (c)subject to subsection (2), the trustee, and not the taxpayer, must pay a tax in respect of each of the bankruptcy period and, if any, the pre-discharge period equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the period determined in accordance with section 31; and

  • (d)subject to subsection (2), the trustee, and not the taxpayer, must pay a tax in respect of any bankrupt year equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the year.

Trustee — exception

(2)A trustee is not liable for the payment of any amount for which a receiver is liable under section 29.

Filing and payment

28(1)If section 27 applies in respect of a bankruptcy day of a taxpayer during a particular calendar year,

  • (a)sections 45 and 49 do not apply to the taxpayer in respect of the particular calendar year, any bankrupt year or a calendar year during which the pre-discharge period, if any, occurs;

  • (b)subject to subsection (2), the trustee must file all returns — in the form and manner, and containing the information, prescribed by the Minister — in respect of any year or period referred to in paragraph 27(1)‍(c) or (d) for which the trustee is liable to pay tax greater than nil, and pay the tax payable under this Act in respect of the year or period, on or before the day that is 90 days after the last day of the year or period; and

  • (c)subject to subsection (2), the trustee must, unless the Minister waives the requirement in writing, file any return that is required to be filed by the taxpayer in respect of the calendar year immediately preceding the particular calendar year or in respect of the pre-bankruptcy period — in the form and manner, and containing the information, prescribed by the Minister — on or before the day that is 90 days after the bankruptcy day.

Trustee — exception

(2)If there is a receiver with authority in respect of any business, property, affairs or assets of a taxpayer referred to in subsection (1), the trustee is not required to include in any return any information that the receiver is required under section 30 to include in a return.

Tax payable for receivership

29If during a particular calendar year there is a receivership day of a taxpayer,

  • (a)if the receiver is a receiver-manager,

    • (i)section 10 does not apply in respect of the particular calendar year, any year in receivership or a calendar year during which the pre-cease period, if any, occurs,

    • (ii)the taxpayer must pay a tax in respect of the pre-receivership period equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the pre-receivership period determined in accordance with section 31,

    • (iii)the receiver-manager, and not the taxpayer, must pay a tax in respect of each of the receivership period and, if any, the pre-cease period equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the period determined in accordance with section 31, and

    • (iv)the receiver-manager, and not the taxpayer, must pay a tax in respect of any year in receivership equal to 3% of the taxpayer’s taxable Canadian digital services revenue for the year; and

  • (b)in any other case,

    • (i)the receiver must pay

      • (A)a tax in respect of each of the receivership period and, if any, the pre-cease period equal to 3% of the portion of the taxpayer’s Canadian digital services revenue for the period (determined in accordance with section 31) that is online marketplace services revenue, online advertising services revenue, social media services revenue and user data revenue earned by the taxpayer for the period that can reasonably be considered to relate to the relevant assets of the receiver, and

      • (B)a tax in respect of any year in receivership, equal to 3% of the portion of the taxpayer’s Canadian digital services revenue for the year that is online marketplace services revenue, online advertising services revenue, social media services revenue and user data revenue earned by the taxpayer for the year that can reasonably be considered to relate to the relevant assets of the receiver, and

    • (ii)for the purpose of section 10, the taxpayer’s taxable Canadian digital services revenue in respect of the particular calendar year, any years in receivership and a calendar year during which the pre-cease period, if any, occurs is determined as if online marketplace services revenue, online advertising services revenue, social media services revenue and user data revenue of the taxpayer for the year did not include revenue that is included in the portion of Canadian digital services revenue described in clause (b)‍(i)‍(A) or (B).

Filing and payment

30If section 29 applies in respect of a receivership day of a taxpayer during a particular calendar year,

  • (a)if the receiver is a receiver-manager,

    • (i)sections 45 and 49 do not apply to the taxpayer in respect of the particular calendar year, any year in receivership or a calendar year during which the pre-cease period, if any, occurs,

    • (ii)the receiver-manager must file all returns — in the form and manner, and containing the information, prescribed by the Minister — in respect of any year or period referred to in subparagraph 29(a)‍(iii) or (iv) for which the receiver-manager is liable to pay tax greater than nil, and pay the tax payable under this Act in respect of the year or period, on or before the day that is 90 days after the last day of the year or period, and

    • (iii)the receiver-manager must, unless the Minister waives the requirement in writing, file any return that is required to be filed by the taxpayer in respect of the calendar year immediately preceding the particular calendar year or in respect of the pre-receivership period — in the form and manner, and containing the information, prescribed by the Minister — on or before the day that is 90 days after the receivership day; and

  • (b)in any other case, the receiver must file all returns — in the form and manner, and containing the information, prescribed by the Minister — in respect of any year or period referred to in subparagraph 29(b)‍(i) for which the receiver is liable to pay tax greater than nil, and pay the tax payable under this Act in respect of the year or period, on or before the day that is 90 days after the last day of the year or period.

Non-calendar year periods

31(1)For the purposes of sections 27 and 29, a taxpayer’s taxable Canadian digital services revenue or Canadian digital services revenue for a pre-bankruptcy period, bankruptcy period, pre-discharge period, pre-receivership period, receivership period or pre-cease period is the taxable Canadian digital services revenue or Canadian digital services revenue of the taxpayer, determined in accordance with Parts 3 and 4, with the following modifications:

  • (a)the references in Parts 3 and 4 to “calendar year” (except in the descriptions of E and F in section 24) are to be read as references to “pre-bankruptcy period”, “bankruptcy period”, “pre-discharge period”, “pre-receivership period”, “receivership period” or “pre-cease period”, as the case may be;

  • (b)the references in Parts 3 and 4 to “year” (except in the descriptions of E and F in section 24) are to be read as references to “period”;

  • (c)paragraphs (a) and (b) of the definition relevant time in section 23 are to be read as follows:

    • “(a)the first moment of the first day of the period;

    • (b)the last moment of the last day of the period;”

  • (d)paragraph (a) of the description of B in section 24 does not apply; and

  • (e)subsections 12(2) and (3) do not apply.

Administration and enforcement

(2)Except as otherwise provided in this Division, Part 6 applies, with any modifications that the circ*mstances require, to any taxpayer, trustee or receiver in respect of any year or period referred to in this Division.

Certificates for receivers

32(1)Every receiver that controls property of a taxpayer that is, or can reasonably be expected to become, required to pay any amount under this Act must, before distributing the property to any person, obtain a certificate from the Minister certifying that the following amounts have been paid, or that security for the payment of them has been accepted by the Minister, in accordance with this Act:

  • (a)all amounts that are payable under this Act by the taxpayer or the receiver (in that capacity) in respect of any calendar year, or period, preceding the calendar year, or period, during which the distribution is made; and

  • (b)all amounts that can reasonably be expected to become payable under this Act by the taxpayer or the receiver (in that capacity) in respect of the calendar year or period during which the distribution is made, or any previous calendar year or period.

Liability for failure to obtain certificate

(2)Any receiver that distributes property without obtaining a certificate in respect of the amounts referred to in subsection (1) is personally liable for the payment of those amounts to the extent of the value of the property so distributed.

DIVISION B 

Partnerships

Partnerships

33(1)For the purposes of this Act, anything done by a person as a member of a partnership is deemed to have been done by the partnership in the course of the partnership’s activities and not to have been done by the person.

Joint and several or solidary liability

(2)A partnership and each member or former member (each of which is referred to in this subsection as the “member”) of the partnership (other than a member that is a limited partner and is not a general partner) are jointly and severally, or solidarily, liable for

  • (a)the payment of all amounts that are required to be paid by the partnership under this Act before or during the period during which the member is a member of the partnership or, if the member was a member of the partnership at the time the partnership was dissolved, after the dissolution of the partnership, except that

    • (i)the member is liable for the payment of amounts that become payable before the period only to the extent of the property that is regarded as property of the partnership under the relevant laws of general application to partnerships in force in a province or other jurisdiction, and

    • (ii)the payment by the partnership or by any member of the partnership of an amount in respect of the liability discharges their liability to the extent of that amount; and

  • (b)all other obligations under this Act that arose before or during that period for which the partnership is liable or, if the member was a member of the partnership at the time the partnership was dissolved, the obligations that arose upon or as a consequence of the dissolution.

DIVISION C 

Anti-avoidance

Definitions

34(1)The following definitions apply in this Division.

tax benefit means a reduction, avoidance or deferral of tax or other amount payable under this Act or an increase in a refund of tax or other amount under this Act.‍ (avantage fiscal)

tax consequences to a person means the amount of tax or other amount payable by, or refundable to, the person under this Act, or any other amount that is relevant for the purposes of computing that amount.‍ (attribut fiscal)

transaction includes an arrangement or event.‍ (opération)

General anti-avoidance rule

(2)If a transaction is an avoidance transaction, the tax consequences to a person are to be determined as is reasonable in the circ*mstances in order to deny a tax benefit that, in the absence of this section, would result, directly or indirectly, from that transaction or from a series of transactions that includes that transaction.

Avoidance transaction

(3)An avoidance transaction means any transaction

  • (a)that, in the absence of this section, would result, directly or indirectly, in a tax benefit, unless the transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the tax benefit; or

  • (b)that is part of a series of transactions, which series, in the absence of this section, would result, directly or indirectly, in a tax benefit, unless the transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the tax benefit.

Application of subsection (2)

(4)Subsection (2) applies to a transaction only if it may reasonably be considered that the transaction

  • (a)would, if this Act were read without reference to this section, result directly or indirectly in a misuse of the provisions of any one or more of

    • (i)this Act,

    • (ii)the Digital Services Tax Regulations, or

    • (iii)any other enactment that is relevant in computing tax or any other amount payable by or refundable to a person under this Act or in determining any amount that is relevant for the purposes of that computation; or

  • (b)would result directly or indirectly in an abuse having regard to those provisions, other than this section, read as a whole.

Determination of tax consequences

(5)Without restricting the generality of subsection (2) and despite any other enactment, in determining the tax consequences to a person as is reasonable in the circ*mstances in order to deny a tax benefit that would, in the absence of this section, result directly or indirectly from an avoidance transaction

  • (a)any deduction, exemption or exclusion in computing Canadian digital services revenue, taxable Canadian digital services revenue or tax payable or any part thereof may be allowed or disallowed in whole or in part;

  • (b)any such deduction, exemption or exclusion, any revenue or other amount or part thereof may be allocated to any person;

  • (c)the nature of any payment or other amount may be recharacterized; and

  • (d)the tax effects that would otherwise result from the application of other provisions of this Act may be ignored.

Request for adjustments

(6)If, with respect to a transaction, a notice of assessment involving the application of subsection (2) with respect to the transaction has been sent to a person, then any person (other than a person to which such a notice has been sent) is entitled, within 180 days after the day of sending of the notice, to request in writing that the Minister make an assessment applying subsection (2) with respect to that transaction.

Exception

(7)Despite any other provision of this Act, the tax consequences to any person, following the application of this section, are only to be determined through a notice of assessment involving the application of this section.

Duties of Minister

(8)On receipt of a request by a person under subsection (6), the Minister must, without delay, consider the request and, despite subsection 70(1), assess the person. However, an assessment may be made under this subsection only to the extent that it may reasonably be regarded as relating to the transaction referred to in subsection (6).

Series of transactions

35For the purposes of this Division, a series of transactions is deemed to include any related transactions completed in contemplation of the series.

PART 6

General Provisions, Administration and Enforcement

Definitions

36(1)The following definitions apply in this Part.

Agency means the Canada Revenue Agency continued by subsection 4(1) of the Canada Revenue Agency Act.‍ (Agence)

bank means a bank or an authorized foreign bank, as those terms are defined in section 2 of the Bank Act, that is not subject to the restrictions and requirements referred to in subsection 524(2) of that Act.‍ (banque)

business number means any number (other than a Social Insurance Number) used by the Minister to identify a person for the purposes of this Act.‍ (numéro d’entreprise)

Commissioner means, except in sections 39, 105 and 122, the Commissioner of Revenue appointed under section 25 of the Canada Revenue Agency Act.‍ (commissaire)

judge, in respect of any matter, means a judge of a superior court having jurisdiction in the province in which the matter arises or a judge of the Federal Court.‍ (juge)

official means a person who is employed in the service of, who occupies a position of responsibility in the service of, or who is engaged by or on behalf of, His Majesty in right of Canada or a province, or a person who was formerly so employed, who formerly occupied such a position or who formerly was so engaged.‍ (fonctionnaire)

record means any material on which representations, in any form, of information or concepts are recorded or marked and that is capable of being read or understood by an individual or a computer system or other device.‍ (registre)

registration threshold means the amount prescribed by regulation.‍ (seuil d’inscription)

Person resident in Canada

(2)For the purposes of this Part, a person is deemed to be resident in Canada at any time

  • (a)in the case of a corporation, if the corporation is

    • (i)incorporated in Canada and not continued elsewhere, or

    • (ii)continued in Canada;

  • (b)in the case of a partnership, an unincorporated society, a club, an association or organization, or a branch thereof, if the member or participant, or a majority of the members or participants, having management and control thereof is or are resident in Canada at that time;

  • (c)in the case of a labour union, if it is carrying on activities as such in Canada and has a local union or branch in Canada at that time; and

  • (d)in the case of an individual, if the individual is deemed under any of paragraphs 250(1)‍(a) to (f) of the Income Tax Act to be resident in Canada at that time.

Administration or enforcement

(3)For greater certainty, a reference in this Part to the administration or enforcement of this Act includes the collection of any amount payable under this Act.

DIVISION A 

Duties of Minister

Minister’s duty

37The Minister must administer and enforce this Act and the Commissioner may exercise the powers and perform the duties of the Minister under this Act.

Staff

38(1)The persons that are necessary to administer and enforce this Act are to be appointed, employed or engaged in the manner authorized by law.

Delegation of powers

(2)The Minister may authorize any person who is employed or engaged by the Agency, or occupies a position of responsibility in the Agency, to exercise powers or perform duties of the Minister under this Act, including any judicial or quasi-judicial power or duty.

Administration of oaths

39Any person, if so designated by the Minister, may administer oaths and take and receive affidavits, declarations and affirmations for the purposes of, or incidental to, the administration or enforcement of this Act, and every person so designated has for those purposes all the powers of a commissioner for administering oaths or taking affidavits.

Waiving the filing of documents

40If any provision of this Act or a regulation requires a person to file a form or other document in the form and manner prescribed by the Minister (other than a return or a form, or other document, with respect to an election) or to provide information, prescribed by the Minister, the Minister may waive the requirement, but at the Minister’s request the person must provide the document or information by the date set out in the request.

DIVISION B 

Registration

Requirement to register

41(1)A taxpayer must apply to register under this Act on or before the earliest of

  • (a)January 31 of the year following the first year of application, if the taxpayer

    • (i)has Canadian digital services revenue greater than nil

      • (A)for the first year of application, or

      • (B)if the rate referred to in the description of B in subsection 10(2) is greater than nil, for any calendar year that is after 2021 and before the first year of application, and

    • (ii)would meet the conditions set out in paragraphs 10(1)‍(a) and (b) in respect of a calendar year for which the condition set out in subparagraph (i) is satisfied if the references to “in-scope revenue threshold” in paragraph 10(1)‍(b) were read as references to “registration threshold”; and

  • (b)January 31 of the year following a calendar year, after the first year of application, for which calendar year the taxpayer

    • (i)has Canadian digital services revenue greater than nil, and

    • (ii)would meet the conditions set out in paragraphs 10(1)‍(a) and (b) if the references to “in-scope revenue threshold” in paragraph 10(1)‍(b) were read as references to “registration threshold”.

Waiving requirement under subsection (1)

(2)The Minister may waive a taxpayer’s requirement under subsection (1), but at the Minister’s request the taxpayer must apply to register by the date set out in the request.

Application to register

42(1)An application for registration under this Division must be made in the form and manner, and contain the information, prescribed by the Minister.

Notification

(2)The Minister may register any taxpayer that applies for registration under this Act and, if the Minister does so, the Minister must notify the taxpayer of the effective date of the registration and of the registration number assigned to the taxpayer.

De-registration

43(1)The Minister may, upon request by a taxpayer, de-register the taxpayer at any time if the Minister is satisfied that the taxpayer would not have met the conditions set out in paragraphs 10(1)‍(a) and (b) — in respect of any of the three calendar years immediately preceding that time — if the references to “in-scope revenue threshold” in paragraph 10(1)‍(b) were read as references to “registration threshold”.

Consequences of de-registration

(2)A taxpayer that is, at a particular time, de-registered under subsection (1) is deemed for the purpose of applying subsection 41(1) at any time subsequent to the particular time

  • (a)not to have applied for registration before the particular time; and

  • (b)not to have met the conditions set out in paragraph 41(1)‍(b) before the particular time.

Notification

(3)If the Minister de-registers a taxpayer under this section, the Minister must notify the taxpayer of the de-registration and the effective date of the de-registration.

Notice of intent

44(1)If the Minister has reason to believe that a taxpayer that is not registered under this Act is required to apply to register and has failed to do so as and when required, the Minister may send a notice of intent in writing to the taxpayer that the Minister proposes to register the taxpayer under this Act.

Notice of intent — requirement to register

(2)On receipt of a notice of intent, a taxpayer must apply to register or establish to the satisfaction of the Minister that the taxpayer is not required to do so.

Notice of intent — notification of registration

(3)If, after 60 days after the day on which a notice of intent was sent by the Minister to a taxpayer, the taxpayer has not applied to register and the Minister is not satisfied that the taxpayer is not required to apply to register, the Minister may register the taxpayer and, on doing so, must notify the taxpayer of the effective date of the registration and the registration number assigned to the taxpayer.

DIVISION C 

Returns

Requirement to file return

45A taxpayer must file a return — in the form and manner, and containing the information, prescribed by the Minister — for a particular calendar year, on or before June 30 of the following calendar year, if

  • (a)the particular calendar year is the first year of application and the taxpayer

    • (i)has Canadian digital services revenue greater than nil

      • (A)for the first year of application, or

      • (B)if the rate referred to in the description of B in subsection 10(2) is greater than nil, for any calendar year that is after 2021 and before the first year of application, and

    • (ii)meets the conditions set out in paragraphs 10(1)‍(a) and (b) in respect of a calendar year for which the condition set out in subparagraph (i) is satisfied; or

  • (b)the particular calendar year is after the first year of application and the taxpayer

    • (i)has Canadian digital services revenue greater than nil for the particular calendar year, and

    • (ii)meets the conditions set out in paragraphs 10(1)‍(a) and (b) in respect of the particular calendar year.

Election — designated entity

46(1)A taxpayer that is a constituent entity of a consolidated group at any time in a particular calendar year (other than a taxpayer that is a constituent entity of more than one consolidated group during the particular calendar year) may jointly elect, in respect of the particular calendar year, with one or more other constituent entities of the group (including a particular constituent entity) to designate the particular constituent entity (referred to in this Act as the “designated entity”) by making an election on or before June 30 of the following calendar year in the form and manner, and containing the information, prescribed by the Minister.

Election — consequences

(2)If a taxpayer elects to designate an entity under subsection (1) in respect of a calendar year

  • (a)the designated entity must act on behalf of the taxpayer for the purposes of this Part in respect of the year;

  • (b)any action taken by the designated entity on behalf of the taxpayer for the purposes of this Part in respect of the year is deemed to have been performed by the taxpayer; and

  • (c)the Minister must direct to the designated entity and the taxpayer any communication for the purposes of this Part as it applies to the taxpayer in respect of the year.

Application for registration — designated entity

(3)If a taxpayer elects to designate an entity under subsection (1) that is not registered under this Act, the designated entity must, at the time of the election, make an application to register in the form and manner, and containing the information, prescribed by the Minister.

Extension of time

47(1)The Minister may at any time extend the time for filing a return, form or other document, providing information, or making an election under this Act.

Effect of extension

(2)If the Minister extends the time for filing a return, form or other document, providing information or making an election under subsection (1),

  • (a)the return, form or other document must be filed, the information must be provided or the election must be made within the time so extended; and

  • (b)in the case of a return, any penalty payable under section 84 in respect of the return must be determined as though the return were required to be filed on the day on which the extended time expires.

Demand for return

48A taxpayer must, on demand sent by the Minister, file, within any reasonable time that may be specified in the demand, a return under this Act for any calendar year that is designated in the demand.

DIVISION D 

Payments

Payments

49The tax payable under this Act by a taxpayer in respect of a calendar year must be paid on or before June 30 of the following calendar year.

Manner and form of payments

50Every person that is required under this Act to pay tax or any other amount must make the payment to the account of the Receiver General for Canada in the manner and form prescribed by the Minister.

Assessment of another constituent entity

51(1)The Minister may assess a particular constituent entity of a consolidated group in respect of tax and other amounts payable under this Act by another constituent entity of the group. If such an assessment is made, the particular constituent entity is jointly and severally, or solidarily, liable with the other constituent entity to pay the amount assessed and this Part applies to the particular constituent entity in respect of the amount assessed with any modifications that the circ*mstances require.

Limitation

(2)Subsection (1) does not limit the liability of the other constituent entity under any other provision of this Act or the liability of the particular constituent entity for the interest that the particular constituent entity is liable to pay under this Act on an assessment in respect of the amount that the particular constituent entity is liable to pay because of that subsection.

Rules applicable

(3)If a particular constituent entity of a consolidated group and another constituent entity of the group become, because of subsection (1), jointly and severally, or solidarily, liable in respect of part or all of the liability of the other constituent entity under this Act, the following rules apply:

  • (a)a payment by the particular constituent entity on account of the particular constituent entity’s liability discharges, to the extent of the payment, the joint liability; and

  • (b)a payment by the other constituent entity on account of the other constituent entity’s liability discharges the particular constituent entity’s liability only to the extent that the payment operates to reduce that liability to an amount less than the amount in respect of which the particular constituent entity is, because of subsection (1), jointly and severally, or solidarily, liable.

Definition of transaction

52(1)In this section and section 87, a transaction includes an arrangement or event.

Tax liability — property transferred not at arm’s length

(2)If at any time a person transfers property, either directly or indirectly, by means of a trust or by any other means, to another person with which the transferor was not, at that time, dealing at arm’s length, the transferee and transferor are jointly and severally, or solidarily, liable to pay under this Act an amount equal to the lesser of

  • (a)the amount determined by the formula

    A − (B − C)

    where

    A
    is the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given by the transferee for the transfer of the property,
    B
    is the total of all amounts, if any, the transferee was assessed under subsection 325(2) of the Excise Tax Act, paragraph 97.‍44(1)‍(b) of the Customs Act, subsection 160(2) of the Income Tax Act, subsection 297(3) of the Excise Act, 2001, subsection 161(3) of the Greenhouse Gas Pollution Pricing Act, subsection 80(3) of the Underused Housing Tax Act or subsection 150(4) of the Select Luxury Items Tax Act in respect of the property, and
    C
    is the amount paid by the transferor in respect of the amount determined for B, and
  • (b)the total of all amounts each of which is

    • (i)an amount that the transferor is liable to pay under this Act in respect of

      • (A)the calendar year that includes that time, or

      • (B)any preceding calendar year, or

    • (ii)interest or penalties (other than amounts included in subparagraph (i)) for which the transferor is liable at that time.

Limitation

(3)Subsection (2) does not limit the liability of the transferor under any other provision of this Act or the liability of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of that subsection.

Fair market value of undivided interest or right

(4)For the purposes of this section, the fair market value at any time of an undivided interest in, or for civil law an undivided right in, a property that is expressed as a proportionate interest or right in that property is deemed to be equal to the same proportion of the fair market value of that property at that time.

Assessment

(5)Despite subsection 70(1), the Minister may at any time assess a transferee in respect of any amount payable because of this section and this Part applies to the transferee with any modifications that the circ*mstances require.

Rules applicable

(6)If a transferor and transferee become, because of subsection (2), jointly and severally, or solidarily, liable in respect of part or all of the liability of the transferor under this Act, the following rules apply:

  • (a)a payment by the transferee on account of the transferee’s liability discharges, to the extent of the payment, the joint liability; and

  • (b)a payment by the transferor on account of the transferor’s liability discharges the transferee’s liability only to the extent that the payment operates to reduce the transferor’s liability to an amount less than the amount in respect of which the transferee is, because of subsection (2), jointly and severally, or solidarily, liable.

Anti-avoidance rules

(7)For the purposes of subsections (1) to (6), if a person (referred to in this section as the “transferor”) has transferred property either directly or indirectly, by means of a trust or by any other means whatever to another person (referred to in this section as the “transferee”) in a transaction or as part of a series of transactions, the following rules apply:

  • (a)the transferor is deemed to not be dealing at arm’s length with the transferee at all times in the transaction or series of transactions if

    • (i)the transferor and the transferee do not deal at arm’s length at any time during the period beginning immediately before the transaction or series of transactions and ending immediately after the transaction or series of transactions, and

    • (ii)it is reasonable to conclude that one of the purposes of undertaking or arranging the transaction or series of transactions is to avoid joint and several, or solidary, liability of the transferee and the transferor under this section for an amount payable under this Act;

  • (b)an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (5) in respect of that amount) is deemed to have become payable in the calendar year in which the property was transferred, if it is reasonable to conclude that one of the purposes of the transfer of the property is to avoid the payment of a future amount payable under this Act by the transferor or transferee; and

  • (c)the amount determined for A in paragraph (2)‍(a) is deemed to be the greater of

    • (i)the amount otherwise determined for A in paragraph (2)‍(a) without reference to this paragraph, and

    • (ii)the amount determined by the formula

      A − B

      where

      A
      is the fair market value of the property at the time of the transfer, and
      B
      is

      (A)the lowest fair market value of the consideration (that is held by the transferor) given for the property at any time during the period beginning immediately before the transaction or series of transactions and ending immediately after the transaction or series of transactions, or

      (B)if the consideration is in a form that is cancelled or extinguished during the period referred to in clause (A),

      (I)the amount that is the lower of the amount determined under clause (A) and the fair market value during that period of any property, other than property that is cancelled or extinguished during the period, that is substituted for the consideration referred to in clause (A), or

      (II)if no property is substituted for the consideration referred to in clause (A), other than property that is cancelled or extinguished during the period, nil.

Payment in Canadian dollars

53(1)Every person that is required under this Act to pay an amount to the Receiver General for Canada must pay the amount in Canadian dollars.

Exception

(2)The Minister may, at any time, waive the requirement under subsection (1) and accept a currency other than Canadian dollars. If such a waiver is granted, the amount is to be converted from Canadian dollars to the other currency using a rate of exchange that is acceptable to the Minister.

Definition of electronic payment

54(1)In this section, electronic payment means any payment to the Receiver General for Canada that is made through electronic services offered by a person described in any of paragraphs (2)‍(a) to (d) or by any electronic means specified by the Minister.

Electronic payment

(2)Every person that is required under this Act to pay an amount to the Receiver General for Canada must, if the amount is $10,000 or more, make the payment by way of electronic payment, unless the person cannot reasonably pay the amount in that manner, to the account of the Receiver General for Canada at or through

  • (a)a bank;

  • (b)a credit union;

  • (c)a corporation authorized under the laws of Canada or a province to carry on the business of offering its services as a trustee to the public; or

  • (d)a corporation that is authorized under the laws of Canada or a province to accept deposits from the public and that carries on the business of lending money on the security of real property or immovables or investing in indebtedness on the security of mortgages on real property or hypothecs on immovables.

Small amounts owing by a person

55(1)If, at any time, the total of all unpaid amounts owing by a person to the Receiver General for Canada under this Act does not exceed $2.‍00, the amount owing by the person is deemed to be nil.

Small amounts payable to a person

(2)If, at any time, the total of all amounts payable by the Minister to a person under this Act does not exceed $2.‍00, the Minister may apply those amounts against any amount owing, at that time, by the person to His Majesty in right of Canada. However, if the person, at that time, does not owe any amount to His Majesty in right of Canada, those amounts payable are deemed to be nil.

DIVISION E 

Interest

Compound interest

56(1)If a person fails to pay an amount to the Receiver General for Canada as and when required under this Act, the person must pay to the Receiver General for Canada interest on the amount. The interest must be compounded daily at the rate prescribed by regulation and determined for the period beginning on the first day after the day on or before which the amount was required to be paid and ending on the day on which the amount is paid.

Payment of compounded interest

(2)For the purposes of subsection (1), interest that is compounded on a particular day on an unpaid amount of a person is deemed to be required to be paid by the person to the Receiver General for Canada at the end of the particular day and, if the person has not paid the interest so determined by the end of the day after the particular day, the interest must be added to the unpaid amount at the end of the particular day.

Period when interest not payable

(3)If the Minister has served a demand that a person pay on or before a specified day all amounts payable by the person under this Act on the date of the demand, and the person pays the amount demanded on or before the specified day, the Minister must waive any interest that would otherwise apply in respect of the amount demanded for the period beginning on the first day after the date of the demand and ending on the day of payment.

Interest and penalty amounts of $25 or less

(4)If, at any time, a person pays an amount that is not less than the total of all amounts, other than interest and penalties, owing at that time to His Majesty in right of Canada under this Act in respect of a calendar year and the total amount of interest and penalties payable by the person under this Act in respect of the year is not more than $25, the Minister may cancel the interest and penalties.

Waiving or cancelling interest

57(1)The Minister may, on or before the day that is 10 calendar years after the end of a particular calendar year, or on application by a person on or before that day, waive, cancel or reduce any interest otherwise payable by the person under this Act on an amount that is required to be paid by the person in respect of the particular calendar year, and may despite subsection 70(1), make any assessment of the interest payable by the person that is necessary to take into account the waiver, cancellation or reduction of the interest.

Interest on amounts waived or cancelled

(2)If a person has paid an amount of interest and the Minister waives, cancels or reduces any portion of that amount under subsection (1), the Minister must refund the portion of the amount and pay interest on it at the rate prescribed by regulation beginning on the day that is 30 days after the day on which the Minister received an application in a manner satisfactory to the Minister to apply that subsection (or, if there is no such application, on the day on which the Minister waives, cancels or reduces the portion of the amount) and ending on the day on which the portion of the amount is paid as a refund or applied against another amount owed by the person to His Majesty in right of Canada.

DIVISION F 

Administrative Charge under Financial Administration Act

Dishonoured instruments

58For the purposes of this Act and section 155.‍1 of the Financial Administration Act, any charge that is payable at any time by a person under the Financial Administration Act in respect of an instrument tendered in payment or settlement of an amount that is payable under this Act is deemed to be an amount that is payable by the person at that time under this Act. In addition, Part II of the Interest and Administrative Charges Regulations does not apply to the charge and any debt under subsection 155.‍1(3) of the Financial Administration Act in respect of the charge is deemed to be extinguished at the time the total of the amount and any applicable interest under this Act is paid.

DIVISION G 

Refunds

Statutory recovery rights

59Except as specifically provided under this Act or the Financial Administration Act, no person has a right to recover any money that has been paid to His Majesty in right of Canada as or on account of, or that has been taken into account by His Majesty in right of Canada as, an amount payable under this Act.

Refund — payment in error

60(1)If a person, otherwise than because of an assessment, has paid any moneys in error to His Majesty in right of Canada, whether by reason of mistake of fact or law or otherwise, and the moneys have been taken into account by His Majesty in right of Canada as taxes, penalties, interest or other amounts under this Act, then an amount equal to the amount of the moneys must, subject to this Act, be refunded to the person if the person applies for the refund of the amount within two years after the day on which the moneys were paid.

Form and contents of application

(2)An application under subsection (1) must be made in the form and manner, and containing the information, prescribed by the Minister.

Determination

(3)On receipt of an application made under subsection (1), the Minister must, without delay, consider the application and determine the amount of the refund, if any, payable to the applicant.

Minister not bound

(4)In considering an application made under subsection (1), the Minister is not bound by any application made or information provided by or on behalf of any person.

Notice and payment

(5)After considering an application made under subsection (1), the Minister must

  • (a)send to the applicant a notice of the determination made under subsection (3); and

  • (b)pay to the applicant the amount of the refund, if any, payable to the applicant.

Objections and appeals

(6)For the purposes of Divisions J and K and subsections 67(5) and 122(7) and (13), a determination made under subsection (3) is deemed to be an assessment.

Interest on payment

(7)If an amount is paid to an applicant under subsection (5), the Minister must pay interest, at the rate prescribed by regulation, to the applicant on the amount for the period beginning on the day that is 30 days after the day on which the application was received (or deemed received under subsection 67(4)) by the Minister and ending on the day on which the amount is paid.

Determination valid and binding

(8)A determination made under subsection (3), subject to being varied or vacated on an objection or appeal under this Act and subject to an assessment, is deemed to be valid and binding despite any irregularity, informality, error, defect or omission in the notice of the determination or in any proceeding under this Act relating to the determination.

Restriction — application to other debts

61Instead of paying to a person a refund that might otherwise be paid under this Act, the Minister may, if the person is, or is about to become, liable to make any payment to His Majesty in right of Canada or a province, apply the amount of the refund to that liability and notify the person of that action.

Restriction — unfulfilled filing requirements

62The Minister must not, in respect of a person, refund, repay, apply to other debts or set off amounts under this Act until the person has filed with the Minister all returns and other records of which the Minister has knowledge that are required to be filed under this Act, the Income Tax Act, the Excise Tax Act, the Excise Act 2001, the Air Travellers Security Charge Act, the Greenhouse Gas Pollution Pricing Act, the Underused Housing Tax Act and the Select Luxury Items Tax Act.

Restriction — trustees

63If a trustee is appointed under the Bankruptcy and Insolvency Act to act in the administration of the estate of a bankrupt, a refund under this Act that the bankrupt was entitled to claim before the appointment must not be paid after the appointment unless all returns required under this Act to be filed before the appointment have been filed and all amounts required under this Act to be paid by the bankrupt have been paid.

Overpayment of refund or interest

64If an amount is paid to, or applied to a liability of, a person as a refund or as interest under this Act and the person is not entitled to the refund or interest or the amount paid or applied exceeds the refund or interest to which the person is entitled, the Minister may, despite subsection 70(1), assess the person at any time and the person must pay to the Receiver General for Canada an amount equal to the refund, interest or excess on the day on which the refund, interest or excess is paid to, or applied to a liability of, the person.

DIVISION H 

Records and Information

Keeping records

65(1)A person must keep all records that are necessary to determine whether the person has complied with this Act and, if the person is or was a constituent entity of a consolidated group, all of that person’s records that are necessary to determine whether other entities of the group have complied with this Act.

Minister may specify information

(2)The Minister may specify the form that a record is to take and any information that the record must contain.

Electronic records

(3)Every person required under this section to keep a record that does so electronically must ensure that all equipment and software necessary to make the record intelligible are available during the retention period required for the record.

General period for retention

(4)Subject to subsection (5), every person that is required to keep records must retain them for a period of eight years after the end of the calendar year to which they relate or for any other period that may be prescribed by regulation.

Exception — general period for retention

(5)If, for a calendar year, a person has not filed a return as and when required by section 45 and subsequently files a return for the year, then the person must retain the records that are required by this section to be kept and that relate to the year for a period of eight years after the day on which the return is filed.

Inadequate records

(6)If a person fails to keep adequate records for the purposes of this Act, the Minister may require the person to keep any records that the Minister may specify and the person must keep the records specified.

Objection or appeal

(7)If a person that is required under this section to keep records serves a notice of objection, or is a party to an appeal or reference, under this Act, the person must retain every record that pertains to the subject matter of the objection, appeal or reference until the objection, appeal or reference is finally disposed of.

Demand by Minister

(8)If the Minister is of the opinion that it is necessary for the administration or enforcement of this Act, the Minister may, by a demand served personally, sent by confirmed delivery service or sent electronically, require any person to keep records and retain them for any period that is specified in the demand, and the person must comply with the demand.

Permission for earlier disposal

(9)A person that is required under this section to keep records may dispose of them before the expiry of the period during which they are required to be kept if permission for their disposal is given by the Minister.

Requirement to provide information or records

66(1)Subject to subsection (2), but despite any other provision of this Act, the Minister may — for any purpose related to the administration or enforcement of this Act by notice served personally, sent by confirmed delivery service or sent electronically — require that any person provide the Minister, within such reasonable time as is specified in the notice, with any information or record.

Unnamed persons

(2)The Minister must not impose on any person (in this section referred to as a “third party”) a requirement to provide information or any record relating to one or more unnamed persons unless the Minister first obtains the authorization of a judge under subsection (3).

Judicial authorization

(3)A judge of the Federal Court may, on application by the Minister and subject to any conditions that the judge considers appropriate, authorize the Minister to impose on a third party a requirement under subsection (1) relating to an unnamed person, or a group of unnamed persons, if the judge is satisfied by information on oath that

  • (a)the unnamed person or the group is ascertainable; and

  • (b)the requirement is imposed to verify compliance by the unnamed person, or persons in the group, with any obligation under this Act.

Time period not to count

(4)If a person is sent or served with a notice of requirement under subsection (1), the period between the day on which an application for judicial review in respect of the requirement is made and the day on which the application is finally disposed of is not to be counted in the computation of the period within which an assessment of the person may be made under subsection 70(1).

DIVISION I 

Assessments

Assessment

67(1)The Minister may assess a person for any tax or other amount payable by the person under this Act and may, despite any previous assessment covering, in whole or in part, the same matter, vary the assessment, reassess the person or make any additional assessments that the circ*mstances require.

Liability not affected

(2)The liability of a person to pay an amount under this Act is not affected by an incorrect or incomplete assessment or by the fact that no assessment has been made.

Minister not bound

(3)The Minister is not bound by any return, application or information provided by or on behalf of any person and may make an assessment despite any return, application or information provided or not provided.

Determination of refunds

(4)In assessing a person under subsection (1), the Minister may determine whether a refund under section 60 is payable to the person. If the Minister makes such a determination, the person is deemed to have made an application under section 60 within two years after the day on which the moneys were paid and the Minister is deemed to have received the application on the date of the notice of assessment.

Irregularities

(5)No assessment is to be vacated or varied on an appeal by reason only of an irregularity, informality, error, defect or omission by any person in the observance of any directory provision of this Act.

Notice of assessment

68(1)After assessing a person under this Act, the Minister must send to the person a notice of the assessment.

Payment of remainder

(2)If the Minister has assessed a person for an amount, any portion of that amount remaining unpaid is payable to the Receiver General for Canada as of the date of the notice of assessment.

Payment by Minister on assessment

69Subject to subsections 72(11), 82(2) and 90(2), if an assessment of a person in respect of a particular calendar year establishes that the person has paid an amount in excess of the amount determined on that assessment to be payable in respect of the particular calendar year by the person, the Minister must pay to the person a refund of the amount of the excess together with interest, at the rate prescribed by regulation, on the amount of the excess for the period beginning on the day that is the later of July 30 of the following calendar year and the day on which the excess was paid and ending on the day on which the refund is paid.

Limitation period for assessments

70(1)Subject to subsections (2) to (5) and (10), no assessment in respect of any tax or other amount payable by a person under this Act is permitted more than seven years after the day on which the return to which the tax or other amount payable relates was filed under section 45.

Exception — objection or appeal

(2)An assessment in respect of any tax or other amount payable by a person under this Act may be made at any time if the assessment is made

  • (a)to give effect to a decision on an objection or appeal;

  • (b)with the written consent of an appellant to dispose of an appeal; or

  • (c)to give effect to an alternative basis or argument advanced by the Minister under subsection (5).

Exception — neglect or fraud

(3)An assessment in respect of any matter may be made at any time if the person to be assessed or the person filing a return has, in respect of that matter,

  • (a)made a misrepresentation that is attributable to neglect, carelessness or wilful default; or

  • (b)committed fraud in filing a return or an application for a refund or in providing any information under this Act.

Exception — other period

(4)If, in making an assessment, the Minister determines that a person has paid in respect of any matter an amount in respect of a particular calendar year that was in fact payable in respect of another calendar year, the Minister may at any time make an assessment for that other calendar year in respect of that matter.

Alternative basis or argument

(5)The Minister may advance an alternative basis or argument in support of an assessment of a person, or in support of all or any portion of the total amount determined on assessment to be payable by a person under this Act, at any time after the period otherwise limited by subsection (1) for making the assessment unless, on an appeal under this Act,

  • (a)there is relevant evidence that the person is no longer able to adduce without leave of the court; and

  • (b)it is not appropriate in the circ*mstances for the court to order that the evidence be adduced.

Limitation — alternative basis or argument

(6)If a reassessment of a person gives effect to an alternative basis or argument advanced by the Minister under subsection (5) in support of a particular assessment of the person, the Minister is not to reassess for an amount that is greater than the total amount of the particular assessment.

Exception — alternative basis or argument

(7)Subsection (6) does not apply to any portion of an amount determined on reassessment that the Minister would, if this Act were read without reference to subsection (5), be entitled to reassess under this Act at any time after the period otherwise limited by subsection (1) for making the reassessment.

Filing waiver

(8)A person may, within the period otherwise limited by subsection (