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Statutes of Newfoundland and Labrador 2005


Statutes of Newfoundland and Labrador 2005 Chapter 10 Statutes of Newfoundland and Labrador 2005 Chapter 10

CHAPTER 10

AN ACT TO AMEND THE INCOME TAX ACT, 2000

(Assented to May 19, 2005)

Analysis

1. S.2 Amdt.
Interpretation

2. S.5 Amdt.
Definitions

3. S.9 Amdt.
Personal credits

4. S.11 Amdt.
Medical expense credit

5. S.12 Amdt.
Credit for mental or physical impairment

6. Ss.12.1, 12.2 & 12.3 Added
12.1 Credit for 2001-2003
12.2 Unused tuition and
education amounts
2001-2003
12.3 Transfer tax credits
2001-2003

7. S.15 R&S
Unused tuition and education amounts

8. S.18 R&S
Tax credit transfer

9. Ss.20 & 21 R&S
20. Dividend tax credit
21. Overseas employment
tax credit

10. S.21.1 Amdt.
Low income reduction

11. S.23 Amdt.
Ordering of credits

12. S.31.1 Added
Pro-rating where income earned outside province

13. S.33 R&S
Foreign tax deduction

14. S.34 R&S
Harmonized sales tax credit

15. S.42 Amdt.
Research and development tax credit

16. S.45.1 Added
Labour-sponsored venture capital tax credit

17. S.68 Amdt.
Regulations

18. S.88.1 Added
Provincial anti-avoidance rule

19. S.89 Amdt.
Collection agreement

20. Commencement

Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:


SNL2000 cI-1.1
as amended

1. Paragraph 2(1)(s) of the Income Tax Act, 2000 is repealed and the following substituted:

(s) "taxation year" of a person means the period determined under the federal Act as a taxation year.

2. Paragraph 5(f) of the Act is repealed and the following substituted:

(f) "provincial percentage" for a taxation year means the appropriate percentage divided by the appropriate percentage as defined in the federal Act, expressed as a percentage that is rounded to the nearest one tenth or, where the result is equidistant from 2 consecutive one-tenths, to the higher one-tenth; and

 

3. Subsection 9(3) of the Act is repealed and the following substituted:

(3) For the purpose of computing the tax payable under this Part for a taxation year, by an individual who was resident in the province on the last day of the taxation year, there may be deducted an amount determined by the formula

A x B

where

A is the appropriate percentage for the year; and

B is the lesser of $1,000 and

(a) where the individual has attained the age of 65 years before the end of the year, the pension income received by the individual in the year; and

(b) where the individual has not attained the age of 65 years before the end of the year, the qualified pension income received by the individual in the year.

 

4. Subsection 11(1) of the Income Tax Act, 2000 is repealed and the following substituted:

Medical expense credit

11. (1) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted an amount determined by the formula

A x ((B-C) + D)

where

A is the appropriate percentage for the year;

B is the amount used in the formula in subsection 118.2(1) of the federal Act for B in computing the individual's deduction under that section for the year;

C is the smaller of $1,614 and 3% of the individual's income for the year; and

D is the amount that would be determined in the formula in subsection 118.2(1) of the federal Act for D in computing the individual's deduction under that section for the year if the reference to $1,813 in the description of F in that subsection is read as a reference to $1,614.

 

5. Section 12 of the Act is amended by adding immediately after subsection (2) the following:

(3) Notwithstanding subsection (2), for the purpose of computing the tax payable under this Part for a taxation year ending after 2003 by an individual who is entitled to a deduction under subsection 118.3(2) of the federal Act for the taxation year in respect of a person referred to in that subsection, there may be deducted the amount, if any, by which

(a) the amount deductible under subsection (1) in computing that personís tax payable under this Part for the taxation year, or that would be so deductible if the person were liable under section 6 to pay tax for the taxation year;

exceeds

(b) the amount of that personís tax payable under this Part for the taxation year if the person were liable under section 6 to pay tax for the taxation year, computed before any deductions under this Part other than deductions referred to in sections 9 and 17.

 

6. The Act is amended by adding immediately after section 12 the following:

Credit for 2001-2003

12.1 Notwithstanding section 12, for the purpose of computing an individualís tax payable under this Part for a taxation year ending before 2004, where the person referred to in subsection 118.3(2) of the federal Act did not reside in the province on the last day of the taxation year, there may deducted for that taxation year an amount determined by the formula

A/B x C

where

A is the appropriate percentage;

B is the appropriate percentage under the federal Act; and

C is

(a) for the 2003 taxation year, the amount that the individual is entitled to deduct under subsection 118.3(2) of the federal Act for the year; and

(b) for the 2001 and 2002 taxation years, the amount that the individual is entitled to deduct under subsection 118.3(2) of the federal Act for the year if determined without reference to the amount for C in the formula provided in that subsection.

Unused tuition and education amounts 2001-2003

12.2 (1) For the purpose of determining the amount that may be deducted under subsection 15(1) for a taxation year ending before 2004 by an individual who did not reside in the province on the last day of the preceding taxation year, the individualís unused tuition and the education tax credits at the end of the preceding taxation year shall be the lesser of

(a) the amount that would be the individualís unused tuition and education tax credits at the end of the preceding taxation year as determined under section 118.61 of the federal Act if the percentage applied under sections 118.5 and 118.6 of the federal Act had been the appropriate percentage for the year instead of the appropriate percentage as defined in that Act; and

(b) the amount that would be the individualís unused tuition and education tax credits at the end of the preceding taxation year as determined under a statutory section similar to section 118.61 of the federal Act or of another province or territory of Canada in which the individual resided on the last day of the taxation year for the preceding taxation year provided that the percentage applied under that section had been the appropriate percentage for the year.

(2) For the purpose of subsection (1), where there is no section of a statute of a province in which the individual resided on the last day of the taxation year for the preceding taxation year that is similar to section 118.61 of the federal Act, the individualís unused tuition and education tax credits for the preceding taxation year shall be deemed to equal the amount determined under paragraph (1)(a).

(3) For the purpose of subsection (1),

(a) the amount referred to in paragraph (1)(a) shall be used only to the extent that it has not been used in claiming a credit under section 118.5, 118.6 or 118.61 of the federal Act or in determining credits transferred under section 118.81 of the federal Act for a taxation year; and

(b) the amount referred to in paragraph (1)(b) shall be used only to the extent that it has not been used in claiming a credit under a statutory section similar to section 118.5, 118.6 or 118.61 of the federal Act or of another province or territory of Canada or in determining credits transferred under a section that is similar to section 118.81 of the federal Act for a taxation year of an income tax statute or similar Act of the province or territory in which the individual resided on the last day of the taxation year for the preceding taxation year.

Transfer tax credits 2001-2003

12.3 (1) Notwithstanding section 18, this section shall apply to a taxation year ending before 2004.

(2) Sections 118.8 and 118.81 of the federal Act apply for the purpose of this Act, except that the reference to $850, or the amount that it is amended to read, in subparagraph (ii) of the description of A in paragraph 118.81(a) of the federal Act shall be read as a reference to the product obtained by multiplying $5,000 by the appropriate percentage for the taxation year.

(3) Where for a taxation year a parent or grandparent of an individual, other than an individual in respect of whom the individualís spouse or common law partner deducts an amount for the year under paragraph 9(1)(a) or subsection 18(1) of this Act, section 118 or 118.8 of the federal Act or similar provisions of an income tax statute of another province or territory, is the only person designated in writing by the individual for the year for the purpose of this subsection and no other person is designated for the purpose of section 118.9 of the federal Act or a similar provision of an income tax statute of another province or territory, there may be deducted in computing the tax payable under this Part for the year by the parent or grandparent, the tuition and education tax credits transferred for the year by the individual to the parent or grandparent.

(4) Notwithstanding subsections (2) and (3) for the purpose of the application of section 118.81 of the federal Act to this Act, where a person did not reside in the province on the last day of the taxation year, the tuition and education tax credits transferred for the taxation year by the person to an individual shall be equal to the lesser of

(a) the amount determined by the formula

A/B x C

where

A is the appropriate percentage under this Act;

B is the appropriate percentage under the federal Act; and

C is the amount determined in respect of the person under section 118.81 of the federal Act for the purpose of computing the personís tax payable under Part I of the federal Act for the taxation year; and

(b) the amount determined by the formula

D/E x F

where

D is the appropriate percentage under this Act;

E is the appropriate percentage under the federal Act; and

F is the amount determined in respect of the person for the taxation year as determined under a section of an income tax statute or similar Act of the province or territory in which the individual resided on the last day of the taxation year for the preceding taxation year that is similar to section 118.81 of the federal Act.

(5) For the purpose of subsection (4), where there is no section that is similar to section 118.81 of the federal Act in an enactment of the province or territory in which the individual resided on the last day of the taxation year for the preceding taxation year, the individualís unused tuition and education tax credits at the end of the preceding taxation year shall be deemed to equal the amount determined under paragraph (4)(a).

(6) Notwithstanding subsections (2) and (3), for the purpose of section 118.8 of the federal Act, as that section applies for the purposes of this Act, where in a taxation year an individualís spouse or common law partner did not reside in the province on the last day of the taxation year,

(a) the amount for B in the formula in section 118.8 of the federal Act, as that section applies for the purpose of this Act, for the individual for the taxation year shall be equal to the amount determined by the formula

G/H x I

where

G is the appropriate percentage under this Act;

H is the appropriate percentage under the federal Act; and

I is the amount determined for the individual for B in the formula in section 118.8 of the federal Act for the purpose of computing the individualís tax payable under Part I of the federal Act for the taxation year; and

(b) the amount for C in the formula in section 118.8 of the federal Act, as that section applies for the purpose of this Act, for the individual for the taxation year shall be equal to the amount determined by the formula

J/K x L

where

J is the appropriate percentage under this Act;

K is the appropriate percentage under the federal Act; and

L is the amount determined for the individual for C in the formula in section 118.8 of the federal Act for the purpose of computing the individualís tax payable under Part I of the federal Act for the taxation year.

7. Section 15 of the Act is repealed and the following substituted:

Unused tuition and education amounts

15. (1) For the purpose of computing an individualís tax payable under this Part for a taxation year, there may deducted the lesser of the

(a) individualís unused tuition and education credits at the end of the preceding taxation year; and

(b) amount that would be the individualís tax payable under this Part for the year if no amount were deductible under this Part, other than an amount deductible under this section and section 9, 12 or 17.

(2) An individualís unused tuition and education tax credits at the end of the taxation year is the amount determined by the formula

A + (B - C) - (D + E)

where

A is the individualís unused tuition and education credits at the end of the preceding taxation year;

B is the total of all amounts, each of which maybe deducted under sections 13 and 14 in computing the individualís tax payable under this Part for the year;

C is the lesser of the value of B and the amount that would be the individualís tax payable under this Part for the year if no amount were deductible under this Part, other than an amount deductible under this section and section 9, 12 or 17;

D is the amount that the individual may deduct under subsection (1) for the year; and

E is the tuition and education tax credits transferred for the year by the individual to the individualís spouse, common law partner, parent or grandparent.

(3) For the purpose of determining the amount that may be deducted under subsection (1) for a taxation year that begins after the year 2003 by an individual who was not resident in the province on the last day of the preceding taxation year, the individualís unused tuition and education tax credits at the end of the preceding taxation year shall be equal to the amount that would be the individualís unused tuition and education tax credits at the end of the preceding taxation year as determined under section 118.61 of the federal Act if the percentage applied under sections 118.5 and 118.6 of the federal Act had been the appropriate percentage as defined in that Act.

(4) For the purpose of subsection (3), the amounts mentioned in that subsection shall be used only to the extent that they have not been used in claiming a credit under section 118.5, 118.6 or 118.61 of the federal Act, or in determining credits transferred under section 118.81 of the federal Act for a taxation year.

 

8. Section 18 of the Act is repealed and the following substituted:

Tax credit transfer

18. (1) For the purpose of computing the tax payable under this Part for a taxation year by an individual who, at any time during the year, is a married person or is in a common law partnership, other than an individual who, by reason of a breakdown of their marriage or common law partnership, is living separate and apart from his or her spouse or common law partner at the end of the year and for a period of 90 days commencing in the year, there may be deducted an amount determined by the formula

A + B - C

where

A is the tuition and education tax credits transferred for the year by the spouse or common law partner to the individual;

B is the total of all amounts, each of which is deductible under subsections 9(2) and 9(3) and section 12 in computing the spouseís or common law partnerís tax payable under this Part for the year, or that would be so deductible if the spouse or common law partner were liable under section 6 to pay tax for the year; and

C is the amount, if any, by which

(a) the amount that would be the spouseís or common law partnerís tax payable under this Part for the year, or that would be so payable under this Part for the year if the spouse or common law partner were liable under section 6 to pay tax for the year, if no amount were deductible under this Part, other than an amount deductible under paragraph 9(1)(c) and sections 15 and 17;

exceeds

(b) the lesser of

(i) the total of all amounts that may be deducted under sections 13 and 14 in computing the spouseís or common law partnerís tax payable under this Part for the year, or that would be so deductible if the spouse or common law partner were liable under section 6 to pay tax for the year, and

(ii) the amount that would be the spouseís or common law partnerís tax payable under this Part for the year, or that would be so payable under this Part for the year if the spouse or common law partner were liable under section 6 to pay tax for the year, if no amount were deductible under this Part other than an amount deductible under sections 9, 12, 15 and 17.

(2) Where for a taxation year a parent or grandparent of an individual, other than an individual in respect of whom the individualís spouse or common law partner deducts an amount for the year under paragraph 9(1)(a) or subsection 18(1) of this Act, section 118 or 118.8 of the federal Act or similar provisions of an income tax statute of another province or territory, is the only person designated in writing by the individual for the year for the purpose of this subsection and no other person is designated for the purpose of section 118.9 of the federal Act, or a similar provision of an income tax statute of another province or territory, there may be deducted in computing the tax payable under this Part for the year by the parent or grandparent, the tuition and education tax credits transferred for the year by the individual to the parent or grandparent.

(3) In this section, the tuition and education tax credits transferred for a taxation year by a person to an individual is the lesser of

(a) the amount determined by the formula

A - B

where

A is the lesser of

(i) the total of all amounts that may be deducted under sections 13 and 14 in computing the personís tax payable under this Part for the year, or that would be so deductible if the person were liable under section 6 to pay tax for the year, and

(ii) the amount obtained by multiplying $5,000 by the appropriate percentage for the taxation year; and

B is the amount that would be the personís tax payable under this Part for the year if no amount were deductible under this Part other than an amount deductible under sections 9, 12, 15 and 17; and

(b) the amount for the year that the person designates in writing for the purpose of subsection (1) or (2).

 

9. Sections 20 and 21 of the Act are repealed and the following substituted:

Dividend tax credit

20. For the purpose of computing the tax payable under this Part for a taxation year by an individual who was resident in the province on the last day of the taxation year, there may be deducted an amount equal to 25% of any amount required under paragraph 82(1)(b) of the federal Act to be included in computing the individualís income for the year.

Overseas employment tax credit

21. For the purpose of computing the tax payable under this Part for a taxation year by an individual who was resident in the province on the last day of the taxation year, there may be deducted an amount equal to the provincial percentage of the amount that the individual may deduct under section 122.3 of the federal Act for that taxation year.

 

10. (1) Paragraph 21.1(1)(a) of the Act is repealed and the following substituted:

(a) "adjusted income" of an individual for a taxation year means the total of all amounts, each of which would be the income for the year of the individual and the individualís qualified relation for the year, if any, calculated as if no amount was included in respect of a gain from a disposition of property to which section 79 of the federal Act applies in computing that income, and the income of a person who is a non-resident of Canada at any time in a taxation year is deemed to be equal to the amount that would, if the person were resident in Canada throughout the year, be the personís income for the year;

(2) Paragraph 21.1(1)(c) of the Act is repealed and the following substituted:

(c) "qualified relation" of an individual for a taxation year means the person who, at the end of the year, is the individualís cohabiting spouse or common law partner within the meaning assigned by section 122.6 of the federal Act.

 

11. Paragraphs 23(2)(p) and (q) of the Act are repealed and the following substituted:

(p) section 45.1;

(q) section 46; and

(r) section 21.1

 

12. The Act is amended by adding immediately after section 31 the following:

Pro-rating where income earned outside province

31.1  Where an individual resided in the province on the last day of a taxation year but had income earned in the taxation year outside the province, the individual may deduct from the amount of tax otherwise payable for the taxation year as determined under section 31 an amount determined by the formula

A x B/C

where

A is the total of all amounts each of which is deductible under subsection 9(3) and sections 20 and 21 by the individual for the taxation year;

B is the individualís income earned in the taxation year outside the province; and

C is the individualís income for the year.

 

13. Section 33 of the Act is repealed and the following substituted:

Foreign tax deduction

33. (1) Where an individual resided in the province on the last day of a taxation year and had income for that year that included income earned in a country other than Canada in respect of which non-business income tax was paid by the individual to the government of a country other than Canada, the individual may deduct from the tax payable by him or her under this Act for that taxation year an amount equal to the lesser of

(a) the amount, if any, by which non-business income tax paid by the individual for the year to the government of the other country exceeds the amount

(i) if section 127.5 of the federal Act does not apply to the individual for the taxation year, that is deductible from the individualís tax payable under Part I of the federal Act for that year under subsection 126(1) of the federal Act that is in respect of non-business income tax paid to the government of that country, or

(ii) if section 127.5 of the federal Act applies to the individual for the taxation year, of the individualís special foreign tax credit for the year determined under section 127.54 of the federal Act that is in respect of non-business income tax paid to the government of that country; and

(b) the proportion of the tax otherwise payable under this Act for that taxation year where

(i) the amount, if any, by which the total of the individualís qualifying incomes exceeds the total of the individualís qualifying losses

(A) for the year, if the individual is resident in Canada throughout the year, and

(B) for the part of the year throughout which the individual is resident in Canada, if the individual is non-resident at any time in the year,

from sources in that country, where

(C) no businesses were carried out by the individual in that country,

(D) no amount was deducted under subsection 91(5) of the federal Act in computing the individualís income for the year, and

(E) the individualís income from employment in that country was not from a source in that country to the extent of the lesser of the amounts determined in respect of it under paragraphs 122.3(1)(c) and (d) of the federal Act for the year,

is of,

(ii) the amount, if any, by which

(A) if the individual was resident in Canada throughout the year, the individualís income earned in the year in the province computed without reference to paragraph 20(1)(ww) of the federal Act, and

(B) if the individual was not resident, in Canada at any time in the year the individualís income earned in the year in the province that is included in the amount determined under paragraph 114(a) of the federal Act in respect of the individual for the year,

exceeds

(C) the total of all amounts, each of which is an amount deducted under section 110.6 or paragraph 111(1)(b) of the federal Act or deductible under paragraph 110(1)(d), (d.1), (d.2), (d.3),(f),(g) or (j) of the federal Act for the year, in computing the individualís taxable income for the year.

(2) For the purposes of subsection (1) and paragraph 44(1)(b), non-business income tax paid by a taxpayer to the government of a country other than Canada in respect of the taxpayerís income for a taxation year is the non-business income tax paid by the taxpayer to the government of that country in respect of that year as determined under the definition "non-business income tax" in subsection 126(7) of the federal Act.

(3) For the purpose of this section, where an individualís income for a taxation year includes income from sources in more than one country other than Canada, subsection (1) shall be read as providing for separate deductions in respect of each of the countries other than Canada.

(4) For the purpose of this section and section 44

(a) the government of the country other than Canada includes the government of a state, province or other political subdivision of that country; and

(b) if income from a source in a particular country would be tax-exempt income except that a portion of the income is subject to an income or profits tax imposed by the government of a country other than Canada, that portion is deemed to be income from a separate source in the particular country.

(5) In this section and section 44, "qualifying incomes", "qualifying losses" and "tax exempt income" shall have the same meaning as in subsection 126(7) of the federal Act.

 

14. Section 34 of the Act is repealed and the following substituted:

Harmonized sales tax credit

34. (1) In this section

(a) "adjusted income", "cohabiting spouse or common law partner", "qualified dependant" and "qualified relation" have the meanings assigned to them under subsection 122.5(1) of the federal Act;

(b) "eligible individual" means an eligible individual as defined in subsection 122.5(1) of the federal Act and who is resident in the province before the specified month;

(c) "return of income" in respect of a person for a taxation year means,

(i) for a person who is resident in the province at the end of the taxation year, the personís return of income, other than a return of income under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4) of the federal Act, that is required to be filed for the taxation year or that would be required to be filed if the person had tax payable under that Act for the taxation year, and

(ii) in any other case, a prescribed form containing prescribed information that is filed for the taxation year with the federal Minister of National Revenue; and

(d) "specified month" means the month of October of the immediately following taxation year.

(2) Notwithstanding subsection (1), a person is not an eligible individual, a qualified relation or a qualified dependant of an individual for a taxation year in relation to the specified month where that person

(a) died before the specified month;

(b) is at the beginning of the specified month a person described in paragraph 149(1)(a) or (b) of the federal Act;

(c) is confined to a prison or similar institution for a period of at least 90 days that includes the first day of the specified month; and

(d) is not a resident of the province at the beginning of the specified month.

(3) Where a return of income is filed for a taxation year in respect of an eligible individual and that individual has applied under subsection 122.5(3) of the federal Act, the amount calculated under subsection (4) shall be deemed to be an amount paid by the individual on account of the individualís tax payable under this Act for that year during the specified month.

(4) The amount referred to in subsection (3) shall be the total of

(a) the amount by which the total of

(i) $40,

(ii) $40 for a person who is the qualified relation of the individual for the year, and

(iii) the product obtained when $60 is multiplied by the number of qualified dependants of the individual for the year,

exceeds

(iv) 5% of the amount by which the individualís adjusted income for the year exceeds $15,000; and

(b) the amount calculated in accordance with the regulations.

(5) Notwithstanding subsection (3), if an individual is a qualified relation of another individual, in relation to a specified month for a taxation year, only one of them is an eligible individual in relation to that month and if both of them claim to be eligible individuals, the individual that the Minister of National Revenue designates is the eligible individual in relation to that specified month.

(6) Where a person eligible for payment under subsection 122.5(3) of the federal Act dies prior to the specified month, that personís qualified relation who has filed a return of income for the taxation year and applied for a payment under subsection 122.5(3) of the federal Act, is deemed to be the eligible individual for the purposes of subsections (3) and (4) for that taxation year and the amount payable for the specified month shall be deemed to be an amount paid on account of the personís qualified relationís tax payable under this Act for the specified month.

(7) An individual shall notify the Minister of National Revenue of the occurrence of any of the following events before the end of the month following the month in which the event occurs

(a) the individual ceases to be an eligible individual;

(b) a person becomes or ceases to be the individualís qualified relation; and

(c) a person ceases to be a qualified dependant of the individual, otherwise than because of attaining the age of 19 years.

(8) For the purposes of this section, where, in a taxation year, an individual becomes bankrupt, the individualís income for that year shall include his or her income for the taxation year that begins on January 1 of the calendar year that includes the date of bankruptcy.

 

15. (1) Paragraph 42(1)(a) of the Act is repealed and the following substituted:

(a) "eligible expenditure" means an expenditure in respect of scientific research carried out in the province made after 1995 by a taxpayer with a permanent establishment in the province, that is a qualified expenditure under subsection 127(9) of the federal Act without reference to paragraph (d) of the definition of that term in that Act; and

(2) Section 42 of the Act is amended by adding immediately after subsection (1) the following:

(1.1) For the purpose of this section reference to "government assistance" in subsections 127(18), (19) and (20) of the federal Act does not include the research and development tax credit determined under this section.

 

16. The Act is amended by adding immediately after section 45 the following:

Labour-sponsored venture capital tax credit

45.1 (1) Where, in respect of a taxation year, a taxpayer has been issued a tax credit certificate under section 8 of the Labour-Sponsored Venture Capital Tax Credit Act, there shall be deducted from the tax otherwise payable by that taxpayer in respect of that taxation year, an amount in accordance with that Act.

(2) A taxpayer who is entitled to a deduction under this section shall file, with the taxpayerís annual return for a taxation year in respect of which a deduction is claimed under this section, a copy of the tax credit certificate.

(3) A taxpayer is not entitled to a deduction under this section unless the taxpayer files a return within 3 years after the end of the taxation year to which the deduction pertains.

 

17. Subsection 68(1) of the Act is amended by adding immediately after paragraph (c) the following:

(c.1) respecting the calculation of harmonized sales tax credits for the purposes of section 34;

 

18. The Act is amended by adding immediately after section 88 the following:

Provincial anti-avoidance rule

88.1 (1) In this section

(a) "avoidance transaction" means a transaction that, if not for this section, would result directly or indirectly in a tax benefit or is a part of a series of transactions which series would result directly or indirectly in a tax benefit but does not include a transaction that may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to

(i) obtain a tax benefit, or

(ii) reduce, avoid or defer a tax or another amount payable in respect of tax under any other Act of Canada or of any province or territory of Canada, or

(iii) increase a refund of tax or of another amount payable in respect of tax under any other Act of Canada or of any province or territory of Canada, and

is not a transaction that would result, directly or indirectly, in a misuse or abuse of the provisions of this Act, other than this section;

(b) "tax benefit" means a reduction, avoidance or deferral of tax or of another amount payable under this Act or an increase in a refund of tax or of another amount under this Act;

(c) "tax consequence" to a person means

(i) the amount of the person's

(A) income for the year,

(B) loss,

(C) taxable income,

(D) taxable income earned in Canada,

(E) income earned in the taxation year in the province,

(F) income earned in the taxation year outside the province, and

(G) taxable income earned in the year in the province, or

(ii) any amount, other than an amount referred to in clauses (A) to (G), that is payable or refundable to the person under this Act or that is relevant for the purpose of determining any other amount referred to in this section; and

(d) "transaction" includes an arrangement or event.

(2) If a transaction is an avoidance transaction, the tax consequence to a person shall be determined in a manner that is reasonable in the circumstances in order to deny a tax benefit that but for this section would result directly or indirectly from that transaction or from a series of transactions that includes that transaction.

(3) In determining the tax consequence to a person in a manner that is reasonable in the circumstances in order to deny a tax benefit that would result directly or indirectly from an avoidance transaction

(a) an amount deducted in computing an amount referred to in the definition of "tax consequence" may be allowed or disallowed in whole or in part;

(b) any deduction referred to in paragraph (a) or any other amount used to determine an amount payable or refundable under this Act may be allocated to another 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.

(4) If a notice of assessment, reassessment or additional assessment reflecting the application of subsection (2) to a transaction has been sent to a person, or a notice of determination has been sent to the person, another person is entitled, within 180 days after the date of mailing of that notice, to request in writing that the minister make an assessment, reassessment or additional assessment applying subsection (2) or otherwise make a determination respecting returns of income, assessments of tax, withholdings of tax or reassessments of tax.

(5) Upon receipt of a request under subsection (4), the minister shall consider the request and make an assessment, reassessment, additional assessment or determination notwithstanding an expiry of a time limit except that an assessment, reassessment, additional assessment or determination may be made under this subsection only to the extent that it may be reasonably regarded as relating to a transaction referred to in subsection (4).

(6) The tax consequence to any person after the application of this section shall only be determined through a notice of assessment, reassessment, additional assessment or determination under section 49 or 50.

 

19. Section 89 of the Act is amended by adding immediately after subsection (4) the following:

(5) Where as a result of a conflict of law or a disagreement between the province and another province or territory in the interpretation of the law or facts, a person who is subject to tax under section 6 is also subject to tax in another province or territory and that personís total income earned in the year in a province under subsection 120(4) of the federal Act exceeds that personís taxable income, the Minister of Finance of the province may negotiate and accept a settlement to relieve the effect of multiple taxation.

(6) The minister of the province may authorize a person employed in the Department of Finance or the Minister of National Revenue to perform and exercise the power conferred under subsection (5) and may set terms, conditions and limitations in the exercise of that power.

Commencement

20. (1) Section 6 shall be considered to have come into force on January 1, 2001.

(2) Sections 1 to 5 and 7 to 19 shall be considered to have come into force on January 1, 2004.

 

 

 

 

©Earl G. Tucker, Queen's Printer