This is an official version.
Copyright © 2003: Queens Printer,
Statutes of Newfoundland and Labrador 2003
AN ACT TO AMEND THE INCOME TAX ACT, 2000 (NO.2)
(Assented to May 15, 2003)
1. S.12(1) R&S
2. S.34(4)(b) Amdt.
3. S.40.1 Added
Be it enacted by the Lieutenant-Governor and House of Assembly in Legislative Session convened, as follows:
1. Subsection 12(1) of the Income Tax Act, 2000 is repealed and the following substituted:
Credit for mental or physical impairment
12. (1) Where an individual is entitled to deduct an amount under subsection 118.3(1) of the federal Act for the purpose of computing the individual's tax payable for a taxation year under Part I of the federal Act, for the purpose of computing the tax payable under this Part by the individual for the taxation year, there may be deducted an amount determined by the formula
A x (B + C)
A is the appropriate percentage for the year;
B is $5,000; and
(a) where the individual has not attained the age of 18 years before the end of the year, the amount, if any, by which
(ii) the amount, if any, by which
(A) the total of all amounts each of which is an amount paid in the year for the care or supervision of the individual and included in computing a deduction under section 63, 64 or 118.2 of the federal Act for a taxation year
(B) $2,000; and
(b) in any other case, zero.
2. Paragraph 34(4)(b) of the Act is amended by
(a) striking out the figure "$300" in subparagraph (i) and substituting "$350";
(b) striking out the figure "$300" in subparagraph (ii) and substituting "$350";
(c) striking out the figure "5%" in subparagraph (iii) and substituting "5.83%"; and
(d) striking out the figure "10%" in subparagraph (iv) and substituting "11.67%".
3. The Act is amended by adding immediately after section 40 the following:
Small business tax holiday
40.1 (1) In this section
(a) "active business" means an active business carried on by a corporation as defined in subsection 125(7) of the federal Act;
(b) "new corporation" means a corporation that carries on a qualifying business, and
(i) was incorporated under the Corporations Act after March 31, 2003 and before April 1, 2006, and
(ii) with respect to a taxation year, is eligible to claim a deduction under subsection 125(1) of the federal Act;
(c) "non-qualifying business" means a business
(i) the principal purpose of which is
(A) wholesale or retail trade,
(B) real estate marketing or development,
(C) oil and gas development or production,
(D) mineral resource exploration,
(E) fish harvesting and primary fish processing except the processing of underutilized species that the minister may designate,
(F) to provide prepared food for consumption on or off the premises, or
(G) the sale of alcoholic beverages for consumption on the premises,
(ii) which is the professional practice of an accountant, dentist, lawyer, medical doctor, veterinarian or chiropractor, or
(iii) which is engaged in personal services, managerial, administrative, financial, maintenance or similar business services, professional practices and trades, unless all or substantially all of those services relate to tourism, export or import activities that the minister may designate;
(d) "north-east Avalon" means the towns of Bauline, Conception Bay South, Flatrock, Logy Bay-Middle Cove-Outer Cove, Paradise, Petty Harbour, Portugal Cove-St. Philip's, Pouch Cove and Torbay incorporated or continued under the Municipalities Act, 1999, the City of Mount Pearl incorporated under the City of Mount Pearl Act and the City of St. John's incorporated under the City of St. John's Act; and
(e) "qualifying business" means a business, other than a non-qualifying business, that carries on an active business in the province in one or more of the following sectors:
(ii) research and development,
(iv) forestry and agrifoods,
(viii) import replacement,
(ix) tourism, or
(x) cultural activities.
(2) For the purposes of this section, individuals or corporations or both are related if they are related within the meaning of section 251 of the federal Act.
(3) There may be deducted from the tax otherwise payable under this Part, for each of the first, second and third taxation years of operation of a new corporation, an amount not exceeding the tax otherwise payable under paragraph 40(3)(a) for the taxation year.
(4) A new corporation that has maintained its establishment and operations outside the north-east Avalon for its first, second and third taxation years and maintains its establishment and operations there for the fourth and fifth years may deduct from the tax otherwise payable under this Part for each of the fourth and fifth taxation years of the corporation an amount equal to the tax otherwise payable under paragraph 40(3)(a) for the taxation year.
(5) For the purpose of a deduction of tax under this section, a new corporation shall minimize its tax liability for the taxation year for which the deduction is claimed by claiming all allowable deductions and credits from tax otherwise payable.
(6) A new corporation is considered to have maintained its establishment and operations outside the north-east Avalon if more than 50% of the total salaries and wages it paid in the taxation year were paid to persons reporting to work at an establishment outside the north-east Avalon.
(7) A new corporation may apply for a deduction under subsection (3) or (4) on the form required by the minister and shall provide the information required by the minister.
(8) Where the minister receives an application under subsection (7) and is satisfied that the new corporation qualifies for the deduction under this section, the minister shall issue a certificate to the corporation authorizing the deduction.
(9) In order to claim a deduction for a taxation year under this section, a new corporation shall file the certificate referred to in subsection (8) with its annual return for the taxation year, as required by this Act.
(10) A new corporation is not eligible for a certificate from the minister authorizing the deduction unless the corporation applies for the deduction within the 3 years immediately following the taxation year for which the deduction is being claimed.
(11) A new corporation is not eligible for a deduction under this section for a taxation year where it, or a predecessor corporation within the meaning of section 87 of the federal Act,
(a) was associated with another corporation within the meaning of section 256 of the federal Act, unless the minister waives this restriction with respect to the association with the other corporation;
(b) carried on an active business in the taxation year by reason of being a member of a partnership, where another member of the partnership was not eligible for a deduction under subsection (3) or (4) for the taxation year;
(c) was a beneficiary of a trust, where another beneficiary of the trust was not eligible for a deduction under subsection (3) or (4) for the taxation year;
(d) carried on an active business in the taxation year by reason of being a co-venturer in a joint venture, where another co-venturer in the joint venture was not eligible for a deduction under subsection (3) or (4) for the taxation year;
(e) has carried on an active business by reason of having acquired, by purchase or otherwise, or leased property from, another corporation, called the "vendor", where the new corporation or the predecessor corporation, their shareholders, or persons related to the new corporation, the predecessor corporation or their shareholders, beneficially owned, directly or indirectly, more than 10% of the issued shares of a class of the capital stock of the vendor; or
(f) has carried on an active business by reason of having acquired, by purchase or otherwise, or leased property from, a sole proprietorship or partnership in respect of which the corporation, its shareholders, or persons related to it or its shareholders, beneficially owned the sole proprietorship or partnership.
(12) Paragraphs (11)(e) and (f) apply only where the new corporation carries on the same or substantially the same business that was carried on by a corporation referred to in paragraph (11)(e) or a sole proprietorship or partnership referred to in paragraph (11)(f) except where the sole proprietorship or partnership carried on the business for a period of 90 days or less.
(13) A corporation shall not be entitled to a deduction under this section for a taxation year where, as a result of a transaction or an event, or a series of transactions or events, property of a business has been transferred, or has been considered to have been transferred, either directly or indirectly, to the corporation, and it is reasonable for the minister to believe that one of the principal purposes of the transfer or considered transfer is to enable the corporation to claim a deduction from tax under this section that it could not otherwise claim.
(14) A corporation is not entitled to a deduction under this section for a taxation year where, as a result of a disposition, a disposition considered to have been made or a series of dispositions of shares of a corporation, it is reasonable for the minister to believe that one of the principal purposes of the disposition, considered disposition or the series of dispositions is to enable the corporation to claim a deduction from tax under this section that it could not otherwise claim.
(15) The Lieutenant-Governor in Council may make regulations
(a) defining, restricting or enlarging the meaning of a word or expression used in this section; and
(b) governing a deduction to be allowed under this section and restrictions, limitations, terms and conditions relating to a deduction.
4. This Act is considered to have come into force on January 1, 2003.
©Earl G. Tucker, Queen's Printer