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Bill C-48

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51-52 ELIZABETH II

CHAPTER 28

An Act to amend the Income Tax Act (natural resources)

[Assented to 7th November, 2003]

R.S., c. 1 (5th Supp.)

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

1. (1) Paragraph 12(1)(o) of the Income Tax Act is replaced by the following:

Royalties, etc.

    (o) any amount (other than a prescribed amount and an amount referred to in paragraph 18(1)(m))

      (i) that became receivable in the year by

        (A) Her Majesty in right of Canada or of a province,

        (B) an agent of Her Majesty in right of Canada or of a province, or

        (C) a corporation, a commission or an association that is controlled by Her Majesty in right of Canada or of a province or by an agent of Her Majesty in right of Canada or of a province, and

      (ii) that can reasonably be considered to be a royalty, tax (other than a tax or portion of a tax that can reasonably be considered to be a municipal or school tax), lease rental or bonus, however described, or to be in respect of the late receipt or non-receipt of any of those amounts, in relation to

        (A) the acquisition, development or ownership of a Canadian resource property of the taxpayer, or

        (B) the production in Canada

          (I) of petroleum, natural gas or related hydrocarbons from a natural accumulation of petroleum or natural gas (other than a mineral resource) located in Canada, or from an oil or gas well located in Canada, in respect of which the taxpayer had an interest,

          (II) of sulphur from a natural accumulation of petroleum or natural gas located in Canada, from an oil or gas well located in Canada or from a mineral resource located in Canada, in respect of which the taxpayer had an interest,

          (III) to any stage that is not beyond the prime metal stage or its equivalent, of metal, minerals (other than iron or petroleum or related hydrocarbons) or coal from a mineral resource located in Canada in respect of which the taxpayer had an interest,

          (IV) to any stage that is not beyond the pellet stage or its equivalent, of iron from a mineral resource located in Canada in respect of which the taxpayer had an interest, or

          (V) to any stage that is not beyond the crude oil stage or its equivalent, of petroleum or related hydrocarbons from a deposit located in Canada of bituminous sands or oil shales in respect of which the taxpayer had an interest;

(2) Paragraph 12(1)(o) of the Act is repealed.

(3) Subsection 12(1) of the Act is amended by adding the following after paragraph (x.1):

Crown charge rebates

    (x.2) the total of all amounts each of which is an amount that

      (i) was received by the taxpayer, including by way of a deduction from tax, in the year as a refund, reimbursement, contribution or allowance, in respect of an amount that was at any time receivable, directly or indirectly in any manner whatever, by Her Majesty in right of Canada or of a province in respect of

        (A) the acquisition, development or ownership of a Canadian resource property, or

        (B) the production in Canada from a mineral resource, a natural accumulation of petroleum or natural gas, or an oil or a gas well, and

      (ii) was not otherwise included in computing the taxpayer's income for the year or a preceding taxation year;

(4) Paragraph 12(1)(z.5) of the Act is repealed.

(5) Subsection (1) applies to amounts that become receivable after December 20, 2002.

(6) For each taxation year that ends after 2002 and begins before 2007, paragraph 12(1)(o) of the Act applies only to the percentage of each amount described by that paragraph that is the total of

    (a) that proportion of 100% that the number of days in the taxation year that are before 2003 is of the number of days in the taxation year,

    (b) that proportion of 90% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,

    (c) that proportion of 75% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,

    (d) that proportion of 65% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year, and

    (e) that proportion of 35% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year.

(7) Subsection (6) does not apply for the purpose of applying any provision of Part XII of the Income Tax Regulations that makes reference to the income of a taxpayer.

(8) Subsection (2) applies to taxation years that begin after 2006.

(9) Subsection (3) applies to taxation years that end after 2002, except that for each taxation year that begins before 2012 paragraph 12(1)(x.2) of the Act, as enacted by that subsection, applies to the amount determined in respect of that taxation year by the formula

[A - (B x C x D)] x E

where

A is the amount to which that paragraph would apply but for this subsection;

B is the total of all amounts each of which was received by the taxpayer in the taxation year under Division 1 of Part 6 or Part 11 of the Alberta Corporate Tax Act, chapter A-15 of the Revised Statutes of Alberta 2000;

C is

      (a) in the case of an individual, 1,

      (b) in the case of a taxable Canadian corporation, the greater of 0 and the fraction determined by the formula

1 - (F/$3 million)

      where

      F is the amount by which the Alberta crown royalty, within the meaning assigned by Division 1 of Part 6 of the Alberta Corporate Tax Act, chapter A-15 of the Revised Statutes of Alberta, 2000, of the corporation for the taxation year exceeds $2 million, and

      (c) in any other case, 0;

D is the percentage that is the total of

      (a) that proportion of 50% that the number of days in the taxation year that are before 2008 is of the number of days in the taxation year,

      (b) that proportion of 40% that the number of days in the taxation year that are in 2008 is of the number of days in the taxation year,

      (c) that proportion of 30% that the number of days in the taxation year that are in 2009 is of the number of days in the taxation year,

      (d) that proportion of 20% that the number of days in the taxation year that are in 2010 is of the number of days in the taxation year, and

      (e) that proportion of 10% that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year; and

E is

      (a) for the purpose of applying any provision of Part XII of the Income Tax Regulations, nil, and

      (b) for any other purpose, the percentage that is the total of

        (i) that proportion of 10% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,

        (ii) that proportion of 25% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,

        (iii) that proportion of 35% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year,

        (iv) that proportion of 65% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year, and

        (v) that proportion of 100% that the number of days in the taxation year that are after 2006 is of the number of days in the taxation year.

(10) For each taxation year that ends after 2002 and begins before 2007, the reference to ``25%'' in paragraph 12(1)(z.5) of the Act is to be read as a reference to the percentage that is the total of

    (a) that proportion of 25% that the number of days in the taxation year that are before 2003 is of the number of days in the taxation year,

    (b) that proportion of 22.5% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,

    (c) that proportion of 18.75% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,

    (d) that proportion of 16.25% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year, and

    (e) that proportion of 8.75% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year.

(11) Subsection (4) applies to taxation years that begin after 2006.

2. (1) Paragraph 18(1)(l.1) of the Act is repealed.

(2) Paragraph 18(1)(m) of the Act is replaced by the following:

Royalties, etc.

    (m) any amount (other than a prescribed amount)

      (i) that is paid or payable in the year to

        (A) Her Majesty in right of Canada or of a province,

        (B) an agent of Her Majesty in right of Canada or of a province, or

        (C) a corporation, a commission or an association that is controlled by Her Majesty in right of Canada or of a province or by an agent of Her Majesty in right of Canada or of a province, and

      (ii) that can reasonably be considered to be a royalty, tax (other than a tax or portion of a tax that can reasonably be considered to be a municipal or school tax), lease rental or bonus, however described, or to be in respect of the late payment or non-payment of any of those amounts, in relation to

        (A) the acquisition, development or ownership of a Canadian resource property, or

        (B) the production in Canada

          (I) of petroleum, natural gas or related hydrocarbons from a natural accumulation of petroleum or natural gas (other than a mineral resource) located in Canada, or from an oil or gas well located in Canada,

          (II) of sulphur from a natural accumulation of petroleum or natural gas located in Canada, from an oil or gas well located in Canada or from a mineral resource located in Canada,

          (III) to any stage that is not beyond the prime metal stage or its equivalent, of metal, minerals (other than iron or petroleum or related hydrocarbons) or coal from a mineral resource located in Canada,

          (IV) to any stage that is not beyond the pellet stage or its equivalent, of iron from a mineral resource located in Canada, or

          (V) to any stage that is not beyond the crude oil stage or its equivalent, of petroleum or related hydrocarbons from a deposit located in Canada of bituminous sands or oil shales;

(3) Paragraph 18(1)(m) of the Act is repealed.

(4) Subsections (1) and (2) apply to amounts that become payable after December 20, 2002.

(5) For each taxation year that ends after 2002 and begins before 2007, paragraph 18(1)(m) of the Act applies, notwithstanding paragraph 20(1)(v) of the Act, only to the percentage of each amount described by that paragraph 18(1)(m) that is the total of

    (a) that proportion of 100% that the number of days in the taxation year that are before 2003 is of the number of days in the taxation year,

    (b) that proportion of 90% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,

    (c) that proportion of 75% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,

    (d) that proportion of 65% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year, and

    (e) that proportion of 35% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year.

(6) Subsection (5) does not apply for the purpose of applying any provision of Part XII of the Income Tax Regulations that makes reference to the income of a taxpayer.

(7) Subsection (3) applies to taxation years that begin after 2006.

3. (1) Paragraph 20(1)(v.1) of the Act is repealed.

(2) Subsection 20(15) of the Act is repealed.

(3) For each taxation year that ends after 2002 and begins before 2007, paragraph 20(1)(v.1) of the Act applies only to the percentage of the amount described by that paragraph that is the total of

    (a) that proportion of 100% that the number of days in the taxation year that are before 2003 is of the number of days in the taxation year,