Bill C-50

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2nd Session, 39th Parliament,

56-57 Elizabeth II, 2007-2008

house of commons of canada

BILL C-50

An Act to implement certain provisions of the budget tabled in Parliament on February 26, 2008 and to enact provisions to preserve the fiscal plan set out in that budget

Preamble

Whereas, when the Government of Canada tables a budget in Parliament, a fiscal plan is an integral part of that budget;

Whereas the Government of Canada is committed to meeting the challenge of global economic uncertainty with a responsible, prudent and effective fiscal plan as reflected in the Budget Plan tabled in Parliament on February 26, 2008;

Whereas it is imperative to preserve the fiscal integrity of that Budget Plan and the integrity of the budget process, and important not to risk the Government of Canada going into deficit;

And whereas it is expedient to implement certain provisions of that Budget Plan;

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

SHORT TITLE

Short title

1. This Act may be cited as the Budget Implementation Act, 2008.

PART 1

AMENDMENTS RELATED TO INCOME TAX

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

Income Tax Act

2. (1) Paragraph 18(1)(u) of the Income Tax Act is replaced by the following:

Fees — individual saving plans

(u) any amount paid or payable by the taxpayer for services in respect of a retirement savings plan, retirement income fund or TFSA under or of which the taxpayer is the annuitant or holder; and

(2) Subsection 18(11) of the Act is amended by striking out the word “or” at the end of paragraph (h), by adding the word “or” at the end of paragraph (i) and by adding the following after paragraph (i):

(j) making a contribution under a TFSA,

(3) Subsections (1) and (2) apply to the 2009 and subsequent taxation years.

3. (1) Section 37 of the Act is amended by adding the following after subsection (1.3):

Salary or wages for SR&ED outside Canada

(1.4) For the purposes of this section, section 127 and Part XXIX of the Income Tax Regulations, the amount of a taxpayer’s expenditure for a taxation year determined under subsection (1.5) is deemed to be made in the taxation year in respect of scientific research and experimental development carried on in Canada by the taxpayer.

Salary or wages outside Canada — limit determined

(1.5) The amount of a taxpayer’s expenditure for a taxation year determined under this subsection is the lesser of

(a) the amount that is the total of all expenditures each of which is an expenditure made by the taxpayer, in the taxation year and after February 25, 2008, in respect of an expense incurred in the taxation year for salary or wages paid to the taxpayer’s employee who was resident in Canada at the time the expense was incurred in respect of scientific research and experimental development,

(i) that was carried on outside Canada,

(ii) that was directly undertaken by the taxpayer,

(iii) that related to a business of the taxpayer, and

(iv) that was solely in support of scientific research and experimental development carried on in Canada by the taxpayer, and

(b) the amount that is 10 per cent of the total of all expenditures, made by the taxpayer in the year, each of which would, if this Act were read without reference to subsection (1.4), be an expenditure made in respect of an expense incurred in the year for salary or wages paid to an employee in respect of scientific research and experimental development that was carried on in Canada, that was directly undertaken by the taxpayer and that related to a business of the taxpayer.

(2) Paragraph 37(2)(a) of the Act is replaced by the following:

(a) on scientific research and experimental development carried on outside Canada, directly undertaken by or on behalf of the taxpayer, and related to the business (except to the extent that subsection (1.4) deems the expenditures to have been made in Canada); or

(3) Subsection 37(9) of the Act is replaced by the following:

Salary or wages

(9) An expenditure of a taxpayer

(a) does not include, for the purposes of clauses (8)(a)(ii)(A) and (B), remuneration based on profits or a bonus, where the remuneration or bonus, as the case may be, is in respect of a specified employee of the taxpayer, and

(b) includes, for the purpose of paragraph (1.5)(a), an amount paid in respect of an expense incurred for salary or wages paid to an employee only if the taxpayer reasonably believes that the salary or wages is not subject to an income or profits tax imposed, because of the employee’s presence or activity in a country other than Canada, by a government of that other country.

(4) Subsections (1) to (3) apply in respect of taxation years that end on or after February 26, 2008, except that in respect of taxation years that include February 26, 2008, the reference in paragraph 37(1.5)(b) of the Act, as enacted by subsection (1), to “10 per cent” shall be read as a reference to the percentage determined by the formula

10% × A/B

where

A is the number of days in the taxation year that are after February 25, 2008; and

B is the number of days in the taxation year.

4. (1) Paragraph 38(a) of the Act is replaced by the following:

(a) subject to paragraphs (a.1) to (a.3), a taxpayer’s taxable capital gain for a taxation year from the disposition of any property is ½ of the taxpayer’s capital gain for the year from the disposition of the property;

(2) Paragraph 38(a.1) of the Act is amended by striking out the word “or” at the end of subparagraph (i), by adding the word “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) the disposition is the exchange, for a security described in subparagraph (i), of a share of the capital stock of a corporation, which share included, at the time it was issued and at the time of the disposition, a condition allowing the holder to exchange it for the security, and the taxpayer

(A) receives no consideration on the exchange other than the security, and

(B) makes a gift of the security to a qualified donee not more than 30 days after the exchange;

(3) Section 38 of the Act is amended by adding the following after paragraph (a.2):

(a.3) a taxpayer’s taxable capital gain for a taxation year, from the disposition of an interest in a partnership (other than a prescribed interest in a partnership) that would be an exchange described in subparagraph (a.1)(iii) if the interest were a share in the capital stock of a corporation, is equal to the lesser of

(i) that taxable capital gain determined without reference to this paragraph, and

(ii) ½ of the amount, if any, by which

(A) the total of

(I) the cost to the taxpayer of the partnership interest, and

(II) each amount required by subparagraph 53(1)(e)(iv) or (x) to be added in determining the taxpayer’s adjusted cost base of the partnership interest,

exceeds

(B) the adjusted cost base to the taxpayer of the partnership interest (determined without reference to subparagraphs 53(2)(c)(iv) and (v));

(4) Subsections (1) to (3) apply in respect of gifts made on or after February 26, 2008.

5. (1) Clause 40(2)(g)(iv)(A) of the Act is replaced by the following:

(A) a trust governed by a deferred profit sharing plan, an employees profit sharing plan, a registered disability savings plan, a registered retirement income fund or a TFSA under which the taxpayer is a beneficiary or immediately after the disposition becomes a beneficiary, or

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

6. (1) Subsection 74.5(12) of the Act is amended by striking out the word “or” at the end of paragraph (a.2), by adding the word “or” at the end of paragraph (b) and by adding the following after paragraph (b):

(i) while the property, or property substituted for it, is held under a TFSA of which the spouse or common-law partner is the holder, and

(ii) to the extent that the spouse or common-law partner does not, at the time of the contribution of the property under the TFSA, have an excess TFSA amount (as defined in subsection 207.01(1)).

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

7. (1) Paragraph 75(3)(a) of the Act is replaced by the following:

(a) by a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a registered disability savings plan, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan, a registered supplementary unemployment benefit plan, a retirement compensation arrangement or a TFSA;

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

8. (1) Subparagraph 82(1)(b)(ii) of the Act is replaced by the following:

(ii) the product of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year multiplied by

(A) for the 2009 taxation year, 45%,

(B) for the 2010 taxation year, 44%,

(D) for taxation years after 2011, 38%;

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

9. (1) The portion of subsection 87(10) of the Act after paragraph (f) is replaced by the following:

the new share is deemed, for the purposes of subsection 116(6), the definitions “qualified investment” in subsections 146(1), 146.1(1) and 146.3(1), in section 204 and in subsections 205(1) and 207.01(1), and the definition “taxable Canadian property” in subsection 248(1), to be listed on the exchange until the earliest time at which it is so redeemed, acquired or cancelled.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

10. (1) Paragraph 107.4(1)(j) of the Act is replaced by the following:

(j) if the contributor is an amateur athlete trust, a cemetery care trust, an employee trust, an inter vivos 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 (as defined 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 registered disability savings plan, a registered education savings plan, a registered supplementary unemployment benefit plan or a TFSA, the particular trust is the same type of trust; and

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

11. (1) Paragraph (a) of the definition “trust” in subsection 108(1) of the Act is replaced by the following:

(a) an amateur athlete trust, an employee trust, a trust described in paragraph 149(1)(o.4) or a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a foreign retirement arrangement, a registered disability savings plan, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan, a registered supplementary unemployment benefit plan or a TFSA,

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

12. (1) Paragraphs 110.1(8)(b) and (c) of the Act are replaced by the following:

(b) the property that is the subject of the gift is a medicine that is available for the donee’s use at least six months prior to its expiration date, within the meaning of the Food and Drug Regulations;

(i) meets the requirements of that Act, or would meet those requirements if that Act were read without reference to its subsection 37(1), and

(ii) is not a food, cosmetic or device (as those terms are defined in that Act), a natural health product (as defined in the Natural Health Products Regulations) or a veterinary drug;

(2) Paragraph 110.1(8)(e) of the Act is replaced by the following:

(e) the donee is a registered charity that, in the opinion of the Minister of International Cooperation (or, if there is no such Minister, the Minister responsible for the Canadian International Development Agency) meets prescribed conditions.

(3) Subsections (1) and (2) apply in respect of gifts made on or after July 1, 2008.

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

(A) $8.25 multiplied by the number of days in the year included in the qualifying period in which the taxpayer resided in the particular area, and

(B) $8.25 multiplied by the number of days in the year included in that portion of the qualifying period throughout which the taxpayer maintained and resided in a self-contained domestic establishment in the particular area (except any day included in computing a deduction claimed under this paragraph by another person who resided on that day in the establishment).

(2) Subsection (1) applies to the 2008 and subsequent taxation years.

14. (1) Subsection 116(5) of the Act is amended by striking out the word “or” at the end of paragraph (a) and by adding the following after that paragraph:

(a.1) subsection (5.01) applies to the acquisition, or

(2) Section 116 of the Act is amended by adding the following after subsection (5):

Treaty-protected property

(5.01) This subsection applies to the acquisition of a property by a person (referred to in this subsection as the “purchaser”) from a non-resident person if

(a) the purchaser concludes after reasonable inquiry that the non-resident person is, under a tax treaty that Canada has with a particular country, resident in the particular country;

(b) the property would be treaty-protected property of the non-resident person if the non-resident person were, under the tax treaty referred to in paragraph (a), resident in the particular country; and

Notice by purchaser in respect of an acquisition of property

(5.02) A person (referred to in this subsection as the “purchaser”) who acquires property from a non-resident person provides notice under this subsection in respect of the acquisition if the purchaser sends to the Minister, on or before the day that is 30 days after the date of the acquisition, a notice setting out

(a) the date of the acquisition;

(b) the name and address of the non-resident person;

(d) the amount paid or payable, as the case may be, by the purchaser for the property; and

(e) the name of the country with which Canada has concluded a tax treaty under which the property is a treaty-protected property for the purposes of subsection (5.01) or (6.1), as the case may be.

(3) The portion of paragraph 116(5.3)(a) of the Act before subparagraph (i) is replaced by the following:

(a) the taxpayer, unless subsection (5.01) applies to the acquisition or unless after reasonable inquiry the taxpayer had no reason to believe that the non-resident person was not resident in Canada, is liable to pay, as tax under this Part for the year on behalf of the non-resident person, 50% of the amount, if any, by which

(4) Subsection 116(6) of the Act is amended by striking out the word “and” at the end of paragraph (g), by adding the word “and” at the end of paragraph (h) and by adding the following after paragraph (h):

(i) a property that is, at the time of its disposition, a treaty-exempt property of the person.

(5) Section 116 of the Act is amended by adding the following after subsection (6):

Treaty-exempt property

(6.1) For the purpose of subsection (6), a property is a treaty-exempt property of a non-resident person, at the time of the non-resident person’s disposition of the property to another person (referred to in this subsection as the “purchaser”), if

(a) it is, at that time, a treaty-protected property of the non-resident person; and

(b) where the purchaser and the non-resident person are related at that time, the purchaser provides notice under subsection (5.02) in respect of the disposition.

(6) Subsections (1) to (5) apply in respect of dispositions of property that occur after 2008.

15. (1) Subsection 118.1(5.3) of the Act is replaced by the following:

Direct designation — RRSPs, RRIFs and TFSAs

(5.3) If as a consequence of an individual’s death, a transfer of money, or a transfer by means of a negotiable instrument, is made, from an arrangement that is a registered retirement savings plan, registered retirement income fund or TFSA (other than an arrangement of which a licensed annuities provider is the issuer or carrier) to a qualified donee, solely because of the donee’s interest or, for civil law, a right as a beneficiary under the arrangement, the individ- ual was the annuitant under, or the holder of, the arrangement immediately before the individ- ual’s death and the transfer occurs within the 36-month period that begins at the time of the death (or, where written application to extend the period has been made to the Minister by the individual’s legal representative, within such longer period as the Minister considers reasonable in the circumstances),

(a) for the purposes of this section (other than this paragraph) and section 149.1, the transfer is deemed to be a gift made, immediately before the individual’s death, by the individual to the donee; and

(b) the fair market value of the gift is deemed to be the fair market value, at the time of the individual’s death, of the right to the transfer (determined without reference to any risk of default with regard to the obligations of the issuer or carrier of the arrangement).

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

16. (1) The portion of paragraph 118.2(2)(l) of the Act before subparagraph (i) is replaced by the following:

(l) on behalf of the patient who is blind or profoundly deaf or has severe autism, severe epilepsy or a severe and prolonged impairment that markedly restricts the use of the patient’s arms or legs,

(2) Paragraph 118.2(2)(n) of the Act is replaced by the following:

(n) for

(i) drugs, medicaments or other preparations or substances (other than those described in paragraph (k))

(A) that are manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function,

(B) that can lawfully be acquired for use by the patient only if prescribed by a medical practitioner or dentist, and

(ii) drugs, medicaments or other preparations or substances that are prescribed by regulation;

(3) Subsection (1) applies to the 2008 and subsequent taxation years.

(4) Subsection (2) applies to expenses incurred after February 26, 2008.

17. (1) Paragraph 121(b) of the Act is replaced by the following:

(b) the product of the amount, if any, that is required by subparagraph 82(1)(b)(ii) to be included in computing the individual’s income for the year multiplied by

(i) for the 2009 taxation year, 11/18,

(ii) for the 2010 taxation year, 10/17,

(iii) for the 2011 taxation year, 13/23, and

(iv) for taxation years after 2011, 6/11.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

18. (1) The description of D in subsection 122(1) of the Act is replaced by the following:

D is the provincial SIFT tax rate of the SIFT trust for the taxation year, and

(2) The description of C in the definition “taxable SIFT trust distributions” in subsection 122(3) of the Act is replaced by the following:

C is the provincial SIFT tax rate of the SIFT trust for the taxation year.

(3) Subsections (1) and (2) apply to the 2009 and subsequent taxation years, except that those subsections also apply for a SIFT trust’s earlier taxation year if the definition “provincial SIFT tax rate” in subsection 248(1) of the Act, as enacted by subsection 34(3), applies to that earlier taxation year.

19. (1) Paragraph (a) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act is replaced by the following:

(a) that is a Canadian exploration expense incurred by a corporation after March 2008 and before 2010 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2010) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definition “mineral resource” in subsection 248(1),

(2) Paragraphs (c) and (d) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act are replaced by the following:

(c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after March 2008 and before April 2009, and

(d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after March 2008 and before April 2009;

(3) Subsection 127(10.2) of the Act is replaced by the following:

Expenditure limit determined

(10.2) For the purpose of subsection (10.1), a particular corporation’s expenditure limit for a particular taxation year is the amount determined by the formula

($7 million - 10A) × [($40 million - B)/$40 million]

where

A is the greater of

(a) $400,000, and

(b) the amount that is

(i) if the particular corporation is not associated with any other corporation in the particular taxation year, the particular corporation’s taxable income for its immediately preceding taxation year (determined before taking into consideration the specified future tax consequences for that preceding year), or

(ii) if the particular corporation is associated with one or more other corporations in the particular taxation year, the total of all amounts each of which is the taxable income of the particular corporation for its, or of one of the other corporations for its, last taxation year that ended in the last calendar year that ended before the end of the particular taxation year (determined before taking into consideration the specified future tax consequences for that last taxation year), and

B is

(a) nil, if the following amount is less than or equal to $10 million:

(i) if the particular corporation is not associated with any other corporation in the particular taxation year, the amount that is its taxable capital employed in Canada (within the meaning assigned by section 181.2) for its immediately preceding taxation year, or

(ii) if the particular corporation is associated with one or more other corporations in the particular taxation year, the amount that is the total of all amounts, each of which is the taxable capital employed in Canada (within the meaning assigned by section 181.2) of the particular corporation for its, or of one of the other corporations for its, last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, or

(b) in any other case, the lesser of $40 million and the amount by which the amount determined under subparagraph (a)(i) or (ii), as the case may be, exceeds $10 million.

(4) Subsections (1) and (2) apply to expenses renounced under a flow through share agreement made after March 2008.

(5) Subsection (3) applies to taxation years that end on or after February 26, 2008, except that for taxation years that include February 26, 2008, the expenditure limit of a corporation shall be determined by the formula

A + [(B - A) × (C/D)]

where

A is the expenditure limit of the corporation for the taxation year determined in accordance with the formula in subsection 127(10.2) as that subsection read in its application to a taxation year that ended immediately before February 26, 2008;

B is the expenditure limit of the corporation for the taxation year determined in accordance with the formula in subsection 127(10.2), as enacted by subsection (3);

C is the number of days in the taxation year that are after February 25, 2008; and

D is the number of days in the taxation year.

20. (1) Paragraph (a) of the definition “excluded right or interest” in subsection 128.1(10) of the Act is amended by adding the following after subparagraph (iii.1):

(iii.2) a TFSA,

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

21. (1) Paragraph 132.2(1)(k) of the Act is replaced by the following:

(k) if a share to which paragraph (j) applies would, but for this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1) or 207.01(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the transfer time and the time at which it is disposed of in accordance with paragraph (j);

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

22. (1) Subsection 138.1(7) of the Act is replaced by the following:

Where ss. (1) to (6) do not apply

(7) Subsections (1) to (6) do not apply to the holder of a segregated fund policy with respect to such a policy that is issued or effected as a registered retirement savings plan, registered retirement income fund or TFSA or that is issued under a registered pension plan.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

23. (1) Paragraphs (b) and (c) of the definition “specified plan” in subsection 146.1(1) of the Act are replaced by the following:

(b) under which the beneficiary is an individual in respect of whom paragraphs 118.3(1)(a) to (b) apply for the beneficiary’s taxation year that ends in the 31st year following the year in which the plan was entered into, and

(c) that provides that, at all times after the end of the 35th year following the year in which the plan was entered into, no other individual may be designated as a beneficiary under the plan;

(2) Subparagraphs 146.1(2)(h)(i) and (ii) of the Act are replaced by the following:

(i) in the case of a specified plan, the 35th year following the year in which the plan was entered into, and

(ii) in any other case, the 31st year following the year in which the plan was entered into;

(3) Subparagraphs 146.1(2)(i)(i) and (ii) of the Act are replaced by the following:

(i) in the case of a specified plan, the 40th year following the year in which the plan was entered into, and

(ii) in any other case, the 35th year following the year in which the plan was entered into;

(4) Clause 146.1(2)(j)(ii)(A) of the Act is replaced by the following:

(A) the beneficiary had not attained 31 years of age before the time of the contribution, or

(5) Section 146.1 of the Act is amended by adding the following after subsection (2.2):

Extension for making educational assistance payments

(2.21) Notwithstanding paragraph (2)(g.1), an education savings plan may allow for the payment of an educational assistance payment to or for an individual at any time in the six-month period immediately following the partic- ular time at which the individual ceases to be enrolled as a student in a qualifying educational program or a specified educational program, as the case may be, if the payment would have complied with the requirements of paragraph (2)(g.1) had the payment been made immediately before the particular time.

Timing of payment

(2.22) An educational assistance payment that is made at any time in accordance with subsection (2.21) but not in accordance with paragraph (2)(g.1) is deemed, for the purposes of applying that paragraph at and after that time, to have been made immediately before the particular time referred to in subsection (2.21).

(6) Subsections (1) to (5) apply to the 2008 and subsequent taxation years, except that subsection (5) does not apply in respect of cessations of enrolment that occur before 2008.

24. (1) Section 146.2 of the Act and the heading before it are replaced by the following:

Tax-free Savings Accounts

Definitions

146.2 (1) The following definitions apply in this section and in Part XI.01.

“distribution”
« distribution »

“distribution” under an arrangement of which an individual is the holder means a payment out of or under the arrangement in satisfaction of all or part of the holder’s interest in the arrangement.

“holder”
« titulaire »

“holder” of an arrangement means

(a) until the death of the individual who entered into the arrangement with the issuer, the individual; and

(b) at and after the death of the individual, the individual’s survivor, if the survivor acquires

(i) all of the individual’s rights as the holder of the arrangement, and

(ii) to the extent it is not included in the rights described in subparagraph (i), the unconditional right to revoke any beneficiary designation made, or similar direction imposed, by the individual under the arrangement or relating to property held in connection with the arrangement.

“issuer”
« émetteur »

“issuer” of an arrangement means the person described as the issuer in the definition “qualifying arrangement”.

“qualifying arrangement”
« arrangement admissible »

“qualifying arrangement”, at a particular time, means an arrangement

(a) that is entered into after 2008 between a person (in this definition referred to as the “issuer”) and an individual (other than a trust) who is at least 18 years of age;

(b) that is

(i) an arrangement in trust with an issuer that is a corporation 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 trustee,

(ii) an annuity contract with an issuer that is a licensed annuities provider, other than a contract that is adjoined to another contract or arrangement, or

(iii) a deposit with an issuer that is

(A) a person who is, or is eligible to become, a member of the Canadian Payments Association, or

(B) a credit union that is a shareholder or member of a body corporate referred to as a “central” for the purposes of the Canadian Payments Act;

(c) that provides for contributions to be made under the arrangement to the issuer in consideration of, or to be used, invested or otherwise applied for the purpose of, the issuer making distributions under the arrangement to the holder;

(d) under which the issuer and the individual agree, at the time the arrangement is entered into, that the issuer will file with the Minister an election to register the arrangement as a TFSA; and

(e) that, at all times throughout the period that begins at the time the arrangement is entered into and that ends at the particular time, complies with the conditions in subsection (2).

“survivor”
« survivant »

“survivor” of an individual means another individual who is, immediately before the individual’s death, a spouse or common-law partner of the individual.

Qualifying arrangement conditions

(2) The conditions referred to in paragraph (e) of the definition “qualifying arrangement” in subsection (1) are as follows:

(a) the arrangement requires that it be maintained for the exclusive benefit of the holder (determined without regard to any right of a person to receive a payment out of or under the arrangement only on or after the death of the holder);

(b) the arrangement prohibits, while there is a holder of the arrangement, anyone that is neither the holder nor the issuer of the arrangement from having rights under the arrangement relating to the amount and timing of distributions and the investing of funds;

(d) the arrangement permits distributions to be made to reduce the amount of tax otherwise payable by the holder under section 207.02 or 207.03;

(e) the arrangement provides that, at the direction of the holder, the issuer shall transfer all or any part of the property held in connection with the arrangement (or an amount equal to its value) to another TFSA of the holder;

(f) if the arrangement is an arrangement in trust, it prohibits the trust from borrowing money or other property for the purposes of the arrangement; and

(g) the arrangement complies with prescribed conditions.

TFSA

(3) If the issuer of an arrangement that is, at the time it is entered into, a qualifying arrangement files with the Minister, on or before the day that is 60 days after the end of the calendar year in which the arrangement was entered into, an election in prescribed form and manner to register the arrangement as a TFSA under the Social Insurance Number of the individual with whom the arrangement was entered into, the arrangement becomes a TFSA at the time the arrangement was entered into and ceases to be a TFSA immediately before the earliest of the following events:

(a) the death of the last holder of the arrangement,

(b) the arrangement ceasing to be a qualifying arrangement, and

Trust not taxable

(4) No tax is payable under this Part by a trust that is governed by a TFSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments (as defined in subsection 207.01(1)) for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,

(a) “income” includes dividends described in section 83; and

(b) the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition.

Amount credited to a deposit

(5) An amount that is credited or added to a deposit that is a TFSA as interest or other income in respect of the TFSA is deemed not to be received by the holder of the TFSA solely because of that crediting or adding.

Trust ceasing to be a TFSA

(6) If an arrangement that governs a trust ceases, at a particular time, to be a TFSA,

(a) the trust is deemed

(i) 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, and

(ii) to have acquired, at the particular time, each such property at a cost equal to that fair market value;

(b) the trust’s last taxation year that began before the particular time is deemed to have ended immediately before the particular time; and

Annuity contract ceasing to be a TFSA

(7) If an annuity contract ceases, at a particular time, to be a TFSA,

(a) the holder of the TFSA is deemed to have disposed of the contract immediately before the particular time for proceeds equal to its fair market value immediately before the particular time;

(b) the contract is deemed to be a separate annuity contract issued and effected at the particular time otherwise than pursuant to or as a TFSA; and

(c) each person who has an interest or, for civil law, a right in the separate annuity contract 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.

Deposit ceasing to be a TFSA

(8) If a deposit ceases, at a particular time, to be a TFSA,

(a) the holder of the TFSA is deemed to have disposed of the deposit immediately before the particular time for proceeds equal to its fair market value immediately before the particular time; and

(b) each person who has an interest or, for civil law, a right in the deposit 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.

Arrangement is TFSA only

(9) An arrangement that is a qualifying arrangement at the time it is entered into is deemed not to be a retirement savings plan, an education savings plan, a retirement income fund or a disability savings plan.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

25. (1) Subparagraph 146.4(4)(p)(ii) of the Act is replaced by the following:

(ii) the first calendar year throughout which the beneficiary has no severe and prolonged impairments with the effects described in paragraph 118.3(1)(a.1).

(2) Paragraph 146.4(12)(d) of the Act is replaced by the following:

(d) if the failure consists of the plan not being terminated by the time set out in paragraph (4)(p) and the failure was due to the issuer being unaware of, or there being some uncertainty as to, the existence of circumstances requiring that the plan be terminated,

(i) the Minister may specify a later time by which the plan is to be terminated (but no later than is reasonably necessary for the plan to be terminated in an orderly manner), and

(ii) paragraph (4)(p) and the plan terms are, for the purposes of paragraphs (11)(a) and (b), to be read as though they required the plan to be terminated by the time so specified.

(3) Subsections (1) and (2) apply to the 2008 and subsequent taxation years.

26. (1) Subsection 148(1) of the Act is amended by adding the following after paragraph (b.1):

(b.2) a TFSA,

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

27. (1) Subsection 149(1) of the Act is amended by adding the following after paragraph (u.1):

TFSA trust

(u.2) a trust governed by a TFSA to the extent provided by section 146.2;

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

28. (1) Clauses 150(1)(a)(i)(C) and (D) of the Act are replaced by the following:

(D) disposes of a taxable Canadian property (otherwise than in an excluded disposition), or

(2) Subparagraph 150(1)(a)(ii) of the Act is replaced by the following:

(ii) tax under this Part

(A) is payable by the corporation for the year, or

(B) would be, but for a tax treaty, payable by the corporation for the year (otherwise than in respect of a disposition of taxable Canadian property that is treaty-protected property of the corporation);

(3) Subparagraph 150(1.1)(b)(iii) of the Act is replaced by the following:

(iii) where the individual is non-resident throughout the year, the individual has a taxable capital gain (otherwise than from an excluded disposition) or disposes of a taxable Canadian property (otherwise than in an excluded disposition) in the year, or

(4) Section 150 of the Act is amended by adding the following after subsection (4):

Excluded disposition

(5) For the purposes of this section, a disposition of a property by a taxpayer at any time in a taxation year is an excluded disposition if

(a) the taxpayer is non-resident at that time;

(b) no tax is payable under this Part by the taxpayer for the taxation year;

(c) the taxpayer is, at that time, not liable to pay any amount under this Act in respect of any previous taxation year (other than an amount for which the Minister has accepted, and holds, adequate security under section 116 or 220); and

(d) each taxable Canadian property disposed of by the taxpayer in the taxation year is

(i) excluded property within the meaning assigned by subsection 116(6), or

(ii) a property in respect of the disposition of which the Minister has issued to the taxpayer a certificate under subsection 116(2), (4) or (5.2).

(5) Subsections (1) to (4) apply in respect of dispositions of property that occur after 2008.

29. (1) Section 153 of the Act is amended by adding the following after subsection (1.3):

Exception — remittance to designated financial institution

(1.4) For the purpose of subsection (1), a prescribed person referred to in that subsection is deemed to have remitted an amount to the account of the Receiver General at a designated financial institution if the prescribed person has remitted the amount to the Receiver General at least one day before the day upon which the amount is due.

(2) Subsection (1) applies in respect of remittances by a prescribed person that are first due after February 25, 2008.

30. (1) The description of C in subsection 197(2) of the Act is replaced by the following:

C is the provincial SIFT tax rate of the SIFT partnership for the taxation year.

(2) Subsection (1) applies to the 2009 and subsequent taxation years, except that that subsection also applies for a SIFT partnership’s earlier taxation year if the definition “provincial SIFT tax rate” in subsection 248(1) of the Act, as enacted by subsection 34(3), applies to that earlier taxation year.

31. (1) The Act is amended by adding the following after Part XI:

PART XI.01

TAXES IN RESPECT OF TFSAs

Definitions

207.01 (1) The definitions in subsection 146.2(1) and the following definitions apply in this Part.

“advantage”
« avantage »

“advantage”, in relation to a TFSA, means

(a) any benefit, loan or indebtedness that is conditional in any way on the existence of the TFSA, other than

(i) a benefit derived from the provision of administrative or investment services in respect of the TFSA, and

(ii) a loan or an indebtedness (including the use of the TFSA as security for a loan or an indebtedness) the terms and conditions of which are terms and conditions that persons dealing at arm’s length with each other would have entered into; and

(b) a prescribed benefit.

“allowable refund”
« remboursement admissible »

“allowable refund” of a person for a calendar year means the total of all amounts each of which is a refund, for the year, to which the person is entitled under subsection 207.04(4).

“excess TFSA amount”
« excédent CÉLI »

“excess TFSA amount” of an individual at a particular time in a calendar year means the amount, if any, determined by the formula

A - B - C - D - E

where

A is the total of all amounts each of which is a contribution made under a TFSA by the individual in the calendar year and at or before the particular time, other than a contribution that is

(a) a qualifying transfer, or

(b) an exempt contribution;

B is the individual’s unused TFSA contribution room at the end of the preceding calendar year;

C is the total of all amounts each of which was a distribution made in the preceding calendar year under a TFSA of which the individual was the holder at the time of the distribution, other than a distribution that is

(a) a qualifying transfer, or

(b) a prescribed distribution;

D is

(a) the TFSA dollar limit for the calendar year if, at any time in the calendar year, the individual is resident in Canada, and

(b) nil, in any other case; and

E is the total of all amounts each of which is a distribution made in the calendar year and at or before the particular time under a TFSA of which the individual was the holder at the time of the distribution, other than a distribution that is

(a) a qualifying transfer, or

(b) a prescribed distribution.

“non-qualified investment”
« placement non admissible »

“non-qualified investment” for a trust governed by a TFSA means property that is not a qualified investment for the trust.

“prohibited investment”
« placement interdit »

“prohibited investment”, at any time, for a trust governed by a TFSA means property (other than prescribed property in relation to the trust) that is at that time

(a) a debt of the holder of the TFSA;

(b) a share of the capital stock of, an interest in, or a debt of

(i) a corporation, partnership or trust in which the holder has a significant interest, or

(ii) a person or partnership that does not deal at arm’s length with the holder or with a person or partnership described in subparagraph (i);

(c) an interest (or, for civil law, a right) in, or a right to acquire, a share, interest or debt described in paragraph (a) or (b); or

(d) restricted property.

“qualified investment”
« placement admissible »

“qualified investment” for a trust governed by a TFSA means

(a) an investment that would be described by any of paragraphs (a) to (d), (f) and (g) of the definition “qualified investment” in section 204 if the reference in that definition to “a trust governed by a deferred profit sharing plan or revoked plan” were read as a reference to “a trust governed by a TFSA” and if that definition were read without reference to the words “with the exception of excluded property in relation to the trust”;

(b) a contract for an annuity issued by a licensed annuities provider if

(i) the trust is the only person who, disregarding any subsequent transfer of the contract by the trust, is or may become entitled to any annuity payments under the contract, and

(ii) the holder of the contract has a right to surrender the contract at any time for an amount that would, if reasonable sales and administration charges were ignored, approximate the value of funds that could otherwise be applied to fund future periodic payments under the contract; and

“qualifying transfer”
« transfert admissible »

“qualifying transfer” means the transfer of an amount from a TFSA of which a particular individual is the holder if

(a) the amount is transferred directly to another TFSA, the holder of which is the particular individual; or

(b) the amount is transferred directly to another TFSA, the holder of which is a spouse or common-law partner or former spouse or common-law partner of the partic- ular individual, and the following conditions are satisfied:

(i) the individuals are living separate and apart at the time of the transfer, and

(ii) the transfer is made under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the individuals in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.

“restricted property”
« bien d’exception »

“restricted property” has the meaning assigned by regulation.

“TFSA dollar limit”
« plafond CÉLI »

“TFSA dollar limit” for a calendar year means,

(a) for 2009, $5,000; and

(b) for each year after 2009, the amount (rounded to the nearest multiple of $500, or if that amount is equidistant from two such consecutive multiples, to the higher multiple) that is equal to $5,000 adjusted for each year after 2009 in the manner set out in section 117.1.

“unused TFSA contribution room”
« droits inutilisés de cotisation à un CÉLI »

“unused TFSA contribution room” of an individual at the end of a calendar year means,

(a) if the year is before 2009, nil; and

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

A + B + C - D

where

A is the individual’s unused TFSA contribution room at the end of the preceding calendar year,

B is the total of all amounts each of which was a distribution made in the preceding calendar year under a TFSA of which the individual was the holder at the time of the distribution, other than a distribution that is

(i) a qualifying transfer, or

(ii) a prescribed distribution,

C is

(i) the TFSA dollar limit for the calendar year, if at any time in the calendar year the individual is 18 years of age or older and resident in Canada, and

(ii) nil, in any other case, and

D is the total of all amounts each of which is a contribution made under a TFSA by the individual in the calendar year, other than a contribution that is

(i) a qualifying transfer, or

(ii) an exempt contribution.

Exempt contribution to survivor TFSA

(2) A contribution made in a taxation year under a TFSA by the survivor of an individual is an exempt contribution if

(a) the contribution is made during the period (in this subsection referred to as the “rollover period”) that begins when the individual dies and that ends on the second anniversary of the individual’s death (or on any later day that is acceptable to the Minister);

(b) a payment (in this subsection referred to as the “survivor payment”) was made to the survivor during the rollover period, as a consequence of the individual’s death, directly or indirectly out of or under an arrangement that ceased, because of the individual’s death, to be a TFSA;

(c) the survivor designates, in prescribed form filed with the survivor’s return of income for the taxation year, the contribution in relation to the survivor payment; and

(d) the amount of the contribution does not exceed the least of

(i) the amount, if any, by which

(A) the amount of the survivor payment

exceeds

(B) the total of all other contributions designated by the survivor in relation to the survivor payment,

(ii) the amount, if any, by which

(A) the total proceeds of disposition determined in respect of the arrangement under paragraph 146.2(6)(a), (7)(a) or (8)(a), as the case may be,

exceeds

(B) the total of all other exempt contributions in respect of the arrangement made by the survivor at or before the time of the contribution, and

(iii) if the individual had, immediately before the individual’s death, an excess TFSA amount or if payments described in paragraph (b) are made to more than one survivor of the individual, nil or the greater amount, if any, allowed by the Minister in respect of the contribution.

Survivor as successor holder

(3) If an individual’s survivor becomes the holder of a TFSA as a consequence of the individual’s death and, immediately before the individual’s death, the individual had an excess TFSA amount, the survivor is deemed (other than for the purposes of subsection (2)) to have made, at the beginning of the month following the individual’s death, a contribution under a TFSA equal to the amount, if any, by which

(a) that excess TFSA amount

exceeds

(b) the total fair market value immediately before the individual’s death of all property held in connection with arrangements that ceased, because of the individual’s death, to be TFSAs.

Significant interest

(4) An individual has a significant interest in a corporation, partnership or trust at any time if

(a) in the case of a corporation, the individ- ual is a specified shareholder of the corporation at that time;

(b) in the case of a partnership, the individ- ual, or the individual together with persons and partnerships with which the individual does not deal at arm’s length, holds at that time interests as a member of the partnership that have a fair market value of 10% or more of the fair market value of the interests of all members in the partnership; and

(c) in the case of a trust, the individual, or the individual together with persons and partnerships with which the individual does not deal at arm’s length, holds at that time interests as a beneficiary (in this paragraph, as defined in subsection 108(1)) under the trust that have a fair market value of 10% or more of the fair market value of the interests of all beneficiaries under the trust.

Obligation of issuer

(5) The issuer of a TFSA shall exercise the care, diligence and skill of a reasonably prudent person to minimize the possibility that a trust governed by the TFSA holds a non-qualified investment.

Tax payable on excess TFSA amount

207.02 If, at any time in a calendar month, an individual has an excess TFSA amount, the individual shall, in respect of that month, pay a tax under this Part equal to 1% of the highest such amount in that month.

Tax payable on non-resident contributions

207.03 If, at a particular time, a non-resident individual makes a contribution under a TFSA, the individual shall pay a tax under this Part equal to 1% of the amount of the contribution in respect of each month that ends after the particular time and before the earlier of

(a) the first time after the particular time at which the amount of the contribution is equalled or exceeded by the total of all amounts each of which is a distribution

(i) that is made after the particular time under a TFSA of which the individual is the holder, and

(ii) that the individual designates in prescribed manner to be a distribution in connection with the contribution and not in connection with any other contribution, and

(b) the time at which the individual becomes resident in Canada.

Tax payable on prohibited or non-qualified investment

207.04 (1) The holder of a TFSA that governs a trust shall pay a tax under this Part for a calendar year if, at any time in the year,

(a) the trust acquires property that is a prohibited investment, or a non-qualified investment, for the trust; or

(b) property held by the trust becomes a prohibited investment, or a non-qualified investment, for the trust.

Amount of tax payable

(2) The amount of tax payable in respect of each property described in subsection (1) is 50% of the fair market value of the property at the time referred to in that subsection.

Where both prohibited and non-qualified investment

(3) For the purposes of subsection 146.2(4) and this section, if a trust governed by a TFSA holds property at any time that is, for the trust, both a prohibited investment and a non-qualified investment, the property is deemed at that time not to be a non-qualified investment, but remains a prohibited investment, for the trust.

Refund of tax on disposition of investment

(4) If in a calendar year a trust governed by a TFSA disposes of a property in respect of which a tax is imposed under subsection (1) on the holder of the TFSA, the holder is entitled to a refund for the year of an amount equal to

(a) except where paragraph (b) applies, the amount of the tax so imposed; or

(b) nil,

(i) if it is reasonable to consider that the holder knew, or ought to have known, at the time the property was acquired by the trust, that it was, or would become, a property described in subsection (1), or

(ii) if the property is not disposed of by the trust before the end of the calendar year following the calendar year in which the tax arose, or any later time that the Minister considers reasonable in the circumstances.

Deemed disposition and reacquisition

(5) For the purposes of this Act, if property held by a trust in respect of which a tax was imposed under subsection (1) ceases, at any particular time after the tax is imposed, to be a prohibited investment, or a non-qualified investment, for the trust, the trust is deemed to have disposed of the property immediately before the particular time for proceeds of disposition equal to its fair market value at the particular time and to have reacquired it immediately after the particular time at a cost equal to that fair market value.

Additional tax payable on prohibited investment

(6) The holder of a TFSA that governs a trust shall pay a tax under this Part for a calendar year, in addition to any tax imposed under subsection (1) for the year, if at any time in the year the trust holds one or more properties that are prohibited investments for the trust.

Amount of additional tax payable

(7) The amount of tax payable under subsection (6) for a calendar year is the amount of tax that would be payable under Part I by the trust for the taxation year that ends in the calendar year if

(a) the Act were read without reference to paragraph 82(1)(b), section 121 and subsection 146.2(4); and

(b) the trust had no incomes or losses from sources other than the properties referred to in subsection (6), and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,

(i) “income” includes dividends described in section 83, and

(ii) the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition.

Tax payable where advantage extended

207.05 (1) A tax is payable under this Part for a calendar year in connection with a TFSA if, in the year, an advantage in relation to the TFSA is extended to a person who is, or who does not deal at arm’s length with, the holder of the TFSA.

Amount of tax payable

(2) The amount of tax payable in respect of an advantage described in subsection (1) is

(a) in the case of a benefit, the fair market value of the benefit; and

(b) in the case of a loan or an indebtedness, the amount of the loan or indebtedness.

Liability for tax

(3) The holder of a TFSA in connection with which a tax is imposed under subsection (1) is liable to pay the tax except that, if the advantage is extended by the issuer of the TFSA or by a person with whom the issuer is not dealing at arm’s length, the issuer, and not the holder, is liable to pay the tax.

Waiver of tax payable

207.06 (1) If an individual would otherwise be liable to pay a tax under this Part because of section 207.02 or 207.03, the Minister may waive or cancel all or part of the liability if

(a) the individual establishes to the satisfaction of the Minister that the liability arose as a consequence of a reasonable error; and

(b) the individual acts without delay to cause one or more distributions to be made, under one or more TFSAs, the total amount of which is not less than the amount in respect of which the individual would otherwise be liable to pay the tax.

Waiver of tax payable

(2) If a person would otherwise be liable to pay a tax under this Part because of section 207.04 or 207.05, the Minister may waive or cancel all or part of the liability where the Minister considers it just and equitable to do so having regard to all the circumstances, including

(a) whether the tax arose as a consequence of reasonable error; and

(b) the extent to which the transaction that gave rise to the tax also gave rise to another tax under this Part.

Return and payment of tax

207.07 (1) A person who is liable to pay tax under this Part for all or any part of a calendar year shall within 90 days after the end of the year

(a) file with the Minister a return for the year under this subsection in prescribed form and containing prescribed information including

(i) an estimate of the amount of tax payable under this Part by the person in respect of the year, and

(ii) an estimate of the amount of the person’s allowable refund, if any, for the year; and

(b) pay to the Receiver General the amount, if any, by which the amount of the person’s tax payable under this Part in respect of the year exceeds the person’s allowable refund, if any, for the year.

Refund

(2) If a person has filed a return under this Part for a calendar year within three years after the end of the year, the Minister

(a) may, on mailing the notice of assessment for the year, refund without application any allowable refund of the person for the year, to the extent that it was not applied against the person’s tax payable under paragraph (1)(b); and

(b) shall, with all due dispatch, make the refund referred to in paragraph (a) after mailing the notice of assessment if an application for it has been made in writing by the person within three years after the mailing of an original notice of assessment for the year.

Provisions applicable to Part

(3) Subsections 150(2) and (3), sections 152 and 158 to 167 and Division J of Part I apply to this Part with any modifications that the circumstances require.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

32. (1) Paragraph (a) of the definition “registered life insurance policy” in subsection 211(1) of the Act is replaced by the following:

(a) as a registered retirement savings plan or TFSA, or

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

33. (1) Paragraph 227(9)(a) of the Act is replaced by the following:

(a) subject to paragraph (b), if

(i) the Receiver General receives that amount on or before the day it was due, but that amount is not paid in the manner required, 3% of that amount,

(ii) the Receiver General receives that amount

(A) no more than three days after it was due, 3% of that amount,

(B) more than three days and no more than five days after it was due, 5% of that amount, or

(iii) that amount is not paid or remitted on or before the seventh day after it was due, 10% of that amount; or

(2) Subsection (1) applies in respect of payments and remittances that are required to be first made after February 25, 2008.

34. (1) The definition “provincial SIFT tax factor” in subsection 248(1) of the Act is repealed.

(2) 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, an inter vivos 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 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

(3) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

“provincial SIFT tax rate”
« taux d’imposition provincial des EIPD »

“provincial SIFT tax rate” of a SIFT trust or a SIFT partnership for a taxation year means the prescribed amount determined in respect of the SIFT trust or SIFT partnership for the taxation year;

“TFSA”
« compte d’épargne libre d’impôt »

“TFSA”, being a tax-free savings account, has the meaning assigned by subsection 146.2(3);

(4) Subsection (1) and the definition “provincial SIFT tax rate” in subsection 248(1) of the Act, as enacted by subsection (3), apply to the 2009 and subsequent taxation years, except that that subsection and that definition also apply

(a) to the 2007 and 2008 taxation years of a SIFT trust if the SIFT trust so elects in its return of income for the 2007 taxation year;

(b) to the 2007 and 2008 taxation years of a SIFT partnership if the SIFT partnership so elects in its return for 2007 required under Part IX.1 of the Act;

(c) to the 2008 taxation year of a SIFT trust if the SIFT trust so elects in its return of income for the 2008 taxation year; and

(d) to the 2008 taxation year of a SIFT partnership if the SIFT partnership so elects in its return for 2008 required under Part IX.1 of the Act.

(5) Subsection (2) and the definition “TFSA” in subsection 248(1) of the Act, as enacted by subsection (3), apply to the 2009 and subsequent taxation years.

35. (1) Subsection 252(3) of the Act is replaced by the following:

Extended meaning of “spouse” and “former spouse”

(3) For the purposes of paragraph 56(1)(b), section 56.1, paragraphs 60(b) and (j), section 60.1, subsections 70(6) and (6.1), 73(1) and (5) and 104(4), (5.1) and (5.4), the definition “pre-1972 spousal trust” in subsection 108(1), subsection 146(16), the definition “survivor” in subsection 146.2(1), subparagraph 146.3(2)(f)(iv), subsections 146.3(14), 147(19), 147.3(5) and (7) and 148(8.1) and (8.2), the definition “small business property” in subsection 206(1), the definition “qualifying transfer” in subsection 207.01(1), subparagraph 210(c)(ii) and subsections 248(22) and (23), “spouse” and “former spouse” of a particular individual include another individual who is a party to a void or voidable marriage with the particular individual.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

36. (1) Section 253.1 of the Act is replaced by the following:

Investments in limited partnerships

253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b) and 132(6)(b), subsection 146.2(4), paragraphs 146.4(5)(b) and 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

37. (1) The portion of subsection 259(1) of the Act before paragraph (a) is replaced by the following:

Proportional holdings in trust property

259. (1) For the purposes of subsections 146(6), (10) and (10.1), 146.2(4) and 146.3(7), (8) and (9) and Parts X, X.2 and XI to XI.1, if at any time a taxpayer that is a registered investment or that is described in any of paragraphs 149(1)(r), (s), (u) to (u.2) or (x) acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

(2) Subsection (1) applies to the 2009 and subsequent taxation years.

R.S., c. C-8

Canada Pension Plan

38. (1) Section 21 of the Canada Pension Plan is amended by adding the following after subsection (1):

Exception — remittance to financial institution

(1.1) For the purpose of subsection (1), a prescribed person referred to in that subsection is deemed to have remitted an amount to the account of the Receiver General at a financial institution referred to in that subsection if the prescribed person has remitted the amount to the Receiver General at least one day before the day on which the amount is due.

R.S., c. 46 (4th Supp.), s. 1

(2) Paragraph 21(7)(a) of the Act is replaced by the following:

(a) subject to paragraph (b), if

(i) the Receiver General receives that amount on or before the day it was due, but that amount is not paid in the manner required, three per cent of that amount,

(ii) the Receiver General receives that amount

(A) no more than three days after it was due, three per cent of that amount,

(B) more than three days and no more than five days after it was due, five per cent of that amount, or

(iii) that amount is not paid or remitted on or before the seventh day after it was due, ten per cent of that amount; or

(3) Subsection (1) applies in respect of remittances by a prescribed person that are first due after February 25, 2008.

(4) Subsection (2) applies in respect of payments and remittances that are required to be first made after February 25, 2008.

1996, c. 23

Employment Insurance Act

39. (1) Section 82 of the Employment Insurance Act is amended by adding the following after subsection (3):

Exception — remittance to financial institution

(3.1) For the purpose of subsection (3), a prescribed person referred to in that subsection is deemed to have remitted an amount to the account of the Receiver General at a financial institution referred to in that subsection if the prescribed person has remitted the amount to the Receiver General at least one day before the day on which the amount is due.

(2) Paragraph 82(9)(a) of the Act is replaced by the following:

(a) subject to paragraph (b), if

(i) the Receiver General receives that amount on or before the day it was due, but that amount is not paid in the manner required, 3% of that amount,

(ii) the Receiver General receives that amount

(A) no more than three days after it was due, 3% of that amount,

(B) more than three days and no more than five days after it was due, 5% of that amount, or

(iii) that amount is not paid or remitted on or before the seventh day after it was due, 10% of that amount; or

(3) Subsection (1) applies in respect of remittances by a prescribed person that are first due after February 25, 2008.

(4) Subsection (2) applies in respect of payments and remittances that are required to be first made after February 25, 2008.

Coordinating Amendments

Bill C-10

40. Sections 41 to 44 apply if Bill C-10, introduced in the 2nd session of the 39th Parliament and entitled the Income Tax Amendments Act, 2006 (referred to in those sections as the “other Act”), receives royal assent.

41. (1) If the other Act is assented to before or on the same day as the day on which this Act is assented to, then

(a) section 21 of this Act is deemed never to have come into force and is repealed; and

(b) paragraph 132.2(3)(h) of the Income Tax Act, as enacted by subsection 130(1) of the other Act, is replaced by the following:

(h) if a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1) or 146.3(1), section 204 or subsection 205(1) or 207.01(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the day that includes the transfer time and the time at which it is disposed of in accordance with paragraph (g);

(2) If this Act is assented to before the day on which the other Act is assented to, then paragraph 132.2(3)(h) of the Income Tax Act, as enacted by subsection 130(1) of the other Act, is replaced by the following:

(3) The replacement of paragraph 132.2(3)(h) of the Income Tax Act by the operation of paragraph (1)(b) or subsection (2) applies in respect of the 2009 and subsequent taxation years.

42. (1) On the first day on which both subsection 190(1) of the other Act and section 35 of this Act are in force, subsection 252(3) of the Income Tax Act is replaced by the following:

Extended meaning of “spouse” and “former spouse”

(3) For the purposes of paragraph 56(1)(b), section 56.1, paragraphs 60(b) and (j), section 60.1, subsections 70(6) and (6.1), 73(1) and (5) and 104(4), (5.1) and (5.4), the definition “pre-1972 spousal trust” in subsection 108(1), subsection 146(16), the definition “survivor” in subsection 146.2(1), subparagraph 146.3(2)(f)(iv), subsections 146.3(14), 147(19), 147.3(5) and (7) and 148(8.1) and (8.2), the definition “small business property” in subsection 206(1), the definition “qualifying transfer” in subsection 207.01(1), and subsections 210(1) and 248(22) and (23), “spouse” and “former spouse” of a particular individual include another individual who is a party to a void or voidable marriage with the particular individual.

(2) The replacement of subsection 252(3) of the Income Tax Act by the operation of subsection (1) applies in respect of the 2009 and subsequent taxation years.

43. (1) On the first day on which both subsection 191(1) of the other Act and section 36 of this Act are in force, section 253.1 of the Income Tax Act is replaced by the following:

Investments in limited partnerships

253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b) and 146.1(2.1)(c), subsection 146.2(4), paragraphs 146.4(5)(b) and 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.

(2) The replacement of section 253.1 of the Income Tax Act by the operation of subsection (1) applies in respect of the 2009 and subsequent taxation years.

44. (1) On the first day on which both subsection 193(1) of the other Act and section 37 of this Act are in force, the portion of subsection 259(1) of the Income Tax Act before paragraph (a) is replaced by the following:

Proportional holdings in trust property

259. (1) For the purposes of subsections 146(6), (10) and (10.1), 146.1(2.1), 146.2(4) and 146.3(7), (8) and (9) and Parts X, X.2 and XI to XI.1, if at any time a taxpayer that is a registered investment or that is described in any of paragraphs 149(1)(r), (s), (u) to (u.2) or (x) acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

(2) The replacement of the portion of subsection 259(1) of the Income Tax Act before paragraph (a) by the operation of subsection (1) applies in respect of the 2009 and subsequent taxation years.

Conditional Amendments

Bill C-253

45. Sections 46 to 48 apply if Bill C-253, introduced in the 1st session of the 39th Parliament and entitled An Act to amend the Income Tax Act (deductibility of RESP contributions) (referred to in those sections as the “other Act”), receives royal assent.

46. Paragraph 60(i) of the Income Tax Act, as enacted by section 1 of the other Act, is replaced by the following:

Premium or payment under RRSP or RRIF

(i) any amount that is deductible under section 146 or subsection 147.3(13.1) in computing the income of the taxpayer for the year;

47. (1) Subsection 146.1(2.01) of the Income Tax Act, as enacted by subsection 2(1) of the other Act, is repealed.

(2) Subsection 146.1(7.1) of the Income Tax Act, as amended by subsection 2(2) of the other Act, is amended by adding the word “and” at the end of paragraph (a), by striking out the word “and” at the end of paragraph (b) and by repealing paragraph (c).

(3) Section 146.1 of the Income Tax Act is amended by adding the following after subsection (7.1):

Excluded amount

(7.2) For the purpose of paragraph (7.1)(b), an excluded amount in respect of a registered education savings plan is

(a) any amount received under the plan;

(b) any amount received in satisfaction of a right to a refund of payments under the plan; or

(c) any amount received by a taxpayer under a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the taxpayer and the taxpayer’s spouse or common-law partner or former spouse or common-law partner in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.

48. Sections 46 and 47 come into force, or are deemed to have come into force, on the day on which the other Act receives royal assent.

PART 2

AMENDMENTS IN RESPECT OF EXCISE DUTY ON TOBACCO PRODUCTS AND ALCOHOL

R.S., c. E-14

Excise Act

2002, c. 22, s. 364

49. (1) The definition “beer” or “malt liquor” in section 4 of the Excise Act is replaced by the following:

“beer” or “malt liquor”
« bière » ou « liqueur de malt »

“beer” or “malt liquor” means all fermented liquor that is brewed in whole or in part from malt, grain or any saccharine matter without any process of distillation and that has an alcoholic strength not in excess of 11.9% absolute ethyl alcohol by volume, but does not include wine as defined in section 2 of the Excise Act, 2001;

(2) With respect to fermented liquor that is brewed by a brewer in whole or in part from malt, grain or any saccharine matter without any process of distillation and that has an alcoholic strength in excess of 11.9% absolute ethyl alcohol by volume, a valid licence held by the brewer under the Excise Act is deemed to be a valid spirits licence issued under section 14 of the Excise Act, 2001 until the day that is 30 days after the day on which this Act is assented to.

(3) For the purposes of applying the provisions of the Excise Act, 2001 and of the Customs Act that provide for the payment of, or the liability to pay, interest in respect of any amount, the amount shall be determined and interest shall be computed on it as though this section had come into force on February 27, 2008.

(4) Subsections (1) and (2) are deemed to have come into force on February 27, 2008.