1993 Legislative Session: 2nd Session, 35th Parliament
FIRST READING


The following electronic version is for informational purposes only.
The printed version remains the official version.


HONOURABLE GLEN CLARK
MINISTER OF FINANCE AND
CORPORATE RELATIONS

BILL 40 -- 1993

CORPORATION CAPITAL TAX AMENDMENT ACT, 1993

HER MAJESTY, by and with the advice and consent of the Legislative Assembly of the Province of British Columbia, enacts as follows:

 
PART 1 -- AMENDMENTS EFFECTIVE APRIL 1, 1992

1 Section 1 (1) of the Corporation Capital Tax Act, S.B.C. 1992, c. 4, is amended

(a) by adding the following definitions:

"apartment corporation" means a corporation

(a) that is, in respect of an apartment building,

(i) an owner of the building, or

(ii) a lessee of the building under a lease, registered in the land title office, for a term of at least 99 years,

(b) each of the shareholders of which has a right to occupy one apartment in the apartment building, and

(c) that operates the apartment building exclusively for the benefit of its shareholders so that no one other than a shareholder and the individuals with whom the shareholder resides may reside in the building except in exceptional circumstances and for a limited time;

"applicable taxation year" means, in relation to a nonresident corporation,

(a) if the corporation has a branch in Canada, the branch's taxation year, or

(b) in any other case, the corporation's taxation year; ,

(b) by repealing the definition of "associated corporations" and substituting:

"associated" and "associated corporations" have the same meaning as in section 256 of the Income Tax Act (Canada); , and

(c) by adding the following definitions:

"current accounts payable" includes amounts that represent a corporation's, partnership's or joint venture's

(a) employee source deductions,

(b) current income taxes payable,

(c) wages and salaries payable, and

(d) cheques issued and outstanding in excess of funds on deposit,

but does not include any amounts that represent

(e) the current portion of long term indebtedness, or

(f) liabilities incurred more than 120 days before the end of the corporation's, partnership's or joint venture's taxation year and not paid by the end of that taxation year;

"generally accepted accounting principles" means generally accepted accounting principles used in Canada;

"loans and advances made by the partnership or joint venture to corporations" includes, in relation to a partnership or joint venture,

(a) accounts receivable, owed to the partnership or joint venture from corporations, that became receivables more than 120 days before the end of the taxation year of the partnership or joint venture, and

(b) holdbacks receivable, owed to the partnership or joint venture from corporations, that became receivables more than 120 days before the end of the taxation year of the partnership or joint venture

but does not include

(c) advances and loans made by the partnership or joint venture to corporations within 120 days before the end of the taxation year of the partnership or joint venture making the advance or loan, or

(d) any amounts provided to or for the benefit of a savings institution by the partnership or joint venture as a result of which the savings institution is or becomes indebted to the partnership or joint venture including

(i) a deposit by the partnership or joint venture with the savings institution, and

(ii) rights held by the partnership or joint venture against the savings institution based on bank paper or similar paper in use by a savings institution other than a bank, including certificates of deposit, bearer deposit notes, swap deposits and banker's acceptances;

"loans and advances to other corporations" includes, in relation to a corporation,

(a) accounts receivable, owed to the corporation from other corporations, that became receivables more than 120 days before the end of the taxation year of the corporation,

(b) holdbacks receivable, owed to the corporation from other corporations, that became receivables more than 120 days before the end of the taxation year of the corporation, and

(c) advances and loans made by the corporation to an associated corporation where

(i) each corporation has a permanent establishment in British Columbia, and

(ii) the taxation year of each corporation ends on the same date,

but does not include

(d) subject to paragraph (c), advances and loans by the corporation to other corporations made within 120 days before the end of the taxation year of the corporation,

(e) any amounts provided to or for the benefit of a savings institution by the corporation as a result of which the savings institution is or becomes indebted to the corporation including

(i) a deposit by the corporation with the savings institution, and

(ii) rights held by the corporation against the savings institution based on bank paper or similar paper in use by a savings institution other than a bank, including certificates of deposit, bearer deposit notes, swap deposits and banker's acceptances, or

(f) advances and loans made by the corporation as part of a series of loans and repayments intended to unduly or artificially reduce the corporation's taxable paid up capital;

"net paid up capital employed in Canada" means the net paid up capital employed in Canada as computed under section 14.1; .

2 Section 3 is amended

(a) by repealing subsections (1) to (3) and substituting the following:

(1) Every corporation that is a bank, trust company or credit union shall, for each taxation year that the corporation has or had a permanent establishment in British Columbia, pay to Her Majesty in right of the Province a tax in an amount equal to 3% of the amount taxable of that corporation in that taxation year if the corporation has, at the end of that taxation year, total paid up capital of more than $500 million.

(2) Every corporation that is a bank, trust company or credit union shall, for each taxation year that the corporation has or had a permanent establishment in British Columbia, pay to Her Majesty in right of the Province, a tax in an amount equal to 1% of the amount taxable of that corporation in that taxation year if the corporation has, at the end of that taxation year, total paid up capital of $500 million or less and

(a) the corporation has total paid up capital of $1 million or more, or

(b) the corporation is one of 2 or more associated corporations and has total paid up capital that, when added to the total paid up capital of every corporation with which it is associated, totals $1 million or more.

(3) Every corporation that is not a bank, trust company or credit union shall, for each taxation year that the corporation has or had a permanent establishment in British Columbia, pay to Her Majesty in right of the Province a tax in an amount equal to 0.3% of the amount taxable of that corporation in that taxation year if, at the end of that taxation year,

(a) the corporation has total paid up capital of $1 million or more, or

(b) the corporation is one of 2 or more associated corporations and has total paid up capital that, when added to the total paid up capital of every corporation with which it is associated, totals $1 million or more. ,

(b) in subsection (4) by striking out "subsection (2) (d) or (3) (c)," and substituting "this section,", and

(c) by repealing subsection (5) and substituting the following:

(5) Where a corporation is one of 2 or more associated corporations, the amounts of total paid up capital of the associated corporations that are to be added together for the purposes of subsection (2) (b) or (3) (b) shall be computed by using the taxation year for each of the associated corporations ending in the same calendar year.

(6) For the purposes of determining whether a corporation referred to in section 14.1 (2) is subject to tax under this section, the corporation shall compute its total paid up capital on the same basis as if it were resident in Canada.

3 Section 4 (3) is amended by adding the following paragraphs:

(f) a mortgage investment corporation as that term is defined in section 130.1 (6) of the Income Tax Act (Canada);

(g) a housing cooperative as that term is defined in section 66 of the Cooperative Association Act;

(h) a bankrupt corporation from the date of its bankruptcy for so long as it remains a bankrupt;

(i) an apartment corporation.

4 Section 6 is amended

(a) by renumbering subsection (1) as subsection (1.1) , and

(b) by adding the following subsection:

(1) For the purposes of subsections (1.1) and (2), "corporation" includes a partnership or joint venture.

5 Section 7 is amended by renumbering the section as section 7 (1) and by adding the following subsection:

(2) For the purposes of subsection (1), the capital stock of a credit union does not include its non-equity shares as that term is defined by the Financial Institutions Act.

6 Section 9 is amended

(a) by repealing subsection (1), and

(b) in subsection (2) by striking out "trust company, credit union or corporation described in section 8" and substituting "a trust company, a credit union or a corporation described in section 8 or 14.1 (2),".

7 Section 10 (1) is amended

(a) by repealing paragraph (b) and substituting the following:

(b) liabilities, whether secured or unsecured, including any deferred credit but excluding

(i) current accounts payable,

(ii) amounts payable by the partnership or joint venture to the corporation or to other corporations that are members of the partnership or joint venture, and

(iii) amounts payable by the partnership or joint venture to corporations that have a permanent establishment in British Columbia and that are associated with the corporation; ,

(b) in paragraph (c) by striking out "resident in Canada", and

(c) by repealing paragraph (d) and substituting the following:

(d) loans and advances made by the partnership or joint venture to corporations; .

8 Section 11 is amended

(a) in subsection (1) by striking out "at the end of its taxation year" and substituting "to which section 14.1 (2) does not apply, at the end of its taxation year",

(b) by repealing subsection (2) and substituting the following:

(2) Where 2 or more corporations are associated corporations and the aggregate of the total paid up capital amounts and the net paid up capital employed in Canada amounts, as the case may be, of those associated corporations is $1 million or more but does not exceed $1 250 000, each of the associated corporations that are corporations to which section 14.1 (2) does not apply may deduct from its total paid up capital at the end of its taxation year its proportionate share of the deduction amount that would be available under subsection (1) (d) to a corporation that had, as its total paid up capital, the aggregate of the total paid up capital amounts and the net paid up capital employed in Canada amounts of the associated corporations.

(2.1) Where a corporation is one of 2 or more associated corporations

(a) the amount of the total paid up capital for the corporation is, for the purposes of subsection (2), its total paid up capital at the end of its taxation year after applying the deductions under subsection (1) (a) to (c) of this section and under section 12,

(b) the total paid up capital amounts and net paid up capital employed in Canada amounts of the associated corporations that are to be aggregated for the purposes of subsection (2) shall be computed by using the taxation year for each of the associated corporations ending in the same calendar year, and

(c) the corporation's proportionate share of the deduction amount referred to in subsection (2) is the proportion of that deduction amount that the corporation's total paid up capital bears to the aggregate of the total paid up capital amounts and net paid up capital employed in Canada amounts referred to in subsection (2). , and

(c) in subsection (3) by striking out "subsection (2) (a)" and substituting "subsections (2) and (2.1)".

9 Section 12 is amended

(a) by repealing subsection (1),

(b) in subsection (2) by striking out "trust company, credit union or corporation described in section 8" and substituting "a trust company, a credit union or a corporation described in section 8 or 14.1 (2)", and

(c) by adding the following subsection:

(2.1) Where a credit union owns shares of another savings institution that has a permanent establishment in British Columbia, other than a savings institution referred to in section 4 (3), there may be deducted from the total paid up capital of the credit union an investment allowance equal to the proportion of the total paid up capital that the carrying value of those shares in the other savings institution bears to the total assets of the credit union.

10 Section 13 is amended

(a) by adding "to which section 14.1 (2) does not apply" after "total paid up capital of a corporation", and

(b) by renumbering the section as section 13 (1) and by adding the following subsection:

(2) Where a corporation is, at the end of an applicable taxation year, a nonresident corporation to which section 14.1 (2) applies, there may be deducted from the net paid up capital employed in Canada of the corporation, at the end of that taxation year, that portion, determined under prescribed rules, of the net paid up capital employed in Canada used by the corporation in Canadian jurisdictions other than British Columbia.

11 Section 14 is amended

(a) in the definition of "B.C. research expenditure" in subsection (1) by striking out "that is expenditure" and substituting "that is an expenditure",

(b) by repealing subsection (2) (f) and substituting the following:

(f) logging activities other than road building or transporting logs or logging equipment, , and

(c) in subsection (3) by striking out "the deductions under" and substituting "any deductions permitted under".

12 The following section is added:

Calculation of net paid up capital employed
in Canada for nonresident corporations

14. (1) In this section

"Canadian assets" means, in respect of a corporation that is a nonresident at the end of an applicable taxation year,

(a) assets of the corporation that are used or held by the corporation during that taxation year, for or in relation to any business carried on by the corporation through a permanent establishment in Canada during that taxation year, and

(b) the corporation's proportionate share, as computed under subsection (4), of the assets of any partnership or joint venture in which the corporation has an interest that are used or held by the partnership or joint venture for or in relation to any business carried on by it through a permanent establishment in Canada in the taxation year of the partnership or joint venture that ends in the applicable taxation year;

"corporation's current accounts payable" includes, for a corporation that has an interest in a partnership or joint venture, the corporation's proportionate share, as computed under subsection (4), of the current accounts payable of the partnership or joint venture as at the end of the taxation year of the partnership or joint venture that ends in the applicable taxation year.

(2) Unless subsection (3) applies, the net paid up capital employed in Canada of a corporation that is a nonresident at the end of the applicable taxation year and that carried on business through a permanent establishment in Canada in that taxation year is the greater of

(a) the product obtained by multiplying the corporation's taxable income earned in Canada in the taxation year, as determined under the Income Tax Act (Canada), by 12.5, and

(b) the amount, if any, by which the aggregate of the carrying values of the corporation's Canadian assets, as at the end of the applicable taxation year, exceeds the aggregate of

(i) the amount of the corporation's current accounts payable at the end of the applicable taxation year that may reasonably be regarded as relating to any business carried on by the corporation through a permanent establishment in Canada during the applicable taxation year, and

(ii) the deductions that the corporation would have been permitted to take under sections 11 (1) (c) and (d) and (2) and 12 if

(A) the corporation was resident in Canada, and

(B) the only assets of the corporation were those of its Canadian assets that pertain exclusively to its permanent establishments in Canada.

(3) A corporation's net paid up capital employed in Canada for an applicable taxation year shall be computed in accordance with sections 7 to 12 if

(a) the corporation is a nonresident at the end of the applicable taxation year, and

(b) the business of the corporation was, throughout the applicable taxation year, carried on solely in Canada.

(4) A corporation's proportionate share of the assets or current accounts payable of a partnership or joint venture in which it has an interest shall be computed on the same basis that the corporation's share of the income from the partnership or joint venture is computed.

13 Section 16 (12) is amended by striking out "the date of each instalment payment" and substituting "the later of the due date of the instalment and the date that the overpayment was made".

 
PART 2 -- AMENDMENTS EFFECTIVE JUNE 1, 1992

14 Section 1 (1) is amended by adding the following definition:

"bank" does not include a bank in respect of which an application under section 344 of the Bank Act (Canada) has been approved under section 345 (2) of that Act; .

 
PART 3 -- AMENDMENTS EFFECTIVE APRIL 1, 1993

15 Section 1 is amended

(a) in subsection (1) by adding the following definition:

"aggregate paid up capital" means

(a) in relation to a bank, trust company or credit union, aggregate paid up capital within the meaning of section 7,

(b) in relation to a corporation that is registered or licensed under the laws of a province to trade in securities, aggregate paid up capital within the meaning of section 8, or

(c) in relation to a corporation that is not a bank, a trust company, a credit union or a corporation referred to in section 8 or 14.1 (2), aggregate paid up capital within the meaning of section 9; ,

(b) in subsection (1) by repealing the definition of "amount taxable",

(c) in subsection (1) by adding the following definitions:

"B.C. paid up capital" means

(a) in relation to a corporation that is a nonresident corporation to which section 14.1 (2) applies at the end of an applicable taxation year, the result obtained by subtracting the deduction, if any, made by the corporation under section 13 (2) at the end of that taxation year from the corporation's net paid up capital employed in Canada, or

(b) in any other case, the result obtained by subtracting the deduction, if any, made by a corporation under section 13 (1) from the corporation's net paid up capital;

"capital lease" means a lease that is, under generally accepted accounting principles, considered to be a capital lease; ,

(d) in subsection (1) by repealing the definition of "loans and advances made by the partnership or joint venture to corporations" and substituting the following:

"loans and advances made by the partnership or joint venture to corporations" includes, in relation to a partnership or joint venture,

(a) accounts receivable, owed to the partnership or joint venture from corporations, that became receivables more than 120 days before the end of the taxation year of the partnership or joint venture,

(b) holdbacks receivable, owed to the partnership or joint venture from corporations, that became receivables more than 120 days before the end of the taxation year of the partnership or joint venture, and

(c) bonds, debentures, mortgages and similar obligations of corporations acquired by the partnership or joint venture more than 120 days before the end of its taxation year,

but does not include

(d) advances and loans made by the partnership or joint venture to corporations within 120 days before the end of the taxation year of the partnership or joint venture, or

(e) any amounts provided to or for the benefit of a savings institution by the partnership or joint venture as a result of which the savings institution is or becomes indebted to the partnership or joint venture including

(i) a deposit by the partnership or joint venture with the savings institution, and

(ii) rights held by the partnership or joint venture against the savings institution based on bank paper or similar paper in use by a savings institution other than a bank, including certificates of deposit, bearer deposit notes, swap deposits and banker's acceptances; ,

(e) in subsection (1) by repealing the definition of "loans and advances to other corporations" and substituting the following:

"loans and advances to other corporations" includes, in relation to a corporation,

(a) accounts receivable, owed to the corporation from other corporations, that became receivables more than 120 days before the end of the taxation year of the corporation,

(b) holdbacks receivable, owed to the corporation from other corporations, that became receivables more than 120 days before the end of the taxation year of the corporation,

(c) bonds, debentures, mortgages and similar obligations of other corporations acquired by the corporation more than 120 days before the end of its taxation year, and

(d) advances and loans made by the corporation to an associated corporation where

(i) each corporation has a permanent establishment in British Columbia, and

(ii) the taxation year of each corporation ends on the same date,

but does not include

(e) subject to paragraph (d), advances and loans by the corporation to other corporations made within 120 days before the end of the taxation year of the corporation,

(f) any amounts provided to or for the benefit of a savings institution by the corporation as a result of which the savings institution is or becomes indebted to the corporation including

(i) a deposit by the corporation with the savings institution, and

(ii) rights held by the corporation against the savings institution based on bank paper or similar paper in use by a savings institution other than a bank, including certificates of deposit, bearer deposit notes, swap deposits and banker's acceptances, or

(g) advances and loans made by the corporation as part of a series of loans and repayments intended to unduly or artificially reduce the corporation's taxable paid up capital; ,

(f) in subsection (1) by adding the following definitions:

"net B.C. paid up capital" means the result obtained by subtracting the aggregate amount of the deductions, if any, made by a corporation under section 14 from the corporation's B.C. paid up capital;

"net paid up capital" means the result obtained by subtracting the deduction, if any, made by a corporation under section 12 from the corporation's total paid up capital;

"operating lease" means a lease that is, under generally accepted accounting principles, considered to be an operating lease;

"taxable paid up capital" means the result obtained by subtracting the deduction, if any, made by a corporation under section 14.2 from the corporation's net B.C. paid up capital;

"total paid up capital" means the result obtained by subtracting the aggregate amount of the deductions, if any, made by a corporation under section 11 from the corporation's aggregate paid up capital; , and

(g) by adding the following subsection:

(3) For the purposes of this Act, a corporation has an interest in any partnership or joint venture in which it or a partnership or a joint venture in which it has an interest is a partner in the partnership or a participant in the joint venture.

16 Section 2 is amended

(a) by repealing subsection (1) and substituting the following:

(1) In this section

"corporation" includes a partnership or joint venture;

"fixed place of business" includes a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop, a warehouse, an office and an agency. ,

(b) by repealing subsection (4) and substituting the following:

(4) A corporation that does not otherwise have a permanent establishment in Canada has a permanent establishment at each of the following:

(a) the place, if any, designated in its charter as being its head office;

(b) the place, if any, designated in its charter as being its registered office. , and

(c) by adding the following subsection:

(12) If a partnership or a joint venture has a permanent establishment at a place, a corporation that has an interest in the partnership or joint venture shall be deemed to have a permanent establishment at that place.

17 Section 3 is amended

(a) by striking out "$1 million" wherever it appears and substituting "$1 250 000",

(b) by striking out "total paid up capital" wherever it appears and substituting "net paid up capital",

(c) by striking out "amount taxable" wherever it appears and substituting "taxable paid up capital",

(d) in subsections (2) and (3) by striking out "Every corporation" wherever it appears and substituting "Subject to subsections (7) and (8), every corporation",

(e) by repealing subsection (4), and

(f) by adding the following subsections:

(7) Every corporation that is subject to tax under subsection (2) or (3) shall, for each taxation year in which the corporation has or had a permanent establishment in British Columbia, pay to Her Majesty in right of the Province,

(a) if, at the end of that taxation year, the corporation has net B.C. paid up capital of $250 000 or more but less than $1 250 000, a tax in the amount of $500, or

(b) if, at the end of that taxation year, the corporation is one of 2 or more associated corporations and has net B.C. paid up capital that, when added to the net B.C. paid up capital of every corporation with which it is associated, totals $250 000 or more but less than $1 250 000, a tax in an amount equal to the corporation's proportionate share of $500.

(8) Every corporation that is subject to tax under subsection (2) or (3) shall, for each taxation year in which the corporation has or had a permanent establishment in British Columbia, pay to Her Majesty in right of the Province,

(a) if, at the end of that taxation year, the corporation has net B.C. paid up capital of less than $250 000, a tax in an amount equal to the lesser of

(i) the product obtained by multiplying the taxable paid up capital of the corporation by 1%, if the corporation is a bank, trust company or credit union, or by 0.3% for any other corporation, and

(ii) $250, or

(b) if, at the end of that taxation year, the corporation is one of 2 or more associated corporations and has net B.C. paid up capital that, when added to the net B.C. paid up capital of every corporation with which it is associated, totals less than $250 000, a tax in an amount equal to

(i) the product obtained by multiplying the taxable paid up capital of the corporation by 1%, if the corporation is a bank, trust company or credit union, or by 0.3% for any other corporation, and

(ii) the corporation's proportionate share of $250.

(9) For the purposes of subsections (7) and (8), a corporation referred to in subsection (7) (b) and (8) (b) that is to pay its proportionate share of an amount referred to in those subsections shall pay the proportion of that amount that its net B.C. paid up capital bears to the aggregate of the net B.C. paid up capital amounts of the corporation and its associated corporations.

(10) The amounts of net B.C. paid up capital of the associated corporations that are to be added together for the purposes of subsections (7) and (8) shall be computed by using the taxation year for the associated corporations ending in the same calendar year.

18 Sections 7, 8 and 9 (2) are amended by striking out "total" wherever it appears and substituting "aggregate".

19 Section 7 (1) is amended by striking out "and" at the end of paragraph (b), by adding ", and" at the end of paragraph (c) and by adding the following:

(d) proportionate share, as computed under section 14.3 (2), of the partnership or joint venture amounts referred to in section 14.3 (1) (c), if any, that are applicable to each of the partnerships or joint ventures in which the bank, trust company or credit union, has an interest.

20 Section 8 is amended by striking out "and" at the end of paragraph (c), by adding ", and" at the end of paragraph (d) and by adding the following:

(e) proportionate share, as computed under section 14.3 (2), of the partnership or joint venture amounts referred to in section 14.3 (1) (a) and (c), if any, that are applicable to each of the partnerships or joint ventures in which the corporation has an interest.

21 Section 9 (2) is amended by striking out "and" at the end of paragraph (b), by adding ", and" at the end of paragraph (c) and by adding the following:

(d) proportionate share, as computed under section 14.3 (2), of the partnership or joint venture amounts referred to in section 14.3 (1) (a) to (c), if any, that are applicable to each of the partnerships or joint ventures in which the corporation has an interest.

22 Section 10 is repealed.

23 Section 11 is repealed and the following substituted:

Total paid up capital

11 There may be deducted from the aggregate paid up capital of a corporation to which section 14.1 (2) does not apply, at the end of its taxation year,

(a) the corporation's negative retained earnings, if any,

(b) in the case of a corporation other than a corporation referred to in section 7, the corporation's deferred tax debit, if any, to the extent that the deferred tax debit is recorded in its financial statements,

(c) in the case of a corporation that is solely engaged in exploration for a mineral resource, petroleum or natural gas and has incurred exploration costs that have not been written off to retained earnings, those exploration costs to the extent that they are not deducted under section 14 in the year in which the deduction under this paragraph is taken, and

(d) in the case of a corporation that has an interest in a partnership or joint venture, the corporation's proportionate share, as computed under section 14.3 (2), of the partnership or joint venture amounts referred to in section 14.3 (1) (k), if any, that are applicable to each of the partnerships or joint ventures in which the corporation has an interest.

24 Section 12 is amended

(a) by adding the following subsection

(1) In this section "total assets", in relation to a corporation, means the aggregate of the carrying values of the corporation's assets on its balance sheet at the end of its taxation year, prepared using generally accepted accounting principles other than the equity method of accounting, and includes

(a) the amount by which the carrying value of an asset has been reduced by a liability or deferred credit, and

(b) where the corporation has an interest in a partnership or joint venture, the proportionate share, within the meaning of section 14.3 (2), of the aggregate of the carrying values of the partnership or joint venture assets on the partnership's or joint venture's balance sheet at the end of the taxation year that falls within the corporation's taxation year in respect of which the accounting is made,

but does not include

(c) the carrying value of the corporation's investment in any partnership or joint venture referred to in paragraph (b). ,

(b) by repealing subsection (2) and substituting the following:

(2) There may be deducted from the total paid up capital of a corporation that is not a bank, a trust company, a credit union or a corporation described in section 8 or 14.1 (2), at the end of the corporation's taxation year, an investment allowance equal to the proportion of the total paid up capital that the carrying value of the following investments bears to the total assets of the corporation:

(a) the corporation's investments in shares of other corporations;

(b) the corporation's net investments, as lessor, in capital leases to other corporations other than savings institutions;

(c) loans and advances to other corporations;

(d) dividends receivable from corporations other than savings institutions;

(e) subject to subsection (3), the amount that represents the carrying value of the corporation's investment, if any, in a ship or aircraft;

(f) an amount equal to the security posted by the corporation under section 10 of the Mines Act;

(g) the corporation's proportionate share, as computed under section 14.3 (2), of the partnership or joint venture amounts referred to in section 14.3 (1) (d) to (i), if any, that are applicable to each of the partnerships or joint ventures in which the corporation has an interest. ,

(c) in subsection (3) by striking out "(2) (c)" and substituting "(2) (e)", and

(d) by adding the following subsection:

(4) Notwithstanding any other provision of this section, the investment allowance to which a corporation may be entitled under subsection (2) or (2.1) must not be greater than the aggregate carrying value of the investments referred to in this section that are made by the corporation.

25 Section 13 (1) is repealed and the following substituted:

(1) There may, at the end of a taxation year of a corporation to which section 14.1 (2) does not apply, be deducted from the net paid up capital of the corporation, that portion, determined under prescribed rules, of the net paid up capital used by the corporation in jurisdictions outside British Columbia.

26 Section 14 is amended

(a) in subsection (1) by adding the following definition:

"acquire" includes obtain, as lessee, under a capital lease; ,

(b) in the definition of "B.C. development expenditure" in subsection (1) by repealing paragraph (b) and substituting the following:

(b) sections 66 (10.2), (12.62) and (12.63) and 66.2 (5) (a) (iii) of the Income Tax Act (Canada) were disregarded; ,

(c) in subsection (1) by repealing the definition of "B.C. exploration expenditure" and substituting the following:

"B.C. exploration expenditure" has the same meaning as "Canadian exploration expense" in section 66.1 (6) (a) of the Income Tax Act (Canada) would have if

(a) the reference in that provision to "Canada" and "taxpayer" were read as references to "British Columbia" and "corporation", and

(b) section 66 (10.1), (12.6) and (12.61) of the Income Tax Act (Canada) were disregarded; ,

(d) in subsection (1) by repealing the definition of "eligible property" and substituting the following:

"eligible property" means property acquired by a corporation, where the property

(a) is a building, a portion of a building, machinery or equipment, including any air and water pollution abatement equipment and structures,

(b) was acquired by the corporation after March 31, 1992,

(c) had not been used for any purpose whatever before

(i) it was acquired by the corporation, or

(ii) it was leased by the corporation, as lessor, under an operating lease, and

(d) is, from the date of its acquisition to and including the end of any taxation year in respect of which the corporation claims a deduction under this section,

(i) owned by the corporation, and

(ii) used primarily for one or more of the purposes referred to in subsection (2) (a) to (k) in British Columbia

(A) by the corporation, or

(B) if the corporation leases the property, as lessor, under an operating lease, by the lessee under that lease

but does not include eligible tourism property; ,

(e) in subsection (1) by repealing the definition of "eligible tourism property" and substituting the following:

"eligible tourism property" means property acquired by a corporation, where the property

(a) is

(i) a building, a structure, a portion of a building or structure, machinery or equipment acquired by the corporation after March 31, 1992, or

(ii) changes to land constructed by the corporation after March 31, 1992,

(b) had not been used for any purpose whatever before

(i) it was acquired by the corporation, or

(ii) it was leased by the corporation, as lessor, under an operating lease, and

(c) is, from the date of its acquisition to and including the end of any taxation year in respect of which the corporation claims a deduction under this section,

(i) owned by the corporation, and

(ii) used primarily in prescribed tourism activities in British Columbia

(A) by the corporation, or

(B) if the corporation leases the property, as lessor, under an operating lease, by the lessee under that lease. ,

(f) in subsection (2) by striking out "The requirements referred to in paragraph (d) of the definition of "eligible property" in subsection (1) are that the corporation acquired the property to use it in British Columbia primarily" and substituting "Eligible property must be used",

(g) in subsection (2) (c) by striking out "oil or gas" and substituting "petroleum or natural gas", and

(h) by repealing subsection (3) and substituting the following:

(3) Subject to subsection (4), there may be deducted from the B.C. paid up capital of a corporation that is not a bank, trust company or credit union, at the end of its taxation year, the amounts of the following eligible expenditures to the extent that they are not written off to retained earnings in the year in which the deduction under this section is taken:

(a) for the first taxation year ending after March 31, 1992, the eligible expenditure incurred by the corporation between March 31, 1992 and the end of that taxation year, multiplied by the ratio that the total number of days in the taxation year bears to the number of days in the taxation year after March 31, 1992;

(b) for the second taxation year ending after March 31, 1992, the eligible expenditure incurred by the corporation during that taxation year;

(c) for the third and subsequent taxation years ending after March 31, 1992, the aggregate of

(i) the eligible expenditure incurred by the corporation during its current taxation year, and

(ii) the eligible expenditure incurred by the corporation in its immediately preceding taxation year, excluding the cost incurred in that immediately preceding taxation year to acquire eligible property or eligible tourism property, if that eligible property or eligible tourism property is not, from the date of its acquisition to and including the end of the taxation year for which the deduction is claimed, owned by the corporation claiming the deduction and used, in British Columbia, by the corporation or, if leased by the corporation, as lessor, under an operating lease, by the lessee, primarily for one of the following:

(A) in the case of eligible property, the purposes set out in subsection (2);

(B) in the case of eligible tourism property, prescribed tourism activities;

(d) for each taxation year of the corporation in which the corporation has an interest in a partnership or joint venture, the corporation's proportionate share, as determined under section 14.3 (2), of the partnership or joint venture amounts referred to in section 14.3 (1) (j), if any, that are applicable to each partnership or joint venture in which the corporation has an interest.

(4) No corporation shall take a deduction with respect to an eligible expenditure under this section in a taxation year if

(a) a deduction, under section 11, with respect to the eligible expenditure has already been taken in the taxation year,

(b) a deduction with respect to the eligible expenditure has been or will be taken by another corporation in any taxation year,

(c) the eligible expenditure was made to acquire eligible property or eligible tourism property, which eligible property or eligible tourism property has been leased by way of an operating lease on more than one occasion, or

(d) the corporation has not filed with the administrator a schedule in the prescribed form.

27 Section 14.1 is amended

(a) in subsection (1) by striking out ", as computed under subsection (4)," wherever it appears and substituting ", within the meaning of section 14.3 (2),",

(b) in subsection (2) (b) (ii) by striking out "11 (1) (c) and (d) and (2)" and substituting "11 (c)", and

(c) by repealing subsection (4).

28 The following sections are added:

Taxable paid up capital

14.2 (1) Unless subsection (2) applies, there may be deducted from the net B.C. paid up capital of a corporation at the end of its taxation year, where the net B.C. paid up capital of the corporation is an amount that is $1 250 000 or more but does not exceed $1 500 000, the appropriate further deduction shown below.

NET B.C. PAID UP CAPITAL

EXCEEDS

BUT DOES
OT EXCEED

DEDUCTION

$1 250 000

$1 275 000

$1 083 000

1 275 000

1 300 000

974 000

1 300 000

1 325 000

865 000

1 325 000

1 350 000

756 000

1 350 000

1 375 000

647 000

1 375 000

1 400 000

538 000

1 400 000

1 425 000

429 000

1 425 000

1 450 000

320 000

1 450 000

1 475 000

211 000

1 475 000

1 500 000

102 000

(2) Where 2 or more corporations are associated corporations and the aggregate of the net B.C. paid up capital amounts of those corporations is $1 250 000 or more but does not exceed $1 500 000, each of the associated corporations may deduct from its net B.C. paid up capital at the end of its taxation year its proportionate share of the deduction amount that would be available, under subsection (1), to a corporation that had, as its net B.C. paid up capital, the aggregate amount of the net B.C. paid up capital amounts referred to in this subsection.

(3) For the purposes of subsection (2), a corporation's proportionate share of the deduction amount referred to in subsection (2) is the proportion of that deduction amount that the corporation's net B.C. paid up capital bears to the aggregate amount of the net B.C. paid up capital amounts referred to in subsection (2).

Partnerships and joint ventures

14.3 (1) Notwithstanding section 14.4 (2), a corporation that has an interest in a partnership or a joint venture must include its proportionate share of the following partnership or joint venture amounts when computing its taxable paid up capital:

(a) subordinate indebtedness where the corporation is an investment dealer within the meaning of section 8;

(b) liabilities, whether secured or unsecured, including any deferred credit but excluding

(i) current accounts payable,

(ii) amounts payable by the partnership or joint venture to the corporation or to other corporations that have an interest in the partnership or joint venture, and

(iii) amounts payable by the partnership or joint venture to corporations that have a permanent establishment in British Columbia and are associated with the corporation;

(c) accumulated earnings or losses of the partnership or joint venture since the date the corporation acquired an interest in the partnership or joint venture;

(d) investments of the partnership or joint venture in shares of corporations;

(e) the partnership's or joint venture's net investments as lessor in capital leases to corporations other than savings institutions;

(f) loans and advances made by the partnership or joint venture to corporations;

(g) dividends receivable by the partnership or joint venture from corporations other than savings institutions;

(h) subject to section 12 (3), the amount that represents the carrying value of the partnership's or joint venture's investment, if any, in a ship or aircraft;

(i) an amount equal to the security posted by the partnership or joint venture under section 10 of the Mines Act;

(j) expenditures of the partnership or joint venture that would be eligible expenditures under section 14 if the partnership or joint venture were a corporation;

(k) deductions taken by the partnership or joint venture that would be deductions under section 11 (c) if the partnership or joint venture were a corporation.

(2) A corporation's proportionate share of the partnership or joint venture amounts referred to in subsection (1) shall be computed on the same basis that the corporation's share of the income from the partnership or joint venture is computed.

(3) The partnership or joint venture amounts of which a corporation must account for its proportionate share under this Act are those amounts referred to in subsection (1)

(a) as at the taxation year end of the partnership or joint venture that falls within the corporation's taxation year in respect of which the computation of the corporation's taxable paid up capital is made, and

(b) as disclosed by the non-consolidated financial statements of the partnership or joint venture prepared using generally accepted accounting principles other than the equity method of accounting.

General rules applicable totaxable paid up capital

14.4 (1) A deduction made by a corporation in computing its taxable paid up capital shall be disallowed if it would unduly or artificially reduce its taxable paid up capital.

(2) For the purposes of this Act, a corporation shall determine its taxable paid up capital on the basis of its non-consolidated financial statements using generally accepted accounting principles other than the equity method of accounting.

29 Section 18 (b) is amended by striking out "amount taxable" and substituting "taxable paid up capital".

Transitional

30 Section 14.2 of the Corporation Capital Tax Act as enacted by section 28 of this Act applies to a corporation in respect of a taxation year of that corporation that ends after March 31, 1993 and section 11 of the Corporation Capital Tax Act as it read immediately before the coming into force of section 23 of this Act applies to a corporation in respect of a taxation year ending before April 1, 1993.

Commencement

31 (1) Sections 1 to 13 are deemed to have come into force on April 1, 1992 and are retroactive to the extent necessary to give them effect on and after that date.

(2) Section 14 is deemed to have come into force on June 1, 1992 and is retroactive to the extent necessary to give it effect on and after that date.

(3) Sections 15 to 30 are deemed to have come into force on April 1, 1993 and are retroactive to the extent necessary to give them effect on and after that date.

 
Explanatory Notes

SECTION 1:

SECTION 2: clarifies that section 3 of the Corporation Capital Tax Act applies to corporations that have or had a permanent establishment in British Columbia and that total paid up capital is to be calculated in respect of nonresident corporations for the purposes only of determining whether they or corporations with which they are associated are subject to tax under that section.

SECTION 3: exempts from tax a mortgage investment corporation, a housing cooperative, a bankrupt corporation and an apartment corporation.

SECTION 4: includes partnerships and joint ventures within rules relating to taxation years.

SECTION 5: excludes non-equity shares from the capital stock of a credit union for the purposes of calculating the credit union's total paid up capital.

SECTION 6:

(a) reflects the movement of the definition of "current accounts payable" to section 1 of the Corporation Capital Tax Act, and

(b) clarifies that the calculations for total paid up capital set out in section 9 of the Corporation Capital Tax Act do not apply to nonresident corporations.

SECTION 7:

(a) excludes from the partnership or joint venture amounts referred to in section 10 of the Corporation Capital Tax Act, specified liabilities of partnerships or joint ventures,

(b) includes in those partnership or joint venture amounts, shares and bonds of corporations whether or not the corporations of which the shares are held are resident in Canada, and

(c) includes in those partnership or joint venture amounts, loans and advances made to corporations by the partnership or joint venture whether or not those corporations are resident in Canada.

SECTION 8: clarifies that the deductions referred to in section 11 of the Corporation Capital Tax Act are not available to nonresident corporations, and includes the net paid up capital employed in Canada of associated corporations in the calculations for deductions under that section.

SECTION 9:

(a) reflects the movement of the definition of "cash on deposit with a savings institution" into the definition of "loans and advances to other corporations" and the movement of the definition of "loans and advances to other corporations" to section 1 of the Corporation Capital Tax Act,

(b) clarifies that the calculations for total paid up capital set out in section 12 of the Corporation Capital Tax Act do not apply to nonresident corporations, and

(c) permits a credit union that owns shares in a specified savings institution to deduct from the credit union's total paid up capital an investment allowance in respect of those shares.

SECTION 10:

(a) clarifies that the calculations for total paid up capital set out in section 13 of the Corporation Capital Tax Act do not apply to nonresident corporations, and

(b) permits a nonresident corporation to deduct from its net paid up capital employed in Canada the portion of that amount that is used in Canada but outside of British Columbia.

SECTION 11:

(a) corrects an omission,

(b) broadens the purposes for which eligible property may be used to include logging activities, and

(c) clarifies that the deductions referred to in sections 11 to 13 of the Corporation Capital Tax Act do not apply to every corporation.

SECTION 12: provides for the method by which a nonresident corporation is to compute its net paid up capital employed in Canada.

SECTION 13: clarifies that interest is to accrue on tax overpayments from the later of the date that the payment is made and the date that the payment is due.

SECTION 14: defines "bank" to exclude banks in voluntary liquidation and dissolution.

SECTION 15:

(a) to (e) define the various levels of paid up capital referred to in the Corporation Capital Tax Act, replace the "amount taxable" definition with a definition of "taxable paid up capital", define "capital lease" and "operating lease" in accordance with generally accepted accounting principles and add bonds, debentures, mortgages and other similar obligations to the definitions of "loans and advances to other corporations" and "loans and advances made by the partnership or joint venture to corporations", and

(f) identifies, for the purposes of the Corporation Capital Tax Act, the partnerships or joint ventures in which a corporation has an interest.

SECTION 16:

(a) applies the permanent establishment rules in section 2 of the Corporation Capital Tax Act to partnerships and joint ventures and removes redundant wording from the definition of "fixed place of business",

(b) adds the registered office of a corporation as a place at which the corporation has a permanent establishment, and

(c) attributes to a corporation a permanent establishment of a partnership or joint venture in which the corporation has an interest.

SECTION 17:

(a) increases the taxation threshold from $1 million to $1 250 000,

(b) and (c) adopt the newly defined terms of "net paid up capital" and "taxable paid up capital" and clarify that the taxation threshold is to be determined after the deductions permitted under the sections up to and including section 12 of the Corporation Capital Tax Act have been taken,

(d) specifies that subsections (7) and (8) of section 3 of the Corporation Capital Tax Act prevail, in the event of conflict, over subsections (2) and (3),

(e) repeals a provision made redundant by the new paid up capital definitions, and

(f) provides for a calculation of tax where the net B.C. paid up capital of a corporation is less than $1 250 000.

SECTION 18: harmonizes the wording of sections 7, 8 and 9 of the Corporation Capital Tax Act with the new definition of "aggregate paid up capital" in this Bill.

SECTIONS 19, 20 and 21: include within the aggregate paid up capital of a corporation the corporation's proportionate share of specified partnership or joint venture amounts.

SECTION 22: repeals section 10 of the Corporation Capital Tax Act insofar as that section is replaced by section 14.3 of that Act as enacted by this Bill.

SECTION 23:

SECTION 24:

(a) and (b) define "total assets" and clarify that the proportionate amount of the investment allowance deduction that is permitted under section 12 of the Corporation Capital Tax Act is to be determined in relation to total assets as defined,

(c) harmonizes section references with the amended sections, and

(d) sets the maximum amount of investment allowance deductions that may be permitted.

SECTION 25: incorporates the newly defined term of "net paid up capital".

SECTION 26:

(a), (b) and (c) add a definition of "acquire" and correct and expand section references to the Income Tax Act (Canada),

(d) clarifies that in order for property to qualify as "eligible property" it must have been used for qualifying purposes since its acquisition,

(e) clarifies that in order for property to qualify as "eligible tourism property" it must have been used in prescribed tourism activities since its acquisition,

(f) harmonizes the wording with the amended definition of "eligible property",

(g) harmonizes the wording with amendments made by this Bill to section 11 of the Corporation Capital Tax Act, and

(h) clarifies that only those eligible expenditures not written off to retained earnings in the year for which the deduction is claimed may be deducted,

SECTION 27: harmonizes the wording of section 14.1 of the Corporation Capital Tax Act with the amendments made to that Act under this Bill.

SECTION 28:

SECTION 29: harmonizes the wording of section 18 (b) of the Corporation Capital Tax Act with the amendments made to that Act under this Bill.

SECTION 30: provides that section 14.2 of the Corporation Capital Tax Act as enacted by this Bill only applies to taxation years of a corporation that end after March 31, 1993.


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