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2005 Legislative Session: 1st Session, 38th Parliament

THIRD READING

The following electronic version is for informational

purposes only.

The printed version remains the official version.

Certified correct as passed Third Reading on the 17th day of October, 2005

Ian D. Izard, Q.C., Law Clerk

HONOURABLE CAROLE TAYLOR

MINISTER OF FINANCE

BILL 2 – 2005

REVENUE STATUTES AMENDMENT ACT, 2005

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

Income Tax Act

1 Sections 14 (2) and (3) (a), 16 (1) (

b) and (2) (

b) and 25 (2) of the Income Tax Act, R.S.B.C. 1996, c. 215, are amended by striking out " 13.5% " and substituting " 12% ".

Section 14 (3.1) (a), as enacted by

section 16 (

b) of the Income Tax Amendment Act, 2005 , S.B.C. 2005, c. 5, is amended by striking out " 13.5% " and substituting " 12% ".

Income Tax Amendment Act, 2005

Section 30 (2) of the Income Tax Amendment Act, 2005, S.B.C. 2005, c. 5, is amended by striking out " sections 1 and 2 " and substituting " sections 8 and 16 ".

International Financial Activity Act

Section 2 (2) of the International Financial Activity Act , S.B.C. 2004, c. 49, is amended by adding the following paragraphs:

(q.1) selling, assigning or licensing to a non-resident person a patent within a prescribed class of patents;

(q.2) selling, to a non-resident person, a good or service in respect of which the sales revenue is principally derived from an invention for which a patent within a prescribed class of patents is owned by the corporation; .

5 Sections 13 (1) (

a) and (

b) and 21 (

d) are amended by striking out "

section 2 (2) (

r) and (s) " and substituting "

section 2 (2) (q.1), (q.2), (

r) and (s) ".

Section 17 is amended

(

a) by striking out " in the amount " and substituting " not exceeding the amount ", and

(

b) by striking out the description of "net tax payable" and substituting the following:

net tax payable = the corporation's net tax payable for the taxation year.

7 The following

section is added:

Tax refund – patent activities

17.1

(1) A corporation may claim a tax refund for a taxation year not exceeding the corporation's eligible refund for the taxation year, if all of the following apply to the corporation:

(

a) the corporation was a registered corporation at any time in the taxation year;

(

b) while the corporation was a registered corporation in the taxation year, the corporation carried on an international financial business whose activities included international financial activities referred to in

section 2 (2) (q.1) or (q.2);

(

c) the corporation does not claim a tax refund under

section 17 for the taxation year.

(2) A corporation's eligible refund for a taxation year is the least of the following:

(a) $8 million;

(

b) the amount calculated by the following formula:

amount = $8 million x

days registered

where

days registered

the following as applicable:

(

i) subject to subparagraph (ii), the number of days in the taxation year that the corporation was a registered corporation;

(ii)

if the taxation year began before January 1, 2006, the number of days in the taxation year after December 31, 2005 that the corporation was a registered corporation;

(

c) the amount calculated by the following formula:

amount = eligible proportion x net tax payable x 75%

where

eligible proportion

the corporation's eligible proportion of income for the taxation year;

net tax payable

the corporation's net tax payable for the taxation year;

(

d) if the corporation is associated at any time in the taxation year, ending in a particular calendar year, with at least one other registered corporation that may claim a tax refund under this

section for a taxation year that ends in the same calendar year,

(

i) the amount calculated by the following formula, if an agreement is filed in accordance with this section:

amount = amount otherwise eligible x percentage assigned

where

amount otherwise eligible

the lesser of

(

A) the amount referred to in paragraph (a), and

(

B) the amount calculated under paragraph (

b) for the corporation for the taxation year;

percentage assigned

the percentage assigned to the corporation in the agreement for the taxation year, or

(ii) zero, in any other case.

(3) For the purposes of subsection (2) (d), all registered corporations referred to in that subsection that are associated with each other must file with the commissioner an agreement that assigns, in accordance with prescribed rules, a percentage to one or more of the corporations for their respective taxation years.

(4) The agreement must

(

a) be in the form and contain the information required by the commissioner, and

(

b) be filed with the corporation's return for the taxation year or within a later period approved by the commissioner.

(5) Section 256 [associated corporations] of the federal Act applies for the purposes of this section.

Section 19 is amended

(

a) in subsection (1) by striking out " A corporation's " and substituting " For the purpose of

section 17, a corporation's ",

(

b) in subsection (1) in the description of "IFB income" by striking out " international financial business " and substituting " international financial business as if the business's income for the taxation year was only from international financial activities, other than those activities referred to in

section 2 (2) (q.1) or (q.2), ", and

(

c) by adding the following subsection:

(1.1) For the purpose of

section 17.1, a corporation's total adjusted IFB income for a taxation year is the total of all amounts, each of which is the corporation's adjusted IFB income, as calculated by the following formula, for the taxation year from a particular source that is an international financial business carried on by the corporation:

adjusted IFB income = IFB income – inducements

where

IFB income

the income or loss, as determined under Subdivision b of Division B of

Part I of the federal Act, of the international financial business as if the business's income for the taxation year was only from international financial activities referred to in

section 2 (2) (q.1) or (q.2) for that part of the taxation year that the corporation was a registered corporation;

inducements

the amount included under

section 12 (1) (

x) of the federal Act in computing the IFB income of the international financial business for the taxation year.

9 The following

section is added:

Net tax payable

19.1 A corporation's net tax payable for a taxation year is the greater of

(

a) zero, and

(

b) the total of

(

i) the corporation's tax payable under sections 14 to 16 [corporation income tax; corporate straddle provision; small business rate] of the Income Tax Act for the taxation year, and

(ii) any amount added to the corporation's tax payable under

section 19 (3) [royalty and deemed income rebate] of that Act for the taxation year

less

(iii) any deductions made by the corporation under the sections referred to in

section 18.1 [order of making deductions from tax payable] of that Act for the taxation year, and

(iv) any amounts deemed to have been paid by the corporation under the following sections of that Act for the taxation year:

(

A) section 25.1 [mining exploration tax credit] ;

(

B) section 84 [film and television tax credit] ;

(

C) section 98 [scientific research and experimental development tax credit] ;

(

D) section 113 [book publishing tax credit] .

Commencement

10 The provisions of this Act referred to in column 1 of the following table come into force as set out in column 2 of the table:

Item

Column 1

Provisions of Act

Column 2

Commencement

Anything not elsewhere covered by this table

The date of Royal Assent

Section 1

July 1, 2005

Sections 4 to 9

January 1, 2006

Copyright

(c) 2005: Queen's Printer, Victoria, British Columbia, Canada