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2002 Legislative Session: 3rd Session, 37th Parliament

FIRST READING

The following electronic version is for informational

purposes only.

The printed version remains the official version.

HONOURABLE GARY COLLINS

MINISTER OF FINANCE

BILL 4 – 2002

CORPORATION CAPITAL TAX AMENDMENT ACT, 2002

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

Section 1 (1) of the Corporation Capital Tax Act, R.S.B.C. 1996, c. 73, is amended

(

a) by repealing the

definitions of "associated" and

"associated corporations" and substituting the following:

"associated" has the same meaning as in

section 256 of the Income Tax Act (Canada); ,

(

b) by repealing the definition of "B.C. paid up capital" and substituting the following:

"B.C. paid up capital" means the result obtained by subtracting from a financial corporation's net paid up capital the

deduction, if any, made by the financial corporation under

section 12; ,

(

c) by repealing the

definitions of "charter", "corporation",

"current accounts payable", "operating lease", "purchase money security interest",

"savings institution", "subsidiary controlled corporation" and "trade accounts payable",

(

d) in the definition of "deferred credit" by striking out "corporation or partnership" in both places and substituting

"financial corporation" ,

(

e) by adding the following definition:

"financial corporation" means

(

a) a bank, trust company or credit union, and

(

b) the agent, assignee, trustee, liquidator, receiver or other official in whose hands, or under whose control, all or any part of the property of a bank, trust company or credit union is placed; ,

(

f) by repealing the definition of "net paid up capital" and substituting the following:

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

section 11; ,

(

g) in the definition of "tax payable" by striking out "corporation"

in both places and substituting "financial corporation" , and

(

h) by repealing the definition of "total paid up capital" and substituting the following:

"total paid up capital" means the result obtained by subtracting from a financial corporation's aggregate paid up capital the deduction, if any, made by the financial corporation under

section 10; .

Section 1 (3) to (5) is repealed and the following substituted:

(4) For the purposes of this Act,

(

a) financial corporations are associated financial corporations if they are associated corporations within the meaning of

section 256 of the Income Tax Act (Canada), and

(

b) a financial corporation is associated with another financial corporation at the end of the first mentioned financial corporation's taxation year if the financial corporations were, at any time during that taxation year, associated financial corporations.

(5) Except as otherwise provided in this Act, for the purposes of determining the carrying value of the assets of a financial corporation, or any other amount relevant to the computation of a financial corporation's B.C. paid up capital for a taxation year, the amounts that must be used are the amounts reflected in the financial statements of the financial corporation for the taxation year that have been

(

a) prepared in accordance with generally accepted accounting principles, and

(

b) presented to the shareholders of the financial corporation.

3 The following

section is added:

Application

1.1

(1) In this section, "corporation" means a corporation, as defined in this Act as it read on August 31, 2002.

(2) Despite the Corporation Capital Tax Amendment

Act, 2001 and the Corporation Capital Tax Amendment Act, 2002 , this

Act and the regulations under this Act, as they read on August 31, 2002,

continue to apply to a corporation for a taxation year that began before September 1,

Section 2 is amended

(

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

(1) In this section:

"charter" includes

(

a) an Act, a statute, an ordinance, letters patent, a certificate, a declaration or any other instrument or provision of law by or under which a financial corporation is incorporated, amalgamated or continued,

(

b) the memorandum, articles or bylaws, by whatever name called, of a financial corporation, and

(

c) in relation to a credit union, its constitution and rules;

"fixed place of business" includes a branch, an office and an agency;

"subsidiary controlled corporation" means a corporation more than 50% of the issued share capital of which, having full voting rights under all circumstances, belongs to the financial corporation to which it is subsidiary. ,

(

b) in subsection (2) by striking out "corporation" and substituting "financial

corporation" ,

(

c) in subsection (3) by striking out "corporation" and substituting "financial corporation"

and by striking out "corporation's" and substituting "financial

corporation's" ,

(

d) in subsections (4), (6) and (9) by striking out "corporation"

wherever it appears and substituting "financial corporation" ,

(

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

(5) If a financial corporation carries on business through an employee or agent, established in a particular place, who has general authority to contract for the employer or principal, the financial corporation is deemed to have a permanent establishment at that place. ,

(

f) by repealing subsection (7) and substituting the following:

(7) A financial corporation that otherwise has a permanent establishment in Canada is deemed to have a permanent establishment on land it owns, or has a right to or interest in, in Canada. ,

(

g) by repealing subsections (8), (11) and (12), and

(

h) in subsection (10) by striking out "a corporation" and substituting "a financial corporation"

and by striking out "first mentioned corporation" and substituting "financial

corporation" .

Section 3 is amended

(

a) in subsection (1) by striking out "corporation" wherever it appears and substituting "financial corporation"

and by striking out "corporations" in both places and substituting "financial

corporations" ,

(

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

(2) If a financial corporation has, at the end of an applicable taxation year, net paid up capital of more than $1 billion, the tax imposed on and payable by the financial corporation under subsection (1) for the taxation year is,

(

a) in the case of a financial corporation that, at the end of the applicable taxation year, is based in British Columbia and has its head office in British Columbia, an amount equal to 1% of the B.C. paid up capital of the financial corporation for that taxation year, or

(

b) in any other case, an amount equal to 3% of the B.C. paid up capital of the financial corporation for that taxation year.

(2.1) If a financial corporation has, at the end of an applicable taxation year, net paid up capital of $1 billion or less, the tax imposed on and payable by the financial corporation under subsection (1) for the taxation year is, subject to sections 3.1 and 3.2, an amount equal to 1% of the B.C. paid up capital of the financial corporation for that taxation year. ,

(

c) in subsection (4) by striking out "corporation" wherever it appears and substituting "financial corporation"

and by striking out "corporations" in both places and substituting "financial

corporations" , and

(

d) in subsection (6) by striking out "corporation" and substituting "financial corporation"

and by striking out "subsection (2) (a) (i)" and substituting "subsection (2) (a)" .

Section 3.1 is amended

(

a) by striking out "corporation" wherever it appears and substituting "financial

corporation" ,

(

b) in subsection (1) (

a) by striking out "section 3 (2) (b)"

and substituting "section 3 (2.1)" ,

(

c) in subsection (1) (

b) by striking out "associated corporations"

and substituting "associated financial corporations" , and

(

d) in subsections (2) and (3) by striking out "corporation's"

and substituting "financial corporation's" .

Section 3.2 is amended

(

a) by striking out "corporation" wherever it appears and substituting "financial

corporation" ,

(

b) in subsection (1) (

a) by striking out "section 3 (2) (b)"

and substituting "section 3 (2.1)" , and

(

c) in subsections (1) (

b) and (7) by striking out "associated corporations"

and substituting "associated financial corporations" .

Section 4 is amended

(

a) in subsection (1) by striking out "corporation" in both places and substituting "financial corporation"

a nd by striking out "corporation's" and substituting "financial

corporation's" , and

(

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

(3) The following financial corporations are exempt from the tax under this Act:

(

a) the British Columbia Central Credit Union;

(

b) the Stabilization Central Credit Union of British Columbia;

(

c) a bankrupt financial corporation from the date of its bankruptcy for as long as it remains a bankrupt.

Section 5 is amended by striking out "corporation" wherever it appears and substituting

"financial corporation" .

Section 6 is amended

(

a) in subsections (2) and (4) by striking out "corporation"

wherever it appears and substituting "financial corporation" ,

(

b) by repealing subsection (2.1), and

(

c) in subsection (3) by striking out "corporation's" in both places and substituting "financial

corporation's" .

Section 7 (1) is amended

(

a) by striking out "bank other than an authorized foreign bank, a trust company or a credit union"

and substituting "financial corporation, other than an authorized foreign

bank," , and

(

b) by adding "and" after paragraph (b), by striking

out ", and" after paragraph (

c) and by repealing paragraph (d).

Section 7.1 is amended

(

a) by repealing subsections (1) and (2) and substituting the following:

(1) The aggregate paid up capital of an authorized foreign bank means the amount, if any, computed at the end of its taxation year, by which the aggregate of

(a) 10% of its total risk weighted assets, and

(

b) its capital deductions,

exceeds the lesser of

(

c) the total of all amounts that represent its subordinated indebtedness, and

(

d) the total of the following amounts:

(i) 3% of its total risk weighted assets;

(ii) its capital deductions except those capital deductions required to be deducted from tier 1 capital under the capital adequacy guidelines issued by the Superintendent of Financial Institutions (Canada).

(2) The Lieutenant Governor in Council may make regulations defining a word or phrase used in this

section but not defined in this Act. , and

(

b) in subsection (4) by striking out "April 1, 2002" and substituting "September 1, 2002" .

Section 10 is repealed and the following substituted:

Total paid up capital

10 At the end of a financial corporation's taxation year, the financial corporation's negative retained earnings, if any, may be deducted from its aggregate paid up capital.

Section 11 is repealed and the following substituted:

Net paid up capital

(1) In this section, "total assets" , in relation to a financial corporation, means the aggregate of the carrying values of the financial corporation's assets on its balance sheet at the end of its taxation year and includes the amounts by which the carrying values of its assets have been reduced by liabilities or deferred credits.

(2) If a financial corporation owns shares of another financial corporation that has a permanent establishment in British Columbia, other than a financial corporation referred to in

section 4 (3), there may be deducted from the total paid up capital of the financial corporation an investment allowance equal to the proportion of the total paid up capital that the carrying value of those shares in the other financial corporation bears to the total assets of the financial corporation.

(3) The investment allowance to which a financial corporation may be entitled under subsection (2) must not be greater than the aggregate of the carrying values of the investments referred to in this

section that are made by the financial corporation.

Section 12 is repealed and the following substituted:

B.C. paid up capital

12 At the end of a taxation year of a financial corporation, there may be deducted from the net paid up capital of the corporation, that portion of the net paid up capital that is allocated to jurisdictions outside British Columbia in accordance with prescribed rules.

Section 16 is repealed.

Section 17 is amended by striking out "corporation" wherever it appears and substituting

"financial corporation" .

Section 18 is amended

(

a) by striking out "corporation" wherever it appears and substituting "financial

corporation" ,

(

b) in subsection (1) by striking out "corporation's" and substituting "financial

corporation's" , and

(

c) in subsection (1) (

a) by striking out "return" and substituting "return and prescribed

records" .

Section 19 is amended

(

a) by striking out "corporation" wherever it appears and substituting "financial

corporation" , and

(

b) by striking out "corporation's" wherever it appears and substituting "financial

corporation's" .

20 Sections 20 and 21 are amended by striking out "corporation" wherever it appears and substituting

"financial corporation" .

Section 22 (4) is amended by striking out "corporation on which" and substituting

"person on whom" .

22 Sections 23 to 26 are amended by striking out "corporation" wherever it appears and substituting

"financial corporation" .

Section 27 is amended by striking out "or" at the end of paragraph (d), by adding

", or" at the end of paragraph (

e) and by adding the following paragraph:

(

f) to an official of the Ministry of Finance, solely for the purpose of the formulation or evaluation of fiscal policy.

Section 28 is amended

(

a) by striking out "corporation" wherever it appears and substituting "financial

corporation" , and

(

b) by striking out "corporation's" wherever it appears and substituting "financial

corporation's" .

25 Sections 29, 30 and 31 (1) are amended by striking out "corporation" wherever it appears and substituting

"financial corporation" .

Section 31 (2) is amended

(

a) by striking out "corporation" in both places and substituting "financial

corporation" , and

(

b) by striking out "corporation's" and substituting "financial

corporation's" .

27 Sections 31 (4), 32, 35, 36 (1) (a), 37 and 39 (1) (

a) are amended by striking out

"corporation" wherever it appears and substituting "financial

corporation" .

Section 40 is amended

(

a) by striking out "corporation" wherever it appears and substituting

"financial corporation" ,

(

b) by striking out "corporation's" in both places and substituting

"financial corporation's" , and

(

c) by adding the following subsection:

(13) In this section, "savings institution" means

(

a) a bank,

(

b) a credit union,

(

c) an insurance company,

(

d) a trust company, and

(

e) a financial institution that accepts deposits from the public in the normal course of its business.

Section 41 is amended

(

a) by striking out "corporation" wherever it appears and substituting

"financial corporation" , and

(

b) by striking out "corporation's" in both places and substituting

"financial corporation's" .

30 Sections 42 (2), 46 and 47 are amended by striking out "corporation" wherever it appears and substituting

"financial corporation" .

Section 48 is amended by adding the following subsection:

(4) Without limiting subsection (1), the Lieutenant Governor in Council may make regulations respecting the delivery of a return or the payment of estimated tax or an installment.

Consequential Amendments

Corporation Capital Tax Amendment Act, 2001

32 Sections 1 (c), 4, 5, 8, 11, 12, 13 and 15 of the Corporation Capital Tax Amendment Act, 2001,

S.B.C. 2001, c. 30, are repealed.

Section 3 is amended by striking out "1 (5), 3 (2)," .

Section 17 is amended by striking out "September 1, 2003" and substituting

"September 1, 2002" .

Commencement

(1) Sections 1 to 11, 13 to 22 and 24 to 30 come into force on September 1, 2002.

(2) Section 12 comes into force by regulation of the Lieutenant Governor in Council.

(3) When brought into force by regulation,

section 12 is deemed to have come into force on February 19, 2002 and is retroactive to the extent necessary to give it effect on and after that date.

Explanatory Notes

SECTION 1: [Corporation Capital Tax Act, amends

section 1 (1)]

replaces the definition of "B.C. paid up capital" enacted in the Corporation Capital Tax Amendment Act, 2001 as a consequence to adding the definition of "financial corporation";

repeals the

definitions that are no longer needed as corporations that are not banks, trust companies or credit unions are no longer taxed under the Act;

removes the

definitions of "charter", "savings institution" and "subsidiary controlled corporation", each of which only appears in one

section of the Act;

amends

definitions as a consequence of adding the definition of "financial corporation";

removes the references to partnerships as the Act no longer requires special calculations for interests in a partnership;

adds the definition of "financial corporation";

replaces the

definitions of "associated" and "associated corporations" with "associated" and replaces the definition of "net paid up capital" as a consequence of adding the definition of "financial corporation";

amends the definition of "total paid up capital" as a consequence of adding the definition of "financial corporation" and to reflect the remaining deduction available under

section 10 of the Act.

SECTION 2: [Corporation Capital Tax Act, amends

section 1]

repeals subsection (3) as the Act no longer requires special calculations for interests in a partnership;

incorporates references to newly defined terms;

provides for the circumstances in which financial corporations are associated financial corporations;

removes the references to partnerships as the Act no longer requires special calculations for interests in a partnership.

SECTION 3: [Corporation Capital Tax Act, enacts

section 1.1] clarifies that the amendments

to the Act contained in this Bill and the Corporation Capital Tax

Amendment Act, 2001 do not apply to a taxation year of a corporation, if the

taxation year started before September 1, 2002.

SECTION 4: [Corporation Capital Tax Act, amends

section 2]

adds the

definitions of "charter" and "subsidiary controlled corporation", which were in

section 1 (1) of the Act;

replaces references to "corporation" with "financial corporation" as appropriate;

removes references that apply to corporations that are not financial corporations, which are no longer taxed under the Act;

removes references to partnerships as the Act no longer requires special calculations for interests in a partnership;

removes references to non-resident status as it only applies to non-financial corporations, which are no longer taxed under the Act.

SECTION 5: [Corporation Capital Tax Act, amends

section 3]

replaces references to "corporation" with "financial corporation";

changes the provision so that it only refers to financial corporations that are to be taxed under the Act;

replaces the references to "net B.C. paid up capital" with "B.C. paid up

capital" as a consequence of the repeal of the definition of "net B.C. paid

up capital" by the Corporation Capital Tax Amendment Act, 2001 ;

updates a cross reference.

SECTION 6: [Corporation Capital Tax Act, amends

section 3.1]

replaces references to "corporation" with "financial corporation" and "associated corporations" with "associated financial corporations";

updates a cross reference.

SECTION 7: [Corporation Capital Tax Act, amends

section 3.2]

replaces references to "corporation" with "financial corporation" and "associated corporations" with "associated financial corporations";

updates a cross reference.

SECTION 8: [Corporation Capital Tax Act, amends

section 4]

replaces references to "corporation" with "financial corporation";

changes the provision so that it only refers to the financial corporations that are to be exempt from taxes under the Act;

adds the Stabilization Central Credit Union of British Columbia, which is currently listed in the regulations as exempt from taxation under the Act.

SECTION 9: [Corporation Capital Tax Act, amends

section 5] replaces references to

"corporation" with "financial corporation".

SECTION 10: [Corporation Capital Tax Act, amends

section 6]

removes a provision that applies to partnerships since partnerships no longer require special calculations under the Act;

replaces references to "corporation's" with "financial corporation's";

replaces references to "corporation" with "financial corporation".

SECTION 11: [Corporation Capital Tax Act, amends

section 7 (1)]

replaces a reference to a bank, trust company and credit union with "financial corporation";

removes a provision that applies to partnerships as the Act no longer requires special calculations for interests in a partnership.

SECTION 12: [Corporation Capital Tax Act, amends

section 7.1]

amends the method by which the aggregate paid up capital of an authorized foreign bank is to be calculated for the purposes of the Act;

changes the date for the repeal of

section 7.1 (3).

SECTION 13: [Corporation Capital Tax Act, re-enacts

section 10]

removes provisions relating to corporations that are not financial corporations, which are no longer taxed under the Act;

removes provisions that apply to partnerships as the Act no longer requires special calculations for interests in a partnership.

SECTION 14: [Corporation Capital Tax Act, re-enacts

section 11]

removes provisions that relate to partnerships as the Act no longer requires special calculations for interests in a partnership;

removes provisions that relate to non-financial corporations, which are no longer taxed under the Act;

expands the investment allowance deduction from applying only to credit unions to applying to all financial corporations;

replaces references to "corporation" with "financial corporation".

SECTION 15: [Corporation Capital Tax Act, re-enacts

section 12] replaces the re-enactment

of this

section by

section 13 by the Corporation Capital Tax Amendment Act,

2001 to replace references to "corporation" with "financial corporation".

SECTION 16: [Corporation Capital Tax Act, repeals

section 16] removes special calculations

for an interest in a partnership.

SECTION 17: [Corporation Capital Tax Act, amends

section 17] replaces references to

"corporation" with "financial corporation".

SECTION 18: [Corporation Capital Tax Act, amends

section 18]

replaces references to "corporation" with "financial corporation";

provides for the delivery of prescribed records to the administrator.

SECTIONS 19 AND 20: [Corporation Capital Tax Act, amends sections 19, 20 and 21] replace references

to "corporation" with "financial corporation".

SECTION 21: [Corporation Capital Tax Act, amends

section 22 (4)] replaces a reference to

"corporation" with "person".

SECTION 22: [Corporation Capital Tax Act, amends sections 23 to 26] replaces references

to "corporation" with "financial corporation".

SECTION 23: [Corporation Capital Tax Act, amends

section 27] adds paragraph (

f) to allow

for the limited disclosure of information to an official of the Ministry of

Finance.

SECTIONS 24 TO 27: [Corporation Capital Tax Act, amends sections 28 to 30, 31 (1), (2) and (4),

32, 35, 36 (1) (a), 37 and 39 (1) (a)] replace references to "corporation" with

"financial corporation".

SECTION 28: [Corporation Capital Tax Act, amends

section 40] replaces references to

"corporation" with "financial corporation" and adds a definition from

section 1 (1) of the Act that now only appears in this section.

SECTIONS 29 AND 30: [Corporation Capital Tax Act, amends sections 41, 42 (2), 46 and 47] replace

references to "corporation" with "financial corporation".

SECTION 31: [Corporation Capital Tax Act, amends

section 48] adds subsection (4) to

authorize the Lieutenant Governor in Council to make regulations respecting

the delivery of a return or the payment of tax.

Corporation Capital Tax Amendment Act, 2001

SECTION 32: [Corporation Capital Tax Amendment Act, 2001, repeals sections 1 (c), 4, 5,

8, 11, 12, 13 and 15] is consequential to amendments in this Bill that replace

those provisions.

SECTION 33: [Corporation Capital Tax Amendment Act, 2001, amends

section 3] removes

references to sections that no longer require the amendment.

SECTION 34: [Corporation Capital Tax Amendment Act, 2001, amends

section 17] amends

the commencement date.

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