Explanatory Notes Relating to the Excise Tax Act, the Income Tax Act, the First Nations Goods and

139 Pages·2006·0.52 MB·English

Explanatory Notes Relating to the
Excise Tax Act, the Income Tax Act,
the First Nations Goods and Services Tax Act,
the Yukon First Nations Self-Government Act,
and Related Acts

Published by
The Honourable James M. Flaherty, P.C., M.P.
Minister of Finance

June 2006

Explanatory Notes Relating to the
Excise Tax Act, the Income Tax Act,
the First Nations Goods and Services Tax Act,
the Yukon First Nations Self-Government Act,
and Related Acts

Published by
The Honourable James M. Flaherty, P.C., M.P.
Minister of Finance

June 2006
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Cat No.: F2-165/2006E
ISBN 0-660-19634-4
Preface
These explanatory notes describe proposed amendments to the Excise Tax Act, the Air Travellers Security
Charge Act, the Excise Act, 2001, the Excise Act, the Income Tax Act, the Budget Implementation Act, 2005,
the First Nations Goods and Services Tax Act and the Yukon First Nations Self-Government Act.
These explanatory notes describe these amendments, clause by clause, for the assistance of Members
of Parliament, taxpayers and their professional advisors.
These explanatory notes are provided to assist in an understanding of the proposed amendments to which they
relate. These notes are intended for information purposes and should not be construed as an official
interpretation of the provisions they describe.
Table of Contents
Clause in Section of the
Legislation Act Amended Topic Page

Part 1
Amendments related to the GST / HST Rate Reduction
Excise Tax Act
2 123(1) Definition “basic tax content” ........................................................... 11
3 165 Imposition of goods and services tax ................................................ 11
4 173(1) Employee and shareholder benefits ................................................... 17
5 174 Travel and other allowances .............................................................. 18
6 176(1) Acquisition of used returnable containers ......................................... 18
7 181(1) Coupons ............................................................................................. 19
8 181.1 Rebates .............................................................................................. 19
9 182(1) Forfeitures and extinguished debt ...................................................... 20
10 183(4), (5),
and (6) Seizure and repossession ................................................................... 20
11 184(3), (4),
and (5) Property transferred to insurer on settlement of claim ...................... 21
12 184.1(2) Performance bonds ............................................................................ 22
13 187(c) Bets and games of chance .................................................................. 22
14 188 Prizes ................................................................................................. 23
15 193 Real property credits .......................................................................... 23
16 194 Incorrect statement ............................................................................ 25
17 202(4) Non-exclusive use of passenger vehicle or aircraft ........................... 25
18 211 Election for real property of a public service body ........................... 26
19 212 Imposition of goods and services tax on imported goods .................. 27
20 218 Imposition of goods and services tax on imported supplies .............. 28
21 225.2(2) Selected listed financial institution special attribution method ......... 28
22 233(2) Patronage dividends ........................................................................... 29
23 253 Employee and partner rebates ............................................................ 29
24 254 New housing rebate ........................................................................... 31
25 254.1 New housing rebate for building only and rebate in Nova Scotia 31
26 255 Cooperative housing rebate and rebate in Nova Scotia ..................... 32
27 256 Rebate for owner-built homes ........................................................... 33
28 256.2 Rebate in respect of newly constructed or substantially renovated
residential rental accommodation ................................................. 33
29 256.3 to 256.6 Transitional rebate ............................................................................. 34
30 257 Non-registrant sale of real property ................................................... 37
31 259 Rebates .............................................................................................. 39
32 274.1
and 274.2 Anti-avoidance transactions respecting rate change .......................... 39
6
Clause in Section of the
Legislation Act Amended Topic Page

Air Travellers Security Charge Act
33 12(1) and (2) Amount of charge............................................................................... 42
Excise Act, 2001
34 58.1 to 58.6 Tobacco products inventory tax ......................................................... 45
35 216(2) Punishment – minimum and maximum amount ................................ 46
36 240 Contravention of subsection 50(5) ..................................................... 47
37 Sched. 1,
para. 1(b) Duty on cigarettes .............................................................................. 47
38 Sched. 1,
para. 2(b) Duty on tobacco sticks ....................................................................... 47
39 Sched. 1,
para. 3(b) Duty on other manufactured tobacco ................................................ 48
40 Sched. 1, s. 4 Duty on cigars .................................................................................... 48
41 Sched. 2 Application of interest ....................................................................... 48
42 Application of interest........................................................................ 49
Excise Act
43 Sched., Part II Duty on beer ..................................................................................... 49
Excise Act, 2001
44 217(2) and (3) Punishment for certain alcohol offences ............................................ 49
45 218(2) and (3) Punishment for more serious alcohol offences .................................. 50
46 242 Contravention of section 72 ............................................................... 50
47 243 Contravention of section 73, etc. ....................................................... 50
48 Sched. 4 Duty on spirits ................................................................................... 51
49 Sched. 6 Duty on wine ..................................................................................... 51
50 Application of interest ....................................................................... 52
Part 2
Amendments to the Income Tax Act
51 38 Gifts of publicly traded securities and environmentally
sensitive land ................................................................................ 53
52 53 Adjustments to cost base – interest in a partnership .......................... 53
53 64 Disability supports deduction ............................................................ 53
54 67.1 Expenses for food, etc. ....................................................................... 54
55 87 Tax deferred cooperative shares ........................................................ 55
56 110 Charitable donation deduction ........................................................... 55
57 111 Carry-forward period for business, restricted farm, and farm losses . 56
58 117 Tax rates applicable to individuals .................................................... 56
59 117.1 Annual adjustment (indexing) ........................................................... 57
60 118 Personal credits .................................................................................. 57
61 118.01 Adoption expense tax credit .............................................................. 59
7
Clause in Section of the
Legislation Act Amended Topic Page

62 118.2 Medical expense credit ...................................................................... 60
63 118.3 Credit for impairment in physical or mental functions ...................... 62
64 118.4 Nature of impairment ........................................................................ 65
65 118.61 Unused tuition and education tax credits ........................................... 66
66 118.81 Tuition and education tax credits transferred .................................... 67
67 118.91 Part-year residents ............................................................................. 68
68 118.92 Ordering of credits ............................................................................. 68
118.93 Credits in separate returns ................................................................. 68
118.94 Tax payable by non-resident ............................................................. 69
69 118.95 Credits in year of bankruptcy ............................................................ 69
70 122.51 Refundable medical expense supplement .......................................... 69
71 122.61 Canada Child Tax Benefit and the Child Disability Benefit .............. 70
72 123.2 Corporate surtax ................................................................................ 70
73 123.4 Corporate tax reductions .................................................................... 71
74 125.1 Manufacturing and processing profits deduction ............................... 72
75 127 Flow-through mining expenditure ..................................................... 72
75.1 127.52 Alternative minimum tax ................................................................... 73
76 127.531 Basic minimum tax credit determined ............................................... 74
77 127.54 Minimum tax credit – foreign tax credit ............................................ 74
78 128 Where individual bankrupt ................................................................ 75
79 135 Deduction in computing income ........................................................ 75
80 135.1 Agricultural cooperatives – tax-deferred patronage dividends .......... 77
81 136 Definition of “cooperative corporation” ............................................ 81
82 181.1 Federal capital tax ............................................................................. 81
83 186 Carry-forward period for business losses and farm losses under
Part IV .......................................................................................... 82
84 211.1 Carry-forward period for Canadian life investment losses ................ 82
85 225.1 Federal capital tax – consequential amendment to
subsection 225.1(8)........................................................................ 82
86 227 Payments by trustees, etc. .................................................................. 83
87 227.1 Liability of directors for failure to deduct ......................................... 84
88 235 Federal capital tax – consequential amendment to section 235 ......... 84
Part 3
Amendments Relating to the Excise Tax on Jewellery, Etc.
Excise Tax Act
89 Sched. I, Excise tax on jewellery ...................................................................... 85
ss. 5 to 5.2
8
Clause in Section of the
Legislation Act Amended Topic Page

Budget Implementation Act, 2005
90 26 Excise tax on jewellery ...................................................................... 85
Part 4
Amendments Relating to Aboriginal Tax Powers and Aboriginal Tax Treatment
First Nations Goods and Services Tax Act
91 Part 2 Title of Part 2 ..................................................................................... 86
92 17 Interpretation ..................................................................................... 86
93 21 and 22 Application of other Acts ................................................................... 86
94 23 Delegation – authority to enact a law ................................................ 87
95 24 Delegation – force of law .................................................................. 88
96 29 Amendment of Schedule 2 ................................................................. 89
97 Sched. 2 Amendment of Schedule 2 ................................................................. 89
Yukon First Nations Self-Government Act
98 22.1 Transitional tax exemption................................................................. 89
Part 5
Other Tax-Related Amendments
Air Travellers Security Charge Act
99 21(2) Small amounts payable ...................................................................... 91
100 25(1) and (2) Effect of extension ............................................................................. 91
101 27 Interest and penalties ......................................................................... 92
102 30(1) Waiving or reducing interest ............................................................. 93
103 30.1 Dishonoured instruments ................................................................... 94
104 40(4) Restriction .......................................................................................... 94
105 53 Failure to file a return when required ................................................ 94
106 54 Effect of extension for returns ........................................................... 95
107 55 Waiving or cancelling penalties ......................................................... 95
108 56 Waiving or cancelling penalties ......................................................... 96
109 61(2) Saving ................................................................................................ 96
110 62(3) Penalty on conviction ........................................................................ 97
111 72(3) Assessment before collection ............................................................ 97
112 74(12) Details in certificates and memorials ................................................. 97