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The Statute Law Amendment (Taxation) Act, 1999

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S.M. 1999, c. 3

THE STATUTE LAW AMENDMENT (TAXATION) ACT, 1999


 

(Assented to May 17, 1999)

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

PART 1

THE CORPORATION CAPITAL TAX ACT

C.C.S.M. c. C226 amended

1         The Corporation Capital Tax Act is amended by this Part.

2         Paragraph 9(1)(b)(ii)(B) is repealed and the following is substituted:

(B) after April 20, 1994, its current accounts payable as at the close of the fiscal year relating to its permanent establishments in Canada plus, in the case of an insurance corporation, its policy reserves as at the close of the fiscal year, to the extent that they are deductible in computing the corporation's income subject to tax under the Income Tax Act (Canada);

3         Section 20 is renumbered as subsection 20(1) and the following is added as subsections 20(2) and (3):

Liability

20(2)     A person who, in contravention of clause (1)(b), distributes assets of a corporation that would or the proceeds of which would, but for the distribution, have been available to pay the tax, interest and penalties then payable by the corporation under this Act, is personally liable, to the extent of the value of the assets so distributed, for the amount so payable by the corporation, and the director may at any time assess the person in respect of the amount payable because of this subsection.

Application of other provisions

20(3)     The provisions of this Act apply, with any modifications the circumstances require,

(a) to an assessment made under subsection (2) as though it had been made under section 34; and

(b) to the person and the amount assessed as though the person were a corporation and the amount assessed were a tax payable by the corporation.

PART 2

THE INCOME TAX ACT

C.C.S.M. c. I10 amended

4         The Income Tax Act is amended by this Part.

5         Subsection 4(4) is amended by striking out "and" at the end of clause (c) and by repealing clause (d) and substituting the following:

(d) for 1999, 48.5%, allocated and distributed as 46.3% for provincial purposes and 2.2% for municipal purposes; and

(e) for 2000 and subsequent years, 47%, allocated and distributed as 44.8% for provincial purposes and 2.2% for municipal purposes.

6(1)      Subsection 7(3) is amended by striking out "and" at the end of clause (b) and by repealing clause (c) and substituting the following:

(c) for the period beginning January 1, 1995 and ending June 30, 1999, 8%;

(d) for the period beginning July 1, 1999 and ending December 31, 1999, 9%;

(e) for the 2000 calendar year, 10%;

(f) for the 2001 calendar year, 11%; and

(g) for the 2002 and subsequent calendar years, 12%.

6(2)      Subsection 7(3.1) is repealed and the following is substituted:

Application

7(3.1)    Where a corporation has a taxation year that commences in a particular period referred to in subsection (3) and ends after the end of the period, the deduction allowed to the corporation under subsection (3) for the taxation year shall be calculated in accordance with the following formula:

D = (R1 x A/E x I) + (R2 x B/E x I) + (R3 x C/E x I)

In this formula:

D   is the deduction allowed to the corporation under subsection (3) for the taxation year;

R1is the percentage specified in subsection (3) for the particular period;

R2is the percentage specified in subsection (3) for the immediately following period ;

R3is the percentage specified in subsection (3), if any, for the next following period;

A   is the number of days of the corporation's taxation year within the particular period;

B   is the number of days of the corporation's taxation year within the immediately following period;

C   is the number of days of the corporation's taxation year within the next following period, if any;

E   is the total number of days in the corporation's taxation year; and

I   is the taxable income earned in Manitoba by the corporation in its taxation year in respect of which the small business deduction is allowed under section 125 of the federal Act.

7         The definition "qualified property" in subsection 7.2(2) is amended by striking out "2000" and substituting "2003".

8         Section 7.6 is amended by striking out "March 1, 2000" wherever it occurs and substituting "March 2, 2002".

9(1)      Subsection 11.1(2.1) is amended by striking out "for a taxation year after 1996 such amount as the individual may claim not exceeding the lesser of $525. and the amount" and substituting "such amount as the individual may claim, not exceeding the lesser of

(a) for the 1997 taxation year, $525.; and

(b) for the 1998 and subsequent taxation years, $750.;

and the amount".

9(2)      Subsection 11.1(5) is amended by striking out "and" at the end of clause (b) and by repealing clause (c) and substituting the following:

(c) for 1997, $3,500; and

(d) for 1998 and subsequent years, $5,000.

10        The following is added after section 11.5:

Definitions

11.6(1)   In this section,

"affiliate" in relation to a particular corporation means, subject to the regulations, a corporation or partnership that is affiliated with the particular corporation for the purposes of the federal Act; (« affiliée »)

"creditable amount" of a share at any time means

(a) in the case of an eligible share, the amount determined in accordance with the regulations in respect of the subscription price of the share, less the total of all amounts paid before that time as a return of capital on the share, and

(b) in any other case, nil; (« montant donnant droit à un crédit »)

"eligible corporation" at any time means a taxable Canadian corporation where

(a) the total carrying value at that time of all the property of the corporation and of all affiliates of the corporation (determined in accordance with generally accepted accounting principles on a consolidated and combined basis, where applicable) does not exceed $50,000,000.,

(b) neither the corporation nor any affiliate of the corporation carries on a business prescribed by regulation,

(c) not more than 10% of the total carrying value of the property of the corporation, and not more than 10% of the total carrying value of the property referred to in clause (a), is attributable to property prescribed by regulation,

(d) the corporation meets any active business or other requirements prescribed by regulation,

(e) the total number of employees each of whom is employed at that time by the corporation or an affiliate of the corporation does not exceed 500,

(f) at least 25% of the total number of employees each of whom is employed at that time by the corporation or an affiliate of the corporation are employed in Manitoba,

(g) at least 25% of the total number of employees employed at that time by the corporation are employed in Manitoba, and

(h) at least 25% of the total of all amounts each of which is comprised of the wages and salaries paid or payable by the corporation or an affiliate of the corporation to its employees for the calendar year that includes that time is reasonably attributable to services rendered in Manitoba by those employees; (« corporation admissible »)

"eligible investor" in relation to a share in the capital stock of a corporation means an individual, other than a trust and an investment dealer, where

(a) the individual or a qualifying trust for the individual owns the share, and

(b) the individual is not an insider of the corporation for the purposes of Part XI of The Securities Act; (« investisseur admissible »)

"eligible share" at any time means a share of a class of the capital stock of a corporation where

(a) the issuer of the share was an eligible corporation at the time it was issued,

(b) the corporation is or would, if the definition "eligible corporation" were read without clauses (a) and (e), be an eligible corporation at the particular time,

(c) the class of shares is listed and posted for trading on the Winnipeg Stock Exchange and is not listed on any other stock exchange,

(d) every share of the class was issued after April 29, 1999, before July, 2002 and not more than three years before the particular time,

(e) all of the shares of the class were issued on the same primary distribution to the public, as defined in The Securities Act, of previously unissued shares at a time when, or immediately following which, the class of shares was listed and posted for trading on the Winnipeg Stock Exchange,

(f) the class was listed and posted for trading on the Winnipeg Stock Exchange before July, 2002,

(g) every share of the class was issued for consideration that consisted only of money,

(h) the issuer of the share received written confirmation from the minister that the issuance of the share as an eligible share would not cause the total of the creditable amounts for shares issued in the year to exceed $20,000,000.,

(i) the issuance of the share as an eligible share would not cause the total of the eligible shares amounts for the corporation and all affiliates of the corporation to exceed $5,000,000., and

(j) the share is a common share as defined in the regulations,

and includes a successor share as defined in the regulations; (« action admissible »)

"eligible shares amount" of a corporation at any time means the total of all amounts each of which is the creditable amount at that time in respect of a share issued before that time by the corporation or a predecessor of the corporation; (« montant des actions admissibles »)

"investment dealer" means a person registered as an investment dealer under The Securities Act; (« courtier en valeurs mobilières »)

"minister" means the minister appointed by the Lieutenant Governor in Council to administer The Labour-Sponsored Venture Capital Corporations Act; (« ministre »)

"qualifying trust" in relation to an individual means a trust governed by

(a) a registered retirement savings plan or registered retirement income fund of the individual, unless it is a spousal plan, or

(b) a spousal plan in relation to the individual. (« fiducie admissible »)

Delegation by minister

11.6(2)   The minister may delegate to one or more persons the authority to exercise any power or the requirement to perform any duty or function assigned to the minister by this section or the regulations made under this section.

Manitoba equity tax credit

11.6(3)   Subject to subsection (7), there may be deducted from the tax otherwise payable under this Act by a taxpayer for a taxation year an amount not exceeding the lesser of

(a) $1,500; and

(b) the total of all amounts each of which is an amount determined for a day in the year by the following formula:

C = .05 x A/B

In this formula:

C   is the amount of the taxpayer's tax credit for the day in respect of a share that is owned at the end of the day by the taxpayer or a qualifying trust for the taxpayer;

A   is

(i) if at the end of the day the taxpayer is an eligible investor in relation to the share, the creditable amount in respect of the share at that time, and

(ii) in any other case, nil, and

B   is the total number of days in the year.

Report by issuer

11.6(4)   Every corporation shall, for each calendar year in which any of its issued shares are eligible shares, submit to the minister, in accordance with the regulations, a report respecting the corporation and each class of shares of its capital stock that were eligible shares at any time in that year.

Information for investment dealers

11.6(5)   For each year in respect of which information is provided under subsection (4) to the minister, the minister shall, in accordance with any applicable regulations,

(a) prepare a report listing all classes of shares that the minister is satisfied were eligible shares in the year and, if they were eligible shares for only part of the year, specifying the period or periods in the year that they were eligible shares; and

(b) send a copy of the report to each investment dealer.

Return of information

11.6(6)   A person who at any time in a calendar year holds, as investment dealer, an eligible share for an eligible investor or for a qualifying trust in relation to an eligible investor shall complete and send to the eligible investor and file with the minister and with the Minister of National Revenue, in accordance with the regulations, a return of information setting out

(a) the name of the issuer of the share and the class of shares to which it belongs;

(b) the eligible investor's total tax credit determined under clause (3)(b) in respect of the shares of that class for the period or periods in the year during which they were owned by the eligible investor or qualifying trust through the investment dealer; and

(c) any additional prescribed information.

Proof of credit

11.6(7)   A taxpayer is not entitled to a credit under this section unless the amount claimed is proven by the taxpayer filing with the Minister of National Revenue a return of information issued under subsection (6).

Regulations

11.6(8)   The Lieutenant Governor in Council may make regulations

(a) defining any term used in this section but not defined in this Act;

(b) restricting or enlarging, for the purpose of this section, the meaning of any term used in this section;

(c) prescribing any matter required or authorized by this section to be prescribed by regulation;

(d) respecting the determination of the creditable amount in respect of a share;

(e) respecting reports referred to in subsections (4) and (5);

(f) respecting returns of information to be issued under subsection (6), including information to be included in those returns of information;

(g) respecting the maintenance of books and records, and the provision of or access to information, for the purpose of verifying the validity of any claim for a tax credit under this section;

(h) respecting any other matter that the Lieutenant Governor in Council considers necessary or advisable to carry out the purpose of this section.

11        Section 55 is repealed and the following is substituted:

Penalty for evading the Act or regulations

55(1)     Subsections 239(1) and (1.1) of the federal Act apply with necessary modifications for the purposes of this Act.

Offence re refund or credit

55(2)     Every person who, by doing or conspiring with any person to do any of the things referred to in paragraphs 239(1.1)(a) to (d) of the federal Act, enables any other person to claim or obtain a refund or credit under this Act to which the other person is not entitled or in an amount that is greater than the amount to which the other person is entitled, is guilty of an offence and, in addition to any other penalty otherwise provided, is liable on summary conviction to

(a) a fine of not less than 50% and not more than 200% of the amount by which the amount of the refund or credit obtained or claimed exceeds the amount, if any, of the refund or credit to which the other person is entitled; or

(b) both the fine described in clause (a) and imprisonment for a term not exceeding two years.

Offences by officers and directors

55(3)     Except as otherwise provided in this Act, if a corporation commits an offence under this Act, a director or officer of the corporation who authorized, permitted or acquiesced in the commission of the offence is also guilty of an offence and is liable on summary conviction, whether or not the corporation has been prosecuted or convicted, to any penalty to which an individual committing the offence committed by the corporation would be liable.

PART 3

THE MINING TAX ACT

C.C.S.M. c. M195 amended

12        The Mining Tax Act is amended by this Part.

13        Subsection 13(1) is amended by striking out everything after "shall" and substituting "pay to the minister a tax for each fiscal year equal to 18% of the operator's profit for the year."

PART 4

THE MOTIVE FUEL TAX ACT

C.C.S.M. c. M220 amended

14        The Motive Fuel Tax Act is amended by this Part.

15(1)     Subsection 2(9) is amended by adding "or" at the end of clause (h) and adding the following after clause (h):

(i) the operation of an international ocean-going ship;

15(2)     The following is added after subsection 2(21):

Exemption for international ocean-going ships

2(21.1)   Notwithstanding any other provision of this Act, no tax is payable under this Act by a purchaser in respect of a purchase of motive fuel from a dealer where the motive fuel is delivered by the dealer directly into the fuel tanks of an international ocean-going ship and is used in the operation of the ship.

Tax refund to dealers

2(21.2)   Subject to subsection (26), where a dealer has sold and delivered to a purchaser motive fuel that is exempt from tax because of subsection (21.1) and has paid an amount in respect of the tax that would, but for that subsection, have been payable by the purchaser, the minister may refund the amount so paid if the dealer files, within two years after the day on which the motive fuel was sold, an application supported by documents proving to the satisfaction of the minister that the dealer paid the amount claimed and delivered the motive fuel directly into the fuel tanks of an international ocean-going ship for use in the operation of the ship.

15(3)     Subsection 2(26) is amended by striking out "(22), (23)" and substituting "(21.2), (22)".

PART 5

THE RETAIL SALES TAX ACT

C.C.S.M. c. R130 amended

16        The Retail Sales Tax Act is amended by this Part.

17        The following is added after subsection 1(4):

Parent and subsidiary relationship

1(5)      For the purpose of subsection (6),

(a) a corporation is a parent corporation of another corporation if it beneficially owns at least 95% of the issued share capital of the other corporation or is otherwise, in the opinion of the minister, to all intents and purposes a parent corporation of the other corporation; and

(b) a corporation is a wholly-owned subsidiary of another corporation if the other corporation is a parent corporation of it.

Custom software transferred to related person

1(6)      If all the rights, title and interest in and to custom software are sold or transferred

(a) by a parent corporation to its wholly-owned subsidiary; or

(b) by a wholly-owned subsidiary to its parent corporation or to another wholly-owned subsidiary of its parent corporation;

the purchaser or transferee is deemed for the purpose of the definition "software" in subsection (1) to be the specific person for whom the custom software was originally developed or modified.

Custom software sold on sale of business

1(7)       Where a business is sold to a purchaser as a going concern and the business assets sold to the purchaser include all of the rights, title and interest in and to custom software used by the seller in that business, the purchaser is deemed for the purposes of the definition "software" in subsection (1) to be the specific person for whom the custom software was originally developed or modified.

Custom software sold at time of incorporation

1(8)      If all of the rights, title and interest in and to custom software are sold to a corporation, at the time of its incorporation,

(a) by a seller who owns and retains after the sale at least 95% of the issued share capital of the purchaser; or

(b) for consideration that consists only of shares of the capital stock of the purchaser that are retained by the seller and have a fair value, immediately after they are issued, equal to the fair value of the custom software;

the purchaser is deemed for the purpose of the definition "software" in subsection (1) to be the specific person for whom the custom software was originally developed or modified.

18(1)     Subsection 3(1) is amended,

(a) in subclause (c)(ii), by striking out "$100." and substituting "$150."; and

(b) by adding the following after clause (xx):

(yy) a manure slurry tank or a liner for a manure lagoon, if

(i) it is purchased after April 29, 1999 and before 2001 and used directly in the farming production of livestock, and

(ii) the purchaser provides to the seller a signed statement certifying that the tank or liner will be used by the purchaser directly in the farming production of livestock.

18(2)     The following is added after subsection 3(27):

Refund in respect of liner for manure lagoon

3(27.1)   Where a farmer has paid an amount in respect of tax paid by a purchaser in respect of a liner for a manure lagoon purchased after April 29, 1999 and before 2001 and installed by the purchaser for the farmer's use in the farming production of livestock, the minister may refund the amount so paid if the farmer files, within two years after the date of the invoice pursuant to which the amount was paid, an application supported by documents proving to the satisfaction of the minister that

(a) the amount claimed was paid in respect of tax paid by a purchaser in respect of the liner; and

(b) the liner is used by the farmer in the farming production of livestock.

19(1)     Subsection 3.1(3) is amended by striking out "1999" wherever it occurs and substituting "2000".

19(2)     Clause 3.1(4)(a) is amended by striking out "2000" and substituting "2001".

19(3)     Subsection 3.1(6) is amended by striking out "1999" wherever it occurs and substituting "2000".

20(1)     The following is added after clause 4(1)(g):

(h) the provision of a contract for the service, maintenance or warranty of tangible personal property.

20(2)     Subsection 4(6) is amended

(a) in the section heading, by striking out "1-800" and substituting "Toll free"; and

(b) in the subsection, by adding "or other equivalent toll free" after "1-800".

PART 6

COMING INTO FORCE

Coming into force

21(1)     Except as otherwise provided in this section, this Act comes into force on the day it receives royal assent.

Part 2:  The Income Tax Act

21(2)     Section 5 is retroactive and is deemed to have come into force on January 1, 1999.

21(3)     Section 6 comes into force on July 1, 1999 and, if this Act receives royal assent after that date, section 6 is retroactive and deemed to have come into force on that date.

21(4)     Section 9 is retroactive and is deemed to have come into force on January 1, 1998.

Part 3:  The Mining Tax Act

21(5)     Section 13 is retroactive and is deemed to have come into force on January 1, 1999 with respect to fiscal years commencing after 1998.

Part 4:  The Motive Fuel Tax Act

21(6)     Section 15 is retroactive and is deemed to have come into force on April 30, 1999.

Part 5:  The Retail Sales Tax Act

21(7)     Sections 17 and 18 are retroactive and are deemed to have come into force on April 30, 1999.

21(8)     Section 19 is retroactive and is deemed to have come into force on April 1, 1999.