Regulations Amending the Income Tax Regulations (Technical Amendments): SOR/2024-231

Canada Gazette, Part II, Volume 158, Number 25

Registration
SOR/2024-231 November 22, 2024

INCOME TAX ACT

P.C. 2024-1236 November 22, 2024

Her Excellency the Governor General in Council, on the recommendation of the Minister of Finance, makes the annexed Regulations Amending the Income Tax Regulations (Technical Amendments) under section 221^{footnote a} of the Income Tax Act ^{footnote b}.

Regulations Amending the Income Tax Regulations (Technical Amendments)

Amendments

1 (1) The definition remuneration in subsection 100(1) of the Income Tax Regulations ^{footnote 1} is amended by adding the following after paragraph (h):

• (h.1) an amount that is required by paragraph 56(1)(z.2) of the Act to be included in computing a taxpayer’s income,

(2) Subsection 100(3) of the Regulations is amended by striking out “or” at the end of paragraphs (a), (c.1) and (d), by adding “or” at the end of paragraph (e) and by adding the following after paragraph (e):

• (f) an amount that is deductible under paragraph 60(l) of the Act.

2 (1) Subsection 205(3) of the Regulations is amended by deleting the following:

Past Service Pension Adjustment (PSPA) Exempt from Certification	T215
Pension Adjustment Reversal (PAR)	T10

(2) Subsection 205(3) of the Regulations is amended by adding the following in alphabetical order:

Past Service Pension Adjustment (PSPA) Exempt from Certification or Permitted Corrective Contribution (PCC)	T215
Pension Adjustment Reversal (PAR) or Pension Adjustment Correction (PAC)	T10

(3) Subsection 205(3) of the Regulations is amended by deleting the following:

Pooled Registered Pension Plan (PRPP) Information Return

(4) Subsection 205(3) of the Regulations is amended by adding the following in alphabetical order:

Pooled Registered Pension Plan (PRPP) Contribution Information Return

3 (1) Subsection 205.1(1) of the Regulations is amended by deleting the following:

Pooled Registered Pension Plan (PRPP) Information Return

(2) Subsection 205.1(1) of the Regulations is amended by adding the following in alphabetical order:

Pooled Registered Pension Plan (PRPP) Contribution Information Return

4 The Regulations are amended by adding the following after section 214.1:

214.2 (1) The administrator of a pooled registered pension plan shall make an information return in prescribed form in respect of the amount of contributions made to the account of a member of the plan by

• (a) the member in a contribution year; or
• (b) an employer of the member in the taxation year of the member that ends in the contribution year.

(2) For greater certainty and for the purposes of subsection (1), amounts contributed to the member’s account do not include amounts that have been transferred to the account in accordance with any of subsections 146(16) and (21), 146.3(14), 147(19), 147.3(1), (4) and (5) to (7) and 147.5(21) of the Act.

(3) The return shall be filed with the Minister on or before the 1st day of May of the year in which the contribution year ends and shall be in respect of

• (a) the contribution year in the case of contributions made by the member; and
• (b) the taxation year of the member that ends in the contribution year in the case of contributions made by an employer.

(4) The following definitions apply in this section.

administrator

has the same meaning as in subsection 147.5(1) of the Act. (administrateur)

contribution year

means the period beginning on the 61st day of one year and ending on the 60th day of the following year. (année de contribution)

member

has the same meaning as in subsection 147.5(1) of the Act. (participant)

5 Subsection 1100(3) of the Regulations is replaced by the following:

(3) Where a taxation year is less than 12 months, the amount allowed as a deduction under this section, other than under subsection (0.1) and any of paragraphs (1)(c), (e), (f), (g), (m), (w), (x), (y) and (ya), shall not exceed that proportion of the maximum amount otherwise allowable that the number of days in the taxation year is of 365.

6 (1) Paragraph 3504(a) of the Regulations is replaced by the following:

• (a) American Friends of Nature Conservancy of Canada, Inc., a charity established in the United States;

(2) Paragraph 3504(a) of the Regulations is replaced by the following:

• (a) American Friends of Canadian Nature Inc., a charity established in the United States;

7 Paragraph 4301(b.1) of the French version of the Regulations is replaced by the following:

• b.1) pour l’application du paragraphe 17.1(1) de la Loi, le taux qui serait déterminé selon l’alinéa a) pour le trimestre donné si le passage « arrondie au point de pourcentage supérieur » au sous-alinéa a)(i) était remplacé par « arrondie à deux décimales »;

8 (1) Subsection 4900(1) of the Regulations is amended by adding the following after paragraph (i.13):

• (i.14) a share of the capital stock of a Canadian corporation that is registered under section 29 or 34 of the Investing in a Diversified Alberta Economy Act, S.A. 2016, c. I-10.5, the registration of which has not been revoked under that Act;

(2) Paragraph 4900(2)(c) of the Regulations is replaced by the following:

• (c) Fitch Ratings, Inc.;

(3) Subsection 4900(2) of the Regulations is amended by striking out “and” at the end of paragraph (d), by adding “and” at the end of paragraph (e) and by adding the following after paragraph (e):

• (f) a subsidiary or affiliate of a company listed in any of paragraphs (a) to (e), to the extent that it provides credit rating services outside of Canada on behalf of the company in respect of which it is the subsidiary or affiliate.

9 The portion of section 5200 of the Regulations before paragraph (a) is replaced by the following:

5200 Subject to section 5201, for the purposes of subsection 125.1(3) of the Act, “Canadian manufacturing and processing profits” of a corporation for a taxation year are hereby prescribed to be that proportion of the corporation’s adjusted business income for the year that

10 (1) The portion of section 5201 of the Regulations before paragraph (a) is replaced by the following:

5201 For the purposes of subsection 125.1(3) of the Act, “Canadian manufacturing and processing profits” of a corporation for a taxation year are hereby prescribed to be equal to the corporation’s adjusted business income for the year where

(2) Paragraph 5201(c) of the Regulations is replaced by the following:

• (c) the corporation was not engaged in any of the activities listed in paragraphs (a) to (k) of the definition manufacturing or processing in subsection 125.1(3) of the Act at any time during the year;

11 (1) The portion of paragraph (a) of the definition qualified activities in section 5202 of the Regulations before subparagraph (i) is replaced by the following:

• (a) any of the following activities, when they are performed in Canada in connection with manufacturing or processing (not including the activities listed in paragraphs (a) to (k) of the definition manufacturing or processing in subsection 125.1(3) of the Act) in Canada of goods for sale or lease:

(2) Paragraph (b) of the definition qualified activities in section 5202 of the Regulations is replaced by the following:

• (b) all other activities that are performed in Canada directly in connection with manufacturing or processing (not including the activities listed in paragraphs (a) to (k) of the definition manufacturing or processing in subsection 125.1(3) of the Act) in Canada of goods for sale or lease, and

12 Section 5600 of the Regulations is amended by striking out “and” at the end of paragraph (i) and by adding the following after paragraph (j):

• (k) the distribution by Svenska Cellulosa Aktiebolaget SCA (publ), on June 15, 2017 to its common shareholders, of common shares of Essity Aktiebolag (publ);
• (l) the distribution by Modern Times Group MTG AB, on March 28, 2019 to its common shareholders, of common shares of Nordic Entertainment Group AB; and
• (m) the distribution by Novartis AG, on April 9, 2019 to its common shareholders, of common shares of Alcon Inc.

13 Paragraph 5700(z.3) of the English version of the Regulations is replaced by the following:

• (z.3) standing device designed to be used by an individual who has a severe mobility impairment to undertake standing therapy; or

14 The portion of subsection 5907(2.01) of the Regulations before paragraph (b) is replaced by the following:

(2.01) Subparagraphs (2)(f)(ii) and (j)(iii) and subsection (5.1) do not apply to a particular disposition of property (referred to in this subsection as the “affiliate property”) by a particular foreign affiliate of a taxpayer to another foreign affiliate of the taxpayer if

• (a) the only consideration in respect of the particular disposition is one or any combination of
  • (i) shares of the capital stock of the other affiliate, and
  • (ii) the assumption by the other affiliate of a debt or other obligation owing by the particular affiliate that arose in the ordinary course of the business of the particular affiliate to which the affiliate property relates;

15 (1) Subparagraph 6204(1)(a)(iii) of the Regulations is replaced by the following:

• (iii) the share cannot be converted into, or exchanged for, any other security, other than into another security of the corporation or of another corporation with which it does not deal at arm’s length immediately after such conversion or exchange that is, or would be at the date of conversion or exchange, a prescribed share,

(2) Paragraph 6204(1)(b) of the Regulations is amended by striking out “or” at the end of subparagraph (ii), by replacing “and’’ at the end of subparagraph (iii) with “or” and by adding the following after subparagraph (iii):

• (iv) an exchange to which subsection 51(1) of the Act applies or a disposition to which subsection 86(1) of the Act applies, if no consideration is provided by the corporation for the share other than shares of the capital stock of the corporation that are prescribed shares; and

(3) Subparagraph 6204(1)(b)(iv) of the Regulations is replaced by the following:

• (iv) a conversion or exchange of the share into another security of the corporation or of another corporation with which it does not deal at arm’s length immediately after the conversion or exchange that is, or would be at the date of the conversion or exchange, a prescribed share; and

16 (1) Section 6700 of the Regulations is amended by striking out “or” at the end of paragraph (e.1), by adding “or” at the end of paragraph (f) and by adding the following after paragraph (f):

• (g) a corporation (including incorporated cooperative associations) registered under section 2 of the Community Development Equity Tax Credit Act, R.S.P.E.I. 1988, c. C-13.01.

(2) Section 6700 of the Regulations is amended by striking out “or” at the end of paragraph (f), by adding “or” at the end of paragraph (g) and by adding the following after paragraph (g):

• (h) a corporation that is a community economic development corporation, an eligible business corporation or a venture capital corporation, as defined in subsection 2(1) of the Investing in a Diversified Alberta Economy Act, S.A. 2016, c. I-10.5, and that is registered under that Act.

17 Paragraph 6701(e) of the Regulations is repealed.

18 Section 6802 of the Regulations is amended by striking out “or” at the end of paragraph (g), by adding “or” at the end of paragraph (h) and by adding the following after paragraph (h):

• (i) a trust and partnership established pursuant to the June 9, 2017 plan of compromise, arrangement and reorganization for U.S. Steel Canada Inc. under the Companies’ Creditors Arrangement Act where
  • (i) the trust contributes amounts received or receivable by it to registered pension plans sponsored by U.S. Steel Canada Inc., and
  • (ii) the limited partners of the partnership are the trust and employee life and health trusts established for employees and former employees of U.S. Steel Canada Inc.

19 Paragraph 7000(1)(c) of the Regulations is replaced by the following:

• (c) a particular debt obligation in respect of which it can be determined, at the time the taxpayer acquired the interest therein, that the maximum amount of interest payable thereon in a year ending after that time is less than the maximum amount of interest payable thereon in a subsequent year, other than a debt obligation that
  • (i) is described in paragraph (a) or (b), or
  • (ii) meets the following conditions:
    • (A) it is issued by, or by an agency of, the Government of Canada or a province, and
    • (B) it satisfies the conditions in subparagraphs (2)(c.1)(i) and (ii); and

20 The portion of subsection 7303.1(2) of the Regulations before paragraph (a) is replaced by the following:

(2) An area is a prescribed intermediate zone for a taxation year for the purposes of section 110.7 of the Act where it is Haida Gwaii, Anticosti Island, the Magdalen Islands or Sable Island, or where it is not part of a prescribed northern zone referred to in subsection (1) for the year and is

21 (1) The definition excluded contribution in subsection 8300(1) of the Regulations is replaced by the following:

excluded contribution,

to a registered pension plan, means an amount that is

• (a) contributed to the plan and that is deductible under paragraph 60(j.1) of the Act, or
• (b) transferred to the plan in accordance with any of subsections 146(16), 146.3(14.1), 147(19), 147.3(1) to (4) and (5) to (7) and 147.5(21) of the Act; (cotisation exclue)

(2) Paragraph (a) of the definition past service event in subsection 8300(1) of the Regulations is replaced by the following:

• (a) retirement benefits become provided to an individual under a defined benefit provision of a pension plan in respect of a period before the time the transaction, event or circumstance occurs, other than, if accrued retirement benefits under the provision were previously reduced in respect of a particular period, an increase to a level of retirement benefits for that particular period not exceeding the level of retirement benefits from which those benefits were previously reduced,

(3) Paragraph (a) of the definition period of reduced services in subsection 8300(1) of the Regulations is replaced by the following:

• (a) an eligible period of reduced pay or an eligible period of temporary absence of the individual with respect to an employer who participates under the provision, or

22 (1) Subsection 8302(3) of the Regulations is amended by adding the following after paragraph (i):

• (i.1) where the amount of the individual’s lifetime retirement benefits depends on the Year’s Additional Maximum Pensionable Earnings for calendar years other than the particular year, the Year’s Additional Maximum Pensionable Earnings for each such year were equal to the Year’s Additional Maximum Pensionable Earnings for the particular year;

(2) The portion of paragraph 8302(3)(j.1) of the Regulations before subparagraph (i) is replaced by the following:

• (j.1) where the amount of the individual’s lifetime retirement benefits depends on the actual amount of the pension (in this paragraph referred to as the “statutory pension”) payable to the individual under paragraphs 46(1)(a) to (c) of the Canada Pension Plan or a similar provision of a provincial pension plan (as defined in section 3 of that Act), the amount of statutory pension (expressed on an annualized basis) were equal to

(3) The description of B in subparagraph 8302(3)(j.1)(i) of the Regulations is replaced by the following:

B

is

• (A) for each particular year prior to 2024, the lesser of the Year’s Maximum Pensionable Earnings for the year and,
  • (I) in the case of an individual who renders services throughout the particular year on a full-time basis to employers who participate in the plan, the aggregate of all amounts each of which is the individual’s remuneration for the particular year from such an employer, and
  • (II) in any other case, the amount that it is reasonable to consider would be determined under subclause (I) if the individual had rendered services throughout the particular year on a full-time basis to employers who participate in the plan, or
• (B) for each particular year after 2023, the lesser of the Year’s Additional Maximum Pensionable Earnings for the year and the amount determined under subclause (A)(I) or (II), as the case may be, or

(4) Paragraph 8302(3)(k) of the Regulations is replaced by the following:

• (k) where the amount of the individual’s lifetime retirement benefits depends on a pension (in this paragraph referred to as the “statutory pension”) payable to the individual under Part I of the Old Age Security Act, the amount of statutory pension payable for each calendar year were equal to the aggregate of all amounts each of which is the amount of the full monthly pension payable under Part I of that Act for a month in the particular year other than an amount described in subsection 7(5) of that Act;

23 (1) Paragraph 8304(5.1)(b) of the Regulations is amended by striking out “or” at the end of subparagraph (ii), by replacing “and” at the end of subparagraph (iii) with “or” and by adding the following after subparagraph (iii):

• (iv) the following conditions apply:
  • (A) the individual has not ceased, at the particular time, to be a member in relation to the former provision, and
  • (B) subparagraph 8503(3)(a)(v.1) applies to the period described in paragraph (a), and

(2) Subparagraph (ii) of the description of A in paragraph 8304(5.1)(g) of the Regulations is replaced by the following:

• (ii) an amount that is to be paid or otherwise made available under the former provision with respect to the individual after the particular time, other than
  • (A) an amount that is to be transferred to fund the past service benefits or paid directly to the individual, or
  • (B) the balance of property described in clause 8503(3)(a)(v.1)(B) that is required to be transferred after the particular time to fund the past service benefits,

24 (1) Paragraph 8409(1)(a) of the Regulations is replaced by the following:

• (a) where an agreement concerning annual information returns has been entered into by the Minister and a regulator identified in subsection (2), with that regulator, on or before the day that an information return required by that regulator is to be filed for the fiscal period; and

(2) Paragraphs 8409(2)(a) to (e) of the Regulations are replaced by the following:

• (a) the Office of the Superintendent of Financial Institutions;
• (b) the Financial Services Regulatory Authority of Ontario;
• (c) Retraite Québec;
• (d) the Superintendent of Pensions, Province of Nova Scotia;
• (e) the Superintendent of Pensions, Province of New Brunswick;
• (f) the Office of the Superintendent - Pension Commission, Province of Manitoba;
• (g) the Superintendent of Pensions, Province of British Columbia;
• (h) the Superintendent of Pensions, Province of Saskatchewan;
• (i) the Superintendent of Pensions, Province of Alberta; and
• (j) the Superintendent of Pensions, Province of Newfoundland and Labrador.

25 (1) The definition Consumer Price Index in subsection 8500(1) of the Regulations is replaced by the following:

Consumer Price Index

for a month means the Consumer Price Index for Canada for the month as published by Statistics Canada under the authority of the Statistics Act; (indice des prix à la consommation)

(2) Paragraph (a) of the definition eligible period of reduced pay in subsection 8500(1) of the Regulations is replaced by the following:

• (a) that begins after the employee has been employed by the employer or predecessor employers to the employer for not less than three months,

(3) Subsection 8500(1) of the Regulations is amended by adding the following in alphabetical order:

Year’s Additional Maximum Pensionable Earnings

for a calendar year has the meaning assigned by section 18.1 of the Canada Pension Plan; (maximum supplémentaire des gains annuels ouvrant droit à pension)

26 (1) Subparagraph 8502(b)(v.1) of the Regulations is replaced by the following:

• (v.1) is paid by the trustee of a trust described in paragraph 6802(h) or (i), where the amount would have been an eligible contribution if the amount had been paid in respect of a defined benefit provision of the plan by an employer with respect to the employer’s employees or former employees,

(2) Subparagraph 8502(f)(ii) of the Regulations is replaced by the following:

• (ii) surrender does not include
  • (A) a reduction in benefits to avoid the revocation of the registration of the plan, or
  • (B) a surrender of retirement benefits payable to a beneficiary of a member after the member’s death, to the extent permitted under the Pension Benefits Standards Act, 1985 or a similar law of a province;

27 (1) Paragraph 8503(2)(a) of the Regulations is amended by striking out “or” at the end of subparagraph (ix), by adding “or” at the end of subparagraph (x) and by adding the following after subparagraph (x):

• (xi) the amount of the benefits is reduced as permitted under the Pension Benefits Standards Act, 1985 or a similar law of a province;

(2) Clause (D) of the description of A in subparagraph 8503(2)(b)(ii) of the Regulations is replaced by the following:

• (D) the member were entitled to the total of
  • (I) that proportion, not exceeding one, of the maximum benefits that an individual could receive under paragraphs 46(1)(a) and (b) of the Canada Pension Plan (or a similar provision of a provincial pension plan as defined in that Act) that the total of the member’s remuneration for the three calendar years in which the remuneration is the highest is of the total of the Year’s Maximum Pensionable Earnings for those three years (or such other proportion of remuneration to Year’s Maximum Pensionable Earnings as is acceptable to the Minister),
  • (II) that proportion, not exceeding one, of the maximum benefits that an individual could receive under paragraph 46(1)(c) of the Canada Pension Plan (or a similar provision of a provincial pension plan as defined in that Act) that the total of the member’s remuneration in excess of the Year’s Maximum Pensionable Earnings for the three calendar years in which the remuneration is the highest is of the total of the Year’s Additional Maximum Pensionable Earnings in excess of the Year’s Maximum Pensionable Earnings for those three years (or such other proportion as is acceptable to the Minister),

(3) Subparagraph 8503(2)(i)(ii) of the Regulations is replaced by the following:

• (ii) the aggregate of all amounts, each of which is such a single amount (other than the portion thereof, if any, that can reasonably be considered to be interest, computed at a rate not exceeding a reasonable rate, in respect of the period from the day of death of the member to the day the single amount is paid), does not exceed the present value, immediately before the death of the member or at any other time allowed under the Pension Benefits Standards Act, 1985 or similar law of a province, of all benefits that have accrued under the provision with respect to the member to the day of the member’s death;

(4) Subsection 8503(2) of the Regulations is amended by striking out “and” at the end of paragraph (m), by adding “and” at the end of paragraph (n) and by adding the following after paragraph (n):

• (o) retirement benefits provided to a member or a beneficiary of the member after the death of the member, if the beneficiary is a spouse or common-law partner or former spouse or common-law partner of the member, as permitted by the Pension Benefits Standards Act, 1985 or a similar law of a province where
  • (i) the life expectancy of the individual is significantly shorter than normal and has been so certified by a medical doctor or nurse practitioner licensed under the laws of a province or of the place where the individual resides,
  • (ii) the retirement benefits replace all or a portion of retirement benefits (referred to in subparagraph (iii) as the “former benefits”) that would otherwise be payable under the provision with respect to the individual, and
  • (iii) at the time the retirement benefits replace the former benefits, the present value of the benefits does not exceed the present value of the former benefits.

(5) The portion of paragraph 8503(3)(b) of the Regulations before subparagraph (i) is replaced by the following:

• (b) benefits are not provided under the provision (in this paragraph referred to as the “particular provision”) to a member in respect of a period that is after the day on which retirement benefits (other than retirement benefits payable as a consequence of the death of another person) commence to be paid to the member under a defined benefit provision of

(6) Paragraph 8503(26)(c) of the Regulations is replaced by the following:

• (c) the plan has not paid in the year an amount to the person equal to the greater of
  • (i) the retirement benefits payable to the person for the year, and
  • (ii) the lesser of
    • (A) the IPP minimum amount for the person for the year, and
    • (B) the actuarial surplus under the plan at the beginning of the year.

28 (1) The portion of subsection 8504(5) of the Regulations before paragraph (a) is replaced by the following:

(5) For the purposes of subparagraph 8502(c)(i), the following conditions are applicable in respect of retirement benefits (other than retirement benefits payable as the result of the death of another member) payable under a defined benefit provision of a pension plan to a member of the plan for the period (in this subsection referred to as the “bridging period”) from the time the benefits commence to be paid to the time the member attains 65 years of age:

(2) The formula in paragraph 8504(5)(a) of the Regulations is replaced by the following:

(A × B) + (0.25 × C × (D ÷ 35)) + (0.3333 × E × (F ÷ 35))

(3) Paragraph 8504(5)(a) of the Regulations is amended by striking out “and” at the end of the description of C and by replacing the description of D with the following:

D

is the amount by which the lesser of 35 and the amount determined for B exceeds the amount determined for F,

E

is

• (i) for years after 2027, the average of the Year’s Additional Maximum Pensionable Earnings for the calendar year in which the benefits commence to be paid and for each of the four immediately preceding years, and
• (ii) for years prior to 2028, the average of the Year’s Additional Maximum Pensionable Earnings for the year in which the benefits commence to be paid and for each of the immediately preceding years after 2023, and

F

is the lesser of 35 and the amount determined for B for years after 2023; and

29 (1) Subparagraph 8506(1)(e.2)(iii) of the Regulations is amended by striking out “and” at the end of clause (B) and by replacing clause (C) with the following:

• (C) a retirement benefit that would be described in paragraph (a) if its subparagraph (ii) read as follows:
• (ii) the benefits are adjusted annually, after they commence to be paid, in whole or in part to reflect increases at a rate specified under the terms of the plan not exceeding 2% per annum;
• (D) the payment of one or more single amounts to a beneficiary after the death of a member, as permitted by the Pension Benefits Standards Act, 1985 or similar law of a province, and

(2) Subparagraph 8506(1)(e.2)(iv) of the Regulations is replaced by the following:

• (iv) the VPLA benefits are increased or decreased to the extent that
  • (A) the following differ from the actuarial assumptions used to determine the VPLA benefits:
    • (I) the amount or rate of return earned by the VPLA fund, or
    • (II) the rate of mortality of the members and beneficiaries of one or more VPLA funds under the pension plan, or
  • (B) the mortality-related actuarial assumptions are changed;

(3) Paragraph 8506(13)(a) of the Regulations is replaced by the following:

• (a) no amounts are contributed to the arrangement other than amounts that are
  • (i) transferred from accounts of the members under one or more plans of the participating employer or a related group of participating employers, or
  • (ii) transferred from another VPLA fund under the plan, to the extent that an increase or decrease in VPLA benefits takes into account rates of mortality of the members and beneficiaries of that other VPLA fund;

30 (1) Subparagraph 8507(3)(a)(i) of the Regulations is replaced by the following:

• (i) the period is an eligible period of reduced pay or an eligible period of temporary absence of the individual in the year with respect to the employer,

(2) Paragraph 8507(3)(b) of the Regulations is replaced by the following:

• (b) a period of parenting of an individual is all or a part of a period that
  • (i) begins at the time of the birth of a child of whom the individual is a natural parent, or at the time the individual adopts a child, and
  • (ii) ends 18 months after that time.

(3) Paragraph 8507(7)(b) of the Regulations is replaced by the following:

• (b) an eligible period of reduced pay or an eligible period of temporary absence of the individual with respect to the employer,

31 Paragraphs 8510(3)(c) and (d) of the Regulations are replaced by the following:

• (c) each employer participates in the plan pursuant to one or more collective bargaining agreements or participation agreements whose contribution rates and benefits are substantially the same as under the collective bargaining agreements related to the plan;
• (d) all or substantially all of the employers who participate in the plan are persons, each of whom is
  • (i) not exempt from tax under Part I of the Act, or
  • (ii) exempt from tax under Part I of the Act pursuant to paragraph 149(1)(f) or (l) of the Act and, collectively with its related persons, employs fewer than 100 full-time employees at the time the employer or its predecessor employer became a participating employer;

32 Section 8513 of the Regulations is replaced by the following:

8513 For the purposes of paragraph 8302(3)(m), subparagraph 8502(c)(iii) and paragraph 8517(5)(f), designated provision of the law of Canada or a province means section 21 of the Pension Benefits Standards Act, 1985 and any provision of a law of a province that is similar to that section.

33 Subsection 8514(2) of the Regulations 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 after paragraph (e):

• (f) except in the case of an individual pension plan, a share of the capital stock of, an interest in, or a debt of a person or partnership that does not deal at arm’s length with a participating employer, if the participating employer’s principal activity is to manage the investments of or provide investment advice to
  • (i) one or more registered pension plans,
  • (ii) His Majesty in right of Canada or a province, or
  • (iii) an entity described in paragraph 149(1)(c) to (d.4) of the Act.

34 Section 9000 of the Regulations is amended by adding the following after paragraph (a):

• (a.1) Farm Credit Canada;

35 Paragraph 9002.1(a) of the Regulations is amended by striking out “or” at the end of subparagraph (ii), by replacing “and” at the end of subparagraph (iii) with “or” and by adding the following after subparagraph (iii):

• (iv) Interac Corp.; and

Application and Coming into Force

36 (1) Subsection 1(1) is deemed to have come into force on August 9, 2022.

(2) Subsection 1(2) is deemed to have come into force on August 4, 2023.

37 (1) Subsections 2(1) and (2) are deemed to have come into force on January 1, 2021.

(2) Subsections 2(3) and (4) are deemed to have come into force on January 1, 2022.

38 Section 3 is deemed to have come into force on January 1, 2022.

39 Section 4 applies to contribution years and taxation years that end after August 9, 2022.

40 Section 5 applies to taxation years that end on or after April 19, 2021.

41 (1) Subsection 6(1) is deemed to have come into force on December 7, 2015.

(2) Subsection 6(2) is deemed to have come into force on October 16, 2018.

42 Section 7 is deemed to have come into force on March 29, 2012.

43 (1) Subsection 8(1) is deemed to have come into force on April 14, 2016.

(2) Subsections 8(2) and (3) are deemed to have come into force on August 9, 2022.

44 Section 12 is deemed to have come into force on June 15, 2017.

45 Section 14 applies in respect of dispositions that occur on or after August 9, 2022.

46 (1) Subsections 15(1) and (3) apply to the 2023 and subsequent taxation years.

(2) Subsection 15(2) applies to the 2012 and subsequent taxation years.

47 (1) Subsection 16(1) is deemed to have come into force on August 1, 2011.

(2) Subsection 16(2) is deemed to have come into force on April 14, 2016.

48 Section 17 is deemed to have come into force on August 9, 2022.

49 Section 18 is deemed to have come into force on June 1, 2017.

50 Section 19 applies in respect of debt obligations issued on or after October 16, 1996.

51 Section 20 is deemed to have come into force on June 3, 2010.

52 (1) Subsection 21(1) applies in respect of contributions and transfers that occur on or after August 9, 2022.

(2) Subsection 21(2) is deemed to have come into force on January 1, 2011.

(3) Subsection 21(3) is deemed to have come into force on August 9, 2022.

53 (1) Subsections 22(1) to (3) are deemed to have come into force on January 1, 2024.

(2) Subsection 22(4) applies to the 2022 and subsequent taxation years.

54 Section 23 applies in respect of past service events, as defined in subsection 8300(1) of the Income Tax Regulations, that occur after 2012.

55 Section 24 is deemed to have come into force on June 8, 2019.

56 (1) Subsection 25(1) is deemed to have come into force on August 9, 2022.

(2) Subsection 25(2) is deemed to have come into force on January 1, 2022.

(3) Subsection 25(3) is deemed to have come into force on January 1, 2024.

57 (1) Subsection 26(1) is deemed to have come into force on June 1, 2017.

(2) Subsection 26(2) is deemed to have come into force on August 9, 2022.

58 (1) Subsection 27(1) is deemed to have come into force on January 1, 2011.

(2) Subsections 27(2) is deemed to have come into force on January 1, 2024.

(3) Subsection 27(3) is deemed to have come into force on January 1, 2020.

(4) Subsection 27(4) is deemed to have come into force on September 30, 2015.

(5) Subsection 27(5) is deemed to have come into force on January 1, 2022.

(6) Subsection 27(6) applies to the 2012 and subsequent taxation years.

59 (1) Subsection 28(1) is deemed to have come into force on January 1, 2022.

(2) Subsections 28(2) and (3) are deemed to have come into force on January 1, 2024.

60 Section 29 is deemed to have come into force on January 1, 2020.

61 (1) Subsections 30(1) and (3) are deemed to have come into force on August 9, 2022.

(2) Subsection 30(2) is deemed to have come into force on December 3, 2017.

62 Section 31 is deemed to have come into force on January 1, 2023.

63 Section 32 is deemed to have come into force on July 1, 2011.

64 Section 33 is deemed to have come into force on June 1, 2017.

65 Section 34 applies to the 2016 and subsequent taxation years.

66 Section 35 is deemed to have come into force on January 29, 2018.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

The Canada Revenue Agency (CRA), provincial governments, and pension plan consultants have identified several areas in the Income Tax Regulations (the Regulations) that require technical amendments.

Amendments are needed to various tax rules applicable to registered pension plans, pooled registered pension plans, qualified investments, employee stock options and mark-to-market rules to provide greater clarity or flexibility in the interpretation and administration of the tax rules so that their intended policy objectives will apply in particular situations.

Background

The Department of Finance routinely releases draft legislative proposals relating to technical amendments to the Income Tax Act (the Act) and the Regulations. These types of draft legislative and regulatory proposals are technical in nature and are generally intended to align the law with its intended policy.

Two packages of proposed technical tax amendments were previously released for public consultation, one on August 9, 2022, and the other on August 4, 2023. The Regulations Amending the Income Tax Regulations (Technical Amendments) are needed to make 46 technical tax amendments to the Regulations to address the issues identified in these public releases.

Objective

The objective of the technical tax amendments is to provide stakeholders with more flexibility, clarity or certainty in the interpretation and administration of the tax rules.

Description

The technical tax amendments generally fall into the following categories:

• Amendments that are relieving in nature to address situations where the law does not apply appropriately in a particular situation, having regard to the policy objectives of the relevant rules.
• Amendments that are consequential to updated federal legislation that ensure tax rules are applied appropriately and align with provincial pension standards legislation, eliminating potential conflicts in law and reducing unnecessary inefficiencies for registered pension plan administrators, while preserving the policy intent of the tax rules.
• Amendments that correct drafting errors or clarify uncertainties, including typographical errors and differences between the English and French versions of the Regulations.

Some examples of the amendments in this package include:

Amendments that correspond with Canada Pension Plan and Old Age Security changes

• Several tax rules are being amended to align with enhancements to the Canada Pension Plan (CPP). In 2024, a second earnings ceiling, known as the year’s additional maximum pensionable earnings or YAMPE, is being added to the CPP. As a result, the tax rules for determining each plan member’s “pension adjustment” and “past service pension adjustment” (which reduce the contribution room of the member’s registered retirement savings plan [RRSP]) are amended to account for the new YAMPE limit.
• Old Age Security (OAS) was amended to increase payments for individuals over age 75 beginning in 2022. The tax rule that applies to annual pension adjustment calculations for members of pension plans whose benefit formulas are integrated with the OAS is amended to ensure that increased OAS payments to individuals over age 75 will not be taken into account when calculating pension adjustments, thus the increased payments will not adversely impact RRSP room.

Registered pension plans

• The Regulations permit employers to credit employees with pensionable service during various periods of absence and reduced pay. Previously, an employee needed to be employed for at least 36 months before their employer could credit the employee with full-time pensionable service during an “eligible period of reduced pay.” This definition is being amended to reduce the minimum employment requirement to 3 months, thus permitting registered pension plans to include newer employees in deemed full-time earnings during periods of reduced pay, eliminating inequitable treatment between newer employees and longer-service employees.
• The Regulations generally require pension benefit payments to be paid in equal annual amounts from retirement to death, with some exceptions. Quebec and New Brunswick amended their pension standards legislation to permit certain types of pension plans (e.g. shared-risk pension plans or target benefit plans) to reduce pension benefits in cases where plan assets are insufficient to make payments to retirees at previous benefit levels. To avoid a conflict with provincial laws, amendments have been made to the Regulations to add provincially prescribed reductions in benefits to the list of exemptions to the general rule of equal annuity payments.
• A registered pension plan can qualify as a specified multi-employer plan (SMEP), a multi-employer plan with collectively bargained defined benefits, if certain conditions are met. The conditions are being relaxed to permit registered charities and non-profit organizations to be participating employers in SMEPs if they have fewer than 100 full-time employees, as well as to permit employers to add non-unionized members to the plan under “participation agreements.” It is expected that this amendment will result in greater participation in defined benefit plans by Canadians employed by small tax-exempt employers.
• To align with recent changes to the Employment Insurance Act, for the purposes of determining pensionable service under a registered pension plan during a parental leave, the definition of “eligible period of parenting” in the Regulations is amended to extend such a 12-month period to 18 months from the birth or adoption of the child.

Align registered pension plan tax rules with provincial pension rules

• The tax rules require the calculation of a past service pension adjustment when an individual transfers from one pension plan to another (i.e. of their new employer). In the case where an individual transfers their benefit entitlement from an underfunded pension plan, Ontario’s Pension Benefits Act and Quebec’s Supplemental Pension Plans Act generally requires that the transfer of associated assets be made in two stages. For example, if a plan is 80% funded, the first transfer is 80% of the assets and the second transfer is 20% of the assets (i.e. at the earlier of when the plan is fully funded and five years after the first transfer). The tax rules are being amended to permit two separate amounts of past service pension adjustments to be calculated and reported, so as to correspond to the provincial rules.
• Permit a new “permissible benefit” (i.e. periodic payments for a short and fixed period to replace normal lifetime benefits) under the pension tax rules in cases of short-life expectancy of a pension plan member and where conditions in provincial pension standards legislation (as of 2024, British Columbia’s Pension Benefits Standards Act) are satisfied.
• Variable payment life annuity (VPLA) rules were added to the Act in 2020. Small adjustments are made to the rules to better align with VPLA rules that will be introduced in provincial pension standards legislation.
• The technical tax amendments will permit a recalculation of the present value of a survivor benefit if it is not paid within a specified time period after the death of the plan member and if the pension standards legislation (as of 2024 in British Columbia and Alberta) permits or requires a redetermination of the present value of benefits.

Qualified investments

Provinces often wish to attract registered savings investors (such as RRSPs) to invest in shares of their regional economic development corporations. Those shares are generally similar to other liquid and publicly traded securities that are listed in the Regulations as qualified investments for registered savings plans. The Regulations are being amended to add the shares of economic development corporations or venture capital corporations that are registered under Alberta’s Investing in a Diversified Alberta Economy Act to the list of qualified investments. Shares registered under Nova Scotia’s Equity Tax Credit Act and Prince Edward Island’s Equity Tax Credit Act are also on this list.

Prescribed venture capital corporations

The Regulations contain a list of prescribed venture capital corporations (VCCs) that are eligible corporations pursuant to various provincial statutes that provide tax credits for investments. That list is amended to add corporations registered under Prince Edward Island’s Community Development Equity Tax Credit Act and to add eligible business corporations and VCCs registered under Alberta’s Investing in a Diversified Alberta Economy Act, to the list of prescribed corporations, as they are similar to other VCCs already prescribed. As a result, financial assistance received for the acquisition of shares of those provincially registered corporations is not included in the business or property income of the investor taxpayer.

Employee stock options

Generally, one of the conditions for an employee to receive the stock option deduction (to exempt 50% of capital gains from income tax) is that shares acquired under the agreement be prescribed shares (i.e. common shares). However, under the Regulations, to receive the stock option deduction, prescribed shares must not reasonably be expected to be redeemed, acquired or cancelled by the employer within two years after it is acquired by the employee. The Regulations are amended to allow prescribed shares to be exchanged for other prescribed shares under certain conditions (e.g. a share-for-share exchange pursuant to a corporate acquisition or reorganization). That is, the original shares are deemed to not have been redeemed, acquired or cancelled. The amendments ensure that, the employee will not lose the employee stock option deduction available under section 110 of the Act.

Accommodate Stelco’s CCAA plan

In June 2017, U.S. Steel Canada Inc. (now “Stelco”) emerged from Companies’ Creditors Arrangement Act (CCAA) proceedings through the implementation of a CCAA plan. A “Landco” was created to monetize significant land holdings into a pension deficit funding trust that would make large contributions to underfunded defined benefit pension plans sponsored by Stelco. In order for those contributions to occur on a tax-efficient basis, as is the policy intent, two Regulations are amended retroactive to June 2017. Section 6802 is amended to exclude the pension deficit funding trust from the retirement compensation arrangement rules (which otherwise would require refundable taxes on contributions to a pension arrangement that is not a registered pension plan). Paragraph 8502(b) is amended to permit the pension deficit funding trust to make contributions (in lieu of employer contributions) to registered pension plans.

Pooled Registered Pension Plan (PRPP) Filing with the CRA

The Regulations are amended to clarify that PRPP administrators must annually file PRPP contribution receipts and PRPP Contribution Information Returns (and not use RRSP forms in respect of PRPPs). This amendment ensures that the Regulations reflect the administrative practice that the CRA and PRPP administrators have followed since PRPP rules were introduced in 2012.

Withholding

Payments out of an employee life and health trust (ELHT) are subject to tax withholding, similar to withholding requirements that apply to other remuneration or employee benefits paid by employers or employer-sponsored pension and benefit plans. The Regulations are being amended to correspond with existing administrative practice (i.e. which will have a neutral impact on taxpayers).

Name changes

The Regulations are amended to

• reflect the name change of a prescribed donee (an entity specially designated to receive gifts of capital property from non-resident donors). For example, “Friends of the Nature Conservancy of Canada, Inc.” was renamed “American Friends of Canadian Nature Inc”;
• update the name of Queen Charlotte Islands to Haida Gwaii to reflect its status as a prescribed intermediate zone, a designated remote area for the purposes of the northern residence deduction;
• update the names of the recognized credit rating agencies and to recognize their subsidiary corporations;
• update the names of provincial pension regulators with whom the CRA has entered into an agreement for joint filing (by pension plan administrators) of annual information returns; and
• update the names of CRA forms T10 (pension adjustment reversal) and T215 (past service pension adjustment).

Foreign affiliates (i.e. subsidiaries) — packaging of assets for sale

Under the current income tax rules, where a foreign subsidiary (referred to in the tax rules as a “foreign affiliate”) of a Canadian company earns business profits (referred to in the tax rules as “surplus”), it can generally distribute those profits as a dividend to the Canadian company and the Canadian company is not taxable on the receipt of the dividend. However, to ensure that a foreign subsidiary can only generate such profits through real business activities with its customers, there is a rule that, in effect, prevents a foreign subsidiary from using sales of assets to “non-arm’s length” persons (e.g. another foreign subsidiary of the Canadian company) in order to artificially generate profits that can be distributed tax-free to its Canadian parent company. There is, however, an exception to that rule, which allows one foreign subsidiary (the “disposing” foreign affiliate) to generate such profits from selling an asset to another foreign subsidiary (the “acquiring” foreign affiliate), provided the acquiring foreign affiliate issues shares to the disposing foreign affiliate in exchange for the asset sale, and the disposing foreign affiliate in turn sells those shares to an arm’s length person. The reason for that exception is that such a transaction is viewed as being equivalent to selling the asset to an arm’s length person.

That exception is being amended in two ways: (1) to allow the acquiring foreign affiliate to take on certain debts of the disposing foreign affiliate in exchange for the asset, in addition to issuing shares to the disposing foreign affiliate; and (2) to clarify that the shares received by the disposing foreign affiliate in exchange for the asset must be shares of the acquiring foreign affiliate, as this is not entirely clear in the current rules.

Mark-to-market rules

The mark-to-market rules require taxpayers that are “financial institutions” to include in income on an annual basis any accrued but unrealized gains on “mark-to-market property.”

The Regulations are amended to

• include Farm Credit Canada as a “prescribed person” for the purposes of the definition of “financial institution” in the mark-to-market rules (“prescribed persons” are not “financial institutions” for the purposes of these rules). Farm Credit Canada is a financial institution for purposes of these rules; however, it is also a tax-exempt Crown corporation. Although Farm Credit Canada is not subject to the mark-to-market rules because of its tax-exempt status, Farm Credit Canada’s status as a financial institution for purposes of the mark-to-market rules could result in certain funds that it invests in (and the arm’s length investors in those funds that are not themselves financial institutions) being subject to the mark-to-market rules. This amendment is consistent with the tax policy behind the mark-to-market rules and ensures that certain funds that Farm Credit Canada invests in would not themselves become subject to the mark-to-market rules solely because of an investment by Farm Credit Canada; and
• provide that a share of Interac Corp., a private Canadian interbank network, may qualify as a “prescribed payment card corporation share” of a taxpayer for the purposes of the definition of “excluded property” when it meets certain conditions (i.e. the shares of Interac Corp. will not be caught under the definition of “mark-to-market property”).

Regulatory development

Consultation

The draft regulatory amendments were released for public consultation on August 9, 2022, and August 4, 2023. On each occasion, the Department of Finance officially provided a 60-day period for stakeholders to provide their input. Suggestions for improvements to five amendments related to registered pension plans were received from legal and actuarial firms, the Canada Revenue Agency, and provincial regulators of pension plans. Stakeholder concerns have been taken into account when finalizing these technical tax amendments. More specifically, as provinces are currently drafting VPLA laws (with design features that had not been contemplated under the tax rules when VPLAs were introduced in 2021), the regulations were adjusted to permit multiple RPPs of an employer or a related group to be in a pooled VPLA fund.

Given that stakeholders already had an opportunity to comment on the draft regulations, it is not expected that further public consultations would result in modifications to the proposed amendments. Accordingly, the amendments were exempted from prepublication in the Canada Gazette.

Instrument choice

Every so often, regulatory amendments are required to ensure that Canada’s tax system is functioning as intended. No other type of instrument is available to achieve this objective.

Regulatory analysis

Benefits and costs

These amendments are neutral in nature. The benefits and costs associated with the amendment are expected to be minimal for both the Government and stakeholders.

The regulatory amendments make pension plan administration more flexible. Most of the proposed amendments provide clarity and certainty for requirements that stakeholders are already complying with. For example, PRPP administrators already file PRPP contribution information returns. Adding it to the list of required returns aligns the Regulations with current practices.

Small business lens

Analysis under the small business lens determined that the proposal will not directly impact small businesses in Canada. Small employers that are non-profit corporations or registered charities will benefit from greater opportunities to join specified multi-employer plans for the purposes of providing cost-effective pension benefit accumulation for their employees.

One-for-one rule

The one-for-one rule does not apply, as there is no incremental change in administrative burden on business and no regulatory titles are repealed or introduced.

Regulatory cooperation and alignment

Due to the technical nature of these proposed amendments, no steps were taken to coordinate or to align with other regulatory jurisdictions. However, a small number of these amendments will ensure that the tax rules align with provincial pension standards legislation.

Effects on the environment

In accordance with the Cabinet Directive on Strategic Environmental and Economic Assessment, a preliminary scan concluded that a strategic environmental assessment is not required.

Gender-based analysis plus

No gender-based analysis plus (GBA+) impacts have been identified for this proposal.

Implementation, compliance and enforcement, and service standards

Implementation

As these technical tax amendments are neutral or relieving in nature, the coming-into-force dates are generally retroactive to the date of announcement (e.g. August 9, 2022, or August 4, 2023) or to an earlier date to provide appropriate relief in the circumstance. The pension amendments relating to bridge benefits came into force on January 1, 2024.

The Canada Revenue Agency will administer these amendments to the Regulations.

Contact

Andrew Donelle
Tax Legislation Division
Tax Policy Branch
Department of Finance Canada
Telephone: 613‑302‑8451
Email: andrew.donelle@fin.gc.ca