BILL 4 – 2002
CORPORATION CAPITAL TAX AMENDMENT ACT, 2002

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

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

(a) by repealing the definitions of "associated" and "associated corporations" and substituting the following:

"associated" has the same meaning as in section 256 of the Income Tax Act (Canada); ,

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

"B.C. paid up capital" means the result obtained by subtracting from a financial corporation's net paid up capital the deduction, if any, made by the financial corporation under section 12; ,

(c) by repealing the definitions of "charter", "corporation", "current accounts payable", "operating lease", "purchase money security interest", "savings institution", "subsidiary controlled corporation" and "trade accounts payable",

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

(e) by adding the following definition:

"financial corporation" means

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

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

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

"net paid up capital" means the result obtained by subtracting from a financial corporation's total paid up capital the deduction, if any, made by the financial corporation under section 11; ,

(g) in the definition of "tax payable" by striking out "corporation" in both places and substituting "financial corporation", and

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

"total paid up capital" means the result obtained by subtracting from a financial corporation's aggregate paid up capital the deduction, if any, made by the financial corporation under section 10; .

2 Section 1 (3) to (5) is repealed and the following substituted:

(4) For the purposes of this Act,

(a) financial corporations are associated financial corporations if they are associated corporations within the meaning of section 256 of the Income Tax Act (Canada), and

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

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

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

(b) presented to the shareholders of the financial corporation.

3 The following section is added:

Application

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

(2) Despite the Corporation Capital Tax Amendment Act, 2001 and the Corporation Capital Tax Amendment Act, 2002, this Act and the regulations under this Act, as they read on August 31, 2002, continue to apply to a corporation for a taxation year that began before September 1, 2002.

4 Section 2 is amended

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

(1) In this section:

"charter" includes

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

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

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

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

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

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

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

(d) in subsections (4), (6) and (9) by striking out "corporation" wherever it appears and substituting "financial corporation",

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

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

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

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

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

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

5 Section 3 is amended

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

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

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

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

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

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

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

(d) in subsection (6) by striking out "corporation" and substituting "financial corporation" and by striking out "subsection (2) (a) (i)" and substituting "subsection (2) (a)".

6 Section 3.1 is amended

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

(b) in subsection (1) (a) by striking out "section 3 (2) (b)" and substituting "section 3 (2.1)",

(c) in subsection (1) (b) by striking out "associated corporations" and substituting "associated financial corporations", and

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

7 Section 3.2 is amended

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

(b) in subsection (1) (a) by striking out "section 3 (2) (b)" and substituting "section 3 (2.1)", and

(c) in subsections (1) (b) and (7) by striking out "associated corporations" and substituting "associated financial corporations".

8 Section 4 is amended

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

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

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

(a) the Credit Union Central of British Columbia;

(b) the Stabilization Central Credit Union of British Columbia;

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

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

10 Section 6 is amended

(a) in subsections (2) and (4) by striking out "corporation" wherever it appears and substituting "financial corporation",

(b) by repealing subsection (2.1), and

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

11 Section 7 (1) is amended

(a) by striking out "bank other than an authorized foreign bank, a trust company or a credit union" and substituting "financial corporation, other than an authorized foreign bank,", and

(b) by adding "and" after paragraph (b), by striking out ", and" after paragraph (c) and by repealing paragraph (d).

12 Section 7.1 is amended

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

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

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

(b) its capital deductions,

exceeds the lesser of

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

(d) the total of the following amounts:

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

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

(2) The Lieutenant Governor in Council may make regulations defining a word or phrase used in this section but not defined in this Act. , and

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

13 Section 10 is repealed and the following substituted:

Total paid up capital

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

14 Section 11 is repealed and the following substituted:

Net paid up capital

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

(2) If a financial corporation owns shares of another financial corporation that has a permanent establishment in British Columbia, other than a financial corporation referred to in section 4 (3), there may be deducted from the total paid up capital of the financial corporation an investment allowance equal to the proportion of the total paid up capital that the carrying value of those shares in the other financial corporation bears to the total assets of the financial corporation.

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

15 Section 12 is repealed and the following substituted:

B.C. paid up capital

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

16 Section 16 is repealed.

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

18 Section 18 is amended

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

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

(c) in subsection (1) (a) by striking out "return" and substituting "return and prescribed records".

19 Section 19 is amended

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

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

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

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

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

23 Section 27 is amended by striking out "or" at the end of paragraph (d), by adding ", or" at the end of paragraph (e) and by adding the following paragraph:

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

24 Section 28 is amended

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

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

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

26 Section 31 (2) is amended

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

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

27 Sections 31 (4), 32, 35, 36 (1) (a), 37 and 39 (1) (a) are amended by striking out "corporation" wherever it appears and substituting "financial corporation".

28 Section 40 is amended

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

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

(c) by adding the following subsection:

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

(a) a bank,

(b) a credit union,

(c) an insurance company,

(d) a trust company, and

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

29 Section 41 is amended

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

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

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

31 Section 48 is amended by adding the following subsection:

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

 
Consequential Amendments

 
Corporation Capital Tax Amendment Act, 2001

32 Sections 1 (c), 4, 5, 8, 11, 12, 13 and 15 of the Corporation Capital Tax Amendment Act, 2001, S.B.C. 2001, c. 30, are repealed.

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

34 Section 17 is amended by striking out "September 1, 2003" and substituting "September 1, 2002".

Commencement

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

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

(3) When brought into force by regulation, section 12 is deemed to have come into force on February 19, 2002 and is retroactive to the extent necessary to give it effect on and after that date.