First Session, 48th

General Assembly

65 Elizabeth II,

BILL 17

AN ACT TO AMEND THE INCOME TAX

ACT, 2000 NO. 5

Received

and Read the First Time ................................................................

Second

Reading ............................................................................................

Committee .....................................................................................................

Third

Reading ...............................................................................................

Royal

Assent .................................................................................................

HONOURABLE CATHY

BENNETT

Minister of Finance

and President of Treasury Board

Ordered to be printed by

the Honourable House of Assembly

EXPLANATORY NOTES

This Bill would amend the Income Tax Act, 2000 to

change the rate of the dividend

tax credit;

eliminate the Harmonized Sales

Tax credit and replace it with a new refundable tax benefit; and

eliminate the manufacturing and

processing profits deduction.

A BILL

AN ACT TO AMEND THE

INCOME TAX ACT, 2000 NO. 5

Analysis

S.20 R&S

Dividend tax credit

S.34 R&S

Income supplement

S.35 Amdt.

No set off

S.36 Amdt.

Date on which amount applied

S.41 Amdt.

Manufacturing and processing profits deduction

S.50 Amdt.

Reassessment

S.68 Amdt.

Regulations

Repeal

Commencement

Be it enacted by the Lieutenant-Governor and

House of Assembly in Legislative Session convened, as follows:

SNL2000 cI-1.1

as amended

Section 20 of the Income Tax Act, 2000 is repealed and the following substituted:

Dividend tax

credit

(1) For

the purpose of computing the tax payable under this Part for a taxation year by

an individual who was resident in the province on the last day of the taxation

year, there may be deducted an amount equal to the total of

(a) 3.5% of the total of the amount required under

paragraph 82(1)(

a) and subparagraph 82(1)(b)(

i) of the federal Act to be

included in computing the individuals income for the year; and

(b) 5.4% of the total of the amount required under

paragraph 82(1)(a.1) and subparagraph 82(1)(b)(ii) of the federal Act to be

included in computing the individuals income for the year.

(2) Subsection (1) shall only apply to a dividend

received on or after the coming into force of this section.

Section 34 of the Act is repealed and the

following substituted:

Income supplement

(1) In

this

section

(a) "adjusted income", "cohabiting

spouse or common-law partner", "qualified dependant" and

"qualified relation" have the meanings assigned to them under

subsection 122.5(1) of the federal Act;

(b) "eligible individual" means an

eligible individual as defined in subsection 122.5(1) of the federal Act and

who is resident in the province in relation to a month specified for a taxation

year; and

(c) "return of income" in respect of a

person for a taxation year means,

(

i) for a person who is resident in the province

at the end of the taxation year, the persons return of income, other than a

return of income under subsection 70(2) or 104(23), paragraph 128(2)(

e) or

subsection 150(4) of the federal Act, that is required to be filed for the taxation

year or that would be required to be filed if the person had tax payable under

that Act for the taxation year, and

(ii) in any other case, a prescribed form

containing prescribed information that is filed for the taxation year with the

Minister of National Revenue.

(2) Notwithstanding subsection (1), a person is

not an eligible individual, a qualified relation or a qualified dependant of an

individual in relation to a month specified for a taxation year where that

person

(

a) died before the specified month;

(

b) is at the beginning of the specified month a

person described in paragraph 149(1)(

a) or (

b) of the federal Act;

(

c) is confined to a prison or similar institution

for a period of at least 90 days that includes the first day of the specified month;

(

d) is a person in respect of whom a special

allowance under the Childrens Special

Allowances Act ( Canada )

is payable for the specified month.

(3) An eligible individual in relation to a month specified

for a taxation year who files a return of income for the taxation year is considered

to have paid during the specified month on account of his or her tax payable

under this Act for the taxation year an amount equal to 25% of the amount, if any,

calculated in accordance with the regulations.

(4) Notwithstanding subsections (3) and (6), if an

eligible individual is a shared-custody parent, within the meaning assigned by

section 122.6 of the federal Act, but with the words "qualified dependant"

in that

section having the meaning assigned by subsection (1), in respect of

one or more qualified dependants at the beginning of a month, the amount

considered by subsection (3) to have been paid during a specified month is

equal to the amount determined by the following formula:

1/2 (A +

B) where

the amount determined under subsection

(3), calculated without reference to this subsection; and

the amount determined under subsection

(3), calculated without reference to this subsection and subparagraph (b)(ii)

of the definition "eligible individual" in

section 122.6 of the

federal Act.

(5) Subsection (4) applies for amounts that are

considered to be paid during months after June 2011.

(6) Notwithstanding subsection (3), if an

individual is a qualified relation of another individual, in relation to a month

specified for a taxation year, only one of them is an eligible individual in

relation to the specified month and if both of them claim to be eligible

individuals, the individual that the Minister of National Revenue designates is

the eligible individual in relation to the specified month.

(7) Where a person considered to have paid an

amount under subsection (3) dies prior to the month specified, that persons

qualified relation who has filed a return of income for the taxation year is considered

to be the eligible individual for the purpose of subsection (3) for that

taxation year and the amount payable for the specified month shall be considered

to be an amount paid on account of the persons qualified relations tax

payable under this Act for the specified month.

(8) An individual shall notify the Minister of

National Revenue of the occurrence of any of the following events before the

end of the month following the month in which the event occurs

(

a) the individual ceases to be an eligible

individual;

(

b) a person becomes or ceases to be the

individuals qualified relation; and

(

c) a person ceases to be a qualified dependant of

the individual, otherwise than because of attaining the age of 19 years.

(9) For the purpose of this section, where, in a

taxation year, an individual becomes bankrupt, the individuals income for that

year shall include his or her income for the taxation year that begins on

January 1 of the calendar year that includes the date of bankruptcy.

(10) Subsection (11) applies in respect of an

eligible individual in relation to a particular month specified for a taxation

year, and each subsequent month specified for the taxation year, if

(

a) the amount considered by that subsection to

have been paid by the eligible individual during the particular month specified

for the taxation year is less than $10; and

(

b) it is reasonable to conclude that the amount considered

by that subsection to have been paid by the eligible individual during each

subsequent month specified for the taxation year will be less than $10.

(11) Where this subsection applies, the total of

the amounts that would otherwise be considered by subsection (3) to have been

paid on account of the eligible individuals tax payable under this Part for

the taxation year during the particular month specified for the taxation year,

and during each subsequent month specified for the taxation year, is considered

to have been paid by the eligible individual on account of his or her tax

payable under this Part for the taxation year during the particular specified

month for the taxation year, and the amount considered by subsection (3) to

have been paid by the eligible individual during those subsequent months specified

for the taxation year is considered, except for the purpose of this subsection,

not to have been paid to the extent that it is included in an amount considered

to have been paid by this subsection.

(12) For the purpose of this section, the months

specified for a taxation year are July and October of the immediately following

taxation year and January and April of the second immediately following

taxation year.

Section 35 of the Act is amended by deleting

the subsection reference "34(4)" wherever it occurs and substituting

the subsection reference "34(3)".

Section 36 of the Act is amended by deleting

the subsection reference "34(4)" and substituting the subsection reference

"34(3)".

5. Subsections 41(1) to (3) of the Act are

repealed and the following substituted:

Manufacturing and

processing profits deduction

(1) Where in a taxation year that ends before 2016 a portion of the taxable income

earned in the year in the province by a corporation is Canadian manufacturing

and processing profits of the corporation for the year, within the meaning

assigned by subsection 125.1(3) of the federal Act, there may be deducted from

the tax otherwise payable by the corporation under subsection 40(1) or

paragraph 40(3)(b), whichever applies, 9% of the amount, if any, by which those

manufacturing and processing profits earned in the year in the province by the

corporation exceed the amount, if any, upon which tax is payable under

paragraph 40(3)(

a) by the corporation for the year.

(1.1) Where in a taxation year that includes January

1, 2016, a portion of the taxable income earned in the year in the province by

a corporation is Canadian manufacturing and processing profits of the

corporation for the year, within the meaning assigned by subsection 125.1(3) of

the federal Act, there may be deducted from the tax otherwise payable by the

corporation under subsection 40(1) or paragraph 40(3)(b), whichever applies, the

proportion that the number of days in the taxation year before January 1, 2016

is of the number of days in the taxation year multiplied by 9% of the amount, if

any, by which those manufacturing and processing profits earned in the year in

the province by the corporation exceed the amount, if any, upon which tax is payable

under paragraph 40(3)(

a) by the corporation for the year.

(2) For the purpose of subsections (1) and (1.1),

the manufacturing and processing profits earned in a taxation year in the

province by a corporation are the Canadian manufacturing and processing profits

of the corporation for the year, within the meaning assigned by subsection

125.1(3) of the federal Act, multiplied by the proportion that its taxable

income earned in the year in the province bears to the total of all amounts

each of which is its taxable income earned in the year in a province determined

in accordance with federal regulations made for the purpose of the definition

"taxable income earned in the year in a province" in subsection

124(4) of the federal Act.

(3) Notwithstanding subsections (1), (1.1) and

(2), no deduction may be made under this

section unless the corporation has

engaged in manufacturing or processing in the taxation year from a permanent establishment

in the province.

6. Subsection 50(2) of the Act is amended by

deleting the subsection reference "34(4)" and substituting the

subsection reference "34(3)".

7. Paragraph 68(1)(c.1) of the Act is repealed and

the following substituted:

(c.1) respecting the calculation of the income

supplement for the purposes of

section 34;

Repeal

8. The Seniors'

Benefit Regulations, 2007 , Newfoundland

and Labrador Regulation 119/07, published

under the Income Tax Act, 2000 , is

repealed.

Commencement

(1) Section 1 comes into force on July 1,

(2) Sections 2 to 8 are considered to have come

into force on January 1, 2016.

Queen's Printer