Annual lists 2005 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995

Ottawa, December 19, 1996
1996-099

Transitional Relief Extended for Film Production Services, Mutual Fund Transactions

Related document:

• Proposals for Amendment.

Finance Minister Paul Martin today announced further transitional relief for film production services and mutual fund commission fee transactions. This will provide additional relief from measures proposed in respect of matchable expenditures announced in Finance Canada release 1996-082 (dated November 18, 1996). This additional extension is designed to facilitate those transactions that were at various stages of advancement on November 18, 1996.

The transitional rules will be extended to accommodate certain expenditures made before August 1997 in respect of films or video production services. As well, grandfathering will be extended to the financing of mutual fund selling commissions where those commissions have been incurred and funded before August 1997. The proposed coming-into-force rules are more fully described in the attached annex. A revised Notice of Ways and Means Motion reflecting these proposals will be tabled in the House for consideration by Parliament when the House resumes in early 1997.

___________________
For further information:

Annex

Proposals For Amendment

That the coming-into-force of proposed section 18.1 of the Income Tax Act be as follows:

1. Section 18.1 of the Income Tax Act applies to an expenditure made by a taxpayer or a partnership after November 17, 1996 other than, in respect of a particular right to receive production, such an expenditure made

• (a) before 1997 pursuant to an agreement in writing made by the taxpayer or the partnership before 1997 to acquire the particular right
  • (i) in return for paying selling commissions incurred before 1997 in connection with the distribution of shares of a mutual fund corporation or units of a mutual fund trust, or

    (ii) to render production services before 1997 for a film or video production,

  and for the purpose of applying this paragraph, the expenditure is considered to have been made no earlier than the time it is determined to have been made with reference to the Income Tax Act and only to the extent the services are rendered on or before that time

  (b) before August 1997 where

  • (i) the expenditure is made pursuant to an agreement in writing made by the taxpayer or the partnership before August 1997 to acquire the particular right in return for paying selling commissions incurred after 1996 and before August 1997 in connection with the distribution of shares of a mutual fund corporation or units of a mutual fund trust by an administrator of mutual funds,

    (ii) the particular right to receive production is identified in an advance income tax ruling request delivered to Revenue Canada before November 18, 1996,

    (iii) the total of all such expenditures made by any taxpayer or partnership in respect of all of the rights identified in the advance income tax ruling request does not exceed $30 million, and

    (iv) all tax shelter investments (as defined by section 143.2 of the Income Tax Act), that reasonably can be considered to relate to the expenditure, are acquired before August 1997,

  and for the purpose of applying this paragraph, the expenditure is considered to have been made no earlier than the time it is determined to have been made with reference to the Income Tax Act and only to the extent the services are rendered on or before that time,

  (c) before August 1997 where

  • (i) the expenditure is made pursuant to an agreement in writing made by the taxpayer or the partnership before August 1997 to acquire the particular right in return for paying selling commissions incurred after 1996 and before August 1997 in connection with the distribution of shares of a mutual fund corporation or units of a mutual fund trust by an administrator of mutual funds, other than by an administrator of mutual funds that is or is related to an administrator to which paragraph (b) applies in respect of commissions incurred in connection with the distribution of the shares or units,

    (ii) the total of all such expenditures made by any taxpayer or partnership to acquire particular rights in return for paying selling commissions in connection with the distribution of shares of the mutual fund corporation or units of the mutual fund trust by the mutual fund administrator or any other person that is related to the administrator does not exceed $10 million, and

    (iii) all tax shelter investments (as defined by section 143.2 of the Income Tax Act), that can reasonably be considered to relate to the expenditure, are acquired before August 1997,

  and for the purpose of applying this paragraph, the expenditure is considered to have been made no earlier than the time it is determined to have been made with reference to the Income Tax Act and only to the extent the services are rendered on or before that time,

  (d) before August 1997 pursuant to an agreement in writing made by the taxpayer or the partnership before August 1997 to acquire the particular right and to render production services before August 1997 for a film or video production where

  • (i) at least 75% of the expenditures made in respect of the film or video production by the taxpayer or partnership pertain to services performed in Canada by residents of Canada, and

    (ii) all tax shelter investments (as defined by section 143.2 of the Income Tax Act), that can reasonably be considered to relate to the expenditure, are acquired before August 1997,

  and for the purpose of applying this paragraph, the expenditure is considered to have been made no earlier than the time it is determined to have been made with reference to the Income Tax Act and only to the extent the services are rendered on or before that time,

  (e) before 1998 pursuant to an agreement in writing made by the taxpayer or the partnership before November 18, 1996 to acquire the particular right, and for this purpose where the expenditure relates to service obligations to be fulfilled by the taxpayer or partnership, the expenditure is considered to have been made no earlier than time it is determined to have been made with reference to the Income Tax Act and only to the extent the services are rendered on or before that time, or

  (f) before 1998 pursuant to the terms of a document that is a prospectus, preliminary prospectus or registration statement where

  (i) the document was filed before November 18, 1996 with a public authority in Canada pursuant to and in accordance with the securities legislation of Canada or of any province and, where required by law, accepted for filing by the public authority,

  • (ii) the particular right is identified in the document, and

    (iii) all the funds raised pursuant to the document were raised before 1997 and all tax shelter investments (as defined by section 143.2 of the Income Tax Act), that can reasonably be considered to relate to the expenditure, are acquired before 1997,

  and for the purpose of applying this paragraph, where an expenditure relates to service obligations to be fulfilled by the taxpayer or partnership, the expenditure is considered to have been made no earlier than the time it is determined to have been made with reference to the Income Tax Act and only to the extent the services are rendered on or before that time, or

  (g) before 1998 pursuant to the terms of an offering memorandum distributed as part of an offering of securities where

  • (i) the memorandum contained a complete or substantially complete description of the securities contemplated in the offering as well as the terms and conditions of the offering,

    (ii) the memorandum was distributed before November 18, 1996,

    (iii) solicitations in respect of the sale of the securities contemplated by the memorandum were made before November 18, 1996,

    (iv) the sale of the securities was substantially in accordance with the memorandum,

    (v) the particular right is identified in the document, and

    (vi) all the funds raised pursuant to the memorandum were raised before 1997 and all tax shelter investments (as defined by section 143.2 of Income Tax Act), that can reasonably be considered to the relate to the expenditure, are acquired before 1997

  and for the purpose of applying this paragraph, where an expenditure relates to service obligations to be fulfilled by the taxpayer or partnership, the expenditure is considered to have been made no earlier than the time it is determined to have been made reference to the Income Tax Act and only to the extent the services are rendered on or before that time,

  except that paragraphs (e), (f) and (g) apply to an expenditure only if:

  (h) there is no agreement or other arrangement under which the obligations of the taxpayer or the partnership with respect to the expenditure can be changed, reduced or waived if there is a change to the Income Tax Act or if there is an adverse assessment under the Act,

  (i) where the expenditure is associated with one or more tax shelters sold or offered for sale at a time and in circumstances in which section 237.1 of the Income Tax Act requires an identification number to be obtained, an identification number was obtained before that time, and

  (j) in the case of an expenditure made pursuant to a document described in paragraph (f) or (g) including such an expenditure to which paragraph (e) applies, a portion of the securities authorised to be sold in 1996 pursuant to the document were in 1996 and before November 18, 1996 sold to, or subscribed for by, a person who is not

  • (i) a promoter, or an agent of the promoter, of the securities,

    (ii) the grantor of the right to receive production to which the expenditure relates,

    (iii) a broker or dealer in securities, or

    (iv) a person who does not deal at arm's length with a person referred to in subparagraph (i) or (ii).