O. Reg. 194/00: GENERAL

 

ONTARIO REGULATION 194/00

made under the

Corporations Tax Act

Made: March 21, 2000
Filed: March 23, 2000

Amending Reg. 183 of R.R.O. 1990

(General)

Note: Since the end of 1998, Regulation 183 has been amended by Ontario Regulations 76/99, 419/99, 449/99 and 558/99.  Previous amendments are listed in the Table of Regulations in the Statutes of Ontario, 1998.

1. (1) Paragraphs 7 and 8 of subsection 703 (2) of Regulation 183 of the Revised Regulations of Ontario, 1990 are revoked and the following substituted: 

7. Associates Financial Services of Canada Ltd.  This applies for taxation years ending after March 1, 1998.

8. Associates Mortgage Corporation.  This applies for taxation years ending after March 1, 1998.

(2) Subsection 703 (2) of the Regulation is amended by adding the following paragraphs:

22. Superior Acceptance Corporation Limited.  This applies for taxation years ending before January 1, 1999.

23. Superior Credit Corporation Limited.  This applies for taxation years ending before January 1, 1999.

2. Part IX of the Regulation is amended by adding the following section:

906. (1) This section applies with respect to the Ontario interactive digital media tax credit established by section 43.11 of the Act of a qualifying corporation for a taxation year.

(2) For the purposes of this section and section 43.11 of the Act,

“interactive digital media product” means a combination of one or more application files and one or more data files, all in a digital format, that are integrated and are intended to be operated together and that have the following characteristics when they are being operated:

1. Their primary purpose is to educate, inform or entertain the user.

2. They achieve their primary purpose by presenting information in at least two of the following forms:

i. text,

ii. sound,

iii. images.

3. They are intended to be used by individuals.

4. By interacting with them, the user can choose what information is to be presented and the form and sequence in which it is to be presented.

(3) A combination of application files and data files that is developed primarily for use as system software does not constitute an interactive digital media product.

(4) For the purposes of the definition of “eligible product” in subsection 43.11 (15) of the Act, the following are the prescribed conditions that must be satisfied for a product to be an eligible product of the qualifying corporation:

1. The product is an interactive digital media product.

2. All or substantially all of the product was developed in Ontario by the qualifying corporation.

3. The product was developed for commercial exploitation by the qualifying corporation.

4. The product is not used primarily for interpersonal communication.

5. The product is not used primarily to present or promote the qualifying corporation.

6. The product is not used primarily to present, promote or sell the products or services of the qualifying corporation.

(5) For the purposes of the definition of “Ontario labour expenditure” in subsection 43.11 (15) of the Act, the amount of the Ontario labour expenditure of the qualifying corporation incurred in a taxation year with respect to an eligible product is the sum of,

(a) the qualifying wage amount as described in subsection (6) of the qualifying corporation for the taxation year with respect to the eligible product; and

(b) 50 per cent of the qualifying remuneration amount as described in subsection (7) of the qualifying corporation for the taxation year with respect to the eligible product.

(6) Subject to subsection (8), the qualifying wage amount of the qualifying corporation for a taxation year with respect to the eligible product is the amount incurred by the qualifying corporation during the taxation year and after June 30, 1998 on account of salaries or wages of its employees.

(7) Subject to subsection (8), the qualifying remuneration amount of the qualifying corporation for a taxation year with respect to the eligible product is the amount incurred during the taxation year and after May 4, 1999 by the qualifying corporation on account of remuneration, which is paid to any of the following persons or entities in the circumstances that are described:

1. An individual who is not an employee of the corporation and who deals at arm’s length with the qualifying corporation, if the expenditure is attributable to services personally rendered by the individual.

2. An individual described in paragraph 1 for services rendered by the individual’s employees, if the expenditure does not exceed the salaries or wages of those employees for personally rendering those services.

3. A taxable Canadian corporation for services rendered person–ally by an individual,

i. if all of the issued and outstanding shares of the capital stock of the taxable Canadian corporation (other than directors’ qualifying shares) are owned by the individual,

ii. if the individual deals at arm’s length with the qualifying corporation, and

iii. if the activities of the taxable Canadian corporation consist principally of the provision of the individual’s services.

4. A taxable Canadian corporation that deals at arm’s length with the qualifying corporation for services rendered by employees of the taxable Canadian corporation, if the expenditure does not exceed the salaries or wages of those employees for personally rendering those services.

5. An eligible partnership described in subsection (9),

i. for services rendered personally by a member of the eligible partnership, or

ii. for services rendered personally by employees of the eligible partnership, if the expenditure does not exceed the salaries or wages of those employees for personally rendering those services.

(8) An expenditure is not to be included in the qualifying wage amount or qualifying remuneration amount of the qualifying corporation for a taxation year with respect to the eligible product unless it meets all of the following conditions:

1. The expenditure is directly attributable to the development of the eligible product.

2. The expenditure is included in the cost or, in the case of depreciable property, the capital cost of the eligible product.

3. The expenditure is paid no later than 60 days after the end of the taxation year.

4. The expenditure was incurred for services personally rendered by an individual who was subject to tax under section 2 of the Income Tax Act (by virtue of being an individual described in clause 2 (a) of that Act) for the calendar year before the calendar year in which he or she rendered the services.

5. In the case of the qualifying wage amount, the expenditure is paid to an employee of the qualifying corporation who reported to a permanent establishment of the qualifying corporation in Ontario at which the eligible product was developed.

6. In the case of the qualifying remuneration amount, the expenditure is paid for services rendered at a permanent establishment in Ontario of the qualifying corporation or of a person or entity described in subsection (7).

7. The expenditure is not an amount,

i. for which the qualifying corporation makes a claim under section 43.5, 43.8 or 43.10 of the Act, or

ii. incurred by the corporation in carrying out activities that constitute scientific research and experimental development for the purposes of paragraph 37 (1) (a) of the Income Tax Act (Canada) or subparagraph 37 (1) (b) (i) of that Act.

(9) For the purposes of paragraph 5 of subsection (7), an eligible partnership is a partnership carrying on business in Canada whose members are all individuals.  However, a partnership is not an eligible partnership in relation to a qualifying corporation if more than 50 per cent of the income of the partnership is allocable (or would be allocable, if it had income) to one or more members,

(a) who directly or indirectly control the qualifying corporation; or

(b) who are related to one or more persons who directly or indirectly control the qualifying corporation.

3. (1) The definition of “Ontario labour expenditure” in subsection 1201 (1) of the Regulation is revoked.

(2) Section 1201 of the Regulation is amended by adding the following subsections:

(3) For the purposes of the definition of “Ontario labour expenditure” in subsection 43.8 (17) of the Act, the amount of the Ontario labour expenditure of the qualifying corporation for a taxation year with respect to an eligible production is the sum of,

(a) the qualifying wage amount as described in subsection (4) of the qualifying corporation for the taxation year with respect to the eligible production; and

(b) 50 per cent of the qualifying remuneration amount of the corporation as described in subsection (5) of the qualifying corporation for the taxation year with respect to the eligible production.

(4) Subject to subsection (6), the qualifying wage amount of the qualifying corporation for a taxation year with respect to the eligible production is the amount incurred by it during the taxation year and after June 30, 1997 on account of salaries or wages that are directly attributable to eligible computer animation and special effects activities carried out by the qualifying corporation in Ontario for the eligible production.

(5) Subject to subsection (6), the qualifying remuneration amount of the qualifying corporation for a taxation year with respect to the eligible production is the amount incurred during the taxation year and after May 4, 1999 that is directly attributable to eligible computer animation and special effects activities undertaken for the eligible production on behalf of the qualifying corporation, which is paid to anyof the following persons or entities in the circumstances that are described:

1. An individual who is not an employee of the corporation and who deals at arm’s length with the qualifying corporation, if the expenditure is attributable to activities personally undertaken by the individual.

2. An individual described in paragraph 1 for activities undertaken by the individual’s employees, if the expenditure does not exceed the salaries and wages of those employees for person–ally undertaking those activities.

3. An eligible partnership described in subsection (7),

i. for activities personally undertaken by a member of the eligible partnership, or

ii. for activities personally undertaken by employees of the eligible partnership, if the expenditure does not exceed the salaries and wages of those employees for personally undertaking those activities.

(6) An expenditure is not to be included in the qualifying wage amount or qualifying remuneration amount of the qualifying corporation for a taxation year with respect to the eligible production unless it meets all of the following conditions:

1. The expenditure is paid by the qualifying corporation no later than 60 days after the end of the taxation year.

2. The expenditure was incurred for activities personally undertaken by an individual who was subject to tax under section 2 of the Income Tax Act (by virtue of being an individual described in clause 2 (a) of that Act) for the calendar year before the calendar year in which he or she undertook the activities.

3. In the case of the qualifying wage amount, the expenditure is paid to an employee of the qualifying corporation who reported to a permanent establishment of the qualifying corporation in Ontario where the eligible computer animation and special effects activities were undertaken for the eligible production.

4. In the case of the qualifying remuneration amount, the expenditure is paid for activities undertaken at a permanent establishment in Ontario of the qualifying corporation or of a person or entity described in subsection (5).

(7) For the purposes of paragraph 3 of subsection (5), an eligible partnership is a partnership carrying on business in Canada whose members are all individuals.  However, a partnership is not an eligible partnership in relation to a qualifying corporation if more than 50 per cent of the income of the partnership is allocable (or would be allocable, if it had income) to one or more members,

(a) who directly or indirectly control the qualifying corporation; or

(b) who are related to one or more persons who directly or indirectly control the qualifying corporation.

4. (1) Subsection 1 (2) shall be deemed to have come into force on May 7, 1997.

(2) Subsection 1 (1) shall be deemed to have come into force on March 2, 1998.

(3) Section 2 shall be deemed to have come into force on July 1, 1998.

(4) Section 3 shall be deemed to have come into force on May 5, 1999.