Definitions and interpretation

1  (1)  In this Act:

"affiliate" means a corporation that is affiliated with another corporation within the meaning of subsection (3) (a);

"captive insurance company" means an insurance company registered under the Insurance (Captive Company) Act;

"claimant" means a person making a claim for payment of a tax refund under section 5;

"commissioner" means the Commissioner of Income Tax appointed under section 75 of the Income Tax Act;

"dealing in securities" means acting

(a) as principal in making or offering to make with a nonresident an agreement for acquiring, disposing of, subscribing for or underwriting securities,

(b) as agent for a nonresident in making or offering to make with a resident or another nonresident an agreement for acquiring, disposing of, subscribing for or underwriting securities, or

(c) as agent for a resident in making or offering to make with a nonresident an agreement for acquiring, disposing of, subscribing for or underwriting securities;

"eligible employee" means an individual, other than a specialist,

(a) who is designated by a registered financial institution,

(b) who works exclusively for the registered financial institution under a contract of services, performing duties that are primarily devoted to its international financial business, and

(c) who meets any other prescribed requirements,

but does not include an employee of a captive insurance company or of an export financing company;

"export financing company" means a company whose only business is making loans to non-resident buyers of Canadian exports of goods or services, or both;

"factoring" means buying, outright and without recourse from a resident or nonresident, accounts that are receivable from a nonresident;

"financial institution" means

(a) a bank, trust company, investment dealer, insurer or export financing company,

(b) a corporation licensed under the International Financial Business Act, or

(c) a corporation that comes within a prescribed class of corporation;

"financial leasing" means granting to a nonresident for use outside Canada a lease of equipment, machinery or other personal property with the object of receiving in return from the nonresident payments that recoup to the lessor its entire investment in the equipment, machinery or other personal property;

"insurer" means an insurance company or a captive insurance company;

"international financial activity" means

(a) accepting deposits in any currency from nonresidents or from a person carrying on a business that comes within a prescribed class of business,

(b) making loans in any currency to nonresidents or to a person carrying on a business that comes within a prescribed class of business,

(c) for or on behalf of nonresidents

(i)  negotiating, confirming, amending, issuing and accepting documentary letters of credit and standby letters of credit,

(ii)  advising of the issue, the terms and any amendments to the terms of documentary letters of credit and standby letters of credit,

(iii)  handling documentary collections, or

(iv)  financing or refinancing documentary letters of credit and standby letters of credit,

if the ultimate obligation of payment rests with a nonresident,

(d) providing fiduciary services,

(e) dealing in securities other than securities of the capital stock of the financial institution dealing in the securities or of the capital stock of an affiliate of the financial institution,

(f) insuring or reinsuring prescribed risks

(i)  of, or relating to, nonresidents, and

(ii)  relating to property situated or events occurring outside Canada,

(g) acting as a financial adviser to nonresidents,

(h) dealing in foreign exchange for or on behalf of nonresidents,

(i) managing investments for or on behalf of nonresidents,

(j) managing, for or on behalf of residents, investments in securities issued by a nonresident,

(k) preparing stock market or other financial research for the exclusive use of nonresidents,

(l) factoring,

(m) financial leasing, and

(n) any activity designated as an international financial activity by regulation of the Lieutenant Governor in Council;

"international financial business" means a business or part of a business

(a) that is carried on by a financial institution,

(b) all the activities of which are international financial activities specified under section 3 (3) or (4), and

(c) the management of the international financial activities of which is conducted in an international financial office;

"international financial office" means a branch or office, within the Greater Vancouver Regional District, in respect of which a financial institution is registered;

"investment dealer" means a person registered under the Securities Act as a dealer or underwriter;

"nonresident" means

(a) a person, or

(b) a trust

that is not resident in Canada under the Income Tax Act (Canada), but does not include a person who is a nonresident under that Act only because of section 33.1 (1) of that Act;

"nonresident broker" means a nonresident who

(a) is licensed or registered under the laws of a foreign country or a political division of a foreign country to trade in securities as principal or agent,

(b) is not licensed or registered under the Securities Act or a similar law of another province to carry on any activity in a province, and

(c) is not related within the meaning of section 251 of the Income Tax Act (Canada) to a corporation that is licensed or registered under the Securities Act or a similar law of another province to carry on any activity in a province;

"providing fiduciary services" means acting

(a) as trustee of a trust that, at all relevant times, is a nonresident,

(b) as an executor or administrator of the estate of a nonresident, all the beneficiaries of which are at all relevant times nonresidents,

(c) as guardian of the estate of a minor who is a nonresident, or

(d) as committee of the estate of a mentally incompetent person who is a nonresident;

"registered" means registered under section 3;

"resident" means a person other than a nonresident;

"return of claim" means a return described in section 8 (3);

"security" means a security as defined in the Securities Act;

"specialist" means an individual who

(a) is designated by a registered financial institution,

(b) is a specialist in the field of international financial activities,

(c) was a nonresident immediately before entering into a contract of services with the registered financial institution or before commencing the duties of the individual's employment with the registered financial institution,

(d) from the time the individual commences employment with the registered financial institution works exclusively for it performing duties that are primarily devoted to its international financial business, and

(e) meets any other prescribed requirements;

"subsidiary" means a corporation that, in respect of another corporation, is controlled, directly or indirectly, by the other corporation;

"superintendent" means the person designated by the minister to exercise the powers and perform the duties of the superintendent under this Act, and, in relation to a power or duty that the Lieutenant Governor in Council has delegated to another person under section 18, includes that other person;

"tax" means the tax payable under the Income Tax Act.

(2)  The definitions and interpretation provisions in or made by regulation under the Income Tax Act apply in this Act except where they vary from the definitions or interpretation provisions in this Act.

(3)  The following rules apply for the purposes of this Act:

(a) one corporation is affiliated with another corporation if

(i)  one of them is the subsidiary of the other, or both are subsidiaries of the same corporation,

(ii)  each of them is controlled by the same person or the same group of persons, or

(iii)  one of them is controlled by one person and the other is controlled by one or more partners of that person, other than a limited partner, or by one or more related persons within the meaning of sections 251 (2) to (6) and 252 of the Income Tax Act (Canada);

(b) an affiliate of a corporation is affiliated with all other corporations with which the corporation is affiliated;

(c) a corporation is controlled by a person if the votes carried by shares held by or for the benefit of the person, other than by way of security only, are sufficient to elect a majority of the directors of the corporation;

(d) a person is beneficially interested in a trust if the person has a right to receive any of the income or capital of the trust either directly from the trust or indirectly through one or more other trusts;

(e) a trust is deemed to be a person;

(f) an activity carried on for, with or on behalf of a nonresident in respect of a fixed place of business in Canada of the nonresident is deemed to have been carried on for, with or on behalf of a resident;

(g) for the purposes of paragraphs (a) and (c) of the definition of "dealing in securities", if a financial institution is acting as principal or agent in making or offering to make an agreement referred to in those paragraphs with a nonresident broker acting as agent for another person, the nonresident broker is deemed to be the nonresident.

 Application for registration

2  (1)  A financial institution that meets all the following requirements may apply to the superintendent for registration of the designated branch or office of the financial institution as an international financial office:

(a) the financial institution must be chartered, incorporated, licensed or registered by or under a law of Canada or a province and must be authorized or permitted by or under that law or another law to carry on one or more international financial activities;

(b) the financial institution must carry on or propose to carry on those international financial activities from a designated branch or office within the Greater Vancouver Regional District;

(b.1) the financial institution must be a member of the International Financial Centre Society of Vancouver;

(c) the financial institution meets any other prescribed requirements.

(2)  An application for registration must

(a) contain the prescribed information and verifications, and

(b) be accompanied by the prescribed documents and fees.

(3)  The superintendent may

(a) request any additional information or documents, or

(b) make any inquiries,

the superintendent considers necessary for the evaluation of the application.

(4)  After making inquiries and evaluating the application, the superintendent must forward the application to the minister and must advise the minister as to whether or not

(a) the applicant meets the requirements of subsection (1), and

(b) granting the registration would be contrary to the public interest.

 Registration

3  (1)  After considering the application and the advice of the superintendent, the minister may grant registration of a designated branch or office of a financial institution that applies under section 2 if the minister is satisfied that

(a) the applicant meets the requirements of section 2 (1), and

(b) granting the registration is not contrary to the public interest.

(2)  The minister may grant registration in respect of one or more international financial activities carried on, or proposed to be carried on, in the designated branch or office of the financial institution.

(3)  On being notified by the minister that registration is granted, the superintendent must register the designated branch or office of the financial institution and must serve a notice of registration on the financial institution that specifies the international financial activity or activities in respect of which the designated branch or office is registered.

(4)  On application to the superintendent by a registered financial institution, the minister may, by serving an amended notice of registration on the financial institution, delete an activity specified in its notice of registration or specify any additional international financial activities that it carries on or proposes to carry on in its international financial office.

 Society membership

3.1  (1)  It is a requirement for the renewal, reinstatement or amendment of the registration under this Act of a financial institution that the financial institution be a member of the International Financial Centre Society of Vancouver.

(2)  A registration under the Act of a financial institution whose registration is in effect on April 1, 1998 expires at the end of the current taxation year of the financial institution, unless the financial institution is a member of the International Financial Centre Society of Vancouver.

 International financial office and books of account

4  The following are conditions of registration:

(a) a financial institution that does not have a branch or office in the Greater Vancouver Regional District on the date of registration will, within 90 days after that date, establish and then maintain throughout the registration period an international financial office there;

(b) a financial institution will, throughout the registration period, maintain at its international financial office separate books of account in respect of its international financial business as though that business were carried on by a subsidiary of the financial institution;

(c) the books of account referred to in paragraph (b) will

(i)  be in a form and contain information that will enable the amount of a tax refund required to be paid under this Act to be determined, and

(ii)  be maintained in a way that will enable financial statements and other financial reports required under this Act to be prepared in accordance with generally accepted accounting principles;

(d) a financial institution will have its financial statements audited in accordance with the regulations.

 Tax refund

5  (1)  Subject to sections 6, 7, 8 (4) and 16 and the regulations, the minister must pay out of the consolidated revenue fund a tax refund in an amount determined in accordance with the regulations

(a) to a registered financial institution in respect of tax paid by it for a taxation year in respect of income for that year attributable to its international financial business,

(b) to a specialist in respect of tax paid by the specialist for a taxation year on income earned by the specialist from employment as a specialist, and

(c) to an eligible employee in respect of tax paid by the eligible employee for a taxation year on a prescribed proportion of the income earned by the eligible employee from employment as an eligible employee.

(2)  Despite subsection (1) (a), if the regulations permit the amount of a tax refund to a registered financial institution to be determined on an income averaging basis, a financial institution that is registered throughout a prescribed averaging period may elect, in accordance with the regulations, to have a tax refund claimed by it for the last taxation year of the prescribed averaging period determined on that basis.

(3)  This section applies in respect of a taxation year that commences after October 31, 1988.

(4)  A registered financial institution may not designate more than 5 specialists in respect of a taxation year.

 Dealing at arm's length

6  (1)  No amount is payable under section 5 to a registered financial institution in respect of an international financial activity carried on by it for, with or on behalf of a person unless the financial institution deals at arm's length with the person.

(2)  Subsection (1) does not apply if the person for, with or on behalf of whom the financial institution carries on the international financial activity is acting for a nonresident with whom that person deals at arm's length.

(3)  For the purposes of subsection (1),

(a) sections 251 and 252 of the Income Tax Act (Canada) apply,

(b) if a partner in a partnership and a person do not deal with each other at arm's length, the partnership and the person are deemed not to deal with each other at arm's length, and

(c) a partner in a partnership is deemed not to deal at arm's length with the partnership or with another partner in the partnership.

(4)  Subsection (1) does not apply to a captive insurance company.

 Declarations, inquiries and change of residence

7  (1)  No amount is payable under section 5 to a registered financial institution in respect of an international financial activity carried on by it for, with or on behalf of a person unless, before carrying on the activity, the financial institution

(a) receives a declaration from that person stating that the person is a nonresident, and

(b) makes reasonable inquiries and has no reasonable grounds to believe the person is a resident at that time.

(2)  Subsection (1) does not apply in respect of an activity that

(a) comes within paragraph (a) or (b) of the definition of "international financial activity" and is carried on by a registered financial institution with a person referred to in that paragraph,

(b) comes within paragraph (j) of the definition of "international financial activity",

(c) comes within paragraph (c) of the definition of "dealing in securities", or

(d) comes within paragraph (a) of the definition of "dealing in securities" and is carried on for, with or on behalf of a nonresident broker.

(3)  On application by a registered financial institution, the superintendent may exempt the financial institution from the requirement of subsection (1) (a) in respect of a specified international financial activity or a specified class of international financial activity, if the superintendent is satisfied that the financial institution

(a) will not be carrying on the exempted international financial activity or class of international financial activity for, with or on behalf of residents, or

(b) would, if it were required to comply with subsection (1) (a) in respect of the exempted international financial activity or class of international financial activity, be unable to carry on a permitted international financial activity with a nonresident or with nonresidents.

(4)  If a registered financial institution

(a) has received a declaration under subsection (1) (a), unless exempted under subsection (3), and

(b) has made reasonable inquiries and has no reasonable grounds to believe the person referred to in subsection (1) is a resident,

the person referred to in subsection (1) is deemed for the purposes of section 5 to have been a nonresident at the time the financial institution began to carry on the activity referred to in subsection (1) for, with or on behalf of that person.

(5)  If a registered financial institution has reasonable grounds to believe that a person, deemed under subsection (4) to have been a nonresident at the time the financial institution began to carry on an activity for, with or on behalf of that person, has in fact ceased to be a nonresident,

(a) the financial institution must immediately cease to account for any activity it carries on for, with or on behalf of that person as an international financial activity, and

(b) no amount is payable under section 5 to the financial institution in respect of any activity carried on for, with or on behalf of that person after the date on which the financial institution has reasonable grounds for that belief.

 Return of claim

8  (1)  A claimant must,

(a) in respect of each taxation year, file with the commissioner within 6 months after the end of the taxation year, or at a later time the commissioner may allow, a return of claim, and

(b) on demand from the commissioner, served on the claimant, file with the commissioner within the time specified in the demand a return of claim for the taxation year specified in the demand.

(2)  A registered financial institution must set out in a return of claim in respect of a taxation year the income of the financial institution for that year that is attributable to its international financial business.

(3)  Subject to the requirements of this Act and the regulations, a return of claim must be in the form and must contain the information required by the commissioner.

(4)  Until a return of claim in respect of a taxation year is filed by a claimant under subsection (1) (a) or (b), the minister is not liable to pay for that year any amount to the claimant under section 5.

 No set off

9  A claimant must not set off any amount payable to the claimant under section 5 against the amount of tax payable by the claimant.

 Amended returns of claim

10  (1)  A claimant must file an amended return of claim with the commissioner if the tax reported by the claimant in a return of claim filed under section 8 for a taxation year is assessed or reassessed or an additional assessment is made under the Income Tax Act so that the tax is different from that reported on the return of claim.

(2)  An amended return of claim required under subsection (1) must be filed with the commissioner within 90 days after the date of issue of the notice of the assessment, reassessment or additional assessment and, once filed, the amended return of claim is deemed to have been filed under section 8.

 Determination of tax refund

11  (1)  Within 60 days after the receipt of a return of claim filed under section 8, the commissioner must examine the return of claim and determine the amount of the tax refund, if any, that is payable.

(2)  After examining a return of claim, the commissioner must promptly serve on the claimant a notice as to whether or not a refund is payable and the amount of refund, if any.

(3)  The commissioner may redetermine the amount of a refund

(a) at any time, if the claimant has committed an offence under section 22 (1) (a), or

(b) in any other case, within 3 years after the later of

(i)  the date of service of a notice on the claimant under subsection (2), or

(ii)  the date of mailing to the claimant of a notice of assessment, reassessment, or additional assessment of tax under the Income Tax Act.

(4)  In determining or redetermining the amount of a tax refund, the commissioner is not bound by a return of claim or information supplied by or on behalf of a claimant.

(5)  On demand from the commissioner, served on a claimant, the claimant must provide to the commissioner, within the time specified in the demand, any information the commissioner requests to facilitate the determination of the claimant's tax refund.

(6)  A determination made by the commissioner under this section must not be varied or vacated by a court because of an irregularity, informality or omission on the part of a person in the observation of a directory provision up to the date of service of the notice of refund.

 Payment of tax refund

12  (1)  Within 60 days after service of the notice under section 11 (2), the minister must pay the tax refund to the claimant, whether or not an appeal from the commissioner's determination is outstanding.

(2)  Subsections (3) and (4) apply if, by

(a) a determination of the commissioner under section 11,

(b) a decision of the minister under section 14, or

(c) a decision of a court,

it is determined that the tax refund payable in respect of a taxation year is less than the tax refund paid for the year by the minister.

(3)  On demand, a claimant to whom subsection (2) applies must, whether or not an appeal is outstanding,

(a) pay to the minister the difference between the amounts referred to in subsection (2), together with interest on the difference at the rate prescribed under the Financial Administration Act, or

(b) if the minister directs, set it off against any debt due by the government to the claimant.

(4)  If the minister is liable to pay a tax refund to the claimant, the minister may apply the difference between the amounts referred to in subsection (2) in respect of the claimant, plus any interest on the difference payable by the claimant, to that liability and must notify the claimant of that action.

(5)  The application of an amount by the minister under subsection (3) or (4) is, to the extent of the amount, a good and sufficient discharge of the original liability of the claimant to the minister.

 Recovery of tax refund

13  The person to whom the tax refund has been paid is liable to pay to the government the amount of the refund if

(a) the tax refund has been paid under section 5 on the basis of false or misleading information supplied by a director, officer, specialist, eligible employee or other employee of a registered financial institution, and

(b) at the time the information was supplied, the person supplying it knew, or ought reasonably to have known, that the information was false or misleading.

 Appeal to the minister

14  (1)  A determination of the commissioner under section 11 may be appealed to the minister.

(2)  Written notice of the appeal must be served on the minister within 90 days after the date on the notice under section 11 (2).

(3)  The appellant must set out in the notice of appeal a statement of all material facts and the reasons in support of the appeal.

(4)  On receipt of all relevant information from the commissioner and the notice of appeal, the minister must consider the matter and confirm, reverse or vary the commissioner's determination and must promptly notify the appellant in writing of the minister's decision.

 Suspension or cancellation of registration

15  The minister may suspend or cancel the registration of a financial institution if the minister is satisfied that the financial institution has, with respect to its international financial business,

(a) supplied false or misleading information or records to the superintendent or commissioner,

(b) failed to supply information or records when they are required under this Act or the regulations,

(c) breached a condition of registration,

(d) conducted itself in a manner that is contrary to the public interest, or

(e) conducted itself in a manner that is contrary to the spirit and intent of this Act, whether or not it has contravened this Act or the regulations.

 Effect of suspension or cancellation

16  (1)  If the registration of a financial institution is suspended under section 15,

(a) no amount is payable under section 5 (1) (a) to the financial institution in respect of tax paid by it in respect of an international financial activity carried on from its international financial office during the period of suspension, and,

(b) no amount is payable under section 5 (1) (b) or (c) to a specialist or an eligible employee of the financial institution in respect of tax paid by the specialist or eligible employee for a taxation year or part of a taxation year during which the licence is suspended.

(2)  If the registration of a financial institution is cancelled under section 15,

(a) no amount is payable under section 5 (1) (a) to the financial institution in respect of tax paid by it in respect of an international financial activity carried on from its international financial office after notice of cancellation is served on the financial institution, and

(b) no amount is payable under section 5 (1) (b) or (c) to a specialist or an eligible employee of the financial institution in respect of tax paid by the specialist or eligible employee for a taxation year or part of a taxation year after notice of cancellation is served on the financial institution.

 Confidentiality

17  (1)  A person who has custody or control over information or records under this Act must not disclose the information or records to any other person except

(a) in the course of administering or enforcing this Act,

(b) in court proceedings relating to this Act, or

(c) as provided in subsection (2).

(2)  The superintendent may disclose the name of a registered financial institution to any person.

 Delegation of powers

18  (1)  The Lieutenant Governor in Council may, by regulation, delegate any of the superintendent's powers and duties under sections 2 and 3 and the regulations.

(2)  A delegation under subsection (1) may be to a person designated by name or by position.

 Service of notices

19  (1)  If service of a notice or other document on a person is required or authorized under this Act or the regulations, the notice or document is conclusively deemed to have been served if served on the person or sent by registered mail to the last known address of the person according to the records of the superintendent.

(2)  If service of a notice or other document on the minister is required or authorized under this Act or the regulations, the notice or document is conclusively deemed to have been served if delivered to the office of the deputy minister.

(3)  If service is by registered mail, the notice or document is conclusively deemed to be served 14 days after its deposit in a post office as defined by the Canada Post Corporation Act (Canada).

 Appeal to court

20  (1)  A decision of the minister under section 14 may be appealed to the Supreme Court by way of an originating application.

(2)  The Rules of Court relating to originating applications apply, but Rule 49 does not apply.

(3)  An appeal must be commenced by a petition filed in the court registry within 60 days after the date on the minister's notification of decision.

(4)  Within 14 days after the date of filing of the petition under subsection (3), it must be served on the Crown in accordance with section 8 of the Crown Proceeding Act, and the Crown must be designated "Her Majesty the Queen in right of the Province of British Columbia".

(5)  The court may dismiss the appeal, allow the appeal, vary the decision from which the appeal is made or refer the decision back to the minister for reconsideration.

(6)  An appeal lies from a decision of the court under this section to the Court of Appeal with leave of a justice of the Court of Appeal.

 Inspection of records

21  (1)  For any purposes related to the administration or enforcement of this Act or the regulations, the commissioner may enter during normal business hours any business premises where the records of a registered financial institution are kept and may inspect, audit and examine those records.

(2)  On the request of the commissioner, a person occupying premises entered under subsection (1) must produce in the manner required by the commissioner any records requested by the commissioner.

 Offences

22  (1)  A person commits an offence if the person

(a) makes a statement in any return, information or record required to be submitted, provided or filed under this Act or the regulations or in a book of account or other record required to be maintained under this Act or the regulations that, at the time and in light of the circumstances under which the statement is made,

(i)  is false or misleading with respect to a material fact, or

(ii)  omits a statement of material fact, the omission of which makes the statement false or misleading, or

(b) contravenes section 17 or 21 (2).

(2)  If a corporation commits an offence under subsection (1) (a), every officer, director, employee or agent of the corporation who directed, authorized, assented to, acquiesced in or participated in the commission of the offence also commits the offence.

(3)  No person commits an offence under subsection (1) (a) if the person did not know that the statement was false or misleading and, by the exercise of reasonable diligence, could not have known that the statement was false or misleading.

(4)  A corporation convicted of an offence under subsection (1) (a) is liable to a fine not greater than $100 000.

(5)  An individual convicted of an offence under subsection (1) (a) or (2) is liable either to a fine not greater than $100 000 or to imprisonment for not more than 5 years less one day.

(6)  A person convicted of an offence under subsection (1) (b) is liable to a fine not greater than $2 000.

(7)  Section 5 of the Offence Act does not apply to this Act or to the regulations.

 Power to make regulations

23  (1)  The Lieutenant Governor in Council may make regulations referred to in section 41 of the Interpretation Act.

(2)  Without limiting subsection (1), the Lieutenant Governor in Council may make regulations as follows:

(a) respecting

(i)  the expiry of registrations, and

(ii)  requirements for the renewal, reinstatement or amendment of registrations and the circumstances in which the minister may refuse to grant registration or to renew, reinstate or amend a registration;

(b) respecting

(i)  the maintenance by registered financial institutions of books, accounts and other records pertaining to its international financial business,

(ii)  the submitting by registered financial institutions of financial statements, or other records to the superintendent or the commissioner, and

(iii)  the auditing of financial statements;

(c) respecting

(i)  the maximum amount of shareholders' equity a registered financial institution may attribute to its international financial business,

(ii)  the manner in which business profits of a registered financial institution may be attributed by it to its international financial business,

(iii)  deduction of expenses incurred by a registered financial institution in respect of its international financial business, and

(iv)  any other matter of accounting;

(d) for the purpose of

(i)  allowing a registered financial institution to elect, in prescribed circumstances, to repay all or part of any tax refund,

(ii)  determining the amount to be repaid by a registered financial institution that makes an election referred to in subparagraph (i), and

(iii)  determining or redetermining the amount of a tax refund payable to a registered financial institution in respect of a taxation year subsequent to the taxation year or years in respect of which it made an election referred to in subparagraph (i);

(e) defining any word or expression used in this Act and not defined in it;

(f) for any purpose for which regulations are contemplated by this Act.

(3)  A regulation made under subsection (1) or (2) may

(a) be made applicable to one or more classes of registered financial institutions, applicants or other persons, and

(b) provide for different requirements or fees for different classes of registered financial institutions, applicants or other persons.