Canada: The 2012 Federal Budget

Last Updated: April 2 2012

Posted by Kim G C Moody CA, TEP, Dale Franko CA, CPA (IL, USA), Jeff Hlynski CA, CPA (IL, USA), CFP, TEP and Riaz S. Mohamed CA in Special announcements on Friday, 30 March 2012

On March 29, 2012, The Honourable Jim Flaherty, Minister of Finance released the 2012 Federal Budget. This blog discusses some of the more important tax proposals that will affect our clients and friends. Our blog of February 21, 2012 had some predictions as to what the Federal Budget would contain and certainly some of our predictions have come true as highlighted below.

1. Tax Rate Changes

There are no tax rate increases or decreases proposed in Budget 2012.

2. Improvements to the Eligible Dividend System

This proposal is a welcome surprise!

Budget 2012 proposes to improve the ability for a company to designate a dividend as an eligible dividend. As discussed in our May 7, 2009 blog, the current law is very strict both in terms of the method and the timing of how eligible dividends are designated as such. Budget 2012 proposes a method which will enable split dividend designations and late designations to occur. Currently, if a Canadian Controlled Private Corporation ("CCPC") declares a taxable dividend and wishes for the dividend to be treated as an eligible dividend, all of the dividend must be designated as an eligible dividend pursuant to subsection 89(14) of the Income Tax Act (the "Act"). Now, for dividends declared after March 28, 2012, any portion of the taxable dividend may be designated as an eligible dividend. In addition, a late designation of an eligible dividend may be made within a three year period following the day which the designation was first required to be made. Currently, no such provisions are in existence and therefore this should provide great flexibility for CCPCs and their shareholders to designate dividends to be eligible dividends. This is a great move by the Federal Government to provide flexibility.

3. Employees Profit Sharing Plans ("EPSPs")

EPSPs are a trust most commonly used by owner-managers of private corporations to allocate income to employees (beneficiaries), which may include members of the owner's family. Often a private corporation could make a tax deductible contribution to an EPSP and the EPSP would allocate such amounts to its beneficiaries. EPSP allocations are generally included in computing the income of beneficiaries, hence simple income splitting and source withholding avoidance (such as CPP and EI amounts) could be achieved. As the allocations are taxable to the beneficiaries, EPSP trusts are generally not subject to tax.

Budget 2012 targets "excessive EPSP amounts" paid to a specified employee (defined as an employee who has a significant equity interest in the corporation or who does not deal at arm's length with the corporation). The Budget includes a measure to impose a special tax on the "excessive EPSP amounts" which will consist of a tax levied at the highest federal and provincial marginal rates to be applied on allocations from an EPSP that exceed 20% of the specified employee's salary from the corporation in the year.

Although this measure was adumbrated in the prior year budget, the method on how Finance would approach perceived abuses involving EPSPs was of interest to many. The 2012 Budget proposal appears to limit the ability of an owner to income split with family members as a special tax at the highest marginal rate is applied to any "excessive EPSP amounts".

As mentioned above, owners could often avoid paying CPP and EI by paying themselves a salary of a nominal amount from their corporation and receive the balance of their compensation by having the corporation contribute to an EPSP and receive allocations from it. The 2012 Budget proposal should deter an owner of a business from doing this in the future (assuming they have a significant equity interest in the business) since the excessive amount of the allocation from the EPSP would be subject to the special tax at the highest marginal tax rate.

Bottom line, it would appear that much of the mischief involving EPSPs and owner-manager remuneration planning (income splitting with minor children or other non-arm's length persons and CPP/EI avoidance) will end and many EPSPs will now likely need to be wound down.

4. Partnership "Bumps"

Section 88 of the Act contains very complex rules that enable a taxable Canadian corporation ("Parent") that has acquired control of another corporation ("Sub") to increase the cost of certain capital assets acquired by the Parent on a vertical amalgamation or on winding up the Sub. Very generally, the section 88 bump recognizes that in such cases the amount paid by the Parent for the shares of the Sub represents the cost of the assets of the Sub and allows the Parent, within limits, to add the amount paid for the shares to the cost of certain capital assets acquired on the amalgamation or winding up. Essentially, only the non-depreciable capital property of the Sub is eligible for the section 88 bump. Examples of such property are land, shares of a corporation or an interest in a partnership. Other assets such as eligible capital property, depreciable property, inventory and resource properties (assets that are generally held on account of income ("income assets")) are not eligible.

The Government has noticed that partnership structures can be used to achieve a bump in respect of the cost of a partnership interest (which is holding income assets) where the bump would otherwise be denied in respect of the shares of a subsidiary (which is holding income assets). Accordingly, Budget 2012 introduces measures that will result in a denial of a section 88 bump in respect of a partnership interest to the extent that the unrealized gain of the partnership interest is reasonably attributable to the amount by which the fair market value ("FMV") of income assets exceed their cost amount. This measure will apply to amalgamations that occur and windings-up that begin on or after March 29, 2012.

This is a very targeted measure that will now shut down some otherwise useful planning.

5. Overseas Employment Tax Credit ("OETC")

The OETC was introduced over 30 years ago as a measure to maintain the competitiveness of Canadian firms in certain sectors in bidding for overseas contracts. If an employee is eligible for the OETC, they are entitled to a tax credit equal to the federal income tax otherwise payable on 80% of their qualified employment income up to a maximum foreign employment income of $100,000.

Budget 2012 proposes to phase out the OETC over four taxation years beginning with the 2013 taxation year. The Government believes that the conditions in which the OETC was originally introduced have now changed to the point where Canada is just as competitive as many other foreign countries who do not have an OETC comparative credit. Accordingly, Budget 2012 proposes to reduce the 80% factor applied to an employee's qualifying foreign employment income to the following:

  • 2013 – 60%
  • 2014 - 40%
  • 2015 - 20%
  • 2016 - 0 %

For employees who work outside of Canada, this will have a dramatic impact on their Canadian taxes otherwise payable. We know of many employees who are eligible for the OETC and this may ultimately impact their desire to work overseas.

6. Employee Benefits: Group Sickness or Accident Insurance Plans

In addition to the tax that is withheld on an employee's salary, tax is generally withheld on all other taxable benefits provided to employees. These include benefits such as the automobile benefit for personal use of a company car, private medical plan premiums and life insurance.

The premiums paid by an employer to a wage loss replacement plan were not included as a taxable benefit at the time premiums were paid but the periodic benefits were taxable to the employee when received. This was generally beneficial as the employee might not ever receive wage loss benefits and if they did, the employee's wage loss payments were generally subject to a lower rate of tax.

However, if the benefits were not payable on a periodic basis or when there was no loss of employment income, the benefits were not taxable.

Budget 2012 proposes to change this so that in the future, premiums attributable to these non-periodic or other benefits will be taxable benefits to the employee at the time of payment by the employer.

7. Retirement Compensation Arrangements ("RCAs")

RCAs are plans which enable an employer to make a deductible contribution to certain retirement plans in respect of select employees with no immediate tax implications to the employee. However, contributions to RCAs require the RCA to remit a tax, which is refundable, equal to 50% of the amount contributed to the RCA. The refundable tax is held by the Canada Revenue Agency ("CRA") until such time the employee withdraws amounts from the RCA. Such withdrawals create a taxable event for the employee and a proportionate return of the refundable tax to the RCA. These rules were introduced as anti-avoidance measures during the 80's to prevent inappropriate tax deferral involving employee's contributions to self-funded plan arrangements.

Over the years, RCAs have been used as planning vehicles for owner-managed companies and their shareholders. For example, consider where OpCo makes a deductible contribution of $100 to an RCA in respect of Mr. Apple, who is an employee (and likely a shareholder) of OpCo. As required, OpCo contributes $100 to the RCA (a trust) and the RCA remits $50 of refundable tax to the CRA. Subsequently, the RCA borrows from a bank against the refundable tax and receives say $45. The RCA then loans the aggregate $95 to OpCo. Presumably, the Government was bothered by the loan from the RCA to OpCo, and obviously had questions about whether the RCA was created for the purpose of funding employee retirement.

In addition, RCAs were allowed a wide range of investment choices in the past and, as illustrated in the above example, the Government does not appear to like some of those choices.

Just as RRSPs and TFSAs are currently subject to penalties for owning "prohibited investments" or conferring "advantages" on a beneficiary, Budget 2012 proposes to adopt such concepts for RCAs, where an RCA has a beneficiary with a significant interest in the employer (generally more than 10% ownership). If applicable, the RCA and the beneficiary will be subject to a 50% tax on the value of the prohibited investments and a 100% tax on the value of any advantage. Further, the refundable tax held by CRA will not be returned to the RCA if a decline in value of property held in trust is reasonably attributable to prohibited investments or advantages. We previously discussed the concept of "advantage" in our blog dated February 1, 2012.

The Budget proposals for RCAs should put a stop to much of the perceived mischief that was occurring with RCAs. Using our example above, the RCA custodian would be liable to a 50% tax on the prohibited investment, the $95 loan receivable to OpCo, resulting in a $45 tax liability. Ouch!

8. Changes to the Thin Capitalization Rules

In general, the existing thin capitalization rules limit the deductibility of interest paid to non-resident shareholders to the amount that is computed on a 2:1 debt-to-equity ratio for Canadian subsidiaries of non-residents. This requires a non-resident setting up a Canadian subsidiary to provide at least one-third of its financing through equity rather than debt.

Budget 2012 proposes the following changes:

  • Reduction of the debt-to-equity ratio of the Canadian subsidiary to 1.5:1 for taxation years that begin after 2012;
  • The debts of a partnership of which the Canadian resident corporation is a member will now be included in the thin capitalization calculation. Partnership debts were previously excluded from the calculation of thin capitalization. This new rule will apply in respect of debts of a partnership that are outstanding during corporate taxation years that begin on or after March 29, 2012;
  • Disallowed interest under the thin capitalization rules will now be reclassified as dividends, and therefore subject to the appropriate withholding tax requirements; and
  • Interest that is included in the calculation of foreign accrual property income ("FAPI") of the controlled foreign affiliate will be excluded from the thin capitalization calculation. This measure is proposed to avoid double taxation on these amounts.

Overall, the thin capitalization measures of the 2012 Budget reflect the Government's efforts to ensure the profits of Canadian corporations are taxed in Canada by limiting the ability of a Canadian company to obtain an interest deduction on "excessive" foreign debt.

9. Foreign Affiliate Dumping

The Department of Finance has identified certain types of "foreign affiliate dumping" transactions as being rather abusive in respect of Canadian fiscal policy. Such transactions are thought to erode the Canadian tax base without net economic benefits to Canada.

Generally, foreign affiliate dumping transactions involve a foreign parent corporation ("FPCo") and a Canadian subsidiary ("Canco"), whereby Canco acquires shares of a foreign affiliate ("FACo") that were previously held by FPCo. The perceived abuse arises when Canco borrows money to acquire the shares of FACo (presumably, the interest is deductible in Canada by Canco) and FACo will likely repatriate its profits to Canco through dividends that are effectively not subject to Canadian taxation.

The Budget proposes to implement measures that will, where certain conditions are met, deem a dividend to be paid by Canco to FPCo to the extent of any non-share consideration that is provided by Canco in respect of the acquisition of the shares of FACo. Further, the deemed dividend will be subject to the Canadian withholding tax regime as reduced by any applicable tax treaty.

10. Scientific Research and Experimental Development Program ("SR&ED")

The SR&ED program essentially provides two tax incentives for qualified activities and expenditures incurred by a taxpayer by way of (i) a deduction in computing income for tax purposes for current and capital SR&ED expenditures incurred, and (ii) an investment tax credit ("ITC"), either a "general" or "enhanced" rate, on qualified expenditures in the form of a cash refund, a reduction of income taxes payable, or both.

The Budget proposes several changes to SR&ED with the hope that the revised program will be "more focused, cost effective and predictable". Generally, the Budget proposes to:

  1. Exclude capital expenditures from SR&ED deductions and ITCs for capital property acquired on or after January 1, 2014;
  2. Reduce the "prescribed proxy" amount from a rate of 65% to 60% for 2013, and to 55% after 2013. Note the "prescribed proxy" method (which is in lieu of itemizing detailed overhead expenses) generally allows a taxpayer to include an amount (the prescribed proxy amount) for salary and wages incurred, in the direct conduct of SR&ED in Canada, as qualified expenditures for the purposes of SR&ED deductions and ITCs;
  3. For ITC purposes, disallow the profit element in arm's length (third party) SR&ED contract payments from qualified expenditures for amounts incurred on or after January 1, 2013 (for simplicity, it is proposed that the cost of arm's length SR&ED contract payments will be restricted to 80% of the actual amount incurred, which equates to an imputed profit element of 20%); and
  4. Reduce the "general rate" ITC from 20% to 15% in respect of taxation years that end after 2013. However, the "enhanced rate" ITC, which is available to eligible CCPCs, will remain unchanged from the current rate of 35% on up to $3 million of qualified SR&ED expenditures.

11. Charitable Organizations

Foreign Charitable Organizations

Generally, donations made by taxpayers to foreign charities are not eligible for a donation tax credit, or deduction, unless the taxpayer also has foreign sourced income. However, in recent years the Government of Canada has graciously made gifts to foreign charitable organizations, which if so desired, enabled the foreign charitable organization to register as a "qualified donee" under the Act.

A registration as a "qualified donee" provides Canadian taxpayers the opportunity to donate to foreign charitable organizations and receive a corresponding donation tax credit or deduction.

The Budget proposes to restrict "qualified donee" status to those foreign charitable organizations that only pursue activities "related to disaster relief or urgent humanitarian aid" or that are "in the national interest of Canada". The restrictions apply to those foreign charitable organizations seeking "qualified donee" status on or after January 1, 2013.

Canadian Charitable Organizations

Canadian charitable organizations are required to operate exclusively for charitable purposes, which include "relief of poverty, the advancement of education or religion, and certain other purposes as recognized by the courts", including engaging in political activities as long as such efforts represent a "limited portion of its resources, are non-partisan, and are ancillary and incidental to its charitable purposes and activities".

The Budget proposes to implement sanctions against those charities that (i) exceed the limitations imposed in respect of political activities, or (ii) do not comply with the compliance obligations legislated by the Act. If the proposed legislation is passed, the CRA will have the authority to suspend the offending charity's tax-receipting privileges for a one year period if the charity exceeds the limitations on political activities or suspend such privileges indefinitely until its compliance obligations are met.

12. Tax Shelter Administrative Changes

Section 237.1 of the Act provides rules for the registration and reporting requirements for arrangements that are considered tax shelters (as defined in subsection 237.1(1)). For instance, a promoter of a tax shelter arrangement must obtain an identification number in order for deductions and claims to be allowed by those taxpayers who participated in the tax shelter. Currently, the Act imposes a penalty on any person (usually the promoter) for failure to register or comply with reporting obligations. Also, if the penalty applies, the taxpayer is prohibited from any deduction or claim in respect of the penalized tax shelter.

In an effort to encourage compliance with registration and reporting requirements, the Budget proposes to:

  1. In respect of charitable donation tax shelters, increase the current penalty (the greater of $500 and 25% of the consideration received or receivable by the promoter) to the greater of the amount determined under the existing rules and 25% of the amount the taxpayer receives as a charitable donation tax receipt, and
  2. Increase the failure to file or inaccurate filing penalty from the existing amount (the greater of $100 and $25 multiplied by the number of days a return is outstanding to a maximum of $2,500) to 25% of (i) the unreported tax shelter sales, or (ii) in the case of a charitable donation tax shelter, the greater of 25% of the consideration received or receivable by the promoter and the amount the taxpayer receives as a charitable donation tax receipt.

The proposed increase in penalties against offending charitable tax shelter organizations are timely as many Canadians have been fleeced by unscrupulous promoters of what initially appears to be a charitable giving arrangement. Our firm welcomes these proposals.

13. Government Commitment to Proceed with Previously Announced Tax and Related Measures

The Government took the opportunity to announce that it is committed to proceed with previously announced tax and related measures, as modified to take into account consultations and deliberations since their original release date. The list was rather lengthy but included the July 16, 2010 Income Tax Technical Amendments which include the restrictive covenant proposals under section 56.4. We have written about these proposals in our July 20, 2010 and April 10, 2008 blogs. Stay tuned! It appears that the Government is getting ready to pass a huge back-log of proposed technical tax amendments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
19 Dec 2017, Webinar, Calgary, Canada

By December 19, 2017, the world should know whether or not the US was successful in implementing landmark and historic tax reforms – the largest and most impactful such reforms since 1986. These reforms appear to touch virtually every American individual and business, and will ultimately affect many Canadian individuals and businesses directly or indirectly as well.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions