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Canada To Amend Tax Rules For Banks

by Mike Godfrey, Tax-News.com, Washington

03 December 2012


Canadian Finance Minister Jim Flaherty has introduced draft legislative proposals to amend the rules concerning the taxation of Canadian-based banks with foreign affiliates.

The changes relate to the Income Tax Act and Income Tax Regulations. Included in the draft package are revisions to the so-called “base erosion” rules in the Income Tax Act’s foreign accrual property income regime. The aim is to alleviate the tax cost to Canadian-based banks of using excess liquidity of their foreign affiliates in their Canadian operations.

The proposals are also designed to ensure that certain securities transactions undertaken in the course of a bank’s business of facilitating trades for arm’s length customers are not inappropriately caught by the base erosion rules.

A consultation on the proposals is open until December 27, 2012. The government will then proceed with legislation at an early opportunity to implement the amendments, taking into account comments received. The intention is for the proposals to be effective for taxation years that begin after October 31, 2012.

TAGS: tax | investment | banking | group taxation | ministry of finance | offshore | multinationals | legislation | Canada

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