Canada To Legislate For Budget Tax Reforms

by Mike Godfrey, Tax-News.com, Washington

08 August 2019

The Canadian Government is consulting on draft legislative proposals to implement a number of tax measures announced in the 2019 Budget.

The proposals would implement measures to:

• Improve the transfer pricing rules that apply in transactions occurring across international borders by persons who are not dealing at arm's length;
• Better target the foreign affiliate dumping rules to counter erosion of the tax base that can result from transactions in which a corporation resident in Canada controlled by a non-resident invests in a foreign affiliate;
• Ensure that the appropriate tax consequences apply to cross-border share lending arrangements that are being used to avoid Canadian dividend withholding tax;
• Improve the consistency of the tax treatment of owners of multi-unit residential properties with that of owners of single-unit residential properties;
• Improve the rules meant to prevent taxpayers from using derivative transactions to convert fully taxable ordinary income into capital gains;
• Provide greater flexibility in managing retirement savings by permitting two new types of annuities under the tax rules for certain registered plans;
• Bring the specified multi-employer plan rules into line with the tax rules that apply to other defined benefit registered pension plans; and
• Improve the "allocation to redeemers" methodology used to allocate capital gains to redeeming unitholders of mutual funds.

The draft legislation would also modify measures legislated in Budget Implementation Act, 2019, No.1, to address feedback received during a separate consultation. These measures relate to the Accelerated Investment Incentive as it applies to resource expenditures and depreciable property, and to the temporary enhanced first-year Capital Cost Allowance rate for eligible zero-emission vehicles.

The consultation will close on October 7.

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