Global Tax Alert (News from Americas Tax Center) | 16 September 2013

Canada releases draft legislation for 2013 budget measures

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On 13 September 2013, Canada’s Department of Finance released for public comment a package of draft legislative proposals and explanatory notes to implement a number of international, corporate and personal tax measures announced in the 2013-14 federal budget.

Interested parties are invited to provide comments on the draft legislation by 15 October 2013.

The package includes the following income tax legislative proposals:

  • Loss trading transactions: Expansion of the acquisition of control (AOC) measures related to corporations and extension of the AOC rules to trusts.
  • Synthetic dispositions: Measures targeting certain financial arrangements that seek to defer tax or obtain other tax benefits by allowing a taxpayer to economically dispose of property while continuing to own it for income tax purposes.
  • Character conversion transactions: Measures targeting certain financial arrangements designed to convert income-like economic returns into capital gains through the use of derivative contracts.
  • Thin capitalization rules: Extension of the rules to Canadian-resident trusts and nonresident corporations and trusts that carry on business in Canada or elect to be taxed on a net income basis under section 216 of the Income Tax Act, as well as partnerships having members that are such entities.
  • Other business measures: Various changes that expand the eligibility for accelerated CCA for clean energy generation equipment, phase out the accelerated CCA write-off for mining property, treat pre-production mine development expenses as CDE rather than CEE, extend the normal reassessment period for Form T1135, tax shelters, and reportable transactions, adjust the five-year phase-out of the additional deduction for credit unions, and impose a new penalty for missing, incomplete or inaccurate information on SR&ED third-party service providers and billing arrangements.
  • Various personal and other income tax measures: Various changes related to the increase of the lifetime capital gains exemption, the phase-out of the labor-sponsored venture capital corporations tax credit, restricted farm losses, correcting RPP contribution errors, leverage life insurance arrangements and nonresident trusts.

The package also includes GST/HST legislative proposals on supplies of paid parking by public-sector bodies, as well as income tax and GST/HST sanctions in respect of electronic suppression of sales software.

While many of the measures listed above generally apply as of 21 March 2013, the Department of Finance noted in its news release that in a few cases where it has made some modifications to the proposed measures, the modifications will apply as of 13 September 2013, the announcement date.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (Canada), Toronto
  • Yi-Wen Hsu
    +1 416 943 5310
    yi-wen.hsu@ca.ey.com
  • Mark Kaplan
    +1 416 943 3507
    mark.kaplan@ca.ey.com
  • Heather Kerr
    +1 416 943 3162
    heather.i.kerr@ca.ey.com
  • Terry McDowell
    +1 416 943 3600
    terry.j.mcdowell@ca.ey.com
  • Trevor O’Brien
    +1 416 943 5435
    trevor.obrien@ca.ey.com
  • Linda Tang
    +1 416 943 3421
    linda.y.tang@ca.ey.com
  • Andy Tse
    +1 416 943 3024
    andy.tse@ca.ey.com
Ernst & Young LLP (Canada), Montreal
  • Albert Anelli
    +1 514 874 4403
    albert.anelli@ca.ey.com
  • Angelo Nikolakakis
    +1 514 879 2862
    angelo.nikolakakis@ca.ey.com
  • Nicolas Legault
    +1 514 874 4404
    nicolas.legault@ca.ey.com
  • Nik Diksic
    +1 514 879 6537
    nik.diksic@ca.ey.com
Ernst & Young LLP (Canada), Calgary
  • Karen Nixon
    +1 403 206 5326
    karen.r.nixon@ca.ey.com
  • Mark Coleman
    +1 403 206 5147
    mark.coleman@ca.ey.com
Ernst & Young LLP (Canada), Vancouver
  • Eric Bretsen
    +1 604 899 3578
    eric.r.bretsen@ca.ey.com
Ernst & Young LLP, Canadian Tax Desk, New York
  • Andrea Lepitzki
    +1 212 773 5415
    andrea.lepitzki@ey.com

EYG no. CM3803