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Canada Consults On Tax Provisions

Wednesday, September 1, 2010

The Canadian Department of Finance has commenced a consultation on draft legislative proposals to implement tax measures from Budget 2010 along with several previously announced tax initiatives.

The proposals, released on August 27, include draft legislation to:

  • Provide for the sharing of the Canada Child Tax Benefit and the Universal Child Care Benefit in cases of shared custody;
  • Allow Registered Retirement Savings Plan proceeds to be transferred to a Registered Disability Savings Plan on a tax-deferred basis;
  • Implement disbursement quota reform for registered charities;
  • Better target the tax incentives in place for employee stock options;
  • Expand the availability of accelerated capital cost allowance for clean energy generation;
  • Adjust the capital cost allowance rate for television set-top boxes to better reflect the useful life of these assets;
  • Clarify the definition of a principal-business corporation for the purposes of the rules relating to Canadian Renewable and Conservation Expenses;
  • Introduce amendments consequential to the introduction in 2011 of new International Financial Reporting Standards (IFRS) by the Accounting Standards Board;
  • Provide legislative authority for the Canada Revenue Agency to issue online notices where the taxpayer so requests;
  • Implement a new reporting regime for aggressive tax planning, taking into account comments received during post-budget consultations;
  • Counter schemes designed to shelter tax otherwise payable by artificially increasing foreign tax credits;
  • Replace the previous proposals relating to foreign investment entities with several limited enhancements to the current Income Tax Act, and better target and simplify previous proposals relating to non-resident trusts, taking into account comments received during post-budget consultations;
  • Ensure that income trust conversions into corporations are subject to the same loss utilization rules that currently apply to similar transactions involving only corporations; and finally to,
  • Limit tax arbitrage opportunities by extending the application of the Specified Leasing Property rules to property that is the subject of a lease to a government or other tax-exempt entity, or to a non-resident.

The draft legislative proposals also include other previously announced measures identified in Budget 2010, as modified to take into account consultations and deliberations since their release, as well as an income tax amendment relating to the enactment of the Fairness for the Self-Employed Act. Among other proposals, the introduction of a personal income tax credit in respect of Employment Insurance premiums paid by self-employed individuals is also proposed.