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Canada Legislates For Tax Fairness Reforms

Thursday, July 18, 2013

The Canadian Government is consulting on draft proposals it says will ensure that tax legislation is clear and reflects the underlying policy intent.

According to the Finance Department, the planned technical amendments to the Income Tax Act, Income Tax Regulations, Excise Act 2001, and Part IX of the Excise Tax Act respond to issues brought to its attention by taxpayers and their representatives.

In the case of Canadian corporations with foreign affiliates, a new regime will aim to guarantee an appropriate income inclusion for "stub-year foreign accrual property income" on dispositions of foreign affiliate shares. The "exempt surplus" rules will be properly enforced in the case of certain trusts resident in Canada, in which a controlled foreign affiliate has a beneficial interest.

Changes will also be made to a number of the country's base-erosion stipulations, and the Government will seek the suitable application of the rules relating to structures that include partnerships. There will be an overhaul of the circumstances under which Government officials can alert law enforcement organizations to evidence of the commission of a serious crime, such as money laundering or terrorism financing, based on taxpayer information.

Finally, reforms will be made to the system for determining the residence of international shipping corporations.

The consultation is open until September 13.