Wednesday, October 15, 2014
The Canadian Government has tabled a detailed Notice of Ways and Means Motion to implement tax provisions contained in its 2014 Budget, along with a number of previously unannounced measures.
Finance Minister Joe Oliver said: "Canada's Economic Action Plan builds on our Government's record of keeping taxes low for families and businesses. Our Government's plan for jobs and growth is creating opportunities right across the country. It is keeping Canada on track to return to balanced budgets in 2015 so that we can continue to lower taxes and promote long-term prosperity for Canadians."
The Motion proposes the implementation of Budget measures relating to international, business, and personal taxation. It also includes a number of new income tax and sales tax measures.
The Motion includes plans for better circumscribing an existing exception from the "investment business" definition in the foreign accrual property income regime, by introducing additional conditions for the application of the exception. It adjusts Canada's foreign accrual property income rules to address offshore insurance swap transactions and ensure that income derived directly or indirectly from the insurance of Canadian risks is taxed appropriately.
The Motion also adds a specific anti-avoidance rule in respect of withholding tax on interest payments and modifies an existing anti-avoidance rule in the thin capitalization rules. Both measures are designed to address back-to-back loan arrangements involving an intermediary.
The Motion amends the foreign affiliate dumping rules, to ensure that the rules apply in appropriate circumstances and, where applicable, provide appropriate results. It alters the definition of "non-qualifying country" in the foreign affiliate rules. The new definition will exclude those countries or jurisdictions for which the Convention on Mutual Administrative Assistance in Tax Matters is in force and effect, and aims to avoid unintended tax consequences with respect to the British Virgin Islands, which now has a comprehensive tax information exchange agreement with Canada.
The foreign affiliates rules will also better accommodate the use of partnerships.
The remaining tax measures included in the Motion will: