News Update

Government of Canada Moves to Implement Outstanding Tax Measures

The Honourable Jim Flaherty, Minister of Finance, released draft legislative proposals to implement the remaining tax measures from Budget 2008 along with several previously announced tax initiatives for consultation. "Our government is not only reducing the tax burden on all Canadians, many of the measures contained in this second Budget Implementation Bill will modernize our tax system and make it more efficient," said Minister Flaherty. The proposals released include draft legislation to:

Clarify the application of the excess corporate holdings rules for private foundations; Increase the amount that corporations will be able in future to pay as "eligible dividends", to reflect lower corporate income tax rates and in keeping with the Budget 2008 modification of the dividend tax credit;Reduce the paper burden on businesses by allowing a larger number of government entities to share Business Number-related information in connection with government programs and services; Enact several regulatory amendments that complement and complete measures enacted in the Budget Implementation Act, 2008; and Introduce minor adjustments to the Tax Free Savings Account rules and the scientific research and experimental development investment tax credit rules, further to post-Budget consultation with affected taxpayers.

The draft legislative proposals also include other measures including:

New income tax rules to facilitate the conversion of specified investment flow through (SIFT) trusts (often referred to as "income trusts") into corporations. The rules reflect the Government’s commitment to ensure that existing SIFTs can choose to reorganize as corporations without undue tax effects;

Revised draft amendments to take into account financial nstitution accounting changes; The extension of the general treatment of capital gains and losses on an acquisition of control of a corporation to gains and losses that result from fluctuations in foreign exchange rates in respect of debt denominated in foreign currency; An enhanced carry-forward for investment tax credits;

Updated prescribed amounts for automobile expenses and benefits;

Revised draft amendments relating to the computation of income, gains and losses of a foreign affiliate; and Revised draft regulations that modify the tax treatment of foreign affiliate active business income earned in a jurisdiction with which Canada has concluded a tax information exchange agreement.