Eases Tax Compliance Burden for Internationally-Engaged Canadian Businesses
Honourable Jim Flaherty, Minister of Finance, proposed changes to the Income Tax
Act for Canadian businesses with foreign affiliates and those that report
earnings in a foreign currency.
government is committed to creating a corporate tax system that is both fair and
internationally competitive," said Minister Flaherty. "The proposals I am
announcing will improve the tax system and will assist Canadian businesses in
complying with the tax law."
C-28, the second Budget 2007 implementation bill, provided substantial tax
relief for Canadian businesses, including the historic corporate income tax rate
reductions announced in the 2007 Economic Statement. In addition, the bill,
which received Royal Assent on December 14, 2007, implemented a number of
amendments to the Income Tax Act relating to foreign affiliates.
in the bill were provisions which allow taxpayers to elect retroactive
application of some of these foreign affiliate amendments. However, in response
to concerns that the deadline for filing these elections is too tight—for
example, a taxpayer with a December 31, 2007 year-end must file these elections
by June 30, 2008—the Government is proposing to extend the filing deadline for
these elections by 18 months. These proposals are set out in more detail in the
Functional Currency Tax Reporting
C-28 also included amendments to the Act that implemented the Budget 2006
proposal to introduce functional currency tax reporting rules. In response to
representations from stakeholders concerning the amended rules, the Government
is proposing several technical revisions. The revisions, which are described in
detail in the attached annex, include:
Extending the deadline to elect functional currency tax reporting to October 31,
the definition of "functional currency" to address concerns about its practical
application to the situations of certain taxpayers; and
Introducing symmetry in foreign exchange rate calculations used in the reporting
of assets and debt obligations.