Canada - English

2012 Federal Budget Bill #1 Introduced 

Canadian Tax Adviser

 

April 24, 2012

 

Nancy Belo-Gomes
Toronto, National Tax

 

Finance tabled a Notice of Ways and Means Motion (NWMM) on April 23, 2012 containing 32 pages of proposed legislation and 35 pages of explanatory notes to implement certain 2012 federal budget measures and other tax proposals. The related bill is expected to receive first reading in the House of Commons very shortly. While most of the 2012 budget's controversial measures are not included in the NWMM, here's a quick, non-exhaustive summary of what has been tabled.

Business tax measures
The NWMM contains measures to:

 

  • Allow corporations to make split and late eligible dividend designations
  • Allow a designated partner of a partnership to provide a waiver on behalf of all partners to extend the time limit for issuing a determination in respect of the partnership.

 

Personal tax measures
The NWMM contains measures to:

 

  • Extend for one year the temporary Mineral Exploration Tax Credit for flow-through share investors
  • Introduce a temporary measure to allow certain family members to open a Registered Disability Savings Plan for an adult individual who might not be able to enter into a contract.

 

Excise tax measures
The NWMM contains measures to:

 

  • Increase the value of goods that may be imported duty- and tax-free by Canadian residents returning after 24-hour and 48-hour absences to $200 and $800, respectively
  • Expand the list of Goods and Services Tax (GST) / Harmonized Sales Tax (HST) zero-rated medical and assistive devices and the list of GST/HST zero-rated non-prescription drugs that are used to treat life-threatening diseases
  • Exempt certain pharmacists' professional services from the GST/HST, other than prescription drug dispensing services that are already zero-rated under the GST/HST
  • Allow certain literacy organizations to claim a rebate of the GST and the federal component of the HST paid on the acquisition of books that they give away for free.

 

Charity and tax shelter measures
The NWMM contains measures to:

 

  • Amend the penalty applicable to promoters of charitable donation tax shelters who file false registration information or who fail to register a tax shelter prior to selling interests in the tax shelter
  • Introduce a new penalty applicable to tax shelter promoters who fail to respond to a demand to file an information return or who file an information return that contains false or misleading sales information
  • Limit the period for which a tax shelter identification number is valid to one calendar year
  • Require gifts made by a charity to support the political activities of a qualified donee to be considered an expenditure by the charity on political activities
  • Provide the Minister of National Revenue with the authority to suspend the tax-receipting privileges of a registered charity or a registered Canadian amateur athletic association, if the charity or association fails to report information that is required to be filed annually in an information return or devotes resources to political activities in excess of the limits set out in the Income Tax Act.

 

What is not included in the NWMM:
It appears that most of the controversial measures in the 2012 budget are not included in the NWMM, including measures related to:

 

  • Scientific research and experimental development
  • Retirement compensation arrangements
  • Employee profit sharing plans
  • Elimination of the section 88 bump related to partnership interests and partnership dispositions to non-residents
  • Accelerated capital cost allowance for certain equipment
  • Changes to the thin capitalization rules
  • Foreign affiliate debt dumping
  • Base erosion test for Canadian banks
  • Transfer pricing adjustments.

 

For more information, contact your KPMG adviser.

Publications

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