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Bill C-38 - Federal Budget Bill #1 Enacted 

Canadian Tax Adviser


July 03, 2012


Legislation to enact certain tax measures announced in the 2012 federal budget, tabled as Bill C-38, received Royal Assent on June 29, 2012, making these measures enacted for U.S. GAAP as of that date. The bill, which received first reading on April 26, 2012, does not make any corporate or income tax rate changes or include many of the bigger changes in the 2012 budget (including the SR&ED changes, the change to the thin cap rules, foreign affiliate debt dumping and transfer pricing amendments). The bill does contain measures to allow corporations to make split or late eligible dividend designations, extend the Mineral Exploration Tax Credit for one year, and to legislate numerous changes to the GST/HST treatment of goods and services.

Included in the Bill


Certain selected tax measures included in the bill are:


Income tax measures


  • The ability to make split or late eligible dividend designations
  • A one-year extension of the Mineral Exploration Tax Credit
  • Introduction of a mandatory e-filing requirement for returns prepared by a "tax preparer", and a related penalty.


Excise tax measures


  • Expansion of 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
  • Exemption of certain pharmacists' professional services from the GST/HST, other than prescription drug dispensing services that are already zero-rated under the GST/HST
  • Provision to 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
  • Introduction of 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
  • An increase of the travellers' exemptions from import duties and tax for Canadian residents returning after 24-hour and 48-hour absences to $200 and $800, respectively.


Charity tax measures


  • Recognition of certain foreign charitable organizations as qualified donees
  • Provision to the Minister of National Revenue of 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 annually report an information return or devotes resources to political activities in excess of the limits set out in the Income Tax Act
  • Requirement that charities devote their resources primarily to charitable, rather than political, activities and enhancing public transparency and accountability in this area.


Other measures


  • Limitation of the EI premium rate increase to five cents each year until the EI Operating Account is in balance, and then moving to a seven-year break-even rate
  • An increase to the age of eligibility for Old Age Security payments to 67 (from 65) by April 2023, and allowing a voluntary deferral of the basic pension for up to five years starting on July 1, 2013.


For more information, contact your KPMG adviser.


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