Global

Details

  • Service: Tax, International Corporate Tax, Global Transfer Pricing Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 10/18/2012

Canada - 2012 federal budget tax measures are substantively enacted 

October 18:  Bill C-45—to implement most of the remaining 2012 federal budget measures in Canada—today received first reading in the House of Commons, meaning that the legislation is now considered “substantively enacted” for purposes of IFRS and Canadian GAAP (i.e., as of 18 October 2012)

Bill C-45 includes business and international tax measures from the 2012 federal budget that:


  • Restrict the ability of foreign-based multinational corporations to transfer, or "dump", foreign affiliates into their Canadian subsidiaries, while preserving the ability of these subsidiaries to undertake legitimate expansions of their Canadian businesses
  • Improve the integrity and fairness of the thin capitalization rules
  • Reduce the general Scientific Research and Experimental Development (SR&ED) investment tax credit rate to 15% (from 20%)
  • Reduce the prescribed proxy amount, which taxpayers use to claim SR&ED overhead expenditures, to 55% of the salaries and wages of employees who are engaged in SR&ED activities (from 65%)
  • Remove the profit element from arm's length third-party contracts for the purpose of the calculation of SR&ED tax credits
  • Remove capital from the base of eligible expenditures for the purpose of the calculation of SR&ED tax incentives
  • Prevent the avoidance of corporate income tax through the use of partnerships to convert income gains into capital gains
  • Provide that transfer pricing secondary adjustments will be treated as dividends for Part XIII withholding tax purposes
  • Phase out the Atlantic investment tax credit for activities related to the oil and gas and mining sectors
  • Phase out the Corporate Mineral Exploration and Development Tax Credit
  • Provide that qualified property for the purposes of the Atlantic investment tax credit will include certain electricity generation equipment and clean energy generation equipment used primarily in an eligible activity
  • Expand the eligibility for the accelerated capital cost allowance for clean energy generation equipment to include a broader range of bioenergy equipment
  • Phase out the Overseas Employment Tax Credit

Read an October 2012 report prepared by the KPMG member firm in Canada: 2012 Federal Budget Tax Measures Now Substantively Enacted




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