• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 5/22/2013

Canada - Broad reach of financial products anti-avoidance rules 

May 22:  Financial institutions, investment funds, and certain general corporations may be affected by targeted tax measures introduced in the 2013 federal budget to address what the government considers “loopholes” in the Canadian tax system.

The budget measures include anti-avoidance rules relating to “character conversion transactions” and “synthetic dispositions.”

These new rules may have a broader reach than simply preventing the perceived abuse identified in the budget, and thus may inadvertently affect normal commercial transactions.

The rules affect certain financial arrangements used to convert ordinary income into capital gains (character conversion transactions) and transactions that are economically equivalent to a disposition of the property but the taxpayer retains legal ownership of the property (synthetic dispositions).

Read a May 2013 report prepared by the KPMG member firm in Canada: New Financial Products Anti-Avoidance Rules Cast a Broad Net

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