Global

Details

  • Service: Tax, International Corporate Tax, International Executive Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 8/22/2012

Canada - Part 2—2012 federal budget draft legislation 

August 22:   Canada’s Department of Finance released on 14 August 2012 draft legislation for most of the remaining tax items announced in the 2012 federal budget.

Finance has requested comments by 13 September 2012.


These measures apply as indicated in the 2012 federal budget (generally after 28 March 2012). In a few situations, the changes have an effective date of 14 August 2012—the "announcement date.”

Summary

To summarize, the changes in the 53-page draft legislation and 77-page related explanatory notes include proposals affecting international tax, the scientific research and experimental development (SR&ED) program, and other corporate and individual (personal) tax rules.


Among the proposals are provisions that would:


  • Introduce foreign affiliate dumping rules that are fairly consistent with the description of the rules in the 2012 budget documents, with certain changes
  • Amend the thin capitalization rules to reduce the debt-to-equity ratio to 1.5:1 (from 2:1) for tax years beginning after 2012
  • Revise SR&ED measures to reduce the general investment tax credit rate to 15% (from 20%), effective 1 January 2014
  • Introduce an election to apply a deemed interest imputation rule (instead of having a deemed dividend) on loans to certain non-residents created after 28 March 2012 and meeting the definition of "pertinent loans or indebtedness"
  • Prevent tax avoidance using partnerships
  • Amend the eligibility for accelerated capital cost allowance for clean energy generation equipment under Class 43.1 and 43.2
  • Phase out the corporate mineral exploration and development tax credit
  • Change the eligibility for the Atlantic investment tax credit
  • Introduce the prohibited investment rules for retirement compensation arrangements
  • Change the taxable benefits for an employer's contributions to a group sickness or accident insurance plan

Read an August 2012 report prepared by the KPMG member firm in Canada: 2012 Federal Budget Part 2 - Draft Legislation Released




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