Global

Details

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

Canada - Transfers of partnership interest to non-residents, tax-exempt entities 

August 22:   Canada’s Department of Finance has released draft legislation regarding its 2012 federal budget proposal to apply section 100* to the recalculation of a taxpayer's gain on (1) the sale of a partnership interest to a non-resident person, or (2) an indirect transfer of a partnership interest to a non-resident person or a tax-exempt entity.

The draft legislation, released 14 August 2012, would expand current rules to include a series test and would refine the gain calculation to include depreciable property held indirectly by the partnership through one or more other partnerships.


*Currently, section 100 provides that a taxpayer's gain on the disposition of a partnership interest may be recalculated when there is a sale of a partnership interest to an entity exempt from tax under section 149 (e.g., a pension fund, certain Crown corporations). The gain is recalculated such that the portion of the gain related to income assets held by a partnership (i.e., assets other than capital assets that are not depreciable assets) is fully taxable—rather than taxed at the 50% capital gains inclusion rate.


Read an August 2012 report prepared by the KPMG member firm in Canada: Proposals to Impact Sale of Partnership Interest to Non-Residents and Tax Exempt Entities




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