This update is intended for those seeking additional insights into the 2018 Federal Budget including its impact on both domestic and multinational enterprises.
The Minister of Finance (Canada), the Honourable Bill Morneau, presented the Government of Canada’s (the “Federal Government”) 2018 Federal Budget (“Budget 2018”) on February 27th, 2018 (“Budget Day”). Budget 2018 contains significant proposals to amend the Income Tax Act (Canada) (the “ITA”) and the Excise Tax Act (the “ETA”) while also providing updates on previously announced tax measures and policies.
Significant Budget 2018 proposals and updates include:
- Introduction of simplified measures (compared to the July 2017 proposals) applicable to passive investment income in a private corporation that will: (i) limit access to the small business rate for small businesses with significant passive savings, and (ii) limit access to refundable taxes for larger Canadian-controlled private corporations (“CCPCs”).
- Rules applicable to equity-based financial arrangements including synthetic equity arrangements and securities lending arrangements.
- Rules to prevent tax-free distributions by Canadian corporations to non-resident shareholders through the use of certain transactions involving partnerships and trusts.
- Modification of the foreign affiliate provisions so certain rules cannot be avoided through the use of “tracking arrangements”.
- Updates on Canada’s participation in the Organisation for Economic Co-operation and Development (“OECD”) project on Base Erosion and Profit Shifting (“BEPS”).
Our full analysis of selected proposals and tax measures can be found on Fasken.com.