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Federal Bill Update - Budget Bill #1 and More Enacted in Pre-Election Blitz

Budget Bill #1 and More Enacted in Pre-Election Blitz

Corporate income tax measures now substantively enacted

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The government passed three federal bills into law on June 21, 2019, including the first 2019 federal budget implementation bill. The corporate income tax measures included in Bill C-97 are considered substantively enacted for purposes of IFRS and Accounting Standards for Private Enterprise (ASPE) as of April 8, 2019, the date it received first reading as Canada has a majority government. These measures are considered enacted for U.S. GAAP purposes on June 21, 2019, the date the bill received Royal Assent.

The implementation bill for the multilateral instrument (MLI) (Bill C-82) and the bill to temporarily cancel a two-year moratorium on imposing surtaxes on steel imports (Bill C-101) also both received Royal Assent on June 21, 2019.

In addition, Bill C-100 to ratify the Canada-United States-Mexico Agreement (CUSMA) recently received second reading and has been referred to the Standing Committee on International Trade. Although now adjourned for the summer, the government says it may recall Parliament if necessary to pass the CUSMA bill.

Tax measures included in Bill C-97

Corporate income tax measures
Among other changes, Bill C-97 includes income tax measures proposed in the 2018 Fall Economic Update to:

  • Introduce the Accelerated Investment Incentive
  • Provide an immediate write-off of the full cost of machinery and equipment used in the manufacturing and processing of goods and the full cost of specified clean energy equipment
  • Extend the 15% mineral exploration tax credit
  • Ensure that business income of communal organizations retains its character when allocated to its members.

For more details on these measures, see TaxNewsFlash-Canada 2018-47, "Canada Announces Enhanced Capital Cost Allowances".

Bill C-97 also includes corporate income tax measures introduced in the 2019 federal budget to:

  • Repeal the use of a CCPC's taxable income as a factor when determining its annual eligible expenditure limit under the enhanced SR&ED tax credit
  • Introduce new tax measures supporting Canadian journalism including:
  • Qualified donee status
  • A new refundable labour tax credit
  • A new temporary non-refundable tax credit
  • Introduce a temporary enhanced first-year CCA of 100% for zero-emission vehicles (new Classes 54 and 55)
  • Exclude from "specified corporate income" income from sales of farming products or fishing catches of farming and fishing businesses to arm's-length purchaser corporations.

For more details, see TaxNewsFlash-Canada 2019-09, "2019 Federal Budget Highlights".

Bill C-97 also includes other previously announced measures to:

  • Support employees who must reimburse a salary overpayment to their employers due to a system administrative or clerical error
  • Expand tax support for electric vehicle charging stations and electrical energy storage equipment (2016 federal budget).

The bill also included a number of personal tax measures, including changes to the Home Buyer's Plan.

2019 federal budget outstanding measures

Bill C-97 does not include the budget's more substantial corporate tax changes. Since both the House of Commons and the Senate have adjourned for the summer, it is unlikely that these outstanding measures will be enacted before the upcoming federal election expected in October. The outstanding 2019 federal budget measures include changes to:

  • Character conversion transactions
  • Mutual funds - Allocation to redeemers methodology
  • Foreign affiliate dumping
  • Cross-border share lending arrangements
  • Transfer pricing (ordering of rules and reassessment period)
  • Change in use rules for multi-unit residential properties
  • Electronic delivery of requirements for information
  • Rules for specified multi-employer pension plans
  • Pensionable service under an individual pension plan

Next steps for Bill C-82 -MLI implementation bill

Bill C-82 contains legislation to implement the MLI. Although the bill has received Royal Assent, Canada's ratification instrument must still be deposited with the OECD, before it enters into force. If Canada deposits its notice of ratification with the OECD on or before September 30, 2019, the MLI will begin to apply to some Canadian tax treaties for withholding tax purposes on January 1, 2020.

For more on Canada's MLI, see TaxNewsFlash-Canada 2018-26, "Canada Adopts More MLI Provisions".

For more information, contact your KPMG adviser.

Information is current to June 25, 2019. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500.

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