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Canada: Draft legislation for Budget Bill #2, includes corporate tax measures

Canada: Draft legislation for Budget Bill #2

The Department of Finance released draft legislation to implement certain tax measures from the 2019 federal budget.

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The draft legislation also includes proposed amendments to several recently enacted measures related to the accelerated investment incentive for resource expenditures and depreciable property.

The draft legislation and related explanatory notes were released 30 July 2019, and Finance is accepting comments on the draft legislative proposals until 7 October 2019. These measures are not expected to be included in a bill before the next federal election.


Corporate tax measures

The draft legislation includes corporate tax measures proposed in the 2019 budget regarding:

  • Character conversion transactions
  • Mutual funds—allocation-to-redeemers methodology
  • Foreign affiliate “dumping” amendments
  • Cross-border share lending arrangements
  • Transfer pricing measures (ordering of rules and reassessment period)
  • Electronic delivery of requirements for information


Individual tax measures

Individual (personal) tax measures from the 2019 federal budget included in the draft legislation concern:

  • The change-in-use rules for multi-unit residential properties
  • Allowing additional annuities under registered plans
  • Registered disability plans and eligibility for the disability tax credit
  • Changes to the rules for specified multi-employer pension plans
  • Changes to pensionable services under an individual pension plan


Accelerated investment incentive changes

The draft legislation also includes modifications intended to clarify legislation that was recently enacted to implement the accelerated investment incentive. Among these clarifications is an amendment to the "first-year rule" in subsection 1100(2) of the Regulations, under which the accelerated capital cost allowance (CCA) deduction may be computed correctly regarding certain Class 43.2 and 53 properties that become available for use after 2024 and 2025, respectively (but that were acquired in an earlier year).
 

Read an August 2019 report prepared by the KPMG member firm in Canada

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