Canada: Proposals to limit interest deductions, require more disclosure and reporting

Proposals in the draft legislation include a range of corporate, individual (personal), and trust tax provisions.

Corporate, individual (personal), and trust tax provisions

The Department of Finance on 4 February 2022 released for public consultation proposals to change the interest expensing rules as well as provide for other tax measures.

The proposals in the draft legislation include a range of corporate, individual (personal), and trust tax provisions including measures to:

  • Introduce limitations on deductible interest
  • Expand the mandatory disclosure requirements
  • Introduce enhanced trust reporting requirements
  • Allow certain taxpayers to temporarily expense up to $1.5 million* of eligible property per year
  • Deny input tax credits for many inputs related to mining activities of “cryptoassets” and provide that such activities not be considered as “supplies” for GST/HST (goods and services tax / harmonized sales tax) purposes

KPMG observation

Although this draft legislation includes many long-anticipated tax measures, there are still certain outstanding legislative proposals that have not yet been released—such as measures to introduce a new luxury tax, hybrid mismatch rules, changes to “modernize” the General Anti-Avoidance Rule (GAAR), and other amendments affecting certain intergenerational share transfers.

Read a February 2022 report [PDF 267 KB] prepared by the KPMG member firm in Canada

*$=Canadian dollar

 

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