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Canada

6 May 2013

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Budget for 2013 – International taxation

The Budget for 2013 was tabled by the Minister of Finance on 22 March 2013. Details of the international taxation measures, which unless otherwise indicated will apply from 1 January 2013, are summarized below.

-   International tax evasion and aggressive tax avoidance. Budget 2013 proposes a number of measures to strengthen the capacity of the Canada Revenue Agency (CRA) to combat international tax evasion and to address international aggressive tax avoidance.
-   International electronic funds transfers. Budget 2013 proposes that the Income Tax Act, the Excise Tax Act and the Excise Act, 2001 be amended to require that certain financial intermediaries report to the CRA international electronic funds transfers (EFTs) of CAD 10,000 or more. Reporting will be required beginning in 2015.
-   Stop International Tax Evasion Program. The CRA will launch the Stop International Tax Evasion Program under which it will pay rewards to individuals with knowledge of major international tax non-compliance when they provide information to the CRA that leads to the collection of outstanding taxes due. The CRA will enter into a contract that will pay an individual only if the information results in total additional assessments or reassessments exceeding CAD 100,000 in federal tax. The contract will provide for payment of up to 15% per cent of the federal tax collected (i.e., not including penalties, interest and provincial taxes).
-   Extended reassessment period: Form T1135. A Canadian-resident individual, corporation or trust that, at any time during a year, owns specified foreign property costing more in total than CAD 100,000 must file a Foreign Income Verification Statement (Form T1135) with the CRA. Budget 2013 proposes to extend the normal reassessment period for a taxation year of a taxpayer by 3 years in certain circumstances, revises the content of the form and makes improvements to facilitate the reporting process.
-   Thin capitalization rules. Budget 2013 proposes to further improve the integrity and fairness of the thin capitalization rules by extending the scope of their application to Canadian-resident trusts, as well as non-resident corporations and trusts that operate in Canada. The Budget 2013 thin capitalization proposals build on the Budget 2012 partnership changes and will apply where a Canadian-resident trust or a non-resident corporation or trust is a member of a partnership.
-   International Banking Centres. Budget 2013 proposes to repeal the International Banking centre (IBC) rules. This measure will apply to taxation years that begin on or after Budget Day.
-   Treaty shopping. Budget 2013 announces the government's intention to consult on possible measures that would protect the integrity of Canada's tax treaties while preserving a business tax environment that is conducive to foreign investment. A consultation paper will be publicly released to provide stakeholders with an opportunity to comment on possible measures.

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