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Canada

23 March 2017

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Canada Federal Budget 2017 Tabled

Canada's Federal Budget 2017 was tabled by Finance Minister Bill Morneau on 22 March 2017. The business related tax measures proposed in the Budget include:

  • Measures related to investment fund mergers, including:
    • Extending the mutual fund merger rules to facilitate the reorganization of a mutual fund corporation that is structured as a switch corporation into multiple mutual fund trusts on a tax-deferred basis;
    • Allowing insurers to effect tax-deferred mergers of segregated funds and allowing segregated funds to carry over non-capital losses;
  • Extending the scope of eligible equipment for accelerated capital cost allowance for clean energy generation equipment;
  • Measures related to Canada development expense (CDE) and exploration expense (CEE), including:
    • Reclassifying most expenditures related to drilling or completing a discovery well as CDE (deducted at 30% per year on declining-balance basis) instead of CEE (deducted in full in year incurred);
    • No longer allowing small oil and gas corporations to treat the first CAD1 million of CDE as CEE;
  • Clarifying that in determining whether de facto (factual) control of a corporation exists, the factors that may be considered are not limited to factors that include a legally enforceable right to effect a change to the board, or to exercise influence of shareholders;
  • Measures related to the timing of recognition of gains and losses on derivatives, including:
    • Introducing an elective mark-to-market regime for derivatives held on income account;
    • Introducing a specific anti-avoidance rule that targets straddle transactions;
  • Eliminating certain incentives, including
    • The 50% additional deduction for donations of medicine;
    • The investment tax credit for child care spaces;
    • The tax exemption for insurers of farming and fishing property;
  • Eliminating the ability for designated professionals to elect to use billed-basis accounting;
  • Extending the base erosion rules to foreign branches of life insurers to ensure that Canadian life insurers are taxable in Canada with respect to their income from the insurance of Canadian risks; and
  • Amending the definition of a taxi business to require providers of ride-sharing services to register for the GST/HST and charge tax on their fares in the same manner as taxi operators.

Click the following link for the main Budget 2017 webpage and the Tax Measures: Supplementary Information.

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