The provisions in Bill C-15 are considered substantively enacted for purposes of IFRS and Accounting Standards for Private Enterprise (ASPE) as of April 20, 2016, when it received first reading in the House of Commons (as Canada has a majority government). Bill C-15 is enacted for U.S. GAAP purposes on June 22, 2016, the date the bill received Royal Assent.
Corporate tax measures
Bill C-15 includes the following corporate tax measures to:
- Keep the small business tax rate at 10.5% for the 2016 and subsequent taxation years under section 125
- Amend the anti-avoidance rules in section 55 that prevent the conversion of capital gains into tax-deductible inter-corporate dividends and make consequential stock dividend changes in section 52
- Modify the dividend rental arrangement rules to deny the inter-corporate dividend deduction for synthetic equity arrangements, under sections 112 and 248
- Expand the definition of Canadian exploration expense, to include the costs of environmental studies or community consultations to obtain certain permits, under section 66.1
- Tighten the anti-avoidance rules for captive insurance companies by amending the foreign accrual property income (FAPI) rules in section 95.
Other income tax measures
Bill C-15 also includes other income tax measures, including measures to:
- Adjust the gross-up and dividend tax credit for non-eligible dividends consequential to holding the small business tax rate for the 2016 and subsequent taxation years at 10.5%
- Introduce changes consequential to the introduction of the new 33% individual tax rate related to the charitable donations tax credit, the taxation of personal services business income and the capital gains refund mechanism for
mutual fund trusts
- Provide an exemption to the withholding tax requirement on payments made by "qualifying non-resident employers" to "qualifying non-resident employees" under Regulation 102
- Permit investments in limited partnerships by registered charities and registered Canadian amateur athletic associations
- Extend the mineral exploration tax credit for flow-through share investors by one year
- Reinstate the labour-sponsored venture capital corporations tax credit for purchases of shares of provincially registered labour-sponsored venture capital corporations for the 2016 and subsequent taxation years.
What’s not in the bill
There are still major pieces of proposed tax amendments from the 2016 federal budget that remain outstanding and are not yet law. For example, the bill does not include legislation related to:
- The repeal of the eligible capital property regime
- Country-by-country reporting rules
- Rules precluding the multiplication of the small business deduction
- Capital cost allowance changes
- The taxation of switch fund shares
- The sale of linked notes
- International tax changes (cross border paid up capital, back-to-back loans, and debt-parking)
- Rules related to the taxation of life insurance proceeds.
For more information, contact your KPMG adviser.
Information is current to June 28, 2016. 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.