Federal Budget Bill #2 Receives Royal Assent | KPMG | CA

Federal Budget Bill #2 Receives Royal Assent

Federal Budget Bill #2 Receives Royal Assent

Bill C-29, enacting certain 2016 federal budget tax measures, has received Royal Assent.

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The provisions in Bill C-29 are considered substantively enacted for purposes of IFRS and Accounting Standards for Private Enterprise (ASPE) as of October 25, 2016, when it received first reading in the House of Commons (as Canada has a majority government). Bill C-29 is considered enacted for U.S. GAAP purposes as of December 15, 2016, the date the bill received Royal Assent.

Background
Bill C-29 includes the 2016 federal budget measures released by Finance as draft legislation on July 29, 2016. Among other things, it contains legislation to:

  • Repeal the ECP regime and replace it with a new CCA class 
  • Prevent taxpayers from multiplying the small business deduction in order to avoid the small business deduction limit and the taxable capital limit 
  • Introduce back-to-back rules to 
    • Prevent the avoidance of the shareholder loan rules by using back-to-back arrangements 
    • Apply the back-to-back loan withholding tax rules to multiple intermediary structures 
    • Add character substitution back-to-back loan rules to the withholding rules 
  • Tighten the cross-border surplus-stripping anti-avoidance rules 
  • Ensure that accrued foreign exchange gains on a foreign currency debt will be realized when the debt becomes a parked obligation 
  • Exclude derivatives from the application of the inventory valuation rules 
  • Provide that the CRA and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided the total amount of the assessment does not increase 
  • Ensure that an exchange of shares of a mutual fund corporation or investment corporation that results in the investor switching between funds will be considered to be a disposition at fair market value; this issue was previously discussed in TaxNewsFlash-Canada 2016-49, "2016 Year-End Personal Tax Planning Tips
  • Ensure that the return on a linked note retains the same character whether it is earned at maturity or reflected in a secondary market sale 
  • Implement country-by-country reporting requirements 
  • Implement certain GST/HST measures proposed or confirmed in the 2016 federal budget. 

Bill C-29 also includes the common reporting standard measures released in draft legislation on April 15, 2016 (see TaxNewsFlash-Canada 2016-40 "Canadian FIs - Start Collecting Non-Resident Account Details").

Bill C-29 also includes measures that will provide relief for trusts and estates that are affected by the "graduated rate estate rules". It also includes amendments affecting trusts that are subject to the "loss restriction event" rules. (See TaxNewsFlash-Canada 2016-03 "New Estate and Trust Tax Regime - Welcome Relief Announced", TaxNewsFlash-Canada 2016-05 "Investment Funds Welcome Fixes to Trust Loss Restriction Event Rules"). 

Outstanding measures
The bill does not contain the measures from the GST/HST technical amendment package released on July 22, 2016 that proposes changes to rules affecting pension plans, financial institutions (FI), and certain group trusts, among others. Also not included are the measures from the income tax technical amendment package released on September 16, 2016 that includes changes to international measures, business measures, personal tax and trust measures, SRED measures, and more.

For more information, contact your KPMG adviser.

Information is current to December 20, 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

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