2018 Federal Budget Bill #2 Receives First Reading | KPMG | CA
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2018 Federal Budget Bill #2 Receives First Reading

2018 Federal Budget Bill #2 Receives First Reading

This bill includes tax measures first released in a NWMM on October 25, 2018

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Taxpayers will find some relief from the new accelerated T1134 filing deadline in new Bill C-86, which received first reading on October 29, 2018. Most of the remaining income tax measures from the 2018 federal budget can also be found in this bill, along with some measures that were announced earlier this year in pieces of draft legislation released in July and September. These measures involve indirect tax changes and legislative changes related to political activities by charities.

Since Bill C-86 received first reading on October 29, 2018, the corporate income tax measures that it introduces are considered to be substantively enacted for purposes of IFRS and Accounting Standards for Private Enterprise (ASPE) as of this date (as Canada has a majority government). The measures will be considered enacted for U.S. GAAP purposes on the date the bill receives Royal Assent.

The bill includes tax measures that were first released in a Notice of Ways and Means Motion (NWMM) on October 25, 2018.

Some relief for T1134 accelerated filing
Bill C-86 provides some relief related to the T1134 filing deadline, which was accelerated by Budget 2018. The filing deadline is now being reduced to twelve months after the taxpayer's year-end (from fifteen months) for taxation years that begin in 2020, according to these new measures. This deadline will then be changed to ten months after the taxpayer's year-end for taxation years that begin after 2020, according to the measure. The budget (and July draft legislation) originally proposed to accelerate the filing deadline to six months after year-end.

Income tax changes

Corporate tax measures

Bill C-86 includes the following outstanding corporate tax measures proposed in the 2018 budget:

  • Changes to the at-risk rules for limited partnerships
  • Changes related to synthetic equity arrangements and securities lending arrangements
  • Amendments to the dividend stop-loss rules on share repurchase transactions
  • Certain international tax changes, including amendments related to cross-border surplus stripping using partnerships and trusts
  • Foreign affiliate proposals relating to investment businesses, controlled foreign affiliate status, trading or dealing in indebtedness, reassessments and reporting requirements
  • Amendments affecting the thin capitalization rules, specifically, clarifying the definition of "equity amount" in subsection 18(5) to exclude certain contributed surplus
  • Amendments to limit the amount of contributed surplus that can be converted to paid up capital without triggering a deemed dividend.

Bill C-86 also includes previously announced measures related to:

  • Allocating losses for RDTOH, as a consequence of the newly introduced eligible and non-eligible RDTOH pools
  • Corporations that are divided under foreign laws.

Other 2018 budget measures in the bill include:

  • Extension of reassessment periods for the requirement for information and compliance orders
  • Extension of reassessment periods regarding non-resident non-arm's length persons.

Personal tax measures

Personal measures from the 2018 federal budget included in Bill C-86 relate to:

  • Improving access to the Canada Worker's Benefit
  • Deductibility of employee contributions to the enhanced portion of the Quebec pension plan.

The bill also includes the recently-announced refundable new Climate Action Incentive credit for individuals, applicable to 2018 and subsequent tax years.

Trust measures not included in Bill C-86

The bill does not include the enhanced reporting requirements for trusts, proposed in the 2018 budget and included in the July 27, 2018 draft legislation.

Indirect tax measures

Bill C-86 includes previously announced GST/HST changes related to:

  • Supplies of management or administrative services made by a general partner (GP) of an investment limited partnership (ILP)
  • Amendments to extend the selected listed financial institution rules to ILPs
  • Proposed changes to supplies of carbon emission allowances
  • An exception to the rebate for printed books.

Bill C-86 also includes measures to simplify the Customs Tariff.

For more information, contact your KPMG adviser.

Information is current to October 30, 2018. 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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