Canada: Tax provisions in 2016 federal budget | KPMG | GLOBAL

Canada: Tax provisions in 2016 federal budget

Canada: Tax provisions in 2016 federal budget

The Finance Minister today delivered Canada's 2016 federal budget. Among the tax provisions are measures to:


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  • Repeal certain tax credits available for individual taxpayers
  • Defer further reductions of the small business tax rate of 10.5% on the first $500,000* of business income
  • Bar multiplication of the small business deduction in certain partnerships and corporate structures
  • Repeal the eligible capital property regime and replace it with a new capital cost allowance class
  • Tighten the rules on the use of a life insurance policy to distribute amounts tax-free to shareholders
  • Impose new rules to limit cross-border paid-up capital (PUC) increases
  • Extend the back-to-back loan rules
  • Introduce country-by-country reporting, address treaty abuse pursuant to the base erosion and profit shifting (BEPS) project, and provide for the spontaneous exchange of certain tax rulings
  • Revise the financial institution rules for indirect tax purposes


*$=Canadian dollar 

There were no changes introduced to the capital gains inclusion rate or the stock options deduction.


Read a March 2016 report [PDF 199 KB] prepared by the KPMG member firm in Canada: 2016 Federal Budget Highlights 

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