Canada: Legislation to implement tax measures in 2015, 2016 budgets

Canada: Tax measures in 2015, 2016 budgets

Canada’s Finance Department on 18 April 2016 released draft legislation to implement certain measures that were proposed in the 2015 and 2016 federal budgets. The measures are set out in 91 pages of draft legislation and 96 pages of explanatory notes.

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The draft legislation includes changes proposed in the 2015 budget affecting the taxation of inter-corporate dividends under section 55, withholding tax requirements for non-resident employers under section 153, and the dividend rental arrangement rules under section 112. The draft legislation does not appear to include many of the significant tax changes announced in the 2016 federal budget. These may be expected in a future bill.

Draft legislation measures: April 2016

The draft legislation features numerous amendments to the Income Tax Act, including changes that affect: 

  • Taxation of inter-corporate dividends, including consequential stock dividend changes - sections 52 and 55 
  • Expansion of definition of Canadian exploration expense to include costs of environmental studies or community consultations to obtain certain permits - section 66.1
  • Gross-up and dividend tax credit for non-eligible dividends - sections 82 and 121
  • Dividend rental arrangement rules denying the inter-corporate dividend deduction under synthetic equity arrangements - sections 112 and 248
  • Determination of certain components of foreign accrual property income (FAPI) - section 95 
  • Small business deduction rate - section 125
  • Withholding tax on payments made by "qualifying non-resident employers" - sections 153 and 227 
  • Investments in limited partnerships by registered charities - section 253.1 
  • New Canada child benefit - section 122.61
  • Individual (personal) tax credits including the tuition, textbook and education tax credits, school supplies tax credit, family tax cut and child fitness tax credits - sections 118.031 to 122.9  

Amendments to the Excise Tax Act are also included in the release.

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