Bill C-74—First Reading for Federal Budget Bill #1 | KPMG | GLOBAL
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Bill C-74—First Reading for Federal Budget Bill #1

Bill C-74—First Reading for Federal Budget Bill #1

The first bill to reflect 2018’s federal budget received first reading March 27, 2018.

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Bill C-74 includes certain previously announced tax measures, such as reductions to the small business tax rate in 2018 and 2019 and the tax on split income rules (TOSI). Bill C-74's tax measures were initially released on March 22, 2018 as a notice of ways and means motion (NWMM).

Since Bill C-74 received first reading on March 27, 2018, the corporate income tax measures included in the bill are considered to be substantively enacted for purposes of IFRS and ASPE as of this date (since Canada has a majority government).

This bill includes measures from the 2018 federal budget and other measures including income tax amendments to:

  • Introduce passive investment income rules applicable to taxation years that begin after 2018, subject to anti-avoidance rules, to:
    • Reduce the small business limit, on a straight-line basis, for Canadian controlled private corporations (CCPCs) with investment income between $50,000 and $150,000
    • Introduce the new two-pool refundable dividend tax on land (RDTOH) system and related transitional rules
  • Extend eligibility for investing in specified clean energy generation and conservation equipment in CCA class 43.2 to property acquired before 2025 (from 2020)
  • Reduce the federal small business tax rate to 10% (from 10.5%) effective January 1, 2018, before reducing it again to 9%, effective January 1, 2019.

Excluded measures

The following 2018 budget measures are still outstanding:

  • Changes to the at-risk rules for tiered 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 or trusts and certain foreign affiliate related measures
  • Extension of the reassessment period in certain situations
  • Amendments affecting the thin capitalization rules, specifically, clarifying the definition of "equity amount" in subsection 18(5) to exclude contributed surplus that arose when the corporation was a non-resident or in connection with a 212.1(1.1) disposition or an investment to which subsection 212.3(2) applies
  • Amendments to paragraphs 84(1)(c.1) to (c.3) to limit the amount of contributed surplus that can be converted to paid up capital without triggering a deemed dividend to exclude contributed surplus that arose at a time the corporation was a non-resident, or that arose in connection with a 212.1(1.1) disposition or an investment to which subsection 212.3(2) applies
  • Increased reporting requirements for trusts
  • Amendments related to health and welfare trusts. 

 

For more information, contact your KPMG adviser.

 

Information is current to April 03, 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

© 2018 KPMG LLP, a Canada limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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