Department of Finance Canada Consults on Updates to the Tax System

September 16, 2016 – Ottawa, Ontario – Department of Finance Canada

The Government of Canada is committed to ensuring that Canada’s tax system is fair, efficient, and functioning as intended to make sure that our economy is working for the middle class and all Canadians. Providing opportunities for Canadians to have their say on proposed changes to the tax system is an important part of this ongoing process. To that end, the Department of Finance Canada today released draft legislative and regulatory proposals relating to technical amendments to the Income Tax Act and related legislation.

These proposals include amendments to:

  • improve the accuracy and consistency of the income tax legislation and regulations;
  • extend the types of reverse takeover transactions to which the corporate acquisition of control rules apply;
  • improve the consistency of rules applicable for expenditures in respect of scientific research and experimental development;
  • introduce new rules to ensure that the taxable income of federal credit unions will be allocated among provinces and territories using the same allocation formula as applicable to the taxable income of banks; and
  • ensure the appropriate application of Canada’s international tax rules, including by:
    • making largely relieving changes to the “upstream loan” rules (and related transitional relieving rules);
    • re-introducing previously proposed rules to ensure an appropriate income inclusion for stub-year foreign accrual property income on dispositions of foreign affiliate shares;
    • introducing a new elective rule that provides tax-deferred treatment in respect of dispositions of taxable Canadian property on a foreign merger;
    • making generally relieving changes to the shareholder benefit rules as they apply to foreign corporate reorganizations; and
    • clarifying the taxation of dispositions of taxable Canadian property resulting from a “negative adjusted cost base” in a property.

Additionally, the Department of Finance Canada is proposing changes to the measure in respect of the Sales of Linked Notes announced in Budget 2016.

The legislative and regulatory proposals, as well as explanatory notes that describe the proposals in detail, are included with this release. Interested parties are invited to provide comments on the legislative and regulatory proposals by November 15, 2016. Please send your comments to fin.legislation-taxation-legislation-taxation.fin@canada.ca or to:

Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario
K1A 0G5

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Media Contacts

Annie Donolo
Press Secretary
Office of the Minister of Finance
613-769-7187

Media Relations
Department of Finance Canada
613-369-4000

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