Regulatory Initiative: Proposals relating to Foreign Divisive Reorganizations – Forward Regulatory Plan 2018-2020

Title or working title of the regulatory initiative:

Proposals relating to Foreign Divisive Reorganizations

Description of the objective:

In connection with proposed amendments to the Income Tax Act relating to foreign divisive reorganizations, which Budget 2018 confirmed the Government's intention to proceed with, proposed amendments to the Income Tax Regulations are required. The proposed amendments to the Income Tax Regulations, together with the proposed amendments to the Income Tax Act, are intended to ensure appropriate income tax consequences to Canadian shareholders of foreign corporations that undergo reorganizations under foreign laws that effectively divide the corporation into multiple, separate corporations. More particularly, the proposed amendments to the Income Tax Regulations are intended to ensure that, where appropriate, the transfer of property from a foreign corporation that undergoes a divisive reorganization to a separate corporation formed as a result of the reorganization does not have adverse tax consequences for Canadian shareholders. The proposed amendments are generally effective for transfers of property, as part of divisive reorganizations, that occur after October 23, 2012.

Indication of business impacts:

The Small Business Lens is not expected to apply.

Public consultation opportunities:

Details on the initiative are available in Budget 2018 in the supplementary information on tax measures.

Canadians were consulted on the draft regulatory proposal as part of a consultation announced by news release on July 27, 2018. Interested parties were invited to provide comments on the proposal by September 10, 2018.

The news release for the consultation, along with the draft regulatory proposals and the explanatory notes, is available on the Finance Canada website.

Departmental contact:

Consultations and Communications Branch
Department of Finance Canada
14th floor
90 Elgin Street
Ottawa, Ontario K1A 0G5

Phone: 613-369-3710
Facsimile: 613-369-4065
TTY: 613-369-3230
E-mail: fin.financepublic-financepublique.fin@canada.ca

For more information

To learn about upcoming or ongoing consultations on proposed federal regulations, visit the Canada Gazette and Consulting with Canadians websites.