On
September 13, the Department of Finance released for consultation
draft legislative proposals that would implement a number of tax
measures from Canada's Economic Action Plan 2013, which was
originally introduced in March this year by Finance Minister Jim
Flaherty during his 2013 Budget.
The
draft legislation contains various measures to be taken within the
personal income tax code, including an increase to the Lifetime
Capital Gains Exemption to CAD800,000 (USD774,000) and indexing the
new limit to inflation.
However,
the major elements within the personal income tax changes relate to
tax compliance. Examples include: extending the reassessment period
for reportable tax avoidance transactions and tax shelters when
information returns are not filed properly and on time; ensuring that
derivative transactions cannot be used to convert fully taxable
ordinary income into capital gains taxed at a lower rate; and
ensuring that the tax attributes of trusts cannot be inappropriately
transferred among arm's length persons, and responding to the Federal
Court of Appeal decision in the Sommerer case
to restore the intended tax policy result in relation to non-resident
trusts.
In
like manner, with regard to international taxation, the reassessment
period for taxpayers who have failed to correctly report income from
a specified foreign property on their annual income tax return, will
be extended; as will the application of Canada's thin capitalization
rules to Canadian resident trusts and non-resident entities.
In
respect of business taxation, the draft legislation will eliminate
the unintended tax benefits of leveraged life insurance arrangements,
and enhance corporate anti-loss trading rules to address planning
that avoids those rules. It will also expand the eligibility for the
accelerated capital cost allowance for clean energy generation
equipment to include a broader range of biogas production equipment
and equipment used to treat gases from waste.
In
addition, the accelerated capital cost allowance for capital assets
used in new mines and certain mine expansions will be phased out, and
the deduction rate for pre-production mine development expenses will
be reduced.
Interested
parties are invited to provide comments on the draft legislative
proposals by October 15, 2013.
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