Department of Finance Canada Consulting on Draft Proposals to Improve Tax System

July 30, 2019 - Ottawa, Ontario - Department of Finance Canada

A fair and efficient tax system is fundamental to an economy that works for everyone—making life more affordable for Canada's middle class and people working hard to join it.

To support this goal, the Government of Canada routinely seeks public feedback on proposed changes to the tax system.

The Department of Finance Canada today released for public comment a set of draft legislative proposals to implement tax and other related measures announced in Budget 2019 that have not yet been legislated.

Specifically, the proposals would implement Budget 2019 measures to:

• improve the consistency of the tax treatment of owners of multi-unit residential properties with that of owners of single-unit residential properties;
• provide greater flexibility in managing retirement savings by permitting two new types of annuities under the tax rules for certain registered plans;
• modify the Income Tax Act to remove the time limitation on the period that a Registered Disability Savings Plan may remain open after a beneficiary becomes ineligible for the Disability Tax Credit, and eliminate the requirement for medical certification that the beneficiary is likely to become eligible for the Disability Tax Credit in the future in order for the plan to remain open (draft legislative proposals to amend the Canada Disability Savings Regulations as part of this measure are not included in the release);
• bring the specified multi-employer plan rules into line with the tax rules that apply to other defined benefit registered pension plans;
• prohibit an Individual Pension Plan from providing retirement benefits in respect of past years of pensionable service under a defined benefit plan of an employer other than the Individual Pension Plan's participating employer (or its predecessor employer);
• improve the "allocation to redeemers" methodology used to allocate capital gains to redeeming unitholders of mutual funds;
• improve the rules meant to prevent taxpayers from using derivative transactions to convert fully taxable ordinary income into capital gains;
• make the "requirement-for-information" process more efficient by allowing requirements for information to be sent to banks and credit unions electronically;
• improve the transfer pricing rules that apply in transactions occurring across international borders by persons who are not dealing at arm's length;
• better target the foreign affiliate dumping rules to counter erosion of the tax base that can result from transactions in which a corporation resident in Canada controlled by a non-resident invests in a foreign affiliate; and
• ensure that the appropriate tax consequences apply to cross-border share lending arrangements that are being used to avoid Canadian dividend withholding tax.

The draft proposals released today would also modify tax measures legislated in Budget Implementation Act, 2019, No. 1 to address early feedback from Canadians. These measures relate to the Accelerated Investment Incentive as it applies to resource expenditures and depreciable property, and to the temporary enhanced first-year Capital Cost Allowance rate of 100 per cent in respect of eligible zero-emission vehicles.

Note that references to "Announcement Date" in the draft legislative proposals, and the accompanying explanatory notes included with this release, refer to today's date.

Canadians are invited to provide comments on these draft income tax legislative proposals by October 7, 2019. Please send your comments to fin.legislation-taxation-legislation-taxation.fin@canada.ca.

Written correspondence related to the consultation can also be mailed to:

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