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A. Tax Legislation

Late Breaking News - Ottawa Hammers Income Sprinkling

uly 18, 2017:   Ottawa has unveiled a series of new measures to significantly restrict the ability of high-income Canadians to use private corporations to reduce their tax bills, including those who pay out dividends to family members in lower tax brackets.

The measures fall into three categories:

  1. curtailing the ability of high-income Canadians to “sprinkle” income to family members, such as their children and spouse who are in lower tax brackets;
  2. harmonizing the treatment of “passive” investment portfolios. Under the current system, high-income Canadians can benefit from a more favourable taxation rate for income derived by stocks and real-estate investments when the investment is held in a private corporation. The proposed measure would not be applied retroactively, but rather to future investments; and
  3. limiting the ability to convert a private corporation’s regular income into capital gains, given that only half of capital gains are included in a taxpayer’s income.

For the full techincal details go to the following link on the Department of Finance website.

The federal government is not enacting the measures immediately, but instead is launching consultations in the lead-up to final proposals in coming months. The deadline for submissions is Oct. 2, 2017.  The government hopes to recoup at least $250-million a year with the proposed changes.

Dont hold your breath on the Government’s willingness to change the basic thrust of these rules!

1. Budget Dates 2017

Federal – March 22, 2017
Alberta – March 16, 2017
British Columbia – February 21, 2017
Manitoba – April 11, 2017
New Brunswick – February 7, 2017
Newfoundland & Labrador – April 6, 2017
Northwest Territories – February 1, 2017
Nova Scotia – April 27, 2017
Nunavut – February 22, 2017
Ontario – April 27, 2017
Prince Edward Island – April 7, 2017
Quebec – March 28, 2017
Saskatchewan – March 22, 2017
Yukon – April 20, 2017

2. Proposed Federal Tax Legislation - Including Budgets

The Department of Finance Website links all pending/draft tax legislation on its website, including the recent Federal Budget introduced by Notice of Ways and Means Motion on the same day as the Federal Budget. 

This is where you can find links to the various Notices of Ways and Means Motions and draft technical legislative proposals which have not yet become law, as well as the Department of Finance’s explanatory notes for the proposed tax changes.The status of proposed tax legislation as it progresses though Parliament until it is Proclaimed into Force, please follow this link to the “Federal Statutory Updates” can be found here.For additional details on tax legislation contact the Finance official responsible for the particular piece of legislation whose contact details are typically included with each piece of Draft Legislation.

3. Status of Tax Treaties

For the Status of International Tax Treaty Negotiations on the Department of Finance website, scroll down past the yearly Notices to see the: In Force; Signed but Not Yet In Force and Under negotiation/re-negotiation details. Also included in this section of the Department of Finance website is an update on TIEA’s. New this month:

4. Tax Rate Links

KPMG –Digital Tax Facts 2016-2017 April 30, 2017

CRA – Individual Tax RatesCorporate Tax Rates

BDO – Personal Tax Rates 2017Corporate Tax Facts 2017E & Y – Personal Tax Calculator and Corporate Tax RatesKPMG – Personal Tax TablesCorporate Tax TablesDeloitte – Personal and Corporate Tax Rates ArchivePwC – Combined Tax Rates

5. 2017 Federal Budget Commentaries

Aird & Berlis

Stikeman Elliot – GST/HSTBlake Cassels & GraydonMoodys GartnerMcCarthy TetreaultBDOKPMGDeloittePWC

6. 2017 Provincial Territorial Budgets - Deloitte

Deloitte Provincial budget commentaries

B. CRA's Interpretations

7. No Treaty relief from double taxation for a LLC with U.S.-source income and single Canadian-resident Member

No Treaty relief from double taxation for a LLC with U.S.-source income and single Canadian-resident member

8. CRA Proposes Sweeping Changes to Voluntary Disclosures Program

CRA Proposes Sweeping Changes to Voluntary Disclosures Program

See slso BLG article, “Canada Revenue Agency Proposes Sweeping Changes to Voluntary Disclosures Program”

9. Family expenses paid by discretionary family trust must be unequivocally for the benefit of the child beneficiary's benefit

Family expenses paid by discretionary family trust must be unequivocally for the benefit of the child beneficiary’s benefit – CRA Q. 10 June 2017 STEP

10. Medical clinic receiving a share of the clinic doctors’ billings supplying GST/HST taxable admin

Medical clinic receiving a share of the clinic doctors’ billings to the provincial health care plan was supplying GST/HST taxable administrative services – CRA

11. TI 2016-0649841E5 F - Dividend Refund to Private Corporation

TI 2016-0649841E5 F – Dividend Refund to Private Corporation – Although a private corporation with an available claim for a dividend refund (“DR”) is not required to make the claim, CRA considers that it has the discretion to make the DR even when not claimed

Tax Interpretations

12. TI 2016-0679751E5 F Tr - a “survivor payment” can be made out of TFSA

T.I. 2016-0679751E5 F Tr – a “survivor payment” can be made out of the deceased’s TFSA even where this occurs in the executor’s discretion

13. CRA comments on the Uber GST/HST amendment

CRA comments on the Uber GST/HST amendment

C. Tax Court Cases

14. Estate of Norman Frank Berkner - B.C. Multiple Wills

Does Berkner Estate Case resolve validity of Multiple will in B.C.?

See decision of BCSC 

CVTrsutCo Blog

15. TCC finds that value-shift scheme were included as part of an estate-freezing purpose - 2763478

TCC finds that value-shift scheme was included as part of an estate-freezing purpose – 2763478 Canada (2017 CCI 98 )

See Tax Interpretations

16. Series of transactions can inform whether a bad s. 74.5(11) purpose - taxpayer not responsible under s.163(2)

TCC Mady decision (2017 TCC 112) finds that the series of transactions can inform whether an included property transfer has a bad s. 74.5(11) purpose, and that the taxpayer is not responsible under s. 163(2) for the unbeknownst sharp practice of his tax advisor

See Tax Interpretations

D. Practitioner's Forum

17. STEP Canada CRA Roundtable, June 13, 2017 - Gowlings

STEP Canada CRA Roundtable, June 13, 2017  – Gowlings Link 

See also Tax Interpretations Commentary

Topics Covered:

  1. Paragraph (b) of the Definition of “Specified Corporate Income”
  2. GAAR and Capital Distribution to Canco Beneficiary
  3. Dual-resident estate and Article IV(4)
  4. US Grantor Trust
  5. Allocation of safe income to discretionary dividends
  6. Application of GAAR to share redemption transactions relying on paragraph 55(3)(a)
  7. Subsection 55(2) and pipeline planning
  8. Articles IV and XXVI: Single-member disregarded U.S. LLC
  9. Paragraph 5 of Article XXIX — procedures for Qualified Subchapter S Corporation Subsidiary
  10. Application of 104(6), (13) and (24)
  11. Spousal rollover and substituted property
  12. Subsection 75(2) and T3 reporting requirements
  13. TFSA audit project
  14. Dedicated Telephone Service
  15. Registration of Tax Preparers Program

18. Key considerations on the new small business deduction denial rules

Key considerations on the new small business deduction denial rules

19. The impact of high personal and corporate tax rates

The impact of high personal and corporate tax rates

20. Less Relief under Draft GST VDP Guidelines - KPMG

Less Relief under Draft GST VDP Guidelines – KPMG

21. CRA announces arrangement with IRS on country-by-country reports

CRA announces arrangement with IRS on country-by-country reports.

22. Finance Targets Private Company Tax Planning - KPMG

Finance Targets Private Company Tax Planning – KPMG