Bill C-59, which includes certain outstanding 2023 federal budget measures, 2023 federal economic update measures and other previously announced changes and technical amendments, received first reading in the House of Commons on November 30, 2023. The bill includes legislation to implement the Digital Services Tax (DST), Excessive Interest and Financing Expenses Limitation (EIFEL) rules, substantive CCPC measures, new rules to facilitate employee ownership trusts, rules to address certain hybrid mismatch arrangements and changes to the general anti-avoidance rule (GAAR), among other measures.

Notably the bill does not include the proposed changes to the Alternative Minimum Tax (AMT) or previously proposed changes to eliminate the deferral for CCPCs (and substantive CCPCs) earning certain income through foreign affiliates, as Finance is continuing to work on these measures. In addition, and as expected, the bill does not include the Global Minimum Tax Act, or legislation for the clean hydrogen, clean electricity or clean technology manufacturing investment tax credits, among other measures. The measures in the bill were first released in a Notice of Ways and Means Motion (NWMM) on November 28, 2023.

Note that the business income tax measures included in Bill C-59 will not be substantively enacted for ASPE or IFRS purposes until they are included in a bill that passes third reading in the House of Commons (as Canada has a minority government). These measures will not be considered enacted for U.S. GAAP purposes until the date the bill receives Royal Assent.

Business tax measures

The bill includes many previously announced tax measures from the 2023 and earlier federal budgets and the 2023 federal economic update, including measures related to:

  • EIFEL rules
  • Hybrid mismatch arrangements (first tranche)
  • New substantive CCPC rules (but does not yet include related measures to eliminate deferral for CCPCs (and substantive CCPCs) earning certain income through foreign affiliates)
  • Expansion of eligible minerals for Critical Mineral Exploration Tax Credit (CMETC) to include lithium from brines
  • Carbon capture, utilization and storage (CCUS) investment tax credit (including labour conditions)
  • Clean technology investment tax credit (including labour conditions)
  • Expanded eligible activities for corporate income tax rate reduction for zero-emission technology manufacturing to include certain nuclear manufacturing and processing activities, and three-year extension for the availability of the rate reduction
  • 2% tax on the net value of equity repurchases by certain publicly listed entities
  • Changes to the GAAR
  • Dividend received deduction by financial institutions
  • Removing the requirement that credit unions derive no more than 10% of their revenue from sources other than certain specified sources
  • Technical changes to existing rules for the First Home Savings Account
  • Exemption of certain fees from the refundable tax applicable to contributions under retirement compensation arrangements.

Personal tax changes

The bill also includes previously announced personal tax measures related to:

  • Intergenerational business transfers
  • Employee ownership trusts (but does not yet include the proposed temporary exemption for the first $10 million of capital gains realized on the sale of a business to an employee ownership trust, subject to certain conditions, announced in the 2023 Federal Fall Economic Update)
  • Allowable successors of a holder of a Registered Disability Savings Plan
  • An increase in the rural top-up on the pollution price rebate to 20% (from 10%) of the base amount.

Indirect tax changes

Among other indirect tax changes, the bill includes the Digital Services Tax Act, which is proposed to come into force on the day that is fixed by Order of the Governor in Council, but not earlier than January 1, 2024.

For more information, contact your KPMG adviser.

Information is current to November 30, 2023. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500

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