Pension Plan Tax Policy Review — What’s in Scope?
Pension Plan Tax Policy Review
Federally-regulated Canadian pension plans may be affected by a government consultation.
Federally-regulated Canadian pension plans that hold controlling interests in businesses may be affected by the results of a new government consultation on tax policy issues. The consultation process, which was recently launched by Finance, is intended to assess:
- The value of the existing rule that restricts federally-regulated pension plans from holding more than 30% of the voting shares of a company (i.e., the “30% rule”)
- The tax fairness and economic and market efficiency of the ability of pension plans to reduce or eliminate entity level income tax of businesses in which they hold a controlling interest
- Whether existing tax rules such as the specified investment flow-through (SIFT) rules or the thin capitalization rules should be extended to pension-controlled subsidiaries.
If the policy changes are made as a result of this consultation, they could have a major impact on the current investment strategies of Canadian pension plans.
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