Canada: 2018 Budget Includes International Tax Measures
Canada released its 2018 Budget Plan, which includes “rules aimed at ensuring that non-residents pay their fair share of tax on income derived from Canadian sources.”
Among other aims, the proposed tax measures look to ensure existing rules “cannot be avoided through the use of so-called ‘tracking arrangements’ (which allow taxpayers to ‘track’ to their specific benefit the return from assets that they contribute to a foreign resident corporation).” The measures also look to “prevent unintended, tax-free distributions by Canadian corporations to non-resident shareholders through the use of certain transactions involving partnerships and trusts.”
The budget indicates that the government will implement new rules to prevent tax-treaty shopping in order to combat base erosion and profit shifting and will publish new guidance this year on revised OECD transfer pricing guidelines, which Canada has adopted. The report also emphasizes that “large multinational enterprises in Canada and elsewhere are now required to file country-by-country (CbC) reports containing information on their global allocation of income and taxes, as well as the nature of their global business activities.”
In order to promote tax-system fairness, the government “proposes to clarify the application of certain rules for limited partnerships in order to prevent taxpayers from obtaining unintended tax advantages through the use of complex partnership structures.”
The budget also notes that the government will invest $38.7 million over the next five years in the Canada Revenue Authority (CRA) “to expand its offshore compliance activities through the use of improved risk assessment systems and business intelligence, and will facilitate the hiring of additional auditors."