Canada: New Tax Changes in 2016

The Canadian government recently announced measures that impact the Income Tax Act and the Excise Tax Act.


Here are the highlights:

Implementation of Base Erosion and Profit Sharing: The Canadian government will be introducing new legislation that requires multinational companies to report their international revenue – country-by-country. The legislation is in line with the Organisation for Economic Co-operation and Development’s (OECD) recommendations on how global companies recognize and report their international revenue. The government will also refocus on arm’s length principles for transfer pricing so it reflects the revised OECD interpretation of the principle, and it announced increase reciprocity/information sharing with foreign revenue authorities.

The country-by-country reporting obligations will apply to companies with total annualized consolidated revenue of €750 million or more. All companies where the parent company is located in Canada will have a reporting obligation to the Canadian Revenue Authority.

Small Business Taxation: The government will keep the small business tax rate at the current 10.5%. It had previously proposed to reduce the rate progressively to 9% for tax years 2018 onwards. The current gross-up factor and dividend tax credit applicable to non-eligible dividends will also remain unchanged.

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