Canada Introduces Aggressive Measures to Counter Tax Evasion Schemes: Canada Budget Update from International Tax Advisory Team

Canada recently announced its budget for 2013 and all taxation measures, unless otherwise indicated, will apply retroactively from January 1, 2013.

Sunnyvale, CA (prHWY.com) March 29, 2013 - International Tax
* The government has proposed a series of measures to combat international tax evasion and address tax avoidance schemes.
* The Canada Revenue Agency is launching the 'Stop International Tax Evasion Program' where it will reward individuals that blow the whistle on tax avoidance schemes leading to the collection of outstanding tax dues:
1. The CRA will be contractually bound to reward the whistleblower; however, the information provided must result in total additional assessments or reassessments exceeding CAD 100,000 in federal tax.
2. The reward may be up to 15% per cent of the federal tax collected (not including penalties, interest and provincial taxes).

* In the latest budget, the government has proposed to extend, in certain circumstances, by three years the normal reassessment period for a taxation year. The government has also proposed to revise the contents of the T1135 form (Foreign Income Verification Statement) and make improvements to facilitate the reporting process. Under current regulations, a Canadian-resident individual, corporation or trust that owns certain foreign property exceeding CAD 100,000 in value must file a Foreign Income Verification Statement (Form T1135) with the CRA.
* The Canada Budget 2013 proposes to extend the scope of thin capitalization rules to Canadian-resident trusts and non-resident corporations and trusts operating in Canada.
The international tax services team at Nair & Co. can help you plan a comprehensive tax strategy for your international operations in over 50 countries. To get more details about international tax services or the latest in anti tax avoidance measures please email us at info@nair-co.com

Corporate Tax
* The government has proposed an anti-avoidance regulation to back up the existing loss restriction rules applicable on the acquisition of control of a corporation. As per the new rules, there is an acquisition of control if a person/s acquire from the corporation shares that have a fair market value of more than 75% of all the shares for that corporation but have not formally taken control of that corporation. However, it must be proved that the control was not acquired to avoid tax restrictions.
* Accelerated Capital Cost Allowance extended for manufacturing and processing machinery and equipment. The government has extended for two years the temporary measure that allowed accelerated depreciation (50% on a straight-line basis) for machinery and equipment (acquired after March 18, 2007 and before 2014).
* The government has introduced measures that would help the Canada Revenue Agency (CRA) acquire new resources and administrative tools to better deal with the Scientific Research and Experimental Development (SR&ED) program tax preparers and SR&ED performers who participate in claims where the risk of non-compliance is high. In such cases, they are generally unlikely to get eligibility for the SR&ED program.

1. Tax payers will need to provide comprehensive information on their SR&ED program claim forms about the SR&ED program tax preparers and the billing arrangements.
2. If the information about the SR&ED program tax preparers and billing arrangements is missing, incomplete or inaccurate, a new penalty of CAD 1,000 will be enforced for each claim.
3. If a third-party SR&ED program tax preparer is involved, both the claimant and the tax preparer are jointly and severally, or solidarily liable.
4. This measure applies to all SR&ED program claims filed on or after January 1, 2014 or the day of Royal Assent to the enactment of legislation, whichever is later.
* Despite exploring new rules for taxation of corporate groups in the 2010 and 2012 budgets, the government in this budget, did not give priority to moving to a formal system of corporate group taxation.

Indirect Tax
* Two measures have been introduced to simplify compliance with the GST/HST rules in pension plans for employers.
1. If certain conditions are met, employers participating in a registered pension plan can (jointly with a pension entity) treat the taxable supply by the employer to the pension entity as being for no consideration. This is applicable only if the employer accounts for and remits tax on the deemed taxable supply.
2. If the pension plan related activities for employers participating in a registered pension fall within prescribed thresholds and meet certain criteria then that employer can be fully or partially exempt from accounting for tax on the deemed taxable supplies. This is applicable for any fiscal year that begins after Budget Day i.e. March 22, 2013.
* The budget proposes authorizing the Minister of National Revenue to hold back GST/HST claims for refunds by businesses till the businesses provide all the required business identification information. This measure will be enacted after Royal Assent is granted.
For information about creating robust international pension plans contact the international HR and Payroll services team at info@nair-co.com

Personal Tax
* The government has proposed to reduce from 25% to 18% the gross-up factor applicable to non-eligible dividends. The Dividend Tax Credit (DTC) is proposed to be reduced from 2/3 of the gross-up amount to 13/18. The effective rate of the DTC in such cases will be 11%. This measure applies to non-eligible dividends paid after 2013.

For more information about doing business overseas or to know more about our international tax consulting team and international tax services please visitwww.nair-co.com
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