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Federal Budget 2017: Business Income Tax Measures, Part 2in Canadian Government News and Updates
· Meaning of Factual Control; A recent court decision held that, in order for a factor to be considered in determining whether factual control exists, it must include “a legally enforceable right and ability to effect a change to the board of directors or its powers, or to exercise influence over the shareholders who have the right and ability.” This requirement limits the scope of factors that may be taken into consideration in determining whether factual control of a corporation exists. Budget 2017 proposes that the Income Tax Act be amended to clarify that, in determining whether factual control of corporation exists, factors may be considered that are not limited to the requirement mentioned.
· Timing of Recognition of Gains and Losses on Derivatives: Budget 2017 proposes to introduce an elective mark-to-market regime for derivatives held on income account. Budget 2017 also proposes to introduce a specific anti-avoidance rule that targets straddle transactions.
· Additional Deduction for Gifts of Medicine: Budget 2017 proposes to eliminate the additional deduction for gifts of medicine. This measure does not affect the general income tax treatment of donations made by corporations to registered charities, including donations of medicine.
· Investment Tax Credit for Child Care Spaces: Budget 2017 proposes to eliminate this tax credit, a 25% non-refundable tax credit on costs incurred to build or expand child care spaces in licensed child care facilities.
· Insurers of Farming and Fishing Property: Insurers of farming and fishing property benefit from a tax exemption based upon the proportion of their gross premium income, and that of their affiliated insurers, that is earned from the insurance of property used in farming or fishing. Budget 2017 proposes to eliminate this tax exemption. This will apply to taxation years that begin after 2018.
· Billed-basis Accounting: Billed-basis accounting enables taxpayers to defer tax by permitting the costs associated with work in progress to be expensed without the matching inclusion of the associated revenues. Budget 2017 proposes to eliminate the ability for designated professionals to elect to use billed-basis accounting.
· Consultation on Cash Purchase Tickets: Budget 2017 launches a consultation on the income tax deferral available in respect of deferred cash purchase tickets for deliveries of listed grains Stakeholders are invited to provide comments on the ongoing utility, and potential elimination of this tax deferral, including any appropriate transitional period or rules.
- Federal Budget 2017: Business Income Tax Measures...
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