Finance releases draft proposals on trusts, taxable dividends

Canadians have until Sept. 10 to comment on a number of income tax measures from the 2018 federal budget, including non-eligible portfolio dividends and the reporting requirements for trusts.

Finance Canada released draft legislative proposals Friday for several tax measures introduced in February’s federal budget, with the comment period ending Sept. 10. A number of budget measures were already adopted in a bill that received royal assent in June.

The new draft proposals include increased reporting requirements for trusts. Effective in tax years after 2021, the changes would require certain trusts to file an annual T3 return and provide additional information to help CRA assess the tax liability.

The proposals also include changes to how passive investment income is taxed. The proposed changes will decrease the refunds to a corporation’s refundable dividend tax on hand (RDTOH) account.

Other measures in the proposals include changes to:

• access to the Canada Workers Benefit;
• deductibility of employee contributions to the enhanced portion of the Quebec Pension Plan;
• artificial losses using equity-based financial arrangements;
• the stop-loss rule on share repurchase transactions;
• the at-risk rules for tiered partnerships;
• cross-border surplus stripping using partnerships and trusts;
• foreign affiliate proposals relating to investment businesses, controlled foreign affiliate status, trading or dealing in indebtedness, reassessments and reporting requirements;
• reassessment periods—requirements for information and compliance orders;
• reassessment periods—non-resident non-arm’s length persons; and
• the sharing of information relating to criminal matters.

The consultation also includes draft sales and excise tax legislative and regulatory proposals. A separate consultation on the GST/HST holding corporation rules ends Sept. 28.

Read the full income tax proposal document here.

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The staff of Advisor.ca have been covering news for financial advisors since 1998.