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Corporate Tax
Canada
According to the recent 2013 Federal Budget, the government remains on track to return to balanced budgets by 2015-2016, despite continued global economic uncertainty. Budget 2013 proposes a number of significant business income tax and international tax measures. The government's intentions in introducing these measures are, among other things, to improve the integrity of the tax system and to close tax loopholes.
The Department of Finance has released draft legislation to amend the Income Tax Act to eliminate the tax advantages of stapled security transactions. The draft amendments are generally consistent with the proposals announced by the Department of Finance in 2011. Their principal thrust is to deny the deduction of amounts paid by the issuer of a stapled security in a variety of circumstances.
The 2012 Federal Budget was recently tabled. It is intended to keep the government on track to return to balanced budgets through a broad range of selective spending cuts, and repeats themes from previous budgets. It also proposes a number of important tax measures in the areas of business income tax and international tax.
Stapled security structures have begun to appear in the market in recent months in response to the specified investment flow-through rules. The Department of Finance Canada has issued a news release and accompanying background document announcing proposed amendments intended to eliminate the tax advantages of stapled security transactions. Draft legislation has not yet been released.
Public company spin-off transactions
Corporate spin-off transactions have again become a preferred structure for companies to release shareholder value and achieve other business purposes. There are several ways of implementing a corporate spin-off. This update looks at three common alternatives used in order to minimise tax consequences - a butterfly transaction, a return of capital transaction and a share capital reorganisation transaction.
The Canadian minister of finance recently released the long-anticipated draft legislation and accompanying explanatory notes in connection with the conversion of specified investment flow-through (SIFT) trusts and SIFT partnerships into corporations. The draft legislation takes into account the different ownership structures used by income trusts.
