Federal budget 2017 – international tax measures

The 2017 Federal Budget announced the government’s continuing goal to address base erosion and profit sharing (BEPS) and international tax evasion that was first dealt with in the 2016 Federal Budget.

Canada has worked with the Group of 20 (G20) and the Organisation for Economic Cooperation and Development (OECD) to develop recommendations under the BEPS project to address these issues. As a result, Canada has implemented – or is currently implementing – the minimum standards under the BEPS project, as follows:

• Requiring large, multinational corporations to file country-by-country reports to disclose the international distribution of the activities of a corporate group.
• Assisting in the development of a streamlined process to implement recommendations under the BEPS project through a multilateral instrument to modify certain provisions of existing bilateral tax treaties.
• Improving the mutual agreement within Canada’s treaties to effectively resolve tax treaty-related disputes, in a timely manner.
• Sharing tax rulings with other countries to help address the BEPS issues.
• Continuing to enforce foreign accrual property income (FAPI) rules, which prevent taxpayers from hiding passive income in foreign entities.
• Implementing requirements for taxpayers to disclose specified tax avoidance transactions to the Canada Revenue Agency.
• The application of revised international guidance on transfer pricing by multinational enterprises. These guidelines provide an improved interpretation of the Canadian tax laws regarding transactions between entities of a corporate group in different jurisdictions being priced as if they were arm’s length.

Canada is also increasing efforts to battle international tax evasion by sharing relevant financial account and tax information with other foreign tax authorities. This sharing is based on the framework established under the Common Reporting Standard, developed by the OECD. The implementation of this measure will begin on July 1, 2017, and the exchange of information will begin in 2018.

Contact us today for more information on how the Federal Budget may affect you and your business.