Switch Funds and Other Changes Fly Under Summer Radar

In case you missed it, Finance Canada released draft legislation for consultation on July 29, the Friday of the August long weekend. Responses must be received by September 27. Of particular interest to investors: the implementation date for new taxation on switches in corporate-class mutual funds appears to be pushed back to January 1, 2017. And there’s much more than that to be aware of.

All references to “Announcement Date” in the draft legislation will refer to July 29, 2016. The provisions all stem from the March 22, 2016, budget and include:

• New taxation of switch-fund shares (corporate-class funds) at their fair market value (previously, switches were tax free; the big news here is the postponement of the implementation date to January 1, 2017
• Alternative arguments in support of assessments (which gives CRA additional opportunities when defending an assessment of tax under objection or appeal)
• Sales of linked notes (changes are still scheduled for implementation on October 1, after which the income returns will all be considered taxable interest; there are changes to the calculation of foreign currency fluctuations as well.)
• Expanding tax support for clean energy and emissions trading regimes
• Clauses relating to the multiplication of the Small Business Deduction; avoidance of the business limit and taxable capital limit
• New clauses relating to life insurance policies
• Changes relating to debt-parking to avoid foreign exchange gains
• Tightening up of rules regarding the valuation for derivatives
• New Eligible Capital Property rules
• Updates to country-by-Country reporting rules
• Changes to the Common Reporting Standard Penalty and consequential amendments
• Updates to Cross-Border Surplus Stripping Rules
• Extension of the Back-to-Back Rules

The news release accompanying the draft legislation noted that these and other provisions from the March Budget “may” be included in a bill to be tabled after September 27. Comments are to be sent to legislation-taxation@canada.ca or to the Tax Policy Branch, Department of Finance, 90 Elgin Street, Ottawa, Ontario, K1A 0G5.

For more information on these and other budget proposals, Knowledge Bureau students are invited to consult EverGreen Explanatory Notes. Professionals who are not students may otherwise subscribe to EverGreen Explanatory Notes by clicking here.

Refer a Friend	Research	Calculators	Course Trials