The Budget and Economic Statement Implementation Act, 2007 (Bill C-28) received Royal Assent on December 14, 2007. Bill C-28 contained significant amendments to the rules in the Income Tax Act (Canada) applicable to foreign affiliates of Canadian taxpayers. These amendments generally apply retroactively – in most cases, to taxation years of a foreign affiliate beginning either after 1999 or after December 20, 2002. However, taxpayers may elect to have many of these amendments apply earlier – to taxation years of foreign affiliates beginning after 1994. Depending on a taxpayer's particular circumstances, these elections could be very favourable to a Canadian taxpayer and must be made in a timely manner.

Elections made by a Canadian-resident taxpayer will apply with respect to all of that taxpayer's foreign affiliates. Any election must be made in writing and filed with the Canada Revenue Agency on or before the day on which the Canadian-resident taxpayer's tax return is due for its taxation year that includes December 14, 2007. Thus, Canadian corporations that have a December 31 taxation year end must make any election by June 30, 2008.

Whether or not a Canadian-resident taxpayer should make one or more of these elections in respect of its foreign affiliates is a complex matter. Please contact any member of our National Tax Department for assistance in determining whether these elections are appropriate in your particular circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.