The Honourable Bill Morneau, Minister of Finance, tabled the Liberal government's third budget on February 27, 2018 (Budget 2018).
Budget 2018 contains several important changes affecting Canadian business, but stays the course when it comes to corporate tax rates. In particular, Budget 2018 does not respond to the recent U.S. tax reform other than to promise a detailed review to determine its impact on Canada.
Budget 2018 includes detailed provisions relating to the taxation of passive investment earned in private corporations, responding to criticisms with a more modest proposal than originally outlined. There are changes to the foreign affiliate system to address the use of tracking interests to satisfy the employee test or to avoid controlled foreign affiliate status, an extension of the period in which the income relating to foreign affiliate transactions may be reassessed, and a much shorter timeline for filing foreign affiliate information returns. Transactions using partnerships and trusts to avoid cross-border surplus-stripping limitations are targeted. Trust reporting requirements have been expanded. Other changes address losses using equity-based financial arrangements and the application of the limited partnership at-risk rules to tiered partnerships.
Budget 2018 also confirms the government's intention to proceed with its proposal to apply GST/HST to management and administrative services provided to an investment limited partnership by a general partner.
Our Budget Briefing 2018 summarizes many of the important tax proposals included in this year's budget.
Read the entire 2018 Budget Briefing
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