(December 1 – 13:30 ET) –
Finance minister Paul Martin has
tabled a package of draft technical
amendments to the Income Tax Act.
Martin said the amendments are
being released in draft form to
give taxpayers and their advisors
time to consider and comment on
the proposed changes. Martin also
said a bill to implement tax
measures arising out of the 1999
federal budget will likely be
tabled in the House of Commons
before the Christmas recess. It
will also include legislation to
implement the income tax treatment
of demutualizing life insurance
companies.
The draft amendments include
new approaches for the taxation of
non-resident “family” trusts (NRTs)
and foreign investment funds
(FIFs).
Under the proposals, NRTs will
be treated as resident in Canada
during the period in which a
contributor to the NRT was resident
in Canada. As a result, the
contributor is jointly liable with
the NRT for the NRT’s total
Canadian income tax liability on
its worldwide income.
Finance has, however, dropped
its plans to additionally tax
distributions that had not been
subject to Canadian tax. It has
also dropped plans to exempt
vehicles resident in the U.S.
As for FIFs, Finance is
proposing either an annual
allocation of a FIF’s income to a
Canadian unitholder, or the
unitholder will be taxed on any
increases in the fair market
value of the unitholder’s interest
in the FIF on an annual basis.
The proposed new rules for NRTs
and FIFs will apply in all cases
to taxation years that begin
after 2000.
Finance is also planning a
revised draft of the December 1998
legislative proposals on taxpayer
migration and trusts. It will be
released within the next few
weeks.
-IE Staff
For more information, please see: