(August 8 – 17:20 ET) – The Department of Finance today released detailed income tax proposals concerning foreign banks that operate branches in Canada.

The new rules, which will amend the Income Tax Act, follow from amendments to the Bank Act enacted in June 1999. Those amendments allowed foreign banks to establish branches rather than just Canadian-incorporated subsidiaries. Among the new changes is a proposal that foreign currency deposits be classed as permitted investments for RRSPs and other deferred-income plans.

“These rules will make Canada1s taxation of the new foreign bank branches broadly comparable to the taxation of Canadian banks,” said Jim Peterson, Secretary of State (International Financial Institutions).

The rules give foreign banks a fixed window to move their operations from subsidiaries into Canadian branches without undue tax consequences. Banks must apply to the Office of the Superintendent of Financial Institutions to operate a Canadian branch by March 31, 2001.
-IE Staff