The Deputy Prime Minister and Minister of Finance, Chrystia Freeland, presented the Canadian Government’s budget on April 19. The budget includes several international tax proposals, in which the budget:
- enhances Canada’s mandatory reportable transaction disclosure rules, subject to public consultation,
- provides further details of a proposed digital services tax, to be effective January 1, 2022,
- limits the deductibility of interest by corporations, trusts, and partnerships to a percentage of tax-basis EBITDA, and
- introduces rules to address hybrid mismatch arrangements.
The budget does not contain any proposed changes to the corporate tax rates in Canada. The timeline for draft legislation and proposed effective dates are described below.
With this proposed budget, Canada is aligning with actions proposed by the OECD, the European Union, and many jurisdictions. Given the global momentum for such provisions, MNCs should understand how the proposals might impact their operations. In addition, MNCs should consider providing feedback on such impact as requested within the proposals.