On 27 July 2018, the Canadian Department of Finance (Finance) released draft legislative proposals that may impact a Canadian-resident holding corporation's entitlement to claim input tax credits (ITCs). Specifically, under proposed changes to section 186 of the Excise Tax Act (the ETA), the test for claiming ITCs will no longer be based on whether expenses incurred by a holding corporation can reasonably be regarded as being incurred for consumption or use in relation to shares or debt of a related corporation. Instead, ITCs will be available only where the expenses incurred by the holding corporation meet the specific requirements in paragraphs 186(1)(a) to (c) of the ETA.
If enacted, these proposals will be effective after 27 July 2018.
If the legislative proposals are enacted, a Canadian-resident holding corporation's ability to claim ITCs may be significantly reduced.
Read more in the attached PwC Tax Insights newsalert.