Tax Perspectives: Review of 2022 & 2023 Outlook
Between an avalanche of new legislative proposals, draft legislation implementing prior proposals, technical amendments, and a commitment by the Government of Canada to further future tax reform, there were numerous tax developments in 2022 that will have major implications for Canadian tax law moving forward.
To provide clarity for these changes, McCarthy Tétrault’s National Tax Group has authored its Tax Perspectives: Review of 2022 & 2023 Outlook. The report offers an overview of important Canadian legislative and judicial tax developments of 2022 and looks ahead to potential significant Canadian tax changes in 2023.
Topics covered include the following:
- Overview of Canadian tax developments in 2022
- developments in income tax legislation, including in relation to EIFEL Rules, Trust Reporting Rules, Mandatory Disclosure Rules, Canada Recovery Dividend, Hybrid Mismatch Rules, GAAR amendments and more
- income tax cases, including decisions from the Supreme Court of Canada, Tax Court of Canada and Quebec Court
- commodity tax developments for various regions
- Outlook for 2023
- expectations for significant tax measures previously announced by the government in Budget 2022 and decisions expected to be issued in the next year
Tax Perspectives: Review of 2022 & 2023 Outlook
Read an excerpt from the publication below:
INCOME TAX – LEGISLATION
The significant volume of new proposals and draft legislation implementing previously announced proposals included the following1:
- On February 4, 2022, Finance released draft legislation for a number of previously announced proposals (“February Release”). The package of draft legislation included the “excess interest and financing expenses limitation rules” (“EIFEL Rules”), new trust reporting rules (“Trust Reporting Rules”) and mandatory disclosure rules (“Mandatory Disclosure Rules”).
- On April 7, 2022, the Government released the 2022 federal budget (“Budget 2022”) which included significant proposals such as the Canada recovery dividend and additional tax on banks and life insurers, substantive CCPC rules (“Substantive CCPC Rules”) and rules regarding foreign accrual property income earned by controlled foreign affiliates of Canadian-controlled private corporations, an update on the Government’s commitment to follow through on the Organization for Economic Co-operation and Development (“OECD”) international tax reform recommendations, and a consultation process on “modernizing” the general anti-avoidance rule (“GAAR”). The McCarthy Tétrault LLP overview of Budget 2022 provides a more detailed review.
- On April 29, 2022, Finance released the first of two packages of draft legislation for the “anti-hybrid mismatch” rules (“Hybrid Mismatch Rules”) announced in the 2021 federal budget.
- On August 9, 2022, the Government released proposed draft legislation in respect of certain measures proposed in Budget 2022 and prior budgets. The package of legislation included amended draft legislation implementing the Mandatory Disclosure Rules and Trust Reporting Rules responding to comments from the tax community since February 4, 2022. The package also included new draft legislation for Budget 2022 proposals such as the Canada recovery dividend and additional tax on banks and life insurers, investment tax credit for carbon capture, utilization and storage, the critical mineral exploration tax credit, the elimination of flow-through shares for oil, gas and coal exploration and development, rules addressing hedging and short selling by Canadian financial institutions, Substantive CCPC Rules and many more. The August 9 package of legislation also included a number of “technical amendments” that Finance described as “amendments to improve the certainty and integrity of the tax system” but include substantive changes that will have a meaningful impact on tax planning.
- Also on August 9, 2022, Finance released a consultation paper entitled “Modernizing and Strengthening the General Anti-avoidance Rule”, and began the GAAR consultation process announced in Budget 2022.
- On November 3, 2022, the Government presented the Fall Economic Statement 2022 (“Fall Economic Statement”) in the House of Commons. In tandem with the Fall Economic Statement, the Government released a series of draft legislative proposals for public consultation on a variety of previously announced tax measures. On November 4, 2022, the Government introduced Bill C-32, the Fall Economic Statement Implementation Act (“Bill C-32”) in the House of Commons. This November package of draft legislation and Bill C-32 included, inter alia, (i) revised EIFEL Rules, with changes intended to address stakeholder comments and other issues identified and defer the coming into force of such rules from taxation years beginning on or after January 1, 2023 to taxation years beginning on or after October 1, 2023; (ii) a deferral of the coming into force date for amended reporting requirements for reportable transactions and new reporting requirements for notifiable transactions until the date on which a bill implementing such legislation receives Royal Assent; and (iii) a deferral of coming into force of the enhanced reporting requirements for trusts (including bare trusts) by one year from taxation years ending after December 30, 2022 (as previously contemplated) to taxation years ending after December 30, 2023.
- On December 15, 2022, Bill C-32 received Royal Assent.
The volume of legislative developments in the year precludes a comprehensive review. In the immediately following sections, we provide an overview of some of the more noteworthy 2022 developments.
1. All statutory references herein are to the Income Tax Act (Canada) (“Act”) unless specifically otherwise noted.
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