The Federal Court of Appeal (the “FCA”) recently released its decision in 3295940 Canada Inc v His Majesty The King, 2024 FCA 42. This decision is a welcome development in the jurisprudence regarding the application of the General Anti-Avoidance Rule (the “GAAR”) in subsection 245(2) of the Income Tax Act (the “Act”), particularly regarding the scope of the abuse analysis and relevance of alternative transactions. Background Gestion Micsau Inc. (“Micsau”) indirectly held a minority interest in a generic drug business (the “Business”). An American investment fund, RoundTable, indirectly held th ..read more

Tax and industry professionals have been waiting for the Federal Court of Appeal (the “FCA”) to issue its decision in Glencore Canada Corporation v R for several months. The decision under appeal (2021 TCC 63) sparked many discussions, and the FCA’s reasons for dismissing the taxpayer’s appeal (2024 FCA 3) are sure to spark many more. The FCA determined that “break fees” paid by a target company to a would-be acquirer were taxable not as capital gains but as an “inducement” received “in the course of earning income from a business or property” under paragraph 12(1)(x) of the ITA. Taxpayers eng ..read more

I.              INTRODUCTION The Department of Finance first publicly announced an intention to modify the general anti-avoidance rule (the “GAAR”), found in section 245 of the Income Tax Act (Canada) (the “Act”), on November 30, 2020. This intention most recently came to fruition with the release of legislative proposals on August 4, 2023 (the “August Proposals”) and the introduction of Bill C-59 in Parliament on November 30, 2023. This blog outlines the key similarities and differences between the August Proposals and the GAAR ..read more

A recent decision from the British Columbia Supreme Court (“BCSC”), AF2G Investments Inc. v. Minister of Finance (BC), 2023 BCSC 2133, provided guidance on when a communication constitutes an objection under section 19 of the Property Transfer Tax Act, R.S.B.C, 1996, C. 378 (the “Act”). At issue was whether a letter dated February 10, 2020 (the “February Letter”) addressed to an auditor at the Ministry of Finance, Property Taxation Branch (the “Branch”) constituted a valid objection. The Act requires a valid objection to: be in writing; be mailed to the Minister of Finance (the “Minister”); b ..read more

Earlier this week, the Supreme Court of Canada heard two tax appeals that may help clarify the jurisdictional boundaries between the Tax Court of Canada and Federal Court: Dow Chemical Canada ULC v His Majesty the King (SCC File No. 40276) (“Dow Chemical”) and Iris Technologies Inc v Attorney General of Canada (SCC File No. 40346 ) (“Iris Technologies”). The two appeals from the Federal Court of Appeal (“FCA”) offer Canada’s highest court an opportunity to provide certainty to taxpayers and the Minister of National Revenue (“Minister”) about the appropriate path for their tax disputes. We ..read more

Yesterday, the Department of Finance announced GST relief for new residential rental construction.  In addition to signaling a reduction in the cost of supplying new rental homes, the measure potentially reduces or eliminates a major source of friction between developers and the Canada Revenue Agency (“CRA”). This is a significant change for developers and their advisors. Although there is no draft legislation just yet, the following is a summary of the expected changes based on the Department of Finance’s recent announcement: Finance is not revoking the “self-supply” GST rule. Rather, t ..read more

Context: As part of the avalanche of new draft legislation, the Department of Finance has released revised excessive interest and financing expenses limitation (EIFEL) rules.  The attached Excel is a high-level and technical summary of the new EIFEL regime.  The changes released last month are highlighted in red in the technical summaries (at the numbered tabs). Effective dates and elections: The new EIFEL rules are far-reaching, difficult to digest, and fast approaching.  The rules will apply to many corporations for their taxation years beginning after October 1, 2023 (see Tab ..read more

The recently enacted “flipped property” rules in the Income Tax Act (Canada) (the “Act”) have wide ranging implications. Several tax practitioners have written about the problematic nature of the rules (see, for example: Evan Crocker and Kenneth Keung, “Related-Party Transfers and the Flipped Property Rules” (2023) 23:2 Tax for the Owner-Manager 6-8). In this blog, we describe a further issue, namely, the lack of exemptions applicable to certain deemed dispositions of trust property. Overview of the flipped property rules By way of background, on December 15, 2022 the new “flipped property” ru ..read more

When is an allocation of costs amongst supplies “fair and reasonable” for calculating input tax credits (“ITCs”)? In Marine Atlantic Inc. v The King (2023 TCC 95), the Tax Court confirmed that a “fair and reasonable” allocation: is based on the facts and supported by evidence; accurately reflects the economic realities of the business; and focusses on the activities that consume or use the taxable inputs to make supplies. ITCs are available for properties and services acquired to be used or consumed in a registrant’s business, except if that business is making exempt supplies. For registrant ..read more

The application of British Columbia’s provincial sales tax (“BC PST”) to digital services is controversial. A main issue has been whether the services should be taxed as “software”.  The British Columbia Supreme Court in Hootsuite Inc. v British Columbia (Finance), 2023 BCSC 358 (“Hootsuite”)  has provided helpful guidance in determining what constitutes “software”. The Court determined that the cloud computing services at issue were not taxable.  The government did not appeal the decision, but has also not updated its administrative position on this issue to date. By way of ove ..read more