New Anti-Avoidance Rule Imposes Tax on Some Inter-Corporate Transactions

By July 10, 2015CRA
The General Anti-Avoidance Rule (GAAR), was originally introduced in 1988 as a method for the Canada Revenue Agency to address possible cases of tax avoidance and/or tax system abuses. Recently updated legislation, introduced in the 2015 federal budget, imposes tax on investments that would be considered non-qualified investments or prohibited investments.
Canadian corporations receiving dividends from other Canadian corporations will be adversely affected under some circumstances.  A few examples of this type of transaction may be: a share ownership change, paying a dividend from an operating company to a holding company for the purpose of asset protection, or paying a dividend to remove a non-active business asset from an operating company. Many more transactions also fall under this new rule, so please contact our office to discuss specific considerations.
This tax tip is a publication of DSK on developments in the area of taxation. The material is general in nature, is current as of published date, and should not be relied upon to replace the requirement for specific professional guidance. These posts should not be considered advice to be acted upon without further professional consultation, as each reader’s personal financial situation is unique.