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Weekly tax highlights - November 3, 2011

November 3, 2011

Deloitte comments on draft foreign affiliate rules

On October 19, 2011, tax leaders from Deloitte provided comments to the Department of Finance on certain policy issues related to the draft foreign affiliate legislation that was released on August 19, 2011. Our comments focused primarily on the upstream loan and the hybrid surplus provisions.

Read more in our letter.

Comments invited from stakeholders on RDSPs

Registered Disability Savings Plans (RDSPs) were announced in the 2007 federal budget and were launched in 2008. They are intended to assist parents and grandparents to ensure the financial security of children with severe disabilities. RDSPs were scheduled to be reviewed in 2011, and this review was announced on October 21, 2011.

The government aims to gather input from those who benefit from these plans, including individuals, families, groups representing Canadians with disabilities and financial institutions, to ensure that “RDSPs continue to accurately reflect and address their true needs”. Various issues will be examined, such as questions related to establishing plans, accessing savings plans, plan termination, the administration of the program and the reduction of red tape.

Comments are due by December 16, 2011. Further details about the consultation process can be found in the Department of Finance announcement.

Quebec: changes to the tax credit for green vehicles and the refundable R&D tax credit

On October 27, 2011, the Quebec Minister of Finance released Information Bulletin 2011-4, which proposes various changes to the Quebec taxation system including:

  • For extended range rechargeable hybrid vehicles acquired or leased under a long-term lease contract after March 17, 2011 and before January 1, 2012, the amount of the tax credit allowed for the acquisition of such a vehicle will be $7,769 if the vehicle is equipped with a battery with a capacity of 16 kilowatt-hours and $8,000 if the battery’s capacity is 17 kilowatt-hours or more
  • Modifications will be made to the information contained in the return filed by taxpayers who claim a refundable tax credit for research & development salaries for taxation years ending after March 30, 2010. This change will apply where the taxpayer claims an amount paid to an arm’s length subcontractor who participates as a subject in a clinical trial conducted within the standards in the Food and Drug Regulations. In this situation, this subcontractor will be identified with his or her name and date of birth on the return. The subcontractor’s social insurance number will no longer be required.

The Fiscal Monitor – budgetary deficit of $10.7 billion for the period of April to August 2011

In the October 2011 edition of The Fiscal Monitor, the Department of Finance provided an overview of the budgetary deficit for the first five months (April to August) of the 2011-2012 fiscal year. The deficit in August was $3.6 billion. Thus, the total deficit for the five month period was $10.7 billion, compared to a deficit of $13.5 billion reported in the same period last year. For the five months combined, revenues increased by $3.1 billion, or 3.4%, to $95.9 billion. Total program expenses in that period were $93.3 billion, down $0.3 billion, or 0.3%, from the prior year.

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