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July 13, 2021

Canada's Bill C-208 includes changes to section 84.1 and section 55

Private member's Bill C-208, An Act to amend the Income Tax Act (transfer of small business or family farm or fishing corporation), received Royal Assent on June 29. Bill C-208 contains amendments to provide exceptions to the application of the capital gains stripping and anti-surplus stripping rules in sections 84.1 and 55 of the Income Tax Act in the context of qualified small business corporation (QSBC) shares or shares of the capital stock of a family farm or fishing corporation, and thus to facilitate their transfer to family members. Bill C-208 was adopted without amendment by both the House of Commons and the Senate and without being supported by the current minority government. The Department of Finance has expressed concerns about this bill and has indicated its intention to introduce legislation that would delay the application date of Bill C-208 to January 1, 2022, and it appears, although not explicitly stated in its June 30 news release, that the government will make further changes.

A Tax Alert prepared by Ernst & Young Canada, and attached below, provides additional details.


Full text of Tax Alert