Recent Updates in Canadian Tax Laws

Canada’s tax laws have seen some significant changes recently. Here’s a look at the latest updates:

Limiting Income Tax Deductions on Short-Term Rentals

In an effort to ease the severe rental housing shortage, Canada has introduced tax measures that limit income tax deductions on short-term rentals on services such as Airbnb Inc and VRBO. This move aligns Canada with many other countries that have enacted similar laws.

Upcoming 2024 Tax Changes

The 2023 Budget announced certain changes for the 2024 tax year. One of the key changes is related to intergenerational transfers of family corporations under Bill C-208. The government amended a specific condition of ITA 84.1 (surplus stripping), that these transfers had to be done with non-arm’s length entities to include arm’s length individuals such as children or grandchildren of the taxpayer who are 18 years of age or older.

For this new interpretation of arm’s length to apply, the purchaser corporation cannot dispose of the shares within 60 months of their purchase. Budget 2023 will amend the 60-month condition above, and will now require the transferor and transferee to jointly elect to transfer through two options:

1. An immediate intergenerational business transfer (three-year test) based on arm’s length sale terms.
2. A gradual intergenerational business transfer (five-to-ten-year test) based on traditional estate freeze characteristics.

New Anti-Flipping Rules for Residential Real Estate

Starting from January 1, 2023, new anti-flipping rules for residential real estate have been introduced.

New Trust Reporting Requirements

For taxation years ending on or after December 31, 2023, there will be new trust reporting requirements.

These changes reflect the government’s ongoing efforts to ensure fairness and transparency in the tax system. It’s important for taxpayers to stay informed about these changes and understand how they may impact their financial situation.

Please note that this article is intended to provide a general overview of recent tax law changes in Canada. For specific advice related to your personal or business situation, please consult with one of our tax professionals in Canada.