International and Other Tax Measures in the Federal Budget 2021
International tax measures are applied to products or services that are imported from foreign countries. These tax measures are usually recognized as customs or conventions levied upon goods coming into the country.
Let’s take a look at some international and other tax measures that were proposed in the new Federal Budget of 2021.
Interest Deductibility Limit
A new rule focused on the stripping of earnings was introduced in the 2021 budget. The rule is consistent with the Organization for Economic Co-operation and Development (OECD) and Base Erosion and Profit Shifting (BEPS).
The introduced rule limits the total amount of net interest expense a corporation will be allowed to deduct when they’re calculating their taxable income. This amount must not be more than the fixed ratio of 30% of the tax earnings before interest, taxes, depreciation, and amortization (EBITDA). This amount would be 40% for the transition year.
Moreover, any interest denied under this new rule can be carried forward for up to 20 years or can be moved backwards for up to 3 years. This rule is applicable to all partnerships, trusts, and branches of non-resident organizations. The rule must be phased in from 1 January 2023.
Duty And Tax Correction on Imported Goods
The budget proposed by the finance minister in 2021 seeks to improve the collection of taxes and duties that are applied to goods imported into Canada. The budget proposed changes to the Customs Act to ensure all importers value their goods based on the value of their previous sale for export to a buyer in Canada.
The budget also explains the digital sales tax that would apply at a rate of 3% on revenue of all businesses that provide digital services and products to consumers in Canada. The DST is proposed to be implemented from 1 January 2022.
The federal government also makes space for encouraging businesses to support Carbon Capture, Utilization, and Storage (CCUS). The budget includes several tax incentives for this purpose, such as an investment tax credit for the total capital amount invested in these projects.
Do you want to find out what these new tax measures would mean for your business in West Edmonton? Get in touch with us at Faber LLP. We’re a tax consultancy firm, and we offer tax planning and tax advisory services for all small and large businesses in Edmonton. Contact us today.