Canada

Canada's corporate tax summary reflects all 2022 federal, provincial, and territorial budgets. This summary is based on enacted and proposed legislation and assumes that the proposed legislation will become law. Generally, budget proposals and draft legislation are enacted into law, even with a minority federal government, which is currently the case. For more details of the proposed new business tax measures noted in the summary, see our Tax Insights on the 2022 federal budget at www.pwc.com/ca/budget.

Mandatory disclosure rules

Draft legislative proposals enhance Canada’s mandatory reportable transaction disclosure rules, with various implementation dates. See Mandatory disclosure rules in the Tax administration section and our Tax Insights ‘Finance releases draft legislative proposals: Mandatory disclosure rules' at www.pwc.com/ca/taxinsights for more information.

Interest deductibility limits

Draft legislative proposals limit the amount of net interest and financing expenses that a corporation may deduct in computing its taxable income to a fixed ratio of its ‘tax EBITDA’ (taxable income before interest expense, interest income, income tax, and deductions for depreciation and amortisation), with an election to instead use a ratio based on the 'book EBITDA' of its group, effective starting with taxation years beginning after 30 September 2023. See Interest deductibility limits in the Group taxation section and our Tax Insights ‘Updated legislation: Excessive interest and financing expenses limitation (EIFEL) regime' at www.pwc.com/ca/taxinsights for more information.

Additional taxes on banks and life insurers

Draft legislation implements, for banks and life insurers and their related financial institutions, a one-time 15% tax for the 2022 taxation year and a new additional 1.5% income tax for taxation years ending after 7 April 2022 (exemptions are available). See Banks and life insurers in the Taxes on corporate income section and our Tax Insights 'Finance releases draft legislative proposals: Taxation of insurance contracts under IFRS 17' at www.pwc.com/ca/taxinsights for more information.

Hybrid mismatch arrangements

Draft legislative proposals (the first of two legislative packages) eliminate the tax benefits from hybrid mismatch arrangements, which are generally cross-border transactions that are characterised differently under the tax laws of different countries. The first package of proposed rules will apply for payments generally arising after 30 June 2022. See Hybrid mismatch arrangements in the Group taxation section and our Tax Insights ‘Canada introduces first package of hybrid mismatch rules' at www.pwc.com/ca/taxinsights for more information.

Global minimum tax and the new international tax framework

137 countries, including Canada, have committed to fundamental changes to the international corporate tax system that support the Organisation for Economic Co-operation and Development (OECD) Inclusive Framework's 'Tax Challenges Arising from Digitalisation' project. The changes would provide new taxing rights that:

• reallocate some portion of the profits of large multinational enterprises (MNEs) to countries where the MNE's customers are located (Pillar One), and
• adopt a global minimum effective tax rate of 15% (Pillar Two).

These two pillars are expected to generally come into effect in 2024 at the earliest. See Global minimum tax and the new international tax framework in the Taxes on corporate income section and our Tax Insights 'The new international tax framework and Canada's digital services tax' at www.pwc.com/ca/taxinsights for more information.

Digital services tax (DST)

Draft legislative proposals implement a tax on certain corporations that provide digital services in Canada, effective 1 January 2022. However, the tax would only be imposed if a multilateral convention implementing Pillar One (see Global minimum tax and the new international tax framework above) has not come into force by 31 December 2023; in that event, Canada would start imposing the tax on 1 January 2024, in respect of in-scope revenues earned since 1 January 2022. See Digital services tax (DST) in the Other taxes section and our Tax Insights 'The new international tax framework and Canada's digital services tax' at www.pwc.com/ca/taxinsights for more information.

Exchange of tax information on digital economy platform sellers

For calendar years beginning after 2023, draft legislative proposals will require certain digital platform operators, which provide support to reportable platform sellers for relevant activities, to determine the jurisdiction of residence of these sellers and report to the Canada Revenue Agency (CRA) specified information about those sellers. This information would be exchanged with a partner jurisdiction that has implemented similar reporting requirements on platform operators and has agreed to exchange information with the CRA on reportable platform sellers. See Exchange of tax information on digital economy platform sellers in the Tax administration section and our Tax Insights ‘2022 Federal budget: Encouraging affordable housing and sustainability’ at www.pwc.com/ca/budget for more information.