FEDERAL BUDGET SUMMARY – 2017
15.00% $500,000 31.00% 31.00%
Newfoundland 13.50% $500,000 30.00% 30.00%
BILLED BASIS ACCOUNTING
Professionals, such as dentists, medical doctors, veterinarians, accountants,
chiropractors and lawyers are able to exclude the amount of their work in
progress when computing their income; colloquially referred to as the “WIP
deduction.” However, this amount is included in income when billed. Budget 2017
proposes to eliminate the WIP deduction for taxation years that begin on or after
Budget Day. This measure may be transitioned by including 50% of the lesser of
cost and fair market value of the WIP in income for the first taxation year after
March 22, 2017, with the full amount being included in subsequent taxation years.
MEANING OF FACTUAL CONTROL
Factual control of a corporation exists where a person has “directly or indirectly in
any manner whatever” influence that, if exercised, would result in a control in fact
of the corporation. The factual control test is used for the purposes of determining
if two Canadian-controlled private corporations (“CCPCs”) are associated.
In each situation, consideration of all relevant factors is required in determining
whether there is factual control of a corporation. A significant body of case law
has been developed concerning which factors may be useful in determining
whether factual control exists.
A recent court decision, McGillivray Restaurant Ltd., held that in order for a factor
to be considered in determining whether factual control exists, it must include “a
legally enforceable right and ability to effect a change to the board of directors or
its powers or to exercise influence over the shareholder or shareholders who have
that right and ability.” This requirement limits the scope of factors that may be
taken into consideration in determining whether factual control of a corporation
It is not intended from a policy perspective that the factual control test be
dependent on the existence of such a legally enforceable right or that factors that
do not include such a right ought to be disregarded.
Budget 2017 proposes that the Income Tax Act be amended to clarify that, in
determining whether factual control of a corporation exists, factors may be
considered that are not limited to the requirement set out above.
CLEAN ENERGY GENERATION EQUIPMENT: GEOTHERMAL ENERGY
Classes 43.1 and 43.2 of Schedule II to the Income Tax Regulations provide 30%
and 50% capital cost allowance (“CCA”) rates (on a declining-balance basis) for
equipment that generates or conserves energy by:
• Using a renewable energy source (e.g. wind, solar or small hydro);