Canada: Economic Action Plan 2015 – The Election Budget

On April 21, Finance Minister Joe Oliver tabled in the House of Commons his first budget, Economic Action Plan 2015 (Budget 2015), and the one that the Conservatives will take to the polls. There are, of course, no new taxes but it has initiatives to support families, veterans, disabled persons, charities and small businesses. Also included are proposals to encourage investment in manufacturing, research and infrastructure and to expand the investment options for pension plans and charities. Increased revenues are projected to come from closing perceived loopholes, enhanced tax compliance and changes to the federal public service sick leave and disability plans.


Reduction in Small Business Tax Rate

In a measure intended to assist small businesses in growing and to encourage entrepreneurship, Budget 2015 proposes to lower by 2% the federal tax rate applicable to Canadian-controlled private corporations (CCPCs) on their first $500,000 per year of qualifying active business income.

Currently, CCPCs are entitled to a small business deduction that reduces their federal corporate tax rate from 28% to 11% on their first $500,000 per year of qualifying active business income. The $500,000 annual limit is shared among associated corporations. The small business deduction is phased out on a straight-line basis for CCPCs that, together with corporations with which they are associated, have taxable capital employed in Canada of between $10 million and $15 million.

The decrease in the 11% federal small business tax rate is to be phased in over the next four years in 0.5% increments, commencing on January 1, 2016. The rates will be pro-rated for CCPCs that do not have December 31st year-ends.

Consequential upon the introduction of the new small business tax rates, Budget 2015 proposes to adjust the gross-up factor and dividend tax credit (DTC) rate applicable to non-eligible dividends (generally, dividends from corporate income taxed at the small business tax rate).

The dividend gross-up and DTC provisions are intended to ensure that active business income earned by a corporation and paid out to an individual as a dividend will be subject to the same amount of tax as income earned directly by the individual. As a consequence of the small business tax rate on CCPCs being reduced, effective January 1, 2016, the gross-up on non-eligible dividends will be increased and the DTC rate on the grossed-up amount of non-eligible dividends will be reduced. The following table summarizes the changes:

  2015 2016 2017 2018 2019 and
later years
Small Business Tax Rate (%) 11 10.5 10 9.5 9
Gross-Up (%) 18 17 17 16 15
DTC (% of grossed-up dividend) 11.02 10.52 10.02 9.51 9.03

The Government estimates that these measures will result in tax savings for small businesses and their shareholders of more than $2.7 billion between now and the 2019-20 fiscal period. These tax savings are expected to be comprised of a reduction in corporate taxes on CCPCs of just over $5 billion and an increase in taxes payable by individuals by reason of the gross-up and DTC adjustments on non-eligible dividends of just under $2.3 billion. Given this combination of lower corporate rates and increased taxes on non-eligible dividends, the changes will provide significantly enhanced incentives for CCPCs that qualify for the small business tax rate to retain after-tax income in the corporation.

Possible Expansion of Small Business Deduction to Certain Specified Investment Businesses

The small business deduction available to CCPCs on their first $500,000 of qualifying business income each year applies generally to active business income from a business carried on in Canada. However, active business income does not include income from a "specified investment business", which, generally, is a business whose principal purpose is to earn income from property (other than such a business that has more than five full-time employees).

However, the Government notes that concerns have been raised that the specified investment rules may apply to businesses such as self-storage facilities and campgrounds. Accordingly, Budget 2015 provides that the Government will review the circumstances in which income from a business, whose principal purpose is to earn income from property, should qualify as active business income. Submissions are invited from interested parties until August 31, 2015.

Machinery and Equipment Used for Manufacturing and Processing – Accelerated Capital Cost Allowance

Machinery and equipment acquired by a taxpayer after March 18, 2007, and before 2016 primarily for use in Canada for the manufacturing or processing of goods for sale or lease qualify for an accelerated capital cost allowance (CCA) rate of 50% calculated on a straight-line basis under Class 29 of Schedule II to the Income Tax Regulations. Starting in 2016, such assets were going to qualify for a CCA rate of 30% computed on a declining balance basis under Class 43.

Budget 2015 proposes to provide an accelerated CCA rate of 50% on a declining-balance basis for machinery and equipment acquired by a taxpayer after 2015 and before 2026 primarily for use in Canada for the manufacturing and processing of goods for sale or lease. Eligible assets are those that would currently be included in Class 29. These assets will be included in new Class 53.

Class 53 assets will be subject to the "half-year rule", which limits the CCA deduction in the taxation year in which an asset is first available for use by a taxpayer to one-half of that which otherwise would be available. Such assets will be considered "qualified property" for purposes of the Atlantic Investment Tax Credit.

Tax Avoidance of Corporate Capital Gains

Budget 2015 includes measures intended to expand the application of the anti-avoidance rule in subsection 55(2) of the Income Tax Act (ITA), which was enacted primarily to counter transactions known as "capital gain strips" (essentially converting a capital gain that otherwise would arise on the disposition of shares into a tax-free inter-corporate dividend). The provision currently applies to transactions if one of the purposes for receiving a dividend is to effect a significant reduction in a capital gain realized on the disposition of a share, and this will continue to be the case. The proposed amendments will extend the rule to apply to transactions if one of the purposes for paying or receiving a dividend is to effect a significant reduction in the fair market value of any share or a significant increase in the total cost of properties of the dividend recipient. The concern underlying the proposal is that the shareholder in such a transaction could, subject to the general anti-avoidance rule (GAAR), use the unrealized loss created by the payment of the dividend to shelter an accrued capital gain in respect of other property.

The targeted transactions are ones that, according to the Government, can be challenged under the GAAR. However, as has been the case for a number of other recently targeted arrangements, given the time and costs of bringing such challenges – and the unstated possibility that they could be unsuccessful – the Government has elected to introduce specific legislative measures to ensure that the anti-avoidance rule in subsection 55(2) of the ITA applies.

Concerns with Present Provisions

Budget 2015 refers to a recent decision of the Tax Court of Canada where a dividend-in-kind (consisting of shares of another corporation) created an unrealized capital loss on shares, which loss was used to shelter a capital gain on the disposition of another property of the taxpayer. The Government's concerns stem from the fact that subsection 55(2) was held not to apply in the circumstances.

The Government also provided the following example:

Corporation A wholly owns Corporation B, which has one class of shares. These shares have a fair market value of $1 million and an adjusted cost base of $1 million.

Corporation A contributes $1 million of cash to Corporation B in return for additional shares of the same class, with the result that Corporation A's shares of Corporation B have a fair market value of $2 million and an adjusted cost base of $2 million.

If Corporation B uses its $1 million of cash to pay Corporation A a tax-deductible dividend of $1 million, the fair market value of Corporation A's shares of Corporation B is reduced to $1 million although their adjusted cost base remains at $2 million. At this point, Corporation A has an unrealized capital loss of $1 million on Corporation B's shares.

If Corporation A transfers an asset having a fair market value and unrealized capital gain of $1 million to Corporation B on a tax-deferred basis, Corporation A could then sell its shares of Corporation B for $2 million and take the position that there is no gain because the adjusted cost base of those shares is also $2 million.

Budget 2015 Proposed Provisions

Budget 2015 proposes an amendment to ensure that the anti-avoidance rule applies where one of the purposes of a dividend is to effect a significant reduction in the fair market value of any share or a significant increase in the total cost of properties of the dividend recipient.

Budget 2015 proposes related rules to ensure this amendment will also apply in circumstances in which a dividend is paid on the share and the value of the share is or becomes nominal. As well, changes will address the use of stock dividends as a method of circumventing the rule.

Budget 2015 proposes to treat all dividends to which the anti-avoidance rule applies as gains from the disposition of capital property.

Finally, Budget 2015 also proposes to limit the exception to the anti-avoidance rule contained in paragraph 55(3)(a) (applicable to certain related-party transactions) to apply only to dividends that are received on shares as a result of the corporation having redeemed, acquired, or cancelled the shares.

The new rules are potentially very far-reaching, particularly in light of the restrictions placed on the application of paragraph 55(3)(a) in the related-party context. Taxpayers would be well-advised to give careful consideration to their possible application when tax-free inter-corporate dividends are being paid.

These measures will apply to dividends received after April 20, 2015.

Synthetic Equity Arrangements

The ITA generally permits a corporation to deduct, in computing its taxable income, taxable dividends received from a taxable Canadian corporation, taxable dividends received from a corporation resident in Canada that is not exempt from tax under Part I and that is controlled by the recipient, and a portion of dividends received from a non-resident corporation that, since June 18, 1971, has carried on business in Canada through a permanent establishment. A life insurer may deduct certain taxable dividends received from taxable Canadian corporations. This deduction for inter-corporate dividends is intended to prevent the imposition of multiple levels of corporate taxation on earnings that are distributed from one corporation to another.

The ITA currently denies the deduction for inter-corporate dividends where a dividend is received on a share as part of a dividend rental arrangement (DRA) of the recipient corporation. The definition of DRA applies to an arrangement where it may reasonably be considered that the main reason for the person entering into the arrangement was to enable the person to receive a dividend on a share and under the arrangement someone other than that person bears the risk of loss or enjoys the opportunity for gain or profit with respect to the share in any material respect. The definition expressly includes an arrangement under which a corporation receives a dividend and is obliged to pay to another person or partnership an amount that is compensation for the dividend that, if paid, would be deemed to be received by the recipient as a taxable dividend because it was paid pursuant to a securities lending arrangement (as defined in section 260) or was a dealer compensation payment.

Budget 2015 states that certain taxpayers, typically financial institutions, enter into synthetic equity arrangements under which the taxpayer retains the legal ownership of a share but transfers all or substantially all of the risk of loss and opportunity for gain or profit with respect to the share to a counterparty. For example, a taxpayer could own shares of Canadian corporation that pays regular dividends but enter into a total return swap with a counterparty under which the counterparty is entitled to receive from the taxpayer an amount equal to any increase in the value of the shares and any dividends paid on the shares and the taxpayer is entitled to receive from the counterparty an amount equal to the decrease in the value of the shares. The taxpayer would include dividends received in income and claim a deduction for the same amount in respect of the obligation to pay an equivalent amount to the counterparty. The Government is concerned that some taxpayers are taking the position that the DRA rules do not apply to certain synthetic equity arrangements and, accordingly, are also claiming a deduction in computing taxable income equal to the amount of dividends received. Where the counterparty is a non-resident or tax-exempt that is not subject to tax on the dividend equivalent payment, there would be erosion to the Canadian tax base.

The Government maintains that certain synthetic equity arrangements could be challenged under current provisions of the ITA. However, it is proposing amendments to treat certain synthetic equity arrangements as DRAs. The budget papers indicate that the amendments are expected to raise $1.235 billion over the next four years. The proposed amendments will apply to dividends paid or payable after October 2015. There is no grandfathering for existing arrangements.

In general terms, the proposed amendments will apply to synthetic equity arrangements if the counterparty is a non-resident or is a tax-exempt. The Government is also requesting submissions by August 31, 2015 on an alternative proposal that the amendments apply to synthetic equity arrangements regardless of the tax status of the counterparty, asserting that while the amendments would apply more broadly, some of the complexities of the measures as described below would be eliminated.

The definition of DRA will be amended to provide that a DRA of a person or partnership includes any synthetic equity arrangement (SEA) in respect of a share owned by the person or partnership.

Definition of an SEA

An SEA in respect of a share owned by a person or partnership (the Owner) means one or more agreements or other arrangements that:

  1. are entered into by the Owner, or by a person or partnership that does not deal at arm's length with the Owner (NAL Person), with one or more other persons or partnerships (each, a Counterparty);
  2. have the effect of providing all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share to the Counterparty (or group of Counterparties each member of which is affiliated with each other member) or, if the arrangements are entered into by a NAL Person, would have that effect if entered into by the Owner; for these purposes, opportunity for gain or profit includes rights to, benefits from and distributions on a share; and
  3. if entered into by a NAL Person, can reasonably be considered to have been entered into with the knowledge that the foregoing effect would result (or where the NAL Person ought to have had such knowledge).

A key difference from the current definition of DRA is that for an arrangement to be an SEA it is necessary only that the arrangement have the effect of providing to the Counterparty all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share. The current definition of DRA requires that the main reason for the Owner entering into the arrangement was to receive the dividend and that under the arrangement someone other than that person bears the risk of loss or enjoys the opportunity for gain or profit with respect to the share in any material respect.

Carve-outs from SEA Definition

Certain arrangements are carved out of the definition of SEA. In addition, the denial of the deduction for dividends received on a DRA has a number of carve-outs for dividends received on certain SEAs.

The carve-outs from the definition of SEA are the following:

  1. An agreement traded on a recognized derivatives exchange. The carve-out does not apply, however, if at the time the agreement is entered into the Owner or NAL Person, as applicable, knows or ought to know the identity of its Counterparty. A recognized derivatives exchange means a person or partnership recognized or registered under provincial securities law to carry on the business of providing the facilities necessary for trading in derivatives.
  2. An agreement whose payment or settlement obligations are derived from or referenced to an index that meets each of the following conditions:

    1. the index reflects the value of 75 or more types of identical shares;
    2. the index references only long positions;
    3. the index is created and maintained by persons or partnerships that deal at arm's length with the Owner and the value of which is published and publicly available; and
    4. the total fair market value of shares of Canadian corporations reflected in the index does not at any time during the term of the agreement exceed 5% of the total fair market value of all shares reflected in the index.
  3. An agreement or arrangement that would otherwise be an SEA (referred to as a synthetic short) that meets the following conditions:

    1. the Owner has entered into other agreements or arrangements (other than an agreement under which the share is acquired or a securities lending agreement as defined in section 260) that have the effect of providing to the Owner all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share (referred to as a synthetic long);
    2. the synthetic short has the effect of offsetting all amounts included or deducted in computing the income of the Owner with respect to the synthetic long; and
    3. the synthetic short was entered into in order to offset all such amounts with respect to the synthetic long.

Exceptions to the Dividend Deduction Denial

An exception to the proposed inter-corporate dividend deduction denial rules for DRAs is to be included where: (i) the DRA is a DRA because there is an SEA in respect of a share; and (ii) a taxpayer can establish that no "tax-indifferent investor" or group of "tax-indifferent investors" (each member of which is affiliated with each other member) has all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share because of the SEA or a "specified synthetic equity arrangement" (a Specified SEA), as defined below.

A "tax-indifferent investor" is defined to mean:

  1. a person exempt from tax under section 149 (which includes a registered pension plan);
  2. a non-resident person (except to the extent that amounts paid or credited under an SEA or a Specified SEA may reasonably be attributed to a business carried on in Canada through a permanent establishment, in which case such amounts would presumably be taxable in Canada);
  3. a trust resident in Canada (other than a specified mutual fund trust) if any beneficiary's interest is not a specified fixed interest (referred to in the definition as a discretionary trust); a "specified mutual fund trust" is a "mutual fund trust" as defined in the ITA other than one in which it can reasonably be considered that the fair market value of units owned by persons exempt from tax under section 149 represents all or substantially all of the fair market value of the outstanding units of the trust;
  4. a partnership, if more than 10% of the fair market value of all interests in the partnership is held, directly or indirectly through one or more trusts or partnerships, by any combination of the foregoing tax-exempt persons, non-residents or discretionary trusts; and
  5. a trust resident in Canada (other than a discretionary trust or a specified mutual fund trust) if more than 10% of the fair market value of all interests as beneficiaries of the trust can reasonably be considered to be held, directly or indirectly through one or more trusts or partnerships, by any combination of the foregoing tax-exempt persons or discretionary trusts.

The Owner is considered to have satisfied the "no tax-indifferent investor condition" in respect of a share where the Owner obtains accurate written representations from the Counterparty as to certain matters. Conceptually, the representations are intended to establish that the Counterparty is not a tax-indifferent investor and either does not reasonably expect to eliminate all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share or has transferred all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share to its own Counterparty which in turn has provided similar representations. If the representations are later determined to be inaccurate, the arrangement will be treated as a DRA.

Presumably, industry-standard documentation will be adapted to provide for such representations by Counterparties (although the proposals do not preclude an Owner from establishing the necessary condition even in the absence of such representations).

A Specified SEA in respect of a share owned by a person or partnership is defined as one or more agreements or arrangements that: (i) have the effect of providing to a person or partnership all or any portion of the risk of loss and opportunity for gain or profit in respect of the share; and (ii) can reasonably be considered to have been entered into in connection with an SEA in respect of the share, or in connection with another Specified SEA, in respect of the share.

Anti-Avoidance Rule

The definition of DRA will also be amended to include an anti-avoidance rule. In this regard, a DRA will include one or more agreements or arrangements entered into by the Owner or a NAL Person if: (i) the agreements or arrangements have the effect (or would have the effect if entered into by the Owner instead of the NAL Person) of eliminating all or substantially all of the Owner's risk of loss and opportunity for gain or profit in respect of the share; (ii) a tax-indifferent investor (or group of tax-indifferent investors each of which is affiliated with every other member) obtains all of the risk of loss and opportunity for gain or profit in respect of the share; and (iii) it is reasonable to conclude that one of the purposes of the series (which need not be a main purpose) was to obtain the result described in (ii).

Quarterly Remittance Category for Certain New Employers

Budget 2015 proposes to decrease the required frequency of remittance obligations for certain small new employers in respect of withholding obligations.

Specifically, new employers that have obligations to remit income tax and the employer and employee portions of Canada Pension Plan (CPP) contributions and Employment Insurance (EI) contributions (collectively, withholding amount) of less than $1,000 per month will be required to remit on a quarterly basis rather than monthly, as is required currently for a new employer at least for the first year. This measure will apply to employers that first become employers after 2015.

Such employers will remain eligible for quarterly remitting provided that they maintain a perfect compliance record in respect of their Canadian tax obligations and so long as their required monthly withholding amount remains under $1,000.

Consultations on Eligible Capital Property

In a measure aimed at tax simplification, the 2014 federal budget proposed that the eligible capital property regime be repealed and replaced by a new CCA class. Budget 2015 confirms that the Government has received, and continues to receive, various submissions on the proposal. The Government states that these submissions will be taken into account in developing the new rules and transitional measures. Budget 2015 confirms the Government's intention to release detailed draft legislative proposals for comment before the provisions are included in a bill.

Agricultural Cooperative Corporations – Deferral of Tax on Patronage Dividends Paid in Shares

Budget 2015 proposes to extend a temporary measure that provides a tax deferral in respect of patronage dividends paid to members in the form of shares issued after 2005 by eligible agricultural corporations. The proposal will apply to eligible shares issued before 2021, rather than before 2016, as is currently the case. An eligible share must not be redeemable or retractable within five years of its issue, except in the case of death, disability or the holder ceasing to be a member of the cooperative corporation.

This measure generally permits eligible members to defer tax on all or any portion of a patronage dividend received as an eligible share until the disposition or deemed disposition of the share, and provides that the cooperative corporation is not required to withhold and remit in respect of the patronage dividend until the share is redeemed. Absent this measure, the patronage dividend would be taxable to the member in the year in which the share was received, and the cooperative corporation paying the dividend would be required to withhold an amount from the dividend and remit that amount to the Canada Revenue Agency (CRA) on account of the recipient's tax liability.


Withholdings by Non-Resident Employers

Budget 2015 proposes a relieving measure with respect to certain payments by non-resident employers to non-resident employees working in Canada. This is a welcome measure that will reduce the administrative burden of businesses engaged in cross-border trade.

Canada generally taxes the income of non-residents from employment performed in Canada. However, a resident of a country that has a tax treaty with Canada is often exempt from Canadian tax on income from employment exercised in Canada if certain conditions are met. For example, a U.S.-resident individual employed by a non-resident employer generally will be exempt from Canadian tax on remuneration from employment exercised in Canada if the employee is present in Canada for no more than 183 days in any 12-month period commencing or ending in the relevant calendar year and the remuneration is not borne by a permanent establishment in Canada.

An employer (including a non-resident employer) is generally required to withhold amounts on account of the income tax liability of an employee working in Canada, even if the employee is not liable to tax in Canada on such remuneration under a tax treaty with Canada. In this situation, the employee must file a Canadian tax return to obtain a refund of the tax withheld. It may be possible for the employer to obtain a waiver from the CRA in order to be relieved from its obligation to withhold. The existing employee waiver system has been criticized as inefficient because each waiver is granted only in respect of a specific employee and for a specific time period.

Budget 2015 proposes to provide an exception to the withholding requirements for payments made by qualifying non-resident employers to qualifying non-resident employees.

An employee will be a qualifying non-resident employee in respect of a payment if the employee is resident at the time of the payment in a country with which Canada has a tax treaty, is exempt from tax under Part I of the ITA in respect of the payment because of that treaty and is not present in Canada for 90 or more days in any 12-month period that includes the time of the payment.

An employer will be a qualifying non-resident employer at a particular time if it satisfies the following requirements:

  1. if it is not a partnership, It is resident in a country with which Canada has a tax treaty. In order for an employer that is a partnership to qualify, at least 90% of the partnership's income or loss for the fiscal period that includes the time of the payment must be allocated to persons that are resident in a treaty country;
  2. it does not carry on business through a permanent establishment in Canada in its fiscal period that includes the time of the payment; and
  3. it is certified by the Minister of National Revenue at the time of the payment.

In order for an employer to obtain certification, it must apply to the Minister in prescribed form providing prescribed information and the Minister must be satisfied that the tests noted above are satisfied together with such other conditions as the Minister may establish. Certification may be revoked if the employer does not meet the foregoing conditions.

A qualifying non-resident employer will not be obligated to withhold with respect to remuneration paid to a qualifying non-resident employee but will continue to be responsible for reporting such payments. The ultimate tax liability of the employee will not be affected if the employee is not, in fact, entitled to treaty benefits in respect of the remuneration.

Subsection 227(8) of the ITA imposes a penalty where a person fails to withhold amounts as required from payments of salary or wages. It is possible that an employee could lose its status as a qualifying non-resident employee of the time of a payment due to events occurring after the payment such as failing to satisfy the less than 90 days presence in Canada test. However, no penalty will be applied if the employer had no reason to believe, at the time of payment, that the employee did not meet the conditions to be a qualifying non-resident employee.

This measure will apply in respect of payments made after 2015.

Captive Insurance

Budget 2015 proposes to amend the existing anti-avoidance rule in the foreign accrual property income (FAPI) regime that relates to the insurance of Canadian risks. This amendment is intended to ensure that profits of a Canadian taxpayer from the insurance of Canadian risks remain taxable in Canada.

Generally, the FAPI regime prevents taxpayers from shifting certain Canadian-source income to no or low-tax jurisdictions. Under the FAPI rules, such income earned by a controlled foreign affiliate of a taxpayer resident in Canada is considered FAPI and is taxable in the hands of the Canadian taxpayer on an accrual basis.

A specific anti-avoidance rule in the FAPI regime is intended to prevent Canadian taxpayers from shifting income from the insurance of Canadian risks (i.e., risks in respect of persons resident in Canada, property situated in Canada or businesses carried on in Canada) to a foreign affiliate resident in a lower-tax jurisdiction. This anti-avoidance rule was amended in 2014 to curtail certain tax-planning arrangements (sometimes referred to as "insurance swaps"). These arrangements were designed to circumvent the existing anti-avoidance rule while allowing the affiliate to retain its economic exposure to a pool of Canadian risks.

Budget 2015 mentions that the Government has become aware of alternative arrangements that are intended to achieve tax benefits similar to those that the 2014 amendment was intended to prevent. Under these alternative arrangements, the affiliate receives consideration with an embedded profit component (based upon the expected return on the pool of Canadian risks) in exchange for ceding its Canadian risks as opposed to entering into traditional insurance swap arrangements that otherwise would be caught by the 2014 amendment.

To avoid time consuming and costly challenges through the use of existing anti-avoidance or other rules in the ITA, Budget 2015 proposes specific legislative action to clarify that these alternative arrangements give rise to FAPI. More specifically, the ITA will be amended to provide that a foreign affiliate's income in respect of the ceding of Canadian risks must be included in computing the affiliate's FAPI. For these purposes, when an affiliate cedes Canadian risks and receives as consideration a portfolio of insured foreign risks, the affiliate is considered to have earned FAPI in respect of the ceding of the Canadian risks in an amount equal to the difference between the fair market value of the Canadian risks ceded and the affiliate's costs in respect of having acquired those Canadian risks.

This measure will apply to taxation years of taxpayers that begin after April 20, 2015, giving most taxpayers a minimum transition period.

The Government invites interested stakeholders to submit comments on this measure by June 30, 2015.

Update on Tax Planning by Multinational Enterprises

The 2014 federal budget included detailed guidance on the domestic anti-treaty-shopping approach that the Government intended to adopt and provided several examples of the scope of the proposals. Then, on August 29, 2014, the Government announced that it would instead await further work by the Organisation for Economic Co-operation and Development (OECD) and the Group of 20 (G-20) in relation to their Base Erosion and Profit Shifting (BEPS) initiative.

BEPS is generally referred to as the legal tax planning arrangements undertaken by multinational enterprises that use the interaction between domestic and international tax rules to shift profits away from the countries where income-producing activities take place.

Budget 2015 reiterates the intention of the Government to continue to work with the others members of the OECD and the G-20 on the issues identified in the OECD's Action Plan on BEPS adopting a 15 point action plan that was released by the OECD in July 2013 (OECD/G-20 BEPS project).

Budget 2015 mentions that input from stakeholders on issues related to international tax planning further to the Government's invitation in Economic Action Plan 2014 has helped shape Canada's ongoing participation in the international discussions related to the OECD/G-20 BEPS project.

Budget 2015 reiterates the Government's commitment to proceed in this area in a manner that balances tax integrity and fairness with the competitiveness of Canada's tax system to maintain Canada's advantage as an attractive destination for business investment.


Increasing the Tax-Free Savings Account Annual Contribution Limit

The Tax-Free Savings Account (TFSA), a registered general-purpose savings vehicle, has been available to Canadian-resident individuals since January 1, 2009. When it was first introduced, the annual contribution limit for TFSAs was capped at $5,000 (with unused contribution room being carried forward), indexed to inflation in $500 increments. Due to indexation, the annual contribution limit increased to $5,500 in 2013.

Budget 2015 proposes to increase the TFSA annual contribution limit to $10,000, effective for the 2015 taxation year, and to provide that such limit not be indexed to inflation (i.e., the annual limit will be $10,000 for the 2015 calendar year and thereafter, subject to any future legislative amendment).

Reducing the Minimum Withdrawal Factors for Registered Retirement Income Funds

A Registered Retirement Savings Plan (RRSP) must be converted to a Registered Retirement Income Fund (RRIF), or used to purchase an annuity, by the end of the year in which the RRSP holder reaches 71 years of age. Where the RRSP has been converted to a RRIF, a minimum amount must be withdrawn from the RRIF annually (computed based on a percentage factor multiplied by the value of the assets in the RRIF), starting in the year that the holder turns 72. The existing RRIF withdrawal factors were established in 1992 and require a RRIF holder who is 71 at the beginning of the year to withdraw 7.38% of the RRIF in the year; this minimum amount then increases each year until it peaks at 20% at age 94. The factors are also used to determine the minimum amount that must be withdrawn annually, starting at age 71, from defined contribution Registered Pension Plans (RPPs) and Pooled Registered Pension Plans (PRPPs).

Budget 2015 proposes to reduce the minimum withdrawal factors for RRIFs in order to permit additional capital preservation. The proposed factors are said to better reflect long-term historical real rates of return on a portfolio of investments and expected inflation. The new factors will range from 5.28% at age 71 to 18.79% at age 94.

The new RRIF factors will apply for the 2015 and subsequent taxation years. Individuals who, in 2015, withdraw more than the reduced 2015 minimum amount will be permitted to re-contribute, until February 29, 2016, the excess to their RRIFs (up to the amount of the reduction in the minimum withdrawal amount provided by the proposed measure). Qualifying re-contributions will be deductible for the 2015 taxation year. Similar rules will apply to individuals receiving annual payments from a defined contribution RPP or a PRPP.

Home Accessibility Tax Credit

Budget 2015 proposes a non-refundable Home Accessibility Tax Credit (HATC) for "qualifying individuals" and "eligible individuals" equal to 15% of the "qualifying expenditures" (up to $10,000) of the individual in a calendar year in respect of an "eligible dwelling".

Qualifying individuals for purposes of the HATC are: (i) individuals who have attained the age of 65 before the end of the applicable taxation year, and (ii) individuals who are eligible for the Disability Tax Credit at any time in the applicable taxation year.

Eligible individuals for purposes of the HATC are individuals who have claimed the spouse or common-law partner amount, eligible dependant amount, caregiver amount, or infirm dependant amount in respect of a qualifying individual for the applicable taxation year, or who could have claimed any such amount had the qualifying individual met certain conditions.

In general, an eligible dwelling (which includes the land on which the dwelling is situated) must be the principal residence of a qualifying individual in the applicable taxation year, or the principal residence of an eligible individual that is ordinarily inhabited by the eligible individual and a qualifying individual.

Qualifying expenditures must be directly attributable to a "qualifying renovation," meaning a renovation or alteration that is: (i) of an enduring nature and integral to the eligible dwelling, and (ii) undertaken to enable the qualifying individual to gain access to, or to be mobile or functional within, the eligible dwelling, or reduce the risk of harm to the qualifying individual within the eligible dwelling or in gaining access to the dwelling. For example, the costs associated with the purchase and installation of wheelchair ramps, walk-in bathtubs, wheel-in showers, and grab bars generally would qualify.

Qualifying expenditures are limited to the cost of goods acquired or services received in respect of the qualifying renovation (including outlays and expenses for required permits and equipment rentals), but do not include certain listed types of expenses (such as the cost of routine maintenance, household appliances and housekeeping, as well as financing costs).

Special rules apply to qualifying expenditures incurred by cooperative housing corporations, condominium corporations, and similar entities that own, administer, or manage properties that include eligible dwellings, as well as those incurred by trusts that own properties that include eligible dwellings.

The HATC will apply in respect of qualifying expenditures for work performed and paid for and/or goods acquired on or after January 1, 2016.

Increasing the Lifetime Capital Gains Exemption to $1 Million for Owners of Farm and Fishing Businesses

Under the ITA, individuals are afforded a lifetime capital gains exemption (LCGE) to shelter capital gains realized on the disposition of qualified small business corporation shares and qualified farm or fishing property. The amount of the LCGE is $813,600 in 2015 and is indexed to inflation.

Budget 2015 proposes to increase the LCGE to apply to up to $1 million of capital gains realized by an individual on the disposition of qualified farm or fishing property, applicable to dispositions that occur on or after April 21, 2015. This amount will not be indexed for inflation until the LCGE applicable to dispositions of qualified small business corporation shares, as adjusted by indexation, exceeds $1 million. Once that occurs, the same LCGE, indexed for inflation, will apply to dispositions of qualified farm or fishing property and qualified small business corporation shares.

Registered Disability Savings Plan – Legal Representation

The 2012 federal budget introduced a temporary measure intended to address concerns relating to adults with disabilities having difficulty constituting a Registered Disability Savings Plan (RDSP) due to their legal capacity to contract being called into question. The measure, originally intended to apply until the end of 2016, allowed a "qualifying family member" (defined to include a beneficiary's parent, spouse or common-law partner) to become the plan holder of an RDSP.

Given that questions of appropriate legal capacity fall under provincial and territorial jurisdiction, constituting an RDSP for adults who lack the legal capacity to contract usually involves the lengthy and expensive process of declaring the individual legally incompetent. While some provinces and territories have introduced legislation to facilitate the appointment of a trusted person in such circumstances, others have indicated that their systems were already sufficiently flexible in this regard.

In order to accommodate provinces and territories whose legal systems do not provide for the streamlined appointment of a trusted person in the foregoing circumstances, Budget 2015 proposes to extend the temporary measure introduced in the 2012 federal budget to apply to the end of 2018. The rules implementing the 2012 federal budget measure will not otherwise be changed and a qualifying family member who becomes a plan holder before the end of 2018 can remain the plan holder after 2018.

Transfer of Education Credits – Effect on the Family Tax Cut

The Family Tax Cut, announced on October 30, 2014, is a proposed maximum $2,000 federal non-refundable tax credit for couples with children under the age of 18. The credit is intended to help narrow the gap between the federal tax payable by one-earner and two-earner couples with similar family incomes. The Family Tax Cut allows a higher-income spouse or common-law partner to transfer a notional maximum of $50,000 of taxable income to a spouse or common-law partner. The credit will apply for the 2014 and subsequent taxation years.

In order to prevent the double counting of personal tax credits in determining the value of the Family Tax Cut, the Family Tax Cut suppresses the use of personal income tax credits that have been transferred from one spouse or common-law partner to the other. Instead, the personal income tax credits previously transferred are taken into consideration in the calculation of the transferor's adjusted tax payable.

The proposed Family Tax Cut rules prevent transferred education-related amounts (Tuition, Education and Textbook Tax Credits) from being included in the Family Tax Cut calculation. The rules in respect of these education-related tax credits already prevent such double-counting from occurring in their current form. As a result, this may reduce the value of the Family Tax Cut for couples who transfer education-related amounts between themselves.

Budget 2015 proposes to revise the calculation of the Family Tax Cut for the 2014 and subsequent taxation years to ensure that couples transferring education-related credits between themselves and claiming the Family Tax Cut receive the full benefit of the Family Tax Cut. After the enacting legislation receives Royal Assent, the CRA will automatically reassess affected taxpayers for the 2014 taxation year to ensure that they receive any additional benefits to which they are entitled under the Family Tax Cut.


Donations Involving Private Corporation Shares or Real Estate

Budget 2015 proposes to provide an exemption from capital gains tax in respect of certain dispositions of shares of private corporations and real estate. The exemption, applicable to donations made in respect of dispositions occurring after 2016, will be available where the following conditions are met:

  1. cash proceeds from the disposition of the shares of the private corporation or real estate are donated to a qualified donee within 30 days of the disposition; and
  2. the shares of the private corporation or real estate are sold to a purchaser that deals at arm's length with both the donor and the qualified donee.

The exempt portion of the capital gain will be determined by reference to the proportion that the cash proceeds donated is of the total proceeds from the disposition of the shares or real estate. Interestingly, no exemption is proposed from tax arising from recaptured depreciation which is often triggered on a sale of a rental or business property.

Related anti-avoidance rules are also proposed that will reverse the exemption in circumstances where, within five years of the disposition the donor, or a person not dealing at arm's length with the donor, reacquires the property or, in the case of shares, acquires substituted shares.

Investments by Registered Charities in Limited Partnerships

Generally, a partner, including a limited partner, of a partnership is considered to be carrying on the business of the partnership. Section 253.1 of the ITA, which deems limited partners not to be carrying on the business of the partnership for the purposes of certain provisions of the ITA, does not extend to charitable organizations and foundations.

Since charitable organizations and public foundations are entitled only to carry on businesses that are related to their charitable purpose and private foundations are not entitled to carry onany business, the range of investment opportunities available to them is restricted. Budget 2015 proposes to amend the ITA to provide that a registered charity will not be considered to be carrying on a business solely because it acquires or holds an interest in a limited partnership. With the intention of ensuring that a registered charity's investment in a limited partnership remains a passive investment, the proposed measure will apply only if the following conditions are met:

  1. the charity (together with all non-arm's length entities) holds no more than 20% of the interests in the limited partnership, and
  2. the charity deals at arm's length with each general partner of the limited partnership.

The restrictions on limited partnership investments will not apply, however, if a charitable organization or public foundation carries on a related business through a limited partnership.

Registered Canadian amateur athletic associations are subject to similar business restrictions as charities and the proposed amendment to allow investments in limited partnerships will also apply to such associations.

The above proposals will apply in respect of investments in limited partnerships that are made or acquired on or after April 20, 2015.

Gifts to Foreign Charitable Foundations

Budget 2015 proposes to amend the ITA to allow foreign charitable foundations to be registered as qualified donees if they receive a gift from the Government and if they are pursuing activities related to disaster relief or urgent humanitarian aid or are carrying on activities in the national interest of Canada. Under the amended rules, the CRA may, in consultation with the Minister of Finance, grant qualified donee status to a foreign charitable foundation that meets the latter conditions. Qualified donee status will be granted for a 24-month period that begins on the date chosen by the CRA, which is normally expected to be no later than the date of the gift from the Government. Registered foreign charitable foundations will be included on the list of registered foreign charities maintained on the CRA's website.

This proposed measure will apply on Royal Assent to the enacting legislation.


Repeated Failure to Report Income Penalty

Under the ITA, two sets of penalties may apply when a taxpayer fails to report all of their income on their income tax return:

  1. In the case of repeated failures to report income (i.e., a failure in the year and in any of the three preceding taxation years), the taxpayer is liable to a penalty equal to 10% of the unreported income for that taxation year.
  2. Where a taxpayer knew or, under circumstances amounting to gross negligence, ought to have known that an amount of income should have been reported, a second set of penalties (the "gross negligence" penalties) generally equal to 50% of the understatement of tax payable (or the overstatement of tax credits) related to the omission may also apply. If gross negligence penalties are applicable, penalties for repeated failure to report income will not be imposed.

In certain circumstances, the penalty for repeated failure to report income can be disproportionate in relation to the associated tax liability, particularly for lower income individuals. In some cases, it may actually result in a greater penalty than would be imposed had the gross negligence penalty been levied instead.

Budget 2015 proposes to amend the repeated failure to report income penalty to apply in a taxation year only if a taxpayer fails to report at least $500 of income in the year and in any of the three preceding taxation years. The amount of the penalty will equal the lesser of:

  1. 10% of the amount of unreported income; and
  2. an amount equal to 50% of the difference between the understatement of tax (or the overstatement of tax credits) related to the omission and the amount of any tax paid in respect of the unreported amount (e.g., by an employer as employee withholdings).

The gross negligence penalty will continue to apply in its current form in cases where a taxpayer fails to report income intentionally or in circumstances amounting to gross negligence.

This measure will apply to the 2015 and subsequent taxation years.

Streamlining Reporting Requirements for Foreign Assets

After having introduced a revised Foreign Income Verification Statement (Form T1135) in 2013, requiring taxpayers to provide more detailed information regarding specified foreign property, the Government proposes in Budget 2015 to simplify the foreign asset reporting system for taxation years that begin after 2014 for taxpayers for whom the cost of specified foreign property is less than $250,000 throughout the year. This is a relieving measure addressing the complaint that the additional information resulted in a compliance burden for them that was disproportionate to the amount of their foreign investments.

Under the current rules, Canadian-resident individuals, corporations, trusts and certain partnerships that, at any time in a taxation year, own or hold specified foreign property with a total cost of more than $100,000 must file Form T1135 with the CRA. Specified foreign property generally includes funds and investments held outside Canada, but excludes property used exclusively in carrying on an active business, real estate and other property that is for personal use, as well as shares and indebtedness of a foreign affiliate of the taxpayer. Property held in registered plans, such as RRSPs and TFSAs, is excluded from the Form T1135 reporting requirements.

Under the revised form being developed by the CRA, if the total cost of a taxpayer's specified foreign property is less than $250,000 throughout the year, the taxpayer will be able to report these assets to the CRA under a new simplified foreign asset reporting system. The current reporting requirements will continue to apply to taxpayers with specified foreign property that has a total cost at any time during the year of $250,000 or more.

Update on the Automatic Exchange of Information for Tax Purposes

In November 2014, Canada and the other G-20 countries endorsed a new common reporting standard for automatic information exchange developed by the OECD and committed to a first exchange of information by 2017 or 2018. G-20 finance ministers committed in February 2015 to work toward completing the necessary legislative procedures within the agreed time frame.

Under the new standard, foreign tax authorities will provide information to the CRA relating to financial accounts in their jurisdictions held by Canadian residents. The CRA will, on a reciprocal basis, provide corresponding information to the foreign tax authorities on accounts in Canada held by residents of their jurisdictions. The new standard will not require reporting on accounts held by residents of Canada with foreign citizenship. The standard includes important safeguards to protect taxpayer confidentiality and ensure that the exchanged information is used only by tax authorities and only for tax purposes.

Budget 2015 states that the CRA will ensure that each jurisdiction has appropriate capacity and safeguards in place before formalizing exchange arrangements with such jurisdictions and beginning to exchange information on a reciprocal, bilateral basis.

Canada proposes to implement the common reporting standard starting on July 1, 2017, allowing a first exchange of information in 2018.

As of the implementation date, financial institutions will be expected to have due diligence procedures in place to identify accounts held by residents of any country other than Canada and to report the required information to the CRA. Further to enactment of the intergovernmental agreement (IGA) between Canada and the United States to implement the U.S. Foreign Account Tax Compliance Act (FATCA), Canadian financial institutions will again see their compliance burden increased by the tax authorities. It is, however, very likely that they will be in a position to leverage the procedures and systems put in place in respect of the IGA. It is interesting to note that, unlike the FATCA regime, the new standard does not provide for the imposition of penalties or withholding taxes on financial institutions that do not comply with the reporting standard.

Draft legislative proposals will be released for comments in the coming months.

Revenue Canada Funding

Budget 2015 proposes to expand and enhance CRA programs that target the underground economy, offshore non-compliance and aggressive tax avoidance by large complex entities. It announces that over a five-year period:

  1. $118.2 million will be provided to the CRA for enhanced underground economy audit efforts through the creation of additional Underground Economy Specialist Teams;
  2. $25.3 million will be provided to the CRA to expand its offshore compliance activities through the use of improved risk assessment systems and business intelligence, as well as the hiring of additional auditors; and
  3. $58.2 million will be provided to the CRA to address additional cases that have been identified through the enhanced risk assessment systems to further combat aggressive tax avoidance—domestically and internationally.

In Budget 2015, the Government accounts for the expected revenue impact of these measures, which it estimates at $831 million over five years.


Alternative Arguments in Support of Assessments

An income tax assessment is a calculation of a taxpayer's total tax liability for a particular taxation year. The case law has generally established that the question to be answered on a taxpayer's appeal of an assessment is whether the CRA's assessment is for a greater amount than is required under the ITA.

The general understanding in such an appeal was that the basis of the assessment could change after the expiration of the normal reassessment period, but only to the extent that the total amount assessed from all sources was not increased.

In accordance with this principle, subsection 152(9) of the ITAprovides that the Minister of National Revenue may generally advance an alternativeargument in support of an assessment at any time after the normal reassessmentperiod. The purpose of this provision is to allow the Minister to advance analternative argument after the relevant reassessment period has expired.

The recent decision of the Federal Court of Appeal in Geoffrey Last v. The Queen ([2014] 5 CTC 201 (FCA), [2013] 1 CTC 2062 (TCC)) established thatwhile the Minister of National Revenue may invoke an alternative basis in support of an assessment after the expiration of the normal reassessment period, each source of income is to be considered in isolation and the amount of the assessment in respect of any particular source of income cannot increase.

Budget 2015 proposes that the ITAbe amended to clarify that the CRA and the courts may increase or adjust an amount included in an assessment that is under objection or appeal at any time, provided that the total amount of the assessment does not increase. Similar amendments are proposed to be made to Part IX of the Excise Tax Act (in relation to the GST/HST) and the Excise Act, 2001 (in relation to excise duties on tobacco and alcohol products) to help ensure consistency in administrative measures in federal tax statutes.

These measures will apply in respect of appeals instituted after Royal Assent to the enacting legislation.

Pension Fund Investments

The Government proposes to undertake a public consultation on the usefulness of the rule that restricts federally regulated pension funds from holding more than 30% of the voting securities of a corporation (30% Rule). The stated objective is to reduce red tape and improve the investment climate in Canada. Interestingly, the Government last reviewed the 30% Rule in 2010 and, at the time, concluded that "it remains appropriate at this time for prudential reasons."

If the Government were to dilute or eliminate the 30% Rule, the changes would apply not only to federally registered pension plans, but also to pension plans registered in Alberta, British Columbia, Manitoba, Newfoundland and Labrador, Ontario and Saskatchewan. The pension legislation of those provinces incorporates the federal 30% Rule, as amended from time to time, by reference.

Information Sharing for the Collection of Non-Tax Debts

The CRA collects debts under a number of non-tax programs on behalf of federal and provincial governments. Currently, the CRA must, however, segregate its tax and non-tax collection activities as taxpayer information cannot be shared between staff responsible for the collection of tax debts and those responsible for the collection of non-tax debts. In addition to the limitations this measure imposes on the Government's ability to achieve administrative efficiency, taxpayers who owe amounts under both tax and non-tax programs can be frustrated as a result of being contacted by more than one CRA debt collector.

Budget 2015 proposes to amend the ITA, Part IX of the Excise Tax Act (in relation to the GST/HST) and the Excise Act, 2001 (in relation to excise duties on tobacco and alcohol products) in order to allow for taxpayer information to be shared within the CRA in respect of non-tax debts under certain federal and provincial government programs. In the interest of ensuring consistency in the information sharing rules in federal tax statutes, Budget 2015 also proposes to amend Part IX of the Excise Tax Act and the Excise Act, 2001 to allow for taxpayer information to be shared in respect of certain programs where such information sharing is currently permitted under the ITA.

This measure will apply on Royal Assent to the enacting legislation.

Employment Insurance Premiums

The Small Business Job Credit, introduced in 2014, will lower small businesses' EI premiums from the current rate of $1.88 to $1.60 per $100 of insurable earnings in 2015 and 2016. Any firm that pays employer premiums equal to or less than $15,000 in those years will be eligible for the credit.

Budget 2015 announces that, in 2017, the Government will implement a seven-year break-even EI premium rate-setting mechanism, which will ensure that EI premiums are no higher than needed to pay for the EI program over time. After the new mechanism takes effect, any cumulative surplus recorded in the EI Operating Account will be returned to employers and employees through lower EI premium rates. This is expected to result in a substantial reduction in the EI premium rate, from $1.88 in 2016 to an estimated $1.49 in 2017.

Balanced Budget Legislation

Budget 2015 makes much of the fact that the federal budget is balanced and that after taking into account the 2015 measures, the deficit will have been replaced with a projected surplus of $1.4 billion for 2015-16. It then includes the Government's proposal to introduce balanced budget legislation.

Under the proposed legislation, the only acceptable deficit will be one that responds to a recession or an extraordinary circumstance, such as a war or natural disaster. If there is a published deficit, the Minister of Finance will be required to appear before the House of Commons Standing Committee on Finance within 30 days to present a plan with concrete timelines to return to balanced budgets.

To view original article, please click here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.