Canada: Proposed Changes To ITC Rules For Holding Corporations
Companies using section 186 of the Excise Tax act to claim Input Tax Credits should be aware of the proposed changes. If enacted, these changes will, then affect their business. Section 186 has often been confusing, with even court disputes unable to interpret some situations when it should be applied. The new proposal will lay down a specific set of circumstances in which the tax credits involved can be used. Companies will need to be aware of these specifics if these proposed changes occur, especially if they have been receiving these credits in the past.
“If the proposed legislation is enacted in its current form, ITC eligibility will no longer turn on whether the inputs “can reasonably be regarded” as being in relation to the shares or debt of a related corporation, but on whether the detailed and specific requirements of paragraph 186(1)(a), 186(1)(b) and 186(1)(c) are met.”