The bill is now part of Canada’s income tax law, the minister of finance said
By Diego Flammini
Staff Writer
Farms.com
Deputy Prime Minister and Finance Minister Chrystia Freeland has cleared the air surrounding Bill C-208.
The piece of legislation, which amends the Income Tax Act to “establish uniform tax treatment” for the sale of a farm or fishing operation whether it’s sold to a family member or not, is now law, Freeland said on July 19.
Freeland addressed the issue after confusion arose.
The bill received royal assent on June 29 but one day later the Department of Finance indicated the changes to the Income Tax Act wouldn’t apply until Jan. 1, 2022.
Bill C-208 is part of Canadian income tax law now, Freeland said.
“We fully support genuine intergenerational share transfers and regret recent uncertainty that we have caused,” Freeland said in her July 19 statement. “Bill C-208 was voted on by Parliament and received Royal Assent. The law is the law.”
The Canadian ag sector is happy the issue has been settled.
The June 30 announcement created "stress and uncertainty for many farmers who were looking to retire this year and transition their farm to their family members," Mary Robinsin, president of the Canadian Federation of Agriculture, told Farms.com in an email. "This bill's passage will help support the continuation of Canadian family farming by removing the unfair tax burden previously incurred when transferring a farm to a family member rather than a third party."
Members of Canada’s business community are pleased with the Bill C-208 clarification.
Knowing this law is in place will help Canadian businesses make sound decisions, said Perrin Beatty, president and CEO of the Canadian Chamber of Commerce.
Minister Freeland’s comments provide “much needed certainty for small businesses by making clear the Bill is now part of the Income Tax Act,” he said in a statement. “The unfair taxation of intergenerational transfers meant that until Bill C-208, it was more difficult and made less financial sense for small business owners to sell their company to their children and grandchildren versus a complete stranger. Small businesses make up 98% of all companies in Canada.”
The federal government does plan to bring further amendments forward in the future.
The bill, as currently constituted may allow for “surplus stripping,” where dividends are converted capital gains to take advantage of the lower tax rate without any transfer of business taking place.
Any legislative proposals would come in the fall.