No Consolidated Taxation of Corporate Groups in Canada

May 22, 2013

No Consolidated Taxation of Corporate Groups in Canada
This posting was authored by Crystal Taylor
a Partner in the Saskatoon Office of
Miller Thomson LLP

Canada does not have a formal system of corporate group taxation like the United States and other jurisdictions. Although Canadian corporate groups may be able to undertake loss consolidation transactions through financing arrangements, reorganizations, and transfers of property on a tax-deferred basis, such consolidation is generally more cumbersome and often requires obtaining tax rulings.

In its 2010 and 2012 Budgets, the Canadian Federal Government expressed interest in exploring the issue of whether new rules for the taxation of Canadian corporate groups, such as the introduction of a formal system of loss transfers or consolidated reporting, could improve the functioning of the corporate tax system in Canada.

The Federal Government conducted extensive public consultations on this issue, including with provincial and territorial officials. Generally, businesses indicated that they were primarily interested in a system of group taxation that would allow them to easily transfer losses, tax credits, and other tax attributes between members of a corporate group. Provinces and territories expressed their concerns about the possibility that a new system of corporate group taxation could reduce their revenues, and could result in significant upfront costs for governments associated with introducing a new approach to the taxation of corporate groups.

On March 21, 2013, the Minister of Finance, Jim Flaherty, tabled the 2013 Federal Budget entitled Jobs, Growth and Long-Term Prosperity – Economic Plan 2013.  In the 2013 Budget, the Federal Government confirmed that it completed its examination of the taxation of corporate groups and determined that moving to a formal system of corporate group taxation is not a priority at this time. The Federal Government indicated that it will continue to work with provinces and territories regarding their concerns about the uncertainty of the cost associated with the current approach to loss utilization.

If you would like more information on this topic, please contact the author of this posting, Crystal Taylor at (306) 667.5613 or cltaylor@millerthomson.com.

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