The Canadian Department of Finance introduced draft legislation in the 2023 Canadian Federal Budget Budget 2023 to create employee ownership trusts EOTs to facilitate the transfer of a business to the employees of the business. We provided an overview of the rules initially proposed in Budget 2023 in Employee Ownership Trusts A Useful Tool for Employee Business Ownership?, and recommended various revisions to the proposed rules to improve the tax incentives and ease some of the conditions required to qualify for EOT treatment. The Department of Finance released revised EOT legislation on August 4, 2023, addressing some of our concerns but not the big one the revised EOT legislation still contained minimal tax incentives.
With the enactment of Bill C-47 on June 22, 2023, Canada s enhanced mandatory disclosure rules are now fully in effect. These rules, which were first announced in the 2021 Canadian federal budget: expand the prior rules for reportable transactions; include new reporting requirements for notifiable transactions and uncertain tax treatments; and impose new punitive consequences, including penalties and extended reassessment periods, for failing to comply with the disclosure requirements.
There is a growing international movement to increase employee ownership of businesses. Some jurisdictions such as the United Kingdom and the United States have developed tax rules and incentives to facilitate business ownership by trusts created for the benefit of a business s employees.
The 2023 Canadian Federal Budget, released March 28, 2023 Budget 2023, proposes significant amendments to expand the application of Canada s general anti-avoidance rule GAAR.
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