Resource Expenditures Canadian resource expenditures (other than expenditures related to the acquisition of tangible property, which would generally be treated as depreciable property) are classified as either Canadian oil and gas property expense (COGPE), Canadian development expense (CDE) or Canadian exploration expense (CEE). Expenditures related to the acquisition of Canadian oil and gas properties or rights (including oil sands properties) are generally classified as COGPE. Expenditures related to the acquisition of Canadian mining properties or rights are generally classified as CDE. Expenditures in respect of the exploration and development of Canadian resource properties are generally classified as either CDE or CEE. Once classified as COGPE, CDE or CEE, the expenditures are added to the corresponding cumulative pool. Subject to certain restrictions, a taxpayer may deduct in a taxation year 10% of its cumulative COGPE, 30% of its cumulative CDE and 100% of its cumulative CEE. Certain expenses incurred after November 20, 2018, and before 2028 may entitle the taxpayer to first year accelerated COGPE of up to 5% (2.5% for 2024–2027) and CDE of up to 15% (7.5% for 2024–2027). Some provinces, such as Québec, offer similar or additional incentives. Capital Tax The federal government imposes a capital tax on financial institutions in respect of their “taxable capital employed in Canada” in excess of $1 billion. Corporate Reorganizations The Tax Act permits many corporate reorganizations to be effected on a “rollover” or tax-deferred basis to shareholders. Some reorganizations, such as share-for- share exchanges, are relatively straightforward from a tax perspective, whereas others, such as tax-deferred spinoffs, have complex statutory and administrative restrictions.
The Income Tax Act permits many corporate
reorganizations to be effected on a “rollover” or tax-deferred basis to shareholders. Some reorganizations, such as share- for-share exchanges, are relatively straightforward from a tax perspective, whereas others, such as tax-deferred spinoffs, have complex statutory and administrative restrictions.
78
Doing Business in Canada
Powered by FlippingBook