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2010 Federal Budget Amendments to “Taxable Canadian Property” - Your Questions Answered

April-20-2010

Lawyer Jon Northup
Area Mergers and Acquisitions, Tax, Private Equity

Summary

It has been over a month since the March 4, 2010 release of the Canadian Federal Budget (the “Budget”). The Budget included proposed amendments that will significantly narrow the definition (the “TCP Definition”) of “taxable Canadian property” (“TCP”). As a result, Canada’s domestic system for taxing gains realized by non-residents of Canada will be similar to that of the United States: Canadian tax will generally only arise in respect of gains from dispositions of (i) real property situated in Canada and Canadian resource property, and (ii) shares of corporations, and equity interests in partnerships and trusts, where the shares or equity interests derive (or have derived in the previous five year period) more than 50% of their value from real property situated in Canada or Canadian resource property. As a result of this substantive amendment, nonresident vendors will no longer need to obtain Canadian tax clearance certificates in respect of many dispositions
of shares of Canadian corporations.

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