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Mergers and Acquisitions in Canada


In addition to income taxes and capital taxes, both goods and services are taxed in Canada. For the most part, a consumption tax is levied at both the federal and provincial levels, although some provinces levy this tax through a harmonized structure. The federal sales tax is presently 5% and is called the goods and services tax (the “GST”). Ontario’s and British Columbia’s sales taxes, 8% and 7% respectively, are “harmonized” with the GST (the “HST”). Quebec levies a sales tax of 8.5% (the “QST”) which is very similar to the GST. It should be noted that the GST, the Ontario and British Columbia HST, and the QST, are “value added taxes” and are generally refunded to most commercial operations. In addition, most goods exported from Canada are not subject to the GST, HST or QST.

Commercial entities that are involved in making taxable supplies in Canada, including non-residents of Canada who are making supplies in the course of a business carried on in Canada, are required to register for and charge, collect, and remit GST, HST and QST, where applicable, on such supplies.

Currently, the provinces of Saskatchewan and Manitoba impose a provincial sales tax (the “PST”) which is a single incidence sales tax imposed on end-users of tangible personal property as well as certain services in the province. The PST varies from five percent in Saskatchewan, seven percent in British Columbia and eight percent in Manitoba. The province of Alberta does not impose a separate sales tax.

Most provinces also levy a tax when land is transferred. In addition there are several payroll taxes imposed by the federal and provincial governments including employment insurance, Canada Pension Plan (which in Quebec is replaced by the Quebec Pension Plan) and provincial health taxes.

Accordingly, in connection with any transaction, income, commodity and payroll tax advice should be obtained.

Additional posts from the blog

May

21

New Bill Heightens Potential for More Investment Canada Reviews of SOE Acquisitions

by Sandra Walker

Last week the Canadian Government introduced amendments to the Investment Canada Act (ICA) to implement its revised policy towards state-owned enterprises (SOEs) which it announced in December last year. At that time, while it approved the acquisition by Chinese SOE, CNOOC, of Canadian oil and gas company, Nexen, the Government announced its intention to prohibit acquisitions of control of Canadian oil sands businesses by SOEs except on an exceptional basis. It also stated that joint ventures and minority investments were welcome. In addition, the government indicated it would closely monitor SOE acquisitions in other sectors of the economy and would distinguish between SOE and non-SOE investments when setting the ICA review threshold. (See Focus on Foreign Investment Review, December 2012)

May

13

The Autorité des marchés financiers Proposes An Alternative Approach to Securities Regulators Intervention in Defensive Tactics

by Guy Paul Allard

On March 14, 2013, the Autorité des marchés financiers (“AMF”) published for comments a consultation paper (the “AMF Proposal”) pertaining to defensive tactics in response to take-over bids. This consultation is taking place concurrently with the one launched the same day by the Canadian Securities Administrator (“CSA”) with the release of proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). Unlike the CSA’s 62-105, the AMF Proposal addresses all defensive tacticsii, not only security holders rights plans.

May

10

Proposed New Framework for Rights Plans a Potential Game Changer for Hostile Bids

by Daniel Katzin

The Canadian Securities Administrators published for comment a proposed new regulatory framework for rights plans under proposed National Instrument 62-105 Security Holder Rights Plans and proposed Companion Policy 62-105CP Security Holder Rights Plans (collectively, “62-105”). If adopted, 62-105 would provide issuers with a game changing tool to respond to hostile take-over bids, where a target board will be able to use a rights plan as leverage to negotiate with a potential bidder.



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