A Review of Canada’s Draft GloBE Law

On August 4, 2023, Canada issued the draft Global Minimum Tax Act (the ‘draft law’) for consultation. The consultation closes on September 8, 2023.

The draft law includes an Income Inclusion Rule (IIR) and a domestic minimum tax (intended to be a Qualified Domestic Minimum Top-Up Tax (QDMTT)), for fiscal years beginning on or after December 31, 2023. The draft law is split into five parts:

Part I – Interpretation and Rules of Application

Part II – Global Minimum Tax (Income Inclusion Rule (IIR))

Part III – Under-Taxed Profits Rule (UTPR)

Part IV – QDMTT

Part V – Anti Avoidance

Part VI – General Provisions, Administration and Enforcement

Part III does not currently contain any provisions for the implementation of the UTPR. This is in line with the 2023 Budget, which stated that the UTPR will apply for fiscal years beginning on or after December 31, 2024, and as such draft legislative proposals for the UTPR are to follow at a later date.

Part V applies the anti-avoidance rule in Section 245 of the Income Tax Act for GloBE purposes.  This is a general anti-avoidance that amends the tax treatment (where it is reasonable to do so) to deny a tax benefit that would result, directly or indirectly, from a transaction or series of transactions. It therefore has a very wide scope. 

Key Aspects