Company in British Columbia Seeks Court Order to Prevent Increase in Capital Gains Tax Proposed by Federal Liberal Government

January 27, 2025 TruthUSA

A B.C. company’s law firm is seeking an injunction to halt the Canada Revenue Agency from enforcing a proposed capital gains tax increase that has not yet been passed by Parliament.

Thorsteinssons LLP has filed a challenge in Federal Court on behalf of Pelco Holdings Inc. to prevent the government agency from implementing the change as if it were already law.

The proposal in the Liberal’s spring budget aims to raise the portion of capital gains subject to tax for companies to two-thirds from one-half, and would also impact individuals with capital gains over $250,000.

Although the rule change has not been passed by Parliament, which is currently prorogued until March 24, the CRA insists on acting as if it will come into effect unless Parliament reconvenes and the government signals otherwise.

Instead of complying with the proposal, the law firm argues that their client wants the Federal Court to direct the CRA to enforce the existing law, which taxes capital gains at a one-half inclusion rate.

Pelco Holdings argues that failure to adhere to the current inclusion rate could create a dilemma for taxpayers who must decide whether to follow the law or the revenue agency.