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CRA Requires Independent Business Valuations - new Bill C-208 now in effect

Government of Canada, Revenue of Canada Tax Service Bulletin (Link)

Changes to the Income Tax Act in 2021 altered the tax treatment of family transfers of:

  • shares in a qualified small business corporation

  • shares of the capital stock of a family farm or fishing corporation

Valuations and affidavits for the transfer of a small business, family farm or fishing corporation are now a requirement as a result of Bill C-208 that came into effect on June 29, 2021.

If an individual transfers these shares to a corporation controlled by one or more of their children or grandchildren, under the new rules, the transfer is taxed the same as an arm’s length sale.

The individual who transfers the shares must provide the Canada Revenue Agency (CRA) with these documents:

  • a valuation report that is an independent assessment of the fair market value of the transferred shares

  • an affidavit signed by the individual and a commissioner of oaths or notary public, attesting to the disposal of the shares.

Requirements for an independent assessment of fair market value

In order for the CRA to accept a valuation as an independent assessment of fair market value, the valuation must be completed by someone who meets these requirements:

  • is unrelated to the corporation or vendor and does not have any financial interest in the transactions

  • has sufficient knowledge and experience in valuations and the industry being dealt with

The specific contents of the valuation report will depend on the nature of the corporation, its location and its operations. A valuation report typically includes the following information:

  • calculations of value

  • analysis of the business, industry, location, and economy to assess risk

  • explanation of the calculations and the methodology rationale

  • appraisals of equipment and livestock

  • appraisals of real property, if the company’s value is based on assets

  • analysis of the rights and restrictions of the corporation shares and other agreements (for example, shareholder agreements)

  • description of the assumptions made when completing the analysis

A report that meets the Chartered Business Valuation Institute’s standards will meet the CRA’s expectations.

If you are filing your income tax and benefit return by paper, the valuation report is to be included with your return. If you are filing your return electronically, CRA instuctions are to keep the affidavit and valuation reporting with your records. The CRA may ask for these documents if it reviews your return.

If you need help with a valuation for a family transfer or have further questions please contact us for assistance.


Malahat Valuation Group specializes in business valuation and real estate appraisals to owners of privately-owned companies and their professional advisors.

When owners need to leverage, sell or reorganize their assets, we answer the age-old question "what is it worth?".

We provide our clients and their advisor's peace of mind by preparing professional valuations that stand up to scrutiny from lenders, the Courts, and Canada Revenue Agency.

Malahat Valuation Group Inc.

(250) 929-2929


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