Federal Budget -> 2018 Budget and Subsequent Legislation
2018 Federal Budget - February 27, 2018
All budget measures are subject to legislative approval. Not all budget measures are included below, just the main tax measures. See the 2018 Federal Budget website for complete information. For your convenience we've created a pdf containing the Notice of Ways and Means Motions, and another containing the previously announced tax measures.
Bill C-74, Budget Implementation Act, 2018, No. 1 tabled March 27, 2018 and receiving Royal Assent June 21, 2018: includes
- Canada Child Benefit indexation
- Small business tax rate reduction
- Dividend tax credit revision for 2018 & 2019 for non-eligible dividends
- Employment Insurance (EI) Working While on Claim pilot rules made permanent, extended to EI maternity and sickness benefits
- Federal carbon pollution pricing system
- Federal excise duty framework for cannabis products
- Income sprinkling (Tax on Split Income, or TOSI) proposals released in December 2017
- Passive investments proposals re private corporations
- Consolidating Government of Canada's cyber security expertise under one roof through creation of Canadian Centre for Cyber Security.
Bill C-86, Budget Implementation Act, 2018, No. 2 tabled October 29, 2018 and receiving Royal Assent December 13, 2018 includes:
- Providing Canada Revenue Agency (CRA) with an extended reassessment period for a few different situations - see Summary at the beginning of the bill.
- Revising the rules relating to the non-partisan political activities of charities
- Allowing CRA to calculate the Canada Workers Benefit (formerly Working Income Tax Benefit) for any tax filer who has not claimed it
- Simplifying Canada's tariff regime
- Provides a deduction for employee contributions to the enhanced portion of the Quebec Pension Plan
- Advancing the rights and interests of consumers when dealing with their banks
- Measures re GST/HST, and excise tax
See Summary at the start of the bill for a full list of all provisions - above are just some of the Income Tax provisions.
Consulting Canadians on Draft Income Tax Legislative Proposals Regarding Political Activities of Charities
- The legislative changes would allow charities to pursue their charitable purposes by engaging in non-partisan political activities and in the development of public policy. A Canadian amateur athletic association would also be able to engage in non-partisan political activities, within defined limits, that are ancillary and incidental to its promotion of amateur athletics in Canada on a nationwide basis.
- Charities would still be required to be constituted and operated for exclusively charitable purposes, and restrictions against partisan political activities would remain. The charity would still be prohibited from devoting resources to the direct or indirect support of, or opposition to, any political party or candidate for public office. This prohibition would also still apply to Canadian amateur athletic associations.
- excise refund in respect of diesel fuel used for certain purposes
- GST/HST holding corporation rules;
- GST/HST rebate for printed books for qualifying public service bodies;
- reassessment periods - requirements for information and compliance orders; and
- sharing of information relating to criminal matters
- Consulting Canadians on Draft Income Tax Legislative Proposals relating to:
- Improving access to the Canada Workers Benefit;
- The deductibility of employee contributions to the enhanced portion of the Quebec Pension Plan;
- The reporting requirements for trusts;
- Artificial losses using equity-based financial arrangements;
- The stop-loss rule on share repurchase transactions;
- The at-risk rules for tiered partnerships;
- Cross-border surplus stripping using partnerships and trusts;
- Foreign affiliate proposals relating to investment businesses, controlled foreign affiliate status, trading or dealing in indebtedness, reassessments and reporting requirements;
- Passive income – the allocation rule for losses applied against Part IV taxes;
- Reassessment periods - requirements for information and compliance orders;
- Reassessment periods - non-resident non-arm's length persons; and
- The sharing of information relating to criminal matters.
See the Video Tax News commentary on the Extended Reassessment Period Proposal.
Canada Workers Benefit (formerly Working Income Tax Benefit - WITB)
The budget proposes to rename the WITB as the Canada Workers Benefit, and to enhance the amounts of the benefit. We've prepared a table which compares the 2019 Canada Workers Benefit factors to the 2018 WITB factors.
Eligible Medical Expenses - the expenses currently allowed for animals specially trained to assist patients who are blind, profoundly deaf, have severe autism, diabetes or epilepsy, or a severe and prolonged impairment that markedly restricts the use of the patient's arms or legs are now also allowed for animals specially trained to assist patients who have severe mental impairments.
Deductibility of Employee Contributions to Enhanced Portions of Quebec Pension Plan
The Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) will both be enhanced beginning in 2019. The Income Tax Act was already amended to provide a deduction for employee contributions, as well as the employee share of contributions by self-employed taxpayers, to the enhanced portion of the CPP. The budget proposes to also provide the same deduction for contributions to the enhanced portion of the QPP.
Under the new Canada Child Benefit, foreign-born status Indians who reside legally in Canada but who are neither Canadian citizens nor permanent residents are eligible for the benefit, when all other eligibility requirements are met. However, these individuals were not eligible for the Canada Child Tax Benefit, the National Child Benefit supplement and the Universal Child Care Benefit. The budget proposes that such individuals be made eligible for these benefits, retroactive to 2005, as long as all other eligibility requirements are met.
Small Business Deduction - Business Limit Reduction re Passive Investment Income
Canadian controlled private corporations (CCPCs) are eligible for a lower rate of tax on the first $500,000 (federal business limit) of active business income. The budget proposes to reduce the business limit for private corporations which earn investment income in excess of $50,000. Currently the business limit is only reduced when the corporation's taxable capital employed in Canada exceeds $10 million.
For tables showing how the reduced business limit will be calculated, see our article on the Small Business Deduction.
Refundable Dividend Tax on Hand (RDTOH)
The budget proposes to introduce a new RDTOH account, eligible RDTOH, which will track refundable taxes paid under Part IV of the Income Tax Act on eligible portfolio dividends. Refunds from this account will be obtained upon the payment of eligible or non-eligible dividends. However, when a non-eligible dividend is paid, the CCPC must obtain a refund from its non-eligible RDTOH before it obtains a refund from its eligible RDTOH.
The current RDTOH account will be referred to as non-eligible RDTOH, and will track refundable taxes paid under Part I of the Income Tax Act on investment income as well as under Part IV on non-eligible portfolio dividends. Refunds from non-eligible RDTOH will only be obtained upon the payment of non-eligible dividends.
The budget proposes a new federal excise duty framework for cannabis products to be introduced as part of the Excise Act, 2001. The duty will generally apply to all products available for legal purchase. See the excerpt from the Tax Measures Supplementary Information which shows proposed excise duty rates for cannabis (pdf)
Tobacco taxation is currently set to automatically increase every 5 years to account for inflation. This will be revised to be adjusted annually, so that adjustments take effect on April 1 each year starting in 2019. Effective February 28, 2018, tobacco excise duty rates will be adjusted to account for inflation since the last inflationary adjustment in 2014.
For information on all tax measures, see the Tax Measures Supplementary Information (pdf) on the Budget website. This pdf also contains the Notice of Ways and Means Motion.
Revised: March 19, 2019
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