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2018 Federal Budget

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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.

Subsequent legislation:

bulletBill C-74, Budget Implementation Act, 2018, No. 1 tabled March 27, 2018 and receiving Royal Assent June 21, 2018:  includes
bulletCanada Workers Benefit (CWB)
bulletCanada Child Benefit indexation
bulletSmall business tax rate reduction
bulletEmployment Insurance (EI) Working While on Claim pilot rules made permanent, extended to EI maternity and sickness benefits
bulletFederal carbon pollution pricing system
bulletFederal excise duty framework for cannabis products
bulletIncome sprinkling (Tax on Split Income, or TOSI) proposals released in December 2017 - See CRA Comments on Excluded Shares from Video Tax News
bulletPassive investments proposals re private corporations
bulletConsolidating Government of Canada's cyber security expertise under one roof through creation of Canadian Centre for Cyber Security.

Draft Legislation Released for Comments From Canadians - respond by October 13, 2018

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.

    - News release September 14, 2018

    - Draft legislation and Explanatory Notes

    - Backgrounder:  Draft Legislative Proposals Regarding Political Activities of Charities

Draft Legislation Released for Comments From Canadians - respond by September 10, 2018

bulletConsulting Canadians on Draft Sales and Excise Tax Legislative Proposals related to:
bulletexcise refund in respect of diesel fuel used for certain purposes
bulletGST/HST holding corporation rules;
bulletGST/HST rebate for printed books for qualifying public service bodies;
bulletreassessment periods - requirements for information and compliance orders; and
bulletsharing of information relating to criminal matters
bullet Consulting Canadians on Draft Income Tax Legislative Proposals relating to:
bulletImproving access to the Canada Workers Benefit;
bulletThe deductibility of employee contributions to the enhanced portion of the Quebec Pension Plan;
bulletThe reporting requirements for trusts;
bulletArtificial losses using equity-based financial arrangements;
bulletThe stop-loss rule on share repurchase transactions;
bulletThe at-risk rules for tiered partnerships;
bulletCross-border surplus stripping using partnerships and trusts;
bulletForeign affiliate proposals relating to investment businesses, controlled foreign affiliate status, trading or dealing in indebtedness, reassessments and reporting requirements;
bulletPassive income – the allocation rule for losses applied against Part IV taxes;
bulletReassessment periods - requirements for information and compliance orders;
bulletReassessment periods - non-resident non-arm's length persons; and
bulletThe sharing of information relating to criminal matters.
bulletJuly 27, 2018 News Release re Draft Legislative Proposals, with email addresses for comments
bulletLegislative and Regulatory Proposals Relating to the Excise Tax Act, the Excise Act, 2001 and the Air Travellers Security Charge Act and Explanatory Notes
bulletLegislative Proposals Relating to Income Tax and Other Legislation

See the Video Tax News commentary on the Extended Reassessment Period Proposal.

Personal Income Tax Measures

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.

Mineral Exploration Tax Credit for Flow-Through Share Investors - eligibility extended for an additional year, to March 31, 2019.

Child Benefits

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 metn.

 

Business Income Tax Measures

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.

Sales Taxes

Cannabis

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

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: September 14, 2018

   

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