Bill C-56 received Royal Assent December 15, 2023.
2023 Federal Budget - March 28, 2023
All budget measures are subject to legislative
approval. Not all budget measures are included below, just the main tax
measures. See the 2023 Federal
Budget website for complete information.
All federal draft legislation, whether budget-related or not,
can be found on the Department of Finance website Draft
Legislation page.
authorizes additional payments to the provinces and territories
provides for one additional payment of the Goods and Services
Tax/Harmonized Sales Tax (GST/HST) credit equal to double the amount of the
regular January 2023 payment (Grocery Rebate).
Grocery
Rebate: Increasing the GST credit for the 2022-2023 benefit year (July 1,
2022 to June 30, 2023), by an additional payment for January 2023 based on the
2021 tax return. Included in Bill C-46. The additional payment will be
delivered to eligible Canadians on July 5, 2023.
extend the capital gains reserve to 10 years for qualifying sales to an
EOT
create an exception to the current shareholder loan rule for EOTs
exempt EOTs from the 21-year deemed disposition rule that applies to
certain trusts
The 2024
Federal Budget included further details on the proposed exemption and
conditions.
It's important for anyone thinking of pursuing EOTs to listen to the August
2024 Life in the Tax Lane video from Video Tax News, which reveals
surprising details of the EOT and discusses whether it is an exemption from tax,
or a deferral of tax.
Tax Tip: Thinking of establishing an EOT? Seek advice
from a qualified tax professional!
Income Tax to be amended so that fees or premiums paid to secure or renew
a letter of credit (or a surety bond) for an RCA that is supplemental to a
registered pension plan will not be subject to the refundable Part XI.3 tax.
Effective for fees or premiums paid on or after Budget Day
Proposal to allow employer to request a refund of previously remitted
refundable Part XI.3 taxes, based on the retirement benefits paid out of the
employer's corporate revenues to employees that had RCA benefits secured by
letters of credit (or surety bonds). Employers would be eligible for a
refund of 50% of the retirement retirement benefits paid, up to the amount
of the refundable tax previously paid.
Effective for retirement benefits paid after 2023.
temporary measure which is set to expire on December 31, 2023, which
allows a qualifying family member to open an RDSP and be the plan holder for
an adult whose capacity to enter into an RDSP contract is in doubt, will be
extended by 3 years to December 31, 2026.
would apply to Canadian-resident corporations whose shares are listed on a
designated stock exchange, but excludes mutual fund corporations
would also apply to the following entities if they have units listed on a
designated stock exchange:
real estate investment trusts;
specified investment flow-through (SIFT) trusts; and
SIFT partnerships
would also apply to publicly traded entities that would be SIFT trusts or
SIFT partnerships if their assets were located in Canada
tax would be 2% of the net value of an entity's repurchase of equity = the
FMV of equity repurchased less the FMV of equity issued from treasury,
during a taxation year
the following transactions would not be considered an issuance or
repurchase of equity:
the issuance and cancellation of debt-like preferred shares and units
the issuance and cancellation of shares or units in certain corporate
reorganizations and acquisitions
would not apply to an entity in a taxation year if it repurchased less
than $1 million of equity during that taxation year (prorated for short
taxation years), as determined on a gross basis
The tax would apply in respect of repurchases and issuances of equity that
occur on or after January 1, 2024.
A rule would be added to the GAAR so that it better meets its initial objective of requiring economic substance in addition to literal compliance with the words of the Income Tax Act.
A penalty of 25% of the amount of the tax benefit would be introduced for
transactions subject to the GAAR.
A 3-year extension to the normal reassessment period would be provided for
GAAR assessments, unless the transaction had been disclosed to the CRA.
Consultation: Interested parties are invited to send written
representations expressing their views on the proposals, to the Department
of Finance Canada, Tax Policy Branch at GAAR-RGAE@fin.gc.ca
by May 31, 2023
proposal to amend the Income Tax Act by eliminating the revenue test from the definition of "credit union" and amending that definition to accommodate how credit unions currently
operate
would apply in respect of taxation years of a credit union ending after
2016
proposal to expand eligibility of this 30%tax credit to include geothermal
energy systems that are eligible for CCA Class 43.1
to apply to property that is acquired and becomes available for use n or
after March 28, 2023, where it has not been used for any purpose before its
acquisition
phase-out schedule to be modified to start in 2034, reduced to 15% in that
year, unavailable after 2034.
businesses that do not meet the prevailing wage and apprenticeship labour
requirements will receive reduced tax credit rates for
Clean Technology Investment Tax Credit: 20% instead of 30%, during
phase-out periods reduced from 10% to zero
Clean Hydrogen Investment Tax Credit: reduced by 10%, during phase-out
periods reduced to zero
Clean Electricity Investment Tax Credit: 5% instead of 15%
intention to also apply labour requirements to the Investment Tax
Credit for Carbon Capture, Utilization, and Storage, details to be
announced at a labour date
requirements would apply to work that is performed on or after October
1, 2023
for clean technology manufacturing and processing, and critical mineral
extraction and processing, equal to 30% of the capital cost of eligible
property associated with eligible activities
would apply to property that is acquired and becomes available for use on
or after January 1, 2024
to be gradually phased out starting in 2032, no longer in effect after
2034
BC added as an eligible jurisdiction for dedicated geological storage of CO2
applicable to expenses incurred on or after January 1, 2022
processes for using and storing the gas in concrete to be validated by
a qualified third party, instead of Environment and Climate Change
Canada
changes proposed to CCUS Tax Credits related to eligible refurbishment
costs (Refurbishment ITCs) and to Refurbishment ITC Recovery
these measures would apply to eligible expenses incurred after 2021 and
before 2041.
Businesses would be able to claim only one of the CCUS Tax Credit, the Investment Tax Credit for Clean Technology, the Investment Tax Credit for Clean Electricity, or the Investment Tax Credit for Clean Hydrogen, if a particular property is eligible for more than one of these tax credits.
currently provides lower corporate income tax rates for qualifying
zero-emission technology manufacturers
eligible activities to be expanded to income from certain qualifying
nuclear manufacturing and processing activities
expansion would apply for taxation years beginning after 2023
planned phase-out starting in 2029 will be extended by 3 years, to start
in taxation years that begin in 2032, fully phased out for taxation years
that begin after 2034
Eligible expenses related to lithium from brines made after Budget Day would qualify as Canadian exploration expenses and Canadian development expenses. The expansion of the eligibility for the CMETC to lithium from brines would apply to flow-through share agreements entered into after Budget Day and before April 2027.
Budget 2023 includes a proposal to amend the GST/HST definition of
"financial service" to clarify that payment card clearing services
rendered by a payment card network operator are excluded from the definition to
ensure that such services general continue to be subject to the GST/HST, in
light of a recent court decision that that found that the GST/HST does not apply
to supplies of these services.
The excise duty rates for alcohol is automatically indexed to total
Consumer Price Index (CPI) inflation every April 1st, which does happen with
other sales tax rates.
The budget proposes to temporarily cap the rate increase for one year
only, as of April 1, 2023.
The excise duty rates will be increased by 2% instead of 6.3% for that
period.
proposal to increase the Air Travellers Security Charge (ATSC) by 32.85%,
to apply to air transportation services that include a chargeable emplanement on or after May 1, 2024, for which any payment is made on or after that date.
the increase is meant to fund an increase to the level of service provided
by the Canadian Air Transport Security Authority (CATSA), which is
responsible for the security screening of air passengers and their baggage.
a federal Digital Services Tax (DST) would be payable as of January 1,
2024 in respect of revenues earned as of January 1, 2022 if the
multilateral convention implementing the Pillar One framework has not
come into force.
Pillar Two - Global Minimum Tax
multilateral framework for a global minimum tax regime designed to
ensure that MNEs with annual revenues of €750 million or more are
subject to a minimum effective tax rate of 15% on their profits in every
jurisdiction in which they operate, to reduce the incentive for MNEs to
shift profits into low-tax jurisdictions.
primary charging rule is known as the Income Inclusion Rule (IIR), and
there is a "backstop" rule, known as the Undertaxed Profits
Rule (UTPR)
Budget 2023 announces the government's intention to introduce
legislation
implementing the IIR and a domestic minimum top-up tax applicable
to Canadian entities of MNEs that are within scope of Pillar Two,
for fiscal years beginning on or after December 31, 2023.
draft legislative proposals for the UTPR with effect for fiscal
years of MNEs beginning on or after December 31, 2024.