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Home   ->   Federal Budget  -> 2023 Federal Budget

Legislation subsequent to the 2023 Budget

On September 21, 2023, Bill C-56, the Affordable Housing and Groceries Act, was introduced to increase the GST Rental Rebate on new rental housing from 36% to 100%.  The rebate increase is effective for projects that begin construction on or after September 14, 2023 and before December 31, 2030, and complete construction by December 31, 2035. See the September 21, 2023 Department of Finance news release as well as the Backgrounder.

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.

Balancing the Budget

There is no plan to balance the budget.

Projected deficits / downside scenario / upside scenario:

bullet2022-23 $43.0 billion / $43.0 billion / $40.1 billion
bullet2023-24 $40.1 billion / $47.0 billion / $32.3 billion
bullet2024-25 $35.0 billion / $42.1 billion / $28.6 billion
bullet2025-26 $26.8 billion / $34.2 billion / $20.2 billion
bullet2026-27 $15.8 billion / $23.3 billion / $10.3 billion
bullet2027-28 $14.0 billion / $21.4 billion / $7.8 billion

See Budget 2023 Economic Scenario Analysis.

Canada's Federal Debt as per the Canadian Taxpayers Federation Debt Clock is currently approximately $1.2 trillion.

Contents

Budget Bills

Personal Tax Measures

Business Income Tax Measures

Sales and Excise Tax Measures

Customs Tariff Measures

International Tax Measures

For more complete information, see Tax Measures: Supplementary Information.

Budget Bills

Bill C-46, An Act to amend the Federal-Provincial Fiscal Arrangements Act and the Income Tax Act - Royal Assent May 11, 2023

bulletauthorizes additional payments to the provinces and territories
bulletprovides 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).

Bill C-47, Budget Implementation Act, 2023, No. 1 - Royal Assent June 22, 2023

Draft Legislation including Alternative Minimum Tax changes

Personal Tax Measures

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.

Employee Ownership Trusts (EOTs): New rules coming into force January 1, 2024 would make it easier to establish EOTs:

bulletextend the capital gains reserve to 10 years for qualifying sales to an EOT
bulletcreate an exception to the current shareholder loan rule for EOTs
bulletexempt EOTs from the 21-year deemed disposition rule that applies to certain trusts

Deduction for Tradespeople's Tool Expenses: Effective for 2023 taxation year, included in Bill C-47:

bulletdouble the maximum employment deduction for tradespeople's tools from $500 to $1,000

Registered Education Savings Plans (RESPs): Effective March 28, 2023:

bulletEducational Assistance Payment withdrawal limits increased
bulletallowing divorced or separated parents to open joint RESPs

Retirement Compensation Arrangements (RCAs):

bulletIncome 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.
bulletEffective for fees or premiums paid on or after Budget Day
bulletProposal 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.
bulletEffective for retirement benefits paid after 2023.

Registered Disability Savings Plans (RDSPs):

bullettemporary 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.

Alternative Minimum Tax (AMT) for High-Income Individuals: Effective for tax years beginning after 2023 - proposals:

bulletAMT exemption to be raised from $40,000 to start of 4th tax bracket (will be $173,205 in 2024)
bulletAMT rate to be increased from 15% to 20.5%
bullet50% of certain deductions would be disallowed in the AMT calculation
bulletallow only 50% of certain non-refundable tax credits to be allowed to reduce the AMT
bulletincrease the AMT capital gains inclusion rate from 80% to 100%, with capital loss carry forwards and allowable business investment losses remaining at 50% rate
bulletinclude 100% of the benefit associated with employee stock options in the AMT base
bulletinclude 30% of capital gains on donations of publicly listed securities in the AMT base. The 30% rate would also apply to the full benefit associated with the employee stock options to the extent that a deduction is available.

AMT is currently calculated on form T691 Alternative Minimum Tax.

See the Notice of Ways and Means Motion which includes changes to the AMT, and which will become Budget Implementation Act, 2024, No. 1.

See Draft Legislation including Alternative Minimum Tax changes, and the related August 4, 2023 News Release.

On May 2, 2024 Bill C-69, was tabled and past first reading. It includes the changes to AMT.

See Alternative Minimum Tax (AMT) and Donation of Securities.

Strengthening the Intergenerational Business Transfer Framework - Bill C-208 Follow-Up - proposals:

bulletamend Bill C-208 rules to ensure that they apply only where a genuine intergenerational business transfer takes place.
bulletincludes a table outlining the proposed conditions to qualify as a genuine intergenerational business transfer.
bulletprovide a 10-year capital gains reserve for genuine intergenerational business transfers meeting the proposed conditions
bulletEffective for transactions that occur on or after January 1, 2024
bulletThe legislation for this was included in Bill C-59, Fall Economic Statement Implementation Act, 2023

Business Income Tax Measures

Tax on Share Repurchases by Public Corporations in Canada

bulletwould apply to Canadian-resident corporations whose shares are listed on a designated stock exchange, but excludes mutual fund corporations
bulletwould also apply to the following entities if they have units listed on a designated stock exchange:
bulletreal estate investment trusts;
bulletspecified investment flow-through (SIFT) trusts; and
bulletSIFT partnerships
bulletwould also apply to publicly traded entities that would be SIFT trusts or SIFT partnerships if their assets were located in Canada
bullettax 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
bulletthe following transactions would not be considered an issuance or repurchase of equity:
bulletthe issuance and cancellation of debt-like preferred shares and units
bulletthe issuance and cancellation of shares or units in certain corporate reorganizations and acquisitions
bulletwould 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
bulletThe tax would apply in respect of repurchases and issuances of equity that occur on or after January 1, 2024.

General Anti-Avoidance Rule (GAAR)

bulletA 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.
bulletA penalty of 25% of the amount of the tax benefit would be introduced for transactions subject to the GAAR.
bulletA 3-year extension to the normal reassessment period would be provided for GAAR assessments, unless the transaction had been disclosed to the CRA.
bulletConsultation:  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

Dividend Received Deduction by Financial Institutions

bulletproposal to deny the dividend received deduction in respect of dividends received by financial institutions on shares that are mark-to-market property
bulletwould apply to dividends received after 2023

Income Tax and GST/HST Treatment of Credit Unions

bulletproposal 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
bulletwould apply in respect of taxation years of a credit union ending after 2016

Refundable Clean Hydrogen (CH) Tax Credit

bulletto apply to property that is acquired and becomes available for use on or after March 28, 2023
bulletto be fully phased out for property that becomes available for use after 2034
bulletCH tax credit rates for eligible projects will be based on assessed carbon intensity of the hydrogen that is produced, with rates of 15%, 25%, and 40%

Refundable Clean Technology Investment Tax Credit – Geothermal Energy

bulletproposal to expand eligibility of this 30%tax credit to include geothermal energy systems that are eligible for CCA Class 43.1
bulletto 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
bulletphase-out schedule to be modified to start in 2034, reduced to 15% in that year, unavailable after 2034.

Labour Requirements Related to Certain Investment Tax Credits

bulletbusinesses that do not meet the prevailing wage and apprenticeship labour requirements will receive reduced tax credit rates for
bulletClean Technology Investment Tax Credit: 20% instead of 30%, during phase-out periods reduced from 10% to zero
bulletClean Hydrogen Investment Tax Credit: reduced by 10%, during phase-out periods reduced to zero
bulletClean Electricity Investment Tax Credit: 5% instead of 15%
bulletintention to also apply labour requirements to the Investment Tax Credit for Carbon Capture, Utilization, and Storage, details to be announced at a labour date
bulletrequirements would apply to work that is performed on or after October 1, 2023

Refundable Investment Tax Credit for Clean Technology Manufacturing - new

bulletfor 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
bulletwould apply to property that is acquired and becomes available for use on or after January 1, 2024
bulletto be gradually phased out starting in 2032, no longer in effect after 2034

Refundable Investment Tax Credit for Carbon Capture, Utilization, and Storage (CCUS)

bulletwas proposed in Budget 2022
bulletBudget 2023 proposes additional design details for the CCUS Tax Credit regarding dual use equipment
bulletfurther details will be included in legislative proposals to be released in the coming months
bulletDedicated Geological Storage of CO2
bulletBC added as an eligible jurisdiction for dedicated geological storage of CO2 
bullet applicable to expenses incurred on or after January 1, 2022
bulletprocesses for using and storing the gas in concrete to be validated by a qualified third party, instead of Environment and Climate Change Canada
bulletchanges proposed to CCUS Tax Credits related to eligible refurbishment costs (Refurbishment ITCs) and to Refurbishment ITC Recovery
bulletthese 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.

Zero-Emission Technology Manufacturers

bulletcurrently provides lower corporate income tax rates for qualifying zero-emission technology manufacturers
bulleteligible activities to be expanded to income from certain qualifying nuclear manufacturing and processing activities
bulletexpansion would apply for taxation years beginning after 2023
bulletplanned 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

Flow-Through Shares and Critical Mineral Exploration Tax Credit – Lithium from Brines

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.

Sales and Excise Tax Measures

GST/HST Treatment of Payment Card Clearing Services

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.

Alcohol Excise Duty

bulletThe 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.
bulletThe budget proposes to temporarily cap the rate increase for one year only, as of April 1, 2023.
bulletThe excise duty rates will be increased by 2% instead of 6.3% for that period.

Cannabis Taxation – Quarterly Duty Remittances

bulletinstead of monthly remittances, starting from the quarter beginning on April 1, 2023

Air Travellers Security Charge

bulletproposal 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.
bulletthe 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.

Customs Tariff Measures

Tariff Support for Developing Countries

bulletnon-reciprocal tariff preference programs to developing countries to support their export-led economic development
bullet2 of these programs, the General Preferential Tariff (GPT) and Least Developed Country Tariff (LDCT), expire on December 31, 2024.
bulletproposal to renew these programs until the end of 2034, and update them under the Customs Tariff.

International Tax Measures

International Tax Reform - re Multinational Enterprises (MNEs)

bulletPillar One - Reallocation of Taxing Rights
bulleta 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.
bulletPillar Two - Global Minimum Tax
bulletmultilateral 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.
bulletprimary charging rule is known as the Income Inclusion Rule (IIR), and there is a "backstop" rule, known as the Undertaxed Profits Rule (UTPR)
bulletBudget 2023 announces the government's intention to introduce legislation
bulletimplementing 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.
bulletdraft legislative proposals for the UTPR with effect for fiscal years of MNEs beginning on or after December 31, 2024.

 

Revised: May 20, 2024

 

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