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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:
 | 2022-23 $43.0 billion / $43.0 billion / $40.1 billion |
| 2023-24 $40.1 billion / $47.0 billion / $32.3 billion |
| 2024-25 $35.0 billion / $42.1 billion / $28.6 billion |
| 2025-26 $26.8 billion / $34.2 billion / $20.2 billion |
| 2026-27 $15.8 billion / $23.3 billion / $10.3 billion |
| 2027-28 $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
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
| 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). |
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:
| 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!
Deduction for Tradespeople's Tool Expenses: Effective for 2023 taxation year, included in Bill C-47:
| double the maximum employment deduction for tradespeople's tools from $500 to $1,000 |
Registered Education Savings Plans (RESPs): Effective March 28, 2023:
| Educational Assistance Payment withdrawal limits increased |
| allowing divorced or separated parents to open joint RESPs |
Retirement Compensation Arrangements (RCAs):
| 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.
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| 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.
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Registered Disability Savings Plans (RDSPs):
| 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. |
Alternative Minimum Tax (AMT) Effective January 1, 2024
Strengthening the Intergenerational Business Transfer Framework - Bill C-208 Follow-Up - proposals:
| amend Bill C-208 rules to ensure that they apply only where a genuine intergenerational business transfer takes place. |
| includes a table outlining the proposed conditions to qualify as a genuine intergenerational business transfer. |
| provide a 10-year capital gains reserve for genuine intergenerational business transfers meeting the proposed conditions |
| Effective for transactions that occur on or after January 1, 2024 |
| The 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
| 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:
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| 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:
| ||||||
| 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. |
General Anti-Avoidance Rule (GAAR)
| 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 |
Dividend Received Deduction by Financial Institutions
| proposal to deny the dividend received deduction in respect of dividends received by financial institutions on shares that are mark-to-market property |
| would apply to dividends received after 2023 |
Income Tax and GST/HST Treatment of Credit Unions
| 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 |
Refundable Clean Hydrogen (CH) Tax Credit
| to apply to property that is acquired and becomes available for use on or after March 28, 2023 |
| to be fully phased out for property that becomes available for use after 2034 |
| CH 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
| 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. |
Labour Requirements Related to Certain Investment Tax Credits
| businesses that do not meet the prevailing wage and apprenticeship labour
requirements will receive reduced tax credit rates for
|
Refundable Investment Tax Credit for Clean Technology Manufacturing - new
| 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 |
Refundable Investment Tax Credit for Carbon Capture, Utilization, and Storage (CCUS)
| was proposed in Budget 2022 | ||||||
| Budget 2023 proposes additional design details for the CCUS Tax Credit regarding dual use equipment | ||||||
| further details will be included in legislative proposals to be released in the coming months | ||||||
| Dedicated
Geological Storage of CO2
| ||||||
| 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.
Zero-Emission Technology Manufacturers
| 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 |
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.
| 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. |
Cannabis Taxation – Quarterly Duty Remittances
| instead of monthly remittances, starting from the quarter beginning on April 1, 2023 |
Air Travellers Security Charge
| 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. |
Customs Tariff Measures
Tariff Support for Developing Countries
| non-reciprocal tariff preference programs to developing countries to support their export-led economic development |
| 2 of these programs, the General Preferential Tariff (GPT) and Least Developed Country Tariff (LDCT), expire on December 31, 2024. |
| proposal 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)
| Pillar One - Reallocation of Taxing Rights
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| Pillar Two - Global Minimum Tax
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Revised: September 20, 2024