On April 19, 2021, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, presented the government’s budget.
The program spending measures announced focus on transitioning from emergency response to recovery. The Government announced it will invest more than $101 billion in net new spending over the next three years, including $30 billion over the next five years to build a national child-care system.
No increases in corporate or personal income tax rates were announced.
What follows is a high-level overview of some of the significant new measures. Further specific information is available by contacting us:
- Extends existing COVID-19 emergency business supports to September 25, 2021 with subsidy rates declining over the July – September period (60% – 40% – 20%). Could be extended to November 20. After July 4, revenue must decline by more than 10% to be eligible. Similar reduction arrangements apply to CERS.
- Introduces the Canada Recovery Hiring Program – subsidy up to 50% on incremental remuneration paid between June 6 – November 20 over baseline period Mar 14- April 10, 2021. Can claim CEWS or CRHS but not both. CRHS rate declines from 50% – 20% in stages through October 24.
- Provides immediate expensing of up to $1.5 million per taxation year of capital property acquisitions to Canadian-controlled private corporations (CCPCs). Applies to specific classes. Property must be available for use.
- Enhances Canada’s mandatory reportable transaction disclosure rules, subject to public consultation. Must now report “notifiable transactions” and “uncertain tax treatments”.
- Provides further details of a proposed digital services tax, to be effective January 1, 2022. DST is initially a 3% non-income tax, temporary tax applying to businesses with global revenue> 750 million Euros or “in-scope” revenue (Canadian users’ data) >$20 million.
- Reduces corporate tax rates on eligible zero-emission technology manufacturing and processing income by roughly half for 7 years then increasing gradually.
- Capital cost allowance for Clean Energy Equipment – budget proposes to expand certain classes to include more types of investments.
International tax measures
- Limits the deductibility of interest by corporations, trusts and partnerships to a percentage of tax-basis EBITDA (40% 2023, 30% thereafter) Exemptions for CCPC’s whose aggregate taxable capital employed is less then $15 million and groups of corporations and trusts whose aggregate net interest expense among Canadian members is $250,000 or less.
- Hybrid Mismatch arrangements and transfer pricing will get further attention.
Personal tax measures
- Enhances the Canada Workers Benefit.
- Amends and clarifies proposals on the application of Goods and services tax / Harmonized sales tax (GST / HST) to e-commerce. This legislation will require non-residents and distribution platform operators to register for the GST / HST under a simplified system when they are selling to consumers in Canada. This includes sales of digital supplies and services, shirt-term accommodations in Canada and the supply of goods through online platforms.
- Proposes a new tax on the unproductive use of Canadian housing by foreign non-resident owners commencing in 2022, 1% of value, must file an annual declaration for each residential property owned with retroactive effect to 2021.
- Tax on select, new luxury goods ($100K cars and personal aircrafts, $250K boats). Racing cars (non-street legal and owned solely for on-track or off-track racing are exempt).