The Deputy Prime Minister and Minster of Finance, Chrystia Freeland, provided the Canadian government's budget on April 16, 2024. Here are a few of the changes pertaining to personal and corporate tax measures:
Personal Tax
Capital Gains Inclusion Rate
The budget proposes to increase the capital gains inclusion rate from 1/2 to 2/3 for dispositions after June 24, 2024 for corporations and trusts, and 2/3 for the portion of capital gains realized after June 24, 2024 in excess of $250,000 annually for individuals.
This $250,000 annual threshold applies to capital gains realized by individuals net of capital losses (current year), capital losses of prior years, and the lifetime capital gains exemption.
Stock Option Deduction
The budget also proposes to decrease the stock option deduction to 1/3. Additional details are forthcoming.
Lifetime Capital Gains Exemption
The budget proposes to increase the lifetime capital gains exemption (LCGE) from $1,016,836 to $1,250,000 for dispositions occurring after June 24, 2024.
Canadian Entrepreneurs' Incentive
The budget proposes a Canadian Entrepreneurs' Incentive which will reduce tax on capital gains on sale of shares after December 31, 2024 by eligible individuals subject to conditions:
at the time of sale, the business is a small business corporation owned by an individual
the 24-month period prior to sale, it was a CCPC and > 50% of FMV of assets were used in active business, shares or debts of connected corporations, or a combination of these assets.
the individual is a founder of the company and held the shares for five years
the individual owned shares with FMV of > 10% of all outstanding shares
the individual was involved actively in the business for five years
the shares are not an interest in a professional corporation, or corporation on certain types of business including financial, insurance, real estate, food/accommodation, arts/rec, or entertainment, or provide consulting or personal care services
the share was obtained at FMV
The incentive provides capital gains inclusion rate of 50% of prevailing inclusion rate up to $2M phased in capital gains per individual per lifetime.
Home Buyer's Plan
The budget proposes an increase from $35,000 to $60,000 that an eligible home buyer can withdraw from the RRSP under the HBP without tax impact, to buy or build a qualifying first home, and temporarily extend the repayment grace period by three years to five.
Corporate Tax
SR&ED
The budget announces a second phase of consultations on policy parameters, including how public companies can be eligible for enhanced SR&ED ITC's, and proposes to provide $600 million of additional funding for enhancing the SR&ED program over four years commencing 2025.
Clean Electricity Investment Tax Credit
The budget provides more details to the 2023 refundable ITC for clean electricity of 15% of capital cost of eligible property, eligible to taxable Canadian corporations, and includes equipment used to generate electricity from:
solar, wind or water energy (certain class 43.1)
concentrated solar energy
nuclear fission
geothermal energy
specified waste materials as part of a system
Eligible property also includes equipment that is stationary electricity storage equipment, part of an eligible natural gas system, or used for transmission of electricity between provinces.
EV Supply Chain ITC
The budget proposes an EV supply chain ITC being 10% of cost of buildings used in Canada in the EV assembly, battery production, and cathode active material production.
Clean Technology Manufacturing ITC
The budget proposes updates to the 2023 proposal on clean tech manufacturing ITC for production of qualifying minerals that occur at polymetallic projects.
Accelerated Capital Cost Allowance
The budget allows for immediate expensing for property acquired after April 15, 2024 (and available for use prior to January 1, 2027), for the following asset classes:
Class 44 (patents)
Class 46 (data network infrastructure equipment / related system software)
Class 50 (general purpose electronic data processing equipment and system software)
Property used before it was acquired is eligible for accelerated CCA only if neither the taxpayer or related person previously owned the property and the property was not transferred on a rollover basis.
Non-Resident Service Providers
Currently, a taxpayer making payments to non-residents for services rendered in Canada is required to withhold 15% of payment and remit to CRA. For circumstances where the non-resident has a tax treaty and is not required to pay Canadian tax, CRA may provide an advance waiver from withholding obligations for specific transactions, or the non-resident may apply for refunds withheld. The budget proposes to give CRA authority to grant single waivers to cover multiple transactions, where conditions are met.