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Federal Budget: Summary of Tax Measures

 

The Minister of Finance, Chrystia Freeland, delivered the 2021 Budget this afternoon. Below you will find our summary of highlights of the tax measures announced in the Budget.

The Budget did not contain any significant tax increases, including the rumoured increase to the capital gains inclusion rate or taxation of principal residences.

 

Business Income Tax

 

Canada Emergency Wage Subsidy (CEWS)

The CEWS program has been extended from June 6, 2021 until September 25, 2021. The CEWS rate will decline over the final periods. Only eligible employers with declines of more than 10% will qualify as of July 4th.

 

The CEWS will be calculated as follows:

 

 

The reference periods for the additional CEWS periods are as follows:

 

 

There are additional changes to the support calculations for furloughed employees and the baseline remuneration rules. In addition, publicly listed companies will be required to repay subsidy amounts received in Periods 17 and later periods if they increase specified executive compensation.

 

Canada Emergency Rent Subsidy (CERS)

Similarly for the CEWS, the CERS program will also be extended until September. Only employers with declines of more than 10% will qualify as of July 4th.

 

The CERS will be calculated as follows:

 

 

The Budget extends the lockdown support for Periods 17 through 20.

 

Canada Recovery Hiring Program

The new Canada Recovery Hiring Program will cover as much as 50% of the incremental pay to workers (through higher wages, more hours, or more workers) for the period of June 6th to November 20th for Canadian Controlled Private Corporations (CCPCs), non-profit organizations, registered charities, individuals, and certain partnerships.

 

The grant will be calculated as follows:

 

 

An eligible employer would need to have declines in revenue sufficient to qualify for the CEWS in that period. These declines would have to be more than:

  • 0% for the periods between June 6th and July 3rd
  • 10% for the periods between July 4th and November 20th

 

The reference periods will be similar to those in the CEWS Program.

 

Capital Cost Allowance (CCA) Changes

The Budget proposes to allow the immediate expensing of certain property acquired by CCPCs. The eligible property would be acquired after April 18, 2021 up to January 1, 2024 to a maximum amount of $1.5 million per year. The $1.5 million limit would be shared by associated companies and pro-rated for short fiscal periods. Eligible property would include property that is subject to the CCA rules, other than Class 1 to 6, 14.1, 17, 47, 49, and 51 (generally long-lived assets).

 

Tax Rates for Zero-Emissions Technology Manufacturers

The Budget proposes a temporary reduction of corporate tax rates for qualifying zero-emissions technology manufacturers. This would apply to taxation years after 2021 and gradually phased out beginning in 2029.

 

 

Personal Income Tax

 

Canada Recovery Benefit (CRB)
The Budget calls for an extension of the CRB by 12 weeks, for a total of 50 weeks. The first four weeks of this extension will be continued at $500/week, then decline to $300/week after July 17 for the remaining eight weeks.

 

Non-Resident Owned Housing Tax

The Budget proposes a consultation with the desire to implement a new 1% tax on the value of non-resident owned real estate effective January 1, 2022. Further, beginning in 2023, all owners of residential property in Canada (other than Canadian citizens and permanent residents) will be required to file annual declarations with the CRA. This will be similar to those programs in BC and Ontario.

 

 

Indirect Tax

 

Tax on Select Luxury Goods

The Budget proposes a new retail sales tax on cars and personal aircraft over $100,000 and pleasure boats over $250,000 effective January 1, 2022. Importing vehicles, aircraft, and boats would also be subject to the tax.

 

For vehicles and personal aircraft, the amount of the tax would be the lower of 10% of the total value or 20% of the amount above $100,000. For boats, the amount of the tax would be the lower of 10% of the total value or 20% of the amount above $250,000.

 

The GST/HST would be charged on top of this luxury tax.

 

 

Please note, this information is general in nature and may not be applicable to all taxpayers.

If you have any questions about the information outlined above, please reach out to our team at 604.639.0909 or  we_are@clearlinecpa.ca.