What's new
What's new
Federal, provincial, and territorial budgets for 2024
New items in this guide are outlined in colour. These include changes introduced in the 2024 federal, provincial, or territorial budgets. This guide may contain changes that had not yet become law at the time of publishing.
Canada carbon rebate for small businesses
A new refundable tax credit is available to return a portion of fuel charge proceeds collected under the federal carbon pollution pricing system to eligible Canadian-controlled private corporations (CCPCs).
To be eligible for a Canada carbon rebate for a calendar year, a corporation must:
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have had no more than a total of 499 employees in all provinces in Canada in the calendar year
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for the 2019 to 2023 calendar years, file a tax return for its 2023 tax year by July 15, 2024, and
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have been a CCPC at all times in the tax year ending in 2023
The tax credit amount will be:
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the total number of persons the CCPC employed in each designated province, for each calendar year from 2019 to 2023, multiplied by
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the fuel return the minister of Finance specified for that designated province for that calendar year
The designated provinces are Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Ontario, Manitoba, Saskatchewan, and Alberta.
CCPCs will not have to apply for this tax credit. Once the corporation files a tax return for a tax year ending in 2023, the Canada Revenue Agency (CRA) will determine the corporation's eligibility and, generally, issue the rebate to it.
For calendar years after 2023, the Canada carbon rebate will be determined in a similar way - the CRA will automatically calculate the rebate for eligible CCPCs that filed a tax return on or before July 15 of the next calendar year.
For the 2024-25 and later fuel charge years:
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small businesses that have between 1 and 20 employees across Canada would qualify for a minimum payment amount as if they had 20 employees
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corporations would have their payment amounts reduced on a straight-line basis when the number of employees across Canada is between 300 and 500. The payment amount would be zero once the number of employees across Canada reaches 500
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the rebate would be newly available to cooperative corporations and credit unions
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proceeds will continue to be returned automatically to eligible corporations through direct deposits and cheques from the CRA, separately from CRA tax refunds
For more information, go to canada.ca/en/revenue-agency/services/tax/businesses/topics/corporations/business-tax-credits/canada-carbon-rebate-small-businesses.
Global minimum tax
A new global minimum tax was introduced to ensure that large multinational enterprises (MNEs) are subject to a minimum effective tax rate of at least 15% on their profits in each jurisdiction they operate in. Large MNEs are entreprises with more than €750 million in worldwide revenues on a consolidated group basis.
The new tax applies to fiscal years starting on or after December 31, 2023. Corporations that are subject to this tax must file applicable returns separately from their T2 Corporation Income Tax Return.
Exempt interest and financing expenses on purpose-built residential rentals and regulated energy utility businesses
The definition of "exempt interest and financing expenses" in subsection 18.2(1) provides an exemption from the excessive interest and financing limitation (EIFEL) rules for interest and financing expenses (IFE) incurred in respect of the financing of certain Canadian public-private partnership infrastructure projects.
Under proposed changes, this definition would be amended by adding two elections:
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an election to exempt certain IFE incurred before January 1, 2036, in respect of arm's length financing used to:
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build or acquire an eligible purpose-built residential rental
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convert a property into an eligible purpose-built residential rental in Canada
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an election to exempt IFE incurred in respect of an arm's length borrowing or financing used for the purpose of gaining or producing income from a regulated energy utility business in Canada
A purpose-built residential rental would be a building or part of a building situated in Canada:
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containing either:
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at least 10 residential rental units (that is, housing units used or intended for use as rented residential premises and not provided to the travelling or vacationing public)
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at least 4 residential rental units that are private (a unit with a private kitchen, bathroom, and living area), and
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in which all or substantially all (90%) of the residential rental units would be rented or offered for rent for continuous periods of no less than 28 consecutive days
Manipulation of bankrupt status
Under proposed changes, the exception to the debt forgiveness rules for bankrupt corporations and the loss restriction rule applicable to bankrupt corporations will be repealed.
As a result, bankrupt corporations would be subject to the general rules that apply to other corporations whose commercial debts are forgiven. This change would apply to bankruptcy proceedings that started after April 15, 2024.
Reporting rules for digital platform operators
New reporting requirements have been introduced for the 2024 calendar year for platform operators in select segments of the digital economy under Part XX (which came into force January 1, 2024). Starting in January 2025, reporting platform operators have to file an information return on sellers using their platform to generate revenue in select segments of the platform economy. For more information, go to canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/reporting-rules-digital-platforms.
Synthetic equity arrangement
A corporation can generally deduct the amount of any dividends received on a share of a corporation resident in Canada. However, this is subject to certain limitations. One of these limitations is an anti-avoidance rule that denies the dividend received deduction in respect of synthetic equity arrangements (SEA). The anti-avoidance rule does not apply for SEA for which the taxpayer has established that no tax-indifferent investor has all or substantially all of the risk of loss and opportunity for gain or profit in respect of the share.
Under proposed changes, this anti-avoidance rule would be simplified by removing the tax-indifferent investor exception (including the exchange traded exception). Corporations would therefore be unable to claim the deduction for dividends received on a share there is a SEA for, without any exceptions. This would apply to dividends received after December 31, 2024.
Withholding for non-resident service providers
Currently, a person who pays a fee, commission, or other amount to a non-resident for services provided in Canada is required to withhold 15% of the payment and remit it to the CRA. Effective on royal assent, the CRA would be able to waive this withholding requirement over a specific period under certain conditions. See page 11.
Avoidance of tax debts
A new supplementary rule was announced to strengthen the existing tax debt anti- avoidance rule that is intended to prevent taxpayers from avoiding their tax liabilities by transferring their assets to non-arm's length persons for insufficient consideration.
Under the new supplementary rule, where certain conditions are met, the property transferred by the tax debtor would be deemed to have been transferred to the transferee for the purposes of the tax debt avoidance rule. This would ensure that the tax debt avoidance rule applies in situations where property has been transferred from a tax debtor to a person and, as part of the same transaction or series, property has been received by a non-arm's length person.
In addition, the existing penalty would be extended to tax debt avoidance planning that is subject to the supplementary rule. The penalty is equal to the lesser of:
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50% of the tax that is attempted to be avoided
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$100,000 plus any amount the person, or a related person, is entitled to receive or obtain regarding the planning activity
To further enhance the effectiveness of the tax debt anti-avoidance rule, it is proposed that taxpayers who participate in tax debt avoidance planning would be jointly and severally, or solidarily, liable for the full amount of the avoided tax debt. This amount would include any portion the planner retained as a fee. These measures would apply to transactions or series of transactions that occur after April 15, 2024. See page 16.
Reportable and notifiable transactions penalty
The general penalty provision for failure to file an information return is removed for reportable or notifiable transactions, as there are specific penalty provisions under the mandatory disclosure rules (MDR) that apply. This is deemed to have come into force on June 22, 2023, which is the coming into force date of the specific penalty provisions under the MDR. See page 19.
Non-compliance with information requests
Under proposed changes, effective on royal assent, the information gathering provisions would be amended by:
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creating a new notice of non-compliance
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providing the possibility to require that any required information or document be provided under oath
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adding a penalty when the CRA issues a compliance order or a notice of non-compliance
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expanding the rules to stop the reassessment limitation clock
See page 21.
Excessive interest and financing expenses limitation (EIFEL) rules
New EIFEL rules limit the net amount of interest and financing expenses (interest and financing expenses minus interest and financing revenues) that can be deducted by a taxpayer that is not an excluded entity. For tax years starting on or after January 1, 2024, the limit is generally equal to 30% of adjusted taxable income. As a transition measure, a ratio of 40% applies to tax years starting on or after October 1, 2023, and before January 1, 2024. See page 38.
Non-compliant short-term rentals
Effective January 1, 2024, any deduction (including capital cost allowance deduction in Schedule 8) from income in respect of non-compliant short-term rentals is disallowed to the extent of a non-compliant amount. See page 41.
Accelerated capital cost allowance (CCA)
Under proposed changes, an accelerated CCA rate of 10% under class 1 would apply to new eligible purpose-built rental housing projects that begin construction after April 15, 2024, and before 2031, and are available for use before 2036. Investments eligible for this measure would continue to benefit from the accelerated investment incentive (AII), which currently suspends the half-year rule, providing a CCA deduction at the full rate for eligible property that becomes available for use before 2028.
Immediate expensing (a 100% first-year deduction) would apply to new additions of property to CCA classes 44, 46, and 50, if the property is acquired after April 15, 2024, and becomes available for use before 2027. Property that becomes available for use in 2027 would continue to benefit from the AII.
See page 46.
Accelerated investment incentive and immediate expensing
Under proposed changes, the accelerated investment incentive (AII) and immediate expensing measures for certain CCA classes would be reinstated for qualifying property acquired on or after January 1, 2025, and that becomes available for use before 2030, with a four-year phase out after 2029. See pages 46, 47, and 48.
Charitable donations
Deadline
The deadline for making donations eligible for tax support in the 2024 tax year is proposed to be extended until February 28, 2025, for tax years ending after November 14, 2024, and before 2025. See page 70.
Receipts
Effective on registration of the amended Regulation, charities will be allowed to issue donation receipts electronically, if:
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they contain all required information
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they are issued in a secure and non-editable format
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the charity maintains an electronic copy of the receipts
See page 70.
Line 580 - Total labour requirements addition to tax
For clean economy investment tax credits (ITCs) other than the clean technology manufacturing ITC, there are consequences for not complying with the labour requirements if you have attested and elected to meet the labour requirements and claimed the credit at the regular rate. See page 83.
Scientific research and experimental development
The Government announced that, for tax years that begin on or after December 16, 2024:
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the annual expenditure limit on which CCPCs are entitled to earn an enhanced 35% investment tax credit would increase from $3 million to $4.5 million;
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the prior-year taxable capital phase-out thresholds for the enhanced credit would increase from $10 million and $50 million, to $15 million and $75 million, respectively;
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the enhanced refundable SR&ED credit would be extended to Canadian public corporations
For property acquired after December 15, 2024 (or lease costs first becoming payable after that date) the pre-2014 eligibility of capital expenditures would be reinstated to both the SR&ED income deduction and the SR&ED ITC. Qualifying CCPCs eligible to earn a 35% SR&ED ITC would be entitled to partial refundability of the credit at a rate of 40% on their capital expenditures. See page 89.
Mutual fund corporation
Under proposed changes, for tax years starting after 2024, a corporation will not qualify as a mutual fund corporation if it is controlled by or for the benefit of a corporate group (including a corporate group that consists of any combination of corporations, individuals, trusts, and partnerships that do not deal with each other at arm's length).
This new rule would not apply to mutual fund corporations incorporated within the two previous years and where specified persons hold shares with a value of $5 million or less. Exceptions would apply to ensure that the measure does not adversely affect mutual fund corporations that are widely held pooled investment vehicles. See page 138.
Clean technology ITC
Under proposed changes, for businesses investing in eligible property that is acquired and becomes available for use on or after November 21, 2023, eligibility for the credit would include systems that produce electricity, heat, or both electricity and heat, from eligible waste biomass. See page 136.
Clean hydrogen ITC
Under proposed changes, effective for property that is acquired and becomes available for use in an eligible project on or after December 16, 2024, the clean hydrogen ITC would be expanded to include projects that produce hydrogen from methane pyrolysis. See page 136.
Clean technology manufacturing ITC - Polymetallic extraction and processing
Because producing qualifying materials may occur during polymetallic projects (projects that produce multiple metals), under proposed changes, several adjustments would be made to the credit. One of these includes changing to a "primarily" test (with 50% rather than 90%) for property used in qualifying mineral activities expected to produce qualifying materials at mine or well sites. See page 137.
Clean electricity investment tax credit
Details were provided on the conditions that would need to be satisfied in order for a province or territory to be a designated jurisdiction, along with annual public reporting requirements that will apply to any provincial and territorial crown corporations claiming the clean electricity ITC.
Canada Infrastructure Bank
Under proposed changes, the Canada Infrastructure Bank would be included as an eligible entity under the clean electricity ITC. Financing provided by the Canada Infrastructure Bank to another eligible entity would not reduce the capital cost of eligible property for the purpose of computing that entity's clean electricity ITC. These measures would apply to eligible property that is acquired and that becomes available for use on or after December 16, 2024.
Electric vehicle supply chain ITC
The Government announced a new 10% electric vehicle (EV) supply chain investment tax credit. It would apply on the cost of buildings used in key segments of the EV supply chain for businesses that invest in Canada across three supply chain segments:
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electric vehicle assembly
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electric vehicle battery production
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cathode active material production
A corporation would have to invest at least $100 million in each of the three segments. See page 138.
Newfoundland and Labrador - Provincial corporation tax
Effective January 1, 2024, the lower rate of income tax is decreased from 3% to 2.5%. See page 101.
Newfoundland and Labrador interactive digital media tax credit
The credit, which was set to end December 31, 2024, has been made permanent. See page 103.
Nova Scotia innovation equity tax credit
The credit, which was set to end February 29, 2024, has been extended five years to March 1, 2029. See page 105.
Nova Scotia venture capital tax credit
The credit, which was set to end March 31, 2024, has been extended five years to March 30, 2029. See page 105.
Nova Scotia digital media tax credit
The credit, which was set to end December 31, 2025, has been extended five years to December 31, 2030. See page 106.
Nova Scotia digital animation tax credit
The credit, which was set to end December 31, 2025, has been extended five years to December 31, 2030. See page 106.
Ontario computer animation and special effects (OCASE) tax credit
For film or television productions for which no specified labour costs were incurred before March 26, 2024, an eligible production no longer has to qualify for either the Ontario film and television tax credit or the Ontario production services tax credit to claim the OCASE credit. Instead, the corporation has to incur a minimum of $25,000 in Ontario labour expenditures for each film or television production it is claiming the OCASE credit for. See page 112.
Manitoba interactive digital media tax credit
Expenses for eligible projects are to be claimed in the tax year in which they were incurred. The requirement that a corporation claim the credit on or before its filing due date for the tax year is eliminated. Some qualified corporations, in certain circumstances, will be exempt from having to apply for a certificate of eligibility (pre-approval) before project work begins. See page 121.
Manitoba data processing investment tax credits
These credits are eliminated for the 2025 and later tax years. See page 123.
Manitoba rental housing construction incentive tax credit
Effective for the 2024 tax year, a new refundable tax credit is announced that will provide:
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$8,500 for the construction of new market-rate rental units
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$13,500 for units classified and maintained as affordable units for a period of at least 10 years
Construction must start on or after January 1, 2024. See page 124.
Saskatchewan - Provincial corporation tax
The lower tax rate of income tax of 1% has been made permanent. See page 125.
British Columbia film and television tax credit
Animated productions that begin key animation on or after June 1, 2024, are no longer eligible for the regional and distant location regional tax credits. See page 128.
British Columbia production services tax credit
Animated productions that begin key animation on or after June 1, 2024, are no longer eligible for the regional production services and distant location production services tax credits. See page 130.
British Columbia mining exploration tax credit
Effective February 23, 2024, mining exploration expenses related to a bituminous sands deposit or oil shale deposit do not qualify for the mining exploration tax credit. See page 129.
British Columbia training tax credit
The credit, which was set to end December 31, 2024, is extended three years to December 31, 2027. See page 131.
British Columbia interactive digital media tax credit
Effective September 1, 2024, products that enable gambling with currency will not qualify as interactive digital media products. See page 132.
British Columbia shipbuilding and ship repair industry tax credit
The credit, which was set to end December 31, 2024, is extended two years to December 31, 2026. See page 133.
British Columbia clean buildings tax credit
The retrofit certification deadline is extended by six months from March 31, 2027, to September 30, 2027. See page 133.
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