On November 30, 2020, the federal government and Finance Minister Chrystia Freeland released their 2020 Fall Economic Statement focused on Supporting Canadians and Fighting COVID-19. While no personal or corporate tax rate changes were announced, this article summarizes the proposed tax changes and measures including extensions to current COVID-19 relief programs. As this is a minority government, their proposals still need to be voted on. Since the 2020 Federal Budget was cancelled due to the COVID-19 pandemic, a full federal budget is expected sometime in 2021.
The Federal government expects a national deficit of $381.6 billion for this fiscal year of 2020-21. This is the highest deficit in Canadian history.
The maximum combined base subsidy and top-up subsidy rate is currently set at 65% for the current period ending on December 19, 2020. It is proposed that the maximum combined subsidy will be raised to 75% for the periods of December 20, 2020 to March 13, 2021.
The Government has proposed to extend, until March 13, 2021, the current rate structure for the base rent subsidy (that currently applies until December 19, 2020). The top-up subsidy (AKA the Lockdown subsidy) has also been proposed to extend until March 13, 2021, at the current 25% rate.
The Government has stated that Canada remains committed to a multilateral approach to address the taxation of international corporations providing digital services in Canada. If no international consensus has been achieved, the Government intends to propose a tax on corporations providing digital services starting January 1, 2022.
Effective July 1, 2021, many changes have been proposed to ensure the GST/HST obligations of non-resident businesses selling to Canadian consumers are on a level playing field with Canadian businesses. We do not discuss the details of these changes in this article as they are technical in nature.
Changes have also been proposed with respect to goods supplied through fulfillment warehouses in Canada where the non-resident business may have otherwise been able to avoid charging GST/HST on sales to Canadians.
There are also proposed changes with respect to short-term rental accommodations supplied through digital platforms (such as AirBnB). These changes are to ensure GST/HST is collected and remitted on short-term accommodations.
In 2021, there will be four additional payments of:
The first payment would occur after the proposed legislation is passed with subsequent amounts payable in the first month of each remaining quarter (i.e. at the end of April, July and October 2021).
The Government says that the CRA will allow employees working from home in 2020 due to COVID-19 to claim up to $400 in home office expenses, based on the amount of time working from home, without the need to track detailed expenses. The CRA will generally not request employees to provide a signed Form T2200 from their employer. The CRA is expected to communicate further details in the coming weeks.
Budget 2019 announced the Government’s intention to establish limits on the beneficial tax treatment of employee stock options (ESO). After consultations with stakeholders, the proposed changes will not impact Canadian Controlled Private Corporations (CCPC) or non-CCPC employers (e.g. public companies or non-Canadian controlled companies) whose annual gross revenue does not exceed $500 million.
For impacted employees (generally those of public companies), there will be a $200,000 annual limit on the amount of employee stock options that may vest in any calendar year and qualify for the 50% stock option deduction. Employers will be required to notify employees (and the CRA) in writing whether options granted are subject to the new tax treatment.
The proposed changes would apply to employee stock options granted after June 2021. The existing rules would continue to apply to options granted before July 2021.
The Government has proposed changes with respect to how a RDSP is treated when a person becomes ineligible for the DTC. The proposed changes include removing the time limitations on the period for which an RDSP may remain open after a beneficiary becomes ineligible for the DTC and modifying repayment obligations (where applicable).
The Government has said they will take steps over the coming year to implement a national, tax-based measure targeting the unproductive use of domestic housing that is owned by non-resident, non-Canadians, which removes these assets from the domestic housing supply. This likely means the introduction of a non-resident speculation and/or vacancy tax similar to what is in place in British Columbia.
Disclaimer: This summary is intended to inform readers in general terms. It is not intended to provide any tax or business advice. Please consult your Stern Cohen advisor if you have any questions about your unique situation and how these proposed changes might impact you or your business or not-for-profit organization.
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