On November 3, 2022, the Honourable Chrystia Freeland presented the Fall Economic Statement 2022. The update predicts the deficit for 2022-2023 to be $36.4 billion representing an almost 30% decrease from the projection earlier in the year of $52 billion.
This article provides highlights of the tax related items we think are most relevant to our clients. The full Fall Economic Statement is available on this link.
- Canada’s economy is now 102.6% the size that it was before the pandemic.
- Canada has the strongest economic growth in the G7 this year.
- Canada’s 30.5% net debt-to-GDP ratio is the lowest in the G7 (G7 countries’ average is 95.6 per cent).
- The IMF is projecting that real GDP in Canada will expand by 3.3 per cent in 2022 and 1.5 per cent in 2023.
- Today, 400,000+ more Canadians are working than before the pandemic.
Highlights of Corporate and Business Tax Changes
Excessive interest and financing expenses rules (EIFEL)
The EIFEL rules will now apply for taxation years beginning on or after October 1, 2023. Previously the rules were to apply for taxation years beginning in 2023. The EIFEL rules are intended to limit the amount of interest and financing expenses that corporations and trusts may deduct for Canadian income tax purposes to 30% (40% for taxation years beginning on or after October 1, 2023 and before January 1, 2024) of adjusted taxable income. Some exceptions apply for small businesses.
Share buyback tax on public companies
A 2% corporate tax on the net value of share buybacks by public corporations in Canada, effective January 1, 2024.
Clean Technology Investment Tax Credit
A refundable Clean Technology Investment Tax Credit equal to 30% of the cost of certain eligible clean technology equipment. The credit will apply to qualifying equipment acquired and available for use on or after the date the 2023 budget is released. The credit will begin to be phased out starting in 2023. The type of equipment that will qualify include:
- Equipment used to generate electricity from solar, wind, and water energy
- Stationary electricity storage systems that do not use fossil fuels in their operation
- Low-carbon heat equipment
- Industrial zero-emission vehicles and related charging equipment
Highlights of Personal Tax Measures
Residential property flipping applies to assignment sales
Starting January 1, 2023 the residential property flipping rules will apply to assignment sales. In simplified terms, the profits realized on assignment sales will be taxed as business income if the rights to purchase the property are assigned within the first 12 months. The same exceptions for certain life events (e.g., death, disability, marital breakdown, etc.) that apply to property sales will apply to assignment sales.
Interest eliminated on Canada Student Loans
Starting April 1, 2023, interest on Canada Student Loans and Canada Apprentice Loans will be eliminated.
Canada Working Benefit to be paid quarterly
The benefit will be paid automatically on a quarterly basis rather than on an annual basis starting July 2023.
Previously announced measures that were reiterated in statement
- Canada Dental Benefit will cover dental expenses for children under 12 years of age for families earning less than $90,000 a year;
- GST credit will be doubled for six months starting November 4, 2022.
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