On March 21, 2025, the Government of Canada announced actions to support workers and businesses affected by tariffs.

To support businesses, the Canada Revenue Agency (CRA) will:

• Defer GST/HST remittances and corporate income tax payments from April 2 to June 30, 2025
• Waive interest on GST/HST and T2 instalment and arrears payments that are required to be paid between April 2 and June 30, 2025
• Provide interest relief on existing GST/HST and T2 balances between April 2 and June 30, 2025

Note: Interest will resume starting July 1, 2025.

Reminder to file
You must continue to file any GST/HST returns or T2 returns by their due dates to remain compliant with filing requirements.

Revenu Quebec
On March 28 2025, the Québec government has decided to follow suit as regards the QST and corporate income tax.

Businesses must continue to file their returns by the usual deadlines between April 2 and June 30, 2025. Interest will resume as of July 1, 2025.

DOWNLOAD THE ARTICLE

Introduction

The Minister of Finance, Mr. Eric Girard, tabled his 2025-2026 budget plan on March 25, 2025, which plans to introduce a new, simplified and enhanced tax assistance system to stimulate research, innovation and commercialization, to redirect tax assistance to artificial intelligence solutions and to eliminate inefficient or little-used tax expenditures.

Here are the highlights of the 2025-2026 budget.

Measures pertaining to individuals

Changing the age requirement for eligibility for the refundable tax credit for child care expenses

As of the 2026 taxation year, the age of 16 included in the definition of “eligible child”, for the purposes of the tax credit for child care expenses, will be reduced to 14.

Consequently, an eligible child of an individual or of an individual’s spouse will have to be under 14 years of age at any time during the year for child care expenses incurred for the child in the year to be eligible for the tax credit for child care expenses for that year.

This change does not apply to children who are dependent due to a severe and prolonged impairment in mental or physical functions.

Enhancing the Family Allowance for bereaved parents

The tax legislation will be amended to provide that Family Allowance payments, as well as the Supplement for Handicapped Children (SHC) or the Supplement for Handicapped Children Requiring Exceptional Care (SHCREC) payments, where applicable, will be extended for 12 months from the month following the month that includes the day of an eligible dependent child’s death.

Application date

This new measure will apply in respect of a death occurring after June 30, 2025.

Adjusting the term “practitioner” used in the personal income tax system

Starting in 2026, only medical expenses for health services provided by practitioners who are members of a professional order in Québec will be eligible for the tax credits for medical expenses.

This will have the effect of harmonizing more closely with the federal tax credit by excluding medical expenses for alternative medicine services, such as those provided by homeopaths, osteopaths, naturopaths and phytotherapists.

New criteria for designating educational institutions recognized by Revenu Québec

As of 2026, new designation and exclusion criteria will be introduced to enable Revenu Québec to better oversee the process of recognizing institutions eligible for the non-refundable tax credit for tuition and examination fees.

Change to the deduction in respect of the cooperative investment plan

The tax legislation will be amended so that, for the purposes of the deduction in respect of the second cooperative investment plan (CIP deduction), the adjusted cost of a qualifying security for an individual will be the cost of that security (100 %), determined without taking into account borrowing costs and other costs related to the acquisition, instead of 125% of such cost.

Application date

This change will apply in respect of a qualifying security acquired after March 25, 2025.

For greater clarity, the rules relating to the 30% limit on total income applicable to the CIP deduction remain unchanged.

Transformation of two deductions into tax credits

Starting in 2026, two deductions will be converted to non-refundable tax credits at the base rate of 14%:

• the religious residence deduction;
• the deduction for assistance received for the payment of tuition fees for adult basic education programs.

Abolition of tax measures

As of the 2026 taxation year:

• abolishing the tax shield;
• abolishing the non-refundable tax credit for municipal political parties.

As of March 26, 2025:

• abolishing the foreign researcher tax holiday;
• abolishing the foreign expert tax holiday;
• abolishing the tax holiday for foreign specialists assigned to operations of an international financial centre;
• abolishing the tax holiday for foreign specialists working in the financial services sector;
• abolishing the tax holiday for seamen engaged in international transportation of freight;
• abolishing the tax credit for patronage gift.

Finally, the deduction relating to the acquisition of an income-averaging annuity respecting income from artistic activities will be abolished for new income-averaging annuities respecting income from artistic activities acquired after the 2025 taxation year.

Measures pertaining to businesses

Implementing a new tax assistance system fostering scientific research and experimental development activities

Introducing a tax credit for R&D, innovation and pre-commercialization

An eligible corporation that will incur, in a taxation year, “expenditures relating to R&D activities” or “expenditures relating to pre-commercialization activities” will be able to benefit, under certain conditions, from the tax credit for R&D, innovation and pre-commercialization (hereinafter referred to as the “CRIC”).

Similarly, a corporation, other than an excluded corporation, that is a member of an eligible partnership, will be able to benefit, under certain conditions, from the CRIC on its share of expenditures relating to R&D activities or expenditures relating to pre-commercialization activities incurred by the eligible partnership in a fiscal period.

The basic rate of this refundable tax credit will be 20%.

This rate may be increased to 30% for a maximum of $1 million (hereinafter referred to as the “expenditure limit”) in expenditures relating to R&D activities or expenditures relating to pre-commercialization activities of an eligible corporation that exceed the amount of the applicable exclusion threshold, regardless of its assets.

Expenditures relating to R&D activities (or pre-commercialization) will include salaries and wages, considerations paid to subcontractors, payments made to certain research organizations as well as capital expenditures relating to the acquisition of property incurred by the eligible corporation or eligible partnership in respect of R&D activities (or pre-commercialization).

The exclusion threshold for a business’s eligible expenditures will correspond to the higher of:

• the basic personal amount under the personal income tax system applicable for each employee, adjusted to the proportion of their time spent carrying out eligible R&D or pre-commercialization activities;
• $50 000.

See main parameters of the CRIC in Appendix 1.

Eligible corporation

The tax legislation will be amended so that the expression “eligible corporation” will mean a corporation, other than an excluded corporation, which, in the year, operates a business in Québec and undertakes in Québec or causes to be undertaken on its behalf in Québec as part of a contract, R&D activities or pre-commercialization activities in respect of a business of the corporation.

Excluded corporation

An excluded corporation will mean a corporation which is one of the following corporations:

• a corporation exempt from tax;
• a Canadian Crown corporation or a wholly-controlled subsidiary of such a corporation;
• a corporation that is controlled[1], directly or indirectly in any manner whatever, by one or a combination of the following entities, at any time during the 24 months preceding the date on which an R&D contract or a pre-commercialization contract was entered into:
  • an eligible university entity,
  • an eligible public research centre,
  • an eligible research consortium,
  • a trust one of the capital or income beneficiaries of which is one of the entities listed above,
  • a corporation carrying on a personal services business.

Eligible partnership

The tax legislation will be amended so that the expression “eligible partnership” will mean a partnership which, in the fiscal period, operates a business in Québec and undertakes in Québec or causes to be undertaken on its behalf in Québec as part of a contract, R&D activities or pre-commercialization activities in respect of a business of the partnership.

Calculating the tax credit

An eligible corporation will be able to determine the allocation of the expenditure limit between its expenditures relating to R&D activities and its expenditures relating to pre-commercialization activities.

In the case of a taxation year of less than 51 weeks, the amount of the expenditure limit will be adjusted to reflect the number of days in the taxation year.

Where an eligible corporation will be a member of an associated group, in a taxation year, the expenditure limit will have to be the subject of a sharing agreement between the members of the associated group in accordance with the usual rules.

Capital expenditure relating to the acquisition of property used in R&D activities/pre-commercialization

A capital expenditure relating to the acquisition of property used in R&D activities (or pre-commercialization) will mean a capital expenditure for all or substantially all of its operating time during its expected useful life for R&D activities (or pre-commercialization) undertaken directly by the corporation or partnership, or on its behalf, in respect of a business of the corporation or partnership.

However, it will not include a capital expenditure relating to the acquisition of:

• land or a leasehold interest in such land;
• a building, including a leasehold interest in such building;
• a right to use a building.

In addition, the property must not, before its acquisition, have been used for any purpose nor have been acquired to be used or leased for any purpose whatever.

A capital expenditure for the acquisition of property used in R&D (or for pre-commercializaton activities) will be deemed not to have been incurred before the property is considered available for use.

Pre-commercialization activity

A pre-commercialization activity will mean, except to the extent that such activity constitutes an R&D activity, all of the following activities:

• tests, technological validations and studies carried out to meet regulatory requirements and aimed at obtaining a registration or certification for the purpose of commercializing a product or process, provided that such activities constitute a continuation of R&D activities undertaken in Québec by the eligible corporation or eligible partnership or caused to be undertaken on its behalf in respect of a business of the corporation or partnership;
• product design, provided that such activities constitute a continuation of R&D activities undertaken in Québec by the eligible corporation or eligible partnership in respect of a business of the corporation or partnership.

Other terms and conditions

The amount of any government or non-government assistance, and of any benefit or advantage attributable to expenditures relating to R&D activities or expenditures relating to pre-commercialization activities will have to be withdrawn from the amount of expenditures, in accordance with the usual rules. An amount received as an investment tax credit under the federal tax system will not, however, constitute government assistance for the purposes of the CRIC.

The rules relating to contract payments currently in effect for the purposes of the tax credit for salaries (R&D) and the R&D tax credit (research contract) will apply to the CRIC with the necessary adaptations.

In the event that expenditures relating to R&D activities or expenditures relating to pre-commercialization activities are reimbursed in whole or in part, the CRIC granted in respect of an amount thus reimbursed will be recovered by means of a special tax in accordance with the usual rules.

The portion of the CRIC attributable to the acquisition of property used in R&D or pre-commercialization activities, as the case may be, will be recovered by means of a special tax, according to the usual rules, where such property ceases, during the minimum period of 730 consecutive days following the beginning of the use of the property (otherwise than by reason of its loss, of its involuntary destruction caused by fire, theft or water, or of a major breakdown), to be used solely in Québec in whole or in substantial part in R&D or pre-commercialization activities undertaken by the eligible corporation or eligible partnership, or by a person with which the corporation or partnership does not deal at arm’s length and which has acquired the property in circumstances where there has been a transfer, amalgamation or winding-up.

The rules aimed at avoiding the accumulation of tax assistance for an expenditure that can give rise to more than one tax credit, for more than one taxpayer or for one taxpayer will also apply.

Similarly, an eligible corporation or a corporation that is a member of an eligible partnership for which an initial qualification certificate was issued for the purposes of the tax holiday relating to the carrying out of a large investment project (the former TH-LIP) as well as for the purposes of the new deduction relating to the carrying out of a large investment project will not be able to claim the CRIC for property used, or acquired to be used, as part of a large investment project.

Complementarity of the CRIC with the federal SR&ED tax credit

The CRIC will support business salaries and wages beyond the R&D stage (pre-commercialization), while the addition of equipment expenditures will encourage the acquisition of technologies and properties used in R&D or pre-commercialization activities.

As these expenditures are not currently eligible for the federal government’s SR&ED tax credit, the related CRIC assistance will not affect the amount of federal tax assistance.

For R&D salary and wage expenditures, a business will be able to combine the two tax credits.

Application date

The CRIC will apply to a taxation year or a fiscal period, as the case may be, beginning March 26, 2025.

Consequential adjustments of certain fiscal measures

Incentive deduction for the commercialization of innovations in Québec (IDCI)

The tax legislation will be amended as a result of the implementation of the CRIC and the abolition of the tax credit for salaries (R&D) and the R&D tax credit (research contract) in order to adjust the variables of the fraction considered for the calculation of the Québec nexus ratio of a qualified corporation for the purposes of the IDCI.

Application date

These changes will apply to a taxation year that will begin after March 25, 2025.

Securities options deduction

The tax legislation will therefore be amended so that a corporation will qualify as a qualified corporation for a calendar year for the purposes of the security options deduction if, in the calendar year, the corporation carries on a business in Québec and has an establishment there and if an amount under the CRIC was allocated to it for its taxation year ended in the calendar year or if, for one of the three preceding taxation years, either an amount under the CRIC was allocated to it or the corporation’s assets as shown in its financial statements were less than $50 million and an amount under one of the former tax credits for R&D was allocated to it. This change will apply as of the 2026 calendar year. In addition, for the 2025 calendar year, a corporation will qualify as a qualified corporation for the purposes of the security options deduction if, in 2025, it carries on a business in Québec and has an establishment there, and if the following conditions are met:

• either an amount in respect of the CRIC was granted to it for a taxation year ended in 2025; or
• an amount in respect of one of the former tax credits for R&D was granted to it for a taxation year ended in 2025, or for one of the three preceding taxation years, and the corporation had assets of less than $50 million shown in its financial statements for 2025 or one of the three preceding taxation years.

Consequential abolition of certain fiscal measures

As a result of the implementation of the CRIC, the following tax credits will be abolished in respect of a taxation year of a taxpayer or a fiscal period of a partnership, as the case may be, beginning after March 25, 2025:

• tax credit for scientific research and experimental development;
• tax credit for university research and for research carried on by a public research centre or a research consortium;
• tax credit for private partnership pre-competitive research;
• tax credit for fees and dues paid to a research consortium;
• tax credit for technological adaptation services.

Also, the industrial design component of this tax credit will be abolished. Consequently, no expenditure relating to the industrial design component will be eligible for the tax credit where it is incurred by a corporation or a partnership for salaries or under an external consulting contract, for a taxation year or fiscal period, as the case may be, beginning after March 25, 2025.

For greater clarity, this tax credit will remain unchanged with regard to the fashion design component and will continue to apply to expenditures relating to this component.

See summary of changes to the tax assistance for innovation in Appendix 2.

Modernization of the tax credits for the development of e-business

Changes will be made to modernize the eligible activities for the tax credit for the development of e-business (TCEB) purposes. These changes consist in:

• refocusing eligible activities for TCEB purposes on e-business integrating artificial intelligence (AI) functionalities to a significant extent;
• relaxing the criteria relating to activities and the criterion relating to services provided by adding data processing and hosting activities, to promote the eligibility of AI businesses;
• removing activities relating to maintenance or evolution.

In addition, a change will also be made to reduce the tax assistance to corporations that provide services to persons with whom they are not dealing at arm’s length, in relation to an application intended to be used exclusively outside Québec.

Modernization of the eligible activities for TCEB purposes

Refocusing on e-business integrating artificial intelligence functionalities to a significant extent

The Sectoral Act will be amended so that, to be an eligible activity, for employee certificate purposes, an activity must be primarily related to e-business integrating AI functionalities to a significant extent.

For greater clarity, an activity will be considered, in respect of an employee, to be primarily related to e-business integrating AI functionalities to a significant extent, when the duties performed by the employee are primarily related to e-business and relate to a mandate, a project or a product that integrates AI functionalities to a significant extent.

Adding data processing and hosting activities for the purposes of the criteria relating to activities and the criterion relating to services provided

The Sectoral Act will be amended to add the data processing, hosting and related services activities included in the group described under NAICS code 51821 to the list of NAICS codes that meet the 50% test, for the purposes of the criteria relating to activities.

Consequently, the Sectoral Act will be amended so that the data processing, hosting and related services activities included in the group described under NAICS code 51821 are eligible activities considered in analyzing the criterion relating to services provided for corporation certificate purposes.

For greater certainty, the criterion relating to services provided will therefore be met where at least 75% of the corporation’s gross revenue deriving from activities included in the groups described under NAICS codes 511210 (software publishers), 51821 (data processing, hosting and related services), 541510 (computer systems design and related services), 561320 (temporary help services) and 561330 (professional employer organizations) is attributable to all of the following services:

• services whose ultimate beneficiary is a person or a partnership with whom the corporation is dealing at arm’s length; or
• services that relate to an application developed by the corporation and used exclusively outside Québec.

In addition, where services are provided to a particular person as part of activities included in the groups described under NAICS codes 561320 (temporary help services) and 561330 (professional employer organizations), these services must ultimately relate to an application that results from activities described in NAICS codes 511210 (software publishers), 51821 (data processing, hosting and related services) and 541510 (computer systems design and related services) that have been developed for the benefit of the particular person.

Removing activities relating to maintenance or evolution

The Sectoral Act will be amended to remove activities relating to maintenance or evolution from eligible activities, for employee certificate purposes.

Application date

These amendments will apply, for both refundable and non-refundable tax credits, in respect of a taxation year beginning after December 31, 2025.

These amendments may also apply, where the corporation files an election in writing with Investissement Québec, for a taxation year that begins after March 25, 2025 and before January 1, 2026. However, such an election in writing must be filed by the corporation before the expiry of the ninth month following the due date for filing its tax return for the taxation year concerned.

In addition, these two tax credits will be renamed, as of the effective date of these amendments, so as to be referred to as “refundable tax credit for the development of e-business integrating artificial intelligence” and “non-refundable tax credit for the development of e-business integrating artificial intelligence.”

Reducing the tax assistance granted to corporations that carry out intercompany outsourcing

The tax legislation will be amended to reduce the tax assistance provided to corporations that carry out intercompany outsourcing.

Accordingly, the Sectoral Act will be amended to clarify that the corporation certificate will now have to specify the proportion of a corporation’s gross revenue derived from activities included in the groups described under NAICS codes 511210 (software publishers), 51821 (data processing, hosting and related services) and 541510 (computer systems design and related services) that is attributable to services that relate to an application developed by the corporation to be used exclusively outside Québec by an ultimate beneficiary who is a person or a partnership with whom the corporation is not dealing at arm’s length.

The Sectoral Act will also be amended to clarify that the corporation certificate will now have to specify the proportion of a corporation’s gross revenue deriving from activities included in the groups described under NAICS codes 561320 (temporary help services) and 561330 (professional employer organizations) that is ultimately attributable to services provided relating to an application developed in connection with activities included in the groups described under NAICS codes 511210 (software publishers), 51821 (data processing, hosting and related services) and 541510 (computer systems design and related services) to be used exclusively outside Québec by an ultimate beneficiary who is a person or a partnership with whom the corporation is not dealing at arm’s length.

The tax legislation will also be amended to provide that when any one of these proportions is at least 50%, the rates applicable to the TCEB, both for the refundable and non-refundable tax credit, will correspond to half of the rates otherwise applicable for that taxation year.

The table below sets out the TCEB rates following these amendments.

Application date

These amendments will apply, for both refundable and non-refundable tax credits, in respect of a taxation year beginning after December 31, 2025.

Changes to the refundable tax credit relating to mining or other resources

Changes will be made to the tax credit relating to resources. These changes consist in:

• adding development expenses to the eligible expenses for the tax credit;
• revising the tax credit rates applicable to the eligible expenses related to mining resource;
• enhancing the rates applicable to projects related to critical and strategic minerals until December 31, 2029;
• introducing a limit on eligible expenses of $100 million per five-year period.

See the main parameters of the tax credit relating to resources applicable to mining resource expenses in Appendix 3.

Consequential adjustments of the tax benefits relating to the flow-through share regime

An individual can benefit from an additional deduction of 10% in respect of certain exploration expenses incurred in Québec. On the other hand, the individual can also benefit from an additional deduction of 10% in respect of certain surface mining exploration expenses incurred in Québec.

The tax legislation will be amended to abolish the additional deduction in respect of certain exploration expenses incurred in Québec as well as the additional deduction in respect of certain surface mining exploration expenses incurred in Québec.

Application date

These changes will apply to flow-through shares issued after March 25, 2025.

However, they will not apply to shares issued after that day, but before January 1, 2026, when they are issued following an application for a receipt for a preliminary prospectus made on or before March 25, 2025.

Similarly, the changes will not apply to shares issued after March 25, 2025 when they are issued following a public announcement made on or before that day, if the report of distribution form has been submitted to the Autorité des marchés financiers on or before May 31, 2025.

Consequential abolition of the additional capital gains exemption in respect of certain resource properties

The tax legislation will be amended to abolish the additional capital gains exemption in respect of certain resource properties.

Application date

This abolition will apply to dispositions made after March 25, 2025.

Extension of the tax credit for the digital transformation of print media

The tax legislation will be amended to extend the assistance granted under the refundable tax credit by one year. As a result, the eligibility period for the refundable tax credit will end on December 31, 2025. In addition, to qualify as a qualified property, the property must be acquired before January 1, 2025.

Abolishing the tax credit to foster synergy between Québec businesses

The tax credit will therefore be abolished as of March 26, 2025.

Introducing a due date for additional deductions for public transit and shared transportation

The tax legislation will be amended to introduce, for the additional deduction relating to public transit passes as well as for the additional deduction relating to the organization of an intermunicipal shared transportation service, a December 31, 2027 due date.

Consequential adjustment providing for taxation of the benefit received from an employer in connection with the use of public transit or shared transportation services

The tax legislation will be amended to state that an individual must include, in computing their income, the value of the benefit received by the individual from his employer after December 31, 2027 in respect of an eligible transit pass, an eligible paratransit pass or the benefit resulting from the use of an intermunicipal shared transportation service.

Measures pertaining to commodity taxes

Harmonizing the rate of the tax on insurance premiums with that of the Québec sales tax

The rate of the tax on insurance premiums will be set at the same rate as the Québec sales tax. As a result, the tax on insurance premiums at the rate of 9.975% will apply to insurance premiums paid after December 31, 2026.

Abolishing the fuel tax refund for biodiesel

The fuel tax system will be amended to abolish this refund. This change will apply to biodiesel acquired after March 25, 2025.

Other measures

Relaunching the Roulez vert program

The Québec government confirms that the Roulez vert program will once again be accessible as of April 1, 2025 for the purchase of electric vehicles.

The maximum rebates for the acquisition of electric vehicles will be:

• $4 000 for new fully electric or fuel cell vehicles and $2 000 for new plug-in hybrid vehicles costing less than $65 000;
• $2 000 for used fully electric vehicles and $1 000 for electric motorcycles.

Rebates for the purchase of an electric vehicle will be reduced gradually and will stop being offered on vehicles registered on or after January 1, 2027.

Introducing an annual contribution for electric and plug-in hybrid vehicles

An annual contribution of $125 for electric vehicles and $62.50 for plug-in hybrid vehicles will be introduced.

The new fee will be in addition to fees payable to put a vehicle on the road after December 31, 2026, or to fees payable to retain the right to drive after that date. It will subsequently be indexed annually.

Ending free access to toll bridges and ferries for electric and plug-in hybrid vehicles

The government is announcing that it will not be extending free access to toll bridges and ferries for vehicles with green licence plates beyond March 31, 2027.

Ending indexation of the eligibility threshold for reduced rates of employer contributions to the Health Services Fund

The government is announcing the end of indexation of the payroll threshold entitling to reduced rates of employer contributions to the Health Services Fund, which will be maintained at $7.8 million.

Changing the public utility tax

Budget 2025-2026 provides for public utility tax rates to be increased from 2027 onward, reaching a flat rate of 1.5% in 2035.

Changes to various parameters of Capital régional et coopératif Desjardins

These amendments are aimed at:

• setting the annual capitalization limit applicable until February 28, 2030;
• introducing a cumulative subscription ceiling for each current and future shareholder;
• introducing a new class of shares with a maximum holding period of 14 years, entitling the holder to a non-refundable tax credit calculated at a reduced rate.

Setting the annual capitalization limit

The Capital régional et coopératif Desjardins (CRCD) constituting act and tax legislation will be amended so that the amount that CRCD will be able to raise will be temporarily set for the acquisition periods between March 1, 2025 and February 28, 2030.

The annual limit amount will therefore correspond to the ceilings shown in the following table.

Introduction of a cumulative subscription ceiling

The tax legislation will be amended to introduce, for all classes of shares of CRCD’s authorized share capital, a cumulative subscription ceiling of $45 000 per shareholder, which will be applicable to both current and future CRCD shareholders, subject to the following:

• individuals who, on March 25, 2025, have subscribed to CRCD shares for which they have paid an amount totalling more than $45 000 will be able to keep all these shares and the related tax credits;
• amounts paid in respect of the following shares will not count toward an individual’s cumulative subscription ceiling:
  • shares obtained by an individual as a result of the devolution of an estate,
  • shares redeemed by CRCD within 30 days of subscription,
  • shares purchased by agreement because no tax credit was obtained, in accordance with CRCD’s purchase by agreement policy.

This cumulative subscription ceiling of $45 000 per shareholder will apply as March 26, 2025.

Introduction of a new share class

The CRCD constituting act will be amended to introduce a new class of shares to its authorized share capital, namely class C shares. These shares may be held for a maximum period of 14 years. The first purchaser of such shares will be entitled to a non-refundable tax credit at a rate of 25%. Amounts paid by an individual during an acquisition period cannot exceed $5 000. Accordingly, the maximum amount that this tax credit can reach is $1 250.

From the capitalization period beginning March 1, 2025, only class C shares or class C fractional shares may be issued by CRCD in connection with a new subscription to its share capital.

Introducing a new reporting requirement for foreign property held outside Canada

The new reporting requirement for foreign property held outside Canada will be satisfied by a new prescribed form to be completed and filed with Revenu Québec for a taxation year or fiscal period, as the case may be, taking into account the parameters set out below.

Definition of “designated foreign property”

For the purposes of the Québec tax system, designated foreign property that will be subject to the new reporting requirement will be essentially the same as foreign property subject to the federal tax legislation, with the necessary adaptations.

Definition of “reporting entity”

A person or an entity which will be required to file with the Québec Minister of Revenue a report in respect of designated foreign property it holds, for a taxation year or fiscal period, as the case may be, will mean a designated Québec entity whose total of all amounts each of which is the total cost amount, to the person or entity, of a designated foreign property exceeds $100 000, at any time in the taxation year or fiscal period, other than a time when the person or entity is not resident in Canada.

Definition of “designated Québec entity”

A designated Québec entity will mean:

• an individual resident in Québec in a taxation year;
• a corporation that simultaneously resides in Canada and has an establishment in Québec for that taxation year;
• a trust that is a resident in Québec in a taxation year;
• a partnership where the partner’s share of the income or loss is less than 90% of the partnership’s income or loss for the fiscal period.

Filing-due date of the new Québec prescribed form

The new Québec prescribed form will need to be filed with Revenu Québec by a reporting entity on or before the same filing-due date as that of the tax return applicable to the reporting entity for the year, except if the entity is a partnership, in which case the filing-due date will be the same as that of the information return (or the one that would apply if the partnership were to file one).

Introducing new penalties

The Québec tax legislation will be amended to introduce penalties corresponding to those in the federal tax system, in particular:

• a penalty for failing to file the new Québec form of $500 per month or part of a month for a maximum of 24 months, that is, a maximum of $12 000, and, where the entity has been given formal notice to file the new return and has failed to meet the deadline, the double of that amount;
• an additional penalty for failing to file the report for more than 24 months set at 5% of the total cost of the designated foreign property;
• a penalty in case of false statement or omission equal to or higher than $24 000 or 5% of the total cost of designated foreign property.

Extending the assessment period

As in the federal tax legislation, an extension of three years after the end of the normal reassessment period for the taxpayer in respect of the year will be introduced.

Application date

These measures will apply as of a date to be determined by the government after the assent of the bill giving effect to them.

Position of the Ministère des Finances du Québec –Government of Canada’s 2024 Fall Economic Statement

The Ministère des Finances du Québec wishes to make public its position on these new federal tax measures.

Measures retained

Québec tax legislation and regulations will be amended to incorporate, with adaptations on the basis of their general principles, the measures relating to:

• the exemption of the Canada Disability Benefit from tax;
• capital gains rollover on investments;
• reporting by non-profit organizations;
• the scientific research and experimental development tax incentive program (SR&ED), with respect to the eligibility of capital expenditures for the deduction relating to SR&ED expenditures;
• the extension of the Accelerated Investment Incentive and immediate expensing measures, subject to the rules set out below.

Qualifying intellectual property included in Class 14.1

A qualifying intellectual property included in Class 14.1 which becomes available for use before 2026 benefits from a temporary accelerated capital cost allowance under the Québec tax system.

Consequently, the extension of the Accelerated Investment Incentive will not apply to such a property.

Deduction for Canadian development expenses

The extension of the Accelerated Investment Incentive will not apply to the deduction for cumulative Canadian development expenses claimed by a development corporation carrying on a mining business, neither will it apply to the deduction for cumulative Canadian development expenses incurred in Québec claimed by a development corporation carrying on an oil business.

Measures not retained

Certain measures have not been retained because they do not correspond to the characteristics of the Québec tax system or because the latter is satisfactory or does not contain similar provisions. These measures relate to:

• the Canada Carbon Rebate Rural Supplement;
• the reclassification of the islands of Haida Gwaii for the purposes of the Northern residents deduction;
• the Canada Carbon Rebate for Small Businesses;
• the clean electricity investment tax credit for provincial and territorial Crown corporations;
• the clean electricity investment tax credit and the Canada Infrastructure Bank;
• the EV supply chain investment tax credit;
• the clean hydrogen investment tax credit – methane pyrolysis;
• the scientific research and experimental development tax incentive program, with respect to the expenditure limit and taxable capital phase-out thresholds, the extension of the enhanced refundable tax credit to eligible Canadian public corporations, including elections for Canadian-controlled private corporations, and the eligibility of capital expenditures for computing the tax credit.

Appendix 1

Appendix 2

Appendix 3

Notice to Users

The reproduction of the contents of this Québec budget summary is authorized without restriction.

This budget summary is based on the documents issued by the Québec government. The legislation, when enacted, may vary from the summary described herein. Professional advice should be obtained.

PSB BOISJOLI LLP has acted solely as publisher of this budget summary. Consequently, neither PSB BOISJOLI LLP nor any person involved in its preparation accepts any form of liability for its contents or for any consequences arising from its use.

---

[1] A corporation related to such a corporation will also be an excluded corporation for the purposes of the CRIC.

DOWNLOAD THE ARTICLE

 

On March 7, 2025,  the federal government issued a news release whereby its stated that it will use every tool at its disposal so Canadian businesses and workers can weather the storm stemming from the imposition by the United States’ administration of unjustified tariffs on Canada.

According to the Department of Finance (“DoF”), to support Canadian businesses and ensure they have the liquidity they need through this turbulent time, the following measures are proposed:

• Launching the Trade Impact Program through Export Development Canada. The program will deploy $5 billion over two years, starting this year, to help exporters reach new markets for Canadian products and help companies navigate the economic challenges imposed by the tariffs, including losses from non-payment, currency fluctuations, lack of access to cash flows, and barriers to expansion.
• Making $500 million in favourably priced loans available through the Business Development Bank of Canada to support impacted businesses in sectors directly targeted by tariffs, as well as companies in their supply chains. Businesses will also benefit from advisory services in areas such as financial management and market diversification.
• Providing $1 billion in new financing through Farm Credit Canada to reduce financial barriers for the Canadian agriculture and food industry. This lending offer will help address cash flow challenges so that businesses can adjust to a new operating environment and continue to supply the high-quality agricultural and food products that Canadians rely on.

Along with supporting businesses, the DoF is also introducing temporary flexibilities to the EI Work-Sharing Program to increase access and maximum agreement duration.

https://www.canada.ca/en/department-finance/news/2025/03/fighting-for-canadian-workers-and-businesses.html

DOWNLOAD THE ARTICLE

On January 31, 2025, the Honourable Dominic LeBlanc, Minister of Finance and Intergovernmental Affairs, announced that the federal government is deferring—from June 25, 2024 to January 1, 2026—the date on which the capital gains inclusion rate would increase from one-half to two-thirds on capital gains realized annually above $250,000 by individuals and on all capital gains realized by corporations and most types of trusts. The capital gains inclusion rate represents the portion of capital gains that is taxable.

The news release included the following statements:

To ensure most middle-class Canadians do not pay more tax once the capital gains inclusion rate is increased, the government will maintain or enhance existing capital gains exemptions while creating a new investment incentive.

The capital gains exemptions being maintained and created would include:

• Maintaining the Principal Residence Exemption, to ensure Canadians do not pay capital gains taxes when selling their home. Any amount they make when they sell their home will remain tax-free.
• A new $250,000 Annual Threshold for Canadians, effective January 1, 2026, to ensure individuals earning modest capital gains continue to benefit from the current one-half inclusion rate. Capital gains, including on the sale of a secondary property, such as a cottage, will be eligible for the $250,000 annual threshold, meaning a couple selling a cottage with a $500,000 capital gain would not pay more tax.
• Increasing the Lifetime Capital Gains Exemption to $1.25 million, effective June 25, 2024, from the current amount of $1,016,836 on the sale of small business shares and farming and fishing property. With this increase, Canadians with eligible capital gains below $2.25 million would pay less tax and be better off, even after the inclusion rate increases on January 1, 2026.
• A new Canadian Entrepreneurs’ Incentive, to encourage entrepreneurship by reducing the inclusion rate to one-third on a lifetime maximum of $2 million in eligible capital gains. This incentive would take effect starting in the 2025 tax year and the maximum would increase by $400,000 each year, reaching $2 million in 2029. Combined with the new $1.25 million lifetime capital gains exemption, when this incentive is fully rolled out, entrepreneurs would pay less tax and be better off on capital gains of up to $6.25 million.

The proposed implementation date for the increase in the Lifetime Capital Gains Exemption and the introduction of the Canadian Entrepreneurs’ Incentive would not change.

The government will introduce legislation effecting the increase in the capital gains inclusion rate, the increase in the Lifetime Capital Gains Exemption and the introduction of the Canadian Entrepreneurs’ Incentive in due course.

DOWNLOAD THE ARTICLE

On December 16, 2024, the Federal government released its 2024 Fall Economic Statement which included the introduction of new Personal Income Tax measures, Business Income Tax measures as well as comments on Previously announced measures.

Below you will find some of the highlights of the statement.*

Capital Gains Rollover on Eligible Small Business Corporation shares

Under the Income Tax Act, individuals are allowed to defer taxation on capital gains realized on the qualifying disposition of Eligible Small Business Corporation (ESBC) shares to the extent that proceeds from the disposition are used to acquire replacement ESBC shares within the year of disposition, or up to 120 days following that year. To qualify as an ESBC share, a share must be a common share issued by an ESBC to the individual and the total carrying value of the assets of the ESBC and related corporations must not exceed $50 million immediately before and immediately after the share was issued.

The 2024 Fall Economic Statement proposes to increase the period to acquire replacement shares and to expand what qualifies as an ESBC share. First, the period to acquire replacement shares would be expanded to encompass the year of disposition and the entire calendar year after the year of disposition. Second, an ESBC share would include both common and preferred shares. Finally, the limit to the carrying value of the assets of the ESBC and related corporations would be increased to $100 million.

These changes would be effective for qualifying dispositions that occur on or after January 1, 2025.

Scientific Research and Experimental Development Tax Incentive Program

Under the Scientific Research and Experimental Development (SR&ED) tax incentive program, qualifying expenditures are fully deductible in the year they are incurred. In addition, these expenditures are generally eligible for an investment tax credit. The rate and level of refundability of the credit vary depending on the characteristics of the taxpayer, including its legal status and its size. In general terms:

For most corporations other than Canadian-controlled private corporations (CCPCs), a 15 per cent non-refundable tax credit is available on qualified SR&ED expenditures. Unincorporated businesses, individuals, and certain trusts have access to a 15 per cent partially refundable tax credit on qualified SR&ED expenditures.

For CCPCs, a fully refundable enhanced tax credit at a rate of 35 per cent is available on up to $3 million of qualifying SR&ED expenditures annually. The $3 million expenditure limit for a taxation year is gradually phased out based on prior-year taxable capital, which applies on the basis of an associated group. The expenditure limit is gradually reduced where taxable capital employed in Canada for the previous taxation year is between $10 million and $50 million.

Qualifying expenditures in excess of a CCPC’s expenditure limit are eligible for the 15 per cent tax credit. Depending on whether a CCPC’s income in the previous taxation year exceeds its qualifying income limit, these credits can be partially refundable.

Expenditure Limit and Taxable Capital Phase-out Thresholds

The 2024 Fall Economic Statement proposes to increase the expenditure limit on which the enhanced 35 per cent rate can be earned from $3 million to $4.5 million. As a result, qualifying CCPCs would be able to claim up to $1.575 million per year of the enhanced, fully refundable tax credit.

The taxable capital phase-out thresholds for determining the expenditure limit would also be increased from $10 million and $50 million to $15 million and $75 million, respectively.

Election for CCPCs

Instead of determining eligibility based on taxable capital, CCPCs would have the option to elect to have their expenditure limit for the enhanced SR&ED credit determined based on the same gross revenue phase-out structure proposed for Canadian public corporations: the expenditure limit would be reduced on a straight-line basis when the corporation’s average gross revenue over the three preceding years is between $15 million and $75 million.

• For a corporation that is a member of a corporate group that prepares consolidated financial statements, gross revenue would be as reported in the annual financial statements of the group presented to shareholders at the highest level of consolidation. Members of a corporate group for financial reporting purposes would be required to share access to the enhanced SR&ED credit’s expenditure limit.

• For a corporation that is not a member of such a corporate group, gross revenue would be as reported in the corporation’s annual financial statements prepared in accordance with generally accepted accounting principles and presented to shareholders.

Coming into Force

The proposed new rules to determine eligibility for the enhanced SR&ED credit would apply for taxation years that begin on or after the date of the 2024 Fall Economic Statement.

Additional Tax Support for Productivity-Enhancing Assets

The SR&ED program delivers support to businesses through both an immediate deduction against income and a tax credit. Currently, eligible expenditures under the SR&ED program generally include salary and wages, as well as the cost of materials, contract payments, third-party payments and overhead expenditures. Capital expenditures were removed from eligibility under the SR&ED program for property acquired after 2013.

The 2024 Fall Economic Statement proposes to restore the eligibility of capital expenditures for both the deduction against income and investment tax credit components of the SR&ED program. The rules would be generally the same as those that existed prior to 2014. This change would apply to property acquired on or after the date of the 2024 Fall Economic Statement and, in the case of lease costs, to amounts that first become payable on or after the date of the 2024 Fall Economic Statement.

Deduction Against Income

Eligible capital expenditures for the purposes of immediate expensing under the SR&ED program would be expenditures incurred to acquire new or used depreciable property that the claimant intends to either:

• use all or substantially all of the operating time in its expected useful life in the performance of SR&ED in Canada, or,
• consume all or substantially all of its value in the performance of SR&ED in Canada.

Eligible property would be eligible for expensing once it becomes available for use.

If these criteria are met, the expenditure could be fully deducted for the purpose of determining taxable income in the year the eligible property becomes available for use or carried forward to the extent it is not deducted in the tax year (i.e., as part of a pool of deductible SR&ED expenditures).

Qualifying SR&ED Expenditures for Tax Credit Purposes

Qualifying capital expenditures would also generally be eligible for the SR&ED tax credit, with some differences from those eligible for immediate expensing, including:

The acquisition of property that had been used or acquired for use or lease before it was acquired by the claimant would not be eligible for a tax credit.

A SR&ED-related capital expenditure ineligible for a full deduction against income because it does not meet one of the all-or-substantially-all tests noted above could still be considered “shared-use equipment”, meaning that part of the cost of the property would be eligible for the tax credit.

Other Rules

For qualifying CCPCs with access to the SR&ED program’s enhanced 35-per-cent tax credit, credits earned on capital expenditures would be eligible for partial refundability at a rate of up to 40 per cent, unlike credits earned on current expenditures which are fully refundable up to a CCPC’s expenditure limit.

If a taxpayer sells, or converts the use of, SR&ED capital property, recapture rules would apply in respect of the capital cost allowance for claimed and unclaimed SR&ED capital expenditures, as well as the investment tax credit.

Extension of the Accelerated Investment Incentive and Immediate Expensing Measures

The Accelerated Investment Incentive, which provides an enhanced first-year capital cost allowance (CCA) for most depreciable capital property, began phasing out in 2024 and is set to be fully eliminated after 2027. Immediate expensing measures for manufacturing or processing machinery and equipment, clean energy generation and energy conservation equipment, and zero-emission vehicles are also currently phasing out on the same timeline.

The 2024 Fall Economic Statement proposes to fully re-instate the Accelerated Investment Incentive and immediate expensing measures for a five-year period, with a four-year phase-out after 2029.

The 2024 Fall Economic Statement proposes to fully re-instate the Accelerated Investment Incentive for qualifying property acquired on or after January 1, 2025, and that becomes available for use before 2030. It would be phased out starting in 2030 and fully eliminated for property that becomes available for use after 2033.

Eligible property not normally subject to the half-year rule would qualify for an enhanced CCA equal to one-and-a-half times the normal first year allowance if it is acquired on or after January 1, 2025, and becomes available for use before 2030. For eligible property not normally subject to the half-year rule that is acquired on or after January 1, 2025, and becomes available for use during the 2030-2033 phase-out period, the enhanced allowance would be equal to one-and-a-quarter times the normal first-year allowance.

The Accelerated Investment Incentive also applies to eligible Canadian development expenses and Canadian oil and gas property expenses. These expenses would qualify for the same enhanced allowances described above as eligible property not subject to the half-year rule.

Immediate Expensing Measures

Manufacturing or processing machinery and equipment under CCA Class 53 of Schedule II to the Income Tax Regulations, clean energy generation and energy conservation equipment under Class 43.1 (and Class 43.2 for property acquired before 2025), and zero-emission vehicles under Classes 54, 55, and 56 qualified for an enhanced first-year allowance that provided a 100-per-cent deduction for property that became available for use before 2024. These immediate expensing measures are currently phasing out for property that becomes available for use after 2023 and before 2028.

The 2024 Fall Economic Statement proposes to fully re-instate these immediate expensing measures for qualifying property acquired on or after January 1, 2025, and that becomes available for use before 2030. These immediate expensing measures would be phased out starting in 2030 and fully eliminated for property that becomes available for use after 2033. The half-year rule would continue to effectively be suspended for property eligible for these measures.

Previously Announced Measures

The 2024 Fall Economic Statement confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:

• Legislative proposals included in the notice of ways and means motion tabled on October 29, 2024, related to charities and reproductive services.
• Legislative proposals included in the notice of ways and means motion tabled on September 23, 2024, related to capital gains and the lifetime capital gains exemption.
• Legislative and regulatory proposals released on August 12, 2024, including with respect to the following measures:
  • Canadian Entrepreneurs’ Incentive;
  • Alternative Minimum Tax;
  • Disability Supports Deduction;
  • Employee Ownership Trust Tax Exemption;
  • Worker Cooperatives;
  • Charities and Qualified Donees;
  • Registered Education Savings Plans;
  • Non-Compliance with Information Requests;
  • Avoidance of Tax Debts;
  • Mutual Fund Corporations;
  • Synthetic Equity Arrangements;
  • Manipulation of Bankrupt Status;
  • Accelerated Capital Cost Allowance for Productivity-Enhancing Assets;
  • Accelerated Capital Cost Allowance for Purpose-Built Rental Housing;
  • Interest Deductibility Limits;
  • Withholding for Non-Resident Service Providers;
  • Substantive CCPCs;
  • Regulations related to the application of the enhanced (100-per-cent) GST Rental Rebate to qualifying co-operative housing corporations;
  • Technical amendments relating to the GST/HST, excise levies and other taxes and charges announced in the August 12, 2024, release;
  • Clean Electricity Investment Tax Credit;
  • Proposed expansion of eligibility for the Clean Technology investment tax credit to support generation of electricity and heat from waste biomass;
  • Proposed expansion of eligibility for the Clean Technology Manufacturing investment tax credit to support Polymetallic Extraction and Processing;
  • Other changes related to the Clean Economy Investment Tax Credits;
  • The Global Minimum Tax Act and the Income Tax Conventions Act; and,
  • Technical tax amendments to the Income Tax Act and the Income Tax Regulations.
  • Legislative proposals released on July 12, 2024, related to implementing an opt-in Fuel, Alcohol, Cannabis, Tobacco and Vaping (FACT) value-added sales tax framework for interested Indigenous governments.
  • The Crypto-Asset Reporting Framework and the Common Reporting Standard announced in Budget 2024.
  • The proposed exemption from the Alternative Minimum Tax for certain trusts for the benefit of Indigenous groups announced in Budget 2024.
• Legislative and regulatory proposals announced in Budget 2024 with respect to a new importation limit for packaged raw leaf tobacco for personal use.
• Legislative and regulatory proposals announced in the 2023 Fall Economic Statement with respect to the GST/HST joint venture election rules.
• Regulatory proposals released on November 3, 2023, to temporarily pause the federal fuel charge on deliveries of heating oil.
• Legislative proposals released on August 4, 2023, including with respect to the following measures:
  • Technical amendments to GST/HST rules for financial institutions;
  • Tax-exempt sales of motive fuels for export;
  • Revised Luxury Tax draft regulations to provide greater clarity on the tax treatment of luxury items; and,
  • Technical tax amendments to the Income Tax Act and the Income Tax Regulations.
• Legislative amendments to implement changes discussed in the transfer pricing consultation paper released on June 6, 2023.
• Legislative proposals released on August 9, 2022, including with respect to the following measures:
  • Technical amendments to the Income Tax Act and Income Tax Regulations; and,
  • Remaining legislative and regulatory proposals relating to the GST/HST, excise levies and other taxes and charges announced in the August 9, 2022, release.
• Legislative amendments to implement the Hybrid Mismatch Arrangements rules announced in Budget 2021.
• The income tax measure announced on December 20, 2019, to extend the maturation period of amateur athlete trusts maturing in 2019 by one year, from eight years to nine years.
• Legislative amendments to give effect to the suspension of the Agreement Between the Government of Canada and the Government of the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital under domestic law as of November 18, 2024.

The 2024 Fall Economic Statement also reaffirms the government’s commitment to move forward as required with other technical amendments to improve the certainty and integrity of the tax system.

*The information presented has been extracted from the 2024 Fall Economic Statement which can be found at: https://www.budget.canada.ca/update-miseajour/2024/report-rapport/tm-mf-en.html

DOWNLOAD THE ARTICLE

As the holiday season approaches, from out of left field, the government of Canada unveiled a temporary GST/HST holiday on grocery items and other specific products.

This temporary exemption applies to the sale of eligible products for a two-month period, beginning December 14, 2024, and ending on February 15, 2025. Suppliers are expected to apply the exemption at the point of sale. It will also cover the importation of eligible products.

A comprehensive list of products subject to the temporary exemption is detailed in the Document “More money in your pocket: A tax break for All Canadians” published by the Canadian Ministry of Finance on November 21, 2024. It is available at the following link:

More money in your pocket: A tax break for all Canadians – Canada.ca

Eligible products include, among others:

• Children’s clothing and footwear meeting specific size criteria;
• Children’s diapers and car seats;
• Printed newspapers and books (note that several exclusions apply);
• Christmas trees or similar decorative trees;
• Food and beverages for human consumption that are generally not zero-rated, such as alcoholic drinks, soft drinks, fruit juices, candy, chips, etc.;
• Food and beverages sold as part of a catering service or at restaurants, cafes, etc.;
• Certain children’s toys;
• Jigsaw puzzles;
• Video game consoles, controllers, or physical game media.

We recommend reviewing the detailed list of eligible products and exclusions in the Document.

Although this temporary holiday announced by the Government of Canada seems like a gift to consumers, it will undoubtedly be a headache for affected Canadian businesses. These businesses will need to adjust their systems to apply these temporary GST exemptions on short notice. Moreover, after two months, they will have to reconfigure their systems to return to the usual application of the GST.

It is essential to highlight that temporary measures of this nature significantly increase the risk of errors in tax collection by suppliers, leading to potential reassessments in the event of audits.

At this time, it is unclear whether the measure applies solely to retail sales of eligible products or also includes sales for distribution purposes. From a practical perspective, given the temporary nature of the measure and considering that GST is a value-added tax, it might be administratively simpler for distributors not to modify their systems and instead collect GST, which the purchaser can then recover as an input tax credit.

Notably, according to the Ministry of Finance of Canada, we understand that the participating HST provinces — Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador, and Prince Edward Island — will also extend this relief to the provincial component of the HST.

Currently, the Government of Quebec has deemed the federal measure “improvised” and has indicated that it will not harmonize the QST unless it receives financial compensation from the Government of Canada. To be continued.

Do not hesitate to contact our indirect tax specialists for advice and guidance in implementing this measure.

LORIE PALMER, CPA, CA, CIA PARTNER, TAX
T. 514 341-5511, ext. 366
lpalmer@psbboisjoli.ca

Lorie has been leading PSB BOISJOLIS’s commodity tax department since 2011.

Drawing on her vast experience and comprehensive legal knowledge, Lorie assists our clients with all aspects of Canadian commodity tax compliance. Whether she is providing tax advice or negotiating with the tax authorities, Lorie remains passionately devoted to defending her clients’ best interests. Her unique and personalised approach supports a smooth process for handling government audits and the resolution of disputes between our clients and tax authorities. Throughout all of her work, Lorie never ceases to advocate for her clients.

To consult her complete biography click here.

DOWNLOAD THE ARTICLE

On April 18, 2024, the Ministère des Finances du Québec announced its intention to amend Québec’s tax legislation and regulations to incorporate, with adaptations on the basis of their general principles, measures relating to:

1. the increase in the lifetime capital gains exemption;
2. the introduction of the Canadian Entrepreneurs’ Incentive;
3. the increase in the capital gains inclusion rate and consequential measures, with the exception of the stock option deduction, which will be the subject of a subsequent announcement to take into account Québec’s particularities in this regard;
4. the increase in the withdrawal limit for the Home Buyers’ Plan and the temporary repayment relief for this plan.

In the absence of federal legislation, and since other consequential amendments and additional details will be announced by the federal government in the coming months, the Ministère des Finances du Québec could issue further details on these measures at a later date.

Moreover, the amendments to the Québec tax system will be adopted only after the assent of any federal legislation or the adoption of any federal regulation giving effect to the retained measures, taking into account the technical amendments that may be made prior to the assent or adoption. For greater clarity, these amendments will be applicable on the same dates as the federal measures with which they are harmonized.

DOWNLOAD THE ARTICLE

The federal budget has proposed increasing the inclusion rate on capital gains from 50% to 66.667%.

The proposal applies to capital gains realized on or after June 25, 2024. There is a $250,000 “safe harbour” for individuals.

Assuming that [1] Québec harmonizes and [2] that RDTOH rates remain the same, the chart below summarizes the impact of the change.

[1]    There will be significant activity. We anticipate that there will be significant structuring activity between now and June 24, 2024 to lock in the existing rate.

[2]    We encourage you to identify clients that may require assistance immediately.

DOWNLOAD THE ARTICLE

Introduction

On April 16, 2024, Deputy Prime Minister and Minister of Finance, Chrystia Freeland, presented Budget 2024.

This budget aims to increase lifetime capital gains exemption, introduce a new Canadian Entrepreneurs’ Incentive and increase the capital gains inclusion rate.

It also proposes measures to help Canadians buy their first home by increasing the withdrawal limit and granting a temporary repayment relief.

The budget also provides the design and implementation details of the Clean Electricity investment tax credit and proposes to introduce an accelerated capital cost allowance for new purpose-built rental projects and for innovation-enabling and productivity-enhancing assets.

Here are the highlights of the 2024 budget.

Measures pertaining to individuals

Capital Gains Inclusion Rate

Budget 2024 proposes to increase the capital gains inclusion rate from ½ to ⅔ for corporations and trusts, and from ½ to ⅔ on the portion of capital gains realized in the year that exceed $250,000 for individuals, for capital gains realized on or after June 25, 2024.

The $250,000 threshold would effectively apply to capital gains realized by an individual, either directly or indirectly via a partnership or trust, net of any:

• current-year capital losses;
• capital losses of other years applied to reduce current-year capital gains;

and

• capital gains in respect of which the Lifetime Capital Gains Exemption (LCGE), the proposed Employee Ownership Trust (EOT) Exemption or the proposed Canadian Entrepreneurs’ Incentive is claimed.

Claimants of the employee stock option deduction would be provided a ⅓ deduction of the taxable benefit to reflect the new capital gains inclusion rate, but would be entitled to a deduction of one half the taxable benefit up to a combined limit of $250,000 for both employee stock options and capital gains.

Net capital losses of prior years would continue to be deductible against taxable capital gains in the current year by adjusting their value to reflect the inclusion rate of the capital gains being offset. This means that a capital loss realized prior to the rate change would fully offset an equivalent capital gain realized after the rate change.

For tax years that begin before and end on or after June 25, 2024, two different inclusion rates would apply. As a result, transitional rules would be required to separately identify capital gains and losses realized before the effective date (Period 1) and those realized on or after the effective date (Period 2).

The annual $250,000 threshold for individuals would be fully available in 2024 (i.e., it would not be prorated) and would apply only in respect of net capital gains realized in Period 2.

Additional design details will be released in the coming months.

Lifetime Capital Gains Exemption

Budget 2024 proposes to increase the LCGE to apply to up to $1.25 million of eligible capital gains.

This measure would apply to dispositions that occur on or after June 25, 2024. Indexation of the LCGE would resume in 2026.

Canadian Entrepreneurs’ Incentive

Budget 2024 proposes to introduce the Canadian Entrepreneurs’ Incentive. This incentive would reduce the tax rate on capital gains on the disposition of qualifying shares by an eligible individual. Specifically, this incentive would provide for a capital gains inclusion rate that is one half the prevailing inclusion rate, on up to $2 million in capital gains per individual over their lifetime.

The lifetime limit would be phased in by increments of $200,000 per year, beginning on January 1, 2025, before ultimately reaching a value of $2 million by January 1, 2034.

Under the ⅔ capital gains inclusion rate proposed in Budget 2024, this measure would result in an inclusion rate of ⅓ for qualifying dispositions. This measure would apply in addition to any available capital gains exemption.

A share of a corporation would be a qualifying share if certain conditions are met, including all the following conditions:

• At the time of sale, it was a share of the capital stock of a small business corporation owned directly by the claimant.
• Throughout the 24-month period immediately before the disposition of the share, it was a share of a Canadian-Controlled Private Corporation and more than 50 % of the fair market value of the assets of the corporation were:
  • used principally in an active business carried on primarily in Canada by the Canadian-Controlled Private Corporation, or by a related corporation,
  • certain shares or debts of connected corporations, or
  • a combination of these two types of assets.
• The claimant was a founding investor at the time the corporation was initially capitalized and held the share for a minimum of five years prior to disposition.
• At all times since the initial share subscription until the time that is immediately before the sale of the shares, the claimant directly owned shares amounting to more than 10 % of the fair market value of the issued and outstanding capital stock of the corporation and giving the individual more than 10 % of the votes that could be cast at an annual meeting of the shareholders of the corporation.
• Throughout the five-year period immediately before the disposition of the share, the claimant must have been actively engaged on a regular, continuous, and substantial basis in the activities of the business.
• The share does not represent a direct or indirect interest in a professional corporation, a corporation whose principal asset is the reputation or skill of one or more employees, or a corporation that carries on certain types of businesses including a business:
  • operating in the financial, insurance, real estate, food and accommodation, arts, recreation, or entertainment sector; or
  • providing consulting or personal care services.
• The share must have been obtained for fair market value consideration.

Coming Into Force

This measure would apply to dispositions that occur on or after January 1, 2025.

Volunteer Firefighters and Search and Rescue Volunteers Tax Credits

Budget 2024 proposes to double the tax credit amount to $6,000. This would increase the maximum tax relief to $900.

This enhancement would apply to the 2024 and subsequent taxation years.

Mineral Exploration Tax Credit

The government proposes to extend eligibility for the tax credit for one year, to flow-through share agreements entered into on or before March 31, 2025.

Alternative Minimum Tax

Budget 2024 proposes several amendments to the Alternative Minimum Tax (AMT) proposals. These amendments would:

• allow individuals to claim 80 % (instead of the previously proposed 50 %) of the Charitable Donation Tax Credit when calculating AMT;
• fully allow deductions for the Guaranteed Income Supplement, social assistance, and workers’ compensation payments;
• allow individuals to fully claim the federal logging tax credit under the AMT;
• fully exempt Employee Ownership Trusts from the AMT; and
• allow certain disallowed credits under the AMT to be eligible for the AMT carry-forward (i.e., the federal political contribution tax credit, investment tax credits, and labour-sponsored funds tax credit).

Coming Into Force

These amendments would apply to taxation years that begin on or after January 1, 2024.

Canada Child Benefit

Budget 2024 proposes to extend eligibility for the Canada Child Benefit (CCB) in respect of a child for six months after the child’s death (the “extended period”), if the individual would have otherwise been eligible for the CCB in respect of that particular child.

A CCB recipient would still be required to notify the Canada Revenue Agency (CRA) of their child’s death before the end of the month following the month of their child’s death to ensure that there are no overpayments after the new extended period of six months ends.

The extended period would also apply to the Child Disability Benefit, which is paid with the CCB in respect of a child eligible for the Disability Tax Credit.

This measure would be effective for deaths that occur after 2024.

Disability Supports Deduction

Budget 2024 proposes to expand the list of expenses recognized under the Disability Supports Deduction, subject to certain conditions, such as:

• service animals trained to perform specific tasks for people with certain severe impairments;
• alternative computer input devices, such as assistive keyboards, braille display, digital pens, and speech recognition devices; and,
• ergonomic work chairs and bed positioning devices, including related assessments.

This measure would apply to the 2024 and subsequent taxation years.

Employee Ownership Trust Tax Exemption

Budget 2024 provides further details on the exemption of the first $10 million in capital gains realized on the sale of a business and proposed conditions.

Budget 2024 also proposes to expand qualifying business transfers to include the sale of shares to a worker cooperative corporation.

Coming into Force

This measure would apply to qualifying dispositions of shares that occur between January 1, 2024 and December 31, 2026.

Charities and Qualified Donees

Foreign Charities Registered as Qualified Donees

Budget 2024 proposes to extend the period for which qualifying foreign charities are granted status as a qualified donee from 24 months to 36 months. In addition, foreign charities would be required to submit an annual information return to the CRA.

Modernizing Service

Budget 2024 proposes to permit the CRA to communicate certain official notices digitally, where the charity has opted to receive information from the CRA electronically.

Budget 2024 proposes the revocation of registration would become effective upon the publication of an official notice of revocation on a government webpage.

Donation Receipts

Budget 2024 proposes to remove the requirement that official donation receipts contain:

• the place of issuance of the receipt;
• the name and address of the appraiser, if an appraisal of the donated property has been done; and
• the middle initial of the donor.

Budget 2024 also proposes to expressly permit charities to issue official donation receipts electronically.

Coming into Force

Measures relating to the extension of the registration period for foreign charities would apply to foreign charities registered after April 16, 2024. New reporting requirements for foreign charities would apply to taxation years beginning after April 16, 2024.

All remaining measures would apply upon royal assent.

Home Buyers’ Plan

Increasing the withdrawal limit

Budget 2024 proposes to increase the withdrawal limit from $35,000 to $60,000. This increase would also apply to withdrawals made for the benefit of a disabled individual.

This measure would apply to the 2024 and subsequent calendar years in respect of withdrawals made after April 16, 2024.

Temporary repayment relief

Budget 2024 proposes to temporarily defer the start of the 15-year repayment period by an additional three years for participants making a first withdrawal between January 1, 2022, and December 31, 2025. Accordingly, the 15-year repayment period would start the fifth year following the year in which a first withdrawal was made.

Qualified Investments for Registered Plans

Budget 2024 invites stakeholders to provide suggestions by July 14, 2024 on how the qualified investment rules could be modernized on a prospective basis to improve the clarity and coherence of the registered plans regime.

Deduction for Tradespeople’s Travel Expenses

A private member’s bill (Bill C-241) was introduced to enact an alternative deduction for certain travel expenses of tradespeople in the construction industry, with no cap on expenses, retroactive to the 2022 taxation year.

Budget 2024 announces that the government will consider bringing forward amendments to the Income Tax Act (ITA) to provide for a single, harmonized deduction for tradespeople’s travel that respects the intent of Bill C-241.

Measures pertaining to businesses

Clean Electricity Investment Tax Credit

Budget 2024 announces the design and implementation details of the Clean Electricity investment tax credit with the following design features:

• A 15 % refundable tax credit rate for eligible investments in new equipment or refurbishments related to:
  • Low-emitting electricity generation systems using energy from wind, solar, water, geothermal, waste biomass, nuclear, or natural gas with carbon capture and storage.
  • Stationary electricity storage systems that do not use fossil fuels in operation, such as batteries and pumped hydroelectric storage.
  • Transmission of electricity between provinces and territories.
• The tax credit would be available to certain taxable and non-taxable corporations, including corporations owned by municipalities or Indigenous communities, and pension investment corporations.
• Provided that a provincial and territorial government satisfies additional conditions, the tax credit would also be available to provincial and territorial Crown corporations investing in that province or territory.
• Robust labour requirements to pay prevailing union wages and create apprenticeship opportunities will need to be met to receive the full 15 % tax credit.

The tax credit would apply to property that is acquired and becomes available for use on or after April 16, 2024 for projects that did not begin construction before March 28, 2023. The credit would no longer be in effect after 2034.

Polymetallic Extraction and Processing

Budget 2024 proposes adjustments to the Clean Technology Manufacturing investment tax credit to provide greater support and clarity to businesses engaged in these activities.

These changes would apply for property that is acquired and becomes available for use on or after January 1, 2024.

Accelerated Capital Cost Allowance

Purpose-Built Rental Housing

Budget 2024 proposes to provide an accelerated Capital Cost Allowance (CCA) of 10 % for new eligible purpose-built rental projects that begin construction on or after April 16, 2024 and before January 1, 2031, and are available for use before January 1, 2036.

Eligible Property

Consistent with eligibility under the temporary enhancement to the Goods and Services Tax (GST) New Residential Rental Property Rebate, eligible property would be new purpose-built rental housing that is a residential complex:

• with at least four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or 10 private rooms or suites; and
• in which at least 90 % of residential units are held for long-term rental.

Projects that convert existing non-residential real estate, such as an office building, into a residential complex would be eligible if the conditions above are met. The accelerated CCA would not apply to renovations of existing residential complexes. However, the cost of a new addition to an existing structure would be eligible, provided that addition meets the conditions above.

Interaction with the Accelerated Investment Incentive

Investments eligible for this measure would continue to benefit from the Accelerated Investment Incentive, which currently suspends the half-year rule, providing a CCA deduction at the full rate for eligible property put in use before 2028.

After 2027, the half-year rule would apply.

Productivity-Enhancing Assets

Budget 2024 proposes to provide immediate expensing for new additions of property in respect to the following three classes, if the property is acquired on or after April 16, 2024 and becomes available for use before January 1, 2027:

• Class 44 (patents or the rights to use patented information for a limited or unlimited period),
• Class 46 (data network infrastructure equipment and related systems software), and
• Class 50 (general-purpose electronic data-processing equipment and systems software).

The enhanced allowance would provide a 100 % first-year deduction and would be available only for the year in which the property becomes available for use.

Property that becomes available for use after 2026 and before 2028 would continue to benefit from the Accelerated Investment Incentive.

Restrictions

Property that has been used, or acquired for use, for any purpose before it is acquired by the taxpayer would be eligible for the accelerated CCA only if both of the following conditions are met:

• neither the taxpayer nor a non-arm’s-length person previously owned the property; and
• the property has not been transferred to the taxpayer on a tax-deferred “rollover” basis.

Short taxation year

The accelerated CCA would apply in respect of an eligible property on the prorated basis and would not be available in the following taxation year in respect of the property.

Interest Deductibility Limits – Purpose-Built Rental Housing

The excessive interest and financing expenses limitation (EIFEL) rules provide an exemption for interest and financing expenses incurred in respect of arm’s length financing for certain Canadian public private partnership infrastructure projects.

Budget 2024 proposes expanding this exemption to also include an elective exemption for certain interest and financing expenses incurred before January 1, 2036, in respect of arm’s length financing used to build or acquire eligible purpose-built rental housing in Canada.

Consistent with the proposed Accelerated Capital Cost Allowance for Purpose-Built Rental Housing, eligible purpose-built rental housing would be a residential complex:

• with at least four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or 10 private rooms or suites; and
• in which at least 90 % of residential units are held for long-term rental.

This change would apply to taxation years that begin on or after October 1, 2023.

Non-Compliance with Information Requests

Budget 2024 proposes several amendments to the information gathering provisions in the ITA.

Notice of Non-Compliance

Budget 2024 proposes to allow the CRA to issue a new type of notice (referred to as a “notice of non-compliance”) to a person that has not complied with a requirement or notice to provide assistance or information issued by the CRA.

Where a notice of non-compliance related to a taxpayer has been issued to the taxpayer or a person that does not deal at arm’s length with the taxpayer, the normal reassessment period for any taxation year of the taxpayer to which the notice of non-compliance relates would be extended by the period of time the notice of non-compliance is outstanding.

Budget 2024 proposes to impose a penalty on a person that has been issued a notice of non-compliance of $50 for each day that the notice is outstanding, to a maximum of $25,000. This penalty would not apply if a notice of non-compliance is ultimately vacated by the CRA or a court.

Questioning Under Oath

Budget 2024 proposes to allow the CRA to include in a requirement or notice that any required information (oral or written) or documents be provided under oath or affirmation.

Compliance Orders

Currently, the CRA can obtain a compliance order from a court that directs a non-compliant taxpayer to comply with the CRA’s information requests.

Budget 2024 proposes to impose a penalty when the CRA obtains a compliance order against a taxpayer. The penalty would be equal to 10 % of the aggregate tax payable by the taxpayer in respect of the taxation year or years to which the compliance order relates. It would only be applied if the tax owing in respect of one of the taxation years to which the compliance order relates exceeds $50,000.

Budget 2024 further proposes to allow the CRA to seek a compliance order when a person has failed to comply with a requirement to provide foreign-based information or documents.

Stopping the Reassessment Limitation Clock

Under existing rules, a taxpayer may seek judicial review of a requirement or notice issued to the taxpayer by the CRA. In these circumstances, the reassessment period is extended by the amount of time it takes to dispose of the judicial review. An analogous rule applies in respect of a compliance order.

Budget 2024 proposes to amend the stop the clock rules to provide that they apply when a taxpayer seeks judicial review of any requirement or notice issued to the taxpayer by the CRA in relation to the audit and enforcement process or during any period that a notice of non-compliance is outstanding. Analogous rules would apply where a requirement or notice has been issued to a person that does not deal at arm’s length with the taxpayer.

Other Tax Statutes Administered by the CRA

Budget 2024 proposes that other tax statutes administered by the CRA, which have provisions similar to the ITA, also be amended, as needed.

Coming into Force

These amendments would come into force on royal assent of the enacting legislation.

Avoidance of Tax Debts

The ITA includes an anti-avoidance rule that is intended to prevent taxpayers from avoiding paying their tax liabilities by transferring their assets to non-arm’s length persons.

Budget 2024 proposes to introduce a supplementary rule to strengthen the tax debt anti-avoidance rule. This rule would apply in the following circumstances:

• there has been a transfer of property from a tax debtor to another person;
• as part of the same transaction or series of transactions, there has been a separate transfer of property from a person other than the tax debtor to a transferee that does not deal at arm’s length with the tax debtor; and
• one of the purposes of the transaction or series is to avoid joint and several, or solidary, liability.

Where these 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.

Penalty

The ITA contains a penalty for those who engage in, participate in, assent to, or acquiesce in planning activity that they know, or would reasonably be expected to know, is tax debt avoidance planning. The penalty is equal to the lesser of:

• 50 % of the tax that is attempted to be avoided; and
• $100,000 plus any amount the person, or a related person, is entitled to receive or obtain in respect of the planning activity.

Budget 2024 proposes to extend this penalty to tax debt avoidance planning that is subject to the proposed supplementary rule.

Expanded Joint and Several, or Solidary, Liability

Budget 2024 proposes that taxpayers who participate in tax debt avoidance planning be jointly and severally, or solidarily, liable for the full amount of the avoided tax debt, including any portion that has effectively been retained by the planner.

Similar Statutes

Similar amendments would be made to comparable provisions in other federal statutes.

Coming into Force

These measures would apply to transactions or series of transactions that occur on or after April, 16, 2024.

Reportable and Notifiable Transactions Penalty

The ITA includes a general provision that provides that a person who fails to file or make a return or comply with certain specified rules is guilty of an offence, and liable to penalties up to $25,000 and imprisonment up to a year. The mandatory disclosure rules in the ITA also include specific penalties that apply in these circumstances, making the application of this general penalty provision unnecessary.

Budget 2024 announces the government’s intention to remove from the scope of this general penalty provision the failure to file an information return in respect of a reportable or notifiable transaction under the mandatory disclosure rules.

This amendment would be deemed to have come into force on June 22, 2023.

Mutual Fund Corporations

Budget 2024 proposes amendments to preclude a corporation from qualifying as a mutual fund corporation where 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). Exceptions would be provided to ensure that the measure does not adversely affect mutual fund corporations that are widely held pooled investment vehicles.

This measure would apply to taxation years that begin after 2024.

Synthetic Equity Arrangements

The ITA allows a corporation to deduct the amount of any dividends received on a share of a corporation resident in Canada, 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. Synthetic equity arrangements include agreements that provide all or substantially all of the risk of loss and opportunity for gain or profit (the “economic exposure”) in respect of a share to another person.

Where a taxpayer enters into a synthetic equity arrangement in respect of a share, the taxpayer is generally obligated to compensate the other person for the amount of any dividends paid on the share. This compensation payment may result in a tax deduction for the taxpayer in addition to the dividend received deduction.

Budget 2024 proposes to remove the tax-indifferent investor exception (including the exchange traded exception) to the anti-avoidance rule. This measure would simplify the anti-avoidance rule and prevent taxpayers from claiming the dividend received deduction for dividends received on a share in respect of which there is a synthetic equity arrangement.

This measure would apply to dividends received on or after January 1, 2025.

Manipulation of Bankrupt Status

The ITA contains a set of debt forgiveness rules that apply where a commercial debt is settled for less than its principal amount. The Act also contains a rule that entitles an insolvent corporation to a corresponding deduction to offset all or part of an income inclusion from the debt forgiveness rules.

Bankrupt taxpayers are generally excluded from these debt forgiveness rules. Instead, a separate loss restriction rule applies to extinguish the losses of bankrupt corporations that have received an absolute order of discharge.

Budget 2024 proposes to repeal the exception to the debt forgiveness rules for bankrupt corporations and the loss restriction rule applicable to bankrupt corporations. This change would subject bankrupt corporations to the general rules that apply to other corporations whose commercial debts are forgiven. The bankruptcy exception to the debt forgiveness rules would remain in place for individuals. While bankrupt corporations would be subject to the reduction of their loss carryforward balances and other tax attributes upon debt forgiveness, as insolvent corporations they could qualify for relief from the debt forgiveness income inclusion rule provided under the existing deduction for insolvent corporations.

These proposals would apply to bankruptcy proceedings that are commenced on or after April 16, 2024.

Measures pertaining to commodity taxes

Extending GST Relief to Student Residences

Budget 2024 announces that the eligibility conditions for the removal of GST on new student residences will be relaxed for not-for-profit universities, public colleges, and school authorities.

The relaxed eligibility will apply to new student residences that begin construction on or after September 14, 2023, and before 2031, and that complete construction before 2036. Private institutions will not be eligible for this support.

Tobacco and Vaping Product Taxation

Excise Duty on Tobacco

Budget 2024 announces the Government’s intention to increase the tobacco excise duty rate by $4 per carton of 200 cigarettes (i.e., for a total of $5.49 including the automatic inflationary adjustment of $1.49 per carton of 200 cigarettes that took effect on April 1, 2024).

This measure would come into force on April 17, 2024.

Importation Limit for Packaged Raw Leaf Tobacco for Personal Use

Budget 2024 proposes to provide a new prescribed limit of up to 2500 grams of packaged raw leaf tobacco for importation for personal use and to amend the definition of “packaged” for raw leaf tobacco.

This measure would come into force on the first day of the month following royal assent to the enabling legislation.

Requiring Information Returns from Tobacco Prescribed Persons

Budget 2024 proposes to require tobacco prescribed persons to file information returns for tobacco excise stamps.

This measure would come into force on the first day of the month following royal assent to the enabling legislation.

Excise Duty on Vaping Products

Budget 2024 announces the Government’s intention to increase by 12 % the vaping product excise duty rate.

This measure would come into force on July 1, 2024.

Measures pertaining to international tax

Crypto-Asset Reporting Framework and the Common Reporting Standard

Crypto-Asset Reporting Framework

The Organization for Economic Cooperation and Development (OECD) has developed a new framework (referred to as the Crypto-Asset Reporting Framework, or CARF) that provides for the automatic exchange of tax information in relation to transactions in crypto-assets.

Budget 2024 proposes to implement the CARF in Canada. The measure would impose a new annual reporting requirement on entities and individuals (referred to as crypto-asset service providers) that are resident in Canada, or that carry on business in Canada, and that provide business services effectuating exchange transactions in crypto-assets. This would include crypto exchanges, crypto-asset brokers and dealers, and operators of crypto-asset automated teller machines.

Common Reporting Standard

Budget 2024 also proposes to implement amendments to the Common Reporting Standard (CRS) that have been endorsed by the OECD in connection with the CARF.

Coming into Force

These measures would apply to the 2026 and subsequent calendar years. This would allow the first reporting and exchange of information under the CARF and amended CRS to take place in 2027 with respect to the 2026 calendar year.

Withholding for Non-Resident Service Providers

Budget 2024 proposes to provide the CRA with the legislative authority to waive the withholding requirement, over a specified period, for payments to a nonresident service provider if either of the following conditions are met:

• the non-resident would not be subject to Canadian income tax in respect of the payments because of a tax treaty between its country of residence and Canada; or
• the income from providing the services is exempt income from international shipping or from operating an aircraft in international traffic.

This proposal would allow the CRA to waive the withholding requirement on multiple transactions with a single waiver, subject to any conditions and information requirements necessary to reduce compliance risks.

This measure would come into force on royal assent of the enacting legislation.

Previously announced measures

Budget 2024 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations, deliberations, and legislative developments, since their release.

• Legislative proposals released on March 9, 2024, to extend by two years the 2 % cap on the inflation adjustment on beer, spirit, and wine excise duties, and to cut by half for two years the excise duty rate on the first 15,000 hectolitres of beer brewed in Canada.
• Legislative proposals released on December 20, 2023, including with respect to the following measures:
  • The Clean Hydrogen investment tax credit;
  • The Clean Technology Manufacturing investment tax credit;
  • Concessional Loans;
  • Short-Term Rentals;
  • Vaping Excise Duties; and
  • International Shipping.
• Legislative and regulatory proposals announced in the 2023 Fall Economic Statement, including with respect to the following measures:
  • The Canadian journalism labour tax credit;
  • Proposed expansion of eligibility for the Clean Technology and Clean Electricity investments tax credits to support generation of electricity and heat from waste biomass;
  • The addition of psychotherapists and counselling therapists to the list of health care practitioners whose professional services rendered to individuals are exempt from the Goods and Services Tax/Harmonized Sales Tax (GST/HST);
  • Proposals relating to the GST/HST joint venture election rules;
  • The application of the enhanced (100-per-cent) GST Rental Rebate to qualifying co-operative housing corporations; and
  • Proposals relating to the Underused Housing Tax.
• Regulatory proposals released on November 3, 2023, to temporarily pause the federal fuel charge on deliveries of heating oil.
• Legislative and regulatory amendments to implement the enhanced (100-percent) GST Rental Rebate for purpose-built rental housing announced on September 14, 2023.
• Legislative proposals released on August 4, 2023, including with respect to the following measures:
  • The Carbon Capture, Utilization, and Storage investment tax credit;
  • The Clean Technology investment tax credit;
  • Labour Requirements Related to Certain investment tax credits;
  • Enhancing the Reduced Tax Rates for Zero-Emission Technology Manufacturers;
  • Flow-Through Shares and the Critical Mineral Exploration Tax Credit – Lithium from Brines;
  • Employee Ownership Trusts;
  • Retirement Compensation Arrangements;
  • Strengthening the Intergenerational Business Transfer Framework;
  • The Income Tax and GST/HST Treatment of Credit Unions;
  • The Alternative Minimum Tax for High-Income Individuals;
  • A Tax on Repurchases of Equity;
  • Modernizing the General Anti-Avoidance Rule;
  • Global Minimum Tax (Pillar Two);
  • Digital Services Tax;
  • Technical amendments to GST/HST rules for financial institutions;
  • Providing relief in relation to the GST/HST treatment of payment card clearing services;
  • Enhancements to the vaping product taxation framework;
  • Tax-exempt sales of motive fuels for export;
  • Excessive Interest and Financing Expenses Limitations;
  • Extending the quarterly duty remittance option to all licensed cannabis producers;
  • Revised Luxury Tax draft regulations to provide greater clarity on the tax treatment of luxury items; and
  • Technical tax amendments to the ITA and the Income Tax Regulations.
• Legislative amendments to implement changes discussed in the transfer pricing consultation paper released on June 6, 2023.
• Tax measures announced in Budget 2023, including the Dividend Received Deduction by Financial Institutions.
• Legislative proposals released on August 9, 2022, including with respect to the following measures:
  • Substantive Canadian-Controlled Private Corporations;
  • Technical amendments to the ITA and Income Tax Regulations; and
  • Remaining legislative and regulatory proposals relating to the GST/HST, excise levies and other taxes and charges announced in the August 9, 2022 release.
• Legislative amendments to implement the Hybrid Mismatch Arrangements rules announced in Budget 2021.
• Legislative proposals released in Budget 2021 with respect to the Rebate of Excise Tax for Goods Purchased by Provinces.
• Regulatory proposals released in Budget 2021 related to information requirements to support input tax credit claims under the GST/HST.
• The income tax measure announced on December 20, 2019, to extend the maturation period of amateur athlete trusts maturing in 2019 by one year, from eight years to nine years.

Notice to Users

The reproduction of the contents of this Federal budget summary is authorized without restriction.

This budget summary is based on the documents issued by the government of Canada. The legislation, when enacted, may vary from the summary described herein. Professional advice should be obtained.

PSB BOISJOLI LLP has acted solely as publisher of this budget summary. Consequently, neither PSB BOISJOLI LLP nor any person involved in its preparation accepts any liability for its contents or for any consequences arising from its use.

DOWNLOAD THE ARTICLE