Federal government releases Fall Economic Statement
On November 3, the Deputy Prime Minister and Minister of Finance released the federal government’s 2022 Fall Economic Statement (FES), which contained several new tax announcements along with an update on previously announced tax measures. We have provided a summary of the key changes/updates below along with links to the relevant sections of the FES, accompanying news release and draft legislation where further details are available.
Personal tax changes:
- Extension of the Residential Property Flipping Rule to assignment sales – The original rule introduced in Budget 2022 will be extended to apply to profits arising from dispositions of residential property via an assignment sale if the rights to purchase a property were assigned after having been owned for less than 12 months (subject to various life event exceptions).
- Automatic advance for the Canada Workers Benefit (CWB) – The government will automatically provide individuals who received the CWB last year an entitlement for the current year through quarterly advance payments based on their prior year tax return if it was filed and assessed prior to November 1, 2022. The payments start in July 2023.
- Alternative Minimum Tax (AMT) – The FES reiterates that the government will examine a new minimum tax regime as outlined in Budget 2022. More details will be released in Budget 2023.
Business tax changes:
- Investment Tax Credit for Clean Technologies – The FES proposes to introduce a refundable Clean Technology Investment Tax Credit of up to 30 per cent of the capital cost of eligible equipment. To incentivize companies to create good jobs, those that adhere to certain labour conditions will be eligible for the full 30 per cent credit, while those that do not will only be eligible for a credit of 20 per cent. Specific details will be announced in Budget 2023.
- Income reporting by digital platform operators – Draft legislation was released for public comment to incorporate the OECD Model Rules for income reporting by digital platforms into the Income Tax Act and is proposed to come into force on January 1, 2024. The consultation period will end on January 6, 2023.
- Tax on stock buybacks – The FES introduces a 2 per cent corporate-level tax on the net value of share buybacks by public corporations in Canada. This new tax is proposed to come into force on January 1, 2024, and more details will be released in Budget 2023.
Updates on previously announced tax measures:
- Excessive Interest and Financing Expenses Limitation – Revised draft legislation was released and is subject to a consultation period that ends on January 6, 2023. It is now proposed that these rules will apply to taxation years beginning on or after October 1, 2023.
- Mandatory reporting rules – In order to fully assess the feedback received on the mandatory reporting rules consultation, the effective date of the Reportable Transaction and Notifiable Transaction proposals will be delayed until the date the implementation bill receives Royal Assent. The Uncertain Tax Treatment proposals will apply to taxation years beginning after 2022 as previously announced.
- Scientific Research and Experimental Development (SR&ED) tax program –A review of the SR&ED program, including consideration of a patent box regime, was announced in the 2022 Federal Budget. The government indicated that further details would follow in the 2023 Budget.
- OECD Pillar 1 and Pillar 2 initiatives – The government confirmed that the OECD’s intention is to complete multilateral negotiations so that the treaty to implement Pillar 1 can be signed in the first half of 2023, with a view to it entering into force in 2024. On Pillar 2, an update to the timeline was not provided although the Government reaffirmed its commitment to the initiative.
- Investment Tax Credit for Clean Hydrogen – The government announced its intention to move forward with this tax credit, which was announced in the 2022 Federal Budget, including an upcoming consultation.
- Other outstanding tax proposals – The government also confirmed its intention to move forward with a lengthy list of previously announced measures.