Minister of Finance Joe Oliver today tabled the 2015 Federal Budget (the “Budget”), his first budget as Minister of Finance, entitled “Strong Leadership: A Balanced-Budget, Low-Tax Plan for Jobs, Growth and Security”.
We are pleased to provide our summary of tax measures contained in the Budget.
The Budget proposed no changes to the general corporate income tax rates or to the Goods and Services Tax. Federal small business corporate tax rates will be reduced from 11% to 9% over the 2016 to 2019 taxation years, with corresponding changes to the dividend tax credit applicable to non-eligible dividends. The accelerated CCA write-off for manufacturing and processing equipment will be extended.
There are no individual tax rate or tax bracket changes in the Budget. Beneficial tax measures impacting individuals include an increase to the TFSA annual contribution limit to $10,000, increased flexibility for withdrawals from registered retirement income funds, revisions to the Family Tax Cut Credit and the introduction of a new Home Accessibility Tax Credit. The Budget also increases the Lifetime Capital Gains Deduction to $1 million of capital gains realized by an individual on the disposition of qualified farm or fishing property.
International tax changes include changes to the withholding tax regime for non-resident employers who send their non-resident employees to work in Canada for short periods of time, proposed streamlined reporting requirements for foreign assets owned by Canadian residents (i.e., changes to Form T1135) and anti-avoidance rules for captive insurance companies. The Budget also reinforces Canada’s commitment to address base erosion and profit shifting through its participation in the OECD consultation process and to balance tax integrity with competitiveness.
There were some favourable proposals of importance to the charitable sector. The Budget proposes an exemption from income tax to individual and corporate donors on capital gains in respect of certain shares of private corporations and real estate. As well, the Budget addresses the investment of registered charities in limited partnerships and will allow a registered charity to hold certain investments in limited partnerships without the charity being considered to be carrying on the non-permitted activity of engaging in a business.
Budgets in recent years have focused on integrity and tax fairness measures, sometimes described as closing tax loopholes. The Budget continues this approach, but to a lesser extent, with the main proposed changes being modifications to the dividend rental arrangement rules and synthetic equity arrangements and a change relating to deemed capital gains.
Many of the proposed tax changes are scheduled to be implemented over a number of taxation years.
From a fiscal perspective, the Budget reports an improved budgetary balance in comparison to recent federal budgets and economic updates. The 2015 deficit is now forecasted to be $2 Billion (compared to a 2015 deficit of $2.9 Billion that was projected in the 2014 budget) and a budget surplus of $1.4 Billion is now forecast for 2016 to be followed by additional surpluses in subsequent years.
It was hoped that the Budget would propose changes to recently enacted legislation regarding estates and trusts as the impact of the recent changes on individuals, estates and trusts has caused concern among tax and estate practitioners. Unfortunately, the Budget did not propose any relieving changes or even comment on any review of these tax measures.
Our summary of tax highlights contained in the Budget follows.