Presented on November 21, 2023 by Deputy Prime Minister and Finance Minister Chrystia Freeland, the Federal government’s fall economic statement includes goals to target inflation and a slowing economy. In the upcoming years, Canada plans to allocate billions of dollars towards new spending and specific policy measures designed to boost the country’s housing supply.
Following the pattern of decreased post-pandemic expenditures, the fall economic statement for 2023 details an extra $20.8 billion in spending over the next six years, surpassing the allocations specified in the 2023 federal budget.
In today’s fall economic statement, the government announced these initiatives:
Underused Housing Tax (UHT) Measures
- To make a “specified Canadian corporation,” partners of a “specified Canadian partnership” and trustees of a “specified Canadian trust,” “excluded owners” for UHT purposes, such that these owners would no longer have UHT filing requirements, effective for 2023 and later years.
- To reduce the minimum penalty per failure to file to $1,000 for individuals and $2,000 for corporations, effective for 2022 and subsequent years. Under the current rules, the minimum penalty per failure to file is $5,000 for individuals, and $10,000 for corporations.
- To introduce a new UHT exemption for residential properties held as a place of residence or lodging for employees, where the residential property is located in a rural area, effective for 2023 and later years.
- To introduce further technical clarifications, such as clarifying that unitized apartment buildings are not “residential property” for UHT purposes (effective for 2022 and later years) and ensuring that an individual or spousal unit can claim the “vacation property” exemption for only one residential property (effective for 2023 and later years).
Sales and Excise Tax Measures
- To add psychotherapists and counselling therapists to the list of health care practitioners whose professional services rendered to individuals are exempt from GST/HST.
- To broaden the application of the joint venture election that is available for GST/HST reporting, such that more participants in commercial joint ventures can benefit from the simplification benefits, by:
- Replacing the condition that the activities of the joint venture must be eligible activities set out in the legislation or regulations with an “all or substantially all” commercial activities condition (within the meaning of the GST/HST legislation);
- Requiring all electing participants to be registered for GST/HST purposes; and
- Replacing existing deeming measures with revised deeming measures that are more precisely focused on tax accounting.
Personal Income Tax Measures
- To introduce a new 15-week shareable EI adoption benefit, beginning in 2023-2024. Currently, adoptive parents can access EI parental benefits, but they cannot access the 15 weeks of EI maternity benefits. Surrogate parents will also be eligible for this benefit.
Business Income Tax Measures
- To provide an additional $15 billion in new loan funding for the Apartment Construction Loan Program that will provide low-cost financing to builders and developers, beginning in 2025-2026.
- To deny income tax deductions for expenses incurred to earn short-term rental income in provinces and municipalities that have prohibited short-term rentals, and where short-term rental operators are not compliant with the applicable provincial or municipal licensing, permitting, or registration requirements. These measures would apply to expenses incurred on or after January 1, 2024.
- To exempt the first $10 million in capital gains realized on the sale of a business to an employee ownership trust (EOT) from taxation, subject to certain conditions. The 2023 Federal Budget previously introduced updates intended to help facilitate the use of EOTs.
- To increase the limitation on labour expenditures for the Canadian journalism labour tax credit for each eligible newsroom employee from $55,000 to $85,000 and to temporarily increase the Canadian journalism labour tax credit rate from 25 per cent to 35 per cent for a period of four years (for expenditures incurred on or after January 1, 2023).
- To provide an exception to dividends received on “taxable preferred shares” held by financial institutions from the previously announced measure (in Budget 2023) that would deny deductions in respect of dividends received by financial institutions on shares that are mark-to-market property.
- To provide that bona fide concessional loans with reasonable repayment terms from public authorities will “generally” not be considered government assistance, such that the amount of assistance would not need to be included in the taxpayer’s taxable income.
International Tax Measures
- To announce Canada’s intention to move ahead with legislation to implement the Pillar Two global minimum tax (to ensure that large multinational corporations are subject to a minimum effective tax rate of 15 per cent), and to move ahead with its plan to enact a Digital Services Tax in Canada.
- To provide an income tax exemption on international shipping income earned by Canadian resident companies that meet certain requirements, to ensure consistency with the international shipping exclusion in Pillar Two, and to provide the same exemption that is already afforded to non-Canadian companies that meet certain requirements.
To know how these initiatives will affect your personal and business affairs, schedule a consultation with a Crowe Soberman advisor.
This article has been prepared for the general information of our clients. Please note that this publication should not be considered a substitute for personalized advice related to your situation.
