2023 Canada Federal Budget: Industry Highlights

TAX ALERT | March 29, 2023

Authored by RSM Canada, COURTESY of NVS Corporation

Key industry takeaways from the latest budget release

Finance Minister Chrystia Freeland on March 28, 2023, tabled the 2023 Canada Federal Budget. Here are the implications of Budget 2023 across major industries, including key takeaways for middle market companies. 

 Looking for more in-depth information? Read our 2023 Canada Federal Budget: Detailed Commentary.

BELOW IS THE LINK TO THE VISUAL INFOGAPHIC

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BUSINESS AND PROFESSIONAL SERVICES

1. 1.Proposes new rules, as of Jan. 1, 2024, to facilitate the use of employee ownership trusts (EOTs) to transfer the ownership of qualifying businesses to employees on a tax-efficient basis.
2. 2.Proposes clarifications to Bill C-208 to ensure that exceptions to surplus stripping rules apply only when a genuine intergenerational business transfer takes place, specifically by introducing a three-year immediate option or a 10-year gradual business transfer.

CONSUMER PRODUCTS

1. Introduces a one-time Grocery Rebate which will top up the GST credit otherwise payable in January 2023, providing $2.5 billion in targeted inflation relief.
2. Proposes to temporarily cap the inflation adjustment for excise duties on beer, spirits and wine at 2%, for one year, as of April 1, 2023.
3. Proposes to allow all licensed cannabis producers to remit excise duties on a quarterly rather than monthly basis, starting from the quarter beginning on April 1, 2023.

ENERGY

1. Provides details on the previously proposed Clean Technology Investment Tax Credit: a refundable 30% tax credit for eligible investments in clean energy generation and storage
2. Provides details on the proposed Clean Hydrogen Investment Tax Credit, including a tax credit incentive structure with rates varying from 15% to 40%, applying to eligible costs.
3. Introduces design elements on the Carbon Capture, Utilization, and Storage Investment Tax Credit: a proposed tax credit for capital investments to store or use CO2 in industrial processes.

INDUSTRIALS

1. Proposes a new refundable investment tax credit for clean technology manufacturing and processing (M&P) as well as critical mineral extraction, equal to 30% of the capital cost of eligible property engaged in eligible activities.
2. Proposes extending the tax rate reduction for zero-emission technology manufacturers until 2034 and including certain nuclear M&P activities.
3. Proposes measures targeted at advancing clean technology supply chains, creating electric vehicles and electric vehicle batteries.
4. Proposed an additional $500 million in funding to the Strategic Innovation Fund (SIF) and directed $1.5 billion of SIF’s current capital toward clean technology, critical minerals and industrial transformation projects.

LIFE SCIENCES

1. 1.Invests $198.3 billion over 10 years into Canada’s public health care system, $13.0 billion over five years to implement the Canadian Dental Care Plan providing dental coverage to low-income families, and $46.2 billion through the Canada Health Transfer measures to support provincial health care improvements.
2. 2.Commits $359.2 million over five years to support the Canadian Drugs and Substance Strategy to combat the opioid crisis.
3. 3.Building on the biomanufacturing and life sciences strategy, the federal government will consult with experts on improving readiness for future health emergencies.

REAL ESTATE

1. Announces that financial institutions can offer the previously announced Tax-Free First Home Savings Account to Canadians as of April 1, 2023, which is a new registered plan providing prospective first-time home buyers with the ability to save $40,000 on a tax-free basis.
2. Suggests guidelines to protect Canadians with mortgages, including extended amortizations, adjusted payment schedules, and authorization of lump-sum payments.
3. Reallocates funding from the National Housing Co-Investment Fund’s repair stream to its new construction stream to boost the construction of affordable homes.
4. Commits an additional $4 billion over seven years to implement a co-developed urban, rural and northern Indigenous housing strategy.

TECHNOLOGY

1. Proposes legislative amendments to combat cybercrime and financial risks associated with crypto assets, including the ability to freeze and seize virtual assets, improving intelligence sharing among government enterprises, and mandating certain entities to disclose crypto asset investment exposure publicly.
2. Proposes changes to the Canada Labour Code to provide protections for federally regulated gig workers against intentional misclassification of employees.
3. Announces intention to engage with stakeholders in coming months to ensure the Scientific Research and Experimental Development (SR&ED) program is providing adequate support and development of intellectual property, consistent with promises from Budget 2022.

FINANCIAL SERVICES

1. 1.Proposes to treat dividends received on Canadian shares held by financial institutions in the ordinary course of their business as business income.
2. 2.Proposes to amend the definition of “credit union” to remove the revenue test for income tax and GST/HST purposes applying to financial years ending after 2016.
3. 3.Secures commitments from Visa and Mastercard to lower fees for small businesses.
4. 4.Proposes to amend the GST/HST definition of “financial service” to clarify that payment card clearing services rendered by a network operator are excluded from the definition.

PUBLIC SECTOR

1. Reduces government spending in certain sectors to help fund Canada’s public health care system, the Canadian Dental Care Plan and Canada’s clean economy.
2. Invests $11.4 million over three years to Crown-Indigenous Relations and Northern Affairs Canada and $368.4 million over three years to Natural Resources Canada to renew and update forestry sector support.
3. Proposes additional investment in several public infrastructure projects, such as rail and water transportation infrastructure development.
4. Commits international development assistance annually through 2030 and proposes to introduce legislation to eradicate forced labour from Canadian supply chains and incentivize countries to adhere to international human rights standards.

NON-PROFIT ORGANIZATIONS

PRIVATE EQUITY

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1. 1.Introduces, as of Jan. 1, 2024, a 2% tax on share buybacks by public corporations, certain publicly traded trusts and partnerships, which would apply to the annual net value of repurchases of equity.
2. 2.Imposes the Digital Services Tax as of Jan. 1, 2024, but only if the multilateral convention implementing the Pillar One framework has not come into force.
3. 3.Proposes to broaden the GAAR by introducing an economic substance rule, introducing a penalty and extending the reassessment period.
4. 4.Reinforces the government’s commitment to enact the mandatory disclosure rules.

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Source: RSM Canada
Used with permission as a member of RSM Canada Alliance
https://rsmcanada.com/insights/budget-commentary/2023-canada-federal-budget-industry-highlights.html

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