Tax Measure Highlights 

Budget Highlights

• Confirms $19 billion in federal stimulus under year two of Canada’s Economic Action Plan introduced last year.
• Canada’s Economic Action Plan will be wound down as intended.
• Reduced government spending in targeted areas and a comprehensive review of administrative functions and overhead to identify areas of savings.

Personal Income Tax Measures

• In general, changes in personal income tax measures are geared to specific taxpayers.
• Benefits Entitlement - Shared Custody - parents who share equal custody of a child will be able to each receive one-half of the entitlement for the Canada Child Tax Benefit, Universal Child Tax Care Benefit and the child component of the GST/HST Credit.
• Universal Child Care Benefit for Single Parents - the single parent has the option to include the aggregate Universal Tax Credit Benefit amount received in the parent’s income or in the income of the dependant for whom an Eligible Dependant Credit is claimed. If no Eligible Dependant Credit is claimed, the aggregate Benefit amount can be included in the income of the one of the children for whom the Benefit is paid.
• Medical Expense Tax Credit – expenses incurred for purely cosmetic procedures are ineligible to be claimed for expenses incurred after March 4, 2010.
• Registered Disability Savings Plans - Rollover of RRSP Proceeds to an RDSP – for deaths occurring after March 4, 2010, permit rollover of a deceased individual’s RRSP proceeds to the RDSP of a financially dependent infirm child or grandchild to the extent there is available RDSP contribution room. There are transitional rules for deaths that occurred after 2007 that provide an equivalent treatment.
• Carry Forward of RDSP Grants and Bonds – amend the Canada Disability Savings Act to allow a 10-year carry forward of Canada Disability Savings Grants (CDSG) and Canada Disability Savings Bonds. Upon opening a RDSP, CDSG entitlements will be determined and paid into the plan for the previous 10 years (but not before 2008).
• Scholarship Exemption and Education Tax Credit – clarifies that a post-secondary program that is primarily research is not eligible for the Education Tax Credit unless it leads to a diploma from a college or CEGEP or a bachelor, masters or doctoral degree. The amount eligible for the Scholarship Exemption is limited to what was received for enrolment in an eligible educational program for the period of study related to the scholarship. For part-time programs, the amount eligible is limited to the amount of the tuition and program-related materials. Exceptions are made for students entitled to the Disability Tax Credit or students having mental or physical impairments.
• Employee Stock Options – In situations where the employer allows employees to cash out their stock option rights to the corporation, the stock option deduction will only be available to employees when the employer makes an election to forgo the deduction for the cash payment.
  • Employees of publicly-traded companies will no longer be able to elect to defer the recognition of the employment benefit when acquiring securities under a stock option plan. Employers are required to withhold and remit an amount in respect of the tax on the value of the employment benefit.
  • For taxpayers that elected to defer taxation of their stock option benefit until they disposed of the shares may elect in the year of disposition to pay a special tax for the year equal to the taxpayer’s proceeds of disposition and claim an offsetting deduction equal to the amount of the stock option benefit and taking into account the tax relief resulting from the use of capital losses.
  • U.S. Social Security Benefits – Reduce the inclusion rate from the current 85% to 50% for benefits received on or after January 1, 2010.
  • Mineral Exploration Tax Credit – extended by one year for flow-through share agreements entered into on or before March 31, 2011.

Charities

• Repeal of the charitable expenditure rule and increase the capital accumulation threshold to $100,000 for charitable organizations from the current $25,000.

Business Income Tax Measures

• Capital Cost Allowance
  • Expansion of Class 43.2 (Specified Clean Energy Generation and Conservation equipment) to include heat recovery equipment and distribution equipment relying on ground source heat pumps, active solar systems or heat recovery equipment acquired on or after March 4, 2010.
  • Increase in CCA rates for satellite and cable set-top boxes to a declining balance CCA rate of 40 per cent for equipment acquired after March 4, 2010.
• Interest on Overpaid Taxes – Effective July 1, 2010, the interest rate payable to corporations will be set at the average yield of three-month Government of Canada Treasury bills sold in the first month of the preceding quarter.

International Taxation

• Dispositions of “Taxable Canadian Property” on which non-residents get taxed will exclude shares of corporations and certain other interests that do not derive their value principally from real or immovable property situated in Canada.
• Foreign Investment Entities and Non-Resident Trusts – ongoing efforts to tighten rules to prevent taxpayers from using off-shore tax-planning schemes to avoid paying tax. The proposed provisions apply to taxation years that end after March 4, 2010.

Sales Tax Measures

• Cosmetic procedures – To be consistent with the restrictions for the Medical Expense Tax Credit, purely cosmetic procedures and services related to these procedures are subject to GST/HST starting for supplies made after March 4, 2010.
• Network Sellers employing the commission-based model in the direct selling industry can apply to use a special GST/HST accounting method.

Other Tax Measures

• The budget announced a public consultation on proposals that require the reporting of certain tax avoidance transactions. The budget proposes that reportable transactions are those transactions that have at least two of the following three hallmarks:
  • tax advisor or promoter fees that are based on the tax benefit
  • “confidential protection” provided to the promoter or tax advisor
  • “contractual protection” provided to the tax advisor or promoter
• Online notices – Various Acts to be amended to allow for electronic issuance of notices that currently can only be sent by ordinary mail. This would not include notices that are required to be served personally or by registered mail.

Customs Tariff Measures

• Elimination of the remaining tariffs on manufacturing inputs, machinery and equipment will be in effect for goods imported into Canada on or after March 5, 2010.

[ TOP ]