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  • Charles Rotenberg

MEMO


This afternoon, Finance Minister Chrystia Freeland tabled the Fall Economic and Fiscal Statement.


Although there have been times that the Economic Statement has been more of a mini-Budget, introducing tax measures, it was not evident this year.

Recognizing the precarious nature of the economy, there are no tax increases and no closing of tax benefits. There are a few tax related benefits for taxpayers and a confirmation of the Government’s intent to proceed with previously introduced tax measures.

What was not in the Economic Statement

There are certain items upon which we always hold our breath to see if there will be attacks on taxpayers.

There were no general increases in tax rates for small corporations or individuals

There was no increase in the inclusion rate for capital gains.

There was no change announced to the provisions of Bill C-208 for inter-generational transfers of businesses (see my earlier comments on this Bill). The Government pledged not to change any of the rules until the final form of legislation is introduced into the House. Likely we will see these proposed changes in Budget 2023.

There was no change to rules related to surplus stripping.

There was no provision to move toward a pharma-care initiative.

What was in the Economic Statement


Really, not very much.

Personal Income Tax Measures


Extension of the Residential Property Flipping Rule to Assignment Sales

Budget 2022 proposed the Residential Property Flipping Rule, a new deeming rule to ensure profits from flipping residential real estate are always subject to full taxation. Starting on January 1, 2023, profits arising from dispositions of residential property (including a rental property) that was owned for less than 12 months would be deemed to be business income, subject to the exceptions listed below.

The 2022 Fall Economic Statement proposes to extend this new deeming rule to profits arising from the disposition of the rights to purchase a residential property via an assignment sale. Profits arising from an assignment sale would be deemed to be business income if the rights to purchase a property were assigned after having been owned for less than 12 months.

The Residential Property Flipping Rule would not apply when a transaction is in relation to at least one of the life events listed below:


  • The death of the taxpayer or a person related to the taxpayer;

  • One or more persons related to the taxpayer becoming a member of the taxpayer's household or the taxpayer becoming a member of the household of a related person;

  • The breakdown of the marriage or common-law partnership of the taxpayer if the taxpayer has been living separate and apart from their spouse or common-law partner for at least 90 days prior to the disposition;

  • A threat to the personal safety of the taxpayer or a related person;

  • The taxpayer or a related person suffering from a serious illness or disability;

  • An eligible relocation of the taxpayer or the taxpayer's spouse or common-law partner (i.e., generally a relocation that enables the taxpayer to carry on business, be employed or attend full-time post-secondary education);

  • An involuntary termination of the employment of the taxpayer or the taxpayer's spouse or common-law partner;

  • The insolvency of the taxpayer; or

  • The destruction or expropriation of the property.

Automatic Advance for the Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low- and modest-income workers. An individual claims the CWB when completing their tax return, but filers are automatically assessed by the Canada Revenue Agency (CRA) for eligibility if the CWB is not claimed. An advance payment option is available through which eligible individuals may apply to receive up to half of their anticipated CWB entitlement for a taxation year through up to four advance payments. Despite recent efforts to raise awareness of this option, the provision is little used.

The Economic Statement proposes to automatically provide individuals who received the CWB for the previous taxation year an entitlement for the current taxation year through quarterly advance payments, so long as their income tax return for the previous year is received and assessed by the CRA prior to November 1 of the current year.

Doubling the GST Credit for Six Months


In the coming weeks, low- and modest-income people and families will receive an additional Goods and Services Tax (GST) Credit payment.

Single Canadians without children will receive up to an extra $234, and couples with two children will receive up to an extra $467. Seniors will receive an extra $225 on average.

Current GST Credit recipients will receive this support automatically.

Student Loan Interest

There will be a permanent elimination of interest on Canada Student Loans and Canada Apprentice Loans.

Business Income Tax Measure

Investment Tax Credit for Clean Technologies


The 2022 Fall Economic Statement proposes to introduce a refundable Clean Technology Investment Tax Credit equal to 30 per cent of the capital cost of eligible equipment.

The following types of equipment would be eligible for the credit:

  • equipment to generate electricity from solar, wind and water energy;

  • stationary electricity storage equipment that does not use any fossil fuels in operation, which includes, but is not limited to, batteries, flywheels, supercapacitors, magnetic energy storage, compressed air energy storage, pumped hydroelectric energy storage, gravity energy storage, and thermal energy storage;

  • active solar heating equipment, air-source heat pumps, and ground-source heat pumps;

  • equipment to generate heat or electricity from concentrated solar energy;

  • equipment to generate heat or electricity from small modular nuclear reactors; and

  • non-road zero-emission vehicles described (e.g. hydrogen or electric heavy duty equipment used in mining or construction) and charging or refuelling equipment that is used primarily for such vehicles.

A Tax on Share Buybacks

A share buyback occurs when a corporation buys its own stock back from existing shareholders. While buying back shares is one legitimate way that corporations can return value to their shareholders, it can also divert corporate resources away from making investments in their workers and businesses in Canada.

The 2022 Fall Economic Statement announces the government’s intention to introduce a 2 per cent tax that would apply on the net value of all types of share buybacks by public corporations in Canada, similar to a recent measure introduced in the United States. The details of this new tax will be announced in Budget 2023, and the tax would come into force on January 1, 2024.

Conclusion

All in all this was a nothing event.

I look forward to working with all of you and your advisors on regular year end planning without having to navigate new rules.


-- Chuck

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