Canada: Federal Fall Update

Canada Federal Fall Update – Introduction

Measures announced in the 2021 Federal Fall Economic Update will be implemented by Bill C-8. On 4 May 2022, this Bill passed its third reading in the House of Commons on 4 May 2022.

Its contents will enact measures including:

• the temporary Small Businesses Air Quality Improvement Tax Credit;
• the new refundable tax credit for farming businesses; and
• the Underused Housing Tax Act

Other measures are also included.

The first reading of the Bill took place on December 15, 2021.

The temporary Small Businesses Air Quality Improvement Tax Credit

The new Bill will include a refundable 25% tax credit for qualifying entities, which have qualifying expenditures for air quality improvements. This expenditure must have been incurred between 1 September 2021 and 31 December 2022.

Qualifying entities will include both unincorporated sole proprietors and Canadian-controlled private corporations with taxable capital employed in Canada of less than $15 million in the tax year directly preceding it.

A maximum of $10,000 is available in qualifying expenditures per qualifying location. The credit is capped at a maximum of $50,000 across all qualifying locations. It should be noted that these two ‘caps’ are shared amongst affiliated businesses.

Refundable tax credit for farming businesses

The contents of the bill also includes the new refundable tax credit to return fuel charge proceeds from pollution pricing directly to farming businesses in certain provinces.

These provinces include Ontario, Manitoba, Saskatchewan and Alberta. The scheme started in 2021.

The refundable tax credit is available to taxpayers who are actively engaged in either the management or day-to-day activities of farming. This includes farming enterprises that are carried out through a partnership.

A qualifying farming business must incur total farming expenses of $25,000 and those expenses must be at least partly attributable to the provinces mentioned above.

Underused Housing Tax Act

The bill also includes the proposed legislation behind the Underused Housing Tax Act. This legislation will result in an annual tax of 1% on the value of vacant or underused Canadian residential real property.

The property must be owned either directly or indirectly owned by non-resident non-Canadians.

The new annual tax applies beginning in the 2022 calendar year.

If you have any queries about this article, the Canada Federal Fall Update, or the matters discussed more generally, then please do not hesitate to get in touch.

The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.