On April 19, 2021, Canada’s Deputy Prime Minister and Minister of Finance, Chrystia Freeland, released the first official budget in the past two years, titled, Federal Budget 2021: A Recovery Plan for Jobs, Growth, and Resilience (the “Budget”). The Budget proposed over $100 billion in spending, and, among the more significant measures, the Budget proposes to extend the Canada Emergency Wage Subsidy (CEWS), the Canada Emergency Rent Subsidy (CERS), and Lockdown Support through September, 2021. The Budget also introduces a new Canada Recovery Hiring Program.
In summary, the Budget:
- Puts limitations on interest deductibility by corporations, trusts, and partnerships to a percentage of tax-basis EBITDA;
- Enhances Canada’s mandatory reportable transaction disclosure rules (subject to a public consultation) and introduces a new “notifiable transaction” regime;
- Proposes to consult on the transfer pricing rules;
- Imposes new rules to target hybrid mismatch arrangements;
- Reduces corporate tax rates on eligible zero-emission technology manufacturing and processing income;
- Amends the capital cost allowance system by providing for temporary immediate expensing of up to $1.5 million per taxation year of capital property acquisitions to Canadian-controlled private corporations (CCPCs);
- Provides further details of a proposed digital services tax, to be effective January, 2022;
- Proposes amendments to the measures announced in the Fall 2020 Economic Statement regarding the new GST/HST rules targeting e-commerce coming into effect July 1, 2021;
- Proposes a new tax on luxury items (namely, automobiles, planes, and boats) over a certain price threshold; and
- Proposes a new tax on the unproductive use of Canadian housing owned by foreigners.