Bill C-8, which implements some of the measures announced in the 2021 Federal Fall Economic Update, received Royal Assent on June 9, 2022. This bill enacts the temporary Small Businesses Air Quality Improvement Tax Credit and a new refundable tax credit for farming businesses as well as the Underused Housing Tax Act, among other measures.
The corporate income tax measures in Bill C-8 are considered enacted for U.S. GAAP purposes on June 9, 2022 (the date the bill received Royal Assent). These measures were considered substantively enacted for IFRS and Accounting Standards for Private Enterprise (ASPE) purposes on May 4, 2022 (the date the bill passed third reading), as Canada has a minority government.
Corporate income tax measures
Small Businesses Air Quality Improvement Tax Credit
Bill C-8 includes a temporary refundable 25% tax credit for eligible entities that have qualifying expenditures for air quality improvements incurred between September 1, 2021 and December 31, 2022. Eligible entities include unincorporated sole proprietors and Canadian-controlled private corporations with taxable capital employed in Canada of less than $15 million in the immediately preceding taxation year. This tax credit is available to a maximum of $10,000 in qualifying expenditures per qualifying location and provides a maximum of $50,000 across all qualifying locations (both of these expense limits are shared among affiliated businesses).
Refundable tax credit for farming businesses
The bill also includes a new refundable tax credit to return fuel charge proceeds from pollution pricing directly to farming businesses in backstop jurisdictions (i.e., Ontario, Manitoba, Saskatchewan and Alberta), starting in 2021. This credit is available to taxpayers that are actively engaged in the management or day-to-day activities of earning income from farming (including farming businesses carried on through a partnership) and incur total farming expenses of $25,000 or more, which are all or partly attributable to these provinces.
Among other measures, Bill C-8 also includes the Underused Housing Tax Act, which implements an annual tax of 1% on the value of vacant or underused Canadian residential real property directly or indirectly owned by non-resident non-Canadians. The new annual tax was originally announced in the 2021 federal budget and applies beginning in the 2022 calendar year.
The bill also includes measures to expand the refundable tax credit for eligible school supplies expenditures by teachers and early childhood educators, effective for the 2021 and subsequent taxation years.
For more information, contact your KPMG adviser.
Information is current to June 13, 2022. The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's National Tax Centre at 416.777.8500