Canada's first budget implementation bill, which includes several tax measures from the 2022 budget, passed third reading in the House of Commons on June 9, 2022. Bill C-19 also includes several outstanding 2021 federal budget measures, such as immediate expensing of certain capital property for Canadian-controlled private corporations (CCPCs), sole proprietors and certain partnerships, corporate income tax rate reductions for zero-emission technology manufacturing, changes to capital cost allowance (CCA) for clean energy equipment and the new luxury tax.
Prior to passing third reading, several measures in Bill C-19 were amended. Specifically, the amendments include changes to the coming-into-force provision for the proposed luxury tax on certain aircraft and changes to some of the indirect tax measures in the bill. The amendments also clarify that the proposed two-year ban on foreign purchases of Canadian residential property will now come into force on January 1, 2023.
Note that Bill C-19 does not include corporate tax changes proposed in the 2022 federal budget, such as the "substantive CCPC" rules, the one-time 15% Canada Recovery Dividend on bank and life insurer groups or the additional 1.5% tax on the taxable income for members of bank and life insurer groups (as determined for the purposes of the dividend).
Accounting implications
The corporate income tax measures included in Bill C-19 are considered substantively enacted for IFRS and Accounting Standards for Private Enterprise (ASPE) purposes on June 9, 2022 (the date the bill passed third reading), as Canada has a minority government. The corporate income tax measures in Bill C-19 will be considered enacted for U.S. GAAP purposes on the date the bill receives Royal Assent.
Business income tax measures
Bill C-19 includes certain outstanding 2021 federal budget measures related to:
- Immediate expensing of eligible property for CCPCs, sole proprietors and certain partnerships
- Expanded access to the accelerated CCA for certain clean energy equipment (Classes 43.1 and 43.2)
- The 50% reduction of the general corporate and small business income tax rates for businesses that manufacture zero-emission technologies to 7.5% (from 15%) and 4.5% (from 9%), respectively, for taxation years beginning after 2021 and before 2029 (this reduction is gradually phased out for taxation years that begin in 2029 and are fully phased out for taxation years that begin after 2031)
- The temporary extension to the period for incurring eligible expenses and other deadlines under film or video production tax credits.
Indirect tax and other measures
Bill C-19 also includes proposed legislation for the new Select Luxury Items Tax Act, which introduces a luxury tax on certain new aircrafts and motor vehicles priced over $100,000 and certain boats priced over $250,000. Finance originally announced this tax in the 2021 federal budget and previously released draft legislation on March 11, 2022 (see TaxNewsFlash-Canada 2022-17, "Vendors — Prepare Now to Meet Luxury Tax Requirements"). The coming-into-force date for the luxury tax on subject aircraft was amended and will now be "on a day or days to be fixed by order of the Governor in Council, which day or days may not be fixed before September 1, 2022" (instead of September 1, 2022).
For further details on these and other tax measures included in the bill, see TaxNewsNow, "Federal Budget Bill #1 receives first reading with other outstanding measures".
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
