Bill C-32, which includes certain outstanding measures announced in the 2022 and 2021 federal budgets, received first reading on November 4, 2022. The bill includes the highly anticipated enhanced trust reporting rules, which have been delayed by an additional year, and are now proposed to apply to taxation years that end after December 30, 2023 (instead of after December 30, 2022). The bill also includes the one-time Canada Recovery Dividend and the additional 1.5% tax on banks and life insurer groups, expands access to the small business deduction, and introduces several tax credits, among other business and personal tax measures.
Notably, Bill C-32 does not include the mandatory disclosure reporting rules or updated EIFEL rules, which Finance separately addressed alongside the 2022 Federal Fall Economic Update on November 3, 2022 (see TaxNewsFlash-Canada 2022-48, “Highlights of the 2022 Federal Fall Economic Update”). The bill also does not include previously announced measures related to substantive Canadian-controlled private corporations (CCPCs), hybrid mismatch arrangements, the Carbon Capture, Utilization and Storage investment tax credit or any changes to the existing intergenerational business transfer rules, among other measures.
The proposed corporate income tax measures in Bill C-32 will not be substantively enacted for purposes of IFRS or Accounting Standards for Private Enterprise (ASPE) until the bill passes third reading in the House of Commons (as Canada has a minority government).
Business income tax measures
The bill includes certain business tax measures announced in the 2022 federal budget related to:
- The Canada Recovery Dividend and the additional 1.5% Tax on Banks and Life Insurers
- The Small Business Deduction (i.e., increasing the upper limit of taxable capital to $50 million (from $15 million))
- Clean Technology Tax Incentives for air-source heat pumps (i.e., expanding the CCA regime and tax rate reduction for zero-emission technology manufacturers)
- The 30% Critical Mineral Exploration Tax Credit
- Phase-out of flow-through shares for oil, gas and coal activities
- International Financial Reporting Standards for insurance contracts (IFRS 17)
- The application of the general anti-avoidance rule (GAAR) to tax attributes
- Interest coupon stripping.
Personal tax measures
The bill includes certain personal tax measures announced in the 2022 federal budget related to:
- The Tax-Free First Home Savings Account (FHSA)
- The First-Time Home Buyers’ Tax Credit (HBTC)
- The Multigenerational Home Renovation Tax Credit
- The Residential Property Flipping Rule
- The Medical Expense Tax Credit for Surrogacy and Other Expenses.
Other tax measures
The bill includes other previously announced tax measures related to:
- Enhanced trust reporting rules
- Avoidance of tax debts
- Annual disbursement quota for charities
- Taxes on registered investments
- CRA audit authority
- Mutual funds — Allocation to redeemers rules
- The Underused Housing Tax, including a new exemption for certain vacation properties.
In addition, Bill C-32 includes changes to provide the CRA with the discretion to decline to issue a section 116 certificate in certain circumstances related to the administration and enforcement of the Underused Housing Tax Act. The bill also includes certain changes to the excise duty frameworks related to cannabis and vaping products.
For more information, contact your KPMG adviser.
Information is current to November 7, 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