Canada: Tax measures in 2024 federal budget

The Deputy Prime Minister and Finance Minister delivered Canada's 2024 federal budget yesterday.

• Capital gains: Finance proposed increasing the inclusion rate for capital gains in excess of $250,000* realized on or after 25 June 2024 to 2/3 for corporations, trusts, and individuals. Finance also proposed increasing the lifetime capital gains exemption to $1.25 million and amending the temporary tax exemption on up to $10 million in capital gains that may be realized when a business is sold to an employee ownership trust (EOT).
• Housing: The budget also proposes several incentives for purpose-built rental housing in Canada, including an elective exemption from the interest deductibility limitation and enhanced capital cost allowance (CCA) for certain new additions of property. There are also proposed measures intended to benefit first-time homebuyers.
• Clean economy: The budget also focuses on clean economy changes, including with respect to the clean electricity investment tax credit.
• BEPS 2.0: Finance reaffirmed Canada’s commitment to Pillar One, but in view of delays in implementing the Pillar One multilateral treaty, the budget reiterates the government’s plan to enact the digital services tax (DST) that is currently before Parliament in Bill C-59. The DST would apply beginning in calendar year 2024, with that first year covering taxable revenues earned since 1 January 2022. The budget also reiterates the government’s intention to introduce global minimum tax legislation in Parliament to implement Pillar Two.
• Indirect measures: The budget also includes various indirect tax proposals, including extending goods and services tax (GST) relief to student residences.

Read an April 2024 report prepared by the KPMG member firm in Canada