2022 Federal Budget Highlights – View Manitoba Budget 2020
April 8, 2022
Below you will find some of the notable highlights from the 2022 Federal Budget released on April 7, 2022.
For more details on any of the proposals listed below, please refer to the full release of the federal budget by following the link at the end.
A Tax-Free First Home Savings Account:
- First time home buyers could save up to $40,000 in this account with maximum contributions of $8000/annually. Like an RRSP, contributions would be tax-deductible, and withdrawals to purchase a first home — including investment income — would be non-taxable, like a TFSA. Tax-free in,
tax-free out. Discussions with providers should see this launch in 2023.
Doubling the First-Time Home Buyers Tax Credit:
- The enhanced credit would provide up to $1,500 in direct support to home buyers.
Making Property Flippers Pay Their Fair Share:
- any person who sells a property they have held for less than
12 months would be considered to be flipping properties and would be subject to full taxation on their profits as business income. Some exceptions will apply and would be applicable to property sales after January 1, 2023.
Cutting Taxes for Canada’s Growing Small Businesses:
- phase out access to the small business tax rate more gradually, with access to be fully phased out when taxable capital reaches $50 million, rather than at $15 million.
Employee Ownership Trusts:
- Employee ownership trusts encourage employee ownership of a business and facilitate the transition of privately owned businesses to employees.
Making the Switch to Zero-Emission Vehicles:
- Broadened support of eligible vehicles for purchase incentives. Continued support of expanding the electric charging station network.
Dental Care for Canadians:
- Health Canada to provide dental care for Canadians. This will start with under
12-year-olds in 2022, and then expand to under 18-year-olds, seniors, and persons living with a disability in 2023, with full implementation by 2025. The program would be restricted to families with an income of less than $90,000 annually, with no co-pays for those under $70,000 annually in income.
Increasing Loan Forgiveness for Doctors and Nurses in Rural and Remote Communities:
- increase the maximum amount of forgivable Canada Student Loans by 50 per cent. This will mean up to $30,000 in loan forgiveness for nurses and up to $60,000 in loan forgiveness for doctors working in underserved rural or remote communities.
Boosting Charitable Spending in Our Communities:
- Introduce a new graduated disbursement quota rate for charities. For investment assets exceeding $1 million, the rate of the disbursement quota will be increased from 3.5 per cent to 5 per cent.
Requiring Financial Institutions to Help Pay for the Recovery:
- Proposes to introduce a temporary Canada Recovery Dividend, under which banking and life insurers’ groups (as determined under Part VI of the Income Tax Act) will pay a one-time 15 per cent tax on taxable income above $1 billion for the 2021 tax year. The Canada Recovery Dividend will be paid in equal installments over five years. Also, it proposes to permanently increase the corporate income tax rate by 1.5 percentage points on the taxable income of banking and life insurance groups (as determined under Part VI of the Income Tax Act) above $100 million, such that the overall federal corporate income tax rate above this income threshold will increase from 15 per cent to 16.5 per cent.
Preventing the Use of Foreign Corporations to Avoid Canadian Tax:
- Proposes targeted amendments to the Income Tax Act to ensure that, for taxation years that end on or after April 7, 2022, investment income earned and distributed by private corporations that are, in substance, CCPCs is subject to the same taxation as investment income earned and distributed by CCPCs. This may apply to those who have moved a corporation
into a foreign low-tax jurisdiction, by using foreign shell companies, or by moving passive portfolios to an
Next Steps Towards a Minimum Tax for High Earners:
- Announces the government’s commitment to examine a new minimum tax regime, which will go further towards ensuring that all wealthy Canadians pay their fair share of tax. The government will release details on a proposed approach in the 2022 fall economic and fiscal update.
Closing the Double-Deduction Loophole:
- Proposes to amend the Income Tax Act to deny the deduction for a dividend received where the taxpayer has entered into such transactions. Some Canadian financial institutions have been using hedging and short selling arrangements in aggressive tax planning strategies. Put simply, two different parts of an institution take different positions in relation to a Canadian dividend-paying stock — one short, or betting against the stock; one long, or betting on the stock — to take advantage of special treatment that those Canadian stocks receive.
Expanding Anti-Avoidance Tax Rules:
- To improve the fairness of Canada’s international tax system, Budget 2022 proposes to create a specific anti-avoidance rule in the Income Tax Act to ensure that the appropriate amount of tax is paid when an interest coupon stripping arrangement is used. Interest coupon stripping arrangements exploit these differences between tax treaties and allow some to pay less in taxes.
Strengthening the General Anti-Avoidance Rule:
- proposes to amend the Income Tax Act to provide that the GAAR can apply to transactions that affect tax attributes that have not yet been used to reduce taxes.
The government intends to release in the near future a broader consultation paper on modernizing the GAAR, with a consultation period running through the summer of 2022, and with legislative proposals to be tabled by the end of 2022.
International Tax Reform:
- Canada is one of 137 members of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting that joined a two-pillar plan for international tax reform agreed to in October 2021. The government is prepared to advance legislation for a Digital Services Tax to ensure that corporations in all sectors, including digital corporations, pay their fair share of tax on that money they earn by doing business in Canada.
Bill C-208 Follow-up:
- Announces a consultation process for stakeholders to share their views as to how the existing rules could be strengthened to protect the integrity of the tax system while continuing to facilitate genuine intergenerational business transfers. The government is committed to bringing forward legislation, as necessary to address this specific issue, which could be included in a bill to be tabled in the fall after conclusion of the consultation process.
Addressing the Digitalization of Money:
- Budget 2022 announces the government’s intention to launch a financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security. The first phase of the review will be directed at digital currencies, including cryptocurrencies and stablecoins.
Multigenerational Home Renovation Tax Credit:
- Proposing to introduce a Multigenerational Home Renovation Tax Credit, which would provide up to $7500 in support for constructing a secondary suite for a senior or adult with a disability. Starting in 2023 this refundable tax credit would allow families to claim 15% of up to $50,000 in eligible expenses.
Ban on Foreign Investment in Canadian Housing:
Intention to propose restrictions that would prohibit foreign commercial enterprises and people who are not Canadian Citizens or permanent residents from acquiring non-recreational, residential property in Canada for a two year period.
Taxing Assignment Sales:
To address speculative trading in the Canadian Housing market, the budget proposes to make all assignment sales of newly constructed or substantially renovated residential housing taxable for GST/HST purposes, effective May 7, 2022.
Medical expense tax credit for surrogacy and other expenses:
- Budget 2022 proposes to broaden the Medical Expense Tax Credit (METC) definition of patient to recognize surrogate mothers or donors. This would allow medical expenses and certain reimbursements with respect to a surrogate mother or donor to be eligible for the METC. The budget also proposes that fees paid to fertility clinics and donor banks to become a parent be eligible under the METC. The measure would apply to expenses incurred in 2022 and subsequent years.
Phasing out flow-through shares for oil, gas, and coal activities:
- Proposes to eliminate the flow-through share regime for oil, gas, and coal activities by no longer allowing oil, gas, and coal exploration or development expenditures to be renounced to a flow-through share investor — effective for expenditures renounced under flow-through share agreements entered into after March 31, 2023.
Home Accessibility Tax Credit:
- The non-refundable Home Accessibility Tax Credit (HATC) provides a 15% credit on eligible home renovation expenses up to $10,000. The budget proposes to double the annual expense limit to $20,000, which would provide up to $3,000 in tax relief. This measure would apply to expenses incurred in the 2022 and subsequent taxation years.
Labour Mobility Deduction for Tradespeople:
- The budget proposes to allow the deduction of up to $4,000 per year for reasonable lodging expenses for construction workers who temporarily relocate for work. The deduction would apply to construction tradespeople and apprentices who maintain an ordinary place of residence and maintain temporary lodging near to a temporary work location. Both locations must be in Canada. The temporary lodging must be at least 150 kilometers closer than the ordinary residence to the temporary work location and the temporary relocation must be for a minimum duration of 36 hours.
DISCLAIMER: The above commentary was provided for information purposes and is not intended to provide legal or tax advice.
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