February 16, 2023
The new year has brought with it some important tax changes for businesses and residential property owners in Canada:
(1) Making the Small Business Deduction More Accessible
The small business deduction (“SBD”) reduces the corporate income tax rate for Canadian-controlled private corporations (“CCPCs”) to 9%, instead of the general federal corporate tax rate of 15%, on the first $500,000 CAD of its active business income.
(2) New “Excessive Interest and Financing Expenses Limitations” Rules
The Canadian government has revised proposed legislation regarding excessive interest and financing expenses limitations (“EIFEL”) of a taxpayer. EIFEL aims to limit tax planning strategies used by multinational enterprises to shift profits to low or no-tax locations or erode tax bases by deducting excessive interest and financing costs principally in the context of multinational enterprises and cross-border investments.
(3) Changes to the Reporting Requirements for Trusts
The tax changes also expand the categories of trusts that are required to file a T3 Trust Income Tax and Information Return (“T3”). All express trusts resident in Canada, including bare trusts, are now required to file a T3 Return for the taxation years ending on or after December 31, 2023, even if there are no taxes payable.
(4) Home Renovation Tax Credit for Multigenerational Families
Taxpayers who created a secondary dwelling unit for a related family member who is a senior or an adult with a disability, will be eligible to receive a one time 15% tax credit for up to $50,000 in renovation expenses that are incurred within the taxation year in which the renovation period ends.
(5) Residential Property Flipping May Now Be Considered as Business Income
Any profits made from the disposition of residential real estate, including rental property, which have been owned for less than 12 months, are deemed to be business income.
