Canada's first budget implementation bill, which includes several tax measures from the 2021 budget, received Royal Assent on June 29, 2021 and is now law. Bill C-30 also includes previously announced tax measures, including measures from the 2020 fall economic update and the 2019 federal budget.

In addition, the House Standing Committee on Finance (FINA) amended Bill C-30 in its report on the bill dated June 7, 2021. This amendment requires Finance to address proposed measures related to the Canada Emergency Wage Subsidy (CEWS). Specifically, Finance must prepare and table a report on proposed measures to prevent certain publicly traded companies and their subsidiaries from claiming the CEWS, and to recover any CEWS amounts that those companies may have already received, under certain circumstances. Under the amendment, Finance must table this report within the first 15 sitting days after the House and Senate return after the summer recess.

Note that the bill does not contain some of the more significant changes proposed in the 2021 federal budget, such as new interest deductibility rules, new rules to address hybrid mismatch arrangements, the digital services tax and the luxury tax.

Accounting implications

The corporate income tax measures included in Bill C-30 are considered substantively enacted for IFRS and Accounting Standards for Private Enterprise (ASPE) purposes on June 23, 2021, the date Bill C-30 received third reading (as Canada has a minority government). The corporate income tax measures in Bill C-30 are considered enacted for U.S. GAAP purposes on June 29, 2021 (the date the bill received Royal Assent).

Corporate income tax measures

Bill C-30 includes corporate income tax measures included in the 2021 budget to:

  • Introduce the Canada Recovery Hiring Program refundable tax credit
  • Extend the Canada Emergency Wage Subsidy (CEWS), and Canada Emergency Rent Subsidy (CERS), including Lockdown Support, until September 25, 2021 (with certain revisions to eligibility requirements and subsidy levels)
  • Introduce a CEWS repayment obligation for certain public corporations if aggregate compensation for specified executives during the 2021 calendar year exceeds such compensation for the 2019 calendar year.

For more information, see TaxNewsFlash-Canada 2021-23, "Budget Brings Hiring Subsidy & Extends COVID-19 Support" and TaxNewsFlash-Canada 2021-21, "2021 Federal Budget Highlights".

Bill C-30 also includes corporate income tax measures included in the 2020 Fall Economic Update to:

  • Extend the income tax deferral available for certain patronage dividends paid in shares by an agricultural cooperative to payments made before 2026
  • Limit the employee stock option deduction for certain employees and allow a corporate deduction if certain conditions are met.

For more information, see TaxNewsFlash-Canada 2020-87, "Highlights of the 2020 Federal Fall Economic Update" and TaxNewsFlash-Canada 2021-35, "New Stock Option Regime — Takes Effect July 1, 2021".

Bill C-30 also includes outstanding 2019 federal budget measures related to:

  • Character conversion transactions
  • Mutual funds — allocation to redeemer rules
  • Foreign affiliate dumping
  • Transfer pricing rules (ordering of rules and reassessment period)
  • Cross-border securities lending arrangements.

For more information, see TaxNewsFlash-Canada 2019-09, "2019 Federal Budget Highlights".

Other previously announced changes included in Bill C-30 include measures to:

  • Temporarily provide flow-through share issuers with additional time to incur eligible expenses
  • Apply the short taxation year rule to the accelerated investment incentive for resource expenditures among other technical changes
  • Broaden eligibility for the enhanced capital cost allowance to additional zero-emission vehicles
  • Amend support measures for Canadian journalism.

Bill C-30 also includes several personal and indirect tax measures, including new GST/HST measures related to e-commerce supplies (see TaxNewsFlash-Canada 2021-34, "Non-Resident Businesses and Operators — Prepare for GST Registration" and TaxNewsNow, Canada's 2021 Budget Bill #1 Receives First Reading).

Bill C-30 amendment

The amendment to Bill C-30 adds a new requirement for Finance to prepare and table a report on proposed measures to:

  • Prevent publicly traded companies and their subsidiaries from paying dividends or repurchasing their own shares while receiving the CEWS, for the period following the tabling of the report
  • Recover wage subsidy amounts from publicly traded companies and their subsidiaries that paid dividends or repurchased their own shares while receiving the CEWS, for the period prior to the tabling of the report.

Under the amendment, Finance must table this report within the first 15 sitting days after the House and Senate return after the summer recess. Currently, both the House and Senate are scheduled to return in September 2021.

What's not included in Bill C-30

Notably, Bill C-30 does not include several significant 2021 federal budget tax measures, many of which are subject to further consultation or comment. These measures include proposed changes related to:

  • Interest deductibility limits
  • Hybrid mismatch arrangements
  • Mandatory disclosure rules
  • Digital services tax
  • Reduced tax rates for zero-emission technology manufacturing
  • Annual tax on unproductive use of Canadian housing by non-resident owners
  • Investment tax credit for carbon capture, utilization and storage
  • Immediate expensing of eligible property for Canadian-controlled private corporations
  • Changes to capital cost allowance for clean energy equipment (Class 43.1 and 43.2)
  • Tax debt avoidance (section 160)
  • Luxury tax.

For more information, contact your KPMG advisor.

Information is current to June 29, 2021. 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