Canada: Tax measures in 2021 federal budget

The 2021 federal budget does not propose any changes to the federal individual (personal) or corporate tax rates

Does not propose any changes to the federal individual (personal) or corporate tax rates

The 2021 federal budget—presented on 19 April 2021—does not propose any changes to the federal individual (personal) or corporate tax rates but would extend certain relief programs offered in response to the coronavirus (COVID-19) pandemic.

Other tax measures in the budget would impose or implement interest expense limitations on corporations, anti-hybrid rules, and a digital services tax.

COVID-19 relief measures in budget

The budget would extend until 25 September 2021:

  • The Canada emergency wage subsidy (CEWS) program
  • The Canada emergency rent subsidy (CERS) program
  • The lockdown support program

The budget would also introduce a new Canada recovery hiring program

Tax measures in budget

Among the tax measures in the federal budget are the following items:

  • New interest expense limitations for certain Canadian corporations starting in 2023
  • Anti-hybrid rules that may affect Canadian multinationals
  • Details of the digital services tax (scheduled to be effective 1 January 2022) 

Innovation-related proposals

In addition, the budget provides new incentives to support small business innovation and amounts for green investments and jobs. Further, the government announced a range of funding and new initiatives intended to foster Canadian innovation and growth.

KPMG observation

Because Canada has a “minority government,” these measures will require the support of another political party before they can be pass into law.

Tax professionals have observed that the budget does not propose to:

  • Increase the capital gains inclusion rate
  • Change the principal residence exemption
  • Introduce a wealth tax
  • Address the taxation of intergenerational transfers of businesses

In addition, Finance did not announce comprehensive tax reform.

Read an April 2021 report [PDF 362 KB] prepared by the KPMG member firm in Canada

 

 

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