Canada: Tax measures in 2021 federal budget (Bill C-30) enacted

Canada's first budget implementation bill is now law.

Canada's first budget implementation bill is now law.

Canada's first budget implementation bill—Bill C-30—that includes several tax measures from the 2021 budget, the 2020 Fall Economic Update, and the 2019 federal budget received Royal Assent on 29 June 2021 and is now law. 

Corporate tax measures

Bill C-30 includes corporate income tax measures from the 2021 budget:

  • To introduce the Canada recovery hiring program refundable tax credit
  • To extend the Canada emergency wage subsidy (CEWS), and Canada emergency rent subsidy (CERS), including lockdown support, until 25 September 2021 (with certain revisions to eligibility requirements and subsidy levels)
  • To 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

Bill C-30 also includes corporate income tax measures from 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
  • To limit the employee stock option deduction for certain employees and allow a corporate deduction if certain conditions are met

Finally, Bill C-30 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

The other previously announced changes in Bill C-30 include measures to:

  • Temporarily provide flow-through share issuers with additional time to incur eligible expenses
  • Apply the short tax 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

Individual (personal) and indirect tax measures are part of Bill C-30, including new goods and services tax (GST) / harmonized sales tax (HST) measures related to e-commerce supplies. 

Bill C-30 amendment

Bill C-30 was amended during parliamentary consideration by the House Standing Committee on Finance to require the Department of Finance to address proposed measures related to the Canada emergency wage subsidy (CEWS). Specifically, the Department of Finance is to prepare and table a report:

  • 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
  • To 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 (scheduled for September 2021).

KPMG observation

Bill C-30 does not contain certain 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.

Read a June 2021 report prepared by the KPMG member firm in Canada

 

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