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Archived - Tax Measures: Supplementary Information

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Overview

This annex provides detailed information on tax measures proposed in the 2022 Fall Economic Statement.

Table 1 lists these measures and provides estimates of their fiscal impact.

Table 1
Revenue Impacts of Proposed Tax Measures1, 2, 3
millions of dollars
  2022–
2023
2023–
2024
2024–
2025
2025–
2026
2026–
2027
2027–
2028
Total
Personal Income Tax
Extension of the Residential Property Flipping Rule to Assignment Sales -1 -1 -1 -1 -1 -5
Automatic Advance for the Canada Workers Benefit 0 750 780 790 805 820 3,945
Business Income Tax
Investment Tax Credit for Clean Technologies 0 1,070 1,110 1,135 1,600 1,735 6,650

1 A positive amount represents a decrease in revenue; a negative amount represents an increase in revenue.

2 A "–" indicates a small amount (less than $500,000).

3 Totals may not add due to rounding.

Personal Income Tax Measures

Extension of the Residential Property Flipping Rule to Assignment Sales

Budget 2022 proposed the Residential Property Flipping Rule, a new deeming rule to ensure profits from flipping residential real estate are always subject to full taxation. Starting on January 1, 2023, profits arising from dispositions of residential property (including a rental property) that was owned for less than 12 months would be deemed to be business income, subject to the exceptions listed below.

The 2022 Fall Economic Statement proposes to extend this new deeming rule to profits arising from the disposition of the rights to purchase a residential property via an assignment sale. Profits arising from an assignment sale would be deemed to be business income if the rights to purchase a property were assigned after having been owned for less than 12 months.

The Residential Property Flipping Rule would not apply when a transaction is in relation to at least one of the life events listed below:

The 12-month holding period for the Residential Property Flipping Rule will reset once the property is owned by the taxpayer who entered into a purchase and sale agreement. This will ensure the Residential Property Flipping Rule cannot be bypassed when selling a constructed property simply because a taxpayer held the rights to purchase the property before it was constructed. In other words, the 12-month holding period would reset once a taxpayer secures ownership of the property.

Where the new deeming rule does not apply because of a life event listed above or because the property was owned for 12 months or more, it would remain a question of fact whether profits from the disposition are taxed as business income.

The Residential Property Flipping Rule, including the extension for assignment sales, would apply in respect of transactions occurring on or after January 1, 2023.

Automatic Advance for the Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low- and modest-income workers. An individual claims the CWB when completing their tax return, but filers are automatically assessed by the Canada Revenue Agency (CRA) for eligibility if the CWB is not claimed. An advance payment option is available through which eligible individuals may apply to receive up to half of their anticipated CWB entitlement for a taxation year through up to four advance payments. Despite recent efforts to raise awareness of this option, the provision is little used.

To provide CWB beneficiaries with more timely support throughout the year, the 2022 Fall Economic Statement proposes to automatically provide individuals who received the CWB for the previous taxation year an entitlement for the current taxation year through quarterly advance payments, so long as their income tax return for the previous year is received and assessed by the CRA prior to November 1 of the current year.

Half of an individual's estimated CWB entitlement for a year, determined on the basis of their prior-year tax return (and where applicable, that of their spouse), would be delivered through advance payments in July, October and January. Any residual entitlement would be calculated and paid through the individual's tax return for the year.

Eligibility to receive advance payments during the course of a year would cease in cases where an individual is incarcerated for a period of 90 days or more; moves out of the country; or dies prior to July 1 (death on or after July 1 does not typically lead to a change in CWB entitlement for the individual or the surviving spouse/parent).

Changes in circumstances relating to eligibility criteria not mentioned above would not affect individuals' advance payment entitlements for the current taxation year.

Advance payments would be issued automatically starting in July 2023 for the 2023 taxation year, and the option to apply for an advance payment under the existing provision would no longer be available after January 1, 2023.

Business Income Tax Measure

Investment Tax Credit for Clean Technologies

The 2022 Fall Economic Statement proposes to introduce a refundable Clean Technology Investment Tax Credit equal to 30 per cent of the capital cost of eligible equipment.

The following types of equipment would be eligible for the credit:

Going forward, the government will continue to review eligibility for relevant technologies, including additional ones.

Application and Phase-Out

The Clean Technology Investment Tax Credit would be available in respect of the capital cost of property that is acquired and that becomes available for use on or after the day that the 2023 Budget is released, where it has not been used for any purpose before its acquisition.

Businesses would be able to benefit from the full amount of both the Clean Technology Investment Tax Credit and the Atlantic Investment Tax Credit.

The Clean Technology Investment Tax Credit would be gradually phased out starting with property that becomes available for use in 2032 and would no longer be in effect for property that becomes available for use after 2034. The credit would gradually phase out with a credit rate of 20 per cent in 2032, 10 per cent in 2033 and 5 per cent in 2034.

Labour Conditions

The tax credit rate available under the Clean Technology Investment Tax Credit would depend on whether the claimant meets certain labour conditions. The Clean Technology Investment Tax Credit rate for eligible investments would require that all labour conditions be fulfilled in order to obtain the 30-per-cent rate. A 20-per-cent rate would be available to claimants that do not meet the labour conditions.

The Department of Finance will consult with a broad group of stakeholders, but especially with unions, on how best to attach labour conditions to the proposed tax credit. Additional details on the labour conditions will be announced in Budget 2023.

Strategic Environmental Assessment Statement

The Clean Technology Investment Tax Credit is expected to have positive environmental impacts by encouraging the adoption of clean technologies, contributing to fewer emissions of greenhouse gases and air particulates. This would contribute towards Canada's goal of reducing greenhouse gas emissions by 40 to 45 per cent below 2005 levels by 2030 and achieving net-zero greenhouse gas emissions by 2050.

The Clean Technology Investment Tax Credit would also contribute to achieving the Federal Sustainable Development Strategy target related to achieving 90 per cent of electricity generated from renewable and non-emitting sources by 2030.

Previously Announced Measures

The 2022 Fall Economic Statement confirms the government's intention to proceed with the following previously announced tax and related measures, as modified to take into account consultations and deliberations since their release:

The 2022 Fall Economic Statement also reaffirms the government's commitment to move forward as required with other technical amendments to improve the certainty and integrity of the tax system.

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