Following is a summary of key business and personal income tax amendments proposed in the provincial and territorial budgets released for the 2020-2021 fiscal year. This commentary combines the pre-pandemic budget measures with the supplemental measures, revisions and delays that provincial governments introduced as a result of COVID-19 in their respective economic recovery plans or fiscal updates. We have detailed specific tax measures Canada has taken in response to COVID-19 in this article.
In September, the federal Liberal government also provided a high-level overview of the proposed economic plan in the Throne Speech. A complete overview of federal measures, specifically those to be announced in our upcoming fall fiscal update after the federal government releases their fall fiscal update.
Official budget dates:
Province/ Territory |
Date the budget was tabled |
Date of economic recovery plan or fiscal update |
Federal |
Budget not yet released |
Sept. 23, 2020 (Throne Speech) |
Alberta |
Feb. 27, 2020 |
June 29, 2020 and Aug. 27, 2020 |
British Columbia |
Feb. 18, 2020 |
Sept. 17, 2020 |
Manitoba |
March 11, 2020 |
Sept. 29, 2020 |
New Brunswick |
March 10, 2020 |
May 21, 2020 |
Newfoundland and Labrador |
Sept. 30, 2020 |
N/A |
Northwest Territories |
Feb. 25, 2020 |
May 27, 2020 |
Nova Scotia |
Feb. 25, 2020 |
July 29, 2020 |
Nunavut |
Feb. 19, 2020 |
Update not yet released |
Ontario |
March 25, 2020 |
Aug., 2020 |
Prince Edward Island |
June 17, 2020 |
Sept. 30, 2020 |
Québec |
March 10, 2020 |
June 19, 2020 |
Saskatchewan |
June 15, 2020 |
N/A |
Yukon |
March 5, 2020 |
Oct. 1, 2020 |
Federal
On Sept. 23, 2020, the Liberal Government delivered the Throne Speech, which provided a glimpse of the proposed economic plan to help the Canadian economy recover from the pandemic. The government’s plan is based on four pillars: (1) protecting Canadians from COVID-19; (2) helping Canadians through the pandemic by providing financial support to individuals and businesses; (3) strengthening the middle class by creating jobs and long-term competitiveness with clean growth; and (4) a focus on equality, acceptance, reconciliation and fighting discrimination. For more information on the Throne Speech, please see RSM Canada’s Tax updates in Canada in response to COVID-19 tax alert.
The government will release details on these measures this fall in an update to Canada’s COVID-19 Economic Response Plan. Specifically, the update will disclose the government’s economic and fiscal position, provide fiscal projections and provide details of the economic plan outlined in the Throne Speech. A complete overview of federal measures, specifically those to be announced in the upcoming fall fiscal update, will be covered in a forthcoming Tax Alert after the federal government releases the fall fiscal update.
Alberta
Alberta tabled its 2020-2021 Budget on Feb. 27, 2020. See RSM’s previous Tax Alert on the Alberta Budget for more details. However, due to COVID-19 and its economic impact, the Alberta government released its Economic Recovery Plan on June 29, 2020 and 2020-21 First Quarter Fiscal Update and Economic Statement on Aug. 27, 2020. In addition to the key elements outlined below, the updates revise the Alberta Budget’s fiscal and economic forecast and project a deficit of $24.2 billion for 2020-21.
CORPORATE TAX RATE
Alberta implemented the Job Creation Tax Cut, which lowered the general corporate income tax rate from 10% to 8% on July 1, 2020.
INNOVATION EMPLOYMENT GRANT
The Economic Recovery Plan announced a new Innovation Employment Grant to incentivize job creation within smaller businesses and start-ups. For more details on this grant, see RSM’s Tax updates in Canada in response to COVID-19 tax alert.
British Columbia
British Columbia tabled its 2020 Budget on Feb. 18, 2020 and projected a surplus of $277 million. After making adjustments as a result of COVID-19, the British Columbia government released its Economic Recovery Plan on Sept. 17, 2020 revising the projection to a deficit of $12.5 billion.
The Economic Recovery Plan recapped measures the government introduced after the Budget in response to COVID-19. The Economic Recovery Plan also introduced new financial measures to support businesses and communities from the financial hardships of COVID-19. For a summary of the key new measures in the Economic Recovery Plan, including (1) the Small and Medium Business Recovery Grant program and (2) the Increased Employment Incentive, and the relief measures the government introduced outside of both the Budget and Economic Recovery Plan, see RSM’s Tax updates in Canada in response to COVID-19 tax alert.
BUSINESS INCOME TAX MEASURES
No changes are proposed to British Columbia’s corporate income tax rates or the $500,000 small business limit.
Extension of training tax credit
British Columbia’s Training Tax Credit is extended by three years to the end of 2022. The credit provides employers of apprentices with a 15% subsidy of the apprentices’ salaries.
Extension of farmers’ food donation tax credit
The British Columbia’s Farmers’ Food Donation Tax Credit is extended by three years to the end of 2023. The credit is 25% of the eligible amount of a farming corporation’s qualifying gifts for the tax year. The credit is available to a farming corporation that makes a gift of agricultural products after Feb. 16, 2016. The Budget proposes to include in the credit program gifts of agricultural products made before Jan. 1, 2024.
Production service tax credit
The Production Services Tax Credit is for accredited production corporations that produce accredited films or videos in British Columbia. The changes related to the credit are as follows:
- Effective Feb. 19, 2020, the application fee for an accreditation certificate for the Production Service Tax Credit increased to $10,000 (from $5,500).
- Effective July 1, 2020, corporations intending to claim the Production Service Tax Credit must provide pre-certification notification of their intent within 60 days of first incurring an eligible expenditure for the tax credit.
- Effective for taxation years beginning after Feb. 18, 2020, the deadline to claim the Film Incentive and the Production Service Tax Credit is reduced from 36 months to 18 months after the end of the taxation year.
Extension of new mine allowance
To provide new business opportunities to mining companies, the New Mine Allowance is extended for five years to the end of 2025.
PERSONAL TAX MEASURES
New tax bracket on taxable income more than $220,000
The government introduced a new tax bracket, effective Jan. 1, 2020. Under the new tax rate, individuals who have taxable income of more than $220,000 a year will be subject to a provincial Personal Income Tax rate of 20.5% on the amount over $220,000, up from the previous 16.8%.
Charitable donation tax credit
Consequential to the increase in the rate of Personal Income Tax, effective 2020, the Charitable Donation Tax Credit rate for individuals is increased from 16.8% to 20.5% for donations over $200, to the extent the individual’s income is subject to the top 20.5% tax rate.
British Columbia child opportunity benefit
The government launched the new British Columbia Child Opportunity Benefit effective Oct. 1, 2020. The benefit is a refundable personal income tax credit that replaced the existing Early Childhood Tax Benefit. Eligible families will receive tax-free monthly payments up to an annual maximum amount of $1,600 for a family’s first child, $1,000 for a second child, and $800 for each subsequent child.
Climate action tax credit
In order to boost the government's plan to reduce pollution and build a cleaner future, the Budget proposed to increase the Climate Action Tax Credit. The program will continue to provide up to $3,000 in credit on the purchase of a new battery electric or hydrogen fuel cell vehicle. In order to provide relief to British Columbians from COVID-19, the government also provided a one-time enhanced credit in July 2020.
Introduction of British Columbia access grant
Effective September 2020, a new grant is available for low to middle-income post-secondary students. The British Columbia Access Grant provides up-front support of up to $4,000 a year to assist with the cost of a program that leads to a degree, diploma or certificate.
OTHER MEASURES
Property transfer tax
Effective on a date to be specified by regulation, a new exemption from additional Property Transfer Tax will be introduced for qualifying Canadian-controlled limited partnerships. The Property Transfer Tax Act will be amended to clarify the calculation of partial principal residence exemptions where the land is greater than 0.5 hectares or the property includes non-residential improvements. There is no change to the calculation as the clarification is consistent with administrative practice.
Motor fuel tax
The refund rates for International Fuel Tax Agreement licensees will be adjusted to reflect the revised Carbon Tax rates. The effective date has not been announced.
Property tax deferment
Effective May 1, 2020, the Land Tax Deferment Act was amended to centralize program administration within the Ministry of Finance. These changes will improve the filing and processing of Property Tax deferment applications. The eligibility requirements for property tax deferment remain the same.
Manitoba
Manitoba tabled its 2020 fiscal year Budget on March 11, 2020. Taking into consideration the effects of COVID-19, the Manitoba government released its 2020-21 First Quarter Report and Fiscal and Economic Update on Sept. 29, 2020. The report compared the 2020 Budget to the fiscal forecast, provided an update on the evolving economic situation in Manitoba and projected a deficit of $2.9 billion.
In addition to the measures outlined below, see RSM’s Tax updates in Canada in response to COVID-19 for details on the Manitoba Gap Protection Program and the Back to work in Manitoba initiative.
BUSINESS INCOME TAX MEASURES
No changes are proposed to Manitoba’s corporate income tax rates or the $500,000 small business limit.
OTHER BUSINESS MEASURES
Manitoba Film and Video Production Tax Credit
The Film and Video Production Tax Credit is a refundable corporation income tax credit designed to promote the growth of the Manitoba film and video production industry. Effective May 31, 2020, a new credit of 8% was added to the cost-of-production credit. The total credit is 38%.
Manufacturing Investment Tax Credit
The Manufacturing Investment Tax Credit provides a credit for businesses that acquire qualifying property that is available for use after June 30, 2020, such as qualified machinery and equipment for use in manufacturing or processing in Manitoba. The credit will decrease from 8% to 7% (6% is refundable).
Mineral Exploration Tax Credit
Extended until Dec. 31, 2023, the Mineral Exploration Tax Credit supports Manitobans who invest in flow-through shares of qualifying mineral exploration companies engaged in mineral operations in Manitoba and is equal to 30% of the investment in flow-through shares.
Cultural Industries Printing Tax Credit
Extended until Dec. 31, 2021, the Cultural Industries Printing Tax Credit is a 35% refundable credit on salary and wages paid to Manitoba printers’ employees.
Community Enterprise Development Tax Credit
Extended until Dec. 31, 2021, the Community Enterprise Development Tax Credit supports Manitoba-resident investors who invest in business opportunities in their communities. It also assists community-based enterprise development projects with a 45% refundable tax credit on eligible shares.
Child Care Centre Development Tax Credit
The Child Care Centre Development Tax Credit is a refundable corporation income tax credit for private corporations that invest in licensed childcare centres in work places. The credit provides a credit of $10,000 for each new infant space or preschool space created and can be claimed over 5 years. The Budget also increased the child care spaces limit from 208 to 682 spaces.
PERSONAL TAX MEASURES
No changes were proposed to personal income tax rates in the Budget. However, effective for the 2020 tax year, the basic personal amount, which is essentially a non-refundable tax credit, increased from $9,626 to $9,838.
New Brunswick
New Brunswick’s tabled its 2020 Budget on March 10, 2020. With the outbreak of the COVID-19, the New Brunswick government released a Fiscal and Economic Update on May 21, 2020, and provides significant changes in the province’s financial outlook as compared to the projections outlined in the Budget. As a result of COVID-19, the projected a deficit is $299.2 million. The various measures introduced in the Budget are outlined below.
BUSINESS AND PERSONAL TAX MEASURES
No changes are proposed to the corporate tax rates, the $500,000 small business limit or personal income tax rates in the Budget.
OTHER TAX MEASURES
Property tax
The Budget originally proposed a 50% reduction of the provincial non-owner-occupied property residential tax rate and a reduction over a four-year period of the provincial non-residential property tax. However, in light of the COVID-19 pandemic, the New Brunswick government announced that it will not proceed with the proposed property tax rate changes.
Carbon Tax
As part of the Made-In New Brunswick Carbon Plan, effective April 1, 2020, gasoline tax decreased by 4.63 cents per litre (from 15.5 cents per litre to 10.87 cents per litre) and the motive fuel (diesel) tax by 6.05 cents per litre (from 21.5 cents per litre to 15.45 cents per litre).
Newfoundland and Labrador
Newfoundland and Labrador tabled its 2020 Budget on Sept. 30, 2020. Due to the ongoing COVID-19 pandemic, it is a shortened Budget covering the six-month period from Oct. 1, 2020 to March 2021. The Budget projects a deficit of $1.84 billion in the 2020-21 year due to COVID-19-related spending and the global oil crisis. Various measures introduced in the Budget are outlined below.
BUSINESS AND PERSONAL TAX MEASURES
The Budget does not propose any changes to the corporate tax rates, the $500,000 small business limit or personal income tax rates.
Introduction of Child Care
The government proposed to introduce affordable childcare in 2021 to help parents join the workforce. This new initiative will provide families with access to childcare for $25 per day.
OTHER TAX MEASURES
Small Business Assistance Program
In order to support small businesses and community organizations, the Budget introduced a $30 million investment in the Small Business Assistance Program. The program earmarks $25 million for small businesses and $5 million for community based organizations. The program will be retroactive and will help offset expenses including innovation expenses incurred by the businesses and organizations in responding to COVID-19.
Expanding eligibility under the Tourism and Hospitality Support Program
To promote innovation and industry development, the Budget expanded the eligibility under Tourism and Hospitality Support Program to include professional artists and musicians who have been impacted by COVID-19. The program aims to provide one-time, non-repayable contribution of either $5,000 or $10,000, based on the operator’s gross sales.
Northwest Territories
Northwest Territories tabled its 2020 Budget on Feb. 25, 2020. The Legislative Assembly was subsequently suspended, and on May 27, 2020, the Northwest Territories government announced that they are setting the stage for finalizing Budget 2020. The COVID-19 pandemic has led to a decline in revenues and an increase in expenditures, however, the measures introduced in the Budget remain unchanged. Various measures introduced in the Budget are outlined below.
BUSINESS AND PERSONAL TAX MEASURES
No changes are proposed to the corporate tax rates, the $500,000 small business limit or personal income tax rates.
OTHER TAX MEASURES
Carbon pricing
Effective July 1, 2020, federally mandated Carbon Tax rate was increased to $30 per tonne of greenhouse gas emissions. The Budget also increased the Northwest Territories’ cost-of-living-offset benefit due to the increase in the Carbon Tax rate. As of July 1, 2020, the amounts are $156 per year for an individual and $180 per year for a child. The cost-of-living-offset payments are made on a quarterly basis except for single individuals, who would have received a lump sum in July 2020.
Property mill rates
Effective April 1, 2020, in keeping with the existing indexation policy, property mill rates were adjusted for inflation.
Nova Scotia
Nova Scotia tabled its 2020-2021 Budget on Feb. 25, 2020. Taking into account the impact of the COVID-19 on the financial position, the Nova Scotia government released a Fiscal and Economic Update on July 29, 2020. The government is forecasting a deficit of $852.9 million. Various measures introduced in the Budget are outlined below.
BUSINESS INCOME TAX MEASURES
Reduction of general Corporate Income tax rate and Small Business tax rate
Effective April 1, 2020, the general corporate tax rate was reduced from 16% to 14%. The small business rate was reduced from 3% to 2.5%.
Extended Digital Tax Credits
The Digital Media Tax Credit and the Digital Animation Tax Credit, both refundable corporate income tax credits, are extended by five years until Dec. 31, 2025.
PERSONAL TAX MEASURES
No changes are proposed to the personal income tax rates.
Nunavut
Nunavut tabled its 2020 Budget on Feb. 19, 2020.
BUSINESS AND PERSONAL TAX MEASURES
No changes are proposed to the corporate tax rates, the $500,000 small business limit or personal income tax rates in the Budget.
Ontario
Ontario tabled its 2020-2021 action plan on March 25, 2020, which is summarized in RSM’s previous Tax Alert. In August 2020, the province released its 2020-21 First Quarter Finances and updated Ontario's Action Plan: Responding to COVID-19. Due to the decline in government revenues stemming from the significant negative economic impacts of COVID-19 on businesses, the government is projecting a deficit in 2020-21.
Through its Action Plan, the Ontario government extended the interest- and penalty-free period for most provincially-administered taxes by one month, to Oct. 1, 2020. For more details, see RSM’s tax alert summarizing the Tax updates in Canada in response to COVID-19.
The Ontario government will release its Budget on Nov. 5, 2020. It is expected that the government will provide tax benefits and credits to support individuals and businesses during the pandemic. RSM will detail the Ontario Budget in a forthcoming Tax Alert.
Prince Edward Island
Prince Edward Island (PEI) tabled its annual Operating Budget for 2020-2021 on June 17, 2020 and released its fall Economic and Fiscal Update on Sept. 30, 2020. The Update outlines the current economic position of PEI amid the ongoing COVID-19 pandemic. Based on the revised forecast for the 2020-2021 fiscal year, a deficit of $178.1 million is projected. Various measures introduced in the Budget are outlined below.
BUSINESS INCOME TAX MEASURES
Reduction in small business tax rates
The Budget will lower the small business tax rate on the first $500,000 of income from 3% to 2% effective Jan. 1, 2021. No changes are proposed to the general income corporate tax rate in the Budget.
PERSONAL TAX MEASURES
No changes were proposed to the personal income tax rates in the Budget.
Increasing basic personal income tax exemption
The Budget proposed to increase the basic personal income amount from $10,000 to $10,500 beginning on Jan. 1, 2021. The basic personal amount is a non-refundable tax credit, which aims to provide a reduction from income tax liability for all individuals.
Increasing tax threshold for low-income residents
The Budget proposed to increase the tax threshold from $18,000 to $19,000 for low-income residents, beginning on Jan. 1, 2021.
Wellness Tax Credit for children
Effective Jan. 1, 2021, there will be a new $500 non-refundable children’s Wellness Tax Credit to help families with children under the age of 18 pay for activities related to their children’s well-being.
Quebec
Quebec tabled its 2020-2021 Budget entitled, “Your Future, Your Budget” on March 10, 2020. See RSM’s previous Tax Alert on the Quebec Budget for more details. To address the effects of the COVID-19 crisis on Quebec’s public finance, the Quebec government provided a snapshot of Québec’s ‘Economic and Financial Situation 2020-2021’ on June 19, 2020. Due to the pandemic’s effect on the economy, the government now projects a deficit of $14.9 billion this year. Despite the deficit, the government is committing to return to fiscal balance within the next five years due to their previously strong economy and public finances.
Saskatchewan
Saskatchewan tabled its spending estimates for 2020-2021 (March Estimate) on March 18, 2020 and its 2020-2021 Budget (June Budget) on June 15, 2020. Much of the June Budget confirmed the proposed changes listed in the March Estimate. In particular, two notable bills that will be released: (1) the Income Tax Amendment Act, 2020 and (2) the Provincial Sales Tax Amendment Act, 2020.
BUSINESS AND PERSONAL TAX MEASURES
No changes were proposed to the corporate tax rates, the $500,000 small business limit or personal income tax rates. However, the Income Tax Amendment Act, 2020, if passed, will introduce the re-indexation of Saskatchewan’s personal income tax system. This will allow Saskatchewan’s income tax rate to correspond with the Government of Canada’s rate at the beginning of 2021.
Incentives for various industries
Other proposed amendments in the Income Tax Amendment Act, 2020 include a new investment incentive for the fertilizer sector and an extension to the manufacturing and processing exporter tax. The Saskatchewan government also proposed to introduce the oil infrastructure investment program, which is a new growth tax incentive to support new and expanded pipelines.
The Manufacturing and Processing Exporter Tax Incentive is available to eligible businesses that derive at least 25% of revenues from the export of their manufactured goods to the rest of Canada or internationally each year, among other conditions. The new Chemical Fertilizer Incentive will provide a 15% tax credit to investors in the chemical fertilizer sector.
Yukon
Yukon tabled its fiscal 2020-2021 Budget on March 5, 2020. The Yukon government released its 2020–21 First Supplementary Estimates and presented an overview of the impact of COVID-19 pandemic on Yukon’s finances and economy in its Interim Fiscal and Economic Update on Oct.1, 2020. For the 2020-21 year, the government projects a deficit of $31.6 million. Various measures introduced in the Budget are outlined below.
BUSINESS TAX MEASURES
Corporate tax rates
Effective Jan. 1, 2021, the Yukon small-business Corporate Income Tax rates will be reduced from 2% to 0%. The 1.5% tax rate on manufacturing and processing profits will be reduced to 0%. The limit to qualify for the small business tax rate remains at $500,000. There are no proposed changes to the general corporate income tax rate.
Business Investment Credit
In 2020, medium-sized businesses are eligible for the Business Investment Credit. The Business Investment Credit provides a credit of 25% on the amount invested up to $25 million.
PERSONAL TAX MEASURES
There are no changes being made to personal tax rates. However, the Yukon government proposed amendments to the Yukon Basic Personal Amount under the Income Tax Act to align with the amounts recently changed by the Government of Canada.
Authors: Sigita Bersenas, Chetna Thapar, Yoni Moussadji, Clara Pham
