Personal tax
The government continued as part of this statement to address inflation and the rising costs of everyday life.
Capital gains rollover on business investments
The Income Tax Act (ITA) allows individuals to defer capital gains taxation realized on a qualifying disposition of eligible small business corporation (ESBC) shares. Under the current rules, this deferral applies to the extent that the proceeds of disposition are used to acquire replacement ESBC shares within the year of disposition, or up to 120 days following that year.
Effective for transactions on or after Jan. 1, 2025, the 2024 Statement proposes to expand the relevant period to acquire replacement shares to include the entire year of disposition and the entire following calendar year.
The types of shares which qualify for this rollover will also be expanded. Currently, the shares must be common shares issued by an ESBC to an individual where the total carrying value of the assets of the ESBC and related corporations does not exceed $50M immediately before and immediately after the share was issued. Under the proposal, both common and preferred shares will qualify. Furthermore, the limit of the carrying value of the assets of the ESBC and related corporations will be increased to $100 million.
This expanded rollover will help small businesses access capital through the deferral of capital gains taxation for its investors.
Confirming the GST/HST holiday tax break
The Tax Break for All Canadians Act, which recently received Royal Assent, provides a two-month goods and services tax/harmonized sales tax (GST/HST) break for holiday essentials, like groceries, restaurant meals, drinks, snacks, children's clothing and gifts. This initiative aims to provide significant tax relief to Canadians on a variety of goods during the eligible period.
Business tax
EV supply chain investment tax credit
In the 2024 Federal Budget, the government announced a refundable electric vehicle (EV) supply chain investment tax credit equal to 10 per cent of the capital cost of buildings involved within the EV supply chain to incentivize EV manufacturing. The 2024 Statement provides the relevant design and implementation details of the previously introduced investment tax credit, including:
- Eligible corporations: The EV supply chain investment tax credit would be available only to taxable Canadian corporations that invest directly in eligible property.
- Machinery and equipment investment requirement: To be eligible, a corporation (either by itself or as part of a related group of companies) will be required to invest a minimum of $100 million in each of the relevant supply chain segments.
Clean electricity investment tax credit for provincial and territorial Crown corporations
The 2024 statement provides clarifications and an exception related to the previously proposed clean electricity investment tax credit including:
- Any financing provided by the Canada Infrastructure Bank will not reduce the cost of eligible property for the purpose of computing the clean electricity investment tax credit where the eligible property is acquired and becomes available for use on or after Dec. 16, 2024.
- Provincial and territorial Crown corporation claimants will have to issue public written statements committing to net-zero emissions by 2050 and detail how the credit will be passed on to ratepayers. They will also need to publicly report certain information related to their cost of service and the credit received both for the year and cumulatively.
Clean hydrogen investment tax credit—methane pyrolysis
The 2024 statement proposes to expand the clean hydrogen investment tax credit to include methane pyrolysis as an eligible hydrogen production pathway. With this expansion, eligible items will include pyrolysis reactors, heat exchangers, separation/purification and storage/compression equipment. The expansion of the credit applies to property acquired and becomes available for use on or after Dec. 16, 2024.
Canada carbon rebate for small businesses
In the 2024 Federal Budget, the government announced that the carbon pricing fuel charge proceeds will be returned to Canadian-controlled private corporations (CCPCs) with 1 to 499 employees for the 2019–2020 to 2023–2024 fuel charge years if the corporation filed their 2023 tax return by July 15, 2024. Furthermore, on Oct. 1, 2024, the government proposed that corporations who would have qualified without the filing deadline would receive the rebate if they filed their 2023 tax return after July 15, 2024, and on or before Dec. 31, 2024.
The 2024 statement outlines that the design elements and eligibility of the Canada carbon rebate for the 2024–2025 and later years will be modified. In particular:
- Cooperative corporations and credit unions will qualify for the credit.
- Small businesses that have less than 20 employees would qualify for a payment amount that is equivalent to having 20 employees.
- Larger businesses with over 300 employees and up to 500 employees will have their payments gradually reduced on a straight-line basis.
Extension of the accelerated investment incentive and immediate expensing measures
The accelerated investment incentive provides an enhanced first-year capital cost allowance for most depreciable capital property. The 2024 statement proposes to reinstate these incentives for a five-year period starting Jan. 1, 2025, effectively reversing the phase out that began in 2024.
SR&ED program
Following consultations held earlier this year, the government is proposing the following enhancements to the SR&ED program effective on or after Dec. 16, 2024:
- Raise the annual expenditure limit from $3 million to $4.5 million for the enhanced 35 per cent investment tax credit for CCPCs.
- Increase the prior-year taxable capital phase-out thresholds for the enhanced credit from $10 million–$50 million to $15 million–$75 million.
- Extend the enhanced refundable credit of 35 per cent to Canadian public corporations, replacing the current 15 per cent non-refundable tax credit.
The 2024 statement also proposes to restore the capital expenditure eligibility for SR&ED program deductions and investment tax credits, applicable to property acquired on or after Dec. 16, 2024.
Further SR&ED reforms, including updates to qualified expenses, as well as plans to implement a patent box regime to encourage intellectual property development will be detailed in the upcoming 2025 Federal Budget.
Tariff and trade measures
Tariffs on select products from China
Following surtaxes imposed on EVs, steel and aluminum products from China earlier this year, the 2024 Statement announced tariffs on select Chinese solar products and critical minerals for 2025 and additional tariffs on semiconductors and other materials beginning in 2026.
Amendments to the Export and Import Permits Act
The 2024 statement proposes legislative amendments to the Export and Import Permits Act, enabling the government to restrict the import or export of items to enhance supply chain security, or in response to actions by other countries that “harm Canada”.
Reciprocity in federal policies
The 2024 statement establishes reciprocity as a requirement in federal policies, including government procurement, investment tax incentives and grants, to protect Canadian businesses from “unfair foreign trade and economic practices”. Similarly, starting in spring of 2025, Canada will enforce its procurement trade obligations to limit access to federal procurement markets to those who provide reciprocal access to Canada.
Other measures
NPO reporting
The ITA provides an exemption from income tax for organizations that meet the definition of a non-profit organization (NPO). Under the current rules, NPOs are required to file an annual information return if:
- its passive income in a fiscal year exceeds $10,000,
- its total assets at the end of the preceding fiscal period exceeds $200,000, or
- an information return was required to be filed for a preceding fiscal period.
The 2024 statement proposes changes to require NPOs with total gross revenues over $50,000 to also file the annual information return.
For those NPOs that do not meet the above thresholds for filing the annual information return, the government is proposing to introduce a new, short-form return which will require NPOs to submit basic information including:
- The NPO’s business number or trust number,
- The NPO’s name and mailing address,
- The names and addresses of the NPO’s directors, officers, trustees, or similar officials,
- A description of the NPO’s activities, including whether it conducts activities outside of Canada,
- The NPO’s total assets/liabilities and annual revenues, and
- Other prescribed information.
Both measures would apply to the 2026 and subsequent taxation years.
Intention to proceed with previously announced measures
Subject to amendments resulting from public consultations and legislative processes, the government intends to proceed with previously announced tax measures including but not limited to:
- Legislative proposals included in the notice of ways and means motion introduced on Sept. 23, 2024, related to capital gains and the lifetime capital gains exemption.
- Legislative and regulatory proposals released on Aug. 12, 2024, including but not limited to the following:
- New measures
- Amendments to existing measures
- Legislative amendments to implement the hybrid mismatch arrangements rules announced in the 2021 Federal Budget.
