What's new for corporations

2017 – Federal

Country-by-country reporting

[Bill C–29, R.A. 2016-12-15]

Country-by-country reporting requirements apply to any multinational enterprise (MNE) group that has total annual consolidated group revenue of €750 million or more, as reflected in its consolidated financial statements, in the immediately preceding fiscal year. In Canada, it applies to fiscal years of the MNE group beginning on or after January 1, 2016For more information see Guide RC4651, Guidance on Country-by-Country Reporting in Canada, and Form RC4649, Country-by-Country Report

2017 – Provinces and territories

British Columbia

[2017-02-21 Budget] 

British Columbia book publishing tax credit – This credit, which was scheduled to expire March 31, 2017, is being extended two years to March 31, 2019.

British Columbia interactive digital media tax credit For tax years that end after February 21, 2017:

  • Corporations whose annual qualifying B.C. labour expenses are more than $2 million are allowed to claim the credit, even if their principal business is not the development of interactive digital media products
  • Eligible business corporations participating in the small business venture capital program are allowed to claim the credit

For eligible salary and wages incurred after February 21, 2017, the credit is expanded to include augmented and virtual reality products designed to entertain.

British Columbia mining exploration tax credit – Exploration expenses will include expenses incurred after February 28, 2015, for environmental studies and community consultation to obtain a right, licence or privilege for the purpose of determining the existence, location, extent or quality of a mineral resource in B.C.

British Columbia SR&ED tax credit – This credit, which was scheduled to expire August 31, 2017, is being extended five years to August 31, 2022.

British Columbia training tax credit – This credit, which was scheduled to expire at the end of 2017, is being extended three years to the end of 2020.

Lower rate of British Columbia corporation income tax Effective April 1, 2017, the lower rate of corporation income tax will decrease from 2.5% to 2%.

[January 24, 2017, announcement]

British Columbia additional deduction for credit unions – British Columbia announced that the preferential treatment for credit unions will remain at the 2016 level (80% of its full value) through to the end of 2017.

New Brunswick

[2017-02-07 Budget] 

Lower rate of New Brunswick corporation income tax Effective April 1, 2017, the lower rate of corporation income tax will decrease from 3.5% to 3%.

Saskatchewan

[2017-03-22 Budget] 

Higher rate of Saskatchewan corporation income tax Effective July 1, 2017, the higher rate of corporation income tax will decrease from 12% to 11.5%. It will further decrease to 11% effective July 1, 2019.

Saskatchewan manufacturing and processing investment tax credit – For qualified property acquired after March 22, 2017, the tax credit rate is increased from 5% to 6% of the capital cost.

Saskatchewan research and development tax credit Effective April 1, 2017, Canadian-controlled private corporations (CCPCs) are eligible for a 10% refundable tax credit on the first $1 million of qualifying expenditures. Qualifying expenditures that are more that the annual limit, and those incurred by non-CCPCs, remain eligible for the 10% non-refundable credit, but the maximum for eligible expenditures is set at $10 million per year.

2016 – Federal

Electronic filing of the T2 Corporation Income Tax Return for insurance corporations

The CRA allows the electronic filing of the T2 Corporation Income Tax Return for insurance corporations as of October 2016.

Form T1135, Foreign Income Verification Statement

Corporations can Efile Form T1135 for the 2014 and later tax years as of May 16, 2016. The completed Form T1135 must be filed either electronically (Efile) or attached to the corporation’s paper return.

Internet filing for insurance corporations

Insurance corporations are able to file their T2 return electronically as of October 2016.

Online services for businesses

You can now:

  • submit supporting documents on a formal dispute; and
  • register to receive online mail for your T2 account when you file your T2 Corporation Income Tax Return online. To view your mail online, you must be registered for My Business Account.

To access our secure online services, go to:

Schedule 89, Request for Capital Dividend Account (CDA) Balance Verification 

If you are a private corporation, this schedule is available to summarize the components making up your CDA balance as at a date specified. Use this schedule to request a CDA balance verification, or attach it to Form T2054, Election for a Capital Dividend Under Subsection 83(2), if you are paying out a capital dividend from your CDA. Mail one completed copy of this schedule, separate from any other return, to your tax services office. Please note, we verify your CDA balance as a matter of courtesy. You can only request a CDA balance verification once every three years unless filed with Form T2054.

Service Renewal Initiative

Most corporations now file their taxes electronically. In order to continue offering world class services, the CRA will be consolidating its processing activities in fewer sites.

[2016-03-22 Federal budget]

Abusive tax avoidance and international taxation

Changes were announced concerning abusive tax avoidance, including back-to-back arrangements, base erosion and profit shifting, cross-border surplus stripping, debt parking, life insurance policies, and valuation for derivatives:

Back-to-back arrangements

Existing back-to-back loan rules will be expanded. These rules prevent taxpayers from inserting an intermediary between a Canadian borrower and a foreign lender in an attempt to avoid the tax consequences that would result from a direct loan.

Base erosion and profit shifting (BEPS)

The Government announces it is moving forward with a number of initiatives to address base erosion and profit shifting by:

  • introducing country-by-country reporting for large multinational enterprises;
  • applying revised international guidance on transfer pricing;
  • addressing treaty abuse;
  • providing spontaneous exchange of tax rulings.

Cross-border surplus stripping

For dispositions that occur after March 21, 2016, the application of an anti-surplus stripping rule will be generally expanded to prevent a non-resident shareholder of a Canadian corporation from extracting (either now or in the future), free of withholding tax, the corporation’s retained earnings that exceed the amount of capital that has been contributed to the corporation by the shareholder.

Debt parking

For foreign currency debt that meets the conditions to become a parked obligation after March 21, 2016, rules will be introduced so that any foreign exchange gain on a foreign currency debt will be realized when the debt becomes a parked obligation. A parked obligation is a transfer of a debt by an initial creditor to another creditor that does not deal at arm’s length with the debtor, to avoid the tax consequences related to the settling or extinguishing of the debt.

Life insurance policies

Some taxpayers have structured their affairs so that the insurance benefit limit may not apply, resulting in an artificial increase in either a corporation’s capital dividend account balance or the adjusted cost base of a partnership interest.

For policy benefits received as a result of deaths that occurs after March 21, 2016:

  • the legislation will be amended to ensure the insurance benefit limit applies as intended;
  • the capital dividend account and paid-up capital rules for private corporations and the adjusted cost base rules for partnership interests will be amended where an interest in a life insurance policy was disposed of after 1999 and before March 22, 2016, for consideration in excess of the proceeds of the disposition determined under the policy transfer rule.

For dispositions that occur after March 21, 2016, the legislation will be amended to ensure that amounts are not inappropriately received tax-free by a policyholder as a result of a disposition of an interest in a life insurance policy.

Valuation for derivatives

A derivative that provides rights to a corporation and is held on income account is considered to be inventory property, and the corporation could therefore choose to value it at the lower of its cost and its fair market value at the end of the year (inventory valuation rules). For agreements entered into after March 21, 2016, derivatives will still be treated as inventory, but will not be eligible for these inventory valuation rules.

Assignment of the business limit

For tax years that begin after March 21, 2016, Canadian-controlled private corporations can assign all or part of their business limit under subsection 125(3.2) or specified partnership business limit to another corporation.

Avoidance of the business limit and taxable capital limit

For tax years that begin after March 21, 2016, where two corporations (Corps A and B) are deemed to be associated because they are associated with the same third corporation (Corp C), but because they have filed a Schedule 28 election, they are not associated for determining the small business deduction:

  • investment income from an associated corporation’s active business will be ineligible for the small business deduction and will be taxed at the general corporation income rate;
  • Corps A and B must calculate their respective small business deductions as if each corporation were still associated with Corp C (that is, it must include the taxable capital limit of Corp C).

Capital cost allowance

Under proposed changes, for property acquired for use after March 21, 2016, that has not been used or acquired for use before March 22, 2016:

  • accelerated capital cost allowance (CCA) will be allowed for electric vehicle charging stations that meet certain power thresholds; and
  • the range of electrical energy storage property that is eligible for accelerated CCA will be clarified and expanded.

For more information, see CCA rates and classes in chapter 3 of the T2 Corporation – Income Tax Guide.

Eligible capital property

On January 1, 2017, the eligible capital property regime will be replaced with a new capital cost allowance (CCA) class available to businesses. Under the old regime, eligible capital expenditures are added to the cumulative eligible capital pool at a 75% inclusion rate, and the rate of depreciation of those expenditures is 7% on a declining-balance basis. Under the new regime, newly-acquired eligible properties will be included in a new CCA class at a 100% inclusion rate with a 5% CCA rate on a declining-balance basis. The existing CCA rules will generally apply. Transitional rules will be provided.

Emissions allowances

Specific rules will be introduced to clarify the tax treatment of emissions allowances and to eliminate the double taxation of certain free allowances.

Emissions allowances will be treated as inventory for all corporations. However, the “lower of cost and market” method for the valuation of inventory will not be available for emissions allowances because of the potential volatility in their value.

If a regulated emitter receives a free allowance, there will be no income inclusion when receiving the allowance. Also, the deduction for an accrued emissions obligation will be limited to the extent that the obligation exceeds the cost of any emissions allowances that the corporation has acquired and that can be used to settle the obligation.

If a corporation disposes of an emissions allowance otherwise than to satisfy an obligation under the emissions allowance regime, any proceeds received in excess of the corporation’s cost, if any, for the allowance will be included in computing income.

This measure will apply to emissions allowances acquired in tax years beginning after 2016. It will also apply to emissions allowances acquired in tax years ending after 2012 if a corporation makes an election in its income tax return for the 2016 or 2017 tax year.

Extended reassessment period

Under proposed changes, beginning with tax years that end after October 2, 2016, the CRA may at any time reassess an income tax return beyond the normal reassessment period where:

  • the corporation does not report on their income tax return a sale or other disposition of a real or immovable property that is capital property of the corporation;
  • the corporation does not file an income tax return but the CRA issues an assessment of tax (for example, after a review of a corporation who did not file a return); or
  • the corporation owned the capital property directly or indirectly through a partnership and the partnership did not report the sale or other disposition in the partnership information return.

Under this extended reassessment period, the reassessment is limited to amounts reasonably relating to the unreported or previously unreported disposition of real or immovable property that is capital property of the corporation or partnership, as the case may be.

Read more about the proposed changes to improve reporting of the sale or disposition of real estate.

Multiplication of the small business deduction

For tax years that begin after March 21, 2016, to prevent the multiplication of the small business deduction (SBD), the specified partnership rules will also apply to partnership structures in which a Canadian-controlled private corporation (CCPC) provides services or property to a partnership during the tax year of the CCPC where the CCPC or a shareholder of the CCPC is a member of the partnership. A similar measure will also apply for corporate structures that multiply access to the SBD.

Preventing multiplication of the small business deduction

For tax years that begin after March 21, 2016, to prevent the multiplication of the small business deduction (SBD), the specified partnership rules will also apply to partnership structures in which a CCPC provides services or property to a partnership during the tax year of the CCPC, where the CCPC or a shareholder of the CCPC is a member of the partnership. A similar measure will also apply for corporate structures that multiply access to the SBD.

Small business tax rate

For tax years ending after 2016, the small business tax rate will remain at the 2016 level of 10.5%.

Tax on personal services business income (section 123.5)

For tax years that end after 2015, a corporation must add to its Part I tax payable for a year an amount equal to 5% of the corporation’s taxable income for the year from a personal services business.

2016 – Provinces and territories

British Columbia

[Bill 25, R.A. 2016-05-19]

British Columbia film and television tax creditFor productions that start principal photography on or after October 1, 2016, the digital animation, visual effects and post-production (DAVE) tax credit is decreased from 17.5% to 16%. If the first episode in a cycle of a television series starts principal photography before that date, the 17.5% rate applies to all episodes in that cycle.

British Columbia production services tax credit – For productions that start principal photography on or after October 1, 2016:

  • the rate of the basic production services tax credit is decreased from 33% to 28%; 
  • the rate of the digital animation, visual effects and post-production (DAVE) services tax credit is decreased from 17.5% to 16%.

If the first episode in a cycle of a television series starts principal photography before that date, the old rates apply to all episodes in that cycle.

[2016-02-16 Budget]

British Columbia farmers’ food donation tax credit – The Province introduced a 25% non-refundable credit for corporations in the business of farming in British Columbia that donate a qualifying agricultural product after February 16, 2016, to a registered charity that provides food to those in need or helps to operate a school meal program. The tax credit must be claimed in the same year that a deduction for charitable gifts under section 110.1 of the federal Income Tax Act is claimed for the donation.

British Columbia film and television tax credit The regional and the distant location tax credits for animated productions will be calculated differently than for live action productions. These credits will be based on the qualified BC labour expenditure prorated by the BC labour expenditure incurred in BC outside of the designated Vancouver area or in a distant location over the total BC labour expenditure incurred in the tax year. This measure applies to animated productions that start principal photography after June 26, 2015. For animated productions that started on or before that date, the proration is based on days.

British Columbia mining exploration tax credit – This credit, which was scheduled to expire December 31, 2016, is extended three years to the end of 2019. Starting January 1, 2017, the period for claiming the credit for a tax year is reduced from 36 to 18 months after the end of that tax year.

British Columbia production services tax credit – The regional and the distant location production services tax credits for animated productions will be calculated differently than for live action productions. These credits will be based on the accredited qualified BC labour expenditure for the animated production prorated by the accredited BC labour expenditure incurred in BC outside of the designated Vancouver area or in a distant location over the total accredited BC labour expenditure incurred in the tax year. This measure applies to animated productions that start principal photography after June 26, 2015. For animated productions that started on or before that date, the proration is based on days.

Manitoba

[2016-05-31 Budget]

Manitoba business limit The budget did NOT confirm the increase in the business limit that was previously announced in the Economic and Fiscal Outlook, March 2016 (see below).

Manitoba green energy equipment tax credit – The Province introduces a new component tax credit of 8% for manufacturers of green energy transmission equipment sold before July 1, 2023. This measure is effective on November 5, 2015.

Manitoba interactive digital media tax credit – Effective on June 30, 2016, the limits of 24 months and $500,000 labour expense per project from the existing 40% credit are eliminated. And a new 35% credit is added for a corporation that pays less than 25% of its wages to Manitoba employees, but pays wages of at least $1 million each year to Manitoba employees working on eligible projects.

Manitoba small business venture capital tax credit – The budget confirmed the extension of the Manitoba small business venture capital tax credit by three years, from December 31, 2016, to December 31, 2019.

Manitoba held its general election on April 19, 2016.

[2016-03-08 Fiscal update]
Manitoba business limit The Economic and Fiscal Outlook, March 2016, proposes to increase the business limit from $450,000 to $500,000, effective July 1, 2017.

Manitoba small business venture capital tax credit – The Economic and Fiscal Outlook, March 2016, proposes to extend the Manitoba small business venture capital tax credit by three years, from December 31, 2016, to December 31, 2019.

New Brunswick

[Bill 32 R.A. 2016-07-08] 

Lower rate of New Brunswick corporation income tax Effective April 1, 2016, the lower rate of corporation income tax will decrease from 4% to 3.5%.

[2016-02-02 Budget] 

Higher rate of New Brunswick corporation income tax Effective April 1, 2016, the higher rate of corporation income tax will increase from 12% to 14%.

Newfoundland and Labrador

[2016-04-14 Budget]

Higher rate of Newfoundland and Labrador corporation income tax – Effective January 1, 2016, the higher rate of corporation income tax is increased from 14% to 15%.

Newfoundland and Labrador capital tax on financial institutions – Effective January 1, 2016, this tax is increased from 5% to 6%.

Newfoundland and Labrador manufacturing and processing profits tax credit – This tax credit is eliminated effective January 1, 2016.

Nova Scotia

[2016-04-29 Budget]
Nova Scotia food bank tax credit for farmers – Effective January 1, 2016, corporations that carry on a farming business in Nova Scotia may claim a non‑refundable tax credit equal to 25% of the amount of the qualifying donation that is deducted the same year under section 110.1 of the federal Income Tax Act for the donation. A qualifying donation is a donation of one or more agriculture products to an eligible food bank.

Ontario

[Bill 70, R.A, 2016-12-08] 
Ontario interactive digital media tax credit – A corporation has to apply for a certificate for this credit by the later of 18 months after the end of the tax year in which development of the eligible product was completed or May 15, 2017.

[Bill 2, R.A. 2016-12-05]
Ontario political contributions tax credit Effective January 1, 2017, this credit is eliminated for corporations. They will have up to 20 years to claim their unused credits.

[2016-02-25 Budget]  

Ontario innovation tax credit - For eligible expenditures incurred in tax years that end on or after June 1, 2016, the rate for the refundable Ontario innovation tax credit decreases from 10% to 8%. The rate reduction is prorated for tax years straddling June 1, 2016.

Ontario research and development tax credit For eligible expenditures incurred in tax years that end on or after June 1, 2016, the rate for the non-refundable Ontario research and development tax credit decreases from 4.5% to 3.5%. The rate reduction is prorated for tax years straddling June 1, 2016.

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