Economic and Financial Update 2021 | Dentons
On December 14, 2021, the Honorable Chrystia Freeland, Deputy Prime Minister and Minister of Finance, tabled the 2021 Economic and Fiscal Update (Access the update here).
The Economic and Fiscal Update describes a recovering Canadian economy with increased revenues and declining spending, estimating a $ 38.5 billion reduction in the budget deficit for the current year. Despite the decline in spending, the Economic and Budget Update outlines spending for COVID-19 supports of approximately $ 30 billion, with an additional $ 4.5 billion allocated as part of the federal governments response to the Omicron variant. $ 4.5 billion has been set aside for flooding in British Columbia in late 2021.
The following provides a summary of the main fiscal and fiscal measures presented in the Economic and Financial Update documents.
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Small Business Air Quality Improvement Tax Credit
A 25% refundable tax credit will be offered to small businesses that invest in better ventilation and air filtration to improve indoor air quality (the “Air Quality Credit”). The air quality credit will be limited to a maximum of $ 10,000 in eligible expenses per eligible location and to a maximum of $ 50,000 for all eligible locations. Affiliate companies will be required to share these limits. Expenses must be incurred between September 1, 2021 and December 31, 2022. An eligible location will include properties used by an eligible entity primarily in the course of its ordinary business activities in Canada, including rental activities.
Entities eligible for the Air Quality Credit will include unincorporated sole proprietorships and Canadian-controlled private corporations with, alone or with associated corporations, taxable capital employed in Canada of less than $ 15 million in the year. during the taxation year immediately preceding the year in which the expenditure is incurred. Qualifying corporations or individuals (other than trusts) who are members of a partnership that incurs qualifying expenses can also claim the clean air credit.
Return the proceeds of the price on pollution directly to farmers
The proceeds of the fuel charge collected as part of the federal government’s pollution pricing system in “protected territories” (currently Ontario, Manitoba, Saskatchewan and Alberta) will be refunded to businesses. eligible agricultural products through a refundable tax credit (the “fuel charge credit”). Supporting jurisdictions are provinces whose carbon pollution pricing systems do not meet federal stringency requirements.
Eligible farm businesses that can claim the fuel charge credit include corporations, individuals, and trusts actively engaged in the management or day-to-day activities of earning farm income (including through a corporation of persons) and which incur total farm expenses of $ 25,000 or more, all or part of which are attributable to supporting jurisdictions.
Underutilized housing tax
Beginning in calendar year 2022, the government proposes to implement an annual tax of 1% (the “underutilized housing tax”) on the value of vacant or underutilized residential real estate located in Canada and owned by non-residents of Canada.
The underutilized council tax will not apply for a calendar year if the property in question is the principal place of residence of the owner, the owner’s spouse or common-law partner, or a child of the owner or the owner. spouse or common-law partner of the owner (but only if the child is in Canada for the purposes of authorized study and the occupation relates to that purpose).
Vacation or recreation properties will be exempt from underutilized housing tax if the property is located in an area of Canada that is not an urban area in a census metropolitan area or census agglomeration with 30,000 residents or more and is personally used by the owner or the owner’s spouse or common-law partner for at least four weeks during the calendar year.
Canadian Hiring Recovery Program (CHRP)
This program has been extended until May 7, 2022. If the entity is a for-profit corporation, to be eligible for the program, the entity must be: (a) a CCPC, or (b) an eligible corporation the small business deduction program. The CRHP is available to eligible employers with current earnings losses greater than 10 percent and the subsidy rate has been increased to 50 percent.
Credit availability program for heavily affected sectors
The program has been extended until March 31, 2022. This program offers low interest government guaranteed loans of up to $ 1 million to organizations that have suffered significant loss of income due to the pandemic. .
The government offers three support programs through wage and rental subsidies that target organizations that have been affected by the pandemic. The following three programs are available until May 7, 2022, with the subsidy rates offered until March 12, 2022.
Tourism and hospitality revival program
This program provides support to organizations in the tourism and hospitality sector (such as hotels, tour operators, travel agencies, restaurants and organizations that plan and host festivals or performances) which, among others, have a loss of income for the current month of at least 40% using the applicable rules in the Canada Emergency Wage Subsidy (CUS) and the Canada Emergency Rent Grant (CRS). This program offers a subsidy rate of up to 75%.
Heavily affected business recovery program
This program offers support to organizations that have, among other things, a loss of income of at least 50% during the month using the rules applicable in the SSUC and CERS programs. This program has a subsidy rate of up to 50% for wage and rental subsidies.
Local lockout program
This program provides support to organizations that are subject to new local COVID-19 lockdown measures up to the maximum grant amount available through the SSUC and CERS programs. Additional rent assistance of 25% is provided under this program in proportion to the number of days a location is locked.
Support for workers
Improve the home office expense deduction
The government has extended the “simplified rules” for individuals to deduct home office expenses that were introduced in 2020 and increased the temporary flat rate to $ 500 per year for the 2021 and 2022 tax years.
The Canadian Worker Containment Benefit (CWLB)
The CWLB is a benefit proposed to provide income support of $ 300 per week to workers affected by specific foreclosure restrictions imposed by the government. The CWLB would be available until May 7, 2022 and would apply retroactively to October 24, 2021.
Canada Caregiver Recovery Benefit (CRCB) and Canada Illness Recovery Benefit (CRSB)
The CRCB and the CRSB will be extended until May 7, 2022. The maximum duration of the two benefits is extended by two weeks: the CRCB would be extended to 44 weeks and the CRSB would be extended to 6 weeks.
Improved support for teachers
The government proposed to increase the eligible educator school supply tax credit to 25 percent (instead of 15 percent) of a maximum of $ 1,000 of purchased supplies, and to expand the list of supplies. eligible courses to include electronic devices and tools for distance learning from in 2021.
Assistance for Guaranteed Income Supplement (GIS) Recipients
The government has proposed spending up to $ 742.4 million to provide one-time payments to GIS recipients to offset the decline in their benefits due to being also receiving the ECP or the Canada Recovery Benefit ( PRC) in 2020.
Students affected by Canada Emergency Benefit (CEP) payments
Students who received the ECP but were instead eligible for the Canada Student Emergency Benefit (CESP) will be allowed to set off the debt related to the ECP against the amount they would have received from the ECCP during the same period. of benefits.
Support for workers in the performing arts sector
The government has pledged $ 60 million over the next two years to establish the “Performing Arts Workers of Canada Resilience Fund”, a temporary program aimed at improving the economic, professional and personal situation of Canadian workers in the performing arts industry. performing Arts.
Digital services tax
As announced on October 8, 2021, the government is moving forward with digital services tax (DST) legislation. RST would apply at a rate of 3% on revenues earned by large companies from certain digital services that depend on data and content contributions from Canadian users. The DST would not be imposed before January 1, 2024, and only if the treaty implementing the Pillar 1 tax regime under the multilateral approach has not entered into force. In this case, RST would be payable from the year it comes into effect with respect to income earned on January 1, 2022. A notice of ways and means motion for the implementation of RST has been filed. with the Economic and Financial Update.
Budget 2021 proposed to introduce a tax on the sales, for personal use, of luxury cars and personal airplanes with a retail price greater than $ 100,000, and on boats, for personal use, of over $ 250,000. The Ministry of Finance has undertaken consultations on the design of this measure and is working to integrate the results of this consultation into the proposed fiscal framework. A draft law, including details on its entry into force, will be released in early 2022.