2023 Federal Fall Economic Statement Highlights
On November 21, 2023, Chrystia Freeland, Deputy Prime Minister and Minister of Finance, presented the comprehensive 2023 Fall Economic Statement (FES). The FES anticipates a budget deficit of $40.0 billion for the fiscal year 2023-24, as well as deficits of $38.4 billion for 2024-25 and $38.3 billion for 2025-26. The FES brings into focus initiatives aimed at improving affordability, particularly in the housing sector, and fostering sustainable growth.
No Tax Rate Changes
There are no changes to personal, business or GST tax rates. Personal brackets will continue to be indexed for inflation. See our Tax Rates page for a list of all the tax rates for the current year and upcoming year.
Business Tax Measures
- Clean Technology and Electricity Investment Tax Credits: The FES expands the 30% refundable Clean Technology Investment Tax Credit and the 15% refundable Clean Electricity Investment Tax Credit to include projects generating electricity or heat from waste biomass.
- Further Details on Clean Hydrogen Investment Tax Credit: This credit, following its introduction in Budget 2023, includes more specific eligibility requirements for ammonia production and projects using renewable natural gas, along with detailed compliance and assessment conditions.
- Incentives for Employee Ownership Trusts: The FES introduces a temporary income tax exemption for the first $10 million in capital gains from sales to employee ownership trusts, applicable for the tax years 2024 to 2026.
- Enhancement of Canadian Journalism Labour Tax Credit: The FES proposes increasing the labour expenditure cap per eligible newsroom employee from $55,000 to $85,000, with a temporary rise in the tax credit rate to 35% for four years, effective from January 1, 2023.
Indirect Tax Measures and Housing Initiatives
- Revised Underused Housing Tax (UHT): To alleviate the unintended compliance burden on Canadian entities, the FES expands the ‘excluded owner’ definition in the UHT Act to include specified Canadian corporations, specified Canadian partnerships, and specified Canadian trusts, exempting them from UHT reporting for 2023 and subsequent calendar years.
- It also introduces UHT exemptions for certain residential properties and reduces penalties for non-compliance. Minimum penalties for individuals have been lowered from $5,000 to $1,000, and for corporations, from $10,000 to $2,000, effective for 2022 and subsequent calendar years. 2022 UHT returns can be filed up to April 30, 2024, without penalty. See our UHT overview, guide on filing your UHT return and list of exemptions from filing or paying the tax.
- GST Exemption for New Co-op Rental Housing: The FES introduces an exemption from GST on a cooperative housing corporation’s costs of constructing new long-term rental housing. The exemption is available for projects that commence between September 14, 2023, and December 31, 2030, and that are completed before 2036.
- Adjustment to Concessional Loans: The FES proposes that bona fide concessional loans from public authorities with reasonable repayment terms will not be treated as government assistance, commencing November 21, 2023.
- Measures Against Non-Compliant Short-Term Rentals: Effective January 1, 2024, the FES proposes denying income tax deductions for expenses incurred to earn income from short-term rentals where such rentals are prohibited by municipal or provincial law, or where the operator is non-compliant with municipal or provincial licensing, permitting, or registration requirements.
- Simplification of GST/HST Joint Venture Election: New rules are proposed to expand access to the joint venture election. Making the election can simplify tax accounting for joint venture participants. Changes include replacing the ‘eligible activities’ requirement with an ‘all or substantially all commercial activities’ requirement. Changes would be effective upon royal assent.
Continuation of Key Tax Measures
- The government confirmed its intention to proceed with several important tax measures, including strengthening the Intergenerational Business Transfer Framework, supporting clean energy investment tax credits, modernizing the General Anti-Avoidance Rules (GAAR)1, and promoting employee ownership trusts.
International Tax Measures and Additional Initiatives
- Global Minimum Tax Implementation: The FES reiterates Canada’s commitment to implementing a global minimum tax rate as part of international tax reform efforts.
- Exemption of Psychotherapist and Counselling Therapist Services from GST/HST: The FES proposes exempting these services from GST/HST to align with other healthcare exemptions.
This year’s Fall Economic Statement outlines the government’s current approach to economic challenges, focusing on housing affordability, sustainable development, and fiscal stability. These measures will have significant implications for both you and your business, so talk your DMCL advisor for personalized advice and strategic planning in response to these changes.
1See our 2023 Year-End Tax Planning article for more information on the expanded GAAR.