Originally published on April, 28, 2020.

The commentary below is updated as of July 13, 2020, and summarizes key business and personal tax amendments proposed in the provincial and territorial budgets released for the 2020-2021 fiscal year. Certain budgets introduced before mid-March did not account for the COVID-19 pandemic, and as such, may no longer reflect those provinces’ and territories’ forecasts. Some provinces and territories have since updated their budgets by releasing supplemental budgets or fiscal updates. The federal government has also released its fiscal snapshot.

Details on the specific COVID-19 tax measures can be found in RSM’s ‘Tax updates in Canada in response to COVID-19’ Tax Alert.

Official budget dates:

Province/ Territory	Date the budget was tabled	Date of supplemental budget or fiscal update
Federal	Budget not yet released	June 8, 2020
Alberta	Feb. 27, 2020	June 29, 2020
British Columbia	Feb. 18, 2020	June 14, 2020
Manitoba	March 19, 2020	June 30, 2020
New Brunswick	March 10, 2020	May 21, 2020
Newfoundland and Labrador	Budget not yet released	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 (Ontario’s 2020-21 Action Plan only)	June 8, 2020
Prince Edward Island	June 17, 2020	N/A
Québec	March 10, 2020	June 19, 2020
Saskatchewan	June 15, 2020	June 15, 2020
Yukon	March 5, 2020	Update not yet released

Federal

Updated The 2020 Federal Budget was originally planned to be tabled on March 30, 2020. However, the budget was postponed because of COVID-19. The economic and fiscal statement is traditionally released between budgets. On July 8, 2020, Finance Minister Bill Morneau released Canada’s Economic and Fiscal Snapshot 2020 before the 2020 Budget. The deficit for 2020-2021 is expected to increase to $343.2 billion from the $34.4 billion deficit projected before the COVID-19 pandemic. The additional deficit is primarily due to the $231.9 billion in direct support measures the government is providing to Canadian individual and businesses during COVID-19, including $80 billion projected cost for Canada Emergency Response Benefit, $82 billion for Canada Emergency Wage Subsidy, $13.8 billion for Canada Emergency Business Account, and $7.5 billion for GST credit and Canada Child Benefit enhancements. In addition, the projected cost of deferred taxes and customs is $85 billion, and $86.5 in liquidity. The revenue from corporate income taxes and the GST are expected to decline by 22.3% and 20.4%, respectively, as comparable to the last year’s figures. An overview of these and other federal COVID-19 measures can be found in the ‘Tax updates in Canada in response to COVID-19’ Tax Alert. Despite the staggering numbers, Canada is on par with the other G7 partners and remains to be one of the more stable economies despite its COVID-19 related spending debt. The next steps for the federal government is working with the provinces and territories to re-open the economy by providing more than $14 billion for the Safe Restart Agreement to build a stronger, more resilient future. All levels of governments are working to fill in the equality gaps that have been made more evident throughout the COVID-19 pandemic. The snapshot also addresses the 2020-2021 Debt Management Strategy, which sets out its response to the deficit. Pending the government’s review of the market’s capacity to sustain long-term debt, its current plan will be heavily reliant on providing various investment opportunities, such as low-yield, long-term bonds. The government will issue an unprecedented amount of long-term bonds and low rates to encourage investors and to mitigate the risk of increasing interest rates in the future.

 

Alberta

Updated On Feb. 27, 2020, Alberta tabled its 2020-2021 budget. See RSM’s previous Tax Alert on the Alberta budget for more details. Due to COVID-19 and its economic impact, on June 29, 2020 the Premier of Alberta released Alberta’s economic recovery plan. Key elements of the economic recovery plan are outlined below. Corporate tax rate Previously, the budget announced the Job Creation Tax Cut, which would lower the general corporate income tax rate to 8% by Jan. 1, 2022. Under Alberta’s economic recovery plan, the government of Alberta will immediately accelerate the tax cut, which will reduce the general corporate tax rate from 10% to 8% effective on July 1, 2020. Innovation Employment Grant The economic recovery plan also announced a new Innovation Employment Grant, which will focus on investing in the technology and innovation sector. Although an effective date has not been announced, this new refundable tax credit will be available to companies who invest in research and development to incentivize job creation within smaller businesses and start-ups.

 

British Columbia

On Feb. 18, 2020, British Columbia’s Finance Minister Carole James tabled the province’s 2020 budget. The budget aims to keep British Columbia moving forward by building a strong and sustainable economy, improving services people count on, and making life more affordable for everyone.

On July 14, 2020, the government released its 2020-21 economic and fiscal update. The update highlights British Columbia’s COVID-19 investments, and revenue and deficit projections. The update projections for fiscal year 2020–2021 now depicts an operating deficit of $12.5 billion against the budgeted surplus of $277 million. This is largely due to the COVID-19 related measures that were implemented and lower government revenues, such as income taxes.

While the economy begins to rebound, the British Columbia government has set aside $1.5 billion from its Pandemic Contingencies plan for future economic recovery programs, which will be announced in September 2020. In addition, the province’s capital spending plan that was announced in its 2020 Budget, such as infrastructure development, has not yet been affected by COVID-19 and will continue as planned. However, the provincial government will continue to monitor the economy and its projects and amend them as needed.

As part of its COVID-19 initiatives, no changes to direct tax measures were announced in the economic and fiscal update. However, the provincial government implemented temporary relief measures including a one-time Climate Action Tax Credit enhancement, a reduction in school tax for commercial properties, and delaying the increase to the carbon tax. The economic and fiscal update summarizes the indirect tax changes and confirms that they have been delayed until further notice due to the COVID-19 pandemic.

For up to date information on British Columbia’s COVID-19 measures, see RSM’s Tax updates in Canada in response to COVID-19.

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

In order to ensure that younger generations have the skills and training to excel, British Columbia’s Training Tax Credit is extended by three years to the end of 2022.

The Training Tax Credit is a refundable income tax credit for employers and apprentices who take part in eligible apprenticeship programs administered through the Industry Training Authority. The credit is available to employers who employ apprentices. The amount of credit claimable by the employer can be up to 15% of the apprentice’s salaries. The credit was introduced in 2007, and extended several times before being extended in 2020 for the three years to the end of 2022.

Extension of farmers’ food donation tax credit

In order to provide new business opportunities to mining companies, effective on a date to be specified by regulation, the new mine allowance will be extended for five years to the end of 2025.

The allowance encourages the development of new mines and eligible expansion projects and is calculated as 1/3 of the eligible capital expenditures from the development of the new mine or expansion project.

Production service tax credit

The Production Services Tax Credit is for accredited production corporations that produce accredited film or video productions in British Columbia. The credits are available to both domestic and foreign producers and there is no Canadian content requirement. The credit is the most volatile of all tax transfers and is influenced by several factors including delay in filing returns and assessment of claims, length of projects and changes in the exchange rates. Changes related to the credit proposed by the budget are as follows:

1. Effective February 19, 2020, the application fee for an accreditation certificate for the Production Service Tax Credit increased to $10,000 (from $5,500).
2. 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.
3. Effective for taxation years beginning after Feb. 18, 2020, the deadline to claim the Film Incentive and the Production Service Tax Credit is reduced to 18 months.

Extension of new mine allowance

In order to provide new business opportunities to mining companies, effective on a date to be specified by regulation, the new mine allowance will be extended for five years to the end of 2025.

The allowance encourages the development of new mines and eligible expansion projects and is calculated as 1/3 of the eligible capital expenditures from the development of the new mine or expansion project.

PERSONAL TAX MEASURES

New tax bracket on taxable income more than $220,000

The government targets the province’s top 1% of the population by introducing a new tax bracket, effective Jan. 1, 2020. Under the new tax rate, individuals having taxable income of more than $220,000 a year will be subject to a provincial personal income tax rate of 20.5%, up from the previous 16.8%.

Personal income tax brackets and rates - 2020 tax year

Taxable Income - 2020 Brackets	Tax Rate
$0 to $41,725	5.06%
$41,725.01 to $83,451	7.70%
$83,451.01 to $95,812	10.50%
$95,812.01 to $116,344	12.29%
$116,344.01 to $157,748	14.70%
$157,748.01 to $220,000	16.80%
Over $220,000	20.5%

 

The budget forecasts that personal tax revenue will increase by 6.8% in 2020-2021 and on average by 4.5% over the next three years because of the introduction of the new tax rate of 20.5% on taxable income above $220,000..

Charitable donation tax credit

Consequential to the increase in the rate of personal income tax, effective 2020, the budget increases the Charitable Donation Tax Credit rate for individuals 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.

The charitable donation tax credit was introduced in 2000 and provides a tax credit to individuals who make charitable donations to CRA registered charities and eligible donees. The credit encourages donors to make donations to charities.

Reimbursement of overpaid wages

The British Columbia Employment Standards Act prohibits an employer from withholding wages of an employee for any reason, except as permitted by law. If the employer overpays an employee's wages, the overpayment cannot be deducted unilaterally from future wage payments. The employee may provide written consent to the deduction for an overpayment through a written assignment of wages. However, the British Columbia Income Tax Act will now be amended, effective Jan. 1, 2016, in order to allow employees to reimburse their employers any overpaid amount net of British Columbia income tax withheld.

Elimination of medical services plan premium

To improve affordability for British Columbians, as of Jan. 1, 2020, the Medical Services Plan Premiums were eliminated. British Columbians no longer have to pay medical services plan premiums, saving individuals up to $900 a year and families up to $1,800 per year. Enrolment in medical services plan, however, remains mandatory for all residents.

British Columbia child opportunity benefit

To build on affordability measures across all British Columbia communities, such as child care, participation in sports, arts and the community, the government is launching the new British Columbia Child Opportunity Benefit effective Oct. 1, 2020. The benefit will replace the existing early childhood tax benefit and will be available to families with children under 18 years of age. The families will be eligible to 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. The benefit will decrease where family income is between $25,000 and $80,000, and will be ground-down for families with net income over $80,000 until it is reduced to zero.

Climate action tax credit

In order to boost the government's plan to reduce pollution and build a cleaner future, increases are coming to the Climate Action Tax Credit, with an additional $20 million earmarked to make electric vehicles more affordable. 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.

The Climate Action Tax Credit was introduced in 2008 with the introduction of the carbon tax. This credit is to help offset the impact of the carbon taxes paid by low and middle-income families. The benefit varies based on the composition of the family and their family net income.

Introduction of British Columbia access grant

To place college or university education within reach of more British Columbians and build a skilled workforce, beginning September 2020, a new grant will become available for low to middle-income post-secondary students. The British Columbia Access Grant will provide 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. This new grant is to replace and expand eligibility for existing grant program to make post-secondary education more accessible and affordable.

The new grant will benefit more than 40,000 students attending public post-secondary institutions in B.C. and traditional degree programs.

INDIRECT TAX MEASURES

In addition to the Provincial Sales Tax changes and policy expansion around the registration of remote sellers, the budget introduced the following new amendments.

Updated Certain indirect tax changes that were scheduled to be effective as April 1, 2020 have been delayed until further notice due to the COVID-19 pandemic. For up to date information on British Columbia’s COVID-19 measures, see RSM’s Tax updates in Canada in response to COVID-19.

PST exemption for Electric Aircraft

To support the Province’s goal of reducing greenhouse gas emissions by encouraging a shift away from the use of fossil fuels to clean and renewable energy, the budget proposes a PST exemption for electric aircraft, effective Feb. 19, 2020. Further, effective Feb. 19, 2020, a PST refund is available for the PST paid on non-electric aircraft, if the aircraft is obtained for the purpose of converting the aircraft to operate solely on electricity. The refund is also available for PST paid on parts and service obtained to convert non-electric aircraft to operate solely on electricity.

Tax rate for heated tobacco products

The budget introduced a default tax of 29.5 cents per heated tobacco product, effective April 1, 2020 (this date has now been delayed – see update above). The budget also introduced new rules for dealers who intend to sell heated tobacco products that were not yet authorized by the director for sale or use in British Columbia.

Carbon tax rate alignment with Federal Carbon pricing backstop rates

Effective April 1, 2020, the budget proposes that the British Columbia Carbon Tax rates for 2020 and 2021 would be aligned with the federal carbon pricing backstop methodology, where applicable (this date has now been delayed – see update above). Additionally, the province proposed to update Carbon Tax rates to ensure that they would be in line with the latest science on emissions. The rates were previously set in 2008; those rates are considered to be based on old science. As a result, Schedule 1 of the Carbon Tax Act is being amended based on new science. In some cases, the rate is lower than the original scheduled rate.

Dealer-Use Motor Vehicles

The province imposes a luxury vehicle surtax on vehicles over a certain threshold. Additionally, the province also imposes a requirement on certain vehicle dealers to self-assess PST on dealer-use vehicles. The budget proposes technical amendment to ensure that dealers are subject to the luxury vehicle surtax when using the dealer-use formula to calculate PST owing when there is a change in use of a vehicle acquired by the dealer for sale or lease. The surtax rates to be used in the dealer-use formula are as follows:

1. 15% for vehicles with an average value between $125,000 and $149,999.99; and
2. 20% for vehicles with an average value of $150,000 or more.

Bundled Leases

Effective Feb. 19, 2020, new rules are introduced in respect to bundled leases when taxable tangible personal property is leased together for a single price with PST-exempt tangible personal property. The amendments help to ensure that PST applies to taxable tangible personal property when it is supplied as part of a bundled lease for a single price.

Out of Province Audit Fees

The government of British Columbia has announced that effective April 1, 2020, an audit fee will apply if a taxpayer is selected for an audit and an auditor attends a location of the taxpayer outside of BC. The fee will apply to audits done under the Provincial Sales Tax Act, the Motor Fuel Tax Act, and the Carbon Tax Act.

The daily rates, per auditor, are:

• $335 CAD for audits conducted on records located outside B.C. but within Canada; and
• $405 CAD for audits conducted on records located in the United States.

If an out of province audit is scheduled and is cancelled by the taxpayer with less than four weeks’ notice, a cancellation fee of one day per auditor will also apply. Invoices for audit fees will be billed separately and will not form a part of any assessments. There is no definitive announcement about the postponement of this measure.  

OTHER MEASURES

Property transfer tax

Effective on a date yet 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

Effective April 1, 2020, the refund rates for International Fuel Tax Agreement licensees will be adjusted to reflect the revised carbon tax rates. (This date has now been delayed – see update in the box above.)

Property tax deferment

Effective May 1, 2020, the Land Tax Deferment Act is 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.

Home owner grant

The threshold for the phase-out of the home owner grant has decreased from $1,650,000 to $1,525,000 for the 2020 tax year. For properties above the threshold, the grant continues to be reduced by $5 for every $1000 of assessed value in excess of the threshold. This measure was previously announced on January 3, 2020.

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Manitoba

On March 11, 2020, the Minister of Finance for Manitoba, Scott Fielding, tabled the province’s 2020 fiscal year budget. The focus of this year’s budget is continuing to improve its quality of services and building a stronger economy while continuing to decrease the financial deficit. For 2020, the Minister anticipates a deficit of $220 million, an improvement of $53 million from the prior year.

Updated On June 30, 2020, Finance Minister Scott Fielding, tabled Manitoba’s economic and fiscal update to assess the impact of the COVID-19 pandemic. Manitoba is anticipating a deficit of $2.9 billion for 2020-2021 and the deficit could be as high as $5 billion if the economic downturn continues. Manitoba has spent $2.1 billion to fight COVID-19. As such, the taxation changes announced in the previous budget are deferred. For up to date information on Manitoba’s COVID-19 tax measures, see RSM’s tax updates in Canada in response to COVID-19.

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 percent is added to the cost-of-production credit. The total credit is 38 percent.

Manufacturing Investment Tax Credit

The Manufacturing Investment Tax Credit supports business by providing a credit for businesses that acquire qualifying property that is available for use after June 30, 2020, such as qualified plant, machinery and equipment for use in manufacturing or processing in Manitoba. The credit will decrease from 8 percent to 7 percent. The refundable portion of the credit will decrease from 7 percent to 6 percent and the non-refundable portion remains unchanged at 1 percent.

Mineral Exploration Tax Credit

The Mineral Exploration Tax Credit, scheduled to expire on December 31, 2020, is extended for three years to December 31, 2023. This 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 percent of investments in flow-through shares.

Cultural Industries Printing Tax Credit

The Cultural Industries Printing Tax Credit is a 35 percent refundable credit on salary and wages paid to Manitoba printers’ employees. The credit was scheduled to expire on December 31, 2020, and has been extended for one year to December 31, 2021.

Community Enterprise Development Tax Credit

The Community Enterprise Development Tax Credit supports Manitoba-resident investors with investing in business opportunities in their communities and assists community-based enterprise development projects by providing a 45 percent refundable tax credit on eligible shares. The credit was scheduled to expire on December 31, 2020, is extended for one year to December 31, 2021.

Child Care Centre Development Tax Credit

The Child Care Centre Development Tax Credit is a refundable corporation income tax credit that stimulates the creation of licensed childcare centres in work places. Effective one day after budget day, the tax credit is available for private corporations and offers a total benefit of $10,000 per new infant or preschool space created, claimable over five years.

Health and Post-Secondary Education Tax Levy

Effective January 1, 2021, the Health and Post-Secondary Education Tax Levy’s (commonly referred to as the payroll tax) exemption threshold is raised from $1.25 million to $1.5 million of annual remuneration. In addition, the threshold below which employers pay a reduced rate is raised from $2.5 million to $3.0 million.

PERSONAL TAX MEASURES

No changes are proposed to personal income tax rates in the budget. However, effective for the 2020 tax year, the basic personal amount is increasing. The basic personal amount, which is the non-refundable tax credit that every Manitoba resident is entitled to claim on their income tax return, will increase from $9,626 to $9,838.

INDIRECT TAX MEASURES

Updated The retail sales tax rate reduction, the introduction of a green levy and the tobacco tax rate increase that were supposed to be effective July 1, 2020 have all been deferred until further notice. While the health and post-secondary education tax levy adjustment has not been postponed, the filing deadlines have been extended to October 2020. For up to date information on Manitoba’s COVID-19 tax measures, see RSM’s Tax updates in Canada in response to COVID-19.

Retail Sales Tax rates

The budget announced a reduction to the general retail sales tax rate from 7% to 6%, effective July 1, 2020. The province had previously reduced the rate of retail sales tax from 8% to 7% in 2019.  This retail sales tax rate reduction, along with the 2019 tax rate reduction, represents a 25% decrease from 2018 (8% to 6%) and will benefit all taxpayers.

The rates of retail sales tax on electricity used by qualifying manufacturing, mining and oil well operators as well as on mixed uses of electricity and natural gas for home heating, heating and cooling of farm buildings, and operating farm grain dryers are also being reduced. The budget also announced that the retail sales tax rate on mobile home, modular and ready-to-move homes has been reduced.

The prorated vehicle tax rates for commercial trucking will also be adjusted to the lower general retail sales tax rate of 6%. All these rate changes are effective July 1, 2020.

Health and Post-Secondary Education Tax Levy

Effective Jan. 1, 2021, the Health and Post-Secondary Education Tax Levy’s (commonly referred to as the payroll tax) exemption threshold is raised from $1.25 million to $1.5 million of annual remuneration. In addition, the threshold below which employers pay a reduced rate is raised from $2.5 million to $3.0 million.

Green levy

Manitoba introduced a green levy in the budget at a flat rate of $25 per tonne of carbon dioxide equivalent emissions, effective July 1, 2020 (this date has now been delayed). This levy will apply to gas, liquid, and solid fuel products intended for combustion (referred to as fuels). This levy is meant to offset some of the decrease in revenue on account of the reduction in the retail sales tax rate. The green levy on natural gas and coal will, however, be exempted from retail sales tax. A similar exemption was not required for gasoline, diesel and propane as they were already not subject to retail sales tax.

Tobacco Tax

The rate of tax on cigarettes and other tobacco-based products will increase, effective July 1, 2020, to ensure that the total retail price of tobacco will remain approximately the same once the general sales tax rate decreases to 6% (this effective date has now been delayed).

New Sales Tax Exemptions

Effective October 1, 2020, personal income tax return preparation will be exempt from retail sales tax. The exemption will include personal income tax returns prepared by an income tax rebate discounter. This will ensure that personal income tax returns prepared for the 2020 taxation year are exempt from retail sales tax.

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New Brunswick

On March 10, 2020, NNew Brunswick’s Finance and Treasury Board Minister, Ernie L. Steeves, tabled the province’s 2020 budget. The budget reflected strategic investments in key priority areas of health care, education, and social services, and contains for the first time ever, multi-year net debt reduction targets and net debt-to-GDP targets. Furthermore, because of an ongoing commitment to responsible fiscal management, the government is now in a position to begin lowering taxes in a sustainable manner.

Updated With the outbreak of the COVID-19 pandemic, New Brunswick’s government has released a fiscal and economic update on May 21, 2020. The update shows a significant change in the province’s financial outlook as compared to the projections outlined in the budget. The updated projections for fiscal year 2020–2021 now depicts a deficit of $299.2 million against the budgeted surplus of $92.4 million. Revenue is projected to be $291.4 million lower than budgeted due to pandemic-related effects. This is largely due to lower projections for provincial taxes, agency revenues, licenses and permits, and interest revenue. The province also projects increased expenditures in response to the pandemic.

BUSINESS AND PERSONAL TAX MEASURES

No changes are proposed to the corporate tax rates, the $500,000 small-business limit and personal income tax rates in the budget.

OTHER TAX MEAUSRES

Property tax

Beginning with the 2021 taxation year, the budget proposes 50 percent reduction of the provincial non-owner-occupied property residential tax rate (double-taxation) over a four-year period to $0.5617 per $100 of assessment value of such properties from $1.1233 per $100 of assessment value, representing a reduction of 14.04 cents per year until 2024.

The budget also proposes a reduction over a four-year period of the provincial non-residential property tax rate to $1.8560 per $100 of assessment value from $2.1860 per $100 of assessment value, representing a reduction of 8.25 cents per year until 2024.

Updated In light of the COVID-19 pandemic, on May 21, 2020 New Brunswick’s government announced that they will not proceed with the proposed property tax measures contained in its 2020-2021 budget.

Carbon Tax

As part of the made-in New Brunswick carbon plan, effective April 1, 2020, the budget proposes to decrease gasoline tax 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).

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Northwest Territories

On February 25, 2020, Northwest Territories’ Minister of Finance, Caroline Wawzonek, tabled the fiscal 2020 budget. The budget is directed towards economic growth, environmental stewardship, and a healthy and better-educated population.

Updated The Legislative Assembly was suspended in March because of COVID-19. 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. So far, the government has spent almost $7.9 million in COVID-related costs and projects additional need of $31.1 million, of which $11.3 million is allocated to the health response. The government has assessed the impact of COVID-19 on the mandate priorities, associated actions, and found that most of the mandate items can be fulfilled by the end of the 19th Legislative Assembly with few delays or issues. The mandate priorities include addressing the high cost of housing and food in the north, as well as increasing employment in small communities and investing in sectors of the economy outside mining and resource extraction.

BUSINESS AND PERSONAL TAX MEASURES

No changes are proposed to the corporate tax rates, the $500,000 small-business limit, and personal income tax rates in the budget.

OTHER TAX MEASURES

Carbon pricing

The carbon tax was introduced in the 2019 budget and became effective July 1, 2019. This rate increase is a federally mandated adjustment as part of the Territories’ commitment to carbon pricing under the Pan-Canadian framework. Effective July 1, 2020, federally mandated carbon tax rate will increase to $30 per tonne of greenhouse gas emissions. The budget also proposes to increase the Northwest Territories’ cost of living offset benefit due to the increase in the carbon tax rate. As of July 1, 2020, the amounts will be $156 per year for an individual and $180 per year for a child. The cost of living offset payments will be made on a quarterly basis except for single individuals. Single individuals will receive a lump sum in July 2020.

Property mill rates

Effective April 1, 2020, in keeping with the existing indexation policy, property mill rates will be adjusted for inflation. 

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Nova Scotia

On February 25, 2020, Nova Scotia’s Finance Minister, Karen Casey, tabled the fiscal 2020-2021 budget. With an estimated surplus of $55 million dollars for the 2020 fiscal year, this year’s budget is focusing on investing in capital funding to improve infrastructure. The 2020 budget is helping businesses in Nova Scotia become more competitive and putting them in a position to invest back into their businesses and employees.

On July 29, 2020, Nova Scotia’s government released a fiscal and economic update taking into account the impact of the COVID-19 pandemic. As expected, the government is forecasting a deficit of $852.9 million, which is a decrease of $907.9 million from the original budget’s anticipated surplus of $55.0 million. Much of the revenue decrease can be attributed to the increase in spending on COVID-19 related measure and the decline in tax revenue from personal and corporate income tax, and harmonized sales tax. Nonetheless, the provincial government has not changed the refundable tax credits announced in the budget.

BUSINESS INCOME TAX MEASURES

The budget reduces tax rates for general corporate income tax and small business tax, and increases digital tax credits.

Effective April 1, 2020, the general corporate tax rate is being reduced from 16 percent to 14 percent. The small business rate will also be reduced from 3 percent to 2.5 percent.

	2019		2020
	Nova Scotia	Nova Scotia & Federal	Nova Scotia	Nova Scotia & Federal
General corporate income tax rate	16.0%	31.0%	14.0%	29.0%
General manufacturing and processing tax rate	16.0%	31.0%	14.0%	29.0%
Small business tax rate	3.0%	12.0%	2.5%	11.5%

Digital Media Tax Credit

The Digital Media Tax Credit, a refundable corporate income tax credit, was introduced in 2007 to foster the development of digital media industry. As part of the 2020 budget, new legislation is being introduced to extend the tax credit for another five years. Once passed, the credit will expire on December 31, 2025.

Digital Animation Tax Credit

The Digital Animation Tax Credit, a refundable corporate income tax credit, was introduced in 2015 to provide support for digital-animation productions in Nova Scotia. As part of the 2020 budget, new legislation is being introduced to extend the tax credit for another five years. Once passed, the credit will expire on December 31, 2025.

PERSONAL TAX MEASURES

No changes are proposed to the personal income tax rates.

INDIRECT TAX MEASURES

The budget is increasing the rate of tobacco taxes, and introducing a new tax on vaping products, which will affect any business selling vaping products in the province.

Tobacco Tax

Effective February 26, the province will increase tax rates on all tobacco products sold in Nova Scotia to align with other Canadian jurisdictions. The tax rate on cigarettes and tobacco sticks will increase from 27.52 cents per unit to 29.52 cents per unit. The tax rate on fine cut tobacco will increase from 26 cents per gram to 40 cents per gram. The tax rate on other tobacco products will increase from 18.52 cents per gram to 40 cents per gram. The tax rate on cigars will increase from 60 percent of the retail selling price to 75 percent of the retail selling price.

	Tobacco Tax Rates
	2019	2020
Cigarettes and tobacco sticks	$0.2752 per unit	$0.2952 per unit
Fine Cut Tobacco	$0.26 per gram	$0.40 per gram
Other Tobacco Products	$0.1852 per gram	$0.40 per gram
Cigars	60 percent of retail selling price	75 percent of retail selling price

 

Vaping Products Tax

As part of the 2020 budget, Nova Scotia will implement a vaping products tax. Effective July 1, 2020, all retailers, wholesalers, and manufacturers of vaping products will be required to be licensed to sell their products in the province. Subsequent to the licensing requirement, the province will then implement a tax on the vaping products, including those that do not have nicotine. Effective September 15, 2020, the tax rate for vaping substances will be 50 cents per millilitre. Vaping devices will have a tax rate of 20 percent of the retail selling price.

Businesses in the vaping industry should be cognizant that further clarifications are likely to be released by the province in regards to the vaping products tax.

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Nunavut

On February 19, 2020, Nunavut’s Finance Minister George Hickes tabled the territory’s 2020 budget. The budget aimed to foster individual and community wellness, particularly in health care and support to families and individuals in crisis by improving the territorial health care system and other health services. The budget also targets funding of $8.4 million for the Department of Family Services. This will enable it to support homeless and family violence shelters, youth in crisis and foster parents.

BUSINESS AND PERSONAL TAX MEASURES

No changes are proposed to the corporate tax rates, the $500,000 small-business limit, and personal income tax rates in the budget.

Ontario

Updated On March 25, 2020, Ontario released its 2020-2021 action plan. Due to COVID-19 and its economic impact, on July 8, 2020, the Premier of Ontario, Doug Ford, released Ontario’s economy recovery plan. As part of its recovery plan, the government of Ontario is introducing the COVID-19 Economic Recovery Act, 2020 and proposing to amend approximately 20 pieces of current legislation that govern the province’s schools, infrastructure, development, and municipalities. If passed into law, they would help address unemployment and attract more investment to Ontario. Much of the government’s focus in the coming months will be: restarting jobs and development, providing municipalities with tools to provide critical services, and improving the lives and livelihood by improving education and removing social and economic barriers. Ontario’s action plan related to COVID-19 tax measures are summarized in RSM’s Tax updates in Canada in response to COVID-19. Ontario has not yet released its formal budget. Stay tuned.

 

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Prince Edward Island

Updated On June 17, 2020, Prince Edward Island’s Minister of Finance Darlene Compton, tabled the province’s annual operating budget for 2020-2021. The budget anticipated a deficit of $172.7 million for 2020-2021 and prioritized health care support, education including effective learning with flexible delivery models, housing needs, and employment support for Islanders thereby ensuring a sustainable environment. BUSINESS INCOME TAX MEASURES Reduction in small business tax rates The budget aims to strengthen small businesses and primary industries by lowering the tax rate from 3% to 2%, effective January 1, 2021. The limit to qualify for the small-business tax rate remains at $500,000. Further, no changes are proposed to the general income corporate tax rate in the budget.

 

	2020		2021
	PEI	PEI & Federal	PEI	PEI & Federal
Small-business tax rate	3.0%	12.0%	2.0%	11.0%
Manufacturing and processing tax rate	16.0%	31.0%	16.0%	31.0%
General corporate income tax rate	16.0%	31.0%	16.0%	31.0%

 

PERSONAL TAX MEASURES No changes are proposed to the personal income tax rates in the budget. Increasing basic personal income tax exemption Effective January 1, 2021, the budget increases the provincial’s basic personal income amount from $10,000 to $10,500. 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 In order to leave more cash in the hands of islanders, effective January 1, 2021, the budget increases the tax threshold from $18,000 to $19,000 for low-income residents. Wellness Tax Credit for children To assist with the costs incurred by the residents in maintaining a healthier lifestyle of their children, the government has introduced a new $500 non-refundable children’s Wellness Tax Credit. This tax credit will be available effective January 1, 2021 to families with children under the age of 18 for activities related to their children’s well-being. INDIRECT TAX MEASURES The Government of PEI will increase the tax to 27.52 cents per gram on tobacco from 21.5 cents per gram as well as increase the tax on cigars to 75% of the retail price from 71.6%. The increase will bring the tobacco tax in line with regional averages and will be effective the day following Royal Assent.

 

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Quebec

Updated On March 10, 2020, Quebec Finance Minister Eric Girard tabled the province’s 2020-2021 budget entitled, “Your Future, Your Budget”. 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, Quebec’s Minister of Finance provided a snapshot of Québec’s ‘Economic and Financial Situation 2020-2021’ on June 19, 2020, three months after the budget was tabled. The 2020-2021 budget originally forecasted a surplus of $1.9 billion in 2019-2020 and a balanced budget thereafter. However, due to the economic disparity brought by the pandemic, the government is now projecting to record a deficit of $14.9 billion this year due to an increase in COVID-related spending. Despite the record deficit, the government is committing to return to fiscal balance within the next five years due to their previously strong economy and public finances. In particular, the Quebec government is planning to accelerate investments under the 2020-2030 Quebec infrastructure plan by $2.9 billion in 2020-2021. The estimated impact of the early investment is an increase of Quebec’s GDP by 0.3%. The Quebec government also plans to use the entire stabilization reserve of $14.9 billion in 2020-2021 to allow for a balanced budget.

 

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Saskatchewan

On March 18, 2020, Finance Minister, Donna Harpauer, tabled its spending estimates for 2020-2021 (“March Estimate”). Due to the current climate surrounding COVID-19, the complete budget along with revenue forecasts have been postponed. Despite the postponement of the budget, the estimate has two notable bills that will be proposed: (1) the Income Tax Amendment Act, 2020, and (2) the Provincial Sales Tax Amendment Act, 2020, as well as a new housing rebate program.

Updated On June 15, 2020, Finance Minister, Donna Harpauer, tabled Saskatchewan’s 2020-2021 budget (“June Budget”). The June Budget anticipates a deficit of $2.4 billion for 2020-2021. Much of the June Budget has confirmed the proposed changes listed in the province’s March Estimates. 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, as well as a new housing rebate program.

BUSINESS AND PERSONAL TAX MEASURES

No changes are proposed to the corporate tax rates, the $500,000 small-business limit, and 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.

Another proposed amendment in the Income Tax Amendment Act, 2020, is a new investment incentive for the fertilizer sector, and an extension to the manufacturing and processing exporter tax. Saskatchewan will also introduce the oil infrastructure investment program, which is a new growth tax incentive to support new and expanded pipelines.

Updated As first mentioned in the March Estimate, the June Budget will re-introduce the automatic annual indexation of the personal tax system. This will allow Saskatchewan’s income tax rate to correspond with the Government of Canada’s rate at the beginning of 2021.  The 2020-2021 June Budget also extends the Manufacturing and Processing Exporter Tax Incentive and introduces a new investment incentive for the chemical fertilizer sector, which were initially announced as part of Saskatchewan’s earlier budget estimates. The Manufacturing and Processing Exporter Tax Incentive is available to eligible businesses who 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 of the chemical fertilizer sector.

INDIRECT TAX MEASURES

Provincial Sales Tax Amendment Act, 2020

Saskatchewan is proposing a Provincial Sales Tax Amendment Act, 2020. If passed, the bill will enact initiatives that will ensure out-of-province e-commerce platforms collect and remit Provincial Sales Tax. The bill also contains related amendments to The Revenue and Financial Services Act to maintain consistency with the provincial sales tax legislative changes.

Updated On June 15, 2020, Saskatchewan confirmed that legislation will be introduced to enact initiatives that was proposed in its March Estimate for 2020-2021 on March 18, 2020.

New housing rebate program

The province announced a 3-year PST new housing rebate program for new home construction beginning April 1, 2020. The program will provide a rebate up to 42 percent of the PST paid on new housing valued at $350,000. A partial rebate is available for houses valued between $350,000 and $450,000. The introduction of this rebate will support the struggling housing sector by providing jobs in the construction industry, and provide residents an opportunity for affordable homeownership.

Updated On June 15, 2020, the province also confirmed that the new housing rebate program Saskatchewan proposed in its March Estimate for 2020-2021 will be enacted.

 

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Yukon

On March 5, 2020, Yukon’s Premier and Finance Minister, Sandy Silver, tabled the fiscal 2020-2021 budget. The 2020-2021 budget focuses on the wellness of Yukoners and strong government-to-government relations with First Nations. The budget also focuses on addressing climate change, and ensuring a strong economy through business development. Premier Silver is projecting a surplus of $4.1 million dollars for 2020 to 2021. There are no new taxes being introduced and there is a reduction in taxes for small business. However, there is an increase in insurance premium tax rate.

BUSINESS TAX MEASURES

Corporate tax rates

Effective January 1, 2021, the Yukon small-business corporate income tax rates will be reduced from 2 percent to 0 percent. The 1.5% tax rate on manufacturing and processing profits will be reduced to 0 percent. 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.

	2020		2021
	Yukon	Yukon & Federal	Yukon	Yukon & Federal
Small-business tax rate	2.0%	11.0%	0.0%	9.0%
Small-business manufacturing and  processing tax rate	1.5%	10.5%	0.0%	9.0%
General corporate income tax rate	12.0%	27.0%	12.0%	27.0%
General manufacturing and processing tax rate	2.5%	17.5%	2.5%	17.5%

 

Business Investment Credit

Starting in 2020, the Small-Business Investment Credit will be expanded to include medium-sized business. Subsequently, the credit will be renamed to the Business Investment Credit.

Previously, the Small-Business Investment Credit allowed Yukon organizations to issue shares to Yukon investors in exchange for an agreed upon return and an individual tax credit of 25% on the amount invested up to $25 million in total capitalization. The budget does not provide specifics; however, it does state that the amount of money a business will be able to raise in a year will increase.

PERSONAL TAX MEASURES

There are no changes being made to personal tax rates. However, Premier Silver is proposing amendments to the Yukon Basic Personal Amount under the Income Tax Act to align with the amounts recently changed by the Government of Canada.

INDIRECT TAX MEASURES

Yukon has increased the rate of insurance premium tax to 4%, effective January 1, 2021. This rate has been increased to offset some of the revenue loss to the territory arising due to the reduction in the small business tax rate to zero. Businesses insuring risk in Yukon should take note of the increase.

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Authors: Ibrahim Hatia, David Crawford, Krutika Iyer, Ryan Fullerton, Julie Poulin, Beverly Lucas-King, Betsy Qin, Bill Macqueen, Rob Dew, Fredie Eaton, Alannah Johnson, Sigita Bersenas, Chetna Thapar, Jerry Chen