The Canadian government unveiled its 2021 spring federal budget on April 19, 2021 with an emphasis on economic recovery and supporting taxpayers through the financial challenges of COVID-19.

What does this budget mean for individuals and businesses from a tax perspective? We’ve highlighted the key updates in our summary below:

2021 Federal Budget Highlights

  • No changes to capital gains tax rates

  • No changes to principal residence exemption rules

  • No changes to eliminate non-CCPC structure planning (i.e. structure to earn investment income without paying refundable tax)

  • No changes in offshore trusts

Personal Tax Measures

  • Increased requirements for electronic filing and communications with CRA

  • Commitment to introduce rules implementing the previous stock option proposals that would limit the 50% deduction

  • Broadening of disability tax credit rules

  • Enhancement of Canada Workers Benefit non-refundable tax credit

  • Amendment to allow individuals the option to deduct COVID-19 benefit repayments in the year the benefit was received (rather than the year repaid)

Business/International Tax Measures

  • Temporary immediate expensing of certain property acquired after budget day by CCPCs that would otherwise be subject to CCA rules (must be available for use before 2024

  • Proposes to implement rules consistent with BEPS Action 2 recommendations to address hybrid mismatch arrangements for years starting on or after January 1, 2023

  • Proposes to implement rules consistent with BEPS Action 4 recommendations to address earnings stripping by introducing new interest deductibility rules (with some exemptions)

  • New 3% Digital Services Tax

  • Broadens the GST/HST rules to capture e-commerce businesses

  • New mandatory disclosure on the adoption of uncertain tax positions (will only apply to corporations with at least $50m of assets)

Sales Tax/Other Tax Measures

  • New 10%/20% tax on the sale of luxury cars and aircraft over $100,000 and boats over $250,000 (GST/HST to then be charged on tax)

  • New 3% Digital Services Tax

  • Proposed new 1% tax on the value of unused or underused residential real estate owned by foreign non-residents (starting in 2022)

  • As of 2023, all non-citizens and non-permanent residents with Canadian real estate will have to file annual declarations to declare it and determine whether they owe the tax

  • New 10%/20% tax on the sale of luxury cars and aircraft over $100,000 and boats over $250,000 (GST/HST to then be applied to purchase price inclusive of proposed tax)

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