On Friday, August 4, 2023, the Department of Finance released for public consultation extensive legislative proposals accompanied by explanatory notes (the “August Proposals”). The August Proposals relate to various measures previously announced in Budget 2023. See here for our 2023 Federal Budget Review.
What do the August Proposals amend?
There are several pieces of legislation that may be affected by the August Proposals. These include the Income Tax Act, the Excise Tax Act, the Excise Act, 2001, the Select Luxury Items Tax Act, the Digital Services Tax Act, and the Global Minimum Tax Act.
The proposed measures were grouped together in the news release as follows:
- Measures to grow Canada’s clean economy. In recent years, several clean energy investment tax credits and other green tax incentives have been announced. The August Proposals seek feedback on the carbon capture, utilization and storage (CCUS) investment tax credit, the clean technology investment tax credit, and the related labour requirements that must be met in order to be eligible for the higher credit rate. In addition, the August Proposals include measures relating to the reduced tax rates for zero emission technology manufacturers and the addition of lithium from brines to the flow-through share regime and the critical mineral exploration tax credit.
- Measures to deliver tax relief for Canadian workers and businesses. These measures include employee ownership trusts as an additional succession planning option for Canadian businesses. They also include measures relating to the intergenerational business transfer framework that was initially announced in Budget 2023 in response to the purported shortcomings in Bill C-208. Further, the August Proposals include matters relating to registered compensation arrangements and the treatment of credit unions.
- Measures to close tax loopholes. The August Proposals include changes to the alternative minimum tax (AMT) regime, the tax on share buybacks by public corporations, real estate investments trusts, SIFT trusts, SIFT partnerships and other entities, and modernizing the general anti-avoidance rules (GAAR).
- Measures to ensure tax fairness. These measures relate to global minimum tax (OECD Pillar Two) matters and revised draft legislation for the digital services tax.
- Sales and excise tax measures. The August Proposals include technical GST/HST amendments that affect financial institutions, enhancements to the vaping product taxation framework, and measures relating to the tax-exempt sales of motive fuels for export.
- Previously announced measures. The August Proposals also include the excessive interest and financing expenses limitations (EIFEL) rules, which were originally announced in the 2021 Budget. Other measures relate to remittance obligations for licensed cannabis producers, and clarifying the tax treatment of luxury items.
What else is happening?
Details regarding the clean hydrogen investment tax credit are expected to be released soon. It is anticipated that the cleanest forms of blue hydrogen will be eligible for the credit.
Further, Finance is continuing to seek feedback regarding the substantive CCPC (Canadian-controlled private corporation) proposals that were first announced in Budget 2022.
How can we help?
If you have any questions about how the August Proposals may affect you or your business, please reach out to a member of the Miller Thomson Corporate Tax or Sales, Commodity and Indirect Tax Team.
The consultation period for most of the proposed draft legislation ends on September 8, 2023. However, submissions regarding the Global Minimum Tax (Pillar Two) are due on September 29, 2023. We will continue to monitor for any further developments.
