Federal Budget 2017: How Are Taxes Different Now?

On March 22nd, the Canadian Liberal government released their new federal budget for 2017. It is designed to elaborate on the spending and tax policies that the government will focus on for the year. If you want to know what changes were made to federal tax policy that might affect you or your business, we wrote this guide to help summarize the major issues:

federal budget

Business Taxes

When it comes to companies in Canada, from big corporations to small businesses, there were no major changes announced to tax policy. No increases in taxes on investors, but also no major incentives to aid entrepreneurs or small businesses. There were some small changes to business taxes, however, including the following:

  • Eliminating the Use of Billed-Basis Tax Accounting — deferral of taxes for work that is still in progress will be phased out over two years for accountants, dentists, lawyers, and other certain professions
  • Increased Employment Insurance Premiums — there will be a 5-cent increase in EI premiums with some new measures to help give more people access to EI benefits
  • Review of tax benefits for small businesses — no new policy was announced yet but they will review things such as dividends and capital gains spread among family members

There are other small changes made to more obscure tax policies. If you run a business and are not sure how they all work, make sure you contact your accountant to make sure you are adapting to these changes properly.

International Taxes

When it comes to international taxes, there was a continuation of the sorts of efforts begun in the 2016 federal budget to deal with “base erosion and profit shifting” (BEPS). As a result, the 2017 budget pointed to recent measures already enacted and proposed future changes including the following:

  • Reporting enterprise income — Multi-national corporations must file country-by-country reports after new legislation was passed in December 2016
  • Improving current tax treaties — mutual agreements with other countries designed to improve the process used to address disputes related to tax treaties
  • New transfer pricing guidelines — the Canadian Revenue Agency will be applying revised guidelines on how to determine if multinational companies are pricing their transactions properly

There are other policies designed to reduce tax avoidance in international taxes, which any Canadian business that has business in other countries would be wise to learn. These new policies may focus on larger multinational companies but will impact smaller and independent businesses as well.

Personal Taxes

Similar to businesses, there were no major changes to the policies affecting your personal taxes in the new federal budget for the year. There were no big new tax credits for middle class professions, but there were some proposed changes to certain tax credits. Here are a few of those proposed changes:

  • Eliminate public transit tax credits — any transit pass purchased on June 30th, 2017 or after will not be eligible for tax credits
  • Eliminate new caregiver tax credits — the current Caregiver Credit, Family Caregiver Tax Credit and Infirm Dependant Credit are all proposed to be removed
  • Extend eligibility for tuition tax credits — the number of courses eligible for tuition tax credits and the amount of bursaries that can receive scholarship exemption would be increased

There are other proposed changes and reviews to things like the use of private corporations to affect personal income tax, home relocation loans, and “advantage rules” for things like TFSA’s and RRSP’s. Most of the changes either have to do with halting previous policies that did not have the desired effect, and reducing some tax advantages for individuals with an income above $200,000. If you want to know how some of these new changes would affect you, contact your accountant.

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