Corporate Tax Rates and Legislation: Q4 2023 Accounting status

Legislative changes — October 1 to December 31, 2023

Legislative developments from October 1 to December 31, 2023, that affect income taxes, are outlined below.

Federal Bill C-59 (2023 federal budget and other measures)

Federal Bill C-59, An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023, which includes the Notice of Ways and Means Motion tabled on November 28, 2023, received first reading on November 30, 2023. Key tax measures in Bill C-59:

• introduce a 2% tax on the net value of equity repurchased by certain public corporations and other publicly listed entities
• limit the amount of net interest and financing expenses that certain taxpayers may deduct in computing their taxable income, by introducing the excessive interest and financing expenses limitation (EIFEL) regime
• provide for refundable investment tax credits (ITCs) for both clean technology equipment and carbon capture, utilization and storage equipment, and require that certain labour requirements be met to qualify for the full ITC rates 
• extend the availability of the reduced tax rates for zero-emission technology manufacturing and processing (M&P) income by three years and expand the eligible activities that qualify for these reduced rates to certain nuclear M&P activities 
• deny the dividend received deduction for dividends received by Canadian financial institutions after 2023 on certain shares that are held as mark-to-market properties
• implement the Digital Services Tax Act, which introduces a 3% tax in respect of Canadian-source digital services revenue earned by large domestic and foreign taxpayers
• eliminate the tax benefits arising under certain hybrid mismatch arrangements
• amend the general anti-avoidance rule (GAAR)

For more information, see our Tax Insights: 

• “Bill C-59 introduces EIFEL, environmental incentives, digital services tax, GAAR changes and more”
• “Bill C-59: Excessive interest and financing expenses limitation (EIFEL) regime”
• “Clean economy investment tax credits (Fall 2023 update)”
• “Bill C-59: Changes to the general anti-avoidance rule (GAAR)”

Status: As at December 31, 2023, Bill C-59 is not considered substantively enacted for Canadian GAAP or enacted for US GAAP.

2023 Federal Fall Economic Statement

On November 21, 2023, the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, presented the 2023 federal Fall Economic Statement (economic statement). Key tax measures contained in the economic statement include:

• providing additional details on the Clean Hydrogen Investment Tax Credit
• expanding eligibility for the Clean Technology Investment Tax Credit and the Clean Electricity Investment Tax Credit to support the generation of electricity, heat, or both, from waste biomass
• enhancing the Canadian journalism labour tax credit by increasing: 
  • the annual cap on labour expenditures per eligible newsroom employee from $55,000 to $85,000
  • the tax credit rate from 25% to 35% until December 31, 2026
• introducing an exception to the proposed measure that denies the dividend received deduction for financial institutions (see Federal Bill C-59 above), for dividends received on “taxable preferred shares” after 2023
• providing that bona fide concessional loans from public authorities with reasonable repayment terms will generally not be considered government assistance, effective November 21, 2023
• making an exemption for international shipping income in the Income Tax Act generally available to Canadian resident companies, for taxation years beginning after December 30, 2023

For more information, see our Tax Insights:

• “2023 Federal Fall Economic Statement: Tax highlights” 
• “Clean economy investment tax credits (Fall 2023 update)”

Status: As at December 31, 2023:

• the measure relating to the dividend received deduction for financial institutions is included in federal Bill C-59 (see above [and Table 1] for the status of Bill C-59 as at December 31, 2023)
• the measures relating to bona fide concessional loans and international shipping income are included in federal draft legislative proposals (see below) and the remaining measures have not been tabled as a bill in the House of Commons and therefore are not considered substantively enacted for Canadian GAAP or enacted for US GAAP

Federal draft legislative proposals (clean energy ITCs and other measures)

On December 20, 2023, the Department of Finance released draft legislative proposals to implement:

• 2023 federal budget measures that introduce the Clean Hydrogen Investment Tax Credit and Clean Technology Manufacturing Investment Tax Credit (for a summary of these ITCs, see Tax Facts and Figures: Canada 2023 (page 24) 
• key 2023 federal Fall Economic Statement measures (see above) relating to bone fide concessional loans and international shipping income

Status: As at December 31, 2023, the draft legislative proposals have not yet been tabled as a bill in the House of Commons and therefore are not considered substantively enacted for Canadian GAAP or enacted for US GAAP.

“Designated” notifiable transactions 

On November 1, 2023, the Canada Revenue Agency designated its first set of transactions for the purposes of the “notifiable transactions” regime (which are part of Canada’s enhanced mandatory disclosure rules that were enacted by federal Bill C-47 [see Table 1]). Effective November 1, 2023, “designated” transactions are those relating to:

• creating straddle loss transactions using a partnership
• avoiding the deemed disposal of trust property
• manipulating bankruptcy status to reduce a forgiven amount in respect of a commercial obligation
• relying on purpose tests in section 256.1 of the Income Tax Act to avoid a deemed acquisition of control
• using back-to-back arrangements to circumvent the thin capitalization and the non-resident withholding tax rules 

See our Tax Insights “Canada Revenue Agency officially designates first notifiable transactions” for more information.

Status: The requirement for taxpayers, advisers and promoters to file a prescribed information return to report a transaction or series of transactions that is the same as, or substantially similar to, these designated transactions or series of transactions, is effective November 1, 2023.

Québec Information Bulletin 2023-6

On November 7, 2023, Quebec’s Ministère des Finances released Information Bulletin 2023-6 “Fiscal measures announced as part of the presentation of the Update on Québec’s Economic and Financial Situation.” Key tax measures in Information Bulletin 2023-6:

• extend and enhance certain parameters of the tax credit relating to investment and innovation
• abolish the additional 30% capital cost allowance (that was available for certain property) for property acquired after December 31, 2023

See our Tax Insights “Update on Québec’s Economic and Financial Situation” for more information.

Status: As at December 31, 2023, the measures implemented by Information Bulletin 2023-6 have not been tabled as a bill in the National Assembly of Québec and therefore are not considered substantively enacted for Canadian GAAP or enacted for US GAAP.

Québec Information Bulletin 2023-7

On December 19, 2023, Quebec’s Ministère des Finances released Information Bulletin 2023-7 “Changes to various fiscal measures and harmonization with certain federal fiscal measures.” Information Bulletin 2023-7 includes measures that:

• modify some aspects of the incentive deduction for the commercialization of innovations in Quebec to comply with Organisation for Economic Co-operation and Development standards
• adjust the criteria governing an employee’s connection to an establishment (due to teleworking) for the tax credits for international financial centres, effective for taxation years that begin after December 19, 2023
• extend the refundable tax credit for the digital transformation of print media by one year to December 31, 2024
• postpone the deadline to file an election to choose the alternative calculation method for the former tax holiday for large investment projects, from March 31, 2024 to December 31, 2024

Status: As at December 31, 2023, the measures implemented by Information Bulletin 2023-7 have not been tabled as a bill in the National Assembly of Québec and therefore are not considered substantively enacted for Canadian GAAP or enacted for US GAAP.

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Accounting updates — October 1 to December 31, 2023

Amendments to enhance income tax disclosures (US GAAP)

On December 14, 2023, the US Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU), Income Taxes (Topic 740): Improvements to Income Tax Disclosures (2023-09), that makes amendments to enhance US GAAP income tax disclosures in the following areas:

• tax rate reconciliation
• cash taxes paid 

The ASU also contains certain other amendments to improve income tax disclosures. The amendments generally apply to all entities that are subject to income taxes, with some exceptions for certain amendments. The standard is effective for annual periods beginning after: 

• December 15, 2024 for public business entities
• December 15, 2025 for other entities

The new guidance will be applied prospectively with the option to apply retrospectively; early adoption is permitted. For more information, see our In depth “FASB issues guidance on income tax disclosures.” 

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Federal and provincial/territorial bills 

Table 1 lists key bills that include corporate income tax rate changes or other income tax changes (e.g. for research and development) that were:

• tabled or received royal assent during 2023, or
• tabled before 2023, but did not receive royal assent before 2023

Table 1: Federal and provincial/territorial bills
Bolded rows indicate a change in status from October 1 to December 31, 2023.

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Corporate income tax rates—accounting status (January 1, 2020 to December 31, 2023) 

The following information excludes Canadian-controlled private corporation small business rates and thresholds.

Table 2: Corporate income tax rates—accounting status
There were no changes in status from October 1 to December 31, 2023.

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