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On November 30, 2020, the Deputy Prime Minister and federal Minister of Finance, Chrystia Freeland, presented the 2020 Federal Fall Economic Statement (economic statement). The economic statement does not change personal or corporate income tax rates, but does:
This Tax Insights discusses these and other tax initiatives proposed in the economic statement.
The government plans to move ahead with new rules for the taxation of employee stock options, which will be effective for stock options granted after June 2021. These rules build on proposals released in 2019:
The $200,000 limit applies to an employee on a calendar year basis, for each separate employer (but options issued by multiple non-arm’s length employers would have only one $200,000 limit). If the value of the stock to be acquired under options vesting in a year by an employee exceeds $200,000, the stock option deduction would not apply to taxable benefits realized on a related portion of those options.
The proposed new rules also clarify that an employee donating publicly listed shares acquired under a stock option that exceeds the $200,000 limit would not be eligible for the related stock option deduction. The employee should still be entitled to claim the charitable donation tax credit for the full value of the shares donated.
Provided that an employer complies with certain notification requirements, the portion of an employee’s stock option employment benefit in a year that does not qualify for the stock option deduction under these new rules would be deductible by the employer in that year. The employer could also elect to have this tax treatment apply for stock options below the $200,000 threshold.
The rules apply to options issued by an employer that, at the time the options are granted to an employee, is:
* as reflected in the last annual consolidated financial statements presented to the shareholders or unitholders of the ultimate parent entity of that group
Employers not subject to the new rules will not be permitted to opt in to the new tax treatment.
The economic statement provides details for the CEWS, CERS and Lockdown Support programs for:
Details for these programs for March 14, 2021 to June 30, 2021 will be provided at a later date.
The government proposes to increase the maximum wage subsidy rate for active employees to 75% (from 65%) for periods 11 to 13. The maximum base subsidy remains 40%, but the top-up wage subsidy rate will increase to 35% (from 25%). As a result, employers who have experienced a revenue decline of 70% or more in their respective reference period will be eligible for a 75% wage subsidy rate for active employees, while employers who have experienced a revenue decline of between 50% and 70% will qualify for a combined wage subsidy rate of between 40% and 75% for these employees. The wage subsidy rate for other employers will remain unchanged at 80% of the revenue decline percentage.
The government proposes to extend the current rate structure for the CERS and Lockdown Support programs to periods 11 to 13. As a result, for example, eligible entities that have experienced a revenue decline of 70% or more in their respective reference period will be eligible for a 65% CERS base subsidy rate, plus an additional 25% for the lockdown support.
The qualifying criteria and related rules for these programs will otherwise remain unchanged. For more information on the CEWS, CERS and Lockdown Support programs and details that apply for September 27, 2020 to December 19, 2020, see our Tax Insights “New Canada Emergency Rent Subsidy and revised Canada Emergency Wage Subsidy provide more relief to businesses and other organizations”.
The government proposes to implement a tax on certain corporations providing digital services in Canada, effective January 1, 2022. This tax will apply until an acceptable common approach among the international community (led by the Organisation for Economic Co-operation and Development) comes into effect. Details will be announced in the 2021 federal budget.
The economic statement announces that the Canada Revenue Agency (CRA) will permit a simplified home office expense deduction for employees working from home due to the COVID-19 pandemic in 2020. These employees will be allowed to deduct up to $400 (expected to be a per diem amount for the number of days working from home, up to this maximum), with no requirement to track or report detailed expenses. The CRA will generally not request that they provide a signed form T2200 from their employer. Further details will be announced by the CRA. For more information on deducting home office expenses, see our Tax Insights "Employee home office expenses during the COVID-19 pandemic - tax deductions."
CCB recipients will receive four additional payments in 2021, of:
The first payment will be made after the related legislation is enacted, with each of the other amounts to be paid by the end of the next three quarters. Like the CCB, these supplementary payments will be made to the child’s primary caregiver and will not be taxable or reduce benefits paid under the goods and services tax credit; nor will they be included in income for the purposes of federal income-tested programs delivered outside of the income tax system.
The government proposes to temporarily zero-rate supplies of certain face masks (medical and non-medical) and face shields designed for human use, effective for supplies made after December 6, 2020, until their use is no longer broadly recommended by public health officials for the COVID-19 pandemic.
To ensure the GST/HST system applies in a fair and efficient manner to the growing digital economy, the government proposes that, for supplies that generally become due (or made) after June 30, 2021:
Comments to the government on these three proposals are requested by February 1, 2021. For more information on these proposed new GST/HST rules, see our Tax Insights "New GST/HST regime for non‑resident vendors of digital products will be effective July 1, 2021."
The economic statement outlines the government’s initiatives to improve the fairness of Canada’s tax system, as follows: