Corporate Tax Rates and Legislation: Q2 2023 Accounting status

July 05, 2023

Issue 2 – Q2 2023 Accounting status

Legislative changes—April 1 to June 30, 2023
Accounting updates—April 1 to June 30, 2023
Federal and provincial/territorial bills—tabled or received royal assent in 2023
Corporate income tax rates—accounting status (January 1, 2020 to June 30, 2023)

Legislative changes — April 1 to June 30, 2023

Legislative developments from April 1 to June 30, 2023, that affect income taxes, are outlined below.

Federal Bill C-47 (2023 federal budget and other measures)

Federal Bill C-47, An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023, which includes the Notice of Ways and Means Motion tabled on April 17, 2023, received first reading on April 20, 2023 and royal assent on June 22, 2023. Bill C-47 does not implement any of the key 2023 federal budget measures discussed in our Q1 2023 publication, but does implement:

the 2021 federal budget measure that enhances Canada’s mandatory disclosure rules (for more information, see our Tax Insights “Mandatory disclosure rules: Taxpayers, advisers and promoters need to prepare”
2022 federal budget measures that:
- curtail certain aggressive tax planning arrangements by financial institutions that result in artificial tax deductions, for dividends and related dividend compensation payments that are paid or become payable after April 6, 2022 (exceptions apply)
- apply the Model Reporting Rules for Digital Platforms developed by the Organisation for Economic Co-operation and Development (OECD)

Status: Bill C-47 is considered substantively enacted for Canadian GAAP as at June 8, 2023, and enacted for US GAAP as at June 22, 2023.

Provincial/territorial budgets

Prince Edward Island introduced its 2023 budget on May 25, 2023. The budget did not announce changes to the province’s general and M&P corporate income tax rates, nor did it contain key corporate income tax measures.

Status: As at June 30, 2023, Prince Edward Island has tabled legislation to implement its budget measures, but none of the measures relate to general corporate income tax changes.

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Accounting updates — April 1 to June 30, 2023

Amendments to IAS 12, Income Taxes, to address Pillar Two (global minimum tax)

On May 23, 2023, the International Accounting Standards Board (IASB) issued narrow-scope amendments to IAS 12 Income Taxes, to address the potential implications of the proposed global minimum tax’s implementation on the accounting for income taxes. The amendments will introduce:

a temporary exception from accounting for deferred taxes arising from application of the OECD’s Pillar Two model rules, effective May 23, 2023
targeted disclosure requirements for affected entities, to help users of the financial statements better understand a company’s exposure to Pillar Two income taxes arising from the legislation, particularly before its effective date, for annual reporting periods beginning after December 31, 2022

For more information, see our Viewpoint “Global implementation of Pillar Two: narrow-scope amendments to IAS 12.”

Proposed amendments to the IFRS for SMEs Accounting Standard, to address Pillar Two (global minimum tax)

On June 1, 2023, the IASB issued an exposure draft, International Tax Refom–Pillar Two Model Rules: Proposed amendments to the IFRS for SMEs Standard. The exposure draft proposes narrow-scope amendments to Section 29 (Income Tax) of the IFRS for SMEs Accounting Standard, to address the potential implications of the proposed global minimum tax’s implementation on the accounting for income taxes for small- and medium-sized entities (SMEs). The proposed amendments will introduce:

a temporary exception from accounting for deferred taxes arising from application of the OECD’s Pillar Two model rules
targeted disclosure requirements for affected SMEs, in periods when Pillar Two legislation is in effect

The amendments will also clarify that “other events” in the disclosure objective for income tax include enacted or substantively enacted Pillar Two legislation. The IASB exposure draft is open for comment until July 17, 2023, and the IASB plans to issue any resulting amendments in the third quarter of 2023.

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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 April 1 to June 30, 2023.

	Legislation		Recognized for accounting purposes
	Bill #	Bill name	Canada	US GAAP
Federal	C-47	An Act to implement certain provisions of the budget tabled in Parliament on March 28, 2023	June 8/23¹	June 22/23
Alberta	10	Financial Statutes Amendment Act, 2023	March 9/23	March 28/23
British Columbia	10	*Budget Measures Implementation Act, 2023*	February 28/23	May 11/23
Manitoba	14	*The Budget Implementation and Tax Statutes Amendment Act, 2023*	March 10/23	April 3/23
Newfoundland and Labrador	38	*An Act to Amend the Revenue Administration Act and an Act to Amend the Income Tax Act, 2000*	April 25/23	May 25/23
Ontario	85	*An Act to implement Budget measures and to amend various statutes*	March 23/23	May 18/23
Québec	6	An Act to give effect to fiscal measures announced in the Budget Speech delivered on 22 March 2022 and to certain other measures	December 9/22	March 15/23
Québec	27	*An Act to amend the Taxation Act, the Act respecting the Québec sales tax and other provisions*	May 30/23	Not as at June 30/23
Saskatchewan	128	The Mineral Resources Amendment Act, 2023	March 27/23	May 17/23
Saskatchewan	133	An Act to Amend The Income Tax Act, 2000	April 5/23	May 17/23
Because Canada has a minority government, a federal bill is only considered substantively enacted for Canadian GAAP once it passes third reading in the House of Commons.

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Corporate income tax rates—accounting status (January 1, 2020 to June 30, 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 April 1 to June 30, 2023.

		Effective date	Rate	Recognized for accounting purposes		Bill #
				Canada	US GAAP
Federal	General and manufacturing and processing (M&P)	Before January 1/20	15%¹	Before January 1/20		N/A
	Provincial SIFT tax factor/rate²	Before January 1/20	Varies²	Before January 1/20		N/A
	Additional tax on banks and life insurers	For taxation years ending after April 7, 2022³	1.5%	December 8/22⁴	December 15/22	C-32
Alberta	General and M&P	Before January 1/20	11%	Before January 1/20		N/A
		January 1/20	10%	Before January 1/20		N/A
		July 1/20	8%	October 20/20	December 9/20	35
		January 1/21	9%	Before January 1/20		N/A
		January 1/21	8%	October 20/20	December 9/20	35
		January 1/22	8%	Before January 1/20		N/A
British Columbia	General and M&P	Before January 1/20	12%	Before January 1/20		N/A
Manitoba	General and M&P	Before January 1/20	12%	Before January 1/20		N/A
New Brunswick	General and M&P	Before January 1/20	14%	Before January 1/20		N/A
Newfoundland and Labrador	General and M&P	Before January 1/20	15%	Before January 1/20		N/A
Northwest Territories	General and M&P	Before January 1/20	11.5%	Before January 1/20		N/A
Nova Scotia	General and M&P	Before April 1/20	16%	Before January 1/20		N/A
Nova Scotia	General and M&P	April 1/20	14%	March 3/20	March 10/20	243
Nunavut	General and M&P	Before January 1/20	12%	Before January 1/20		N/A
Ontario	General	Before January 1/20	11.5%	Before January 1/20		N/A
	M&P		10%
	Corporate Minimum Tax (CMT)		2.7%
Prince Edward Island	General and M&P	Before January 1/20	16%	Before January 1/20		N/A
Québec	General and M&P	Before January 1/20	11.6%	Before January 1/20		N/A
	General and M&P	January 1/20	11.5%	Before January 1/20		N/A
	SIFT Distribution Tax	Before January 1/20	Varies⁵	Before January 1/20		N/A
Saskatchewan	General	Before January 1/20	12%	Before January 1/20		N/A
Saskatchewan	M&P	Before January 1/20	10%	Before January 1/20		N/A
Yukon	General	Before January 1/20	12%	Before January 1/20		N/A
Yukon	M&P	Before January 1/20	2.5%	Before January 1/20		N/A
Starting taxation years beginning after 2021, federal Bill C-19 (royal assent: June 23, 2022) temporarily reduces corporate income tax rates for qualified zero-emission technology manufacturing income by 50% until 2028, with the rate reduction gradually phased out until it is eliminated for taxation years beginning after 2031; these rate reductions are substantively enacted for Canadian GAAP and enacted for US GAAP as at June 23, 2022. The 2023 federal budget proposes to: (i) extend the availability of the 50% reduced rates by three years, to 2031, with the rate reduction gradually phased out until it is eliminated for taxation years beginning after 2034; and (ii) expand these reduced rates to income from certain nuclear manufacturing and processing activities, for taxation years beginning after 2023; these 2023 federal budget measures are not considered substantively enacted for Canadian GAAP or enacted for US GAAP as at June 30, 2023. Except for Québec, the “provincial Specified Investment Flow-Through (SIFT) tax rate” is: - based on the general provincial corporate income tax rate for each province in which the SIFT has a permanent establishment - 10% for SIFTs that do not have a permanent establishment in a province The additional tax on banks and life insurers applies on taxable income over $100 million; the exemption is shared by related corporations. For a taxation year that includes April 7, 2022, the additional tax is prorated based on the number of days in the taxation year after April 7, 2022. Because Canada has a minority government, a federal bill is only considered substantively enacted for Canadian GAAP once it passes third reading in the House of Commons. Québec’s SIFT Distribution Tax equals the Québec corporate income tax rate that would apply if the SIFT were a corporation.

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