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Summary of Federal Tax Relief for 2008 and 2009
Personal Income Tax Measures
1 Tax-Free Savings Account January 1, 2009 The Tax-Free Savings Account announced in Budget 2008 is a flexible savings vehicle that allows Canadians to contribute up to $5,000 per year to the account, with unused contribution room being carried forward. Investment income, including capital gains, earned within the account will not be taxed, and withdrawals will be tax-free.
2 Registered Retirement Income Funds (RRIFs) Applies to 2008 taxation year only The 2008 Economic and Fiscal Statement proposed a one-time 25-per-cent reduction in the required minimum RRIF withdrawal for 2008 to help retirees affected by the market downturn by allowing them to keep more of their savings in their RRIFs.
3 Northern Residents Deduction January 1, 2008 Budget 2008 increased the Northern Residents Deduction by 10 per cent.
4 Registered Education Savings Plans (RESPs) January 1, 2008 Budget 2008 made RESPs more responsive to the changing needs of families and students by increasing both the contribution period and the number of years RESPs may remain open.
5 Medical Expense Tax Credit January 1, 2008 Budget 2008 expanded the list of expenses eligible for the Medical Expense Tax Credit.
6 Registered Disability Savings Plan (RDSP) 2008 taxation year Budget 2007 introduced the RDSP to help parents save to ensure the long-term financial security of a child with a severe disability. In a December 23, 2008 news release, the Government announced that the deadline for opening an RDSP, making contributions and applying for the matching Grant and the income-tested Bond for the 2008 contribution year has been extended to March 2, 2009 from December 31, 2008. The 2009 RDSP contribution year will begin March 3, 2009.
7 Donations of exchangeable securities Donations after February 25, 2008 Budget 2008 extended the capital gains exemption on donations of listed securities to gains realized on certain unlisted securities that are exchanged for listed securities that are subsequently donated. (Applies also to corporations.)
8 Phased retirement January 1, 2008 To provide more flexibility to employers to offer phased retirement programs, and to increase the reward to older workers from full-time work, Budget 2007 amended the income tax rules to permit an employee to receive pension benefits from a defined benefit Registered Pension Plan and simultaneously accrue further benefits, subject to certain constraints.
9 Amateur Athlete Trusts 2008 taxation year In a December 29, 2008 news release, the Government announced proposed changes to the Income Tax Act that would increase the number of Canadian amateur athletes eligible to defer income tax on income from endorsements, prizes and other remuneration related to their athletic endeavours.
10 Meal expenses for truck drivers Being phased in from March 19, 2007 to January 1, 2011 Budget 2007 increased the deductible portion of the cost of food and beverages consumed by long-haul truck drivers to 80 per cent from 50 per cent over a five-year period.
Business Income Tax Measures
11 Reducing the general corporate income tax rate January 1, 2008 to January 1, 2012 The 2007 Economic Statement introduced reductions in the general corporate income tax rate to 15 per cent by 2012. On January 1, 2008, the rate was reduced from 22.12 per cent (including the corporate surtax) to 19.5 per cent. The general corporate income tax rate will be further reduced to 19 per cent effective January 1, 2009, to 18 per cent effective January 1, 2010, to 16.5 per cent effective January 1, 2011, and to 15 per cent effective January 1, 2012.
12 Reducing the small business tax rate January 1, 2008 Budget 2006 and the 2007 Economic Statement reduced the small business tax rate from 13.12 per cent (including the corporate surtax) to 11 per cent effective January 1, 2008.
13 Aligning capital cost allowance rates with useful life February 26, 2008 Capital cost allowance (CCA) is a deduction for tax purposes that recognizes the depreciation of capital property. As part of the Government's ongoing review of CCA rates, Budget 2008 introduced several improvements to the CCA system.
14 Temporary incentive for manufacturing and processing machinery and equipment March 19, 2007 to December 31, 2011 To assist the manufacturing and processing sector in restructuring to meet current economic challenges and to increase its long-term prospects, Budget 2007 and Budget 2008 introduced measures that allow manufacturing and processing businesses to write off their capital investments in machinery and equipment using a special two-year 50-per-cent straight-line CCA rate for eligible assets acquired between March 19, 2007 and December 31, 2009. This will be followed by a two-year period (calendar years 2010 and 2011) during which accelerated CCA will be provided on a declining basis.
15 Accelerated CCA for clean energy generation February 26, 2008 Budget 2008 announced a number of measures to expand eligibility for accelerated CCA under Class 43.2 to additional applications involving ground source heat pumps and energy-from-waste.
16 Mineral Exploration Tax Credit April 1, 2008 Budget 2008 extended the temporary Mineral Exploration Tax Credit for investors in flow-through shares for an additional year, to March 31, 2009. The one year "look-back" rule will allow funds raised with the benefit of the credit to support exploration spending up until the end of 2010.
17 Scientific Research and Experimental Development (SR&ED) Tax Incentive Program February 26, 2008 Budget 2008 enhanced the availability and accessibility of the SR&ED Tax Incentive Program for small and medium-sized businesses.
18 Extension of 10-year carry-forward of investment tax credits (ITCs) to 20 years for credits earned in the 1998 to 2005 taxation years 2008 taxation year Budget 2006 extended the carry-forward period for unused ITCs to 20 years from 10 years, applicable to ITCs earned in taxation years that ended after 2005. The carry-forward period was extended to increase the likelihood that firms will be able to apply ITCs against future tax liabilities. On January 21, 2008, the Minister of Finance issued a press release announcing that the 20-year carry-forward period would be further extended to unused ITCs earned in the 1998 to 2005 taxation years. This change will facilitate a smooth transition to the new single corporate tax administration in Ontario, starting in the 2009 taxation year.
19 Withholding tax on arm’s length interest January 1, 2008 Budget 2007 announced the elimination of withholding tax on interest paid to arm’s length non-residents.
20 Withholding tax on non-arm’s length interest paid to U.S lenders Being phased out starting in 2008 As part of the fifth Protocol to the Canada-U.S. Tax Treaty, withholding tax on interest payments from Canada to non-arm’s length U.S. lenders is being phased-out over a three-year period. The rate was reduced from 10 per cent to 7 per cent as of January 1, 2008. It is being further reduced from 7 per cent to 4 per cent as of January 1, 2009. The withholding tax on non-arm’s length interest will be completely eliminated as of 2010.
21 Gains and losses on debt owed in a foreign currency Applies generally to acquisitions of control that occur after March 7, 2008 In a March 7, 2008 news release, the Minister of Finance announced the extension of the existing treatment of accrued capital gains and losses on an acquisition of control of a corporation to a corporation’s accrued capital gains and capital losses resulting from foreign currency fluctuations on debt denominated in a foreign currency.
Sales and Excise Tax Measures
22 Second goods and services tax (GST) rate reduction January 1, 2008 The 2007 Economic Statement announced the reduction of the 6-per-cent GST rate to 5 per cent.
23 GST/HST health measures February 27, 2008 Budget 2008 expanded the list of GST/HST-exempt health care services to include training to help individuals cope with disabilities or disorders, such as autism, and expanded the list of GST/HST-free medical and assistive devices to include service dogs, for instance.
