The earned depletion deduction supplemented the deduction for actual costs incurred with an extra deduction of up to 33 1/3% of certain exploration and development expenses. This measure was phased out as part of the 1987 Tax Reform and, accordingly, new expenditures cannot be added to the earned depletion base after 1989. As in the case of Canadian Exploration Expenses and Canadian Development Expenses, earned depletion could be pooled and any remaining balance could be carried forward indefinitely for use in later years. As a result, deductions can still be made on the basis of existing unused depletion pools. The deduction for earned depletion is generally limited to 25% of the corporation's annual resource profits, although mining exploration depletion can be deducted against non-resource income.

Personal (including trusts) and corporate income tax

Businesses in the mining and oil and gas industry

Other

Income Tax Regulations, section 1201

• Introduced in Budget 1971.
• Phased out in 1990 as part of the 1987 Tax Reform.

To encourage or attract investment

This measure was designed to encourage corporations to undertake exploration and development of natural resources (Proposals for Tax Reform, 1969; Summary of 1971 Tax Reform Legislation; Budget, May 6, 1974; Budget, November 18, 1974).

Non-structural tax measure

This measure permitted the deduction of an amount that exceeded the expense actually incurred to earn income.

Business - natural resources

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

70431 - Economic affairs - Fuel and energy - Coal and other solid mineral fuels

70432 - Economic affairs - Fuel and energy - Petroleum and natural gas

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on earned depletion balances of unincorporated businesses is not available, but such balances are not expected to be significant.

Corporate income tax: T2 Corporation Income Tax Return

Personal income tax: No estimate is available.

Corporate income tax: The cost of this measure is equal to the amount of earned depletion claimed, multiplied by the general corporate income tax rate.

Personal income tax: No projection is available.

Corporate income tax: Projections are based on current market conditions.

A small number of corporations (fewer than 20) claimed this deduction in 2021. No data is available for unincorporated businesses.

A student could claim a non-refundable tax credit at the lowest personal income tax rate on an amount of $400 per month of study for full-time students and $120 per month of study for part-time students. The credit had to be claimed on the tax return of the student. If the student did not need to use all of the credit, the unused amount could be transferred to a supporting individual or carried forward to a subsequent taxation year. Budget 2016 announced the elimination of this measure as of 2017. Amounts carried forward from prior years may still be claimed.

Personal income tax

Students and individuals supporting them

Credit, non-refundable

Income Tax Act, subsection 118.6(2)

• Introduced as a deduction in Budget 1972. Effective for the 1972 and subsequent taxation years.
• Replaced by a non-refundable tax credit and made transferable to spouses, parents or grandparents as part of the 1987 Tax Reform.
• Budget 1997 introduced a provision allowing unused education amounts to be carried forward for use in a subsequent year.
• The October 2000 Economic Statement and Budget Update announced the doubling of the amounts used to calculate the Education Tax Credit to $400 per month of full-time study and $120 per month of part-time study.
• Budget 2011 reduced the 13-week minimum duration requirement applying to studies undertaken by Canadians at foreign universities to three consecutive weeks.
• Budget 2016 announced the elimination of this measure as of 2017.

To recognize education costs

This measure provided students with assistance by recognizing non-tuition costs associated with full- and part-time education (Budget 1972).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

This measure extended the unit of taxation.

The tax benefit from this measure could be obtained in a taxation year other than the year during which it accrued.

Education

70939 - Education - College education

70949 - Education - University education

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 2.3 million individuals earned this credit in 2016.

A taxpayer that does not have a spouse or common-law partner (or that is not living with, supporting, or being supported by their spouse or common‑law partner) may claim a non-refundable credit in respect of a co-habiting and dependent parent or grandparent, or of a co-habiting child, grandchild, brother or sister who is either under the age of 18 or is wholly dependent due to physical or mental infirmity. The value of the credit is calculated by applying the lowest personal income tax rate to the eligible dependant amount. The credit amount is reduced dollar-for-dollar by the net income of the dependant. The credit may only be claimed once by the same household, and only one individual may claim the credit in respect of the same dependant in a given year. As of 2020, a taxpayer may also claim an income-tested supplement to the Eligible Dependant Credit. This supplement is legislated to gradually increase in steps each year until 2023, at which time the maximum credit amount will reach $15,000. The increased portion of the credit is subject to an income test beginning at a level of individual net income equal to the fourth federal tax bracket threshold ($165,430 in 2023), and is fully phased out by the fifth federal bracket threshold ($235,675 in 2023). The maximum credit amount (i.e., the base credit + supplement) for 2023 is $15,000, with the fully reduced amount being $13,520.

Personal income tax

Individuals with eligible dependants

Credit, non-refundable

Income Tax Act, paragraph 118(1)(b)

• Introduced as part of the 1987 Tax Reform, to replace the previous exemption. Effective for the 1988 and subsequent taxation years.
• Until 2007, the Eligible Dependant Credit amount was less than the Basic Personal Amount, and was reduced dollar-for-dollar by the net income of the dependant in excess of the income threshold applicable for the taxation year.
• Budget 2007 introduced two changes to this credit: (i) the credit amount was set equal to the Basic Personal Amount; and (ii) the income threshold was eliminated, resulting in the credit amount being reduced dollar-for-dollar by the net income of the dependant. These changes became effective in 2007.
• In December 2019, the government introduced a gradual increase to the Eligible Dependant Credit to $15,000 over the 2020 to 2023 period.

To recognize non-discretionary expenses (ability to pay)

This measure recognizes that a taxpayer without a spouse or common-law partner who is supporting a dependent young child, parent or grandparent or other dependent relative due to mental or physical infirmity has a reduced ability to pay tax relative to a taxpayer with the same income and no such dependant (Report of the Royal Commission on Taxation, vol. 3, 1966).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Families and households

Health

71049 - Social protection - Family and children

71012 - Social protection - Sickness and disability – Disability

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 1 million individuals claimed this credit in 2021.

Employers may make contributions to an employee benefit plan on behalf of their employees. The employee is not required to include in income the contributions to the plan or the investment income earned within the plan until amounts are received. Employers may not deduct these contributions to the plan until the contributions are distributed to the employees. As such, relative to the situation where the employee would have paid income tax on the amount of deferred salary, the government incurs a tax expenditure on the amount, in the form of a deferral of tax, to the extent that the employee's personal income tax rate exceeds the corporate income tax rate. Investment income earned in an employee benefit plan is taxed in the hands of the plan or, if it is paid out, in the hands of the employer or employee. The preferential tax treatment under an employee benefit plan is available only in certain circumstances, for instance, where the main purpose of the plan is not the deferral of tax or where an employee is not yet able to exercise their right to any income under the plan. In addition, certain leaves of absence or sabbatical plans under which employees may be entitled to defer salaries, as well as salary deferral plans established for professional athletes playing for a team that participates in a league with regularly scheduled games, may be treated as employee benefit plans. Provided certain conditions are met by the plans or arrangements, these amounts are not subject to tax until received by the employee.

Personal income tax

Employees with an employee benefit plan

Timing preference

Income Tax Act, paragraph 6(1)(g), section 32.1 and subsection 248(1), definition of "employee benefit plan"

Income Tax Act, subsection 248(1), definition of "salary deferral arrangement"

Income Tax Regulations, section 6801

• Introduced in Budget 1979. Effective for the 1980 and subsequent taxation years.
• Rules were introduced in 1986 (Budget 1986; Department of Finance Canada news release 86-131, July 28, 1986) to prevent the deferral of tax on salary income other than in certain specific circumstances such as leaves of absence and sabbatical plans.

To achieve a social objective

To encourage employment

This measure improves access to employee benefit plans and accommodates extended leaves of a sabbatical nature within the employment relationship (Budget 1979; Budget 1986).

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Employment

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available.

No projection is available.

No data is available.

When individuals acquire company shares under an employee stock option plan, they are deemed to have received a taxable benefit from employment equal to the difference between the fair market value of the shares at the time they are acquired and the amount paid to acquire them. Provided certain conditions are met, individuals may deduct one-half of the employment benefit earned on employee stock options from income for tax purposes, thereby benefiting from the same effective tax rate that investors receive on capital gains.

Personal income tax

Employees

Deduction

Income Tax Act, subsections 7(1) and (1.1) and paragraphs 110(1)(d) and (d.1)

• Introduced in Budget 1977 for employee stock options granted by Canadian-controlled private corporations (CCPCs). Effective April 1, 1977.
• Extended in Budget 1984 to employee stock options granted by corporations other than CCPCs, effective February 15, 1984.
• Budget 2010 eliminated the ability for both the employee and the employer to claim a deduction in relation to the same employment benefit under certain arrangements where employees surrendered their stock options to the employer in exchange for cash payments or other benefits.
• The 2020 Fall Economic Statement introduced a $200,000 annual limit (based on the fair market value of the shares underlying the options) on employee stock option grants that can qualify for the employee stock option deduction, effective for employee stock options granted after June 2021. Employee stock options granted by employers that are Canadian-controlled private corporations (CCPCs) and by non-CCPC employers with annual gross revenues of $500 million or less are generally not subject to the new limit.

To achieve an economic objective – other

To support competitiveness

This measure assists businesses in their efforts to attract and retain highly skilled employees and encourages employee participation in the ownership of the employer's business to promote increased productivity (Budget 1977; Budget 1984).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Employment

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 42,000 individuals claimed this deduction in 2021.

The enhanced GST rebate will apply to new purpose-built rental housing, such as apartment buildings, student housing, and senior residences built specifically for long-term rental accommodation.

This enhancement increases the GST Rental Rebate from 36% to 100% and removes the existing GST Rental Rebate phase-out thresholds for purpose-built rental housing projects. The enhanced GST Rental Rebate will apply to projects that begin construction on or after September 14, 2023, and on or before December 31, 2030, and complete construction by December 31, 2035.

For a two-bedroom rental unit valued at $500,000, the enhanced GST Rental Rebate would deliver $25,000 in tax relief.

Qualifying new residential units would be those that qualify for the existing GST Rental Rebate and are in buildings with at least:

• Four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or at least 10 private rooms or suites (e.g., a 10-unit residence for students, seniors, or people with disabilities); and,
• 90% of residential units designated for long-term rental.

Goods and Services Tax 

Builders and purchasers of new residential rental property and landlords that lease housing lots or sites in new residential trailer parks for long-term residential use 

Rebate 

Not yet legislated (as of December 31, 2023)

• Announced and effective September 14, 2023. 

To achieve a social objective 

This measure incentivizes construction of rental homes for Canadians.

Non-structural tax measure 

GST rebates effectively reduce the value added subject to tax and are therefore deviations from a broadly defined value-added tax base. 

Housing 

70619 - Housing and community amenities - Housing development 

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3. 

Form GST524 - GST/HST New Residential Rental Property Rebate Application 

The cost of this measure is calculated from source data. 

The cost of this measure is projected to grow in line with housing completions for multiple units. 

No data is available. 

Insurers of farming and fishing property could benefit from a tax exemption provided they did not engage in any business other than insurance. The proportion of an insurer's taxable income for a taxation year that was exempt was determined based on the proportion that the insurer's gross premium income (net of reinsurance ceded) earned for the year from the insurance of property used in farming or fishing or residences of farmers or fishers was of the insurer's total gross premium income (net of reinsurance ceded) for the year:

• If the proportion was 90% or more, all of the insurer's taxable income was exempt from tax;
• If the proportion was less than 90% but not less than 25%, only that proportion of the insurer's taxable income was exempt from tax;
• If the proportion was less than 25% but not less than 20%, one half of that proportion of the insurer's taxable income was exempt from tax;
• If the proportion was less than 20%, no exemption was available.

Corporate income tax

Insurers of farming and fishing property

Exemption

Income Tax Act, paragraph 149(1)(t) and subsections 149(4.1) to (4.3)

Income Tax Regulations, subsection 4802(2)

• Introduced in 1954, the original provision exempted all of an insurer's taxable income from tax if the proportion of its gross premium income (net of reinsurance ceded) from the insurance of property used in farming or fishing or residences of farmers or fishers was more than 50%.
• This measure was amended in 1989, with the effect that if the proportion was between 25% and 90%, only that proportion of the insurer's taxable income became exempt from tax.
• Amendments in 1996 introduced the remaining elements that, together, constitute the rules currently in effect.
• Budget 2017 announced the elimination of this measure, effective for taxation years that begin after 2018.

To achieve an economic objective – other

This exemption encourages insurers to provide insurance service in all rural districts (1945 Royal Commission on Co-operatives).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

This measure exempts from tax certain taxpayers.

Business - farming and fishing

70421 - Economic affairs - Agriculture, forestry, fishing, and hunting – Agriculture

70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting

Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

The tax expenditure is estimated by multiplying the eligible amount of exempt income with the tax rate for each claimant.

n/a

This measure provided tax relief to about 25 corporations in 2018.

Income earned in Canada by a non-resident person from international shipping or the operation of an aircraft in international traffic is exempt from Canadian income tax if the country where the non-resident person resides grants substantially similar relief to a Canadian resident. This exemption is consistent with international practice and with the Model Tax Convention developed by the Organisation for Economic Co-operation and Development, and is supported by similar provisions in Canada's bilateral tax treaties.

Personal (including trusts) and corporate income tax

Non-resident businesses

Exemption

Income Tax Act,paragraph 81(1)(c)

• Introduced in 1926 for income of a non-resident person from the operation of a ship in international traffic.
• Extended in 1945 to income of a non-resident person from the operation of an aircraft in international traffic.

To prevent double taxation

This measure is provided to prevent international double taxation.

Structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

International

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

No data is available.

No estimate is available.

No projection is available.

No data is available.

A statutory 25% tax, known as the "branch tax", is imposed on a non-resident corporation's after-tax income from carrying on business in Canada, to the extent this income is not reinvested in Canada. The statutory tax rate is generally reduced by Canada's bilateral tax treaties to 5%, 10% or 15% depending on the treaty. These treaties also generally restrict the scope of the branch tax to non-resident corporations which are carrying on business in Canada through a permanent establishment. A non-resident corporation the principal business of which is the transportation of persons or goods, communications, or mining iron ore in Canada, as well as registered charities and other corporations that are exempt from income tax, are exempt from the branch tax.

Corporate income tax

Non-resident corporations

Exemption

Income Tax Act, Part XIV, subsection 219(2)

• Introduced in Budget 1960, concurrently with the introduction of the branch tax. Effective for the 1961 and subsequent taxation years.
• Iron ore mining corporations were added to the list of exemptions in 1962.
• The exemption for insurance companies (in effect since 1961) was repealed in 1969.
• The exemption for corporations incorporated before July 1, 1867 (in effect since 1961) was repealed in 1972.
• The exemption for banks (in effect since 1961) was repealed in 2001.

To provide relief for special circumstances

This measure recognizes that certain foreign companies sometimes have no real alternative to the branch office form of organization when operating in other jurisdictions (Budget 1960; Budget 1962).

Structural tax measure

This measure exempts from tax certain taxpayers.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

The cost of this tax expenditure is calculated by multiplying the income of the branch exempt from branch tax by the applicable statutory or treaty tax rate.

This tax expenditure is projected to grow in line with nominal gross domestic product. The base year for the projections is the average of the previous five years.

This measure provides tax relief to a small number of non-residents (fewer than 20) each year. No data is available for other non-residents who are exempt under this provision but do not file a Canadian income tax return.

GST is relieved in respect of legal aid services in two ways:

• legal aid services delivered directly by a province or a provincial agency are exempt; and
• legal aid services provided by private practitioners to a legal aid plan administrator are taxable. However, the person responsible for the legal aid plan is entitled to a rebate of 100% of any tax paid on the supply. This eases the compliance burden for private practitioners.

Goods and Services Tax

Governments, individuals using provincial legal aid plans

Exemption; rebate

Part V of Schedule V to the Excise Tax Act (exemption)

Excise Tax Act, section 258 (rebate)

• These measures have been in effect since the inception of the GST in 1991.

To achieve a social objective

These measures ensure that the introduction of the GST resulted in no increase in the tax borne by consumers of these services (Report on the Technical Paper on the Goods and Services Tax, November 1989).

Non-structural tax measure

GST exemptions and rebates are deviations from a broadly defined value-added tax base.

Social

70169 - General public services - General public services not elsewhere classified

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, legal aid plan expenditures and Supply and Use Tables

The value of the exemption is calculated by multiplying the estimated value of services provided by public legal aid agencies by the GST rate. This corresponds to the forgone GST on all exempt legal aid services—including on the imputed value of unpriced or subsidized services paid indirectly with government funding. From this is subtracted an estimate of the input tax credits that would be allowed if these services were taxable.

The value of the rebate is calculated by multiplying an estimate of fees paid by legal aid plans to private sector lawyers by the GST rate.

The cost of this measure is projected to grow in line with household final consumption expenditure of services other than services related to dwelling and property.

No data is available.

Rentals of a residential complex (such as a house) or a residential unit (such as an apartment) for a period of at least one month are exempt from GST.

Goods and Services Tax

Tenants of long-term residential housing

Exemption

Section 6 of Part I of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure is intended to preserve the affordability of housing (Goods and Services Tax: Technical Paper, August 1989).

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Housing

70619 - Housing and community amenities - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Most supplies made by charities are exempt from GST. Many supplies made by non-profit organizations are also exempt, including: supplies made for no consideration; supplies of food and lodging made for the relief of poverty or distress; subsidized home-care services; meals on wheels; recreational programs established for children, individuals with a disability and disadvantaged individuals; memberships in organizations providing no significant benefit to individual members; and trade union and mandatory professional dues.

Goods and Services Tax

Consumers of supplies made by charities and non-profit organizations

Exemption

Part V.1 of Schedule V to the Excise Tax Act

Part VI of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.
• This measure is periodically amended in accordance with its objectives and to preserve the integrity of the tax system. Most recently, Budget 2016 clarified that GST/HST generally applies to supplies of purely cosmetic procedures (e.g., liposuction, botulinum toxin injections) provided by all suppliers, including registered charities.

To achieve a social objective

To reduce administration or compliance costs

This measure recognizes the important role of charities and non-profit organizations in Canadian society (Goods and Services Tax, December 1989).

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Donations, gifts, charities and non-profit organizations

705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes

Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Child care services provided for periods of less than 24 hours to children 14 years of age or under are generally exempt from GST.

Goods and Services Tax

Families with minor children

Exemption

Section 1 of Part IV of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure helps preserve the affordability of child care services.

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Families and households

71049 - Social protection - Family and children

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Under the GST, there is no tax charged on the supply of financial services. However, financial service providers such as financial institutions are not allowed to claim input tax credits in respect of GST costs incurred on inputs used in providing those services. As a result, consumers of financial services (e.g., depositors and borrowers) are not directly subject to tax, and financial institutions that make exempt supplies of financial services are effectively treated as final consumers.

Goods and Services Tax

Consumers of financial services

Exemption

Part VII of Schedule V to the Excise Tax Act

Excise Tax Act,section 123(1), definition of "financial service"

• This measure has been in effect since the inception of the GST in 1991.
• Amended in December 2009 to confirm that certain investment management, facilitatory and credit management services are not eligible for the exemption (Department of Finance Canada news release 2009-115, December 14, 2009).

Other

This measure is in recognition of the fact that, since the price of a financial service is often implicit and difficult to determine (e.g., the price of deposit-taking services that is reflected in the interest paid to depositors, the price of lending services that is included in the interest paid by borrowers), taxing financial services in a consistent and equitable manner is challenging (Goods and Services Tax: Technical Paper, August 1989).

Structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available.

No projection is available.

No data is available.

Ferry services and road and bridge tolls are generally exempt from GST. The exemption does not include international ferry services, which are zero-rated, consistent with other international transportation services.

Goods and Services Tax

Households

Exemption

Part VIII of Schedule V and section 14 of Part VII of Schedule VI to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure ensures that the use of Canada's highway systems and related infrastructure will not be subject to tax (Goods and Services Tax: Technical Paper, August 1989).

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Social

70451 - Economic affairs - Transport - Road transport

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Basic health care services are exempt under the GST, including:

• services provided by physicians, dentists and certain other health care practitioners whose profession is regulated by the governments of at least five provinces;
• services covered by a provincial health insurance plan; and
• institutional health care services provided in a health care facility, including accommodation, meals provided with accommodation, rentals of medical equipment to patients or residents of the facility, and a number of other supplies.

Goods and Services Tax

Individuals with medical conditions

Exemption

Part II of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.
• The list of exempt services is periodically amended. Most recently, Budget 2014 announced the addition of acupuncturists and naturopathic doctors to the list of health care practitioners whose professional services are exempt from the GST.
• Budget 2013 clarified that the GST applies to reports, examinations and other services that are not performed for the purpose of the protection, maintenance or restoration of the health of a person or for palliative care.

To achieve a social objective

This measure recognizes that most health services are provided by the public sector in a non-commercial context. 

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Health

7072 - Health - Outpatient services

7073 - Health - Hospital services

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model. The value of this tax expenditure corresponds to the forgone GST on health services—excluding on the imputed value of unpriced or subsidized services paid for indirectly with government funding—less the input tax credits that would be allowed if these services were taxable.

Goods and Services Tax model

No data is available.

The supply of parking at a public hospital is generally exempt from GST when made by a charity, a non-profit organization, a hospital or another public sector body to persons such as patients, visitors and volunteers.

Goods and Services Tax

Consumers of hospital parking intended for patients, visitors and volunteers

Exemption

Section 7 of Part V.1 of Schedule V to the Excise Tax Act

Section 25.1 of Part VI of Schedule V to the Excise Tax Act

• The exemption of hospital parking supplies made by charities has been in effect since March 22, 2013.
• The exemption of hospital parking supplies made by other public sector bodies was introduced on January 24, 2014, effective after that date (Department of Finance Canada news release).

To achieve a social objective

This measure helps reduce the cost of hospital parking for patients and visitors (Department of Finance Canada news release 2014-009, January 24, 2014).

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Health

70739 - Health - Hospital services - Hospital services not elsewhere classified

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Municipal transit services are exempt from GST. Specifically, no tax applies on fares charged by transit systems operated by a local authority or government, or by a government-funded non-profit organization. A municipal transit service is defined as a public passenger transportation service provided by a transit authority whose services are all or substantially all within a particular municipality and its surrounding areas.

Goods and Services Tax

Users of municipal transit

Exemption

Section 24 of Part VI of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This exemption is consistent with the treatment of standard municipal services (Goods and Services Tax: Technical Paper, August 1989).

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Social

70456 - Economic affairs - Transport - Public Transit

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Certain personal care services are exempt under the GST. The exemption covers the following services when provided at the establishment of the supplier:

• supplies of care, supervision and a place of residence to children, underprivileged individuals or individuals with a disability (e.g., group homes); and
• supplies of care and supervision to an individual with limited physical or mental capacity for self-supervision and self-care due to an infirmity or disability (e.g., respite care).

Goods and Services Tax

Children, individuals with disabilities, disadvantaged individuals and caregivers

Exemption

Sections 2 and 3 of Part IV of Schedule V to the Excise Tax Act

• The exemption in respect of care and a place of residence has been in effect since the inception of the GST in 1991.
• The exemption in respect of respite care was announced in Budget 1998, applicable after February 24, 1998.

To achieve a social objective

This measure helps preserve the affordability of personal care services.

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Families and households

Health

Social

71049 - Social protection - Family and children

71012 - Social protection - Sickness and disability - Disability

71099 - Social protection - Social protection not elsewhere classified

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Generally, the GST applies to newly constructed residential housing and residential trailer parks when they are first sold or leased for residential purposes. Subsequent sales of used residential housing or used residential trailer parks are tax-exempt. In addition, most sales of other personal-use real property, such as vacant land, are tax-exempt when sold by individuals. This exemption is consistent with the tax treatment of personal-use property and services not supplied in the course of commercial activities. The sale of farmland to a family member who is acquiring the property for personal use is also tax-exempt.

Goods and Services Tax

Households

Exemption

Sections 2-5.3 and 9-12 of Part I of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To reduce administration or compliance costs

To achieve an economic objective - other

This measure is intended to preserve the affordability of housing while ensuring that the tax regime is not overly complex (Goods and Services Tax: Technical Paper, August 1989).

Structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Housing

70619 - Housing and community amenities - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available.

No projection is available.

No data is available.

Short-term accommodation is exempt from GST where the charge for the accommodation is not more than $20 per day.

Goods and Services Tax

Individuals occupying low-cost short-term accommodation

Exemption

Paragraph 6(b) of Part I of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure is intended to preserve the affordability of low-cost temporary accommodation offered by the private sector (Goods and Services Tax, December 1989).

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Housing

70619 - Housing and community amenities - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Most educational services are exempt from GST, including:

• courses provided primarily for elementary or secondary school students;
• courses leading to credits towards a diploma or degree awarded by a recognized school authority, university or college; and
• certain other types of training for a trade or vocation.

Certain ancillary supplies are also exempt, such as most meal plans at a university or college and supplies by school authorities of a service of transporting students to or from school.

Goods and Services Tax

Students

Exemption

Part III of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure recognizes that most education services are provided by the public sector in a non-commercial context.

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Education

70929 - Education - Primary and Secondary education

70939 - Education - College education

70949 - Education - University education

70969 - Education - Subsidiary services to education

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model. The value of this tax expenditure corresponds to the forgone GST on all education services less the input tax credits that would be allowed if these services were taxable.

Goods and Services Tax model

No data is available.

Water and sewage services are exempt from GST when the supplies are made by a municipality or organization designated to be a municipality for the purpose of making these supplies. Basic garbage collection services are exempt from GST when the supplies are made by or on behalf of a government or municipality to a recipient who has no option but to receive the service.

Goods and Services Tax

Households

Exemption

Sections 21 and 22 of Part VI of Schedule V to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

Water, sewage and garbage collection are integral to the role of local governments (Goods and Services Tax: Technical Paper, August 1989).

Non-structural tax measure

GST exemptions are deviations from a broadly defined value-added tax base.

Social

70639 - Housing and community amenities - Water supply

70519 - Environmental protection - Waste management

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

A student can claim a full exemption for scholarship, fellowship and bursary income received in connection with the student's enrolment in an elementary or secondary school educational program or a program in respect of which the student is defined as a "qualifying student". A $500 tax exemption is available for scholarship, fellowship and bursary income that does not qualify for the full exemption.

Personal income tax

Students

Exemption

Income Tax Act, paragraph 56(1)(n) and subsection 56(3)

• Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
• Budget 2000 increased the tax exemption for scholarship, fellowship and bursary income to $3,000 from $500.
• Budget 2006 removed the $3,000 limit to establish a full exemption for post-secondary scholarship, fellowship and bursary income.
• Budget 2007 extended the tax exemption to scholarship, fellowship and bursary income received by elementary and secondary school students.

To encourage investment in education

This measure encourages Canadians to experience exceptional education opportunities by providing additional tax assistance to students (Summary of 1971 Tax Reform Legislation, 1971).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Education

70959 - Education - Education not definable by level

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T4A Statement of Pension, Retirement, Annuity, and Other Income

The value of this measure is calculated by multiplying the total non-taxable scholarship amount by an assumed marginal tax rate.

The value of this measure is projected based on historical growth.

About 1,300,000 individuals received a scholarship, fellowship or bursary in 2021.

Non-resident withholding tax is imposed on the gross amount of certain payments made by Canadians to non-residents. These amounts include interest, dividends, rents, royalties, management fees, pension benefits, annuities, estate or trust income, and payments for film or video acting services. Non-resident withholding tax is imposed at the statutory rate of 25%; however, this rate can be reduced by the effect of the provisions of a bilateral tax treaty.

The Income Tax Act exempts certain payments from non-resident withholding tax on a unilateral basis. Exemptions may also be available under certain bilateral tax treaties.

Personal (including trusts) and corporate income tax

Non-residents

Exemption; preferential tax rate

Income Tax Act, Part XIII, section 212

• Non-resident withholding tax was introduced in 1933, applicable to certain dividend, interest and royalty payments to non-residents at a rate of 5%. The withholding tax was modified on several occasions over the years. In particular, the rate was increased to 15% in 1942 and to 25% in 1972. The base was also extended to other types of payments, including pension benefits, annuities and management fees.
• Exemptions or reduced withholding tax rates have been introduced at various times, both in the Income Tax Act and in most bilateral tax treaties. A statutory exemption for interest payments made to arm's length non-resident lenders came into effect in 2008, and the Canada-U.S. tax treaty was amended to bilaterally exempt most cross-border interest payments, effective 2008.

To encourage or attract investment

To support competitiveness

Exemptions from non-resident withholding tax are intended to enhance the competitiveness of Canadian businesses by lowering the cost of accessing capital and other business inputs from abroad.

Non-structural tax measure

This measure exempts from non-resident withholding tax certain payments that are included in the benchmark base for this tax.

International

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

NR4 Statement of Amounts Paid or Credited to Non-Residents of Canada

The cost of this tax expenditure is estimated by multiplying observed payments by the benchmark tax rate (25% or the general tax rate for the relevant type of income set out in the applicable tax treaty) and deducting from this amount any withholding tax collected on the payments.

The cost of this measure is projected to grow in line with nominal gross domestic product.

No data is available.

Advertising expenses are deductible in computing business income in the year they are incurred, even though some of these expenses provide a benefit in the future. Under the benchmark tax system, the expenses would be amortized over the benefit period. Certain restrictions regarding advertising expenses in foreign media apply (see the measure "Non-deductibility of advertising expenses in foreign media").

Personal (including trusts) and corporate income tax

Businesses

Timing preference

Income Tax Act, paragraph 18(1)(a)

• This measure has been in effect since 1917.

To reduce administration or compliance costs

This measure reduces administration costs for the Canada Revenue Agency and compliance costs for taxpayers.

Structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

No data is available.

Eligible current expenditures on scientific research and experimental development (SR&ED) performed in Canada may be fully deducted in the year they are incurred. These expenditures give rise to new knowledge, technology and other intangible assets that are expected to generate benefits over multiple years. Under the benchmark tax system, such expenditures would be capitalized and depreciated over the time period the assets created are expected to generate revenues. A tax credit is also available in respect of these expenses (see measure "Scientific Research and Experimental Development Investment Tax Credit").

Personal (including trusts) and corporate income tax

Businesses conducting eligible scientific research and experimental development

Timing preference

Income Tax Act, section 37

• Introduced in 1944.

To encourage or attract investment

This measure is intended to encourage the performance of scientific research and experimental development in Canada by the private sector and to assist small businesses to perform scientific research and experimental development (Budget 1996).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business - research and development

7048 - Economic affairs - R&D Economic affairs

Programs within the mandates of Innovation, Science and Economic Development Canada, the National Research Council Canada and the federal granting councils also support research and development. Additional information on the relevant government programs is provided in the table at the end of Part 3.

The calculation of the cost of this tax expenditure would require information on the intangible assets created through expenditures on SR&ED. Such information is not available. Information on current SR&ED expenditures by unincorporated businesses is also not available.

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

About 17,100 corporations incurred eligible expenditures in 2021. No data is available for unincorporated businesses.

Expenditures that are incurred for employee training for the benefit of the employer are fully deductible by businesses. Expenditures on training improve the quality of human capital and provide benefits to the business in both the current year and future years similar to an acquisition of physical capital. Under the benchmark tax system, a portion of these costs would be capitalized and depreciated over the period of time over which they are expected to generate revenues for the business.

Personal (including trusts) and corporate income tax

Businesses

Timing preference

Income Tax Act, paragraph 18(1)(a)

• This measure has been in effect since 1917. 

To encourage employment

This measure encourages employers to invest in employee training by increasing the after-tax returns on such investment.

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

No data is available.

The first $3,000 of incorporation expenses is fully deductible in the first year after incorporation. Under the benchmark tax system, these costs would be capitalized and depreciated over the period of time during which the expenditures contribute to the earning of income.

Corporate income tax

Businesses

Timing preference

Income Tax Act, paragraph 20(1)(b)

• These expenses were previously deducted under the Eligible Capital Property regime. Budget 2016 announced that the Eligible Capital Property regime would be replaced with a new class of depreciable property to which the capital cost allowance rules would apply. However, Budget 2016 also announced that effective January 1, 2017, the first $3,000 of incorporation expenses would be fully deductible rather than being added to the new capital cost allowance class.

To reduce administration or compliance costs

This measure reduces administration costs for the Canada Revenue Agency and compliance costs for taxpayers.

Structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

No data is available.

Corporations can claim a 16% refundable tax credit in respect of salaries and wages paid to Canadian residents for film or video production services provided in Canada in respect of accredited productions that do not have sufficient Canadian content to qualify for the Canadian Film or Video Production Tax Credit. The Canadian Audio-Visual Certification Office of the Department of Canadian Heritage is responsible for certifying productions that are eligible for the credit.

Corporate income tax

Corporations in the film and video production industry

Credit, refundable

Income Tax Act, section 125.5

• Introduced at a rate of 11% in 1997, to coincide with the elimination of film production services tax shelters (Department of Finance Canada news release, July 30, 1997).
• The credit rate was increased to 16% in Budget 2003, for expenditures incurred after February 18, 2003.
• Budget 2021 extended by 12 months the 24-month timelines in respect of when aggregate expenditure thresholds must be met for film or video productions for the purposes of the Film or Video Production Services Tax Credit for taxation years ending in 2020 or 2021.

To support business activity

To support competitiveness

The Film or Video Production Services Tax Credit makes Canada a more attractive place for film production by complementing the existing Canadian Film or Video Production Tax Credit and by allowing a greater range of productions (usually foreign-owned) to qualify for assistance (Department of Finance Canada news release, July 30, 1997).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Arts and culture

70829 - Recreation, culture, and religion - Cultural services

Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

The estimates are based on actual amounts earned and claimed by businesses.

The cost of this measure is projected to grow in line with nominal gross domestic product.

About 540 corporations received this benefit in 2021.

First-time home buyers who acquire a qualifying home can obtain up to $1,500 in tax relief by claiming the First-Time Home Buyers' Tax Credit. The value of this non-refundable credit is calculated by multiplying the credit amount of $10,000 by the lowest personal income tax rate (15% in 2023). Any unused portion of the credit may be claimed by an individual's spouse or common-law partner. An individual is considered to be a first-time home buyer if neither the individual nor the individual's spouse or common-law partner owned and lived in another home in the calendar year of the home purchase or in any of the four preceding calendar years. A qualifying home is one that is generally considered to be a housing unit that an individual or an individual's spouse or common-law partner intends to occupy as a principal residence no later than one year after its acquisition.

The First-Time Home Buyers' Tax Credit is also available for certain acquisitions of a home by or for the benefit of an individual who is eligible for the Disability Tax Credit, even if the first-time home buyer condition is not met.

Personal income tax

Individual first-time home buyers

Credit, non-refundable

Income Tax Act, section 118.05

• Introduced in Budget 2009. Effective for qualifying homes acquired after January 27, 2009.
• Budget 2022 increased the credit amount to $10,000 from $5,000, effective for the 2022 and subsequent taxation years.

To achieve a social objective

This measure assists first-time home buyers with the cost associated with the purchase of a home (Budget 2009).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure is transferable between spouses or common-law partners.

Housing

70619 - Housing and community amenities - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 262,000 individuals claimed this credit in 2021.

Flow-through shares are an authorized tax shelter arrangement that allows a corporation to transfer certain unused tax deductions to equity investors. An investor buying a flow-through share, in addition to receiving an equity interest in the issuing corporation, is entitled to claim deductions on account of Canadian Exploration Expenses (100% immediate deduction, including for Canadian Renewable and Conservation Expenses) and Canadian Development Expenses (deductible at 30% per year) transferred to the investor by the corporation. Investors are willing to pay more for such shares than for regular equity because of the flow-through tax deductions. Flow-through shares are typically issued by corporations which are not yet profitable and therefore not able to immediately use the deductions themselves. It facilitates the raising of capital by allowing such firms to sell their equity at a premium.

A flow-through share is deemed to have a zero cost base for income tax purposes, based on the fact that the shareholder will have claimed a flow-through deduction as high as the full cost of the share. As a result of the zero cost base, the gain realized on the sale of the share will be equal to the share's full value at the time of sale rather than the change in its value since the time of acquisition.

Personal (including trusts) and corporate income tax

Investors in flow-through shares and businesses in the oil and gas, mining and renewable energy sectors

Other

Income Tax Act, subsections 66(12.6) and 66(12.62)

• Flow-through share deductions have existed in various forms since the 1950s.
• The current flow-through share regime was introduced in Budget 1986 and implemented on March 1, 1986.
• In response to COVID-19, the government extended by 12 months the period to incur eligible flow-through share expenses under the general and look-back rules for agreements entered into during a specified and limited time period. The government also announced that Part XII.6 tax would apply as if expenditures were incurred up to one year prior to the date they were actually incurred.
• Budget 2022 announced that expenditures related to oil, gas, and coal exploration and development will no longer be eligible to be renounced to flow-through share investors for flow-through share agreements entered into after March 31, 2023.
• Budget 2023 proposed to expand eligibility to include eligible expenditures related to lithium from brines exploration and development.

To encourage or attract investment

This measure assists corporations in the oil and gas, mining and renewable energy sectors to raise capital for eligible exploration, development and project start-up expenses by issuing their shares (Improving the Income Taxation of the Resource Sector in Canada, 2003).

Non-structural tax measure

This measure extends the unit of taxation.

Business - natural resources

70432 - Economic affairs - Fuel and energy - Petroleum and natural gas

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

70435 - Economic affairs - Fuel and energy - Electricity

70439 - Economic affairs - Fuel and energy - Fuel and energy not elsewhere classified

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T2 Corporation Income Tax Return

See the Annex to Part 1 of this report for an explanation of the method used to estimate the value of this measure. The breakdown of the estimates between individuals and trusts is not available.

Projections are based on current market conditions.

This measure provided tax relief to about 44,600 individuals and 440 corporations in 2021.

The Foreign Convention and Tour Incentive Program provides rebates of the GST paid in respect of:

• certain property and services used in the course of a foreign convention (generally defined as a convention where at least 75% of participants are non-residents and the sponsor is a non-resident) held in Canada; and
• the use of a convention site and related convention supplies acquired by non-resident exhibitors in respect of a foreign or Canadian convention held in Canada.
• A rebate for the accommodation portion of a tour package supplied to a non-resident was also provided, but was repealed in Budget 2017.

Goods and Services Tax

Non-residents that are individuals, suppliers of tour packages, exhibitors in respect of conventions held in Canada, and sponsors and participants of foreign conventions held in Canada

Rebate

Excise Tax Act,sections 252.1, 252.3 and 252.4

• The Foreign Convention and Tour Incentive Program was introduced in Budget 2007 and became effective on April 1, 2007.
• This program replaced the former Visitors' Rebate Program, which had been in effect since the inception of the GST in 1991. Under the former program, non-residents visiting Canada were entitled to a rebate for the GST paid on most goods purchased for export and on short-term accommodation (whether or not provided as part of a tour package). Rebates were also provided for eligible conference-related expenses for conferences attended by non-residents.
• Budget 2017 announced the repeal of the rebate in respect of the accommodation portion of a tour package supplied to a non-resident. The repeal generally applies in respect of supplies of tour packages or accommodations made after March 22, 2017. As a transitional measure, the rebate was available in respect of supplies made after March 22, 2017 but before January 1, 2018 if all of the consideration for the supply was paid before January 1, 2018.

To support business activity

To support competitiveness

This measure promotes Canada as a destination of choice for group travel (Budget 2007).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Business – other

70473 - Economic affairs - Other industries - Tourism

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

GST106 - Information on Claims Paid or Credited for Foreign Conventions and Tour Packages

GST115 - GST/HST Rebate Application for Tour Packages

GST386 - Rebate Application for Conventions

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with non-merchandise travel exports.

No data is available.

Individuals who are residents of Canada and who paid income tax to a foreign government may be eligible to claim a foreign tax credit, which provides a tax credit against Canadian income tax payable for income taxes paid to a foreign government up to a limit of the Canadian tax on that income. In addition, the foreign tax credit claimed in respect of tax paid on income from a foreign property cannot exceed 15% of the net income from that property. This credit is also available to trusts in respect of the foreign income of a trust that is retained and taxed within the trust.

Personal income tax (including trusts)

Individuals and trusts with foreign income

Credit, non-refundable

Income Tax Act, section 126

• This measure has been in place since 1927.

To prevent double taxation

This measure ensures that foreign income is not subject to double taxation (June 1987 Tax Reform White Paper).

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

International

n/a

n/a

T1 Income Tax and Benefit Return

T3 Trust Income Tax and Information Return

T1 and T3 micro-simulation models

T1 micro-simulation model in the case of individuals. Projections for trusts are based on projected growth for individuals.

About 2.0 million individuals in 2021 and 12,500 trusts claimed this credit in 2021.

A refundable income tax credit (now known as the GST/HST Credit) was established at the time of the introduction of the GST to ensure that low-income families would be better off under the new sales tax regime than under the former federal sales tax. The amount of the credit depends on family composition and income. Specifically, for the period from July 2023 to June 2024, based on net family income reported for the 2022 taxation year:

• an adult receives a basic adult credit of $325 per year;
• families with children aged 18 and under receive a basic child credit of $171 per year for each child;
• single parents can claim, in lieu of the basic child credit, the full basic adult credit of $325 per year for one dependent child;
• single parents are eligible for an additional credit of $171 per year in addition to their basic credit, child credits and full basic adult credit for the first dependent child; and
• single adults without children are eligible for an additional credit of up to $171 per year (depending on income) in addition to their basic credit.

The value of the credit is reduced for individuals and families with annual incomes over $42,335. Both the credit amounts and the income threshold are adjusted annually for inflation.

Income tax, in respect of Goods and Services Tax

Households

Credit, refundable

Income Tax Act, section 122.5

• This measure has been in effect since the inception of the GST in 1991.
• As part of the Government of Canada's COVID-19 Economic Response Plan, a one-time special supplemental payment under the GST/HST Credit was made beginning April 9, 2020. This top-up payment doubled the 2019-20 GST/HST Credit amounts and paid out the resulting difference in an individual's benefit entitlement as a lump sum.
• As announced on September 13, 2022, the government introduced a temporary measure to double the 2022-23 GST/HST Credit for six months and pay out the extra amount as a one-time, lump-sum payment, starting in November 2022, to existing credit beneficiaries.
• Budget 2023 introduced the Grocery Rebate, which provided temporary support equivalent to twice the amount received for January 2023 under the GST/HST Credit. The extra amount was paid out as a one-time, lump-sum payment, starting on July 5, 2023, through the GST/HST Credit system.

To promote the fairness of the tax system

To provide income support or tax relief

This measure alleviates the regressive features of consumption taxation.

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Families and households

71099 - Social protection - Social protection not elsewhere classified

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Public Accounts of Canada

The cost of this measure is calculated from source data.

T1 micro-simulation model

About 11 million individuals receive this benefit each year.

The Hardest-Hit Business Recovery Program (HHBRP) provided a wage and rent subsidy for hardest-hit businesses that did not otherwise qualify for the Tourism and Hospitality Recovery Program or the Local Lockdown Program, and that had an average revenue reduction for the first year of the CEWS of 50% or more and had a current period revenue reduction of at least 50%. For qualifying entities, the HHBRP paid a wage and rent subsidy of between 10% and 50% for claim periods between October 24, 2021 to March 13, 2022. From March 13 to May 7, 2022 the maximum wage and rent subsidy rate decreased by half. The program ended on May 7, 2022.

Personal (including trusts) and corporate income tax

Businesses, individuals and other organizations

Credit, refundable

Income Tax Act, sections 125.7 and 164

• On October 21, 2021, the government announced a new wage and rent subsidy program for hardest-hit businesses (i.e., businesses that had an average revenue reduction for the first year of the CEWS of 50% or more and had a current period revenue reduction of at least 50%).

To encourage employment

To support business activity

This measure was put in place to help prevent job losses and encourage employers to quickly rehire workers previously laid off as a result of COVID-19.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

71059 - Social Protection - Unemployment

Programs relevant to supporting individuals and businesses during the COVID-19 crisis, as part of the Canada's COVID-19 Economic Response Plan. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Administrative data provided by the Canada Revenue Agency

The cost of this measure reflects administrative data provided by the Canada Revenue Agency.

n/a

The numbers of unique applicants with approved claims are 10,900 and 20,640 for the wage and rent portions of the program, respectively (data as of September 3, 2023).

Contractors in the construction industry are typically given progress payments as construction proceeds. However, a portion of these progress payments can be held back by the client until the entire project is completed. Under this measure, amounts held back are considered not to be receivable when earned (as would be the case under the benchmark tax structure), but only when the project to which they apply is certified as complete, and these amounts are not deductible by the client and not brought into the income of the contractor until that time. In contrast, progress payments not held back are deductible by the client as incurred, and brought into the income of the contractor as earned.

Personal (including trusts) and corporate income tax

Construction contractors

Other

Income Tax Act, paragraph 12(1)(b)

• This tax expenditure is the result of an interpretation of the Income Tax Act that has been effective since the early 1970s.

To provide relief for special circumstances

This measure is intended to alleviate potential cash-flow difficulties for construction contractors.

Structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on holdbacks payable and receivable by unincorporated businesses is not available.

Corporate income tax: T2 Corporation Income Tax Return

Personal income tax: No estimate is available.

Corporate income tax: T2 micro-simulation model

This tax expenditure may be positive or negative, depending on the tax rates applicable to contractors and clients and on whether holdbacks receivable exceed or are smaller than holdbacks payable. Total holdbacks receivable may not equal total holdbacks payable when related amounts receivable and payable are not assigned to the same calendar year (because the taxation years of contractors and clients end in different calendar years) or because no data is available in respect of amounts receivable and payable by unincorporated businesses.

Personal income tax: No projection is available.

Corporate income tax: The cost of this measure is projected to grow in line with nominal gross domestic product.

About 6,800 corporations claimed this deduction in 2021. No data is available for unincorporated businesses.

The Home Accessibility Tax Credit provides a non-refundable tax credit of 15% on up to $20,000 of eligible home renovation or alteration expenses per calendar year in respect of a qualifying individual, to a maximum of $20,000 per eligible dwelling. Qualifying individuals are persons with disabilities who are eligible for the Disability Tax Credit and seniors (65 years of age or older). Qualifying individuals, as well as eligible family members who are supporting the qualifying individual, may claim eligible expenses in respect of an eligible dwelling. The eligible dwelling must be the principal residence of the qualifying individual at any time during the taxation year. The dwelling must also be owned by the qualifying individual, their spouse or common-law partner, or an eligible family member in respect of the qualifying individual with whom the qualifying individual ordinarily inhabits that dwelling. Eligible expenses are home renovation or alteration expenses to the eligible dwelling incurred in order to allow the qualifying individual to gain access to the dwelling, allow the qualifying individual to be more mobile or functional within the dwelling, or reduce the risk of harm to the qualifying individual within the dwelling or in gaining access to the dwelling. Improvements must also be of an enduring nature and be integral to the eligible dwelling. Examples of eligible expenditures include costs associated with the purchase and installation of wheelchair ramps, walk-in bathtubs, wheel-in showers and grab bars.

Personal income tax

Seniors and persons with disabilities

Credit, non-refundable

Income Tax Act, section 118.041

• Introduced in Budget 2015. Effective for eligible expenditures for work performed and paid for or goods acquired on or after January 1, 2016.
• The annual qualifying expense limit was doubled from $10,000 to $20,000 in Budget 2022, effective for the 2022 and subsequent taxation years.

To achieve a social objective

To recognize non-discretionary expenses (ability to pay)

This measure recognizes the particular impact that the costs of improving the safety, accessibility and functionality of a dwelling can have for seniors and persons with disabilities, and the additional benefits of independent living (Budget 2015).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

This measure extends the unit of taxation.

Health

Housing

70769 - Health - Health not elsewhere classified

71069 - Social protection - Housing

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

n/a

Projections reflect the estimates presented in Budget 2015. The cost of this measure is projected to grow with the eligible population and inflation, as forecasted in the T1 micro-simulation model.

About 45,000 individuals claimed this credit in 2021.

Immediate expensing is provided in respect of certain property acquired by Canadian-controlled private corporations (CCPCs), sole proprietors and certain partnerships. This immediate expensing is available for "eligible property" acquired by a CCPC on or after April 19, 2021, and that becomes available for use before January 1, 2024, up to a maximum amount of $1.5 million per taxation year. Immediate expensing is also available to unincorporated businesses carried on directly by Canadian resident individuals (other than trusts) and certain eligible partnerships for investments made on or after January 1, 2022 and that become available for use before 2025 (in the case of an individual or a partnership all the members of which are individuals) or before 2024 (for other partnerships). The immediate expensing is only available for the year in which the property becomes available for use. The $1.5 million limit is shared among associated members of a group of CCPCs. The half-year rule is suspended for property for which this measure is used. For businesses with less than $1.5 million of eligible capital costs, no carry-forward of excess capacity is allowed.

Eligible property under the immediate expensing is capital property that is subject to the capital cost allowance (CCA) rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long lived assets.

Personal and corporate income tax

Canadian-controlled private corporations, unincorporated businesses, certain partnerships

Timing preference

Income Tax Regulations, section 1100 (0.1) to (0.3), subsection 1102(20.1), section 1104 (3.1) to (3.6)

• Introduced in Budget 2021.
• The government announced on February 4, 2022 the expansion of eligibility to a broader range of taxpayers.

To encourage or attract investment

This temporary measure provides an incentive for businesses to accelerate or increase capital investment.

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, Innovation, Science and Economic Development Canada, Business Development Bank of Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

T1 Personal Income Tax Return

T5013 Statement of Partnership Income

T2 micro-simulation model and aggregate investment data from T1 Income Tax and Benefit Return using the nominal cash-flow method of estimation.

The cost of this measure is projected to decline over time considering that additional allowances claimed in early years will be offset by lower allowances in future years. This effect is partly offset by the projected growth in business investment.

About 18,900 corporations made new additions under the immediate expensing measure in 2021. No data is available for unincorporated businesses.

The Income Tax Act contains special rules that exempt from federal income tax the income of municipalities, public bodies performing a function of government in Canada, entities that are substantially owned by a provincial Crown (or owned by municipalities or public bodies performing a function of government in Canada) and the wholly-owned subsidiaries of such entities, where such entities are eligible for the exemption under the Act. In the absence of these special rules, these entities could be subject to federal income tax, because constitutional immunity from federal income taxation does not extend to these entities (except where they act as agent of a province).

Corporate income tax

Certain provincial, municipal and Indigenous public bodies and their entities

Exemption

Income Tax Act, paragraphs 149(1)(c) and (d) to (d.6)

• This measure has been in effect since the inception of the federal income tax in 1917.

To implement intergovernmental tax arrangements

This measure extends exemption from federal taxation to certain public bodies.

Structural tax measure

This measure exempts from tax certain taxpayers.

Intergovernmental tax arrangements

n/a

n/a

No data is available.

No estimate is available.

No projection is available.

No data is available.

An investment corporation is a Canadian public corporation whose activities are limited to owning portfolio investments, whose revenues must be substantially from Canadian sources, and that is required to distribute substantially all of its income (other than net taxable capital gains) in the form of dividends to shareholders in the taxation year in which the income is earned. An investment corporation is permitted to deduct from its tax otherwise payable an amount equal to 20% of its taxable income minus taxed capital gains. This special deduction achieves a degree of integration between the personal and corporate income tax systems.

Corporate income tax

Investment corporations

Preferential tax rate

Income Tax Act, subsection 130(1)

• Introduced in 1946.
• The deduction rate was initially set at 15% and has changed several times since then. Most recently, the deduction rate was set at 20% (up from 16⅔%) for years commencing after June 30, 1988.

To prevent double taxation

To encourage or attract investment

This measure encourages investment in Canada rather than abroad by achieving a degree of integration between the personal and corporate tax systems so that investment in Canadian properties is taxed at a lower rate than investment abroad (Budget 1960).

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

Savings and investment

n/a

n/a

T2 Corporation Income Tax Return

The cost of this measure corresponds to the amount reported on line 620 of form 200 of the T2 Corporation Income Tax Return.

The cost of this measure would be expected to be fairly stable; as such no growth is assumed over the projection period.

No corporations claimed this deduction in 2021.

Certain expenditures incurred by eligible businesses in order to create new child care spaces in a new or existing licensed child care facility were eligible for a non-refundable investment tax credit of 25%, to a maximum credit of $10,000 per child care space created. Eligible expenditures included the cost or incremental cost of the building in which the child care facility is located, as well as the cost of furniture, appliances, computer equipment, audio-visual equipment, playground structures and playground equipment. Initial start-up costs such as landscaping costs for the children's playground, architect's fees, building permit costs and costs to acquire children's educational materials were also eligible. Unused credits could be carried back 3 years or forward 20 years to reduce taxes payable in those years. Budget 2017 announced the phase-out of this measure. Unused deductions may continue to be carried forward for up to 20 years.

Personal (including trusts) and corporate income tax

Businesses that create child care spaces

Credit, non-refundable

Income Tax Act, section 127

• Introduced in Budget 2007, effective for eligible expenditures incurred on or after March 19, 2007.
• Budget 2017 announced the elimination of the measure for eligible expenditures made on or after March 22, 2017. The credit remains available in respect of eligible expenditures incurred before 2020 pursuant to a written agreement entered into before March 22, 2017.

To achieve a social objective

This measure encourages businesses to create licensed child care spaces for the children of their employees and, potentially, for children in the surrounding community (Budget 2007).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure could be obtained in a taxation year other than the year during which it accrued.

Families and households

Business – other

71049 - Social protection - Family and children

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return

The estimates are based on actual amounts earned and claimed by businesses. The estimates do not cover investment tax credits claimed by trusts.

Personal income tax: The cost of this measure is projected based on historical growth.
Corporate income tax: The cost of this measure is projected to grow in line with nominal gross domestic product.

No individuals claimed this credit in 2021. The number of corporations and trusts having claimed this credit in 2021 is not disclosed due to confidentiality restrictions.

Eligible tradespeople and apprentices who make an eligible temporary relocation can deduct up to $4,000 in eligible expenses per year. Eligible expenses include temporary lodging near a temporary work location, transportation for one round trip from the ordinary residence to the temporary lodging, and meals in the course of travel. Among other things, an eligible temporary relocation requires that the temporary lodging be at least 150 kilometres closer than the ordinary residence to the temporary work location. The maximum amount of expenses that can be claimed in respect of a particular eligible temporary relocation is capped at 50% of the worker's employment income from construction activities at temporary work locations associated with that relocation in the year.

Personal income tax

Tradespeople and apprentices working in a construction activity

Deduction

Income Tax Act, paragraph 8(1)(t) and subsection 8(14)

• Introduced in Budget 2022. Effective for the 2022 and subsequent taxation years.

To recognize expenses incurred to earn employment income

This measure assists in improving labour mobility for workers in the construction trades (Budget 2022).

Structural tax measure

This measure provides tax recognition for an expense that is incurred to earn employment income.

Employment

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant government programs is provided in the table at the end of Part 3.

External data, T1 Income Tax and Benefit Return and T4 Statement of Remuneration Paid

n/a

The projected cost of this measure is calculated based on employment numbers in the construction industry, the assumed percentage of workers who are mobile, and the projected average annual eligible expenses. It is expected to grow in line with the growth in the population aged 15 and over.

About 3,200 individuals claimed this deduction in 2022.  

Labour-Sponsored Venture Capital Corporations (LSVCCs) are investment funds, sponsored by unions or other labour organizations, that make venture capital investments in small and medium-sized businesses. A tax credit is provided to individuals for the acquisition of shares of LSVCCs, up to an annual eligible share purchase limit of $5,000, if such a tax credit is provided at the provincial or territorial level.

Personal income tax

Individual investors

Credit, non-refundable

Income Tax Act, section 127.4

Income Tax Regulations, section 6701

• Implemented in Budget 1985. Effective for shares purchased by individuals after May 23, 1985. The rate of the tax credit was set at 20%, up to an annual eligible share purchase limit of $3,500 (maximum annual credit of $750).
• Budget 1992 increased the annual eligible share purchase limit to $5,000 (for a maximum federal credit of $1,000).
• Budget 1996 reduced the tax credit rate to 15% from 20%, and the annual eligible share purchase limit to $3,500 from $5,000 (for a maximum federal credit of $525).
• For the 1998 and subsequent taxation years, the annual eligible share purchase limit was increased to $5,000 from $3,500 (for a maximum federal credit of $750) (Department of Finance Canada news release 1998-086, August 31, 1998).
• Budget 2013 announced the reduction of the tax credit rate from 15% to 10% for the 2015 taxation year and to 5% for the 2016 taxation year, and the elimination of the tax credit for the 2017 and subsequent taxation years.
• Budget 2016 restored the tax credit to 15% for provincially registered LSVCCs for the 2016 and subsequent taxation years.

To achieve an economic objective - other

This measure was introduced to foster entrepreneurship by encouraging investment by individuals in labour-sponsored venture capital organizations, set up to maintain or create jobs and stimulate the economy (Budget 1985).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Savings and investment

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

T1 Income Tax and Benefit Return

T1 micro-simulation model

Projections for this measure are based on expected LSVCC share purchases. The projections reflect policy changes and observed historical growth.

About 399,000 individuals claimed this credit in 2021.

The Lifetime Capital Gains Exemption (LCGE) provides a tax exemption in computing taxable income in respect of capital gains realized by individuals on the disposition of qualified farm or fishing property and qualified small business shares. As only half of capital gains are included in income for income tax purposes, a $1 capital gains exemption under the LCGE translates into an effective reduction in taxable income of 50 cents.

An individual may shelter capital gains realized on the disposition of qualified small business shares up to a lifetime limit of $971,190 in 2023 which is indexed to inflation. In the case of capital gains realized on the disposition of qualified farm or fishing property made after April 20, 2015, the lifetime capital gains limit is the greater of $1 million and the indexed lifetime limit for qualified small business shares.

Before 2016, a spousal or common-law partner trust could claim the LCGE in the year the spouse or common-law partner beneficiary died, to the extent of the remaining exemption of the deceased beneficiary. For deaths occurring after 2015, capital gains realized by a spousal or joint spousal trust are deemed to have been made payable to the beneficiary.

Personal income tax

Individual owners of incorporated small businesses or incorporated or unincorporated farming and fishing businesses

Exemption

Income Tax Act, section 110.6

• Introduced in Budget 1985. The $500,000 LCGE on qualified farm property was effective starting in 1985. The $500,000 LCGE on other capital gains, including small business corporation shares, was phased in between 1985 and 1990.
• The 1987 Tax Reform capped the LCGE for capital gains other than gains on qualified farm property and small business corporation shares at $100,000 in 1988.
• Budget 1992 excluded real property (except real property used in an active business) from the $100,000 LCGE on other capital gains.
• Budget 1994 eliminated the $100,000 LCGE on other capital gains.
• Budget 2006 extended the $500,000 LCGE to include qualified fishing property, effective May 2, 2006.
• Budget 2007 increased the LCGE limit to $750,000, effective March 19, 2007.
• Budget 2013 increased the LCGE limit to $800,000 for 2014, and indexed the LCGE limit to inflation effective for 2015 and subsequent years.
• Budget 2014 eliminated the LCGE for spousal and common-law partner trusts, effective for the 2016 taxation year.
• Budget 2015 increased the LCGE limit for qualified farm or fishing property to $1 million, effective April 21, 2015. For taxation years after 2015, the LCGE for qualified farm or fishing property will be maintained at $1 million until the indexed LCGE applicable to capital gains realized on the disposition of qualified small business shares exceeds $1 million. At that time, the same LCGE limit, indexed to inflation, will apply to the three types of property.

To encourage or attract investment

To encourage savings

To achieve an economic objective - other

This measure was introduced to bolster risk taking and investment in small businesses, to provide an incentive to invest in the development of productive farm and fishing businesses, and to help small business owners and farm and fishing business owners better ensure their financial security for retirement (Budget 1985; The Lifetime Capital Gains Exemption: An Evaluation, Department of Finance Canada, 1995; Budget 2006; Budget 2007).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Business - farming and fishing

Business - small businesses

70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture

70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T3 Trust Income Tax and Information Return

T1 and T3 micro-simulation models

T1 micro-simulation model

About 65,000 individuals claimed this deduction in 2021.

The Local Lockdown Program (LLP), available from October 24, 2021 to May 7, 2022, provided wage and rent subsidies to employers that had one or more locations subject to a public health restriction (lasting for at least seven days in the current claim period) that required them to cease activities that accounted for at least approximately 25% of total revenues of the employer during the prior reference period. Eligible organizations were not required to show a 12-month revenue decline over a certain threshold, but were required to show a current-month revenue loss of at least 40% to qualify for this new LLP. For qualifying entities, the LLP paid a wage and rent subsidy of between 40% and 75% until March 13, 2022. From March 13 to May 7, 2022 the maximum wage and rent subsidy rate decreased by half. The program ended on May 7, 2022.

From December 19, 2021 until March 12, 2022, employers subject to capacity-limiting restrictions of 50% or more and with current-month revenue declines greater than 25% were also eligible for the program, with a subsidy rate from 25% to 75%, depending on their degree of revenue decline.

Personal (including trusts) and corporate income tax

Businesses, individuals and other organizations

Credit, refundable

Income Tax Act, sections 125.7 and 164

• On October 21, 2021, the government announced a new Local Lockdown Program, that provided businesses that faced new local lockdowns with up to the maximum amount of support available under the wage and rent subsidy programs. To qualify, businesses had to be subject to a qualifying public health restriction (lasting for at least seven days in the current claim period) that required them to cease activities that accounted for at least approximately 25% of total revenues of the employer during the prior reference period and had a current period revenue reduction of at least 40%.
• On December 22, 2021, the government proposed to temporarily expand this program to include employers subject to capacity-limiting restrictions of 50% or more; and reduce the current-month revenue decline threshold requirement to 25%. This expansion was initially in effect from December 19, 2021 until February 12, 2022.
• On February 9, 2022, the government announced an extension of this temporary expansion of the program to March 12, 2022. The maximum LLP rate was then decreased by half, until the program fully phased out on May 7, 2022. 

To encourage employment

To support business activity

This measure was put in place to help prevent job losses and encourage employers to quickly rehire workers previously laid off as a result of COVID-19.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

71059 - Social Protection - Unemployment

Programs relevant to supporting individuals and businesses during the COVID-19 crisis, as part of the Canada's COVID-19 Economic Response Plan. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available.

No projection is available.

No data is available.

The Logging Tax Credit reduces federal income taxes payable by businesses by the lesser of two-thirds of any tax on income from logging operations paid to a province and 6⅔% of net income from logging operations in that province. Two provinces currently impose logging taxes that are prescribed by regulation for the purpose of this credit—British Columbia and Quebec.

Personal (including trusts) and corporate income tax

Businesses in the forest industry

Credit, non-refundable

Income Tax Act, section 127

• Introduced in Budget 1962. Effective for taxation years commencing after 1961.
• The Budget 1962 announcement followed discussions with provinces concerning the impact of provincial logging taxes on forest sector businesses. Budget 1962 expressed the hope that provinces imposing a logging tax would provide a provincial income tax credit equal to one-third of the logging tax. Both British Columbia and Quebec currently provide a partial credit against provincial income tax in respect of their logging tax. 

To implement intergovernmental tax arrangements

This measure, along with parallel credits provided by provinces that impose logging taxes, is intended to provide relief to the forest industry for provincial logging taxes (Budget 1962).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Intergovernmental tax arrangements

70422 - Economic affairs - Agriculture, forestry, fishing, and hunting – Forestry

n/a

Personal income tax: T1 Income Tax and Benefit Return and T3 Trust Income Tax and Information Return

Corporate income tax: T2 Corporation Income Tax Return

Personal income tax: T1 and T3 micro-simulation models

Corporate income tax: T2 data on actual credits used in a year

Personal income tax: T1 micro-simulation model in the case of individuals. Projections for trusts are based on projected growth for individuals.

Corporate income tax: The cost of this measure is projected to grow in line with lumber production and lumber prices.

About 650 individuals and 830 corporations claimed this credit in 2021. The number of trusts having claimed this credit in 2021 is not disclosed due to confidentiality restrictions.

The Medical Expense Tax Credit provides tax relief for qualifying above-average medical or disability-related expenses incurred by individuals on behalf of themselves, a spouse or a common-law partner, or a dependent relative. The value of the credit is calculated by applying the lowest personal income tax rate to the amount of qualifying medical expenses in excess of the lesser of 3% of net income and $2,635 (in 2023). The credit can be claimed in respect of expenses paid in any period of 12 consecutive months that ends in the taxation year in which the claim is made.

Medical expense claims made on behalf of a spouse or common-law partner or minor children may be pooled with the medical expenses of the taxpayer, subject to the minimum expense threshold. There is no upper limit on the amount that can be claimed, except for certain specific expenses. For medical expenses paid on behalf of dependent relatives other than minor children, caregivers are able to claim qualifying medical expenses that exceed the lesser of 3% of the dependant's net income and $2,635 (in 2023). For purposes of the credit, a dependant is defined as a child, grandchild, parent, grandparent, brother, sister, uncle, aunt, niece or nephew who is dependent on the taxpayer for support.

Personal income tax

Individuals, caregivers

Credit, non-refundable

Income Tax Act, section 118.2

Income Tax Regulations, sections 5700 and 5701

• Introduced as the Medical Expense Deduction in Budget 1942, and replaced by a non-refundable credit as part of the 1987 Tax Reform, applicable to the 1988 and subsequent taxation years.
• The maximum eligible amount that can be claimed on behalf of dependent relatives other than minor children was eliminated in Budget 2011 for the 2011 and subsequent taxation years in order to allow caregivers to receive full tax recognition for eligible medical expenses.
• Budget 2017 clarified the application of the Medical Expense Tax Credit so that individuals who require medical intervention in order to conceive a child are eligible to claim the same expenses that would generally be eligible for individuals on account of medical infertility, effective for the 2017 and subsequent taxation years.
• Budget 2022 amended the Income Tax Act to allow medical expenses incurred in Canada related to a surrogate mother or a sperm, ova, or embryo donor, as well as fees paid to fertility clinics and donor banks in Canada in order to obtain donor sperm and ova, to be eligible under the Medical Expense Tax Credit for the 2022 and subsequent taxation years.
• The list of expenses eligible for this credit is regularly reviewed and expanded in light of new technologies and other disability-specific or medically-related developments.

To recognize non-discretionary expenses (ability to pay)

This measure recognizes the effect of above-average medical and disability-related expenses on the ability of an individual to pay income tax (Budget 1942; Budget 1997; Budget 2005).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure is transferable between spouses or common-law partners.

Health

7071 - Health - Medical products, appliances, and equipment

7072 - Health - Outpatient services

7073 - Health - Hospital services

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 5.4 million individuals claimed this credit in 2021.

Flow-through shares facilitate the financing of exploration by allowing companies to transfer unused tax deductions to investors. In addition to claiming regular flow-through deductions, individuals (other than trusts) who invest in flow-through shares of a corporation can claim a 15% non-refundable tax credit in respect of specified mineral exploration expenses incurred by the corporation and transferred to the individual under a flow-through share agreement. Expenses eligible for the credit are specified surface grassroots exploration expenses (i.e., seeking new resources away from an existing mine site) in respect of a mineral resource (other than a coal or oil sands deposit) in Canada. A "look-back" rule allows corporations to raise funds by issuing flow-through shares in one calendar year and spending the funds in the following calendar year, while allowing the investor to claim the flow-through deduction and the Mineral Exploration Tax Credit in the year the share investment is made. See the description of the measure "Flow-through share deductions" for additional information about flow-through shares.

Personal income tax

Individual investors (other than trusts) in flow-through shares

Credit, non-refundable

Income Tax Act, subsection 127(9), paragraph (a.2) of definition of "investment tax credit" and definition of "flow-through mining expenditure"

• Introduced as part of the October 2000 Economic Statement and Budget Update. Effective in respect of expenditures incurred after October 17, 2000 and before 2004.
• This measure has been extended on a number of occasions. Most recently, as part of the 2018 Fall Economic Statement, the government extended the credit for an additional 5 years, until March 31, 2024.
• Budget 2023 proposed to expand eligibility to include eligible expenditures related to lithium from brines exploration.

To encourage or attract investment

This measure helps junior exploration companies raise capital by providing an incentive to investors in flow-through shares issued to finance mineral exploration (Budget 2015).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Business - natural resources

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

The cost of this measure in a year is calculated by multiplying the estimated Canadian Exploration Expenses eligible for the credit by the credit rate (i.e., 15%). The cost in the initial year is partially offset in the following year as the investor's cumulative Canadian Exploration Expenses account is then reduced by the credit claimed the year before.

Projections are based on current market conditions.

About 320 companies issued flow-through shares and over 12,400 individuals claimed the credit in 2021.

If a move is an "eligible relocation", the related "eligible moving expenses" are deductible in computing employment or self-employment income earned at the new location. Eligible moving expenses include travel costs, the costs of transporting or storing household effects, meals and temporary accommodation and the cost of selling a former residence. Eligible moving expenses may also be deducted from a student's taxable income from scholarships, bursaries and research grants if the expenses are incurred to begin full-time attendance at a post-secondary educational institution. Among other things, to be an "eligible relocation" requires that a taxpayer move at least 40 kilometres closer to the new place of employment or study. Most moving expense reimbursements provided by employers are not included in income; however, to the extent that certain employer-provided reimbursements are included in income, the moving expense deduction is allowed to the same extent as permitted for self-paid expenses.

Personal income tax

Employees and self-employed individuals, students

Deduction

Income Tax Act, section 62 and the definition "eligible relocation" in subsection 248(1)

• Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.

To recognize expenses incurred to earn employment income

To recognize education costs

This measure recognizes the expenses involved in moving to a new job or educational institution, and thus facilitates labour mobility by allowing taxpayers greater flexibility in pursuing new employment and business opportunities anywhere in Canada (Budget 1971; Budget 1998).

Structural tax measure

This measure provides tax recognition for an expense that is incurred to earn employment income.

This measure provides tax recognition for an expense that is incurred for education purposes.

Expenses incurred to earn business income are generally deductible under the benchmark tax system; however, moving expenses may also have an element of personal consumption, hence the classification of this measure as a tax expenditure.

Employment

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 103,000 individuals claimed this deduction in 2021.

The Multigenerational Home Renovation Tax Credit provides a refundable tax credit of 15% on up to $50,000 of eligible expenses to establish a secondary dwelling unit to permit an eligible person to live with a qualifying relation. Eligible persons are adults with disabilities who qualify for the Disability Tax Credit (18 years of age or older) and seniors (65 years of age or older). Qualifying relations are the parent, grandparent, child, grandchild, brother, sister, aunt, uncle, nephew, or niece of the eligible person, which includes the spouse or common-law partner of one of those individuals. The eligible person, their spouse or common-law partner, and a qualifying relation who owns the eligible dwelling can claim eligible renovation expenses.  One qualifying renovation is permitted to be claimed in respect of an eligible person over their lifetime.

Personal income tax

Seniors and persons with disabilities

Credit, refundable

Income Tax Act, section 122.92

• Introduced in Budget 2022. This measure applies for the 2023 and subsequent taxation years, in respect of work performed and paid for and/or goods acquired on or after January 1, 2023.  

To achieve a social objective

To recognize non-discretionary expenses (ability to pay)

This measure recognizes the particular impact that the costs of constructing a secondary dwelling unit can have for seniors and persons with disabilities and their families, and the additional benefits of multigenerational living (Budget 2022).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Housing

71069 - Social protection - Housing

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Information from Statistics Canada's Building Permits Survey, Canadian Survey on Disability, Census of Canada and Survey of Household Spending.

The tax expenditure is estimated by multiplying the estimated number of single dwellings converted to eligible dual-unit dwellings by the maximum credit value. The tax expenditure also includes an estimate of illegal secondary dwellings that would be converted into legal dwellings.

Projections reflect the estimates presented in Budget 2022. The tax expenditure is projected to grow in line with the growth rate for the formation of multigenerational households.

No data is available.