What's new

We list the service enhancements and major changes below, including announced income tax changes that were not law when this guide was published. If they become law as proposed, they will be effective for 2023 or as of the dates given.

Excessive interest and financing expenses limitation (EIFEL) rules

In general terms, the proposed EIFEL rules limit the amount of net interest and financing expenses (being the taxpayer's interest and financing expenses net of its interest and financing revenues) that may be deducted in computing a taxpayer's income to no more than a fixed ratio of earnings before interest, taxes, depreciation and amortization. Generally, the proposed EIFEL rules apply directly to taxpayers that are corporations or trusts. They also apply indirectly in respect of partnerships, as interest and financing expenses and revenues of a partnership are attributed to members that are corporations or trusts, in proportion to their interests in the partnership.

The proposed EIFEL rules generally apply to tax years that start on or after October 1, 2023. Go to Notice of Ways and Means Motion to introduce a bill entitled An Act to implement certain provisions of the fall economic statement tabled in Parliament on November 21, 2023 and certain provisions of the budget tabled in Parliament on March 28, 2023 and Explanatory Notesmendments to the Income Tax Act.

Investment tax credit (ITC) for carbon capture, utilization, and storage (CCUS)

New design details were added to the credit regarding:

• the expansion of eligible equipment
• the addition of British Columbia as an eligible jurisdiction
• the validation of concrete storage requirement
• the treatment of refurbishment costs
• the recovery of refurbishment investment tax credits
• the reporting of knowledge sharing and climate risk disclosure

This proposed measure would apply to eligible expenses incurred after 2021 and before 2041.

Mandatory disclosure rules

For transactions entered into after June 21, 2023, the reportable transaction rules have changed and there are new requirements to report notifiable transactions, including related penalties for each failure to meet these reporting requirements. See Mandatory disclosure rules.

Passenger vehicles deduction limits

On December 16, 2022, the Department of Finance announced a proposed revision to the passenger vehicle prescribed amounts.

For zero-emission passenger vehicles (new and used) acquired on or after January 1, 2023, the prescribed amount would be increased from $59,000 to $61,000, before sales tax.

For passenger vehicles (new and used) acquired on or after January 1, 2023, the prescribed amount would be increased from $34,000 to $36,000, before sales tax.

The previous proposed increases from $55,000 to $59,000 and from $30,000 to $34,000, respectively, were announced in a Department of Finance news release on December 23, 2021. These increases would be effective January 1, 2022, once the necessary regulations come into force. See List of the most common CCA rates and classes.

Flow-through shares and critical mineral exploration tax credit – Lithium from brines

Eligible expenses related to the exploration of lithium brine deposits made on or after March 28, 2023, qualify as Canadian exploration expenses and Canadian development expenses. The eligibility to the critical mineral exploration tax credit is expanded to include these expenses.

Ontario Focused Flow-Through Share Tax Credit

For a taxation year ending after December 31, 2022, eligible exploration expenditures for the Ontario focused flow-through share tax credit may also include exploration expenditures incurred in Ontario that qualify for the critical mineral exploration tax credit.

Reclassified Canadian development expenses

Effective June 22, 2023, Canadian development expenses in respect of a discovery well made after 2018 can no longer be reclassified as Canadian exploration expenses (CEE). However, you can still reclassify expenses as CEE if you:

• made the expenses before 2021
• entered into a written commitment before March 22, 2017, to incur those expenses

Clean economy investment tax credits

New investment tax credits (ITCs) have been introduced:

• clean hydrogen ITC (proposed), which is available for eligible property that is acquired and becomes available for use after March 27, 2023, and before 2035
• clean electricity ITC (proposed), which applies as of the day of Budget 2024 and before 2035, for projects that did not begin construction before March 28, 2023
• clean technology manufacturing ITC (proposed), which is available for eligible property that is acquired and becomes available for use after December 31, 2023, and before 2035
• clean technology ITC (proposed), which is available for eligible property that is acquired and becomes available for use after March 27, 2023, and before 2035

Businesses will be able to claim only one of these ITCs if a property is eligible for more than one. However, more than one clean economy ITC could be available for the same project, if the project includes different types of eligible property. Businesses would be able to fully benefit from both the Atlantic investment tax credit and the clean economy ITCs (other than the CCUS ITC).

To achieve the maximum tax credit rates for all ITCs other than the clean technology manufacturing ITC, businesses would have to meet certain labour requirements – prevailing wage requirements and apprenticeship requirements. Otherwise, the credit rate would decrease by 10 percentage points. Exemptions would apply for an ITC claimed for acquisitions of off-road zero-emission vehicles as well as acquisitions and installations of low-carbon heat equipment.

British Columbia clean buildings tax credit

Effective February 23, 2022, there is a new temporary tax credit for retrofits that improve the energy efficiency of multi-unit residential buildings with four or more dwelling units and prescribed types of commercial buildings.

The refundable credit is equal to 5% of qualifying expenditures made before April 1, 2025, and incurred under an agreement entered into after February 22, 2022. The qualifying retrofit must be completed before April 1, 2026. See British Columbia clean buildings tax credit.

Canadian journalism labour tax credit

The 2023 Fall Economic Statement announced the government's intention to increase the cap on labour expenditures per eligible newsroom employee from $55,000 to $85,000. It also announced the government's intention to temporarily increase the tax credit rate from 25% to 35% for a period of four years. These measures would apply after 2022. See Zero-emission vehicles (ZEVs) – Classes 54 and 55.