Tax Alert Canada. Alberta budget

Transcription

1 2016 Issue No April 2016 Tax Alert Canada Alberta budget EY Tax Alerts cover significant tax news, developments and changes in legislation that affect Canadian businesses. They act as technical summaries to keep you on top of the latest tax issues. For more information, please contact your EY or EY Law advisor. In , the province booked almost $10 billion in non-renewable resource revenue. This year, we are forecasting an almost 90% drop to $1.4 billion less revenue than we ve seen in 40 years. On the subject of the carbon levy: First, a carbon levy sends a clear market signal to consumers and to businesses about the need to reduce their carbon emissions. And second, every penny raised will be rebated back to Albertans and reinvested in our economy. On the subject of the lowered small-business tax : When oil prices collapse, I know that small-business people are some of the first to feel its effects. Alberta Finance Minister Joe Ceci, budget speech Alberta Finance Minister Joe Ceci tabled the province s fiscal budget on 14 April The budget contains several tax measures affecting individuals and corporations. The minister anticipates a deficit of $10.4 billion for , and projects deficits for at least the next two years. Following is a brief summary of the key tax measures.

2 Business tax measures Corpo tax s No changes are proposed to the general corpo tax. Last year, there was an increase to the general corpo income tax to 12% (from 10%) effective 1 July As part of the Climate Leadership Plan, the government will lower the small-business corpo income tax from 3% to 2% effective 1 January This is intended to compensate small business for the potential effects of the carbon levy (which is described further below). No changes are proposed to the $500,000 small-business limit. Alberta s current corpo tax s are summarized in Table A. Table A: Corpo tax s Alberta Federal and Alberta combined Alberta Federal and Alberta combined Small-business tax * 3.0% 13.5% 2.0% 12.5% General corpo tax 12.0% 27.0% 12.0% 27.0% *The 22 March 2016 federal budget stated the federal small-business tax will remain at 10.5% for 2016 and subsequent taxation years. Other business tax measures The minister also proposed the following business tax measures: Capital Investment Tax: This is a credit aimed at benefiting corporations that make investments in eligible capital assets. It is budgeted at $90 million over two years. More details will be announced later this year. Alberta Investor Tax Credit: This is a credit aimed at benefiting investors who invest in eligible small and medium-sized enterprises in Alberta. This credit is budgeted at $90 million over two years. More details will be announced later this year. Personal tax Personal income tax s The April Alberta budget does not include any changes to personal income tax s. Bill 2, enacted on 29 June 2015, replaced Alberta s single 10% tax with a system of progressive s, beginning in The system, as outlined in Table B, is now fully in effect. The new income brackets will be indexed starting in Table B: 2016 Alberta personal tax s First bracket Second bracket Third bracket Fourth bracket Fifth bracket $0 to $125,000 $125,001 to $150,000 $150,001 to $200,000 $200,001 to $300,000 Above $300, % 12.00% 13.00% 14.00% 15.00% Alberta budget

3 For taxable income in excess of $150,000, the 2016 combined federal-alberta personal income tax s are outlined in Table C. Table C: 2016 combined federal and Alberta personal tax s Bracket Ordinary income* Eligible dividends Non-eligible dividends $150,001 to $200, % 23.43% 33.22% $200,001 to $300, % 30.33% 39.07% Above $300, % 31.71% 40.24% *The on the actual capital gain is one-half the ordinary income. Personal tax credits This budget proposes the following changes to personal tax credit amounts: The dividend tax credit for dividends paid out of income taxed at the small-business (other than eligible dividends) will be adjusted downwards as a result of lowering the small-business to 2%. This change will take effect simultaneously to the change in the small-business, on 1 January Minister Ceci confirmed the government s support for other personal tax measures: All credit amounts were increased by 1.3% in order to index the amounts to inflation. This means that the basic personal and spousal amounts will rise from $18,214 to $18,451. The government is maintaining the dividend tax credit at 10% for dividends paid out of income taxed at the general corpo income tax (eligible dividends). The government is now implementing the Alberta Child Benefit and enhancing the Alberta Family Employment Tax Credit. These measures were announced in the last budget in October 2015 and come into effect July Carbon tax The Alberta government has developed a new Climate Leadership Plan based on the recommendations put forward by the Climate Change Advisory Panel. The new plan has several components, including the implementation of a new carbon price on greenhouse gas emissions. The carbon price will take two forms: 1. Performance standards for Large Final Emitters: Alberta already has a carbon price in place for certain large industrial greenhouse gas emitters. Currently, the carbon price paid by such Large Final Emitters is $20 per tonne; this is to be increased to $30 per tonne on 1 January 2017; 2. Carbon Levy: Fuels (natural gas, transportation fuels and other fuels) will be subject to the new levy when consumed for combustion purposes. This levy will be imposed on 1 January 2017 and will reflect a price of $20 per tonne of carbon dioxide-equivalent emissions, rising to $30 per tonne on 1 January This will translate into the following levy s indicated in Table D. Alberta budget

4 Table D Carbon levy s major fuels Type of Fuel Rate as of 1 January 2017 Rate as of 1 January 2018 Diesel 5.35 cents/l 8.03 cents/l Gasoline 4.49 cents/l 6.73 cents/l Natural Gas $/GJ $/GJ Propane 3.08 cents/l 4.62 cents/l For natural gas, it is anticipated that the carbon levy will be shown as a sepa line item on consumers bills. The application of the levy to the other fuel types will depend on the type of fuel and how that particular type of fuel is distributed and sold. Certain rebates will be available for lower- and middle-income Albertans, to protect those taxpayers from the full effect of the levy. Fuel sold for export will be exempt from the levy. Shortly, EY will release a dedicated Tax Alert on this new carbon tax. Draft legislation is expected to be released in spring Other tax measures Retail sales tax No provincial sales tax was introduced in this budget. Property tax The education property tax revenue for is forecast at $2.4 billion, an increase of 6.8% from the forecast. The government will continue to determine this amount annually. The 2016 residential/farmland will fall from $2.50 to $2.48 per $1,000 of equalized assessment. The non-residential will fall from $3.67 to $3.64 per $1,000 of equalized assessment. Learn more For more information, contact your EY or EY Law advisor or one of the following professionals: Calgary Alison Jackson alison.e.jackson@ca.ey.com Dave Van Dyke dave.a.vandyke@ca.ey.com Dean Radomsky dean.w.radomsky@ca.ey.com Edmonton Derek Alty derek.g.alty@ca.ey.com Dustin Burbank dustin.burbank@ca.ey.com And for up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/budget. Alberta budget

5 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a sepa legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. About EY s Tax Services EY s tax professionals across Canada provide you with deep technical knowledge, both global and local, combined with practical, commercial and industry experience. We offer a range of tax-saving services backed by in-depth industry knowledge. Our talented people, consistent methodologies and unwavering commitment to quality service help you build the strong compliance and reporting foundations and sustainable tax stgies that help your business achieve its potential. It s how we make a difference. For more information, visit ey.com/ca/tax. About EY Law EY Law LLP is a national firm of Canadian tax lawyers, allied with Ernst & Young LLP, specializing in tax litigation and tax counsel services. For more information, visit couzintaylor.com Ernst & Young LLP. All Rights Reserved. A member firm of Ernst & Young Global Limited. This publication contains information in summary form, current as of the date of publication, and is intended for general guidance only. It should not be regarded as comprehensive or a substitute for professional advice. Before taking any particular course of action, contact EY or another professional advisor to discuss these matters in the context of your particular circumstances. We accept no responsibility for any loss or damage occasioned by your reliance on information contained in this publication. ey.com/ca Alberta budget