2017 BUDGET BREAKFAST

Transcription

1 2017 BUDGET BREAKFAST Presented by: Date: Jerry Inman, Stephanie Smith, Earl MacLeod March 23, 2017

2 SPEAKERS METRO TRURO Jerry Inman Stephanie Smith Earl MacLeod Greg Mosher Krysta Adamski Page 2

3 A NATIONAL FIRM Founded in 1958, we have grown to become the 5 th largest professional accounting, tax and business consulting firm in Canada We have 69 offices strategically located in urban and rural markets throughout Canada More than 4,400 team members and 650 partners dedicated to delivering the right solutions for you Page 3

4 OUR TEAM Nationally recognized recipient of Aon Hewitt s Best Employers in Canada award consecutively since 2009 Presenting Partner of Canada s Top 40 Under 40 Page 4

5 OUR CLIENTS Our industry and market insight is your business advantage. Our specialized market and client groups include: Aboriginals Agriculture China Credit Unions Food & Beverage Processing Forestry Manufacturing Mining Not-For-Profit Oilfield Services Private Enterprise Professionals Public Companies Public Sector Real Estate & Construction Page 5

6 Our Specialized Tax Services Canadian Tax U.S. Tax International Tax SR&ED Indirect Tax Page 6

7 Our Other Services Assurance and Accounting Consulting Corporate Finance Enterprise Risk Corporate and Consumer Insolvency Succession Planning Technology Solutions Valuations, Forensics and Litigation Support Page 7

8 ECONOMIC PLAN SURPLUS (DEFICIT) SUMMARY ANNUAL SURPLUS/DEFICIT B - SURPLUS B - DEFICIT B - DEFICIT B - DEFICIT B - DEFICIT B - DEFICIT B - DEFICIT B - SURPLUS B - DEFICIT B - DEFICIT B - PROJECTED DEFICIT B - PROJECTED DEFICIT B - PROJECTED DEFICIT B - PROJECTED DEFICIT B - PROJECTED DEFICIT Page 8

9 NET PUBLIC DEBT B B B B B B B B B B B B B B B B B B B B 1. Projected net public debt Page 9

10 MNP POLITICAL COMMENTARY Bill Morneau Morneau s 2 nd Budget Canada s Budget 2017, Skills & Innovation, proposes a Deficit from 2017 thru 2022 Canada will have a world-leading innovation economy to create jobs and grow the middle class Outlines plans to make investments in six economic sectors: 1) Digital; 2) Clean Technology; 3) Agri-food; 4) Advanced Manufacturing; 5) Bio Sciences; 6) Clean Resources Tom Mulcair Promises not being kept Nothing for Dairy Producers Nothing for Small Business Nothing for Exporters Page 10

11 MNP POLITICAL COMMENTARY Rona Ambrose No Tax Breaks for Individuals No Tax Breaks for Corporations Increases in User Fees such as Buses and Booze Carbon Tax will increase costs for Homeowners and use of vehicles They do not have a Revenue Problem, they have a spending problem. Avery Shenfeld (CIBC) All about telling us where money is being spent Watch and wait budget Wait to see what USA (Trump) does. Page 11

12 MNP POLITICAL COMMENTARY CBC News Commentary No plan to get out of deficit No capital gains tax increases Deficits expected through Chantel Hebert Old Fashioned budget More like a government at the end of term No tax increase to hurt an individual A pretty sad budget Page 12

13 MNP COMMENTARY Supporting Seniors No new initiatives to help seniors Consultation for Enhancement of CPP is ongoing Restoring eligibility ages for OAS from 67 to 65 Supporting Canadian Jobs and Education Help Canadians get Better Jobs 90 M support for training Expand Labour Market Agreements 1.8 M over 6 years Expand Eligibility of Canada student grants 59.8 M over 4 years Adults returning to school 287 M over 3 years Post secondary support for Indigenous students 90 M over 2 years Page 13

14 MEASURES TO SUPPORT INNOVATION Venture Capital for Innovation 102 B over 3 years Super Cluster Dense area of business 950 M over 5 years Strategic Innovation Fund 1.20 B over 5 years Futurpreneur Canada 14 M over 2 years Innovative Solutions Canada 50 M over 2 years National Research Council 59.6 M over 2 years Page 14

15 ATLANTIC FOCUS 117 M over 8 years for 150 research chairs M over 5 years to support Foreign Worker Program Canada Space Agency 80.9 M over 5 years Destination Canada for Tourists 37.5 M per year Via Rail Operations & Capital 867 M over 3 years Marine Atlantic 445 M over 3 years NS to NL Marine Atlantic 278 M over 3 years NS to PEI and NS to NB Funds to reopen the Maritime Rescue Centre in NL Page 15

16 PERSONAL TAX MEASURES Page 16

17 Disability Tax Credit 15% non-refundable tax credit for individuals with a severe and prolonged impairment in physical or mental functions. For 2017, the credit is $8,113, which reduces taxes by up to $1,217 (plus an additional NS tax savings of approx. $645). An eligible medical practitioner must certify the patient has met the eligibility requirements. Budget 2017 proposes to add nurse practitioners to the list of medical practitioners that can certify eligibility for the DTC. This will apply to certifications made on or after Budget Day. Page 17

18 Medical Expense Tax Credit 15% non-refundable tax credit for qualifying medical expenses in excess of the lesser of $2,268 and 3% of the individual s net income. Expenses incurred related to the use of reproductive technologies (Rx, in-vitro) are eligible for the credit where there is a medical condition (eg infertility). Budget 2017 proposes to expand the eligibility for these expenses to individuals even in the absence of an existing illness or condition. This will apply for 2017 and subsequent taxation years and a taxpayer will also be permitted to elect for this treatment to apply to any of the immediately 10 preceding tax years. Page 18

19 Consolidation of Caregiver Credits Tax relief for caregivers currently includes three separate credits with varying eligibility conditions Infirm dependant credit For individuals supporting an adult family member Doesn t need to live with the individual Max $6,883, reduced dollar-for-dollar by dependant s net income > $6,902 Caregiver credit For individuals supporting their parents/grandparents 65 or older or for individuals supporting infirm adult family members. Must live with the individual Max $4,732, reduced dollar-for-dollar by dependant s net income > $16,163 Max $6,882 if infirm, reduced for net income > $16,163 Family caregiver tax credit A top up credit of $2,150 for infirm individuals (added to caregiver credit, spousal credit or eligible dependent credit) Page 19

20 Consolidation of Caregiver Credits Budget 2017 proposes to simplify the existing system by replacing it with one new credit Canada Caregiver Credit New credit amount will be: $6,883 in respect of infirm dependents who are parents/grandparents, brothers/sisters, aunts/uncles, nieces/nephews, adult children of the claimant or of the claimant s spouse or common-law partner (results in max $1,032 of reduced federal taxes) $2,150 in respect of: An infirm dependent spouse or common-law partner in respect of whom the individual claims the spouse or common-law partner amount, An infirm dependent for whom the individual claims an eligible dependent credit, or An infirm child who is under the age of 18 years at the end of the taxation year. (results in max $322 of reduced federal taxes) Page 20

21 Consolidation of Caregiver Credits The credit will be reduced dollar-for-dollar by the dependent's net income above $16,163 (in 2017). The dependent will NOT be required to live with the caregiver. The credit will no longer be available in respect of non-infirm seniors who reside with their adult children. Canada Caregiver Credit will apply for 2017 and subsequent taxation years. Page 21

22 Mineral exploration tax credit for flow-through share investors Flow-through shares allow resource companies to renounce, or flow tax expenses associated with their qualifying Canadian exploration activities to investors. The mineral exploration tax credit provides an additional credit equal to 15% of specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors. Budget 2017 will extend the eligibility for this tax credit for one year to include flow-through share agreements entered into on or before March 31, 2018, as long as the funds raised are spent on eligible activities by the end of Page 22

23 Electronic distribution of T4 slips For 2017 and subsequent tax years, employers can issue T4 s electronically. Employers must have sufficient privacy safeguards for confidentiality purposes. Employees can still request to receive a paper copy in which case the employer must provide one. Page 23

24 Tuition tax credit Tuition credit is 15% non-refundable credit available to taxpayers for eligible fees paid for tuition and licensing examinations at a post-secondary level. Budget 2017 will extend the eligibility for the tuition tax credit to include fees paid for occupational skills courses. This will include fees paid to a university, college or other post-secondary institution for occupational skills courses that are not at the post-secondary level. In order to be eligible, the course has to be taken for the purpose of providing the individual with skills in an occupation, and the individual must be over the age of 16. Page 24

25 Ecological Gift Program The ecological gifts program provides Canadians with incentives with respect to the donation of ecologically sensitive land to a registered charity Individual and corporate donors are eligible for a tax break of up to 100% of their net income (as opposed to 75% for ordinary donations) Any unused amounts can be carried forward up to 10 years (as opposed to 5 years with ordinary donations) Capital gain triggered on disposition due to a donation is exempt from tax A 50% tax can be imposed if the recipient changes the use of the land, after the donation, without consent of Environment and Climate Change Canada (ECCC) Budget 2017 Proposes The 50% tax on change of use of land will be extended to any other organization that subsequently purchases the land from the recipient of the donation Private foundations are no longer entitled to receive ecological gifts Page 25

26 Public Transit Tax Credit Currently a 15% non-refundable tax credit for cost of eligible public transit passes. Budget 2017 proposes that this tax credit be eliminated Effective July 1 st, 2017 Page 26

27 Home Relocation Loans Deduction When a person receives a loan from an employer, and the interest rate on the loan is below the prescribed rate, difference is a taxable benefit Eligible home relocation loans are eligible for a deduction from that benefit Budget 2017 proposes to eliminate the deduction for eligible home relocation loans Will apply in 2018 and subsequent years Page 27

28 Anti-Avoidance Rules for Registered Plans RRSP, RRIF, and TFSA subject to a number of anti-avoidance rules to prevent excessive tax advantages in these plans, including; The Advantage Rules These rules prevent the exploitation of the tax attributes of a registered plan The Prohibited Investment Rules These rules ensure that investments held by a registered plan are arm s length portfolio investments (i.e. not closely connected private company shares); and The Non-Qualified Investment Rules These rules restrict the classes of investments that can be held by a registered plan. Budget 2017 proposes to extend these anti-avoidance rules to apply to RESPs and RDSP Should not impact vast majority of these plans Page 28

29 BUSINESS TAX MEASURES Page 29

30 Investment Fund Mergers Merger of Switch Corporations into Mutual Fund Trusts Currently there are rules facilitating tax-deferred mergers of: Two mutual funds into one Mutual fund corporation can be merged into a mutual fund trust Currently do not permit reorganizing a mutual fund corporation into multiple mutual fund trusts. The mutual fund corporation must be a switch corporation; meaning it is organized with multiple classes of shares where each class represents a distinct fund. Measure will apply to qualifying reorganizations on or after Budget Day. Page 30

31 Investment Fund Mergers Segregated Fund Mergers Segregated funds are life insurance policies that have many characteristics of mutual fund trusts. To provide consistent treatment, Budget 2017 proposes to allow rules which are generally parallel to those of mutual fund mergers. Measure will apply after 2017 to apply the life insurance industry an opportunity to comment. Page 31

32 Clean Energy Generation Equipment: Geothermal Energy Classes 43.1 and 43.2 provide 30% and 50% CCA rates (on a decliningbalance basis) for equipment that generates or conserves energy by: Using a renewable energy source (wind, solar, hydro) Using a fuel from waste (landfill gas, wood waste, manure), or Making efficient use of fossil fuels (high efficiency cogeneration systems) Page 32

33 Clean Energy Generation Equipment: Geothermal Energy Budget 2017 proposes the following changes: Eligible geothermal energy equipment will be expanded to include geothermal equipment that is used primarily for the purpose of generating heat or a combination of heat and electricity (e.g. the cost of completing a geothermal wall). Geothermal heating will be made an eligible thermal energy source for use in a district energy system. Expenses incurred for the purpose of determining the extent and quality of a geothermal resource and the cost of all geothermal drilling for both electricity and heating projects, will qualify as a Canadian renewable and conservation expense. Page 33

34 Canadian Exploration Expense: Oil and Gas Discovery Wells Expenditures associated with drilling an oil or gas well that results in the discovery of a previously unknown petroleum or natural gas reservoir are currently treated as a Canadian Exploration Expense (CEE). CEE may be deducted in full in the year incurred. In contrast, expenditures associated with drilling a well, other than a discovery well, are generally treated as a Canadian Development Expense (CDE) of which costs may be deducted at a rate of 30% per year on a declining basis. Page 34

35 Canadian Exploration Expense: Oil and Gas Discovery Wells Budget 2017 proposes that discovery well expenditures (or related drilling well expenses like building a temporary access road, or in preparing the drill site), generally be classified as CDE instead of CEE. i.e. limiting deduction to 30% per year from 100% Drilling expenditures can continue to be classified as CEE in certain specific situations This measure will apply to expenses incurred after However, the measure will not apply to expenses actually incurred before 2021 where the taxpayer has, before Budget Day, entered into a written commitment to incur these expenses. Page 35

36 Reclassification of Expenses Renounced to Flow-through Share Investors An eligible small oil and gas corporation can currently treat up to $1M of Canadian development expenses (CDE) as Canadian exploration expenses (CEE) when renounced to shareholders under a flow-through share agreement. CEE is fully deductible in the year it is incurred. Budget 2017 proposes to no longer allow this treatment. This measure will apply in respect of expenses incurred after 2018 with the exception of expenses incurred after 2018 and before April 2019 that are renounced under a flow-through share agreement entered into after 2016 and before Budget Day. Page 36

37 CONTROL OF A CORPORATION Common tax issue who has factual control of a company. Relevant for tax provisions dealing with associated companies. Several factors are considered huge body of case law. Key questions 1) who controls the board of directors? 2) who controls the day to day operations? 3) what are the provisions of any shareholder agreements? Page 37

38 CONTROL OF A CORPORATION Recent court decision McGillivray focused on the control issue. Court concluded that in order for a factor to be included it must include a legally enforceable right and ability to effect a change to the board of directors or its powers, or to exercise influence over the shareholders that have that right and ability. Government considers that the focus on a legally enforceable right is too limiting in scope. Amendments proposed to ensure that the factors considered are not as limited as outlined in the case effective tax years beginning after March 22, Page 38

39 CHILD CARE SPACES The 25% non refundable credit on building child care spaces for the children of employees will be eliminated. Effective for expenditures on and after March 22, Transitional relief for projects under a written agreement and completed by Page 39

40 GIFTS OF MEDICINE Donation deduction has been available to corporations that donated medicine from inventory to registered charities. Eliminated for these donations made on or after March 22, Page 40

41 ENDING BILLED BASIS ACCOUNTING Prior to this budget, the income of professionals, such as dentists, medical doctors, engineers, accountants and lawyers was taxable when a bill was rendered for work performed. The way the tax act allowed the deferral of income until completion, was to allow professionals a deduction for Work in Process or WIP. Budget 2017 proposes to eliminate the WIP Deduction for taxation years that begin on or after Budget Day. With a transition measure which spreads the impact over the next two fiscal years which begin after March 22, Page 41

42 Gains and Losses on Derivatives Election For Mark-to-market Rules To eliminate potential for selective recognition of gains and losses, the budget introduces an election to allow taxpayers to treat eligible derivatives on income account. Once made the taxpayer is required to report on a consistent manner across all eligible derivatives. Otherwise gains an losses may only be recognized on an as realized basis. Straddle Transactions To eliminate the potential to create an artificial deferral of income from one year to another, the budget introduced legislation to deny a loss on derivatives where a taxpayer holds an offsetting gain (straddle) at the same time. Limited exceptions apply where it is in the normal course of the business to have such positions in place (hedging). Page 42

43 INDIRECT TAX MEASURES Page 43

44 Sales and Excise Tax Measures Opioid Overdose Treatment Drug Naloxone Generally prescription and a list of specific non-prescription drugs are exempt from GST/HST. Naloxone, used to treat opioid (i.e. fentanyl) overdose is proposed to be added to the list of non-prescription drugs which are exempt from GST/HST. Page 44

45 Sales and Excise Tax Measures Taxi and Ride-Sharing Services GST/HST is required to be charged on taxi services regulated under the laws of Canada or a province. Prior to the Budget, ride-sharing services such as Uber were not required to charge GST/HST Budget 2017 proposes to amend the definition of taxi services to include ride sharing services. Page 45

46 Sales and Excise Tax Measures GST/HST Rebate to Non-Residents for Tour Package Accommodations Budget 2017 proposes to repeal a GST/HST rebate currently available to non-residents who purchase tour packages in Canada. The rebate specifically relates to the accommodation portion of the tour packages. Page 46

47 Sales and Excise Tax Measures Tobacco Taxation Budget 2017 proposes to eliminate the 10.5% surtax on tobacco manufacturers. In place of the surtax, Budget 2017 proposes to raise the excise duty rates on tobacco products, including cigarettes, tobacco sticks and chewing tobacco. In addition, Budget 2017 proposes that inventories of cigarettes held by manufacturers, importers, wholesalers, and retailers at the of Budget Day be subject to an Inventory Tax of $ per cigarette. Page 47

48 Sales and Excise Tax Measures Alcohol Taxation Budget 2017 proposes that excise duty rates on alcohol products be increased by 2% effective the day after Budget Day. Page 48

49 Tax Planning Using Private Corporations Government plans to review tax planning strategies Income splitting through private corporations Conversion of dividends into tax efficient capital gains Possible changes to the capital gains inclusion rate The government intends to release a paper outlining the nature of these issues in more detail. Page 49

50 DISCLAIMER The information contained in this presentation is intended for general information purposes only. Care has been taken to ensure that the information herein is accurate; however, no representation is made as to the accuracy or appropriateness thereof. The information should not be relied upon to replace specific professional advice. Page 50

51 THANK YOU ANY QUESTIONS? Page 51