Research and Development Tax Credits. The Low-Income Individuals and Families Tax (LIFT) Credit

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Robyn Mason
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1 Ontario Fall Economic Statement

2 HIGHLIGHTS On Thursday November 15, 2018, the Ontario government released its Fall Economic Statement. It included details of the government s proposed tax measures and technical amendments, 2018 Budget announcements that are not being implemented and federal measures that impact Ontario. Below are highlights from the announcements: A. Corporate Tax Measures Small Business Limit The 2018 Ontario Budget proposed to parallel a federal measure to phase out the $500,000 business limit for corporations that earn between $50,000 and $150,000 of passive investment income in a taxation year. The federal changes apply for tax years that begin after The Ontario government announced it will propose legislation to ensure that the province will not parallel this new federal restriction. All eligible Ontario small businesses will continue to receive the Ontario small business deduction. Employer Health Tax Exemption The Employer Health Tax (EHT) is paid by employers on their Ontario payrolls. Privatesector employers may be eligible for an exemption from EHT on up to $450,000 of payroll. Public-sector employers, and private-sector employers with payrolls over $5 million are not eligible for the exemption. The government announced that the EHT exemption will increase from $450,000 to $490,000 effective January 1, The 2018 Ontario Budget had proposed measures to target the Employer Health Tax exemption. The government has announced it will not be moving forward with those proposals. Research and Development Tax Credits The 2018 Ontario Budget announced changes to the Ontario Research and Development Tax Credit and the Ontario Innovation Tax Credit that would have linked a corporation s tax credit to the level of its investment in research and development. The government has announced that it will not be implementing these changes. B. Personal Tax Measures The Low-Income Individuals and Families Tax (LIFT) Credit Beginning with the 2019 tax year, the government proposed a new, non-refundable lowincome individuals and families tax (LIFT) credit. The LIFT credit would eliminate or reduce Ontario Personal Income Tax (PIT) for low-income Ontario taxpayers who have employment income. The proposed tax credit would be calculated as the lesser of: $850 and 5.05 percent of employment income. This amount would then be reduced by 10 percent of the greater of:

3 Adjusted individual net income in excess of $30,000 and Adjusted family net income in excess of $60,000. The resulting amount would then be limited to the taxpayer s PIT otherwise payable, excluding the Ontario Health Premium. People who are resident in Canada at the beginning of the year and resident in Ontario at the end of the year would be eligible for this credit. Non-Eligible Dividend Tax Rate Ontario also proposes to make a technical amendment to adjust the non-eligible tax credit calculation to maintain the rate at percent. This adjustment will result in the top noneligible dividend tax rate being percent in 2018, rather than the current percent. Surtax The government will not proceed with the 2018 Ontario Budget proposed adjustments to the rates, brackets, surtaxes and credits for Ontario s Personal Income Tax (PIT).

4 ABOUT MNP MNP is a leading national accounting, tax and business consulting firm in Canada. We proudly serve and respond to the needs of our clients in the public, private and not-forprofit sectors. Through partner-led engagements, we provide a collaborative, cost-effective approach to doing business and personalized strategies to help organizations succeed across the country and around the world. Ontario Region Contacts Name Region Phone Number Don Carson Toronto North Brandon Hodge Toronto North Glenn Willis Toronto North Eddy Burello Toronto Jeanne Cheng Toronto North Michael Saxe Toronto North Colin Chambers Toronto Le Van Toronto Rosario Suppa GTA-West Razik Sarsam GTA-West Dave Thompson GTA-West Steve Blazino NW Ontario René Deroy NW Ontario x. 128 Gavin Miranda Eastern ON Peter Bangs Eastern ON Nick Korhonen Eastern ON Erin Lalonde Eastern ON x 238 Jason Skilnick Eastern ON Adom Posta South Central Ontario Mike Veldhuizen South Central Ontario Fred Gallagher South Central Ontario Bryan Walters South Central Ontario Doug Greenhow SW Ontario John Humphrey SW Ontario x. 166 Melissa Aveiro SW Ontario x 231 Kal Ruprai Indirect Tax - Toronto Tim Bloos Int'l Tax - Toronto Frank Kacsandi Int'l Tax - Toronto

5 Andrew Lam Int'l Tax - Toronto Melinda Nguyen Int l Tax Toronto Kevyn Nightingale Int'l Tax - Toronto Mark Pearlman Int'l Tax - Toronto Michael Shumate Int'l Tax - Toronto Anthony Bellomo Int l Tax - Toronto Tony Marchegiano Int l Tax - Toronto Costa Tsakiris Int l Tax - Toronto Faisal Hadibhai Int l Tax - Toronto Jay McLean SRED - Waterloo Neha Tiku SRED - Markham

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6 Visit us at MNP.ca Praxity AISBL is a global alliance of independent firms. Organised as an international not-for-profit entity under Belgium law, Praxity has its executive office in Epsom. Praxity Global Alliance Limited is a not-for-profit company registered in England and Wales, limited by guarantee, and has its registered office in England. As an Alliance, Praxity does not practice the profession of public accountancy or provide audit, tax, consulting or other professional services of any type to third parties. The Alliance does not constitute a joint venture, partnership or network between participating firms. Because the Alliance firms are independent, Praxity does not guarantee the services or the quality of services provided by participating firms.

FALL ECONOMIC STATEMENT HIGHLIGHTS

Federal Fall Economic Statement 2018 FALL ECONOMIC STATEMENT HIGHLIGHTS On Wednesday, November 21, 2018 the Honourable Bill Morneau, Minister of Finance, tabled the 2018 Fall Economic Statement Investing