Ontario budget

Transcription

1 2015 Issue No April 2015 Tax Alert Canada Ontario 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 advisor. Ontario Finance Minister Charles Sousa tabled the province s fiscal budget on 23 April The budget contains no new income taxes, but includes several tax measures affecting individuals, trusts and corporations. Deficit and Ontario debt outlook The minister anticipates a deficit of $10.9b for , no change from the 31 March projection and $1.6b less than projected a year ago. Further deficits are anticipated of $8.5b for , $4.8b in and a return to a balanced budget in The Ontario accumulated deficit is expected to reach $199.7b in Table A Projections of Ontario budgetary deficit Revenue outlook Program expense outlook (118.8) (120.5) (120.6) (120.0) (0.3) Interest on debt (10.7) (11.4) (12.4) (13.2) Reserve - (1.0) (1.2) (1.2) (Deficit) (10.9) (8.5) (4.8) 0.0 Accumulated deficit % of GDP 25.8% 25.9% 25.5% 24.5% Numbers may not add due to rounding.

2 In 2014, real GDP grew by 2.2%. The government projects real GDP growth of 2.7% in 2015, 2.4% in 2016, 2.2% in 2017 and 2.1% in Following is a brief summary of the key tax measures. Business tax measures Corpo tax s No changes are proposed to the corpo tax s or the $500,000 small-business limit. Ontario s current corpo tax s for 2015 are summarized in Table B. Table B Smallbusiness tax General corpo tax Manufacturing and processing income tax Ontario 4.5% 11.5% 10.0% Federal and Ontario combined 15.5% 26.5% 25.0% Business tax credits Further to Ontario s review of the province s business support programs, Ontario proposes the following tax credit changes. Apprenticeship training tax credit (ATTC): The budget proposes to Reduce the general tax credit from 35% to 25%, and the for small businesses (with salaries or wages under $400,000) from 45% to 30% Reduce the annual maximum per apprentice from $10,000 to $5,000 Reduce the eligibility period from the first 48 months of an apprenticeship program to 36 months The changes to the ATTC will be applicable to eligible expenditures related to apprentices who commenced an apprenticeship program after 23 April The province will continue to monitor and review the ATTC in the future to ensure it is encouraging businesses to provide apprentices with the certifications and skills they need. Ontario interactive digital media tax credit: The budget proposes to focus the credit on entertainment products and to educational products for children under 12. In addition, certain products (e.g., search engines, real estate databases, and news and public affairs) will be specifically excluded. The rules that exclude promotional products will also be strengthened. Subject to transitional rules, these changes will be applicable to expenditures incurred after 23 April Changes will also be made to the product certification process, so that there is a new test based on the labour costs of the company developing the product. These changes will be applicable to all products not certified before 24 April Ontario production services tax credit (OPSTC): The budget announces a reduction in the tax credit for eligible film and television productions from 25% to 21.5% for qualifying production expenditures incurred after 23 April In addition, the following eligibility restrictions are proposed for taxation years beginning after 23 April 2015: Ontario labour expenditures must amount to at least 25% of the total expenditures incurred by a qualifying corporation Expenditures incurred by a qualifying corporation pursuant to non-arm s length contracts will be limited to expenditures that would have been eligible if incurred directly by the corporation A technical change is also proposed to ensure that only expenditures incurred after the final script stage to the end of the post-production stage will be eligible for the credit. This change will be applicable to expenditures incurred after 30 June Ontario budget

3 Ontario computer animation and special effects tax credit (OCASE): The budget announces a reduction in the tax credit from 20% to 18% for expenditures incurred after 23 April In addition, production started after 23 April 2015 must also receive the OPSTC or the Ontario film and television tax credit (OFTTC) to be entitled to claim the OCASE. Ontario film and television tax credit (OFTTC): The budget proposes not to parallel the federal change to treat a government equity investment in a Canadian film or video production in the same manner as other forms of assistance, so that it will continue not to reduce the amount of eligible expenditures for the purposes of the OFTTC. A regulation, effective after 31 December 2008, will be filed to enable the continuation of the province s long-standing administrative position. Ontario sound recording tax credit: Subject to transitional rules, the budget proposes to eliminate the credit for expenditures incurred after 23 April Other business tax measures The 2015 personal tax s are summarized in Table C. Table C First Second Third Fourth Fifth 5.05% on the first $40, % on $40,923 to $81, % on $81,848 to $150, % on $150,001 to 13.16% in excess of For 2015, the 20% surtax applies to basic Ontario tax in excess of $4,418, and the additional 36% surtax applies to basic Ontario tax in excess of $5,654. The 2015 combined federal/ontario personal tax s for taxable income in excess of $150,000 are summarized in Table D. Resource tax credit and additional tax on crown royalties: To harmonize with the federal government and other provinces, the budget proposes to eliminate the Ontario resource tax credit and the additional tax on crown royalties, and provide a deduction for royalties and mining taxes paid. These changes will apply as of 23 April Accrued but unused Ontario resource tax credit amounts will be eligible for carryforward to offset Ontario corpo income tax payable in the first five taxation years beginning after 23 April Personal tax Personal income tax s The budget does not include any changes to personal income tax s. Table D Taxable income Ordinary income tax Capital gains tax Eligible dividend tax Non-eligible dividend tax $150,001 to 47.97% Over 49.53% 23.98% 24.76% 31.67% 33.82% 38.29% 40.13% Ontario budget

4 Taxation of trusts and estates Ontario proposes to parallel federal changes to the taxation of trusts that were announced in the 2014 federal budget (with some exceptions). Under the proposed changes, graduated Ontario s and the Ontario surtax will continue to apply to graduated estates and qualified disability trusts that are taxable in Ontario. All other trusts (referred to as top- trusts) that are taxable in Ontario will pay tax at Ontario s effective top marginal personal income tax of 20.53% (i.e., 13.16% plus the 56% surtax) on all of the trust s taxable income. Related to this change, the tax credit for charitable donations in excess of $200 will be increased to 17.41% for top- trusts. These changes will apply for taxation years ending after 31 December Other tax measures Beer charge The province proposes a new three-cents-perlitre beer charge that will apply beginning in November 2015, and will increase by threecents-per-litre every year until Ontario retirement pension plan (ORPP) Related to the proposed introduction of the ORPP (the mandatory provincial pension plan proposals) announced in Ontario s 2014 budget, the province proposes to introduce legislation that, if enacted, would create an arm s length entity to administer the ORPP. In addition, the province will consider the feedback it has received from stakeholders on the key design features of the ORPP (in response to the consultation paper the province released in December 2014). electricity utilities, including transfers to the private sector. Specifically, for the period beginning 1 January 2016 to 31 December 2018, the province proposes changes under the Electricity Act, The changes include a reduction in the transfer tax to 22% (from 33%), a transfer tax exemption for municipal electricity utilities with fewer than 30,000 customers, and an exemption from payments in lieu of taxes (PILs) for capital gains arising under the PILs deemed disposition rule. Under the PILs deemed disposition rule, a municipal electricity utility would otherwise be deemed to dispose of all of its assets at fair market value when it ceases to be exempt from federal and Ontario income tax. Provincial land tax The budget includes proposals intended to reduce provincial land tax (PLT) inequities beginning in 2015, as the first stage in reforming the PLT system. The PLT is the property tax paid in unincorpod areas of northern Ontario outside municipal boundaries. The government had announced a review of the PLT in 2013 to address concerns raised by northern municipalities regarding inequities between their property tax s and the PLT. Following consultations, a summary paper was released by the province in December Property assessment system The budget indicates that the province, in partnership with the Municipal Property Assessment Corporation (MPAC), municipalities and stakeholders, is working to improve the property assessment system prior to the next province-wide reassessment in The focus of these improvements is the implementation of the Special Purpose Business Property Assessment Review report recommendations. Municipal electricity utilities The budget proposes temporary tax relief for transfers of electricity assets for all municipal Ontario budget

5 Learn more For more information, contact your EY or Couzin Taylor advisor or one of the following professionals: Karen Atkinson, Toronto Neil Moore, Toronto Ian Sherman, Ottawa John Sliskovic, London Cynthia McIntyre, Kitchener And for up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/budget. 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 indepth 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 Couzin Taylor Couzin Taylor 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 Ernst & Young 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 Ontario budget