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2010 Federal Budget Executive Summary

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									2010 Federal Budget Executive Summary
The following are the highlights of the tax changes announced in the Federal budget of March 4, 2010.

Personal Tax
   Personal Tax Rates

    There are no changes to personal income tax rates for 2010. See Appendix A for a summary of the combined
    top personal tax rates.
   Medical Expense Tax Credit

    Purely cosmetic medical expenses incurred after March 4, 2010 that are aimed solely at improving one’s
    appearance are no longer eligible for the Medical Expense Tax Credit. Examples include liposuction, hair
    replacement procedures and teeth whitening.
   Rollover of Registered Retirement Savings Plan (RRSP) Proceeds to a Registered Disability Savings
    Plan (RDSP)

    The budget proposes to allow a deceased individual’s RRSP proceeds to rollover tax-free to the RDSP of a
    financially dependent infirm child or grandchild for deaths occurring on or after March 4, 2010. The amount
    eligible for transfer is limited to the beneficiary’s available RDSP contribution room which has a lifetime
    maximum of $200,000.
   Scholarship Exemption and Education Tax Credit

    The budget clarifies certain post-secondary program eligibility requirements for the post secondary scholarship
    exemption and the Education Tax Credit.
   Charities Disbursement Quota

    For fiscal years that end on or after March 4, 2010 the budget proposes to eliminate all disbursement quota
    requirements except those related to the requirement to annually disburse a percentage of investments held.

   Employee Stock Options

    The budget proposes to amend various measures associated with stock options. These measures are generally
    effective after March 4, 2010.

    The 50% stock option deduction (allowing stock option gains to be treated like capital gains) will only be available
    to employees where they exercise their options by acquiring shares of their employer or if the employee receives
    cash and the employer makes an election to forego the deduction for the cash payment.

    Clarification to ensure withholding tax remittances related to stock-based compensation is remitted for the
    period that includes the date on which the security was issued or sold.

    Clarification that a disposition of rights under a stock option agreement to a non-arm’s-length person results in
    an employment benefit at the time of disposition.


     RSM Richter LLP is an independent member firm of RSM International,
     an affiliation of independent accounting and consulting firms.
                                                           2



    A repeal of the tax deferral election for public company stock options.

    A relieving tax exemption for taxpayers who elected to defer the stock option benefit on public company
    shares that have declined in value and are disposed of before 2015. The election ensures that the tax liability
    on the deferred stock option benefit does not exceed the proceeds from the disposition of the shares.

   Mineral Exploration Tax Credit

    The budget proposes to extend the eligibility for the mineral exploration tax credit to investors for flow-through
    share agreements entered into on or before March 31, 2011.

Corporate Tax
   Corporate Tax Rates

    There are no changes to corporate tax rates. See Appendices B, C and D for a summary of all corporate tax
    rates.
   Income Trust Loss Trading

    The budget proposes to apply the acquisition of control rules to restrict use of corporate losses in situations
    where a specified investment flow-through trust or partnership (a SIFT, commonly referred to as an income
    trust) exchanges its units for shares of a corporation.

    The budget further proposes to not apply the acquisition of control rules to corporations distributed on the
    winding-up of a SIFT in certain circumstances.

   Taxation of Corporate Groups

    Going forward the Government will consider introducing a formal system of loss transfers or consolidated
    reporting for corporate groups. This would be similar to the current structure in the United States.

    This would be a significant improvement for corporations as it would reduce the requirement for complex
    structuring to achieve loss utilization within a corporate group.

   Clean Energy Generation – Accelerated CCA

    The accelerated CCA treatment has been extended to include heat recovery equipment used in a broader range
    of applications, and to include various distribution equipment.

    The budget also provides “principle-business corporations” the opportunity to fully deduct Canadian Renewable
    and Conservation Expenses in the year incurred or to transfer these expenses to investors through the use of
    flow-through shares.

   Television Set-top Boxes

    Satellite and cable set-top boxes acquired after March 4, 2010 are now eligible for a 40% CCA rate.
                                                           3



   Interest on Overpaid Taxes
    Effective July 1, 2010, the interest rate payable by the CRA to corporations on overpayments of tax will be
    reduced to the average yield of three-month Government of Canada T-Bills sold in the first month of the
    preceding quarter, rounded up to the nearest percentage point. In the past, 2 percentage points had been
    added to the rounded rate.


International Tax
   Dispositions of Taxable Canadian Property

    The budget proposes to exempt non-residents from the requirement to obtain a Section 116 clearance certificate
    on the disposition of shares of a corporation that does not principally derive its value from real property or
    resource properties situated in Canada.

   Refunds of Withholding Tax

    The budget proposes to allow non-residents to apply for refunds on overpaid withholding taxes under Regulation
    105 or Section 116 where an assessment of taxes has been made and an income tax return is filed within two
    years of the assessment.

   Foreign Tax Credit Generators

    The budget proposes to limit claims of foreign tax credits, deductions of foreign accrual tax and deductions of
    underlying foreign taxes if they relate to aggressive scenarios known as "foreign tax credit generators".

   Foreign Investment Entities (FIE) and Non-Resident Trusts (NRT)

    The budget proposes to simplify the current proposals for FIEs and NRTs subject to further public consultation.
    Specifically, the budget proposes to revert to the existing FIE rules subject to certain changes including applying
    an imputed income inclusion at the average T-Bill rate plus 2% and extending the assessment period in respect
    of offshore investment fund property by three years. The proposed rules would apply for tax years ending after
    March 4, 2010.

    The budget further proposes to substantially modify NRT rules based existing proposals subject to further public
    consultation. The proposed NRT rules would apply for the 2007 and subsequent taxation years.

Sales Tax
   Direct Selling Industry

    The budget proposes to implement the 2009 budget proposals to simplify the operation of the GST/HST for the
    direct selling industry and proposes additional enhancements for operators in this sector.
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Other
   Specified Leasing Property Rules

    The budget proposes to apply the Specified Leasing Property rules to otherwise exempt property that is leased
    to a government or other tax-exempt entity, or to a non-resident. The rules apply to leases entered into after
    March 4, 2010.

   Aggressive Tax Planning

    The Government announces public consultation on proposals requiring taxpayers to report aggressive tax
    planning transactions. Aggressive planning which meets certain criteria will need to be reported to the Canada
    Revenue Agency. The “reportable transaction”, will apply to transactions entered into after 2010 or those that
    were part of a series of transactions completed after 2010.

   Online Notices

    The budget proposes to allow the Canada Revenue Agency to electronically issue notices that currently can only
    be sent by ordinary mail. Notices that are required to be served personally or by registered mail will not be
    eligible for electronic issuance.
                                                                 Appendix A



                       2010 Combined Top Personal Tax Rates


                                 Ontario           Quebec     Alberta
Interest                         46.41%            48.22%     39.00%
Capital Gains                    23.21%            24.11%     19.50%
Eligible Dividends               26.57%            30.68%     14.56%
Ineligible Dividends             32.57%            36.36%     27.73%
                                                                                                                                        Appendix B



                               Ontario and Federal Corporate Tax Rates 2010 – 2014
                                        (Assumed December 31 Year-End)


      Tax Rates (¹)                                                             2010            2011              2012           2013      2014



      Small Business Income
      Federal (²)                                                          11.00%           11.00%            11.00%           11.00%    11.00%
      Ontario   (³)                                                            5.00%          4.50%             4.50%           4.50%     4.50%
      Total                                                                16.00%           15.50%            15.50%           15.50%    15.50%

      Manufacturing Income
      Federal                                                              18.00%           16.50%            15.00%           15.00%    15.00%
      Ontario                                                              11.00%           10.00%            10.00%           10.00%    10.00%
      Total                                                                29.00%           26.50%            25.00%           25.00%    25.00%

      Non-Manufacturing, Investment Income
      Non-Canadian Controlled Private
      Corporation (CCPC)
      Federal                                                              18.00%           16.50%            15.00%           15.00%    15.00%
      Ontario                                                              13.00%           11.75%            11.25%           10.50%    10.00%
      Total                                                                31.00%           28.25%            26.25%           25.50%    25.00%

      CCPC Investment Income
      Federal                                                              34.67%           34.67%            34.67%           34.67%    34.67%
      Ontario                                                              13.00%           11.75%            11.25%           10.50%    10.00%
      Total                                                                47.67%           46.42%            45.92%           45.17%    44.67%

(1)    Ontario Rate changes are effective on July 1st of each calendar year.

(2)    Small business income for Federal purposes is $500,000.

(3)    Small business income for Ontario purposes is $500,000. The Ontario surtax will be eliminated effective July 1, 2010.
                                                                                                        Appendix C



              Quebec and Federal Corporate Tax Rates 2010 – 2014
                      (Assumed December 31 Year-End)


      Tax Rates                                                             2010     2011   2012-2014



      Small Business Income (¹)
      Federal                                                         11.00%       11.00%     11.00%
      Quebec                                                           8.00%        8.00%      8.00%
      Total                                                           19.00%       19.00%     19.00%

      Manufacturing Income
      Federal                                                         18.00%       16.50%     15.00%
      Quebec                                                          11.90%       11.90%     11.90%
      Total                                                           29.90%       28.40%     26.90%

      Non-Manufacturing, Investment Income
      Non-Canadian Controlled Private
      Corporation (CCPC)
      Federal                                                         18.00%       16.50%     15.00%
      Quebec                                                          11.90%       11.90%     11.90%
      Total                                                           29.90%       28.40%     26.90%

      CCPC Investment Income
      Federal                                                         34.67%       34.67%     34.67%
      Quebec                                                          11.90%       11.90%     11.90%
      Total                                                           46.57%       46.57%     46.57%


(1)    Small business income for Federal and Quebec purposes is $500,000.
                                                                                                                                             Appendix D



                             Alberta and Federal Corporate Tax Rates 2010 – 2014
                                      (Assumed December 31 Year-End)


                     Tax Rates                                                               2010              2011       2012-2014



                     Small Business Income (¹)
                     Federal                                                             11.00%             11.00%            11.00%
                     Alberta                                                               3.00%             3.00%              3.00%
                     Total                                                               14.00%             14.00%            14.00%

                     Manufacturing Income
                     Federal                                                             18.00%             16.50%            15.00%
                     Alberta                                                             10.00%             10.00%            10.00%
                     Total                                                               28.00%             26.50%            25.00%

                     Non-Manufacturing, Investment Income
                     Non-Canadian Controlled Private
                     Corporation (CCPC)
                     Federal                                                             18.00%             16.50%            15.00%
                     Alberta                                                             10.00%             10.00%            10.00%
                     Total                                                               28.00%             26.50%            25.00%

                     CCPC Investment Income
                     Federal                                                             34.67%             34.67%            34.67%
                     Alberta                                                             10.00%             10.00%            10.00%
                     Total                                                               44.67%            44.67%             44.67%


               (1)    Small business income for Federal and Alberta purposes is $500,000.




RSM Richter LLP, Chartered Accountants, periodically publishes information as a service to clients, staff and other interested parties. Its objective is to
inform the reader of current developments in the field of taxation. The topics included are of a general nature and are not intended to provide a complete
analysis of any subject. Although every effort has been made to ensure the accuracy of the information included as of the date on which it was issued,
consideration must be given to the particular facts in each circumstance as well as changing laws and policies before implementation of any concepts.
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