Canada's corporate tax summary reflects all 2020 provincial and territorial budgets. The federal government has not released (and is not expected to release) its 2020 budget due to the economic uncertainty created by the COVID-19 pandemic.
This summary is based on enacted and proposed legislation, and assumes that the proposed legislation will become law. Generally, budget proposals and draft legislation are enacted into law, even with a minority federal government, which is currently the case.
COVID-19 corporate tax measures
In response to the COVID-19 pandemic, the federal, provincial, and territorial governments implemented various measures to help mitigate the economic impact to Canadian individuals and businesses. Corporate tax measures include extending the deadline for certain:
- corporate income tax (CI)T return and other administrative filings
- CIT payments, and
- sales tax remittances.
See Tax returns and Payment of tax in the Tax administration section for more information.
100% first-year deduction for certain newly acquired property
An immediate 100% capital cost allowance (CCA) deduction is available for:
- manufacturing and processing and specified clean energy equipment acquired after 20 November 2018, and
- zero-emission vehicles purchased after 18 March 2019,*
if available for use before 2024. The 100% deduction is gradually phased out for property that becomes available for use after 2023 and before 2028. In addition, an increased first-year CCA deduction is available on most other eligible depreciable property acquired after 20 November 2018 and available for use before 2028. See Depreciation and amortisation in the Deductions section for more information.
* The federal government proposes to extend this 100% CCA deduction to eligible zero-emission automotive vehicles and equipment (i.e. off-road vehicles and equipment) acquired after 1 March 2020 and available for use before 2024. See Depreciation and amortisation in the Deductions section for more information.
Draft legislative proposals amend the definition of 'derivative forward agreement' to prevent fully taxable ordinary income from being recharacterised into more favourably taxed capital gains under these agreements, in certain cases, for transactions generally entered into after 18 March 2019. See Derivatives in the Income determination section for more information.
Foreign affiliate dumping rules
Draft legislative proposals extend the foreign affiliate dumping rules to Canadian-resident corporations controlled by non-resident individuals, non-resident trusts, or a group of non-resident corporations, individuals, and/or trusts who do not deal with each other at arm's length, for transactions or events occurring after 18 March 2019. See Foreign affiliate dumping rules in the Income determination section for more information.
Draft legislative proposals introduce a new ordering rule to prioritise transfer pricing adjustments, and broadens the definition of a 'transaction' for purposes of the extended reassessment period that applies to non-arm's-length cross-border transactions, for transactions beginning after 18 March 2019. See Transfer pricing in the Group taxation section and Statute of limitations in the Tax administration section for more information.
Cross-border securities lending arrangements (SLAs)
Draft legislative proposals modify the withholding tax (WHT) rules for dividend compensation payments that a Canadian borrower makes to a non-resident lender under an SLA, to address planning undertaken by certain non-residents that attempts to avoid the Canadian dividend WHT, for dividend compensation payments generally made after 18 March 2019. See Cross-border SLAs in the Income determination section for more information.
Digital services tax
The federal government is proposing to implement a tax on certain corporations that provide digital services in Canada, effective 1 January 2022. See Base erosion and profit shifting (BEPS) in the Tax administration section for more information.
Goods and Services Tax (GST)/Harmonised Sales Tax (HST) and the digital economy
Draft legislative proposals that affect the GST/HST regime address the digitisation of the global economy and are intended to ensure that the GST/HST applies to all goods and services consumed in Canada regardless of how they are supplied or who supplies them. Among other proposals, the federal government is proposing that foreign-based digital businesses (that are not required to register under the current GST/HST rules) that supply digital products and services to consumers in Canada will generally be required to register for and collect GST/HST under a new simplified GST/HST regime starting 1 July 2021. See GST/HST and the digital economy under Consumption taxes in the Other taxes section for more information.
Mandatory Quebec Sales Tax (QST) registration for non-residents of Quebec
The mandatory QST registration rules are expanded to non-residents of Quebec. Suppliers that are not residents of, and have no physical or significant presence in, Quebec, and that make digital and certain other supplies to ‘specified Quebec consumers’, may be required to register for QST under a new specified registration system, starting:
- 1 January 2019, for non-residents of Canada, and
- 1 September 2019, for residents of Canada that reside outside Quebec.
See Provincial retail sales tax in the Other taxes section for more information.