Taxes

Businesses can choose not to include the rebate in taxable income when filing their T2 Corporation Income Tax Return for the year in which it was received. However, they could be reassessed, with interest, in the event that the legislation does not receive Royal Assent.

Read more: Canada Carbon Rebate for Small Businesses - Tax treatment of the rebate

Capital gains inclusion rate deferral and filing difficulties have spurred several relief announcements from the CRA.

The delayed implementation of the increase to the capital gains inclusion rate to January 1, 2026, has resulted in several relief announcements by Canada Revenue Agency (CRA), adding to the uncertainty for many taxpayers and tax professionals this year.

On January 31, 2025, the CRA announced that it would grant relief in respect of late-filing penalties and interest until June 2, 2025, for “impacted T1 Individual filers” and until May 1, 2025, for “impacted T3 Trust filers”.  In a statement published on its website on February 13, 2025, the CRA stated that the penalty and interest relief is “to provide additional time for taxpayers reporting capital gains to meet their tax filing obligations”.

On February 19, 2025, the CRA announced penalty relief for certain information slips.  Citing “ongoing challenges” faced by some filers, the CRA will waive late-filing penalties for T4, T4A and T5 slips filed by March 7, 2025, even though the deadline remains February 28, 2025.  Similarly, penalty relief applies to T4PS and T5008 slips filed by March 17, 2025, and to T3 slips for “impacted T3 Trust filers” filed by May 1, 2025. The CRA cautions that penalties for filing these returns after the relief period will be calculated based on the original due date.  For example, if the relief period for a return ends March 7, 2025, for a return due February 28, 2025, and a return is filed on March 8, 2025, the CRA will consider the return to be 8 days late.  

Learn more: Need to know: CRA announced penalty relief for taxpayers

On the day that CRA was to release updated forms for the proposed changes to the capital gains inclusion rate, the government of Canada announced that the proposed changes will be delayed to January 1, 2026.

The federal government’s decision to delay implementation of proposed changes to the capital gains inclusion rate provides temporary relief for taxpayers, but the fate of the proposed changes still remains unknown due to prorogation and pending election.

Read more: Amid Growing Economic Uncertainty due to Possible Tariffs, CPA Canada has Recommended that the Government Consider Rescinding the Proposed Changes Entirely.

The Department of Finance announced today that it will introduce legislation in Parliament in due course, related to the capital gains inclusion rate change with a new effective date of January 1, 2026. The announcement confirms the government’s intention that, effective for dispositions that occur on or after January 1, 2026, the inclusion rate will increase from one-half to two-thirds on capital gains realized in excess of $250,000 annually for individuals and on all capital gains realized by corporations and most types of trusts.

As a result, the Canada Revenue Agency (CRA) has reverted to administering the currently enacted capital gains inclusion rate of one-half. This means that all capital gains realized before January 1, 2026 will be subject to the currently enacted inclusion rate of one-half, unless an exemption applies.

Read more: Update on the Canada Revenue Agency's administration of the proposed capital gains taxation changes

On September 23, 2024, the government tabled a Notice of Ways and Means Motion (NWMM) to introduce a bill entitled An Act to amend the Income Tax Act and the Income Tax Regulations. This Notice of Ways and Means Motion modified the motion tabled on June 10, 2024. For more information about the capital gains tax changes, please visit the Notice of Ways and Means Motion.

Notwithstanding that Parliament is prorogued, the Canada Revenue Agency (CRA) will continue to administer the proposed capital gains legislation.

Although these proposed changes are subject to parliamentary approval, consistent with standard practice, the CRA is administering the changes to the capital gains inclusion rate effective June 25, 2024, based on the proposals included in the Notice of Ways and Means Motion tabled September 23, 2024. Parliamentary convention dictates that taxation proposals are effective as soon as the government tables a Notice of Ways and Means Motion; this approach provides consistency and fairness in the treatment of all taxpayers.

Read more: CRA's updated announcement regarding the capital gains changes following prorogation of Parliament

The federal government has introduced proposed changes to the Income Tax Act that have sparked widespread interest and, in some cases, uncertainty about their implementation and administration

Understanding the evolving landscape of income tax legislation is crucial for taxpayers, tax professionals, and businesses alike. Over the past several months, the federal government has introduced various proposed changes to the Income Tax Act including, most notably, the increase to the capital gains inclusion rate from 1/2 to 2/3. The status of these proposals has sparked widespread interest and, in some cases, uncertainty about their implementation and administration. CPA Canada continually engages with the Canada Revenue Agency (CRA) and the Department of Finance for clarity as to which proposals are presently being administered.

Read more: CPA Canada helps navigate tax uncertainty

Your source for the latest Canadian tax news and updates on changing tax laws. Working collaboratively with the Canada Revenue Agency (CRA) we aim to bring clarity on pressing tax questions and tax updates.

Read more: CPA Canada - Canadian Tax News

CPA Canada co-hosted a webinar with the CRA to review updates to the SR&ED program. In this session, CRA provides an overview of the program and highlights upcoming initiatives that will transform it. CRA also reviews some of the most common trends they are seeing on the field and answers some of the top questions heard from CPA Canada's SR&ED Committee.

Watch on YouTube:  CRA update on SR&ED Program

Here is CRA's updated announcement regarding the capital gains changes following prorogation of Parliament.

On September 23, 2024, the government tabled a Notice of Ways and Means Motion (NWMM) to introduce a bill entitled An Act to amend the Income Tax Act and the Income Tax Regulations. This Notice of Ways and Means Motion modified the motion tabled on June 10, 2024. For more information about the capital gains tax changes, please visit the Notice of Ways and Means Motion.

Notwithstanding that Parliament is prorogued, the Canada Revenue Agency (CRA) will continue to administer the proposed capital gains legislation.

Read more: CRA's updated announcement regarding capital gains following prorogation of Parliament

In Budget 2023, the federal government introduced new requirements for employers and pension plan administrators to report dental coverage offered to employees and plan members. Beginning with the 2023 tax year, issuers of T4 and T4A slips must complete:

• Box 45 (T4)
• Box 015 (T4A)

These boxes use codes to indicate the status of dental coverage:

• Code 1: No access to dental care insurance or coverage of dental services.
• Codes 2-5: Indicate dental insurance or coverage is provided and the recipients.

Health Canada has the authority to collect and use Social Insurance Numbers (SINs) for individuals applying to the Canadian Dental Care Plan for plan administration and enforcement.

Temporary Administrative Relief

For the 2023 tax year, issuers were not required to complete Box 45/015 when Code 1 (no coverage) applied, provided all reasonable efforts were made to comply with the reporting requirements.

We have learned that the federal government will extend this administrative relief to the 2024 tax filing season. As in 2023, issuers will not be required to complete Box 45/015 when Code 1 applies under these same conditions.

Looking Ahead: Full Compliance Expected in 2025

We are told this temporary administrative relief will not be extended beyond 2024. Employers and plan administrators should familiarize themselves with the full reporting requirements and ensure their systems and processes are prepared for compliance starting in 2025.

Next Steps for Employers and Plan Administrators

Employers and plan administrators are encouraged to:

• Review the updated T4/T4A reporting requirements.
• Ensure payroll systems are equipped to handle the new reporting codes.
• Consult with tax professionals or review CRA guidance to stay informed.
  
  

Joined by guest speakers John Oakey and Ryan Minor of CPA Canada, this session explores 2024 tax filings amid legislative uncertainty, prorogation, proposed changes, CRA positions, and strategies to manage risks in a shifting tax landscape.

Join this comprehensive session as we navigate the challenges and complexities of 2024 tax filings in the face of legislative uncertainty. With expert insights from John Oakey, Vice President of Taxation at CPA Canada, and Ryan Minor, Director of Taxation at CPA Canada, this discussion will delve into the implications of prorogation and the administration of proposed yet unenacted tax legislation. Facilitated by Jay Goodis and Kim G C Moody, the session will explore the practical impacts of key proposals, CRA’s administrative positions, and strategic planning to address taxpayer concerns. This session will provide a detailed examination of proposed changes to the capital gains inclusion rate, lifetime capital gains exemption, and alternative minimum tax (AMT), as well as insights into bare trusts, charitable donations, and the Canada Carbon Rebate for Small Businesses. Our experts will share practical recommendations for navigating these uncertainties and explore how similar challenges have been addressed in past tax years.

Read more: Navigating Tax Uncertainty: Practical Insights for 2024 Filings

CPA Canada recognizes that the Canada Revenue Agency’s (CRA) initial guidance, released on July 5th, did not address all our members questions regarding administration of the rules. The objective of CRA’s initial guidance was to ensure timely guidance was provided to taxpayers and their advisors.

Read more: CRA mandatory disclosure rules guidance – Update

The issue of whether an individual is an employee or an independent contractor can have far-reaching effects on both the individual and the company for whom they provide services. However, companies often pay little attention to either the distinction between the two statuses or the possible effects of an incorrectly described relationship.

Read more: Dentons - Employee or independent contractor?

Tax Resources for CPAs

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