A 100% rebate is provided in respect of GST paid on books acquired by:

• schools, universities, public colleges and municipalities;
• charities and qualifying non-profit organizations that operate public lending libraries; and
• designated charities and qualifying non-profit organizations whose primary purpose is the promotion of literacy.

The rebate is not available when the books are acquired for resale.

Goods and Services Tax

Schools, colleges, universities, municipalities, certain charities and certain non-profit organizations

Rebate

Excise Tax Act, section 259.1

• Introduced on October 23, 1996 (Department of Finance Canada news release 1996-076). Effective in respect of GST paid after that date.
• Budget 2012 extended the rebate to include books acquired to be given away by designated literacy organizations.

To achieve a social objective

This measure recognizes the important role played by public libraries, educational institutions and other community organizations in helping people learn how to read and improve their reading skills (Department of Finance Canada news release 1996-076, October 23, 1996).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Education

70959 - Education - Education not definable by level

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Form GST66 - Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with provincial government expenditures on education.

About 1,700 entities claim this rebate each year.

Hospitals provide primarily tax-exempt services, and as such are unable to claim input tax credits for GST paid on most of their purchases. However, public hospitals are eligible for a rebate of 83% of the GST paid on purchases related to their supply of exempt services.

Since 2005, government-funded charities and non-profit organizations that provide health care services similar to those traditionally performed in hospitals or supply ancillary support services to hospitals and eligible health care facilities ("facility operators and external suppliers") are also eligible for an 83% rebate of the GST paid on purchases related to their exempt health care supplies.

Goods and Services Tax

Public hospitals, facility operators and external suppliers

Rebate

Excise Tax Act,subsection 259(3)

• The rebate for public hospitals has been in effect since the inception of the GST in 1991.
• Budget 2005 extended the 83% rebate to facility operators and external suppliers to accommodate the restructuring by provinces and territories of the delivery of health care services that has resulted in some services formerly provided by hospitals being performed by other non-profit organizations.
• Budget 2022 amended the expanded GST/HST hospital rebate eligibility rules to include health care services delivered with the active involvement of, or on the recommendation of, either a physician or a nurse practitioner, irrespective of their geographical location.

To achieve a social objective

The rebate for public hospitals was implemented at the time of inception of the GST to ensure that the sales tax burden did not increase as a result of moving to the GST from the previous federal sales tax (Goods and Services Tax: Technical Paper, August 1989).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Health

7073 - Health - Hospital services

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Form GST66 - Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with provincial government expenditures on health.

About 700 entities claim this rebate each year.

Municipalities are eligible for a 100% rebate for the GST paid on their purchases of inputs used in the provision of their exempt supplies. Entities that are not municipalities (e.g., library boards) may nonetheless be determined by the Minister of National Revenue to be municipalities for the purposes of this rebate. Similarly, service providers may be designated to be municipalities with respect to certain municipal-like services they provide (e.g., sewage treatment services). Entities determined or designated to be municipalities are eligible for the 100% rebate in respect of GST paid on inputs used in the course of their exempt municipal activities.

Goods and Services Tax

Municipalities

Rebate

Excise Tax Act,subsections 259(3) and (4)

• This measure has been in effect since the inception of the GST in 1991, initially with a rebate rate of 57.14%.
• The rebate rate was increased to 100%, generally effective since February 2004 (Department of Finance Canada news release 2004-007, February 3, 2004).

To implement intergovernmental tax arrangements

The partial rebate initially provided was intended to ensure that the sales tax burden of municipalities did not increase as a result of moving to the GST from the previous federal sales tax (Goods and Services Tax: Technical Paper, August 1989). The rebate was increased to 100% to provide municipalities with an increased source of reliable, predictable and long-term funding to address infrastructure priorities (Department of Finance Canada news release 2004-007, February 3, 2004).

Structural tax measure

GST rebates effectively reduce the value added subject to tax and are therefore deviations from a broadly defined value-added tax base.

Intergovernmental tax arrangements

70183 - General public services - Transfers of a general character between different levels of government - General purpose transfers to local governments

n/a

Form GST66 - Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with local government expenditures.

About 9,500 entities claim this rebate each year.

Builders or purchasers of newly constructed and substantially renovated residential housing are eligible for a rebate of the GST paid if the housing is for use as a primary place of residence. For houses valued at or below $350,000, the rebate is 36% of the total GST paid to a maximum of $6,300. The rebate is gradually phased out for houses valued between $350,000 and $450,000, and there is no rebate for houses valued at $450,000 or more. The same rebate is available for the GST paid by individuals to construct or substantially renovate housing that is for use by the owner or a relative as a primary place of residence.

The rate of rebate was established so that the GST burden on new housing would be equal to the federal sales tax component of the total price of a new home before the introduction of the GST (which was approximately 4.5% on average).

Goods and Services Tax

Individuals who have purchased or constructed new homes

Rebate

Excise Tax Act, sections 254 and 256

• This measure has been in effect since the inception of the GST in 1991.
• The maximum dollar value of the rebate was lowered in Budget 2006 and in the 2007 Economic Statement concurrently with the reductions in the GST rate from 7% to 6% on July 1, 2006 and to 5% on January 1, 2008.

To achieve a social objective

This measure is designed to ensure that the GST does not pose a barrier to the affordability of new homes (Goods and Services Tax Consolidated Explanatory Notes, April 1997).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Housing

70619 - Housing and community amenities - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada. Data on expenditures on residential construction from the System of National Accounts were adjusted by Statistics Canada for conceptual differences in the timing and tax treatment of land.

The cost of this measure is calculated from source data.

The cost of this measure is projected to grow in line with housing completions.

No data is available.

Builders or purchasers of newly constructed or substantially renovated residential rental housing are eligible for a rebate of the GST payable if it can reasonably be expected that the first use of the individual residential units within the property will be as a primary place of residence for at least one year. The rebate also applies to builders or purchasers of new additions to multiple-unit residential rental housing and to the leasing of land (i.e., housing lots) to a person that affixes a new or substantially renovated house or sites in new residential trailer parks for long-term residential use.

For single-unit residential housing (including duplexes) or units in multiple-unit residential housing valued at or below $350,000, the rebate is 36% of the total GST paid to a maximum of $6,300. The rebate is phased out for such residential housing or units valued between $350,000 and $450,000. In the case of leasing housing lots or sites in residential trailer parks, the rebate is 36% of the total GST paid to a maximum $1,575. The rebate is phased out for each housing lot or site valued between $87,500 and $112,500.

Goods and Services Tax

Builders and purchasers of new residential rental property and landlords that lease housing lots or sites in new residential trailer parks for long-term residential use

Rebate

Excise Tax Act, section 256.1

• Introduced in Budget 2000. Effective February 28, 2000.
• The maximum dollar value of the rebate was lowered in Budget 2006 and in the 2007 Economic Statement concurrently with the reductions in the GST rate from 7% to 6% on July 1, 2006 and to 5% on January 1, 2008.

To achieve a social objective

This measure ensures that builders and purchasers of new residential rental property face the same effective GST rate faced by purchasers of new owner-occupied homes (Budget 2000).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Housing

70619 - Housing and community amenities - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Form GST524 - GST/HST New Residential Rental Property Rebate Application

The cost of this measure is calculated from source data.

The cost of this measure is projected to grow in line with housing completions for multiple units.

No data is available.

The Royal Canadian Legion is eligible for a 100% rebate of GST paid on Remembrance Day poppies and wreaths it acquires.

Goods and Services Tax

Royal Canadian Legion

Rebate

Excise Tax Act, section 259.2

• Introduced on October 28, 2010 (Department of Finance Canada news release 2010-101). Effective in respect of tax payable or paid after 2009.

To achieve a social objective

This measure recognizes the special status of poppies and wreaths as symbols of the contribution, courage and sacrifices of those who served in the Canadian Forces (Department of Finance Canada news release 2010-101, October 28, 2010).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Donations, gifts, charities and non-profit organizations

70869 - Recreation, culture, and religion - Recreation, culture, and religion not elsewhere classified

Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.

Form GST189 - General Application for Rebate of GST/HST

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

n/a

The Royal Canadian Legion is the sole direct beneficiary of this measure.

Non-profit organizations that receive at least 40% of their funding from governments, municipalities or Indian Bands are eligible for a rebate of 50% of the GST paid on purchases related to their supplies of exempt services.

Goods and Services Tax

Non-profit organizations

Rebate

Excise Tax Act,subsection 259(3)

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure recognizes the important role of non-profit organizations in Canadian society (Goods and Services Tax, December 1989).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Donations, gifts, charities and non-profit organizations

705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes

Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.

Form GST66 - Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with nominal gross domestic product.

About 7,000 entities claim this rebate each year.

Charities registered under the Income Tax Act and registered Canadian amateur athletic associations are eligible for a rebate of 50% of the GST paid on purchases related to their supplies of exempt services. Non-profit organizations operating a facility or part thereof to provide nursing home care are also eligible for the rebate.

Goods and Services Tax

Registered charities, registered Canadian amateur athletic associations, non-profit organizations operating a facility or part thereof to provide nursing home care

Rebate

Excise Tax Act,subsection 259(3)

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure recognizes the important role of charities in Canadian society (Goods and Services Tax, December 1989).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Donations, gifts, charities and non-profit organizations

705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes

Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.

Form GST66 - Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with nominal gross domestic product.

About 45,000 entities claim this rebate each year.

Schools, colleges and universities provide primarily tax-exempt services, and as such are unable to claim input tax credits for GST paid on most of their purchases. However, elementary and secondary schools operating on a not-for-profit basis are eligible for a rebate of 68% of the GST paid on purchases related to their supplies of exempt services. Publicly funded colleges and recognized degree-granting universities operating on a not-for-profit basis are eligible for a rebate of 67% of the GST paid on purchases related to their supplies of exempt services.

Goods and Services Tax

Schools, colleges and universities

Rebate

Excise Tax Act,subsection 259(3)

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

This measure was implemented at the time of inception of the GST to ensure that the sales tax burden on these sectors did not increase as a result of moving to the GST from the previous federal sales tax (Goods and Services Tax: Technical Paper, August 1989).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Education

70929 - Education - Primary and Secondary education

70939 - Education - College education

70949 - Education - University education

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Form GST66 - Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with provincial government expenditures on education.

About 4,500 entities claim this rebate each year.

A GST rebate is available in respect of motor vehicles specially equipped with certain features for use by individuals with disabilities. The amount of the rebate is the GST paid on the portion of the purchase price attributable to the special features. The rebate is available in respect of both new and used vehicles, and in respect of vehicles purchased either in Canada or abroad (with the GST being paid on importation). The rebate is also available when a vehicle is imported after being modified with special features.

Goods and Services Tax

Individuals with disabilities, organizations serving these individuals and caregivers

Rebate

Excise Tax Act,sections 258.1 and 258.2

• Introduced on April 3, 1998 (Department of Finance Canada news release 1998-036). Effective in respect of new vehicles paid for after April 3, 1998.
• An amendment to extend the relief to used vehicles was announced on November 27, 2006 (Department of Finance Canada news release 2006-073), effective retrospectively to vehicles paid for after April 3, 1998.

To achieve a social objective

This measure ensures that all individuals and organizations get tax relief on the additional cost of purchasing vehicles, such as a car or minivan, that meet their special needs (Department of Finance Canada news release 1998-036, April 3, 1998).

Non-structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Health

70713 - Health - Medical products, appliances, and equipment - Therapeutic appliances and equipment

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Form GST518 - GST/HST Specially Equipped Motor Vehicle Rebate Application

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with consumption expenditures on vehicles and parts.

No data is available.

Employees and partners may incur expenses in the course of carrying out their duties that are not directly reimbursed by their employers and partnerships. Instead, compensation may be provided through salaries, commissions, profits and other means that would not be subject to GST. Consequently, employers and partnerships cannot recover the GST paid by the employees and partners through the input tax credit mechanism.

A rebate is available to an employee of a GST registrant (other than a listed financial institution) for the GST paid on those expenses that are deductible in computing the employee's income from employment for income tax purposes. For example, an employee is allowed to claim a rebate in respect of the GST on a portion of entertainment expenses or on the capital cost allowance for an automobile, aircraft or musical instrument that is used in his or her employment and on which GST is payable.

This rebate is also available to an individual who is a member of a GST-registered partnership in respect of expenses incurred outside the partnership that are deducted in computing the member's income from the partnership for income tax purposes.

Goods and Services Tax

Employees and partners

Rebate

Excise Tax Act, section 253

• This measure has been in effect since the inception of the GST in 1991.

To provide relief for special circumstances

This measure is designed to reduce the possible tax-cascading effect that would occur in certain cases when employers and partnerships cannot recover GST paid by employees and partners in the course of their duties.

Structural tax measure

GST rebates effectively reduce the value added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Employment

Business – other

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Form GST370 - Employee and Partner GST/HST Rebate Application

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with nominal gross domestic product.

No data is available.

Small corporations in the oil and gas sector were entitled to reclassify as Canadian Exploration Expenses (CEE) the first $1 million per year of eligible Canadian Development Expenses (CDE) renounced to shareholders under a flow-through share agreement. CEE is fully deductible in the year incurred, while CDE is deductible at the rate of 30% per year. For background information, see the related item "Flow-through share deductions". Budget 2017 announced the elimination of this measure.

Personal (including trusts) and corporate income tax

Investors in flow-through shares and small oil and gas corporations

Timing preference

Income Tax Act, subsection 66(12.601)

• Introduced in the 1992 Economic and Fiscal Statement. Effective after December 2, 1992.
• Budget 1996 reduced the amount of CDE that can be reclassified to $1 million per year from $2 million and restricted the reclassification to firms with less than $15 million of taxable capital employed in Canada.
• Budget 2017 announced the elimination of this tax expenditure by April 2019.

To encourage or attract investment

This measure was introduced to facilitate financing and promote investment in the junior oil and gas sector (Economic and Fiscal Statement, 1992; Budget 1996).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business - natural resources

70432 - Economic affairs - Fuel and energy - Petroleum and natural gas

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T2 Corporation Income Tax Return

The value of this tax expenditure is estimated by comparing the tax benefits received by the shareholders to the tax benefits that would have been received if the CDE had been flowed out as CDE rather than CEE. It is assumed that the issuing corporations would have been able to fully flow out the expenses as CDE, even though CDE is generally less attractive to investors than CEE. To the extent that they could not, the tax expenditure would be higher than this estimate. The breakdown of the estimates between individuals and trusts is not available.

Projections are based on current market conditions.

Information on the number of flow-through share investors who benefitted from the measure is not available. No corporations reclassified expenses under this provision in 2021.

Capital gains realized by an investment corporation or a mutual fund corporation are taxed at the corporation level, and the tax is accumulated in an account known as the "refundable capital gains tax on hand" account. The tax accumulated in that account is refunded to the corporation upon distribution of its capital gains to its shareholders or when a mutual fund corporation redeems shares. These distributions are taxed as capital gains in the hands of the shareholder and not as dividends. This departs from general practice in that income earned by a public corporation (including taxable capital gains) does not generally retain its character for tax purposes when subsequently distributed to shareholders.

Similarly, a mutual fund trust can claim a refund when it redeems units in respect of the tax the trust has paid on capital gains retained within the trust.

Personal (trusts only) and corporate income tax

Investment and mutual fund corporations and mutual fund trusts

Other

Income Tax Act, subsections 131(2) and (6)

• Introduced as part of the 1971 Tax Reform to enable investment corporations and mutual fund corporations that realize capital gains to flow them out to shareholders in a subsequent distribution.

To prevent double taxation

This measure permits capital gains earned by investors through investment corporations and mutual fund corporations to be taxed on a similar basis as capital gains earned directly by investors.

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

Savings and investment

n/a

n/a

T2 Corporation Income Tax Return

T3 Trust Income Tax and Information Return

The value of this measure is the sum of the amounts of federal capital gains refunds claimed by investment corporations, mutual fund corporations and mutual fund trusts.

Corporate income tax: Projections are based on the Department of Finance Canada's forecast for the growth of capital gains.

About 45 investment and mutual fund corporations and 2,500 mutual fund trusts claimed a capital gain refund in 2021.

The Refundable Medical Expense Supplement is a refundable credit that provides low-income working Canadians with assistance for medical and disability-related expenses. For 2023, the supplement is available to individuals whose earnings from employment or self-employment meet or exceed a minimum threshold of $4,083. To be eligible for the supplement, individuals must be 18 years of age or older and have claimed eligible medical expenses under the Medical Expense Tax Credit or the disability supports deduction. The supplement is equal to the lesser of $1,399 (for 2023) and 25% of the allowable portion of expenses that can be claimed under the Medical Expense Tax Credit and the disability supports deduction. The supplement is reduced by 5% of net family income above an income threshold of $30,964. The maximum supplement amount, the minimum earnings threshold and the family net income threshold are indexed to inflation.

Personal income tax

Low-income employees and self-employed individuals

Credit, refundable

Income Tax Act, section 122.51

• Introduced in Budget 1997. Effective for the 1997 and subsequent taxation years.
• The maximum supplement amount was increased to $750 in Budget 2005 (from $562 in 2004) and to $1,000 in Budget 2006.

To encourage employment

This measure improves work incentives for Canadians with disabilities by helping to offset the loss of coverage for medical and disability-related expenses when individuals move from social assistance to the paid labour force (Budget 2006).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Health

7071 - Health - Medical products, appliances, and equipment

7072 - Health - Outpatient services

7073 - Health - Hospital services

71012 - Social protection - Sickness and disability – Disability

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 444,000 individuals received this benefit in 2021.

An individual could defer personal income tax on investment income if the individual earned the investment income through a private corporation that is subject to a corporate income tax rate that is significantly lower than the highest personal income tax rate. Consequently, the Income Tax Act provides rules that counter such a deferral:

• Under Part I of the Income Tax Act, investment income (other than taxable dividends) received by a Canadian-controlled private corporation is subject to a partly refundable 38⅔% income tax rate (an unreduced 28% general tax rate plus an additional tax of 10⅔%). The refundable portion corresponds to 30⅔% of the investment income.
• Under Part IV of the Act, taxable dividends received by a private corporation are generally subject to a 38⅓% income tax rate.

The refundable portion of the Part I tax and the Part IV tax paid on ineligible dividends are added to the corporation's Non-Eligible Refundable Dividend Tax on Hand account. The Part IV tax paid on eligible dividends is added to the corporation's Eligible Refundable Dividend Tax on Hand account. Amounts in both accounts are refundable to the corporation upon the payment of ineligible dividends, at the effective rate of 38⅓% of ineligible dividends paid. Only amounts in the corporation's Eligible Refundable Dividend Tax on Hand account, however, are refundable upon the payment of eligible dividends, also at the effective rate of 38⅓%.

Corporate income tax

Private corporations

Other

Income Tax Act, sections 123, 123.3, 123.4, 124, 129 and 186

• Introduced as part of the 1971 Tax Reform. The Part I tax was 50% and the refundable portion of that tax was 25%. The Part IV tax was introduced at a rate of 33⅓% and was fully refundable. The refundable tax paid on investment income was refundable at a basic rate of one dollar for every three dollars of taxable dividends paid.
• Amended as part of the 1987 Tax Reform, effective after 1987, to reflect changes in federal tax rates. The Part I tax was reduced to 28% from 36%, and its refundable portion to 20%. The Part IV tax was reduced to 25%. The rate of refund was decreased to one dollar for every four dollars of taxable dividends paid.
• Budgets 1994 and 1995 increased the rate of the Part IV tax to 33⅓% to further reduce personal income tax deferral possibilities. The rate of refund was increased to one dollar for every three dollars of taxable dividends paid. These changes were generally effective for taxation years beginning after June 1995.
• Budget 1995 introduced an additional refundable 6⅔% Part I tax on investment income earned by Canadian-controlled private corporations.
• These refundable taxes (and the related refund rate) were increased to their current levels effective January 1, 2016, in order to reflect the new 33% top personal income tax rate applicable as of that date.
• In July 2017, the government launched consultations on proposals to limit tax planning strategies using private corporations. The 2017 Fall Economic Statement announced that the government will move forward with measures to limit tax deferral opportunities related to investment income earned through private corporations, with further details to be announced in Budget 2018.
• Budget 2018 announced that Canadian-controlled private corporations would no longer be able to obtain refunds of taxes paid on investment income while distributing dividends from income taxed at the general corporate rate. Private corporations will now track two Refundable Dividend Tax on Hand accounts to allow Part IV tax paid on eligible dividend income to be recovered upon the payment of eligible dividends. This measure applies in respect of tax years beginning after 2018.

To ensure a neutral tax treatment across similar situations

This measure is intended to reduce the possibility for individuals to defer personal income tax on investment income by earning such income through a private corporation instead of earning such income directly (Budget 1995).

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

Other

n/a

n/a

T2 Corporation Income Tax Return                               

The tax expenditure is comprised of the additional Part I tax (the difference between the applicable Part I tax rate and the federal general corporate income tax rate of 15%), the Part IV tax and the sum of the aforementioned refunds. In these accounts, tax revenues are recorded as negative amounts.

The cost of this measure is projected to grow in line with investment income and taxable income.

About 339,500 and 283,600 corporations were respectively subject to the additional Part I tax and Part IV tax in 2021, while 298,500 corporations claimed the dividend refund in that year.

Under agreements which are given force of law by Parliament, Indigenous self-governments are provided with a 100% refund of the GST for goods and services acquired for use in governmental activities.

Goods and Services Tax

Indigenous self-governments, their corporations and entities performing functions of government 

Refund

The agreements are given force of law by the implementation legislation related to Self-Government Agreements and Comprehensive Land Claims and Self-Government Agreements.

• The refund first became available in the late 1990s in Self-Government Agreements signed with certain Yukon First Nations.
• To date, 18 combined Comprehensive Land Claims and Self-Government Agreements have been concluded (in the Yukon, British Columbia, the Northwest Territories and Newfoundland and Labrador) and several other Indigenous groups, mainly in British Columbia, Saskatchewan, Quebec and the Northwest Territories, are at the final agreement stage.

To implement intergovernmental tax arrangements

This measure relieves from GST the expenditures incurred by Indigenous self-governments in exercising governmental activities.

Structural tax measure

GST refunds effectively reduce the value-added subject to tax, and are therefore deviations from a broadly defined value-added tax base.

Intergovernmental tax arrangements

7018 - General public services - Transfers of a general character between different levels of government

n/a

Form GST66 - Application for GST/HST Public Service Bodies' Rebate and GST Self-Government Refund

The cost of this measure corresponds to the amounts of rebates approved, as reported in administrative data.

The cost of this measure is projected to grow in line with government expenditures and expected ratification of new Self-Government Agreements and Comprehensive Land Claims and Self-Government Agreements.

About 30 entities claim these refunds each year.

A Registered Disability Savings Plan (RDSP) is a tax-assisted long-term savings plan that may generally be established for the benefit of an individual under 60 years of age who is eligible for the Disability Tax Credit. Contributions to an RDSP are not deductible from income, and therefore are also not included in income for tax purposes when paid out of an RDSP. Canada Disability Savings Grants (CDSGs) and Canada Disability Savings Bonds (CDSBs) are not taxed when they are paid into an RDSP and investment income earned in the plan is not taxed as it accrues. CDSGs, CDSBs and investment income earned in the plan are included in the beneficiary's income for tax purposes when paid out of an RDSP.

Contributions to an RDSP are limited to a lifetime maximum of $200,000, and are permitted up until the end of the year in which a beneficiary attains 59 years of age. Up to $70,000 in matching CDSGs and up to $20,000 in CDSBs may be provided to a beneficiary over their lifetime, up until the end of the year in which the beneficiary attains 49 years of age. While the CDSGs and CDSBs are not tax expenditures, they increase the cost of the tax expenditure to the extent that they encourage increased use of RDSPs.

Personal income tax

Individuals with disabilities

Timing preference

Income Tax Act, sections 146.4 and 205

Canada Disability Savings Act and Canada Disability Savings Regulations

• Introduced in Budget 2007. Effective for the 2008 and subsequent taxation years.
• Budget 2019 eliminated the requirement to close an RDSP when a beneficiary no longer qualifies for the Disability Tax Credit.
• Budget 2023 extended until the end of 2026, a temporary measure that allows certain family members to become the plan holder of an RDSP for certain adult beneficiaries. It also broadened this measure by including the sibling of a beneficiary in the definition of a qualifying family member.

To encourage savings

This measure helps individuals with severe disabilities and their families save for their long-term financial security (Budget 2014).

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Health

Savings and investment

71012 - Social protection - Sickness and disability - Disability

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Employment and Social Development Canada

The value of this tax expenditure is calculated as the tax revenue forgone from the non-taxation of investment income earned on RDSP assets as well as from the non-taxation of CDSBs and CDSGs when deposited in an RDSP, minus the taxes paid on RDSP withdrawals. These amounts are determined using assumed marginal tax rates for plan contributors and beneficiaries. The tax-sheltered investment income is estimated based on the assumption that the rate of return on net RDSP assets is equal to the rate of return on Government of Canada bonds. Estimates and projections vary from those in last year's report due primarily to a revision in the reporting of actual and projected levels of bond payments.

Projections for this measure are based on projected RDSP net assets and withdrawals produced by Employment and Social Development Canada. Future bond yields are based on the average private sector forecast of the 10-year government bond rate.

About 272,000 RDSPs were registered and remained open as of October 2023.

A Registered Education Savings Plan (RESP) is a tax-assisted savings vehicle designed to help families accumulate savings for the post-secondary education of their children. Contributions to an RESP are not deductible for income tax purposes and as such are not taxed upon withdrawal, while the investment income accruing in the plan is not subject to tax until withdrawal.

An individual can contribute to an RESP on behalf of a designated beneficiary. For each beneficiary of an RESP, there is a lifetime contribution limit of $50,000, but no annual limit on contributions. Contributions to an RESP may attract additional government assistance through the Canada Education Savings Grant (CESG) and the Canada Learning Bond (CLB), both of which are generally included in the income of the plan's beneficiary on withdrawal. While the CESG and CLB are not tax expenditures, they increase the tax expenditure associated with RESPs to the extent that they encourage the use of RESPs, are not taxable until withdrawn and generate investment income on which tax can be deferred.

Personal income tax

Individuals who subscribe under an RESP

Timing preference

Income Tax Act, section 146.1

Canada Education Savings Act and Canada Education Savings Regulations

• Introduced in 1973 (Department of Finance Canada news release 1973-97). Effective for the 1972 and subsequent taxation years.
• Budget 1998 introduced the CESG, equal generally to 20% of annual contributions made after 1997 to an RESP for beneficiaries up to and including age 17.
• Budget 2004 introduced the CLB and enhanced the CESG.
• Budget 2007 eliminated the $4,000 limit on annual contributions and increased the maximum CESG annual amount to $500 from $400 (to $1,000 from $800 if there is unused grant room). The lifetime RESP contribution limit was raised to $50,000 from $42,000.
• Budget 2008 raised the number of years that contributions can be made to an RESP (to 31 years from 21 years) and the number of years before an RESP must be terminated (to 35 years from 25 years).
• Budget 2023 raised the limits on certain withdrawals of Educational Assistance Payments (EAPs). For students enrolled in a qualifying educational program the limit on EAPs in the first 13 weeks of study was raised to $8,000 from $5,000. For students enrolled in a specified educational program the limit on EAPs was raised to $4,000 from $2,500 per 13-week period of study.

To encourage savings

This measure broadens access to higher education by encouraging Canadians to save towards the post-secondary education of children (Budget 1998).

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Education

Savings and investment

70939 - Education - College education

70949 - Education - University education

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Employment and Social Development Canada

The value of this tax expenditure is calculated as the tax revenue forgone from the non-taxation of investment income earned on RESP assets, minus the taxes paid on RESP withdrawals. These amounts are determined using assumed marginal tax rates for plan contributors and beneficiaries. The tax-sheltered investment income is estimated assuming that the rate of return on net RESP assets is equal to the rate of return on Government of Canada bonds.

The projection for the first year is based on projected RESP net assets and withdrawals produced by Employment and Social Development Canada, while projections for outer years are made based on historical growth. Future Government of Canada bond yields are based on the average private sector forecast of the 10-year government bond rate.

No data on the total number of individuals with an RESP is available. About 7.1 million individuals with an RESP have received a Canada Education Savings Grant between 1998 and 2021.

A deferral of tax is provided on contributions to Registered Pension Plans (RPPs) in order to encourage and assist Canadians to save for retirement. Contributions to these plans are deductible from income, the investment income is not taxed as it accrues in the plan, and withdrawals are included in income for tax purposes. For defined contribution RPP members, contributions are limited to 18% of employment earnings up to a specified dollar amount ($31,560 for 2023). For defined benefit RPP members, pension benefits are limited to 2% of employment earnings per year of service up to a specified dollar amount ($3,506.67 for 2023).

Personal income tax

Employees with a registered pension plan

Timing preference

Income Tax Act, sections 147.1 to 147.4

• Employer RPP contributions became deductible with the introduction of income tax in 1917. Employee RPP contributions became deductible in 1919.
• A major reform of the RPP and Registered Retirement Savings Plan limits was introduced in 1990 in order to provide more comparable tax-assisted savings opportunities for Canadians regardless of whether they saved in a defined benefit RPP, a defined contribution RPP or a Registered Retirement Savings Plan.
• The maximum dollar contribution and benefit limits for RPPs were increased in 2003 and 2005.
• The RPP dollar limits were indexed to average wage growth for 2010 and subsequent years. 

To encourage savings

By allowing taxpayers to defer tax on savings, this measure encourages and assists Canadians to arrange for their financial security in later years (Pension Reform: Improvements in Tax Assistance for Retirement Saving, Department of Finance Canada, 1989).

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Retirement

Savings and investment

71029 - Social protection - Old age

Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

Statistics Canada, Registered pension plans, Trusteed pension funds and Pension satellite account (Tables 11-10-0122-01, 11-10-0086-01 and 36-10-0576-01)

The value of this tax expenditure is calculated on a cash-flow basis as the sum of forgone tax revenue from the deductibility of RPP contributions and non-taxation of investment income earned on RPP assets, minus the tax revenue from RPP benefit payments.

Projections are derived using T1 micro-simulation model and data from Statistics Canada on historical RPP assets.

About 8 million households had individuals that had accrued benefits under RPPs in 2019.

A deferral of tax is provided on contributions to Registered Retirement Savings Plans (RRSPs) in order to encourage and assist Canadians to save for retirement. Contributions to these plans are deductible from income, the investment income is not taxed as it accrues in the plan, and withdrawals are included in income for tax purposes. Contribution limits are determined as 18% of prior year earned income up to a specified dollar limit ($30,780 for 2023), less an estimate of contributions made to a Registered Pension Plan and/or a Deferred Profit-Sharing Plan, plus unused contribution room carried forward from previous years. Earned income for this purpose includes income from employment and self-employment as well as other specified types of earnings. Tax-free withdrawals from RRSPs are permitted under the Home Buyers' Plan and the Lifelong Learning Plan to promote home ownership and skills enhancement respectively, subject to specified eligibility conditions, withdrawal limits and repayment provisions.

Personal income tax

Individuals with earned income

Timing preference

Income Tax Act, section 146

• Introduced in 1957.
• A major reform of the RRSP and Registered Pension Plan limits was introduced in 1990 in order to provide more comparable tax-assisted savings opportunities for Canadians regardless of whether they saved in a defined benefit Registered Pension Plan, a defined contribution Registered Pension Plan or an RRSP.
• The maximum dollar contribution limit for RRSPs was increased in 2003 and 2005.
• The RRSP dollar limit was indexed to average wage growth for 2011 and subsequent years.

To encourage savings

By allowing taxpayers to defer tax on savings, this measure encourages and assists Canadians to arrange for their financial security in later years (Pension Reform: Improvements in Tax Assistance for Retirement Saving, Department of Finance Canada, 1989).

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Retirement

Savings and investment

71029 - Social protection - Old age

Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

Statistics Canada, Pension satellite account (Table 36-10-0576-01)

The value of this tax expenditure is calculated on a cash-flow basis as the sum of forgone tax revenue from the deductibility of RRSP contributions and non-taxation of investment income earned on RRSP assets, minus the tax revenue from Registered Retirement Income Fund/annuity income and RRSP withdrawals.

Projections are derived using the T1 micro-simulation model and Statistics Canada data on historical RRSP assets.

About 9.3 million households had individuals that had RRSPs or Registered Retirement Income Funds in 2019.

Individuals are permitted to defer the tax on a capital gain arising from the disposition of shares in a qualified small business investment, to the extent the proceeds are reinvested in shares of another qualified small business. An eligible small business investment consists of shares issued from treasury in an active Canadian-controlled private corporation with assets not exceeding $50 million, excluding professional corporations, specified financial institutions, rental or leasing corporations, and real estate corporations. The reinvestment must be made at any time in the year of disposition or within 120 days after the end of that year.

Personal income tax

Individual investors

Timing preference

Income Tax Act, section 44.1

• Introduced in Budget 2000. Effective for dispositions after February 27, 2000.
• The October 2000 Economic Statement and Budget Update increased the size of an eligible investment from $500,000 to $2 million and the size of business eligible for the rollover from $10 million to $50 million.
• Budget 2003 eliminated the individual investor limits on the amount of the original investment and reinvestment eligible for the deferral and allowed a reinvestment to be eligible for the rollover when made at any time in the year of disposition or within 120 days after the end of the year.

To encourage or attract investment

This measure was implemented to improve access to capital for small business corporations (Economic Statement and Budget Update, October 2000; Budget 2003).

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Business - small businesses

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 800 individuals reported capital gains eligible for this measure in 2021.

A deferral of tax is provided on contributions to the Saskatchewan Pension Plan (SPP) in order to encourage and assist Canadians to save for retirement. Contributions to the SPP are deductible from income, the investment income is not taxed as it accrues in the plan, and withdrawals and benefit payments are included in income for tax purposes. Contributions to the SPP must be made within an SPP member's available Registered Retirement Savings Plan (RRSP) contribution limit.

Personal income tax

Individuals with available RRSP contribution room

Timing preference

Income Tax Act, subsections 146(21) to (21.3)

Income Tax Regulations, section 7800

• The SPP was introduced in 1986. Deductible contributions were initially limited to $600 annually, if made within an SPP member's available RRSP contribution limit.
• In 2011, the federal tax rules were amended to accommodate certain changes proposed by the Saskatchewan government to improve the plan, in particular an increase in the annual contribution limit to $2,500 (Department of Finance Canada news release 2010-118, December 7, 2010).
• In January 2018, the SPP increased its annual contribution limit to $6,000 and indexed the limit to increases in the Year's Maximum Pensionable Earnings for the Canada Pension Plan.
• In April 2023, the SPP removed annual contribution and transfer limits, allowing contributions up to an individual's RRSP contribution limits. 

To encourage savings

This measure was introduced to ensure consistency in the tax treatment of Canadians saving for their retirement, whether they save through a private or a provincially sponsored registered plan (Budget 1987).

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Retirement

Savings and investment

71029 - Social protection - Old age

Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant government programs is provided in the table at the end of Part 3.

n/a

n/a

n/a

About 11,100 individuals contributed to the Saskatchewan Pension Plan in 2022.

A credit is available in respect of eligible expenditures on scientific research and experimental development (SR&ED) performed by businesses in Canada. SR&ED involves the systematic investigation or search carried out in a field of science or technology by means of experiment or analysis, and eligible SR&ED activities cover basic research and applied research as well as experimental development. Expenditures eligible for the credit include most current expenditures in respect of SR&ED performed by or on behalf of a taxpayer and that are related to a business of the taxpayer, including salary and wages, materials, overhead and contracts.

The credit is provided at a general rate of 15%. An enhanced rate of 35% is provided to small Canadian-controlled private corporations (CCPCs) on their first $3 million per year of eligible expenditures. Small CCPCs that have prior-year taxable capital of $10 million or less can obtain a refund in respect of credits earned in a year but not used, at a rate of 100% on the first $3 million of eligible expenses. The $3 million expenditure limit is gradually reduced if prior-year taxable capital is between $10 million and $50 million. Qualifying expenditures in excess of a CCPC's expenditure limit are eligible for the 15% tax credit. Unused SR&ED credits earned at this rate may be partially refundable depending on the CCPC's taxable income and taxable capital. Unused credits that are not refunded can be carried forward 20 years and back 3 years to reduce taxes payable in those years. Unincorporated businesses are not eligible for the enhanced 35% credit rate, but are generally eligible for a 40% refund.

An immediate income tax deduction is also provided in respect of eligible SR&ED expenditures (see the measure "Expensing of current expenditures on scientific research and experimental development").

Personal (including trusts) and corporate income tax

Businesses conducting eligible scientific research and experimental development

Credit, refundable and non-refundable

Income Tax Act, section 127

• Federal tax incentives for SR&ED were first introduced in 1948. The basic structure of the current credit system was put in place between 1983 and 1985.
• Several changes were introduced in Budget 2012, including: the reduction of the general credit rate to 15% from 20% and the removal of capital expenditures from the base of expenditures eligible for the credit (both changes effective January 1, 2014); the reduction in the prescribed proxy amount in respect of overhead expenses from 65% of the salaries and wages of employees directly engaged in the conduct of SR&ED to 60% in 2013 and 55% in subsequent years; and the removal of the profit element for arm's length third-party contracts (effective January 1, 2013).
• For taxation years ending after March 19, 2019, Budget 2019 announced the repeal of the use of taxable income as a factor in determining a CCPC's annual expenditure limit for the purpose of the enhanced SR&ED tax credit. 

To encourage or attract investment

This measure is intended to encourage the performance of scientific research and experimental development in Canada by the private sector and to assist small businesses to perform scientific research and experimental development (Budget 1996). The rationale for this tax support is that the benefits of SR&ED extend beyond the performers themselves to other firms and sectors of the economy. The existence of these spillovers of externalities means that, in the absence of government support, firms would perform less SR&ED than desirable for the economy.

Non-structural tax measure and refundable tax credit

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

The portion of this measure that is refundable is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Business - research and development

7048 - Economic affairs - R&D Economic affairs

Programs within the mandates of Innovation, Science and Economic Development Canada, the National Research Council Canada and the federal granting councils also support research and development. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return

The cost of this measure is based on data on actual credits claimed. Estimates for the personal income tax for 2010 to 2013 include investment tax credits claimed in respect of certain other certified property under a provision that is now repealed. These credits cannot be separated from SR&ED investment tax credits, but are likely negligible. The estimates do not cover investment tax credits claimed by trusts.

Personal income tax: The cost of this measure is projected based on historical growth.

Corporate income tax: The cost of this measure is projected to grow in line with nominal gross domestic product.

About 4,300 individuals and 22,450 corporations claimed this credit in 2021. The number of trusts having claimed this credit in 2021 is not disclosed due to confidentiality restrictions.

Individuals who performed at least 200 hours of eligible ground, air and marine search and rescue volunteer services during a year can claim the non-refundable Search and Rescue Volunteers Tax Credit. The value of the credit is calculated by applying the lowest personal income tax rate to a credit amount of $3,000. An individual who performs both eligible volunteer search and rescue services and eligible volunteer firefighting services for a total of at least 200 hours in the year can claim either the Search and Rescue Volunteers Tax Credit or the Volunteer Firefighters Tax Credit. An individual who claims the Search and Rescue Volunteers Tax Credit is ineligible for the exemption from income that would otherwise apply to up to $1,000 of income (honoraria) received in the year for being a search and rescue volunteer (see the measure "Tax-free amount for emergency services volunteers").

Personal income tax

Search and rescue volunteers

Credit, non-refundable

Income Tax Act, section 118.07

• Introduced in Budget 2014. Effective for the 2014 and subsequent taxation years.

To achieve a social objective

This measure recognizes the important role played by search and rescue volunteers in contributing to the security and safety of Canadians (Budget 2014).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Social

70369 - Public order and safety - Public order and safety not elsewhere classified

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 5,800 individuals claimed this credit in 2021.

Small businesses could claim a refundable tax credit of 25% on eligible air quality improvement expenses incurred between September 1, 2021, and December 31, 2022. Eligible businesses included individuals (other than trusts) and Canadian-controlled private corporations with taxable capital employed in Canada of less than $15 million in the taxation year immediately preceding the taxation year in which the qualifying expenditure was incurred. Businesses could claim the credit on eligible expenses related to the purchase or upgrade of mechanical heating, ventilation and air conditioning (HVAC) systems and the purchase of devices designed to filter air using high efficiency particulate air (HEPA) filters, up to a maximum of $10,000 per location and $50,000 in total.

Personal and corporate income tax

Small businesses and small commercial landlords

Credit, refundable

Income Tax Act, section 127.43

• Introduced in the 2021 Economic and Fiscal Update.

To achieve a social objective

To support business activity

To make it more affordable for small businesses to invest in safer and healthier ventilation and air filtration. (2021 Economic and Fiscal Update).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Health

Business – other

70761 - Health - Health not elsewhere classified - Health prevention programs (collective)

Programs within the mandate of Infrastructure Canada also support projects whose primary purpose is to increase outdoor air intake and/or increase air cleaning in order to help reduce the transmission of the virus that causes COVID-19. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T2 Corporation Income Tax Return

Micro-simulation model

Micro-simulation model

No data is available.

Small suppliers (other than taxi businesses, which include ride-sharing providers) are not required to register for GST purposes. Small suppliers who choose not to register do not have to charge and remit GST on taxable supplies (other than sales of real property and, in the case of municipalities, of capital property) and they are not entitled to input tax credits.

A "small supplier" is a person whose total taxable supplies in the preceding year do not exceed $30,000 ($50,000 in the case of public service bodies). A charity or public institution (i.e., a registered charity that is a university, a public college, a school authority, a hospital authority or a designated municipality) can also qualify as a small supplier if its gross annual revenue in either of its previous two fiscal years does not exceed $250,000.

Goods and Services Tax

Small businesses, charities and public institutions

Other

Excise Tax Act, paragraph 240(1)(a) and section 166

• This measure has been in effect since the inception of the GST in 1991.
• Municipalities that are small suppliers are required to charge and remit GST on sales of their capital property, effective after March 9, 2004 (Department of Finance Canada news release 2004-018, March 9, 2004). This change was made concurrently with the increase to 100% of the rebate for municipalities.
• Budget 2017 announced that the definition of "taxi business" in the Excise Tax Act would be amended to include providers of ride-sharing services. This means that the small suppliers' threshold no longer applies to these providers; they must register for and collect GST/HST regardless of the total amount of sales they make. The change was effective July 1, 2017.
• The 2020 Fall Economic Statement announced that an electronic platform that facilitates the supply of goods located in Canadian fulfillment warehouses or elsewhere in Canada, or short-term accommodation in Canada, by vendors that are not registered for the GST/HST, would be deemed to be the supplier of the goods or accommodation for purposes of the GST/HST. As the platform operator is required to collect and remit the GST/HST, the small suppliers' threshold no longer operates to relieve the tax on these supplies. The changes were effective July 1, 2021. However, the Canada Revenue Agency is providing flexibility for platform operators who are unable to comply with the new requirements by that date. Therefore, the effects of this measure may not be fully visible until the second half of 2022.

To reduce administration or compliance costs

This measure ensures that very small businesses do not face an additional compliance burden as a result of the introduction of the GST (Goods and Services Tax: Technical Paper, August 1989).

Structural tax measure

This measure is a deviation from a broadly defined value-added tax base.

Business - small businesses

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T2 Corporation Income Tax Return

GST34 Goods and Services Tax/Harmonized Sales Tax Return

The cost of this measure is estimated by applying the GST rate to the net revenues of non-registered businesses with gross revenue under $30,000. Net revenues of the small businesses are estimated using personal and corporate income tax data.  Businesses that are registered for the GST are identified from GST34 return and deducted to obtain the net revenues of non-registered businesses. 

The cost of this measure is projected to grow in line with nominal gross domestic product.

About 1.5 million small suppliers make use of this measure each year.

Taxpayers receiving qualifying retroactive lump-sum payments may use a special mechanism to compute the tax on those payments. The tax under the special mechanism is the federal tax that would have been payable if the principal portion of the retroactive lump-sum payment had been taxed in the year to which it relates, plus interest to reflect the time value of money in respect of the delay in paying the tax. The interest component of the receipt of a lump-sum payment is fully included in income in the year in which it is received. To be eligible for the special tax calculation, the right to receive the income must have existed in a prior year. In addition, the principal portion of the lump-sum payment must be at least $3,000, and must have been received in a year after 1994.

Personal income tax

Individuals

Other

Income Tax Act, sections 110.2 and 120.31

• Introduced in Budget 1999. Effective for the 1995 and subsequent taxation years.

To assess tax liability over a multi-year period

This measure aims to ensure that the government does not benefit from the delay in certain types of lump-sum payments at the taxpayer's expense as a result of the progressivity of the income tax system (Budget 1999).

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

Other

n/a

n/a

T1 Income Tax and Benefit Return

T1 micro-simulation model. The value of this measure corresponds to the difference between the tax that would be owed on the principal portion of eligible retroactive lump-sum payments if they were taxed in the year received, and the tax computed under the special mechanism.

T1 micro-simulation model

This measure provided tax relief to about 500 individuals in 2021.

A taxpayer supporting a spouse or common-law partner may be eligible for the non-refundable Spouse or Common-Law Partner Credit, the value of which is calculated by applying the lowest personal income tax rate to the credit amount. The credit amount is indexed to inflation. The credit amount is reduced dollar-for-dollar by the net income of the dependent spouse or common-law partner. As of 2020, a taxpayer may also claim an income-tested supplement to the Spouse or Common-Law Partner Credit. This supplement is legislated to gradually increase in steps each year until 2023 at which time the maximum credit amount will reach $15,000. The increased portion of the credit is subject to an income test beginning at a level of individual net income equal to the fourth federal tax bracket threshold ($165,430 in 2023), and is fully phased out by the fifth federal bracket threshold ($235,675 in 2023). The maximum credit amount (i.e., the base credit + supplement) for 2023 is $15,000, with the fully reduced amount being $13,520.

Personal income tax

Couples

Credit, non-refundable

Income Tax Act, paragraph 118(1)(a)

• Introduced as part of the 1987 Tax Reform, effective for the 1988 and subsequent taxation years, to replace the previous married exemption.
• Until 2007, the Spouse or Common-Law Partner Credit amount was less than the Basic Personal Amount, and was reduced dollar-for-dollar by the net income of the dependent spouse or common-law partner in excess of the income threshold applicable for the taxation year.
• Budget 2007 introduced two changes to the Spouse or Common-Law Partner Credit: (i) the credit amount was set equal to the Basic Personal Amount; and (ii) the income threshold was eliminated, resulting in the credit amount being reduced dollar-for-dollar by the net income of the dependent spouse or common-law partner. These changes became effective in 2007.
• In December 2019, the government introduced a gradual increase to the Spouse or Common-Law Partner Credit to $15,000 over the 2020 to 2023 period.

To recognize non-discretionary expenses (ability to pay)

This measure recognizes that a taxpayer whose spouse or common-law partner has little or no income has a reduced ability to pay tax relative to a single taxpayer with the same income (Report of the Royal Commission on Taxation, vol. 3, 1966).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Families and households

71049 - Social protection - Family and children

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 1.9 million individuals claimed this credit in 2021.

Individuals can claim a non-refundable credit in respect of interest paid in the year or in the preceding five years on a student loan received for post-secondary education under the Canada Student Loans Act, the Canada Student Financial Assistance Act, the Apprentice Loans Act or similar provincial or territorial government programs. The value of the credit is calculated by applying the lowest personal income tax rate to the amount of interest paid.

Personal income tax

Students

Credit, non-refundable

Income Tax Act, section 118.62

• Introduced in Budget 1998. Effective for the 1998 and subsequent taxation years.
• Extended to Canada Apprentice Loans in Budget 2014.

To recognize education costs

This measure helps individuals manage their student debt loads by providing tax relief for interest payments on student loans and improving the Canada Student Loan Program to help borrowers facing financial difficulties (Budget 1998).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

Education

70939 - Education - College education

70949 - Education - University education

70959 - Education - Education not definable by level

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 463,000 individuals claimed this credit in 2021.

A 2% tax applies to the net value of all types of share repurchases by public corporations, which for the purpose of this measure refers to Canadian-resident corporations whose shares are listed on a designated stock exchange (excluding mutual funds). Other publicly traded businesses with units listed on a designated stock exchange are also subject to the tax, including real estate investment trusts, specified investment flow-through (SIFT) trusts, and SIFT partnerships. An entity's net value of share repurchases is defined as the fair market value of equity repurchased less the fair market value of equity issued from treasury, calculated on an annual basis, corresponding to the entity's taxation year. The tax does not apply to an entity in a taxation year if it repurchased less than $1 million of equity during that year.

The tax applies in respect of repurchases and issuances of equity that occur on or after January 1, 2024.

Corporate income tax

Public corporations and other publicly traded businesses

Other

Not yet legislated (as of December 31, 2023)

• Introduced in the 2022 Fall Economic Statement.
• Details of the measure announced in Budget 2023.

General revenue raising

To support business activity

To increase federal revenues while also encouraging corporations to make investments in their workers and businesses in Canada (2022 Fall Economic Statement).

Non-structural tax measure

The applicable tax departs from the use of income as the tax base.

Business – other

n/a

n/a

T2 Corporation Income Tax Return

n/a

In the absence of T2 data, projections reflect a purpose-built model of net repurchases across the business cycle, using historical data on repurchases and share issuance of public corporations from their financial statements.

No data is available.

Under section 125 of the Constitution Act, 1867, Canada and the Provinces are immune from taxation. This immunity generally extends to federal Crown corporations that act as agents of the Crown. However, federal Crown corporations prescribed under the Income Tax Regulations that carry on substantial business activities, as well as their subsidiaries, are subject to federal corporate income tax. This gives rise to a negative tax expenditure. For agent Crown corporations, the applicable federal tax rate is increased by 10% (i.e., they do not benefit from the federal abatement) given that no provincial taxes apply. Prescribed non-agent Crown corporations are taxed at the regular applicable rate by both the federal and provincial governments.

Corporate income tax

Certain federal Crown corporations

Other

Income Tax Act, sections 27 and 124 and paragraphs 149(1)(d) to (d.4)

Income Tax Regulations, section 7100

• The taxation of prescribed federal Crown corporations was introduced in 1952.
• The list of prescribed federal Crown corporations is reviewed and updated as required.

To ensure a neutral tax treatment across similar situations

To support competitiveness

This measure is intended to ensure a level playing field between these corporations and similar businesses in the private sector.

Structural tax measure

The measure imposes federal tax on prescribed federal Crown corporations that would otherwise be immune or exempt from income tax.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

The value of this (negative) tax expenditure corresponds to the taxes paid by prescribed federal Crown corporations.

n/a

The Income Tax Regulations currently prescribe 10 federal Crown corporations.

The active business income of a foreign affiliate of a Canadian corporation is effectively exempt from tax in Canada, both when it is earned and when paid out as a dividend to the Canadian corporation, if the foreign affiliate is located in a country which has a tax treaty or tax information exchange agreement (TIEA) with Canada and has earned the income from a business carried on in such a country (referred to as "exempt surplus" treatment). In other situations the active business income of a foreign affiliate is generally taxable in Canada when paid out as a dividend to the Canadian corporation ("taxable surplus" treatment). Half of a dividend paid out of certain capital gains of a foreign affiliate is taxable in Canada, and half is exempt ("hybrid surplus" treatment). If the active business income is earned by a controlled foreign affiliate in a country with which Canada has no tax treaty and has not concluded a TIEA within five years of being asked by Canada to do so, then it is taxed to the Canadian corporation as it accrues (i.e., on a current basis as "foreign accrual property income"). Where active business income is taxable, relief is provided for foreign tax paid on that income.

For fiscal years beginning on or after December 31, 2023, the Global Minimum Tax may apply to certain large Canadian multinational groups on their income earned outside of Canada that is taxed abroad at an effective rate of less than 15%.

Interest and other expenses incurred by a Canadian corporation in respect of an investment in a foreign affiliate can generally be deducted in Canada, regardless of whether income from that investment is taxable in Canada, subject to the general limitations on the deductibility of interest that are not specific to investments in foreign affiliates as well as to the Excessive Interest and Financing Expenses Limitation (EIFEL) rules.

Corporate income tax

Corporations with foreign affiliates

Exemption; deduction

Income Tax Act, sections 91 and 113 and subsections 20(1), 93.1(1), 94.2(2) and 95(1)

Income Tax Regulations, sections 5900-5902, 5905 and 5907

Global Minimum Tax Act (proposed)

• Most aspects of the current system were introduced as part of the 1972 Tax Reform and became effective as of 1976.
• Budget 2007 added the provisions related to TIEAs, effective 2008.
• The hybrid surplus provisions were added in 2014, effective retrospectively to August 2011.
• The Global Minimum Tax was announced in Budget 2022 and, once enacted, will be effective for fiscal years of qualifying multinational enterprise (MNE) groups that begin on or after December 31, 2023.

To support competitiveness

To prevent double taxation

The tax treatment of foreign active business income prevents international double taxation, supports the competitiveness of Canadian companies abroad, and assists Canada's policy on tax information exchange by giving an incentive to non-treaty countries to enter into TIEAs with Canada (Proposals for Tax Reform, 1969; Budget 2007).

Non-structural tax measure

There are at least three possible benchmarks for taxing the active business income of foreign affiliates of Canadian corporations (see part I of this report, footnote 5). Under the benchmark where that income would be exempt, its taxation in Canada in certain circumstances would be a negative tax expenditure, while the deductibility of interest would be a positive tax expenditure. Under the benchmark where that income would be taxable when dividends are paid to the Canadian corporation, the exemption in some cases would be a positive tax expenditure, taxation of the income on an accrual basis in certain cases would be a negative tax expenditure, and the immediate deductibility of interest would be a positive tax expenditure. Under the benchmark where that income would be taxable in Canada as it accrues, the exemption of that income in some cases and the deferral of tax until the income is paid out as dividends in other cases would both be considered a positive tax expenditure.

International

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

n/a

n/a

n/a

No data is available.

Spousal support payments (also called "alimony and maintenance payments") paid on a periodic basis under a written agreement or court order are deductible by the payer and included in the taxable income of the recipient.

Personal income tax

Former couples

Other

Income Tax Act, paragraph 56(1)(b) and subsection 60(b)

• Budget 1944 made alimony and comparable payments deductible from income.
• Budget 1958 extended the tax treatment of payments in support of a dependant to cases where no divorce or written separation agreement was made, so long as the payments are made under a court order.

To extend or modify the unit of taxation

This measure provides consistent tax treatment of alimony payments under a written agreement or court order.

Non-structural tax measure

This measure extends the unit of taxation.

Families and households

71049 - Social protection - Family and children

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model. The value of this tax expenditure corresponds to the value of the deduction to the payer, less the tax collected from the recipient.

T1 micro-simulation model

About 83,000 individuals reported having received alimony or maintenance payments in 2021, while about 55,000 individuals claimed a deduction.

Contributions to the Canada Pension Plan/Quebec Pension Plan receive tax recognition for income tax purposes, consistent with the taxation of the benefits received. Employees receive a tax credit for their contributions, and employer contributions are not included in their incomes. Self-employed individuals also receive a tax credit for the employee portion of the contribution, as well as a deduction for the employer portion. For both employees and self-employed individuals, the value of the credit for contributions is calculated by applying the lowest personal income tax rate to the value of contributions.

A tax deduction is provided on employee contributions (and on the employee share of contributions by self-employed individuals) associated with the enhanced portion of the Canada Pension Plan and Quebec Pension Plan (contributions to the enhanced portion of the Canada Pension Plan and Quebec Pension Plan began in 2019).

Personal income tax

Employees and self-employed individuals

Exemption; credit, non-refundable; deduction

Income Tax Act,section 118.7 and paragraphs 56(1)(a), 60(1)(e) and (e.1)

• Budget 1965 introduced a deduction for Canada Pension Plan contributions, effective for the 1965 and subsequent taxation years. This deduction was replaced by a non-refundable tax credit as part of the 1987 Tax Reform.
• Budget 2016 introduced the enhancement of the Canada Pension Plan, which is being phased in from 2019 to 2025. Employee contributions to the enhanced portion of the Canada Pension Plan are deductible.
• Budget 2018 introduced an amendment to provide a tax deduction for employee contributions to the enhanced portion of the Quebec Pension Plan (the enhanced portion of the Quebec Pension Plan is being phased in from 2019 to 2025).

Other

These measures ensure a consistent tax treatment of Canada Pension Plan/Quebec Pension Plan contributions and benefits.

Structural tax measure

These measures are considered part of the benchmark tax system, and therefore are not tax expenditures.

Employment

Retirement

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

71029 - Social protection - Old age

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 16.8 million individuals claimed the credit for Canada Pension Plan or Quebec Pension Plan contributions on employment income in 2021, while about 2 million claimed the credit for contributions on self-employment or other income.

A tax credit is provided for Employment Insurance and Quebec Parental Insurance Plan premiums paid by employees, while premiums paid by employers are not included in employees' incomes. The recognition for income tax purposes of employee and employer premiums is consistent with the taxation of the benefits received. The value of the credit for employee premiums is calculated by applying the lowest personal income tax rate to the premiums.

Personal income tax

Employees and self-employed individuals

Exemption; credit, non-refundable

Income Tax Act,section 118.7, subparagraphs 56(1)(a)(iv) and (vii) and paragraph 56(1)(r)

• Budget 1971 introduced a deduction for employee premiums. This deduction was replaced by a non-refundable tax credit as part of the 1987 Tax Reform.
• The credit was amended in 2010 to allow for a credit in respect of Quebec Parental Insurance Plan premiums, effective for 2006 and subsequent years, and to allow for a credit in respect of premiums paid by self-employed individuals.

Other

These measures ensure a consistent tax treatment of Employment Insurance and Quebec Parental Insurance Plan premiums and benefits.

Structural tax measure

These measures are considered part of the benchmark tax system, and therefore are not tax expenditures.

Employment

Social

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

71049 - Social protection - Family and children

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

In 2021, about 16 million individuals claimed the credit for Employment Insurance contributions on employment income, while about 15,500 individuals claimed this credit on self-employment or other eligible earnings. About 4 million individuals claimed the credit for Quebec Parental Insurance Plan contributions on employment income earned in the province of Quebec, while about 128,000 individuals claimed the credit on income earned outside Quebec. About 447,000 individuals claimed the Quebec Parental Insurance Plan credit on self-employment or other eligible income.

AgriInvest is a producer savings account that provides flexible coverage to farmers for small income declines and supports investments to mitigate risks and improve market income. Generally, producers may make a deposit into an AgriInvest account each year, and receive a matching contribution from the federal and provincial governments. Interest income earned in AgriInvest accounts and government contributions to them are not taxable until the year of withdrawal.

Since 2011, the province of Quebec has supplemented AgriInvest with the Agri-Québec program, an agricultural income stabilization account program that is very similar to the AgriInvest program. The Agri-Québec program is accorded the same income tax treatment as is provided to the AgriInvest program.

Personal (including trusts) and corporate income tax

Farming businesses

Timing preference

Income Tax Act, subsections 12(10.2) and 248(1)

• Introduced in Budget 2007. Effective for the 2007 and subsequent taxation years. A similar tax treatment was previously granted to accounts established under the Net Income Stabilization Account program. This program was introduced in 1991 and terminated in 2009.
• Budget 2011 extended the AgriInvest tax treatment to the Agri-Québec program, effective for the 2011 and subsequent taxation years.

To achieve an economic objective - other

To encourage savings

This measure is provided in support of the AgriInvest program, which is designed to encourage farmers, through government-matched contributions, to set aside earnings in order to provide coverage against income declines.

Non-structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Business - farming and fishing

70421 - Economic affairs - Agriculture, forestry, fishing, and hunting – Agriculture

Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Agriculture and Agri-Food Canada

Personal income tax (unincorporated farms): The value of this tax expenditure is estimated on a cash-flow basis and corresponds to the taxes forgone in the year on the government contributions to and interest income earned in the farm savings accounts, minus the taxes paid on amounts withdrawn from the accounts in the year. This amount is multiplied by the share of farms that are unincorporated. Calculations are based on a marginal tax rate for unincorporated farm income as estimated by the Department of Finance Canada. The breakdown of the estimates between individuals and trusts is not available.

Corporate income tax (incorporated farms): The estimated amount described above is multiplied by the share of farms that are incorporated and then by the average tax rate faced by farms, based on T2 tax return data.

No estimate is available for Agri-Québec.

Projections for 2023 through 2025 are not provided as the value of this measure cannot be reliably forecast for these years.

As of December 2022, about 92,600 AgriInvest accounts were registered. 

A life insurance policyholder is not subject to annual taxation on the investment income earned in a life insurance policy as long as the policy qualifies as an exempt life insurance policy. Instead, life insurance companies pay a 15% tax (known as the Investment Income Tax) on the income they earn on investments that they hold to meet their liabilities under the life insurance policy. This treatment results in a tax deferral and tax rate reduction to the extent that the Investment Income Tax is less than the income tax that the policyholders would pay if they were taxed on the investment income as this income accrues.

In practice, almost all life insurance policies with a savings element are structured by the life insurance industry to qualify as exempt policies, with the result that the Investment Income Tax system is the de facto system.

Personal (including trusts) and corporate income tax

Life insurance policyholders

Preferential tax rate

Income Tax Act, subsections 12.2(9) and 211.1(1) and (2)

• Prior to 1968, the accumulated savings within a life insurance policy were not taxed.
• To reduce the tax preference given to savings accumulated in a life insurance policy, the Investment Income Tax was introduced in 1968, along with additional rules to tax on an accrual basis the income earned in non-exempt life insurance policies.
• The Investment Income Tax was repealed in 1978, reintroduced in 1987, and modified and considerably simplified in 1990.

To reduce administration or compliance costs

This measure simplifies the taxation of investment income earned on life insurance policies.

Structural tax measure

The applicable tax rate departs from the benchmark tax rate.

Savings and investment

71029 - Social protection - Old age

n/a

T2 Corporation Income Tax Return, industry survey statistics

The tax expenditure is estimated as the difference between the annual tax that would be payable by policyholders and the Investment Income Tax paid by life insurance companies. The breakdown of the estimated value by type of policyholders is not available.

Projected growth in the Investment Income Tax is based on changes to average reserves and long-term bond rates.

According to the Canadian Health and Life Insurance Association, about 22 million individuals own life insurance.

In general, capital gains are taxed on a realization basis, upon the disposition of property. This results in a tax expenditure because, under the benchmark tax system, capital gains (net of capital losses) would be included in income as they accrue.

Personal (including trusts) and corporate income tax

Individuals and corporations

Timing preference

Income Tax Act, subsection 40(1)

• Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.

To reduce administration or compliance costs

This measure recognizes that, in many cases, it is difficult to estimate with accuracy the value of unsold assets, and that taxing the accrued gains on assets that have not been sold would be administratively complex and could create significant liquidity problems for taxpayers (Report of the Royal Commission on Taxation, vol. 3, 1966).

Structural tax measure

This measure permits the deferral of the recognition of income or gains for income tax purposes.

Savings and investment

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

No data is available.

No estimate is available.

No projection is available.

No data is available.

A volunteer emergency service provider can claim an exemption of up to $1,000 for amounts received from a government, municipality or other public authority for work as a volunteer ambulance technician, firefighter, or search, rescue or other type of emergency worker. If the volunteer emergency service provider claims the $1,000 exemption, he or she cannot claim the Volunteer Firefighters Tax Credit or Search and Rescue Volunteers Tax Credit in respect of the emergency work.

Personal income tax

Providers of volunteer emergency services

Exemption

Income Tax Act, subsection 81(4)

• Introduced in Budget 1961. Retroactive to the 1958 taxation year and effective in subsequent taxation years. The exemption was initially limited to volunteer firefighters.
• Budget 1998 increased the exemption for volunteer firefighters to $1,000 from $500 and extended the exemption to other emergency services volunteers.

To achieve a social objective

This measure assists small and rural communities, which are often unable to maintain full-time emergency staff and depend on the services of volunteers. The measure supports emergency services volunteers who give freely of their time and expertise, often at considerable risk to themselves, in the service of their community (Budget 1998).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Social

70329 - Public order and safety - Fire protection services

70369 - Public order and safety - Public order and safety not elsewhere classified

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T4 Statement of Remuneration Paid

The value of this measure is estimated by first excluding taxpayers who claim the Volunteer Firefighters Tax Credit rather than the exemption. An estimate of forgone tax revenue is calculated by multiplying the total number of individuals assumed to claim the exemption by the average amount claimed in the year, and by the marginal tax rate of individuals claiming the Volunteer Firefighters Tax Credit over the estimation period.

The projection assumes 0.68% average annual growth in the number of emergency services volunteers claiming the exemption.

It is estimated that about 18,000 individuals benefitted from this exemption in 2021.

The First Home Savings Account (FHSA) is a registered plan helping individuals save for their first home. Canadian residents 18 years and older who are first-time home buyers are eligible to open an FHSA. The annual contribution limit is $8,000, with a lifetime contribution limit of $40,000. Any unused annual contribution room can be carried forward, up to a maximum of $8,000. The carry-forward amounts only start accumulating after an individual opens an FHSA for the first time. FHSA contributions are tax-deductible, unless funded from an RRSP, and income earned in an FHSA is not subject to tax. Qualifying FHSA withdrawals, used to purchase a first home in Canada, are non-taxable, whereas non-qualifying withdrawals are subject to taxation. Individuals are allowed to transfer funds from an FHSA to another FHSA, an RRSP or a RRIF, subject to the usual rules applicable to these accounts.

Personal income tax

Individual first-time home buyers

Exemption

Income Tax Act, proposed sections 146.6 and 207.01

• Introduced in Budget 2022. The measure came into effect in 2023.

To achieve a social objective

This measure supports first-time home buyers by facilitating saving for a down payment (Budget 2022).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Housing

70619 - Housing and community amenities - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

n/a

T1 micro-simulation model

No data is available.  

The Tax-Free Savings Account (TFSA) is a general-purpose savings account that allows individuals to earn tax-free investment income. Individuals 18 years of age and older acquire TFSA contribution room each year, with unused room being carried forward. The TFSA annual contribution limit was $6,500 for 2023. TFSA contributions are not deductible, but investment income earned in the account and amounts withdrawn are not included in income for tax purposes or taken into account in determining eligibility for federal income-tested benefits and credits. Withdrawals also create contribution room in the following year for future savings.

Personal income tax

Individuals

Exemption

Income Tax Act, sections 146.2 and 207.01

• Introduced in Budget 2008. Effective for 2009 and subsequent years.
• The TFSA annual contribution limit was initially $5,000 per individual, indexed to inflation in $500 increments. The limit increased to $5,500 on January 1, 2013 due to indexation.
• Budget 2015 increased the TFSA annual contribution limit to $10,000, not indexed to inflation, for 2015 and subsequent taxation years.
• On December 7, 2015, the government announced that the TFSA annual contribution limit would be returned to $5,500 and that indexation would be reinstated, effective for 2016.

To encourage savings

This measure improves incentives for Canadians to save by reducing taxes on savings (Budget 2008).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Savings and investment

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

Canada Revenue Agency, Tax-Free Savings Account statistics

The value of this tax expenditure corresponds to the tax revenues forgone on the investment income earned in TFSAs. It is calculated by estimating how much of the total investment income earned in TFSAs is interest, dividends or capital gains, and multiplying these amounts by estimates of the average marginal tax rates applicable to TFSA holders (accounting for the dividend gross-up and tax credit and for the partial inclusion of capital gains). Interest income and dividend income are calculated based on estimated shares of TFSA assets that are fixed income and equity investments and on historical interest rates and dividend yields. Capital gains (or losses) are determined residually by subtracting estimated interest and dividend income from the total investment income.

The value of this measure is projected based on the expected growth of net contributions and investment income earned in the accounts.

About 17.8 million individuals had a TFSA at the end of 2022.

Teachers and early childhood educators may claim a 25% refundable tax credit based on an amount of up to $1,000 in expenditures made in a taxation year for eligible supplies.

Eligible supplies must be purchased for the purpose of teaching or otherwise enhancing students' learning. Eligible supplies include consumable goods, such as construction paper for activities, flashcards or activity centres, as well as prescribed durable goods.

This measure applies to supplies acquired on or after January 1, 2016.

Personal income tax

Teachers and early childhood educators

Credit, refundable

Income Tax Act, section 122.9

Income Tax Regulations, section 9600

• Introduced in Budget 2016, effective for the 2016 and subsequent taxation years.
• The 2021 Economic and Fiscal Update increased the credit rate to 25%; removed a requirement that supplies be used in the classroom; and extended the list of prescribed durable goods, effective for the 2021 and subsequent taxation years

To recognize expenses incurred to earn employment income

This measure provides tax recognition for costs that educators often incur at their own expense for supplies that enrich the learning environment (Budget 2016).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Labour Force Survey

n/a

Projections are based on estimates of total amounts to be claimed multiplied by the 15% credit rate. Total amounts to be claimed are estimated on the basis of the eligible population and anticipated out-of-pocket school supply expenses. The number of eligible educators is projected to grow in line with Employment and Social Development Canada's Canadian Occupational Projection System for secondary and elementary school teachers and counsellors.

About 80,000 individuals claimed this credit in 2021.

A student eligible for the Education Tax Credit could claim a non-refundable tax credit at the lowest personal income tax rate for post-secondary textbook costs. For full-time students the amount was $65 per month of study, and for part-time students the amount was $20 per month. Unused amounts could be transferred to a supporting individual or carried forward to a subsequent taxation year. Budget 2016 announced the elimination of this measure as of 2017. Amounts carried forward from prior years may still be claimed.

Personal income tax

Students and individuals supporting them

Credit, non-refundable

Income Tax Act, subsection 118.6(2.1)

• Introduced in Budget 2006. Effective for the 2006 and subsequent taxation years.
• Budget 2016 announced the elimination of this measure as of 2017.

To recognize education costs

This measure provided better tax recognition for the cost of textbooks for post-secondary students (Budget 2006).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

This measure extended the unit of taxation.

The tax benefit from this measure could be obtained in a taxation year other than the year during which it accrued.

Education

70939 - Education - College education

70949 - Education - University education

70959 - Education - Education not definable by level

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 2.3 million individuals earned this credit in 2016.

The Tourism and Hospitality Recovery Program (THRP) provided a wage and rent subsidy for employers in prescribed tourism or hospitality businesses that had an average revenue reduction for the first year of the CEWS of 40% or more and had a current period revenue reduction of at least 40%. For qualifying entities, the THRP paid a wage and rent subsidy of between 40% and 75% for claim periods between October 24, 2021 to March 13, 2022. From March 13 to May 7, 2022 the maximum wage and rent subsidy rate decreased by half. The program ended on May 7, 2022.

Personal (including trusts) and corporate income tax

Businesses, individuals and other organizations

Credit, refundable

Income Tax Act, sections 125.7 and 164

• On October 21, 2021, the government announced the Tourism and Hospitality Recovery Program to provide wage and rent subsidies for qualifying tourism or hospitality organizations (i.e., prescribed tourism or hospitality organizations that had an average revenue reduction for the first year of the CEWS of 40% or more and had a current period revenue reduction of at least 40%).

To encourage employment

To support business activity

This measure was put in place to help prevent job losses and encourage employers to quickly rehire workers previously laid off as a result of COVID-19.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

71059 - Social Protection - Unemployment

Programs relevant to supporting individuals and businesses during the COVID-19 crisis, as part of Canada's COVID-19 Economic Response Plan. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Administrative data provided by the Canada Revenue Agency

The cost of this measure reflects administrative data provided by the Canada Revenue Agency.

n/a

The number of unique applicants with approved claims since the start of the program is 30,300 and 30,130, for the wage portion and the rent portion, respectively (data as of September 3, 2023).

The federal government transfers 14.85851 points of personal income tax and one point of corporate income tax to provincial and territorial governments as part of existing federal-provincial fiscal arrangements.

Personal (including trusts) and corporate income tax

n/a

Other

Federal-Provincial Fiscal Arrangements Act, Part V.1

• In 1967, the federal government transferred four points of personal income tax to all provinces in place of certain direct cash transfers under the then-existing cost-shared program for post-secondary education.
• In 1977, the federal government agreed to transfer an additional 9.143 points of personal income tax and one point of corporate income tax to all provinces and territories as part of the Established Programs Financing for health and post-secondary education.
• The 1977 reform involved a reduction of federal tax by 9.143% and a concurrent increase in provincial rates. This is the equivalent of 14.85851 tax points.

To implement intergovernmental tax arrangements

This measure reflects arrangements with provincial and territorial governments that allowed them to receive part of the federal program contribution for health and social programs in the form of tax abatements.

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

Intergovernmental tax arrangements

n/a

n/a

Canada Revenue Agency, Tax Sharing Statements

The value of the tax point transfers for personal income tax is estimated by multiplying Basic Federal Tax by 0.1485851. For corporate income tax, it is estimated by multiplying corporate taxable income by 0.01.

Projections for this measure are based on forecasted growth of Basic Federal Tax for personal income tax and corporate taxable income for corporate income tax.

n/a

Canadian travellers are eligible for limited GST relief on goods they bring back to Canada. The relief that is provided depends on the length of absence: returning residents can bring back up to $200 in goods without paying the GST if they were outside the country for between 24 and 48 hours, and up to $800 in goods if they were away for more than 48 hours. There is no relief for same-day travel.

This measure is referred to as an "exemption", based on customs administrative terminology. However, the imported goods are not exempt supplies as defined under the Excise Tax Act, and unlike exempt supplies, no GST is embedded in the cost of these goods.

Goods and Services Tax

Canadian travellers returning to Canada

Other

Section 1 of Schedule VII to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.
• Budget 2012 announced the following increases in the travellers' exemption limits for lengths of absence greater than 24 hours, effective June 1, 2012:
• From $50 to $200 for lengths of absence between 24 and 48 hours;
• From $400 to $800 for lengths of absence between 48 hours and 7 days;
• From $750 to $800 for lengths of absence over 7 days.

To reduce administration or compliance costs

This measure expedites customs clearance for returning Canadian consumers, making cross-border business and personal travel more convenient for Canadians (Department of Finance Canada news release 2012-061, June 1, 2012).

Structural tax measure

The non-taxation of goods that will be consumed in Canada is a deviation from a broadly defined value-added tax base.

International

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

Statistics Canada, Supply and Use Tables

Canada Border Services Agency data

The cost of this measure is calculated by applying the GST rate to Statistics Canada's estimates of expenditures by Canadians abroad on goods brought back to Canada less the GST collected on such goods.

The cost of this measure is projected to grow in line with non-merchandise travel imports.

No data is available.

A student can claim a non-refundable tax credit at the lowest personal income tax rate on tuition fees paid to designated educational institutions where the total for such fees exceeds $100. The student must claim the credit first on his or her own return. If the student does not need to use all of the credit, the unused amount may be transferred (up to a limit of $5,000, less the amount claimed by the student) to a supporting individual or carried forward to a subsequent taxation year.

Personal income tax

Students and individuals supporting them

Credit, non-refundable

Income Tax Act, section 118.5

• Introduced as a deduction in Budget 1960. Effective for the 1961 and subsequent taxation years.
• Replaced by a non-refundable tax credit and made transferable to spouses, parents or grandparents as part of the 1987 Tax Reform.
• Budget 1997 introduced a provision allowing unused tuition amounts to be carried forward for use in a subsequent year.
• Budget 2011 made occupational, trade or professional examinations eligible for the Tuition Tax Credit. The 13-week minimum duration requirement applying to studies undertaken by Canadians at foreign universities was also reduced to 3 consecutive weeks.
• Budget 2017 expanded the range of courses eligible for the credit to include occupational skills courses that are undertaken at a post-secondary institution in Canada, effective for the 2017 and subsequent taxation years. 

To recognize education costs

This measure provides students with tax relief by recognizing the costs of enrolling in qualifying programs or courses (Budget 1960).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

This measure extends the unit of taxation.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

Education

70939 - Education - College education

70949 - Education - University education

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 2.7 million individuals earned this credit in 2021.

Individuals who performed at least 200 hours of eligible volunteer firefighting services during a year can claim the non-refundable Volunteer Firefighters Tax Credit. The value of the credit is calculated by applying the lowest personal income tax rate to a credit amount of $3,000. An individual who performs both eligible volunteer firefighting services and eligible volunteer search and rescue services for a total of at least 200 hours in the year can claim either the Volunteer Firefighters Tax Credit or the Search and Rescue Volunteers Tax Credit. An individual who claims the Volunteer Firefighters Tax Credit is ineligible for the exemption from income that would otherwise apply to up to $1,000 of income (honoraria) received in the year for being a volunteer firefighter (see the measure "Tax-free amount for emergency services volunteers").

Personal income tax

Volunteer firefighters

Credit, non-refundable

Income Tax Act, section 118.06

• Introduced in Budget 2011. Effective for the 2011 and subsequent taxation years.
• The Volunteer Firefighters Tax Credit was extended to recognize hours of eligible search and rescue volunteer service in Budget 2014.

To achieve a social objective

This measure recognizes the important role played by volunteer firefighters in contributing to the security and safety of Canadians (Budget 2011).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Social

70329 - Public order and safety - Fire protection services

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 43,700 individuals claimed this credit in 2021.

Certain agricultural and fish products are zero-rated throughout the production chain, including farm livestock, poultry, bees, grains and seeds for planting or feed, hops, barley, flax seed, straw, sugar cane, sugar beets and fertilizer. Prescribed agricultural and fishing equipment, such as tractors and fishing nets, are also zero-rated. This measure relates to the zero-rating of basic groceries.

Goods and Services Tax

Farming and fishing businesses

Zero-rating

Part IV of Schedule VI to the Excise Tax Act

Agriculture and Fishing Property (GST/HST) Regulations

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

To provide income support or tax relief

This measure is intended to improve the cash-flow position of farming and fishing businesses (Goods and Services Tax, December 1989).

Non-structural tax measure

Zero-rating inputs is a deviation from the multi-stage design of the GST, whereby businesses pay tax on their inputs and then claim input tax credits in respect of inputs used in making taxable (including zero-rated) supplies.

Business - farming and fishing

70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture

70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting

Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available.

No projection is available.

No data is available.

Basic groceries, which include the majority of foodstuffs for preparation and consumption at home, are zero-rated under the GST. A specified list of goods, such as soft drinks, candies, confections and alcoholic beverages, are not staple grocery items and are therefore taxable.

Goods and Services Tax

Households

Zero-rating

Part III of Schedule VI to the Excise Tax Act

• This measure has been in effect since the inception of the GST in 1991.

To achieve a social objective

The zero-rating of basic groceries reflects the widely held view of Canadians that, as a general principle, basic foodstuffs should not be taxed (Goods and Services Tax: Technical Paper, August 1989).

Non-structural tax measure

Zero-rating is a deviation from a broadly defined value-added tax base.

Social

n/a

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables and National Income and Expenditure Accounts

Goods and Services Tax model

Goods and Services Tax model

No data is available.

Face masks (medical and non-medical grade) and face shields designed for human use that meet certain specifications (e.g., cover the nose and mouth) and that are for use in preventing the transmission of infectious agents, such as respiratory viruses, are currently zero-rated under the GST.

Goods and Services Tax

Households

Zero-rating

Sections 2 to 5 of Part II.1 of Schedule VI to the Excise Tax Act

• Proposed as part of the November 30, 2020 Fall Economic Statement. This measure would apply to supplies of these items made after December 6, 2020, and is proposed to only be in effect until their use is no longer broadly recommended for the COVID-19 pandemic.

To achieve a social objective

This measure provides tax relief to households and other purchasers to support public health during the COVID-19 pandemic.

Non-structural tax measure

Zero-rating is a deviation from a broadly defined value-added tax base.

Health

70719 - Health - Medical products, appliances, and equipment - Medical products, appliances, and equipment not elsewhere classified 

Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Statistics Canada, Supply and Use Tables

Canada Border Services Agency data

The cost of this measure corresponds to the tax on the estimated value of face masks (medical and non-medical grade) and face shields that would otherwise be taxable.

Projections for this measure are based on the anticipated demand for face masks (medical and non-medical grade) and face shields.

About 38.9 million individuals benefit from this measure.

Sanitary napkins, tampons, sanitary belts, menstrual cups and other similar products that are marketed exclusively for feminine hygiene purposes are zero-rated.

Goods and Services Tax

Households

Zero-rating

Section 1 of Part II.1 of Schedule VI to the Excise Tax Act

• Budget 2016 confirmed and implemented a previous Notice of Ways and Means Motion tabled in Parliament on May 28, 2015. The relief was effective in respect of supplies made on or after July 1, 2015.

To provide income support or tax relief

This measure provides tax relief to households.

Non-structural tax measure

Zero-rating is a deviation from a broadly defined value-added tax base.