On Thursday, November 5, 2020, Ontario Minister of Finance Rod Phillips released the province’s 2020 Budget. The budget builds on Ontario’s Action Plan: Responding to COVID-19, introduced on March 25, 2020 and includes significant investment in health care and support for families, workers and employers.
Not surprisingly, the COVID-19 pandemic has significantly impacted Ontario’s economy. The budget projects a deficit of $38.5 billion for 2020-21 and forecasts deficits of $33.1 billion in 2021-22 and $28.2 billion in 2022-23.
Below are highlights from the announcement from our accounting partner, MNP.
Corporate Tax Rates
No new corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2020 are outlined below:
|Small Business Corporations ||General Corporations
Employer Health Tax (EHT)
Ontario’s EHT is a payroll tax paid by employers based on total annual Ontario remuneration; the top rate is 1.95 percent. Private-sector employers with a total remuneration amount of less than $5 million were previously eligible for an EHT exemption on up to $490,000 of their payroll. As part of Ontario’s Action Plan: Responding to COVID-19 that was released in March 2020, the EHT exemption was temporarily increased from $490,000 to $1 million for 2020. This increase was set to expire January 1, 2021; Budget 2020 proposes to make the increase permanent.
Currently, employers with annual Ontario payroll over $600,000 are required to pay EHT by way of monthly installments. The government is proposing to double this threshold payroll amount to $1.2 million, beginning in 2021. Private-sector employers who claim the full exemption would be required to remit EHT installments when they owe more than $3,900 in EHT for the year.
Cultural Media Tax Credit
Due to production delays resulting from COVID-19, companies operating in the cultural industries may be unable to meet tax credit deadlines and may lose eligibility for tax credit support. Budget 2020 proposes to temporarily extend some timelines and amend some requirements for cultural media tax credits.
The following is a summary of the proposed amendments:
Ontario Film and Television Tax Credit (OFTTC)
- Companies must file an application for a certificate of completion within 24 months of the year end in which principal photography begins.
- Eligible expenditures can be claimed up to 24 months before principal photography begins.
- Productions must have an agreement in writing to have the production shown in Ontario within two years of the production being complete and becoming commercially exploitable.
- Extend deadline by an additional 24 months
- Extend this claim period by an additional 24 months
- Extend this two-year period by an additional 24 months
Would Apply to:
- Productions for which eligible expenditures were incurred prior to March 15, 2020 and which were not completed, certified by Ontario Creates or deemed ineligible for the tax credit by Ontario Creates before March 15, 2020.
Ontario Production Services Tax Credit (OPSTC)
- Total expenditures included in the cost of the production during 24 months after principal photography begins must exceed minimum spending requirements.
- Productions cannot claim the OPSTC until the taxation year in which principal photography begins.
- Allow an additional 24 months to meet the minimum spending requirements.
- Allow certain companies to claim otherwise eligible expenditures incurred in the two taxation years prior to the year in which principal photography begins
Would Apply to:
- Productions for which eligible expenditures (or otherwise eligible expenditures) were incurred in Ontario in taxation years ending in 2020 and 2021.
Ontario Interactive Digital Media Tax Credit (OIDMTC)
- For specified and non-specified products, eligible labour expenditures must be incurred during the 37-month period prior to product completion.
- Extend this expenditure window by an additional 24 months.
Would Apply to:
- Products that were not completed before March 15, 2020 and for which eligible labour expenditures were incurred in the 2020 taxation year.
Ontario Book Publishing Tax Credit (OBPTC)
- Literary works must be published in a bound edition of at least 500 copies.
- Temporarily waive this requirement.
Would Apply to:
- 2020 and 2021 taxation years.
Source: Ontario Ministry of Finance
Ontario Research and Development Tax Credit (ORDTC)
The government proposes to extend the reporting period to claim an ORDTC. Corporations with tax year-ends from September 13, 2018 to December 31, 2018 would have an additional six months to file a claim; corporations with tax year-ends from January 1, 2019 to June 29, 2019 would have until December 31, 2020 to file an ORDTC claim.
The proposed change parallels the extension of the reporting deadlines for federal scientific research and experimental development claims.
B. Personal Tax Measures
Personal Tax Rates
No new personal income tax rate changes have been announced in this year’s budget. The top marginal personal income tax rate for Ontario is 20.53 percent for 2020. The current top combined federal and Ontario marginal rates for 2020 are outlined below:
|Salary, business income, interest||53.53%|
Seniors’ Home Safety Tax Credit
Budget 2020 proposes the new temporary Seniors’ Home Safety Tax Credit, a refundable tax credit for eligible claimants whether or not they owe income tax for 2021.
The proposed credit would not be dependent on income and could be claimed for eligible expenses by senior homeowners, renters or people who live with relatives who are seniors.
The Seniors’ Home Safety Tax Credit would equal 25 percent of up to $10,000 in eligible expenses for a senior’s principal residence in Ontario. The maximum credit would be $2,500; the $10,000 maximum would be shared by the people who live together, including spouses and common-law partners.
To be eligible, expenses must be paid or become payable in 2021 and must relate to renovations that improve safety and accessibility or help a senior be more functional or mobile at home. Eligible expenses would include:
- Renovations to permit a first-floor occupancy or secondary suite for a senior;
- Grab bars and related reinforcements around the toilet, tub and shower;
- Wheelchair ramps, stair / wheelchair lifts and elevators;
- Non-slip flooring;
- Additional light fixtures throughout the home and exterior entrances;
- Automatic garage door openers; and
- Modular or removable versions of a permanent fixture, such as modular ramps and non-fixed bath lifts.
Individuals would be able to claim the credit if the improvement was made to their principal residence, or to a residence that is reasonably expected to become their principal residence within 24 months after the end of 2021.
C. Other Measures
Business Education Tax (BET)
To reduce regional tax inequities and improve business competitiveness, the government proposes to reduce all high BET rates to a rate of 0.88 percent for both commercial and industrial properties beginning in 2021, a reduction of 30 percent for businesses currently subject to the highest BET rate.
Property Tax Relief for Small Businesses
The Ontario Government plans to provide municipalities with flexibility for providing property tax relief to small businesses. Beginning in 2021, municipalities would be able to adopt a new optional property subclass for small business properties. The small business property subclass will allow municipalities to target tax relief by reducing property taxes to eligible small business properties. The Province will also consider matching municipal property tax reductions to provide further support to small businesses.
Wine and Beer Tax
The government is freezing beer tax rates until March 1, 2022 and is proposing to retroactively cancel the increase in wine basic tax rates legislated to occur on June 1, 2020.
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