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What Finance Canada Said

Canada’s 2024 Automobile Deduction Limits and Expense Benefit Rates for Businesses Announced

Government of Canada Announces 2024 Automobile Deduction Limits and Expense Benefit Rates for Businesses
2023-12-18 15:15

The Department of Finance Canada has released the updated automobile income tax deduction limits and expense benefit rates for 2024. These changes, effective from January 1, 2024, include:

  1. Capital Cost Allowances (CCA) Increase: The CCA ceiling for Class 10.1 passenger vehicles is raised to $37,000 (up from $36,000) for vehicles acquired on or after January 1, 2024.
  2. Leasing Costs Limit Increase: The deductible limit for leasing costs is now $1,050 per month (previously $950) for new leases initiated from January 1, 2024.
  3. Interest Deduction Rise: The maximum allowable interest deduction for new automobile loans is increased to $350 per month (from $300).
  4. Higher Tax-Exempt Allowances for Business Use of Personal Vehicles:
  • In provinces, the allowance rate is 70 cents per kilometre for the first 5,000 kilometres (up by two cents) and 64 cents for each additional kilometre.
  • In territories, the rate is 74 cents per kilometre for the first 5,000 kilometres (also up by two cents) and 68 cents for each additional kilometre.
  1. Zero-Emission Vehicles CCA Unchanged: The CCA ceiling for Class 54 zero-emission passenger vehicles remains at $61,000 for 2024.
  2. Constant Taxable Benefit Rates:
  • The general prescribed rate for the personal portion of automobile expenses remains at 33 cents per kilometre.
  • For employees primarily involved in selling or leasing automobiles, the rate stays at 30 cents per kilometre.

Canada Growth Fund Invests in Entropy Inc. for Carbon Capture Technology

Deputy Prime Minister welcomes the Canada Growth Fund’s first carbon contract for difference
2023-12-20 05:47

The Department of Finance Canada announced the Canada Growth Fund’s $200 million investment in Entropy Inc., a Calgary-based carbon capture and sequestration company. This investment, combined with a carbon contract for difference, is intended to support job creation in Alberta and advance Entropy’s carbon capture technology.

Entropy, working with the University of Regina, has developed a modular carbon capture, utilization, and storage technology aimed at reducing emissions in industries that are challenging to decarbonize. The investment is expected to help scale up this technology for the Advantage Energy’s Glacier Phase 2 plant in Alberta, targeting a reduction of about 2.8 million tonnes of emissions over 15 years. Additionally, it aims to commercialize the technology for future projects both in Canada and internationally.

The Canada Growth Fund’s commitment includes not only the direct investment but also the purchase of up to 185,000 tonnes per year of carbon credits for 15 years, at a starting price of $86.50 per tonne. This arrangement, a form of carbon contracts for difference, aims to provide a stable financial environment for Entropy’s project by ensuring a fixed purchase price for carbon credits.

Moreover, this investment could enable further emission reductions in future Canadian projects using Entropy’s technology. The Growth Fund has agreed to a large-scale, long-term carbon credit offtake framework with Entropy, potentially involving up to 1 million tonnes per year. This commitment could support Entropy’s future carbon capture projects in Canada, which might reduce emissions by up to 9 million tonnes over 15 years.

The project may also be eligible for additional federal support through the Carbon Capture, Utilization, and Storage investment tax credit, as proposed in the Fall Economic Statement Implementation Act, 2023.

Canada’s Government Initiates Consultations on Economic Measures

Government consults Canadians on major investment tax credits, cracking down on short-term rentals, and ensuring a fair tax system
2023-12-20 14:52

 The Canadian Government has launched consultations on various economic measures as part of its ongoing economic plan. These include advancing major economic investment tax credits, addressing issues with short-term rentals, and implementing measures to maintain the fairness of the national tax system.

Advancing Economic Investment Tax Credits

The government is proceeding with its plan to introduce five major economic investment tax credits, as outlined in the 2023 Fall Economic Statement. These credits, with a federal support of $85 billion over the next decade, are intended to attract private investment and create jobs. Legislation for the Carbon Capture, Utilization, and Storage investment tax credit and the Clean Technology investment tax credit, including labor requirements, was introduced last month. Draft legislation is now being released for the Clean Hydrogen investment tax credit and the Clean Technology Manufacturing investment tax credit, with completion targeted for 2024.

Addressing Short-Term Rental Market

In response to concerns about short-term rentals impacting housing availability, draft legislation is being proposed to deny income tax deductions for short-term rentals that are either prohibited or non-compliant with provincial or municipal regulations. This measure is part of the 2023 Fall Economic Statement initiative.

Ensuring a Fair Tax System

Draft legislation and regulations are being released for several previously announced tax measures. These include exempting international shipping income of Canadian companies from the Income Tax Act, clarifying the treatment of concessional loans, and implementing the vaping excise duty in coordination with certain provinces and territories. Additionally, draft regulations are being provided for the removal of the Goods and Services Tax (GST) from new purpose-built rental housing, applicable to specific construction timelines.

The government invites feedback from all Canadians, including Indigenous governments, organizations, and associations, on these proposals. Responses are requested by February 5, 2024.

The term “Announcement Date” in the draft legislation and regulations refers to the date of this release.

Canadian Government Approves HSBC Sale to RBC with Conditions

Government of Canada approves sale of HSBC Bank Canada to the Royal Bank of Canada with conditions
2023-12-21 17:51

The Canadian Government, through the Department of Finance, has approved the sale of HSBC Bank Canada to the Royal Bank of Canada (RBC), contingent on specific terms and conditions. This decision, made by the Deputy Prime Minister and Minister of Finance, Chrystia Freeland, follows HSBC Global’s announcement in November 2022 of its exit from the Canadian market, as part of a broader restructuring.

Key considerations for the government’s approval included job protection for HSBC’s approximately 4,000 Canadian employees, the continuation of services for around 780,000 Canadian clients, and the promotion of competitive banking services. RBC has committed to several measures:

  1. Protecting HSBC’s Canadian workforce.
  2. Establishing a new Global Banking Hub in Vancouver, creating about 440 new jobs in British Columbia.
  3. Increasing its client operations center workforce in Winnipeg by 10%, creating 100 new jobs.
  4. Continuing banking services at a minimum of 33 HSBC branches and all associated ATMs for four years.
  5. Waiving specific fees for HSBC clients for 18 months, including mortgage transfer fees and international money transfers.
  6. Providing $7 billion in financing for the construction of affordable housing across Canada.
  7. Offering additional retail lending for the conversion of single-family homes into multi-family homes.
  8. Maintaining Mandarin and Cantonese banking services at selected HSBC branch locations.

This decision was informed by the Competition Bureau’s report, which concluded that the acquisition would not substantially lessen competition in the Canadian financial sector. The Bureau noted that HSBC’s market share was less than 2%, and therefore, RBC’s increased market share post-acquisition would not be significant. The Office of the Superintendent of Financial Institutions (OSFI) had no objections to the transaction.

Following this approval, the Department of Finance is launching new consultations aimed at strengthening competition in the financial sector. This move is part of the government’s ongoing efforts to safeguard consumer interests and maintain stability in the Canadian financial landscape.

Canadian Government’s Housing Initiatives in Toronto

Canada’s economic plan is helping over 500,000 Canadians save for their first home and building more homes, faster
2024-01-11 12:17

The Canadian Government’s economic plan includes efforts to facilitate homeownership and accelerate housing construction. This was highlighted during a visit by the Deputy Prime Minister Chrystia Freeland and Minister Marci Ien to Canary Landing in Toronto.

Key aspects of the government’s plan include:

  1. Support for New Rental Homes: The construction of 2,510 new rental homes at Canary Landing, which includes 685 affordable homes offered at below-market rates. These homes are intended for families, victims of domestic violence, seniors, people with disabilities, artists, and Indigenous people.
  2. Federal Funding for Housing Projects: Significant federal support has been provided for the construction of new rental homes:
  • Maple House (125 Mill Street) with 761 new rental homes, receiving $357 million through the Apartment Construction Loan Program.
  • Cherry House (373 Front Street East) with 855 new rental homes, receiving $444 million through the same program.
  1. Housing Accelerator Fund Agreement: The federal government’s agreement with the City of Toronto includes a $471 million Housing Accelerator Fund. This fund is expected to fast-track the construction of nearly 12,000 new homes over three years and contribute to over 53,000 new homes over the next decade in Toronto.
  2. Tax-Free First Home Savings Account: More than 500,000 Canadians have opened a Tax-Free First Home Savings Account since its launch. This account allows contributions up to $40,000 for a first down payment, with tax benefits both on contributions and withdrawals.

The government’s approach is aimed at making housing more accessible and affordable, particularly in Toronto, and is part of a broader national economic strategy.

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Nizam Shajani, Partner, LLM, CPA, CA, TEP, MBA

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