How Canada’s 2021 Budget Will Affect Taxpayers

June 22, 2021 | Written by: Sohail Afzal

How Canada's 2021 Budget Will Affect Taxpayers

Ever since the Honourable Chrystia Freeland tabled the Federal Budget for 2021 (Budget 2021) on April 19, 2021, there has been quite a movement in excise and taxation institutions. There are many glad tidings for the law-abiding citizens and taxpayers of Canada. This is the first budget in more than two years. The Budget 2021 ensures strong resolutions for the recovery of the economy after the severe effects of Covid-19. The resolutions involve the spending of billions of dollars to finish the fight against Covid-19.

Here are some of the highlights of Budget 2021 that relate to the general tax activities.

  • A new hiring program, called the Canada Recovery Hiring Program, is introduced.
  • Introduction of new incentives for supporting clean emission activities.
  • Introduction of new reporting requirements for some specific aggressive transactions.

The important thing to note about Budget 2021 is that it does not

  • Propose increment in corporate or personal tax rates,
  • Amend the inclusion rates for capital profits,

There are some more amendments in the GST/HST regulations for online businesses. If you are a person in this industry, you can contact a professional accounting firm to gain full guidelines. When we talk about the excise tax and GST/HST measures of the Budget 2021, the following amendments are noteworthy.

Amendments to the GST/HST Online Businesses Proposals (E-Commerce)

Non-resident e-commerce business owners are now required to register for, collect, and remit the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) on their taxable digital products or services to Canadian consumers. Non-resident vendors are also required to perform all the tax duties based on the sales of goods shipped from a fulfillment warehouse or any other place in Canada.

In this regard, Distribution Platform Operators are also required to register for, collect, and remit the GST and HST on the products or services to Canadian consumers. They are also required to follow tax implications for the sales made by non-registered vendors through their platform. All the short-term accommodation supplies in Canada facilitated through any digital platform are also GST/HST liable.

Furthermore, the following amendments to the E-Commerce proposals are introduced by Budget 2021:

  • Eligible Deductions
  • Threshold Amount Determination
  • Liability and Safe Harbour Rules
  • Compliance of Short-Term Accommodation Platform Operator
  • CRA’s authority to register a person

The Luxury Tax

Canadians will now be paying a new retail sales tax called the “Luxury Tax” on the purchase or possession of select vehicles, aircraft, and boats. The tax criteria for this new implication is that the purchase of any vehicle over the price tag of $100,000 will come under the luxury tax. Similarly, any boats (yachts, recreational motorboats, and sailboats) with a price over $250,000 will fall under this new tax category. The tax rate is 10% of the total value of the luxury good.

There are many more ways in which the Canadian taxpayers will be affected by Budget 2021. Some regulations and resolutions are proposed and resting on a probationary basis. At the same time, other regulations have been declared. Any citizen should take professional assistance when trying to update their tax policies in their business.

Conclusion

The budget brings important highlights: an extension in the Canadian Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) until September 25, 2021. New recovery hiring programs are introduced to incentivize the new hiring or wage increments for the current employees. There is a luxury tax now on the purchase of select vehicles, boats, and aircraft. Amid all these new policies and rules, if you cannot integrate these laws into your business, always remember to consult the professionals.

Sohail Afzal CPA Toronto

Sohail Afzal, CPA, CMA, MBA

Sohail Afzal, (CPA, CMA, MBA) is the founder & CEO of GTA Accounting Professional Corporation. He is a highly experienced Chartered Professional Accountant and businessman himself and understands the challenges that many businesses face when it comes to cash flow management. As an experienced business consultant & tax advisor, he is helping companies grow by providing the technical, financial, and contractual information necessary for strategic decision-making.

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