2019 Federal Budget Summary
The 2019 Federal Budget was tabled March 19, 2019 and given the upcoming election, there wasn’t anything ground-breaking, but there are nonetheless a few measures to note that may directly or indirectly affect our clients, specifically:
- Employee Stock Options: When an employee stock option is exercised, the employee is taxed on an employment benefit equal to the difference between the exercise price and the fair market value of the underlying shares. In certain circumstances, only 50% of that employment benefit is taxable. The 2019 Budget proposes to place an annual limit on the amount of stock option grants that may qualify for such tax-preferred treatment to $200,000 per employee, which will apply to individuals working for “large, long-established, mature firms”. We will have to wait for further clarification on what qualifies as a “large, long-established, mature firm”, but it appears the target is not start-up companies. The government has indicated that more details on this will be released before the summer.
- Scientific Research and Experimental development (SR&ED): Canadian-controlled private corporations (CCPC) are currently entitled to an enhanced refundable tax credit of 35% of qualified spending up to a maximum of $3M, but subject to certain claw-backs based on the corporation’s taxable income and taxable capital employed in Canada. The 2019 Budget proposes to get rid of the taxable income threshold for accessing the enhanced tax credit for CCPCs, in part because the claw-back has been too drastic.
- Corporate Ownership Record Requirements: In line with the recent changes to the Canada Business Corporations Act (CBCA) with respect to corporate beneficial ownership records (see our blog post for more information), the 2019 Budget proposes to make further amendments to the CBCA to ensure the register of beneficial owners of corporations and trusts is easily accessible for tax authorities.
- Intergenerational Transfers: As you may recall, recently the government submitted proposals affecting the transfer of businesses between related parties. These proposals were eventually withdrawn after blowback from farmers, fishers and other small business owners. The 2019 Budget indicates that this topic has not been forgotten, and the government continues to consult with such affected parties to find an appropriate solution. It will be interesting to see what, if anything, comes from these discussions.
If you have any questions regarding the tax and estate planning, please contact us and we would be happy to assist.