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On Thursday, November 5, 2020, Ontario Minister of Finance Rod Phillips tabled 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:
A. Corporate Tax Measures
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:
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.
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:
Would Apply to:
Would Apply to:
Source: Ontario Ministry of Finance
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.
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:
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:
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.
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.
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.
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.
Find out key details and impacts of the 2020 provincial budgets and sign up for our exclusive tax insights.
Related Topics:Budget Announcements
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