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Federal Government proposes new employee ownership trusts and relief to employers for taxes paid in respect of retirement compensation arrangements

On March 28, 2023, Canada’s Deputy Prime Minister and Minister of Finance, Chrystia Freeland, delivered the Liberal Government’s federal budget, “A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future” (“Budget 2023”). Tax measures of interest in the labour and employment law space include:

  • rules for the establishment and use of new “Employee Ownership Trusts,” which are designed to facilitate the purchase of businesses by employees; and
  • proposed amendments to assist employers that sponsor retirement compensation arrangements (“RCA”) that are not pre-funded by the employer. For an RCA that is supplemental to a registered pension plan, Budget 2023 will exempt letter of credit (or surety bond) fees or premiums from the refundable RCA tax and will create a mechanism for an RCA to recover refundable tax previously paid.

For a discussion of these tax measures and others in Budget 2023, please see McCarthy Tétrault’s Budget 2023 Commentary.



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