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Federal Government releases proposals to increase the capital gains inclusion rate and other tax measures relevant to employers

On April 16, 2024, Canada’s Deputy Prime Minister and Minister of Finance, Chrystia Freeland, delivered the Liberal Government’s federal budget, Fairness for Every Generation (Budget 2024). The most notable tax measure in Budget 2024 is the proposal to increase the capital gains inclusion rate from one-half to two-thirds, for capital gains realized on or after June 25, 2024. This measure will apply to all capital gains realized by corporations and trusts, but only will apply to individuals in respect of the portion of capital gains realized in the year that exceeds $250,000.

As a consequence of the above, the deductions for employee stock option benefits will be reduced from one-half to one-third. However, qualifying employees will remain entitled to the one-half deduction to the extent that their combined employee stock option benefits and capital gains realized in the taxation year total to $250,000 or less.

Among other things, Budget 2024 also proposes to:

  • temporarily increase the capital cost allowance rate for productivity-enhancing assets;
  • provide a framework for a proposed exemption for certain capital gains realized by an individual (other than a trust) as a result of a qualifying disposition to an “employee ownership trust”; and
  • provide the Canada Revenue Agency with statutory authority to waive the requirement to withhold tax on payments made to non-resident persons for services performed in Canada.

For a discussion of these tax measures and others in Budget 2024, please see McCarthy Tétrault’s Budget 2024 Commentary.



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