Annex: Details of Tax Measures and Other Legislative Initiatives

Overview

This Annex contains detailed information on proposed and previously announced tax measures and other legislative initiatives.

Implementing 2022 Budget Tax Measures

In April 2022, the government proposed tax measures as part of the 2022 Budget to provide targeted support to people and families, modernize cultural media tax credits, and extend other time-limited supports. These proposed measures were re-introduced in the Legislature in August, and on September 8, 2022, Bill 2, the Plan to Build Act (Budget Measures), 2022 received Royal Assent, enabling these measures to be implemented.

Key measures include:

• An enhancement to the non-refundable Low-income Individuals and Families Tax (LIFT) Credit, starting with the 2022 tax year, to help lower-income workers keep even more of their hard‑earned money;
• The Ontario Seniors Care at Home Tax Credit, a new refundable Personal Income Tax credit, starting with the 2022 tax year, to help seniors with eligible medical expenses, including expenses that support aging at home;
• Extending the time-limited enhancement of the Regional Opportunities Investment Tax Credit to encourage additional business investment in certain regions of Ontario that have lagged in employment growth; and
• Updating the Ontario Book Publishing Tax Credit by removing the requirement that an eligible literary work must be published in an edition of at least 500 copies of a bound book.

More information on these measures can be found in the 2022 Budget.

Supporting Small Business Growth

Ontario provides a small business corporate income tax rate of 3.2 per cent for Canadian-controlled private corporations (CCPCs) on their first $500,000 of active business income. This compares to a general Ontario corporate income tax rate of 11.5 per cent. The benefit from the small business rate is phased out on a straight-line basis for CCPCs, and associated groups of CCPCs, that have more than $10 million of taxable capital employed in Canada in the previous year and is fully eliminated at $15 million.

Ontario is proposing to extend the range over which the benefit from the small business rate is phased out. The proposed measure would phase out the benefit from the small business rate for taxable capital between $10 million and $50 million, up from $15 million.

This measure would mirror the federal Budget 2022 announcement in respect of the federal small business corporate income tax rate. Ontario intends to introduce legislation for this measure once the corresponding federal legislation has received Royal Assent to ensure simplicity and clarity for businesses. The proposed Ontario measure would apply to taxation years that begin on or after April 7, 2022, consistent with the proposed federal change.

Allowing Immediate Expensing to Encourage Business Investment

Ontario is providing temporary immediate expensing for eligible property acquired by a CCPCs, an unincorporated business carried on directly by Canadian-resident individuals (other than trusts), and Canadian partnerships where all the partners are CCPCs or Canadian-resident individuals (other than trusts). This measure parallels federal measures and will provide over $675 million of Ontario income tax relief over three years.

Eligible Periods

For CCPCs, the measure applies to eligible property that is acquired after April 18, 2021, and that becomes available for use before January 1, 2024.

For unincorporated businesses and partnerships, the measure applies to eligible property that is acquired after December 31, 2021, and that becomes available for use before January 1, 2025, subject to special rules for certain partnerships.

Annual Limit

The immediate expensing measure has a limit of $1.5 million per year. If CCPCs, eligible persons or partnerships are members of an associated group, the $1.5 million limit must be shared among members of the group.

Eligible Property

Eligible property under this measure is capital property that is subject to the federal capital cost allowance (CCA) rules, other than property included in CCA classes 1 to 6, 14.1, 17, 47, 49 and 51, which are generally long-life assets, such as buildings and certain structures, and unlimited life intangibles including goodwill.

Eligible property includes property such as office furniture described in Class 8; passenger vehicles and tractors described in Class 10 or 10.1; freight trucks and rental cars described in Class 16; data network infrastructure equipment and systems software described in Class 46; and computers described in Class 50.

Modernizing Ontario’s Cultural Media Tax Credits

The government offers five refundable cultural media tax credits to encourage film and television production, computer animation and special effects activities, interactive digital media product development and book publishing in Ontario. These industries are an important and growing segment of Ontario’s economy, offering high-value technical and creative employment opportunities.

The 2022 Budget announced that the government is undertaking work to modernize these tax credits to reflect the latest cultural media industry practices and to continue to attract investment and jobs.

Extending Film and Television Tax Credits to Online-Only Productions

As committed to in the 2022 Budget, the government is expanding Ontario’s film and television tax credits to professional film and television productions distributed exclusively online. In the coming months, proposed regulatory amendments to implement this measure will be posted on the Ontario Regulatory Registry for public review and comment.

Expanding Support for Location Fees

The Ontario Production Services Tax Credit (OPSTC) is a 21.5 per cent refundable tax credit on qualifying labour, service contract and tangible property expenditures for foreign and domestic film and television productions that meet minimum budget thresholds (e.g., $1 million for feature films).

In most cases, tangible property expenditures for leasing locations for on-location filming (e.g., private homes, restaurants, stores) are not eligible expenditures for the OPSTC. Eligible tangible property expenditures must be paid to a person or partnership that is ordinarily engaged in the business of selling or leasing tangible property of the type acquired or leased by the applicant corporation (i.e., “ordinarily engaged in” requirement). As homeowners and most business owners are not ordinarily engaged in the business of selling or leasing their homes or businesses, location fees for filming at these properties are not currently eligible for the OPSTC.

To help improve the competitiveness of this tax credit and to incentivize more on-location filming in communities across Ontario, the government proposes to amend the definition of eligible tangible property expenditures for the OPSTC to remove the “ordinarily engaged in” requirement for expenditures for leasing real property for on-location filming, effective for expenditures incurred after November 14, 2022. To be eligible for the OPSTC, expenditures for leasing real property for on-location filming would need to be reasonable in the circumstances and paid to a party that deals at arm’s length from the qualifying applicant corporation.

The maximum eligible expenditures for leasing real property for on-location filming that could be claimed for a production would be limited to five per cent of the production’s qualifying production expenditures.

Increasing Visibility of Ontario Tax Credit Support

The Ontario government’s film and television tax credits are estimated to provide over $700 million in support to the industry in 2022–23. To help increase the visibility of this support, the government is proposing to make regulatory amendments to the Ontario Film and Television Tax Credit and the Ontario Production Services Tax Credit to require that eligible film and television productions provide on-screen acknowledgement of their receipt of Ontario tax credit support.

This requirement would be effective for productions that begin principal photography after December 31, 2022.

Extending the Temporary Gas Tax and Fuel Tax Cuts

The Ontario government cut the gas tax by 5.7 cents per litre and the fuel tax by 5.3 cents per litre for six months, beginning July 1, 2022. The gas tax and fuel tax rates are currently 9 cents per litre. These tax reductions are set to end on December 31, 2022, when the tax rates would return to 14.7 cents per litre for gas and 14.3 cents per litre for fuel (diesel).

The government is introducing legislation that would amend the Gasoline Tax Act and the Fuel Tax Act to extend the rate cuts so that the rate of tax on gas and fuel (diesel) would remain at 9 cents per litre until December 31, 2023. This would save Ontario households $195 on average between July 1, 2022, and December 31, 2023.

Increasing the Non-Resident Speculation Tax Rate

Effective October 25, 2022, the government implemented amendments to O. Reg. 182/17 made under the Land Transfer Tax Act to increase the Non-Resident Speculation Tax rate from 20 per cent to 25 per cent. The Non-Resident Speculation Tax applies to the purchase of a home located anywhere in Ontario by foreign nationals, foreign corporations or taxable trustees.

To ensure taxpayer fairness, purchasers who entered into binding agreements of purchase and sale before October 25, 2022, may be eligible for relieving transitional provisions.

Rebates remain available for foreign nationals who become permanent residents of Canada within four years after the tax became payable, if eligibility criteria are met. Exemptions also remain available for nominees under the Ontario Immigrant Nominee Program, protected persons (refugees), and spouses of individuals not subject to the Non‑Resident Speculation Tax, if eligibility criteria are met.

Addressing Unregulated Tobacco

The government continues to take action to support efforts to address unregulated tobacco, including:

• Strengthening First Nation partnerships by focusing on economic development, business regulation and community safety;
• Collaborating with federal partners on strengthening border enforcement and combatting tobacco smuggling;
• Working closely with cigar wholesalers to strengthen guidance regarding on-reserve sales; and
• Modernizing the raw leaf tobacco oversight program through the adoption of advanced technologies.

Moving forward, the government is proceeding with a review of the Tobacco Tax Act. A review of the Act and its regulations is intended to advance the government’s overall burden reduction goals and improve administration. The government will continue to engage with First Nation partners, industry and public health organizations on this initiative.

Summary of Tax Measures

Table A.1 reflects the impact over the medium-term outlook of tax measures outlined in this document and in the 2022 Budget.