The Government’s Gambit: Three Things Everyone Needs to Know About Federal Fiscal Update 2020Tuesday, December 1, 2020
Read online or download the full update here.
By now, enough has been written on the support that the Canadian Government has (and will) provide to the struggling Canadian economy and especially hard-hit business sectors such as small businesses and tourism. These measures involve tremendous spending and national debt but are necessary to keep a lot of Canadians with their heads above water. However, hidden in the federal Government’s Fall Economic Statement 2020 (the “Fiscal Update”) released on November 30, 2020, the Government introduced some new (and updated some old) tax proposals that will affect all of us. Here are three things everyone needs to know regarding the tax changes proposed in the Fiscal Update:
1. Stock Options
Recall that in the 2019 Federal Budget, the Liberal government proposed changes to the way stock options are taxed. My previous update discussed the release of legislation that placed a $200,000 annual cap on stock options granted by “large, long-established, mature firms” that are eligible for capital-gains like treatment. At the end of 2019 (which feels like 10 years ago), the Government announced that the proposed changes would not come into force on January 1, 2020 as they were supposed to, but that the 2020 Federal Budget would provide additional details and a new coming into force date. Because of the COVID-19 pandemic, the 2020 Federal Budget did not happen, so the Fiscal Update now provides us with the details on the proposed changes.
Highlights from the Fiscal Update include that the new rules on the way stock options are taxed: (i) will apply to stock options granted after July 1, 2021, (ii) will not apply to Canadian-controlled private corporations (“CCPCs”), and (iii) will apply to non-CCPCs that are members of a group with consolidated gross revenues greater than $500 million (to capture large, long-established, mature firms).
2. Working from Home
In a normal world, in order to be allowed specific deductions against employment income, an employee needs a signed form from their employer and must comply with technical, restrictive rules as to what expenses are permitted to be deducted. The Fiscal Update provides that those employees working from home will be able to claim up to $400 in expenses (with no need to track them) for 2020 as part of a simplified process and, generally, the Canada Revenue Agency will not ask for supporting documentation. This should be a welcome simplified process for employees who have been working remotely since March 2020.
3. Netflix Tax
Speaking of working from home… Many Canadians have been spending a great deal of time at home watching Netflix (and, if you are like my family, Apple TV+, Amazon Prime, and DAZN to name a few more). These streaming services are about to get more expensive for Canadians.
Today, foreign digital companies do not charge sales taxes on digital products sold to Canadians. However, starting in July 2021, digital vendors who sell directly to consumers, such as these streaming services, must charge GST/HST on goods and services sold in Canada. These additional costs will surely get passed on to the Canadian consumer.
This update is intended as a summary only and should not be regarded or relied upon as advice to any specific client or regarding any specific situation.
If you would like further information regarding the issues discussed in this update or if you wish to discuss any aspect of this commentary, please feel free to contact us.