On March 23, 2023, Ontario’s Finance Minister delivered the 2023 Ontario Budget titled Building a Strong Ontario. The government’s plan is to drive growth by lowering costs, getting key infrastructure projects built faster, and attracting more jobs and investment to help businesses, families and workers. For 2022–23, the government is projecting a deficit of $2.2 billion. Over the medium term, the government is forecasting a deficit of $1.3 billion in 2023–24 and expects a surplus of $0.2 billion in 2024–25 and a $4.4 billion surplus in 2025-26. No major tax changes were announced however notable tax announcements from the budget are discussed below. For complete details on the Budget and proposed spending, please visit the Budget Ontario website.
Corporate Income Tax Rates
There have been no changes to the Ontario corporate income tax rates which are summarized below:
|Ontario||Federal & Ontario|
|CCPC – first $500,000 of active income||3.2%||12.2%|
|CCPC investment rate||11.5%||50.17%|
Ontario Made Manufacturing Investment Tax Credit
The Budget proposes a new Ontario Made Manufacturing Investment Tax Credit. It is a 10% refundable tax credit available to Canadian-controlled private corporations (CCPCs) that make qualifying investments in manufacturing and processing (M&P) and that have a permanent establishment in Ontario (i.e. an office, factory or workshop in Ontario). The credit is available for qualifying investments up to a limit of $20 million in a taxation year (shared by an associated group and pro-rated for short taxation years).
Qualifying investments include expenditures for certain capital investments in buildings, machinery and equipment used in M&P included in Class 1 or Class 53 for capital cost allowance (CCA) purposes. Specific criteria are summarized below.
Class 1 – Building
- Expenditures for constructing, renovating or acquiring buildings used for M&P in Ontario that become available for use on or after March 23, 2023.
- 90% of the floor space of the building must be used at the end of the corporation’s taxation year for M&P in Ontario and the building must be eligible for the additional 6% CCA permitted under the federal Income Tax Act.
Class 53 – Machinery and Equipment
- Expenditures for machinery and equipment used in the M&P of goods in Ontario
- Acquired and available for use on or after March 23, 2023, and before 2026.
- After 2025, includes expenditures for machinery and equipment used in the M&P of goods for sale or lease that are included in Class 43(a).
The government estimates that $780 million in income tax support will be provided over the next three years to qualifying CCPC’s. The Budget proposes that the government will undertake a review of the credit every three years to evaluate the effectiveness, compliance burden and administrative costs.
Film and Television Tax Credits
The government continues to explore opportunities to modernize and improve these credits. The Budget proposes to:
- Extend credits to professional film and television productions made available exclusively online
- Require film and television productions supported by Ontario tax credits provide on-screen acknowledgement of this support in their end credits.
- Explore ways to simplify the Ontario Computer Animation and Special Effects Tax Credit to reduce administrative complexity
- Review the Ontario Film and Television Tax Credit regional bonus to ensure its providing effective and appropriate support in all regions
Small Business Deduction Phase Out
The Budget proposes to mirror the federal government’s extension of the federal phase‐out range for the small business deduction to between $10 million and $50 million of taxable capital employed in Canada. This proposed measure would apply to taxation years that begin on or after April 7, 2022, for consistency with the federal effective date.
The government of Ontario is proposing to set a single 12% basic tax rate on wine and wine coolers sold in off-site winery retail stores, including wine boutiques. The new rate would come into effect on July 1, 2023. These proposed changes are in response to a World Trade Organization settlement reached between Canada and Australia.
The information in this article is of a general nature and is in summary form. Contact one of our tax professionals to discuss these matters in the context of your situation before acting upon such information.