The Fall Economic Statement Implementation Act, 2023 (Bill C-59) is a comprehensive piece of legislation that implements various measures from the Canadian government's recent economic statements and budget. The bill amends several existing laws and enacts new ones, touching on areas such as income tax, digital services tax, excise taxes, financial institutions, labor standards, environmental protection, competition, and more. The main goal is to put into action some of the financial priorities and economic strategies outlined by the government.
Part 1 of the bill focuses on amending the Income Tax Act and related legislation. These changes include limiting interest deductibility for corporations, addressing hybrid mismatch arrangements to prevent tax avoidance, providing tax credits for carbon capture and clean technology, and adjusting rules for intergenerational business transfers. It also introduces a tax on net equity repurchases by certain corporations and facilitates the creation of employee ownership trusts.
Part 2 introduces the Digital Services Tax Act, which establishes a 3% tax on certain digital services revenues earned by large businesses that meet specific revenue thresholds. This tax aims to capture revenue from digital companies operating in Canada.
Part 3 implements changes to the Excise Tax Act and related legislation, including measures affecting the Goods and Services Tax/Harmonized Sales Tax (GST/HST). These changes address financial instruments, related partnerships, healthcare practitioners, payment card clearing services, and rebates for new rental housing.
Part 4 amends the Excise Act, 2001, focusing on vaping products. These changes allow vaping product licensees to import packaged vaping products, permit cannabis licensees to remit excise duties quarterly, and introduce administrative penalties for vaping-related infractions.
Inflation and Cost of Living
Part 3 of the bill includes an expansion of the GST/HST exemption for services rendered by health care practitioners to include professional services rendered by psychotherapists and counselling therapists. In addition, the bill raises the input tax credit (ITC) documentation thresholds from $30 to $100 and from $150 to $500, which may reduce compliance costs for businesses.
Jobs
Part 1 of the bill facilitates the creation of employee ownership trusts, which could help employees gain ownership in their companies.
Taxation
The bill introduces several taxation measures. Part 1 limits the deductibility of net interest and financing expenses for certain corporations and implements hybrid mismatch rules to counter cross-border tax avoidance. It also introduces a 2% tax on the net value of equity repurchases by certain Canadian corporations. Part 2 enacts the Digital Services Tax Act, establishing a 3% tax on specific digital services revenue for businesses meeting certain revenue thresholds. Part 3 makes changes to GST/HST rules and excise tax, and part 4 amends excise duties on vaping products.
Climate
Part 1 provides a refundable investment tax credit to businesses for carbon capture, utilization, and storage equipment, as well as for clean technology equipment. It also introduces labor requirements for these tax credits and expands eligible activities for reduced tax rates for zero-emission technology manufacturers.
Environmental Protection
Division 3 of Part 5 enacts the Canada Water Agency Act, establishing the Canada Water Agency to assist the Minister of the Environment in freshwater-related powers, duties, and functions. Subdivision A of Division 8 of Part 5 authorizes the Financial Transactions and Reports Analysis Centre of Canada to disclose information to the Department of the Environment and the Department of Fisheries and Oceans, subject to certain conditions.
Energy
Part 1 allows expenditures for lithium exploration and development to qualify as Canadian exploration expenses and Canadian development expenses. Additionally, the bill includes investment tax credits for carbon capture, utilization, and storage equipment, and it extends reduced tax rates for zero-emission technology manufacturers. Part 3 allows the joint venture election to be made for the operation of a pipeline, rail terminal or truck terminal that is used for the transportation of oil, natural gas or related products.
Crime
Subdivision A of Division 8 of Part 5 amends the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to provide that, if a person or entity has reasonable grounds to suspect possible sanctions evasion, the relevant information is reported to the Financial Transactions and Reports Analysis Centre of Canada. It also amends the Budget Implementation Act, 2023, No. 1 in relation to the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and makes consequential amendments to other Acts and a regulation.
Subdivision B of Division 8 of Part 5 amends the Criminal Code to, among other things, in certain circumstances, provide that a court may infer the knowledge or belief or recklessness required in relation to the offence of laundering proceeds of crime and specify that it is not necessary for the prosecutor to prove that the accused knew, believed they knew or was reckless as to the specific nature of the designated offence.
It also makes consequential amendments to the Seized Property Management Act and the Forfeited Property Sharing Regulations.