CORY REDEKOP
LANGLEY – The Canada Revenue Agency (CRA) has announced that it is continuing to administer the proposed changes to the capital gains inclusion rate, despite the fact that Parliament is currently prorogued and the legislation was never passed.
The proposed legislation would increase the capital gains inclusion rate, which determines how much of your capital gains are taxable. While the changes still require formal parliamentary approval, the CRA is administering the new rate as of June 25, 2024. This is in line with standard government practice, where taxation measures become effective upon tabling a Notice of Ways and Means Motion.
Here’s what Langley businesses need to know:
What’s Changing?
The federal government announced last year its intention to increase the capital gains inclusion rate – or the amount that is subject to income tax – from 1/2 (50%) to 2/3 (66.7%). This would impact individuals, corporations, and business owners realizing capital gains, however various exemptions and thresholds exist for each.
The Langley Chamber opposed this increase as it punishes business owners who hold assets/investments within their corporations, whose businesses have grown in value beyond the threshold, or who are in one of the excluded sectors. In addition, the overall approach of taxing business growth more discourages capital investment in Canada and punishes entrepreneurs and business owners.
What Does This Mean for Businesses?
- Filing Requirements:
The CRA will issue updated forms by January 31, 2025, allowing businesses and taxpayers to file their returns in accordance with the proposed rules. - Penalties and Interest Relief:
The CRA has indicated that arrears interest and penalty relief will be available for corporations and trusts impacted by the changes if their filing deadline falls on or before March 3, 2025. - What Happens if the Legislation Isn’t Passed?
Since Parliament was prorogued before the actual legislation could be adopted, the bill will need to be reintroduced in a new session of Parliament. If the government decides not to move forward with the proposed changes, or an election is held and the new government indicates it will not move forward with the changes, then the CRA will stop administering the new inclusion rate and assist taxpayers in correcting their filings.
However, for now, businesses should proceed as though the changes are in effect.
What Should Langley Businesses Do?
We encourage businesses and professionals to:
- Work with your accountant or financial advisor to review your capital gains filings to ensure compliance with the new rules. Need an accountant? Find one >
- Stay tuned for updates from the Chamber as Parliament resumes, and new developments arise.
For more details, visit the CRA’s website or contact your tax professional for advice specific to your business.
What is the Langley Chamber doing?
The Langley Chamber remains committed to keeping our members informed about important tax and policy changes that impact the local business community, and will share what we learn with our members.
We have also contacted Finance Minister LeBlanc (read our letter) to advocate for clarity on this matter, and for the changes to be abandoned once and for all given the uncertainty they have caused the business and investment community and the unlikelihood of legislation passing any time soon.
If you have questions or concerns, feel free to reach out—we’re on your side.
Cory Redekop is the CEO of the Langley Chamber
