Canada Federal Budget 2023 Highlights

April 3, 2023

Prepared by Andersen in Canada, Montreal Partner Danny Guérin with support from Kiran Younas

On the 28th of March 2023, Deputy Prime Minister and Minister of Finance, the Honourable Chrystia Freeland, presented Budget 2023 entitled “A Made-in-Canada Plan: Strong Middle Class, Affordable Economy, Healthy Future”. The Budget 2023 announces new measures to make sure that the very wealthy and the biggest corporations pay their fair share of taxes, so that it is affordable to keep taxes low for the middle-class families and invest in the health care system and social safety net.

Regarding the personal income tax, the Budget does not change the federal tax rate, but it makes a change to broaden the Alternative Minimum Tax for high-income individuals. A new Grocery Rebate and Employee Ownership Trust are introduced. The budget also proposes amendments to the Income Tax Act (“ITA”) for RESP, RCA and RDSP. Some clarifications are also brought through proposed changes of the Bill C-208 to ensure that they apply only when a genuine intergenerational business transfer takes place to exclude the application of subsection 84.1 of the Act.

On the business income tax side, the budget does not change the corporate tax rates. Having said that, a major focus is oriented towards developing Canada’s green economy through corporate tax credits to encourage investment in clean energy and technology. The budget also provides design and implementation details for the 2% tax on the net value of share repurchase of public corporations. In addition, it solicits feedback on specific proposals to strengthen the General Anti-Avoidance Rule (“GAAR”). Because a strong and effective health care system is essential for a strong and healthy Canadian workforce, measures are established so that businesses are encouraged to apply prevailing wage and apprenticeship requirements.

A summary of the Canadian federal budget 2023 is provided below.


I. Tax on Repurchases of Equity

The equity repurchase tax would be equal to 2% of the net value of equity repurchased by an entity, defined as the FMV of equity repurchased less the FMV of equity issued from treasury (‘’netting rule’’).

The tax would apply to the following entities:

  • Canadian-resident public corporations whose shares are listed on a designated stock exchange, but excluding mutual fund corporations;
  • real estate investment trusts;
  • specified investment flow-through (SIFT) trusts;
  • SIFT partnerships.
  • publicly traded entities that would be SIFT trusts or SIFT partnerships if their assets were situated in Canada.

The tax would not apply to an entity in a tax year if it redeemed less than $1 million of equity in that tax year, calculated on a gross basis.

The netting rule will consider all transactions undertaken by an entity that involve the repurchase of equity or the issuance of equity from treasury. Normal course issuer bids and substantial issuer bids constitute the repurchase of equity for tax purposes.

  • Exceptions:
    • the issuance and cancellation of debt-like preferred shares and units, meaning shares and units with a fixed dividend and redemption entitlement; and
    • the issuance and cancellation of shares or units in certain corporate reorganizations and acquisitions, including certain amalgamations, liquidations, and share-for-share exchanges.

The acquisition of equity by certain affiliates of an entity will be deemed to have been a repurchase of equity by the entity itself.

  • Exceptions:
    • acquisition intended to facilitate certain equity-based compensation arrangements, and
    • acquisitions made by registered securities dealers in the ordinary course of business.

The tax will be applicable to repurchases and issuances of equity that occur on or after January 1, 2024.

II. General Anti-Avoidance Rule (“GAAR”)

The Budget 2023 proposes the following amendments to the General Anti-Avoidance Rule:

  1. Introducing a preamble to clarify that the GAAR is intended to:
    • deny the tax benefits of avoidance transactions that result directly or indirectly in an abuse of the provisions of the Income Tax Act or an abuse of the provisions of the Income Tax Act income tax taken as a whole, while allowing taxpayers to obtain the tax benefits referred to in the applicable provisions.
    • apply regardless of whether the tax planning strategy used to obtain the tax benefit was planned or not.
  2. Changing the avoidance transaction standard by reducing the threshold for the GAAR avoidance transaction test. The “primary purpose” test will become the “one of the main purposes” test. Thus, the GAAR would apply to transactions where tax avoidance is an important objective, but not to those where tax was simply a consideration.
  3. Introducing an economic substance rule that must be considered at the ‘misuse or abuse’ stage of the GAAR analysis. A lack of economic substance tends to indicate abusive tax avoidance, but it is not always the case. It is necessary to determine the object, spirit and purpose of the provisions or scheme relied upon, in line with existing GAAR jurisprudence. The amendments would provide indicators for determining whether a transaction or series of transactions is lacking in economic substance. These indicators include:
    • whether there is the potential for pre-tax profit
    • whether the transaction has resulted in a change of economic position; and
    • whether the transaction is entirely (or almost entirely) tax motivated.
  4. Introducing a penalty for transactions subject to the GAAR, equal to 25% of the amount of the tax benefit. Where the tax benefit involves a tax attribute that has not yet been used to reduce tax, the amount of the tax benefit will be nil. The penalty could be avoided if the transaction is disclosed to the CRA, either as part of the proposed mandatory disclosure rules or voluntarily.
  5. A three-year extension to the normal reassessment period will be provided for GAAR assessments unless the transaction had been disclosed to the CRA.

Finance has indicated that it will review all of the stakeholders’ comments and written representations and that following that public consultation, which is due on or before May 31, 2023, the government would issue legislative proposals which would include the application date of these amendments.

III. Dividend Received Deduction by Financial Institutions

To align the treatment of dividends and gains on portfolio shares under the mark-to-market rules, Budget 2023 proposes to deny the dividend received deduction in respect of dividends received by financial institutions on shares that are mark-to-market property. This measure will apply to dividends received after 2023.

IV. Income Tax and GST/HST Treatment of Credit Unions

Budget 2023 proposes to amend the ITA by eliminating the revenue test from the definition of “credit union” and amending that definition to accommodate how credit unions currently operate. Therefore, even if more than 10% of their revenue is earned from certain sources (such as interest income tax from lending activities), it could still be considered a ‘’credit union’’ and the income tax and GST/HST rules governing credit union will be applicable. The amendment would apply in respect of taxation years of a credit union ending after 2016.

V. Investment Tax Credits

  • Clean Hydrogen (CH):  The newly proposed CH Tax Credit will be available in respect of the cost of purchasing and installing eligible equipment for projects that produce hydrogen from electrolysis or natural gas if emissions are abated using carbon capture, utilization, and storage (CCUS). The CH Tax Credit will be refundable and could be claimed when eligible equipment becomes available for use. The following credit rates will apply, based on assessed carbon intensity (CI) of the hydrogen that is produced (i.e., kilogram (kg) of carbon dioxide equivalent (CO2 e) per kg of hydrogen), to eligible property that becomes available for use before 2034:
    • 40% for a CI of less than 0.75 kg;
    • 25% for a CI greater than or equal to 0.75 kg, but less than 2 kg; and
    • 15 per cent for a CI greater than or equal to 2 kg, but less than 4 kg.

The CH Tax Credit will be phased out starting in 2034, with property that becomes available for use in 2034 subject to a credit rate that is reduced by one half. The CH Tax Credit will be fully phased out for property that becomes available for use after 2034. This measure would apply to property that is acquired and that becomes available for use on or after Budget Day.

  • Clean Technology:
    • Geothermal Energy: Budget 2023 proposes to expand eligibility of the Clean Technology Investment Tax Credit to include geothermal energy systems that are eligible for Class 43.1 of Schedule II of the Income Tax Regulations. A 30% refundable credit will be available to businesses investing in eligible property that is acquired and that becomes available for use on or after Budget Day. Eligible property includes equipment used primarily for the purpose of generating electrical energy or/and heat energy, solely from geothermal energy, that is described in subparagraph (d)(vii) of Class 43.1. but does not include equipment that will co-produce oil, gas or other fossil fuels. The phase out of the credit will begin in 2034 rather than 2032 as previously announced.
    • Manufacturing: Budget 2023 proposes to introduce a refundable investment tax credit for clean technology manufacturing and processing, and critical mineral extraction and processing, equal to 30% of the capital cost of eligible property associated with eligible activities. The Investment Tax Credit for Clean Technology Manufacturing would apply to property that is acquired and becomes available for use on or after January 1, 2024. It will be gradually phased out starting with property that becomes available for use in 2032 and would no longer be in effect for property that becomes available for use after 2034.
  • Clean Electricity: The budget proposes to introduce a refundable 15% Investment Tax Credit for Clean Electricity for the following eligible investments in new projects and the refurbishment of existing facilities:
    • non-emitting electricity generation systems: wind, concentrated solar, solar photovoltaic, hydro (including large-scale), wave, tidal, nuclear (including largescale and small modular reactors)
    • abated natural gas-fired electricity generation (which will be subject to an emissions intensity threshold compatible with a net-zero grid by 2035)
    • stationary electricity storage systems that do not use fossil fuels in operation (such as batteries, pumped hydroelectric storage, and compressed air storage)
    • equipment for the transmission of electricity between provinces and territories

This credit is available for taxable and non-taxable entities, such as Crown corporations and publicly owned utilities as of the day of the 2024 federal budget for projects that did not begin construction before March 28, 2023, and the credit will not be available after 2034.

  • Carbon Capture, Utilization and Storage (initially proposed under 2022 budget and with further details introduced as per 2023 budget)
    • Dual use equipment: Budget 2023 proposes that dual use equipment that produces heat and/or power or uses water, that is used for carbon capture, utilization, and storage (CCUS) as well as another process, be eligible for the CCUS Tax Credit. This equipment will be treated as capture equipment. It will also need to satisfy all other conditions for the CCUS Tax Credit.
    • Addition of BC as an eligible jurisdiction: Budget 2023 proposes that British Columbia be added to the list of eligible jurisdictions for dedicated geological storage, applicable to expenses incurred on or after January 1, 2022.
    • Validating concrete storage requirement: Budget 2023 proposes that, rather than obtaining approval from Environment and Climate Change Canada, taxpayers will need to have their technology validated by a qualified third-party, which will confirm that the process meets the minimum 60% mineralization requirement
    • Treatment of refurbishment cost: Budget 2023 proposes that CCUS Tax Credits related to eligible refurbishment costs incurred once the project is operating would be calculated based on the average of the expected eligible use ratio for the five-year period in which they are incurred, and each subsequent period. These periods would be the same as those used to calculate the CCUS Tax Credit during construction. More terms and conditions apply.

These measures will apply to eligible expenses incurred after 2021 and before 2041.

  • Flow-Through Shares and Critical Mineral Exploration – Lithium from Brines: Budget 2023 proposes to amend the Income Tax Act to include lithium from brines as a mineral resource. This will allow relevant principal-business corporations that undertake certain exploration and development activities to issue flow-through shares and renounce expenses to their investors. Budget 2023 also proposes to expand the eligibility of the CMETC to lithium from brines. Eligible expenses related to lithium from brines made after Budget Day will qualify as Canadian exploration expenses and Canadian development expenses. The expansion of the eligibility for the CMETC to lithium from brines would apply to flow-through share agreements entered after Budget Day and before April 2027.
  • Interactions with Other Federal Tax Credits – businesses will be able to claim only one of the CH Tax Credit, the Investment Tax Credit for CCUS, the Investment Tax Credit for Clean Technologies, the Investment Tax Credit for Clean Electricity or the Investment Tax Credit for Clean Technology Manufacturing, if a particular property is eligible for more than one of these tax credits. However, multiple tax credits could be available for the same project if the project includes different types of eligible property. Businesses would be able to fully benefit from both the CH Tax Credit (or one of the other above mentioned credits) and the Atlantic Investment Tax Credit. Accordingly, the CH Tax Credit would not reduce the cost of the property that is used to determine the amount of the Atlantic Investment Tax Credit.
  • Labour Requirements
    • Prevailing Wage requirement: a business would need to ensure that all covered workers are compensated at a level that meets or exceeds the relevant wage, plus the substantially similar monetary value of benefits and pension contributions (converted into an hourly wage format), as specified in an “eligible collective agreement”. Standard benefits would include health and welfare and vacation benefits. The requirement could be satisfied through different combinations of wages, pension contributions and benefits. Outside Quebec, an eligible collective agreement in a particular region, province or territory would be:
      • the most recent multi-employer collective bargaining agreement between a trade union and a group of employers who are accredited to bargain together and be bound by the same agreement that may reasonably be considered the industry standard for a given trade, in a region, province or territory (e.g., those arranged by construction labour relations associations); or
      • a project labour agreement that covers the work associated with the investments eligible for the investment tax credits and is based on the industry standard multi-employer collective bargaining agreements for the region, province or territory in which the investment takes place.

In Quebec, eligible agreements would be those negotiated in accordance with provincial law (i.e., the Act Respecting Labour Relations, Vocational Training, and Workforce Management in the Construction Industry).

  • Apprenticeship Requirement: a business will need to ensure that for a given taxation year, not less than 10% of the total labour hours performed by covered workers engaged in subsidised project elements be performed by registered apprentices. Covered workers are those whose duties correspond to those performed by a journeyperson in a Red Seal trade.

To qualify for the 30% rate under the Clean Technology Investment Tax Credit, the labour requirements will need to be met. A 20% rate will be available to businesses that do not meet the labour requirements.

Under the Clean Hydrogen Investment Tax Credit, credit rates will vary across different carbon intensity (CI) tiers depending on the CI of the hydrogen that is produced, up to a maximum credit rate of 40 per cent. If a business does not meet the labour requirements, the credit rate for each CI tier will be reduced by ten percentage points.

To qualify for the 15% Clean Electricity Investment Tax Credit, the labour requirements will need to be met. A 5% rate will be available if the labour requirements are not met.

During the phase-out periods of the Clean Technology and Clean Hydrogen Investment Tax Credits, if a business does not meet the labour requirements, the tax credit rate available would be reduced by ten percentage points, down to a minimum of zero.

The requirements would apply to work that is performed on or after October 1, 2023.

VI. Zero-Emission technology manufacturers

Budget 2023 proposes to expand the reduced tax rates for zero-emission technology manufacturers to the following nuclear manufacturing and processing activities:

  • manufacturing of nuclear energy
  • equipment.processing or recycling of nuclear fuels and heavy water; and
  • manufacturing of nuclear fuel rods.

This expansion of eligible activities would apply for taxation years beginning after 2023. Budget 2023 proposes to extend the availability of these reduced rates by three years, such that the planned phase-out would start in taxation years that begin in 2032. The measure would be fully phased out for taxation years that begin after 2034.


I. Grocery Rebate

Budget 2023 proposes to introduce a ‘’Grocery Rebate’’ that would increase the maximum Goods and Services Tax Credit (GSTC) amount for January 2023. Eligible individuals will receive an additional GSTC amount equivalent to twice the amount received in January and will be paid as soon as possible through the GSTC system after the passage of legislation. The maximum amounts under the Grocery Rebate will be 153$ per adult, 81$ per child and 81$ for the single supplement.

To legislate this change, the maximum GST credit amount for January 2023 will be changed to an amount that is three times the maximum amount for that month under the current rules. For the purposes of the January 2023 replacement payment only, the phase-in and phase-out rates will be tripled from 2% to 6% and from 5% to 15%, respectively.

II. Employee Ownership Trusts (EOT)

A new type of trust will be introduced as of January 2024 to facilitate the acquisition and holding of business shares for an employee. Budget 2023 proposes new rules to set the qualifying conditions required to be considered an EOT as follow:

  1. The trust is a Canadian resident trust (excluding deemed resident trusts) and has only two purposes:
    • To hold shares of qualifying businesses for the benefit of the employee beneficiaries of the trust.
    • To make distributions to employee beneficiaries, where reasonable, under a distribution formula that could only consider an employee’s:
      • length of service,
      • remuneration and
      • hours worked
  2. The trust holds a controlling interest in the shares of one or more ‘’qualifying businesses’’, described as follow:
    • All or substantially all the fair market value of its assets are attributable to assets used in an active business.
    • Its business is carried on in Canada.
    • Its business is not carried on as a partner to a partnership.
  3. All or substantially all the trust’s assets are shares of qualifying businesses.
  4. The trustees, including corporations that serves as trustees, are Canadian residents (excluding deemed residents) and must meet certain conditions regarding their election and their portion of economic interest.
  5. The trust’s beneficiaries consist exclusively of ‘’qualifying employees’’, described as follow:
    • Individuals employed by a qualifying business and any other qualifying business it controls.
    • Exception:
      • employees who are significant economic interest holders
      • employees who have not completed a reasonable probation period of to 12 months.
      • Individuals and their related persons who hold a significant economic interest in a qualifying business of the trust.

Budget 2023 proposes changes to tax rules to facilitate the establishment of ETOs as follow:

  1. Extend the capital gains reserve to ten years (instead of five years) for qualifying sales to an EOT.
  2. Create an exception to the current shareholder loan rule to extend the repayment period from one to 15 years for amounts loaned to the EOT from a qualifying business to purchase shares in a qualifying business transfer.
  3. Exempt EOTs from the 21-year deemed disposition rule as long as the trust meets the conditions to be considered an EOT.

III. Intergenerational Business Transfer Strengthening 

Budget 2023 proposes to amend the rules introduced by Bill C-208 to ensure that they apply only where a genuine intergenerational business transfer takes place to exclude the application of section 84.1 of the Income Tax Act (“ITA”). Taxpayers may choose to rely on one of the two following transfer options:

  1. an immediate intergenerational business transfer (three-year test) based on arm’s length sale terms; or
  2. a gradual intergenerational business transfer (five-to-ten-year test) based on a traditional estate freeze characteristic.

Depending on the chosen option, to qualify as a genuine intergenerational business transfer, the followings conditions, with necessary adaptation, must be met from now on:

  1. the parent ceases to control the underlying business of the corporation whose shares are transferred (i.e. parent transfers a majority of voting shares),
  2. the child has an involvement in the business (i.e. at least one child remains actively involved in the business),
  3. the interest in the purchaser corporation held by the child continues to have value (i.e. parent transfers a majority of common growth shares) and
  4. the child retains an interest in the business after the transfer (i.e. the child retains control in the business for a certain period of time following the share transfer).

The intergenerational transfer is extended to include children, grandchildren, step-children, children-in-law, nieces and nephews and grandnieces and grandnephews. 

The Budget 2023 proposes to replace the rules introduced by Bill C-208 which apply to subsequent share transfers by the acquiring company and the lifetime capital gains exemption with the exemption rules that would apply to a subsequent arm’s length transfer of shares or upon the death or disability of a child. There will be no limit on the value of shares transferred under this rule.

The Transferor and the child must jointly make an election for the transfer to qualify as either an immediate or gradual intergenerational share transfer. Both are jointly and severally liable for any additional taxes payable by the Transferor under section 84.1. Where the election is made, a ten-year capital gains reserve is provided.

To provide the CRA with the ability to monitor compliance with these rules, the limitation period for reassessing the Transferor’s liability for tax that may arise on the transfer is proposed to be extended by three years for an immediate business transfer and by ten years for a gradual business transfer.

IV. Alternative Minimum Tax (AMT) for High-Income Individuals

To better target the high-income individuals, Budget 2023 proposes the following changes to the calculation of the ATM that will come in force for the taxation years that begin after 2023:

  • Broadening the AMT Base:
    • Capital Gains – increase the AMT capital gains inclusion rate from 80% to 100% and apply a 50% rate on the capital loss carry forwards and allowable business investment losses.
    • Stock Options – include 100% of the benefit associated with the employee stock options in the AMT base.
    • Donations of Publicly Listed Securities – include 30% of capital gains on donations of publicly listed securities in the AMT base. The 30% inclusion will also apply to the full benefit associated with employee stock options to the extent that a deduction is available.
    • Deductions and Expenses – disallow 50% of the following deductions:
      • employment expenses, other than those to earn commission income
      • deductions for Canada Pension Plan, Quebec Pension Plan, and Provincial Parental Insurance Plan contributions
      • moving expenses;
      • child care expenses;disability supports deduction;
      • deduction for workers’ compensation payments;
      • deduction for social assistance payments;
      • deduction for Guaranteed Income Supplement and Allowance payments;
      • Canadian armed forces personnel and police deduction;
      • interest and carrying charges incurred to earn income from property;
      • deduction for limited partnership losses of other years;
      • non-capital loss carryovers;
      • and Northern residents deductions.
    • Non-Refundable Credits – only 50% of the non-refundable tax credits would be allowed to reduce the AMT.
      • Exception:
    • Some non-refundable credits will continue to be disallowed in full (Political Contribution Tax Credit, Labour Sponsored Venture Capital Corporation Credit, and the non-refundable portion of investment tax credits).
    • Foreign Tax Credit, allowed in full and based on the new AMT tax rateAMT would continue to use the cash value of dividends and fully disallow the Dividend Tax Credit
  • Raising the AMT Exemption: increase the exemption from 40 000$ to the start of the fourth federal tax bracket. Based on expected indexation for the 2024 taxation year, this would be approximately $173,000. The exemption amount would be indexed annually to inflation.
  • Increasing the AMT Rate: increase the AMT rate from 15% to 20,5%, corresponding to the first the second federal income tax brackets, respectively.

V. Other personal income tax measures

Deduction for Tradespeople’s tool ExpensesBudget 2023 proposes to double the maximum employment deduction for tradespeople’s tools from $500 to $1,000, effective for 2023 and subsequent taxation years. This will impact the eligibility of extraordinary tool costs that are deducted under the apprentice vehicle mechanics’ tools deduction.

Registered Education Savings Plans (RESPs) – Budget 2023 proposes to amend the section 146.1 of the ITA so that the terms of a RESP can allow Educational Assistance Payment withdrawals of up to $8,000 (current limit is $5,000) for the first 13 consecutive weeks of enrollment for beneficiaries enrolled full-time and up to $4,000 (currently the limit is $2,500) per 13-week period for beneficiaries enrolled part-time.

The Budget proposes to allow divorced or separated parents to jointly enter a new RESP contract for one or more of their children or to transfer an existing RESP for which they are joint subscribers to another promoter. These amendments would come into force on March 28, 2023.

Retirement Compensation Arrangements (RCAs) – Budget 2023 proposes to amend the ITA so that fees or premiums paid for the purposes of securing or renewing a letter of credit (or a surety bond) for an RCA that is supplemental to a registered pension plan will not be subject to the 50 per cent refundable tax. This change would apply to fees or premiums paid on or after Budget Day.

The Budget also proposes to allow employers to request a refund of previously remitted refundable taxes in respect of fees or premiums paid for letters of credit (or surety bonds) by RCA trusts, based on the retirement benefits that are paid out of the employer’s corporate revenues to employees that had RCA benefits secured by letters of credit (or surety bonds). Employers would be eligible for a refund of 50 per cent of the retirement benefits paid, up to the amount of refundable tax previously paid. This change would apply to retirement benefits paid after 2023.

Registered Disability Savings Plans (RDSPs) – the Budget proposes to extend until 2026 a temporary measure set to expire at the end of 2023 that allows a qualifying member, who is a parent, spouse our common-law partner, to open a RDSP and be the plan holder for an adult whose capacity to enter a RDSP contract is in doubt and doesn’t have a legal representative. The ‘’qualifying family member’’ definition is also broadened to include the disabled adult’s siblings, effective once this amendment receives royal assent.

Taxpayer Information Sharing for the Canadian Dental Care PlanBudget 2023 proposes to amend the ITA and ETA to allow the Canada Revenue Agency to share taxpayer information with an official of Employment and Social Development Canada or Health Canada for specific purposes, effective upon royal assent. 


International Tax Reform

I. Pillar One – Reallocation of Taxing Rights

Pillar One is intended to reallocate a portion of taxing rights over the profits of the largest and most profitable MNEs to countries where their users and customers are located.

Budget 2023 reaffirms the government’s support of Pillar One and notesthat it is working with its international partners toward completing multilateral negotiations so that the convention to implement Pillar One can be signed by mid-2023, with a view to it entering into force in 2024.

To ensure that Canadians’ interests are protected, the government reiterates that a Digital Services Tax (DST) could be imposed as of January 1, 2024 (in respect of revenues earned as of January 1, 2022), but only if the multilateral convention implementing the Pillar One framework has not come into force. The government intends to release a revised draft of the legislative proposals for a DST for public comment before introducing the bill to parliament.

II. Pillar Two – Global Minimum Tax

Pillar Two is intended to ensure that the profit of large MNEs (with revenues above €750 million) are subject to an effective tax rate of at least 15 percent, regardless of where they are earned.

Under Pillar Two, the Income Inclusion Rule (IIR) is the primary charging rule under Pillar Two that generally requires the ultimate parent of the MNE to pay the top up tax computed for its foreign subsidiaries. Pillar Two also contains a “backstop” rule, known as the Undertaxed Profits Rule (UTPR), that is intended to collect top up tax that is not collected under the IIR. The framework also contemplates that a country may enact a domestic minimum top up tax.

Budget 2023 announces the government’s intention to introduce legislation implementing the IIR and a domestic minimum top-up tax with effect for fiscal years of MNEs that begin on or after December 31, 2023, as well as to implement the UTPR with effect for fiscal years of MNEs that begin on or after December 31, 2024. An MNE is considered to have the same fiscal year as its ultimate parent entity. These draft legislative proposals are intended to be released for the IIR and domestic minimum top-up tax for public consultation in the coming months, and that for the UTPR to follow at a later time.


I. GST/HST Treatment of Payment Card Clearing Services

Budget 2023 proposes to amend the GST/HST definition of “financial service” to clarify that payment card clearing services rendered by a payment card network operator are excluded from the definition to ensure that such services generally continue to be subject to the GST/HST.

This measure would apply to a service rendered under an agreement for a supply if any consideration for the supply becomes due, or is paid without becoming due, after Budget Day and also on or before the budget Day except in certain situations, generally being where the following two conditions were both met:

  1. the supplier did not, on or before Budget Day, charge, collect or remit any amount as or on account of tax in respect of the supply; and
  2. the supplier did not, on or before Budget Day, charge, collect or remit any amount as or on account of tax in respect of any other supply that is made under the agreement and that includes the provision of a payment card clearing service.

II. Alcohol Excise Duty

Budget 2023 proposes to temporarily cap the inflation adjustment for excise duties on beer, spirits and wine at 2%, for one year only, as of April 1, 2023.

III. Cannabis Taxation – Quarterly Duty Remittances

Budget 2023 proposes to allow all licensed cannabis producers to remit excise duties on a quarterly rather than monthly basis, starting from the quarter beginning on April 1, 2023.

IV. Air Travellers Security Charge (ATSC)

Budget 2023 proposes to provide $1.8 billion over five years, starting in 2023-24, to maintain and increase Canadian Air Transport Security Authority’s level of service, improve screening wait times, and strengthen security measures at airports. To support financing of this proposal, Budget 2023 proposes to increase ATSC rates by 32.85 per cent. The proposed new ATSC rates will apply to air transportation services that include a chargeable emplanement on or after May 1, 2024, for which any payment is made on or after that date.


I. Tariff Support for Developing Countries

Budget 2023 proposes to renew, until the end of 2034, and update the General Preferential Tariff (GPT) and Least Developed Country Tariff (LDCT) programs. Updates would include creating a GPT+ program, in alignment with Canada’s progressive trade agenda, as well as expanding benefits for certain import categories, and simplifying administrative requirements for Canadian importers.


Budget 2023 confirms the government’s intention to proceed with the following previously announced tax and related measures, as modified to consider consultations and deliberations since their release.

  • Legislative proposals released on November 3, 2022 with respect to Excessive Interest and Financing Expenses Limitations and Reporting Rules for Digital Platform Operators.
  • Tax measures announced in the Fall Economic Statement on November 3, 2022, for which legislative proposals have not yet been released, including:
    • Automatic Advance for the Canada Workers Benefit;
    • Investment Tax Credit for Clean Technologies; and
    • Extension of the Residential Property Flipping Rule to Assignment Sales.
  • Legislative proposals released on August 9, 2022, including with respect to the following measures:
    • Borrowing by Defined Benefit Pension Plans;
    • Reporting Requirements for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs);
    • Fixing Contribution Errors in Defined Contribution Pension Plans;
    • The Investment Tax Credit for Carbon Capture, Utilization and Storage (“CCUS”);
    • Hedging and Short Selling by Canadian Financial Institutions;
    • Substantive Canadian-Controlled Private Corporations;
    • Mandatory Disclosure Rules;
    • The Electronic Filing and Certification of Tax and Information Returns;
    • Canadian Forces Members and Veterans Amounts
    • other technical amendments to the Income Tax Act and Income Tax Regulations proposed in the August 9th release; and
    • remaining legislative and regulatory proposals relating to the Goods and Services Tax/Harmonized Sales Tax, excise levies and other taxes and charges announced in the August 9th release.
  • Legislative proposals released on April 29, 2022 with respect to Hybrid Mismatch Arrangements.
  • Legislative proposals released on February 4, 2022 with respect to the Goods and Services Tax/Harmonized Sales Tax treatment of Cryptoasset Mining.
  • Legislative proposals tabled in a Notice of Ways and Means Motion on December 14, 2021 to introduce the Digital Services Tax Act.
  • The transfer pricing consultation announced in Budget 2021.
  • The income tax measure announced on December 20, 2019 to extend the maturation period of amateur athletes trusts maturing in 2019 by one year, from eight years to nine years.
  • Measures confirmed in Budget 2016 relating to the Goods and Services Tax/Harmonized Sales Tax joint venture election.

Budget 2023 also reaffirms the government’s commitment to move forward as required with other technical amendments to improve the certainty and integrity of the tax system.