Canada: Ontario Budget 2016 Tax Highlights

Last Updated: February 29 2016
Article by Crowe Soberman LLP

Today, Ontario's Finance Minister, the Honourable Charles Sousa, tabled the province's budget for 2016 ("Budget 2016"). This year's budget proposes modest tax changes, which include the elimination of specific personal income tax credits, the introduction of personal income tax measures to parallel existing federal measures, the reduction of certain research and development tax credits and increases to the tax on tobacco and wine. The budget also promises to consider ways to simplify the calculation of personal income taxes, and to re-evaluate the Apprenticeship Training Tax Credit. The government continues to consider measures to create a more equitable property taxation regime for northern residents, and to improve the Municipal Property Assessment Corporation's property tax assessment system.  Finally, Budget 2016 introduces a "Cap and Trade" program to reduce greenhouse gas emissions.

Ontario's deficit for 2015-16 is estimated to be $5.7 billion, a $2.8 billion improvement compared with the 2015 Budget forecast. The government is projecting a return to a balanced budget in 2017-18.

Details of the significant tax measures proposed in Budget 2016 are outlined below. Please contact us for additional information on any of these measures.

Pension Plan Measures

Ontario Retirement Pension Plan

The Ontario Retirement Pension Plan ("ORPP ") was first announced in the 2014 budget. The ORPP is intended to build on the key features of the Canada Pension Plan and to provide a predictable, lifelong stream of retirement income of up to 15% of pre-retirement earnings (a threshold of $90,000 in 2017 dollars).

The Province acknowledges the business community's concerns about the timing of implementation of the ORPP, and will, therefore, provide employers with more time to make the technical changes required. Implementation will now begin to be phased in on January 1, 2018, for large and medium employers without registered workplace pension plans, and will be fully implemented for all employers who have a registered plan that does not meet minimum requirements by January 1, 2021.

Business Tax Measures

Research and Development Tax Credits

The Ontario Research and Development Tax Credit ("ORDTC") is a non-refundable tax credit applied to research and development expenditures. Budget 2016 proposes to reduce the ORDTC rate from 4.5% to 3.5%.

The Ontario Innovation Tax Credit ("OITC") is a refundable tax credit benefiting small-to-medium-sized companies incurring eligible research and development expenditures. Budget 2016 proposes to reduce the OITC rate from 10% to 8%.

The reductions in the ORDTC and OITC are applicable for eligible research and development expenditures incurred in taxation years that end on or after June 1, 2016. For taxation years that straddle June 1, 2016, the rate reductions will be prorated.

Budget 2016 proposes to reinvest the resulting savings into new targeted investments and projects across key sectors of Ontario's economy in an effort to continue to encourage research and development activities in the province.

Apprenticeship Training Tax Credit

The Apprenticeship Training Tax Credit ("ATTC") is available to businesses that employ and train Its purpose is to encourage enrollment in, and completion of, apprenticeship programs for trades in the construction, industrial, motive power and service industries.

Budget 2016 proposes to review the ATTC by undertaking an engagement process with stakeholders and partners with the goal of ensuring that the ATTC encourages businesses to help apprentices gain the skills and certifications that they need.

Personal Tax Measures

Tuition and Education Tax Credits

Budget 2016 proposes to eliminate the Ontario Tuition and Education Tax Credits effective fall 2017. Students will be able to claim the Ontario Tuition Tax Credit for eligible tuition fees paid in respect of studies up to and including September 4, 2017, and the Education Tax Credit for months of study before September 2017.

Taxpayers who are resident in Ontario on December 31, 2017, and have Ontario carry-forward tuition and education tax credits, will be able to claim these credits in future years. However, taxpayers who move to Ontario from other provinces after December 31, 2017, will no longer be able to claim their carry-forward tuition and education tax credits in Ontario.

Budget 2016 proposes to make post-secondary education free for students from families with incomes of $50,000 or less. Moreover, students from families with income of $83,000 or less will be eligible for non-repayable grants in excess of average tuitions.

Children's Activity Tax Credit

The Children's Activity Tax Credit ("CATC") is a refundable tax credit that was designed to help parents with the cost of various extracurricular activities. Budget 2016 proposes to eliminate the CATC as of January 1, 2017, but at the same time, develop other programs to encourage physical activity and healthy eating for children.

Healthy Homes Renovation Tax Credit

The Healthy Homes Renovation Tax Credit ("HHRTC") is a non-refundable tax credit intended to make safety and accessibility home renovations for seniors more affordable. Budget 2016 proposes to eliminate HHRTC as of January 1, 2017 due to a low take-up rate, and the fact that it provided little support to lower-income seniors.

Ontario Non-Eligible Dividend Gross-Up and Tax Credit

In its 2015 budget, the federal government announced that it would reduce the federal small business corporate income tax rate over four years. As a result of this change, it modified the gross-up rate for non-eligible dividends.

Budget 2016 proposes to parallel the federal non-eligible dividend gross-up rate and, as a result, Ontario's non-eligible dividend tax credit will decrease as previously expected from 4.5% to 4.2863% for 2016. A review of the 2017 non-eligible dividend rate for 2017 and subsequent years will be undertaken.

Tax on Split Income

Budget 2016 proposes to parallel the federal approach of applying the top marginal personal income tax rate to income that is split with minor children ("split income").

Effective January 1, 2016, split income will be taxed at Ontario's top marginal personal income tax rate of 20.53%. No surtax will be payable on this income.

Other Significant Measures

Cap and Trade Program

Starting in 2017, Budget 2016 proposes to introduce a cap on greenhouse gases in Ontario. This cap would continue to decline through to 2020. Allowances would be made available through "free of charge" allocations and auctioning.

Emitters would be required to hold an allowance for every tonne of greenhouse gas they produce. To remain compliant as the cap decreases, emitters will need to reduce their emissions or purchase allowances in the carbon market.

Tax on Tobacco and Wine

Effective February 25, 2016, Ontario's tobacco tax will increase to 15.475 cents (from 13.975 cents) on each cigarette and gram of tobacco (other than cigars). Moreover, tobacco tax rates will increase based on inflation over each of the next five years, beginning in 2017.

Budget 2016 proposes to increase the ad valorem mark-up for wine products, as follows:

  • By two percentage points in April 2017;
  • By two percentage points in April 2018; and
  • By one percentage point in April 2019.

Ontario will establish a definition of "authorized grocery store", where alcohol can be sold, and provide for the collection of tax in those stores.

Budget 2016 proposes to increase the basic tax on Ontario wine purchased at winery retail stores by one percentage point on each of June 2016, April 2017, April 2018 and April 2019.

In addition, the minimum retail price for a 750mL bottle of table wine will increase to $7.95, including deposit. This change will be phased in over three years, as will the increases to the minimum retail prices for cider, fortified wine and low-alcohol wine.

Click Here to download a copy of the tax letter (PDF).

The information in our Tax Letter is current to February 25, 2016. The information contained here is of a general nature and is not intended to address the particular circumstances of an individual or entity. We endeavor to provide accurate and timely information; however, there is no guarantee that such information is accurate in the future. Specific professional advice should be obtained prior to the implementation of any suggestion contained in this publication.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Crowe Soberman LLP
Similar Articles
Relevancy Powered by MondaqAI
Crowe Soberman LLP
Crowe MacKay LLP
Minden Gross LLP
Collins Barrow National Incorporated
Crowe Soberman LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Crowe Soberman LLP
Crowe MacKay LLP
Minden Gross LLP
Collins Barrow National Incorporated
Crowe Soberman LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions