The Canada Revenue Agency has said it is implementing a pitched capital gains inclusion rate law even though the prime minister prorogued Parliament. The new inclusion rate applies to capital gains realized on or after June 25, 2024, for all taxpayers.
The deputy prime minister and minister of finance introduced a Notice of Ways and Means Motion (NWMM) to modify the Income Tax Act and the Income Tax Regulations on September 23, 2024. The NWMM amended the motion tabled on June 10, 2024.
The proposed reforms are awaiting parliamentary approval in accordance with standard practice. Still, according to the pitches in the NWMM tabled on September 23, 2024, the CRA is administering capital gains inclusion rate amendments as of June 25, 2024.
“Parliamentary convention dictates that taxation proposals are effective as soon as the government tables a notice of ways and means motion; this approach provides consistency and fairness in the treatment of all taxpayers,” Investment Executive reported that a government statement said.
According to the agency, impacted forms for individuals, trusts, and corporations will be posted on Canada.ca on January 31. Corporations and trusts affected by the amendments will be granted applicable arrears interest and penalty relief if their filing due date falls on or before March 3, the expiration date of the interest relief.
Bare trusts remain exempted from trust reporting
In other tax updates, the CRA confirmed that bare trusts would not be required to file a T3 Income Tax and Information Return, including Schedule 15 (Beneficial Ownership Information of a Trust) unless specifically requested for the 2024 tax year. This extends the trust reporting exemption for bare trusts issued for the 2023 tax year.
Updated reporting requirements will apply to affected trusts with taxation years ending after December 30, 2023; these trusts must file a T3 return, including Schedule 15, unless they meet certain conditions.
Online mail will be the default business correspondence medium
Effective spring 2025, online mail will be the default medium for most business correspondence. Notices and updates will be delivered through My Business Account instead of paper mail.
This covers new business number and program account registrations, businesses already enrolled in My Business Account, and businesses with authorized representatives using Represent a Client. The CRA encouraged businesses to ensure that their email address on My Business Account is updated.
2025 updates to the Canada Pension Plan
This year, the Year’s Maximum Pensionable Earnings (YMPE) will be $71,300. The Year’s Additional Maximum Pensionable Earnings (YAMPE) will increase to $81,200, approximately 14 percent higher than the YMPE; this rate will apply starting this year. Pensionable earnings between $71,300 and $81,200 will be subject to second additional Canada Pension Plan (CPP2) contributions.
This is the final year in which legislative updates will be made to enhance the Canada Pension Plan. The YAMPE was introduced in 2024 as a second earnings ceiling to determine CPP2 contributions; last year, the YAMPE was about 7 percent higher than the YMPE.
Legislative changes for short-term rentals
Short-term rentals must adhere to the short-term rental laws of their municipality or province to claim deductions. The mandate for short-term rental hosts – individuals and businesses – to comply with applicable provincial and municipal registration, permit, license, and operating requirements took effect on December 31, 2024.
Digital service enhancements
The CRA introduced a new interface for My Account, My Business Account, and Represent a Client to improve navigation. The agency also enhanced message flagging, archiving, confirmation displays, and user preferences for these accounts.
Businesses can access assessment details and account transactions for the Canada Carbon Rebate for Small Businesses via My Business Account; moreover, some notifications were optional. A Scientific Research & Experimental Development (SR&ED) self-assessment and learning tool was also integrated into My Business Account to aid claimants with project description preparation and the monitoring of eligible expenditures before SR&ED claim submission.
Information returns filing amendments
Effective this month, the CRA unveiled an updated T619. Submissions have been limited to a single information return type, and online validations will flag discrepancies before submission.
Administrative relief extended for Canadian Dental Care Plan reporting
The CRA is extending administrative relief to employers for Canadian Dental Care Plan (CDCP) reporting in the tax year 2024. Employers who do not provide dental coverage can leave the related box on T4 and T4A blank, provided reasonable compliance efforts have been made.
The CRA will host a free webinar on January 29 to outline updates related to CDCP reporting.