FHSA, other tax proposals tabled in House of Commons

The bill includes a new FHSA provision: it states that any holder carrying on a business in the FHSA will be liable for the associated taxes. Wording in the bill states that the holder is “jointly and severally, or solidarily, liable with the trust to pay” tax attributable to carrying on a business. The issuer’s tax liability would be limited to the property held in the FHSA only. (Editor’s note, Nov. 23: Bill C-32 also stated that the FHSA will come into force on April 1, 2023, and that a homebuyer can use both the FHSA and the Home Buyers’ Plan for the same home purchase.)

The bill also delays the implementation of enhanced reporting requirements for trusts that were first proposed in the 2018 federal budget. The effective date has been pushed to taxation years that end after Dec. 30, 2023, instead of Dec. 30, 2022. This is the second time that the date has been changed since the proposal was introduced.

“This is good news, since it allows time for taxpayers to obtain the required information and for government to provide clarification of the proposed rules,” said Dino Infanti, national leader, Enterprise Tax, with KPMG, in an email.

For example, the rules currently apply to bare trusts, and tax practitioners have expressed concern that clients may have bare trusts without realizing it.

Among other proposals, Bill C-32 also implements the revised anti-flipping rule announced in Thursday’s fall economic statement, as well as:

• the Canada Recovery Dividend, a one-time 15% tax on banks’ and insurers’ taxable income above $1 billion, based on average income for the 2020 and 2021 tax years
• the 1.5% bank and insurer surtax on taxable income over $100 million for taxation years that end after April 7
• the allocation to redeemers methodology for ETFs
• doubling of the first-time homebuyers’ tax credit to $10,000
• the expanded definition of “patient” for the purposes of medical expense tax credit, a 15% non-refundable tax credit
• the multigenerational home renovation tax credit of 15% on up to $50,000 in eligible renovation and construction costs
• access to the small business tax rate on a phased-out basis up to taxable capital of $50 million
• raising the disbursement quota for charities to 5% from 3.5% for the portion of property registered charities do not use in charitable activities or administration that exceeds $1 million
• modifying the calculation of the taxes applicable to registered investments that hold property that is not a qualified investment

The investment and tax community is still awaiting further information about how the government intends to proceed with Bill C-208, which concerned “genuine” intergenerational transfers of small businesses, farms and fishing corporations. The issue was last addressed in the 2022 federal budget.

Bill C-32 is at second reading. The House of Commons will sit until Dec. 16 before breaking until the last week of January.