President of Treasury Board and Minister of Finance, Travis Toews, delivered the 2019 Alberta budget on October 24, 2019. This year’s budget—titled “A plan for jobs and the economy”—focuses on getting Albertans back to work by restoring competitiveness, stimulating private investment, cutting red tape, and supporting skills training.
This year’s budget includes several significant corporate income tax and commodity tax announcements, as summarized below.
Corporate Income Tax
Alberta reaffirmed its intention to continue cuts to the corporate income tax rate, which commenced on July 1, 2019 when the rate was reduced by 1% to 11%. An additional 1% rate decrease will become effective on January 1, 2020, with 1% decreases continuing annually until January 1, 2022, when the general corporate income tax rate will become 8%. These rate reductions are expected to benefit over 100,000 businesses in various sectors of the economy.
The province has also proposed to introduce measures similar to the federal government’s initiative that enables corporations to claim capital cost allowance more quickly on new capital acquisitions. It is expected that this initiative will help improve an organization’s cash flow and encourage further investment in Alberta.
Scientific Research and Experimental Development (SR&ED) Tax Credit
Starting in 2020, several targeted corporate income tax credits will be eliminated in favour of the corporate income tax rate cut, including the SR&ED tax credit. Expenses incurred after December 31, 2019 will no longer be eligible for the SR&ED tax credit.
Taxation years that straddle December 31, 2019 may still have eligible expenditures up to the end of the calendar year. However, otherwise eligible expenditures incurred in a tax year after December 31, 2019 will no longer qualify for Alberta SR&ED tax credit. Note that corporations will still be able to claim any unused SR&ED tax credits carried forward beyond 2019, where applicable.
Tobacco Tax
The budget has proposed an increase to the tobacco tax rate, ostensibly with the aim of improving public health. Effective October 25, 2019, additional tax of $5 per carton of 200 cigarettes will be imposed, bringing the total tax to $55 per carton. In addition, the tax on loose tobacco will increase by 3.75 cents to 41.25 cents per gram, and the tax on cigars will rise from 129% to 142% of the taxable price, with the minimum and maximum tax per cigar increasing to 27.5 cents and $8.61, respectively.
Alberta is also proposing to implement a tax on vaping products. Further details on this proposal are to be communicated in its 2020 budget.
Tourism Levy
The budget also proposes to extend the 4% tourism levy to short-term rentals (STRs) that are provided through an online marketplace, such as Airbnb and HomeAway. To simplify the collection of the tourism levy by the STR operator, the online marketplace will be granted the ability to collect and remit the levy to the province on behalf of operators. Legislation for this proposed change is expected to be in force by Spring 2020. This change is expected to eliminate any unfair advantage that these online platforms may have over traditional STR providers as a result of not having to charge the levy.
More Information
Further information on Alberta’s 2019 budget may be found on the province’s website at:
https://www.alberta.ca/budget-documents.aspx
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.