On April 28, 2022, Minister of Finance Peter Bethlenfalvy tabled Ontario’s 2022 budget. With a provincial election campaign just days away, this year’s budget projects a deficit of $19.9 billion and includes unprecedented levels of spending over the next decade on initiatives to rebuild Ontario’s economy, improve highways and key infrastructure, and bolster the province’s healthcare system. However, the proposals included in “Ontario’s Plan to Build” will not be passed by the legislature until after the provincial election on June 2.
While no new taxes or tax increases were included in the budget, the government did announce several interesting tax changes, as outlined below.
Corporate Tax Measures
Extension and Enhancement of Tax Credits
This year’s budget proposes several changes to existing provincial corporate income tax credits, including:
- Extension of the temporary enhancement to the Regional Opportunities Investment Tax Credit to December 31, 2023;
- Expansion of the Ontario Film and Television Tax Credit and Ontario Production Services Tax Credit to include eligible online productions, as well as adjustments to the calculation of both credits;
- Simplification and clarification of the Ontario Computer Animation and Special Effects Tax Credit and Ontario Interactive Digital Media Tax Credit; and
- An update to the Ontario Book Publishing Tax Credit to permanently remove the requirement that an eligible literary work be published in an edition of at least 500 copies of a printed (i.e., bound) book (this requirement was previously waived for 2020 and 2021).
Gasoline and Fuel Tax Measures
The budget confirmed the government’s intention to keep temporary reductions to the gasoline tax rate of 5.7 cents per litre (from 14.7 to 9 cents per litre) and fuel tax rate of 5.3 cents per litre (from 14.3 to 9 cents per litre) in place from July 1 to December 31, 2022, as enacted in mid-April.
A one-time tax adjustment process will allow suppliers to issue tax adjustments, in the form of account credits, to importers, wholesalers, and retailers holding inventories of gasoline or fuel taxed at the previously higher rates as of July 1, 2022, with such organizations required to take an inventory at 12:01 a.m. on that date.
Tobacco Tax Measures
The province expressed its ongoing commitment to dialogue with Indigenous groups and industry, retail, and public health stakeholders on unregulated tobacco. In this regard, the province has indicated that it will continue to strive for a balanced approach to addressing issues with unregulated tobacco, including plans to:
- Reform the Tobacco Tax Act based on recommendations aimed at easing the administrative burden and strengthening provincial oversight;
- Enhance raw leaf tobacco oversight through the implementation of “track and trace” technologies; and
- Expand enforcement partnerships with provincial, local, and Indigenous police services.
Non-Resident Speculation Tax Measures
In this year’s budget, the government reiterated previously announced changes to its Non-Resident Speculation Tax (NRST), which applies to purchases of residential property in Ontario by foreign nationals, foreign entities, and taxable trustees. First, the NRST rate has been increased to 20% from 15%. Second, the scope of the tax has been broadened to apply to qualifying residential property purchases province-wide, rather than being limited to purchases in the Greater Golden Horseshoe Region. In addition, certain rebates previously available for qualifying purchases by international students and foreign nationals working in Ontario have been eliminated. These changes apply to purchase and sale agreements entered into on or after March 30, 2022.
Property Tax Review
The province announced that it has completed its Property Assessment and Taxation Review, with input received from several different stakeholder groups. However, while the current government indicated that its decisions going forward will be informed by the results of this review, no details were provided on the timing or valuation date for future reassessments in Ontario, which have been postponed for the 2021 to 2023 tax years. Ryan continues to monitor this situation closely and will advise taxpayers once information on the next property tax assessment cycle is made available.
For information on new and extended government funding initiatives included in this year’s Ontario budget, please navigate to Mentor Works news at: https://www.mentorworks.ca/blog/government-funding/ontario-budget-2022/.
Further details on Ontario’s 2022 budget may be found on the province’s website at: https://budget.ontario.ca/2022/index.html.
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to contact Ryan TaxDirect® at TaxDirect@ryan.com.