2022 Ontario budget: Tax highlights

Issue 2022-17

In brief

On April 28, 2022, Ontario’s Minister of Finance, Peter Bethlenfalvy, presented the province’s budget. The budget does not change corporate or personal income tax rates, but does:

• extend the temporary increase to the regional opportunities investment tax credit rate
• expand eligibility for Ontario’s film and television tax credits, to professional film and television productions distributed exclusively online
• introduce the Ontario seniors care at home tax credit, beginning the 2022 taxation year
• enhance the low-income individuals and families tax (LIFT) credit

This Tax Insights discusses these and other tax initiatives outlined in the budget.

An Ontario general election will be held on (or before) June 2, 2022. It is uncertain whether tax initiatives proposed in the Ontario budget will be enacted into law before the Legislative Assembly of Ontario is dissolved for the province’s upcoming general election.

In detail

Business tax measures

Corporate income tax rates

Ontario’s corporate income tax rates will remain as shown in the table below. The table also shows combined federal/Ontario corporate tax rates.

Regional opportunities investment tax credit (ROITC)

The budget proposes to extend the temporary increase in the ROITC rate (from 10% to 20%) to qualifying investments that become available for use after March 23, 2021 and before January 1, 2024 (currently available before January 1, 2023). The ROITC is a refundable corporate income tax credit that is available for CCPCs that make qualifying investments in eligible geographic areas of Ontario. The maximum credit is $90,000 per taxation year during this temporary enhancement period.

Cultural media tax credits

Film and television tax credits

The budget proposes to make regulatory amendments to the Ontario film and television tax credit (OFTTC) and the Ontario production services tax credit (OPSTC) to extend eligibility to professional film and television productions distributed exclusively online. Additional eligibility requirements will apply for these productions when applying for the OFTTC.

Specifics, including the effective date of these proposed amendments, will be provided later this year. In addition, productions that become eligible for the OFTTC or the OPSTC under these amendments may also become eligible for the Ontario computer animation and special effects tax credit, if they meet all of the other eligibility requirements.

The government also intends to review:

• the OFTTC’s regional bonus to ensure that the credit is “providing effective and appropriate incentives and support for film and television production in all regions of Ontario”
• the eligibility of location fees for the OPSTC “to better understand the importance and contribution of on-location film production to Ontario’s film and television industry” (currently, location fees are generally not eligible expenditures for this tax credit)

Ontario computer animation and special effects tax credit (OCASETC)

To be eligible for the OCASETC, a film or television production must receive either the OFTTC or the OPSTC, “tethering” the tax credits together. To help simplify the tax credit, the government will examine ways to untether the OCASETC from the other film and television tax credits, while “continuing to ensure support remains targeted to professional productions with significant cultural or economic impact.”

Work-from-home labour for interactive digital media tax credit (IDMTC) and OCASETC

To provide clarity and certainty, the government confirms that eligible labour expenditures for employees working remotely can be claimed under the IDMTC and the OCASETC, provided the work is undertaken in Ontario by an Ontario resident who reports to, and is under the direction of, an eligible tax credit applicant with a permanent establishment in Ontario.

Ontario book publishing tax credit

To be eligible for the Ontario book publishing tax credit, a literary work must be published in an edition of at least 500 copies of a bound book. This requirement had been temporarily removed for the 2020 and 2021 taxation years. Due to the growth of e-books and audiobooks, the budget proposes to permanently remove this requirement, effective starting the 2022 taxation year.

Personal tax measures

Personal income tax rates

The budget does not change Ontario’s personal income tax rates. Top combined federal/Ontario personal income tax rates are shown below. These rates apply to individuals with taxable income above $221,708 in 2022 ($220,000 in 2021).

Ontario seniors care at home tax credit

The budget proposes to introduce the Ontario seniors care at home tax credit (SCHTC), starting with the 2022 tax year. A refundable tax credit, the SCHTC would provide up to 25% of an eligible senior’s claimable medical expenses up to $6,000 (maximum credit of $1,500). The credit would be reduced by 5% of family net income over $35,000, and the maximum credit would be fully phased out when family net income reaches $65,000.

Taxpayers would be eligible to claim this credit if they, or their spouse or common-law partner, turned 70 years of age or older in the year. Medical expenses eligible for the SCHTC would be the same as those claimed for the Ontario medical expense tax credit and taxpayers could claim both the SCHTC and the non-refundable federal and Ontario medical expense tax credits for the same eligible expenses.

Low-income individuals and families tax (LIFT) credit

The budget proposes to enhance the LIFT credit, starting with the 2022 tax year. The LIFT credit is a non-refundable tax credit that can reduce (or eliminate) Ontario personal income tax (excluding the Ontario Health Premium) for low-income Ontario taxpayers with employment income.

If enacted, starting in 2022, the LIFT credit would be calculated as the lesser of:

• $875 (up from $850)
• 5.05% of employment income

This amount would then be reduced by 5% (down from 10%) of the greater of:

• adjusted individual net income exceeding $32,500 (up from $30,000)
• adjusted family net income (i.e. income of the taxpayer and a spouse or common-law partner) exceeding $65,000 (up from $60,000)

Taxpayers with individual net income up to $50,000 (or family net income up to $82,500) can benefit from the proposed changes to the LIFT credit.

Other measures

Ontario non-resident speculation tax (ONRST)

As previously announced, effective March 30, 2022, changes to the ONRST:

• increase the rate to 20% (from 15%)
• expand the tax to apply provincewide (instead of only in the Greater Golden Horseshoe region)
• restrict eligibility for exemptions from the tax, by eliminating two of the previous rebates for certain:
  • international students
  • foreign nationals working in Ontario

Transitional provisions apply for agreements of purchase and sale entered into before March 30, 2022. For more information, see our upcoming Tax Insights “Ontario non-resident speculation tax: Changes” at www.pwc.com/ca/taxinsights.

Electricity transfer tax

The budget proposes to extend, to December 31, 2024 (previously extended to December 31, 2022), tax relief provided to municipal electricity utilities (MEUs) that:

• reduces the transfer tax rate, which applies to sales of electricity assets, from 33% to 22% (or, for MEUs with fewer than 30,000 customers, to 0%)
• exempts capital gains arising under the payments in lieu of taxes (PILs) deemed disposition rules from PILs

Gasoline and fuel tax

The budget provides a reminder that, for the six-month period July 1 to December 31, 2022, the following taxes are temporarily reduced:

• gasoline tax, by 5.7¢ per litre
• fuel tax, by 5.3¢ per litre

Technical amendments

Ontario may amend its provincial statutes to:

• improve administrative effectiveness or enforcement
• maintain the integrity and equity of its tax and revenue collection system, or
• enhance legislative clarity or flexibility to preserve policy intent