Corporate Tax Rates and Legislation: Q3 2023 Accounting status

Legislative changes — July 1 to September 30, 2023

Legislative developments from July 1 to September 30, 2023, that affect income taxes, are outlined below.

Federal draft legislative proposals (2023 budget and other measures)

On August 4, 2023, the Department of Finance released draft legislative proposals to implement several 2023 federal budget and other measures, and technical amendments. It also announced public consultations on these proposals. Key 2023 federal budget and other tax measures contained in the draft legislative proposals include:

• a tax on share repurchases by public corporations
• updated proposals to introduce an excessive interest and financing expenses limitation (EIFEL) regime; see our Tax Insights “Updated legislation: Excessive interest and financing expenses limitation (EIFEL) regime (August 2023 release)Opens in a new window” 
• the refundable investment tax credits (ITCs) for:
  • clean technology equipment
  • carbon capture, utilization, and storage (CCUS),

and labour requirements for these ITCs (and for the ITCs for clean electricity and clean hydrogen); see our Tax Insights “Finance releases draft legislation for the clean technology and CCUS investment tax creditsOpens in a new window”

• reduced tax rates for zero-emission technology manufacturing and processing income
• lithium from brines as a mineral resource for purposes of flow-through shares and application of the critical mineral exploration tax credit to this resource
• amendments to the general anti-avoidance rule (GAAR)

See our Tax Insights “Finance releases draft legislative proposalsOpens in a new window” for more information.

Status: As at September 30, 2023, the draft legislative proposals have not yet been tabled as a bill in the House of Commons and therefore are not considered substantively enacted for Canadian GAAP or enacted for US GAAP.

Draft Digital Services Tax Act

On August 4, 2023, the Department of Finance released a revised draft of the Digital Services Tax Act (DST Act), which contained a number of substantive and administrative revisions, including a new election to determine a taxpayer’s Digital Services Tax (DST) liability for the initial years of application based on Canadian digital services revenue for the year in which the DST Act comes into force. It did not change the timing aspects of the DST Act (i.e. that the DST would retroactively apply to Canadian digital services revenues earned since January 1, 2022). For more information, see our Tax Insights “Digital Services Tax: One step closer to becoming a realityOpens in a new window.” 

Status: As at September 30, 2023, the draft DST Act has not yet been tabled as a bill in the House of Commons and therefore is not considered substantively enacted for Canadian GAAP or enacted for US GAAP.

Draft Global Minimum Tax Act

On August 4, 2023, the Department of Finance released draft legislation to implement the “Pillar Two” global minimum tax regime developed by the Organisation for Economic Co‑operation and Development (OECD)/G-20 Inclusive Framework on Base Erosion and Profit Shifting. This regime will generally apply to multinational groups (MNE groups) with consolidated revenue of at least €750 million. The OECD has released model rules to implement Pillar Two; participating countries must each introduce domestic tax legislation based on the model rules for Pillar Two to take effect in those countries. Canada has released its draft Pillar Two implementing legislation, the Global Minimum Tax Act (GMTA). The GMTA is generally aligned with the model rules and OECD commentary. For more information, see our Tax Insights “Canada releases draft Global Minimum Tax ActOpens in a new window.” 

Status: As at September 30, 2023, the draft Global Minimum Tax Act has not yet been tabled as a bill in the House of Commons and therefore is not considered substantively enacted for Canadian GAAP or enacted for US GAAP.

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Accounting updates — July 1 to September 30, 2023

Amendments to the IFRS for SMEs Accounting Standard, to address Pillar Two (global minimum tax)

On September 29, 2023, the International Accounting Standards Board (IASB) issued narrow-scope amendments to Section 29 (Income Tax) of the IFRS for SMEs Accounting Standard, to address the potential implications of the proposed global minimum tax’s implementation on the accounting for income taxes for small- and medium-sized entities (SMEs). The amendments:

• provide a temporary exception from accounting for deferred taxes arising from the implementation of the OECD’s Pillar Two model rules, effective September 29, 2023
• clarify that companies are required to “disclose information that enables users of their financial statements to evaluate the nature and financial effect of income tax consequences of the Pillar Two legislation,” for annual reporting periods beginning after 2022

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Federal and provincial/territorial bills 

Table 1 lists key bills that include corporate income tax rate changes or other income tax changes (e.g. for research and development) that were:

• tabled or received royal assent during 2023, or
• tabled before 2023, but did not receive royal assent before 2023

Table 1: Federal and provincial/territorial bills
Bolded rows indicate a change in status from July 1 to September 30, 2023.

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Corporate income tax rates—accounting status (January 1, 2020 to September 30, 2023) 

The following information excludes Canadian-controlled private corporation small business rates and thresholds.

Table 2: Corporate income tax rates—accounting status
There were no changes in status from July 1 to September 30, 2023.

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