To better align the refund of taxes paid on passive income with the
payment of dividends sourced from passive income (i.e. non-eligible
dividends), Budget 2018 proposes that a refund of RDTOH be
available only in cases where a private corporation pays non-eligible
dividends. An exception will be provided in respect of RDTOH that
arises from eligible portfolio dividends received by a corporation,
in which case the corporation will still be able to obtain a refund of
that RDTOH upon the payment of eligible dividends.
The different treatment proposed regarding the refund of taxes
imposed on eligible portfolio dividend income will necessitate the
addition of a new RDTOH account. This new account (eligible
RDTOH) will track refundable taxes paid under Part IV of the
Income Tax Act on eligible portfolio dividends. Any taxable
dividend (i.e., eligible or non-eligible) will entitle the corporation
to a refund from its eligible RDTOH account, subject to the ordering
The current RDTOH account (which will now be referred to as
non-eligible RDTOH) will track refundable taxes paid under Part I
of the Income Tax Act on investment income, as well as under Part
IV on non-eligible portfolio dividends (i.e., dividends that are paid
by non-connected corporations as non-eligible dividends). Refunds
from this account will be obtained only upon the payment of
The proposed rules track refundable balances through connected
corporations, adding them to either the eligible or non-eligible
RDTOH account depending upon which account the dividend was
Both classes include eligible equipment that generates or conserves
• using a renewable energy source;
• using a fuel from waste; or
• making efficient use of fossil fuels.
Class 43.2 was introduced in 2005 and is currently available in
respect of property acquired before 2020.
Budget 2018 proposes to extent eligibility for Class 43.2 by five
years so that is available in respect of property acquired before
These measures will apply to taxation years that begin after 2018.
Transitional rules will apply to convert the existing RDTOH pool
balances to the eligible and non-eligible RDTOH balances.
Budget 2018 proposes to legislate income tax rules for health and
welfare trusts by extending the current tax rules for employee life
and health trusts. Transitional rules will be added to the Income Tax
AT-RISK RULES FOR TIERED PARTNERSHIPS
Budget 2018 proposes to clarify the at-risk rules applicable to partnerships in circumstances where a limited partnership is itself a
limited partner of a limited partnership (commonly referred to as
tiered-partnership structures). These rules restrict the availability
of limited partnership losses to a limited partner that is itself a partnership, effectively reversing a recent Federal Court of Appeal
decision which was perceived to be inconsistent with the policies
underlying the at-risk rules. These rules apply to taxation years that
end on or after Budget Day.
CLEAN ENERGY EQUIPMENT
Class 43.1 and 43.2 of Schedule II to the Income Tax Regulations
provide accelerated capital cost allowance rates ( 30 percent and 50
percent, respectively on a declining balance) for investments in
specified clean energy generation and conservation equipment.
HEALTH & WELFARE TRUSTS
There are currently no explicit rules in the Income Tax Act for
Health & Welfare Trusts. These trusts are established by employers
to provide health and welfare benefits to their employees. Canada
Revenue Agency (CRA) has historically published administrative
positions relating to health and welfare trusts, such as what arrangements qualify and how their income is computed.
Act so that existing health and welfare trusts can convert to
employee life and health trusts. The government is seeking input
from stakeholders on transitional issues, and will subsequently
release draft legislation. CRA will no longer apply current
administrative positions to existing health and welfare trusts after
2020, or any such new trusts created after Budget Day. Existing
health and welfare trusts will be subject to existing trust tax rules
if they do not convert to employee life and health trusts.
PERSONAL TAX RATES
No new personal income tax rate or tax bracket changes were
announced in this year’s Budget. The government did, however,
confirm that it will proceed with the proposed tax on split income
measures announced on December 13, 2017.
MINERAL EXPLORATION TAX CREDIT
Flow-through shares facilitate resource companies in raising capital. The mineral exploration tax credit, equal to 15 percent of specified mineral exploration expenses incurred in Canada and
renounced to investors, will be extended to flow through share
agreements entered into on or before March 31, 2019. This credit
was set to expire on March 31, 2018.
CANADA WORKERS BENEFIT (CWB) (FORMERLY
WORKING INCOME TAX BENEFIT)
Budget 2018 enhances the CWB which is a refundable tax credit
paid to low income workers. Currently, the maximum benefit for
an individual is $1,192. The amount is clawed back at a rate of 14
percent of income and is eliminated at approximately $21,000 of
income. The maximum CWB will be increased to $1,355, with the
claw-back rate reduced to 12 percent and is eliminated at approximately $24,000 of income.
For a family, the maximum benefit will increase from $2,165 to
$2,335, and is eliminated at approximately $36,500 of income.
The change is effective for 2019 and subsequent taxation years.
B. Personal Tax Measures