On 19 April 2021, the Finance Minister, Chrystia Freeland, presented Budget 2021, which includes important business tax measures, digital service taxes, limitation of interest deduction, hybrid mismatch arrangements, transfer price cases, mandatory disclosure rules. The Budget also includes a national childcare plan, continued pandemic relief, and green economy provisions. Due to COVID-19 pandemic, no budget was presented in 2020. The highlighting measures include in the Budget are given below:

  • The budget proposed a 3% digital service tax, which would apply only to large businesses with gross revenue of at least 750 million euros. The rate would apply on revenue from digital services that rely on data and content contributions from Canadian users.
  • The budget proposed to limit the amount of interest that certain businesses can deduct starting in 2023. The margin would be fixed at 40 of the company’s earnings in the first year of application and 30 percent thereafter. This will not applicable for small businesses and other circumstances representing low risk of tax evasion.
  • Government proposed to amend the Income Tax Act to eliminate the tax benefits of hybrid mismatch arrangements. These proposals would be implemented in stages starting 1 July 2022.
  • Government made invitation for public consultations on proposals to enhance Canada’s income tax mandatory disclosure rules, building on the advice of the BEPS Project. This will address changes to the Income Tax Act’s reportable transaction rules, a new requirement to report notifiable transactions, and a new requirement for specified corporations to report uncertain tax treatments.
  • The budget also announced the government’s intention to consult on Canada’s transfer pricing rules with a view to protecting the integrity of the tax system.
  • Government made a proposal in this budget to improve the Canada Small Business Financing Program through amendments to the Canada Small Business Financing Act and its regulations.
  • This budget included an ambitious plan for jobs and growth that is precisely designed to heal the specific wounds of the COVID-19 recession, and to build new economic muscle.
  • This budget 2021 proposed to expand the Canada Workers Benefit due to COVID-19 pandemic.