Update: CRA offers relief as capital gains rule changes have yet to receive royal assent
As the Notice of Ways and Means Motion that will implement the federal government’s increase to the capital gains inclusion rate lingers in a House of Commons brought to a virtual standstill by recent privilege debates, the Canada Revenue Agency has officially announced that it is administering the tax change, which was first tabled in Budget 2024.
The increase—which raises the inclusion rate to two-thirds from one half on annual capital gains in excess of $250,000 for individuals, and to two-thirds on all capital gains realized by corporations and certain trusts (without the $250,000 threshold)—applies to capital gains realized on or after June 25th, 2024.
But as we noted in a recent blog, the fact that the draft legislation has yet to receive royal assent has posed major challenges to both taxpayers that need to file a tax return, as well as the Canada Revenue Agency, which currently has no mechanism to collect the tax (the Agency’s software is expected to be updated to intake the additional tax by early 2025, at the latest). At this point, taxpayers who owe the extra capital gains tax have no means to pay it.
In addition, the minority Liberal government could fall at any point. If that (still unlikely) scenario plays out, all pending legislation will be terminated, and the capital gains inclusion rate increase will no longer be in effect.
The unusual situation has prompted the federal government to announce that capital gains arrears and penalty relief, if applicable, will be provided to affected corporations that have a tax filing date on or before March 3rd, 2025. The interest relief will expire on March 3rd. The Agency has said that it will provide additional details as to how the relief will be administered in the coming weeks. In addition, tax forms for individuals, trusts and corporations will be posted to the government website by January 31st, 2025.
The KRP tax team will provide updates and any necessary clarifications to ensure your full compliance.
Armando Iannuzzi, Co-Managing Partner
For assistance with your tax and accounting needs, contact a member of our team.
