Newfoundland and Labrador budget 2023‑24

Tax Alert 2023 No. 17, 24 March 2023

On 23 March 2023, Newfoundland and Labrador Deputy Premier and Minister of Finance Siobhan Coady tabled the province’s fiscal 2023‑24 budget. The budget contains tax measures affecting individuals and corporations.

The minister anticipates a surplus of $784 million for 2022‑23 compared to the original estimated deficit of $351 million. The minister projects a deficit of $160 million for 2023‑24 followed by a return to surplus for the next four years.

Following is a brief summary of the key tax measures.

Business tax measures

Corporate income tax rates

No changes are proposed to the corporate income tax rates or the $500,000 small‑business limit.

Newfoundland and Labrador’s (NL) 2023 corporate income tax rates are summarized in Table A.

Table A – 2023 Newfoundland and Labrador corporate income tax rates¹

1  The rates represent calendar-year-end rates unless otherwise indicated.

2  The federal corporate income tax rates for manufacturers of qualifying zero-emission technology are reduced to 7.5% for eligible income otherwise subject to the 15% federal general corporate income tax rate or 4.5% for eligible income otherwise subject to the 9% federal small-business corporate income tax rate. These reductions are not reflected in the combined federal and Ontario rates above.

3  An additional tax applies to banks and life insurers at a rate of 1.5% on taxable income (subject to a $100 million exemption to be shared by group members), effective for taxation years ending after 7 April 2022 (prorated for taxation years straddling this effective date).

Other business tax measures

The minister also proposed the following business tax measures:

• Ontario made manufacturing investment tax credit – As previously announced on 22 March 2023, the budget is introducing a 10% refundable corporate income tax credit for qualifying investments of up to $20 million per taxation year made by eligible corporations, for a maximum credit of $2 million a year. Eligible corporations will be Canadian-controlled private corporations (CCPCs) that have a permanent establishment in Ontario. The $20 million limit will be shared by an associated group of corporations and will be prorated for short taxation years.

Qualifying investments consist of expenditures included in Class 1 for capital cost allowance purposes for the construction, renovation or acquisition of buildings that become available for use on or after 23 March 2023, and expenditures for machinery and equipment included in Class 53 that are acquired and become available for use on or after 23 March 2023 and before 2026. The buildings and machinery and equipment must be used for the manufacturing or processing of goods in Ontario. After 2025, qualifying investments in machinery and equipment will consist of expenditures included in Class 43(a) that are used in the manufacturing or processing of goods for sale or lease.

• Small-business deduction – The budget confirms, as previously announced in the province’s fall economic statement delivered on 14 November 2022, that Ontario is paralleling the federal increase in the upper value of the range over which the small-business deduction is phased out from $15 million to $50 million, effective for taxation years beginning on or after 7 April 2022.

As a result of this measure, the small-business deduction will not be reduced to nil until a CCPC and its associated corporations have combined taxable capital employed in Canada of $50 million or more.

• Ontario film and television tax credits – Ontario is continuing to work on commitments to modernize the film and television tax credits regime, which were first announced in the province’s 2022 Budget and 2022 Economic Outlook and Fiscal Review.

As part of these proposals, the Ontario film and television tax credit and the Ontario production services tax credit eligibility would be extended to professional film and television productions that are distributed exclusively online. The province released draft regulatory amendments on 21 February 2023, which will be available for public comment until 11 April 2023.

As well, film and television productions supported by Ontario tax credits would be required to provide on-screen acknowledgment of this support in their end credits. Draft regulatory amendments to this effect were included as part of the draft amendments released by Ontario on 21 February 2023.

The government aims to simplify the Ontario computer animation and special effects tax credit to reduce administrative complexity while ensuring that targeted support remains available to professional productions with significant cultural or economic impact.

The government will proceed with the review of the Ontario film and television tax credit regional bonus to ensure it is providing effective and appropriate incentives and support for film and television production across the province.

Personal tax

Personal income tax rates

The budget does not include any changes to personal income tax rates.

The 2023 Ontario personal income tax rates are summarized in Table B.

Table B – 2023 Ontario personal income tax rates^1,2

Budget information: For up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/Budget.