Canada | Prince Edward Island budget 2024-25 discussed

• The Prince Edward Island budget for 2024-25 has been tabled.
  
  
• The budget contains several tax measures affecting individuals.
  
  
• This Alert summarizes the key tax measures.

On 29 February 2024, Prince Edward Island Finance Minister and Chair of Treasury Board Jill Burridge tabled the province's fiscal 2024-25 budget. The budget contains several tax measures affecting individuals.

The minister anticipates a deficit of CA$85.5m for 2023-24 and projects a deficit of CA$85m for 2024-25, followed by reduced deficits for each of the next two years (CA$59.5m for 2025-26 and CA$30.5m for 2026-27).

A brief summary of the key tax measures follows.

Business tax measures

Corporate income tax rates

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

Prince Edward Island's 2024 corporate income tax rates are summarized in Table A.

Table A — 2024 Prince Edward Island (PEI) 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 Prince Edward Island rates, above.

3 An additional tax applies to banks and life insurers at a rate of 1.5% on taxable income (subject to a CA$100m exemption to be shared by group members).

Personal tax

Personal income tax rates

Beginning in 2025, the minister proposes to reduce the personal income tax rates (with the exception of last bracket rate, which will be increased) and to raise the thresholds of the first three brackets as outlined in Table B.

Table B — 2024 and 2025 Prince Edward Island personal income tax rates

1Individuals resident in Prince Edward Island on 31 December 2024 with taxable income up to CA$17,127 pay no provincial income tax, due to a low-income tax reduction. The low-income tax reduction is clawed back for income exceeding CA$21,500 until the reduction is eliminated, resulting in an additional 5% of provincial tax on income between CA$21,501 and CA$28,500. Similarly, individuals resident in Prince Edward Island on 31 December 2025 with taxable income up to CA$17,934 will pay no provincial income tax as a result of a low-income tax reduction. The low-income tax reduction will be clawed back for income exceeding CA$22,250 until the reduction is eliminated, resulting in an additional 5% of provincial tax on income between CA$22,251 and CA$29,250.

For taxable income exceeding CA$140,000, the 2024 combined federal-PEI personal income tax rates are outlined in Table C.

Table C — Combined 2024 federal and Prince Edward Island personal income tax rates

1 The rate on capital gains is one-half the ordinary income tax rate.

2 The federal basic personal amount comprises two elements: the base amount (CA$14,156 for 2024) and an additional amount (CA$1,549 for 2024). The additional amount is reduced for individuals with net income exceeding CA$173,205 and is fully eliminated for individuals with net income exceeding CAC$246,752. Consequently, the additional amount is clawed back on net income exceeding CA$173,205 until the additional tax credit of CA$232 is eliminated; this results in additional federal income tax (e.g., 0.32% on ordinary income) on net income between CA$173,206 and CA$246,752.

Personal tax credits

This budget proposes changes to the following personal credits/amounts:

• Basic personal amount — Increase from CA$13,500 to CA$14,250 in the basic personal amount for 2025
  
  
• Low-income tax reduction — Similar CA$750 increase to the income threshold for the low-income tax reduction to CA$22,250 for 2025
  
  
• Age credit amount — Increase in the age credit amount and income threshold to CAC$6,510 (from CA$5,595) and CA$36,600 (from CA$33,740), respectively, for 2025
  
  
• Spousal and equivalent amounts — Increase in the spouse or common-law partner amount, as well as in the amount for an eligible dependent, from CA$11,466 to CA$12,103 for 2025 and increase in the related income threshold from CA$1,147 to CA$1,210 for 2025
   

Other personal tax measures include:

Children's benefit — Introduction, starting in January 2025, of an income-based monthly benefit (the PEI Children's Benefit), which will be administered by the Canada Revenue Agency and reviewed on an annual basis.

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

Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (Canada), Toronto

• Linda Tang
  
  
• Mark Kaplan
  
  
• Phil Halvorson
  
  
• Terri McDowell
  
  
• Trevor O’Brien
  
  
• Leslie Ivany

Ernst & Young LLP (Canada), Quebec and Atlantic Canada

• Albert Anelli
  
  
• Angelo Nikolakakis
  
  
• Brian Mustard
  
  
• Nicolas Legault
  
  
• Nik Diksic
  
  
• Philippe-Antoine Morin
  
  
• Joannie Ethier

Ernst & Young LLP (Canada), Prairies

• Mark Coleman
  
  
• Liza Mathew

Ernst & Young LLP (Canada), Vancouver

• Eric Bretsen

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert