Canada: Nunavut issues budget 2023/24

Executive summary

On 23 February 2023, Nunavut Finance Minister Lorne Kusugak tabled the territory’s fiscal 2023/24 budget. The budget contains no new taxes and no income tax increases.

The Minister anticipates an operating surplus of CA$67.6 million[i] for 2022/23 and projects an operating deficit of $8.2 million for 2023/24.

The following is a brief summary of the key tax measures.

Detailed discussion

Business tax measures

Corporate income tax rates

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

Nunavut’s 2023 corporate income tax rates are summarized in Table A.

Table A – 2023 Nunavut corporate income tax rates1

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

2 The corporate income tax rates for manufacturers of qualifying zero-emission technology are reduced to 7.5% for eligible income otherwise subject to the 15% general corporate income tax rate or 4.5% for eligible income otherwise subject to the 9% small-business corporate income tax rate.

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).

Personal tax

Personal income tax rates

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

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

Table B – 2023 Nunavut personal income tax rates

For taxable income in excess of $106,717, the 2023 combined federal-Nunavut personal income tax rates are outlined in Table C.

Table C – Combined 2023 federal and Nunavut 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 ($13,521 for 2023) and an additional amount ($1,479 for 2023). The additional amount is reduced for individuals with net income in excess of $165,430 and is fully eliminated for individuals with net income in excess of $235,675. Consequently, the additional amount is clawed back on net income in excess of $165,430 until the additional tax credit of $222 is eliminated; this results in additional federal income tax (e.g., 0.32% on ordinary income) on net income between $165,430 and $235,675.

Personal tax credits

This budget proposes the following personal tax credit:

Nunavut Carbon Credit – Introduction of a new refundable tax credit to replace the Nunavut Carbon Rebate that was offering a direct 50% at-the-pump discount of the carbon tax. The new income tax credit will offer direct payments every three months starting July 2023 to offset higher fuel costs.

Other tax measures

Homeowner fuel subsidy

Budget 2023/24 proposes a one-time subsidy or rebate to offset the higher cost of heating, up to a maximum payment of $1,000 for each eligible homeowner. Eligible homeowners can apply for the subsidy starting in spring 2023.

Fuel Tax Act

Following a review of the Petroleum Products Tax Act, the Government intends to replace it with a new Fuel Tax Act (the Act) to keep up with Nunavut’s evolving economic reality. The Act is to be introduced into the Nunavut Legislative Assembly in spring 2023. No further details were announced.

Tobacco Tax Act

The Government intends to complete its review of the Tobacco Tax Act and recommend possible legislative amendments in 2023/24. No further details were announced.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP (Canada), Toronto

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

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

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

Ernst & Young LLP (Canada), Prairies

• Mark Coleman                                                                                                                                                                                               

• Liza Mathew

Ernst & Young LLP (Canada), Vancouver

• Eric Bretsen

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