01 October 2020 Canada: Newfoundland and Labrador issues budget 2020–21 On 30 September 2020, Newfoundland and Labrador Finance Minister Siobhan Coady tabled the province’s fiscal 2020–21 budget. The budget contains no new income taxes and no income tax increases. The Minister anticipates a deficit of CA$1.84 billion1 for 2020–21, a $300 million reduction from the province’s July fiscal update. A multi-year budget forecast was not prepared as part of this budget, due to uncertainties stemming from the COVID-19 pandemic. The following is a brief summary of the key tax measures. No changes are proposed to the corporate tax rates or the $500,000 small-business limit. Newfoundland and Labrador’s (NL) 2020 corporate tax rates are summarized in Table A. Table A – Corporate tax rates 2020 | | 2020 | | | NL | Federal and NL combined | Small-business tax rate* | 3.00% | 12.00% | General corporate tax rate | 15.00% | 30.00% |
* The small-business rate is based on a 31 December year-end. Personal income tax rates The budget does not include any changes to personal income tax rates. The 2020 NL personal tax rates are summarized in Table B. Table B – NL personal tax rates 2020 First bracket rate | Second bracket rate | Third bracket rate | Fourth bracket rate | Fifth bracket rate | $0 to $37,929 | $37,930 to $75,858 | $75,859 to $135,432 | $135,433 to $189,604 | Above $189,604 | 8.70% | 14.50% | 15.80% | 17.30% | 18.50% |
- Individuals resident in NL on 31 December 2020 with taxable income up to $19,372 pay no provincial income tax as a result of a low-income tax reduction. The low-income tax reduction is clawed back for income in excess of $20,537 until the reduction is eliminated, resulting in an additional 16% of provincial tax on income between $20,538 and $25,906.
For taxable income in excess of $150,473, the 2020 combined federal-NL personal income tax rates are outlined in Table C. Table C – Combined federal and NL personal tax rates 2020 Bracket | Ordinary income* | Eligible dividends | Non-eligible dividends | $150,474 to $189,604 | 46.52% | 36.02% | 39.09% | $189,605 to $214,368** | 47.52% | 37.40% | 40.24% | Above $214,368 | 51.30% | 42.61% | 44.59% |
* The rate on capital gains is one-half the ordinary income tax rate. ** The basic personal amount comprises two basic elements: the existing personal amount ($12,298 for 2020) and an additional amount ($931 for 2020). The additional amount is gradually phased out for individuals with taxable income in excess of $150,473 and is fully eliminated for individuals with taxable income in excess of $214,368. Consequently, the additional amount is clawed back on taxable income in excess of $150,473 until the additional tax credit of $140 is eliminated; this results in additional federal income tax (e.g., 0.22% on ordinary income) on taxable income between $150,474 and $214,368. Other tax measures- Effective 1 October 2020, as a consequence of the federal carbon tax, tax on gasoline and diesel fuel will increase by 0.21 and 2.68 cents per liter, respectively.
- A new 20% tax on vaping products was introduced, and the provincial tax on tobacco products was increased by 5 cents per cigarette and 10 cents per gram of fine cut tobacco.
1. Currency references in this Alert are to CA$. _____________________________________________________________________________________________________________ For additional information with respect to this Alert, please contact the following: Document ID: 2020-6265 |
