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June 2, 2021
2021-5623

Canada: Newfoundland and Labrador issues budget 202122

On 31 May 2021, Newfoundland and Labrador Finance Minister Siobhan Coady tabled the province’s fiscal 2021–22 budget. The budget contains several tax measures affecting individuals and no changes affecting corporations.

The Minister anticipates a deficit of CA$826 million1 for 2021–22 and projects deficits for each of the next four years.

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

Business tax measures

Corporate tax rates

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

Newfoundland and Labrador’s (NL) 2021 corporate tax rates are summarized in Table A.

Table A – 2021 NL corporate tax rates

 

2021

NL

Federal and
NL combined

Small-business tax rate*

3.00%

12.00%

General corporate tax rate*

15.00%

30.00%

* Rates represent calendar-year rates unless otherwise indicated.

Personal tax

Personal income tax rates

The Minister proposes to increase personal tax rates for individuals earning more than $135,974 beginning on 1 January 2022. The Minister also proposes to add new tax brackets, which will impact individuals that earn in excess of $250,000. The new rates and tax brackets are outlined in Table B.

Table B – 2021 and 2022 NL personal tax rates

Bracket

Pre-budget rate

Proposed rates

2021

2022

$0 to $38,081*

8.70%

No change

No change

$38,082 to $76,161

14.50%

No change

No change

$76,162 to $135,973

15.80%

No change

No change

$135,974 to $190,363

17.30%

No change

17.80%

$190,364 to $250,000

18.30%

No change

19.80%

$250,001 to $500,000

18.30%

No change

20.80%

$500,001 to $1,000,000

18.30%

No change

21.30%

Above $1,000,000**

18.30%

No change

21.80%

* Individuals resident in NL on 31 December 2021 with taxable income up to $19,444 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 $20,619 until the reduction is eliminated, resulting in an additional 16% of provincial tax on income between $20,620 and $26,007.

** Accordingly, the proposed combined federal and NL 2021 and 2022 top marginal personal tax rates on income above $1,000,000 are as follows:

 

2021

2022

Ordinary income

51.30%

54.80%

Eligible dividends

42.61%

47.44%

Non-eligible dividends

44.59%

48.61%

Personal tax credits

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

  • A new Physical Activity Tax Credit, which will provide a refundable tax credit up to $2,000 (value of up to $174) per family. No further details were provided.

Other budget measures

  • Provincial tax on tobacco products has increased by 3 cents per cigarette and 6 cents per gram of fine-cut tobacco.
  • A new Sugar Sweetened Beverage Tax of 20 cents per liter. This tax is effective 1 April 2022.

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

Ernst & Young LLP (Canada), St. John’s

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Endnotes

  1. Currency references in this Alert are to the CA$.
 
 

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