Published: December 12, 2023
Introduction: A Challenge to Build A Competitive Economy
On November 21, 2023, the government of Canada released the 2023 Fall Economic Statement, acknowledging and addressing a pivotal economic challenge in Canada to support a strong middle class and building an economy that works for all Canadians. The federal government admitted that it has failed to support the middle class in Canada in the past, despite of the recognition that “a strong economy depends on a strong middle class.” Existing measures include doubling the Goods and Services Tax (GST) Credit for six months in 2022, introducing a new grocery rebate in July 2023 to provide targeted inflation relief to Canadians, delivering enhanced Canada Worker Benefit payments in 2023, offering a tax-free payment of $500 to help low-income Canadians with rent payment, and making tax-free payments of up to $1,300 per child over two years through the Canada Dental Benefits to qualified families without dental insurance.
Furthermore, to remain competitive in the global economy, the federal government says it will continue to develop Canada’s clean economy jobs plan. The new Clean Economy Investment Tax Credits aim to incentivize development in carbon capture, utilization, and storage, clean technology, clean hydrogen, clean technology manufacturing, clean electricity, and the use of waste biomass to generate electricity and heat.
Unfortunately, the 2023 Fall Economic Statement did not bring forward any new measures to correspond with the claim that the middle class is important to the Canadian economy. The only new tax policy that may provide a minor benefit middle-class Canadian taxpayers is the removal of GST from psychotherapy and counselling services.
This article is Part II of the Decoding 2023 Fall Economic Statement series, delving into proposed federal government actions that claim to support the middle class in Canada and to build a better Canadian economy. Key topics include the removal of the GST/HST from psychotherapy and counselling and the expansion of the new Clean Economy Investment Tax Credits. Overall, the proposals provide minimal tax benefits to middle-class Canadian taxpayers.
Removing GST/HST From Psychotherapy and Counselling
Under the Excise Tax Act, there is a list of goods and services in Canada that are exempt from GST/HST, including exempt and zero-rated supplies. For more information on the differences between exempt and zero-rated supplies, you can read more about the topic in our article “GST/HST Zero-Rated & Exempt Supplies: Canadian Tax Lawyer’s Guide.”
The following goods and services are examples of exempt supplies:
- long-term rentals of residential accommodation (of one month or more);
- most health, medical, and dental services performed by licensed physicians or dentists for medical reasons; and
- most financial services.
The following goods and services are examples of zero-rated supplies:
- basic groceries;
- most fishery products; and
- certain medical devices such as hearing aids.
The 2023 Fall Economic Statement proposes the exemption of professional services provided by psychotherapists and counselling therapists from GST/HST, to make such services more affordable to Canadians. This initiative is likely influenced by the campaign led by the Canadian Counselling and Psychotherapy Association, shedding light on the inequity that counselling therapists and psychotherapists have been the only mental health professionals obligated to charge GST/HST. Though there has been no detailed policy announcement as of December 1, 2023, regarding how these professional services are exempt from GST/HST, services provided by psychotherapists and counselling therapists are likely going to be characterized as exempt supplies, similar to other health and medical services performed by licensed physicians for medical reasons that are included in the list of exempt supplies. Consequently, psychotherapists and counselling therapists will not collect GST/HST for their services and will be ineligible to claim any input tax credits.
The New Clean Economy Investment Tax Credits
The Clean Economy Investment Tax Credits comprise the following five tax credits outlined in Budget 2023:
- Clean Electricity Investment Tax Credit;
- Clean Technology Manufacturing Tax Credit;
- Clean Hydrogen Investment Tax Credit;
- Carbon Capture, Utilization, and Storage Investment Tax Credit; and
- Clean Technology Investment Tax Credit.
The Clean Electricity Investment Tax Credit is a 15 percent refundable tax credit for eligible investments in technologies that are required for the generation and storage of clean electricity and its transmission between provinces and territories. This tax credit is available to taxable and tax-exempt entities.
The Clean Technology Manufacturing Tax Credit covers up to 30 percent of costs in new machinery and equipment used to manufacture or process clean technologies and extract, process or recycle critical minerals in Canada.
The Clean Hydrogen Investment Tax Credit supports between 15 and 40 percent of eligible projects’ costs to produce clean hydrogen in Canada.
The Carbon Capture, Utilization, and Storage Investment Tax Credit offers tax credits for costs incurred by additional types of equipment used to capture carbon dioxide emissions for storage or other uses in industrial processes.
The refundable Clean Technology Investment Tax Credit supports the growth of Canada’s clean technology sector by offering tax credits to the development of geothermal energy systems.
The 2023 Fall Economic Statement proposes to expand eligibility for the Clean Technology Investment Tax Credit and the Clean Electricity Investment Tax Credit. The expanded Clean Technology Investment Tax Credit will be available to eligible investments acquired and becomes available for use on or after November 21, 2023. The expanded Clean Electricity Investment Tax Credit aims to include systems that produce electricity or both electricity and heat from waste biomass, for projects that did not begin construction before March 28, 2023.
Pro Tax Tips – Beware of Eligibility Requirements For The Benefits You Are Claiming!
The federal government, as well as other levels of government, often updates available benefits and eligibility of existing benefits. For example, in September 2022, the government announced the Canada Dental Benefit, the application of which opened in December 2022. The Canada Dental Benefit provides eligible parents or guardians with tax-free payments of up to $1,300 over two years, per child, to cover the cost of dental care. Eligibility of existing benefits can also be changed without the direct notification to individual taxpayers who were entitled to them but will no longer qualify once the new rules are introduced. For instance, the change in eligibility requirements from the Canada Emergency Response Benefit (CERB) to the Canada Recovery Benefit (CRB).
If you are unsure about your eligibility for certain types of tax benefits and deductions, please contact our expert Canadian tax lawyers. We can help you better understand your eligibility for new and existing benefits, as well as reporting and filing obligations if you would like to claim such benefits.
FAQ
What Are The New Clean Economy Investment Tax Credits?
The Clean Economy Investment Tax Credits include the Clean Electricity Investment Tax Credit, the Clean Technology Manufacturing Tax Credit, the Clean Hydrogen Investment Tax Credit, the Carbon Capture, Utilization, and Storage Investment Tax Credit, and the Clean Technology Investment Tax Credit. Each type of tax credit targets a specific sector or a certain type of investment that is essential in developing Canada’s clean economy. These tax credits were introduced by the government of Canada in 2022 and were expanded in the 2023 Fall Economic Statement. For more information on your eligibility for the new Clean Economy Investment Tax Credits, consult with our expert Toronto tax lawyers for legal advice specific to your case.
What Does Removal Of GST From Psychotherapy And Counselling Entail?
The 2023 Fall Economic Statement proposes the exemption of professional services provided by psychotherapists and counselling therapists from GST/HST. While detailed policy is yet to be announced as of December 1, 2023, it is likely that these services will be characterized as exempt supplies, similar to most health and medical services performed by licensed physicians for medical reasons. As a result, psychotherapists and counselling therapists will not collect GST/HST for their services and will not be able to claim any input tax credits.
Disclaimer:
This article provides information of a general nature only. It is only current at the posting date. It is not updated, and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions, you should consult a Canadian tax lawyer.
Disclaimer:
"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."
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