Ontario Minister of Finance Peter Bethlenfalvy tabled the province’s 2023 Budget on Thursday, March 23, 2023. This year’s budget, titled Building a Strong Ontario, is focused on economic resilience and building strong infrastructure to support growth across the province.
Business tax measures
Corporate income tax rates
No new corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2023 are summarized below:
| Small Business Corporations | General Corporations | |||
|---|---|---|---|---|
| Rate* | Threshold | Non-M&P | M&P | |
| Federal | 9.0% | $500,000 | 15.0% | 15.0% |
| Ontario | 3.2% | $500,000 | 11.5% | 10.0% |
| Combined | 12.2% | 26.5% | 25.0% | |
M&P – Manufacturing & Processing
* Rates applicable to income not eligible for the temporary rate reduction for manufacturers of qualifying zero-emission technology.
New Ontario Made Manufacturing Investment Tax Credit
The budget proposes a new 10 percent refundable Corporate Income Tax (CIT) credit for capital investments in buildings, machinery, and equipment used in manufacturing or processing. The credit will be available to Canadian-controlled private corporations (CCPCs) that make qualifying investments and have a permanent establishment in Ontario.
For this credit, qualifying investments are defined as expenditures for certain properties in Class 1 or Class 53 for capital cost allowance (CCA) purposes.
- Qualifying investments in Class 1 include expenditures for buildings used for manufacturing or processing in Ontario that become available for use on or after March 23, 2023. To qualify, 90 percent of the floor space of the building must be used for manufacturing or processing in Ontario at the end of the corporation’s tax year and the building must be eligible for the additional six percent CCA permitted under the federal Income Tax Act.
- Qualifying investments in Class 53 include expenditures for machinery and equipment used in the manufacturing or processing of goods in Ontario that is acquired and becomes available for use on or after March 23, 2023, and before 2026. After 2025, qualifying investments would include expenditures for machinery and equipment used in the manufacturing or processing of goods for sale or lease that are included in Class 43(a).
Qualifying investments for this credit will be limited to $20 million in a taxation year (to be shared among an associated group, if applicable). The limit would be prorated for short taxation years.
The credit will be reviewed every three years to assess program effectiveness, compliance burden, and administrative costs.
Extending the phase-out range of the small business limit
To mirror recent federal legislative changes, the budget proposes to extend the phase‐out range for Ontario’s small business CIT rate to between $10 million and $50 million of taxable capital employed in Canada. The proposed measure would apply to taxation years beginning on or after April 7, 2022, consistent with the federal effective date.
Modernizing Ontario’s film and television tax credits
The budget announces the government’s intent to continue work to modernize Ontario’s film and television tax credits. Proposed measures include:
- Extending tax credit eligibility to professional film and television productions made available exclusively online. Regulatory amendments for this change will be reviewed and finalized by the government in the coming months.
- A requirement for film and television productions supported by Ontario tax credits to provide on‐screen acknowledgement of this support in their end credits.
- Engaging with industry stakeholders to explore opportunities to simplify the Ontario Computer Animation and Special Effects Tax Credit.
- Reviewing the Ontario Film and Television Tax Credit regional bonus to assess its effectiveness.
Personal tax measures
Personal income tax rates
No new personal income tax rate changes were announced in this year’s budget. The top marginal personal income tax rate for Ontario is 20.53 percent (including provincial surtaxes) for 2023. The current top combined federal and Ontario marginal rates for 2023 are summarized below:
| Salary, business income, interest | 53.53% |
|---|---|
| Capital gains | 26.76% |
| Eligible dividends | 39.34% |
| Non-eligible dividends | 47.74% |
Expansion of the Guaranteed Annual Income System (GAINS) program
Following the 2022 announcement to temporarily double GAINS benefit payments for eligible seniors for 2023, the budget proposes to expand the eligibility for GAINS by lowering the rate at which the benefit is reduced in relation to annual private income. The proposed change would come into effect in July 2024.
Indirect tax measures
Modernizing Ontario’s tobacco tax administration
As outlined in the 2022 budget, the government is moving ahead with the review and modernization of the Tobacco Tax Act to ease administrative burdens while also strengthening oversight. Technical amendments will be introduced to remove redundant and outdated legislative requirements, provide greater clarity, and reduce the burden for registrants. The government will engage First Nations, industry, and trade associations — including those representing convenience stores, law enforcement and public health stakeholders — on further proposed changes.
Harmonization of wine tax
In response to a World Trade Organization settlement reached between Canada and Australia, the budget proposes to set a single harmonized 12 percent basic tax rate on wine and wine coolers sold in off‐site winery retail stores, including wine boutiques. The new rate would come into effect on July 1, 2023, and will replace the four separate basic tax rates currently applicable.
Tax Administration Measures
Review of Ontario’s tax system
The government will undertake a review of the province’s tax system as part of its plan to make Ontario an attractive place for businesses to invest and grow.
The review will also focus on modernizing administration tools, including improvements to simplify tax administration by creating a more convenient and modern digital platform. Continued investments in information technology infrastructure are intended to provide more digital options to clients.
Technical amendments
Amendments may be proposed to various statutes impacting Ontario’s tax and revenue collections system to improve administrative effectiveness or enforcement, maintain the integrity of the current system, or enhance legislative clarity or regulatory flexibility to preserve policy intent.
This report is provided by MNP. It is for informational and educational purposes only as of the date of writing. This information should not be considered investment, tax or legal professional advice. For specific advice about your situation, please consult a tax, accounting, legal or financial professional. The information contained in this report has been drawn from sources believed to be reliable but is not guaranteed to be accurate or complete. CDSPI, CDSPI Advisory Services Inc., MNP and our affiliates are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.