Descriptions of the Tax Provisions Listed in Transparency in Taxation, 2016

November 14, 2016

The following descriptions are intended to provide a basic understanding of the tax provisions listed in Transparency in Taxation, 2016, but do not replace the relevant legislation or regulations. The descriptions are listed in the order that they appear in Tables 1 to 10 of Transparency in Taxation, 2016.

For the conditions and limitations of the tax provisions, please refer to the legislation and regulations available at www.e-laws.gov.on.ca. For the conditions and limitations of the tax provisions related to the Harmonized Sales Tax (HST), please refer to the federal Excise Tax Act (Canada) and regulations made under that act.

Description of Tax Provisions

Personal Income Tax

Ontario Non-Refundable Tax Credits

Adoption Expense Credit — Tax filers may claim eligible expenses incurred to adopt a child under 18 years of age. The credit is equal to 5.05 per cent of eligible adoption expenses up to $12,214 for each child.

Age Credit — Tax filers aged 65 and over are entitled to claim a credit of 5.05 per cent of up to $4,888. The base amount is reduced by the lesser of $4,888 and 15 per cent of the individual’s net income in excess of $36,387. Any unused portion may be transferred to a spouse or common-law partner.

Amounts Transferred from a Spouse or Common-Law Partner — The unused portions of the age credit, pension income credit, disability credit, and the tuition and education amounts may be transferred to a spouse or common-law partner.

Basic Personal Credit — Tax filers are entitled to claim a basic personal credit of 5.05 per cent of $10,011.

Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions Credit — Employees are entitled to claim 5.05 per cent of their CPP and QPP contributions. The self-employed are entitled to claim 5.05 per cent of half of their contributions.

Caregiver Credit — Tax filers who reside with a dependent adult relative with an infirmity or an elderly parent or grandparent (including in-laws) may claim a credit equal to 5.05 per cent of $4,719 less the amount by which the dependant’s net income for the year exceeds $16,143.

Charitable Donations Credit — Tax filers may claim a credit of 5.05 per cent of the first $200 of eligible charitable donations and gifts plus 11.16 per cent of eligible donations and gifts in excess of $200.

Community Food Program Donation Tax Credit for Farmers — Farmers may claim a tax credit of up to 25 per cent of charitable donations of agricultural products that are made to eligible community food programs.

Disability Credit — Tax filers who have a severe and prolonged mental or physical impairment causing a marked restriction in basic activities of daily living may claim a credit equal to 5.05 per cent of $8,088. Eligible tax filers under 18 years of age may claim an additional amount, the disability supplement, equal to 5.05 per cent of up to $4,717. The disability supplement is reduced by total child and attendant care expenses in excess of $2,763 claimed with respect to the child by anyone. Any unused portion may be transferred to a supporting relative.

Eligible Dependant Credit — Tax filers with eligible dependants may claim 5.05 per cent of $8,500 less the amount by which the eligible dependant’s net income exceeds $850.

Employment Insurance (EI) Premiums Credit — Tax filers may claim 5.05 per cent of their EI premiums.

Infirm Dependant Credit — The amount that a tax filer may claim with respect to a dependent adult relative with an infirmity is 5.05 per cent of $4,719 less the amount by which the dependant’s net income exceeds $6,707.

Medical Expense Credit — Tax filers may claim a credit for eligible non-reimbursed medical expenses, including those incurred on behalf of the tax filer’s spouse or common-law partner or minor children. For 2016, the credit is calculated as 5.05 per cent of eligible expenses in excess of the lesser of $2,266 and three per cent of the individual’s net income for the year. In addition, up to $12,214 of qualifying medical expenses paid on behalf of other dependent relatives may be claimed to the extent that they exceed the lesser of $2,266 and three per cent of the dependant’s net income.

Pension Income Credit — A 5.05 per cent tax credit on up to $1,384 of eligible pension income may be claimed by qualifying tax filers. Any unused portion may be transferred to a spouse or common-law partner.

Spouse or Common-Law Partner Credit — Tax filers who are married or have a common-law partner may claim 5.05 per cent of $8,500 less the amount by which their spouse’s or common-law partner’s net income exceeds $850.

Student Loan Interest Credit — A tax filer who takes out an eligible student loan may claim a credit of 5.05 per cent of the amount of interest paid on that loan in the year the interest is paid or in any of the subsequent five years. The credit is available with respect to payments under the Canada Student Loans Program and similar provincial programs.

Tuition and Education Credits — Students may claim a tuition credit of 5.05 per cent of eligible tuition fees and an education credit of 5.05 per cent of $539 (if enrolled full time, or part time if eligible for the disability credit) or $161 (if enrolled part time) for each month of enrolment at a qualifying postsecondary institution. The unused portion of the tuition and education amounts may be transferred to a spouse or common-law partner, parent or grandparent. The maximum transfer from a student for the two amounts combined is $6,922. To the extent that students cannot claim or do not transfer all of their tuition and education credits in the year, the unused portion can be carried forward indefinitely for their own use in a future year.

Summary of 2016 Indexed Amounts for Ontario Non-Refundable Tax Credits

Adoption Expense Credit, maximum claim

$12,214

Age Credit, maximum claim
Reduced by 15 per cent of individual’s net income in excess of $36,387
Fully phased out when individual’s net income exceeds $68,974

$4,888

Basic Personal Credit

$10,011

Caregiver Credit, maximum claim
Reduced by dependant’s net income in excess of $16,143
Fully phased out when dependant’s net income reaches $20,862

$4,719

Disability Credit
Disability supplement for individuals under 18 years of age, maximum claim
Reduced by child/attendant care expenses over $2,763

$8,088
$4,717

Eligible Dependant Credit, maximum claim
Reduced by dependant’s net income in excess of $850
Fully phased out when dependant’s net income reaches $9,350

$8,500

Infirm Dependant Credit, maximum claim
Reduced by dependant’s net income in excess of $6,707
Fully phased out when dependant’s net income reaches $11,426

$4,719

Medical Expense Credit
Qualifying medical expenses of self, spouse or common-law partner, and dependent children in excess of the lesser of three per cent of net income and $2,266
Qualifying medical expenses of other dependants in excess of the lesser of three per cent of the dependant’s net income and $2,266, maximum claim for each


no limit

$12,214

Pension Income Credit, maximum claim

$1,384

Spouse or Common-Law Partner Credit, maximum claim
Reduced by spouse’s or common-law partner’s net income in excess of $850
Fully phased out when spouse or common-law partner’s net income reaches $9,350

$8,500

Tuition and Education Credits
Education Credit, full time or eligible for Disability Credit (per month)
Education Credit, part time (per month)
Maximum transfer


$539
$161
$6,922

Ontario Tax Reduction (OTR)

Ontario Tax Reduction — This program eliminates or reduces Ontario Personal Income Tax otherwise payable by lower-income tax filers. All Ontario tax filers may claim a basic exemption of $231 plus a supplementary amount of $427 for each dependent child aged 18 or under and each dependant with a disability or infirmity, where the $427 supplementary amount may be claimed twice for a child with a disability or infirmity. An individual pays no Ontario tax if tax otherwise payable is less than the sum of these amounts.

Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government

Business

Deduction for Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) Contributions on Self-Employment and Other Earnings – Self-employed individuals, and employees with certain types of employment income who have contributed less CPP/QPP than required, may deduct from income one-half of the CPP/QPP contributions they make on their self-employment income or one-half of their additional contributions on other employment income.

Items for Which an Estimate is not Available

Assistance for Artists and Deduction for Canadian Art Purchased by Unincorporated Businesses — Certain Canadian art acquired by businesses after November 12, 1981, for display in an office may be depreciated on a 20 per cent declining-balance basis. Non-Canadian art acquired after that date cannot be depreciated. Certain self-employed artists may deduct the costs of creating a work of art in the year the costs are incurred rather than in the year the work of art is sold.

Assistance for Prospectors and Grubstakers — Where a prospector or grubstaker disposes of mining property to a corporation in exchange for shares in that corporation, the tax liability is deferred until the subsequent disposition of the shares.

Deduction of Accelerated Capital Cost Allowance — The depreciation allowable for tax purposes is called capital cost allowance (CCA). A tax deferral may be created when the rate of depreciation of an asset for tax purposes exceeds the rate of depreciation for accounting purposes. Depreciable property is grouped into classes, each having a prescribed maximum rate of CCA. In addition, there are special rates applicable to specific types of property and certain additional accelerated allowances.

Deferral through Use of Billed-Basis Accounting by Professionals — In computing their income for tax purposes, certain professionals are allowed to elect either an accrual or billed-basis accounting method. Under the latter method, the costs of work in progress can be written off as incurred even though the associated revenues are not brought into income until the bill is paid or becomes receivable. This treatment gives rise to a deferral of tax.

Employment

Deduction for Clergy Residence — A full-time member of the clergy or a regular minister of a religious denomination may deduct housing costs from income for tax purposes. Where a member of the clergy is supplied living accommodation by their employer or receives housing allowances, an offsetting deduction may be claimed to the extent that this benefit is included in income.

Deduction of Home Relocation Loans — An offsetting deduction from income is provided for the taxable benefit received by an employee with respect to a home relocation loan. The amount of the deduction is the lesser of the amount included in income as a taxable benefit and the benefit that would arise with respect to an interest-free loan of $25,000 for the first five years of the loan.

Deduction for Military and Police Deployed to High-Risk International Missions — Members of the Canadian Forces or of a Canadian police force who serve on a high-risk international mission, or a prescribed mission, may claim an offsetting deduction for their income earned on the mission.

Deduction of Other Employment Expenses — Employees generally cannot deduct work-related expenses. However, specific employment expenses (such as automobile expenses, cost of meals and lodging for certain transport employees, legal expenses paid to collect salary) are deductible in certain circumstances in the computation of income.

Deduction of Union and Professional Dues — Annual union, professional or like dues are deductible from income.

Deduction for Employee Stock Options — Provided certain conditions are met, an employee of a corporation or Canadian mutual fund is allowed to deduct from net income 50 per cent of the employment benefit earned on employee stock options.

Moving Expense Deduction — A deduction may be made for eligible moving expenses if the tax filer changes residences within Canada and moves at least 40 kilometres closer to a new job, business location or postsecondary institution where the individual will engage in full-time schooling. Eligible expenses do not include non-taxable reimbursements received from employers.

Northern Residents Deductions — To offset the relatively higher cost of living and travelling in the north, individuals living in a qualifying remote location in Canada for a continuous period of at least six months may claim certain deductions from income.

Items for Which an Estimate is not Available

Deduction for Artists and Musicians — Employed musicians may claim the cost of maintenance, rental and insurance, and capital cost allowance on musical instruments against employment income earned as a musician. Employed artists may deduct expenses related to their artistic endeavours, up to a limit.

Deduction for Tradespersons’ and Apprentice Vehicle Mechanics’ Tools — Employed tradespersons and registered apprentice vehicle mechanics may deduct from their employment income as a tradesperson or apprentice an amount for the cost of their tools up to certain limits.

Deduction for Tuition Assistance for Adult Basic Education — Students may deduct from income certain tuition assistance provided under the Employment Insurance Act, under the Department of Human Resources and Skills Development Act or under a similar provincial program under a labour-market development agreement.

Deferral of Salary through Leave of Absence/Sabbatical Plans — Employees may defer salaries through a leave of absence/sabbatical plan. Provided certain conditions are met, these amounts are not subject to tax until received.

Employee Benefit Plans — Employers may make contributions to an “employee benefit plan” on behalf of their employees. The employee is not required to include in income the contributions to the plan, or the investment income earned within the plan, until amounts are received. Employers may not deduct these contributions to the plan until the contributions are actually distributed to employees.

Non-Taxation of Business-Paid Health and Dental Benefits — Employer-paid benefits for private health and dental plans are not taxable employee benefits. However, beginning in 2013, an employer’s contributions to certain group sickness or accident insurance plans are included in an employee’s income. Self-employed individuals may deduct private health and dental insurance premiums from their business income.

Non-Taxation of Certain Non-Monetary Employment Benefits — Certain fringe benefits, such as merchandise discounts and subsidized recreational facilities offered to all employees, are not taxable under certain circumstances. Special clothing provided to employees by their employers is also not taxable.

Special Tax Computations for Certain Retroactive Lump-Sum Payments — Certain retroactive lump-sum payments totalling $3,000 or more are eligible for a special tax calculation.

Farming and Fishing
Items for Which an Estimate is not Available

Cash-Basis and Flexibility in Inventory Accounting — Individuals engaged in farming and fishing may elect to include revenues when received, rather than when earned, and deduct expenses when paid rather than when the related revenue is reported. Farmers using the cash-basis method of accounting are allowed to depart from it with respect to their inventory.

Deferral of Income for Farmers — Income received from herd reduction in a drought region or the statutory forced destruction of livestock can be deemed to be income in the following year. Cash purchase tickets for deliveries of grain before year-end only become income in the year the tickets are cashed.

Income Stabilization Account for Farmers — Farmers may deposit a percentage of a given year’s eligible net sales, up to a limit, into their Income Stabilization Account. Some deposits may be matched by the federal and provincial governments. Governments may also pay an interest bonus annually on deposits that remain in the account. Governments’ contributions and interest accrued in the account are not taxable until withdrawn.

Investment

Lifetime Capital Gains Exemption for Farm or Fishing Property and Small Business Shares — A lifetime capital gains exemption is available for gains with respect to the disposition of qualified farm and fishing property and small business shares. The maximum exemption for dispositions of farming and fishing property made after April 20, 2015 is $1,000,000. The maximum exemption for all other dispositions of farming and fishing property and for dispositions of small business shares is $824,176 for 2016.  

Deduction of Allowable Business Investment Losses — Fifty per cent of capital losses with respect to shares or debts of a small business corporation (allowable business investment losses) may be used to offset other income.

Deduction of Carrying Charges Incurred to Earn Income — Interest and other carrying charges, such as fees for certain investment advice, incurred to earn business or investment income are deductible. For taxation years beginning after March 20, 2013, fees for use of a safety deposit box of a financial institution are no longer deductible.

Deduction of Resource-Related Expenditures — Individuals are entitled to deduct certain expenses associated with the exploration for, and the development of, Canadian natural resources. These expenses are deductible if the taxpayer either engages directly in these resource activities or provides financing to a resource company that in turn “flows through” the tax deductions to the taxpayer.

Partial Inclusion of Capital Gains — Fifty per cent of net realized capital gains are included in income. The estimate of the tax expenditure is the additional tax that would have been collected had the full amount of the net capital gains been included in income.

Tax-Free Savings Accounts (TFSAs) — Non-Taxation of Investment Income — In 2016, up to $5,500 may be contributed to a TFSA by individuals aged 18 and over. Capital gains and investment income earned within and withdrawals from the account are not taxable. Withdrawals and unused room may be carried forward for contributions in the future. Qualified investments that may be held in TFSAs are similar to those that may be held in a Registered Retirement Savings Plan, such as bonds, stocks, mutual funds and Guaranteed Investment Certificates.

Items for Which an Estimate is not Available

Capital Gains Exemptions — $1,000 on Personal-Use Property and $200 on Foreign Exchange Transactions — In calculating the capital gain on personal-use property, if the proceeds of disposition are less than $1,000, no capital gain needs to be reported. The first $200 of net capital gains on foreign exchange transactions is exempt from tax.

Deferral of Capital Gains through Five-Year Reserves — If proceeds from a sale of capital property are not all receivable in the year of the sale, realization of a portion of the capital gain may be deferred until the year in which the proceeds are received. A minimum of 20 per cent of the gain must be brought into income each year, creating a maximum five-year reserve period.

Deferral of Capital Gains through Rollovers — Individuals (other than trusts) are permitted a rollover of capital gains on eligible small business investments. To the extent that the proceeds are reinvested in one or more eligible small business corporations, the liability for personal income tax on the gain is deferred until the replacement property is sold. In addition, capital gains on intergenerational transfers of farming or fishing property are deferred in certain circumstances until the property is disposed of outside the immediate family.

Deferral of Capital Gains through 10-Year Reserves for Farm or Fishing Property and Small Business Shares — If proceeds from the sale of small business shares or from the sale of farm or fishing property to a child, grandchild or great-grandchild are not all receivable in the year of sale, realization of a portion of the capital gain may be deferred until the year in which the proceeds become receivable. However, a minimum of 10 per cent of the gain must be brought into income each year, creating a maximum 10-year reserve period. For most other assets, the maximum reserve period is five years.

Deferral of Capital Gains through Transfers to a Spouse, Spousal Trust or Family Trust — An individual may transfer capital property to a spouse, spousal trust or family trust at the adjusted cost base of the property rather than the fair market value. This provides a deferral of the capital gain until the subsequent disposition of the property or until the transferee spouse dies.

Exemption for Capital Gains Arising from Certain Donations — Capital gains on gifts of certain publicly listed securities to a qualified donee are exempt from tax. Also exempt in certain circumstances are capital gains from securities exchanged for publicly listed securities that are then donated to a qualified donee. In addition, capital gains on gifts of ecologically sensitive land to a qualified donee (other than a private foundation) are exempt from tax, as are capital gains on certain objects certified as being of cultural importance to Canada that are donated to a designated institution or public authority, such as a museum or art gallery.

Non-Taxation of Capital Gains on Principal Residences — Capital gains realized on the disposition of a tax filer’s principal residence are non-taxable.

Taxation of Capital Gains Upon Realization — Capital gains are taxed upon the disposition of property and not on an accrual basis. This provides a tax deferral.

Non-Taxable Income

Guaranteed Income Supplement and Allowance Benefits — Guaranteed Income Supplement and Allowance benefits must be included in income. However, an offsetting deduction from net income is provided. This approach effectively exempts such benefits from taxation while ensuring that they are taken into account in determining income-tested credits and benefits.

Social Assistance Benefits and Provincial Supplements — Social assistance benefits and provincial supplements such as Ontario Guaranteed Annual Income System payments must be included in income. However, an offsetting deduction from net income is provided. This approach effectively exempts such benefits from taxation while ensuring that they are taken into account in determining income-tested credits and benefits.

Workers’ Compensation Benefits — Workers’ compensation benefits must be included in income. However, an offsetting deduction from net income is provided. This approach effectively exempts such benefits from taxation while ensuring that they are taken into account in determining income-tested credits and benefits.

Items for Which an Estimate is not Available

Certain Service Pensions, Allowances, Compensation and Amounts, and Certain War Pensions — Pension payments, allowances and other compensation received with respect to an injury, disability or death associated with service in the Royal Canadian Mounted Police are non-taxable. In addition, veterans’ allowances, veterans’ disability pensions and support for dependants, the Canadian Forces income support benefit and certain disability awards, death benefits, clothing allowances and detention benefits, civilian war pensions and allowances, and certain other service pensions are not included in income for tax purposes.

Damages with Respect to Personal Injury or Death — Amounts received with respect to damages for personal injury or death, and awards paid pursuant to the authority of criminal-injury compensation laws are not taxable. In addition, investment income earned in personal injury awards is excluded from income until the end of the year in which the person reaches age 21.

Death Benefits of Up to $10,000 — Up to $10,000 of death benefits paid by an employer to the spouse or common-law partner of a deceased employee are non-taxable.

Employer-Paid CPP/QPP Contributions and EI Premiums — Employer-paid CPP/QPP contributions and EI premiums are not included in the calculation of income for employees.

Gifts and Bequests — Gifts and bequests are not included in income of the recipient for tax purposes.

Allowances for Diplomats and Other Government Employees Posted Abroad — Diplomats and other government employees posted abroad receive a non-taxable income supplement to cover the additional costs associated with living outside Canada.

Income of Status Indians and Indian Bands on Reserve — The income of status Indians or bands is exempt from tax if the income is situated on a reserve.

Investment Income on Life Insurance Policies — The investment income earned on some life insurance policies is not taxed as income to the policyholder. Instead, for reasons of administrative convenience, insurance companies are subject to tax on such earnings.

Lottery and Gambling Winnings — Lottery and gambling winnings are excluded from income for tax purposes.

Partial Inclusion of U.S. Social Security Benefits — A portion of U.S. Social Security benefits received by certain Canadian residents is excluded from income for tax purposes. The exclusion rate is generally 15 per cent. It is 50 per cent for Canadian residents receiving benefits after 2009 that have been received continuously since before 1996, and for their spouses and common-law partners who are eligible to receive survivor benefits.

Strike Pay — Strike pay is non-taxable.

Special Circumstances

Child Care Expense Deduction — Individuals may deduct from their income all or part of the child care expenses they incurred to earn employment or business income, to study or to conduct research for which a grant is received. The maximum deduction is $8,000 for each child under age seven, $5,000 for each child aged seven to 16 or each dependent child over age 16 with a mental or physical infirmity, and $11,000 for each child of any age with a severe and prolonged disability (i.e., eligible for the disability credit). The spouse or common-law partner with the lower income must generally claim the deduction.

Pension Income Splitting — Individuals may allocate up to half of their qualifying pension income to their spouse or common-law partner and may claim a deduction from income for the allocated amount. The person to whom the amount is allocated must include the allocated amount in income, and may claim the pension income credit to the extent that the allocated amount is eligible, based on the transferee’s age, not the age of the person who allocates the pension income. Allocating pension income to a lower-income spouse or common-law partner may increase tax expenditures for tax credits claimed by those individuals, such as the age credit or pension income credit. At the same time, pension income splitting may reduce tax expenditures for other tax measures provided to recognize that an individual’s income can support other family members. This happens because increasing the income reported by a lower-income spouse or common-law partner reduces the amounts that can be claimed by the higher-income spouse or common-law partner with respect to these measures. Such measures include the spouse or common-law partner credit and the transfer of unused amounts from a spouse or common-law partner (e.g., age credit, pension income credit, disability credit, and tuition and education credits).

Treatment of Spousal and Child Support Payments — As of May 1, 1997, child support paid pursuant to a written agreement or court order made on or after that day is not deductible to the payer nor included in the income of the recipient. Child support paid pursuant to a court order or written agreement made before that date continues to be deductible to the payer and included in the income of the recipient, unless the agreement is varied or both parties elect to have the new rules apply. The tax changes do not apply to spousal support. Spousal support payments remain deductible by the payer and are included in the income of the recipient.

Items for Which an Estimate is not Available

Deduction Related to Vows of Perpetual Poverty — Where a person has taken a vow of perpetual poverty as a member of a religious order, that person may deduct the total amount of their total employment and pension income (but not investment or other income) if that person has paid that amount to the order.

Disability Supports Deduction — Individuals may deduct certain expenses from income with respect to disability supports if they are incurred for education or employment purposes.

Exemption of Scholarship, Fellowship and Bursary Income — For students eligible for the education credit and for elementary and secondary school students, scholarship, fellowship and bursary income is generally exempt from tax.

Tax-Free Amount for Emergency Service Volunteers — The first $1,000 of amounts received by a tax filer in connection with volunteer duties as an ambulance technician, firefighter, or search, rescue or other type of emergency worker is exempt from tax. A tax filer who claims the federal Volunteer Firefighter Tax Credit or Search and Rescue Volunteer Tax Credit is ineligible for this exemption.

Tax-Deferred Savings

Registered Pension Plans (RPPs) — Deduction for Contributions — Contributions by individuals to registered plans are deductible, subject to certain limits.

Registered Retirement Savings Plans (RRSPs) — Deduction for Contributions — Contributions by individuals to registered plans are deductible, subject to certain limits.

Items for Which an Estimate is not Available

Deferred Profit-Sharing Plans — Employer contributions to deferred profit-sharing plans on behalf of their employees are not taxable to the employees up to a limit. Withdrawals from the plans are taxable in the hands of the employees.

Registered Disability Savings Plans (RDSPs) — Non-Taxation of Investment Income and Federal Contributions — Investment income on contributions to RDSPs and federal assistance will accumulate tax free in the plans and contributions will not be included in income for tax purposes when they are withdrawn. Generally, only the portion of withdrawals from an RDSP that relates to federal assistance and investment income will be included in the income of the person with a disability. Individuals benefit from a deferral of tax on investment income and federal contributions until funds are withdrawn from these plans.

Registered Education Savings Plans (RESPs) — Non-Taxation of Investment Income and Federal Contributions — Individuals may contribute to RESPs on behalf of designated children. Federal assistance and investment income accrued within the plans are not taxed until withdrawn for the postsecondary education of the named beneficiaries. Withdrawals are taxed in the hands of the beneficiaries.

RPPs — Non-Taxation of Investment Income — Investment income earned in these plans is not taxed as it is earned. Individuals benefit from a deferral of tax on investment income and capital gains until funds are withdrawn.

RRSPs and Registered Retirement Income Funds — Non-Taxation of Investment Income — Investment income earned in these plans is not taxed as it is earned. Individuals benefit from a deferral of tax on investment income and capital gains until funds are withdrawn, with certain exceptions. For example, individuals can make tax-free withdrawals from their RRSPs, subject to certain limits, to buy their first home under the Home Buyers’ Plan, or to enrol in full-time training or higher education under the Lifelong Learning Plan. The withdrawals must be repaid in annual instalments within 15 years or 10 years, respectively.

Corporate Income Tax

Ontario Deductions, Non-Refundable Tax Credits and Exemptions

Community Food Program Donation Tax Credit for Farmers — Corporations that carry on a farming business in Ontario may claim a non-refundable tax credit of up to 25 per cent of charitable donations of agricultural products that are made to eligible community food programs.

Ontario Credit Union Tax Reduction — Credit unions are eligible for a reduced Corporate Income Tax (CIT) rate of 4.5 per cent on taxable income in excess of the income eligible for the small business deduction in order to maintain the small business rate on all credit union taxable income.

Ontario Political Contributions Tax Credit — A non-refundable tax credit, based on the general CIT rate, is available for contributions of up to $19,950 made to registered Ontario political parties, to their constituency associations and to candidates.

Ontario Research and Development (R&D) Tax Credit — A non-refundable tax credit is available to corporations on eligible Scientific Research and Experimental Development (SR&ED) expenditures in Ontario.  For taxation years that commence after May 31, 2016, the tax credit rate is 3.5 per cent. The tax credit rate is prorated for taxation years straddling June 1, 2016.  For taxation years that end before June 1, 2016, the tax credit rate is 4.5 per cent.

Ontario Resource Tax Credit — A non-refundable tax credit was available where a corporation’s notional resource allowance (25 per cent of resource profits) exceeded the amount paid with respect to Crown royalties and mining taxes. The Resource Tax Credit and the Additional Tax on Crown Royalties were eliminated as of April 23, 2015.  Accrued but unused Ontario Resource Tax Credit amounts will be eligible for carry-forward to offset Ontario CIT payable in the first five taxation years beginning after April 23, 2015.

Ontario Small Business Deduction (SBD) — Canadian-controlled private corporations (CCPCs) operating in Ontario are eligible for a reduced CIT rate of 4.5 per cent on the first $500,000 of active business income.  The $500,000 income limit begins to be reduced when a CCPC's taxable capital reaches $10 million, and is eliminated when taxable capital reaches $15 million.  The cost of the SBD is partially offset by the lower Dividend Tax Credit rate that is applied to non-eligible dividends.  This offset is not included in the SBD estimate.

Ontario Tax Credit for Manufacturing and Processing (M&P) — The general CIT rate is reduced to 10 per cent for income from M&P (including income from the generation of electricity and from the production of steam), farming, fishing, mining and logging.

Exemptions, Deductions, Deferrals and Other Measures Shared with the Federal Government

Allowable Business Investment Losses — Fifty per cent of capital losses with respect to shares or debts of a small business corporation (allowable business investment losses) may be used to offset other income.

Deductibility of Charitable Donations — Donations to registered charities are deductible in computing taxable income within certain limits.

Deductibility of Gifts of Cultural Property and Ecologically Sensitive Land — Gifts of cultural property and ecologically sensitive land are deductible in computing taxable income within certain limits.

Deductibility of Gifts to the Crown — Gifts to Canada or a province are deductible in computing taxable income within certain limits.

Holdback on Progress Payments to Contractors — A contractor may exclude from taxable income the portion of progress payments (e.g., 10 per cent to 15 per cent) that may be held back until a project is completed satisfactorily.

Non-Taxation of Non-profit Organizations — Non-profit corporations are generally exempt from income tax.

Partial Inclusion of Capital Gains — Fifty per cent of net realized capital gains are included in income. The estimate of the tax expenditure is the additional tax that would have been collected had the full amount of the capital gains been included in income.

Items for Which an Estimate is not Available

Accelerated Write-Off of Capital Assets and Resource-related Expenditures — An accelerated write-off permits an asset to be depreciated more quickly for tax purposes than the true economic rate of depreciation based on an asset’s useful life. Accelerated write-offs are provided for certain classes of capital equipment for R&D, M&P, high-efficiency and renewable energy generation, as well as costs associated with exploration and development.

Cash-Basis and Flexibility in Inventory Accounting — Farming and fishing corporations may elect to include revenues when received, rather than when earned, and deduct expenses when paid rather than when the related revenue is reported. Farmers using the cash-basis method of accounting are allowed to depart from it with respect to their inventory.

Deductibility of Countervailing and Anti-Dumping Duties — Cash outlays for duties are deductible in the year they are paid even though these amounts may be refunded, in whole or in part, in a subsequent year.

Deferral of Income for Farmers — Income received from herd reduction in a drought region or the statutory forced destruction of livestock can be deemed to be income in the following year. Cash purchase tickets for deliveries of grain before year-end only become income in the year the tickets are cashed.

Deferral Through Capital Gains Rollovers — The realization of capital gains may be deferred for tax purposes through various rollover provisions.

Deferral Through Use of Billed-Basis Accounting by Professionals — In computing their income for tax purposes, certain professionals are allowed to elect either an accrual or billed-basis accounting method. Under the latter method, the costs of work in progress can be written off as incurred even though the associated revenues are not brought into income until the bill is paid or becomes receivable. This treatment gives rise to a deferral of tax.

Donations of Medicine for the Developing World — Corporations that make donations of medicine from their inventory may claim an additional charitable deduction equal to the lesser of 50 per cent of the difference between the value of the donated medicine and its cost, and the cost of the medicine.

Exemption for Capital Gains Arising from Certain Donations — Capital gains on gifts of certain publicly listed securities to a qualified donee are exempt from tax. Also exempt in certain circumstances are capital gains from securities exchanged for publicly listed securities that are then donated to a qualified donee.

Expensing of Advertising Costs — Advertising expenses are deductible on a current basis even though some of these expenditures provide a benefit in the future.

Non-Taxation of Provincial, Municipal and Federal Crown Corporations — Provincial, municipal and certain federal Crown corporations are generally not subject to income tax.

Non-Taxation of Registered Charities — Registered charities are generally exempt from income tax.

Taxation of Capital Gains Upon Realization — Capital gains are taxed upon the disposition of property and not on an accrual basis. This provides a tax deferral.

Tax Exemption on Income of Foreign Affiliates of Canadian Corporations — Active business income from foreign affiliates is generally exempt from taxation.

Sales and Commodity Tax

Harmonized Sales Tax

Ontario Point-of-Sale Rebates

Point-of-sale rebates for specified supplies allow vendors to credit customers with the provincial portion of the HST at the point of sale and only collect the federal portion of the HST. However, vendors are entitled to recover the provincial portion of the HST paid on inputs to these supplies.

Books — Generally includes a printed book, an audio book, a bound or unbound printed version of a scripture of any religion, a printed magazine or periodical purchased by subscription and with five per cent or less of its total printed space devoted to advertising, a printed book and a read-only medium (e.g., CD-ROM) whose content is related to and integrated with the book’s content and when sold together as a single package, and a printed book and a read-only medium and/or a right to access a website when sold together as a single package and if specifically designed for students enrolled in a qualifying course, such as educational courses of elementary or secondary schools.

Children’s Car Seats/Car Booster Seats — Includes restraint systems or booster seats that conform to Transport Canada’s safety requirements for Standards 213, 213.1, 213.2 or 213.5 as described under the federal Motor Vehicle Safety Act. Excluded are children’s car seats and car booster seats that do not meet Transport Canada safety standards and travel systems that are a combination stroller, carrier and car seat sold in a single package.

Children’s Clothing — Generally includes clothing designed for babies, girls and boys up to and including girls’ Canada Standard Size 16 and boys’ Canada Standard Size 20 and clothing designated for girls and boys in sizes small, medium or large if the clothing does not have a designated Canada Standard Size. Excluded are adult-sized clothing acquired for a child, costumes, and garments used exclusively in sports or recreational activities.

Children’s Diapers — Diapers include cloth and disposable diapers designed for babies and children, and diaper inserts and liners, rubber pants and training pants. Excluded are adult-sized diapers acquired for a child and children’s diapers provided as part of a diaper service.

Children’s Footwear — Generally includes footwear designed for babies, girls and boys up to and including girls’ size 6 and boys’ size 6, including footwear without a numerical size that is designated for girls or boys in sizes small, medium or large. Excluded are socks, stockings, adult-sized footwear acquired for a child, skates, rollerblades, ski-boots, footwear that has cleats and similar footwear.

Prepared Foods and Beverages ($4.00 or less) — Qualifying prepared food and beverages that are ready for immediate consumption and are sold for a total price (for all qualifying items purchased, excluding HST) of $4.00 or less. Included are items such as heated food and beverages, fresh salads, fresh sandwiches and single servings of unpackaged baked goods.

Print Newspapers — Print newspapers that contain news, editorials, feature stories or other information of interest to the general public, and that are published at regular intervals, typically on a daily, weekly or monthly basis. Excluded are flyers, inserts, magazines, periodicals and shoppers.

Qualifying Purchases by First Nations — Most goods and some services purchased off-reserve for personal use by a Status Indian, or for use by an Indian band or band council. Services included are warranty and maintenance agreements for goods, installation and repair services for goods, and telecommunication services. Goods and services excluded are off-reserve purchases of energy, restaurant meals, catering, gasoline, fuel, tobacco, alcoholic beverages, and all services not specifically included.

Ontario Public Service Body Rebates

Hospitals — Public hospitals are eligible for an 87 per cent rebate of the provincial portion of the HST paid on purchases related to their supply of exempt services.

Municipalities — Municipalities, including entities determined or designated by the Minister of National Revenue to be a municipality, are eligible for a rebate of 78 per cent of the provincial portion of the HST paid on purchases related to their supply of exempt services.

Public Colleges — Public colleges operating on a not-for-profit basis that are funded by a government or municipality and whose primary purpose is to provide vocational, technical or general education are eligible for a rebate of  78 per cent of the provincial portion of the HST paid on purchases related to their supply of exempt services.

Qualifying Non-Profit Organizations — Qualifying non-profit organizations are eligible for a rebate of 82 per cent of the provincial portion of the HST paid on purchases related to their supply of exempt services. To be eligible for this rebate, a non-profit organization must receive at least 40 per cent of its funding from governments, municipalities or Indian bands.

Registered Charities — Charities registered under the Income Tax Act (Canada) are eligible for a rebate of 82 per cent of the provincial portion of the HST paid on purchases related to their supply of exempt services. Registered Canadian amateur athletic associations and non-profit organizations operating a facility or part thereof to provide nursing home intermediate care or residential care are also eligible for the rebate.

School Authorities — Elementary and secondary schools operating on a not-for-profit basis are  eligible for a rebate of 93 per cent of the provincial portion of the HST paid on purchases related to their supply of exempt services.

Universities — Recognized degree-granting universities operating on a not-for-profit basis are  eligible for a rebate of 78 per cent of the provincial portion of the HST paid on purchases related to their supply of exempt services.

Other Ontario Measures

Ontario Energy and Property Tax Credit — This credit provides relief for the sales tax on energy and for property tax to low- to moderate-income Ontarians. For the 2016-17 benefit year, eligible tax filers who own or rent a home or who live on a reserve in Ontario may be eligible for an energy amount of up to $224, not exceeding their occupancy cost or home energy costs on a reserve for the individual’s principal residence. Occupancy cost is equal to property tax paid plus 20 per cent of rent paid for an individual’s principal residence.

In addition, eligible Ontario residents may receive a property tax amount.

For the 2016-17 benefit year, non-seniors may be eligible for a property tax amount of $56 plus 10 per cent of their occupancy cost for a maximum property tax amount of $784. The property tax amount may not exceed occupancy cost. The maximum combined energy and property tax amount for a non-senior is $1,008. This total is reduced by two per cent of adjusted family net income over $22,388 for a single person or over $27,985 for a family (including a single parent).

For the 2016-17 benefit year, seniors may be eligible for a property tax amount of $476 plus 10 per cent of their occupancy cost for a maximum property tax amount of $924. The property tax amount may not exceed occupancy cost. The maximum combined energy and property tax amount for a senior is $1,148. This total is reduced by two per cent of adjusted family net income over $27,985 for a single senior or over $33,582 for a senior family.

Ontario New Housing Rebate (including new residential rental property) — Purchasers of newly constructed and substantially renovated homes are eligible for a rebate of the provincial portion of the HST paid if the purchaser is acquiring the dwelling as a primary place of residence. The rebate is calculated as 75 per cent of the provincial portion of the HST payable on the purchase of a new home, up to a maximum rebate of $24,000. This rebate is provided for the same types of new residential properties for which a federal Goods and Services Tax (GST)/Harmonized Sales Tax (HST) new housing rebate is available. A similar rebate for new rental housing is available for the same types of new residential rental properties for which a federal GST/HST rebate is available.

Ontario Sales Tax Credit — This credit provides sales tax relief to low- to moderate-income Ontarians. The credit for the 2016-17 benefit year provides up to $291 in annual relief for an eligible single person and up to $291 per eligible adult and child in a family. It is reduced by four per cent of adjusted family net income over $22,388 for a single person or over $27,985 for a family (including a single parent).

Exemptions, Zero-Rating and Other Measures Shared with the Federal Government

Exemptions (Exempt Supply) — A supply of a good or service where the purchaser pays no GST/HST and the supplier is not entitled to claim input tax credits to recover the GST/HST paid on inputs to the supplies. Examples of exempt supplies would generally include domestic financial services and health care services.

Zero-Rating (Zero-Rated Supply) — A supply of a good or service where the purchaser pays no GST/HST and the supplier of these goods or services is entitled to claim input tax credits to recover the GST/HST paid on inputs to the supplies. Examples of zero-rated supplies include basic groceries, prescription drugs and certain medical devices.

Business

Exemption for Ferry, Road and Bridge Tolls — Ferry, road and bridge tolls are generally exempt from the GST/HST.

Exemption and Rebate for Legal Aid Services — Legal aid services provided under provincial legal aid plans are exempt from the GST/HST when provided to consumers of these services. Legal aid services provided by private practitioners to a legal aid plan administrator are taxable. However, the person responsible for the legal aid plan is entitled to a rebate of 100 per cent of any GST/HST paid on the supply.

Rebate for Foreign Conventions and Tour Packages— A rebate is provided for the GST/HST paid in respect of certain property and services used in the course of foreign conventions (generally defined as a convention where at least 75 per cent of participants are non-residents and the sponsor is a non-resident) held in Canada. A rebate is also provided in respect of the use of a convention site and related convention supplies acquired by non-resident exhibitors in respect of a foreign or Canadian convention held in Canada, and in respect of the accommodation portion of eligible tour packages for non-residents.

Rebate for Poppies and Wreaths — The rebate allows the Dominion Command or any provincial command or branch of the Royal Canadian Legion to recover the GST/HST paid on their purchases of poppies and wreaths.

Small Suppliers’ Threshold — Persons whose total taxable supplies in the preceding year are $30,000 or less ($50,000 or less in the case of public service bodies) are not required to register and collect the GST/HST. Charities and public institutions (for example, a registered charity that is a university, public college, school authority, hospital authority or designated municipality) can also qualify as a small supplier if their gross annual revenue (as determined for income tax purposes) in either of their previous two fiscal years is $250,000 or less.

Items for Which an Estimate is not Available

Exemption for Domestic Financial Services — Financial services include services relating to financial intermediation, market intermediation and risk pooling. Most financial services provided to residents of Canada are exempt from the GST/HST.

Non-Taxability of Certain Importations — Goods imported into Canada are generally taxable. However, certain goods are not subject to the GST/HST when imported, such as goods (other than books and periodicals) valued at not more than $20 and mailed to residents of Canada from other countries, duty-free personal importations, and certain goods imported by foreign diplomats.

Zero-Rating of Agricultural and Fish Products and Purchases — Certain agricultural and fishing supplies are zero-rated, including livestock, poultry, bees, grains and seeds for planting or feed, hops, barley, flax seed, straw, sugar cane and sugar beets. In addition, sales and purchases of certain major types of agricultural and fishing equipment are zero-rated.

Charities and Non-Profit Organizations

Exemption for Certain Supplies Made by Charities and Non-Profit Organizations — Most supplies made by charities are GST/HST exempt. Supplies that are exempt when made by non-profit organizations include supplies made for no consideration; supplies of food and lodging made for the relief of poverty or distress; subsidized homemaker/home-care services; meals on wheels; recreational programs established for children, people with disabilities or disadvantaged individuals; memberships in organizations providing no significant benefit to individual members; and trade union and mandatory professional dues.

Education

Exemption for Education Services (Tuition) — The exemption includes tuition fees paid for courses provided primarily for elementary or secondary school students; courses leading to credits towards a diploma or degree awarded by a recognized school authority, university or college; and certain other types of training for a trade or vocation. In addition, the exemption covers meals supplied to elementary or secondary school students, as well as most meal plans at a university or college.

Health Care

Exemption for Health Care Services — Basic health care services are generally exempt from the GST/HST. These services include institutional health care services provided in a health care facility; health care services provided by physicians, dentists and certain health care practitioners whose profession is regulated by the governments of at least five provinces; services covered by a provincial health insurance plan; and publicly subsidized or funded personal care services for individuals who require assistance in their homes.

Exemption for Hospital Parking — Qualifying parking at a public hospital for patients and visitors is exempt from GST/HST.

Zero-Rating of Medical Devices — A wide range of medical and assistive devices that are required to treat or cope with a chronic disease or illness or a physical disability are zero-rated, including canes, crutches, wheelchairs, medical and surgical prostheses, artificial breathing apparatus, hearing and speaking aids, prescription eyeglasses and contact lenses, and various diabetic supplies.

Zero-Rating of Prescription Drugs — Drugs that are controlled substances for which a prescription is required are zero-rated, as are other drugs that have been prescribed by a recognized health care practitioner.

Households

Exemption for Child Care — Child care services provided for periods of less than 24 hours to children 14 years of age or under are generally exempt under the GST/HST.

Zero-Rating of Basic Groceries — Basic groceries, which include the majority of foodstuffs for preparation and consumption at home, are zero-rated under the GST/HST.

Zero-Rating of Feminine Hygiene Products — A supply of a product that is marketed exclusively for feminine hygiene purposes and is a sanitary napkin, tampon, sanitary belt, menstrual cup or other similar product, is zero-rated under the GST/HST.

Items for Which an Estimate is not Available

Exemption for Personal Care Services – Certain personal care services are exempt under the GST/HST. The exemption covers the following services when provided at the establishment of the supplier: supplies of care, supervision and a place of residence to children, underprivileged individuals or individuals with a disability (e.g., group homes); and supplies of care and supervision to an individual with limited physical or mental capacity for self-supervision and self-care due to an infirmity or disability (e.g., respite care).

Housing

Exemption for Residential Rent (Long-Term) —Long-term residential rentals, where the period throughout which continuous occupancy is given to the same tenant is at least one month, are GST/HST exempt. Short-term accommodation is also exempt where the charge for the accommodation is not more than $20 per day.

Items for Which an Estimate is not Available

Exemption for Sales of Used Residential Housing and Other Personal-Use Real Property — Generally, the GST/HST applies to residential real property when it is first sold or leased for residential purposes. Subsequent sales of used residential housing are GST/HST exempt. In addition, most sales of other personal-use real property, such as vacant land, are GST/HST exempt when sold by individuals. The sale of farmland to a family member who is acquiring the property for personal use is also GST/HST exempt.

Municipalities

Exemption for Municipal Transit — Municipal transit service is defined as a public passenger transportation service provided by a transit authority whose services are at least 90 per cent within a particular municipality and its surrounding areas. Municipal transit services provided on a not-for-profit basis are exempt under the GST/HST.

Exemption for Water and Basic Garbage Collection Services — Water and basic garbage collection services are exempt under the GST/HST.

Retail Sales Tax

Exemption for Automobile Insurance Premiums — Auto insurance premiums are exempt from Retail Sales Tax (RST).

Exemption for Individual Life and Health Insurance Premiums — Premiums for individual life and health insurance are exempt from RST.

Vendor Compensation — Compensation to vendors for collecting RST on insurance premiums on behalf of the Province is based on the amount of RST collected on premiums for the period. The maximum amount that can be claimed as compensation is $1,500 for the 12-month period from April 1 to March 31.

Fuel Tax

Exemptions/Reduced Rates

Exemption for Coloured Fuel — Coloured fuel is exempt from the 14.3 cents per litre tax under the Fuel Tax Act. Examples of permitted coloured fuel use are operating unlicensed construction, forestry, mining, farm and other business equipment; generating electricity; use as heating, lighting or cooking fuel; and operating commercial marine vessels.

Reduced Rate for Railway Diesel — Diesel fuel used to power locomotives is taxed at the rate of 4.5 cents per litre.

Refunds

Auxiliary Power Take-Off Equipment — Powering a unit from an engine that uses fuel from the vehicle’s fuel tank is considered a “power take-off” function (e.g., refrigeration units). The tax paid on the fuel used to power the unit may qualify for a refund of the 14.3 cents per litre fuel tax.

Gasoline Tax

Exemptions/Reduced Rates

Exemption for Methanol and Natural Gas — Methanol and natural gas are exempt from the 14.7 cents per litre gasoline tax.

Reduced Rate for Aviation Fuel — On April 1, 2016, the tax rate on aviation fuel increased from 4.7 cents per litre to 5.7 cents per litre. The 2014 Ontario Budget announced an increase to the tax rate on aviation fuel by one cent per litre each year for four years. The first tax rate increase came into effect on September 1, 2014. The second and third tax rate increases came into effect on April 1 of 2015 and 2016 of each respective year. The tax rate will increase by a further one cent per litre on April 1, 2017.  Upon full implementation, on April 1, 2017, aviation fuel will be taxed at the rate of 6.7 cents per litre.

Reduced Rate for Propane — Propane used to power licensed motor vehicles is taxed at the rate of 4.3 cents per litre.

Refunds

Auxiliary Power Take-Off Equipment — Powering a unit from an engine that uses gasoline from the vehicle’s fuel tank is considered a “power take-off” function. The tax paid on the gasoline used to power the unit may qualify for a refund of the 14.7 cents per litre gasoline tax.

Aviation Fuel — Aviation fuel used for technical stops refuelling at Ottawa International Airport is eligible for a refund of the aviation fuel tax, which increased by one cent per litre on April 1, 2016, from 4.7 cents per litre to 5.7 cents per litre. The tax rate will increase by a further one cent per litre on April 1, 2017.  Upon full implementation, on April 1, 2017, aviation fuel will be taxed at the rate of 6.7 cents per litre.

Tax-Exempt Use in Unlicensed Equipment — Any equipment or vehicle that is not licensed or required to be licensed under the Highway Traffic Act and operated in Ontario by any business, industry or institution (excluding recreational use) may qualify for a refund of gasoline and/or propane tax. Examples of equipment for which a refund may be claimed include unlicensed farming, construction and forestry equipment, and boats used in business operations such as commercial or construction boats.

Land Transfer Tax (LTT)

Exemptions

Deferrals and Exemptions for Corporate Reorganizations — Conveyances of land between corporations can be made without LTT, providing the conveyance is between affiliated corporations, or as part of certain corporate reorganizations, and is not registered on title.

Family Business Conveyances — There is an LTT exemption for conveyances of land from one or more family members to a family business corporation, where the land is to be used in the continued operation of an active business.

Family Farms — There are LTT exemptions for conveyances of farmed land to a family farm corporation, between individual family members, and from family farm corporations to individual family members.

Life Leases — There is an LTT exemption for the acquisition of a unit in a non-profit or charitable life-lease development, where the unit is used as the principal residence of the owner, the owner’s spouse or parent.

Items for Which an Estimate is not Available

Hospital Restructuring — Transfers of land between hospitals as a result of an amalgamation or the closure/transfer of hospital programs are exempt from LTT.

Oil/Pipeline Easements and Mineral Lands — There are LTT exemptions regarding the acquisition of an easement or right of way on land for the purpose of enabling an oil or gas pipeline to be constructed/operated, and for certain acquisitions of mineral rights.

Other Transfers and Dispositions — There are LTT exemptions for certain conveyances of land, including conveyances to the Crown and certain transfers between spouses. There are also exemptions for unregistered dispositions relating to employee relocation packages, as well as for the acquisition of a partner’s de minimis interest in a partnership and the acquisition of a unit in a mutual fund trust. There are also various other tax expenditures, such as a transfer of a leasehold interest in land that has an unexpired term that cannot exceed 50 years and a reduction in the value of consideration for land purchased to replace land taken under statutory authority.

Reorganization of Charities — Transfers of land after March 25, 2010, between registered charities (from either a trust or a non-share capital corporation to a non-share capital corporation) that carry on the same charitable purpose are exempt from LTT provided the transfer results solely from an internal reorganization.

Refunds

First-Time Home Buyers Refund — An LTT refund is available for first-time buyers of new and resale homes. The maximum amount of the refund is $2,000.

Tobacco Tax

On February 26, 2016, the tobacco tax rate increased from 13.975 cents to 15.475 cents per cigarette and per gram of tobacco products other than cigars.

Compensation for Tax Collection — Those who collect tobacco tax may be paid the lesser of $2,000 or four per cent of the tax collected from April 1 to March 31 annually. If there is an increase in the rate of tax, dealers may claim five per cent of the tax differential when required to conduct an inventory by the minister. 

Beer and Wine Tax

Exemptions/Reduced Rates
Exemptions

Exemption for Promotional Distribution — Wine and beer manufacturers, and licensees of brew pubs, are not subject to tax on a maximum of 10,000 litres of wine and wine coolers or beer distributed by them without charge for promotional purposes in Ontario. The exemption is for a 12-month period.

Reduced Rates

Reduced Rate for Beer made by Ontario Microbrewers* — Reduced rate applies on beer sales when sold in the Beer Store, on-site manufacturers’ stores and in licensed establishments. Draft beer made by an Ontario microbrewer purchased by, or delivered to, a person after March 1, 2016, and before November 1, 2016, is taxed at a rate of 27.61 cents per litre. Non-draft beer made by an Ontario microbrewer purchased by, or delivered to, a person after March 1, 2016, and before November 1, 2016, is taxed at a rate of 30.83 cents per litre. The tax rate effective for draft beer is 30.61 cents per litre and 33.83 cents per litre for non-draft beer after October 31, 2016 and before March 1, 2017.  

Reduced Rate for Beer Made and Sold at Ontario Brew Pubs* — Draft beer made and sold to purchasers at a brew pub in Ontario or a secondary location related to the brew pub after March 1, 2016, and before November 1, 2016,  is taxed at a rate of 26.35 cents per litre. The tax rate effective for draft beer sold at brew pubs is 29.35 cents per litre after October 31, 2016 and before March 1, 2017.   Draft beer made and sold to purchasers at a brew pub in Ontario or a secondary location related to the brew pub is not subject to the volume tax.

Reduced Rate for Ontario Wine and Ontario Wine Coolers — Ontario wine and Ontario wine coolers sold to purchasers in Winery Retail Stores (WRS) are taxed at a rate of 6.1 per cent of the retail price of the Ontario wine or Ontario wine cooler.

Reduced Rate for Wine Coolers — Wine coolers sold to purchasers in Winery Retail Stores (WRS) are taxed at a rate of 28 cents per litre.

* The beer basic tax rates are adjusted each March 1, based on a three-year average of the Ontario Consumer Price Index (CPI). As announced in the 2015 Ontario Budget, there is an increase of 3 cents per litre to the rates on November 1 in each of 2015, 2016, 2017 and 2018, in addition to the annual adjustments.

Education Property Tax

Brownfields Financial Tax Incentive Program — Municipalities may freeze or cancel the taxes on eligible brownfields properties for a defined period, and the Province may provide matching relief from education tax.

Charity Rebate — Municipalities must rebate a minimum of 40 per cent of the municipal and education taxes paid by charities occupying property in the commercial and industrial property classes, and may rebate any amount of property taxes paid by charities in other property classes. Municipalities may also rebate any percentage of the municipal and education taxes paid by organizations that are similar to eligible charities such as non-profit organizations.

Conservation Land Property Tax Exemption Program — Eligible conservation lands are exempt from municipal and education property taxes.

Eligible Convention Centres Exemption — Eligible large, privately owned convention centres are exempt from education property taxes.

Eligible Live Performance Theatres Exemption and Professional Sports Facility Tax Rate Reduction — Eligible theatres for live performances are exempt from municipal and education property taxes. Eligible professional sports facilities may receive a locally determined reduction from the otherwise applicable tax rates. Education taxes are reduced by an equivalent amount to the municipal taxes.

Farm Property Class Tax Rate Reduction — Eligible farm properties are subject to residential education property tax rates reduced by 75 per cent. For municipal purposes, these properties are subject to residential property tax rates reduced by a locally determined amount of at least 75 per cent.

Farmlands Awaiting Development Sub-Class Tax Rate Reduction — Eligible farmlands awaiting development may receive a locally determined reduction from the otherwise applicable tax rates.

Heritage Property Tax Rebate — Municipalities may adopt a program to reduce the municipal and education property taxes of eligible heritage properties by up to 40 per cent.

Managed Forest Tax Incentive Program — Eligible managed forest properties are subject to residential property tax rates for municipal and education purposes that are reduced by 75 per cent.

Ontario Energy and Property Tax Credit — See description in the Harmonized Sales Tax section.

Ontario Senior Homeowners’ Property Tax Grant — This grant is available to low- to middle-income Ontario senior homeowners for property taxes paid. The maximum grant is $500 per year for a single person or a couple. It is reduced by 3.33 per cent of adjusted family net income over $35,000 for a single senior or over $45,000 for a senior couple.

Seniors and Persons with Disabilities Property Tax Relief — Expenditures under this category include locally determined municipal and education property tax relief in the form of reduced, cancelled or deferred reassessment-related tax increases on residential properties of low-income seniors and persons with disabilities; the exemption from property taxation of improvements to an existing home to accommodate seniors or persons with disabilities; and the exemption from taxation on 10 per cent of the assessment of newly built homes that provide accommodation to seniors and persons with disabilities.

Tax Exemptions Under Private Statutes — Property tax exemptions have been granted through private statutes to various cultural, heritage, recreational and community service organizations (e.g., YMCAs).

Vacant Commercial and Industrial Unit Rebate — Municipalities must rebate from 30 per cent to 35 per cent of the municipal and education property taxes paid with respect to vacant commercial and industrial buildings or portions of buildings (if vacancy is at least 90 consecutive days).

Vacant Land and Excess Land Sub-Class Tax Rate Reduction — Municipal and education property tax rates on vacant and excess lands in the commercial and industrial property classes are reduced by 30 per cent to 35 per cent of the otherwise applicable class tax rates.

Items for Which an Estimate is not Available

Other Tax Exemptions Under Public Statutes:

(1) Discretionary exemptions granted by municipalities to special purpose properties include:

  • properties used and occupied as memorial homes, clubhouses or athletic grounds by veterans of the Canadian or Allied Armed Forces;
  • properties owned by the Navy League of Canada and used and occupied solely for the purposes of carrying out the activities of the Ontario division of the Navy League;
  • municipal capital facilities operated by private-sector partners and used for municipal purposes. Examples of such facilities could include ice rinks, community centres and municipal housing project facilities; and
  • properties occupied by not-for-profit hospital service corporations for providing laundry and/or food services.

(2) Mandatory exemptions granted to special purpose/institutional properties include:

  • places of worship that are owned by a church or religious organization, including 50 per cent of the principal residence of the clergy;
  • cemeteries and burial sites;
  • land owned, used and occupied solely by a non-profit philanthropic, religious or educational seminary of learning;
  • land owned by a municipality (but not if occupied by a taxable tenant);
  • property owned, occupied and used solely by The Boy Scouts Association of Canada or The Canadian Girl Guides Association;
  • land owned, used and occupied by a non-profit philanthropic corporation for the purpose of a house of refuge;
  • land owned, used and occupied by the Canadian Red Cross, St. John Ambulance, or a charitable, non-profit philanthropic corporation organized for the relief of the poor that is supported in part by public funds;
  • the property of a children’s aid society if used exclusively for the purposes of and in connection with the society;
  • the property of scientific and literary institutions, including public libraries and agricultural societies, to the extent that it is occupied for the purposes of the society;
  • battle sites; and
  • exhibition sites (extent determined by municipal bylaw).

Relief from Property Taxes That Are Unduly Burdensome for Residential, Farm or Managed Forest Properties — Municipalities may reduce municipal property taxes where they are determined to be unduly burdensome to the owner of property in the residential, farm or managed forest property classes. Education taxes are reduced in the same proportion as municipal taxes.

Employer Health Tax

$450,000 Exemption for Private-Sector Employers — The Employer Health Tax is payable by all Ontario employers. Private-sector employers are exempt from tax on the first $450,000 of annual total Ontario remuneration. Private-sector employers with annual Ontario remuneration in excess of $5 million do not receive an exemption.

Mining Tax

Annual $500,000 Deduction — The mining tax is applied to an operator's annual profit in excess of a $500,000 annual deduction, which needs to be shared by associated corporations.

Tax Holiday for New Mines (other than remote mines) — Up to $10 million of profit over the first three years generated by a new Ontario mine or a major expansion of an existing Ontario mine is exempt from mining tax.

Tax Holiday for New Remote Mines — Up to $10 million of profit over the first 10 years generated by a new mine opened in a remote Ontario location is exempt from mining tax.

Reduced Tax Rate for Remote Mines — After the mining tax holiday ends for new remote mines, the mining tax rate is reduced from 10 per cent to 5 per cent on the profits from the operation of a remote Ontario mine.

Processing Allowance — Mine operators that process mine output in Canada receive a deduction from mining profits based on the capital cost of processing assets. The deduction can range from 8 per cent to 20 per cent, depending on the type and location of the asset.

Items for Which an Estimate is not Available

Fast Write-off of Exploration Costs — Up to 100 per cent of eligible exploration, development and pre-production costs incurred by a mine operator in Ontario may be deducted in a taxation year.

Estate Administration Tax

Exemption Where the Value of the Estate Does Not Exceed $1,000 — The Estate Administration Tax is payable by the estate of a deceased person upon the issuance of an estate certificate. If the value of the estate does not exceed $1,000, the estate is exempt from tax.

Gross Revenue Charge

Item for Which an Estimate is not Available

Gross Revenue Charge (GRC) 10-Year Holiday — The GRC is paid with respect to hydro-electric generating stations and includes a property tax component replacing municipal and education property taxes and a water rental component replacing provincial water rental charges. A 10-year holiday from the GRC is provided for eligible new, redeveloped and upgraded hydro-electric generating stations.