Tax news and Alerts cover significant tax developments and changes in the month that affect Canadian individuals and businesses.
Prescribed interest rates for 2022
The Canada Revenue Agency (CRA) has announced the interest rates which will apply to amounts owed to and by the CRA for the first quarter of 2022, as well as the rates that will apply for the purpose of calculating employee and shareholder taxable benefits.
Debit rate Credit rate Shareholder Benefits
January 1 – March 31 5% 1% / 3% 1%
Additional details of interest rates charged and paid by the CRA can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/tax/prescribed-interest-rates.html.
The Canada Revenue Agency (CRA) has issued the TD1 form to be used by all Canadian resident employees for the 2022 tax year. On the TD1 form, the employee indicates the federal personal tax credit amounts for which he or she is eligible in 2022, and the information is then used by the employer to determine the amount of federal income tax to be deducted and remitted to the CRA on the employee’s behalf.
The federal TD1 form for 2022 can be found on the CRA website at https://www.canada.ca/en/revenue-agency/services/forms-publications/td1-personal-tax-credits-returns/td1-forms-pay-received-on-january-1-later.html.
Small Business Air Quality Improvement Tax Credit introduced
As part of the Economic and Fiscal Update, the federal government announced that smal
l businesses would be provided with a refundable Small Businesses Air Quality Improvement Tax Credit. That credit, which is available for eligible expenditures made between September 1, 2021 and December 31, 2022, is equal to 25% of such expenditures.
For purposes of the credit, eligible expenditures include those related to the purchase or upgrade of mechanical heating, ventilation, and air conditioning (HVAC) systems and the purchase of standalone devices designed to filter air using high efficiency particulate air (HEPA) filters, up to a maximum of $10,000 per location and $50,000 in total.
More information on the new credit can be found in Economic and Fiscal Update papers, which are available on the Finance Canada website at EFU-MEB-2021-EN.pdf (budget.gc.ca).
Changes to home office expense deduction extended through 2022
As part of pandemic relief measures, changes were made to the existing home office expense deduction for employees. Those changes, which were for the 2020 tax year only, allowed employees to use a flat rate method for home office expense deduction claims, eliminating the need to make or provide detailed calculations of eligible expenses incurred.
As part of the Economic and Fiscal Update delivered on December 14, it was announced those changes to the rules governing the home office expense deduction would be extended through the 2021 and 2022 tax years and that the flat rate deduction would be increased to $500.
The announcement of the extension can be found in the Economic and Fiscal Update papers, which are available on the Finance Canada website at EFU-MEB-2021-EN.pdf (budget.gc.ca). Detailed information on the home office expense deduction for employees can be found on the Canada Revenue Agency website at Expenses you can claim – Home office expenses for employees – Canada.ca.
Economic and Fiscal Update to be delivered on December 14, 2021
The 2021 Economic and Fiscal Update will be delivered by the Minister of Finance on Tuesday, December 14 at around 4 p.m.
The update is expected to include information on the current state of the Canadian economy, as well as updated revenue, expenditure, and deficit projections for the current (2021-22) fiscal year.
Once the Update is released, the Economic and Fiscal Update papers will be available on the Finance Canada website at Fiscal Updates – Canada.ca.
Prescribed interest leasing rate for January 2022
The prescribed leasing interest rate mandated by the Canada Revenue Agency (CRA) must be calculated using bond yield information found on the Bank of Canada website. That calculation shows that the prescribed interest leasing rate for the month of January 2022 will be 3.03%.
The CRA’s instructions on how to calculate the prescribed leasing interest rate, which includes a link to the necessary bond yield information can be found at How to calculate Prescribed Interest Rates for Leasing Rules – Canada.ca.
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