On May 31, 2021, the NL government released its 2021 budget. The following are highlights of the key tax measures.
Personal tax measures
Effective January 1, 2022, the tax brackets for higher-income earners (over $135,973) will see an increase in personal income tax rates. In addition, the government will be creating three new tax brackets for those earning more than $250,000. The personal combined income tax rates are outlined below:
|
Personal (combined) federal and NL top marginal tax rates |
||
|
|
2021 Rate |
2022 Rate |
|
Interest/regular income |
51.30% |
54.80% |
|
Capital gains |
25.65% |
27.40% |
|
Eligible dividends |
42.61% |
47.45% |
|
Other-than-eligible dividends |
44.59% |
48.61% |
The new rates and brackets, effective January 1, 2022, are as follows:
|
Newfoundland and Labrador top tax brackets |
||
|
|
Current for 2021 |
Rate for 2022 |
|
135,974 – 190,363 |
17.3% |
17.8% |
|
190,364 – 250,000 |
18.3% |
19.8% |
|
250,001 – 500,000 |
18.3% |
20.8% |
|
500,001 – $1 million |
18.3% |
21.3% |
|
More than $1 million |
18.3% |
21.8% |
Physical Activity Tax Credit
The budget introduces a new Physical Activity Tax Credit, which will provide a refundable tax credit of up to $2,000 per family (value of up to $174 per family).
Corporate tax measure
No corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2021 are outlined below:
|
|
Small business corporations |
General corporations |
||
|
|
Rate |
Threshold |
Non-M&P |
M&P |
|
Federal |
9.0% |
$500,000 |
15.0% |
15.0% |
|
NL |
3.0% |
$500,000 |
15.0% |
15.0% |
|
Combined |
12.0% |
$500,000 |
30.0% |
30.0% |
Other tax measures
Sugar-sweetened beverage tax
The budget introduces a sugar-sweetened beverage tax of 20 cents per litre, effective April 1, 2022.
Tobacco tax
The budget increases tax on cigarettes by three cents per cigarette and on fine-cut tobacco by six cents per gram, effective June 1, 2021.
Indirect tax changes
The budget states that Newfoundland and Labrador will evaluate increases to the HST.
Next steps
Contact your Baker Tilly advisor to learn more about how we can help navigate the complexities of the Canadian tax system.
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