2020 AB Provincial Budget tax changes

On February 27, 2020, the Alberta government announced proposed changes to the provincial tax laws in the 2020-2021 budget.

Income taxes

Personal tax

No personal income tax rate changes were announced in this year’s budget. The current personal combined income tax rates for 2020 are outlined below.

In July 2019, the Alberta government announced personal tax brackets and tax credits would no longer be indexed to inflation. Also announced at that time was the end of provincial tuition and education tax credits for costs incurred and courses taken after December 31, 2019.

Alberta Child and Family Benefit (ACFB)

As of July 1, 2020 the Alberta Family Employment Tax Credit (AFETC) and the Alberta Child Benefit (ACB) will be replaced with the new Alberta Child and Family Benefit (ACFB). This new benefit is to be paid quarterly with first payment in August 2020 followed by a payment in November, February and May.

The ACFB includes a base component and a working income component, with maximum combined annual benefits of $5,120. The maximum base component ranges from $1,330 to $3,325, depending on the number of children (an increase of 15 per cent from the former ACB). The base component begins to phase out once family net income exceeds $24,467 and is fully phased out once family net income exceeds about $41,000.

Families are also eligible for a working component once their family employment income exceeds $2,760. The value of this component rises by 15 per cent as family employment income increases, to a maximum of $681 to $1,795, depending on the number of children. As families work more, they earn more benefits, encouraging them to join or remain in the workforce. The working component begins to phase out once family net income exceeds $41,000 and is fully phased out once family net income reaches about $61,000.

Corporate tax

No corporate income tax rate changes were announced in this year’s budget. The current corporate income tax rates for 2020 are outlined below.

Job Creation Tax Cut

In July 2019, the Alberta government implemented the Job Creation Tax Act to lower the general corporate tax rate from 12 per cent to 8 per cent over four years. On January 1, 2020, the corporate tax rate was reduced from 11 per cent to 10 per cent and will be further reduced to 9 per cent on January 1, 2021 and to 8 per cent on January 1, 2022.

The personal dividend tax credit rate for dividends paid out of income taxed at the general corporate income tax rate (eligible dividends) will be adjusted on January 1, 2021 and January 1, 2022. These adjustments are intended to ensure that the combined corporate and personal income tax paid on eligible dividends approximately equals the individual’s personal tax rate, eliminating the double taxation of dividend income. 

Alberta now has the lowest general corporate tax rate in Canada and by 2022 Alberta will have one of the lowest general corporate tax rates in North America.

As part of the return to a low rate, broad-based approach to taxation, the following provincial targeted tax credits have been eliminated:

• Scientific Research & Experimental Development (SR&ED) tax credit;
• Alberta Investor Tax Credit (AITC);
• Capital Investment Tax Credit (CITC); and
• Interactive Digital Media Tax Credit (IDMTC)

Other tax measures

Vaping products tax

Alberta will introduce a 20 per cent tax on the retail sale of vaping products. This tax will be applicable to all vaping devices, e-liquids (including cannabis e-liquids) and other DIY products sold for vaping.

Online sales to individuals in Alberta from other jurisdictions will be subject to this tax. Alberta retailers selling online to individuals in other jurisdictions will not be required to collect Alberta sales tax, but they must remain aware of the taxation laws applied in other provinces.

The date of implementation for this tax, as well as other details, will be announced with the introduction of the legislation in spring 2020.

Tourism levy and short-term rentals (STR)

As announced in Budget 2019, the government will extend the tourism levy to apply to the rental of all STRs listed on online marketplaces. Specifically, the current exemption for establishments with fewer than four bedrooms available for rent separately will be removed. A new exemption will be introduced for properties that are not listed on any online marketplace, where the purchase price of the rental is less than $30 per day or $210 per week or the operator has annual gross revenue from the rental of temporary accommodation in Alberta of less than $5,000.

In order to simplify collection and reduce compliance effort for STR operators, online marketplaces will be authorized to collect and remit the tourism levy on behalf of operators. Operators who offer STRs on online marketplaces, but do not collect the levy on their behalf will be required to register with Alberta’s Tax and Revenue Administration, collect the tourism levy from their customers, file an online return and remit the levy to the government. These operators can reduce their compliance effort by listing properties on online marketplaces that agree to collect and remit the levy.

Legislation implementing these changes will be introduced in spring 2020.