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Capital Gains Inclusion Rate Change: Draft Legislation Released

Friday June 14, 2024

Earlier this week on June 11th, a ‘ways and means motion’ outlining draft legislation on the capital gains inclusion rate cleared the House of Commons.

First introduced in the April budget and expected to be enacted this fall, this change to Canada’s tax laws will see the capital gains inclusion rate increased from 50% to 67% above a $250,000 annual threshold for individuals, and on all capital gains realized by corporations and most types of trusts.

Here is a summary of the additional details and clarification provided:

  • When allocating capital gains income to beneficiaries and partners, trusts and partnerships will be able to designate the portion of capital gains realized prior to June 25, 2024, allowing the beneficiary or partner to utilize the 50% inclusion rate on that portion of their gain.

Note: This allocation will require the trust or partnership to complete and file a prescribed form with their 2024 return. This form has not yet been released.

  • Capital gains reserve income will be subject to the 50% inclusion rate if the taxpayer’s taxation year began prior to June 25, 2024. Capital gains reserve income will be subject to the 67% inclusion rate for taxation years beginning on or after June 25, 2024.

Note: Any amounts included in income from a capital gains reserve are deemed to be realized on the first day of the taxpayer’s taxation year.

  • Non-residents will be able to apply for a certificate of compliance to reduce withholding tax on proceeds from Canadian real estate sales occurring on or after January 1, 2025 from 35% (applicable % after increase to the capital gains inclusion rate) to 25% (% under current rules)

More details are expected to be released when the legislation is introduced next month.

We invite you to read the 2024 Federal Budget Commentary by our Managing Partner Kalin McDonald regarding the proposed changes to the capital gains inclusion rate.


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