BUDGET 2024: TAX BREAKS FOR ENTREPRENEURS

By Socium

As part of Budget 2024, the Government of Canada is proposing a partial lifetime capital gains exemption for entrepreneurs, with a stated goal of enabling entrepreneurs to recycle more capital towards their next goal, whether starting a new company, investing in a start-up or for retirement.

The proposed Canadian Entrepreneurs’ Incentive (the “Incentive”) will reduce the inclusion rate of capital gains income from 50% to 33.3% on a lifetime maximum of $2 million in eligible capital gains. The lifetime maximum will increase by $200,000 each year, starting in 2025, until it reaches $2 million in 2034.

The Incentive will be available to founding investors in certain sectors who own at least 10% of the shares in their company, and where the company in question has been their principal employment for at least five years.

When the Incentive is fully rolled out, entrepreneurs will have a combined exemption of at least $3.25 million when selling all or part of a business, inclusive of the lifetime capital gains exemption of $1.25 million.

The inclusion of the Incentive, as well as other amendments to the Income Tax Act, are proposed to become effective June 25, 2024, subject to parliamentary process, including the consideration of the budget implementation act for 2024 by the House of Commons and Senate, followed by Royal Assent. Once the amendments including the Incentive are in final form and have come into force, we will provide a further update.

For further information, please contact us at info@sociumlaw.com.