For decades, Canada has upheld a brand that promotes inclusive economic growth. The country’s policies show a clear aim for sustainable development, aiming to support the vulnerable groups in society. Efforts like the Canada Child Benefit (CCB) program, minimum wage laws, and progressive taxation policies are designed to provide equal economic opportunity for Canadian residents.

The Canadian Department of Finance recently made significant changes to its taxation laws, which include measures to discourage tax avoidance while bridging the income distribution gap among residents.

In this article, we will cover the highlights of Canada’s new tax fairness laws, as outlined in its 2024 budget. Furthermore, we will compare Canadian and U.S. tax laws, and discuss how the EB-5 visa program can benefit Canadian investors.

 

What Is Canada’s Tax Fairness for Every Generation?

The year 2024 will be pivotal for the Canadian taxation system and economy at large, due to the new anti-avoidance tax laws outlined in the country’s 2024 budget documents. The Canadian Department of Finance aims to influence income distribution to favor less-earning Canadians by placing higher taxes on income from capital gains.

Essentially, the Canadian government found that many young people struggle to get by, unlike older generations. The global pandemic triggered a rise in the cost of living, making it difficult for younger middle-class Canadians to achieve financial security. On the other hand, the top one percent in the Canadian economy, comprising an older generation, earns more and pays less taxes.

Acknowledging this problem, the Canadian government, through its finance department, has enacted new tax laws.

Canada’s new tax fairness policy aims to reduce the taxation burden on middle and lower-class individuals while compelling the upper class to contribute more to the economy.

Tax Laws on Capital Gains in Canada

Before the new taxation policies, the Canadian upper class enjoyed a capital gains tax advantage, paying tax on just half of the income derived from capital gains. However, the country’s 2024 budget documents now mandate that individuals who earn over $250,000 in annual capital gains pay tax on two-thirds of their income. Specifically, the new update calls for an increase in capital gains tax from 50% to 67%.

The updated tax policies in Canada imply that individuals who earn a high income from capital investments will pay higher taxes. For example, an individual who makes a $400,000 annual profit from capital investments will pay $125,000 (50% of $250,000) plus $100,000 (⅔ of $150,000) as of June 25, 2024. That is a total of $225,000, a whopping $25,000 more than what they would have paid before June 25, 2024.

An article on tax fairness from the Canadian Department of Finance indicates that only about 0.01 percent of Canadians under 30 are expected to have capital gains above the $250,000 annual threshold in 2025. In other words, the new tax fairness laws mostly affect the older, upper-class demographic.

The updated tax laws maintained the exemption of certain domestic assets from taxation to ease the financial burden on the middle and lower-class demographic. Consequently, assets such as tax-free savings accounts, pension plans, and principal residences will not be taxable, if they are registered accordingly.

Alternative Minimum Tax

Canada’s new taxation laws also updated the previous Alternative Minimum Tax (AMT) system. The system was adopted to curb tax avoidance by limiting the use of tax credits and other tax deduction methods.

Canadian residents with taxable income compare their minimum tax to their usual tax liability to determine whether they will pay AMT. If the AMT is higher, they pay the difference; if it’s lower, they pay their usual tax amount.

The 2024 budget documents modified Canada’s AMT policy to include a broadened AMT base. The government increased the percentage of taxable capital gains, once again targeting individuals who earn a high income from investments.

Canadian vs. U.S. Taxation Laws

Changes in Canada’s tax rules prompt investors to compare taxation laws in Canada and the USA.

While both countries tax high-income earners, the U.S. tax system stands out for its favorable treatment of investors. Unlike Canada, the U.S. offers more opportunities for deductions and credits, providing investors with several pathways to mitigate their tax liabilities and optimize their financial returns.

One key advantage of the U.S. tax system is how it encourages investment and entrepreneurship through various tax breaks and incentives. For example, the U.S. provides generous deductions for business expenses, including research and development costs, equipment purchases, and employee wages. It also offers favorable tax treatment for long-term capital gains, with lower tax rates applied to investments held for more than one year.

The U.S. tax code also allows for a wide range of deductions and credits for specific industries and activities, such as real estate development, renewable energy investments, and charitable contributions. Additionally, investors in the U.S. have more tax-saving options. They can reduce taxes and increase profits through strategic planning.

Ultimately, the choice between Canada and the U.S. as an investment destination depends on personal goals, risk tolerance, and preferences. Canada has its own advantages, but the U.S. stands out with its low taxes and investor-friendly policies.

Investors should seek guidance from qualified tax professionals to make informed investment decisions and avoid losing money.

Obtain Permanent Residency in the U.S. Through EB5AN

The EB-5 Immigrant Investor Program presents the perfect opportunity for Canadian investors looking to immigrate to the U.S. This initiative offers foreign nationals the opportunity to obtain permanent residence in the U.S. in exchange for boosting the country’s economy through investments.

If the taxation laws in the U.S. align with your long-term financial goals, then EB5AN can help you get your Green Card fast. With over a decade of experience, we have successfully facilitated the EB-5 process for over 2,300 families, including Canadian nationals.

For more information on how we can help you kickstart your EB-5 journey, schedule a free consultation with EB5AN today.