New Proposed Tax Incentive For Entrepreneurs

On August 12, 2024, the Department of Finance Canada released new legislative proposals to implement the Canadian Entrepreneurs' Incentive (the "CEI"), which was first announced in the 2024 Federal Budget.

What is the Canadian Entrepreneurs' Incentive?

The 2024 Federal Budget increased the capital gains inclusion rate from 1/2 to 2/3, save for the first $250,000 of capital gains realized by individuals (excluding most trusts) that will be subject to a 1/2 inclusion rate. Accordingly, the sale of capital property, including the shares of a business will now be subject to a higher rate of tax. The CEI is intended to provide relief to eligible entrepreneurs who dispose of certain qualifying property in the form of a reduced capital gains inclusion rate of 1/3 (instead of 2/3). The CEI will provide access to the reduced inclusion rate for up to a lifetime maximum of $2 million on eligible capital gains, which will apply after the individual utilizes their lifetime