On April 16, 2024, the Minister of Finance (Canada) presented the federal government’s 2024 budget. The 2024 Budget includes an adjustment to the capital gains inclusion rate. Two days later, the Quebec government announced that it would adopt equivalent changes to Quebec's tax legislation and regulations.

Considering that the profit from the sale of a commercial property is considered a capital gain, these federal and provincial measures will have a significant impact on the commercial real estate sector, particularly in the context of property sales.

Currently, 50% of a capital gain is included in calculating a taxpayer's income. For capital gains realized on or after June 25, 2024, the 2024 Budget proposes to increase this rate from 50% to 66.7% for all corporations and trusts.

In view of the above, it would be wise to consider this new measure if you are planning to sell a commercial property in the coming months and a capital gain is anticipated.

That being said, there are a number of strategies available to owners, from proceeding more quickly with an already planned sale to not claiming an otherwise available capital gains reserve on the tax return for the 2023 tax year, reorganizing your fiscal strategies or even doing nothing!

Strategies will need to be assessed quickly to take account of the June 24 date, and support from tax and real estate specialists will be essential.

Pascal Provost
Attorney

Elisa Eouzan
Attorney