FEDERAL BUDGET 2019: Impacts and Insights on the Agriculture Industry

At first glance, the 2019 budget does not propose any significant measures that will impact the landscape of the Canadian agricultural sector as a whole, although there were specific areas that saw targeted changes and financial support. Budget 2019 provides welcome relief to farm corporations that sell their farm products to arm’s length parties by allowing access to small business tax rates on this income. This will not only benefit producers but also related agribusiness corporations, specifically producer-owned grain terminals and feedlots by eliminating a competitive disadvantage in the marketplace.

The government has reiterated its intention to continue consultations with farmers regarding potential improvements to the current taxation rules surrounding intergenerational transfers but time will tell if any significant changes will be forthcoming in this area. Budget 2019 provides $3.9 billion in support to the supply-managed sector to sustain the incomes of eligible dairy, poultry, and egg farmers while also providing a backstop to support the value of existing quota investments previously made by producers. Further details regarding these and other measures introduced can be found below. Please also review your provincial budget summaries for impacts to the agriculture sector in your individual provinces.

Small Business Deduction – Farmers And Fishers

• Budget 2019 proposes relief for farming and fishing businesses by eliminating the requirement that sales must be to a farming or fishing cooperative to be excluded from specified corporate income. Instead, any income from the sales of farming products and fishing catches to any arm’s length corporation will not be subject to the specified corporate income rules. This measure will apply retroactive to any taxation years that began after March 21, 2016.

MNP Insight:

This clarification will provide greater certainty to agricultural producers as well as related businesses in the agricultural sector. Specifically, producers will be able to market their grain and livestock to the purchaser that makes the most business sense without concern for potential income tax consequences.

The expansion to include any arm’s length corporation as opposed to solely agricultural co-operative corporations should incentivize new producer-owned agribusinesses to emerge.

Intergenerational Business Transfers

• The government will continue consultations with farmers, fishers and other business owners throughout 2019 to develop new proposals to facilitate the intergenerational transfers of businesses while protecting the integrity and fairness of the tax system.

Supply Managed Sectors

• Following the recent ratifications of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Budget 2019 proposes $3.9-billion in support for supply-managed farmers:

1. Support of up to $2.4 billion to sustain the incomes of eligible dairy, poultry and egg farmers. $250 million has already been provided to support dairy farms, with the remaining amount of up to $2.15 billion available in the coming years.
2. The introduction of a Quota Value Guarantee Program intended to protect the value of investments made by farmers in supply-managed sectors. $1.5 billion has been set aside for this demand-driven program, which will only apply when actual quota is sold.

For more information, contact Ryan Kehrig, Senior Manager, Tax Services, at 306.664.8347 or [email protected]