ANNOUNCEMENT

Apprentice Training Tax Credit

(Skilled trades that qualifying)

As part of building a solid foundation to support a new generation of economic growth, the government proposes to introduce a new Apprenticeship Training Tax Credit (ATTC) to encourage the hiring of apprentices in certain skilled trades. The ATTC would complement other apprenticeship program measures that are being announced in this Budget to help increase the availability of skilled workers in key sectors of the economy.

Tax Incentive

Corporations and unincorporated businesses would be eligible for a 25 per cent refundable tax credit on eligible expenditures incurred with respect to eligible apprentices. For businesses with total payroll costs not exceeding $400,000, the tax credit rate would be increased to 30 per cent.

An employer would be eligible for a tax credit of up to $5,000 per year per eligible apprentice to a maximum of $15,000 over the first 36 months of the apprenticeship. The maximum annual tax credit of $5,000 would be pro-rated for the number of days the apprentice is employed with that employer during the year.

Eligible Apprentices

Eligible apprentices would be in their first 36 months of an apprenticeship training program in a qualifying skilled trade on or after May 19, 2004 and have commenced employment before January 1, 2008.

Eligible Expenditures

Eligible expenditures would be salaries and wages paid after May 18, 2004 and before January 1, 2011 to an eligible apprentice.

Qualifying Skilled Trades

Qualifying skilled trades would include designated construction, industrial and motive power trades, as well as the service trades eligible under the present apprenticeship component of the Co-operative Education Tax Credit.

Sunset Provision

Prior to December 31, 2007, the government would consult with stakeholders on the effectiveness of the ATTC. Stakeholders would be expected to provide evidence of the tax credit's effectiveness as a condition for continuing the incentive program.

Revising the Co-operative Education Tax Credit (CETC)

The CETC provides employers with a 10 per cent refundable tax credit (15 per cent for small businesses) on the salaries and wages paid to students or apprentices in qualifying work placements.

The following changes are proposed to the CETC:

• The CETC would continue to be available for qualifying co-op placements. Transitional rules are proposed for apprenticeships in their first 36 months that straddle May 18, 2004. Salaries and wages paid before May 19, 2004 would qualify for the CETC, and amounts paid after May 18, 2004 would qualify for the proposed ATTC.

• For apprenticeships not in their first 36 months and for work placements in approved fields of study other than co-operative education programs, no deduction may be claimed for salaries and wages paid after December 31, 2004. Since a minimum initial employment of 10 weeks is required for the CETC, employment commencing after October 25, 2004 would not qualify. These fields of study are listed in Appendix 2 of Tax Legislation Bulletin 96-2R2.

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