Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
New Tax Breaks or Trouble? Share Your Voice Until Sep 11
Taxes | Aug 19, 2024
Image: Freepik/Drazen Zigic
Government is Accepting Feedback on Key Changes to the Canadian Entrepreneurs' Incentive (CEI) and Capital Gains Tax Until September 11
On Aug 12, 2024, the Canadian government published changes to the Canadian Entrepreneurs' Incentive (CEI), a tax incentive included in the 2024 budget that is intended to offset the capital gains tax increase announced in the same budget that increases the taxable component of capital gains from 50% to 66.67% for anyone whose yearly capital gains exceeded $250,000.
Key Changes to CEI
- For up to $2 million in qualified capital gains over the course of the entrepreneur's lifetime, the updated CEI offers a tax relief by lowering the capital gains inclusion rate from 66.67% to 33.33%. This means a lower capital gains inclusion rate for entrepreneurs to promote innovation among Canadian ventures.
- To provide further benefit to entrepreneurs when selling their companies, the government increased the Lifetime Capital Gains Exemption (LCGE) from $1,016,836, to $1.25 million.
See: Canada’s Rising Tax Burden and Fintech Opportunities
- For qualified entrepreneurs, the combined effect of these two changes could result in tax-exempt gains of up to $3.25 million.
- To qualify for CEI, entrepreneurs must own at least 10% of a qualifying company and have worked there for at least five years. Important to note that some industries are excluded from the benefit including consulting, financial services, and real estate.
Implications and Reactions
Over a five-year period, the capital gains tax increase is anticipated to generate $19.4 billion in new government revenue over 5 years. The government has explained this increase to the taxable share of capital gains as a step toward promoting generational fairness, especially for younger Canadians.
See: Can Canada Harvest the Next Wave of Productivity Growth?
Needless to say, investors and management are livid and worried that the changes will discourage investment, slow growth, and make it harder to get growth financing and attract and retain top talent. Also, many have pointed out that family-owned businesses, doctors / medical professionals, and many small businesses may be disproportionately impacted.
Share your voice
The government is accepting comments on the proposed amendments to CEI until September 11, 2024. Send an email with your feedback to: consultation-legislation@fin.gc.ca.
Conclusion
The higher LCGE and lower inclusion rate may help certain entrepreneurs, but more extensive changes are needed to ensure Canada's tech and innovation sector can continue to innovate, solve meaningful challenges, and become economically and globally competitive.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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