With each federal budget comes a mix of new tax measures, program enhancements, and technical rule changes that can be difficult to interpret without context. To help you stay informed, we’ve outlined a selection of key business and indirect tax updates that may affect Canadian companies, innovators, and growing organizations.
This overview is intended to provide a practical snapshot of notable changes, including updates to SR&ED incentives, investment tax credits, international tax rules, and GST/HST measures. As always, the real impact will depend on your specific situation, so we encourage you to reach out if you’d like to discuss how these changes may apply to you.
Business Tax Measures
Immediate expensing – manufacturing & processing buildings
- Temporary 100% first-year deduction for eligible manufacturing/processing buildings (and eligible additions/alterations) if 90%+ floor space used for M&P.
- Applies to property acquired on/after Budget Day and first used for M&P before 2030.
- Phase-down if first used later:
- 75% if first used in 2030–2031
- 55% if first used in 2032–2033
- Not available after 2033
- Recapture may apply if building use changes.
SR&ED enhancements (confirmed + increased)
- Confirms intent to implement previously announced changes (higher limits, broader eligibility, capital expenditures restored).
- Further increases enhanced credit expenditure limit to $6M (from proposed $4.5M).
- Applies to tax years beginning on/after Dec 16, 2024.
Agricultural co-ops – patronage dividends paid in shares
- Extends deferral rules for eligible shares issued before end of 2030 (current expiry end of 2025).
Critical Mineral Exploration Tax Credit expanded
- Adds more minerals (e.g., bismuth, cesium, chromium, fluorspar, germanium, indium, manganese, molybdenum, niobium, tantalum, tin, tungsten).
- Applies to flow-through agreements entered after Budget Day to Mar 31, 2027.
Clean Technology Manufacturing ITC expanded
- Expands eligible critical minerals to include antimony, indium, gallium, germanium, scandium.
- Applies to property acquired/available for use on/after Budget Day.
CCUS ITC – full rates extended
- Extends full CCUS credit rates to end of 2035 (previously end of 2030).
- Lower rates apply 2036–2040.
- Review postponed to before 2035.
Clean Electricity ITC – Canada Growth Fund
- Adds Canada Growth Fund as an eligible entity.
- Financing from Canada Growth Fund would not reduce eligible property cost for credit purposes.
- Applies to property acquired/available for use on/after Budget Day.
Stop tax deferral via tiered corporate structures (mismatched year ends)
- Targets corporate chains using timing differences to defer Part IV / refundable tax mechanics.
- Suspends the payer’s dividend refund in certain affiliated situations until the recipient pays dividends out (with exceptions).
- Applies to taxation years beginning on/after Budget Day.
Canadian Exploration Expense clarification
- Clarifies “quality” does not include economic viability/engineering feasibility studies.
- Effective Budget Day.
International tax measures
Transfer pricing modernization
- Updates rules to align more closely with OECD Guidelines; emphasizes economically relevant characteristics and actual conduct.
- Raises penalty threshold (adjustments) from $5M → $10M.
- Tightens documentation timing: provide documentation within 30 days (down from 3 months).
- Applies to tax years beginning after Budget Day.
Insurance – investment income backing Canadian risks (FAPI)
- Clarifies that investment income in foreign affiliates used to back Canadian insurance risks is included in FAPI.
- Applies to tax years beginning after Budget Day.
Sales and excise tax measures
Underused Housing Tax eliminated going forward
- UHT eliminated for 2025+ calendar years: no tax and no returns for 2025 onward.
- 2022–2024 obligations remain (returns, payments, penalties, interest).
Luxury tax on aircraft and vessels ended
- Ends luxury tax on subject aircraft and vessels after Budget Day.
- Vehicles remain taxable (above threshold).
- Final return required for the period including Budget Day; registrations maintained for rebates, then cancelled Feb 1, 2028.
Carousel fraud – reverse charge mechanism (telecom to start)
- Introduces proposed reverse charge for certain telecom supplies (e.g., VoIP minutes) where recipient is registered and buying mainly to resupply.
- Supplier doesn’t collect tax; recipient self-assesses and may claim ITC if eligible.
- Requires invoice notation that reverse charge applies.
- Consultation deadline: Jan 12, 2026.
Manual osteopathic services – GST/HST clarification
- Clarifies that services by manual osteopathy providers who are not osteopathic physicians are taxable.
- Applies after June 5, 2025, with a transitional exception up to Budget Day if no tax was charged/collected/remitted.
“Previously announced” measures
- Budget 2025 confirms intent to proceed with a long list of previously announced tax measures (various dates in 2024–2025), with some deferred implementation timelines.
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