Tax measures: 
Supplementary information

Related documents

• Notice of Ways and Means Motion to Amend the Income Tax Act and the Income Tax Regulations
• Notice of Ways and Means Motion to amend the Excise Tax Act, the Excise Act, 2001, the Federal-Provincial Fiscal Arrangements Act and other tax statutes and related texts

Overview

This annex provides detailed information on tax measures proposed in Budget 2026.

Table 1 lists these measures and provides estimates of their fiscal impact.

The annex also provides Notices of Ways and Means Motions to amend the Income Tax Act, the Excise Tax Act, the Excise Act, 2001, the Federal-Provincial Fiscal Arrangements Act, the Air Travellers Security Charge Act, the Select Luxury Items Tax Act, and the First Nations Goods and Services Tax Act and draft amendments to various regulations.

In this annex, all references to "Budget Day" are to be read as references to the day on which this Budget is presented.

Personal Income Tax Measures  

2027 Canada Groceries and Essentials Benefit Supplement

The Canada Groceries and Essentials Benefit (CGEB), formerly the Goods and Services Tax (GST) Credit, helps low- and modest-income individuals and families offset the rising cost of food and other everyday essentials and the GST they pay. The CGEB is non-taxable, income-tested, and indexed to inflation.

For the 2026-27 benefit year (July 1, 2026, to June 30, 2027), the current rules provide maximum CGEB amounts of $445 per adult, $234 per child and $234 for the single supplement. The CGEB is delivered as equal quarterly payments in July, October, January and April.

Under the current rules, for the 2026-27 benefit year:

• the CGEB is subject to a five-per-cent phase-out rate based on the portion of 2025 adjusted family net income above $46,432;
• for single adults without children, the single supplement is subject to a two-per-cent phase-in rate based on the portion of 2025 net income above $11,564; and
• single parents receive the full single supplement (without the phase-in) and the adult amount, rather than the child amount, for their first child (the per-child amount is provided for each additional child).

Budget 2026 proposes to deliver a one-time CGEB supplement, to be delivered in early 2027, equal to half of the maximum annual CGEB amounts for the 2026-27 benefit year.

• The maximum amounts of this supplement would be $223 per adult, $117 per child and $117 for the single supplement.
• For this supplement only, the phase-in and phase-out rates would be adjusted to six per cent and 15 per cent, respectively, to ensure that the supplement would be fully phased in and phased out at the same income levels as under the current rules.

Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit

Flow-through shares allow corporations to renounce or "flow through" Canadian exploration expenses (CEE) and Canadian development expenses (CDE) to investors, who can deduct the expenses in calculating their own taxable income. CEE is deductible at a 100-per-cent rate, while CDE is deductible at a 30-per-cent rate on a declining-balance basis. The proposed Productivity Mega Deduction would increase the deduction rate for CDE from 30 per cent to 100 per cent.

In addition to the tax benefits associated with the flow-through share regime, two tax credits provide a further benefit to individuals who invest in eligible flow-through shares. These tax credits support junior mining companies engaged in certain grassroots mineral exploration activities.

• The Mineral Exploration Tax Credit (METC) is equal to 15 per cent of the specified mineral exploration expenses incurred in Canada and renounced to flow-through share investors. The METC is set to expire on March 31, 2027.
• The Critical Mineral Exploration Tax Credit (CMETC) is equal to 30 per cent of specified critical mineral exploration expenses incurred in Canada and renounced to flow-through share investors. The CMETC is set to expire on March 31, 2027.

Budget 2026 proposes to extend eligibility for the METC and CMETC for five years, to flow-through share agreements entered into on or before March 31, 2032.

Budget 2026 also proposes to expand the CMETC to include antimony as an eligible critical mineral. This expansion would apply to expenditures renounced under eligible flow-through share agreements entered into after Budget Day and on or before March 31, 2032.

Canada Caregiver Credit

The Canada Caregiver Credit (CCC) is a non-refundable tax credit that recognizes the impact of non-discretionary, out-of-pocket expenses on a caregiver's ability to pay tax. The amount of tax relief is determined by applying the lowest personal income tax rate to the credit amount.

For 2027, the maximum credit amounts are set out below. 

• $9,001 (providing tax relief of up to $1,260) in respect of infirm dependants who are parents, grandparents, siblings, aunts, uncles, nieces, nephews, or adult children of the caregiver or of the caregiver's spouse or common-law partner.
• $2,812 (providing tax relief of up to $394) in respect of:
  • an infirm dependent spouse or common-law partner in respect of whom the caregiver claims the Spouse or Common-law Partner Credit; or

  • an infirm dependant in respect of whom the caregiver claims the Eligible Dependant Credit.

    Where this results in less total tax relief from a combination of the Spouse or Common-Law Partner Credit or the Eligible Dependant Credit and the lower CCC amount ($2,812) than would be available if the higher amount ($9,001 for 2027) were claimed, a top-up amount is provided to make up the difference. This can occur as the dependant's net income impacts the amount available under the Spouse or Common-Law Partner Credit or Eligible Dependant Credit.

• $2,812 (providing tax relief of up to $394) in respect of an infirm child who is under the age of 18 years at the end of the taxation year.  

The credit amount is reduced dollar-for-dollar by the dependant's net income above a specific threshold ($21,136 in 2027). No income test applies in respect of an infirm child under age 18. 

Budget 2026 proposes to make the CCC refundable to ensure that eligible caregivers can receive the full amount even if they have little or no tax liability.

A refundable CCC would retain the same design parameters of the current non-refundable credit, including the annual indexation of the maximum amounts and income threshold.  

This measure would apply to the 2027 and subsequent taxation years.  

Canada Growth Incentive – Capital Gains Exemption

Budget 2026 proposes to introduce a new Canada Growth Incentive (CGI) capital gains exemption which would allow a Canadian-resident individual to claim a tax exemption on capital gains realized on the disposition of qualifying shares of a qualifying corporation, up to a $15-million limit. This $15 million would apply separately to each qualifying individual in respect of each business.

Qualifying Individual

A qualifying individual would have to be an individual other than a trust and be at least 18 years old at the time they acquired a qualifying share. The individual would have to be resident in Canada throughout the year in which they claimed the exemption. The claim could relate to a capital gain realized on the disposition of a qualifying share in that year or a preceding taxation year.

A qualifying share would have to be issued by a qualifying corporation to the qualifying individual (or a partnership of which the qualifying individual is a member) and owned directly by the qualifying individual or by the partnership. Where a partnership acquired a qualifying share, at the time that the partnership acquired the share, the qualifying individual would have to have been a member of the partnership and at least 18 years old.

Qualifying Shares

A share of the capital stock of a corporation would be a qualifying share of a qualifying corporation if the following conditions were met.

• At the time of share issuance:
  • the corporation must be a Canadian-controlled private corporation; and
  • all or substantially all of the fair market value of the corporation's assets must be attributable to assets used, or reasonably intended to be used within 36 months, principally in a qualifying business carried on primarily in Canada.
• Immediately before and after the share's issuance, the combined carrying value of the assets of the corporation and all corporations related to it must not exceed $100 million.
• The share must have been issued either solely for cash consideration or in exchange for employment services provided by the qualifying individual to the qualifying corporation. Continuity rules would be proposed to accommodate certain share-for-share exchanges and other corporate reorganizations that could occur after qualifying shares have been issued.
• Throughout the period during which the qualifying individual or a partnership of which the qualifying individual is a member owned the qualifying share, 50 per cent or more of the fair market value of the corporation's assets must be attributable to assets used, or reasonably intended to be used, principally in a qualifying business. Further, for a minimum period of 24 consecutive months immediately following share issuance, the qualifying business would be required to be carried on primarily in Canada.
• For a minimum period of 36 consecutive months immediately before the disposition, the share must have been held by the qualifying individual or the partnership of which the qualifying individual was a member.
• At the time of disposition:
  • the corporation must be a Canadian-resident corporation that is either a private corporation or a public corporation listed on a designated stock exchange located in Canada; and
  • all or substantially all of the fair market value of the corporation's assets must be attributable to assets used principally in a qualifying business.

Qualifying Business

A qualifying business would be an active business other than:

• a business providing consulting services, a professional practice of an accountant, lawyer, notary, physician, other health care practitioner, engineer, architect, and any business whose principal asset is the reputation or skill of one or more employees;
• a business operating in the agricultural, fishing, forestry, mining, financial, insurance, utilities, real estate, food and accommodation, arts, recreation, or entertainment sectors; and
• a business operating under a licensing or franchising agreement.

Integrity Rules

Additional rules will be proposed to prevent individuals from accessing the CGI exemption in circumstances that do not align with the intent of the measure, including the multiplication of the exemption limit through the use of multiple corporations that carry on the same underlying business.

Details of these rules will be released at a later date.

Alternative Minimum Tax

The Alternative Minimum Tax (AMT) is a parallel tax calculation that allows fewer tax credits, deductions, and exemptions than the ordinary personal income tax rules allow. Taxpayers pay either regular tax or AMT, whichever is higher. If a taxpayer pays AMT, the amount by which their AMT exceeds their regular tax can normally be carried forward for up to seven years and applied as a credit in computing tax payable for a subsequent taxation year to the extent that the taxpayer's regular tax payable for that year exceeds their AMT.  

Capital gains exempted through this measure would be subject to an inclusion rate of 30 per cent for the purposes of the AMT, consistent with the treatment of gains eligible for the Lifetime Capital Gains Exemption.

Interaction with Other Capital Gains Exemptions

A CGI exemption claimed on qualifying shares of a qualifying corporation would limit the ability of a qualifying individual to claim the Lifetime Capital Gains Exemption for a sale of shares of the same corporation. Similarly, a Lifetime Capital Gains Exemption claimed on the sale of shares of a corporation would limit the ability of a qualifying individual to claim the CGI exemption on the sale of shares of that same corporation.

A qualifying individual could generally claim both the capital gains exemption on a sale to an Employee Ownership Trust or a worker cooperative and the CGI exemption on the same sale of shares, with the use of one exemption having no impact on the limit available under the other exemption.

Coming into Force

This measure would apply in respect of qualifying shares of a qualifying corporation issued on or after Budget Day and before 2037.

Canada Growth Incentive – Rollover for Investments in Small Businesses

Under the Income Tax Act, individuals are allowed to defer taxation on capital gains realized on a qualifying disposition of eligible small business corporation (ESBC) shares to the extent that proceeds from the disposition are used to acquire replacement ESBC shares in the year of disposition or the following calendar year.

For a disposition of ESBC shares by an individual to qualify, the following conditions must be met:

• Holding period: The shares were held by the individual for a minimum of 185 days immediately before the disposition.
• Active business requirement: Throughout the period during which the individual owned the shares, the corporation was a taxable Canadian corporation all or substantially all (generally at least around 90 per cent) of the assets of which (measured by fair market value) were: used principally in an active business carried on by the corporation or by a related active business corporation; or shares or debts of a related active business corporation.
• Canadian activity: The active business of the corporation was carried on primarily in Canada for the lesser of two years and the period during which the individual held the share.

Period to acquire replacement shares

Budget 2026 proposes to increase the period to acquire replacement shares and to introduce a special provision for individuals who have entered into agreements for future equity.

First, the period to acquire replacement shares would be extended to encompass the year of disposition and the three following calendar years. In general terms, an individual who made a qualifying disposition in a taxation year and did not reinvest the proceeds in that year would be able to choose either to pay tax on the capital gain for the year of disposition or to claim a reserve that defers recognition of the gain to the following year. This deferral mechanism would be available until the end of the replacement period.

Second, an individual who, before the end of the proposed three-year replacement period, enters into an agreement with an ESBC under which the investor provides upfront capital in return for shares to be issued at a future date (e.g., a simple agreement for future equity or SAFE), would be able to defer the capital gain for an additional two years, for a total replacement period of up to five years. If no ESBC shares are issued to the individual under the agreement by the end of the fifth year following the year of disposition, the deferred gain would be taxed.

With respect to any proceeds of a qualifying disposition that are not ultimately invested in replacement shares, interest would apply at a prescribed rate from the balance-due day for the year of disposition to the last day of the taxation year in which the gain is taxed.

Active business requirement

Budget 2026 proposes to lower the threshold from "all or substantially all" to "primarily" for the active business requirement's asset test that must be met throughout the period during which the individual owned the shares. However, the "all or substantially all" threshold would need to be met at the time of issuance and disposition of the shares.

Finally, the active business would be required to be carried on primarily in Canada at the time of share issuance and for a continuous period immediately following issuance. That period would be the lesser of two years and the period during which the individual owned the shares.

Coming into force

These measures would apply to qualifying dispositions that occur on or after January 1, 2027.

Instalment Payments for Individuals and Corporations

Most individuals pay taxes through withholdings on their employment income that are remitted to the Canada Revenue Agency by their employers. However, where an individual receives income from sources that are not subject to withholding (e.g., certain sources of pension income, business income, dividends, interest, rental income, and capital gains), they may have to pay income tax in quarterly instalments. For most individuals, instalments are required if their combined federal-provincial net tax owing on income from such sources for the current year and either of the two previous years is more than $3,000 (or $1,800 federal net tax owing for Quebec residents). The income tax instalment thresholds are lower for Quebec residents because the federal government does not collect provincial income tax in Quebec.

Individuals whose chief source of income is from fishing or farming can currently make a single instalment payment of two thirds of their net tax owing by December 31, and pay the remainder by the applicable balance-due date in the following taxation year.

Corporations generally must make monthly or quarterly tax instalment payments in respect of their federal tax liability unless their total federal tax payable is $3,000 or less for either the current or previous year.

Interest and penalties may apply on late or insufficient instalment payments.

Increasing the Instalment Thresholds

Budget 2026 proposes to increase the threshold from $3,000 to $7,500 for corporations and individuals resident outside Quebec, and from $1,800 to $4,500 for individuals resident in Quebec. The thresholds would be indexed to inflation and rounded to the nearest $500. Any remaining tax payable for a taxation year would be due on the applicable balance-due date.

This measure would apply to taxation years that begin on or after January 1, 2028. As with the current rules, in determining whether instalments would be required, the relevant threshold would need to be exceeded for the current year and either of the two previous years. For example, an individual resident in Manitoba would be required to make instalments for the 2028 taxation year if their 2028 net tax owing exceeds $7,500 and either their 2026 or 2027 net tax owing exceeds $7,500.

Allowing an Annual Instalment for All Individuals with Business Income

Budget 2026 proposes that individuals whose primary source of income is from a business (including professional or commission income) be allowed to make a single annual instalment payment, instead of quarterly instalments. The single instalment payment would equal two thirds of their combined federal-provincial net tax owing for the year and be due by December 31. The remainder would be due on the applicable balance-due date. This change would extend similar treatment to what is currently available for farming and fishing income to other business income.

This measure would apply to the 2028 and subsequent taxation years.

Income Tax Return Filing and Balance-Due Dates for Individuals

The Income Tax Act requires most individuals to file their T1 income tax return and pay any balance owing by April 30 following the end of the taxation year. Self-employed individuals and their spouses or common-law partners have until June 15 to file their returns, although any balance owing remains due by April 30.

Budget 2026 proposes to change the T1 filing and balance-due dates to May 15 for all individuals, including self-employed individuals and their spouses or common-law partners.

These measures would apply to the 2027 and subsequent taxation years.

Northern Residents Deductions

The Northern Residents Deductions consist of a residency deduction and a travel deduction, which are available to individuals who live in prescribed Northern and Intermediate Zones. Residents of the Northern Zone are eligible for the full deductions, while residents of the more southerly Intermediate Zone can claim half the maximum deductions.

Residency Deduction

The residency deduction is generally based on the number of days that an individual lives in a prescribed zone, subject to two rules that reduce the value of the deduction in certain situations.

• The amount of the residency deduction is reduced by the amount of non-taxable employer-provided benefits received by the taxpayer for board and lodging at special work sites in the north.
• The residency deduction cannot exceed 20 per cent of the individual's net income.

Budget 2026 proposes to eliminate both of these restrictions.

Travel Deduction

The travel deduction permits a taxpayer to deduct amounts in respect of travel for themselves and eligible family members. The deduction is available for any number of trips made to obtain medical services not available locally and up to two trips per person per year for non-medical reasons. The amount that can be deducted in respect of a given trip is the least of:

• the total travel expenses paid for the trip,
• the lowest cost return airfare to the nearest city designated in the Income Tax Regulations, and
• either the total amount of employer-provided travel benefits received in respect of the trip or the portion of a $1,200 "standard amount" allocated to the trip.

Budget 2026 proposes to eliminate the third limit, which is based on employer-provided travel benefits or the portion of the $1,200 standard amount allocated to the trip. All eligible northern residents would therefore be able to claim their travel expenses subject to the same limits, whether or not they receive employer-provided travel benefits.

These measures would apply to the 2027 and subsequent taxation years.

Expansion of the Intergenerational Farm and Fishing Property Rollover

The Income Tax Act allows for a tax deferral ("rollover") of capital gains on intergenerational transfers of certain farming property and fishing property from a taxpayer to the taxpayer's child or the child's spouse or common-law partner. For these purposes, a child includes the taxpayer's grandchild or great-grandchild.

Budget 2026 proposes to expand the rollover so that it is available for transfers to a niece, nephew, grandniece, or grandnephew of the taxpayer or the taxpayer's spouse or common-law partner.

This measure would be effective for transfers that occur on or after January 1, 2027.

Registered Disability Savings Plan

The Registered Disability Savings Plan (RDSP) is a tax-assisted savings plan designed to support the long-term financial security of a beneficiary who is eligible for the Disability Tax Credit.

Generally, an adult beneficiary is the holder of their own RDSP. Where they do not have contractual capacity due to a mental impairment, the plan holder must be a legal representative who is authorized under provincial or territorial law to act on the individual's behalf. If the individual does not have a legal representative but after reasonable inquiry, it is the opinion of the RDSP issuer that the individual's contractual capacity to enter into a plan is in doubt, a temporary measure is in place up to the end of 2026 to allow a qualifying family member of the individual to open an RDSP and be the plan holder. A qualifying family member may be a parent, spouse or common-law partner, or sibling.

Budget 2026 proposes to make the qualifying family member measure permanent.

Optional Flat Amounts for Personal Income Tax Deductions and Credits

Individuals need to keep receipts and satisfy other requirements to claim certain deductions and tax credits.

To reduce the need for individuals to keep receipts and itemize their expenses to support their amounts claimed, Budget 2026 proposes optional flat-amount calculation methods for certain deductions and credits. Individuals would still need to establish their eligibility.

These measures, described below, would apply to the 2027 and subsequent taxation years.

Moving Expense Deduction

The Moving Expense Deduction allows individuals to deduct moving expenses in respect of an eligible relocation to carry on a business or to be employed. The deduction is limited to the amount of employment or self-employment income earned at the new location. Eligible moving expenses may also be deducted up to the amount of a student's taxable income from scholarships, bursaries and research grants if the expenses are incurred to enable the taxpayer to be a student in full-time attendance at a post-secondary educational institution.

Deductible moving expenses include travel costs, the costs of transporting or storing household effects, meals and temporary accommodation, the cost of selling a former residence, and certain other expenses associated with the move. Individuals must keep documentation such as bills and receipts to support their claim.

Budget 2026 proposes to allow individuals making an eligible relocation to deduct a flat $1,000 in respect of the relocation instead of tracking and claiming their deductible moving expenses. The amount deducted would still be limited to the individual's employment or self-employment income earned at the new location, or to the student's taxable income from scholarships, bursaries and research grants. If an individual claims the flat amount in respect of an eligible relocation, that individual's spouse or common-law partner would not be permitted to claim a deduction in respect of the same eligible relocation. 

Clergy Residence Deduction

The Clergy Residence Deduction is available to individuals who are members of the clergy, members of a religious order, or regular ministers of a religious denomination. To qualify, these individuals must be in charge of, or minister to, a diocese, parish, or congregation, or be engaged exclusively in full-time administrative service by appointment of a religious order or religious denomination.

Eligible individuals receiving remuneration in the form of employer-provided housing can deduct the entire value of this benefit, including amounts in respect of utilities, from income. Eligible individuals who rent or own their own accommodation can claim a deduction that is the least of:

• the greater of a) $1,000 multiplied by the number of months (to a maximum of ten) in the year during which the individual would qualify for the deduction, and b) one-third of the individual's remuneration for the year from the office or employment;
• the actual rent and eligible utilities paid or, if the residence is owned by the individual or their spouse or common-law partner, the fair rental value of the residence including eligible utilities, minus amounts claimed in respect of the same accommodation (e.g., home office expenses), during periods of qualifying employment; and
• the individual's remuneration for the year from their office or employment.

Budget 2026 proposes to allow eligible individuals to deduct a flat amount in a year of $1,000 for each month in which they are eligible for the deduction, up to a maximum of $12,000 for a year, instead of claiming according to the existing detailed method described above. The amount deducted would still be limited to the individual's remuneration for the year from their office or employment.

If both members of a couple are eligible to claim the deduction and live in the same residence, only one could deduct $1,000 for a month in which both qualify for the deduction. If either the individual or their spouse or common-law partner chooses to deduct the flat amount for a year, neither would be permitted to claim a deduction using the detailed method in respect of that residence for that year.

Labour Mobility Deduction for Tradespeople

Eligible tradespeople and apprentices working in the construction industry who undertake an eligible temporary relocation are entitled to deduct up to $10,000 in eligible temporary relocation expenses in 2026. For a particular eligible temporary relocation, the deduction is limited to 50 per cent of the individual's employment income in respect of the relocation.

Eligible expenses in respect of an eligible temporary relocation are reasonable amounts associated with temporary lodging near the temporary work location, round-trip transportation from where the individual ordinarily resides to that lodging, and meals for the individual in the course of that trip.

Budget 2026 proposes to allow eligible tradespeople and apprentices working in the construction industry who undertake an eligible temporary relocation to deduct a flat $1,500 per year instead of claiming actual eligible expenses incurred.

Home Accessibility Tax Credit

The Home Accessibility Tax Credit allows certain eligible individuals to claim up to $20,000 in qualifying home renovation or alteration expenses per calendar year. Expenses must be incurred to improve the safety, accessibility, or functionality of an eligible dwelling for a qualifying individual who is age 65 years or older or eligible for the Disability Tax Credit. The credit may be claimed by qualifying individuals and supporting family members who incur eligible expenses.

Budget 2026 proposes to allow eligible individuals who incur qualifying expenses to calculate the Home Accessibility Tax Credit using a one-time optional flat-expense amount of $1,000 for a year instead of claiming their actual expenses incurred. The following conditions would apply to any flat-amount claim:

• Only one taxpayer would be allowed to claim the flat amount in respect of the same eligible dwelling for a particular year.
• If an individual chooses to claim the credit based on their detailed expenses in respect of an eligible dwelling for a particular year, the flat amount would not be available to any claimant in respect of that dwelling for that year. Instead, each individual with eligible expenses could claim eligible expenses under the existing rules.
• An eligible individual would be allowed to claim the flat amount under the Home Accessibility Tax Credit only once in their lifetime. An individual who claimed the flat amount in a given year would, however, still be able to claim the credit in future years based on their detailed expenses, provided all eligibility requirements are met.
• Individuals claiming the flat amount would continue to be required to retain some documents that substantiate that they incurred qualifying expenses for a qualifying renovation.

Adoption Expense Tax Credit

The Adoption Expense Tax Credit allows adoptive parents to claim up to $19,972 in eligible adoption expenses in 2026 relating to the adoption of a child under the age of 18. The credit may be claimed in the taxation year in which an adoption is completed for expenses that are incurred during the adoption period.

Budget 2026 proposes to allow eligible adoptive parents to calculate the Adoption Expense Tax Credit using an optional flat expense amount of $1,200 per adopted child in the year an adoption is completed, instead of their actual eligible adoption expenses.

• Only one taxpayer would be allowed to claim the flat amount in respect of the same adopted child.
• If one individual chooses to claim the credit based on their detailed expenses under the existing rules, all claimants would also have to use this method (and would not be able to claim the flat amount).

Foreign Income Verification Statement – Form T1135

Canadian-resident individuals, corporations and trusts, as well as certain partnerships, must file a Foreign Income Verification Statement (Form T1135) with the Canada Revenue Agency if they own specified foreign property with a total cost of more than $100,000 at any time in a taxation year or fiscal period. Specified foreign property generally includes most types of income-earning property held outside of Canada, other than personal property and property used in carrying on an active business.

Form T1135 provides a simplified reporting method if the total cost of a taxpayer's specified foreign property is less than $250,000 throughout the year.

Budget 2026 proposes to increase the threshold above which Form T1135 must be filed from $100,000 to $200,000. The Canada Revenue Agency would also increase the threshold for simplified reporting from less than $250,000 to less than $500,000.

These measures would apply to taxation years or fiscal periods that end after 2026.

Apprentice Vehicle Mechanics' Tools Deduction

Under the deduction for tradespeople's tool expenses, a tradesperson (including an apprentice vehicle mechanic) can claim a deduction of up to $1,000 of the amount by which the total cost of eligible new tools acquired in a taxation year as a condition of employment exceeds the amount of the Canada Employment Credit ($1,501 in 2026).

Apprentice vehicle mechanics may claim the deduction for tradespeople's tool expenses in respect of their tools and may additionally claim the apprentice vehicle mechanics' tools deduction on the extraordinary portion of their tool costs.

The extraordinary portion of an apprentice vehicle mechanic's tool costs is the total cost of new eligible apprentice mechanics' tools acquired in the taxation year, less the greater of:

• the sum of the maximum amount of the deduction for tradespeople's tool expenses ($1,000) and the Canada Employment Credit amount ($1,501 in 2026); and
• 5 per cent of the individual's apprenticeship income for the year (including the net amount received under certain government apprenticeship programs).

These rules require apprentice mechanics to claim two separate deductions to get the maximum eligible tax recognition for their tool expenses.

Budget 2026 proposes to allow apprentice vehicle mechanics to deduct all eligible expenses under the apprentice vehicle mechanics' tools deduction.

Subject to certain other existing rules, the deduction would equal the total cost of new eligible tools acquired in the taxation year, less the Canada Employment Credit amount. It would no longer be reduced by the $1,000 amount available under the deduction for tradespeople's tool expenses or by an amount based on the apprentice's income.

Apprentice vehicle mechanics' tools would no longer qualify for the deduction for tradespeople's tool expenses. However, an apprentice vehicle mechanic could continue to claim both deductions if they also incurred eligible tool expenses in the course of employment as a tradesperson other than as an apprentice vehicle mechanic.

This measure would apply to the 2027 and subsequent taxation years.

Medical Expense Tax Credit and Disability Supports Deduction

The Medical Expense Tax Credit (METC) is a non-refundable tax credit that recognizes the effect of above-average medical expenses on an individual's ability to pay tax. For 2026, the METC is available for eligible medical expenses in excess of the lesser of $2,890 and three per cent of the individual's net income. Expenses eligible for the credit are described in the Income Tax Act and Income Tax Regulations and must be evidenced by receipts. Depending on the expense, additional documentation may be required, such as a prescription or written certification from an authorized medical practitioner.

The Disability Supports Deduction (DSD) allows an individual with an impairment in physical or mental functions to deduct certain expenses that enable them to earn business or employment income, attend school, or carry on research. Eligible expenses are described in the Income Tax Act. In general, an authorized medical practitioner must either prescribe or otherwise certify in writing that the expense is required, and expenses must be evidenced by receipts.

An expense that is eligible under both the METC and DSD may be claimed under either measure, but not both.

Documentation Requirements for Certain Eligible Expenses

Budget 2026 proposes to simplify the METC while maintaining the integrity of the credit by reducing the documentation requirements for certain eligible expenses, as described below.

• For certain expenses that are incurred exclusively for medical purposes (described in Table 2), remove the requirement for a prescription; a certification of the individual's medical condition would continue to not be required.
• For certain expenses that may be incurred for non-medical purposes (described in Table 3), replace the prescription requirement with a requirement that an authorized medical practitioner certify the individual's medical condition.

The Canada Revenue Agency would continue to have the authority to ask for additional documentation or information to verify that all requirements for claiming the METC are met.

This measure would apply to the 2026 and subsequent taxation years.

Flat-Amount Method

Under the current rules, individuals need to track their expenses and keep receipts to claim the METC and DSD.

Budget 2026 proposes to allow individuals to claim an optional flat amount in respect of the following categories of expenses. For a particular year, an individual who incurs expenses in an eligible category could choose to either claim the applicable flat amount or itemize and claim the expenses they actually incurred. An individual who chooses the flat amount would not be required to calculate the actual expenses incurred or retain receipts for those expenses. The existing eligibility conditions would continue to apply.

If the flat-amount method is chosen for a category of expenses in respect of an eligible individual, only one individual would be able to claim that flat amount and itemized expenses could not be claimed. If multiple individuals wish to claim the same category of expenses in respect of the same eligible individual, the flat amount would not be available, and each would be required to itemize their expenses and keep receipts to claim them.

Gluten-free Food Expenses 

Under the METC, the incremental cost of gluten-free food products may be claimed in respect of an individual certified by an authorized medical practitioner as requiring a gluten-free diet because of a diagnosis of celiac disease. Eligible expenses are limited to the amount by which the cost of a gluten-free product exceeds that of a comparable gluten-containing product. It is also necessary to retain receipts and other supporting documentation.

Budget 2026 proposes to allow an METC claim in respect of an individual with celiac disease based on an optional flat amount of $1,000 for incremental gluten-free food expenses incurred over a particular year. Under this method, it would no longer be necessary to calculate the incremental cost of gluten-free food products.

This measure would apply to the 2026 and subsequent taxation years.

Incontinence Product Expenses

Expenses incurred for diapers, disposable briefs, catheters, catheter trays, tubing, or other products in respect of an individual certified by an authorized medical practitioner as requiring these products because of incontinence caused by illness, injury, or affliction may generally be claimed under the METC.

Budget 2026 proposes to allow an METC claim based on an optional flat amount of $500 in respect of these expenses incurred over a particular year.

This measure would apply to the 2027 and subsequent taxation years.

Service Dog Expenses

The METC and the DSD recognize certain expenses related to service animals, including dogs, that are specially trained to assist an individual in coping with certain severe and prolonged physical or mental impairments.

Eligible expenses include the cost of acquiring the animal, the care and maintenance of the animal, and reasonable travel expenses for the individual to attend an institution that trains in the handling of such an animal.

Budget 2026 proposes to allow an METC or DSD claim based on an optional flat amount of $2,000 for expenses that are incurred in relation to a service dog over a particular year. The cost incurred to acquire a service dog could be itemized and claimed separately in addition to the flat amount in a particular year.

The flat-amount method would not be allowed for eligible expenses in respect of a service animal other than a dog. It would continue to be necessary, under the METC and the DSD, to itemize expenses incurred in respect of these other service animals and retain receipts.

This measure would apply to the 2027 and subsequent taxation years.

Deductibility of Expenses Against Commission Income

Under a provision specific to commission employees, employees who earn commission income and meet certain conditions are permitted to deduct employment expenses up to their commission income for the year. A commission employee who claims any amount under this provision may not deduct any travel or motor vehicle expenses under general provisions that apply to all employees. As a result, in some cases it is advantageous for a taxpayer to forgo claiming any expenses under the commission-employee rules and instead claim a larger deduction under the general travel provisions available to all employees.

Budget 2026 proposes to eliminate the rules that prevent commission employees from deducting travel and motor vehicle expenses under the general employee provisions when they also claim expenses under the commission-employee rules. This would allow a commission employee claiming travel or motor vehicle expenses under the general provisions to additionally claim other employment expenses as a commission employee up to the amount of their commission income.

This measure would apply to the 2027 and subsequent taxation years.

Lump-sum Thresholds for Periodic Payment of Benefits

The Canada Child Benefit (CCB) and Canada Groceries and Essentials Benefit (CGEB) (formerly the GST Credit) provide targeted, income-tested support to eligible individuals and families through regular payments. These are based on a July 1 to June 30 benefit year. The CCB is paid monthly and provides support for eligible families with children under the age of 18, while the CGEB is paid quarterly and helps offset the impact of the GST on low- and modest-income individuals and families.

The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low- and modest-income workers. The Advance CWB provides part of an individual's CWB entitlement for the taxation year in three advance payments, prior to filing the tax return for the year. (The "Build Canada Workers Benefit" section outlines the Budget 2026 proposal to phase out the Advance CWB).

For individuals and families entitled to small payment amounts under the CCB, CGEB and Advance CWB in a given benefit year, the Income Tax Act specifies that the annual entitlement be issued as a lump-sum, rather than regular payments throughout the year. This payment is equal to the eligible individual's total benefit entitlement for the benefit year and is issued with the first payment for that benefit year (usually in July). A lump-sum payment is made to an eligible individual for:

• the CCB if the individual's monthly CCB entitlement is expected to be less than $20;
• the CGEB if the individual's quarterly CGEB entitlement is expected to be less than $50; and
• the Advance CWB if each of the individual's advance payments is expected to be less than $33.

Budget 2026 proposes to increase the lump-sum payment threshold to $50 per month for the CCB, to $70 per quarter for the CGEB and, for the 2027 taxation year only, to $70 per payment for the Advance CWB.

This measure would apply to benefits paid after June 2027.

Budget 2026 also proposes to index the CCB and CGEB thresholds annually to inflation, rounded to the nearest $5, as of July 2028.

Scholarship, Fellowship, and Bursary Income

An individual can claim a full or partial tax exemption for scholarship, fellowship, and bursary income connected with enrolment in an elementary or secondary school educational program or a program in respect of which the individual is a qualifying student.

To be a qualifying student, an individual must be enrolled in a qualifying or specified educational program at a designated educational institution. Designated institutions generally include universities and colleges within Canada, educational institutions providing occupational skills that are certified by Employment and Social Development Canada, and certain institutions outside Canada.

Under the current rules, a program generally does not qualify as a qualifying or specified educational program if the student receives financial assistance for it from an arm's-length person, such as an employer.

Budget 2026 proposes to allow a program to qualify even where a student received financial assistance from an arm's-length person. As a result, receiving employer or other arm's-length assistance for a program would no longer prevent students from claiming the exemption for scholarships, fellowships or bursaries received for that program.

This measure would apply to the 2027 and subsequent taxation years.

Deductibility of Expenses by Employed Artists

Employed artists are permitted to deduct expenses incurred in the course of employment in specified artistic activities. The deduction is generally limited to the lesser of $1,000 and 20 per cent of the artist's employment income for the year from specified artistic activities. This limit is reduced by amounts deducted for certain other employment expenses. Any artists' expenses that are not deductible in the year because of the cap can be carried forward and deducted in a future year.

Budget 2026 proposes to replace the existing cap on the deduction with a limit equal to the amount of the artist's employment income for the year from the specified artistic activities.

This measure would apply to the 2027 and subsequent taxation years.

Volunteer Firefighters and Search and Rescue Volunteers Tax Credit

The Volunteer Firefighters Tax Credit and the Search and Rescue Volunteers Tax Credit are each 14-per-cent non-refundable tax credits calculated on an amount of $6,000. An individual who performs a combined total of at least 200 hours of eligible services as either a volunteer firefighter or as a search and rescue volunteer in the year may claim either credit, but not both.

Budget 2026 proposes to combine the Volunteer Firefighters Tax Credit and the Search and Rescue Volunteers Tax Credit into a single 14-per-cent non-refundable Volunteer Firefighters and Search and Rescue Volunteers Tax Credit calculated on an amount of $6,000. Eligible volunteer firefighter and search and rescue services would both count towards the 200-hour requirement for the combined credit.

This measure would apply to the 2027 and subsequent taxation years.

Registered Retirement Savings Plan

A Registered Retirement Savings Plan (RRSP) is a tax-assisted vehicle for retirement savings accumulation. Most Canadians convert their RRSP to a Registered Retirement Income Fund (RRIF) by age 71. A RRIF is a vehicle for decumulation of retirement savings via annual minimum withdrawals.

Budget 2026 announces the government's intention to merge the core features of the RRSP and RRIF under the Income Tax Act into a single "RRSP for life" and to make other changes to improve and modernize the RRSP tax rules. This would eliminate the need for individuals to convert their RRSP to a RRIF at age 71. Individuals over the age of 71 would continue to be required to make minimum withdrawals.

The specific issues under consideration include the following:

• Whether and how the RRSP rules could include a "successor holder" (i.e. a spouse or common law partner) feature similar to other registered vehicles. This could permit a RRSP to remain open until the death of the successor holder (i.e., the original holder's surviving spouse or partner) and avoid the value of RRSP property being included in the income of the deceased.
• Whether and how the current RRSP indirect "rollover" provisions that apply on death (involving an income inclusion and offsetting deduction for a qualifying survivor) could be replaced with rules to permit direct tax-free transfers to qualified registered vehicles of qualifying survivors.

Under provincial and federal pension standards, funds transferred from a pension plan are generally subject to locking-in restrictions until retirement and may be required to be held in prescribed vehicles, such as a locked-in RRIF or RRSP. As a result, merging the RRSP and RRIF rules could require consequential changes to the federal Pension Benefits Standards Regulations, 1985 and similar provincial legislation.

Consultation

The government is seeking Canadians' views on this proposal. Interested parties are invited to send written representations to the Department of Finance Canada at RRSP-consultation-REER@fin.gc.ca by January 8, 2027.

Excess Corporate Holdings Regime for Private Foundations

The Income Tax Act contains rules designed to limit the risk of self-dealing associated with private foundations registered as charities, by placing limits on the shareholdings of these foundations. These rules are known as the excess corporate holdings regime. 

The excess corporate holdings regime prevents private foundations from acquiring more than 20 per cent of a class of shares of any corporation, in combination with all relevant persons (generally, non-arm's length individuals). Under these rules, private foundations must track their shareholdings, and the shareholdings of any relevant persons. Private foundations must report these holdings, and any material transaction involving these holdings within the year, to the Canada Revenue Agency. If those total holdings exceed 20 per cent, and the private foundation itself holds more than 2 per cent of the class of shares, it is obligated to divest itself of its excess shareholdings within a particular timeframe.

Budget 2026 proposes to eliminate the excess corporate holdings regime. Instead, the rules that currently prohibit public foundations from acquiring control of a corporation would be extended to private foundations.

This measure would apply to taxation years that begin on or after January 1, 2027.

Objections to Assessments

To object to an income tax assessment, a taxpayer must file a notice of objection. Taxpayers generally have 90 days after a notice of assessment is sent to file a notice of objection. However, individuals and graduated rate estates have the later of 90 days after a notice of assessment is sent and one year from the tax return filing due date for the taxation year being assessed to file a notice of objection. If the objection deadline is missed, taxpayers have one year from the original deadline to apply to the Canada Revenue Agency for an extension of time to file a notice of objection. In almost every case, the Canada Revenue Agency grants an extension.

Budget 2026 proposes, for most taxpayers, to amend the deadline to file a notice of objection to an income tax assessment to one year after the day the notice of assessment is sent. For individuals and graduated rate estates, Budget 2026 proposes to amend the deadline to the later of one year after the notice of assessment is sent and two years from the tax return filing due date for the taxation year being assessed. Consequently, taxpayers would no longer need to apply for an extension of time and the ability to do so would be eliminated.

This amendment would apply to assessments sent on or after the day that is three months after royal assent.

Disclosure of Tax Debt to Credit Bureaus

Most taxpayers pay their tax debts in a timely manner or make arrangements with the Canada Revenue Agency (CRA) to satisfy their tax obligations. Where a taxpayer does not, the CRA generally relies on collection tools such as the set-off of other amounts payable by the Crown, the garnishment of wages and other income, and the seizure and sale of assets. However, unlike other creditors, the CRA is unable to report taxpayer debts to credit bureaus because the Income Tax Act limits the disclosure of taxpayer information to specific circumstances.

To support the collection of outstanding tax debts and more accurate assessments of credit risk, Budget 2026 proposes to amend the Income Tax Act to allow the CRA to disclose information about a taxpayer's tax debts to credit bureaus.

The CRA would be permitted to disclose a taxpayer's tax debt only where:

• the taxpayer's outstanding tax debt exceeds $50,000;
• the assessments or reassessments giving rise to the tax debt are not under objection or appeal, and all rights of objection and appeal in respect of them have expired or been exhausted;
• the CRA has notified the taxpayer in writing of its intention to disclose the tax debt at least 30 days prior to disclosure; and
• before the disclosure, the CRA has taken reasonable steps to collect the tax debt and has given the taxpayer an opportunity to make reasonable repayment arrangements.

Similar amendments would be made to the Excise Tax Act on the same conditions to allow the CRA to disclose information about Goods and Services Tax/Harmonized Sales Tax (GST/HST) debts to credit bureaus.

This measure would apply on royal assent of the enacting legislation.

Trust Distributions to Non-Residents

A trust that distributes property to its beneficiaries is generally deemed to have disposed of the property at fair market value under the Income Tax Act. However, a personal trust (often referred to as a "family trust") and certain other prescribed trusts may transfer property to a Canadian resident beneficiary on a tax-deferred basis (i.e., a "rollout") in satisfaction of all or part of the beneficiary's capital interest in the trust.

A trust cannot roll out property to a non-resident beneficiary (except a limited group of assets that remain subject to Canadian tax). This ensures that Canada can tax any gain that accrued on property while held in the trust, either when the property is distributed from the trust or at a later date when it is disposed of by the beneficiary.

Certain tax avoidance planning techniques have been employed to roll out trust property to a non-resident beneficiary indirectly. For example, trust property may be rolled out to a beneficiary that is a corporation resident in Canada whose shares are held by a non-resident person. This planning may result in an indefinite deferral or the permanent avoidance of Canadian tax.

Budget 2026 proposes to broaden the current rollout denial rule to include indirect distributions of trust property to non-resident beneficiaries. The rollout would be denied for any property that is transferred to a corporation (or partnership) that has a direct or indirect non-resident shareholder (or partner).

This measure would apply in respect of distributions of property that occur on or after Budget Day.

Information Sharing – Pension Administrators

Employer-sponsored pension plans are registered under the Income Tax Act and pension standards rules (e.g., the federal Pension Benefits Standards Act and similar provincial statutes). Under those laws, pension plan administrators have an obligation to pay out retirement benefits (or survivor benefits) in a timely manner.

In some cases, pension plan administrators may be unable to locate former employees who are entitled to pension benefits. If a former employee has died, a surviving spouse or other beneficiary may instead be entitled to survivor benefits. Although the Canada Revenue Agency (CRA) may have information indicating that the former employee is deceased, the Income Tax Act currently does not permit the CRA to confirm the death to the pension plan administrator.

Budget 2026 proposes to amend the Income Tax Act to permit the CRA to confirm to the administrator of a registered pension plan that a plan member is deceased.

This measure would apply on royal assent of the enacting legislation.

Registered Pension Plans

A registered pension plan (RPP) is an arrangement registered by the Canada Revenue Agency (CRA) under which an employer makes contributions to a fund that provides periodic payments to retired employees. At all times, an RPP must comply with registration conditions. If those conditions are not met, the plan becomes a "revocable plan" and the CRA may ultimately issue a notice to the administrator of the RPP that the registration of the plan is revoked as of the date specified in the notice.

The tax consequences of a revocation are not fully specified under the current rules.

Revocation of a Registered Pension Plan

Budget 2026 proposes to provide express tax consequences under the Income Tax Act and Income Tax Regulations where the CRA revokes the registration of an RPP.

• A revoked plan would be liable to pay a special tax, equal to 10 per cent of the fair market value of its property immediately prior to the revocation, subject to waiver or cancellation by the CRA.
• A revoked plan would be deemed to become a "retirement compensation arrangement" (RCA)—another type of retirement savings vehicle under the Income Tax Act.
• An amount equal to the fair market value of its property (less any revocation tax assessed) would be deemed to be contributed to the RCA. As a result, the RCA would be required to remit a 50 per cent refundable tax on the deemed contribution.

These measures would apply to revocations of RPPs after 2026. 

Individual Pension Plans

An individual pension plan (IPP) is a defined benefit RPP that has fewer than four members, at least one of whom is related to an employer that participates in the plan (e.g., a controlling shareholder). IPPs provide businesses with a mechanism to provide pension benefits to owner-managers in respect of their employment.

IPP Status

Given the non-arm's length relationship between a controlling individual and an employer that sponsors an IPP, IPPs are subject to additional conditions that do not apply to other RPPs. However, some plans seek to avoid these conditions by adding related members so that the plan exceeds the three-member threshold for IPP status.

Budget 2026 proposes to expand the IPP definition to include defined benefit RPPs under which all members are either related to a participating employer or do not deal at arm's length with any member related to a participating employer.

This measure would apply as of January 1, 2027.

Non-qualified Investments

Anti-avoidance rules apply to registered plans held by one individual (e.g., Tax-Free Savings Accounts, Registered Retirement Savings Plans and Registered Retirement Income Funds) to help ensure that these plans do not provide excessive tax advantages unrelated to their basic objectives. These rules include:

• the advantage rules, which help prevent the exploitation of the tax attributes of a registered plan (e.g., by shifting returns from a taxable investment to a registered plan);
• the prohibited investment rules, which generally ensure that investments held by a registered plan are arm's length "portfolio" investments; and
• the non-qualified investment rules, which restrict the classes of investments that may be held by a registered plan.

Though similar in nature to other registered plans of controlling individuals, IPPs are not subject to these anti-avoidance rules.

Budget 2026 proposes to subject IPPs to the same advantage rules, non-qualified investment rules, and prohibited investment rules that currently apply to other registered plans of controlling individuals. Consequently, if the IPP acquires a non-qualified or prohibited investment, or if it receives an advantage, the controlling individual of an IPP would be liable to pay a tax equal to

• 50 per cent of the fair market value of a non-qualified investment or prohibited investment acquired by the IPP; and
• 100 per cent of the value of an advantage in relation to the IPP.

This measure would apply as of January 1, 2028. Transitional rules would apply to investments acquired before 2028 that become non-qualified or prohibited on January 1, 2028.

Excessive Surplus

When the assets of an RPP exceed 125 per cent of its pension liabilities, the tax rules require that participating employers take contribution holidays until the RPP's surplus falls below that threshold. Broad-membership RPPs generally absorb excess surplus by a combination of contribution holidays and ongoing growth in pension benefit liabilities.

Some IPPs have modest or no ongoing contributions and relatively stable liabilities. As a result, asset growth can result in excessive surplus that is not needed to satisfy pension benefits. The current rules do not require this surplus to be withdrawn, and income earned from such surplus is tax sheltered while held in the IPP.

Budget 2026 proposes to impose a new condition that an IPP must satisfy to maintain its RPP registration. If the value of an IPP's assets exceeds 200 per cent of its pension liabilities, the plan would become a "revocable plan" for RPP registration purposes. The CRA is required to issue a notice of intent to revoke at least 30 days prior to issuing a revocation letter. This would provide the plan administrator with time to take steps (such as withdrawing excess amounts) to comply with the registration condition and thus no longer be in a revocable position. If the plan's registration were ultimately revoked by the CRA, the same tax consequences of becoming a revoked plan, as described above, would apply.

This measure would apply as of January 1, 2028.

Build Canada Workers Benefit

The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low- and modest-income workers and improves incentives to work. Budget 2026 proposes to phase out the Advance Canada Workers Benefit, reinvest a portion of the resulting savings to enhance the Canada Workers Benefit and rename the enhanced benefit the Build Canada Workers Benefit.

Advance Canada Workers Benefit

Under current law, individuals who received the CWB for the previous taxation year are automatically entitled to receive the Advance CWB for the current taxation year, totaling half of the previous year's CWB entitlement. The Advance CWB is issued over three advance payments. Any residual entitlement is calculated and paid after the individual files their tax return for the current year.

Because advance payments are based on the prior-year tax return, they may exceed an individual's ultimate entitlement to the CWB for the current year. There is no requirement to repay any excess.

For the 2027 taxation year, Budget 2026 proposes to reduce the Advance CWB from 50 per cent to 25 per cent of the individual's CWB entitlement for the 2026 taxation year. The Advance CWB would be eliminated beginning in the 2028 taxation year.

Enhancing the Benefit

Under current law, for the 2027 taxation year, the CWB grows by 27 cents for every dollar of working income (from both employment and self-employment) above a phase-in threshold of $3,000, up to a maximum benefit of $1,709 for single individuals without children, or $2,943 for families (couples and single parents). The benefit is reduced by 15 cents for every dollar of adjusted net income above a phase-out threshold of $28,104 for single individuals without children or $32,064 for families.

Budget 2026 proposes to enhance the benefit and rename it the Build Canada Workers Benefit (BCWB). For the 2027 taxation year, the enhanced benefit would:

• reduce the phase-in threshold to $500;
• increase the maximum benefit amounts to $1,859 for single individuals without children and to $3,143 for families; and
• adjust the phase-out thresholds to $27,104 for single individuals without children and to $30,731 for families, so that the higher maximum benefits do not change the income levels at which the entitlement is fully phased out.

Chart 1 illustrates the proposed BCWB in 2027 for single individuals without children, and Chart 2 illustrates the proposed BCWB for couples and single parents.

The BCWB would retain the supplement for individuals eligible for the Disability Tax Credit. The phase-in threshold of the BCWB disability supplement would be reduced to $200 (down from $1,150 under the CWB).

BCWB parameters would be indexed in the same manner as those of the CWB for years after 2027.

The government recognizes the efforts that provinces and territories have taken to improve work incentives for low- and modest-income individuals and families. To ensure that benefits are harmonized and that the BCWB builds on these efforts, the government will continue to allow for province- or territory-specific changes to the design of the benefit through reconfiguration agreements. Any reconfiguration would be guided by the following principles:

• build on actions taken by the province or territory to improve work incentives;
• be cost-neutral to the federal government;
• provide for a minimum benefit for all recipients of the benefit; and
• preserve harmonization of the benefit with existing federal programs.

These measures would apply to the 2027 and subsequent taxation years.

Business Income Tax Measures

Clean Electricity and Clean Technology Investment Tax Credits

The Clean Electricity investment tax credit is a refundable credit of up to 15 per cent on the capital cost of eligible investments in low-emitting electricity generation, electricity storage, and the transmission of electricity between provinces and territories. The credit is generally available in respect of property that is acquired and becomes available for use on or after April 16, 2024, and before 2035, for projects that started construction on or after March 28, 2023.

The Clean Technology investment tax credit is a refundable credit of up to 30 per cent on the capital cost of eligible investments in low-emitting electricity generation, electricity storage, and low-carbon heating, as well as non-road zero-emission automotive equipment and related charging and refuelling equipment. The credit is generally available in respect of property that is acquired and becomes available for use on or after March 28, 2023, and before 2035. The credit rate is reduced to 15 per cent for property that becomes available for use in 2034.

Claimants must meet prevailing wage and apprenticeship requirements to obtain the full credit rates.

Extension to 2040

Budget 2026 proposes to extend the Clean Electricity and Clean Technology investment tax credits to eligible property that becomes available for use before 2041.

The credit rate of the Clean Technology investment tax credit would continue to be reduced to 15 per cent for its last year of availability, which would be for property that becomes available for use in 2040 instead of 2034.

High-Voltage Intra-Provincial Electricity Transmission

Budget 2026 proposes to expand eligibility for the Clean Electricity investment tax credit to include intra-provincial electricity transmission property built to operate at or above the highest voltage currently used for transmission lines in each province, and at or above 69 kilovolts in the territories.

Specifically, eligible intra-provincial electricity transmission property would include property that is built to operate at no less than:

• 735 kilovolts if installed in Quebec or Newfoundland and Labrador;
• 500 kilovolts if installed in Ontario, Manitoba, British Columbia, or Alberta;
• 345 kilovolts if installed in Nova Scotia or New Brunswick;
• 230 kilovolts if installed in Saskatchewan;
• 138 kilovolts if installed in Prince Edward Island; or
• 69 kilovolts if installed in the Northwest Territories, Yukon, or Nunavut.

Eligible property would include certain equipment and structures related to transmission lines and substations, including cables, towers, lattices, and transformers. Eligible property would exclude buildings and electricity distribution equipment, as well as certain property that is used for international transmission.

Further details on what would constitute eligible intra-provincial electricity transmission property will be made available at a later date.

Coming into Force

This measure would apply with respect to property that is acquired on or after Budget Day.

Scientific Research and Experimental Development Tax Incentive Program

Under the Scientific Research and Experimental Development (SR&ED) tax incentive program, qualifying expenditures are fully deductible in the year they are incurred. Qualifying expenditures are also eligible for an investment tax credit.

The tax credit is provided at an enhanced rate of 35 per cent for certain small- and medium-sized corporations. A general rate of 15 per cent is available for qualified SR&ED expenditures that do not qualify for the enhanced rate.

For the purposes of the tax incentive program, SR&ED generally means systematic investigation or search that is carried out in a field of science or technology by means of experiment or analysis, and that is basic research, applied research, or experimental development. Work undertaken beyond the experimental development stage is generally excluded from eligibility for SR&ED tax incentives.

Budget 2026 proposes to expand the activities and expenditures eligible under the SR&ED program.

Regulatory and Certification Requirements

The expanded scope of eligible activities would include tests, technological validations, and studies conducted to meet regulatory requirements for obtaining the initial approval or certification necessary to commercialize a product or process.

To be eligible, these activities would need to directly relate to a project that is eligible under the SR&ED program's existing rules.

The types of expenditures that could be claimed in respect of these additional eligible activities would be the same as those eligible under the SR&ED program (e.g., wages and salaries, materials, contracting costs, overhead costs, and machinery and equipment).

Intellectual Property Protection

Eligible expenditures would be expanded to include costs related to the registration and maintenance of intellectual property (IP) protection in respect of IP developed in the course of conducting a project that is eligible under the existing scope of activities under the SR&ED program.

Eligible IP would include IP registered or protected as patents, certificates of supplementary protection, plant breeders' rights, or copyrighted software, under the relevant Canadian legislation or equivalent legislation in another jurisdiction.

Eligible expenditures would include costs reasonably incurred to obtain and, where applicable, maintain protection for eligible IP. In general, this would include expenses incurred to prepare and file an application for an eligible form of IP protection, as well as maintenance costs payable on a periodic basis to keep IP rights in force. Eligible expenditures would not include those incurred to enforce IP rights, such as litigation costs in respect of alleged IP infringement, or those not directly connected to securing and maintaining IP rights.

While administrative fees payable to an IP office outside Canada would be eligible, costs of supporting activities, such as those in respect of preparing an application, would be eligible only if those activities are conducted in Canada.

In the event that a taxpayer disposes of IP in respect of which SR&ED support was provided for IP protection costs, recapture rules would apply in respect of the related SR&ED deduction and investment tax credit amounts.

Coming into Force

This measure would apply to taxation years that begin on or after Budget Day.

Interest Deductibility Limits

The Excessive Interest and Financing Expenses Limitation (EIFEL) rules provide Canada's response to the recommendation under Action 4 of the OECD/G20 Base Erosion and Profit Shifting Project. The EIFEL rules restrict the amount of net interest and financing expenses that may be deducted by certain taxpayers in computing taxable income. These rules apply to taxation years that begin on or after October 1, 2023.

Budget 2024 announced an exception to the EIFEL rules for interest and financing expenses incurred before 2036 by a taxpayer on borrowings used by the taxpayer to acquire or build purpose-built rental housing in Canada, or convert a property into such housing. On August 12, 2024, an EIFEL exception for energy utilities was announced for interest and financing expenses incurred by a taxpayer on borrowings used by the taxpayer to carry on a regulated energy utility business in Canada. Neither exception has been enacted into law.

Indirect Borrowings

Under the existing proposals, the exceptions would apply only if the borrower uses the borrowed funds directly to acquire, build, or convert a property into purpose-built rental housing in Canada or to carry on a regulated energy utility business in Canada.

Budget 2026 proposes to expand the two EIFEL exceptions to cover a borrower's interest and financing expenses where the borrowed funds are used for eligible activities carried on by another corporation, trust or partnership within the same group of affiliated entities. The exceptions would also be available where the eligible activities are carried on by a partnership in which the borrower (together with affiliated entities) has at least a 40 per cent interest. Additional consequential changes would be made to the proposed exceptions.

Regulated Energy Utility Business

Budget 2026 also proposes to expand and clarify the definition of a regulated energy utility business in Canada to cover cases where the prices of all or substantially all of the products or services of the business are:

• government-established, approved or guaranteed (including sales to Crown corporations); or
• established through a government-operated market that facilitates delivery for consumption or use in Canada.

Coming into Force

These measures would apply to taxation years that begin on or after October 1, 2023.

Canadian Journalism Labour Tax Credit

The Canadian Journalism Labour Tax Credit (CJLTC) provides qualifying journalism organizations with a refundable 35-per-cent tax credit on the salary or wages paid to eligible newsroom employees. Labour expenditures are capped at $85,000 per eligible employee for a tax year, resulting in an annual credit of up to $29,750 per employee.

To access the CJLTC, an organization must first meet the requirements for designation as a qualified Canadian journalism organization (QCJO). This principally entails being engaged in the production of original news content, and regularly employing two or more journalists who deal at arm's length with the organization in the production of that content. The Independent Advisory Board on Eligibility for Journalism Tax Measures assesses whether an applicant meets certain requirements to be designated as a QCJO and makes non-binding recommendations to the Canada Revenue Agency. 

Extension to Audio and Audiovisual News

The CJLTC applies exclusively to the production of original written news content. Broadcasters and organizations that produce only audio and/or audiovisual original news content are therefore not currently able to claim the credit.

Budget 2026 proposes to extend eligibility for the CJLTC to the production of audio and audiovisual news. Audio and audiovisual news organizations that qualify as a QCJO and meet existing CJLTC-specific Canadian ownership requirements would be eligible to claim the tax credit in respect of the salary or wages of an eligible newsroom employee.

Qualifying organizations would be entitled to the same 35-per-cent credit rate and annual labour expenditure limit of $85,000 per employee that apply to written news production.

An eligible newsroom employee would need to spend at least 75 per cent of their time engaged in the production or post-production of original news content, including researching, collecting information, verifying facts, photographing, recording or editing video or sound, writing, editing, designing, presenting a news bulletin or segment, and undertaking other activities related to the preparation or presentation of original news content.

All other existing eligibility criteria under the CJLTC in respect of an eligible newsroom employee would continue to apply. In particular, an employee would generally be required to work for an organization for an average of at least 26 hours per week and to be employed by it for at least 40 consecutive weeks within a taxation year.

This measure would apply to qualifying labour expenses incurred on or after Budget Day.

Extension of the Enhanced Credit Rate

The CJLTC rate was temporarily increased from 25 per cent to 35 per cent from January 1, 2023 to December 31, 2026. The rate is currently scheduled to return to 25 per cent on January 1, 2027. Budget 2026 proposes to extend the 35-per-cent rate until December 31, 2028.

Taxable Preferred Shares

The Income Tax Act contains a regime designed to prevent the erosion of corporate tax revenues through after-tax financing that involves the issuance of shares with debt-like characteristics (referred to as "taxable preferred shares") in lieu of debt instruments. This can arise when the issuer corporation is non-tax paying (e.g., it has unused deductions, losses or credits) and is unable to immediately benefit from the tax deduction for interest expense. Consequently, the tax benefit to the investor of receiving an amount as a tax-free intercorporate dividend (instead of as taxable interest income) may exceed the tax benefit to the issuer corporation of claiming an equivalent interest expense deduction.

To make the tax system more neutral between debt and preferred share financing, the taxable preferred share regime imposes a special tax (Part VI.1 tax) on dividends paid on taxable preferred shares. To provide relief for tax-paying corporations (that gain no advantage from after-tax financing), Part VI.1 tax can be offset against tax payable under Part I of the Act. Part VI.1 tax is also only payable for dividends paid in excess of a $500,000 dividend allowance threshold. The threshold is reduced to the extent dividends paid in the prior calendar year exceeded $1,000,000.

Budget 2026 proposes to introduce the following measures:

• Exempt Canadian-controlled private corporations from the taxable preferred share regime by excluding dividends they pay from Part VI.1 tax. This measure would apply to dividends paid on or after Budget Day.
• Increase the dividend allowance from $500,000 to $1,500,000 and the threshold for the reduction of the dividend allowance from $1,000,000 to $3,000,000. This measure would apply to taxation years that end after 2026.

The government is also reviewing the broader preferred share regime and is seeking stakeholders' views on the impact of the rules and on potential improvements. Written submissions may be sent by January 8, 2027 to the Tax Policy Branch, Department of Finance Canada, at consultation-legislation@fin.gc.ca.

Helium Exploration, Development and Resource Expenses

Under the Income Tax Act, certain expenses related to petroleum and natural gas exploration, development, and property acquisition are classified as Canadian exploration expense (CEE), Canadian development expense (CDE), or Canadian oil and gas property expense (COGPE). These expenses are deductible at rates of 100 per cent, 30 per cent and 10 per cent, respectively. The proposed Productivity Mega Deduction would increase the deduction rate for CDE from 30 per cent to 100 per cent.

CEE includes expenses related to seismic and other geophysical exploration work and the drilling of exploratory wells that are later abandoned or found to be non-producing. CDE includes expenses related to the development of oil and gas wells, including certain expenses for drilling and completing wells and for injection, monitoring, and waste-disposal wells. COGPE includes the costs of acquiring certain Canadian resource properties related to petroleum or natural gas.

Budget 2026 proposes to allow helium exploration and development expenses to qualify as CEE and CDE, consistent with the treatment of similar expenses in the petroleum and natural gas sector. Expenses incurred to acquire helium resource properties would qualify as COGPE.

This measure would apply to expenses incurred on or after Budget Day.

Corporate Tax Elections

Under various provisions in the Income Tax Act and Income Tax Regulations, corporations may file elections or agreements with the Canada Revenue Agency that determine the tax consequences of specific transactions or events.

Certain rules require corporations to provide a certified copy of a resolution of their directors authorizing the election or agreement or, in certain cases, a certified copy of the authorization of the person entitled to administer the affairs of the corporation. These certified-copy requirements apply, for example, to capital dividend elections; transfers of tax liability on certain taxable dividends; transfers of qualified scientific research and experimental development (SR&ED) expenditures; and allocations of wages and salary of SR&ED employees.

Budget 2026 proposes to eliminate the existing requirements for corporations to file a certified copy of a resolution or authorization when making certain elections or agreements. This measure would apply to elections and agreements made on or after the date of royal assent of the enacting legislation.

Corporate Loss Transfers

Under the Canadian income tax system, corporations are taxed on a stand-alone basis. A corporation may offset its non-capital losses against its own income, subject to the rules in the Income Tax Act, but it cannot directly deduct a loss incurred by another corporation. As a consequence, the overall tax payable by a corporate group may differ depending on whether business activities are conducted through a single corporation or through multiple corporations.

Corporate groups may enter into transactions that effectively allow losses in one group member to offset income in another, such as amalgamations, wind-ups, or intra-group financing transactions. However, these transactions can be complex, costly, or unsuitable where separate corporate entities must be maintained for commercial, financing, regulatory, or liability reasons.

The taxation of corporate groups — in particular, the ability to transfer losses within a corporate group — was the subject of two previous Department of Finance consultations announced in 1985 and 2010. In addition to important federal fiscal impacts, these consultations identified two main issues with respect to corporate loss transfers. First, provincial and territorial corporate tax bases could be adversely affected; and second, tax integrity concerns could arise.

Budget 2026 invites stakeholders to comment on the introduction of a corporate loss transfer rule.

This mechanism would allow the transfer of current-year non-capital losses between corporations under certain conditions. The Department is interested in stakeholder views on the proposed conditions, the potential effects and practical operation of the mechanism, and whether the proposed parameters should be revised. Stakeholders' submissions are encouraged to consider concerns identified in previous consultations regarding tax integrity and protecting the provincial and territorial tax bases. The basic design parameters of the loss transfer mechanism, and certain key considerations, are described below.

Qualifying Corporate Group

Loss transfers would be permitted in the following cases:

• between a parent corporation and a subsidiary corporation that is wholly owned, directly or indirectly, by the parent corporation; and
• between two subsidiary corporations that are wholly owned, directly or indirectly, by the same parent corporation.

Eligible Corporations

The rule would apply only to corporations resident in Canada that are subject to tax under Part I of the Income Tax Act. However, certain types of corporations that are considered conduits for their shareholders or members (e.g., mutual fund corporations) would not be able to transfer or receive losses.

Eligible Losses and Annual Joint Election

The rule would permit current-year non-capital losses to be transferred. A corporation could elect to transfer all or part of its current-year non-capital loss.

The transferor and transferee would be required to make a joint election. The transferee would be permitted to deduct the elected amount in computing its income for the relevant taxation year. The transferor's non-capital loss for the relevant taxation year would be reduced by the elected amount. Any portion of the transferred amount that is not deducted by the transferee in that year would not be made available for carryback or carryforward.

Provincial Allocation

The corporate loss transfer rule could affect provincial and territorial tax bases if a loss arising in one jurisdiction were used to reduce taxable income allocated to another jurisdiction. As such, a loss arising in a province or territory could only be transferred to offset income arising in that same jurisdiction.

In particular, the rule would be available only where:

• the transferor has a permanent establishment in only one province or territory;
• the transferee has a permanent establishment in only one province or territory; and
• the permanent establishments of the transferor and transferee are located in the same province or territory.

The government invites views on whether, and if so how, the rule could be broadened while protecting provincial and territorial tax bases.

Tax Integrity

Allowing corporate loss transfers may give rise to tax integrity concerns. The purpose of a loss transfer rule would be to provide a more efficient mechanism by which income of a corporate group could be offset by non-capital losses of the group. However, applying a loss transfer mechanism to a group of corporate entities, each of which is taxed on a stand-alone basis, may result in other unintended tax benefits.

Example

• Parentco invests $100 in shares of Subco.
• Subco spends the $100 in a failed business venture, incurring a $100 non-capital loss, and transfers that $100 loss to Parentco.
• Result: Parentco has obtained $200 of tax attributes ($100 tax cost in the shares of Subco and $100 non-capital loss) despite having incurred only $100 of expenditures.

Various approaches have been taken in other countries to address such integrity concerns, with varying degrees of complexity. These tax integrity concerns could be addressed through rules that adjust the tax cost of a group member's shares or underlying assets, or that recalculate tax attributes when a corporation enters or leaves a wholly owned corporate group.

The government invites views on how the loss transfer mechanism should address tax integrity concerns.

Consultation

Interested parties are invited to send written representations to the Department of Finance Canada at clt-consultation-tpes@fin.gc.ca by January 8, 2027.

Administrative Penalties

Administrative penalties are imposed under tax statutes when taxpayers do not comply with their tax obligations. These penalties support the integrity of Canada's tax system by encouraging compliance and protecting the tax base.

Budget 2025 announced a review of fines and penalties to ensure that they remain sufficient and that non-compliance is not just treated as a cost of doing business. Following this review, Budget 2026 proposes several amendments to administrative penalties under federal tax statutes.

Inflation Adjustment of Fixed-Dollar Administrative Penalties

The Income Tax Act provides for two types of administrative penalties: those based on fixed-dollar amounts and those based on percentages, such as the late-filing penalty, which is calculated as a percentage of the unpaid tax at the filing deadline.

Several of the penalties with fixed amounts have not been adjusted since they were enacted in the 1980s or 1990s, with one penalty being enacted in 1927. As a result of inflation, the real value of these fixed amounts has declined over time, which has reduced their deterrent effect.

Budget 2026 proposes to increase most fixed-dollar penalties to broadly account for inflation since their enactment, so that they remain meaningful and proportionate. Generally, older penalties would increase by a factor of two or three, depending on when they were enacted, while most recent penalties would remain unchanged, subject to limited exceptions. Budget 2026 also proposes to index these fixed amounts to inflation once every five years.

Medium and Large Corporations and Partnerships

The Income Tax Act provides for some fixed-amount penalties that apply equally to all taxpayers, regardless of their ability to pay. A fixed amount that is significant for an individual or small business may not act as an effective deterrent for a larger corporation or partnership.

Budget 2026 proposes to calibrate certain penalty amounts by taxpayer size. These would apply to penalties for failing to provide required information on a form, failing to file certain tax forms, and failing to comply with certain other obligations under the Income Tax Act.

Individuals and smaller corporations and partnerships would remain subject to a base level of fixed penalty amounts. Medium corporations and partnerships would be subject to penalties equal to three times the base amounts. Large corporations and partnerships would be subject to penalties equal to eight times the base amounts.

Medium corporations would be those that, together with any related corporations, have a combined total of more than $10 million and up to $50 million of taxable capital employed in Canada. Large corporations would be those that, together with any related corporations, have a combined total of more than $50 million of taxable capital employed in Canada. For this purpose, a corporation that is a Canadian-controlled private corporation would only be treated as related to a corporation with which it is also associated.

Medium partnerships would be those that have $2 million but less than $10 million in gross revenue and large partnerships would be those that have $10 million or more in gross revenue.

Repeated Failures

The Income Tax Act imposes higher penalties in some cases of repeated non-compliance, including repeated failures to file an income tax return.

Budget 2026 proposes new penalties that would apply to repeated failures to file tax forms and repeated failures to comply with obligations that do not have a more specific penalty. These penalties would generally double the base penalty that applies in respect of the first failure. The amount of the penalty would be further increased in accordance with the calibration rules for corporations and partnerships discussed above.

These penalties would apply only to a failure in respect of a particular taxation year if the person or partnership has been liable for a penalty for the same type of failure in any of the three preceding taxation years. In addition, the person or partnership must have failed to remedy the current failure after being sent a notice, requirement or demand by the Canada Revenue Agency.

Common Reporting Standard and Other Frameworks

The Common Reporting Standard, the Reporting Rules for Digital Platform Operators and the Crypto-Asset Reporting Framework proposed in Budget 2024 support the collection and exchange of taxpayer information between tax administrations to help combat tax evasion and other forms of tax non-compliance.

Budget 2026 proposes to strengthen the penalties applicable under these information reporting regimes by amending the Income Tax Act to ensure that a penalty would apply for failing to comply with a duty or obligation imposed under these regimes. In particular, this would ensure that penalties apply to reporting entities and individuals for failing to obtain or validate a self-certification, failing to apply due diligence or review procedures, or failing to keep, maintain or retain records as required under these regimes.

Technical Income Tax Act Amendments

Budget 2026 also proposes to make a number of technical amendments to maintain the integrity of the penalty regime in the Income Tax Act.

Other Tax Statutes

Changes are also proposed to certain penalties under the Goods and Services Tax/Harmonized Sales Tax (GST/HST) provisions of the Excise Tax Act, the Excise Act, 2001, the Air Travellers Security Charge Act, the Select Luxury Items Tax Act and to align them with inflation adjustments proposed under the Income Tax Act. Specifically, Budget 2026 proposes to increase most fixed-dollar administrative penalties under these statutes and index them to inflation once every five years in line with proposed income tax penalties. These amounts would be increased by a factor of two or three, or otherwise adjusted as necessary to ensure consistency across the federal tax statutes.

Under the Excise Act, 2001, the Minister may issue a demand for any person to file a return within a reasonable period of time. Budget 2026 proposes to increase the amount for the penalty for failing to file a return following a ministerial demand from $250 to $1,000.

Coming into Force

These Income Tax Act measures would apply to taxation years or fiscal periods ending after 2027. For the Common Reporting Standard and other frameworks, these measures would apply to the 2028 and subsequent calendar years. Changes to penalties under the Excise Tax Act, Excise Act, 2001, Select Luxury Items Tax Act and Air Travellers Security Charge Act would generally apply to reporting periods that end after 2027.

International Tax Measures

Common Reporting Standard

Exchanging tax information between national tax authorities helps promote compliance and combat offshore tax evasion. The Common Reporting Standard (CRS) model rules, developed and endorsed by the Organisation for Economic Co-operation and Development (OECD), provide the global standard for the automatic exchange of financial account information for tax purposes. Over 120 jurisdictions participate in the CRS.

Canada's rules implementing the CRS have been identified on peer review as departing from the global standard in two main areas. The first relates to the scope of financial institutions subject to due diligence and reporting obligations. Under Canada's approach, an entity established to invest or trade in financial assets is excluded from CRS due diligence and reporting requirements if it is not represented or promoted to the public as an investment vehicle. In addition, certain residency conditions bring a narrower range of partnerships within the definition of a financial institution for CRS purposes than the model rules do.

Canada's departures from the CRS model rules may create gaps that individuals could exploit to avoid having information about their financial accounts reported. The effectiveness of the CRS in combatting international tax evasion depends on consistent application of the rules across implementing jurisdictions.

Budget 2026 announces the government's intention to consult on potential measures to strengthen Canada's implementation of the CRS. In particular, the government welcomes views on the following questions:

• How should Canada's CRS rules be amended to bring them into line with the international standard provided in the model rules, including by addressing the departures described above?
• How could these amendments be designed and implemented without imposing unnecessary compliance burdens?

Interested parties are invited to send written representations to the Department of Finance Canada by emailing consultation-legislation@fin.gc.ca by December 31, 2026.

Taxable Canadian Property

Canada generally taxes non-residents on their income and gains from the disposition of taxable Canadian property (TCP). TCP generally includes property with a significant connection to Canada, such as Canadian real estate, resource properties, and certain shares or interests whose value is derived primarily from Canadian real property or resource assets.

To facilitate the collection of this tax, the Income Tax Act requires a purchaser that acquires TCP from a non-resident person (vendor) to withhold and remit an amount to the Canada Revenue Agency (CRA) on account of the vendor's potential tax liability, imposing a liability on the purchaser for any failure to do so. This withholding obligation does not apply if the vendor obtains a certificate of compliance (clearance certificate) from the CRA. To obtain the certificate, the vendor must remit an estimate of the taxes owing, post security or demonstrate to the CRA that no tax will be owing.

The rules for determining a purchaser's withholding obligation and the amount required to be remitted by a vendor as part of the clearance certificate request differ depending on the type of TCP disposed of by the vendor. In general terms, lower rates apply to property subject to the one-half inclusion rate for capital gains while higher rates apply to property (specified TCP) where the disposition may give rise to fully taxable ordinary income (e.g., depreciable property, Canadian life insurance policy, Canadian resource property and real property held as inventory).

In particular, a purchaser must generally withhold 50 per cent of the purchase price for specified TCP and 25 per cent for capital property other than specified TCP. A purchaser is liable for any failure to do so, unless a clearance certificate is issued. To obtain the certificate, the vendor must remit an amount acceptable to the CRA, generally determined by reference to the income arising from the disposition and the applicable income tax rates.

Corporate Vendors

The withholding and remittance rules generally do not account for the different income tax rates applicable to different types of taxpayers (e.g., individuals/trusts and corporations). Consequently, the amounts withheld and remitted may exceed the income tax that could be payable by a corporate vendor. For example, a non-resident corporation carrying on business in Canada solely through a permanent establishment in Prince Edward Island would generally face a combined federal-provincial tax rate of 15 per cent on any capital gain from the disposition of capital property other than specified TCP.

Budget 2026 proposes to reduce the withholding and remittance rates from 25 and 50 per cent to 15 and 30 per cent, respectively (as shown in Table 4).

Section 85 Rollovers

In some circumstances, a vendor may dispose of property and jointly elect with the purchaser under section 85 of the Income Tax Act to transfer the property on a tax-deferred "rollover" basis. A rollover generally deems a property to be transferred at an amount less than its fair market value, thereby deferring all or part of the capital gain or income that would otherwise arise on the transfer.

If TCP is transferred by the vendor under section 85 on a fully tax-deferred basis, the current withholding and remittance rules continue to apply to the purchaser and vendor as if no tax deferral was available. The CRA may administratively allow the vendor to obtain a clearance certificate without remitting tax provided that sufficient documentation is submitted and no tax will be payable as a result of the rollover. However, the purchaser may prefer to withhold tax until the clearance certificate is issued by the CRA to limit their risk of liability. Consequently, for fully tax-deferred section 85 rollovers, there can be an administrative burden and delay in the availability of funds to the vendor.

Budget 2026 proposes to exempt vendors and purchasers from the withholding and tax remittance requirements for fully tax-deferred section 85 rollovers of TCP provided that, within 30 days of the disposition, the section 85 election form is filed and the purchaser provides a notice to the CRA setting out information regarding the transaction and the vendor.

An existing anti-avoidance rule denies a tax-deferred rollover if, within three years, there is a subsequent disposition of the transferred property or substituted property, and one of the main purposes of the series was to benefit from an exemption from Canadian tax (e.g., under a tax treaty). Budget 2026 proposes to strengthen this rule for rollovers of TCP by non-residents by extending the three-year period to five years and ensuring that a subsequent disposition of a property that principally derives its value from the transferred property or substituted property is also subject to the rule.

Coming into Force

These measures would apply to dispositions that occur on or after January 1, 2027.

Sales and Excise Tax Measures

GST/HST Health Measures

Under the Goods and Services Tax/Harmonized Sales Tax (GST/HST), tax relief is provided for certain health care services and products. This is achieved by exempting the services of certain health care professionals and zero-rating certain medical devices.

Exempt treatment means that suppliers of exempt health care services do not charge the GST/HST, but they cannot claim input tax credits to recover the GST/HST paid on inputs in relation to these services. Zero-rating means that suppliers of certain health care products do not charge the GST/HST (i.e., these supplies are taxed at zero per cent) and are entitled to claim input tax credits to recover the GST/HST paid on inputs in relation to these supplies.

Budget 2026 proposes changes to ensure that the GST/HST treatment of certain health care services and devices remains aligned with developments in the health care sector.

GST/HST Treatment of Massage Therapy Services

In determining what health care services are eligible for exemption, the approach that the Government of Canada has generally taken is to refer to the practices of the provinces and territories, given their major role in delivering health care. In this regard, if a service is covered by the public health insurance program in a given province or territory, the GST/HST legislation exempts the service in that province or territory.

Exempt treatment is also provided to certain health care practitioners that are regulated in at least five provinces, such as doctors, dentists and physiotherapists. The list of health care practitioners whose services are tax-exempt is set out in the GST/HST legislation. Massage therapy is currently regulated as a health profession in at least five provinces and therefore meets the criterion generally used to determine whether the professional services of a health care practitioner should be exempt from the GST/HST.

Budget 2026 proposes that qualifying massage therapists be added to the list of health care practitioners whose professional services are exempt from the GST/HST.

Qualifying massage therapy services would generally be exempt from the GST/HST if they are supplied by a person who practices the profession of massage therapy and either of the following conditions are met:

• where the person is required to be licensed or certified to practice the profession in the province in which the service is supplied, the person is so licensed or certified; or
• where the person is not required to be licensed or certified to practice the profession in that province, the person has qualifications equivalent to those necessary to be so licensed or certified in another province.

This measure would apply to qualifying supplies of massage therapy services made after Budget Day.

GST/HST Treatment of Alternating Electric Field Therapy Devices

Prescription drugs and certain medical and assistive devices that are specifically designed to assist an individual in treating or coping with a chronic disease, illness or physical disability may be zero-rated. The medical devices eligible for zero-rating are listed in the GST/HST legislation.

Budget 2026 proposes to add devices that are specially designed for alternating electric field therapy for use by an individual with cancer to the list of medical devices eligible for zero-rating under the GST/HST. An alternating electric field therapy device to treat glioblastoma multiforme, an aggressive form of brain cancer, is approved by Health Canada for use in Canada.

This measure would apply to qualifying supplies made after Budget Day.

Pre-Approval Regime for GST/HST Input Tax Credit Allocation Methods of Financial Institutions

Businesses that make both taxable and exempt supplies are generally eligible to claim input tax credits to recover GST/HST paid on inputs used for making taxable supplies but not on inputs used for making exempt supplies. Where an input is used to make both taxable and exempt supplies, a business must use an allocation method to determine the extent to which the input is used in the making of taxable supplies.

Certain large financial institutions are permitted to use their own GST/HST input allocation methods for a given fiscal year if they obtain approval from the Minister of National Revenue before the beginning of the fiscal year. Currently, this pre-approval must be requested every fiscal year.

Budget 2026 proposes to amend the Excise Tax Act to allow these financial institutions to apply for pre-approval of their GST/HST input allocation methods for three consecutive fiscal years, rather than only in respect of one fiscal year. In the case of a three-year application, the Minister could approve the methods for the first fiscal year only (for example, where the proposed methods are novel). In that case, the financial institution could make subsequent pre-approval applications for the second and third fiscal years and request to use the same or different methods.

This measure would apply in respect of fiscal years of a financial institution beginning after June 30, 2027.

Product Descriptions and Regulatory Cross-References in Sales and Excise Tax Rules

Sales and excise taxes generally apply to goods imported into Canada. That said, certain goods are fully or partially relieved of tax on importation or are subject to tax at a different time. These goods are often identified in the Excise Tax Act rules using the Harmonized Commodity Description and Coding System ("HS codes") or by cross-referencing product descriptions set out in separate regulations under the Customs Tariff.

In 1998, Canada made significant changes to how it uses HS codes to manage importations and related customs regulations. However, sales and excise tax rules continue to refer to codes and regulations as they existed before 1998.

Budget 2026 proposes to update outdated HS codes and regulatory cross-references in the sales and excise tax rules. Most of these changes would preserve the existing tax treatment of affected goods while making the rules easier for importers and administrators to interpret and apply. In some cases, the changes would also broaden or simplify relief to align it with current customs rules, commercial practices or the treatment of comparable goods.

Key Updates to GST/HST Rules

Specified Motor Vehicle

"Specified motor vehicle" is defined in the Excise Tax Act using HS codes and is intended to capture motor vehicles that must be registered with provincial authorities.

The measure would update the HS codes referenced in the definition of "specified motor vehicle". It would also exclude electric cycles requiring pedal propulsion, wheelchairs, and pedestrian-moved vehicles. Although these are generally included in the updated HS codes, they are not required to be registered with provincial authorities.

Cargo Containers Engaged in International Commercial Transportation

Current tax rules provide GST/HST relief for cargo containers entering Canada but restrict relief to those at least 6.1 metres long or with an internal capacity of at least 14m³ that are exported within 30 days, in accordance with HS codes as they existed before 1998. This relief ensures that non-resident importers that are not registered for the GST/HST and therefore unable to claim input tax credits do not incur unrecoverable GST/HST costs.

To align with standard commercial practices, this measure would update the HS codes used to identify containers engaged in international commercial transportation. As a result, tax relief would extend to containers that have a minimum internal volume of 1 m³ and are exported within 365 days.

These updates would also apply to GST/HST rules related to cargo containers that change from commercial to non-commercial uses and rules that provide GST/HST relief for certain emergency repair and storage services related to cargo containers.

Goods Relieved or Partially Relieved from GST/HST on Importation

Goods fully relieved from GST/HST on importation are described in the Excise Tax Act and the Non-Taxable Imported Goods (GST/HST) Regulations. Goods partly relieved from GST/HST on importation are described in the Value of Imported Goods (GST/HST) Regulations. These sales tax rules use HS codes and references to the outdated Temporary Importations (Excise Levies and Additional Duties) Regulations made under the Customs Tariff to describe the goods relieved of tax and relevant conditions for relief.

This measure proposes certain modifications to maintain or expand relief for goods for which HS codes have been modified or no longer exist or that depend on outdated references.

Proposed modifications include:

• Current tax rules provide full or partial GST/HST relief for certain temporary importations by referring to the Temporary Importation (Excise Duties and Additional Levies) Regulations, which are outdated regulations made under the Customs Tariff. The measure would maintain relief for temporary importations by reference to updated regulations under the Customs Tariff (Temporary Importation (Tariff Item No. 9993.00) Regulations). This update would, as a result, extend GST/HST relief for temporary importations by increasing the maximum import period from 12 to 18 months, consistent with current customs rules.
• Current tax rules use certain HS codes that no longer exist to provide relief for temporary importations of display goods, commercial samples, and advertising films. The measure would maintain tax relief for these importations by prescribing them in the Non-Taxable Imported Goods (GST/HST) Regulations rather than referring to HS codes.
• Current tax rules allow international bridge authorities to import equipment for the purpose of repair and maintenance without incurring GST/HST. The customs regulations used to identify these types of importations no longer exist. The measure would maintain this relief by prescribing these importations in the Non-Taxable Imported Goods (GST/HST) Regulations rather than referring to outdated customs regulations and would extend relief to importations made by international tunnel authorities for consistency in treatment.
• Current tax rules use HS codes that no longer exist to provide relief for books received from free lending libraries abroad and returned within 60 days. The measure would maintain relief by prescribing these importations in the Non-Taxable Imported Goods (GST/HST) Regulations rather than referring to HS codes.
• Current tax rules provide full GST/HST relief for railway locomotives, railway rolling stock and related equipment entering Canada for use in international service and partial GST/HST relief for these goods when temporarily diverted or entering domestic service. This relief is provided under the Non-Taxable Imported Goods (GST/HST) Regulations and the Value of Imported Goods (GST/HST) Regulations by reference to outdated customs rules and remission orders. The measure would remove these outdated references to provide relief in the following manner.
• Maintain full GST/HST relief for railway assets used in international service by reference to updated HS codes.
• Maintain partial relief for certain railway assets engaged in a temporary diversion or entering domestic service under the Value of Imported Goods (GST/HST) Regulations while removing references to outdated remission orders.
• Simplify partial relief for certain railway assets engaged in temporary diversions or entering domestic service by applying GST/HST based on 1/120 of their value for duty, instead of the current method of charging GST/HST based on monthly rental charges or average monthly rental charges.
• Current tax rules provide GST/HST relief for certain goods temporarily imported for certain live entertainment events, such as circuses or aquatic shows. The measure would extend relief to temporary importations of side shows and concessions and provide partial relief for temporary imports of amusement rides to ensure consistency between importations of similar goods. This relief would be provided under the Non-Taxable Imported Goods (GST/HST) Regulations.

Goods Brought into an HST Participating Province

Certain goods brought into an HST participating province from another province and certain goods delivered to a person in a participating province from a non-resident may be subject to the provincial component of HST. The Excise Tax Act provides relief from the provincial component of HST in these cases for some goods, which generally parallels relief provided for importations. The measure would update HS codes referenced in these rules and ensure consistency with rules for importations. These modifications generally maintain existing relief.

Key Updates to Excise Tax Rules

Under the Excise Tax Act, excise taxes apply to motive fuels, fuel-inefficient automobiles, air conditioners designed for automobiles and certain insurance premiums. Excise tax relief is generally provided to importations of goods engaged in international commercial transportation, importations of personal or household effects, importations made by government or international bodies, or temporary importations. Updates to HS codes and references to current trade regulations would generally maintain this existing excise tax relief including similar modifications for temporary importations as described above for GST/HST relief.

Coming into Force

These changes would generally come into force on the first day of the second month after the enacting legislation receives royal assent.

Cannabis Taxation

Budget 2026 proposes changes to the cannabis excise duty stamping regime and measures to strengthen the penalty framework.

Cannabis Excise Duty Stamp

The federal government imposes an excise duty on cannabis products and shares 75 per cent of revenues with provinces and territories with which it has entered into Coordinated Cannabis Taxation Agreements – the "participating jurisdictions", currently all but Manitoba. Agreements with four participating jurisdictions – Ontario, Saskatchewan, Alberta, and Nunavut – include an adjustment to their provincial/territorial portion of the duty to account for differences in applicable sales taxes. Licensed cannabis producers must remit and report the duty that applies for the province or territory where the product is destined and affix an excise stamp that is specific to the province or territory before it enters the duty-paid market.

Budget 2026 proposes changes to the cannabis excise duty stamping regime. A new common stamp would be used for products sold in all provinces and territories with the same duty rate (Quebec, Nova Scotia, New Brunswick, British Columbia, Prince Edward Island, Newfoundland and Labrador, the Northwest Territories and Yukon) and in other participating jurisdictions that choose to adopt the common stamp in their jurisdictions. Provinces and territories would have until January 31, 2027 to confirm their participation to the Minister of Finance and National Revenue.

Licensed producers would be able to affix the new common stamp to products beginning January 1, 2028. Products intended to be sold in jurisdictions adopting the common stamp could be stamped and entered into the duty-paid market with either the new common stamp or the existing province- or territory-specific stamp until June 30, 2029. After this date, licensed producers would no longer be able to enter products with the province- or territory-specific stamp into the duty-paid market of jurisdictions adopting the common stamp. Products previously entered into the duty-paid market of these jurisdictions with the existing province- or territory-specific stamps would continue to be allowed to be sold by wholesalers and retailers until December 31, 2029.

Licensed producers would still be required to remit and report the duty applicable to the province or territory where a cannabis product with a common stamp is destined. A new penalty that would match that of other graduated penalties in the Excise Act, 2001, which are currently set at an amount up to $25,000, would be introduced for licensed producers failing to report, or reporting incorrectly, the destination of a cannabis product.

Once a cannabis product has entered into the duty-paid market of a province or territory, transporting or sending a cannabis product stamped with a common stamp across a provincial or territorial border would generally be prohibited. Exceptions would include cannabis transported by individuals for personal use within the possession limits established in the Cannabis Act. Associated contraventions would come with a penalty of 200 per cent of the duty paid on the product.

Licensed producers would be able to accept returned products with a common stamp and re-enter them into another province or territory that has adopted the common stamp by reporting the return and resale, and paying, or receiving a refund of, any difference in duties between the two provinces or territories.

Updated Fine and Penalty Framework

Budget 2026 proposes two penalty measures. First, it proposes a new civil penalty set at twice the duty that would have been payable on cannabis that a licensed producer reported as being in its possession but is unable to account for.

Second, it proposes changes to the calculation of fines and penalties for certain cannabis products. For contraventions related to the sale or distribution of unstamped cannabis edibles, topicals and extracts, applicable fines and penalties would be calculated as two to three times the duty that would be payable if the product had a THC concentration of:

• 10 milligrams per gram for cannabis edibles;
• 15 milligrams per gram for cannabis topicals; and
• 1000 milligrams per gram for cannabis extracts.

These measures would come into force on royal assent of the enacting legislation.

Spirits Licence Security Requirements

Under the Excise Act, 2001, a person must hold a spirits licence to produce or package spirits in Canada and must hold an excise warehouse licence to possess non-duty-paid packaged spirits for storage or distribution. Spirits licensees are generally required to provide security to the Canada Revenue Agency as a condition of obtaining and maintaining a licence, based primarily on inventories of non-duty-paid spirits, e.g., spirits aging in barrels. Excise warehouse licensees are generally not required to provide security.

Budget 2026 proposes to:

• Require excise warehouse licensees authorized to possess non-duty-paid packaged spirits to provide security as a condition of licensing. This requirement would not apply to an excise warehouse licence held by His Majesty in right of a province or a liquor authority.
• Base security amounts on monthly excise duty liabilities. Security would be subject to a minimum of $5,000 and a maximum of $2 million for each licence.

The measure would apply to spirits licences and excise warehouse licences issued on or after the day that the enacting legislation receives royal assent.

Federal Fuel Excise Tax Licensing Framework

Under the Excise Tax Act, the fuel excise tax (the "tax") is imposed on gasoline, diesel and aviation fuel (collectively, "fuel") imported into or manufactured in Canada. The tax generally becomes payable by the importer upon importation or by the manufacturer when the fuel is delivered to a purchaser. Entities that manufacture fuel are generally required to obtain a manufacturer licence, while entities that purchase fuel for resale may qualify for a wholesaler licence. Licensed entities may qualify for relief when purchasing or importing fuel. The framework is intended to ensure that tax applies only once to a quantity of fuel in the supply chain, typically when a licensed entity sells and delivers fuel to an unlicensed entity, such as a retail gas station.

However, the existing eligibility requirements for wholesaler licences are dated and no longer reflect modern fuel wholesaling practices, with the result that certain businesses engaged in fuel wholesaling activities are unable to obtain a licence. In addition, the existing relieving rules do not apply to certain fuel purchases by licensed manufacturers. In certain circumstances, these limitations may result in tax becoming payable more than once along the supply chain in respect of the same quantity of fuel.

Budget 2026 proposes amendments to the Excise Tax Act to expand the eligibility for a wholesaler licence to businesses that resell fuel in the normal course of their business and to broaden the relieving rules for fuel purchased or imported by licensed manufacturers. Budget 2026 also proposes to introduce a time-limited payment in respect of certain past instances in which tax became payable more than once on the same quantity of fuel.

Expansion of the Wholesale Licensing Framework

Under the proposed new rules, an entity would be eligible to apply for a wholesaler licence if the entity meets expanded conditions. Specifically, the entity must be in the business of selling or delivering fuel and, in the normal course of that business, must deliver fuel to a purchaser that is a licensed manufacturer, a licensed wholesaler, or another entity that will resell the fuel in the normal course of their business.

These proposed changes would come into force on the first day of the month following royal assent of the enacting legislation.

Relieving Rules for Licensed Manufacturers

Under the current rules, licensed manufacturers may import fuel without paying the tax, or purchase fuel without triggering the tax for the vendor, only if they intend to further manufacture the fuel (e.g., blending or incorporating additives). The proposed new rules would also permit licensed manufacturers to import fuel without paying the tax, or to purchase fuel without triggering the tax for the vendor, if they intend to resell the fuel. In the case of purchased fuel, relief would be available whether the fuel is acquired from a licensed manufacturer or a licensed wholesaler.

These proposed changes would come into force on the day following Budget Day.

Time-limited Payment

Budget 2026 proposes a time-limited payment to provide relief in certain past cases where the tax effectively applied more than once to the same quantity of fuel. The Minister of National Revenue would be authorized to make a payment to a licensed manufacturer (the "applicant") when all of the following conditions are met:

• Tax was paid by another entity on or after January 1, 2017 and before Budget Day in respect of fuel acquired by the applicant, and that tax was reflected in the applicant's purchase price;
• Tax subsequently became payable on or after January 1, 2017 and before Budget Day by the applicant on the fuel when the fuel was resold;
• The applicant did not embed any portion of the first instance of tax in the selling price when reselling the fuel;
• The applicant claimed deductions corresponding to the first instance of tax for reporting periods ending on or after January 2017 and before Budget Day and those deductions were denied by the Minister of National Revenue on assessment or reassessment;
• No refund, rebate, drawback, remission or other payment in respect of the first instance of tax has been or may be granted to any entity;
• The applicant provides evidence satisfactory to the Minister of National Revenue that all the above conditions are met; and,
• The application is made within two years after the day on which the enacting legislation receives royal assent.

The proposed amendments for this payment would come into force on the day following royal assent of the enacting legislation.

Other Tax Measures

Indigenous Tax Jurisdiction Arrangements

Budget 2026 proposes enhancements to First Nations Personal Income Tax and First Nations Goods and Services Tax arrangements.

• Increasing the First Nations Personal Income Tax revenue-sharing rate from 95 per cent to 99 per cent of revenues attributable to a participating government, in conjunction with a revised revenue-sharing mechanism.
• Establishing an annual ceiling on a participating Indigenous government's share of the cost of the Canada Groceries and Essentials Benefit under First Nations Goods and Services Tax arrangements. This ceiling would ensure greater revenue stability for participating Indigenous governments.

These enhancements would be implemented through negotiations between the federal government and interested Indigenous governments.

Ministerial Delegations

Income Tax Matters

The Income Tax Act requires certain matters to be prescribed by the Income Tax Regulations that require routine updates.

To streamline the approval process for these updates, Budget 2026 proposes to amend the Income Tax Act to allow the following matters to be designated by ministerial authority rather than prescribed by the Income Tax Regulations.

• The drought, flood and excessive moisture regions eligible for the livestock tax deferral would be designated by the Minister of Finance, in consultation with the Minister of Agriculture and Agri-Food, as of the 2025 calendar year.
• The limits and rates applicable to certain deductions and benefits in respect of the business use of an automobile would be designated by the Minister of Finance, as of the 2026 calendar year.
• Eligible distributions for the purpose of the foreign spin-off rules would be designated by the Minister of National Revenue, with the concurrence of the Minister of Finance, for distributions that occur on or after Budget Day.
• Certain administrative requirements for charities and other qualified donees would be designated by the Minister of National Revenue, including the content of donation receipts and which organizations are considered as prescribed donees, effective 90 days after royal assent of the enacting legislation.

Budget 2026 also proposes to streamline the approval process for foreign charities by amending the Income Tax Act to remove the requirement that the Minister of National Revenue consult the Minister of Finance before registering a foreign charity as a qualified donee, effective on royal assent of the enacting legislation.

Sales Tax & Excise Duty Agreements with Provinces and Territories

The Government of Canada has tax coordination agreements in place with provinces and territories for the collection, administration and enforcement of the GST/HST, as well as cannabis and vaping product excise duties. Under these agreements, federal regulations are required to implement provincial or territorial tax policy decisions. Amendments to these coordination agreements and related regulations currently require approval by the Governor in Council.

Budget 2026 proposes to amend the Federal-Provincial Fiscal Arrangements Act (FPFAA), the Excise Tax Act and the Excise Act, 2001 to allow the following matters to be approved by the Minister of Finance rather than by the Governor in Council.

• Amendments to sales tax harmonization agreements, coordinated cannabis taxation agreements and coordinated vaping product taxation agreements entered into by Canada with a province or territory under the authority of the FPFAA.
• Related amendments to regulations for the purpose of implementing provincial or territorial policy decisions permitted under those agreements.

This measure would come into force on royal assent of the enacting legislation.

Tax Administration Agreements with Provinces and Territories

The Government of Canada has tax administration agreements in place with provinces and territories, including agreements to collect and administer their income taxes. These agreements require periodic amendments to reflect administration or policy changes.

Budget 2026 proposes to amend the Federal-Provincial Fiscal Arrangements Act to remove the requirement for Governor-in-Council approval before the Minister of Finance or the Minister of National Revenue can amend these agreements.

This measure would come into force on royal assent of the enacting legislation.

Indigenous Tax Administration Agreements

Currently, with approval of the Governor in Council, the Minister of Finance may enter into or amend tax administration agreements with Indigenous governments so that if these governments choose to do so, they can levy personal income taxes or value-added sales taxes within their lands on the basis of their own tax laws.

Budget 2026 proposes to amend the Federal-Provincial Fiscal Arrangements Act and the First Nations Goods and Services Tax Act to remove the requirement for the Minister of Finance to seek approval from the Governor in Council to enter into or amend tax administration agreements with Indigenous governments.

This measure would come into force on royal assent of the enacting legislation.

Strategic Environmental and Economic Assessment Statement

In accordance with the Cabinet Directive on Strategic Environmental and Economic Assessment, a strategic environmental assessment was conducted for the following measures:

• the Productivity Mega Deduction; 
• the Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit; 
• the Helium Exploration, Development and Resource Expenses; and 
• the Clean Electricity and Clean Technology investment tax credits. 

With respect to the Productivity Mega Deduction, the assessment concluded that the measure could result in negative indirect environmental effects, as it could increase economic growth, which is normally associated with higher consumption, higher greenhouse gas emissions and faster depletion of natural resources. However, the measure could also result in some positive environmental effects to the extent that businesses replace existing capital with more energy-efficient and lower-emission technologies. Based on available data, it is not possible to assess whether the net environmental impact will be positive or negative. 

With respect to the Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit measures, the assessment concluded that mineral exploration, as well as new mining and related processing activities that could follow from successful exploration efforts, could be associated with a variety of environmental impacts on soil, water and air and, as a result, could have an impact on the targets and actions in the Federal Sustainable Development Strategy. Potential effects on nature and biodiversity could also arise, particularly from subsequent mining activity. However, such activities are subject to applicable federal and provincial or territorial environmental regulations, including project-specific environmental assessments where required. Further, the Critical Mineral Exploration Tax Credit supports exploration for certain critical minerals that may contribute to the transition to a low-carbon economy.  

With respect to the Helium Exploration, Development and Resource Expenses measure, the assessment concluded that helium exploration, as well as new extraction and related processing activities that could follow from successful exploration, could have an impact on soil, water and air and, as a result, on the targets and actions in the Federal Sustainable Development Strategy. Subsequent extraction activities may also affect nature and biodiversity. These activities remain subject to applicable federal and provincial or territorial environmental regulations, including project-specific environmental assessments where required.  

With respect to the proposed extension to 2040 of the Clean Electricity and Clean Technology investment tax credits and expansion of eligibility for the Clean Electricity investment tax credit to high-voltage intra-provincial transmission, the assessment concluded that these measures are expected to have a positive environmental impact by encouraging investment in projects that are expected to help reduce emissions of greenhouse gases and air pollutants, in support of Canada's targets set out in the Federal Sustainable Development Strategy. The measures would also support Canada's goal of achieving net-zero greenhouse gas emissions by 2050. However, these positive impacts could be partly offset by certain negative impacts. With respect to the expansion of eligibility to high-voltage intra-provincial transmission, electricity transmission infrastructure can have negative impacts on nature and biodiversity, such as those caused by development in protected areas or fragmentation of wildlife habitats. With respect to the extension of the investment tax credits, negative impacts could result from the use of certain supported technologies that release greenhouse gases as a result of fuel combustion, as well as particulate matter and other air pollutants that impact the environment and human health. In addition, upstream activities related to natural gas energy systems (e.g., natural gas extraction) can have negative environmental impacts, such as increased greenhouse gas emissions. However, the emissions-intensity requirement limits support to natural gas energy systems that use high-performance carbon capture technology, ensuring that emissions are maximally reduced. Additionally, supported waste biomass energy systems are generally viewed as carbon neutral on a lifecycle basis, and potentially carbon negative when combined with carbon capture, utilization and storage. These activities would remain subject to applicable federal and provincial or territorial environmental regulations. 

A strategic economic assessment was also conducted for the following measures: 

• the Productivity Mega Deduction; 
• the 2027 Canada Groceries and Essentials Benefit Supplement; 
• the Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit; 
• the Canada Caregiver Credit; 
• the Canada Growth Incentive; 
• the Build Canada Workers Benefit; 
• the Clean Electricity and Clean Technology investment tax credits; 
• the Scientific Research and Experimental Development Tax Incentive Program; 
• the interest deductibility limits; and
• the Canadian Journalism Labour Tax Credit. 

With respect to the Productivity Mega Deduction, the measure would have positive impacts on GDP growth from increased business investment and a positive impact on employment.

With respect to the 2027 Canada Groceries and Essentials Benefit Supplement, the one-time additional payment would increase disposable income and consumption for eligible recipients in the near term, but have negligible economic impacts at the national level.

With respect to the Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit, these measures would have a positive economic impact on the mining sector by encouraging incremental investment in mineral exploration in Canada.

With respect to the Canada Caregiver Credit, making the credit refundable would increase disposable income and consumption for lower-income caregivers and would have negligible economic impacts due to the small cost of the measure relative to the size of the Canadian economy.

With respect to the Canada Growth Incentive, the measure would have positive impacts on employment and GDP at the national level, driven by increased investment in Canadian high-growth firms and increased economic activity by these firms. 

With respect to the Build Canada Workers Benefit, the measures would result in positive economic impacts at the national level, including through an improvement in incentives to participate in the labour force. Lower program costs would positively contribute to fiscal sustainability.

With respect to the proposed extension to 2040 of the Clean Electricity and Clean Technology investment tax credits and expansion of eligibility for the Clean Electricity investment tax credit to high-voltage intra-provincial transmission, the measures would have positive impacts on GDP and employment. 

With respect to the Scientific Research and Experimental Development Tax Incentive Program, the measure would encourage investment, resulting in positive economic impacts at the national level.

With respect to the interest deductibility limits, the measure could improve the profitability of firms in the purpose-built rental housing and regulated energy utility sectors, with positive impacts on these sectors.

With respect to the Canadian Journalism Labour Tax Credit, the measure would have a positive economic impact on the journalism sector by reducing labour costs and improving profitability.

Previously Announced Measures

Budget 2026 confirms the government's intention to proceed with the following previously announced tax and related measures, with any modifications resulting from consultations and deliberations since their release.

• Legislative and regulatory proposals released on September 15, 2026, to implement the Productivity Mega Deduction.
• Legislative and regulatory proposals released on July 23, 2026, including the following measures:
• Disability Tax Credit;
• Red Seal Completion Bonus;
• Investment Tax Credit for Carbon Capture, Utilization and Storage;
• Investment Income Derived from Assets Supporting Canadian Insurance Risks;
• Transfer Pricing;
• Hybrid Mismatch Arrangements;
• Goods and Services Tax/Harmonized Sales Tax (GST/HST) reverse charge mechanism;
• Technical amendments to the Income Tax Act and Income Tax Regulations;
• Technical amendments to the Global Minimum Tax Act; and
• Technical amendments to the Excise Tax Act, the Excise Act, 2001, the Air Travellers Security Charge Act, the Select Luxury Items Tax Act, and related regulations.
• Legislative proposals released on January 29, 2026, to implement reporting requirements for non-profit organizations.
• Legislative proposals released on August 12, 2024, with respect to technical amendments to the Income Tax Act.
• Tax measures relating to non-compliance with information requests, announced in Budget 2024, to be implemented through amendments to the Excise Tax Act, the Air Travellers Security Charge Act, the Excise Act, 2001 and the Select Luxury Items Tax Act.
• Legislative proposals released on August 4, 2023, with respect to tax-exempt sales of motive fuels for export.
• Legislative and regulatory proposals released on August 9, 2022, including the following measures:
• Technical amendments to the Income Tax Act and Income Tax Regulations; and
• Remaining legislative proposals relating to excise duties.

Budget 2026 also reaffirms the government's commitment to move forward as required with other technical amendments to improve the certainty and integrity of the tax system.