On March 26, 2026, the Budget 2025 Implementation Act, No. 1 (“Bill C-15”), received royal assent, meaning that several major tax measures proposed in the 2025 federal budget, Fall Economic Statement 2024, and 2024 federal budget have all become law. This article summarizes some of the critical changes below.
Lifetime Capital Gains Exemption
According to Bill C-15, the lifetime capital gains exemption (“LCGE”) limit has been increased to $1,250,000 (from $1,016,836) on the sale of qualified small business corporation shares, as well as qualified farm and fishing property, for dispositions that occur on or after June 25, 2024 Additionally, the indexation of the LCGE will resume for the 2026 taxation year and onward.
Immediate Expensing
Bill C-15 provides for temporary immediate expensing in respect of additions or modifications to eligible manufacturing and processing buildings. To qualify, the building must have been acquired on or after November 4, 2025, and it must have been used in a manufacturing process before 2030. The immediate expensing provision will be subject to a gradual phase-out period between 2030 and 2033.
Bill C-15 will also allow immediate expensing on qualifying purchases of patents (class 44), data network infrastructure equipment (Class 46), and computer equipment and system software (Class 50) made on or after April 16, 2024, which is available for use before January 1, 2027
Accelerated Investment Incentive
Bill C-15 will temporarily allow for the reinstatement of the accelerated investment incentive (“AII”) for certain types of eligible property acquired after 2024 that is available for use before 2030. This measure would be phased out starting in 2030 and fully eliminated after 2033.
Bill C-15 will also allow for an enhanced capital cost allowance (“CCA”) claim of 10% (increased from 4%) in respect of certain additions and conversions to eligible new purpose-built residential rental buildings that start between April 15, 2024, and December 31, 2031. To qualify, the building must be available for use before 2036.
Scientific Research and Experimental Development
Bill C-15 will provide enhancements to scientific research and experimental development (“SR&ED”) for taxation years that begin on or after December 16, 2024. Specifically, Bill C-15 will:
- Increase the prior-year taxable capital phase-out range to $15 million and $75 million (from $10 million and $50 million);
- Reinstate the eligibility of certain capital expenditures for SR&ED incentives;
- Expand the eligibility for the 35% refundable credit to include eligible Canadian public corporations (“CCPCs”);
- Increase the annual expenditure limit from $3 million to $6 million; and
- Permit CCPCs to elect to have their expenditure limit for the enhanced SR&ED credit determined based on the same gross revenue phase-out structure proposed for Canadian public corporations.
Limitation of Investment Counsel Fees for Alternative Minimum Tax
For taxation years starting after 2023, Bill C-15 reduces the allowable deduction for investment counsel and management fees to 50% (down from 100%) for alternative minimum tax (“AMT”) purposes. Since most trusts do not have an AMT basic income exemption, the deduction of investment counsel fees may trigger AMT liability for these trusts.
Foreign Accrual Property Income
For taxation years that begin on or after April 7, 2022, Bill C-15 introduced amendments to eliminate tax-deferral opportunities for CCPCs and substantive CCPCs earning investment income through controlled foreign affiliates. By reducing the relevant tax factor applicable to CCPCs and substantive CCPCs from 4 to 1.9, the deduction against foreign accrual property income (“FAPI”) that CCPCs and substantive CCPCs are entitled to in respect of foreign taxes paid by controlled foreign affiliates is drastically reduced. In turn, CCPCs and substantive CCPCs are no longer able to defer tax on all the FAPI earned by their controlled foreign affiliates.
Foreign Accrual Business Income
Bill C-15 also introduced exceptions to the FAPI regime for certain sources of income that would not constitute passive investment income if earned directly by a CCPC or substantive CCPC. These sources of income are deemed to be foreign accrual business income (“FABI”). Eligible taxpayers may elect to use 4 as the tax factor applicable to FABI, which will generally allow for deferral of tax on the FABI earned by their controlled foreign affiliates.
Transfer Pricing
Bill C-15 passes several changes to the transfer pricing rules for taxation years beginning after November 4, 2025. It introduces updated rules for transfer pricing adjustments along with enhanced documentation requirements. Under the Bill, taxpayers must assess cross-border transactions between non-arm’s-length parties not only based on contractual terms, but also by considering other economically relevant factors. The deadline to provide transfer pricing documentation upon CRA request has been reduced from three months to 30 days.
Personal Tax Matters
Bill C-15 will provide for the following changes to personal tax measures:
- Expanding the capital gains rollover for qualifying dispositions of eligible small business corporation shares, applicable to dispositions occurring on or after January 1, 2025.
- Introducing a temporary tax credit for personal support workers, available from 2026 through 2030.
- Enhancing the Mineral Exploration Tax Credit for taxpayers investing in eligible flow-through shares.
- Excluding the Canada Disability Benefit from taxable income beginning in 2025.
- Disallowing taxpayers from claiming both the Home Accessibility Tax Credit and the Medical Expense Tax Credit on the same expenses, effective in 2026.
- Implementing a temporary non-refundable top-up tax credit.
Amendments to Trust Filing Requirements
Bill C-15 introduces several changes to the trust reporting rules. In particular, it provides exceptions for certain listed express trusts from the requirement to file a T3 trust return and the prescribed Schedule 15 beneficial ownership information. Most of these measures apply to taxation years ending after December 30, 2025.
Bill C-15 also provides greater clarity on bare trust tax reporting and introduces several exemptions from the filing requirement. For example, exemptions include principal residence title arrangements among related individuals, as well as situations where a general partner holds legal title to real property for the benefit of a partnership, provided the partnership files a T5013 return. However, many common bare trust arrangements will still be subject to the filing requirement for taxation years ending on or after December 31, 2026.
Extended Period for Loss Carry Back for Graduated Rate Estates
The bill also proposes amendments to the loss carry back rules, extending the period for making an election under subsection 164(6) to any of the first three taxation years. Under the previous rules, a graduated rate estate could only carry back capital losses realized in its first taxation year to the deceased individual’s terminal T1 return. Accordingly, the amendment provides for greater flexibility for tax planning and administration of the estate. Additionally, Bill C-15 replaces the requirement to file an amended final T1 return for a deceased individual. Instead, executors must submit a prescribed form to amend the final T1 return. These changes apply to graduated rate estates of individuals who passed away on or after August 12, 2024.
Underused Housing Tax
The underused housing tax (“UHT”) rules will be discontinued for the 2025 and later calendar years and filing UHT returns will no longer be required for those periods. However, obligations to file UHT returns and remit any amounts owing, along with applicable interest and penalties, will continue to apply for the 2022 through 2024 calendar years.
Luxury Tax
Effective November 5, 2025, Bill C-15 removed the luxury tax on specified aircrafts and vessels.
Canada Carbon Rebate for Small Businesses
Bill C-15 provides that the Canada Carbon Rebate received by small businesses on or after June 20, 2024, will be exempt from tax.
GG Observations
Bill C-15 has introduced a wide variety of changes. Understanding the tax implications of these new provisions can be quite challenging. Furthermore, since a lot of these changes are to be applied retroactively, it is unclear whether the CRA would automatically be amending previously filed returns, or whether the onus will be on taxpayers to do so. Your GG advisors can help assess the impact of these changes and any related filing requirements. Please contact us for more information to see how some of these changes may affect you.
