On November 5th, 2026, the Minister of Finance François-Philippe Champagne, presented the 2026 Federal Budget, entitled “Masters of our destiny.” Presented against a backdrop of global geopolitical uncertainty, ongoing energy price pressures, and intensifying competition for investment, Budget 2026 focuses on strengthening Canada’s economic independence, improving affordability, and accelerating private-sector investment, anchored by the launch of the $25 billion Canada Strong Fund. This national sovereign-wealth fund is dedicated to investing in nation-building projects and high-growth Canadian companies, with the goal of securing long-term prosperity for Canadians.
Budget 2026 prioritizes investments in clean energy, infrastructure, and innovation, while maintaining fiscal discipline by managing operating spending and ensuring that new deficits are driven by long-term capital investments. The projected deficit for 2026-2027 is $62.3 billion, followed by deficits of $62.5 billion in 2027-2028 and $57.6 billion in 2028-2029.
While Budget 2026 proposes no changes to the general Federal personal or corporate income tax rates, it introduces several tax measures affecting investors, corporations, and individual taxpayers. Among the key measures announced, we find the permanent “Productivity Mega Deduction for immediate expensing of eligible new capital investments”, the “Canada Growth Incentive” with a new $15 million capital gains exemption and enhanced rollover for small business reinvestment, and a single May 15 filing deadline for individuals. The budget also introduces higher, inflation-indexed penalties, new measures for repeated non-compliance, and targeted amendments to improve tax administration.
In the following sections, we provide an overview of the key fiscal initiatives introduced by the Federal government, highlighting their objectives, operation, effective dates and potential implications for individuals and corporations.
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Table of contents
Federal Budget 2026 – Masters of our destiny
Administrative Tax Measures
Income Tax Return Filing and Balance-Due Dates for Individuals
Instalment Payments for Individuals and Corporations
Increasing the Instalment Thresholds
Allowing Annual Instalment for All Individuals with Business Income
Inflation Adjustment of Fixed-Dollar Administrative Penalties
Medium and Large Corporations and Partnerships
Common Reporting Standard and Other Frameworks
Foreign Income Verification Statement – Form T1135
Clean Electricity and Clean Technology Investment Tax Credits
Scientific Research and Experimental Development (SR&ED) Tax Incentive Program
Canadian Journalism Labour Tax Credit
Canada Growth Incentive – Capital Gains Exemption
Canada Growth Incentive – Rollover for Investments in Small Businesses
Canada Groceries and Essentials Benefit Supplement
Canada Caregiver Credit: Refundable
Optional Flat Amounts for Personal Income Tax Deductions and Credits
Registered Retirement Savings Plan
Expansion of the Intergenerational Farm and Fishing Property Rollover
Trust Distributions to Non-Residents
Corporate Non-Resident Vendors: Taxable Canadian Propert
Withholding and Remittance Requirements
Alternating Electric Field Therapy Devices
GST/HST Input Tax Credit Methodology Pre-Approval Regime for Certain Financial Institutions
Product Descriptions and Regulatory Cross References in Sales and Excise Tax Rules
Federal Fuel Excise Tax Licensing Framework
Expansion of Wholesaler Licensing
Expanded Relief for Licensed Manufacturers
Time-Limited Relief for Previously Taxed Fuel
Previously Announced Tax Measures
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Administrative Tax Measures
Income Tax Return Filing and Balance-Due Dates for Individuals
Budget 2026 proposes to align the personal income tax return filing and balance-due dates for all individuals, including self-employed individuals and their spouses or common-law partners, by moving both deadlines to May 15.
This measure would apply to the 2027 and subsequent taxation years.
| Taxpayer | Current Rules (2026 and prior taxation years) | Proposed Rules (2027 and subsequent taxation years) |
| Self-employed individuals | File by June 15 and pay by April 30 | File and pay by May 15 |
| Spouses or common-law partners of self-employed individuals | File by June 15 and pay by April 30 | File and pay by May 15 |
| Other individuals | File and pay by April 30 | File and pay by May 15 |
Instalment Payments for Individuals and Corporations
Increasing the Instalment Thresholds
For taxation years beginning on or after January 1, 2028, Budget 2026 proposes to increase the instalment payment thresholds as detailed below:
| Taxpayer | Existing threshold | Proposed threshold |
| Individual resident outside Quebec | $3,000 | $7,500 |
| Individual resident in Quebec | $1,800 | $4,500 |
| Corporation | $3,000 | $7,500 |
Individuals would be required to make instalment payments only if the applicable threshold is exceeded in the current year and in at least one of the two preceding years. Corporations would not have to make instalments where their federal tax payable would not exceed $7,500 in the current year or the preceding taxation year.
Allowing Annual Instalment for All Individuals with Business Income
Budget 2026 proposes to allow individuals whose primary source of income is from a business, professional practice or commission income to make a single annual instalment payment rather than quarterly instalments. The instalment payment would be due by December 31 and would be equal to 2/3 of the combined federal-provincial net tax owing for the year.
This measure would apply to the 2028 and subsequent taxation years.
Objections to Assessments
Budget 2026 proposes extending the time available to file a notice of objection in respect of an income tax assessment as presented below:
| Taxpayer | Current Objection Deadline | Proposed Objection Deadline |
| Individuals and graduated rate estates (“GRE”) | Later of: (i) 90 days after the notice of assessment is sent, and (ii) 1 year from the return filing due date | Later of: (i) 1 year after the notice of assessment is sent, and (ii) 2 years from the return filing due date |
| Other taxpayers | 90 days after the notice of assessment is sent | 1 year after the notice of assessment is sent |
As a result, taxpayers would no longer need to request an extension of time to object, and the existing extension process would be eliminated. The measure would apply to assessments issued on or after the day that is three months following royal assent.
Corporate Tax Elections
Under the current rules, certain elections or agreements filed by corporations with the Canada Revenue Agency (CRA) must be accompanied by a certified copy of a directors’ resolution authorizing the election or agreement or, in certain cases, a certified copy of the authorization of a person empowered to manage the corporation’s affairs. These requirements apply, among others, to capital dividend elections, transfers of tax liability arising from certain taxable dividends, transfers of eligible scientific research and experimental development (SR&ED) expenditures, and allocations of salaries and wages of employees engaged in SR&ED.
To reduce the administrative burden on corporations, Budget 2026 proposes to eliminate the requirement to file a certified copy of such resolutions or authorizations when making certain elections or agreements.
This measure would apply to elections made and agreements entered into on or after the date of royal assent of the implementing legislation.
Administrative Penalties
As announced in Budget 2025, the federal government undertook a review of fines and penalties to ensure that they remain sufficient and that non-compliance is not simply treated as a cost of doing business.
Budget 2026 proposes several amendments to administrative penalties under federal tax statutes, as well as technical amendments to maintain the integrity of the penalty regime under the Income Tax Act (ITA), as outlined below.
Inflation Adjustment of Fixed-Dollar Administrative Penalties
Budget 2026 proposes to increase most fixed-dollar administrative penalties to account for inflation since their enactment, as many have remained unchanged since the 1980s or 1990s.
Most recently enacted penalties would remain unchanged, while older penalties would generally increase by a factor of two or three, depending on when they were enacted. Budget 2026 also proposes to index these fixed amounts to inflation once every five years starting January 1, 2033.
Medium and Large Corporations and Partnerships
Budget 2026 proposes to calibrate certain fixed-dollar penalty amounts based on taxpayer size, considering the taxpayer’s ability to pay and the effectiveness of penalties for larger entities.
These adjustments would apply to certain penalties for failing to provide required information on a form, failing to file certain tax forms, and failing to comply with other obligations under the ITA.
The proposed penalty calibration rules are summarized below:
| Category of taxpayers | Corporations – by taxable capital employed in Canada | Partnerships – by gross revenue | Penalty multiplier |
| Individuals | N/A | N/A | 1 x base amount |
| Small corporations / partnerships | $10 million or less | Less than $2 million | 1 x base amount |
| Medium corporations / partnerships | More than $10 million but not exceeding $50 million | $2 million to less than $10 million | 3 x base amount |
| Large corporations / partnerships | More than $50 million | $10 million or more | 8 x base amount |
Repeated Failures
Budget 2026 proposes new penalties for repeated failures to file tax forms and to comply with obligations for which no specific penalty applies. Under the proposed rules, these penalties would generally be double the base penalty applicable to the first failure. It is further proposed that the penalty amount be increased in accordance with the calibration rules for larger corporations and partnerships discussed above.
These penalties would apply to a failure in respect of a particular taxation year only if (i) the person or partnership was subject to a penalty for the same type of failure in any of the three preceding taxation years and (ii) the person or partnership failed to remedy the current failure after being sent a notice, requirement or demand by the CRA.
Common Reporting Standard and Other Frameworks
Budget 2026 proposes to strengthen the penalties applicable under the Common Reporting Standard, the Reporting Rules for Digital Platform Operators and the Crypto-Asset Reporting Framework.
These amendments would ensure that penalties apply to reporting entities and individuals for failing to obtain or validate self-certification, apply due diligence or review procedures, or keep, maintain or retain records as required under these regimes.
Application
The proposed amendments under the Income Tax Act would apply to taxation years or fiscal periods ending after 2027, except for the measures relating to the Common Reporting Standard and other reporting frameworks, which would apply to the 2028 and subsequent calendar years.
The amendments to penalties under the other federal tax statutes would generally apply to reporting periods ending after 2027.
Business Income Tax Measures
No changes were proposed to the current Federal corporate tax rates.
The Federal corporate income tax rates in Canada for 2026 are as follows:
| Type of corporation | Federal Tax Rate |
| General Corporate Income Tax Rate | 15 % |
| Small Business Tax Rate on the first $500,000 of taxable income | 9 % |
Productivity Mega Deduction
As announced as part of the legislative proposals released on September 15, 2026, and adding to the Budget 2025 Productivity Super Deduction, the Productivity Mega Deduction would allow businesses of all sizes to fully deduct the cost of a significantly wider range of capital assets in the year they become available for use (provided such eligible assets are acquired on or after September 15, 2026). According to the Budget, the proportion of eligible capital assets would increase from approximately 15% to more than 65%.
Eligible assets would include software, computer equipment, vehicles, patents, pipelines, and mining property. However, certain long-lived buildings and intangible assets, some passenger vehicles, and other specified assets would remain excluded.
Additionally, the deduction rate for Canadian Development Expense (CDE) would increase from 30% to 100%, allowing businesses to deduct the full eligible amount.
Corporate Loss Transfers
Budget 2026 is consulting on a proposed corporate loss transfer regime that would allow current-year non-capital-losses to be transferred between qualifying taxable Canadian corporations. Eligible transfers would generally be permitted between a parent corporation and its directly or indirectly wholly owned subsidiary, or between sister corporations directly or indirectly wholly owned by the same parent corporation.
To qualify, both the transferor and transferee corporations would generally have to be taxable Canadian corporations subject to tax under Part I of the Income Tax Act. In addition, each corporation would require having a permanent establishment in only one province or territory, and that permanent establishment would have to be located in the same province or territory for both corporations.
The proposed regime is intended to simplify existing loss-consolidation arrangements while including integrity measures designed to prevent the duplication of tax attributes. Department of Finance has invited comments on the proposed regime by January 8, 2027.
Foreign Income Verification Statement – Form T1135
Budget 2026 proposes to double the reporting threshold for specified foreign property on Form T1135 from $100,000 to $200,000, reducing compliance obligations for taxpayers with more modest foreign holdings. The threshold for simplified reporting would also increase from $250,000 to $500,000.
The proposal would apply to taxation years or fiscal periods ending after 2026.
Clean Electricity and Clean Technology Investment Tax Credits
Budget 2026 proposes to extend the availability period for the refundable Clean Electricity Investment Tax Credit and Clean Technology Investment Tax Credit to eligible property acquired and available for use before 2041. The Clean Technology credit would continue to be reduced from 30% to 15% in its final year, which the Budget proposes to move from 2023 to 2040.
The Budget also proposes to expand Clean Electricity credit eligibility for certain high-voltage intra-provincial electricity transmission property acquired on November 5, 2026, or after. Additional details will be provided later.
Scientific Research and Experimental Development (SR&ED) Tax Incentive Program
Adding on to the SR&ED Budget 2025 changes (which included the $6 million enhanced-credit expenditures limit), Budget 2026 proposes to expand the activities and expenditures eligible for the SR&ED investment tax credit by including certain expenditures relating to commercialization activities, such as costs incurred to obtain regulatory approval and protect intellectual property (IP). Eligible expenditures would include regulatory and certification activities, such as testing, technological validation and related studies, as well as costs incurred to establish and maintain IP protection. Eligible costs would follow the existing categories: salaries, materials, contracts, overhead, machinery and equipment. Any expenditures in relation to enforcement and litigation would not qualify. Finally, should a protected IP be later disposed of, any corresponding deduction and Investment Tax Credit would be subject to recapture.
The measure would apply to taxation years beginning on or after Budget Day.
Interest Deductibility Limits
For taxation years beginning on or after October 1, 2023, the Budget proposes to expand two exceptions to the Excessive Interest and Financing Expenses Limitation (EIFEL).
- The purpose-built rental housing exception (which had been announced as part of Budget 2024 and is not yet enacted) would allow interest and financing expenses to qualify where borrowed funds are used in eligible rental housing activities (i.e. acquiring, building or converting property into purpose-built rental housing), and
- The regulated energy utilities exception (which has been announced as part of the August 12, 2024’s legislative proposals but has yet be enacted) where such funds are used to carry on a business in Canada, which would be broadened to include such activities or business carried on by another corporation, trust or partnership within the same group of affiliated entities.
The exception would also apply where the eligible activities are carried out through a partnership in which the borrower and its affiliated entities hold at least a 40% interest.
Budget 2026 also proposes to expand and clarify the definition of a regulated energy utility business.
Canadian Journalism Labour Tax Credit
Budget 2026 proposes to extend the temporary enhancement of the Canadian Journalism Labor Tax Credit by maintaining the 35% credit rate until December 31, 2028. The enhanced rate would continue to apply to eligible labor expenditures of up to $85,000 per eligible employee.
The Budget also proposes to expand eligibility to qualifying audio and audiovisual news content. This measure would apply to qualifying labor expenses incurred on or after November 5, 2026.
Taxable Preferred Shares
Budget 2026 proposes to exempt Canadian-controlled private corporations (CCPCs) from the taxable preferred share regime by excluding dividends paid from Part VI.1 tax, applicable for dividends paid on or after Budget Day.
The proposals also include the increase of 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 for taxation years ending after 2026.
Personal Income Tax Measures
No changes were proposed to the current Federal individual income tax rates.
The Federal individual income tax rates in Canada for 2026 are as follows:
| Taxable income | 2026 Rate |
| Up to $58,523 | 14.0 % |
| More than $58,523 to $117,045 | 20.5 % |
| More than $117,045 to $181,440 | 26.0 % |
| More than $181,440 to $258,482 | 29.0 % |
| More than $258,482 | 33.0 % |
Canada Growth Incentive – Capital Gains Exemption
Budget 2026 introduces the Canada Growth Incentive (CGI) to encourage individuals to invest new capital in qualifying Canadian growth businesses. This incentive would exempt up to $15 million of capital gains realized by a qualifying individual on the disposition of qualifying shares.
The capital gains exemption incentive is a concept most Canadian individuals are familiar with, given the existing Lifetime Capital Gains Exemption (LCGE) which has been around for quite a long time. However, the proposed CGI would go a step further by allowing qualifying individuals to benefit from a separate exemption for each qualifying business, rather than limiting the relief to a single lifetime amount.
It is proposed that a claim under the CGI in respect of shares of a particular corporation would reduce the LCGE available on shares of that corporation. Similarly, a prior LCGE claim would reduce the amount of CGI that may be claimed in respect of the same corporation. By contrast, Budget 2026 proposes that claims under the CGI and the Employee Ownership Trust exemption would generally not affect one another.
Additional rules are expected to be proposed at a later date to prevent a single underlying business from being split among multiple corporations to multiply the exemption.
Qualifying Individual
- The exemption would generally be available to individuals (other than trusts) who are resident in Canada throughout the taxation year in which the exemption is claimed and who were at least 18 years old at the time they acquired a qualifying share.
Qualifying Shares
- Qualifying shares would have to be issued on or after November 5, 2026, and before 2037.
- The combined carrying value of the assets held by the corporation and all related corporations would have to not exceed $100 million, both immediately before and after the shares are issued. Other share-ownership, corporate, qualifying business and holding-period requirements would also have to be met throughout specified testing periods.
Qualifying Business
- A qualifying business would be an active business other than professional services businesses, businesses primarily dependent on the reputation or skills of their personnel, businesses operating in certain excluded sectors (including agriculture, natural resources, financial services, real estate, hospitality, and entertainment), and businesses operating under franchise or licensing arrangements.
Taxpayers claiming the CGI could be subject to the Alternative Minimum Tax (AMT), as capital gains exempt under the CGI would have a 30% inclusion rate for AMT purposes.
Canada Growth Incentive – Rollover for Investments in Small Businesses
Under current legislation, individuals disposing of eligible small business corporation (ESBC) shares may qualify to defer taxation on capital gains realized on the disposition, provided the proceeds are used to acquire replacement ESBC shares in the year of disposition or the following calendar year.
Budget 2026 proposes the following amendments:
- Extension of the replacement period from one to three calendar years following the year of disposition.[1]
- Extension of the replacement period by up to two additional years where an individual enters into an agreement with an ESBC, under which capital is provided upfront in exchange for shares to be issued at a later date, before the end of the proposed three-year replacement period.
- If no ESBC shares are issued under the agreement by the end of the extended period, the deferred capital gain would become taxable and any amounts not ultimately reinvested would be subject to interest at the prescribed interest rate from the balance-due day of the year of disposition to the end of the taxation year during which the gain was taxed.
Budget 2026 also proposes to amend the qualifying conditions for ESBC shares as follows:
- Active business requirement: Reduction of the asset threshold throughout the holding period from all or substantially all (generally 90%) to primarily (generally 50%) of the fair market value of the corporation’s assets attributable to assets used principally in an active business, or shares or debts of a related active business corporation. However, the “all or substantially all” threshold would continue to apply at the time of issuance and disposition of the shares.
- Canadian activity requirement: The requirement for the active business to be carried on primarily in Canada would have to be met at the time of share issuance and for a continuous period immediately following issuance, equal to the shorter of two years and the individual’s holding period.
These measures would apply to qualifying dispositions occurring on or after January 1, 2027.
Canada Groceries and Essentials Benefit Supplement
Budget 2026 proposes a one-time Canada Groceries and Essentials Benefit (CGEB) supplement to be paid in early 2027. The maximum supplement would be $223 for each eligible adult, $117 for each eligible child and an additional $117 under the single supplement. For this supplement only, the phase-in and phase-out rates would be adjusted to 6% and 15%, respectively.
The measure is intended to provide immediate affordability relief.
Canada Caregiver Credit: Refundable
Starting to the 2027 taxation year, Budget 2026 proposes making the Canada Caregiver Credit refundable, allowing eligible caregivers to receive the full credit within applicable limits, even if their income is low. The maximum claim amount and the dependent’s net income threshold would also be indexed.
Optional Flat Amounts for Personal Income Tax Deductions and Credits
To help individuals reduce record keeping, Budget 2026 proposes optional flat amounts for certain claims. Individuals would still need to establish their eligibility to the claims.
Proposed flat-amount claims would be as follows:
- Moving Expense Deduction: Flat deduction of $1,000 for taxpayers who make an eligible relocation for employment, business or post-secondary education purposes.
- Clergy Residence Deduction: Flat deduction of $1,000 per month for eligible members of the clergy and certain religious orders up to a maximum of $12,000 for a year.
- Labor Mobility Deduction for Tradespeople: Flat deduction of $1,500 per year for eligible tradespeople and apprentices who temporarily relocate to a work location.
- Home Accessibility Tax Credit: One-time optional flat eligible expense amount of $1,000 for individuals claiming qualifying home accessibility renovations, subject to the applicable conditions.
- Adoption Expense Tax Credit: Flat eligible expenses of $1,200 per adopted child in the year the adoption is completed.
These measures would apply to the 2027 and subsequent taxation years. Taxpayers may continue to claim actual eligible expenses if that method results in a larger tax relief.
Registered Retirement Savings Plan
Budget 2026 announces a consultation on consolidating the tax rules governing registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) into a single “RRSP for life” framework. This would eliminate the requirement to convert an RRSP into a RRIF at age 71 and simplify tax-free transfers to eligible survivors upon the account holder’s death, while maintaining the minimum withdrawal requirements applicable after age 71.
Expansion of the Intergenerational Farm and Fishing Property Rollover
Eligibility for the intergenerational rollover of qualifying farm and fishing property is proposed be extended to include transfers to nieces, nephews, grandnieces and grandnephews of the taxpayer or the taxpayer’s spouse or common-law partner. The change would apply to transfers occurring on or after January 1, 2027.
Trust Distributions to Non-Residents
Budget 2026 proposes to broaden the existing rollout denial rule to include indirect distributions of trust property to non-resident beneficiaries. Under the proposed measure, a tax-deferred rollout would be denied where trust property is transferred to a corporation or partnership having a direct or indirect non-resident shareholder or partner. This measure would apply to distributions of property occurring on or after November 5, 2026.
Build Canada Workers Benefit
Effective for the 2027 taxation year, Budget 2026 proposes to introduce the Build Canada Workers Benefit (BCWB), enhancing the existing Canada Workers Benefit (CWB) to extend eligibility to more low-income workers and increase the maximum benefit amounts.
To achieve this, Budget 2026 proposes to gradually phase out the Advance CWB, reducing advance payments from 50% to 25% of an individual’s 2026 CWB entitlement for the 2027 taxation year, and reinvesting part of the resulting savings into the enhanced BCWB. The Advance CWB would be eliminated beginning in the 2028 taxation year.
International Tax Measures
Corporate Non-Resident Vendors: Taxable Canadian Property
Withholding and Remittance Requirements
Budget 2026 proposes to reduce the withholding and remittance requirements applicable to certain dispositions of a taxable Canadian property (TCP), which includes Canadian real property, resource properties and certain shares or interests that derive their value primarily from Canadian real property or resource assets.
Upon disposition of a TCP, a purchaser would generally be liable to withhold and remit a percentage of the purchase price on account of the vendor’s potential tax liability. Where a vendor obtains a certificate of compliance (commonly referred to as a clearance certificate) from the CRA, the vendor would be required to remit an amount in lieu of purchaser withholding.
The applicable withholding and remittance requirements would vary depending on the type of TCP disposed of and whether a clearance certificate has been obtained.
The proposed changes, which would be applicable to corporate non-resident vendors only, are summarized below:
| Current Rules | Proposed Rules | |||
| Type of TCP | Purchaser Withholding Requirement | Vendor Remittance Required for Clearance Certificate | Purchaser Withholding Requirement | Vendor Remittance Required for Clearance Certificate |
| Capital property other than specified TCP | 25 % of the purchase price | 25 % of the capital gain | 15 % of the purchase price | 15 % of the capital gain |
| Specified TCP | 50 % of the purchase price | Amount acceptable to the CRA | 30% of the purchase price | No change |
This measure would apply to dispositions that occur on or after January 1, 2027.
Tax-deferred Transfers
Budget 2026 proposes to exempt certain fully tax-deferred transfers of taxable Canadian property (TCP) completed under section 85 of the Income Tax Act from the withholding and remittance requirements. To qualify, the prescribed election form (Form T2057 – Election on Disposition of Property by a Taxpayer to a Taxable Canadian Corporation) would need to be filed and the purchaser would be required to notify the CRA of the transaction within 30 days of the transfer.
The anti-avoidance rules applicable to tax-deferred rollovers of taxable Canadian property (TCP) by non-residents are also proposed to be strengthened. Currently, a rollover may be denied where, within three years of the transfer, the transferred property or substituted property is disposed of and one of the main purposes of the series of transactions is to obtain an exemption from Canadian tax (e.g. under a tax treaty). The proposal would extend the testing period from three years to five years and broaden the rule to also capture dispositions of property whose value is derived primarily from the transferred property or substituted property.
This measure would apply to dispositions that occur on or after January 1, 2027.
Sales and Excise Tax Measures
GST/HST Health Measures
Budget 2026 seeks to expand GST/HST relief for certain health care services and medical devices to reflect developments in the health care sector.
Massage Therapy Services
Qualifying massage therapists would be added to the list of health care practitioners whose professional services are exempt from GST/HST. As a result, eligible massage therapy services provided by licensed, certified, or equivalently qualified practitioners would no longer be subject to GST/HST. However, as exempt suppliers, practitioners would generally not be entitled to claim input tax credits to recover GST/HST incurred on related expenses.
Alternating Electric Field Therapy Devices
Devices specially designed for alternating electric field therapy used in the treatment of cancer would be added to the list of zero-rated medical devices. Suppliers would not charge GST/HST on qualifying sales and would remain eligible to claim input tax credits.
Both measures would apply to qualifying supplies made after Budget Day.
GST/HST Input Tax Credit Methodology Pre-Approval Regime for Certain Financial Institutions
For a given fiscal year, certain large banks, insurers or securities dealers may use their own methods to allocate inputs between taxable and exempt supplies for input tax credit purposes, rather than being required to apply prescribed percentages to certain inputs. The use of such methods is conditional on obtaining approval from the CRA before the beginning of the given fiscal year and must currently be pre-approved for every fiscal year.
Budget 2026 proposes to allow these financial institutions to apply for pre-approval for three consecutive fiscal years, rather than only in respect of one fiscal year. For a three-year application, the CRA could approve the methods for only the first fiscal year (e.g., if they are novel). The financial institution could then seek approval for the second and third years using the same or different methods.
This measure would apply in respect of fiscal years of such a financial institution beginning after June 30, 2027.
Product Descriptions and Regulatory Cross References in Sales and Excise Tax Rules
Budget 2026 proposes to modernize certain GST/HST and excise tax provisions, particularly those relating to imported goods, by updating outdated Harmonized System (HS) codes and regulatory references. While largely preserving existing tax treatment, the proposed changes would extend relief in targeted sectors, such as transportation and entertainment, improve administrative certainty and simplify compliance.
The key proposals include:
- Temporary importations: Increasing the maximum import period for certain goods qualifying for full or partial GST/HST relief from 12 to 18 months, consistent with current customs rules.
- Display goods, commercial samples, advertising films and library books: Maintaining existing relief by describing qualifying imports directly in the regulations. This includes temporary imports of display goods, commercial samples and films advertising, as well as books received from free-lending libraries abroad and returned within 60 days.
- International bridge and tunnel authorities: Preserving relief for equipment imported by international bridge authorities for repair and maintenance and extending that relief to international tunnel authorities.
- Railway assets: Maintaining full relief for qualifying locomotives, rolling stock and related equipment used in international service, and partial relief for certain assets temporarily diverted or entering domestic service. For certain railway assets, the GST/HST calculation would be simplified by applying the tax to 1/120 of their value for duty, rather than using monthly or average monthly rental charges.
- Cargo containers used in international transportation: Expanding GST/HST relief for cargo containers used in international commercial transportation by reducing the minimum internal volume requirement to 1 m³ and extending the permitted export period from 30 to 365 days. The proposed changes would also update related rules governing changes in use and relief for certain emergency repair and storage services made on cargo containers.
- Live entertainment: Extending relief to temporary imports of side shows and concessions and providing partial relief for temporarily imported amusement rides.
These proposed changes would generally come into force on the first day of the second month following royal assent of the enacting legislation.
Federal Fuel Excise Tax Licensing Framework
Under the Excise Tax Act, federal excise tax generally applies to gasoline, diesel fuel and aviation fuel manufactured in or imported into Canada. Manufacturers and eligible wholesalers may obtain licenses that provide relief from excise tax on certain fuel purchases and imports, helping prevent multiple applications of the tax within the supply chain.
Budget 2026 proposes amendments to modernize the licensing framework, expand relief available to licensed manufacturers and address certain instances of double taxation.
Expansion of Wholesaler Licensing
Current licensing requirements prevent certain businesses that purchase and resell fuel from qualifying for a wholesaler license. Budget 2026 proposes to expand eligibility to businesses that sell or deliver fuel and, in the normal course of business, supply fuel to licensed manufacturers, licensed wholesalers or other businesses that purchase fuel for resale. This measure would take effect on the first day of the month following royal assent of the enacting legislation.
Expanded Relief for Licensed Manufacturers
Under the current rules, licensed manufacturers may generally acquire or import fuel without excise tax becoming payable only where the fuel is intended for further manufacturing. Budget 2026 proposes extending this relief to fuel acquired or imported for resale, allowing licensed manufacturers to import fuel without paying excise tax or purchase fuel without triggering excise tax for the seller. The proposed relief would apply to purchases from both licensed manufacturers and licensed wholesalers. This measure would take effect after Budget Day.
Time-Limited Relief for Previously Taxed Fuel
Budget 2026 proposes a time-limited payment to address certain historical instances where excise tax effectively applied twice to the same quantity of fuel. Eligible licensed manufacturers could apply for relief where both instances of tax arose between January 1, 2017, and Budget Day, the initial tax was included in their purchase price but not passed on upon resale, and related deductions were previously denied by the CRA. Additional eligibility conditions would apply, including restrictions on duplicate recoveries. Applications would need to be submitted within two years following royal assent of the enacting legislation. The measure would take effect on the day following royal assent.
Other Announced Tax Measures
In addition to the measures discussed above, Budget 2026 includes other personal and business tax measures. Highlights of selected proposals are summarized below:
- Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit: Extended eligibility for an additional five years to the Mineral Exploration Tax Credit and Critical Mineral Exploration Tax Credit.
- Volunteer Firefighters and Search and Rescue Volunteers Tax Credit: Combination of the current Volunteer Firefighters Tax Credit and Search and Rescue Volunteers Tax Credit into a single 14% non-refundable Volunteer Firefighters and Search and Rescue Volunteers Tax Credit, effective for the 2027 and subsequent taxation year.
- Northern Residents Deductions: Elimination of certain limits to the Northern Residents Deduction, effective for the 2027 and subsequent taxation years.
- Apprentice Vehicle Mechanics’ Tools Deduction: Single deduction for apprentice vehicle mechanics’ tool expenses, effective for the 2027 and subsequent taxation years.
- Deductibility of Expenses Against Commission Income: Expanded deductibility of travel and motor vehicle expenses for commission employees, effective for the 2027 and subsequent taxation years.
- Scholarship, Fellowship, and Bursary Income: Expanded scholarship income exemption for students receiving arm’s-length financial assistance, effective for the 2027 and subsequent taxation years.
- Deductibility of Expenses by Employed Artists: Changes to the existing cap on the deduction for employed artists, effective for the 2027 and subsequent taxation years.
- Medical Expense Tax Credit and Disability Supports Deduction: Simplified Medical Expense Tax Credit requirements and optional flat-amount claims for specified medical expenses, effective for the 2027 and subsequent taxation years.
- Registered Disability Savings Plan: Permanent extension of the existing qualifying family member measure, previously scheduled to expire at the end of 2026.
- Excess Corporate Holdings Regime for Private Foundations: Elimination of the existing regime, with the rules currently prohibiting public foundations from acquiring control of a corporation extended to private foundations, applicable to taxation years beginning on or after January 1, 2027.
- Disclosure of Tax Debt to Credit Bureaus: Amendments to the Income Tax Act to allow the CRA to disclose information concerning a taxpayer’s outstanding tax debts to credit bureaus, subject to certain conditions, effective upon royal assent of the enacting legislation.
- Information Sharing – Pension Administrators: Amendments to the Income Tax Act to allow the CRA to confirm the death of a registered pension plan member to the plan administrator, effective upon royal assent of the enacting legislation.
- Registered Pension Plans: Clarification of tax consequences where the CRA revokes the registration of a registered pension plan (RPP) applicable to revocations after 2026.
- Lump-sum Thresholds for Periodic Payment of Benefits: Increase of lump-sum payment thresholds to $50 per month for the Canada Child Benefit and $70 per quarter for the Canada Grocery and Essential Benefit for benefits paid after June 2027. Threshold for the Advance CWB would also increase to $70 per payment for the 2027 taxation year.
- Helium Exploration, Development and Resource Expenses: Increase of the deduction rate for Canadian development expense (CDE) from 30% to 100% under the proposed Productivity Mega Deduction. Extension of eligibility for Canadian exploration expenses (CEE) and CDE to helium exploration and development expenses, and for Canadian oil and gas property expenses (COGPE) to helium resource property acquisition expenses, applicable to expenses incurred on or after November 5, 2026.
Previously Announced Tax Measures
The government also confirmed its intention to proceed with the following previously announced tax and related measures, as modified to reflect consultations and subsequent developments.
- 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.
Contact our Team of Experts
For further information on the above, we invite you to please reach out to Danny Guérin of Andersen Inc.
 | Danny Guérin, CPA, L.L.M.Fisc. Partner, Andersen Montreal |
[1] An individual who does not reinvest the proceeds in the year of disposition could either (i) pay tax on the capital gain for that year or (ii) claim a reserve to defer recognition of the gain to the following year. This deferral would remain available until the end of the replacement period.
