Canada’s 2026 filing season for businesses reflects a mix of proposed legislative measures and administrative changes, including updates affecting capital cost allowance and expensing, corporate structures, SR&ED, and CRA filing processes. This update summarizes the changes most likely to influence compliance work and planning, with brief context on applicability, timing, and key items to watch for further guidance.
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What's included in this article:
- CCA measures and immediate expensing
- Tiered corporate structures
- SR&ED
- Transfer pricing
- Luxury tax
- DST changes
Editor’s Note: Because this measure was not yet at royal assent at the time of writing, firms may want to monitor CRA admin guidance for any timing or implementation clarifications.
2025 Federal Budget (Bill C-15)
Capital cost allowance proposals
Federal Bill C-15 proposes to implement the following capital cost allowance (CCA) measures:
Reinstatement of the Accelerated Investment Incentive, which provides an enhanced first-year write-off for most types of depreciable property.
Immediate expensing of:
- Clean energy generation and energy conservation equipment
- Manufacturing and processing equipment
- Zero-emission vehicles
Immediate expensing of patents, data network infrastructure, and computers that are available for use before 2027.
The rules for the immediate expensing and reaccelerated investment incentive are largely the same as before. Property must be “reaccelerated investment incentive property” to be eligible for any of the above measures.
Commentary: For clients planning near-term capital purchases, the practical questions tend to be (1) eligibility/classification and (2) “available for use” timing. Establishing those inputs early can reduce year-end rework.
Immediate expensing of certain buildings
Temporary, immediate expensing for the cost of eligible manufacturing or processing buildings, including eligible additions or alterations to such buildings, will be effective for eligible property acquired on or after November 4, 2025, and is first used for manufacturing or processing before 2030. Draft legislation to implement this measure was released on January 29.
Immediate expensing for greenhouse buildings will be introduced for buildings acquired on or after November 4, 2025, that become available for use before 2030.
Commentary: For building-related measures, documentation usually drives defensibility. A short file note capturing acquisition date, first-use date, and qualifying use can prevent later ambiguity.
Reinstatement of accelerated CCAs for certain facilities
Budget 2025 proposes to reinstate accelerated CCAs for low-carbon Liquefied Natural Gas (“LNG”) equipment and related buildings. This measure would apply to property acquired on or after November 4, 2025, and before 2035.
To be eligible for an accelerated CCA, a facility would need to meet new high standards of emissions performance.
The CRA will be administering these measures throughout the 2026 filing season.
Commentary: Where eligibility is tied to performance standards, firms may want an intake checklist to confirm what evidence exists (and what must be obtained) before an accelerated position is taken.
Tax deferral through tiered corporate structures
The government plans to limit tax deferral on investment income by using tiered corporate structures with mismatched year-ends.
In general terms, the proposed limitation would suspend the dividend refund that could be claimed by a payer corporation on the payment of a taxable dividend to an affiliated recipient corporation if the recipient corporation's balance-due day for the taxation year in which the dividend was received ends after the payer corporation's balance-due day for the taxation year in which the dividend was paid.
This measure applies to taxation years beginning on or after November 4, 2025.
Draft legislation to implement this measure was released on January 29.
Commentary: For affected structures, the planning impact is often felt as a timing and cash-flow expectation issue. Identifying mismatched year-end structures early supports more accurate planning discussions.
Scientific Research and Experimental Development ("SR&ED") Tax Incentive Program
Bill C-15 proposes to make several changes to the SR&ED program that would:
- Increase the expenditure limit from $3 million to $4.5 million and increase the lower and upper prior-year taxable capital phase-out boundaries to $15 million and $75 million, respectively;
- Extend eligibility for the enhanced tax credit to eligible Canadian public corporations;
- Restore the eligibility of SR&ED capital expenditures for both the deduction against income and investment tax credit components of the SR&ED program;
- Increase the expenditure limit on which the SR&ED program's enhanced 35 percent credit can be earned, from the previously announced $4.5 million to $6 million.
Commentary: With capital expenditures returning to eligibility, firms may want to revisit intake questions and documentation expectations for clients that previously limited SR&ED activity to current expenditures.
Transfer pricing
After consideration of stakeholder comments received during the consultation announced in Budget 2021, Bill C-15 proposes to modernise Canada's transfer pricing rules to better align with the international consensus on the application of the arm's length principle.
In addition, an interpretation rule would be added to ensure that Canada's transfer pricing rules are applied consistently with the OECD Transfer Pricing Guidelines' analytic framework.
Luxury tax on aircraft and vessels
The Select Luxury Items Tax Act (“SLITA”) is being amended to end the luxury tax on subject aircraft and subject vessels. All instances of the tax would cease to be payable after November 4, 2025, including the tax on sales, the tax on importations, and the tax on improvements. Registrations for the subject aircraft and vessels under the SLITA would be maintained after November 4, allowing registered vendors to claim rebates for which they are eligible.
All registrations for the subject aircraft and vessels would be automatically cancelled on February 1, 2028, after which time vendors would no longer be able to claim rebates.
Digital Services Tax: Repeal of legislation, refund of tax
Bill C-15 would retroactively repeal the Digital Services Tax Act, effective as of June 20, 2024, the date of its original enactment. Any Digital Services Tax payments received by the CRA will be refunded with interest.
