Affilia thanks Alexandra Fortin for preparing this summary.
Scope of this summary
This summary was prepared based on the “Tax Measures: Supplementary Information” document accompanying the 2026 Federal Budget. It presents proposed measures and does not confirm their enactment. Effective dates vary; some announcements concern consultations or planned reforms.
1. Investment and corporations
New capital gains exemption
An exemption of up to $15 million per eligible individual, per business, would apply to certain gains on shares issued on or after Budget Day and before 2037.
The conditions would include Canadian residency in the year the exemption is claimed; Canadian-controlled private corporation (CCPC) status at the time the shares are issued; a $100 million limit on the carrying value of the assets of the corporation and related corporations immediately before and after issuance; issuance in exchange for cash or certain employment services; a minimum holding period of 36 months; and criteria relating to assets and business operations in Canada.
Several sectors would be excluded: professional and advisory services, real estate, financial services, agriculture, fishing, mining, food services and accommodation, as well as certain businesses operating under a licence or franchise.
Exempt gains would be included at a rate of 30% for alternative minimum tax purposes. The ability to combine this exemption with the lifetime capital gains exemption would be limited in respect of the same corporation.
Deferral of reinvested capital gains
For eligible dispositions on or after January 1, 2027, replacement shares could be acquired during the year of disposition and the following three calendar years. A two-year extension would be available for certain future equity agreements, including simple agreements for future equity (SAFEs). Active business requirements would be relaxed during the holding period. Interest would be payable if the proceeds are not ultimately reinvested in replacement shares.
Intergenerational transfers
The intergenerational rollover for farming or fishing property would be extended to nieces, nephews, grandnieces and grandnephews.
Clean electricity and clean technology
The investment tax credits would be extended to eligible property available for use before 2041. Certain high-voltage intraprovincial transmission infrastructure would become eligible for the clean electricity tax credit.
Resources
The mineral exploration tax credits would be extended to flow-through share agreements entered into on or before March 31, 2032. Antimony would be added to the list of eligible critical minerals for certain agreements. Certain helium-related expenditures would be included in the tax regime for oil and gas resources.
Private foundations
The excess corporate holdings regime would be replaced by the rules prohibiting public foundations from acquiring control of a corporation, for taxation years beginning on or after January 1, 2027.
2. Individuals
Financial support
A one-time supplement to the Canada Groceries and Essentials Benefit would be paid in early 2027: a maximum of $223 per adult, $117 per child and $117 for the single supplement, subject to income.
The Canada Caregiver Credit would become refundable in 2027.
The Canada Workers Benefit would be enhanced and renamed the Build Canada Workers Benefit. For 2027, the proposed maximum amounts would be $1,859 for a single individual without children and $3,143 for a family. Advance payments would be reduced in 2027 and eliminated in 2028.
Registered Disability Savings Plans (RDSPs)
The provision allowing certain family members to open a plan and act as its holder when an adult beneficiary’s contractual capacity is in doubt would become permanent.
Tax returns and instalment payments
Beginning with the 2027 taxation year, the deadline for filing T1 returns and paying any balance owing would be May 15 for all individuals, including self-employed individuals and their spouses or common-law partners. For the latter group, the filing deadline would therefore move forward from June 15, while the payment deadline would be extended from April 30.
For taxation years beginning on or after January 1, 2028, the instalment payment threshold would increase from $3,000 to $7,500 for individuals outside Quebec and for corporations. The federal threshold for individuals residing in Quebec would increase from $1,800 to $4,500. The thresholds would be indexed. Individuals whose primary source of income is a business could make a single annual instalment payment equal to two-thirds of their net federal-provincial tax, due no later than December 31.
Simplified deductions
Optional flat-rate amounts would simplify the calculation of certain deductions and credits, generally beginning in 2027, including those for moving expenses, labour mobility for tradespeople, home accessibility and adoption expenses. Flat-rate amounts would also be introduced for certain medical expenses, with reduced documentation requirements beginning in 2026.
3. Retirement
Lifetime RRSPs
A consultation would explore combining the features of Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). Mandatory conversion at age 71 would be eliminated, but minimum withdrawals after that age would remain.
Pension plan deregistration
A special tax equal to 10% of the fair market value of the plan’s assets would be introduced, subject to relief from the Canada Revenue Agency (CRA). The plan would then be treated as a retirement compensation arrangement, with a 50% refundable tax applying to the deemed contribution.
Individual Pension Plans
The definition of these plans would be broadened beginning in 2027. Rules governing advantages, prohibited investments and non-qualified investments would apply beginning in 2028. Assets exceeding 200% of liabilities could make a plan’s registration revocable.
4. International taxation
T1135
For taxation years or fiscal periods ending after 2026, the reporting threshold would increase from $100,000 to $200,000. The simplified reporting method would be available if the total cost of specified foreign property remains below $500,000 throughout the year, rather than $250,000. These thresholds are based on cost, not fair market value.
Trust distributions
The denial of rollover treatment would be extended to certain indirect distributions to non-residents, including through a corporation or partnership in which a non-resident is directly or indirectly a shareholder or partner. The measure would apply to distributions made on or after Budget Day.
Taxable Canadian property
For dispositions by a non-resident corporation on or after January 1, 2027, the withholding rates of 25% and 50% would be reduced to 15% and 30%, respectively, depending on the property. Certain fully tax-deferred rollovers under section 85 would be exempt from withholding and remittance requirements if the election and notice are submitted within 30 days. The period covered by certain anti-avoidance rules relating to a subsequent disposition would increase from three to five years, and their scope would be broadened.
5. Tax administration and compliance
Objections
The general deadline would be extended to one year after the notice of assessment is sent. For individuals and graduated rate estates, the deadline would be the later of one year after the notice is sent and two years after the filing deadline. The procedure for requesting an extension of time would be eliminated. These changes would apply to notices sent on or after the date that is three months after Royal Assent.
Credit bureaus
The CRA would be permitted to disclose certain tax debts exceeding $50,000 once objection and appeal rights have expired or been exhausted, provided that at least 30 days’ advance notice has been given, reasonable collection efforts have been made, and an opportunity to enter into a reasonable payment arrangement has been offered. Similar rules would apply to the GST/HST.
Penalties
Many fixed-dollar penalties would be increased and indexed every five years. Certain penalties would be multiplied by three for medium-sized corporations and partnerships, and by eight for large corporations and partnerships. Repeat non-compliance and failures to meet certain international reporting obligations would attract higher penalties. These changes would generally apply to taxation years, fiscal periods or reporting periods ending after 2027.
Please note: At the time of writing, the Government of Quebec has not yet confirmed whether it will harmonize its tax system with the measures proposed in the 2026 Federal Budget.