On November 5, 2026, the Federal Government delivered the 2026 Federal Budget. There are a number of significant measures that will affect businesses and corporations, including a Canada Growth Incentive providing up to a $15 million capital gains exemption on the disposition of eligible shares, a reduction of withholding rates on dispositions of taxable Canadian property, a change in the personal income tax return filing and tax payment deadline to May 15 starting in the 2027 tax year, changes to instalment thresholds for corporations and individuals, an extension to the Notice of Objection deadline, and changes to the requirements for filing the T1135 Foreign Income Verification Statement.
The measures introduced in the Budget are proposals and not all of the announcements may be enacted into legislation. There is still uncertainty as to whether the proposals will ultimately be implemented as outlined in the Budget, as well as the timing of when they will be effective.
Full details of Budget can be found by clicking here. Summarized below are a few of the items we believe are most relevant to private companies and individuals.
Business Tax Measures
Corporate Income Tax Rates
No changes to the corporate income tax rates are proposed. As such, the income tax rates as of January 1, 2026, will remain as follows:
| BC | Combined (Federal and BC) | |
| General | 12% | 27% |
| Small business1 | 2% | 11% |
Canada Growth Incentive
The Budget proposes the Canada Growth Incentive, which provides an exemption to capital gains on the disposition of qualifying shares by Canadian-resident individuals, up to a $15 million limit. This limit applies separately to each qualifying individual in respect of each business.
A qualifying individual is an individual other than a trust that is at least 18 years old at the time the qualifying shares were acquired, and the individual was resident in Canada throughout the year the exemption is claimed.
A qualifying business is defined as 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.
In addition, a number of tests must be met to meet the definition of a qualifying share:
- The share has to be held by a qualifying individual or member of a qualifying partnership for 36 months immediately before the disposition;
- Throughout the period the qualifying individual holds the shares, 50% 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;
- For 24 months following share issuance, the qualifying business must actively carry on a business primarily in Canada; and
- At the time of disposition, 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.
There will be additional rules to prevent individuals accessing the 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. Capital gains exempted through this measure would be subject to an inclusion rate of 30% for purposes of the Alternative Minimum Tax, consistent with the treatment of gains eligible for the Lifetime Capital Gains Exemption.
This measure applies in respect of qualifying shares issued on or after November 5, 2026 and before 2037.
Corporate Non-Capital Loss Transfer
The Budget invites stakeholders and announces a consultation to comment on the introduction of a corporate loss transfer rule, which would potentially allow for the transfer of non-capital corporate losses between a parent corporation and a wholly owned subsidiary corporation, and between two subsidiary corporations that are wholly owned by a parent corporation. The transfer could be for a part of or all of the losses via a joint election.
The rules would be available where the transferor and transferee each has a permanent establishment in only one province or territory, and the permanent establishments are located in the same province or territory.
The rules would apply to corporations resident in Canada that are subject to Part I tax.
Tax Elections and Certified Resolution Requirement
The budget rescinds the requirements for corporations to file a certified copy of a resolution or authorization when making certain elections or agreements, such as capital dividend elections, transfers of a tax liability on certain taxable dividends, transfers of qualified scientific research and experimental development (SR&ED) expenditures.
This measure applies to elections and agreements made on or after the date of Royal Assent of the enacting legislation.
“Part VI.1” Tax Exemption to Canadian-controlled private corporations (CCPC)
The Budget proposes to exempt CCPCs from the taxable preferred share rules by excluding dividends they pay from Part VI.1 tax.
This measure applies to dividends paid on or after November 5, 2026.
Eligible Small Business Corporation (ESBC) Rollover
The Budget introduces additional rules relating to the ESBC rollover, including the expansion of the replacement period from one calendar year to three calendar years following the year of disposition. In cases where an individual enters into an agreement with an ESBC and provides capital upfront in return for shares to be issued at a later date, the capital gain can be deferred for an additional two years, resulting in a total replacement period of up to five years.
Further, the budget reduces the active business requirement to qualify, such that the assets of the corporation would only need to be used “primarily” in an active business throughout the period of ownership rather than “all or substantially all”.
The measure applies to qualifying dispositions occurring on or after January 1, 2027.
Clean Electricity and Clean Technology Investment Tax Credits
The Clean Electricity investment tax credit is a refundable tax credit of up to 15 per cent on the cost of eligible investments in low-emitting electricity generation, electricity storage, and the transmission of electricity between provinces and territories. 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 refueling equipment.
The Budget proposes to extend the Clean Electricity and Clean Technology investment tax credits to eligible property that becomes available for use before 2041.
Taxable Canadian Property and Withholding Tax Rate
The Budget proposes to reduce the withholding tax rate on disposition of taxable Canadian property (TCP) including real property situated in Canada. A purchaser’s withholding tax rate, for other than specified TCP such as land, is reduced from 25% of the purchase price to 15%, and the vendor’s remittance rate for the issuance of a clearance certificate is similarly reduced from 25% to 15% of the capital gain. For specified TCP, such as a building, the withholding rate is reduced from 50% to 30% of the purchase price.
The Budget also exempts vendors and purchases from the withholding and tax remittance requirements for section 85 transfers of TCP that are completed on a fully tax-deferred basis. The section 85 election form is required to be filed and the purchaser is required to provide a notice to the CRA setting out information regarding the transaction within 30 days of the disposition in order for the purchaser to be exempt from the withholding and tax remittance requirements. This avoids the administrative burden of obtaining a clearance certificate.
These measures apply to transactions occurring starting on January 1, 2027.
Personal Tax Measures
Personal Income Tax Rates
There were no changes to B.C.’s top personal income tax rates for 2026, and they continue to be as follows:
| Personal Top Marginal Rates (Income above $265,546) | |
| Interest and regular income | 53.50% |
| Capital gains | 26.75% |
| Eligible dividends | 36.54% |
| Non-eligible dividends | 48.89% |
Tax Return Filing and Payment Due Date
The budget changes the T1 personal income tax filing and payment due date to May 15th for all individuals, including self-employed individuals and their spouses or common-law partners.
This would apply to the 2027 and subsequent taxation years, meaning the filing and payment due date for the 2026 T1 tax returns would continue to be April 30, 2027, and so the 2027 T1 tax returns would be due May 15, 2028.
Instalment Thresholds and Changes for Individuals with Business Income
The Budget increases instalment thresholds from $3,000 to $7,500 for corporations and individuals resident outside Quebec. The thresholds will be indexed to inflation and rounded to the nearest $500. This measure applies to tax years starting on January 1, 2028.
For individuals who primarily earn income from a business, the Budget reduces the quarterly instalment requirement to a single annual instalment payment, equal to two-thirds of their combined federal-provincial net tax owing for the year and due on December 31. This will apply to the 2028 and subsequent taxation years.
T1135 Foreign Income Verification Statement Reporting
The Budget increases the thresholds for filing the Form T1135 – Foreign Income Verification Statement. This includes increasing the cost threshold for specified foreign property owned anytime during the fiscal year from $100,000 to $200,000, and the threshold for the simplified reporting method from $250,000 to $500,000. This measure applies to taxation years ending after 2026.
Optional Fixed Amount for Personal Income Tax Deductions and Credits
The budget introduces flat-amount calculations, rather than claiming actual eligible expenses incurred, for certain deductions and credits, including:
- $1,000 for Eligible relocation, limited to the individual’s employment or self-employment income earned at the new location, and limited to one claim per spouse or common-law partner for that particular relocation.
- $12,000 ($1,000 per month) for the Clergy residence deduction, subject to various conditions.
- $1,500 for the labor mobility deduction for tradespeople, for eligible tradespeople and apprentices working in the construction industry who undertake an eligible temporary relocation.
- $1,000 for the Home Accessibility Tax Credit, allowing eligibleindividuals who incur qualifying expenses to calculate the credit using a one time amount of $1,000, subject to various conditions.
- $1,200 for the Adoption Expense Tax Credit, allowing adoptive parents to take the flat amount per adopted child in the year an adoption is completed.
These measures apply to the 2027 and subsequent taxation years.
Medical Expense Tax Credit (METC)
The Budget proposes simplifications to the documentation requirements for expenses that qualify for the METC. The requirement for prescriptions is removed for expenses incurred for medical purposes. This measure applies to 2026 and subsequent taxation years. The budget also introduces the option to use a flat-amount for certain expenses for the 2027 and subsequent taxation years, including $1,000 for gluten-free foods for an individual with celiac disease, $500 for incontinence products, and $2,000 for annual service dog expenses.
Trust Distributions to Non-Resident Beneficiaries
The Budget expends the anti-avoidance rules relating to trust rollouts and includes certain indirect distributions of property to non-resident beneficiaries. This includes certain distributions to a corporation or partnership that has a direct or indirect non-resident shareholder or partner. These measures apply to distributions of property beginning on November 5, 2026.
Mineral Exploration Tax Credit (METC)
The Budget extends the METC and Critical METC eligibility for five years, such that flow-through share agreements entered into on or after March 31, 2032 will qualify.
Canada Caregiver Credit
The Budget provides for the Canada Caregiver Credit to be refundable. This is to apply to the 2027 and subsequent taxation years.
Other Tax Measures
Notice Of Objections
The Budget amends the deadline to file a Notice of Objection to one year after the day the original Notice of Assessment is sent, from 90 days previously. For individuals and graduated rate estates, the Budget extends the deadline to the later of one year after the original Notice of Assessment is sent and two years from the tax return filing due date for the taxation year being assessed. Taxpayers can no longer apply for an extension. The changes apply to assessments sent beginning on the day that is three months after royal assent.
Scientific Research and Experimental Development (SR&ED)
The Budget expands activities that are eligible for the SR&ED investment tax credit, including expenditures relating to regulatory certification, including tests, technological validations, and studies, as well as to establish and maintain intellectual property protection. This measure applies to taxation years beginning on November 5, 2026.
Indirect Tax (GST/HST)
The Budget expands the list of health care providers whose services are exempt from the GST/HST to include message therapists, and also expands the list of medical devices eligible for zero-rating to include certain devices that are specifically designed for alternating electric field therapy for use by an individual with cancer. These measures apply after November 5, 2026.
Disclosure of Tax Debt to Credit Bureaus
The Budget proposes to allow CRA to disclose information about a taxpayer’s tax debts to credit bureaus under certain conditions, including where the taxpayer’s tax debt exceeds $50,000 and the assessments or reassessments are not under objection or appeal, and all rights of objection and appeal in respect of them have expired or been exhausted.
Administrative Penalties
The Budget amends federal administrative penalties, including inflation adjustment of fixed-dollar administrative penalties, increasing penalties for medium and large corporations and partnerships, new penalties that apply for repeated failures to file tax forms and comply with reporting obligations, and other changes.
Productivity Mega Deduction
The Budget confirms that Finance intends to proceed with the previously announced proposal on September 15, 2026 to implement the Productivity Mega Deduction, which allows for immediate expensing for depreciable business property for property acquired on or after September 15, 2026. The proposed list of eligible assets include most property subject to the current Capital Cost Allowance rules unless specifically excluded. The deduction applies to both new and used property, however used property will only qualify where neither the taxpayer nor a non-arm’s length person previously owned the property and the property was not transferred to the taxpayer on a tax-deferred basis.
Reminder: Trust Reporting Requirements for Bare Trusts
The government intends to proceed with reporting requirements for bare trusts for taxation years ending December 31, 2026 or later.
For more information on how any of the proposed changes may have on your business or you, contact your Rise Advisor.
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