Report on Federal Tax Expenditures - Concepts, Estimates and Evaluations 2025: part 4

The 10% Temporary Wage Subsidy for Employers was a 3-month measure providing a subsidy equal to 10% of the remuneration paid from March 18 to June 19, 2020, up to $1,375 for each eligible employee. The maximum total was $25,000 per eligible employer, which included corporations eligible for the small business deduction, individuals (excluding trusts), partnerships, non-profit organizations and charities. Eligible employers were able to directly access the subsidy by reducing their remittances of income tax withheld on their employees' remuneration.

Personal and corporate income tax

Businesses, individuals and other organizations

Deemed remittance

Income Tax Act, section 153

• As part of Canada's COVID-19 Economic Response Plan, this measure was implemented as of March 18, 2020 and expired on June 19, 2020.

To encourage employment

To support business activity

This measure was intended to support businesses and other organizations that are affected by the pandemic through a subsidy on wages and salaries.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs relevant to supporting individuals and businesses during the COVID-19 crisis, as part of the Canada's COVID-19 Economic Response Plan. The Canada Emergency Business Account and programs within the mandate of Innovation, Science and Economic Development Canada also support businesses and other organizations that are affected by the COVID-19 pandemic. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Administrative data provided by the Canada Revenue Agency.

The cost of this measure reflects administrative data provided by the Canada Revenue Agency.

n/a

About 328,000 employers claimed this subsidy in 2020.

The first $200 of net capital gains of an individual on foreign exchange transactions is exempt from tax.

Personal income tax

Individuals

Exemption

Income Tax Act, subsections 39(1.1) and (2)

• Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
• Technical legislative changes to move the $200 exception for individuals from subsection 39(2) into subsection 39(1.1) were adopted on June 26, 2013.

To reduce administration or compliance costs

This measure was introduced to minimize record keeping and simplify administration with respect to modest foreign exchange transactions.

Structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Savings and investment

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

No data is available.

No estimate is available.

No projection is available.

No data is available.

Specified clean energy generation and energy efficient equipment, such as equipment used to generate electricity and/or heat from renewable energy sources (e.g., wind, solar, small hydro) or from waste (e.g., wood waste, landfill gas) or that makes efficient use of fossil fuels (e.g., high efficiency cogeneration), that is acquired by a taxpayer after February 21, 1994, can be depreciated on a declining-balance basis at an accelerated capital cost allowance (CCA) rate of 30% (Class 43.1). If acquired after February 22, 2005 and before 2025, such equipment can be depreciated on a declining-balance basis at an accelerated CCA rate of 50% (Class 43.2). The eligibility criteria for these two classes are generally the same, except that cogeneration systems that use fossil fuels must meet a higher efficiency standard and electric vehicle charging stations must meet a higher power threshold for Class 43.2 than for Class 43.1, and electrical energy storage equipment must be connected to an electricity generation system that is eligible for Class 43.2.

The 2018 Fall Economic Statement announced that Class 43.1 and 43.2 property acquired after November 20, 2018 and that becomes available for use before 2024 would be eligible for immediate expensing, with a phase-out for property that becomes available for use after 2023 (75% deduction in 2024 and 2025, and 55% deduction in 2026 and 2027). Without Class 43.1 and Class 43.2, depending on their nature or use, many of these assets would be depreciated at lower rates of 4%, 8% or 20%.
A related measure addresses specified intangible start-up costs of clean energy projects (see the measure "Accelerated deductibility of Canadian Renewable and Conservation Expenses").

The 2024 Fall Economic Statement proposed to fully re-instate immediate expensing for clean energy generation and energy conservation equipment (Class 43.1). Further details are provided below.

Personal (including trusts) and corporate income tax

Businesses using clean or efficient energy generation equipment

Timing preference

Income Tax Regulations, subsections 1100(2) and 1104(4), Classes 43.1 and 43.2 of Schedule II

• The predecessor Class 34, introduced in 1976, provided an accelerated CCA rate of 50% on a straight-line basis for a range of energy generation and conservation equipment.
• Class 43.1 was introduced in Budget 1994, effective for assets acquired after February 21, 1994.
• Class 43.2 was introduced in Budget 2005, effective for assets acquired after February 22, 2005 and before 2012. Budget 2007 extended the eligibility for Class 43.2 to assets acquired before 2020. Budget 2018 extended the eligibility for Class 43.2 to property acquired before 2025.
• The 2018 Fall Economic Statement announced the accelerated investment incentive for specified clean energy equipment included in Classes 43.1 and 43.2 acquired after November 20, 2018 and that becomes available for use before 2024. This measure would be gradually phased out starting in 2024, and would no longer be in effect for investments that become available for use after 2027.
• The range of assets covered by these CCA classes has been expanded several times. Most recently, Budget 2022 expanded eligibility to include air-source heat pumps used for space and water heating. Budget 2021 expanded eligibility to include equipment used in pumped hydroelectric energy storage, renewable fuel production, hydrogen production by electrolysis of water, and hydrogen refuelling. Certain existing restrictions related to investments in water current, wave and tidal energy, active solar heating, and geothermal energy technologies were also proposed to be removed.
• Budget 2021 also updated the eligibility criteria for Classes 43.1 and 43.2 such that certain fossil-fuelled and low efficiency waste-fuelled electrical generation equipment would no longer be eligible. This would apply in respect of property that becomes available for use after 2024.
• The 2024 Fall Economic Statement proposed to fully re-instate immediate expensing for clean energy generation and energy conservation equipment (Class 43.1) acquired on or after January 1, 2025 and that becomes available for use before 2030, with a four-year phase out for property that becomes available for use after 2029 and before 2034. As of December 31, 2024, this change has not been legislated.

To encourage or attract investment

This measure encourages businesses to invest in specified clean energy generation and energy efficiency equipment (Technical Guide to Class 43.1 and 43.2, Natural Resources Canada, 2013).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Environment

Business – other

70435 - Economic affairs - Fuel and energy - Electricity

70439 - Economic affairs - Fuel and energy - Fuel and energy not elsewhere classified

Programs within the mandates of Environment and Climate Change Canada and Natural Resources Canada also support environment-related objectives. Programs within the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on acquisitions by unincorporated businesses of specified clean energy generation equipment is not available.

Corporate income tax: T2 Corporation Income Tax Return

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. For the estimation method for the incremental cost of the changes announced in the 2018 Fall Economic Statement and for the changes announced in the 2024 Fall Economic Statement, see the Accelerated Investment Incentive.

No projection is available.

About 1,200 businesses made additions to Classes 43.1 and 43.2 in 2022. No data is available for unincorporated businesses.

An accelerated capital cost allowance (CCA) is available for certain property acquired for use in facilities in Canada that liquefy natural gas. The accelerated CCA takes the form of an additional 22% allowance that, combined with the regular CCA rate of 8%, brings the CCA rate up to 30% for liquefaction equipment used in Canada in connection with natural gas liquefaction. A second additional allowance equivalent to 4% brings the CCA rate up to 10% from 6% for non-residential buildings that are part of facilities that are used to liquefy natural gas. These additional allowances may only be claimed against income of the taxpayer that is attributable to the liquefaction of natural gas at the facility. 

Personal (including trusts) and corporate income tax

Businesses in the natural gas liquefaction industry

Timing preference

Income Tax Regulations, paragraphs 1100(1)(a.3) and (yb), subsection 1101(4i) and paragraph (b) of Class 47 of Schedule II

• Introduced in 2015 (Prime Minister of Canada news release, February 19, 2015). Effective for capital assets acquired after February 19, 2015 and before 2025.

To encourage or attract investment

This measure is intended to encourage investment in facilities that liquefy natural gas to supply emerging international and domestic markets (Prime Minister of Canada news release, February 19, 2015).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business - natural resources

70455 - Economic affairs - Transport - Pipeline and other transport

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on investment in liquefied natural gas facilities by unincorporated businesses is not available.

Corporate income tax: T2 Corporation Income Tax Return

Estimates are not presented due to confidentiality restrictions.

Projections are not presented due to confidentiality restrictions.

The number of corporations affected by this measure is not published in order to preserve taxpayer confidentiality. No data is available for unincorporated businesses.

Machinery and equipment acquired by a taxpayer after March 18, 2007 and before 2016 and that is primarily for use in Canada for the manufacturing or processing of goods for sale or lease can be depreciated on a straight-line basis at an accelerated capital cost allowance (CCA) rate of 50% (Class 29 of Schedule II to the Income Tax Regulations). Machinery and equipment acquired after 2015 is depreciable on a declining-balance basis at an accelerated CCA rate of 50% (Class 53). The 2018 Fall Economic Statement announced that property in Class 53 acquired after November 20, 2018 and that becomes available for use before 2024 would be eligible for immediate expensing, with a phase-out for property that becomes available for use after 2023 (75% deduction in 2024 and 2025, and 55% deduction in 2026 and 2027).

Machinery and equipment acquired outside of these periods is included in Class 43 and qualifies for a CCA rate of 30% calculated on a declining-balance basis.

The 2024 Fall Economic Statement proposed to fully re-instate immediate expensing for manufacturing or processing machinery equipment (Class 53 and Class 43). Further details are provided below.

Personal (including trusts) and corporate income tax

Businesses in the manufacturing and processing industry

Timing preference

Income Tax Regulations, paragraph 1100(1)(ta), subsections 1100(2) and 1104(4), and Classes 29 and 53 of Schedule II

• The accelerated CCA provided at a rate of 50% on a straight-line basis was introduced in Budget 2007, effective for eligible manufacturing and processing machinery and equipment acquired on or after March 19, 2007.
• Extended in Budgets 2008, 2009, 2011 and 2013.
• Budget 2015 introduced the 50% accelerated CCA on a declining-balance basis, effective for eligible assets acquired after 2015 and before 2026.
• The 2018 Fall Economic Statement announced immediate expensing of machinery and equipment used for the manufacturing or processing of goods included in Class 53 that is put in use before 2024. This measure would be graduallly phased out starting in 2024, and would no longer be in effect for investments put in use after 2027.
• The 2024 Fall Economic Statement proposed to fully re-instate immediate expensing for manufacturing or processing machinery equipment (Class 53 and Class 43) acquired on or after January 1, 2025 and that becomes available for use before 2030, with a four-year phase out for property that becomes available for use after 2029 and before 2034. As of December 31, 2024, this change has not been legislated.

To encourage or attract investment

This temporary measure provides an incentive for manufacturing and processing businesses to accelerate or increase capital investment (Budget 2008). Providing this incentive for an extended period of time helps to provide businesses with planning certainty for larger projects where the investment may not be completed until several years after the investment decision is made and for longer-term investments with multiple phases (Budget 2015).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on acquisitions by unincorporated businesses of manufacturing or processing machinery and equipment is not available.

Corporate income tax: T2 Corporation Income Tax Return

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure. For the estimation method for the incremental cost of the changes announced in the 2018 Fall Economic Statement and for the changes announced in the 2024 Fall Economic Statement, see the Accelerated Investment Incentive.

No projection is available.

About 16,600 corporations made additions to the relevant CCA class in 2022. No data is available for unincorporated businesses.

In addition to the regular capital cost allowance (CCA) deduction of 25% per year (Class 41), for assets used in mining, an accelerated CCA has been provided for assets acquired for use in new mines, including oil sands mines, and major mine expansions (i.e., expansions that increase the capacity of a mine by at least 25%). The additional allowance allows the taxpayer to deduct up to 100% of the remaining cost of the eligible assets in computing income for a taxation year, not exceeding the taxpayer's income for the year from the mine (calculated after deducting the regular CCA). This measure has been phased out such that new additions to this class cannot benefit from the additional allowance.

Personal (including trusts) and corporate income tax

Businesses in the mining and oil and gas industry

Timing preference

Income Tax Regulations, subsection 1100(1) and Classes 41, 41.1 and 41.2 of Schedule II

• Introduced in Budget 1971, effective 1972.
• Extended in Budget 1996 to in-situ oil sands projects (that is, projects that use oil wells rather than open-pit mining techniques to extract bitumen). This change ensured that both types of oil sands projects are accorded the same CCA treatment. Budget 1996 also extended the accelerated CCA to expenditures on eligible assets acquired in a taxation year for use in a mine or oil sands project, to the extent that the cost of those assets exceeds 5% of the gross revenue for the year from the mine or project.
• Budget 2007 announced the phasing out by 2015 of the accelerated CCA for oil sands projects.
• Budget 2013 announced the phasing out by 2021 of the accelerated CCA for all other mining projects.

To encourage or attract investment

This measure was introduced to maintain an incentive for mining investment while eliminating the three-year exemption for corporate profits that was previously provided for new mines, which was considered in many circumstances to be too generous (Proposals for Tax Reform, 1969).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business - natural resources

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

7043 - Economic affairs - Fuel and energy

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on Class 41 expenditures by unincorporated businesses is not available.

Corporate income tax: T2 Corporation Income Tax Return

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

In 2020 the additional allowance was only available for mining assets under Class 41.2. About 60 corporations made additions to Class 41.2 in 2022. No data is available for unincorporated businesses.

Budget 2024 proposed immediate expensing for new additions of property in respect of assets included in Classes 44, 46, and 50, if the property is acquired on or after April 16, 2024, and becomes available for use before January 1, 2027. The enhanced allowance would provide a 100-per-cent first-year deduction and would be available only for the year in which the property becomes available for use.

Personal and corporate income tax

Businesses

Timing preference

Not yet legislated as of December 31, 2024.

• Announced in Budget 2024.

To encourage or attract investment

This measure was introduced to encourage Canadian businesses to invest in the capital that will help them boost productivity.

Non-structural tax measure

This measure would permit the depreciation of a capital asset faster than its useful life.

Business - other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, Innovation, Science and Economic Development Canada, Business Development Bank of Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on Classes 44, 46, and 50 expenditures by unincorporated businesses is not available.

Corporate income tax: T2 Corporation Income Tax Return

T5013 Statement of Partnership Income

T2 micro-simulation model, T5013 micro-simulation model.

The cost of this measure is projected to decline over time considering that additional allowances claimed in early years will be offset by lower allowances in future years. This effect is partly offset by the projected growth in business investment.

No data is available.

Budget 2024 proposed an accelerated capital cost allowance (CCA) of ten per cent for new eligible purpose-built rental projects that begin construction on or after April 16, 2024, and before January 1, 2031, and are available for use before January 1, 2036.

Eligible property would be new purpose-built rental housing that is a building:

• with at least four private apartment units (i.e., a unit with a private kitchen, bathroom, and living areas), or 10 private rooms or suites; and
• in which at least 90 per cent of residential units are held for long-term rental.

Projects that convert existing non-residential real estate, such as an office building, into a residential complex would be eligible if the conditions above are met. The accelerated CCA would not apply to renovations of existing residential complexes. However, the cost of a new addition to an existing structure would be eligible, provided that addition meets the conditions above.

Personal (including trusts) and corporate income tax

Businesses and individuals

Timing preference

Not yet legislated as of December 31, 2024.

• Introduced in Budget 2024.

To encourage or attract investment

This measure was introduced to increase investment in purpose-built rental housing.

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

Housing

70499 - Economic affairs - Economic affairs not elsewhere classified

70619 - Housing development

Programs within the mandate of the Canada Mortgage and Housing Corporation, Indigenous Services Canada and Crown-Indigenous Relations and Northern Affairs Canada are intended to promote the construction, repair and renewal of affordable and safe housing. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on Class 1 expenditures by unincorporated businesses are not available.

Corporate income tax: T2 Corporation Income Tax Return

T5013 Statement of Partnership Income

N/A

Projections reflect investment data and related projections for PBR housing and parameters derived from the T2 data.

No data is available.

New vessels (including furniture, fittings, radio communication equipment and other equipment) that are constructed and registered in Canada and that were not used for any purpose whatsoever before acquisition by their owners can be depreciated at a maximum capital cost allowance (CCA) rate of 33⅓% on a straight-line basis. Vessels that do not qualify for this treatment are depreciable at a CCA rate of 15% on a declining-balance basis.

Personal (including trusts) and corporate income tax

Businesses

Timing preference

Income Tax Regulations, paragraph 1100(1)(v)

• Introduced in 1967 (Order in Council P.C. 1967-1668). Effective for assets acquired on or after March 23, 1967.

To encourage or attract investment

This measure encourages investment in new vessels built and registered in Canada.

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on acquisitions of vessels by unincorporated businesses is not available.

Corporate income tax: T2 Corporation Income Tax Return

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

About 25 corporations made additions to the relevant CCA class in 2022. No data is available for unincorporated businesses.

Zero-emission automotive equipment and vehicles purchased by businesses are deductible at a rate of 100% in the year they are put in use. Eligible on-road zero-emission vehicles include battery electric, plug-in hybrid (with a battery capacity of at least 7 kWh) or hydrogen fuel cell vehicles, including light-, medium- and heavy-duty vehicles. Other types of eligible zero-emission automotive equipment and vehicles include off-road, rail, aerial and marine automotive equipment and vehicles that are fully electric or powered by hydrogen. For new on-road zero-emission vehicles this measure applies to eligible vehicles acquired on or after March 19, 2019 and that become available for use before 2028. In the case of used on-road zero-emission vehicles, and non-road zero-emission automotive equipment and vehicles, this measure applies to eligible equipment or vehicles acquired on or after March 2, 2020 and that become available for use before 2028. The measure is subject to a phase-out for equipment and vehicles that become available for use after 2023 (75% deduction in 2024 and 2025, and 55% deduction in 2026 and 2027 ).

The 2024 Fall Economic Statement proposed to fully re-instate immediate expensing for zero-emission vehicles (Classes 54, 55 and 56). Further details are provided below.

Personal (including trusts) and corporate income tax

Businesses

Timing preference

Income Tax Regulations, subsection 1100(2) and Classes 54, 55, and 56 of Schedule II

• Classes 54 and 55 were introduced in Budget 2019, applicable to eligible zero-emission vehicles acquired on or after March 19, 2019 and that become available for use before 2028.
• On March 2, 2020, Classes 54 and 55 were expanded to include used on-road zero-emission vehicles acquired on or after March 2, 2020 and that become available for use before 2028.
• On March 2, 2020, Class 56 was introduced, applicable to non-road zero-emission automotive equipment and vehicles acquired on or after March 2, 2020 and that become available for use before 2028.
• The 2024 Fall Economic Statement proposed to fully re-instate immediate expensing for zero-emission vehicles (Classes 54, 55 and 56) acquired on or after January 1, 2025 and that become available for use before 2030, with a four-year phase out for property that becomes available for use after 2029 and before 2034. As of December 31, 2024, this change has not been legislated.

To achieve a social objective

To encourage or attract investment

This temporary measure was introduced to encourage businesses to convert to zero-emission fleets (Budget 2019). The measure was expanded to encourage businesses, including in sectors like mining, transportation, and agriculture, to take advantage of opportunities to upgrade to newer, cleaner technologies (Prime Minister of Canada news release, March 2, 2020).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Environment

Business – other

70539 - Environmental protection - Pollution abatement

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Environment and Climate Change Canada, Transport Canada and Natural Resources Canada also support environment-related objectives. Programs within the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Corporate income tax: T2 Corporation Income Tax Return

External data

Micro-simulation model

The cost of this measure is projected to decline over time considering that additional allowances claimed in early years will be offset by lower allowances in future years. This effect is partly offset by the projected growth in business investment towards zero-emission vehicles.

In 2022, about 2,770 corporations made additions to Class 54, about 925 corporations made additions to Class 55, and about 160 corporations made additions to Class 56. No data is available for unincorporated businesses.

Canadian Renewable and Conservation Expenses (CRCE) can be deducted in full in the year incurred even though some of these expenses are capital in nature. CRCE generally include intangible start-up costs of renewable energy and energy efficiency projects for which at least 50% of the cost of depreciable assets can reasonably be expected to be property that is eligible for accelerated capital cost allowance (CCA) under CCA Class 43.1 or Class 43.2. CRCE also include expenses such as the cost of engineering and feasibility studies, which may be considered analogous to exploration expenses incurred by firms in the non-renewable resource sector. As a type of Canadian Exploration Expense, CRCE can be carried forward indefinitely or transferred to flow-through share investors. For more information, see the related measures "Accelerated capital cost allowance for clean energy generation equipment" and "Flow-through share deductions".

Personal (including trusts) and corporate income tax

Businesses using clean or efficient energy generation equipment

Timing preference

Income Tax Act, subsection 66.1(6)

Income Tax Regulations, section 1219

• Introduced in Budget 1996. Effective for expenditures incurred after December 5, 1996.
• CRCE treatment has been expanded several times as a result of the broadening of the range of assets covered by CCA classes 43.1 and 43.2.
• Most recently, Budget 2021 proposed to expand eligibility to include equipment used in pumped hydroelectric energy storage, renewable fuel production, hydrogen production by electrolysis of water, and hydrogen refuelling. Certain existing restrictions related to investments in water current, wave and tidal energy, active solar heating, and geothermal energy technologies were also proposed to be removed.
• Budget 2021 also proposed to update the eligibility criteria for Classes 43.1 and 43.2, such that certain fossil-fuelled and low efficiency waste-fuelled electrical generation equipment would no longer be eligible after 2024. This would apply in respect of property that becomes available for use after 2024.

To encourage or attract investment

This measure encourages investments in clean energy generation and energy conservation projects (Technical Guide to Canadian Renewable and Conservation Expenses, Natural Resources Canada, 2012).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Environment

Business – other

70435 - Economic affairs - Fuel and energy - Electricity

70439 - Economic affairs - Fuel and energy - Fuel and energy not elsewhere classified

Programs within the mandates of Environment and Climate Change Canada, the Impact Assessment Agency of Canada, Parks Canada and Natural Resources Canada also support environment-related objectives. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on CRCE incurred by unincorporated businesses is not available.

Corporate income tax: T2 Corporation Income Tax Return

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

About 135 corporations incurred Canadian Renewable and Conservation Expenses in 2022. No data is available for unincorporated businesses.

Canadian Exploration Expenses (CEE) are deductible at a rate of 100% in the year incurred. CEE include certain intangible costs incurred to determine the existence, location, extent or quality of a crude oil or natural gas reservoir or of a mineral resource not previously known to exist. For the mining sector (including oil sands mines), CEE have also included intangible pre-production development expenses—costs incurred for the purpose of bringing a new mine into production in reasonable commercial quantities. However, the eligibility of these latter expenses was phased out by 2018.

Exploration expenses are undertaken to create an asset (the reserves discovered), and as with generally accepted accounting tax principles, the benchmark tax treatment would be to capitalize and amortize the expenses of successful exploration over the life of the asset. Unsuccessful efforts that do not result in an exploitable asset could be expensed. In practice, it is often not possible to determine whether or not exploration spending has been successful in the year when the expenses are incurred, since it is often several years afterwards before decisions on production are made. 

Personal (including trusts) and corporate income tax

Businesses in the mining and oil and gas industry

Timing preference

Income Tax Act, section 66.1

• Budget 1974 introduced CEE as a category distinct from Canadian Development Expenses (CDE).
• Budget 1978 expanded coverage to include certain expenditures relating to the development of a new mine.
• Budget 2011 announced the phasing out by 2016 of the eligibility for CEE of pre-production development expenses for oil sands mines.
• Budget 2013 announced the phasing out by 2018 of the eligibility for CEE of pre-production development expenses for all other mines.
• Budget 2017 announced the phasing out by 2021 of the eligibility for CEE for expenses associated with oil and gas discovery wells, unless and until they are deemed unsuccessful.

To encourage or attract investment

This measure recognizes the challenges facing mining and oil and gas companies—a low probability of success, large capital requirements and long timeframes before reporting positive cash flow—as they explore for resources (Budget 2015).

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business - natural resources

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

70432 - Economic affairs - Fuel and energy - Petroleum and natural gas

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: Data on CEE incurred by unincorporated businesses is not available.

Corporate income tax: T2 Corporation Income Tax Return

No estimate is available – see the Annex to Part 1 for an explanation as to why estimates are not available for this measure.

No projection is available.

About 1,980 corporations incurred Canadian Exploration Expenses in 2022. No data is available for unincorporated businesses.

The Accelerated Investment Incentive provides an enhanced first-year allowance for capital property that is subject to the capital cost allowance (CCA) rules, as well as Canadian oil and gas property and Canadian development expenses, with limited restrictions. The Accelerated Investment Incentive does not apply to property in Classes 53 (manufacturing and processing machinery and equipment); Classes 43.1 and 43.2 (clean energy equipment); and Classes 54, 55 and 56 (zero-emission vehicles), which are eligible for immediate expensing. Eligible property generally subject to the half-year rule qualifies for an enhanced CCA equal to three times the normal first-year allowance, and property not generally subject to the half-year rule qualifies for an enhanced CCA equal to one-and-a-half times the normal first-year allowance.

The 2018 Fall Economic Statement introduced the Accelerated Investment Incentive, making it available for property acquired after November 20, 2018 and that becomes available for use before 2028, subject to a four-year phase-out for property that becomes available for use after 2023. For eligible property that would normally be subject to the half-year rule (or an equivalent rule) and that becomes available for use during the 2024-2027 phase-out period, the Accelerated Investment Incentive effectively suspends the half-year rule (and equivalent rules), providing such property with an enhanced allowance equal to two times the normal first-year allowance. For eligible property that would not normally be subject to the half-year rule (or an equivalent rule) and that becomes available for use during the 2024-2027 phase-out period, the enhanced allowance is equal to one-and-a-quarter times the normal first-year allowance.

The 2024 Fall Economic Statement announced the full re-instatement of the Accelerated Investment Incentive. Further details are provided below.

Personal (including trusts) and corporate income tax

Businesses

Timing preference

Income Tax Act, paragraph 66.2(2)(d), definition of accelerated Canadian development expense in subsection 66.2(5), paragraph 66.4(2)I, definition of accelerated Canadian oil and gas property expense in subsection 66.4(5)

Income Tax Regulations, subparagraphs 1100(1)(b)(i) and (c)(i), subparagraph 1100(1)(v)(iv), subsections 1100(2), subsection 1104(4), paragraphs 1(a) and 2(a) of Schedule IV, section 2 and paragraph 3(a) of Schedules V and VI

• Introduced in the 2018 Fall Economic Statement for property acquired after November 20, 2018 and that becomes available for use before 2028, subject to a four-year phase-out for property that becomes available for use after 2023.
• The 2024 Fall Economic Statement announced the full re-instatement of the Accelerated Investment Incentive for property acquired on or after January 1, 2025 and that becomes available for use before 2030. This would be followed by a four-year phase-out for property that becomes available for use after 2029, and the measure would be fully eliminated for property that becomes available for use after 2033. As of December 31, 2024, this change has not been legislated.

To encourage or attract investment

This temporary measure provides an incentive for businesses to accelerate or increase capital investment.

Non-structural tax measure

This measure may permit the depreciation of a capital asset faster than its useful life.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, Innovation, Science and Economic Development Canada, Business Development Bank of Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T2 Corporation Income Tax Return

T5013 Statement of Partnership Income

T2 micro-simulation model, T5013 micro-simulation model, and aggregate investment data from T1 Income Tax and Benefit Return using the nominal cash-flow method of estimation.

The incremental cost of the changes announced in the 2018 Fall Economic Statement to the Accelerated capital cost allowance for manufacturing or processing machinery and equipment and to the Accelerated capital cost allowance for clean energy generation equipment is included in the cost of the Accelerated Investment Incentive.

The incremental cost of the changes announced in the 2024 Fall Economic Statement to the Accelerated capital cost allowance for manufacturing or processing machinery and equipment and to the Accelerated capital cost allowance for clean energy generation equipment is included in the cost of the Accelerated Investment Incentive.

The cost of this measure is projected to decline over time considering that additional allowances claimed in early years will be offset by lower allowances in future years. This effect is partly offset by the projected growth in business investment.

About 355,000 corporations made new additions under the accelerated investment incentive in 2022. No data is available for unincorporated businesses.

Corporations that donated medicines from their inventory to an eligible charity could claim an additional deduction equal to the lesser of:

• 50% of the amount by which the fair market value of the donated medicine exceeds its cost; and
• the cost of the medicine.

An eligible charity is a registered charity that meets the conditions prescribed by regulation. In particular, the registered charity was required to:

• deliver the medicine received outside Canada;
• act in a manner consistent with the principles and objectives of the Guidelines for Drug Donations issued by the World Health Organization;
• have expertise in delivering medicines to the developing world; and
• implement appropriate policies and practices with respect to the delivery of international development assistance.

Budget 2017 announced the elimination of the deduction, effective for gifts made on or after March 22, 2017. Unused deductions may continue to be carried forward for up to five years.

Corporate income tax

Corporate donors

Deduction

Income Tax Act, paragraph 110.1(1)(a.1)

• Introduced in Budget 2007. Effective for gifts made on or after March 19, 2007.
• Amended in Budget 2008 to ensure that the charities to which the medicines are donated have appropriate oversight and accountability practices.
• Budget 2017 announced the elimination of the measure, effective for gifts made on or after March 22, 2017.

To achieve a social objective

This measure provides an incentive for corporations to donate medicines for use in international programs for the distribution of medicines (Budget 2007).

Non-structural tax measure

This measure provides tax recognition for an expense that is not incurred to earn income.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

Donations, gifts, charities and non-profit organizations

70711 - Health - Medical products, appliances, and equipment - Pharmaceutical products

Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.

T2 Corporation Income Tax Return

T2 micro-simulation model

The tax expenditure is projected to grow in line with nominal gross domestic product.

The number of corporations affected by this measure is not published in order to preserve taxpayer confidentiality.

Bank and life insurer groups are subject to an additional 1.5% tax on their taxable income. For the purpose of this measure, groups are defined as a bank or life insurer and any other financial institution (for the purposes of Part VI of the Income Tax Act) that is related to the bank or life insurer. Bank and life insurer group members are permitted to allocate a $100 million taxable income exemption by agreement amongst group members.

Corporate income tax

Bank and life insurance groups

Surtax

Income Tax Act, section 123.6

• Introduced in Budget 2022, effective for taxation years that end after April 7, 2022.

General revenue raising

To raise additional revenues.

Non-structural tax measure

The applicable tax rate departs from the benchmark tax rate.

Business – other

n/a

n/a

T2 Corporation Income Tax Return

Micro-simulation model based on administrative data

The cost of this measure is expected to grow in line with nominal gross domestic product.

About 65 corporations paid the additional tax in 2022.

Adoptive parents can claim the Adoption Expense Tax Credit in respect of the cost of adopting a child under the age of 18. The non-refundable credit is calculated by applying the lowest personal income tax rate to eligible adoption expenses, which are capped at $19,066 per child (in 2024, indexed to inflation). Eligible adoption expenses cover a range of expenses, including adoption agency fees, legal expenses, and travel and living expenses for themselves and the child, but do not include any expenses for which the adoptive parent has been or is entitled to be reimbursed. Eligible adoption expenses may be incurred for domestic adoptions or for a child adopted from outside of Canada. They must also have been incurred during the "adoption period", as defined in the legislation. Parents are able to claim the credit in the taxation year in which the adoption is finalized. The two adoptive parents can split the amount if the total combined claim for eligible expenses for each child is not more than the amount before the split.

Personal income tax

Adoptive parents

Credit, non-refundable

Income Tax Act, section 118.01

• Introduced in Budget 2005. Effective for the 2005 and subsequent taxation years.
• Budget 2013 extended the adoption period to allow for the eligibility of additional adoption-related expenses (e.g., fees for a mandatory home study and adoption courses).
• Budget 2014 increased the maximum eligible expenses claimable to $15,000 and indexed this amount to inflation for the 2015 and subsequent taxation years.

To recognize non-discretionary expenses (ability to pay)

To achieve a social objective

This measure provides tax recognition to parents for costs that are unique to the decision to adopt a child (Budget 2005).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Families and households

71049 - Social protection - Family and children

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 1,610 individuals claimed this credit in 2022.

The Age Credit is provided to individuals aged 65 and over. The value of the credit is calculated by applying the lowest personal income tax rate to the annually indexed credit amount ($8,790 for 2024). The credit is income-tested—the credit amount is reduced by 15% of net income in excess of an annually indexed threshold amount ($44,325 for 2024). The credit is completely phased out at an income level of $102,925 in 2024. Any unused portion of the credit may be transferred to a spouse or common-law partner.

Personal income tax

Seniors

Credit, non-refundable

Income Tax Act, subsection 118(2)

• Introduced as part of the 1987 Tax Reform, effective for the 1988 and subsequent taxation years, to replace the previous age exemption.
• The 2006 Tax Fairness Plan increased the Age Credit amount by $1,000 to $5,066 effective for the 2006 taxation year.
• Budget 2009 increased the Age Credit amount by $1,000 to $6,408 (indexed thereafter).

To provide income support or tax relief

To achieve a social objective

This measure was introduced to reduce the tax burden borne by elderly Canadians (Budget 1972; Budget 2009).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure is transferable between spouses or common-law partners.

Social

Retirement

71029 - Social protection - Old age

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Programs within the mandate of Employment and Social Development Canada also support retirement income security. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 6.9 million individuals claimed this credit in 2022.

Registered apprentice vehicle mechanics may deduct, in computing their employment income subject to income tax, the extraordinary portion of the cost of new tools they purchase in the taxation year or in the last three months of the previous taxation year if the apprentice is in his or her first year. The extraordinary tool costs are those that exceed either 1) the combined value of the deduction for tradespeople's tool expenses ($1,000) and the Canada Employment Credit ($1,433 in 2024) or 2) 5% of the combined value of the taxpayer's net employment income as an eligible apprentice mechanic (calculated without regard to the apprentice vehicle mechanics' tools deduction) and the net amount received under the Apprenticeship Incentive and Completion Grant programs, whichever is greater.

Personal income tax

Apprentice vehicle mechanics

Deduction

Income Tax Act, paragraph 8(1)I and subsection 8(6)

• Introduced in Budget 2001. Effective for tools acquired after 2001.
• In Budget 2007, the threshold for recognition of tool costs was integrated with the new deduction for tradespeople's tool expenses and Canada Employment Credit.

To recognize expenses incurred to earn employment income

This measure recognizes that apprentice vehicle mechanics have reduced ability to pay tax relative to other taxpayers with the same income due to the extraordinary portion of the cost of new tools they have to provide as a condition of their employment (Budget 2001; Budget 2007).

Structural tax measure

This measure provides tax recognition for an expense that is incurred to earn employment income.

Employment

Education

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

70959 - Education - Education not definable by level

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T777 Statement of Employment Expenses

T1 micro-simulation model

T1 micro-simulation model

About 5,600 individuals claimed this deduction in 2022.

Employers can claim a 10% non-refundable tax credit in respect of wages paid to qualifying apprentices in the first two years of their contract, to a maximum of $2,000 per apprentice per year. A qualifying apprentice is defined as someone working in a prescribed trade in the first two years of their apprenticeship contract. This contract must be registered with the federal government or a provincial or territorial government under an apprenticeship program designed to certify or license individuals in the trade. Prescribed trades include the trades currently listed as Red Seal Trades. Unused credits can be carried back 3 years or forward 20 years to reduce taxes payable in those years.

Personal (including trusts) and corporate income tax

Businesses

Credit, non-refundable

Income Tax Act, section 127

• Introduced in Budget 2006. Effective in respect of salaries and wages paid to qualifying apprentices on or after May 2, 2006.

To encourage employment

This measure encourages employers to hire new apprentices and to support apprentices in their training (Budget 2006).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

Employment

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return

The estimates are based on actual amounts earned and claimed by employers. The estimates do not cover investment tax credits claimed by trusts.

Personal income tax: The tax expenditure is projected based on historical growth.
Corporate income tax: The tax expenditure is projected to grow in line with total employment.

About 500 individuals and 11,600 corporations claimed this credit in 2022. The number of trusts having claimed this credit in 2022 is not disclosed due to confidentiality restrictions.

A 10% credit is available for qualifying acquisitions of new buildings, machinery and equipment and prescribed energy and conservation property used primarily in qualified activities in the Atlantic provinces, the Gaspé Peninsula and their associated offshore regions. Qualified activities include farming, fishing, logging, manufacturing and processing, the storing of grain, the harvesting of peat, and the production or processing of electrical energy or steam. Unused credits can be carried back 3 years or forward 20 years to reduce taxes payable in those years. Where the credit exceeds the amount of tax payable in a year, 40% of the credit is refundable for small Canadian-controlled private corporations and individuals.

Personal (including trusts) and corporate income tax

Businesses in the Atlantic provinces and the Gaspé region

Credit, refundable and non-refundable

Income Tax Act, section 127

• Introduced in Budget 1977.
• Budget 2012 announced the reduction of the credit rate from 10% to 5% for assets for use in oil and gas and mining activities acquired in 2014 and 2015. The tax credit ceased to be available for such assets acquired after 2015.

To encourage or attract investment

This measure promotes economic development of the Atlantic provinces and the Gaspé region (Budget 1977).

Non-structural tax measure and refundable tax credit

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

The portion of this measure that is refundable is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada, and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Personal income tax: T1 Income Tax and Benefit Return
Corporate income tax: T2 Corporation Income Tax Return

The estimates are based on actual amounts earned and claimed by businesses. The estimates do not cover investment tax credits claimed by trusts.

Personal income tax: The cost of this measure is projected based on historical growth.
Corporate income tax: The cost of this measure is projected to grow in line with nominal gross domestic product. 

About 3,700 individuals and 6,950 corporations claimed this credit in 2022. The number of trusts having claimed this credit in 2022 is not disclosed due to confidentiality restrictions.

The Canada Caregiver Credit consolidated and replaced the previous system of caregiver credits (which included the Caregiver Credit, Infirm Dependant Credit and Family Caregiver Tax Credit). The credit can be claimed in respect of an infirm spouse or common-law partner or an infirm dependant (i.e., the parent, grandparent, sibling, aunt/uncle, niece/nephew or child/grandchild of the claimant or of the claimant's spouse or common-law partner). In 2024, the amount of the credit is:

• $8,375 in respect of an infirm adult for whom neither the Spouse or Common-Law Partner Credit nor the Eligible Dependant Credit is claimed.;
• $2,616 in respect of an infirm dependent who is a minor child or for whom either the Spouse or Common-Law Partner Credit or the Eligible Dependant Credit is claimed. Where greater tax relief would have been available to the taxpayer by foregoing the Spouse or Common-Law Partner Credit or the Eligible Dependant Credit in order to claim the higher amount for the Canada Caregiver Credit, an additional amount is provided to offset this difference.  

The value of the non-refundable credit is calculated by applying the lowest personal income tax rate to the credit amount per eligible dependant. The credit is reduced dollar-for-dollar by the dependant's net income above $19,666 (in 2024) and is fully phased out when the dependant's income reaches $28,041 (in 2024). Both the credit amount and the income threshold at which the credit starts to be reduced are indexed to inflation. The dependant is not required to live with the caregiver in order for the caregiver to claim the new credit and no credit is available in respect of non-infirm seniors who reside with their adult children. 

Personal income tax

Caregivers

Credit, non-refundable

Income Tax Act, paragraph 118(1)(d)

• Introduced in 2017, effective for the 2017 and subsequent taxation years.

To recognize non-discretionary expenses (ability to pay)

This measure recognizes that individuals providing care for infirm family members have reduced ability to pay tax compared to other taxpayers with similar income (Budget 2017).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Families and households

Health

71049 - Social protection - Family and children

71011 - Social protection - Sickness and disability - Sickness

71012 - Social protection - Sickness and disability – Disability

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Programs within the mandates of Health Canada, the Canadian Food Inspection Agency, the Canadian Institutes of Health Research, the Public Health Agency of Canada and Veterans Affairs Canada also support health-related objectives. Additional information on the relevant government programs is provided in the table at the end of Part 3.  

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

In total, about 576,000 were entitled to an amount for the Canada Caregiver Credit for 2022. This includes about 208,000 who were caring for an infirm spouse or common-law partner, 50,000 who were caring for an eligible dependant, 165,000 individuals who claimed the credit in respect of an infirm dependant age 18 or older, and 153,000 individuals who claimed the credit in respect of an infirm child under 18 years of age. The total number of individuals entitled to an amount for the Canada Caregiver Credit exceeds the total number of individuals claiming an amount because some individuals may not be able to claim an amount in respect of an infirm spouse or common-law partner or eligible dependant after an income test on the dependant's net income is applied.

For the 2024-25 benefit year, the Canada Child Benefit provides a maximum benefit of $7,787 per child under the age of 6 and $6,570 per child aged 6 through 17. The Canada Child Benefit is income-tested based on adjusted family net income with the benefit phase-out rate depending on the number of children. On the portion of 2023 adjusted family net income between $36,502 and $79,087, the benefit is phased out at a rate of 7% for a one-child family, 13.5% for a two-child family, 19% for a three-child family and 23% for larger families. Where 2023 adjusted family net income exceeds $79,087, remaining benefits are phased out at rates of 3.2% for a one-child family, 5.7% for a two-child family, 8% for a three-child family and 9.5% for larger families, on the portion of income above $79,087. Indexation to inflation of the maximum benefit amounts and phase-out thresholds began as of the 2018-19 benefit year.

The Child Disability Benefit is an additional amount provided to families caring for a child eligible for the Disability Tax Credit. For the 2024-25 benefit year, the Child Disability Benefit provides up to $3,322 in benefits per eligible child. The phase-out of this additional amount generally aligns with the Canada Child Benefit. It is phased out at a rate of 3.2% for families with one eligible child and 5.7% for families with more than one eligible child, on 2023 adjusted family net income in excess of $79,087. This additional amount, which is included in Canada Child Benefit payments made to eligible families, is also indexed to inflation as of the 2018-19 benefit year.

Canada Child Benefit payments are made monthly and are non-taxable. The payment cycle runs from July to June.

Personal income tax

Families with minor children

Credit, refundable

Income Tax Act, section 122.6

• The Child Tax Benefit (the precursor to the Canada Child Tax Benefit) was introduced in Budget 1992 and replaced, effective January 1993, the former refundable child tax credit, family allowance and non-refundable tax credit.
• The Canada Child Tax Benefit and National Child Benefit supplement were introduced in 1998. The Child Disability Benefit was introduced in 2003.
• The Canada Child Benefit was introduced in Budget 2016 and replaced the Canada Child Tax Benefit, including the National Child Benefit supplement, and the Universal Child Care Benefit. Payments of the Canada Child Benefit began in July 2016.
• The 2017 Fall Economic Statement introduced the indexation to inflation of the maximum benefit amounts and phase-out thresholds for the Canada Child Benefit (including the Child Disability Benefit) as of the 2018-19 benefit year.
• Budget 2018 granted retroactive eligibility for child benefits to foreign-born individuals who are Indians as that term is defined pursuant to the Indian Act who reside legally in Canada but are neither Canadian citizens nor permanent residents, where all other eligibility requirements are met, from the 2005 taxation year to June 30, 2016.
• Budget Implementation Act, 2018, No. 2 clarified that an individual caring for a child under a kinship care program is eligible for the Canada Child Benefit in respect of that child.
• As part of the Government of Canada's COVID-19 Economic Response Plan, an additional Canada Child Benefit payment of up to $300 per child was provided to eligible families on May 20, 2020.
• As part of the Government of Canada's COVID-19 Economic Response Plan, the government introduced temporary support to be delivered in quarterly payments in 2021, to families entitled to the Canada Child Benefit with children under the age of 6. Payments total up to $1,200 per child under the age of 6 for those with adjusted family net income equal to or less than $120,000, and up to $600 per child under the age of 6 for those with adjusted family net income above $120,000.
• Budget 2022 clarified that an individual caring for a child under a kinship care program is eligible for the Canada Child Benefit in respect of that child, regardless of whether they receive financial assistance from an Indigenous governing body.
• Budget 2024 extended eligibility for the Canada Child Benefit (including the Child Disability Benefit) in respect of a child for six months after the child's death, if the individual would have otherwise been eligible for the benefit in respect of the particular child, effective for deaths that occur after 2024.

To recognize non-discretionary expenses (ability to pay)

To achieve a social objective

This measure gives families more money to help with the high cost of raising their children.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Families and households

71049 - Social protection - Family and children

Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Public Accounts of Canada

T1 Income Tax and Benefit Return

This measure is presented on a fiscal year basis as reported in the Public Accounts of Canada (e.g., the amount for 2013 corresponds to the expenditure reported for the 2013–14 fiscal year).

Projections of the value of this measure are calculated based on projected inflation and growth in family income and population.

It is estimated that about 3.5 million families will receive the Canada Child Benefit in 2024.

The Canada Emergency Rent Subsidy (CERS) provided eligible employers with a subsidy on certain rent- and mortgage-related costs. Eligible entities were individuals, taxable corporations and trusts, partnerships consisting of eligible entities, non-profit organizations, registered charities and other prescribed entities that met the minimum revenue decline. The measure came into effect on September 27, 2020 and ended on October 23, 2021.

At its most generous, the CERS provided a subsidy of up to 65% of eligible costs, with the amount varying, depending on the scale of revenue decline. Eligible costs were capped at $75,000 per location and a maximum of $300,000 among affiliated entities. Additionally, entities with locations that had been significantly affected by a public health order were eligible for the Lockdown Support equal to 25% of eligible costs. The Lockdown Support was subject to a $75,000 cap on eligible costs per location, but not the cap of $300,000 among affiliated entities.

Personal (including trusts) and corporate income tax

Businesses, individuals and other organizations

Credit, refundable

Income Tax Act, sections 125.7 and 164

• As part of Canada's COVID-19 Economic Response Plan, this measure was implemented as of September 27, 2020. On November 5, 2020, details for September 27, 2020 to December 19, 2020 were announced.
• In the 2020 Fall Economic Statement, on November 30, 2020, the government announced details for the CERS program for December 20, 2020 to March 13, 2021.
• On March 3, 2021, the government extended the CERS and Lockdown Support and announced program parameters for the period from March 14 to June 5, 2021.
• In Budget 2021, the government announced that the CERS and Lockdown Support would be further extended until September 25, 2021, with gradually declining CERS rates, beginning July 4, 2021.
• On July 30, 2021, the Government extended the CERS and Lockdown Support until October 23, 2021 and increased the maximum CERS rate for the period between August 29 and September 25, 2021. Technical changes were also announced to provide increased flexibility to organizations not operating on March 1, 2019.

To encourage employment

To support business activity

This measure was intended to support businesses and other organizations that were affected by the COVID-19 pandemic through a subsidy on certain rent- and mortgage-related costs. The top-up was intended to provide direct financial support to businesses that were significantly affected by local public health restrictions.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs relevant to supporting individuals and businesses during the COVID-19 crisis, as part of the Canada's COVID-19 Economic Response Plan. Specifically, the Canada Emergency Rent Subsidy was introduced as a successor to the Canada Emergency Commercial Rent Assistance program administered by the Canada Mortgage and Housing Agency. The Canada Emergency Business Account and programs within the mandate of Innovation, Science and Economic Development Canada also support businesses and other organizations that are affected by the COVID-19 pandemic. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Administrative data provided by the Canada Revenue Agency

The cost of this measure reflects administrative data provided by the Canada Revenue Agency.

n/a

The number of unique applicants with approved claims is 223,530 for the CERS and 94,030 for Lockdown Support (data as of September 3, 2024).

The Canada Emergency Wage Subsidy (CEWS) provided eligible employers whose revenues had decreased due to COVID-19 with a wage subsidy for eligible remuneration paid to employees in respect of a claim period. The measure came into effect on March 15, 2020 and ended on October 23, 2021. Eligible entities were individuals, taxable corporations and trusts, partnerships consisting of eligible entities, non-profit organizations, registered charities and other prescribed entities that met the minimum revenue decline.

At its most generous, the CEWS for active employees provided a total subsidy of up to 85% of wages for eligible employers, with the amount varying depending on the scale of revenue decline. As of July 4, 2021, eligiblity had been restricted to employers with current-month revenue losses above 10% and subsidy rates had also been gradually reduced in order to ensure an orderly phase-out of the program by October 23, 2021.

A separate rate structure applied to furloughed employees, which was aligned with the benefits provided under the Canada Emergency Response Benefit and/or Employment Insurance system. The CEWS for furloughed employees expired on August 28, 2021.

Personal (including trusts) and corporate income tax

Businesses, individuals and other organizations

Credit, refundable

Income Tax Act, sections 125.7 and 164

• As part of Canada's COVID-19 Economic Response Plan, the CEWS was introduced on March 27, 2020, for an initial 12-week period from March 15 to June 6, 2020.
• On May 15, 2020, the government extended the CEWS by an additional 12 weeks to August 29, 2020 and extended eligibility to the CEWS to certain types of organizations.
• On July 17, 2020, the government announced the extension and redesign of the CEWS until December 19, 2020, providing details of the program until November 21, 2020.
• On October 9, 2020, the government confirmed that the CEWS would be extended until June 2021, and announced the details of the program until December 19, 2020 and other enhancements.
• In the 2020 Fall Economic Statement, on November 30, 2020, the government announced the details of the program until March 13, 2021, including an increase to the maximum top-up rate.
• In March 2021, the government announced the program parameters from March 14 to June 5, 2021 and amendments to provide increased flexibility for furloughed and non-arms's length employees.
• In April 2021, Budget 2021 announced a further extension of the CEWS for active employees until September 24, 2021. Program parameters, including changes to the subsidy rate structure and eligibility, were also announced. The wage subsidy for furloughed employees was also extended until August 28, 2021. In addition, Budget 2021 introduced new requirements to prevent publicly listed corporations receiving the wage subsidy from paying its top executives more in 2021 than in 2019.
• On July 30, 2021, the government extended the CEWS for active employees until October 23, 2021 and increased the maximum subsidy rate for the period between August 29 and September 25, 2021. Technical changes were also announced to provide increased flexibility to organizations not operating on March 1, 2019.

To encourage employment

To support business activity

This measure was put in place to help prevent job losses and encourage employers to quickly rehire workers previously laid off as a result of COVID-19.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

71059 - Social Protection - Unemployment

Programs relevant to supporting individuals and businesses during the COVID-19 crisis, as part of the Canada's COVID-19 Economic Response Plan. The Canada Emergency Business Account and programs within the mandate of Innovation, Science and Economic Development Canada also support businesses and other organizations that are affected by the COVID-19 pandemic. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Administrative data provided by the Canada Revenue Agency

The cost of this measure reflects administrative data provided by the Canada Revenue Agency.

n/a

The number of unique applicants with approved claims is 447,270 (data as of September 3, 2024).

Taxpayers with employment income may qualify for the Canada Employment Credit. The value of the credit is calculated by applying the lowest personal income tax rate to the lesser of $1,433 (in 2024) and the individual's employment income for the year. The maximum amount is indexed to inflation.

Personal income tax

Employees

Credit, non-refundable

Income Tax Act, subsection 118(10)

• Introduced in Budget 2006. Effective July 1, 2006. The maximum amount in 2006 was $500, doubling to $1,000 on January 1, 2007.

To recognize expenses incurred to earn employment income

This measure provides general tax recognition of work-related expenses (Budget 2006).

Structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Employment

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

Programs within the mandate of Employment and Social Development Canada also support employment. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 19.5 million individuals claimed this credit in 2022.

The Canada Recovery Dividend (CRD) is a one-time tax on bank and life insurer groups. For the purpose of this measure, groups are defined as a bank or life insurer and any other financial institution (for the purposes of Part VI of the Income Tax Act) that is related to the bank or life insurer. The CRD applies at a rate of 15% on the average of 2020 and 2021 taxable income. Bank and life insurer groups subject to the CRD are permitted to allocate a $1 billion taxable income exemption by agreement amongst group members. The CRD liability is imposed for the 2022 taxation year and is payable in equal amounts over five years.

Corporate income tax

Bank and life insurance groups

Surtax

Income Tax Act, section 191.5

• Introduced in Budget 2022, effective for the 2022 taxation year.

General revenue raising

The Canada Recovery Dividend was introduced to ensure large financial institutions help support Canada's broader recovery from the COVID-19 pandemic.

Non-structural tax measure

The applicable tax rate departs from the benchmark tax rate.

Business - other

n/a

n/a

T2 Corporation Income Tax Return

Micro-simulation model based on administrative data

n/a

The number of corporations affected by this measure is not published in order to preserve taxpayer confidentiality.

Eligible employers received a subsidy of up to 50% on the incremental remuneration paid to eligible active employees between June 6, 2021 and May 7, 2022. Employers eligible for any of the COVID-19 wage subsidy programs (i.e., under the Canada Emergency Wage Subsidy, the Tourism and Hospitality Recovery Program, the Hardest-Hit Business Recovery Program or the Local Lockdown Program) were generally eligible for the Canada Recovery Hiring Program. However, a for-profit corporation was eligible for the hiring subsidy only if it was a Canadian-controlled private corporation (including a cooperative corporation that was eligible for the small business deduction). Other eligible employers included individuals, non profit organizations, registered charities, and certain partnerships. Eligible employers claimed the higher of a COVID-19 wage subsidy or the Canada Recovery Hiring Program.

Personal (including trusts) and corporate income tax

Businesses, individuals and other organizations

Credit, refundable

Income Tax Act, sections 125.7 and 164

• Budget 2021 introduced this program for the period between June 6, 2021 and November 20, 2021. The subsidy rate was initially scheduled to gradually decline from a maximum of 50% (from July 4 to July 31, 2021) to 20% (from October 24 to November 20, 2021), after which the program was expected to end.
• On October 21, 2021, the government announced its intention to extend the program until May 7, 2022. The subsidy rate was also increased back to 50% starting October 24, 2021.

To encourage employment

To support business activity

This measure was put in place to help organizations affected by the pandemic hire more workers as the economy reopens.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

71059 - Social protection - Unemployment

Programs relevant to supporting individuals and businesses during the COVID-19 crisis, as part of Canada's COVID-19 Economic Response Plan. The Canada Emergency Business Account and programs within the mandate of Innovation, Science and Economic Development Canada also support businesses and other organizations that are affected by the COVID-19 pandemic. Additional information on the relevant government programs is provided in the table at the end of Part 3.

Administrative data provided by the Canada Revenue Agency

The cost of this measure reflects administrative data provided by the Canada Revenue Agency.

n/a

The number of unique applicants with approved claims is 58,960 (data as of September 3, 2024).

Qualifying workers between the ages of 25 and 64 will accumulate a credit balance of $250 per year, up to a lifetime limit of $5,000. The credit balance can then be used to refund up to half the costs of taking a qualifying course or training program. In order to accumulate a Canada Training Credit balance for 2024, a worker must have earnings of $11,511 or more (including maternity or parental leave benefits) and must have net income below the upper limit of the third federal tax bracket ($165,430 in 2023).

Personal income tax

Individuals between the ages of 26 and 65

Credit, refundable

Income Tax Act, section 122.91

• Introduced in Budget 2019. The annual accumulation to the notional account became effective in respect of the 2019 taxation year, and the credit was first available to be claimed for expenses in respect of the 2020 taxation year.

To encourage investment in education

This measure was introduced to address barriers to professional development for working Canadians (Budget 2019).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Education

70959 - Education - Education not definable by level

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

The Canada Training Credit was introduced alongside a new Employment Insurance Training Support Benefit, intended to help workers replace any income forgone during training periods. Programs within the mandate of Employment and Social Development Canada also support employment.

Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

n/a

Eligibility to accumulate a Canada Training Credit balance was simulated based on taxfiler data linked across years. Claim amounts were simulated based on Tuition Tax Credit claims, subject to this accumulated balance, with credit balances adjusted accordingly.

About 638,000 individuals claimed this credit in 2022.

The Canada Workers Benefit (CWB) is a refundable tax credit that supplements the earnings of low-income workers. It is generally available to individuals 19 years of age and older not attending school full-time. The refundable credit is equal to 27% of each dollar of earned income in excess of $3,000 to a maximum credit of $1,590 for single individuals without dependants and $2,739 for families (couples and single parents) in 2024. The CWB is phased out at a rate of 15% of each dollar of adjusted net income above thresholds of $26,149 for single individuals without dependants and $29,833 for families in 2024. An additional CWB supplement of up to $821 in 2024 is provided to persons eligible for both the CWB and the Disability Tax Credit. The CWB supplement is phased out at a rate of 15% of each dollar of adjusted net income above a threshold of $36,748 for single individuals without dependants and $48,091 for families in 2024. Maximum benefit amounts and phase-out thresholds are indexed annually for inflation.

Starting in 2023, individuals who received a CWB entitlement for the previous year automatically receive advance payment of the CWB for the year. These advance payment entitlements total half of the previous year's CWB and are generally issued in July and October of the year, as well as January of the subsequent year. Any remaining entitlement for the year is issued through the tax return for the year.

Provincial and territorial governments can propose specific changes to the design of the CWB, subject to certain conditions, including cost neutrality. Quebec, Alberta and Nunavut have jurisdiction-specific CWB designs in 2024.

Personal income tax

Low-income employees and self-employed individuals

Credit, refundable

Income Tax Act, section 122.7

• The Working Income Tax Benefit (WITB) was introduced in Budget 2007. Effective for the 2007 and subsequent taxation years (2008 and subsequent taxation years in respect of advance payments).
• Enhanced in Budget 2009 for the 2009 and subsequent taxation years.
• Budget 2018 introduced the new Canada Workers Benefit, which replaced the WITB in 2019.
• Budget 2021 enhanced the CWB for the 2021 and subsequent taxation years.
• The 2022 Fall Economic Statement introduced automatic advance payment of the Canada Workers Benefit for people who qualified for the benefit in the previous year, starting in July 2023 for the 2023 taxation year.

To encourage employment

To provide income support or tax relief

This measure, like the WITB before it, makes work more rewarding and attractive for low income-earning Canadians already in the workforce, and encourages other Canadians to enter the workforce. The CWB also provides important income support to low- and modest-income working Canadians. (Budget 2007; Budget 2009; Budget 2018; Budget 2021)

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Employment

Income support

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

71099 - Social protection - Social protection not elsewhere classified

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada and Veterans Affairs Canada also support income security. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

The value of this measure corresponds to the amounts claimed as credits, as reported in administrative data.

T1 micro-simulation model

About 2.5 million individuals received the CWB for the 2022 tax year and consequently received automatic advance payment of the CWB for the 2023 taxation year.

The Canadian Entrepreneurs' Incentive (CEI) reduces the tax rate on eligible capital gains realized by individuals on the disposition of qualifying CEI property through a one-third inclusion rate, up to a lifetime limit of $2 million. The CEI is effective for 2025, and subsequent tax years, with the limit phased in over 5 years in $400,000 increments.

Personal income tax

Individual owners of incorporated small businesses operating in particular sectors or incorporated or unincorporated farming and fishing businesses

Exemption

Not yet legislated as of December 31, 2024.

• The CEI was proposed in Budget 2024.

To encourage or attract investment

To achieve an economic objective - other

This measure was introduced to encourage Canadians to pursue entrepreneurial activity (Government announces details on new Canadian Entrepreneurs' Incentive, August 12, 2024).

Non-structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Business - farming and fishing

Business - small business

70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture

70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Programs within the mandate of Innovation, Science and Economic Development Canada also support small businesses. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Returns

T1 micro-simulation model.

T1 micro-simulation model.

No data is available.

Qualified corporations can claim a 25% refundable tax credit in respect of salaries and wages of an eligible Canadian film or video production. The maximum amount of Canadian labour cost qualifying for the credit is 60% of the total cost of a film or video production, net of any assistance, with the result that the credit can cover up to 15% of the total production costs. The Canadian Audio-Visual Certification Office of the Department of Canadian Heritage is responsible for certifying productions that are eligible for the credit.

Corporate income tax

Corporations in the film and video production industry

Credit, refundable

Income Tax Act, section 125.4

• Introduced in Budget 1995 at a rate of 25% of the cost of eligible salaries and wages incurred after 1994 and up to a maximum of 12% of the total cost of production. It replaced the film tax shelter mechanism for certified Canadian films in place prior to 1995.
• The maximum amount of the credit was increased to 15% of total production cost for productions, effective for expenditures incurred on or after November 14, 2003. 
• Talk shows were made eligible for the Canadian Film or Video Production Tax Credit by removing the reference to "talk shows" from the definition of "excluded production" for the purposes of the credit. This change applies to productions for which the principal photography starts after February 16, 2016.
• In 2018, a Memorandum of Understanding (MOU) was signed between the Government of Canada and the Belgian linguistic communities to allow joint projects of producers from Canada and Belgium. This MOU was added to the list of instruments under which a production may qualify for the Canadian Film or Video Production Tax Credit starting as of March 12, 2018.
• Budget 2021 extended by 12 months certain timelines with respect to the credit for taxation years ending in 2020 or 2021, including: the 24 month period to incur qualifying expenditures before the date that a principal photography begins; the timeline to submit a certificate of completion to the Canadian Audio-Visual Certification Office; and, the requirement that there be a written agreement with a Canadian distributor or with a licensed broadcaster to show the production in Canada within 24 months of its completion.

To achieve a social objective

To support business activity

This measure encourages Canadian programming and the development of an active domestic independent production sector (Canadian Heritage news release, December 12, 1995).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Arts and culture

70829 - Recreation, culture, and religion - Cultural services

Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

The estimates are based on actual amounts earned and claimed by businesses.

The cost of this measure is projected to grow in line with nominal gross domestic product.

About 1,550 corporations received this benefit in 2022.

A refundable tax credit in respect of salary or wages paid to eligible newsroom employees of certain qualified Canadian journalism organizations. This incentive currently allows qualifying journalism organizations to claim a 35% credit on up to $85,000 in labour costs per eligible newsroom employee per year, for a maximum credit of $29,750 per employee. The credit rate is set to return to 25%, as it was when this measure was introduced in Budget 2019, for tax years that begin after 2026.

Personal (including trusts) and corporate income tax

Eligible qualified Canadian journalism organizations

Credit, refundable

Income Tax Act, section 125.6

• Introduced in Budget 2019, applicable to salary or wages earned in respect of a period on or after January 1, 2019.
• On April 17, 2020, the government announced adjustments to the Canadian journalism labour tax credit to help ensure that the journalism tax measures introduced in Budget 2019 achieve their initial objectives. These changes applied retroactively to January 1, 2019.
• Effective January 1, 2023, the 2023 Fall Economic Statement enhanced the Canadian journalism labour tax credit by increasing the cap on labour expenditures per eligible newsroom employee to $85,000 from $55,000 and temporarily increasing the tax credit rate to 35% from 25% for a period of four years, after which it is set to return to 25%.

To achieve a social objective

To support business activity

This measure supports Canadian journalism, recognizing that a strong and independent news media is crucial to a well-functioning democracy (Budget 2019).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Social

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandate of Canadian Heritage also support the journalism industry. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T2 Corporation Income Tax Return

Personal income tax: The estimates are based on actual amounts earned and claimed by individuals (other than trusts).

Corporate income tax: The estimates are based on actual amounts earned and claimed by corporations.

The cost of this measure is projected to grow in line with salaries and wages.

About 220 individuals and 126 corporations claimed this tax credit in 2022. Information on the number of trusts claiming this tax credit is not available.

Personal-use property is held primarily for the use and enjoyment of the owner rather than as an investment. In calculating the capital gain on personal-use property, both the proceeds of disposition and the adjusted cost base of the property are deemed to be no less than the greater of $1,000 and the actual proceeds of disposition or adjusted cost base, as appropriate.

As a result, if the proceeds of disposition and adjusted cost base are each greater than $1,000, this measure does not apply and capital gains and losses are calculated in the usual manner. If the proceeds of disposition are greater than $1,000 and the adjusted cost base is less than $1,000, the capital gain is limited to the amount by which the proceeds of disposition exceed $1,000. If the proceeds of disposition are less than $1,000 and the adjusted cost base is greater than $1,000, the net capital loss is the amount by which the adjusted cost base exceeds $1,000.

Personal-use property of a corporation is property owned mainly for the personal use or enjoyment of an individual who is related to the corporation. Personal-use property of a trust is property owned mainly for the personal use or enjoyment of a beneficiary under the trust or any individual related to a beneficiary.

Personal (including trusts) and corporate income tax

Individuals and corporations

Exemption

Income Tax Act, section 46

• Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
• Budget 2000 introduced rules that prevent the $1,000 deemed adjusted cost base and deemed proceeds of disposition for personal-use property from applying if the property is acquired after February 27, 2000 as part of an arrangement or scheme in which the property is donated as a charitable gift.

To reduce administration or compliance costs

This measure was introduced to minimize record keeping and simplify administration with respect to the purchase and disposal of personal-use items (Summary of 1971 Tax Reform Legislation, 1971).

Structural tax measure

This measure exempts from tax income or gains that are included in a comprehensive income tax base.

Savings and investment

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

No data is available.

No estimate is available.

No projection is available.

No data is available.

Net capital losses may be carried back three years and forward indefinitely to offset capital gains of other years. Notwithstanding these rules, net capital losses realized in the year in which a taxpayer dies may be deductible against all forms of income for that taxation year and the immediately preceding year. Unused net capital losses from prior years carried forward to the year of death may also be deductible against all forms of income for that taxation year and the immediately preceding year.

Personal (including trusts) and corporate income tax

Individual and corporate investors

Timing preference

Income Tax Act, subsections 111(1) and 111(2)

• Introduced in Budget 1971. Effective for the 1972 and subsequent taxation years.
• Budget 1983 extended the carry-back for capital losses from one year to three years.

To assess tax liability over a multi-year period

This measure supports investors by reducing the risk associated with investment (Budget 1983).

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

Savings and investment

70499 - Economic affairs - Economic affairs not elsewhere classified

n/a

Personal income tax: T1 Income Tax and Benefit Return and T3 Trust Income Tax and Information Return

Corporate income tax: T2 Corporation Income Tax Return

Personal income tax: T1 and T3 micro-simulation models. For individuals, the estimate for a given year represents the tax relief associated with the carry-forward to that year of losses incurred in prior years and the deductibility of losses in the year of death of a taxpayer. Data on losses carried back to a previous year is not available. For trusts, the estimate for a given year represents the tax relief associated with the carry-forward to that year of losses incurred in prior years, as well as the carry-back to that year of losses incurred in subsequent years. Data on amounts carried back are preliminary.

Corporate income tax: The estimate for a given year represents the tax relief associated with both the carry-forward to that year of losses incurred in prior years and the carry-back to previous years of losses incurred in that year. The estimate is equal to the amount of losses carried over multiplied by the tax rate applicable in the year in which the losses are applied.

Personal income tax: T1 micro-simulation model in the case of individuals. Projections for trusts are based on projected growth for individuals.

Corporate income tax: The value of this measure is projected to grow in line with corporate taxable income.

About 433,000 individuals, 4,300 trusts and 69,710 corporations made use of this measure in 2022 (not counting individuals that carried back losses only).

The Carbon Capture, Utilization, and Storage (CCUS) investment tax credit is a refundable tax credit for businesses that incur eligible CCUS expenses, starting in 2022. The investment tax credit is available to CCUS projects to the extent that they permanently store captured CO₂ through an eligible use. Eligible CO₂ uses include dedicated geological storage and storage of CO₂ in concrete but does not include enhanced oil recovery. Eligible jurisdictions for dedicated geological storage include Alberta, British Columbia, and Saskatchewan.

Corporate income tax

Businesses investing in eligible CCUS equipment

Credit, refundable

Income Tax Act, section 127.44

• First announced in Budget 2021.  
• Budget 2022 announced design details of a refundable tax credit with rates, from 2022 through 2030, set at 60% for investment in equipment to capture CO₂ in direct air capture projects; 50% for investment in equipment to capture CO₂ in all other CCUS projects; and 37.5% for investment in equipment for transportation and storage. These rates will be reduced by 50% for the period from 2031 through 2040.
• Budget 2023 introduced enhancements to the investment tax credit, expanding the list of eligible CCUS equipment and approved jurisdictions for dedicated geological storage. Labour requirements were also announced, which if not met, would reduce the credit rate by 10 percentage points.

To encourage or attract investment

To achieve a social objective

This measure is designed to encourage businesses to invest in CCUS equipment with the goal of reducing emissions by at least 15 megatonnes of CO₂ annually. The measure is an important element in the government's plan to achieve net-zero emissions by 2050 while also accelerating the growth of new businesses and jobs related to carbon capture.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Environment

Business – other

70539 - Environmental protection - Pollution abatement

Programs within the mandates of Natural Resources Canada or Environment and Climate Change Canada, such as the R&D funding for CCUS, or regulatory instruments such as carbon pricing and the Clean Fuel Regulations, also support investment in CCUS technologies. Other government assistance may also be available through the Canada Growth Fund and Canada Infrastructure Bank. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

n/a

The projected cost of this measure is based on available information regarding CCUS project proposals.

No data is available.

Under the benchmark tax system, income is taxable when it accrues, and expenses are deductible in the period when the related revenue is reported. Individuals and corporations engaged in farming and fishing activities may elect to include revenues when received, rather than when earned, and deduct expenses when paid rather than when the related revenue is reported. This measure allows farmers and fishers to better match cash receipts with cash expenses, and may enable them to defer paying tax on income realized but not yet received.

Cash basis accounting may result in non-capital losses that are not reflective of the actual losses that would have been created under an accrual system of accounting. This happens because income and expenses are not necessarily matched under the cash basis system. As a result of loss carry-forward and carry-back limitations (i.e., 20 years forward and 3 years back), farming businesses under the cash-based system may not be able to use these losses to reduce taxable income in some instances. A mandatory inventory adjustment and optional inventory adjustment are provided for farming businesses, which act to lessen this outcome.

Personal (including trusts) and corporate income tax

Farming and fishing businesses

Timing preference

Income Tax Act, section 28

• Prior to 1948, cash basis accounting was an acceptable method for determining business income for tax purposes. Amendments to the Income Tax Act in 1948 introduced the concept of profit and the use of accrual accounting, but at the same time preserved the ability of taxpayers who had been using cash basis accounting to continue to use that method.
• In 1955, a provision specifically allowing farmers to use cash basis accounting was introduced.
• In 1958, the provision preserving the ability for other taxpayers to continue to use cash basis accounting was repealed.
• The optional inventory adjustment was implemented in Budget 1973, effective for the 1972 and subsequent taxation years.
• In 1980, cash basis accounting was confirmed for fishers on a retroactive basis to 1972.
• The mandatory inventory adjustment was introduced following the 1987 Tax Reform (Department of Finance Canada news release 88-89, June 30, 1988), effective for fiscal years commencing after 1988.
• In 1996, a provision was introduced to prevent prepaid expenses (other than for inventory) relating to a taxation year at least two years after the year of payment from reducing cash basis income in the year of payment. This provision was effective for amounts paid after April 26, 1995.

To provide relief for special circumstances

To reduce administration or compliance costs

This measure recognizes that requiring all farmers and fishers to adopt the accrual method of income reporting could result in accounting and liquidity problems (Report of the Royal Commission on Taxation, vol. 4, 1966; Proposals for Tax Reform, 1969).

Structural tax measure

This measure is a departure from the accrual basis of taxation.

Business - farming and fishing

70421 - Economic affairs - Agriculture, forestry, fishing, and hunting - Agriculture

70423 - Economic affairs - Agriculture, forestry, fishing, and hunting - Fishing and hunting

Programs within the mandates of Agriculture and Agri-Food Canada and Fisheries and Oceans Canada also support the farming and fishing sectors. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available.

No projection is available.

No data is available.

The Charitable Donation Tax Credit is a non-refundable tax credit on donations to registered charities, registered Canadian amateur athletic associations and other qualified donees. In 2024, the formula for determining the credit for individuals is linked to the lowest, second-highest and highest federal tax rates. The credit rate is 15% on the first $200 of total annual gifts and 29% on total annual gifts over $200, with the exception of donors with taxable income exceeding $246,752 who may claim a 33% tax credit on the portion of total annual donations over $200 made from taxable income greater than $246,752.

In general, the credit may be claimed on donations totalling up to 75% of an individual's net income (up to 100% of net income for donations of ecologically sensitive land and cultural property or in certain other circumstances) and may be carried forward for up to 5 years (up to 10 years for donations of ecologically sensitive land).

Personal income tax (including trusts)

Individual donors

Credit, non-refundable

Income Tax Act, section 118.1 and subsections 248(30) to (41)

• Introduced in 1917 as a deduction "for amounts paid during the year to the Patriotic and Red Cross Funds, and other patriotic and war funds approved by the Minister."
• The general income limit on donations was increased in several stages from 10% in 1970 to 75% in 1997.
• In 1988, the deduction for donations made by individuals was converted to a two-tier tax credit as part of the 1987 Tax Reform.
• Budget 1994 reduced the threshold to which the higher rate applies from $250 to $200.
• Budget 1995 eliminated the net income limit for donations of ecologically sensitive land eligible for the tax credit.
• In Budget 2014, the carry-forward period for donations of ecologically sensitive land was extended from 5 to 10 years.
• In 2016, the government amended the Charitable Donation Tax Credit to allow donors with taxable income that is subject to the 33% marginal tax rate to also claim a 33% tax credit on the portion of donations (greater than $200) made from that income. Any donations that exceed the amount of a donor's taxable income that is subject to the 33% marginal tax rate will be subject to the 29% credit rate. This change is effective for the 2016 and subsequent taxation years.
• Budget 2019 added registered journalism organizations as a new category of tax-exempt "qualified donee" as referred to in the Income Tax Act. To be a registered journalism organization, an organization must apply to the Canada Revenue Agency and meet certain criteria, including being a Qualified Canadian Journalism Organization having purposes exclusively related to journalism. These organizations are not permitted to distribute their profits, if any, or allow their income to be available for the personal benefit of certain individuals connected with the organization.

To achieve a social objective

This measure is designed to support the important work of the charitable sector in meeting the needs of Canadians (Report of the Royal Commission on Taxation, vol. 3, 1966; 1987 Tax Reform).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

The tax benefit from this measure is transferable between spouses or common-law partners.

Donations, gifts, charities and non-profit organizations

705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes

Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.

T1 Income Tax and Benefit Return

T3 Trust Income Tax and Information Return

Canadian Cultural Property Export Review Board

Environment and Climate Change Canada

The value of this measure in respect of donations other than cultural property and ecologically sensitive land by individuals is estimated using the T1 micro-simulation model. The value of this measure in respect of donations of cultural property is calculated by multiplying an estimate of donations made in the year by the 29% credit rate. The value of this measure in respect of donations of ecologically sensitive land is estimated by multiplying total donations by the 29% credit rate. The value of this measure in respect of donations by trusts is estimated using the T3 micro-simulation model. No breakdown is available of the tax expenditure accruing to trusts by type of donations.

Projections for individuals are obtained using the T1 micro-simulation model in the case of donations other than cultural property and ecologically sensitive land. Projections in respect of donations of cultural property and ecologically sensitive land are made based on the historical trend in the number and value of donations; in particular, projections in respect of cultural property are made based on an average of past donations. Projections for trusts are based on projected growth for individuals.

About 5 million individuals and 3,400 trusts claimed this credit in 2022.

Child care expenses incurred for the purpose of earning business or employment income, taking an occupational training course, pursuing education or carrying on research for which a grant is received are deductible from income, up to a limit. The deduction may not exceed the lesser of (i) the total of the maximum dollar limits for all children ($8,000 per child under age 7, $5,000 per child between 7 and 16 years of age and infirm dependent children over age 16, and $11,000 for a child eligible for the Disability Tax Credit, regardless of their age), (ii) two-thirds of earned income for the year (not applicable to single-parent students), and (iii) the actual amount of child care expenses incurred. The spouse with the lower income must generally claim the deduction. However, the higher-income parent may claim a deduction if the lower-income parent is infirm, confined to a bed or a wheelchair, in prison or a similar situation for at least two weeks, attending a designated educational institution, or living apart due to a breakdown in the relationship for a period of at least 90 days during the year.

Personal income tax

Families with children

Deduction

Income Tax Act, section 63

• Announced in Budget 1971. Legislation introduced in 1972 and effective for the 1972 and subsequent taxation years.
• Budget 1988 eliminated the overall maximum limit of $8,000 per taxpayer for child care expenses.
• Budget 1996 increased the age limit for children from 14 to 16 years.
• Maximum dollar amounts increased by $1,000, effective for the 2015 taxation year (Prime Minister of Canada news release, October 30, 2014).
• As part of the Government of Canada's COVID-19 Economic Response Plan, the government temporarily expanded the definition of income for this deduction to include Employment Insurance (EI) benefits (including EI special benefits) and Quebec Parental Insurance Plan benefits. The requirement that eligible expenses be incurred to earn employment or business income, pursue education, or perform research was also waived. These changes were effective for the 2020 and 2021 taxation years.

To recognize expenses incurred to earn employment income

To recognize education costs

This provision recognizes the child care costs incurred by single parents and two-earner families in the course of earning employment income, pursuing education or performing research (Budget 1992; Budget 1998).

Structural tax measure

This measure provides tax recognition for an expense that is incurred to earn employment income.

Expenses incurred to earn business income are generally deductible under the benchmark tax system; however, child care expenses may also have an element of personal consumption, hence the classification of this measure as a tax expenditure.

Employment

Education

Families and households

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

70989 - Education - Education not elsewhere classified

71049 - Social protection - Family and children

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandates of Employment and Social Development Canada, the Social Sciences and Humanities Research Council, the Natural Sciences and Engineering Research Council, the Canadian Institutes of Health Research and Indigenous Services Canada also support objectives related to education and training. Programs within the mandates of Employment and Social Development Canada and Indigenous Services Canada also support Canadian families and households. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 1.4 million individuals claimed this deduction in 2022.

As proposed, the Clean Electricity investment tax credit is a 15-per-cent refundable tax credit for the capital cost of investments in the following clean electricity generation and transmission technologies:

• Low-emitting electricity generation systems using energy from wind, solar, water, geothermal, waste biomass, nuclear, or natural gas with carbon capture and storage.
• Stationary electricity storage systems that do not use fossil fuels in operation, such as batteries and pumped hydroelectric storage.
• Transmission of electricity between provinces and territories.

Investors would have to adhere to certain labour requirements, including ensuring that workers are paid prevailing wages and that apprenticeship opportunities are being created, in order to qualify for the 15-per-cent rate. If the labour requirements are not met, investments would receive a 5-per-cent tax credit rate.

Both new projects and the refurbishment of existing facilities would be eligible for the Clean Electricity investment tax credit. Taxable and certain non-taxable entities, including corporations owned by municipalities or Indigenous communities, as well as pension investment corporations, would be eligible. 

Provincial and territorial Crown corporations would be able to access the Clean Electricity investment tax credit within jurisdictions that are determined by the Minister of Finance to have satisfied certain conditions.

The credit would generally be available as of April 16, 2024, for projects that did not begin construction before March 28, 2023. The credit would be unavailable after 2034. The availability of the tax credit for provincial and territorial Crown corporations for investments within a particular province or territory would differ depending on whether that jurisdiction's government had satisfied certain conditions by June 30, 2025. 

Corporate income tax

Asset owners investing in clean electricity generation and interprovincial transmission

Credit, refundable

Not yet legislated as of December 31, 2024.

• Announced in Budget 2023.
• Eligibility expansion to cover certain waste biomass energy generation systems announced in the 2023 Fall Economic Statement.
• Design details and eligibility expansion to geothermal energy generation systems announced in Budget 2024.
• The 2024 Fall Economic Statement announced the final conditions that provincial and territorial governments would need to satisfy for any provincial or territorial Crown corporation to claim the Clean Electricity investment tax credit for investments in their jurisdiction, as well as expanded eligibility to include the Canada Infrastructure Bank.

To encourage or attract investment

To achieve a social objective

To accelerate the investments needed to expand the capacity of a clean electricity grid and ensure it delivers more sustainable, more secure, and more affordable electricity across Canada (Budget 2023).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Environment

Business – other

70435 - Economic affairs - Fuel and energy - Electricity

70539 - Environmental protection - Pollution abatement

Programs within the purview of Environment and Climate Change Canada, and Natural Resources Canada also support clean electricity-related objectives. Programs within the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

n/a

Estimates of new investment in eligible assets required to achieve a net-zero carbon emissions electricity grid are combined with estimates of current investment in eligible assets.

No data is available.

The Clean Hydrogen Investment Tax credit is a refundable investment tax credit with varying levels of support between 15 and 40 per cent of eligible project costs based on the carbon intensity of the hydrogen produced. Carbon intensity is measured using Canada's Fuel Life Cycle Assessment Model. The tax credit is available in respect of the cost of purchasing and installing eligible equipment for projects that produce hydrogen from electrolysis, or natural gas, so long as emissions are abated using carbon capture, utilization, and storage (CCUS). Clean ammonia production equipment is also eligible at a 15 per cent credit rate, subject to certain conditions. Businesses must adhere to labour requirements, which if not met, reduces the credit rate by 10 percentage points. The credit applies to property that is acquired and becomes available for projects using an eligible hydrogen production pathway (electrolysis, reforming or partial oxidation of natural gas project (with CCUS)) on or after March 28, 2023. Once legislated, the list of eligible hydrogen production pathways would be expanded to include methane pyrolysis for property that is acquired and becomes available for use on or after January 1, 2025. The credit rate is reduced by one half in 2034 before being fully phased out by 2035.

Corporate income tax

Businesses investing in eligible clean hydrogen equipment

Credit, refundable

Income Tax Act, section 127.48

• The 2022 Fall Economic Statement indicated the government would consult on a refundable investment tax credit based on the lifecycle carbon intensity of hydrogen.
• Budget 2023 announced key design features, with levels of support varying between 15% and 40% of eligible projects costs, with the projects that produce the cleanest hydrogen receiving the highest levels of support, and a 15% tax credit for equipment needed to convert clean hydrogen into clean ammonia. Labour conditions were also announced, which if not met, reduce the maximum tax credit rate by 10 percentage points.
• The 2023 Fall Economic Statement provided design details on eligible clean ammonia equipment, the use of Power Purchase Agreements and other instruments, details on a required 5-year compliance period, and further clarification in respect of administration.
• The 2024 Fall Economic Statement proposed to expand the list of eligible production pathways to include methane pyrolysis, subject to certain pathway specific conditions.

To encourage or attract investment

To achieve a social objective

This measure is intended to encourage businesses to invest in hydrogen production equipment to create good middle class careers, help ensure that Canadian companies can remain globally competitive, and encourage the use of clean energy to reduce pollution.

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Environment

Business – other

70539 - Environmental protection - Pollution abatement

Programs within the mandates of Natural Resources Canada or Environment and Climate Change Canada, such as the Clean Fuels Fund, or regulatory instruments such as carbon pricing and the Clean Fuel Regulations, also support investment in clean hydrogen technologies. Other government assistance may also be available through the Canada Growth Fund and Canada Infrastructure Bank. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

n/a

The projected cost of this measure is based on available information regarding expected hydrogen projects.

No data is available.

The Clean Technology Investment Tax Credit is a refundable tax credit for the capital cost of investments in certain clean technologies:

• Certain Electricity Generation Systems, including small nuclear energy property, solar, wind, geothermal and water (small hydro, run-of-river, wave, and tidal); 
• Stationary Electricity Storage Systems that do not use fossil fuels in their operation;
• Certain Low-Carbon Heat Equipment, including active solar heating, air-source heat pumps, and ground-source heat pumps;
• Non-road zero-emission vehicles and related charging or refueling equipment; and
• Systems that produce electricity, heat, or both electricity and heat from waste biomass.

A 30% tax credit rate will be available to businesses investing in eligible technologies. As outlined in Budget 2023, businesses will have to adhere to certain labour requirements in order to qualify for the 30% rate. If the labour requirements are not met, investments would receive a 20% tax credit rate.

The credit would apply to property that is acquired and becomes available for use on or after March 28, 2023, with the credit rate reduced by one half in 2034, and the credit fully phased out by 2035.

Corporate income tax

Businesses investing in clean technologies

Credit, refundable

 Income Tax Act, section 127.45

• Announced in Budget 2022
• Details on the design and eligible technologies were announced in the 2022 Fall Economic Statement
• Eligibility expansion to cover geothermal energy equipment and a modification to the phase-out schedule were announced in Budget 2023
• Eligibility expansion to cover certain waste biomass energy generation systems was announced in the 2023 Fall Economic Statement. This property would be covered if it is acquired and becomes available for use on or after November 21st 2023.
• The 2024 Fall Economic Statement proposed to modify the small nuclear energy eligibility under the Clean Technology investment tax credit. As of December 31, 2024, this change has not been legislated. 

To encourage or attract investment

o support competitiveness

To achieve a social objective

To help businesses to adopt clean technologies in order to create jobs, ensure that Canadian businesses remain competitive, and reduce Canada's emissions at the same time (Budget 2022 and 2022 Fall Economic Statement).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Environment

Business – other

70435 - Economic affairs - Fuel and energy - Electricity

70539 - Environmental protection - Pollution abatement

Programs within the purview of Environment and Climate Change Canada and Natural Resources Canada also support environment-related objectives. Programs within the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

n/a

Historic acquisitions are projected forward using technology-specific growth rates. These projections are combined with information on announced or expected major investments to project future acquisitions of clean technologies.

No data is available.

The Clean Technology Manufacturing Investment Tax Credit is a refundable tax credit equal to 30% of the cost of investments in certain new machinery, equipment, and building additions used to manufacture or process key clean technologies, and extract, process, or recycle key critical minerals, including:

• Extraction, processing, or recycling of critical minerals essential for clean technology supply chains, specifically: lithium, cobalt, nickel, graphite, copper, and rare earth elements;
• Manufacturing of renewable or nuclear energy equipment;
• Processing or recycling of nuclear fuels and heavy water;
• Manufacturing of grid-scale electrical energy storage equipment;
• Manufacturing of zero-emission vehicles; and,
• Manufacturing or processing of certain upstream components and materials for the above activities, such as cathode materials and batteries used in electric vehicles.

The credit would apply to property that is acquired and becomes available for use on or after January 1, 2024, and would no longer be in effect after 2034, subject to a phase-out starting in 2032.

Corporate income tax

Canadian companies that manufacture or process clean technologies; or extract, process, or recycle key critical minerals

Credit, refundable

Income Tax Act, section 127.49

• Announced in Budget 2023.
• Budget 2024 proposed to modify eligible expenditures to include investments in eligible property used in qualifying mineral activities that are expected to produce "primarily" (i.e., 50% or more) qualifying materials at mine or well sites. Budget 2024 also proposed other modifications to provide greater clarity for businesses engaged in polymetallic activities. As of December 31, 2024, these changes have not been legislated.

To encourage or attract investment

To support competitiveness

To support business activity

To support Canadian companies in the manufacturing and processing of clean technologies, and in the extraction and processing of critical minerals (Budget 2023).

Refundable tax credit

This measure is classified as a transfer payment for government accounting purposes, and therefore is not considered to be a tax expenditure.

Environment

Business – other

70433 - Economic affairs - Fuel and energy - Nuclear fuel

70435 - Economic affairs - Fuel and energy - Electricity

70436 - Economic affairs - Fuel and energy - Non-electric energy

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

70442 - Economic affairs - Mining, manufacturing, and construction - Manufacturing

Programs within the purview of Environment and Climate Change Canada; Natural Resources Canada; and Innovation, Science and Economic Development Canada also support environment-related objectives. Programs within the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

T2 micro-simulation model and information on expected major investments

Historic acquisitions are projected forward using a combination of technology-specific growth rates, information on announced or expected major investments, and government mandates for zero-emission vehicles. The cost of this measure is projected to grow in line with the growth in zero-emission manufacturing and processing activities.

No data is available.

A 10% non-refundable credit was available to corporations in respect of expenditures incurred in Canada for grassroots exploration and pre-production mine development in relation to the mining of diamonds, base and precious metals as well as industrial minerals that become base or precious metals through refining. Budget 2012 announced the phase-out of this credit to make the tax system more neutral between mining and other industries and, as a result, this credit does not apply after 2015. However, unused credits can be pooled and carried forward, and the use of previously earned credits will continue beyond 2015.

Corporate income tax

Corporations in the mining industry

Credit, non-refundable

Income Tax Act, subsection 127(9), paragraph (a.3) of definition of "investment tax credit"

• Introduced in Budget 2003. The credit applied at a rate of 5% in 2003, 7% in 2004 and 10% as of 2005.
• Budget 2012 announced the phase-out of this credit. In the case of exploration expenditures, the credit rate was reduced to 5% for expenses incurred in 2013 and is not available for expenses incurred after 2013. In the case of pre-production development expenditures, the credit rate was reduced to 7% for expenses incurred in 2014, 4% for expenses incurred in 2015, and is not available for expenses incurred after 2015.

To encourage or attract investment

This measure was introduced to improve the international competitiveness of the resource sector and promote the efficient development of Canada's natural resource base (Improving the Income Taxation of the Resource Sector in Canada, March 3, 2003).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Business - natural resources

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T2 Corporation Income Tax Return

The cost of this measure in a year is calculated using data on actual credits claimed in the year. The cost in the initial year is partially offset in the following year as the corporation's cumulative Canadian Exploration Expense account is then reduced by the credit claimed the year before.

Projections are based on current market conditions.

A small number of corporations (fewer than 20) claim this credit each year.

A temporary, non-refundable 15% tax credit is provided on amounts paid by individuals for eligible digital news subscriptions. The credit allows individuals to claim up to $500 in costs paid towards eligible digital subscriptions (or the stand-alone cost of the digital subscription in cases of combined digital and newsprint subscriptions) in a taxation year, for a maximum of $75 annually.

Eligible subscriptions are those that entitle a taxpayer to access the content of a Qualified Canadian Journalism Organization in a digital form, and that content is primarily original written news.

Personal income tax

Individuals

Credit, non-refundable

Income Tax Act, section 118.02

• Introduced in Budget 2019, effective in respect of eligible amounts paid after 2019 and before 2025.

To achieve a social objective

To support business activity

Recognizing that a strong and independent news media is crucial to a well-functioning democracy, this measure supports Canadian digital news media organizations in achieving a more financially sustainable business model (2018 Fall Economic Statement).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Social

Business – other

70499 - Economic affairs - Economic affairs not elsewhere classified

Programs within the mandates of Canadian Heritage, Immigration, Refugees and Citizenship Canada, Transport Canada and Public Safety Canada (among other departments) also support various other social objectives. Programs within the mandates of Global Affairs Canada, Public Services and Procurement Canada and the regional development agencies (among other federal organizations) also offer support to Canadian businesses in various manners. Additional information on the relevant government programs is provided in the table at the end of Part 3.

No data is available.

No estimate is available.

Based on internal projections of growth in this sector.

About 435,000 individuals claimed this credit in 2022. 

Individual taxpayers can claim a non-refundable credit in respect of the Basic Personal Amount, the value of which is calculated by applying the lowest personal income tax rate (15% in 2024) to the credit amount. The credit amount is indexed to inflation. As of 2020, a taxpayer may also claim an income-tested supplement to the Basic Personal Amount. This supplement was legislated to gradually increase in steps each year until 2023. The increased portion of the credit is subject to an income test beginning at a level of individual net income equal to the fourth federal tax bracket threshold ($173,205 in 2024), and is fully phased out by the fifth federal bracket threshold ($246,752 in 2024). The maximum credit amount (i.e., the base credit + supplement) for 2024 is $15,705, with the fully reduced amount being $14,156.

Personal income tax

Individuals

Credit, non-refundable

Income Tax Act, paragraph 118(1)(c)

• Introduced as part of the 1987 Tax Reform, effective for the 1988 and subsequent taxation years, to replace the previous basic personal exemption.
• Between 1998 and 2009, the Basic Personal Amount was periodically increased. 
• In December 2019, the government introduced a gradual increase to the maximum Basic Personal Amount to $15,000 over the 2020 to 2023 period.

To promote the fairness of the tax system

This measure contributes to tax fairness by ensuring that no tax is paid on a basic amount of income (Report of the Royal Commission on Taxation, vol. 3, 1966; Budget 1998).

Structural tax measure

This measure is considered part of the benchmark tax system, and therefore is not a tax expenditure.

Other

n/a

n/a

T1 Income Tax and Benefit Return

T1 micro-simulation model

T1 micro-simulation model

About 30.1 million individuals claimed this credit in 2022.

Flow-through shares facilitate the financing of exploration by allowing companies to transfer unused tax deductions to investors. In addition to claiming regular flow-through deductions, Budget 2022 announced that individuals (other than trusts) who invest in flow-through shares of a corporation be able to claim a 30% non-refundable tax credit in respect of specified critical mineral exploration expenses incurred by the corporation and transferred to the individual under a flow-through share agreement. Expenses eligible for the credit are specified surface grassroots exploration expenses (i.e., seeking new resources away from an existing mine site) in respect of a critical mineral resource in Canada. Eligible expenses may not benefit from both the Critical Mineral Exploration Tax Credit and the Mineral Exploration Tax Credit. See the description of the measure "Flow-through share deductions" for additional information about flow-through shares.

Personal income tax

Individual investors (other than trusts) in flow-through shares

Credit, non-refundable

Income Tax Act, subsection 127(9), paragraph (a.2) of definition of "investment tax credit", and definitions of "critical mineral", "flow-through critical mineral mining expenditure" and "qualified professional engineer or professional geoscientist"

• Introduced as part of Budget 2022. Effective in respect of expenditures incurred after April 7, 2022 and on or before March 31, 2027.
• Budget 2023 expanded the eligibility to include eligible expenditures related to lithium from brines exploration. 

To encourage or attract investment

This measure will make critical mineral projects a less risky undertaking for companies and help grow both Canada's critical mineral industry and secure good resource jobs of the future (Budget 2022).

Non-structural tax measure

Tax credits are treated as deviations from the benchmark tax system.

Business - natural resources

70441 - Economic affairs - Mining, manufacturing, and construction - Mining of mineral resources other than mineral fuels

Programs within the mandate of Natural Resources Canada also support the natural resource sector. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T1 Income Tax and Benefit Return

Estimates are not yet available.

Projections are based on current market conditions.

About 5,400 individuals claimed the credit in 2022. No data is available on the number of corporations that renounced CEE eligible for the credit.

Employed musicians can deduct amounts from their employment income for the expenses they incur for the maintenance, rental and insurance of musical instruments they are required to provide as a term of their employment. The measure also provides for the deduction of capital cost allowance in respect of these instruments.

Personal income tax

Employed musicians

Deduction

Income Tax Act, paragraph 8(1)(p)

• Introduced in 1987 as part of the 1987 Tax Reform. Effective for the 1988 and subsequent taxation years.

To recognize expenses incurred to earn employment income

The deductibility of certain expenses incurred by artists and musicians recognizes that these expenses are necessary to carry on employment in those fields (Musical Instruments: Income Tax Reform, 1987).

Structural tax measure

This measure provides tax recognition for an expense that is incurred to earn employment income.

Employment

Arts and culture

70412 - Economic affairs - General economic, commercial, and labor affairs - General labor affairs

70829 - Recreation, culture, and religion - Cultural services

Programs within the mandate of Employment and Social Development Canada also support employment. Programs within the mandate of Canadian Heritage also support arts and culture. Additional information on the relevant government programs is provided in the table at the end of Part 3.

T777 Statement of Employment Expenses

T1 micro-simulation model

T1 micro-simulation model

About 2,700 individuals claimed this deduction in 2022.

Donations made by corporations to registered charities are deductible in computing taxable income within certain limits. In general, a deduction may be claimed on donations totalling up to 75% of a corporation's taxable income. The limit is increased by 25% of the amount of taxable capital gains arising from donations of appreciated capital property and 25% of any capital cost allowance recapture arising from donations of depreciable capital property. The net income restriction does not apply to certain gifts of cultural property or ecologically sensitive land.

Donations in excess of the particular limit applied may be carried forward up to 5 years with the exception of gifts of ecologically sensitive land, which may be carried forward up to 10 years.

Corporate income tax

Corporate donors

Deduction

Income Tax Act,section 110.1

• Budget 1930 introduced the deductibility of donations to any church, university, college, school or hospital in Canada amounting to no greater than 10% of a taxpayer's net income. By 1933, the deduction applied to donations made to charities.
• Budget 1997 increased the deduction limit to 75% of a corporation's net income, reduced to 25% the portion of taxable capital gains arising from the donations of appreciated capital property that can be added to the deduction limit, and added to the deduction limit 25% of recaptured capital cost allowance amounts.

To achieve a social objective

This measure is designed to support the important work of the charitable sector in meeting the needs of Canadians (Report of the Royal Commission on Taxation, vol. 3, 1966).

Non-structural tax measure

This measure provides tax recognition for an expense that is not incurred to earn income.

The tax benefit from this measure can be obtained in a taxation year other than the year during which it accrues.

Donations, gifts, charities and non-profit organizations

705 - Environmental protection; 706 - Housing and community amenities; 707 - Health; 708 - Recreation, culture, and religion; 709 - Education; 710 - Social protection; Other various codes

Many federal government entities provide direct funding to registered charities, non-profit organizations and international development associations through various programs.

T2 Corporation Income Tax Return

T2 micro-simulation model

The cost of this measure is projected to grow in line with corporate taxable income.

This measure provided tax relief to about 101,700 corporations in 2022.