The 2025 Budget Implementation Act (Bill C-15), which was enacted in late March, delivers a broad package of business tax incentives, OECD-aligned transfer pricing reforms, and the elimination of several indirect taxes.
Canada’s Bill C-15, or the Budget 2025 Implementation Act, No. 1, which received Royal Assent on 26 March 2026, introduces a major overhaul of Canada’s transfer pricing regime, repeals the Digital Services Tax, and enacts a wide array of business tax incentives.
These measures are designed to strengthen the economy, support investment, and enhance the financial sector.
The key measures are as follows:
Transfer pricing overhaul
The Act significantly reforms Canada’s transfer pricing rules in section 247 of the Income Tax Act to align more closely with international standards.
- Delineation of transactions: Transactions or series of transactions must now be analysed and determined based on their economically relevant characteristics. This includes considering contractual terms (to the extent they match actual conduct), the actual conduct of participants, functions performed, assets used, risks assumed, and the broader commercial and financial circumstances.
- OECD consistency: The Act mandates that the analysis and determination of transfer pricing amounts must be made to best achieve consistency with the OECD Transfer Pricing Guidelines.
- Methodology: The “most appropriate method” for determining arm’s length conditions must be selected and applied in accordance with these guidelines.
- Documentation requirements: Taxpayers are deemed not to have made “reasonable efforts” to determine arm’s length prices unless they maintain contemporaneous documentation that provides a complete and accurate description of the transaction, the participants, and the methods used.
Digital services tax (DST) repeal
The Act officially repeals the Digital Services Tax Act and its associated regulations. The repeal is deemed to have come into force on 20 June 2024. Any person who paid tax, penalties, or interest under the now-repealed Digital Services Tax Act is entitled to a refund of those amounts plus interest.
Business tax incentives
The Act implements several measures designed to encourage investment, innovation, and productivity.
Clean economy investment tax credits (ITCs)
The Act expands or introduces several refundable tax credits for green initiatives:
- Clean Electricity ITC: Provides a 15% refundable credit for qualifying corporations and trusts investing in clean electricity property, such as solar, wind, and certain nuclear or natural gas systems with carbon capture.
- CCUS ITC: Extends the full credit rates for Carbon Capture, Utilisation, and Storage investments to 2035.
- Clean Technology ITC: Expands eligibility to include equipment that generates electricity and heat from waste biomass.
- Clean Technology Manufacturing ITC: Expands eligibility to include certain polymetallic projects and additional qualifying materials like gallium, germanium, and scandium. A 30% credit applies to property acquired after 31 December 2023, phasing down to 20% in 2032, 10% in 2033, and 5% in 2034.
Innovation and productivity incentives
- SR&ED enhancement: The Scientific Research and Experimental Development programme is enhanced by increasing expenditure limits and taxable capital phase-out thresholds for the 35% enhanced credit. Eligibility is extended to Canadian public corporations, and the eligibility of capital expenditures is restored.
- Reaccelerated investment incentive: The Act reinstates the accelerated investment incentive and immediate expensing for certain qualifying assets acquired after 2024 and before 2034.
Sector-Specific and other Incentives
- Purpose-built rental housing: Introduces an accelerated Capital Cost Allowance (CCA) of 10% for new eligible purpose-built rental projects where construction begins after April 15, 2024.
- Critical mineral exploration: Expands the Critical Mineral Exploration Tax Credit to include minerals such as bismuth, manganese, and phosphorus.
- Business transfers: To encourage succession planning, the Act exempts the first CAD 10 million in capital gains on the sale of a business to a worker cooperative or an employee ownership trust.
Other indirect taxes, duties, and property tax repeals
- Underused housing tax (UHT): The UHT effectively ends for 2025 and future years, with the underlying Act scheduled for total repeal on 01 January 2035.
- Luxury tax: Taxation on subject aircraft and vessels ends for items where the tax would have become payable after 04 November 2025.
- GST/HST rental rebate: the 100% Enhanced GST Rental Rebate is extended to qualifying cooperative housing corporations and student residences, effective for construction begun on or after 14 September 2023.
- Customs tariff: Amendments allow for the refund of duties paid on obsolete or surplus goods if they are donated to a registered charity, effective upon a date to be fixed by the Governor in Council.
- First Nations Goods and Services Tax Act: Amendments establish a framework for Indigenous governments to levy a value-added sales tax on products like fuel, alcohol, cannabis, tobacco, and vaping products within their lands.
- Excise Tax on osteopathic services: The Act clarifies that osteopathic services provided by non-physicians are taxable under the GST/HST for supplies made after 05 June 2025.
Earlier, Canada’s Department of Finance announced the introduction of Bill C-15, Budget 2025 Implementation Act, No. 1, on 18 November 2025.
