The Canada Revenue Agency updated its 2025 corporate income tax guide on 28 May 2026, introducing changes affecting accelerated capital cost allowance incentives, transfer pricing rules, foreign affiliate taxation, clean technology tax credits, and research and development incentives, alongside the removal or phase-out of several fuel charge rebate measures.
The Canadian Revenue Agency (CRA) has issued an updated corporate income tax guide for tax year 2025 on 28 May 2026.
The guide covers the following:
Accelerated capital cost allowance (CCA) for liquefied natural gas (LNG) facilities
The Government has announced that the accelerated CCA will be reinstated for eligible LNG equipment and related buildings acquired after 3 November 2025, and before 2035. To be eligible, new emission performance requirements will have to be met.
Canada carbon rebate for small businesses
The Canada carbon rebate for small businesses was eliminated. A portion of fuel charge proceeds for the 2019-2020 through 2023-2024 fuel charge years has been returned to the majority of eligible Canadian-controlled private corporations. Proceeds for the 2024-2025 fuel charge year will be returned similarly. This will be the final payment.
Enhanced first-year CCA for manufacturing and processing buildings
Under the proposed changes, a temporary enhanced first-year CCA is introduced for the cost of eligible manufacturing or processing (M&P) buildings, including the cost of eligible additions or alterations to such buildings. A 100% deduction will be allowed in the first tax year that eligible property is used for M&P, if at least 90% of the floor space is used for eligible purposes to manufacture or process goods for sale or lease.
The enhanced rate applies only for the tax year in which the eligible property is first used for manufacturing and processing. This measure would apply to eligible property that is acquired after 3 November 2025. The rate is subject to the following phase‑out:
- 100% for tax years ending before 2030
- 75% for tax years ending in 2030 or 2031
- 55% for tax years ending in 2032 or 2033
- 0% for tax years ending after 2033
Investment income of a foreign affiliate derived from assets supporting Canadian insurance risks
Under proposed changes, the foreign accrual property income (FAPI) rules will be amended to clarify that investment income derived from assets held by a foreign affiliate of a corporation to back Canadian risks as part of a group integrated insurance business is included in the foreign affiliate’s FAPI, regardless of which entity in the group is considered to carry the insurance business. This would apply to tax years that begin after 4 November 2025.
Restricting Part IV tax deferral
Under proposed changes, for tax years starting after 3 November 2025, the deferral of Part IV tax on investment income will be limited when it comes from the use of tiered affiliated corporation structures with mismatched year‑ends.
Transfer pricing
Section 247 of the ITA will be amended to better align with the Organisation for Economic Co‑operation and Development (OECD) Transfer Pricing Guidelines, and will require accurate delineation of transactions, including analysis of the economically relevant characteristics. The proposed measures also include:
- increasing the threshold for the transfer pricing penalty from CAD 5 million to a CAD 10 million transfer pricing adjustment
- clarifying and simplifying the documentation requirements
- reducing the time to provide the documentation from three months to 30 days
These measures apply to tax years starting after 4 November 2025.
Voluntary disclosures program
Effective 1 October 2025, changes were made to the Voluntary Disclosures Program to make it easier to apply to the program and understand it.
Integration and foreign accrual business income
Foreign accrual business income (FABI) is a new elective relieving regime that complements foreign accrual property income (FAPI) by taxing certain foreign affiliate income like Canadian active business income. It also provides relief in respect of distributions made by a foreign affiliate out of its FABI surplus. FABI rules apply to tax years that begin after 2025, but also apply to preceding tax years if an election is filed under 93.4(4) or (5).
Accelerated investment incentive and reaccelerated investment incentive
The accelerated investment incentive is available for qualifying property acquired before 1 January 2025, and that becomes available for use before 2028. The reaccelerated investment incentive (RII) is available for qualifying property acquired on or after 1 January 2025, and that becomes available for use before 2034. The RII generally has a four-year phase-out for property that becomes available for use after 2029.
Eligible activities for Canadian exploration expense
Under proposed clarifying changes, expenses incurred to determine the quality of a mineral resource in Canada will not include expenses related to determining the economic viability or engineering feasibility of the mineral resource. A similar clarifying change is proposed for certain expenses relating to accumulations of petroleum and natural gas.
Agricultural cooperatives: Patronage dividends paid in shares
The temporary deferral of income taxes and withholding obligations, which was set to expire at the end of 2025, will continue to apply to eligible shares issued before 2031.
Scientific research and experimental development
The expenditure limit on which the SR&ED enhanced 35% tax credit can be earned is increased from CAD 3 million to CAD 6 million.
Carbon capture, utilisation, and storage investment tax credit (CCUS ITC)
The full CCUS ITC rates (60%, 50%, and 37.5%) are extended by five years so that they apply from 2022 to 2035. The lower rates (30%, 25%, and 18.75%) will apply to eligible expenditures incurred from the start of 2036 to the end of 2040.
Clean technology manufacturing ITC
The list of qualifying materials eligible for the clean technology manufacturing ITC has been expanded to include antimony, indium, gallium, germanium and scandium. This applies to property that is acquired and becomes available for use after 3 November 2025.
Return of fuel charge proceeds to farmers tax credit
The return of fuel charge proceeds to farmers tax credit is being eliminated. The 2024 calendar year is the final year for which the credit is available.
