Canada

Canada's corporate tax summary reflects all 2025 provincial and territorial budgets. The newly re-elected federal minority government is expected to table a 2025 budget in the autumn of 2025. This summary is based on enacted and proposed legislation and assumes that the proposed legislation will become law. Generally, budget proposals and draft legislation are enacted into law, even with a minority federal government, which is currently the case.

2025 Federal Fall Economic Statement

The 16 December 2024 Federal Fall Economic Statement proposed to:

• re-instate the Accelerated Investment Incentive and the immediate write-off for newly acquired manufacturing and processing and specified clean energy equipment and zero-emission vehicles, and
• significantly enhance the Scientific Research & Experimental Development (SR&ED) program by expanding SR&ED investment tax credit refundability to Canadian public corporations and restoring eligibility for capital expenditures.

See Accelerated capital cost allowance in the Deductions section and Scientific research and experimental development (SR&ED) credit in the Tax credits and incentives section, and our Tax Insights '2024 Federal Fall Economic Statement: Tax highlights' at www.pwc.com/ca/taxinsights for more information.

'Clean economy' investment tax credits

The 2022, 2023, and 2024 federal budgets introduced and enhanced multiple 'clean economy' refundable investment tax credits (ITCs) for: carbon capture, utilisation, and storage (CCUS); clean technology; clean hydrogen; clean technology manufacturing (which includes electric vehicle supply chain investment); and clean electricity generation. Applications are now being accepted for ITCs for CCUS, clean technology, clean hydrogen, and clean technology manufacturing. Draft legislative proposals introduce the ITC for clean electricity generation, for which the 2024 Federal Fall Economic Statement (FES) also expanded eligibility; the FES also provided the design and implementation details for the electric vehicle supply chain ITC. See Federal environmental incentives in the Tax credits and incentives section and our Tax Insights 'Clean economy investment tax credits (August 2024 update)', 'Finance releases draft legislation for the clean hydrogen and clean technology manufacturing investment tax credits' (5 June 2024 update) and ‘2024 Federal Fall Economic Statement: Tax Highlights’ at www.pwc.com/ca/taxinsights for more information.

Capital gains inclusion rate

The federal government has cancelled draft legislative proposals that would have increased the capital gains inclusion rate, from one half to two thirds, for dispositions after 31 December 2025 (previously 24 June 2024). See Capital gains in the Income determination section and our Tax Insights 'Finance releases draft legislation to increase the capital gains inclusion rate' (27 March 2025 update) at www.pwc.com/ca/taxinsights for more information.

Transfer pricing

The government released a consultation paper to gather stakeholder input on various questions and proposals related to modernisation of Canada’s transfer pricing legislation. See Transfer pricing in the Group taxation section and our Tax Insights ‘Finance launches consultation on reforming and modernizing Canada’s transfer pricing rules’ at www.pwc.com/ca/taxinsights for more information.

Global minimum tax and the new international tax framework

138 countries, including Canada, have committed to fundamental changes to the international corporate tax system that support the Organisation for Economic Co-operation and Development (OECD) Inclusive Framework's 'Tax Challenges Arising from Digitalisation' project. The changes would provide new taxing rights that:

• reallocate some portion of the profits of large multinational enterprises (MNEs) to countries where the MNE's customers are located (Pillar One), and
• adopt a global minimum effective tax rate of 15% (Pillar Two).

Pillar Two has been implemented in Canada, generally effective for fiscal years of MNEs that begin after 30 December 2023; draft legislative proposals implement a backstop charging rule that will come into effect for fiscal years of MNEs that begin after 30 December 2024. The multilateral convention to implement Pillar One has been delayed, and the federal government has enacted legislation to implement a Digital Services Tax (DST) in Canada that retroactively applies to Canadian digital services revenue earned since 1 January 2022. See Global minimum tax and the new international tax framework in the Taxes on corporate income section and our Tax Insights 'Canada releases Global Minimum Tax Act' (21 June 2024 update), 'Finance releases draft legislation to implement the undertaxed profits rule' and 'Canada's Digital Services Tax Act is now law: What is next and how can you prepare?' (6 May 2025 update) at www.pwc.com/ca/taxinsights for more information.

Digital services tax (DST)

A tax applies on certain corporations that provide digital services in Canada. The tax would only have been imposed if a multilateral convention implementing Pillar One (see Global minimum tax and the new international tax framework above) had not come into force by the end of 2023, and since a multinational convention has not been signed, the DST applies effective the 2024 calendar year, retroactively in respect of in-scope revenues earned since 1 January 2022. See Digital services tax (DST) in the Other taxes section and our Tax Insights 'Canada's Digital Services Tax Act is now law: What is next and how can you prepare?' (6 May 2025 update) at www.pwc.com/ca/taxinsights for more information.

Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM)

Canadian-resident and non-resident businesses that import goods into Canada and their trade chain partners that interact with the CBSA are required to participate in the CARM, which is now operational (the transition period for the Release Prior to Payment program ended on 19 May 2025; it was originally to end on 19 April 2025). See Canada Border Services Agency (CBSA) Assessment and Revenue Management (CARM) in the Other taxes section and our Tax Insights ‘Businesses importing goods into Canada must register for CARM – Action required! (October 2024 update)' at www.pwc.com/ca/taxinsights for more information.