Budget 2025 Implementation Act, No. 1 (S.C. 2026, c. 3)

• 113 (1) The portion of section 8201 of the Regulations before paragraph (a) is replaced by the following:

  8201 For the purposes of subsection 16.1(1), the definition outstanding debts to specified non-residents in subsection 18(5), subsections 100(1.3), 112(2), 125.4(1) and 125.5(1), the definition taxable supplier in subsection 127(9), subparagraph 128.1(4)(b)(ii), paragraphs 181.3(5)(a) and 190.14(2)(b), section 233.8, the definition Canadian banking business in subsection 248(1) and paragraph 260(5)(a) of the Act, a permanent establishment of a person or partnership (either of whom is referred to in this section as the “person”) means a fixed place of business of the person, including an office, a branch, a mine, an oil well, a farm, a timberland, a factory, a workshop or a warehouse if the person has a fixed place of business and, where the person does not have any fixed place of business, the principal place at which the person’s business is conducted, and

• (2) Subsection (1) is deemed to have come into force on January 1, 2025.

• 114 (1) Section 8517 of the Regulations is amended by adding the following after subsection (7):

  • (8) For the purposes of this section, if subsection 147.4(5) of the Act deems an amount to be transferred under a defined benefit provision (as defined in subsection 147.1(1) of the Act) of a registered pension plan, the benefits payable under the annuity contract are deemed to be benefits payable under the provision.

• (2) Subsection (1) is deemed to have come into force on January 1, 2018.

• 115 (1) Section 9002 of the Regulations is amended by adding the following after subsection (3):

  • (4) For the purpose of subsection (3), if a partnership, at a particular time, owns or holds shares of a corporation (or is deemed under this subsection to own or hold shares of a corporation) that have a fair market value of at least 50% of all the issued shares of the corporation,

    • (a) the partnership is deemed not to exist at that time; and

    • (b) each member of the partnership is deemed to own or hold at that time that proportion of shares of any class of the capital stock of the corporation that are property of the partnership at that time, that the fair market value of the member’s interest in the partnership is of the fair market value of all interests in the partnership at that time.

  • (5) For the purpose of paragraph (3)(b), a subsidiary wholly-owned corporation of a credit union is deemed to be a credit union.

• (2) Subsection (1) applies to taxation years that begin after 2023.

• 116 (1) The portion of paragraph (a) of Class 43.1 in Schedule II to the Regulations after subparagraph (v) is replaced by the following:

  other than buildings or other structures, heat rejection equipment (such as condensers and cooling water systems), transmission equipment, distribution equipment, fuel handling equipment that is not used to upgrade the combustible portion of the fuel, pollution abatement equipment and fuel storage facilities,

• (2) Clause (d)(ii)(B) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

  • (B) is the electrical generating equipment and plant (including structures) of that producer including a canal, a dam, a dyke, an overflow spillway, a penstock, a powerhouse (complete with electrical generating equipment and other ancillary equipment), control equipment, fishways or fish bypasses, and eligible transmission equipment,

• (3) Subparagraph (d)(iv) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

  • (iv) heat recovery equipment used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of conserving energy, reducing the requirement to acquire energy or extracting heat for sale, by extracting for reuse thermal waste that is generated directly in an industrial process (other than an industrial process that generates or processes electrical energy), including such equipment that consists of heat exchange equipment, compressors used to upgrade low pressure steam, vapour or gas, waste heat boilers and other ancillary equipment such as control panels, fans, instruments or pumps, but not including property that is employed in re-using the recovered heat (such as property that is part of the internal heating or cooling system of a building or electrical generating equipment), is pollution abatement equipment, or is a building,

• (4) Subclause (d)(v)(B)(IV) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

  • (IV) eligible transmission equipment,

• (5) The portion of subparagraph (d)(vi) of Class 43.1 in Schedule II to the Regulations before clause (A) is replaced by the following:

  • (vi) fixed location photovoltaic equipment that is used by the taxpayer, or a lessee of the taxpayer, primarily for the purpose of generating electrical energy from solar energy if the equipment consists of solar cells or modules and related equipment including inverters, control and conditioning equipment, support structures and eligible transmission equipment, but not including

• (6) Subparagraph (d)(vii) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

  • (vii) equipment used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of generating electrical energy or heat energy, or both electrical and heat energy, solely from geothermal energy, including such equipment that consists of piping (including above or below ground piping and the cost of completing a well (including the wellhead and production string), or trenching, for the purpose of installing that piping), pumps, heat exchangers, steam separators, electrical generating equipment, eligible transmission equipment and ancillary equipment used to collect the geothermal heat, but not including buildings, distribution equipment, equipment described in subclause (i)(A)(II), property otherwise included in Class 10 and property that would be included in Class 17 if that Class were read without reference to its paragraph (a.1),

• (7) Subparagraph (d)(viii) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

  • (viii) equipment used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of collecting landfill gas or digester gas, including such equipment that consists of piping (including above or below ground piping and the cost of drilling a well, or trenching, for the purpose of installing that piping), fans, compressors, storage tanks, heat exchangers and related equipment used to collect gas, to remove non-combustibles and contaminants from the gas or to store the gas, but not including pollution abatement equipment and property otherwise included in Class 10 or 17,

• (8) Clause (d)(ix)(D) of Class 43.1 in Schedule II to the Regulations is amended by striking out “and” at the end of subclause (V), by adding “and” at the end of subclause (VI) and by adding the following after subclause (VI):

  • (VII) pollution abatement equipment,

• (9) Subparagraph (d)(xi) of Class 43.1 in Schedule II to the Regulations is amended by striking out “and” at the end of clause (E), by adding “and” at the end of clause (F) and by adding the following after clause (F):

  • (G) pollution abatement equipment,

• (10) Subparagraph (d)(xiii) of Class 43.1 in Schedule II to the Regulations is amended by striking out “and” at the end of clause (C), by adding “and” at the end of clause (D) and by adding the following after clause (D):

  • (E) pollution abatement equipment,

• (11) Subparagraph (d)(xiv) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

  • (xiv) property that is used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of generating electricity using kinetic energy of flowing water or wave or tidal energy, including support structures, control and conditioning equipment, submerged cables and eligible transmission equipment, but not including buildings, distribution equipment, auxiliary electricity generating equipment, property otherwise included in Class 10 and property that would be included in Class 17 if that class were read without reference to its subparagraph (a.1)(i),

• (12) Subparagraph (d)(xiv) of Class 43.1 in Schedule II to the Regulations, as enacted by subsection (11), is replaced by the following:

  • (xiv) fixed location property that is used by the taxpayer, or by a lessee of the taxpayer, primarily for the purpose of generating electricity using kinetic energy of flowing water or wave or tidal energy, including support structures, control and conditioning equipment, submerged cables and eligible transmission equipment, but not including buildings, distribution equipment, auxiliary electricity generating equipment, property otherwise included in Class 10 and property that would be included in Class 17 if that class were read without reference to its subparagraph (a.1)(i),

• (13) Clause (d)(xvi)(D) of Class 43.1 in Schedule II to the Regulations is amended by striking out “and” at the end of subclause (III), by adding “and” at the end of subclause (IV) and by adding the following after subclause (IV):

  • (V) pollution abatement equipment,

• (14) Subclause (d)(xviii)(A)(II) of Class 43.1 in Schedule II to the Regulations is replaced by the following:

  • (II) not including buildings, pumped hydroelectric storage, hydro electric dams and reservoirs, property used solely for backup electrical energy, batteries used in vehicles or other automotive equipment, property used to charge vehicles or other automotive equipment, fuel cell systems where the hydrogen is produced via steam reformation of methane and property otherwise included in Class 10 or 17, and

• (15) The portion of subparagraph (d)(xix) of Class 43.1 in Schedule II to the Regulations before clause (A) is replaced by the following:

  • (xix) a pumped hydroelectric energy storage installation all or substantially all of the use of which by the taxpayer, or by a lessee of the taxpayer, is to store and discharge electrical energy including reversing turbines, eligible transmission equipment, dams, reservoirs and related structures, and that meets the condition in either subclause (d)(xviii)(B)(I) or (II) in this Class, but not including

• (16) Subparagraph (d)(xx) of Class 43.1 in Schedule II to the Regulations is amended by striking out “and” at the end of clause (C), by adding “and” at the end of clause (D) and by adding the following after clause (D):

  • (E) pollution abatement equipment,

• (17) Subsections (2), (4) to (6), (11), (14) and (15) apply to property that is acquired and becomes available for use on or after November 17, 2025.

• 117 (1) The portion of Class 56 in Schedule II to the Regulations after the heading “CLASS 56” and before paragraph (a) is replaced by the following:

  Property that is acquired, and becomes available for use, by a taxpayer after March 1, 2020 and before 2034, if the property

• (2) Paragraph (b) of Class 56 in Schedule II to the Regulations is replaced by the following:

  • (b) would be accelerated investment incentive property or reaccelerated investment incentive property of the taxpayer if subsections 1104(4) and (4.01) were read without their exclusions for property included in Class 56.

• (3) Subsections (1) and (2) are deemed to have come into force on January 1, 2025.

• 118 (1) The portion of paragraph (a) of Class 57 in Schedule II to the Regulations before clause (i)(A) is replaced by the following:

  • (a) equipment, other than excluded CCUS equipment, that

    • (i) is to be used solely for capturing carbon dioxide

• (2) Paragraph (g) of Class 57 in Schedule II to the Regulations is replaced by the following:

  • (g) property that is

    • (i) incorporated into another property that would not otherwise be described in any of paragraphs (a) to (f) if the incorporation causes the other property to satisfy the description in any of paragraphs (a) to (f), or

    • (ii) used solely to refurbish property described in any of paragraphs (a) to (f) that is part of a CCUS project of the taxpayer.

• (3) Subsections (1) and (2) are deemed to have come into force on January 1, 2022.

• 119 (1) Paragraph (e) of Class 58 in Schedule II to the Regulations is replaced by the following:

  • (e) property that is

    • (i) incorporated into another property that would not otherwise be described in any of paragraphs (a) to (d) if the incorporation causes the other property to satisfy the description in any of paragraphs (a) to (d), or

    • (ii) used solely to refurbish property described in any of paragraphs (a) to (d) that is part of a CCUS project of the taxpayer.

• (2) Subsection (1) is deemed to have come into force on January 1, 2022.

• 120 (1) Paragraph 1(a) of Schedule IV to the Regulations is amended by striking out “and” at the end of subparagraph (i) and by adding the following after that subparagraph:

  • (i.1) if the property is a reaccelerated investment incentive property acquired in the year,

    • (A) if the property is acquired before 2030, 1.5 times an amount computed on the basis of a rate per cord, board foot or cubic metre cut in the taxation year, and

    • (B) if the property is acquired after 2029, 1.25 times an amount computed on the basis of a rate per cord, board foot or cubic metre cut in the taxation year, and

• (2) Subsection (1) is deemed to have come into force on January 1, 2025.

• 121 (1) Paragraphs (a) and (b) of the description of A in section 2 of Schedule V to the Regulations are replaced by the following:

  • (a) 1.5, if the property is an accelerated investment incentive property acquired before 2024 or a reaccelerated investment incentive property acquired before 2030,

  • (b) 1.25, if the property is an accelerated investment incentive property acquired after 2023 or a reaccelerated investment incentive property acquired after 2029, and

• (2) Subsection (1) is deemed to have come into force on January 1, 2025.

• 122 (1) Paragraphs (a) and (b) of the description of A in section 2 of Schedule VI to the Regulations are replaced by the following:

  • (a) 1.5, if the property is an accelerated investment incentive property acquired before 2024 or a reaccelerated investment incentive property acquired before 2030,

  • (b) 1.25, if the property is an accelerated investment incentive property acquired after 2023 or a reaccelerated investment incentive property acquired after 2029, and

• (2) Subsection (1) is deemed to have come into force on January 1, 2025.

• 123 (1) The French version of the Regulations is amended by replacing “troisième” with “quatrième” in the following provisions:

  • (a) subparagraph 1100(1)(ta)(v) and subclause 1100(1)(v)(iv)(B)(II);

  • (b) paragraph 1100(2.02)(b);

  • (c) paragraph 1100(2.2)(h); and

  • (d) subsection 1100(2.3).

• (2) Subsection (1) is deemed to have come into force on January 1, 2025.

Payment out of Consolidated Revenue Fund

Marginal note:Payment out of Consolidated Revenue Fund

124 Any amount payable by the Minister of National Revenue in relation to the application of subsection 127.491(2) of the Income Tax Act is to be paid out of the Consolidated Revenue Fund.

Coordinating Amendments

Marginal note:Bill C-4

125 If Bill C-4, introduced in the 1st session of the 45th Parliament and entitled the Making Life More Affordable for Canadians Act, receives royal assent, then

• (a) section 118 of the Income Tax Act is amended by adding the following after subsection (10):

  • Marginal note:Top-up tax credit

    (11) For the purpose of computing the tax payable under this Part by an individual for a taxation year that is after 2024 and before 2031, there may be deducted the amount determined by the formula

    (A − B × C) × D

    where

    A

    is the amount determined by the formula

    E + F

    where

    E

    is the total of all amounts each of which is an amount deducted by the individual in computing the individual’s tax payable for the year under this Part under any of subsections (1), (2), (3) and (10) or any of sections 118.01, 118.041, 118.05, 118.06, 118.07, 118.2, 118.3, 118.5, 118.61, 118.62, 118.7, 118.8 and 118.9, and

    F

    is the lesser of

    • (a) the amount deducted by the individual in computing the individual’s tax payable for the year under this Part under section 118.1, and

    • (b) $200 multiplied by the appropriate percentage for the year;

    B

    is the appropriate percentage for the year;

    C

    is the first dollar amount for the year referred to in paragraph 117(2)(b); and

    D

    is,

    • (a) if the taxation year is 2025, 3.45%, and

    • (b) in any other case, 7.14%.

• (b) the description of C in subsection 118.61(1) of the Income Tax Act is replaced by the following:

  C

  is the lesser of the value of B and the amount that would be the individual’s tax payable under this Part for the year if no amount were deductible under this Division (other than an amount deductible under this section and any of subsections 118(1) to (10) and sections 118.01 to 118.07, 118.3 and 118.7);

• (c) paragraph 118.61(2)(b) of the Income Tax Act is replaced by the following:

  • (b) the amount that would be the individual’s tax payable under this Part for the year if no amount were deductible under this Division (other than an amount deductible under this section and any of subsections 118(1) to (10) and sections 118.01 to 118.07, 118.3 and 118.7).

• (d) subsection 118(11) of the Income Tax Act, as enacted by paragraph (a), is deemed to have come into force on January 1, 2025;

• (e) the description of C in subsection 118.61(1) of the Income Tax Act, as enacted by paragraph (b), is deemed to have come into force on January 1, 2025; and

• (f) paragraph 118.61(2)(b) of the Income Tax Act, as enacted by paragraph (c), is deemed to have come into force on January 1, 2025.